Yesterday the Senate Judiciary Committee Antitrust, Competition Policy and Consumer Rights subcommittee held a hearing on the proposed Express Scripts/Medco merger. The merger would unite two of the largest Pharmacy Benefit Managers (PBMs) in the nation, giving them 40 percent of the market share.

PBMs are the middlemen of the pharmaceutical industry which negotiate drug rebates for health insurers and provide other cost-saving services. They also operate mail-order pharmacies, which are becoming increasingly popular for those with chronic conditions. This merger would give Express Scripts/Medco 60 percent of the mail-order pharmacy market share.

Opponents failed to show that the merger would raise prices for consumers, focusing instead on the loss of market power many independent pharmacies would face when competing against a larger mail-order pharmacy. They also emphasized the lower quality of customer service of PBM-run pharmacies. Proponents (including the two CEOs) argued that the administrative efficiencies created by the merger would lower costs to consumers and allow the firm to provide more services, such as adherence programs.

All mergers have winners and losers; in the case of Express Scripts/Medco, the losers are friendly neighborhood pharmacists. Neither side has presented hard data on whether consumers would profit from a more powerful PBM, but evidence suggests that mail-order pharmacies and other PBM services lower prices and raise adherence, which in turn lowers other health costs. Yesterday, opponents of the merger seemed to be fighting a general trend of growing PBM influence, instead of raising serious anti-trust issues.

What you have here is similar to a Walmart-type expansion: a large organization offering cheaper products and lower transaction costs threatening traditional mom-and-pop stores. Whether you are a fan of superstores or not, however, the bottom line of this issue must be costs- we need lower drug prices to mitigate rising health care costs.

-Ryan Holland