To protect themselves from US regulations attempting to lower drug prices, generic drug makers are looking to M&A to increase scale and to sell off specialty units. Generic drugs are less expensive versions of name brand therapeutics, and are being pushed to the forefront with the US government’s latest efforts to decrease the cost of pharmaceuticals. To achieve this, the FDA has accelerated the drug approval process, which would result in potentially 4,000 new drugs on the market within the next few years. For generic drugmakers Impax and Periggo, sales fell by 21% and 12% in the first quarter of the year, respectively, with analysts forecasting continued declines. Through M&A, pressure would be reduced by decreased costs and competition, as well as new products and markets. It would also help companies make better deals with drug distributors, which manage approximately 90% of drug revenues.

Aside from M&A as a strategy to cut costs and increase profits, companies are also exploring foreign investments from India and China, where the generic drug market is booming. According to the Journal of the American Medical Association, the US spends more than twice as much on drugs per capita as any other industrialized nation.
Source: Reuters