Express Scripts Merger of Medco Under Scrutiny

The proposed merger of Express Scripts (NASDAQ:ESRX) and Medco Health Solutions (NYSE:MHS) is being investigated by numerous states, over the possibility of the merged companies to become more aggressive and causing losses to pharmacists.

More than 25 states are joining forces together to form a group to avoid the $22 billion proposed merger of the two companies. The 25 states have formed a group and are opposing the merger together, according to Pennsylvania state attorney general office spokesperson, James Donahue. Iowa and Connecticut are among the states opposing the merger. It is not clear as to the names of all 25 states that are opposing the merger.

The Federal Trade Commission is carrying out a review of its own and only after a green signal from this agency will Express Scripts be able to complete its acquisition of Medco. The states cannot interfere in the investigations that is being carried out by the FTC. However, the states objection can lead to the FTC objecting to the merger. The individual state also have the option of challenging the merger alone.

The two pharmacy benefit manager giants announced the merger in July. The proposal of the two out of the three largest pharmacy benefit managers will make it the largest leader in the market and will dominate over one third of the market.

The Federal Trade Commission has already received scores of complaints from pharmacists and from other communities over the possibility of the giant pharmacy benefit manager to misuse its position to increase costs. More than five meetings have been held between pharmacy groups with the FTC commissioners since the time the acquisition was announced. There has always been a complaint that the pharmacy benefit managers drive a hard bargain. The companies have also been accused of pressuring patients and doctors to switch their pharmacies.

Specialty pharmacists who provide medicines for rare and serious ailments like hepatitis C, hemophilia, have complained that Express Scripts has been pursuing doctors to convince their patients to switch to Express Scripts’ CuraScript. The executives from CuraScript meet doctors numerous times a day to urge the doctors to ask their patients to shift to their service. Express Scripts has termed its efforts as a way to reduce costs.

Community pharmacies are struggling to retain customers and compete against pharmacies from Wal-Mart and others giants. The entry of powerful benefit managers will further push customers away from them. It will however come down to FTC to decide the fate of the merger of the two pharmacy benefit managers.

Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.