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BY KIM ROLLER AND LISA I. FRIED WITH ADDITIONAL REPORTING BY JIM FREDERICK, ANDREA M. GROSSMAN AND ALLENE SYMONS
CAMP HILL, Pa., and IN- DIANAPOLIS - Rite Aid's roposed $1.5 billion cash acquisition of PCS Health Systems, Eli Lilly's 56-million member pharmacy benefits management subsidiary, will catapult Rite Aid into the top ranks of PBM operators, giving the chain power over Wmanagement of more than 300 million prescriptions provided to more than 50 million individuals.
The other largest PBMs are MerckMedco, which covers 51 million lives, and SmithKline Beecham's Diversified Pharmaceutical Services, which covers 23 million lives.
By combining PCS with its own PBM subsidiary, Eagle Managed Care, Rite Aid eXpects to be able to offer more value and more innovative solutions for employers and their health plans.
Industry reaction
The deal is also raising the eyebrows of some chain pharmacy operators. Several expressed surprise at the price tag Rite Aid was willing to pay to acquire PCS. Others are concerned about PCS' ability to protect the proprietary information it receives from participating drug stores, its negotiating stance with pharmacy operators and its intention to operate open pharmacy networks.
In terms of information flow, some industry executives are concerned about the fact that PCS, which will be owned by Rite Aid, will be negotiating prescription reimbursement rates for drug chains and drug stores that compete against Rite Aid. Some sources expressed concern that Rite Aid, through PCS, could potentially have access to a wealth of information about prescription rates and volume at pharmacy competitors. Other concerns focus on the fear that PCS might emulate what is perceived self-serving negotiation tactics currently practiced I he Eagle Managed Care. ive Some caution that if the situations occur, PCS will be transformed from an industry facilitator into a competitor, making drug store chains less willing to participate in PCS plans.
"It's frightening to think that your competitor down the street could have access to all of your prescription pricing information, can tell who your patients are, what medicines they take, and how many prescriptions you dispense," said Calvin Anthony, executive vice president of the National Community Pharmacists Association, which represents 25,000 independent pharmacies. "It follows that it would not be at all difficult for a historically aggressive...