Abstract
BackgroundDrug shortages and increasing generic drug prices are associated with low levels of competition. Mergers and acquisitions impact the level of competition. Record merger and acquisition activity was reported for the pharmaceutical sector in 2014/15, yet information on mergers and acquisitions in the generic drug sector are absent from the literature. This information is necessary to understand if and how such mergers and acquisitions can be a factor in drug shortages and increasing prices.MethodsData on completed merger and acquisition deals that had a generic drug company being taken over (i.e. ‘target’) were extracted from Bloomberg Finance L.P. The number and announced value of deals are presented globally, for the United States, and globally excluding the United States annually from 1995 to 2016 in United States dollars.ResultsGeneric drug companies comprised 9.3% of the value of all deals with pharmaceutical targets occurring from 1995 to 2016. Globally, in 1995 there were no deals, in 2014 there were 22 deals worth $1.86 billion, in 2015 there were 34 deals totalling $33.56 billion, and in 2016 there were 42 deals worth in excess of $44 billion. This substantial increase was partially attributed to Teva’s 2016 acquisition of Allergan’s generic drug business. The surge in mergers and acquisitions for 2015/16 was driven by deals in the United States, where they represented 89.7% of the dollar value of deals in those years.ConclusionsThe recent blitz in mergers and acquisitions signals that the generic drug industry is undergoing a transformation, especially in the United States. This restructuring can negatively affect the level of competition that might impact prices and shortages for some products, emphasizing the importance of updating regulations and procurement policies.
Highlights
Drug shortages and increasing generic drug prices are associated with low levels of competition
The literature provides some explanations for the recent proliferation of merger and acquisition deals in the pharmaceutical industry [1, 4,5,6]; they include: 1 – generic firms can benefit from economies of scale through savings on administrative and capital costs; 2 – the loss of major patents have brought brand-name manufacturers to enter the generic drug market; 3 – mergers and acquisitions may be pursued as a way to enter emerging markets faster; 4 – loans can be obtained due to low-interest rates and because banks consider the Global excluding the United States
Our results show that merger and acquisition activity among generic drug companies have become a major trend in this industry since 2004, but that this trend has accelerated in 2015 and 2016, and that the United States target companies have been the center of this acceleration
Summary
Drug shortages and increasing generic drug prices are associated with low levels of competition. Record merger and acquisition activity was reported for the pharmaceutical sector in 2014/15, yet information on mergers and acquisitions in the generic drug sector are absent from the literature. This information is necessary to understand if and how such mergers and acquisitions can be a factor in drug shortages and increasing prices. The literature has cited several potential reasons for pharmaceutical companies pursuing mergers and acquisitions They include: achieving economies of scale and scope, gaining corporate control, acquiring specific assets such as patents, and buying out dying or financially weak companies [1, 6]. In the case of generics, we find little literature on Gagnon and Volesky Globalization and Health (2017) 13:62 the causes, impacts, and magnitude of mergers and acquisitions in that sector
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