How mergers and acquisitions in the generics sector can be a factor in drug shortages and increasing prices was a question addressed by researchers from Carleton and McGill Universities in Canada [1].
Marc-André Gagnon and Karena D Volesky extracted data on completed merger and acquisition deals that had a generics company being taken over, i.e. target, from Bloomberg Finance L.P. Data was extracted on the number and value of deals that took place between 1995 to 2016.
The results showed that the generics industry is consolidating. Generics companies accounted for 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 US$1.86 billion, in 2015 there were 34 deals totalling US$33.56 billion, and in 2016 there were 42 deals worth in excess of US$44 billion. This substantial increase was partially attributed to the 2016 acquisition of Allergan’s generics business by Teva Pharmaceutical Industries. The surge in mergers and acquisitions for 2015/16 was driven by deals in the US, where they represented 89.7% of the dollar value of deals in those years.
These mergers and acquisitions have been pointed to as an important factor to explain the large price increases for different generics like albendazole (treatment for intestinal parasites) [2], dextroamphetamine (treatment for attention-deficit disorder), pyrimethamine (treatment for toxoplamosis), nitroprusside (treatment for high blood pressure) and isoprotenerol (used in cardiac emergencies). However, Gagnon and Volesky point out that ‘mergers and acquisitions should not be considered the root cause of generic drug price increases, but rather as a factor exacerbating the trend of rising prices.’
A US-based retrospective cohort study has found that generics prices increase when competition is low or non-existent [3]. For example, in August 2015, Turing Pharmaceuticals increased the price of its newly acquired 62-year-old infectious disease drug Daraprim (pyrimethamine) from US$13.50 a tablet to US$750 – a 5,000% price hike [4].
The authors concluded that ‘the recent blitz in mergers and acquisitions signals that the generic drug industry is undergoing a transformation, especially in the US. 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.’ They added that ‘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 drug manufacturers’.
Conflict of interest
The authors of the research paper [1] declared that there was no conflict of interest.
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References
1. Gagnon MA, Volesky KD. Merger mania: mergers and acquisitions in the generic drug sector from 1995 to 2016. Global Health 2017;13(1):62.
2. GaBI Online - Generics and Biosimilars Initiative. Amneal and Impax combine to create 5th largest US generics company [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2017 Nov 10]. Available from: www.gabionline.net/Pharma-News/Amneal-and-Impax-combine-to-create-5th-largest-US-generics-company
3. GaBI Online - Generics and Biosimilars Initiative. Generics prices increase when competition decreases [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2017 Nov 10]. Available from: www.gabionline.net/Generics/Research/Generics-prices-increase-when-competition-decreases
4. GaBI Online - Generics and Biosimilars Initiative. Senator calls for FTC to investigate drug makers for antitrust violations [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2017 Nov 10]. Available from: www.gabionline.net/Policies-Legislation/Senator-calls-for-FTC-to-investigate-drugmakers-for-antitrust-violations
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