...You Decide: Case 5.1 Merck Acquisition of Medco You Decide: Case 5.1 Merck Acquisition of Medco When Merck & Company announced plans to acquire Medco Containment Services Incorporated in July, 1993, it signified the changes taking place in the pharmaceuticals industry. At the time, Merck was the world’s largest drug manufacturer and Medco was the leader in prescription benefits management (PBM). The responsibility for managing prescription drug provisions are increasingly contracted out to PBMs who, in turn, manage claims, negotiate discounts with drug manufacturers, and push generics. One could conclude that the prescription decision making process has shifted away from the doctor and is now being made by the PBMs. As a result, drug manufacturers are directing their marketing efforts to a few PBMs instead of thousands of doctors. It was anticipated that eventually the PBMs would begin to contract with one drug manufacturer instead of negotiating deals with several manufacturers. Therefore, firms with manufacturing, distribution, and prescription management capabilities will become the new industry leaders because of intense competition and lower profits. Merck’s goal should be to acquire capabilities and other resources to achieve a sustainable and competitive advantage (Weston, Mitchell, & Mulherin, 2004). Executive Committee Input The Merck Executive Committee consists of the Chief Operating Officer (COO), the Executive Vice President of Sales and Marketing...
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...Case Study: Merck Acquisition of Medco Professor Daniel Weiss FI561 January 23, 2011 DeVry University Case Study: Merck Acquisition of Medco Abstract The purpose of this case study is to determine whether it would be beneficial to merge Merck Corporation with Medco Containment Services Incorporated. The merger and acquisition between the world’s largest drug manufacturer and the largest prescription benefits management company (PBM) and marketer of mail order medicines in the United States would result in a successful campaign to take over the drug industry if handled appropriately. As Chairman and CEO of Merck Corporation, I have to consider all sides of the arguments, financially, marketing and cultural wise and come to a conclusion as to whether this merger would be a good idea for the company. Like any other investment and merger, there are risks, and I have to decide what would be best in the interest of this company. The details as to whether the decision to acquire or not acquire Medco will be described in this paper. Along with data that helps make that final decision. There are a few things one must take into account before making a decision. You have to look at the long term run, whether or not the merger and acquisition will be successful. You also have to take synergy into account; it is the most important reason why there are a lot of mergers and acquisitions. Synergy would be when two companies join forces to create additional value and cut costs...
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...Tyreece Whyte Fin 561 July 28, 2013 You Decide Case 5.1 Merck Acquisition of medco The merger between Merck and Medco will create a competitive advantage that will allow for long term survival and increase its competitive position by aligning with a PBM. In reaction to the merger between Merck company and Medco Smithkline Beecham and Roche Holding Limited announced their plans to acquire United healthcare and Syntex Corporation health systems in anticipation of the merger. By acquiring Medco, Merck will be a pioneer in the pharmaceutical and drug industry. Medco computer profile of 33 million customers that amounts to 26% of all people covered by pharmaceutical benefit plans, 100 fortune 500 companies, federal and state benefit plans and 58 blue cross/blue shield groups and insurance companies will give Merck an opportunity to identify prescriptions that could be switched from a competitor. Which will increase sales, identify patients who did not refill their prescriptions and provide proof that Merck drugs are worth the premium. The combination of medical records and who takes what pill will allow Merck to establish the supremacy of their products. Other benefits include a $1 billion annuals savings in marketing operations and a more precise marketing strategy. The marketing strategy will allow Merck to reduce sales force and focus on a marketing plan to managers instead of doctors. Some reasons for the merger are experts predict that managed care providers...
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...You Decide: Merck’s Acquisition of Medco Stacey D. Lawson FIN 561: Mergers & Acquisitions Keller Graduate School of Management Professor Gene Smith Fall 2015 Executive Summary Merck & Co., Inc. is one of the largest pharmaceutical firms in the world. The company is known for its discovery, development, production, and marketing of products and services that are geared towards the maintenance and restoration of health. The company’s business focuses on two areas: human and animal health products and Services and Specialty Chemical products. Medco Containment Services, Inc. is one of the largest pharmacy benefits manager (PBM). The company was mainly responsible for the management of drug benefits for more than 65 million Americans whose prescriptions were filled at retail drug stores or the company’s mail order business. Merck’s acquisition of Medco was one of the largest health care industry mergers, as well as one the largest U.S. corporate unions in the early 1990’s (Olmos, 1993). In addition the merger provided Merck with access to Medco’s technology and information. With the merger they acquired more than 1,000 pharmacists who decided or advised physicians on how prescriptions should be filled (Tanouye, 1993). This merger allowed Merck to increase its pharmaceutical sales through the use of patient information from Medco’s database. The merger was expected to solidify Merck’s presence in the pharmaceutical...
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...| You Decide | FIN 561-60619 | Mergers and Acquisitions, Week 3Professor Gene Smith, PhD | Melissa Walter | 7/27/2014 | | Abstract Merck & Company (Merck) is evaluating the possible acquisition of Medco Containment Services Incorporated (Medco). The Chief Operating Officer, Executive Vice President of Sales and Marketing, and the Chief Financial Officer have all stated their thoughts and concerns regarding this matter. It is my job to make the final recommendation to the Board of Trustees. Executive Summary Merck is a leading pharmaceutical manufacturer and Medco is a leading pharmacy benefits manager. Both companies have a strong hold on their piece of the market. In 1992, Merck had revenue of $9.7 billion while Medco recorded $2.2 in revenue.4 Benefits of the merger include: * Increased marketing potential through Medco’s accumulated data * Access into the Managed Care market * Decreased costs in sales and marketing efforts Risks include: * Merging of corporate cultures * Loss of R&D dollars due to subsidizing Medco * Regulatory and compliance threats. The stated price for the merger is $6.6 Billion. At the time of the merger, I would have recommended to the Board to proceed with the merger as benefits seem to out-weigh the risks. However, in looking back, due to the FTC findings stating the merger did create an unfair advantage to Merck, I would have to re-evaluate. Merck was unable to issue the intended...
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...Merck & Medco You Decide Assignment Merck’s acquisition of Medco: Merger Analysis and Recommendation by Marzena Porebski . Table of Contents 1.0 INTRODUCTION 2 2.0 THE COMPANY OVERVIEW 3 2.1 Merck & Company 3 2.2 Medco Containment Services Inc. 5 2.3 The Companies Advantages 6 3.0 MERCK & MEDCO MERGER 7 3.1 Acquisition Details 7 3.2 Merger Analysis 7 4.0 CONCLUSION 11 5.0 APPENDIX 12 5.1 Financial Reports 12 5.2 Sales of Drugs and Prices 13 5.3 Merger and Acquisition Activity 14 5.4 Market Share 15 5.5 Additional Documents 15 6.0 References 15 1.0 INTRODUCTION Mergers and acquisitions occur because directors see benefits that could come from combining two or more businesses, which could improve the company’s overall financial performance. Mergers and related acquisitions have occurred in the United States in a series of waves over the last century or more, as can be seen on the chart in Appendix 5.3. Over time, mergers have become popular and in recent times, the growth has been steeper outside of the United States. One of many reasons why mergers occur is due to macroeconomic factors that contribute to a merger wave such as economic conditions, credit availability, industry shocks, government policy changes, competitive business environment, innovation, technological developments, or globalization (Thompson). Mergers and acquisitions can generate cost efficiency through economies of scale, can increase the revenue through gain in...
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...determine whether it would be beneficial to merge Merck Corporation with Medco Containment Services Incorporated. The merger and acquisition between the world’s largest drug manufacturer and the largest prescription benefits management company (PBM) and marketer of mail order medicines in the United States would result in a successful campaign to take over the drug industry if handled appropriately. As Chairman and CEO of Merck Corporation, I have to consider all sides of the arguments, financially, marketing and cultural wise and come to a conclusion as to whether this merger would be a good idea for the company. Like any other investment and merger, there are risks, and I have to decide what would be best in the interest of this company. The details as to whether the decision to acquire or not acquire Medco will be described in this paper. Along with data that helps make that final decision. There are a few things one must take into account before making a decision. You have to look at the long term run, whether or not the merger and acquisition will be successful. You also have to take synergy into account; it is the most important reason why there are a lot of mergers and acquisitions. Synergy would be when two companies join forces to create additional value and cut costs that would be unnecessary. You would also have to take into account changes in forces, like technological changes, economies of scales, type of merger you want to have and the process it takes to make a...
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...You Decide Assignment on Merck’s Acquisition of Medco By Zankhana Desai FIN 561- Mergers and Acquisition Professor: Yvan Nezerwe Keller Graduate School of Management Table of Contents C5.1.0 Executive Summary…………………………………………….3 C5.1.1 The Major Driving Force of the Merck-Medco Acquisition.. 3-4 C5.1.2 The Role of PBM Companies……………………………….. 4-5 C5.1.3 Utilization of Medco’s Database……………………………. 5-6 C5.1.4 Competitive Reactions to Merck- Medco Acquisition ……. 6 C5.1.5 SWOT Analysis……………………………………………..6-8 C5.1.6 Impact on Marketing and Sales………………………….. 8-9 C5.1.7 Impact on Operational……………………………………..9- 10 C5.1.8 Impact on Financial Consideration………………………...10 C5.1.9 Benefits of the Acquisitions……………………………… 11 C5.1.10 Recommendations……………………………………… 12 References…………………………………………………… 13 C5.1.0 Executive Summary The purpose of this paper is to present the reader with an overview of the changing Health Care industry and the benefits of a vertical merger to the consumer with the Merger of Merck, the worlds’ largest drug manufacturer, and Medco Containment Services Incorporated, the largest most efficient prescriptions benefits management company. The merger would reflect the dynamic changes that have taken place in providing effective healthcare to consumers based on need rather than on insurance coverage. In essence two major players in the same industry would combine their attributes to better serve their clients...
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...Case FIN561: Mergers and Acquisitions You decide: Merck Acquition of Medco Vikash Sharma In July 1993, Merck & Co., the largest pharmaceutical company in the world at that time, acquired Medco Containment Services for $6.6 billion. Medco was the largest prescription benefits management company. With the drug industry experiencing the effects of managed care, pharmaceutical companies had to adapt to new means of distribution. Merck realized that the decisions of what treatments and what drugs should be used in patients’ care were increasingly being influenced by the managed care environment rather than by physicians. In the world of managed care, it was no longer sufficient to market just to physicians. The successful pharmaceutical companies of the future would be companies that were able to adapt to the changed distribution system. This was a very strategic move my Merck and this vertical integration was a move that all its competitors were also targeting. In 1994 SmithKline acquired DPS for $2.2B and later that year Eli Lily acquired PCS for $4.1B. In order to understand why Merck acquired Medco, which was a pharmacy benefits management (PBM) company, we need to look at the role of this so-called PBM’s. These PBM’s have several functions * Process Pharmacy claims i.e. check for eligibility when an order is placed at the retail store, check for copayment etc * Set up Pharmacy benefit, which is to apply PBM codes to what drugs are covered under a particular...
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...| You Decide | Merck’s Acquisition of Medco | | Antonio Cruz | 1/24/2016 | You are the Chairman and CEO of Merck. Make a recommendation to the Board of Directors of Merck & Co. regarding this acquisition based on the recommendations of the three associates and your own analysis. You are the Chairman and Chief Executive Officer of Merck & Company, and you will make the final "yes" or "no" recommendation to the Board of Directors of the company. You are listening to the advice of various department heads regarding this acquisition. Based on your evaluations and additional analysis of the recommendations of your three associates, make your recommendation to the Board of Directors. What will you recommend? Yes? No? Yes with some conditions? What are the reasons for your recommendation? | The Major force driving this acquisition of 6.6 billion dollars between Merck & Company and Medoc Containment Services Incorporated the largest prescription benefits management company and marketer of mail-order medicines in the United States was due to fundamental changes taking place in the pharmaceutical industry such as the growth of managed care in the health care industry which according to the industry experts by the turn of the century 90% of Americans will have drug costs included in some kind of managed health care plan and 60% of all outpatient pharmaceuticals will be purchased by managed care programs (Weston, Mitchell and Mulherin). Other factors driving...
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...You Decide – Week 3 - Merck & Medco Answer Key (Week 3 – FI-561 – Mergers and Acquisitions) C5.1.1 The large growth of managed care has changed the face of the health care industry and impacted drug companies. The prescription decision making authority has shifted away from doctors to managed care and prescription benefits management company (PBM) administrators. With the expectation of managed care providers relying on only one major drug supplier, the benefits of a vertical integration are greatly increased and guaranteed one of the increasingly few distribution channels available. C5.1.2 The role of PBMs is to manage insurance claims, negotiate volume discounts with drug manufacturers and encourage use of certain drugs. They basically have the power, contracted to them by a managed care organization, to recommend a certain drug over others and thereby convince doctors to prescribe it. Further, through their monitoring role they analyze physician prescribing patterns and patient usage. PBMs can take action in trying to monitor costs which can influence the future drug use. C5.1.3 Medco's large database would allow Merck to (a) identify prescriptions which can be switched from a competitor's drug to a Merck drug and promote such a switch with managed care doctors thereby increasing the potential for sales; (b) identify and seek out patients who fail to refill prescriptions once again increasing sales; (c) utilize the database to determine which drugs...
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...You Decide FI561 – Mergers & Acquisitions – Week 3 Scenario Summary This is based on Merck’s Acquisition of Medco: Case 5.1, pp. 124-125. Your Role/Assignment You are the Chairman and CEO of Merck. Make a recommendation to the Board of Directors of Merck & Co. regarding this acquisition based on the recommendations of the three associates and your own analysis. You are the Chairman and Chief Executive Officer of Merck & Company, and you will make the final “yes” or “no” recommendation to the Board of Directors of the company. You are listening to the advice of various department heads regarding this acquisition. Based on your evaluations and additional analysis of the recommendations of your three associates, make your recommendation to the Board of Directors. What will you recommend? Yes? No? Yes with some conditions? What are the reasons for your recommendation? Activity Write an 8-10 page paper (double-spaced) of written analysis, including tables of financial calculations. Key Players Key Players Image Title/Role/Character Chief Operating Officer Script – Text & Audio I’m concerned about synergy and integration issues between our highly research-oriented development of pharmaceuticals here at Merck, and a prescription medicine marketing company like Medco. I am concerned that the cultures and operations of the two companies aren’t going to mix well, and that this deal would result in an expensive failure. I’m all for this acquisition! It will open new marketing leverage...
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...You Decide: MERCK ACQUISITION OF MEDCO “Takeover can be both a problem and a solution”. However the merge between Merck & Company, the world’s largest drug manufacturer, which planned to acquire, for $6.6 billion, Medco Containment Services Incorporated, the largest prescription benefits management company (PBM) and marketer of mail-order medicines in the United States is a solution. As anyone may know, the increasing pace of merge activity during the past two decades is related to the power change forces listed in the textbook (Weston, P. 3). Even though overriding other forces are technological changes, which include computers, computers services, software, servers, and the many advances in information systems, including internet. However, Economies of scale, complementarities seems to be an efficiency gain to be achieved in order to stay competitive in the today’s economy characterized by the globalization. By the way, Lot of changes has taken place in the health care industry. And the most significant change involves the growth of managed care in the health care industry. Managed care plans typically provide members with medical insurance and basic health care services, using volume and long-term contracts to negotiate discounts from health care providers. In addition, managed care programs provide full coverage for prescription drugs more frequently than do traditional medical insurance plans. Industry expert’s estimate that by the turn of the century, 90% of Americans...
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...Table of Contents page no. 1. EXECUTIVE SUMMARY 1-2 2. INTRODUCTION 3-7 * PHARMACEUTICAL INDUSTRY IN INDIA 4 * FACTS ABOUT INDIAN PHARMACEUTICAL COMPANY 5-6 3. COMPANY PROFILE 7-12 * HISTORY 8-9 * VALUES, VIEW AND POSITION 10 * RESPONSIBILITY 11 * DISCOVERY AND DEVELOPMENT 12 4. COMPENETCY MAP 13-18 5. HUMAN RESOURCE DEPARTEMENT 19 ...
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...Chapter 1 Course 7: Mergers & Acquisitions (Part 1) Prepared by: Matt H. Evans, CPA, CMA, CFM Basic Concepts Mergers and acquisitions represent the ultimate in change for a business. No other event is more difficult, challenging, or chaotic as a merger and acquisition. It is imperative that everyone involved in the process has a clear understanding of how the process works. Hopefully this short course will provide you with a better appreciation of what is involved. You might be asking yourself, why do I need to learn the merger and acquisition (M & A) process? Well for starters, mergers and acquisitions are now a normal way of life within the business world. In today's global, competitive environment, mergers are sometimes the only means for long-term survival. In other cases, such as Cisco Systems, mergers are a strategic component for generating long-term growth. Additionally, many entrepreneurs no longer build companies for the long-term; they build companies for the short-term, hoping to sell the company for huge profits. In her book The Art of Merger and Acquisition Integration, Alexandra Reed Lajoux puts it best: Virtually every major company in the United States today has experienced a major acquisition at some point in history. And at any given time, thousands of these companies are adjusting to post-merger reality. For example, so far in the decade of the 1990's (through June 1997), 96,020 companies have come under new ownership worldwide in deals worth a...
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