Consolidations impact generic, prescription pricing

Mergers and acquisitions among pharmaceutical companies has kicked into high gear this year, mirroring the larger trend sweeping across the entire spectrum of the health care industry since the implementation of the Affordable Care Act two years ago.

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According to a recent report from S&P Capital IQ, there were $89 billion in healthcare mergers and acquisitions by the end of March, compared with $56 billion during the first quarter of 2014.



The largest of these deals, by far, has been Actavis’ $66 billion takeover of Allergan. Approved by shareholders at both companies in mid-March, the deal creates a global company with projected annual revenues topping $23 billion and a portfolio that includes more than 1,000 generics, branded generics, established brands and over-the-counter medications.



On the other side of the spectrum was AbbVie’s announcement in March that it would pay more than $19 billion to acquire specialty drug maker Pharmacyclics.



Pharmacyclics markets only one drug, the cancer medication Imbruvica. However, analysts said the deal could provide a windfall for AbbVie since Imburvica retails for about $90 per pill and, depending on the types of cancer they have, patients need to take three or four pills a day for the rest of their lives. AbbVie said it expects the drug to record $1.5 billion in sales this year.



As of press time, the latest round of consolidation involved Mylan attempting to purchase Perrigo, while Teva Pharmaceutical offered $40 billion to buy Mylan.



Critics of the recent spate of pharmaceutical company mergers said the shrinking of the supplier pool that is coming from these combined companies is one of a handful of reasons for recent spikes in the price of generic and branded drugs that made 2014 a record year for drug spending.



To a lesser extent, consolidation has had an affect on overall spending. According to the Express Scripts Drug Trend Report released earlier this year, prescription drug spending in the United States increased 13.1% in 2014 — the largest annual increase since 2003.