Friday, June 19, 2009

Big Pharma M&A = Fewer but Bigger

Will M&A give pharma bargaining power?

By Tracy Staton

With Big Pharma cementing new deals left and right, it's only natural that the analysts among us would start, well, analyzing. A new report from market researchers Frost & Sullivan slices and dices the recent mergers and comes up with several M&A trends. Sure, there's the usual concern about M&A's effect on R&D. There's the common-sense observation that, with the market downturn, both Big Pharma and smaller biotechs are suddenly cheaper--and thus more attractive to buyers. And the point that M&A begets more M&A as companies often have to hive off products or divisions to get regulatory approval for their mega-mergers.

One F&S tenet that surprised us, however was this: With Big Pharma consolidating and drugmakers growing via buyout of smaller companies, there will be fewer--and bigger--pharma companies left standing. And when it comes to negotiating drug prices, bigger is better, the firm says. "One clear outcome of the rapid consolidation of the pharmaceutical industry," the F&S report states, "will be the increased bargaining power of big pharma vis-à-vis payers and the government."

That's pretty much the opposite of what Datamonitor predicted for pharma last week: That healthcare reform will depress prices. We see both sides of that argument: Governments all over the world, not just in the U.S., are pushing back on costly drugs. But big companies do tend to have more power than little--or even medium--developers. Will the two market-shaping forces simply cancel each other out?

Click on title above to read the story in Manufacturing Chemist;

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