FTC Approves PBM Caremark Rx’s Purchase of AdvancePCS

The Federal Trade Commission on Wednesday approved pharmacy benefit manager Caremark Rx's purchase of rival AdvancePCS after investigating the deal's potential effect on competition in the PBM market, the Dallas Morning News reports (Yu, Dallas Morning News, 2/11). Caremark Rx, the nation's fourth-largest PBM, in September 2003 announced the plan to purchase AdvancePCS, the nation's second-largest PBM, for $5.6 billion in stock and cash. The new Caremark Rx is expected to process about 600 million prescriptions per year with an estimated annual revenue of $23 billion. The merger will give Caremark Rx a 20% market share as measured by prescriptions processed, compared with a 22% market share for the nation's largest PBM, Medco Health Solutions. The plan drew criticism about possible narrowing of competition, as well at the $5.6 billion price, which some analysts believe is overvalued (Kaiser Daily Health Policy Report, 9/4/03). FTC officials on Wednesday said that PBMs will face enough competition to make the market viable, and competition from other PBMs, pharmacies and health insurers "should suffice to prevent this acquisition from giving rise to a potentially anticompetitive price increase." Currently, four independent PBMs -- including AdvancePCS and Caremark Rx -- make up the majority of the market, according to the Morning News. Company officials said that state attorneys general investigating antitrust concerns about the merger "have completed their review and closed their investigation of the transaction" (Dallas Morning News, 2/11). The deal still needs to be approved by shareholders of both companies, but the transaction is expected to be complete by the end of March, officials from both companies said (Russell, Tennessean, 2/12).