Mergers & Acquisitions

Economy, IRA, Pharma Competition May Impact Industry in 2023

The pharmaceutical industry likely will continue to battle challenges posed by a variety of factors in 2023, including global economic issues, competition and the Inflation Reduction Act (IRA). The biosimilars space in particular is expected to undergo a change as the world’s top selling drug, AbbVie Inc.’s Humira (adalimumab), finally faces competition from a number of companies. But industry experts tell AIS Health, a division of MMIT, that they expect a number of positive developments in the space in 2023.

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Elevance-BCBS of Louisiana Deal, by the Numbers

Elevance Health has signed a deal to acquire Blue Cross and Blue Shield of Louisiana, the companies said on Jan. 23. With 1,049,194 members, BCBS of Louisiana is currently the second-largest health insurer in the state, according to AIS’s Directory of Health Plans. Combined, the two insurers will surpass the current market leader, UnitedHealthcare, with over 1.4 million enrollees in the state.

The acquisition builds on an existing joint ownership of Healthy Blue, which offers Medicaid and Medicare dual eligible coverage. The deal would expand Elevance’s presence in the state by 281%. If the deal closes, Elevance, the largest Blue Cross and Blue Shield affiliate with almost 37.6 million enrollees, will operate as a Blues licensee in 15 states.

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Elevance’s Louisiana Purchase Could Portend More Blue Cross Blue Shield Consolidation

Elevance Health, Inc. on Jan. 23 announced a deal to acquire Blue Cross and Blue Shield of Louisiana, breaking what one analyst called a nearly two-decade “ice age” in which no major consolidation among Blues took place. Experts say it’s unclear whether the tie-up is a harbinger of a flurry of similar dealmaking, but they suggest that the time may be right to see additional mergers and acquisitions (M&A) among Blues affiliates.

“It has been a long drought” since Blues plans conducted major M&A, observes Ashraf Shehata, national sector lead for health care and life sciences at KPMG. And during that time, the country’s largest health plans have gotten larger and more diversified. “So I think…it’s probably time for the industry, especially on the Blue side, to consolidate a bit more,” Shehata tells AIS Health, a division of MMIT.

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Industry Will Continue to See 340B, Patient-Paid Prescription Impact as IRA Looms

The pharmaceutical industry and the broader health care services market currently are experiencing a series of trends that are likely to persist into 2023, said Adam J. Fein, Ph.D., CEO of Drug Channels Institute, during a Dec. 16 webinar titled Drug Channels Outlook 2023. These include pressure on insurers’ traditional coverage of generics from patient-paid prescriptions, ongoing 340B litigation and providers’ increased presence within the specialty pharmacy market. But the impact of the biggest disruption, the Inflation Reduction Act (IRA), is yet to come. In this second of a two-part series, AIS Health highlights these trends projected by the longtime industry expert.

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2023 Outlook: With High Debt Loads, More Providers Will Be Purchased by Insurers

Health care transactions, particularly in the provider space, appear poised for another banner year, even as inflation, rising interest rates and a possible recession slow mergers & acquisitions (M&A) across the rest of the economy. Some providers are in financial crisis and seem sure to consolidate with each other or be taken over by private equity entities, while health insurers seem poised to spend pandemic-related windfalls.

Generally, health insurers are in good financial health. The health insurance business is somewhat protected from inflation, as carriers can pass through rising prices to commercial plan sponsors. Meanwhile, risk in government books of business is ultimately borne by the public. In addition, many carriers have plenty of cash on hand, meaning they are also insulated from rising interest rates. In spring 2020, when COVID-19 hospitalizations hit their first nationwide peak and local governments shuttered many businesses and in some cases barred nonessential medical procedures, health care utilization cratered. Utilization did not approach normal levels until the end of that year, and so premium revenues far outstripped claims paid for most insurers.

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Expect Industry Impact From Vertical Integration, Provider M&A Activity, Humira Biosimilars

Multiple trends within the pharmaceutical industry and the broader health care services market currently are underway and likely to persist into 2023, said Adam J. Fein, Ph.D., CEO of Drug Channels Institute, during a Dec. 16 webinar titled Drug Channels Outlook 2023. Others, such as the launch of the first biosimilar versions of Humira (adalimumab) are set to take place in the upcoming year. In this first of a two-part series, AIS Health highlights the first half of the trends projected by the longtime industry expert.

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SCAN-CareOregon Merger Could Face Antitrust Scrutiny

SCAN Group, parent company of SCAN Health Plan, said last week that it plans to combine with CareOregon to become HealthRight Group. But the deal has yet to be approved by regulators — and because of Oregon’s strict antitrust laws and proactive regulators, the successful execution of the deal isn’t a given, experts tell AIS Health.

If the deal goes forward, the two nonprofit health plans will become one organization with revenues of $6.8 billion. SCAN operates Medicare Advantage plans in California, Arizona and Nevada, with MA operations launching in Texas starting in 2023. CareOregon serves about 500,000 members of Medicaid and CHIP plans, alongside some dual-eligible members. Together, they expect to serve nearly 800,000 health plan members.

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News Briefs: AbbVie Leaves PhRMA Lobbying Group

AbbVie Inc. is leaving several lobbying organizations, including the Pharmaceutical Research and Manufacturers of America (PhRMA), widely regarded as the most powerful drug industry trade group, according to Politico. PhRMA has had a tough year. In August, the trade group faced its most notable political failure in a generation when Democrats passed Medicare drug price negotiation as part of the Inflation Reduction Act. In the months since, PhRMA has launched an internal review of that episode and has dismissed several of its most prominent executives.

Amgen Inc. plans to acquire Horizon Therapeutics plc. for $27.8 billion, or $116.50 per share, according to regulatory filings; the deal is the largest health care merger of the year, per the Wall Street Journal. Horizon develops specialty drugs for autoimmune and inflammatory diseases. The firm’s best-seller is Tepezza (teprotumumab-trbw), a treatment for thyroid eye disease. If, as expected, Tepezza earns approval in the European Union and Japan, Horizon projects $4 billion in global annual revenue from the drug.

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News Briefs: Health Care Spending Growth Slows in 2021 After Pandemic Spike

U.S. health care spending grew 2.7% to reach $4.3 trillion in 2021, representing a slowdown in growth compared to the 10.3% increase recorded in 2020. That’s according to the 2021 National Health Expenditures Report from CMS’s Office of the Actuary, which attributed the spending-growth slowdown to a 3.5% year-over-year decline in health care expenditures from federal government that jumped in 2020 amid the COVID-19 response. The decline in government spending “more than offset” the impact of greater insurance coverage and higher health care utilization seen in 2021. The report also noted that private health insurance spending increased by 5.8% in 2021 to reach $1.2 trillion.

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2022 Saw Some Pharma Challenges, but Industry Has Continued to Innovate With Novel New Agents

As the pharma industry dealt with the ongoing COVID-19 pandemic amid heightened economic pressures, it largely weathered the storm that was 2022. But with provisions of the Inflation Reduction Act (IRA) set to start rolling out next year, many questions remain that may impact pharma manufacturers. The industry, however, saw continued innovation in novel therapeutics, and in the second half of the year, the number of gene therapies on the U.S. market more than doubled with the approval of three new agents. And while the merger and acquisition (M&A) activity may have been a bit muted compared with past years, 2022 is closing out with the unveiling of the biggest biotech deal of the year: Amgen Inc.’s agreement to purchase Horizon Therapeutics plc for $27.8 billion. AIS Health, a division of MMIT, spoke to industry experts about other 2022 pharma trends.

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