February 24, 2012—Hospitals enrolled in the 340B drug discount program asked the Federal Trade Commission (FTC) yesterday to challenge the merger of pharmacy benefit managers (PBMs) Express Scripts Inc. (ESI) and Medco Health Solutions, saying the union of the two health care giants would undermine their safety-net mission and further reduce their access to specialty medications at 340B prices.
In a Feb. 23 letter to FTC Chairman Jon Leibowitz, Safety Net Hospitals for Pharmaceutical Access (SNPHA) said stopping the merger “would help protect the 340B program and support the ability of 340B covered entities to continue treating their disadvantaged patient populations.”[ms-protect-content id=”2799”] SNHPA represents more than 800 hospitals enrolled in 340B.
“Over the last year, we have seen an increasing number of PBMs discriminate against 340B hospitals by forcing them to accept reimbursement rates below the rates paid to non-340B providers, which significantly weakens the hospitals’ ability to fulfill their safety-net mission,” said SNHPA General Counsel William von Oehsen in a prepared statement. “We believe this merger will likely exacerbate this disturbing trend. The new company’s unprecedented market dominance would allow it to discriminate against 340B providers with impunity. We also believe the company’s sizable specialty drug division would likely further limit 340B providers’ already restricted ability to purchase specialty medications, which interrupts continuity of care, diminishes patient choice, and could jeopardize patient care and safety.”
The National Association of Chain Drug Stores, the National Community Pharmacists Association, and the Food Marketing Institute (which represents large grocery chains) had earlier come out against the $29 billion deal, which would combine two of the nation’s three largest PBMs. The merger is also opposed by a coalition of leading U.S. consumer groups. U.S. Sen. Herb Kohl (D-Wis.), the chairman of the Senate Antitrust, Competition Policy and Consumer Rights Subcommittee, also recently wrote to FTC Chairman Leibowitz saying the proposed merger “presents serious competition concerns which should be examined carefully.”
If the merger were approved, the newly formed company would account for more than 40 percent of the total U.S. prescription drug market and approximately 50 percent of the market for large health plans. In addition, the joint company’s specialty medication division would account for 52 percent of the total market for high-cost specialty drugs that are used to treat complex or rare conditions and require special handling and control.
In its letter to Leibowitz, SNHPA said the combined company’s unprecedented market power would enable it to impose reduced pharmacy reimbursement rates on 340B participants.
“Faced with losing a substantial amount of their business, 340B pharmacies would have no choice but to accept whatever reimbursement terms are offered by the company, depriving covered entities of the savings they need to fulfill their safety-net mission,” SNHPA said. In addition, the group said, there is no guarantee that the new company “would not simply pocket the savings” instead of passing it along to health plans and their enrollees.
SNHPA also observed that the new company would control more than half of the specialty drug market. It said many 340B hospitals already report it is often hard to buy certain specialty drugs at all due to restricted distribution systems and, even when they can be bought, they are not available at a 340B price.
“The new company’s stranglehold on the specialty drug market,” SNHPA said, would greatly reduce its incentive “to make specialty medications available to covered entities, much less at 340B prices.”
ESI, which is purchasing Medco, is expected to file papers with the FTC soon that would start a 30-day countdown for a decision on the merger. The next step in the process would be the FTC staff’s transmittal of its recommendation to the commissioners. The commission rarely overrides its staff’s recommendations.[/ms-protect-content]