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Express Scripts Gets FTC Approval, Closes $29 Bln. Medco Health Acquisition

Pharmacy benefit manager Express Scripts Inc. (ESRX: Quote), Monday completed its $29.1 billion acquisition of Medco Health Solutions Inc. (MHS: Quote), after getting the nod from US Federal Trade Commission.

The FTC commissioners voted 3-1 in favor of the merger after reaching a conclusion that the acquisition of Medco by Express Scripts will not change the dynamics in the pharmacy benefit manager (PBM) industry.

On July 21, 2011, Express Scripts agreed to buy Medco Health Solutions for $28.80 in cash plus 0.81 Express Scripts share for each Medco share held. The companies expect the deal to be slightly accretive to earnings, excluding integration and deal-related costs, in the first full year after closing and moderately accretive once fully integrated.

FTC in a statement said, "The commissioners investigation revealed a competitive market for PBM services characterized by numerous, vigorous competitors who are expanding and winning business from traditional market leaders."

FTC also said its investigation revealed that "the merging parties are not particularly close competitors, the market today is not conducive to coordinated interaction, and there is little risk of the merged company exercising monopsony power."

Meanwhile, Julie Brill, the FTC commissioner who dissented, said the $29 billion merger between two of the largest three PBM providers is a "game changer" in the industry and believes the merger to be "a merger-to-duopoly". "This merger will create a highly concentrated market that should be presumed to be likely to enhance market power," she said.

Commissioner Brill has also called on the FTC to conduct a thorough analysis of the industry three years from now to determine "if prices to employers in fact have gone down."

Express Scripts Chief Executive George Paz said, "Our merger is exactly what the country needs now. It represents the next chapter of our mission to lower costs, drive out waste in healthcare and improve patient health."

ESRX is currently trading on the Nasdaq at $56.01, up 3.40%, on a volume of 17.7 million shares, above the three-month average volume of 8.8 million.

by RTT Staff Writer

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