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Holly Erickson and Tanya Schmidt, Published January 21 2012

Pharmacies threatened by ‘PBMs’

When you start to get signs of a cold or flu or other symptoms, what is the first thing you do? You go to your neighborhood pharmacy. Maybe you even ask the pharmacist for advice. It is certainly possible that the pharmacist’s advice would be to go see your doctor. And there is a good chance that the doctor will give you a prescription and you are right back where you started: at the pharmacy.

Everyone knows this scenario, and everyone takes it for granted. But if two large companies get their way, and the Federal Trade Commission allows them to merge, the combined company will present such monopolistic presence in the marketplace that this scenario may become increasingly rare, as neighborhood pharmacies are driven out of business.

Two companies,/strong>

The companies are Express Scripts Inc. and Medco Health Solutions, and they are pharmacy benefit managers. In fact, they are the first- and third-largest PBMs in the country, and they make their money as the middlemen between drug manufacturers, employer-provided health plans and pharmacies.

The Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights is concerned enough about this that they held a Dec. 8 hearing on the merger in Washington, D.C. In an answer to a question, George Paz, the chief executive officer of ESI, testified, “I can’t stop certain pharmacies from going out of business.” In fact, he is going to help them along.

Also at that hearing was Sen. Al Franken, D-Minn., who pointed out a detail mentioned earlier by Sen. Amy Klobuchar, D-Minn.: Over the past few years, 12 Minnesota communities have lost their only outpatient pharmacy. “It is a huge loss for residents in those communities, especially because Minnesota winters are kind of rough,” he said.

Franken added, “When elderly patients have to drive many miles in the dead of winter, or have someone drive them to pick up their drugs, I worry. There are currently 141 rural communities in Minnesota that have only one pharmacy … You think this merger will help keep the rural pharmacies in business?”

Franken expresses concern for Minnesota communities, but the risk for loss of choice and access to pharmacy services exists on both sides of the Red River.

Market hardball

PBMs play a version of real hardball in the market. They want to dictate which medications can be prescribed and which pharmacies can fill them. PBMs have tried to unilaterally define what does and does not constitute brand and generic drugs, despite existing industry standards.

In fact, PBMs use generics less, meaning consumers pay more and these companies profit. When PBMs funnel sales to their preferred manufacturers and threaten to drop qualified pharmacies from their plan or squeeze more concessions for prescriptions filled at pharmacies, PBMs also profit.

PBMs route more prescriptions through their own mail-order pharmacies rather than through the corner drugstore, putting their competition at a severe disadvantage. While the PBMs ruthlessly press their advantage, the result is poorer and less-convenient service for consumers. This may be why most consumer organizations oppose the merger.

These companies claim they will be able to negotiate lower costs and pass the savings along to their customers. But in this case, getting bigger would mean that patients have less choice in their health care while the PBMs prosper, with no assurance that savings will be passed along to employers and health plans.


Erickson, Pharm. D., is with White Drug #46, West Fargo; Schmidt, Pharm. D., is with White Drug #68, Fargo.