And this firepower could soon be focused on the life sciences supply chain, with its high-volume generic drug manufacturers, diagnostic laboratories, distributors and wholesalers, pharmacy benefit managers and retail pharmacies each ripe for potential disruption.
Potential disruption could take several forms. But any entry into the life sciences supply chain could result in a reduction in profitability for incumbents as margins get squeezed along any link in the chain. Might this be welcome news for biopharma or medtech companies?
Stage set for M&A surge
The emergence of customer-centric care platforms, a key strategic driver of the CVS-Aetna merger, may spark a new and vigorous round of consolidation among manufacturers, payers and intermediaries, such as UnitedHealthcare’s US$4.9 billion acquisition in December of DaVita Medical Group, DaVita Inc.’s chain of medical groups and physician networks.
The underlying dynamics already support larger-scale consolidation within life sciences, and in biopharma in particular, where the market remains highly fragmented. Indeed, the top five companies in the trillion-dollar global pharmaceutical market — Pfizer, Novartis, Roche, Sanofi and Johnson & Johnson’s Janssen — each have no greater than 5% market share.