Low levels of competition among drug makers can lead to product shortages and increased generic drug prices, and a recently published study in Global Health suggests that mergers and acquisitions, which reduce the number of players in the pharmaceutical field, should be closely monitored by regulatory authorities.
Low levels of competition among drug makers can lead to product shortages and increased generic drug prices, and a recently published article in Global Health suggests that mergers and acquisitions, which reduce the number of players in the pharmaceutical field, should be closely monitored by regulatory authorities.
The study’s authors assessed data on completed merger and acquisition deals from January 1, 1995 to December 31, 2016 in which a generic or biosimilar developer was taken over by an innovator developer. Data on mergers and acquisitions were derived from Bloomberg Finance L.P.
The final study sample consisted of 345 deals, totaling $160.30 billion in value (not adjusted for inflation). In 1995, the total value of such mergers was “negligible,” said the authors, but the value of these transactions grew sharply in 2015 and 2016, reaching an annual value of $44.01 billion in 2016.
“Our results suggest that there is a substantial movement in the last [2] years in the generic sector towards using merger and acquisition deals to grow rather than traditional greenfield investments,” the authors note, saying that, since 2011, 3 mergers were announced at values over $10 billion each.
The paper states that mergers and acquisitions are on the upswing because of the following factors:
These shifts in the competitive landscape signal a change in the economic structures of the generics and biosimilars sector, say the authors. In order to ensure protection against unwarranted price increases or drug shortages, “Antitrust authorities should scrutinize current practices, public drug plans should consider modifying their procurement process to ensure the safety of drug supply, and governments could also explore the possibility of establishing public generic manufacturers,” the authors conclude.
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