Occasionally mergers receive the attention of Congress, especially when consumer welfare and jobs are at stake. A prime example: The proposed merger of Express Scripts and Medco Health Solutions.
At this point, both House and Senate Judiciary Committees have held hearings to scrutinize the deal, and more than 55 members of Congress have personally weighed in with the Federal Trade Commission (FTC) to express concerns about this merger's impact on competition, consumers, and containing healthcare costs. Only Sen. Mike Lee (R-Utah) and a handful of other members of Congress have come out in support of the deal.
The lack of Congressional support seems particularly surprising. PBMs are among the biggest spenders on Capitol Hill, spending well over $10 million annually in lobbying and retaining the highest profile lobbying firms, and this merger has been aggressively lobbied by high profile lobbyists and insiders. Why is Congress nearly unanimous in opposition?
It's no secret that the business practices of these 2 PBMs have often harmed consumers. The PBMs have been fined more than $370 million in penalties and fines by a coalition of more than 30 state attorneys general for engaging in fraudulent and deceptive practices that ultimately endangered patient health. And, although the PBMs market their ability to lower drug costs, in the past 6 years alone we've seen their profits skyrocket by more than 600% to $6 billion annually. These rapidly climbing profits cast serious doubt on the whether employers, unions, and consumers are well-served.
Not surprisingly, major consumer advocacy groups actively oppose the merger. Among their concerns is that the deal would create a dominant PBM with the leverage to effectively force consumers into mail-order and away from their pharmacies of choice. The Consumer Service Scoreboard ranks Express Scripts' customer service 433 out of the 508 companies rated. Their customer service and support has been scored as "terrible." That's why consumer groups have made clear that this merger is the worst recipe for competition and American consumers.
Employees and jobs
The merger is a bad prescription for economic growth, employees, and jobs. The merger would give a single player more than a 40% share of the PBM market. With the loss of competition between Express Scripts and Medco, drug prices and the overall cost of healthcare will increase, making it more difficult for employers and unions to provide healthcare benefits.
More directly, Express Scripts post-merger will have the leverage to effectively force consumers to buy their drugs from its out-of-state, mail-order pharmacies. Community pharmacies, in turn, will be forced to cut back hours, lay off employees, and, in some cases, close their doors. The loss of jobs, especially for these professionals, will be particularly adverse. According to a National Community Pharmacists Association analysis, the merger will result in a loss of almost 2,500 jobs in New Jersey alone. Almost every other state will suffer similar harm.
Members of Congress understand controlling healthcare costs is a critical priority. They also recognized the threat of unbridled PBM power and included vital PBM reform measures as part of the Affordable Care Act. The drastic consolidation of the PBM market stands to stymie these reform efforts. Allowing 1 firm to control the pharmacy benefits of 155 million Americans means that it can effectively dictate the terms of healthcare reform in the future. That is much too high a price to pay for any merger.
Moreover, key federal programs such as TRICARE and the Federal Employee Health Benefit Plan have few alternatives but the 3 major PBMs. By reducing the PBMs from 3 to 2, these and other federal government plans stand to pay significantly more for PBM services as they watch their drug spend increase. Five members of Congress have penned letters directly to the Department of Defense to raise such concerns.
It's not high-paid lobbyists who are winning the debate over the merger. Rather, Congress is responding to simple cries for concern from consumers, employers, taxpayers, and unions. Congress has it right in putting the pressure on the FTC. Now it's the FTC's turn to do their job and block this merger.
David Balto is a public interest attorney in Washington, D.C., as well as a former policy director of the Bureau of Competition of the Federal Trade Commission from 1998-2001.