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Large Tempe employer Express Scripts cleared for merger with Medco

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A dose of economic medicine

Express Scripts had a sizeable economic impact on Tempe, according to a 2010 study by the University of Missouri-St. Louis.

- Employees: 1,704 (full-time equivalent)

- Total pay: $106 million (with benefits)

- Average yearly income: $55,868 (before benefits)

- Local and state taxes paid: $8.4 million

- Food and lodging revenue from visiting trainees: $350,000

- Capital investment: $2.4 million

WASHINGTON – The Federal Trade Commission on Monday approved the $29.1 billion merger of pharmaceutical giants Medco and Express Scripts, one of the largest private employers in Tempe.

The FTC’s 3-1 vote clearing Express Scripts’ acquisition of Medco followed an eight-month investigation into the effects the merger would have on the industry.

“Our merger is exactly what the country needs now,” said Express Scripts CEO George Paz in a statement. “It represents the next chapter of our mission to lower costs, drive out waste in health care and improve patient health.”

A spokesman for Express Scripts said Monday that the company could not yet speculate on how the merger would affect its Tempe facility and the 1,700 people employed there. But after testifying to a Senate subcommittee in December, Paz said Express Scripts’ Arizona facility is critical to the company.

“We’re only a few hours into this, and we’re going to evaluate the organization,” said Brian Henry, an Express Scripts spokesman. “We’re just starting down the road of bringing the two companies together.”

Henry said there has been no change since Paz’s statement in December. He did say that there will be an evaluation of the two companies’ structures with the goal of “bringing together the best people, programs and processes to benefit our clients and patients.”

Paz testified in December that the merger could put some of the company’s “back office” positions at risk, but said after the hearing that there are no such positions at the Tempe facility.

“That’s not back-office (in Tempe),” Paz said on Dec. 6. “That’s call centers. That’s pharmacies. It’s very important to our business.”

The Express Scripts-Medco merger still faces opposition from trade associations and lawmakers who argue the merger would benefit the companies but could hurt consumers and give the merged companies an unfair advantage over other pharmacy benefit managers.

“A merger of Express Scripts and Medco would have dire consequences for patients and the retail community pharmacies that serve them,” said Steven Anderson, CEO of the National Association of Chain Drug Stores, in a statement last week announcing a lawsuit to block the merger.┬áNACDS

was joined in the suit in U.S. District Court in Western Pennsylvania by the National Community Pharmacists Association and nine retail pharmacies, according to a statement from the groups.

But most of the FTC commissioners disagreed Monday. The three who voted to allow the merger said their investigation found a competitive market that is continuing to grow and likely will not be negatively affected by the merger.

“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,” the commissioners said in a statement.

“While this transaction appears to result in a significant increase in industry concentration, nearly every other consideration weighs against an enforcement action to block the transaction,” they said.

Dissenting Commissioner Julie Brill said she hopes she is wrong about the anticompetitive effects of the merger will have, but doesn’t think she will be.

“This $29 billion merger – between two of the largest three pharmacy benefit management providers – is a game changer,” she said. “I have reason to believe that this merger is, in fact, a merger to duopoly with few efficiencies in a market with high entry barriers – something no court has ever approved.”