Mergers and acquisitions in the pharmaceutical industry have substantially reduced the number of major companies over the past 20 years.
It has been very common in recent months to note huge changes in the makeup of the players in the pharmaceutical-and-generic sector, as well as at least two acquisitions in the past two years of larger patient recruitment firms. This record-breaking series of deal making has hit every corner of the industry, from pharma to biotech to generics and the over-the-counter market. In 2015, Pharma deals have reached $59.3 billion, a 94% increase over the same period a year ago, and the highest value for this stage in any year since 2009, according to Thomson Reuters. This is illustrated in the chart.
Another way to look at this phenomenon is that since the start of last year, pharmaceutical companies have completed $462 billion in mergers and acquisitions, larger than the gross national product of Austria. This industry consolidation has reduced the number of compounds in development; the boom of the 1990s, which saw the number of approved drugs peak at 54 in 1996, originated from companies that no longer exist. In major mergers today, not only are R&D cuts made, but entire research facilities are eliminated. The FDA, however, approved 41 new drugs last year, the highest tally in 18 years. It is notable for the investigator site to acknowledge that the areas of growth included hepatitis C, cancer and cardiovascular disease.
The goals of such activity are clear: Pharma companies must either deliver innovative compounds that are valued highly enough to justify the best price, or reduce costs to make new medications more cheaply. In addition, the pressure is on the industry to become more efficient when it comes to the demands of an aging population and the consolidation of the U.S. healthcare market.
The impact of these changes increases the vulnerability of the research site directly in terms of work timelines in the pipeline for the site, among other factors. As an example, when mergers and acquisitions occur, commercial sensitivity and intellectual property discussions follow as the last part of the negotiations and can substantially delay programs that were slated to progress. Another factor in this process also can affect the process of research at the site level, as research organizations often differ significantly with basic platforms such as IT systems, data management and adverse event reporting.
We also may find ourselves impacted by the constant M&A activity related to the unstable job market that these changes can bring to bear. We are indirectly impacted by the changes in staff brought on by such activity, including layoffs and new processes and procedures that impact changing faces of CRAs, as well as our contacts for budgeting and contracting. Our long-term relationships and business development contacts can change in a flash. (A recent monitor at one of our sites joked that she had worked for three different companies over the last 18 months without ever changing jobs.) Indeed, only 11 of the 42 companies that were the original members of the Pharmaceutical Research & Manufacturing Association (PhRMA) still exist today.
In respect to such changes and for those of us who have established relationships over years of performing clinical research, we must stay on top of these changes. We need to keep abreast of how, as the players rotate, our businesses must respond to the industry’s changing capacity for innovative research and development. Certainly a daily review of PharmaVOICE Live, CenterWatch Weekly, Biopharm Update, etc., will help to make sure you correctly make the linkages you need to follow business opportunities appropriately. Making contacts, following leads and generating new relationships can be a challenge in this volatile environment as you hunt for new growth and opportunity for the site.
We live and breathe in an interesting industry ecosystem at this point in time, and the experts say there is no end in sight to the divestment, creation of new competitors and asset swaps. There currently is an explosion of the understanding of causality of disease, but fewer scientists to deliver on innovation. There is much to consider.
As investigators committed to clinical research, we strive to survive and sustain our place among the fray and the potential shrinking of research assets.
Jeffrey Adelglass, M.D., F.A.C.S., is founder, owner and president of Research Across America (RAA), a U.S.-based, privately owned, multidiscipline CRO. Email comments and questions to firstname.lastname@example.org.
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