UPDATE: Pharmacy Groups File Suit Against Express Scripts, Medco Deal
30 March 2012 - 9:14AM
Dow Jones News
Two pharmacy trade groups and several pharmacy companies filed a
lawsuit in federal court Thursday aimed at trying to stop Express
Scripts Inc. (ESRX) from buying rival pharmacy-benefit manager
Medco Health Solutions Inc. (MHS).
The National Association of Chain Drug Stores and National
Community Pharmacists Association have strongly opposed the deal
since it was announced last summer, arguing the combined company
will gain clout to boost costs through higher fees and drug prices.
Express Scripts and Medco, which expect the deal could close as
early as next week, have argued that joining forces means more cost
savings they can pass on to customers.
The companies are awaiting clearance from the Federal Trade
Commission following a lengthy antitrust review. The FTC and U.S.
Department of Justice are the entities that typically go to court
when they believe a proposed merger is anticompetitive, and
private-party lawsuits to stop deals face long odds.
In a joint statement, the pharmacy trade groups said the deal
"would create a middleman that will have enormous power to dominate
the market in anticompetitive ways." The lawsuit was filed in the
U.S. District Court for the Western District of Pennsylvania.
The pharmacy trade groups were joined in the lawsuit by nine
community pharmacy companies that have a presence in
Pennsylvania.
Express Scripts spokesman Brian Henry declined to comment on the
lawsuit, but said the company believes the deal will "accelerate
our ability to make prescription medicines safer and more
affordable for American families." He also noted Express Scripts
has historically had good relationships with pharmacies and expects
that will continue in the future.
The company's relationship with the largest pharmacy
company--Walgreen Co. (WAG)--has been turbulent in recent months,
however. Walgreen pharmacies dropped out of Express Scripts'
network on Jan. 1, meaning Express Scripts-covered people had to
head elsewhere to fill prescriptions, because the companies
couldn't agree on new contract terms.
Express Scripts shares declined 1.4% to $53.16 on Thursday while
Medco shares declined 1.4% to $70.19. Medco is currently trading
just slightly below the purchase price in the cash-and-stock deal
after trading at a sharp discount for months, indicating higher
expectations among investors the companies will win approval to
join forces. The deal was valued at about $29 billion when it was
first announced.
One potential sticking point is a combined company's
concentration in the market for pricey drugs used to treat cancer
and other conditions. The FTC is taking a hard look at whether the
merger would impede patient access to these "specialty drugs," The
Wall Street Journal reported Wednesday. The proposed company's heft
in the specialty market is one of the issues spotlighted by the
pharmacy groups.
On Wednesday, both Express Scripts and Medco said in regulatory
filings that their deal may close as early as next week, indicating
FTC approval could be close at hand. The companies also said
closing the deal is "subject to satisfaction or waiver of the
remaining closing conditions."
-By Jon Kamp, Dow Jones Newswires; 617-654-6728;
jon.kamp@dowjones.com
--Brent Kendall contributed to this article.
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