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New York, 4 other states may file suit to stop $29B merger

A possible $29.1 billion merger that would create the largest pharmacy-benefits manager in the U.S. could be delayed if five states opposing it decide to go forward with a lawsuit.

Express Scripts Inc. has submitted a bid to acquire New Jersey-based Medco Health Solutions. Pharmacy benefits managers like these negotiate prices with pharmaceutical companies for health plan sponsors, track use of medicines by patients and manage worker claims. The proposed new company would handle 34 percent of prescriptions in the U.S. this year, according to the head of a consulting company that specializes in pharmaceutical business strategy.

The U.S. Federal Trade Commission has yet to approve the deal, but attorneys general in New York, Ohio, Pennsylvania, Texas and California are concerned it will lead to higher prescription prices and decreased services at pharmacies. Whether a lawsuit filed by the five states will delay the merger remains to be seen, but at least 20 more states are closely examining the deal to see if it contains any antitrust violations.

The states aren’t the only opponents of the acquisition. Two pharmacy groups were asked by the FTC to come up with ways to revise it so it wouldn’t hurt competitors, suggesting the parties would be open to extra conditions.

The FTC’s approval would make it harder for the states to stop the merger with a lawsuit. If the agency imposes conditions, it becomes an issue of whether those conditions adequately resolve any antitrust issues. But a lawsuit could still be effective. In 1990, the Supreme Court allowed California to file a lawsuit to block a supermarket chain merger after the FTC had already approved it.

In this case, FTC regulators must decide whether Express Scripts’ acquisition of Medco will create a near-monopoly that will drive up prescription prices. That decision is expected to happen by the end of the month.

Source:, “Five states consider suing to stop Medco, Express Scripts merger,” Bloomberg News, March 19, 2012

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