Express Scripts CEO: 'Very Good Chance' For Medco Deal Approval

Express Scripts Inc. (ESRX) sees a "very good chance" to get regulatory approval for its planned $29.1 billion cash-and-stock deal to buy Medco Health Solutions Inc. (MHS), Express Scripts Chief Executive George Paz said Thursday.

The two companies are poised to become the largest pharmacy-benefit manager by joining forces in a move analysts said could raise anti-trust scrutiny at the Federal Trade Commission. But Paz, who will remain head of the combined company, said high industry competition, customer sophistication and the potential for the deal to lower health-care costs should lead to regulatory approval.

The company is going to work very hard to show the government the value of the deal, Paz told analysts on a conference call.

"We wouldn't be doing this if we didn't think we didn't have a very good chance of getting this through," he said.

He also disagreed with an analyst's suggestion this was "a borderline case," and said "I believe it's what America needs."

Express Scripts' case could be helped by the fact UnitedHealth Group Inc. (UNH) is becoming a more formidable competitor through the rise of its own pharmacy-benefit business. Medco confirmed Thursday that its deal with UnitedHealth--it's largest customer--will end after next year. A UnitedHealth spokesman confirmed that company will keep the business it currently has with Medco in-house after the deal ends.

Medco's OptumRx pharmacy-benefit manager is "fully capable of delivering outstanding service," UnitedHealth spokesman Don Nathan said.

Medco Chief Executive David Snow said on Thursday's call that the announcement regarding UnitedHealth was tied to a conversation with that company last week.

"What was left on the table did not meet the needs of our shareholders," Snow said.

He added during an interview that the UnitedHealth contract issue played a role in the move to combine with Express Scripts, but said the biggest factor was the changing environment in the U.S. health-care system. The pharmacy-benefit managers have highlighted the deal's potential to help them drive-down health costs through measures like improving adherence to drug therapy that can help ward off expensive medical problems.

Medco shares recently traded up 15% to $64.15, roughly $10 below the planned purchase price based on where Express Scripts shares are trading. They recently were up 6.4% at $55.90.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728; [e-mail]