In an “emergency petition” filed last Monday, the Federal Trade Commission (FTC) sought assistance from a federal court in getting Humana to turn over documents the agency wants to use in evaluating the competitive impact of the proposed $7 billion merger between Walgreens Boots Alliance and Rite Aid Corp.
The FTC filed the subpoena April 10, requesting documents pertaining to Humana’s Medicare prescription drug plans. Wal-Mart is the preferred in-network pharmacy for those plans, and the FTC wants to determine if such narrow or preferred pharmacy networks are viable competitors to broader ones that include all major pharmacies. The FTC also asked for records of certain communications between Humana and the Centers for Medicare and Medicaid Services (CMS).
Humana subsequently filed a petition to limit the FTC’s request, citing the costs involved in collecting and producing the documents, when Humana is “a non-party” in the proposed acquisition.
The FTC said it needed the requested information from Humana by today, as Walgreens and Rite Aid could legally complete their transaction as soon as July 7. A court hearing on the matter was scheduled for last Thursday.
Meanwhile, D.C.-based news service The Capitol Forum reported late last week that the acting director of the FTC’s Bureau of Competition recommended a lawsuit to block the merger. Multiple sources say the FTC will likely vote this week on whether to challenge the acquisition.
Should Walgreens fail in its bid for Rite Aid, analysts speculate that Amazon might step up. Amazon’s announced purchase of Whole Foods demonstrates that the online behemoth is willing to buy its way into new market segments, and the purchase of Rite Aid would give Amazon a competitive entry into the retail pharmacy industry without all of the regulatory hurdles, Forbes reported.
Our Take: For weeks we have been seeing media reports of Amazon’s interest in getting into the retail prescription drug business. CNBC first reported that Amazon hired a new general manager to lead the team and formulate a strategy. It also noted that Amazon has started to recruit more broadly from the pharmacy space.
One reason analysts can’t see it happening—even with Amazon's formidable distribution business—is that Amazon would be starting from scratch, including creating a pharmacy benefit manager (PBM) to negotiate contracts with payers.
But with the acquisition of Rite Aid, Amazon would also get EnvisionRx, a smaller but fully functional PBM. The lion’s share of prescription drugs flows through Express Scripts, CVS Caremark and OptumRx, but we wouldn’t count Amazon out when it comes to growing the PBM business.
If this sounds far fetched, just ask Dr. Steve Miller about how he feels about competing with Amazon.