Pfizer-Wythe merger seen as unhealthy
The creation of the largest pharmaceutical company in the world with the merger of Pfizer and Wythe is being viewed as the next phase of consolidation in the global market, with fears that the new behemoth could use its monopolistic position in several markets to restrict supply and push drug prices up.
On Monday, the board of Pfizer, the largest drug manufacturer in the world, agreed to acquire its major rival Wythe for $68 billion (Dh249.5bn) to create a new global pharmaceutical giant.
When completed, it will be the second-largest merger in the world after the telecoms majors AT&T and Bellsouth completed a $70bn merger in March 2006.
Speaking to Emirates Business, Philip Chapper of Philiph Chapper and Company, a £10 million (Dh52.3m) distributor of generic and branded drugs around the world including the UAE, said: "The pharmaceutical market is already facing a huge challenge because the big companies are trying to limit medicine supply. Big companies such as Pfizer, Wyeth, Novartis and Astra Zeneca are restricting shipment on the pretext of controlling counterfeit medicines. In fact, they are violating the European Common Market rules and the current merger will further strengthen this practice in the global pharmaceutical market."
Philiph Chapper and Company is based in London and sells drugs in the UAE, Oman, Qatar, Saudi Arabia and Yemen.
Chapper said the big companies are creating an even greater incentive for counterfeit manufacturers because there is already a huge shortage of some medicines in the market.
He said his company is sitting on huge orders and cannot supply the medicines because the big companies are not releasing enough stock.
The monopoly taking place in Europe and the US will have a direct impact in other markets, including the Middle East, and affect patients, Chapper said.
Drug prices are being inflated by creating an artificial shortage in the market, he alleged, and big companies are trying to compensate for the loss of business they have accrued from drugs whose patents have expired.
"Pfizer's takeover of Wyeth is not only a consolidation of the market to maximise profit, but gives rise to unfair trading practices, to the detriment of patients. Although medicine prices have come down due to currency fluctuations, companies are creating an artificial shortage in the market and making huge profits," Chapper said.
Mehtab Alam, Manager of City Pharmacy Company, said the impact of mega mergers in the pharmaceutical industry is yet to be felt in the UAE market, which is dependent on purchases made by the government.
"The two pharmaceutical companies, Pfizer and Wyeth, do supply a lot of medicines and equipment in this market. Government hospitals under the Ministry of Health account for more than 60 per cent of the market here and big hospitals and private clinics account for the rest. Such big mergers will reduce competition and increase monopoly in the market. There is always a big threat of monopoly," Alam said.
Richard P George, another pharmaceutical distributor in the region, said patients have to wait for medicines in some markets because big companies are restricting supply.
"It is going to be a worldwide phenomenon. Pharmaceutical companies want to maximise profit because they have lost a major chunk of business after several of their patents expired. Their sales have been falling due to the economic slowdown and the new patent rules, and such mergers will once again help them control the market," George said.
He has been supplying medicines to hospitals and ministries in the region for the past 35 years and said the current shortage is affecting his reputation in the market.
Karen Prentica, from Reactpharma, a wholesale pharmaceutical distributor, also said the big manufacturers were restricting supplies and it was difficult to get large volumes from these companies.
"We are struggling to meet our international orders and have tried to approach the companies through different wholesale dealers. It is affecting our exports to the European Union and the Middle East. Small wholesalers like us are facing a tough time," she said.
A research report by Piribo, an online business intelligence service for pharmaceuticals, said the global pharmaceutical market is forecast to grow to $929 billion (Dh3.4 trillion) in 2012 –a compounded annual growth rate (CAGR) of 5.5 per cent over the next five years.
The US retail pharmaceutical market grew to $206bn, but growth rates fell due to loss of patent protection on some popular drugs. France, Germany and the United Kingdom together accounted for almost 50 per cent of all European pharmaceutical sales in 2007.
The top 100 blockbuster drugs generated sales of $252.5bn, accounting for 35.5 per cent of the total pharmaceutical market. There were a total of 61 companies generating pharmaceutical sales in excess of $1bn in 2007.
Medicine demand in the Gulf is not affected by the slowdown, Piribo found, as such basic items are immune to recessions.
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