Sector News

Here’s an M&A strategy: Buy products, hike prices, watch sales grow

April 28, 2015
Life sciences
As the M&A wave sweeps over pharma, companies are wheeling and dealing for a number of different reasons. Slim-down strategies, tax break potential, portfolio diversification and other usual suspects have all driven transactions as of late–but the promise of price hikes has, too.
 
More and more drugmakers are snapping up drugs or companies with products they see as undervalued–and then jacking up the prices on those meds, The Wall Street Journal notes. As a June 2014 research note from Needham & Co. points out, the number of 50% drug-price jumps in the past 2.5 years matched the number the industry saw in the prior decade, the paper reports.
 
It’s easy to see what makes the strategy appealing for biopharma companies. After all, price hikes–justified or not–can boost sales without the need for risky R&D investments.
 
It’s no surprise that R&D-averse–and M&A-happy–Valeant is among the strategy’s biggest enthusiasts. In February, after grabbing rights to two heart drugs, Valeant upped their list prices by 525% and 212%: Abnormal heart rhythm treatment Isuprel leapt to $1,346.62 per vial from $215.46, WSJ reports, while blood pressure therapy Nitropress vaulted to $805.61 from $257.80.
 
The motivation for those enormous increases? “Our duty is to our shareholders and to maximize the value” of the products that Valeant sells, company spokeswoman Laurie Little told the newspaper. “Sometimes pricing comes into it, sometimes volume comes into it.”
 
Valeant, of course, isn’t the only company jacking up prices. Illinois’ Horizon Pharma, for one, sent the price of Vimovo pain tablets soaring by 597% after buying the rights from AstraZeneca in 2013, the WSJ points out.
 
The company says the Vimovo price increase has “limited financial impact on the patient,” partly because of its copay assistance programs. Not so with payers–and they haven’t been too happy to watch prescription prices soar. Heavyweight pharmacy benefits managers have gone to war inking exclusive agreements with hep C drugmakers to bring prices down, and it’s an act they say they’re ready to bring to fields like cancer, too.
 
Meanwhile, Valeant’s price increases are having a measurable impact, at least at the Cleveland Clinic. Spending on those two heart drugs leapt by $8.6 million thanks to the higher prices, said Scott Knoer, Cleveland Clinic’s chief pharmacy officer. “We’re already under tremendous pressure to reduce costs because of reimbursement changes due to health-care reform,” Knoer told the WSJ, adding that he had hoped to cut drug spending by $10 million this year. The Valeant drugs made a dent in those hopes. “In one fell swoop, it eliminated nearly all of the savings we projected we would achieve,” Knoer told the newspaper.
 
By Carly Helfand
 

comments closed

Related News

January 22, 2023

Sun Pharma to buy Concert Pharmaceuticals for $576m

Life sciences

Sun Pharmaceutical Industries has signed a definitive agreement to buy all outstanding shares of Concert Pharmaceuticals in a deal valued at $576m. Under the deal, the company will buy all shares of Concert common stock through a tender offer for $8.00 per share in cash upfront payment.

January 22, 2023

Novo Nordisk diabetes pill wins FDA approval for first-line use

Life sciences

The Food and Drug Administration on Thursday approved Novo Nordisk’s diabetes pill Rybelsus as an initial treatment to lower blood sugar levels, a label expansion that will allow it to compete more directly with other oral drugs from Merck & Co. and Eli Lilly.

January 22, 2023

Bayer feeling more heat from activist investors, this time from Bluebell

Life sciences

Since making an ill-advised $63 billion buy of Monsanto in 2018, Bayer has faced heaps of pressure from investors that have called for the company to oust its leadership and to restructure. Now comes new pressure from a familiar source. Bluebell Capital Partners has bought an undisclosed stake in the company and is agitating for a breakup, sources told Reuters.

How can we help you?

We're easy to reach