Express Scripts, Medco merger may close as early as next week

Express Scripts and Medco Health Solutions may be able to close the transaction of its merger as early as next week, according to an announcement Wednesday by Express Scripts.

The proposed acquisition of Medco by Express Scripts generated a great deal of discussion and grabbed the headlines after it was announced last July. The merger, valued at $29.1 billion, combines 2 of the largest pharmacy benefit managers in the United States. Medco shareholders will receive $71.36 per share in cash and stock based on the July 20, 2011, closing price, according to Express Scripts spokesman Brian Henry.

Express Scripts believes that the merger with Medco will complement its core competencies, will be enhanced with Medco’s specialty pharmacy platform, will add additional mail-order capabilities, and has significant synergy potential, according to an investor web power-point presentation on Express Scripts website.

“We expect that [with the merger] Express scripts will control about 1.5 billion adjusted prescriptions in 2013, giving it approximately 40% market share. Express Scripts will be about 50% larger than its next largest competitor, CVS Caremark, and around 3 times the size of number-three UnitedHealth,” said Morningstar analyst Matthew Coffina, CFA, in Wednesday’s Stock Analysts Notes.

“Over the long run, we expect Express Scripts’ management team to wield its tremendous influence over pharmaceutical spending to pressure suppliers (generic and brand-name drug makers, distributors, and retail pharmacies) and leverage administrative costs. This should enable the company to expand its own margins while passing some savings through to customers and gaining market share,” Coffina said in the online email newsletter.

Vocal opponents to the merger include the National Association of Chain Drug Stores (NACDS), the National Community Pharmacists Association (NCPA), and the Independent Specialty Pharmacy Coalition. These 3 groups have asked the Federal Trade Commission (FTC) to block the proposed merger due to the potential antitrust concerns.

The FTC has been conducting its own investigation and issued a second request in September 2011 for additional information for a comprehensive review of the proposed merger.

“NACDS and NCPA continue to be steadfastly opposed to the merger of Express Scripts and Medco and believe that the only way to address the anticompetitive effects of this transaction is to block the deal outright,” according to a statement by NCPA.