MERGERS AND ACQUISITIONS IN THE GENERIC DRUG …MERGERS AND ACQUISITIONS IN THE GENERIC DRUG SECTOR:...
Transcript of MERGERS AND ACQUISITIONS IN THE GENERIC DRUG …MERGERS AND ACQUISITIONS IN THE GENERIC DRUG SECTOR:...
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MERGERS AND ACQUISITIONS IN THE GENERIC DRUG SECTOR: THE IMPACTS OF THIS FORGOTTEN FACTOR
ON PRICING AND SHORTAGES
Marc-André, PhD, Associate Professor, School of Public Policy and Administration at Carleton University
[email protected] Twitter @MA_Gagnon
Karena Volesky, MA-MSc, PhD student in Epidemiology at McGill University
[email protected] Twitter @KarenaVolesky
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DISCLOSURES
We have no relationships with commercial interests
This research was funded by the Canadian Institutes of Health Research
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CONTEXT
Generics made-up almost 90% of all dispensed drugs in the USA in 2014 1
Shortages and increasing prices are recurring issues
Patent cliff and downward pressure on generic drug prices since 2010
1 Turk S. Generic Pharmaceutical Manufacturing in the US. IBIS World Industry Report, 2015 32541b.
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CONTEXT
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CONTEXT
Record levels of M&As reported in pharma sector for 2014–15
Pursue M&As to: Achieve economies of scale and scope
Gain corporate control
Acquire specific assets
Buy dying or weak companies
More….
Image from: http://blog.telemerge.ca/blog/bid/379981/Smoothing-out-the-Rocky-Path-of-Mergers-Acquisitions
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OBJECTIVES
Present data on the number and magnitude of M&As in the generic pharma sector over a 21-year period for three regions:
1. Global
2. USA
3. Global excluding the USA
Discuss the potential impacts on pricing and shortages
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APPROACH
Bloomberg Finance L.P. Generic drug firm being taken over Completed M&A deals 1995 to 2016 Global, USA, and global excluding the
USA Not all deal values are released Number and announced value Largest deals US$, not adjusted for inflation
Image from: https://www.reddit.com/r/MechanicalKeyboards/comments/211gvl/this_keyboard_costs_24000_per_year_to_own_a/
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SAMPLE*
*Dollar values are in USDs and represent the total announced value of M&A deals
M&As with global pharmaceutical targets from
1995 to 2016 7,011 deals
$2,575.7 billion (bn)
M&As with global generic targets from 1995 to 2016
379 deals $255.0 bn
M&As with global generic targets completed from 1995
to 2016 345 deals $160.0 bn
Excluded: Terminated 17 deals, $42.85 bn Withdrawn 10 deals, $51.73 bn Pending 7 deals, $0.11 bn
Excluded: Terminated, withdrawn and pending deals (418 deals worth $858 bn)
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VALUE OF GLOBAL GENERIC VERSUS ALL PHARMA M&AS (%)
90.7 98.2 86.6
65.1
9.3 13.4 34.9
All years 2014 2015 2016
Non-generic Generic
$1.72 trillion
$105.1 billion
$250.3 billion
$126.3 billion
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NO. OF COMPLETED M&AS WITH GENERIC TARGETS
05
1015202530354045
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Num
ber o
f dea
ls
Global USA Excluding USA
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VALUE OF COMPLETED M&AS WITH GENERIC TARGETS
05
101520253035404550
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Anno
unce
d va
lue
in U
SD b
illio
n
Global USA Excluding USA
$43 billion in M&As with
USA generic targets
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FIVE LARGEST DEALS WITH GENERIC TARGETS
Target Acquirer Announced $ value (in billions) Completion date
1 Allergan’s generic drug business
Teva Pharmaceutical Industries Ltd 39.56 Aug 2016
2 Hospira Inc Pfizer Inc 16.81 Sept 2015
3 Nycomed A/S Takeda Pharmaceutical Co Ltd 13.73 Sept 2011
4 Par Pharmaceutical Holdings Inc Endo International PLC 8.09 Sept 2015
5 IVAX Corp Teva Pharmaceutical Industries Ltd 7.58 Jan 2006
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SUMMARY
M&As played a minimal role in the generic sector prior to 2000
Trend of M&As since 2004
2015–16 experienced record levels of M&As – USA
Our findings are consistent with industry reports that pharmaceutical companies have turned to M&As to grow
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LIMITATIONS
“Not announced” values are unknown underestimated $ value
No direct association established
Too early to report specific impacts of very recent M&A activity
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INTERPRETATION
2010 patent cliff increased generic utilization while governments exerted downward pressure on prices
Appearance of consolidation, two years after price increases for many generics in the USA, but growing number of companies from 2010 to 2015:
Herfindahl-Hirschman index at 0.021 (threshold is 0.25)
Largest manufacturer (Pfizer Global Established Products) controls 9% of global market
In some therapeutic categories, concentration plays a role in increasing prices; albendazole, dextroamphetamine, and pyrimethamine
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DISCUSSION
Record level of M&As appeared AFTER two years of price increases
M&As not a root cause of price increase, but exacerbating factor
Focus on the USA not linked to “need to enter emerging markets” or “vertical integration with manufacturers of raw ingredients”
M&As linked to increased prices and drug shortages: relying only on “market forces” (or demanding increased prices) is no longer an option
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POLICY IMPLICATIONS
Governments should consider implementing a procurement process with tenders including clauses to ensure a safe and consistent supply
Establish a public generic manufacturer, like in Sweden or Brazil
Competition bureau should investigate current trends of how M&As can allow unilateral price increases
Develop special pathways for foreign or new manufacturers to promote competition
Economic structures of the generic sector are shifting and countries must adapt their regulations
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THANK YOU
QUESTIONS/COMMENTS?