Express Scripts CEO: 'Very Good Chance' For Medco Deal Approval
22 July 2011 - 12:49AM
Dow Jones News
Express Scripts Inc. (ESRX) sees a "very good chance" to get
regulatory approval for its planned $29.1 billion cash-and-stock
deal to buy Medco Health Solutions Inc. (MHS), Express Scripts
Chief Executive George Paz said Thursday.
The two companies are poised to become the largest
pharmacy-benefit manager by joining forces in a move analysts said
could raise anti-trust scrutiny at the Federal Trade Commission.
But Paz, who will remain head of the combined company, said high
industry competition, customer sophistication and the potential for
the deal to lower health-care costs should lead to regulatory
approval.
The company is going to work very hard to show the government
the value of the deal, Paz told analysts on a conference call.
"We wouldn't be doing this if we didn't think we didn't have a
very good chance of getting this through," he said.
He also disagreed with an analyst's suggestion this was "a
borderline case," and said "I believe it's what America needs."
Express Scripts' case could be helped by the fact UnitedHealth
Group Inc. (UNH) is becoming a more formidable competitor through
the rise of its own pharmacy-benefit business. Medco confirmed
Thursday that its deal with UnitedHealth--it's largest
customer--will end after next year. A UnitedHealth spokesman
confirmed that company will keep the business it currently has with
Medco in-house after the deal ends.
Medco's OptumRx pharmacy-benefit manager is "fully capable of
delivering outstanding service," UnitedHealth spokesman Don Nathan
said.
Medco Chief Executive David Snow said on Thursday's call that
the announcement regarding UnitedHealth was tied to a conversation
with that company last week.
"What was left on the table did not meet the needs of our
shareholders," Snow said.
He added during an interview that the UnitedHealth contract
issue played a role in the move to combine with Express Scripts,
but said the biggest factor was the changing environment in the
U.S. health-care system. The pharmacy-benefit managers have
highlighted the deal's potential to help them drive-down health
costs through measures like improving adherence to drug therapy
that can help ward off expensive medical problems.
Medco shares recently traded up 15% to $64.15, roughly $10 below
the planned purchase price based on where Express Scripts shares
are trading. They recently were up 6.4% at $55.90.
-By Jon Kamp, Dow Jones Newswires; 617-654-6728;
jon.kamp@dowjones.com
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