Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Medco Health Solutions
So what: While unconfirmed by the FTC, it appears that Express Scripts' $29 billion offer to buy Medco Health, another pharmacy benefits manager, is in serious jeopardy. The primary opponents to the deal are large grocery chains, but various consumer groups and state attorney generals have also opposed the deal, saying it would stymie competition. The proposed combination of the two PBMs would control about one-third of the PBM business.
Now what: Buyouts that result in monopolies or oligopolies are rarely successful, and that's been one of the main worries of Medco Health shareholders. Both companies have had strong rallies from their October lows in part because of the cost synergies shareholders on both sides expected from the buyout. With the possibility of each company remaining independent still on the table, I feel this hurts Medco far more than Express Scripts. For now I'd say keep a keen eye on this situation, as the FTC is due out with its decision in a few weeks, but I wouldn't change your investment thesis just because of today's as-of-yet-unconfirmed news.