States’ attorney generals concerned about Express Scripts-Medco merger [St. Louis Post-Dispatch]

<p><chron>Oct. 07</chron>--A coalition of state attorneys general have launched an inquiry into the proposed merger of <location value="LU/us.mo.stluis" idsrc="xmltag.org">St. Louis</location>-based <org value="NASDAQ-NMS:ESRX" idsrc="xmltag.org">Express Scripts</org> and pharmacy benefit giant <org value="NYSE:MHS" idsrc="xmltag.org">Medco Health Solutions</org>.</p><p>The states have voiced their concerns about the planned merger to the <org value="ACORN:2373566280" idsrc="xmltag.org">Federal Trade Commission</org>, which is scrutinizing the deal to determine whether it complies with antitrust laws and consumer protection goals.</p><p>Reuters reported on Thursday that more than 25 states were examining the merger. The news agency quoted <person>James Donahue</person>, the chief deputy attorney general in <location value="LS/us.pa" idsrc="xmltag.org">Pennsylvania</location>, who has led a multistate task force that coordinates antitrust cases and advocates competition before federal and state courts and administrative agencies including the <org>FTC and Justice Department</org>.</p><p>An <org value="NASDAQ-NMS:ESRX" idsrc="xmltag.org">Express Scripts</org> spokesman acknowledged that the company had held discussions with representatives from some of the states.</p><p>"We understand there are a number of state attorneys general who are looking into the transaction," said <org value="NASDAQ-NMS:ESRX" idsrc="xmltag.org">Express Scripts</org> spokesman <person>Thom Gross</person>. "This is an ordinary course for a merger of this nature.</p><p>"As is generally the case, they are working in conjunction with the FTC and we have spoken to some of them directly. We will continue to work with the FTC and those states that have requested information."</p><p>Gross declined to say what type of information the states were seeking. "We're still expecting to get the deal done in the first half of next year. That hasn't changed," he said. "At this point, we can't speculate on the FTC's timing."</p><p><location value="LS/us.mo" idsrc="xmltag.org">Missouri</location> Attorney General <person>Chris Koster's</person> office is reviewing the merger but called the inquiry routine.</p><p>"We are looking at it as we often look at mergers," said office press secretary <person>Nanci Gonder</person>. "At this point we're just reviewing."</p><p>The proposed <money>$29.1 billion</money> merger, announced in July, would combine two of the nation's three largest pharmacy benefit managers, double the size of <org value="NASDAQ-NMS:ESRX" idsrc="xmltag.org">Express Scripts</org>, and produce the largest company in its field. The combined entity would have one third of the multi-billion dollar U.S. market for managing prescriptions for employers and insurers.</p><p><org value="NASDAQ-NMS:ESRX" idsrc="xmltag.org">Express Scripts</org> reported revenue last year of <money>$111 billion</money>. Medco, based in <location value="LU/us.nj.frakes" idsrc="xmltag.org">Franklin Lakes, N.J.</location>, had revenue of <money>$66 billion</money>.</p><p><org value="NASDAQ-NMS:ESRX" idsrc="xmltag.org">Express Scripts</org> has tussled previously with state regulatory agencies.</p><p>In 2008, <org value="NASDAQ-NMS:ESRX" idsrc="xmltag.org">Express Scripts</org> and <org>CIGNA Life Insurance Co.</org> agreed to pay <money>$27 million</money> to settle a lawsuit filed by <location value="LU/us.ny.nyc" idsrc="xmltag.org">New York's</location> attorney general that accused the two companies of switching patients to higher-priced or higher profit-margin drugs by contacting their doctor without their knowledge.</p><p>The same year, <org value="NASDAQ-NMS:ESRX" idsrc="xmltag.org">Express Scripts</org> agreed to pay a <money>$9.3 million</money> settlement to a coalition of 29 states, as well as up to <money>$200,000</money> in reimbursement to patients who incurred expenses related to certain switches regarding cholesterol drugs. The states had accused the pharmacy benefit manager of deceptive business practices. <org value="NASDAQ-NMS:ESRX" idsrc="xmltag.org">Express Scripts</org> also agreed to make certain disclosures to consumers, doctors and employers about its business practices.</p><p>The <org>FTC's Bureau of Competition</org> is tasked with reviewing mergers and acquisitions, and challenging those that would probably lead to higher prices, fewer choices, or less innovation.</p><p>Community pharmacists have challenged the proposed merger on the grounds that it will result in part in higher consumer prices and limit consumer choice. In particular, they fear that the combined entity will have more power to steer clients toward receiving their prescriptions through its own mail-order business rather than retail pharmacies.</p><p>In a filing lodged at the <org>Securities and Exchange Commission</org> on Thursday, <org value="NASDAQ-NMS:ESRX" idsrc="xmltag.org">Express Scripts</org> stated that the merger talks were initiated by Medco chairman <person>David Snow</person>, who telephoned <org value="NASDAQ-NMS:ESRX" idsrc="xmltag.org">Express Scripts</org> chairman <person>George Paz</person> on <chron>June 10</chron> to discuss the possibility of a business combination. Several weeks later, on <chron>July 21</chron>, the two companies announced the deal.</p><p class="shirttail">___</p><p class="shirttail">(c)2011 the St. Louis Post-Dispatch</p><p class="shirttail">Visit the St. Louis Post-Dispatch at www.stltoday.com</p><p class="shirttail">Distributed by MCT Information Services</p>