Competition and Acquisition Pressure Hits Glaxo

18 September 1994

Pressure on governments to cut health care costs and the resulting wave of health care reform has brought about many changes in the pharmaceutical industry, with drug companies once again hitting the acquisition trail, but this time in order to guarantee access to patients, distribution and a strong product portfolio in a health care environment focussing more on managed care.

UK pharmaceutical company Glaxo has long resisted the trend to acquire. In the 1980s, when big was beautiful and drug companies were buying each other up to achieve critical mass, Glaxo resisted. In the 1990s, Glaxo's major competitors have honed in on managed care through acquisitions of pharmacy benefit managers, such as Merck & Co's acquisition of Medco. Jan Leschly, who this year moved up to become chief executive of SmithKline Beecham, showed that he too recognized the importance of managed care to the future of his company and acquired Diversified Pharmaceutical Services (Marketletters passim and page 14). Sir Richard Sykes, Glaxo's recently-appointed chief executive and deputy chairman, indicated at this month's press conference to announce the group's financial results for fiscal 1993/94 (Marketletter September 12) that Glaxo is in the arena to make an acquisition.

Sir Richard jokingly said that if Glaxo had acquired all the companies that it has been rumored to be interested in, the group would now have a market share of 75%. But on a more serious note he acknowledged that access to patients is of key importance. He said that Glaxo had looked quite seriously at the possibility of making an acquisition of a PBM around a year ago. However, he said that there are certain benefits and synergies to be gained from association with PBMs and that these vary between companies. "At the time we could not find a deal that would bring those synergies and meet shareholder value," he said, adding that the group will keep looking.

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