I have commented in previous notes about the emergence of Big Medicine, defined as Big Payors plus Big Pharma plus Big Providers (see: Physician Private Practice Declines; the Last Barrier to Emergence of "Big Medicine"). Part of the incentive for the creation of large health systems through mergers is to achieve more negotiating power relating to reimbursement by insurance companies (see: Health Systems Use Their Regional Dominance to Muscle Insurance Companies). The rights of healthcare consumers are often forgotten in this stampede. You can now add another giant to this list of "bigs" -- the giant pharmaceutical bebefits manager (PBMs) (see: As Health Care Giants Merge, Pharmacies Aren't Happy). Below is an excerpt from the story about a merger in this setor:
Express Scripts sealed its long-planned deal to buy Medco Health Solutions on Monday after the Federal Trade Commission voted 3-1 that it would not stifle competition in the industry. The two companies already provide prescription drug benefits services to some 135 million people — more than 1 out of every 3 Americans. But while the FTC might not think the $29 billion union of Express Scripts and Medco threatens the market for how prescription drugs are distributed to patients, owners of brick-and-mortar drug stores certainly do. The National Association of Chain Drug Stores and National Community Pharmacists Association have been running a furious lobbying campaign against the deal for months called Too Big To Play Fair. They insist their members cannot compete with the much larger pharmacy benefit managers, and particularly those firms' mail-order pharmacies. In fact, due to a contract dispute, patients whose pharmacy benefits are handled by Express Scripts are currently unable to purchase drugs at Walgreen's, the nation's largest pharmacy chain. Medco customers, however, will apparently continue to have access to Walgreens, at least until current contracts expire, even under the merged entity. Meanwhile, the community pharmacy groups say they will persist with a lawsuit filed last week in federal district court in Pennsylvania, despite the fact that the deal is now complete....So what might this mean for consumers? ....[T]he two companies say the deal will help control health care costs, but it remains to be seen whether bigger will actually be better.
There's lots of evidence that pharmaceutical companies can, and will, cut self-serving deals with the PBMs to hurt consumers and retail drug stores (see: Pfizer Cuts Deal with PBMs to Continue to Profit from Lipitor). Here's more information about the deliberations within the FTC (see: Indies Sue Over Express Scripts-Medco Merger):
Many tracking the [Express Scripts-Medco merger]...had expected that any approval would come with some strings attached. U.S. Federal Trade Commission Chairman Jon Leibowitz had moved for a consent agreement that would have prohibited Express Scripts from engaging in conduct that would hinder expansion of competition, but his proposal was not supported and was withdrawn. One of the four FTC commissioners, Julie Brill, abstained from voting and issued a dissent calling the merger an “industry game changer” that would create a “a merger to duopoly with few efficiencies in a market with high entry barriers—something no court has ever approved.” The three remaining commissioners voted to approve the deal.
I suspect that the many of the small, independent drug stores are dinosaurs and on their way out. This will be another blow to the quality of life in smaller towns where the local pharmacist provides key services. I believe that the large retail pharmacy chains like CVS and Walgreens will find a way to survive, sometimes providing space for walk-in clinics (see: Wal-Mart Launches Co-Branded Walk-In Medical Clinics in Three Cities; Rite Aid Drugstores Roll Out Telemedicine; New Model for Walk-in Clinics). Here's a look at what the future may hold for large-city drug stores (see: The Future of Drugstores: Operators Broaden Offerings to Capture Market Share):
This summer a new store opened in New York City that created more buzz than retail industry insiders had witnessed in quite a while. The store does not belong to a luxury apparel brand on swanky Madison Avenue, however. It’s a 22,000-square-foot drugstore in Manhattan’s Financial District. The store, operated by regional chain Duane Reade, which is owned by Walgreen Co., blows apart the very idea of what a drugstore is supposed to be. Located on 40 Wall Street, in a former Chase Manhattan Bank building, it features on-site hair and nail salons, an in-store health clinic, an expansive grocery, fresh food and a makeup section worthy of a department store.
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