Forget Pharma Douche, This Huge Merger Is Bad For Everyone’s Pharmaceutical Costs


Two behemoth drug stores are about to become one and that’s very bad news. The already ubiquitous Walgreens just announced that they are going to spend $17.2 billion to buy out Rite Aid. They already bought Duane Reade back in 2010.

As consumers, that leaves us with just Walgreens and CVS and a few mom and pop shops. If you want your prescriptions to be able to travel with you, though, you’re pretty much stuck with the two big names.

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Now, Walgreens does plan to let Rite Aid keep their name, as they have done with Duane Reade, so for people who don’t read rather arcane articles like this, they may not know that they are contributing to a near-monopoly.

CVS isn’t much better. They recently bought out Target’s pharmacies. The argument is that the near-monopolies will somehow be better for consumers.

One may wonder why Walgreens and CVS are so interested in buying out competitors and consolidating their holdings. It has to do with money. By owning more chains, these top chains can now exercise greater leverage when negotiating drug prices with the manufacturers. They can also make a killing with the generic brands of food and household items as well.

Maybe they’re right that it will save them money, but there’s no guarantee or even evidence that the savings will be passed on to the consumer, especially if Walgreens and CVS ever decide to merge. Ironically, one of the pillars of the Republican health care ideas (they don’t actually have a plan) is competition. At the same time, Republicans almost never say “no” to a merger. Unfortunately, Democrats only rarely say “no” to a merger.

Right now, a merger is being discussed among giant health insurance companies and Congress held anti-trust hearings. It’s still being reviewed by federal regulators. As for the Walgreens/Rite Aid merger, the Senate Judiciary Committee’s antitrust subcommittee is calling for scrutiny.

“I have fought tirelessly to promote competition in the health sector and I believe the proposed merger of two of the three largest drug store chains in the country raises serious issues,” Senator Amy Klobuchar, the top Democrat on the Senate Judiciary Committee’s antitrust subcommittee, said in a statement.

Do mergers benefit consumers, as companies always claim? The short answer is no. The long answer was given by people who know to the LA Times.

In the wake of several big deals in recent days, I put that question to dozens of business professors, economists and lawyers specializing in mergers and antitrust issues. These are people who study and track this sort of thing for a living.

Not one was able to cite a single big-ticket merger that irrefutably benefited consumers in a long-term, demonstrable way.

Not one.

“Mergers typically mean less choice and benefits that never come about,” said David Balto, a Washington antitrust lawyer and former policy director for the Federal Trade Commission. “For the consumer, they’re usually about unfulfilled promises.”

This, for the consumer, could mean less availability of drugs and the inability to shop for cheaper prices. Imagine, for a moment, if the CEO of Walgreens was Martin Shkreli, who raised the price of one drug by over 5,000 percent. Fortunately, Shkreli had competition and the competition is practically giving the drug away.

Featured image via Wikipedia

 

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