Senate questions what benefit a super-PBM would have for pharmacies, employers

WHAT IT MEANS AND WHY IT'S IMPORTANT — The longer this proposed Express Scripts-Medco deal remains under the microscope, the more people don't seem to like what they see. The general tone at this Senate hearing was against the merger. Many of the senators in attendance were expressing concern that the proposed merger would negatively impact access to pharmacy, which is perhaps the greatest import of the possibility of an Express Scripts-Medco super-PBM. If one of the larger pharmacy chains in the country can't stomach the proposed reimbursement rates from one-half of that equation, what chance does independent pharmacy have in managing reimbursement rates if Express Scripts and Medco were merged?

(THE NEWS: Express Scripts, Medco grilled by Senate antitrust committee. For the full story, click here.)

Of the concerns raised, senators also questioned how much of the cost savings realized by the combined super-PBM would trickle down to consumers?

"I am particularly concerned that this type of consolidation would leave very few options for large employers who often rely on the big three PBMs to manage and administer their complex benefit plans," noted Sen. Al Franken, D-Minn., in his opening remarks. "This merger will ultimately mean less choice for those companies. That is something we need to be concerned about. … But I am most interested in hearing how Express Scripts can guarantee that those cost savings will be passed down to its customers and won't just result in higher profits for the company."

There wasn't a lot of confidence in the room, with the exception of the chief executives of the respective PBMs, that those cost savings would trickle down, necessarily. "We all know that innovation is the fruit of competition and that the more competitors, the more innovation and the better the consumer is served," challenged Sen. Herb Kohl, D-Wis., chairman of the Senate subcommittee. "You seem to be making an argument to the contrary. Have you come up with a new concept for how capitalism works? … Would you suggest that, if you could also take over Caremark and CVS that would be the best thing for everybody? You control the whole market. Would you then innovate in a way that would not be possible otherwise?"

At one point during the hearing, George Paz, Express Scripts CEO, countered that the merged PBM would have to sustain the viability of independent pharmacy and acknowledged how important those smaller chains were to a pharmacy network. "My intention is to work a deal with the independent pharmacist and reimburse them at a higher rate than the [big-box pharmacies]," he said. "Our clients … are going to insist that we have that access to the [independent] pharmacist."

Express Scripts' clients also may be insisting that the company maintain access with some of those big-box pharmacies as well, namely Walgreens, regarding that national pharmacy chain's stand-off with Express Scripts over adequate reimbursement rates. Two days following the hearing, Walgreens produced 250,000 signatures from the nation's military healthcare plan Tricare demanding that Walgreens remain in the Express Scripts network. The pace of petition signatures from Tricare members seeking to retain access to Walgreens and their supporters has reached more than 10,000 per week in recent weeks, the pharmacy operator added.