NEW YORK (Reuters)—Generic drug makers are turning to mergers and acquisitions to shield themselves against a concerted effort by U.S. regulators to crack down on steep drug prices.
Impax Laboratories Inc, Perrigo Company Plc and Alvogen Inc have been talking to advisers about strategic options for their generics businesses, ranging from acquisitions to increase scale to an outright sale of the units, people familiar with the matter said this week. The persons declined to speak for attribution because the discussions are private.
Meanwhile, Mallinckrodt Plc, one of the largest producers of the generic opioid painkiller oxycodone, has been exploring a sale of its specialty generics unit, Reuters has previously reported.
On an earnings call in May, the chief executive of Impax, which makes a generic version of the EpiPen allergy injection, said it was looking at deals.
“We will look, of course, look for asset acquisitions on the generic side,” Paul Bisaro told analysts. “Given our size, we’re going to have to be creative.”
Impax, Alvogen and Vertice did not immediately respond to requests for comment. Mallinckrodt and Perrigo declined to comment.
Generic drugs, which are less expensive versions of brand-name pharmaceuticals, have become a key front in U.S. officials’ efforts to cut the cost of prescription drugs. U.S. consumers spend more than twice as much on drugs per capita compared with other industrialized countries, according to a 2016 report by the Journal of the American Medical Association.
To bring down prices, the U.S. Food and Drug Administration (FDA) has committed to eliminating the backlog of drug applications awaiting its approval. This could mean nearly 4,000 new medicines will come onto the market over the next several years, based on FDA estimates of drugs awaiting approval.
Even before a potential flood of new products, small and mid-sized drug makers were under pressure as consolidation among generic drug distributors has made it less profitable for them to sell their drugs.
Sales of generics by Impax and Perrigo dropped by 21 percent and 12 percent, respectively, in the first quarter of 2017 compared with a year earlier. Analysts expect continued sales declines for the rest of the year.
A merger or a sale to a rival could alleviate some of the pressure through cost-cutting, reduced competition and new markets and products. It could also help companies negotiate better terms with drug distributors, such as Cardinal Health Inc, McKesson Corp and Amerisource Bergen, which control about 90 percent of all revenue from drug distribution.
