Express Scripts to buy Medco for $29.1B

Associated Press

The top two U.S. companies managing prescription- drug benefits are uniting in a $29.1 billion deal they say will help achieve key goals of the health-care overhaul: reining in costs and improving patients’ health.

Express Scripts Inc. announced an agreement Thursday to buy rival Medco Health Solutions Inc. Together, they would handle the prescriptions of about 135 million people, more than one in three Americans.

That will give them even more clout in demanding discounts from drugmakers, who are dealing with falling or stagnant revenue as an unprecedented amount of blockbuster drugs taken daily by millions are getting cheaper generic competition.

Pharmacy-benefit managers process mail-order prescriptions and handle bills for prescriptions filled at retail pharmacies, acting as middlemen between employers offering prescription drug benefits and drugmakers.

They also hold down costs by extracting discounts and rebates from drugmakers, using tiered co-payments that nudge patients to buy generics or the lowest-cost brand names, and reminding patients to take medicines as scheduled to limit costly complications.

Together, Express Scripts and Medco handled more than 1.7 billion prescriptions in 2010 and reported almost $110 billion in revenue. They have thin profit margins.

The combined company may be able to wring lower prices from drugmakers.

It’s unclear whether patients, or just employers and health plans, will see savings. But patients likely will face stricter rules requiring more use of generics and of mail order services for drugs for chronic conditions, and more programs aimed at ensuring they’re on the best medicine for them.

Changes won’t happen soon, though, as drug- benefit plans are covered under multiyear contracts.