Yesterday's merger between drugstore chain CVS Corp. (NYSE: CVS) and Pharmacy Benefit Manager (PBM) Caremark Rx, Inc. (NYSE: CMX) could raise your medical expenses and slam your stock portfolio. By eliminating competitors, the merger could result in higher drug prices for consumers and the stock market's reaction to the deal knocked 7.4% off of CVS and 2% from CMX.

This merger happened to coincide with a case I taught yesterday about Merck & Co.'s (NYSE: MRK) 1993 merger with PBM, Medco Health Solutions Inc. (NYSE: MHS). Thirteen years ago, Merck spent $6.6 billion to buy Medco with the idea of creating a new coordinated pharmaceutical care approach to health care, using data about patient medical outcomes to improve drug development. But the concept never happened and in 2003, after a botched IPO, Merck spun off Medco to shareholders.

The reasons for the failure of Merck-Medco provide useful insights into the challenges facing CVS and Caremark. Merck-Medco tried to combine two companies with different capabilities and cultures, but the two companies were never integrated and the intent of the merger was not achieved. CVS and Caremark could do a bit better on the integration front -- they forecast $400 million in cost savings -- but the combination is like having two competing business models under the same roof.