When health care giants Express Scripts and Medco Health Solutions announced their plans last July for a mega-merger, they pitched the $29 billion deal as a boon to consumers.

Both of the pharmacy benefit managers, who contract with large employers, base their business models on cost-cutting through bulk buying. Combined, they would create the nation's largest player in that market - a St. Louis-based behemoth controlling about a third of the nation's prescriptions.

But in recent months, major forces have aligned themselves against the deal, raising antitrust concerns. Approval by the Federal Trade Commission, expected to decide soon, now appears less certain. And even a green light could involve significant concessions by the merged company.

Stepping forward to oppose the merger are large supermarket chains, drug stores, community pharmacists, consumer advocates, antitrust experts, columnists, and well-placed politicians. Attorneys general from two dozen states have also raised questions about the merger's effect on consumers.

The companies themselves and their shareholders now seem to be among the few backers of the deal.

"I would be surprised if the FTC approved the merger," said Ken Schaffermeyer, a professor and administrator at the St. Louis College of Pharmacy. "(But) the two companies must have had a reasonable expectation that it will pass, or they wouldn't have gone through all this trouble and expense."

The Obama administration has been no pushover on antitrust issues. The Justice Department derailed last year AT&T's plans to acquire T-Mobile. And some congressmen have chimed in against the Express Scripts-Medco deal.

Sen. Herb Kohl, D-Wis., who chairs the Senate Antitrust Subcommittee, recently sent a cautionary letter to the FTC.

"I believe this proposed merger presents serious competition concerns," Kohl wrote in a 6-page letter. His subcommittee held a hearing on the merger in December.

Rep. Reid Ribble, R-Wis., wrote the FTC that the merger would create "a company that will have excessive market share, cover roughly one-third of the population of this country, and force many small pharmacies out of business while driving up prices for consumers."

Some antitrust experts have spoken out against the deal, as well. David Balto - who served as an antitrust attorney at the Justice Department and the Federal Trade Commission - testified before the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights.

The deal, he said, would "make it more likely for Express Scripts to charge more for its services and to pass along less of the savings they obtain to their customers, the (health) plan sponsors, ultimately harming the millions of consumers who need these services."

Supporters of the merger include some members of the Congressional Black Caucus, who argued the deal would in fact increase competition, drive down costs and increase consumer access. However, Harry Alford, president of the National Black Chamber of Commerce, has written that the merged company would have the power "to increase prices and push out rivals, including community pharmacies."

INDEPENDENT ARBITER

The FTC, whose staff includes antitrust lawyers and economists, prides itself on its independence. It has the reputation of listening closely to consumers and rejecting lobbying pressure more than other federal agencies.

As part of their review, regulators scrutinizing the transaction asked the companies to provide supplementary information related to their market shares and pricing in the pharmacy benefit industry.

Express Scripts and Medco say they have provided the requested data to the FTC. If the FTC decides to challenge the deal, it must bring an enforcement action and win a judge's ruling to block it.

The commission could also approve the merger with conditions -- forcing the merged company, for example, to be more transparent on pricing and profits, or require it to spin off certain divisions.

The FTC may conclude, for instance, that the merged company would dominate both the mail-order market and also the management of new biotech specialty drugs, which are prescribed in complex, chronic, and often potentially life-threatening illnesses including AIDS and some types of cancer. If so, the FTC could order the merged company to sell its specialty and mail-order divisions.

Jeff Jonas, an analyst at Gabelli & Co., an investment management firm in Rye, N.Y., said the merger at this point seems "a little up in the air."

"If it does get approved, I think absolutely there will be conditions," Jonas said. "Maybe they'll have to sell off a mail order pharmacy."

DOMINANT PLAYERS

Express Scripts, based in north St. Louis County, is the nation's third-largest pharmacy benefit manager. Medco, based in Franklin Lakes, N.J., is the nation's largest. PBMs contract with employers to cover drug benefits for their workers, negotiating discounts with drugmakers and retail pharmacies.

Medco has struggled in the past two years and initiated the merger talks with Express Scripts. If the merger falls apart, Express Scripts -- which negotiated from a position of strength -- will not have to pay a "break up" fee, common in such deals.

Express Scripts and Medco handled about 1.7 billion prescriptions in 2010. All told, the two companies have about 38,000 employees. The merger would more than double the size of Express Scripts. The combined company's annual revenue would total more than $100 billion.

Although the pharmacy benefit management industry includes about 50 companies, the top three PBMs control roughly half the market.

"I think we would all agree that it's a fairly highly concentrated industry," Schaffermeyer said. The FTC "would like to have lots of competition and not a situation where there's an oligopoly or a few firms dominating the market."

Express Scripts says its can squeeze out at least $1 billion in savings from the merger, and that the combined company will be able to pass along those savings to consumers. The merged company would have unmatched purchasing power to obtain the best deals from pharmaceutical companies and retailers. George Paz, chairman and CEO of Express Scripts, has said the merger "will accelerate our efforts to lower health care costs while improving health outcomes."

But independent pharmacists say the merger would result in higher consumer prices and limited consumer choice on drugs and where to buy them.

Ron Fitzwater, who heads the Missouri Pharmacy Association, cited the recent breakdown in contract negotiations between Express Scripts and Walgreens, which balked at discounts demanded by Express Scripts. PBMs reimburse pharmacies when an employee fills a prescription at a local drugstore.

"If a major pharmacy organization like Walgreens can't negotiate its reimbursement rate to provide medications to patients, community pharmacists will have an even tougher time," he said.

The National Association of Chain Drug Stores, and the National Community Pharmacists Association, both of Alexandria, Va., have both opposed the deal. Specifically, drug store chains have complained that creating a giant pharmacy benefit manager would leave them vulnerable to unfavorable contracts.

"What they're worried about is having so much power in one pharmacy benefit manager that can make or break their company," Schaffermeyer said. "They'll just be dictated to."

Walgreen Co., the nation's largest drug store chain, has been reluctant to speak publicly about the merger, though officials have said they would provide information to the FTC if the agency asks.

Express Scripts and Walgreens ended their relationship at year's end after contract talks stalled. Asked about the proposed Express Scripts-Medco merger, Walgreen Co. spokesman Michael Polzin said: "If we thought it was a bad deal with one company, why would we take a bad deal from two companies?"

WARY INVESTORS

Wall Street has reacted cautiously to the proposed merger, given the deal's antitrust risk. Medco's stock continues to trade below the price that Express Scripts offered to Medco shareholders.

So far, the major pharmaceutical companies, which would need to negotiate drug prices with the merged company, appear to be sitting on the sidelines.

"It's not a priority of ours right now," said Jennifer Wall, a spokeswoman for Pharmaceutical Research and Manufacturers of America, a trade association that represents the nation's leading pharmaceutical research and biotechnology companies.

Seven of the nation's largest supermarket chains, however, have appeared before the FTC to voice their concerns that the merger will adversely impact supermarket pharmacies and their customers.

In a Feb. 2 letter to FTC Commission Chair Jon Leibowitz, the Food Marketing Institute - which represents nearly 1,250 member companies that operate about 25,000 retail food stores and 22,000 pharmacies - detailed its opposition to the merger. The institute says its members dispense more than 30 percent of drugs in the nation.

It argues the merger could create one dominant pharmacy benefit manager with the ability "to control approximately 40 percent of the overall prescription drug volume in the United States."

The institute asserts that supermarket pharmacies can provide the lowest cost drug options to millions of consumers - and that the merger would force many consumers into mail-order pharmacies.

The merger, the letter argues, "will harm supermarket pharmacies by significantly reducing reimbursement rates and forcing supermarket pharmacy patients to Express Scripts' captive mail-order pharmacy."

Brian Henry, a spokesman for Express Scripts, disagreed. "We have a strong history of working with pharmacies," he said. "Mail order is an option we offer to clients to choose, but we offer a broad range of services."

Express Scripts says that mail order is the least expensive pharmacy alternative and that the 90-day prescriptions issued by mail help patients adhere to their medication schedules.

"Our value proposition, now and as a merged company," Henry said, "is overwhelmingly positive for the American consumer."

EDITOR'S NOTE: This story was updated to indicate that some, but not all, members of the Congressional Black Caucus support the merger.