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Will Antitrust Claims Stop Express Scripts/Medco Health Merger?

 March 30, 2012 12:26 PM
 


There have been rumors that the Attorneys General (AGs) of New York, Pennsylvania, Ohio, Texas and California may attempt to block the $29 billion merger between Express Scripts,Inc. (NASDAQ:ESRX) and Medco Health Solutions, Inc. (NYSE:MHS).

Today, the National Association of Chain Drug Stores (NACDS), the National Community Pharmacists Association (NCPA), and nine retail pharmacy companies filed a lawsuit against the proposed mega merger of pharmacy benefit managers Express Scripts and Medco Health Solutions.

[Related -Express Scripts Holding Company (ESRX): Should You Own ESRX in 2014?]

The lawsuit, which was filed in the U.S. District Court for the Western District of Pennsylvania, would have dire consequences for patients and the retail community pharmacies.

The lawsuit alleges that the merged company would reduce access and service to patients; reduce competition for PBM services, particularly to large plan sponsors; reduce competition for specialty pharmaceutical services, and reduce competition in mail order services, allowing the combined entity to raise mail order prices and drive business to their own mail order pharmacies regardless of patient preference.

Moreover, the merged entity is expected to control a large share of the supply line for brand and generic prescription drugs, and thereby have the ability to raise prices for plans and patients, and limit access to pharmacy patient care.

[Related -Can Abbvie Inc (NYSE:ABBV) Trump Gilead Sciences, Inc.'S (NASDAQ:GILD) HCV Lead?]

Recently, both companies have agreed with the federal trade commission (FTC) not to close the transaction at the scheduled expiration of the deal's Hart-Scott-Rodino 30-day waiting period that ended March 12. The companies now expect the deal to close in the earlier part of the second quarter of 2012.

The extension provides the FTC the opportunity to review the deal further, to develop and explore possible remedies or divestiture requirements that would pave the way for ultimate deal approval.

The threat of antitrust lawsuits sparked fresh concerns in the minds of investors over the closure of the deal.

However, a Wall Street analyst said it is unlikely that the AGs could stop the consummation of the deal.

"We have learned some key information from our political consultants.


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