The Federal Trade Commission filed an administrative complaint seeking to block Omnicare Inc.’s proposed $440.8 million acquisition of PharMerica Corp. The FTC alleged that Omnicare would control over half of the U.S. market for pharmacy services at nursing homes and other long-term facilities where patients receive prescription drugs from sponsors of the government’s Medicare Part D plan. The larger the pharmacy services provider, the Commission explained, the more likely the government is to require a Part D sponsor to include it in its network. A merger with PharMerica — Omnicare’s largest and only national competitor — would therefore allow the new company to force sponsors to accept rate hikes or face being barred from offering Part D plans altogether. The FTC alleges that “Omnicare’s use of termination threats to get price increases from Part D sponsors will likely escalate post-acquisition as the combined firm flexes its increased bargaining leverage to extract even higher prices and better terms.” The government would eventually bear any increase in drug prices because it subsidizes nearly 75% of each Part D plan’s cost.
PharMerica, an operator of assisted living facilities and hospitals across the U.S., rejected Omnicare’s bid, citing concerns that antitrust regulators would not approve the deal. The rejection led Omnicare to sue the company and its board in Delaware court.