AAI Advisory Board Member Gustafson Testifies during House Judiciary Subcommittee Pharmacy Benefits Manager Merger Hearings

Sep 21 2011
Testimony and Interventions

American Antitrust Institute Advisory Board Member Dan E. Gustafson of Gustafson Gluek PLLC in Minneapolis, Minnesota testified before the House Committee on the Judiciary’s Subcommittee on Intellectual Property, Competition and the Internet today during the hearing on the proposed merger between two pharmacy benefit managers (PBMs), Express Scripts and Medco.

In his oral testimony, Gufstason raised antitrust concerns in the form of four questions about the
merger:

  • Could the merger reduce competition for the provision of PBM services to large plan sponsors?
  • Would the merger pose a threat of coordinated interaction by eliminating a major competitive firm from the market?
  • Could the proposed merger lead to increased prices in the distribution of certain specialty pharmaceuticals?
  • Will the proposed merger increase the exercise of monopsony power to reduce the local delivery of pharmaceutical services?

Gustafson’s analysis has just begun and has been limited to considering publicly available materials. The top three PBMs, CVS Caremark, Express Scripts and Medco, control approximately 50 percent of the market when measuring prescriptions filled or controlled. If the market concentration is measured in terms of contractual arrangements with large plan sponsors,the market is even more concentrated, with the big three PBMs controlling over 80 percent," Gustafson stated in written testimony submitted to the subcommittee.

"Because the proposed merger would give Express Scripts-Medco a much larger role as a PBM, it will expand its control of patient data and realize an increased ability to use this data to move patients to its own pharmacy operations. This concern is real in light of CVS Caremark’s demonstrated ability to use data received in its PBM capacity to boost sales of its CVS pharmacies," Gustafson added.

Gustafson is heading an AAI working group that is authoring a white paper to make recommendations to the FTC with respect to this proposed merger. The working group invites comments.

 

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