This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Express, Medco Antitrust Issues Could Be Bitter Pill

Stocks in this article: MHS ESRX TEVA WAG CVS CHSI UNH WLP

(Express Scipts, Medco deal story updated with analyst commentary)

NEW YORK ( TheStreet) -- Aside from the antitrust issues posed by a merger between Express Scripts (ESRX) and Medco Health Solutions (MHS), the deal also would impact drug companies and distributors.

The companies said on Thursday morning that the $29 billion deal, which would create the largest pharmacy benefits manager by far in the U.S., would be great for Americans and reduce pharmacy costs.

Anthony Vendetti, health care analyst at Maxim Group, said distributors and drug companies will line up against the deal.

The impact of the deal on drug distributors was evident on Thursday, as Medco's main distributor, AmerisourceBergen (ABC) declined by 6% on heavy volume, and based on the belief that its position will be weakened if the deal goes through, because Express Scripts' main distributor is Cardinal Health (CAH). Shares of Cardinal Health rose by 2% on Thursday.

"Express Scripts will work more with their preferred distributor or in the least play the distributors off each other, forcing distributors to give more pricing concessions. It 's a market where margins are already thin and my sense is that the distributors will complain," said Vendetti.

The drug companies won't be happy that this PBM behemoth has much more leverage. "'Every drug company will be against this, and that's a powerful lobby," Maxim Group's Vendetti said.

Analysts say the companies may have signaled how significant the extent of the antitrust issues are in the transaction terms: There will be no breakup fee if the deal fails for regulatory reasons, the companies said in a release explaining the deal terms.

"That's somewhat unusual and an acknowledgment of the risk," said Gabelli Securities health care analyst Jeff Jonas.

Ultimately, analysts say the U.S. Department of Justice and Federal Trade Commission review of the deal will hinge on how the category for these companies is defined: Is this a deal that is taking place within the larger pharmaceutical industry, or is the corporate pharmacy benefit manager market an industry that deserves a narrower definition for the purposes of reviewing this deal?

"The question for this deal is are we talking about a marketplace for the PBM that serves corporate employers, or the broader pill market in the U.S.? The threshold for this deal is how the market is defined, and if it is defined narrowly as the PBM market for corporate employers, the deal might be nixed by the FTC," said Dave Shove, health care analyst at BMO Capital Markets. Shove added, "My bias is that the corporate PBM argument fails as a definition, and the FTC will look at the pill marketplace. I don't think Medco and Express Scripts together move the price of generics."

1 of 4

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,064.56 +10.85 0.06%
S&P 500 2,092.84 +4.07 0.19%
NASDAQ 4,811.9330 +5.0740 0.11%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs