WASHINGTON — Only one stakeholder stands to gain from the proposed merger of Express Scripts and Medco — and that would be the new “mega PBM” the deal would create, not payers, and definitely not patients, either.
That was the message Dennis Wiesner, senior director of privacy, pharmacy and government affairs at H-E-B, had for members of the House Judiciary Subcommittee on Intellectual Property, Competition and the Internet during a special hearing Tuesday to examine potential antitrust issues related to the proposed $29 billion ESI-Medco union.
“I have grave concerns about this proposed merger,” noted Wiesner of the proposed deal, which, if approved, would put control of 135 million Americans’ pharmacy benefit into the hands of a single company, controlling more than 40% of national script volume, 60% of mail order and more than 50% of specialty pharmacy. “It would be a tipping point in PBM consolidation, harming patients, as well as government and private health plans and employers,” he said.
Wiesner drew lawmakers' attention to what he called the “opaque manner” under which PBMs operate.
“Do PBMs actually reduce costs?” he posited, “There is no proof that hey pass along their purported savings to health plans, employers or consumers. In fact, the PBM industry has been fraught with allegations of extensive deceptive and fraudulent practices. In recent years, cases brought by a coalition of more than 30 state attorneys general, have resulted in over $370 million in penalties. It has been found that PBMS have accepted rebates from manufacturers in return for placing higher priced medications on prescription drug plans’ formularies, switched customers to the higher-priced drugs and benefited from both the rebate received and the higher priced drug payment without passing along the enrichment to the health plan or employer.”
Amplifying Wiesner’s comments was the testimony of Pennsylvania-based independent pharmacist Joe Lech, who noted that, ultimately, the deal likely would force more pharmacies like his own to go out of business, drive up drug costs, and force patients into mail-order programs.
“ESI and Medco say that this merger will drive out so-called ‘waste’ in the healthcare system. Frankly, these are just code words for squeezing my pharmacy reimbursement as far down as they can and trying to shift as many of my patients as they can to their own mail-order facilities,” Lech said. “My pharmacy has no leverage … [i]n my pharmacy, this merged company will pay for more than half of the prescriptions filled.”
Another myth of the deal, Lech told members of the House Subcommittee, “ESI and Medco will tell you that this merger will lead [to an increase in] adherence. To the contrary, the evidence tells us that face-to-face interaction with their community pharmacist is the best way to modify patient behavior and increase medication adherence, not putting large quantities of drugs through the mail, hoping that they get to the patient, and then hoping that the patient takes them properly,” he said.
And while, ESI and Medco executives insist the deal would lower costs for patients and payers, Lech testified it would do just the opposite. “Everyone knows the fastest way to reduce drug costs is to maximize the proper utilization of less-expensive generic drugs,” Lech said. “Yet, community pharmacies dispense generics at a much higher rate than the PBM-owned mail-order outlets because we do not have incentives, such as kickbacks from manufacturers to dispense brand-name drugs. The generic rate at the ESI mail facility is 60%. It is 62% at the Medco facility. By contrast, community pharmacies dispense generics on average 72% of the time.”
Important, Lech ran the numbers on what the cost of a pharmacy closing could mean in terms of lost tax revenues — a sobering message at a time when Congress wrestles with rising debt and out-of-control spending. “For each pharmacy clerk laid off, there is $3,000 in reduced tax revenue,” more than $4,000 for each pharmacy technician laid off and almost $16,000 for each pharmacist, Lech explained.
Wiesner and Lech’s testimony came directly on the heels of a letter co-signed by five different consumer interest groups sent Tuesday to Federal Trade Commission chairman Jon Leibowitz, urging the agency to reject the merger. The group, which included the National Consumers League, Consumers Union, the Consumer Federation of America, U.S. PIRG and the National Legislative Association on Prescription Drug Prices, argued that the deal would “harm consumers in four significant ways,” including:
Substantially reducing competition in the PBM market resulting in increased costs to plans, employers, and ultimately, consumers;
Increasing the incentive and ability for the merged company to create highly restrictive pharmacy networks, thereby restricting patient choice;
Establishing tremendous dominance for Express Scripts in the specialty pharmacy area, likely resulting in decreased access to care for our most vulnerable patient populations; and
Limiting access to new and innovative drugs by creating a market landscape more conducive to deal making between PBMs and pharmaceutical manufacturers.
Important, the deal would have “two particularly pernicious effects on the retail pharmacy industry,” the group noted in its letter. “First, the combined firm will control the contracts that allow retail community pharmacies in the Express Scripts-Medco to serve patients. Secondly, Express Scripts-Medco will be able to tie its dominant market power in the pharmacy PBM market into the mail-order dispensing market. This would allow Express Scripts-Medco to restrict patient choice to drive patients to their own mil-order facilities.”
The consumer groups also drew particular attention to the enormous share the deal would afford ESI-Medco in the fast-growing specialty pharmacy market. “The merger is of particular concern to the 57 million Americans that rely on specialty drugs,” the group noted, especially “given the rapidly increasing cost of … specialty drug prices,” which it said increased 19.6% in 2010, versus the 1.4% rise in the overall pharmaceutical market, and is expected to increase by as much as 27.5% by 2013.
Also, as it relates to the area of specialty drugs, and the prevalence of limited-distribution networks for certain drugs, “the dominance of post-merger [ESI-Medco] would give the company the unique power to increase the cost of specialty pharmaceuticals at will,” the consumer coalition stressed.