BERGEN BRUNSWIG: TO MERGE WITH IVAX CORP.
Orange, CA-based Bergen Brunswig Corp., one of the largestThis is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
wholesale drug distributors in the nation, announced yesterday
plans to merge with Miami-based Ivax Corp., the nation's largest
generic drugmaker. LOS ANGELES TIMES reports that the $1.4
billion deal aims to sell "more lower-cost drugs to consumers."
Under the deal, Ivax shareholders will control 56% of the new
company, to be called BBI Healthcare Corp. and be based in Miami.
However, industry analysts "see Bergen as the marketing
powerhouse behind the merger, which should yield higher
profitability for the new firm" (Marsh/Granelli/O'Dell, 11/12).
LIFE SAVER: Phillip Frost, founder and CEO of Ivax, said
that the combination, which must receive both shareholder and
regulatory approval, "would eliminate uncertainty for Ivax in the
difficult generic market, where price-cutting competitors can
abruptly puncture a competitor's sales projections" (Freudenheim,
NEW YORK TIMES, 11/12). WALL STREET JOURNAL reports that with
the merger, "Ivax hopes to save its business by boosting its
current $40 million portion of Bergen's $2 billion generics
business." Bergen hopes to broaden its profit margin in the
genetics business (Tanouye, 11/12).
DEAL: The merged company is expected to have combined
annual sales of about $12.5 billion and employ more than 12,000
people. Bergen Brunswig Chair Robert Martini and Ivax Chair
Frost will serve as co-chairs of the new company, and Bergen
President Donald Roden will serve as CEO. Martini said that the
company "would probably sustain -- and even boost -- employment
at its corporate offices in Orange" as well as at several
California distribution centers.
DIFFERENT APPROACH: Hemant Shah, an analyst for Warren, NJ-
based HKS & Co., said, "Generic-drugs distribution is the single
biggest profit center for wholesalers ... and generic makers find
doing business with wholesalers a nightmare. This puts the two
together." James Flynn, an analyst with Furman Selz in New York
said that while "the deal makes sense theoretically," it does
"have a lot of practical problems." Flynn questioned whether
"the combined company would have trouble obtaining products from
generic makers other than Ivax, and if it would have trouble
selling to pharmacies outside Bergen's network" (LOS ANGELES
THE PRICE IS RIGHT: Roden said the deal will enable the
companies to "cut costs in the supply chain and help make health
care more affordable" (AP/WASHINGTON POST, 11/12). However, Jim
Lott, senior vice president of the Healthcare Association of
Southern California, said mergers of this size generally lead to
price increases. "[T]his is not good for hospitals and health
care providers." Lott noted, however, that "consumers probably
won't feel the impact for a few years as hospitals and other
health care providers are forced to absorb any increases" (LOS
ANGELES TIMES, 11/12).