Take, for example, a proposed merger by two giant Pharmacy Benefit Managers (PBM), Express Scripts, Inc., (ESI) and Medco. While these companies inherently have the right to pursue profits, as all companies do, local governments have a duty to protect the economic base of their communities.
The prospective merger could be a real cash cow for the two companies, who after the merger will be called ESI. Together, they’ll represent a majority of the market share in their part of the industry which will give them sufficient economic muscle to influence prices and possibly even drive their competitors out of business. Both of these benefits will be very lucrative for ESI as it emerges from the merger.
But for the local governments looking out for the best interests of their communities, the downside of this merger is all too evident. First, higher prescription prices will put a lot of local residents in a bind, particularly at a time when the economy is all but anemic. What kind of city administrator wants to see local resident having to choose between purchasing their food or purchasing their medicine? Not me.
Secondly, if ESI is able to drive local pharmacies out of business, that will be a huge inconvenience for local citizens and a huge loss of tax revenues to our community’s tax base. And if ESI pushes patients into becoming mail order customers, then zero dollars will be coming back to the coffers of the local communities for all of their medical sales. Again, a big loser for us.
And thirdly, for local employers, their health care costs could be going up as a result of this merger. That’s because the pool of PBM is already small and after the merger, it will be even smaller. Less competition nearly always yields higher prices. Higher prices for prescriptions means higher prices for the premiums being paid by companies for coverage.
So when there’s a big winner and a big loser to an issue, everybody ends up being duty-bound to look out for their best interest. In my estimation, local governments and the people they represent are going to be the big losers from this merger.