One of the most contentious acquisitions in the pharmaceutical industry will be under a microscope this after as the House Judiciary Subcommittee on Intellectual Property, Competition and the Internet explores the proposed $29 billion of Medco Health Solutions by Express Scripts (if you click here, you can watch the hearing, which starts at 3:30 ET).

The deal has generated enormous interest because these are two of the three largest pharmacy benefit managers in the US. Wall Street largely likes the acquisition. “The outlook for Express Scripts, either as a standalone entity or combined with Medco, is extremely promising,” Jefferies & Co analyst Arthur Henderson wrote in an investor note last week. But not everyone is enamored. Last week, three US House Democrats pressed the US Federal Trade Commission to carefully scrutinize the deal (see this).

And in a letter to the FTC this morning, several advocacy groups - including Consumers Union, Consumer Federation of America, National Consumers League, US PIRG and the National Legislative Association on Prescription Drug Prices - wrote that the merger combines the two largest specialty pharmacies, Curascript and Accredo, giving them more than a 50 percent market share. The deal would establish “tremendous dominance for Express Scripts in the specialty pharmacy area, likely resulting in decreased access to care for our most vulnerable patient populations.”

The FTC is, in fact, conducting a close look at the deal. The agency made a so-called second request for information about the proposed acquisition, which had been expected. Agency watchers have noted the FTC was criticized for being too lax when the CVS pharmacy chain purchased Caremark, the other large PBM. There was no second request for information by the FTC during that review.

In prepared remarks, Express Scripts ceo George Paz is expected to discuss how PBMs can lower health care costs. For instance, in his testimony, he notes that, according to Express Scripts data, its members “enjoy an additional annual average savings of over 11 percent per year. These savings are in addition to the discounts from negotiating with drugmakers, which average 27 percent below the average cash price consumers would pay at a retail pharmacy for brand name drugs and 53 percent below the retail cash price for generic drugs.”

He then cites an example - cholesterol drugs, which he refers to as statins. “In 2010, brand drug makers increased prices on statins by an average of 9.3 percent. Yet because of Express Scripts sophisticated negotiating tools, our clients’ exposure to this increase was limited to 6.3 percent – which translates to a 32 percent discount for clients.”

Among those testifying will also be Medco ceo Dave Snow; Joe Lech of the National Community Pharmacists Association; Dennis Wiesner, director of privacy, pharmacy and governmental affairs at the H-E-B food retailer and treasurer at the Texas Board of Pharmacy; and a pair of attorneys who specialize in antitrust issues - Dan Gustafson and Stephanie Kanwit from Manatt, Phelps & Phillips.

pills pic thx to anolobb on flickr