FTC to Sue in Effort to Block Drugstore Chains’ Merger

The Federal Trade Commission voted Wednesday to file a lawsuit to block the merger of the nation’s two largest drugstore chains.

Commissioners decided on a 5-0 vote that Rite Aid Corp.’s planned $1.8-billion purchase of Revco D.S. Inc. would lead to higher prices.

“Rite Aid-Revco would have significantly more pharmacy locations than its closest competition and would have the ability to increase prices and harm consumers,” said George Cary, deputy director of the FTC’s Bureau of Competition.

“If allowed to proceed, the combined Rite Aid-Revco firm would be the dominant pharmacy chain in numerous Eastern and Midwestern metropolitan areas,” he said.

The FTC said it will file a complaint Friday in U.S. District Court in Cleveland. Companion suits were expected from attorneys general in Ohio, New York and other states.

Ohio Atty. Gen. Betty Montgomery said this will be the first time the FTC and states have filed a coordinated merger challenge. “Since many seniors are on fixed incomes, are uninsured and already spend up to 20% of their income on prescriptions, they are particularly vulnerable to the kinds of increased prescription prices that would result from this merger,” she said.

The FTC complaint will seek an injunction preventing the purchase from completion on grounds that it would violate antitrust laws by substantially reducing competition for prescription drugs in parts of nine states.

The country’s largest drugstore chain, however, said it hoped to mount one last effort to salvage the acquisition. Camp Hill, Pa.-based Rite Aid said it would not attempt to close the transaction before Wednesday, and hoped to continue negotiations with the FTC until that time.

“Rite Aid is continuing its negotiations with the FTC in the hope that a successful resolution can be reached,” the company said in a statement.

In New York Stock Exchange trading, Revco shares dipped 37.5 cents to $26.75, while Rite Aid, which has been lately falling from a peak of $34.50 on March 7, retreated 12.5 cents to $30.875.