Prescription drug managment companies consolidate

Workers perform inspections on bottles of prescription pills as they go through an automated packaging machines December 2, 2010 in the Medco pharmacy plant in Willingboro, N.J.

Kai Ryssdal: The new health care law is, in fits and starts, rejiggering the health care industry. But the industry isn't wasting any time rejiggering itself.

There was another gigantic health care merger today. Two of the biggest pharmacy benefits managers -- Medco and Express Scripts -- will create the biggest company of its kind. That news left us with two questions: What will the $30 billion deal mean for consumers, and what the heck's a pharmacy benefits manager anyway?

From our health desk at WHYY in Philadelphia, Gregory Warner has the what and the why now.


Gregory Warner: Pharmacy benefits managers act as middlemen between insurance companies and drugmakers and retail pharmacies. The PBM impact costs in a couple of ways, first by negotiating drug prices.

Michael Manolakis: If a PBM is able to say we're representing twice as many million lives as we represented previously, then they would have more leverage with that pharmaceutical manufacturer.

Michael Manolakis is a professor at Wingate University School of Pharmacy. He says PBMs also cut costs by collecting data on the prescribing habits of thousands of doctors.

Manolakis: One of the things that PBMs are able to do is turn that data into valuable information, to help them to say, here's an opportunity to improve your prescribing practice to help them make it more cost-efficient.

By rewarding doctors for prescribing more generics or using that data to shorten the list of drugs they'll pay for. If this merger goes through, it would give Express Scripts and Medco control of one-third of the market.

Jack Hoadley: The question becomes: how do they choose to use that strength?

Jack Hoadley is a research professor at the Health Policy Institute of Georgetown University. He says a giant PBM might have less incentive to pass on those savings to consumers.

Barak Richman researches antitrust and health care policy at Duke Law School. He says as antitrust regulators scrutinize this deal, they'll be taking into account how the industry has shifted since health care reform. Hospital systems are joining forces, teaming up with doctor groups, while insurance companies and pharmacies are exploring ways to cut out the middleman.

Barak Richman: And it is possible that Medco and Express Scripts will make a good case. That given the changing environment, this is really a necessary move to take.

The question for policymakers will be: is what's necessary for Medco and Express Scripts actually a good deal for the rest of us?

In Philadelphia, I'm Gregory Warner for Marketplace.

About the author

Gregory Warner is a senior reporter covering the economics and business of healthcare for the entire Marketplace portfolio.

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