Sanofi-Aventis to acquire OTC maker Chattem
NEW YORK This is further substantiation that the business of over-the-counter medicines, particularly those sold in the U.S. market, is a key growth driver for pharma companies. If you weren’t convinced when Pfizer re-entered the OTC market with its acquisition of Wyeth, then you certainly should be convinced now.
Sanofi is no stranger to the business of OTC. The international pharmaceutical conglomerate generated $2 billion in OTC sales worldwide in 2009, none of which out of perhaps the largest market in nonprescription medicines, representing more than 25% of worldwide marketshare, the United States.
With the Chattem acquisition, Sanofi acquires a number of second-tier OTC brands in Gold Bond, Icy Hot, ACT, Cortizone-10, Selsun Blue and Unisom. However, that status of fielding second-tier brands won’t last long. Sanofi is expected to push its own second-generation antihistamine Allegra through the prescription-to-over-the-counter switch process very soon. Through an agreement with Barr Laboratories, a generic version of Allegra D-12 was to have launched last month, making the timing for an OTC switch paramount.
“The transaction is expected to be accretive to Sanofi-Aventis’ earnings as early as year one,” the company stated in making the announcement. “This acquisition will allow Sanofi-Aventis to optimize and retain the full value of the Allegra switch to an OTC product.”
Another potential switch product includes NasacortAQ. That’s a corticosteroid, however, and GlaxoSmithKline was reported to have considered and abandoned switching its nasal allergy treatment, Flonase, some years ago.
Pharmacy groups hail bipartisan effort to lift Medicaid generic dispensing rates
NEW YORK A small group of U.S. representatives from both parties has asked House Speaker Nancy Pelosi for changes in health-reform legislation that would boost payment rates to hard-pressed pharmacies when dispensing generic drugs to Medicaid patients.
Given the precarious financial condition facing many community pharmacies and the fact that the current, Bush-era plan for Medicaid reimbursements would probably put some of them out of business, the appeal by those 16 members of Congress is a welcome move. The only question is why aren’t hundreds of their colleagues joining in?
It’s not just a question of fair compensation for community pharmacies, as important an issue as that is. It’s a question of addressing head-on the nation’s massive deficit and out-of-control spending for federal health programs, which is often touted as one of the prime reasons for health reform. After all, the net effect of the change in Medicaid reimbursement rates would be to pay pharmacies a meager reward for saving taxpayers billions of dollars annually, by encouraging patients to use the lower-price generic brand when the choice is available.
The 16 lawmakers — 12 Democrats and four Republicans — are asking the House leadership to assure that retail pharmacists aren’t forced to dispense Medicaid prescriptions at a loss. How? By incrementally raising the federal upper limit and the “weighted average” on what the program pays pharmacists for dispensing generic drugs.
To most of us outside the Beltway, it seems simple enough. Failure to include a workable Medicaid generic payment rate in the massive health-reform bill “could reduce Medicaid patients’ access to many pharmacies and negatively impact generic dispensing,” the House members told Pelosi. It would also perpetuate a cockeyed federal reimbursement system that gives pharmacists and patients absolutely no incentive to save the system money by switching, when possible, to lower-cost generics.
After all, if you’re a pharmacist, why make the effort if you’re going to lose money every time you dispense the generic? And if you’re a Medicaid beneficiary, why not take the higher-cost branded version of the drug? Somebody else is paying the tab.
What a concept: Actually addressing the crisis in rising healthcare costs — which already comprise one-sixth of the nation’s economy and threaten to bankrupt Medicare and Medicaid — by giving retail pharmacists and patients a reason to change to a me-too medication, which can sometimes cost a small fraction of the price for the original branded drug. Given the seemingly irrational way Congress often generates legislation, and the power of interest groups to shape that legislation, it’s almost mind-boggling that some lawmakers are trying to do something rational to address the unsustainable rise in healthcare costs.
Reports: Royal Ahold to acquire Ukrop’s stores
NEW YORK Rumors that Ukrop’s was on the sales block seems to finally have come to fruition. And with Ahold being the acquisition partner, this may mark a resurgence of Ukrop’s, known for its close community ties, in its core Virginia markets.
It also may mark a change in two cultural touchstones that helped define Ukrop’s position in its markets — Ukrop’s supermarkets were closed on Sunday and did not sell alcohol. And while the reasoning behind those decisions may be virtuous, the fact remains that in a toughening economy convenience and value become paramount to the consumer, and that conceivably gave a leg up to Ukrop’s competitors who fielded Sunday hours and beer and wine offerings throughout their aisles. Accordingly, Ukrop’s under Ahold’s guidance will soon entertain Sunday hours. Beer and wine sales is expected to be folded into the store’s mix in the next couple of years, once the Ukrop banner is taken down.
The deal also represents a resurgence of sorts for Ahold, suggesting that the Dutch grocer has completely recovered from the financial scandal that roiled its ranks just a few years ago.
In keeping with an Ahold resurgence, many analysts predict that Ukrop’s will be the first of many acquisitions made by the Dutch grocer as it expands its presence into North America. Ahold currently has more than $3.7 billion in liquid assets, and has repeatedly said that a down economy affords numerous takeover opportunities.
Ahold is currently the No. 14 pharmacy retailer in the U.S., with more than $2 billion in prescription sales through 2008, and the No. 4 supermarket pharmacy retailer. According to analysts, Ukrop’s generated approximately $550 million in annual sales. If Ahold is able to replicate pharmacy sales of 9.4%, that would mean an accretive $51 million in prescription sales with more to come through future acquisitions.