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Tue Dec 6, 2011 1:48pm EST (Reuters) - The chief executive officers of Medco Health Solutions Inc and Express Scripts Inc will tell a U.S. Senate subcommittee that merging the pharmacy benefit managers will wring out wasteful spending and lower the cost of medicine, according to a government filing.

The estimated $26 billion deal, announced in July, would combine two of the three U.S. pharmacy benefit managers that are large enough to manage prescription drug benefits for nationwide companies.

"We are going to lower prescription drug costs that are far too high," Express Scripts Chief Executive Officer George Paz said in testimony prepared for the Senate Judiciary Committee's antitrust panel.

"Our new company will negotiate with drug companies and partner with independent pharmacies, grocery chains and others to create networks of pharmacies where patients -- not profits -- come first," Paz said in his written testimony.

Medco CEO David Snow said in his prepared testimony:

"As the health care industry necessarily focuses on reducing costs; as Congress seeks to find health care savings without compromising patient care; and as all participants in the system are faced with the prospect of doing more with less, we must make our health care dollars work more effectively. We believe that the services that Express Scripts and Medco, working together, will provide are critical to achieving this goal."

The executives could face questions from lawmakers concerned that any savings that the merged company would negotiate would not be passed on to consumers or that the deal would remove the competitive impetus for the companies to offer services through community pharmacies, two congressional staffers have said.

Critics have said the combination would reduce competition.

"Reduced reimbursement is not necessarily good for consumers, especially in health care markets. When monopsony power forces health care providers to accept less money for services, it is likely that the consumer will suffer through a lessening of quality of service," according to David Balto's testimony for the hearing.

"In the form of higher priced health plans and drugs, plan participants will bear the cost of the competition lost for large plan sponsors," wrote Balto, an antitrust attorney who represents consumer groups opposing the deal.

The Federal Trade Commission is assessing the merger to make sure it complies with antitrust law. A group of about two dozen state attorneys general are also looking at it, and could conceivably challenge the deal on their own.

An antitrust subcommittee at the House of Representatives has also held hearings to discuss the deal, although lawmakers have no formal power to stop any transaction.

Community and specialty pharmacists have complained to the FTC about the proposed transaction. One of their concerns is that Medco and Express Scripts may push their customers to obtain their drugs by mail. There have also been complaints that the PBMs unfairly pressure doctors and patients to switch to their own in-house pharmacies.

(Reporting by Debra Sherman in Chicago and Diane Bartz in Washington; Editing by Lisa Von Ahn and Matthew Lewis)

© 2010 Thomson Reuters. Click for Restrictions.

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