Sector News

Sanofi, GSK expect further price pressure, more M&A under Trump

November 16, 2016
Life sciences

Two of Europe’s biggest drugmakers warned on Tuesday there would be no let up in pressure on U.S. medicine prices after last week’s presidential election win for Republican Donald Trump, which sent pharmaceutical and biotech shares soaring.

Mergers and acquisitions (M&A) in the sector, meanwhile, could get a big boost if Trump pushes through plans for a U.S. “tax holiday” on repatriated overseas profits, executives said.

Both France’s Sanofi and Britain’s GlaxoSmithKline have recent direct experience of U.S. pricing pressure, with healthcare providers forcing big discounts for their top-selling diabetes and respiratory medicines.

In the run-up to the U.S. election, investors had focused on the threat of price controls posed by Democrat Hillary Clinton, yet Trump also advocated a new role for government agencies in negotiating down drug costs.

“I don’t think the pricing debate is over,” Sanofi Chief Executive Olivier Brandicourt told an industry conference.

Drugmakers are already having to work much harder to justify U.S. prices due to the rising power of U.S. pharmacy benefit managers (PBMs), which administer drug benefits and negotiate rebates for employers and health plans.

The buying power of these middlemen has been brought to bear particularly in areas of medicine where there are several similar treatments to choose from, such as insulin injections and inhalers for asthma and chronic lung disease.


The trend toward big buyers squeezing prices is only going to accelerate as the U.S. healthcare system struggles to find the resources to pay for new medical interventions, GSK CEO Andrew Witty said.

“It doesn’t really matter too much who won the U.S. election because the direction of travel of the U.S. marketplace, owned not by one stakeholder in the White House but by multiple stakeholders in public and private decision-making environments, is already set,” he told the Financial Times meeting.

Manufacturers contend that the discounts extracted by PBMs are not always passed on to patients.

“We are making significant concessions but patients are paying more,” said Brandicourt, who believes legislation may eventually be needed to ensure patients gain from the discounts.

Another key question for investors is the potential for a further wave of deal-making in the healthcare sector, given impetus by Trump’s plan to work with Congress to allow U.S. firms to pay a lower tax rate when bringing back overseas cash.

That would add tens of billions of dollars in firepower for pharma and biotech acquisitions, with deal-hungry Pfizer alone having more than $80 billion it wants to repatriate.

“I think there is likely to be quite a lot of M&A next year,” said GSK’s head of strategy David Redfern. “The only thing unclear is how big it gets.”

By Ben Hirschler

Source: Reuters

Related News

June 13, 2021

Making drug-resistant bacteria susceptible to antibiotics

Life sciences

Antibiotic resistance remains one of the biggest public health challenges. New drugs are still needed to tackle tough-to-treat bacteria. But finding new therapeutics to kill off pathogenic bacteria has been difficult.

June 13, 2021

Vexed by vectors: How COVID-19 vaccine and cell and gene players are tackling the viral vector bottleneck

Life sciences

Viral vectors are engineered viruses used to deliver gene therapies, gene-modified cell therapies and certain vaccines. And their shortage is already upon us, thanks to manufacturing approaches that simply haven’t kept pace with the advance of cell and gene therapies.

June 13, 2021

Beigene expands into cancer cell therapy with Shoreline pact

Life sciences

Beigene, a fast-growing drugmaker based in Cambridge, Massachusetts and Beijing, will partner with Shoreline Biosciences to develop cell therapies for cancer, expanding its research beyond the small molecule and antibody drugs.

Send this to a friend