Butterfield Releases Letter to Federal Trade Commission Chairman Jon Leibowitz Expressing Concern Over Possible Merger of Two Pharmacy Benefit Management Companies

Dec 19, 2011
Press Release

WASHINGTON, DC – The Office of Congressman G. K. Butterfield (NC-01) today released a letter Congressman Butterfield wrote to Federal Trade Commission Chairman Jon Leibowitz expressing great concern over the impact of a proposed merger between two pharmacy benefit management (PBM) companies, Express Scripts, Inc. (ESI) and Medco Health Solutions.  In his letter, Butterfield wrote that the merger would create market dominance and could force community pharmacies in his district, and nationwide, out of business, which would disproportionately affect elderly, poor and rural populations.

Although there is little evidence supporting their claim, pharmacy benefit managers believe that the merger will result in cost savings for consumers.

“Pharmacy Benefit Managers have long touted their ability to generate savings for consumers,” said Butterfield.  “However, I question the savings alleged by ESI and Medco, and have only heard anecdotal evidence of the decrease in prescriptions or health care premiums.  In fact, many have expressed that the opposite is true.  I fear that giving a consolidated PBM even greater market power could potentially worsen this already troublesome situation.”

Butterfield’s full letter follows.

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December 19, 2011

The Honorable Jon Leibowitz

Chairman

Federal Trade Commission

600 Pennsylvania Avenue N.W.

Washington, D.C. 20580

 

Dear Chairman Leibowitz:

 

I write to express my concerns about the proposed merger between Express Scripts, Inc. (ESI) and Medco Health Solutions, Inc., two pharmacy benefit management (PBM) companies.  The proposed merger could have potentially far-reaching impacts on all aspects of the delivery of drug care nationwide. 

As you know, ESI and Medco are two of the nation’s largest PBMs.  Their merger agreement proposes to create one giant PBM with a combined market that would cover more than 200 million U.S. citizens, or close to two-thirds of our population.  Indeed, the companies themselves have said that approving the merger would give the resulting company more power.

I am concerned that this market dominance could force community pharmacies in my district, and across the country, out of business.  In addition, because the consolidated PBM will have the largest piece of a market that is already highly concentrated, there is a possibility that prescription prices would increase.  Ultimately this market consolidation and price increase will be disproportionally felt by elderly, poor and rural populations. As the representative of a rural, low-income district, I am especially sensitive to this prospect.

Pharmacy Benefit Managers have long touted their ability to generate savings for consumers.  However, I question the savings alleged by ESI and Medco, and have only heard anecdotal evidence of the decrease in prescriptions or health care premiums.  In fact, many have expressed that the opposite is true. I fear that giving a consolidated PBM even greater market power could potentially worsen this already troublesome situation.

Already, community pharmacists have little power to negotiate with their PBM and are essentially offered “take it or leave it” deals with below market reimbursement rates.  A consolidated PBM would have even greater power to dictate contract terms and would likely result in small pharmacies being forced to close their doors.  Local pharmacists play an integral and important role in Eastern North Carolina, where they are often intimately connected with the health care of their customers and my constituents.  I would be troubled if this merger impacted the level of service or damaged the current system of pharmacy delivery of drug and drug care services.

The pharmacies throughout Eastern North Carolina are not only trusted health care providers, but also generators of jobs and contributors to the community and the tax base.  If they are pushed out of the health care system, my district will lose pharmacists, jobs and tax dollars.  My community, and countless others across the country, cannot afford these results.

Given all that is at stake, I ask you to employ all possible FTC resources to very carefully consider this proposed merger and its impact on especially sensitive consumers.

Very truly yours,

 

G. K. Butterfield

Member of Congress