The approval, which creates the United States' largest PBM, is not without controversy, as one FTC commissioner dissented and one abstained while three voted in favor.
PBMs manage prescription drug programs for customers like insurance companies and save money through economies of scale in processing and negotiating lower rates from drug companies and pharmacies.
Over 95 percent of consumers with pharmaceutical drug benefits receive them through PBMs, according to Utilization Review Accreditation Commission, a nonprofit organization that provides healthcare quality.
After St. Louis-based Express Scripts proposed a part-stock and part-cash offer for Franklin Lakes, N.J.-based Medco last year, federal regulators embarked on an eight-month investigation to see whether the deal violates anti-trust rules.
The combined entity would have over 40 percent of the industry's market share, the FTC said, with CVS Caremark being its biggest remaining competitor.
The three FTC commissioners who approved the deal noted that while it was not an easy decision, they believe it will not change the dynamics of a competitive market for PBM services characterized by numerous, vigorous competitors who are expanding and winning business from traditional market leaders.
However, the one commissioner who dissented claimed the merger would create a duopoly between the combined entity and CVS Caremark in an industry with high entry barriers.
She noted that a deal with such characteristics is something no court has ever approved.
Shares of Express Scripts climbed 3.28 percent to close at $55.50.