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Regulators approve $29B sale of Medco to Express Scripts

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St. Louis-based pharmacy benefit management company Express Scripts Inc. today announced it completed its previously announced $29.1 billion acquisition of Medco Health Solutions Inc., of Franklin Lakes.

The Federal Trade Commission today approved the merger, just weeks after the companies jointly filed with the Securities and Exchange Commission to delay the deal until the "earlier part of the second quarter of 2012," which began today. As a result of the transaction, the newly formed Express Scripts Holding Co. will operate as the largest pharmacy benefits manager in the United States.

Both Medco and Express Scripts have large mail-order operations, which allow patients to order prescriptions through the Internet and postal service. The National Association of Chain Drug Stores launched a series of print and radio ads attacking the merger in October, arguing it would give the combined company too much market power, and that some patients might be forced to use the mail-order system.

In a statement issued this afternoon, NACDS and the National Community Pharmacists Association representatives said they plan to file a motion with the court today, requesting that the companies keep their assets separate pending review of the lawsuit.

“We are disappointed that the (FTC) based some of its views of the PBM-pharmacy marketplace on old, inaccurate data, despite NACDS and NCPA providing evidence to the contrary,” said NACDS President and CEO Steven C. Anderson. “While the claims of savings touted by merger supporters are exaggerated and highly dubious, there is no evidence to believe that any supposed savings will be realized by patients, plan sponsors and health plans.”

In a statement, Dave Marley, president of the independent group Pharmacists United for Truth and Transparency, said regulators should be looking into the existing practices at large pharmacy benefits managers.

“Large PBMs often claim they are transparent with clients, then mark up drug costs,” Marley said. “They line their pockets with profits while plans sponsors and consumers pay the price.”

According to the merger announcement, the company expects $1 billion in savings once it is fully integrated, which represents 1 percent of the combined companies' costs.

Express Script expects the deal to be slightly accretive in the first year after closing, and moderately accretive in the second full year after integration.

Medco shareholders will receive .81 shares of Express Scripts Holding Co. and $28.80 in cash, for a total compensation of $71.36 per share. Express Scripts shareholders now own 59 percent of the company, and Medco's shareholders own 41 percent.

The new headquarters will be in St. Louis, and Express Scripts Chairman and CEO George Paz will serve in both roles for the combined company. Two Medco board members will join Express' board.

An Express Scripts spokesman said it is too early to decide the fate of Medco's New Jersey branches and employees.

"We are only a couple of hours into being merged, so we'll need time to evaluate the organization everywhere and make decisions that bring together the best of both companies," Brian Henry said. "We won't speculate any activities yet."

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