FTC reviewing Express Scripts' $29B bid for competitor - East Valley Tribune: Tempe

FTC reviewing Express Scripts' $29B bid for competitor

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Posted: Friday, September 23, 2011 9:47 pm | Updated: 9:52 pm, Fri Sep 23, 2011.

WASHINGTON – One of Tempe’s largest private employers is facing scrutiny from the Federal Trade Commission and a congressional committee over its purchase of a large rival provider.

Express Scripts, a pharmaceutical benefits company that employs about 1,700 at a regional hub in Tempe, announced this summer it would buy Medco for $29.1 billion in July, but the FTC must first deem that the acquisition does not violate antitrust laws.

As for how the deal could affect Tempe, an Express Scripts spokesman said it would be premature to comment until the deal receives regulatory approval. But company spokesman Thom Gross said Tempe is currently a key location for the St. Louis-based provider because it handles all 10 million of the company’s military accounts through the Department of Defense’s Tricare program.

“Tempe is one of our most important sites,” Gross said.

The military agreement is worth an estimated $9.1 billion in revenue for Express Scripts in 2011, CEO George Paz wrote in a disclosure form, before his Tuesday testimony to the House Judiciary Committee.

But the National Association of Chain Drug Stores said the purchase would create an imbalance in the marketplace that would hurt consumers and Arizona’s 1,040 drug-selling businesses, such as supermarkets, independent pharmacies and chain stores.

The deal “would have a considerable anti-competitive impact on employers, health plans, federal employee benefit plans, and Tricare, along with their beneficiaries,” said Dennis Wiesner, who represented the group at Tuesday’s hearing.

The industry group also said in a press release that the resulting combined company – with a projected market share of 30 percent – could raise prices, force customers toward its mail-order system and pigeonhole people into buying name-brand drugs instead of cheaper generics.

Paz rejected that claim, testifying that there are more than 40 businesses like Express Scripts – including more than 20 that serve Fortune 500 companies – and that combining his company and Medco would streamline the process and save money for customers.

A pharmaceutical benefits manager works between drug-makers, health care providers and companies’ benefit programs to coordinate prescription coverage.

While several business leaders in the Valley said they have not heard of the possible effects of the merger, Mary Ann Miller, president and CEO of the Tempe Chamber of Commerce, said she hopes operations increase instead of being moved elsewhere in a Medco merger.

Express Scripts’ type of business also is important, Miller said, because it is part of a growing health care industry that is helping to offset losses in construction.

The Tempe hub of Express Scripts employed the hourly equivalent of 1,704 full-time workers in 2010, according to a study by University of Missouri-St. Louis researchers. Those employees were paid an average of $55,868 before benefits, it said.

“A company like Express Scripts is important to keep,” Miller said. In terms of employment “once you take out the city and the university, that’s near the top.”

Joshua Armstrong is a reporter for Cronkite News Service

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