The top two U.S. companies managing prescription drug benefits are uniting in a $29.1 billion deal they say will help achieve key goals of the health care overhaul -- reining in costs and improving patients' health.
Express Scripts announced an agreement Thursday to buy larger rival Medco Health Solutions, a combination that would handle the prescriptions of about 135 million people, more than one in three Americans.
That will give them even more clout in demanding discounts from drugmakers, who are dealing with falling or stagnant revenue as blockbuster drugs taken daily by millions are getting cheaper generic competition.
Pharmacy benefit managers process mail-order prescriptions and handle bills for prescriptions filled at retail pharmacies. They act as middlemen between employers offering prescription drug benefits and drugmakers, extracting significant discounts, often in exchange for giving their brands preferred status over rivals' drugs.
They also hold down costs with tiered co-payments that nudge patients to buy generics or the lowest-cost brand names.
Together, Express Scripts and Medco handled more than 1.7 billion prescriptions in 2010 and reported almost $110 billion in revenue. But Medco, the bigger company by revenue, recently lost several contracts covering millions of people.
Most of their revenue goes back out to pay for medicines, leaving the industry with razor-thin profit margins.
The combined company hopes to wring even lower prices from drugmakers, but it wasn't immediately clear whether that would benefit just their employer and health plan clients, or if some of those savings would be passed on to consumers in the form of lower co-payments.
Patients might see tougher rules for getting medicines for chronic health problems by mail order or requiring more use of generics. Patients whose prescriptions are handled by either company shouldn't see any changes right away, as their drug benefit plans are covered under multiyear contracts.