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Tricare pharmacy merger worries lawmakers

Seven lawmakers have written to the Pentagon expressing concern over a proposed merger between the company that manages Tricare’s pharmacy benefit and another corporate pharmaceutical giant.

The bipartisan group, led by Reps. Walter Jones, R-N.C., and Joe Courtney, D-Conn., said the transaction could lead to higher drug prices as well as a decline in benefits.

The lawmakers also have written to the Federal Trade Commission about the merger between Tricare’s pharmacy benefit manager Express Scripts of St. Louis, Mo., and Medco of Franklin Lakes, N.J.

The FTC is investigating the deal because it would create a company with control of about 30 percent of all U.S. prescriptions — for about 135 million people — and 60 percent of the mail-order drug market.

The two companies began talks last July.

“On its face, increased concentration suggests greater opportunity to leverage economies of scale and realize cost savings,” the lawmakers wrote. “However, there is little evidence that increased [pharmacy benefit management] market concentration will significantly lower costs for consumers or the American taxpayer.”

The merger is opposed by the National Community Pharmacists Association, which represents independent pharmacists, and Preserve Community Pharmacy Access NOW!, a coalition of 60 organizations and groups that believe the merger will hurt overall health care.

“This merger would further reduce competition in the already concentrated [pharmacy benefit management] market and could lead to higher prescription drug costs, limited patient choice and inferior service,” NCPA Chief Executive Officer B. Douglas Hoey said.

An Express Scripts spokesman said he could not comment on the merger because Medco operates as separate company. He expects the transaction to be closed during the first half of this year.

“The merger will be good for patients, employers and health plans — including Tricare — leading to safer and more affordable medicines. It’s the right merger at the right time for the country, which very much needs more affordable health care,” Express Scripts spokesman Thom Gross said.

Public Health Service Rear Adm. Thomas McGinnis, chief of Tricare’s pharmaceutical operations director, said the contract process will help keep cost increases in check.

Express Scripts won the Tricare contract in 2008 and is in its third exercised option year of five. According to McGinnis, other companies are vying for Tricare’s business, worth $6.1 billion in fiscal 2009.

“The only thing we worry about is adequate competition. I can count five big players out there right now that are probably going to bid on the contract we have put on the streets. … I don’t know how many will bid but there are some big players even without the merger issue,” McGinnis said.