Large U.S. grocers have joined other trade groups in opposing a proposed $29 billion merger of pharmacy benefit managers (PBMs) Express Scripts and rival Medco Health Solutions.

The Food Marketing Institute, which represents large grocery chains such as Kroger, Safeway and Walmart, sent a letter Feb. 2 to Federal Trade Commission Chairman Jon Leibowitz expressing concern about the deal, Reuters reported. The group argues that the deal, which would create the nation's largest PBM, will result in lower reimbursements to grocery chains, already struggling with tight profit margins.

The FMI also says the merger will increase drug prices, reduce generic drug options and could ultimately limit availability of certain medical staff due to the lower reimbursement rates.

We write to you on behalf of the Food Marketing Institute, to fully explain the importance of supermarket pharmacies in the delivery of pharmacy and health care services, detail the harm supermarket pharmacies will incur post-merger and ask the Commission to bring an enforcement action to enjoin the merger, the group told Leibowitz.

A combination of Express Scripts and Medco would create the largest PBM in the U.S. with more than 30 percent of the market share. But Express Scripts spokesman Brian Henry dismissed the notion that the deal would lead to lack of competition in the marketplace, noting there are approximately 40 PBMs operating in the country.

He said St. Louis-based Express Scripts expects the deal, announced last July, will still close in the first half of this year.

We believe this merger will help drive down the cost of medicine, accelerate efforts to drive out waste and improve health outcomes, Henry said.

Medco also expects the merger to be completed within the first half of 2012, Medco spokeswoman Jen Luddy said in an email.

Express Scripts and Medco are two of the three largest PBMs in the U.S. by market share. CVS Caremark is also in the top three.

The FMI joins the Consumer Federation of America, U.S. PIRG and a host of community based pharmacies in opposing the proposed merger.

The government has not expressed opposition to the merger but has been giving more scrutiny to recent proposed mergers. The FTC sued to block a $441 million bid by pharmaceutical provider Omnicare to purchase rival PharMerica, arguing the combined company would lead to increased drug prices for Medicare recipients, which would then be passed down to taxpayers.

Both the U.S. Department of Justice and the Federal Communication Commission last year came out in opposition to the $39 billion merger between AT&T and T-Mobile USA on concerns the deal would excessively consolidate the wireless market. AT&T abandoned the merger in December.

Shares of Express Scripts closed down 4.64 percent to $49.67. Shares of Medco closed down 8.08 percent to $58.47.

This story has been updated to provide comment from Medco.