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Express Scripts wins FTC clearance, closes Medco buy


(Reuters)—U.S. antitrust regulators approved Express Scripts Inc.'s purchase of rival Medco Health Solutions Inc., the Federal Trade Commission said on Monday, following a contentious eight-month review.

The roughly $29 billion deal, first announced in July, combines two of the three largest U.S. pharmacy benefit managers into the clear industry leader. Separately, the companies announced they completed the deal.

Express Scripts shares rose more than 4% in Monday trading on Nasdaq. Before Monday's trading session, Medco shares were converted into Express Scripts shares and cash, based on terms of the deal.

Medco and Express Scripts maintain that a combined company with more clout would benefit consumers by driving down prescription costs, while critics had said the deal would lead to higher prices and worse service for patients.

PBMs administer drug benefits for employers and health plans and run large mail-order pharmacies.

The commission voted 3-1 to close its investigation into the deal. No conditions or asset sales were imposed on the companies.

The majority of commissioners stated that their investigation revealed a “competitive market for PBM services characterized by numerous, vigorous competitors who are expanding and winning business from traditional market leaders.”

“The acquisition of Medco by Express Scripts will likely not change these dynamics,” the statement said.

In her statement dissenting with the majority, Commissioner Julie Brill called it a “merger to duopoly with few efficiencies in a market with high entry barriers—something no court has ever approved.

"I therefore respectfully submit that the commission should have filed a complaint in federal district court seeking to enjoin the transaction pending a full trial on the merits here at the commission,” Ms. Brill said.

The decision comes after months of tension for traders anxious to know if the deal would go through. At one point, shortly after the deal was announced, Medco's share price was 27% below the offer value, and some analysts initially called it a coin flip over whether it would win regulatory approval.

Large grocery chains, many of which operate their own pharmacies, community pharmacies and some consumer groups opposed the deal, saying a combined Express-Medco would gain too much power in the market and would squeeze them financially.

Last week, the National Assn. of Chain Drug Stores, the National Community Pharmacists Assn. and nine retail pharmacy companies filed a lawsuit in the U.S. District Court for the Western District of Pennsylvania seeking to stop the deal.

Express Scripts said it still expected $1 billion in cost savings and other synergies from the acquisitions. The deal is expected to slightly add to earnings per share in the first year after closing, Express Scripts said.