Mention antitrust at a cocktail party, and you’ll probably end up drinking alone. But antitrust has important implications for consumers: “monopolistic behavior” — that is, the type of control that a company with excessive market share can exercise over thatmarket — is bad for consumers in that it artificially drives up prices and deprives them of choice.
The market for prescription drugs is no exception: as with any industry, competition among pharmacies helps to keep prices as low as possible. (Of course, pharmacies don’t have full say over their pricing — it’s a complex market and manufacturers and wholesalers affect pricing as well, which accounts for the high prices of some drugs. But competition among pharmacies is one among several factors that helps to put downward pressure on pricing.)
With this as background, LegitScript’s president and founder, John Horton, recently blogged on the Huffington Post about a possible merger between two pharmacy benefit management (PBM) mail-order companies, Express Scripts and Medco Health Solutions. John notes:
…if you’re on a regimen of prescription drugs, you already know how expensive prescription drugs can be — and you may have found yourself comparing prices among pharmacies, looking for the cheapest deal, or trying to figure out which healthcare plan is least expensive for your needs. Here too, basic antitrust principles hold true: anti-monopolistic competition among America’s diverse pharmacies and healthcare plans is a good thing, and serves to drive down prescription drug prices, making medicines more affordable — and thus, available — to millions nationwide.
Why might the proposed merger between Express Scripts and Medco Health Solutions potentially implicate antitrust laws? As John argues in his blog,
Some analysts estimate that the new entity would control 60 percent of the private sector mail order pharmacy market, and an estimated 30 percent of all prescription drug volume. (A well-settled principle of antitrust law is that you don’t need 100 percent market share to engage in monopolistic behavior — just a big enough chunk that, by throwing your weight around, you end up with an unfair advantage over legitimate competitors.)
Both Express Scripts’ and Medco’s profitability relies heavily on their online pharmacy and mail order business — but the merged company would also supply the local, community pharmacies that they already compete against. That could give the post-merger company the leverage to raise prices to the community pharmacies it supplies, while reducing the costs of their mail-order services. The result could lead to health care plans mandating use of the post-merger company’s mail-order services instead of community pharmacies.
Express Scripts (express-scripts.com) and Medco Health Solutions (medcohealth.com) are both in LegitScript’s database as legitimate Internet pharmacies. They provide a valuable service to consumers who choose to fill a prescription online, and are a great solution for some people, but not everyone. Indeed, LegitScript has consistently adopted the position that brick-and-mortar pharmacies, and the ability to consult with a pharmacist in person, tends to be a superior option for most people. In fact, that’s the point…
…of antitrust laws: (monopolistic behavior) denies people a choice due to artificial price constraints. And, it’s critical to understand that mail-order pharmacies aren’t right for everyone: the adolescent with type-two diabetes or senior with high blood pressure who benefits from continuing consults, in person, with a pharmacist who they know and trust may be better served by a community pharmacy.
Antitrust can sound dry and academic, but it’s one of those things that can have a big effect on your everyday pocketbook. Whether or not the merger proceeds, it’s worth having the Federal Trade Commission (which reviews big mergers) take a close look at the potential effects on prescription drug prices.