Private suit filed to stop Express Scripts, Medco

WASHINGTON, Thu Mar 29, 2012 – Two pharmacy groups and several small pharmacy chains asked a federal court in Pennsylvania on Thursday to stop Express Scripts Inc. $29 billion acquisition of Medco Health Solutions Inc.

The merger partners had said on Wednesday they expected the deal could close as early as next week, indicating they believed that Federal Trade Commission approval was likely.

The National Association of Chain Drug Stores, the National Community Pharmacists Association, and nine retail pharmacy companies filed a lawsuit on Thursday arguing that the court should stop the merger because it would leave “only two significant competitors in a highly concentrated industry.”

Pharmacy benefits managers, or PBMs, like Medco handle prescription drug plans for insurance companies and employer clients, and also operate large mail-order pharmacies.

The National Association of Chain Drug Stores counts among its members such retail heavyweights as CVS Caremark Corp., Walgreen Co., Wal-Mart Stores Inc., Target Corp., Supervalu Inc. and Rite Aid Corp.

The groups argued that if the deal is allowed to go through, it would hurt retail pharmacies, specialty pharmacies which administer expensive and hard to manage drugs for conditions like hemophilia, and large employers who need full service, nationwide pharmacy benefits services.

The lawsuit was filed in the U.S. District Court for the Western District of Pennsylvania.

Express Scripts-Medco deal could close next week

ST. LOUIS, Wed Mar 28, 2012 – Pharmacy benefits managers Express Scripts Inc. said on Wednesday it expects its plan to buy rival Medco Health Solutions Inc. for $29 billion to close as early as the week of April 2, subject to the satisfaction of closing conditions.

Previously the companies said they expected the deal would be completed by the earlier part of the second quarter of 2012. Pharmacy benefits managers such as Medco and Express Scripts are hired by insurance companies to handle prescription drug plans. They sometimes provide drugs by mail order, through their own pharmacies and by contracting with chains and independent pharmacies.

The deal, announced last July, would combine two of the three largest PBMs that are big enough to manage prescription drug benefits for large, nationwide companies. The third is CVS Caremark Corp.

Express Scripts, Medco Health Solutions cut merger termination fee

ST. LOUIS ― Express Scripts Inc. said it agreed to cut the termination fee on its pending $29 billion takeover of Medco Health Solutions Inc.

In a regulatory filing on Tuesday, Express Scripts said the companies agreed to reduce the termination fee on the deal to $650 million. However, if either company changes its recommendation on the merger, the termination fee would still be $950 million.

In July, both companies signed the biggest ever deal in the healthcare services industry to create a pharmacy benefits  manager that has access to nearly one-third of the entire American market.

Shares of Express Scripts had closed at $47.09 Monday on Nasdaq, while Medco shares closed at $57.11 on the New York Stock Exchange.

Express Scripts shares jump 9.5 percent as forecast reassures

ST. LOUIS ― Shares of Express Scripts Inc. jumped 9.5 percent as the U.S. pharmacy benefit manager’s profit outlook for 2011 was less dire than some investors had feared and the company offered positive financial forecasts through 2014.

Express Scripts cut its projected 2011 profit range by about 6 percent, citing higher spending and fewer prescriptions being filled because of consumer worry about the weak economy.

It said spending would rise due to a contract dispute with drugstore chain Walgreen Co. and in anticipation of integrating its $29 billion purchase of rival Medco Health Solutions Inc.

Express Scripts last month warned investors of potentially weak prescription volume, causing some analysts to lower their profit forecasts and investors to send the stock down.

“A lot of people had been expecting it was going to happen and a lot of them were saying, ‘I don’t want to own it ahead of that because it could pull back,’“ Jefferies & Co analyst Brian Tanquilut said. “But now we’re seeing that it’s not as bad … This sets the bottom for the stock.”

Separately on Thursday, Express Scripts revealed fiscal forecasts through 2014 in a securities filing on the Medco merger.

The projections, which the company said were prepared a month before the Medco deal was announced and pertained to it as a standalone company, offered earnings-per-share estimates that eclipse the average estimates of analysts, according to Thomson Reuters I/B/E/S.

“Even with a more moderated script view suggested since then, we see this disclosure as providing comforting clarification around future growth,” Barclays Capital analyst Lawrence Marsh said in a research note.

Marsh said the annual growth in EBITDA for 2012 to 2014 amounted to about 12 percent, above his expectations of average growth of 8 percent.

The merger filing also revealed that Medco approached Express Scripts about a transaction in early June, more than a month before they announced the deal, and that the companies had talked as early as 2006 about a potential combination.

Medco shares were up 5.7 percent to $48.24.

Express Scripts’ lower 2011 profit forecast is the latest sign that Americans are cutting back on healthcare spending to save money because of uncertainty in the economy.

Chief Financial Officer Jeff Hall told an investor conference last month that Express Scripts generally sees prescriptions increase 3 percent to 5 percent in an average year, but there has been virtually no growth over the past three years.

Hall also said the economy had worsened over June and July and the company did not see it improving.

Since Hall’s comments, Express Scripts shares had fallen about 16 percent, compared with a 4 percent drop for the S&P 500 Index.

Express Scripts said in a statement on Thursday, “The company now believes that it is more likely than not that the continuing stagnant economic conditions will negatively impact claims volumes to a greater extent than it had anticipated.”

It expects prescription claims will fall short of its previous forecast for 750 million to 780 million this year.

Overall, Express Scripts forecast 2011 earnings of $2.95 to $3.05 per share, down from its prior view of $3.15 to $3.25.

The company noted that its revised range still amounts to annual earnings per share growth of between 18 percent and 22 percent.

Since June, Express Scripts has been locked in a contract dispute with Walgreen, which plans to stop filling prescriptions for Express Scripts members starting in January. Express Scripts said it was spending to help clients as they transfer away from Walgreen pharmacies.

In cutting its forecast, Express Scripts also pointed to greater competition in the marketplace “resulting in increased client demands and expectations.”

Express Scripts shares were up $3.42, or 9.5 percent, to $39.36 in late-morning trading on Nasdaq.

Medco executives to discuss Express Scripts deal

FRANKLIN LAKES, N.J. ― Medco Health Solutions Inc. said its chairman and chief executive and general counsel will share “insights and perspectives” on the company’s planned $27.5 billion acquisition by Express Scripts Inc.

The value of the deal has dropped from $29.1 billion since it was announced July 21. The spread ― or difference between Express Scripts’ offer price and Medco’s shares ― stood at roughly 24 percent on Wednesday afternoon. Medco shares were trading below the level they closed at the day before the deal was announced.

In a filing with the U.S. Securities and Exchange Commission, Chairman and CEO David Snow said he would hold a live broadcast on Aug. 15 with Medco’s top 400 “leaders.”

“The case for uniting with Express Scripts is compelling, but it’s also complex,” Snow said in the filing.

The deal would combine two of the three largest U.S. pharmacy benefit managers (PBMs) and create an industry leader that holds about one-third of the market.