Tag: Business Competition

Breaking Up is Hard to Do

Senate legislation introduced to target Pharmacy Benefit Managers

Neil Sedaka, a singer, songwriter, and pianist who died last week, hit the charts in the early 1960’s with the hit single, “Breaking Up is Hard to Do.”  He liked it so much that he released a newer version of it some 10 years later, with a slower tempo.

The Break Up Big Medicine Act

Senators Josh Hawley and Elizabeth Warren are looking to put that phrase to the test when it comes to going after Pharmacy Benefit Managers in the health care industry.

The act, officially titled, “The Break Up Big Medicine Act”, was released in February.  The bipartisan measure seeks to reign in the monopoly they feel exists with both prescription drug claims and prescription drug wholesalers, and the insurance companies, physician groups and pharmacists who are involved.

On their official website, Senator Warren is quoted as saying:

“There’s no question that massive health care companies have created layers of complexity to jack up the price of everything from prescription drugs to a visit to the doctor. The only way to make health care more affordable is to break up these health care conglomerates.  Our bill would be a monumental step towards ending the stranglehold that corporate giants have on our broken health care system.”

Senator Hawley says:

“Americans are paying more and more for healthcare while the quality of care gets worse and worse. In their quest to put profits over people, Big Pharma and the insurance companies continue to gobble up every independent healthcare provider and pharmacy they can find.  Working Americans deserve better. This bipartisan legislation is a massive step towards making healthcare affordable for every American.”

Pharmacy Benefit Managers

Pharmacy Benefit Managers (PBM), are companies hired by health plans to manage prescription drug benefits. Which drugs are covered, how much they cost, and where patients can fill prescriptions are determined.  Such things as to what pharmacies are “in network,” prior authorizations, and obtaining price discounts in exchange for favorable positioning are selected.  They started out mainly as an administrative service but grew in power to issue decisions in the daily operations of the pharmacy web.

The largest PBMs in the United States are CVS Caremark, Express Scripts, and Optum Rx. Together, they process nearly 80% of all U.S. prescription claims. 

The largest prescription drug wholesalers in the United States are McKesson, Cencora (formerly AmerisourceBergen), and Cardinal Health. They control over 90% of the U.S. drug‑distribution market.

On their website Warren and Hawley state the companies involved are “vertically integrated”.  This means one company can own or control every part of the health care supply chain—from health insurance companies and PBMs to pharmacists and physicians.

“By controlling both the company that pays for health care services (e.g., a health insurer) and also the entity that sets the prices for those health care services (e.g., a health care provider), these conglomerates may be steering business to their own affiliates, evading laws intended to rein in corporate profiteering, or using providers they employ to boost government payments and pad their bottom lines.”

Analysis

In my opinion this is an uphill fight for the two Senators.  Breaking up here is hard to do.  But it is a step in the right direction.  Legislation or court rulings can be part of the solution.  It is better than simply using social media to bad mouth corporations and their executives.  Social media is freedom of speech and can draw a lot of attention but leads to no solution.  It is also better than cheering on those who assassinate health care executives. 

The health care monopoly is bigger than pharmacy benefit managers.  For example, this legislation does not address its historical acquisition mania and the power it has produced.   Nevertheless, I encourage all of you to contact one or both of your U.S. Senators and express your support.  I am not sure it will garner the support, let alone the attention, of the Trump administration.  But, as I said, it is a step in the right direction.

 

 

What the F.T.C. Can Learn from Al Capone

F.T.C. needs broaden anti-trust laws to better insure convictions.

Al Capone

A century ago, gangster Al Capone was alleged to have been involved with prostitution, illegal gambling and murder, including the St. Valentine’s Day murder.

I say alleged, because Mr. Capone was tried but never convicted of any of the above.  In 1931 the Justice Department changed its strategy and convicted him of tax evasion.  He was given an 11-year sentence and was released early, in 1939.  His health subsequently declined and he died in 1947.

Had there not been laws on tax evasion that could land a person in jail, Mr. Capone may very well have continued his crime spree.

Failed Attempt

The New York Times reported on January 20, 2026 that the Federal Trade Commission (FTC) announced it will reopen its pursuit of anti-trust charges against Meta, parent of Facebook, regarding its acquisition of both Instagram and What’s App.

The judge in the original case, Judge James E. Boasberg, ruled that Meta did not violate anti-trust law with the two acquisitions. 

Judges should interpret the law and not legislate from the bench.  If Judge Boasberg believes that Meta did not violate anti-trust law with these acquisitions, it is important to know where in federal law he justifies his position.  The F.T.C. originally sought charges that the Sherman Anti-Trust Act of 1927 was violated.  Meta argued that it faces competition from apps like You Tube and Tik Tok. 

There is a video on YouTube from 2010 where Mark Zuckerberg states at a company address that Facebook does not acquire companies for the company itself, but to acquire the individual or individuals behind it.  In other words, he explained this as his method of acquiring top talent.  However, as a result, the companies these people started, all tech companies, simply disappeared.  Nice way to quietly get rid of any rising competition, isn’t it? 

Analysis

If the F.T.C. is serious about revisiting this, the people there really need to look at why they lost the first time.  If they apply the same evidence, they may get a similar result, even if ruled by a different judge.  Perhaps looking at Meta’s (previously Facebook) ENTIRE acquisition history may provide additional evidence of anti-trust, monopolistic behavior.  If they feel they still have a weak case, perhaps amending federal law to provide them with a wider net would bring Meta, and possibly others, to justice. 

Hostile Takeovers – How to Cease Hostilities

Businesses need help from wasting time and money on this.

In the News

Paramount continues to pursue Warner Brothers Discovery, though management has clearly indicated the Netflix deal is in the company’s best interest.

At the same time, Cincinnati based Cintas Corporation has announced a third attempt to acquire Massachusetts-based UniFirst.  Both companies provide employee uniforms and related services but in separate parts of the country.

What is the link between the two?  They both involve using the tactic known as the hostile takeover.

Definition

A hostile takeover is an acquiring company seeking to obtain control of another company, often a competitor, against the recommendation of either senior management or the board of directors.  The pursuer will sometimes appeal to the shareholders directly to force a vote on the bid. 

This tactic was used by Standard Oil Company to acquire refineries a century ago.  Since the Depression it was rarely used until the 1980s.  The Reagan administration pursued deregulation, which led to a different, and sometimes aggressive, approach to corporate governance. 

Anheuser-Busch

One that made headlines in 2008 was the acquisition of Anheuser Busch by Belgian-based InBev.  It is now known as AB-InBev, which is now the world’s largest brewer.  By the way, it was the world’s largest brewer PRIOR to the acquisition.  During negotiations InBev promised not to close any breweries, but it did not promise to maintain current employees.  As a result, some 1,400 jobs were eliminated—jobs perfectly legitimate one day were now gone the next day.

Analysis

In my opinion, hostile takeovers deviate far from the founding principle of capitalism.  That principle is having an idea for a product and service and acting on it in an environment where those ideas can become real and make a profit.  Having to battle competition is also part of this principle.  Hostile takeovers are nothing more than a power grab meant to either dominate the market or specific companies.

Some may argue that they are pursuing growth.  They also argue that some companies are bloated and inefficient and an outsider needs to come in and straighten things up.  Nothing wrong with pursuing growth.  But growth can (and should primarily) be pursued through internal research and development.  As for inefficiencies, some companies may have them.  But they should be urged to change through persuasion rather than bullying tactics.  Some may not change, and they may fail.  Business failure is also a principle of a capitalist economy.

How to stop this

Some pursued companies have adopted tactics known as a “poison pill,” meant to provide roadblocks.  An example would be issuing additional shares to existing shareholders, thus making it difficult for the acquirer to obtain a majority stake.

The federal government could also create a law that would allow the victim to declare a hostile takeover has been pursued.  The aggressor would then be prohibited by law from making any further attempt to acquire the other.  If the victim does not declare, the pursuit may continue.  This would allow the pursued to keep its resources and not waste either time or money with lawyers to try and fend it off. 

Does this make sense? 

Should this not be pursued?