Will pharma fight the Express-Medco deal?

As if drugmakers didn't have enough pressure on sales from the upcoming patent cliff, they're now facing the threat of a pharmacy benefits merger that would turn two 900-pound gorillas into one King Kong of pricing power. As Dow Jones reports, pharma companies aren't cringing in fear just yet--at least not in public--but they might soon grab some burning torches and make a run at antitrust regulators, to see if that can keep the monster away.

Since Express Scripts announced last week that it planned to buy Medco Health Solutions for $29-plus billion, drugmakers have been taciturn about the possible threat to U.S. drug prices. Those who have spoken have tended to downplay the risk. Eli Lilly CFO Derica Rice, for instance, said the company could keep its negotiating power simply through the advantages its products offer over generics. (Never mind that the company's recent earnings clearly suffered from generic competition; that's another story.)

But industry experts and analysts have a different story to tell. BioPharma Alliance's Michael Luby, for instance, told Dow Jones that the Express/Medco combo would offer "extraordinary purchasing power for the combined company to leverage with pharmaceutical companies." And Morningstar analyst Damien Conover said the companies might raise antitrust concerns with regulators; that wouldn't be much of a stretch, given that the word "antitrust" was already all over the media coverage when Express and Medco announced the deal.

Price cuts in European countries such as Germany and Spain have already been dogging Big Pharma. In the U.S., drugmakers have escaped government price negotiation, at least so far, though companies have discounted their drugs for Medicare and are subject to mandatory Medicaid rebates. Pharma has, of course, spent lots of time, money and effort lobbying against U.S. government pricing pressure.

Now, the threat comes from the private sector. Besides the obvious danger of sheer size, the planned PBM merger involves at least one company, Medco, that hasn't been shy about subjecting drugs to its own comparative-effectiveness research--something the federal government has had difficulty embracing for political reasons. Pharma isn't wild about the idea. So, if the FTC doesn't start getting letters from drug CEOs, we'd be surprised.

- read the Dow Jones story