DRUG MERGERS: Rush to Consolidate May Hurt Consumers
With the announcement of Glaxo Wellcome and SmithKline Beecham's proposed merger, some analysts are concerned that the rush to consolidate could spell higher prices for consumers. But drug companies insist that mergers are beneficial to consumers because the surviving company to focus more resources on research and development, the odds of finding new medications for a variety of illnesses are increased. The industry also argues that competition is still brutal and merging companies do not hold a large share of the market -- Glaxo SmithKline, if approved, will hold only an 8% share of the world's pharmaceutical market. However, those statistics can be misleading, as some of the mergers give the consolidated company a larger share of the market for specific ailments. For instance, the Glaxo SmithKline merger has the potential to dominate the market for asthma, AIDS and migraine medications. Industry analysts also fear that a small group of super companies will pose a serious threat to the ability of smaller companies to effectively market their drugs to providers and health plans. Plus, larger companies may choose not to focus research funds on developing drugs that have lower sales potential or "me too" drugs -- medications that act like existing drugs (Galewitz, AP/Cleveland Plain Dealer, 1/18.)This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.