Express Scripts’ Acquisition of Medco Wins a Key Antitrust Ruling

Four months after Express Scripts (ESRX) bought Medco Health Solutions to create the largest pharmacy benefit manager in the US, a coalition of trade groups for local and chain-store pharmacies encountered a split decision in their lawsuit claiming antitrust violations. The groups contend that the controversial, $29 billion deal posed an existential threat to the corner drug store and would ultimately raise health care costs for consumers (see previous Pharma news). Stock chart below.

ESRX data by YCharts

After consuming Medco, Express Scripts now manages benefits for more than 115 million people, dispenses about one third of all prescriptions filled in the US and controls about 60 percent of the market for mail-order drugs. But in a 23-page ruling, US District Court Judge Cathy Bissoon dismissed most claims, notably concerns that Express Scripts would set anti-competitive reimbursement rates for pharmacies not in its vast network serving large employers.

The pharmacies, she wrote, “failed to allege a cognizable antitrust injury.” However, this may not be the last word on the subject, because Bissoon dismissed this particular claim without prejudice, which means the pharmacy groups can file an amended complaint and she gave them until September 10 to do so. She did, though, dismiss entirely another claim that the pharmacies are unfairly precluded from competing in the PBM market for large employers.

In the lawsuit, which was filed by The National Association of Chain Drug Stores, the National Community Pharmacists Association, the Independent Specialty Pharmacy Coalition and nine independent pharmacies, the retailers argued that pharmacy benefit managers typically exclude them from participating in networks that dispense specialty medications. This will “allegedly create high barriers to new competitors seeking to enter this field,” they maintained (see previous Pharma news).

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Ed Silverman is the editor of Pharmalot and a contributor toYCharts Pro Investor Service which includes professional stock charts, stock ratings and portfolio strategies.

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