PBM giants Express Scripts, Medco to merge

ST. LOUIS — Two of the country’s largest pharmacy benefit managers plan to merge in a deal worth $29.1 billion.

St. Louis-based Express Scripts and Franklin Lakes, N.J.-based Medco Health Solutions announced Thursday that their boards had voted unanimously to approve the merger, though the deal still is subject to regulatory review. The deal would create the country’s largest PBM, followed by CVS Caremark.

Under the agreement, Express Scripts will form a new holding company called Express Scripts Holding Co., and Medco shareholders will receive $28.80 and 0.81 shares of the new holding company for each Medco share they own, while Express Scripts shareholders will become shareholders of the new company and receive one share of it for each Express Scripts share they own. The $42.56 share price of the new company, combined with the $28.80, means Medco shareholders will receive $71.36 per share, representing a 28% premium over Medco’s stock price as of Wednesday.

Express Scripts shareholders will own 59% of the new company, while Medco shareholders will own the remaining 41%. The company will be headquartered in St. Louis, and Express Scripts CEO George Paz will serve as chairman and CEO. The board of directors will be expanded to include two of Medco’s board members. Bloomberg quoted an analyst as saying the combined company would control a 30% share of the market by 2013, while CVS Caremark would control a share in the low 20s, and UnitedHealth would be in the low teens. While Express Scripts and Medco expressed confidence that the merger would be approved by regulatory authorities, the analyst said it would be difficult for them to get it past the Federal Trade Commission.

“The cost and quality of health care is a great concern to all Americans; this is the right deal at the right time for the right reasons,” Express Scripts CEO George Paz said. “Companies like ours have a responsibility to provide the leadership and resources required to drive out waste in health care and provide the best care in the world. The merger with Medco will accelerate our efforts to create greater efficiencies in the healthcare system and better protect American families from the rising costs of prescription medicine while improving health outcomes.”

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