Antitrust Enforcers Must Crack Down on Big Wholesaler Acquisitions and Protect Patients
Washington, D.C. — In response to news that two of the largest wholesale drug distributors, Cencora and Cardinal Health, plan to acquire management service organizations (MSOs) that oversee specialty medical practice networks and a specialty medical supplies distributor, the American Economic Liberties Project released the following statement.
“Like pharmacy benefit managers (PBMs), wholesalers are sneaky healthcare middleman that drive up costs and reduce quality of care. Their market power should be curtailed, not extended through illegal acquisitions of specialty care providers,” said Emma Freer, Senior Policy Analyst for Healthcare at the Economic Liberties Project. “Through these acquisitions, Cencora and Cardinal Health seek to steer specialists toward their most lucrative drugs and testing devices, to collect higher profits at patients’ expense and prevent competition from upstart wholesalers. This concentration, if allowed, would further embrittle the specialty drug and medical supplies supply chain and subject patients, including those with diabetes to even more frequent shortages. The Federal Trade Commission should block the wholesaler acquisition spree.”
Cencora recently announced its plan to acquire Retina Consultants of America –– the largest retina specialist MSO, with nearly 300 physicians across 22 states –– for $4.6 billion. Meanwhile, Cardinal Health announced plans to acquire a majority stake in GI Alliance –– the largest gastroenterology MSO, with more than 900 physicians across 20 states –– for $2.8 billion. Cardinal Health also plans to acquire the Advanced Diabetes Supply Group, which specializes in the home delivery of diabetes testing supplies and serves roughly 500,000 patients, for $1.1 billion.
These proposed deals involve two of the “Big Three” wholesalers and fit into a concerning trend of vertical integration between wholesalers and specialty care providers. Cencora and Cardinal Health account for 61% of the wholesale drug distribution market by revenue; the third, McKesson, controls an additional 37%. Earlier this year, Cardinal and McKesson announced plans to acquire major oncology MSOs, which the American Economic Liberties Project also recommended the FTC block. Among other notable deals, McKesson purchased US Oncology, the largest oncology MSO, for $2.2 billion in 2010.
Read Economic Liberties’ letter to the FTC regarding Cardinal and McKesson’s oncology MSO acquisitions here.
Learn more about Economic Liberties here.
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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.