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Obamacare Repeal Could Fuel Pharma And Biotech Acquisitions

Just last week, the house voted to repeal Obamacare, and much has already been covered in articles readily available on the internet. But the Senate has already stated they will write up new legislation that will take into consideration the House bill. No timeline for the Senate to produce its new legislation has been set, but the wheels have been put in motion. Everyone is writing about the overall impact to low-income Americans and healthcare providers.  I want to, again, concentrate on the effects on big and small pharma, and focus on the increase of acquisitions and mergers

Rather than say M&A, I put acquisitions first because this is what I see to be the trend. The replacement of Obamacare can mean many things for big and small pharma, such as the possible elimination of excise taxes and other limitations to help subsidize Obamacare. But there is a double-edged sword here. For every benefit that big and small pharma might see from the repeal of Obamacare, there could be restrictions and more competitive measures coming from a proposed new bill.

Overall, President Trump’s vision of healthcare is to provide more flexibility to choose insurance providers, as well as increase the competition to bring costs down. For drug companies this could mean a drive to change the law or find loopholes to allow Medicare to negotiate drug pricing. This would hurt pharma, but potentially have a positive effect on older Americans on Medicare plans.

President Trump also likes to streamline processes, so again, this can work in favor or against pharma. It would be beneficial to reduce the amount of time it takes for new drug approvals by the FDA. At the same time, it would also benefit foreign drug companies to sell more easily here in the U.S.  And, the final question that comes to mind is: what is really going to boost competition and reduce drug prices for Americans? No one is sure as to the best avenue to pursue. This is one of the reasons why stock prices for big and small pharma have been fluctuating so much recently. There are so many ideas on the table and negotiations are just beginning.

Acquisitions and Mergers

This gets back to my point about the occurrence of more acquisitions and mergers. Small pharma, like the many biotechs that are out there today, are striving to survive on the success of one or two drugs they are currently selling. Big pharma can survive drugs coming off patents if they have a strong pipeline. The smaller biotechs don’t have that luxury. So, what you may see happen over the next few years is that more and more smaller biotechs will be acquired by much larger companies. The smaller biotechs, with the one major drug coming off patent, are preparing by seeking to merge with other biotechs, in order to survive longer or become more palatable for an acquisition target. Chances are this trend will not just be limited to companies here in the U.S.  This is happening globally. Don’t be surprised to see biotechs being bought up by foreign drug manufacturers, and not just in Europe, but also from countries like Japan.

Perficient has a history of providing services to companies involved in M&A, whether it’s pre-M&A planning or post-transaction integration. To learn more about our capabilities, please fill out the “contact us” form below.

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Kevin Johns

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