Payer pressure is growing across a wide spectrum of the health care sector. Price increases have been blunted by election-year rhetoric and competition in key global pharmaceutical markets. Continued portfolio rationalization, a professed preference for bolt-on deals, and lower target company valuations continue to sharpen global appetites for acquisitions into 2017. A distinct firepower advantage combined with suddenly friendly political and tax climates in the US should allow big pharma to seize the M&A agenda.
More than any other time in the past several years, big pharma companies have the firepower advantage necessary to execute on the acquisitions they require to bolster revenue and drug pipelines. And more than any other time in the past several years, those deals are necessary.
Big pharma and biotech’s race for inorganic growth has intensified as payers continue to push back on price increases for older drugs and dampen the growth trajectory of newer therapies. M&A has averaged above US$200 billion over the past three years – impressive heights which we deemed the “new normal” in last year’s report. Even so, 2017 could be a banner year for dealmaking, well exceeding this level as industry and political forces converge.