The $29.1 billion acquisition of Medco by Express Scripts may send shivers down the spine of rival pharmacy benefit managers and retail pharmacies, but the deal tells us far more about the pharmacy benefit industry and where the opportunities lie over the next few years.

The most telling aspect of this deal is that Express Scripts views its growth strategy through the path of acquisitions; it's simply buying market share at this point. The fact that ESI would pay a 28 percent premium for Medco after Medco had already increased in value by 20 percent in the past year tells me that Express Scripts doesn't see much incremental value in its core offerings. The low-hanging fruit (increased generic dispensing, greater rebates and increased mail-order) has already been exploited to its fullest potential. Its core offerings are not that discernible from the next PBM, so poaching clients from rivals seems like too much work. Instead, the only way to grow is through acquisitions (ESI bought WellPoint's PBM two years ago) and cutting out corporate operational fat. That's probably not good news for those believing the PBMs could really affect the healthcare cost trend.

Secondly, while the majority of drugs channeled to beneficiaries are small-molecule, the biggest growth area remains specialty drugs and the ESI-Medco merger has some opportunities there. Any list of fastest-growing drug classes those treating multiple sclerosis, rheumatoid arthritis and others tends to fall under the specialty drug benefit because of their handling needs and costs. This is a niche market within PBMs, but represents the growth area for drug companies as some of these therapies can cost more than $100,000 a year. Payers want to control this cost and they're oftentimes carving out the specialty drugs to a separate PBM. Two of the major players in this CuraScript and Accredo just happen to be owned by ESI and Medco.

If this deal passes regulatory muster a big if, especially if you look at Walgreens battles in the past year with its PBMs  you could see greater pressure for rebates by these specialty PBMs around specialty drugs. A combined CuraScript and Accredo would gain more power over the specialty drug market, which could spell trouble for drug companies that have pegged their future to emerging specialty drugs.

As we head toward the Wal-Mart effect on pharmacy benefit management, CuraScript/Accredo may be too much consolidation for federal anti-trust regulators. If they say yes, it could be a game changer for pharma.

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