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Executive Summary

NARD MEMBERS FEEL "BETRAYED" BY MERCK's ACQUISITION OF MEDCO, the independent retail pharmacy association declared in an Aug. 12 public response to the proposed merger. "Our members feel nothing short of betrayed by Merck's decision to join forces with Medco," NARD Exec VP Charles West said. In contesting the proposed merger, NARD is playing off Medco's roots as a mail-order pharmacy in contrast to Merck's emphasis on Medco's expansion into managed pharmaceutical care. Merck and Medco said their union will enable them to offer "coordinated pharmaceutical care"; the pharmacy association contended that "there is nothing 'coordinated' about a faceless mail-service pharmacy delivering medicine to patients hundreds of miles away," "assembly-line dispensing" of each prescription in wasteful volumes and "severing the face-to-face relationship" between patients and their pharmacists. Regardless of Merck's "actual intent," West maintained, "it appears that one of the nation's major manufacturers -- a supporter of independent pharmacy on many important issues -- has entered into an unholy alliance with a company best known to our members as the exemplar of substandard, unregulated mail-order pharmacy." In recognition of the potential opposition of pharmacy to the proposed merger, Merck and Medco declared a willingness to work with retail pharmacy as a united company, indicating that they would establish programs to reimburse community pharmacy for cost- saving interventions ("The Pink Sheet" Aug. 2, p. 6). Noting that it has been monitoring member reactions since the merger was first announced, NARD said "the phones have been ringing off the hook, and the message is resoundingly clear." NARD said it will submit formal comments to the Justice Department and the Federal Trade Commission as the agencies examine "potential anticompetitive and patient confidentiality concerns raised by the merger agreement." Medco and Merck filed for Hart-Scott-Rodino review Aug. 4; the waiting period will expire Sept. 4 unless the government requests an extension. In 1988, NARD opposed McKesson's proposed acquisition of Alco, arguing that McKesson/Alco would have controlled 75%-90% of two major markets, Ohio and the Philadelphia-Baltimore corridor. McKesson ultimately abandoned the merger after FTC indicated plans to block it. NARD said it would discuss the merger with Merck officials in a series of meetings, beginning Aug. 13. The association said it also has written to Merck U.S. Human Health President Richard Lane "to inform him that the format for the annual Merck symposium at the NARD annual convention will be modified to a 'town hall' meeting to give independent pharmacists from across the country an opportunity to share their views on the merger" with Merck representatives. The National Wholesale Druggists Association, noting that it is "carefully analyzing the announced Merck-Medco merger," said it agrees with the companies' statements "that coordinate pharmaceutical care linking payers, patients, doctors, pharmacists and other health care providers may help improve the quality of pharmaceutical care and reduce overall costs." However, NWDA contended, "the vertical integration of large manufacturers with providers also may lead to monopolization and discriminatory pricing without proper checks and balances." NWDA said it "opposes preferential pricing policies that are not based on meaningful functional categories or volume purchasing of all products." It added that it "will work closely with other members of the industry to assure that appropriate, lawful checks and balances are in place and to assure that the public is best served in a free enterprise system.

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