Mergers & Acquisitions

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.

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.

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.

SCAN Group, the parent company of not-for-profit Medicare Advantage insurer SCAN Health Plan, on Dec. 14 said it will combine with another not-for-profit organization, CareOregon. For more than 25 years, CareOregon has provided health services and community benefit programs to Medicaid and the Children’s Health Insurance Program in its home state and currently serves more than 500,000 Oregonians, including individuals who are dually eligible for Medicare and Medicaid.

Under the name HealthRight Group, the combined companies will operate as a mission-driven not-for-profit health care organization and maintain their respective consumer-facing brands, according to a press release from the firms.

Nearly 5.5 million people have selected health plans since the Affordable Care Act open enrollment period began on Nov. 1, CMS said in its latest marketplace enrollment update. That total captures signups on HealthCare.gov through Dec. 3 and through Nov. 26 for the state-based marketplaces, and it represents an 18% increase compared to the same time period last year. So far 22% of total plan selections have been from individuals who are new to the marketplaces, while 78% are returning customers, CMS said. The open enrollment period lasts through Jan. 15 for HealthCare.gov states and most state-based marketplaces.

Blue Shield of California — which lost its bid to continue to serve California’s Medicaid managed care program — plans to lay off 373 employees by Jan. 25, Modern Healthcare reported. The decision from California’s Dept. of Health Care Services came in August after the state held its first competitive bidding process for Medi-Cal contracts. Blue Shield was not chosen — prompting the insurer to later sue the state — while Elevance Health’s Anthem Blue Cross Partnership Plan, Centene Corp.’s Health Net and Molina Health Care were selected to participate in varying service areas across 21 counties. The layoffs represent a small portion of Blue Shield’s total workforce of 7,800, Modern Healthcare noted, and the cuts are mostly concentrated at the insurer’s Sacramento-area offices.

Sen. Mike Lee (R-Utah) unveiled legislation aimed at boosting competition among biologics and reducing consumer costs for the agents. Introduced on Nov. 17, the Biosimilar Red Tape Elimination Act (S.6) would do away with the FDA requirement for switching studies for biosimilars seeking the interchangeability designation. “Eliminating this barrier would increase access to lower-cost biosimilars and save payers and consumers billions over the next five years,” according to a press release from Lee’s office. In contrast to the European Union, whose European Medicines Agency (EMA) and the Heads of Medicines Agencies (HMA) recently clarified that all biosimilars approved in the EU are interchangeable, the FDA has created two levels of biosimilars: biosimilars and interchangeable biosimilars. Also quoted in the release was Sarfaraz Niazi, Ph.D., an adjunct professor of biopharmaceutical ciences at the College of Pharmacy at the University of Illinois Chicago, who pointed out that “according to the FDA, ‘biosimilars have no clinically meaningful difference with their reference product,’ so if there is no difference, they should be interchangeable without the extensive and expensive switching and alternating studies in patients.”

The rise in consolidation among hospital systems operating in different geographic areas may be hampering the competitive strength of health insurers by limiting their negotiating muscle, a new study in Health Affairs says.

The pricing effects of hospital consolidation is not new. Previous research, including a 2020 report from the Medicare Payment Advisory Commission (MedPAC), shows that merging hospital systems tend to lead to higher prices.

However, the new study seeks to unravel the effects of a particular phenomenon — what happens after a merger or acquisition (M&A) among hospitals that operate in different markets and the impact on downstream factors, including contract negotiations with insurers.

During the first three quarters of this year, private equity companies were involved in 725 health care services deals in the U.S. and Canada, according to a PitchBook report released on Nov. 15. That is more than the number of transactions that occurred during each of the years between 2017 and 2020 and on par with 2021 when a record 1,004 such transactions took place for the full year.

PitchBook, a data analytics and software company, defined the health care services segment as “traditional health care providers that offer medical treatment in hospitals, clinics, residential facilities and homes.” UnitedHealthcare sponsored the report, but the insurer did not have editorial control.

When UnitedHealth Group completed its acquisition of Change Healthcare, Inc. in early October — a move made shortly after a federal judge dismissed an antitrust complaint against the deal — it seemed as though the companies could finally close the book on their nearly two-year quest to combine. However, last month the U.S. Dept. of Justice (DOJ) and officials from two states then filed a notice of appeal, once again casting uncertainty around the $13 billion deal.

“The fact that, after losing their challenge at the district court level, the DOJ and the states waited until after the deal closed to file their appeal is somewhat unusual,” says Jim Burns, chair of the Williams Mullen Antitrust & Trade Regulation Practice Group. Usually, when regulators lose their case at the district court level, they file an immediate appeal and request that the court bar the parties from closing their transaction while that appeal is heard, he tells AIS Health, a division of MMIT.

The U.S. Dept. of Justice, Minnesota and New York have filed an appeal in their antitrust case against UnitedHealth Group’s now-completed acquisition of Change Healthcare, Inc. The DOJ and state attorneys general filed their notice of appeal on Nov. 18, roughly two months after Judge Carl Nichols of the U.S. District Court of the District of Columbia dismissed their case against the $13 billion transaction. Regulators had argued that the deal would give UnitedHealth’s OptumInsight division too much power over health care data, but Nichols ruled that Change’s planned divestiture of its claims-editing technology, ClaimsXten, would assuage any anticompetitive concerns. UnitedHealth has now officially closed its deal with Change, and press reports indicate that the firm TPG Capital has finalized its acquisition of ClaimsXten.