Market Overview

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.

Decoded fact:

• 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.

“Gamechanger.”

• 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.

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

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