Decoding Wall St.: Express Scripts and Medco Merger is No Joke
Express Scripts (NASDAQ: ESRX) and Medco Health Solutions (NYSE: MHS) are two companies that you likely are unaware exist. We would compare each to giant squids that swim deep beneath the ocean’s surface; you know they are there but never see them.
Now, one giant squid, Express Scripts, is poised to become even stronger because it’s swallowing its competitor in a merger deal valued at $34 billion after finally receiving government approval. These companies have a responsibility to negotiate lower drug prices from major drugmakers (be smart: one major brand drug maker is called Merck (NYSE: MRK), and one generic drug maker is called Teva (NASDAQ: TEVA) and then pass along those savings onto their customers. The better costs they are able to secure on their inventory, the fatter profits they earn for shareholders.
• Combined, Express Scripts and Medco will control 34% of the prescriptions (sound smart: scripts) in the marketplace. Meaning, 34% of all the prescription drugs being sold will have moved through their huge distribution facilities and onto customers.
One government official said the following about the deal:
“A competitive market for pharmacy benefit management services” existed.
• Decoded: 34% control of an industry is sure close to a super dominate 50%, and the 66% left in the industry will find it tough to win new business with Express Scripts and Medco offering unbeatable prices and services.
• Decoded: You bet. Two already giant stand-alone companies will only be getting larger, helping them lower costs for prescription drug users, but also earning a pretty penny for shareholders.
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Based on the book co-authored by former CNBC anchor Nicole Lapin and Wall Street analyst Brian Sozzi, Decoding Wall St., the daily Decoding Wall St. newsletter is a lifeline to unlocking, and acting upon, an endless array of hidden financial and world news clues. On FaceBook and Twitter, Decoding Wall St. releases unique streaming content daily, as a compliment to the newsletter, to help get you through interviews right on down to after work cocktail parties. For more information, including to join the movement, please visit www.decodingwallst.com.
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