Medco-ESRX Deal Irks Supervalu - Analyst Blog
March 30 2012 - 12:19PM
Zacks
The leading grocery chain and heavyweight pharmacy retailer
Supervalu Inc. (SVU) is now an addition to the
list of many pharmacy companies for whom the takeover of
Medco Health Solutions (MHS) by
Express Scripts Inc. (ESRX) did not go down well.
Supervalu made its view public along with other retail giants
urging the takeover would leave "only two significant competitors
in a highly concentrated industry."
The National Association of Chain Drug Stores (of which
Supervalu is a member), the National Community Pharmacists
Association, and few retail pharmacy companies have filed a lawsuit
at US District Court for the Western District of Pennsylvania
appealing that the merger should be stopped.
Express Scripts wants to takeover Medco Health Solutions for
$29.0 billion. The two pharmacy chains are big players in the field
of Pharmacy Benefit.
Given the large purchasing power, the Pharmacy Benefit Managers
(PBM) negotiate and reduce employers, government agencies and other
clients’ spending on prescription drugs.
If the merger takes place, St. Louis-based Express Scripts and
New Jersey-based Medco would create the largest U.S. PBM,
controlling prescriptions of more than one in three Americans.
Thus, the pharmacy groups are worried that the merger will hurt
several retail pharmacy chains, specialty chains and huge employers
who need pharmacy benefits.
We note, earlier this year that another retail bigwig
Walgreen Company (WAG) had refrained from renewing
its license with Express Scripts.
Therefore, customers who were registered with Express Script had
to refill their prescriptions at new pharmacies or pay for them out
of their own pocket.
Supervalu’s Shop n Save with 50 stores in Illinois and Missouri,
and 34 pharmacies planned to hire more workers and enhance its
pharmacy services to welcome patients with Express Scripts
prescription plans.
It has urged the Express Script customers to transfer
prescriptions well ahead of time, as then the pharmacist at the
Shop n Save stores can arrange for the medicines in advance.
Supervalu holds a Zacks #3 Rank that implies a short term Hold
Rating.
EXPRESS SCRIPTS (ESRX): Free Stock Analysis Report
MEDCO HLTH SOL (MHS): Free Stock Analysis Report
SUPERVALU INC (SVU): Free Stock Analysis Report
WALGREEN CO (WAG): Free Stock Analysis Report
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