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Money Minute: A different kind of drug war [Video]

April 03, 2012|By David Lazarus

Most people might not know what a pharmacy benefit manager is. That's unfortunate, because these companies have a lot of clout over people's healthcare.

The topic arises because the Federal Trade Commission has approved the $29-billion merger of Express Scripts and Medco Health Solutions, creating the country's biggest pharmacy benefit manager.

Pharmacy benefit managers, or PBMs, oversee the drug plans for employers and insurers. They dicker with drugstores over how much prescription drugs should cost. And when they're not happy, they storm off in a huff.

Since January, plans run by Express Scripts haven't allowed people to fill prescriptions at the country's largest drugstore chain, Walgreen. The two sides haven't been able to agree on the size of drug payments, so now they simply don't do business together.

Never mind the millions of consumers who've been stuck in the middle.

Express Scripts and Medco say their marriage will be good for consumers. "Our merger is exactly what the country needs now," declares George Paz, chief exec of Express Scripts. "It represents the next chapter of our mission to lower costs, drive out waste in healthcare and improve patient health."

Sure. But when you couple the newly expanded Express Scripts with the next biggest PBM, CVS Caremark, just two companies now account for about 75% of the market. That's a lot of influence over what people can take and where they can fill prescriptions.

Economists say consumers benefit most when there's competition in the marketplace. As far as prescription drugs go, that's now less the case than ever before.

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