After almost a year of investigating, the U.S. Federal Trade Commission gave a green light to Express Scripts’ (NASDAQ:ESRX) $29.1 billion takeover of Medco Health Solutions (NYSE:MHS).
The regulatory approval paved the way for the two giant pharmacy-benefit managers, or PBMs, to simultaneously announce they had closed the transaction, which was unveiled in July.
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Voting 3-1 to end its investigation, the FTC said its probe “revealed a competitive market for PBM services characterized by numerous, vigorous competitors who are expanding and winning business from traditional market leaders.”
The FTC said it is confident the Medco buyout won’t change those dynamics and it sees little risk of the merged Express Scripts/Medco exercising monopoly power.
“Our merger is exactly what the country needs now," Express Scripts CEO George Paz said in a statement. "It represents the next chapter of our mission to lower costs, drive out waste in health care and improve patient health.”
Regulators had expressed concern that the deal might unduly increase the combined company’s bargaining power with pharmacies, hurting consumers who need medicine to treat rare or complex conditions.
One FTC commissioner, Julie Brill, dissented from the majority and issued a separate statement.
Brill said the deal is an industry “game changer” that creates a “merger to duopoly” between Medco/Express Scripts and CVS Caremark (NYSE:CVS), “with few efficiencies and high entry barriers -- something no court has ever approved.”
Brill suggested the FTC conduct a retrospective study on the deal in three years.
Express Scripts and Medco said they see the transaction creating synergies of $1 billion once fully integrated, representing 1% of their combined costs. The deal is expected to slightly add to the bottom line of Express Scripts in its first full year.
Shares of St. Louis-based Express Scripts jumped 4.1% to $56.40 ahead of the open, putting them on pace to add to their 21% gain so far this year. Medco’s shares were inactive.