Market access specialists- is the current acquisition trend set to continue?

Hemavli Bali

Results Healthcare

In our market access themed month, Hemavli Bali of Results Healthcare explores the attractiveness of market access specialists for acquisition and whether the current surge of acquisitions is set to continue.

Increasing pressures on health budgets have led to a growing squeeze on the prices that governments and health insurers are prepared to pay for medicines. National healthcare technology agencies, such as NICE in the UK and IQWIG in Germany, are adding additional hurdles that pharma companies must jump over before their products reach patients. Not only do they have to convince the regulators that their new drugs are safe and efficacious, but these agencies are now demanding that they provide value for money, too.

Gone are the days when pharma companies could charge what they liked for their medicines, albeit within some overall constraints. Now there are long discussions about pricing, reimbursement and availability. As a result, pharma companies are getting involved in dialogue with the payers in many countries even before a drug has been submitted for market authorisation approval, to try and divine what they will ultimately be looking for, and shorten the length of time these discussions will take after approval. They need to establish the likelihood of making money on a drug should it make it to the market, and therefore whether it is worth investing huge amounts of money developing the drug in the first place.

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“Gone are the days when pharma companies could charge what they liked for their medicines, albeit within some overall constraints.”

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Healthcare economics utilised in proving value for money is a specialist skill, and over the past few years numerous companies have sprung up offering market access assistance. Skills such as pricing, outcomes research, pharmacoeconomic modelling and payer communication tools are invaluable and also difficult to come by. Pharma companies are rarely interested in building these skills up in-house, instead looking to external experts for assistance. Those small, expert market access companies have in turn become extremely attractive acquisition targets across a broad spectrum of buyers, with contract research organisations, large marketing communications companies and the big research houses all looking to expand their offering to pharmaceutical companies.

The scarcity of acquisition targets has led to unprecedented multiples being offered for market access specialists, even when compared to other businesses in the healthcare communications sector. In particular, companies based in the UK are proving attractive, with US-based businesses looking to get a foothold in the European market, and in one of the countries that is leading the way in the value-for-money stakes, with NICE’s decisions being followed closely by health authorities in many other countries.

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“In particular, companies based in the UK are proving attractive, with US-based businesses looking to get a foothold in the European market…”

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What makes an attractive acquisition target?

Scarcity aside, there are a number of factors that make a strong, independent market access specialist particularly attractive to potential suitors. These include but are not limited to:

• Depth of experience

• Strength of management team

• Quality of pharma client list

• Longevity of relationships

• Financial performance

• Strength of global offering

There have been numerous deals in the market access consultancy space over the past year or so, with a variety of different types of company snapping up these smaller market access specialists. CRO PAREXEL International, has just announced its acquisition of specialist market access consultancy Heron Group Ltd, following in the footsteps of rival CRO, ICON plc, which acquired value strategy market access consultancy PriceSpective in early 2012. At the end of last year, Decision Resources Group, owned by Piramal Group, acquired health economics consultancy Abacus International, GfK, the German based research institute acquired market access consultancy Bridgehead International last March and Interpublic Group, the marketing communications giant, acquired Double Helix Consulting last July. Also, La-Ser Group, which focuses on health impact and value assessments, has been on an acquisition spree, buying pharmacoepidemiologists BioMedCom Consultants, health impact assessors Arcana Institute, and several other companies in the market access space.

The attractiveness of companies in this area is highlighted by the fact that it is not only research and healthcare specialists who are involved in acquisitions and several deals have piqued private equity interest.

What’s next?

While many market access specialists are being acquired, there is inevitable fall-out from such transactions, and the skills shortages that remain will certainly lead to fledgling companies springing up behind them. It would therefore seem likely that there will be another round of these independent market access companies growing to a significant size over the next three years or so, assuming the market demand persists to support this. This in turn will entirely depend upon how the need for market access assistance changes going forward, and how the dynamics of the regulatory regime change during that time. Will there remain sufficient market share to allow these new businesses to grow at the rate that those currently being acquired have grown? Also, will there be appetite in the market to acquire more of these businesses, or will the big CROs and other players have satisfied their appetites for gaining market access services?

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“…will there be appetite in the market to acquire more of these businesses, or will the big CROs and other players have satisfied their appetites for gaining market access services?”

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Market access services have been important from Phase III and onwards for some time, but they are becoming increasingly important at the earlier stages of the drug development process. It could be that the role market access plays grows in this way, with pharma companies engaging more closely with the regulators when potential drugs are still in Phase II, or even Phase I, trials. It will almost certainly expand geographically, too, as more countries make moves to implement formal agencies and processes that introduce value for money into their healthcare purchasing.

Increasingly, the brief for a market access specialist will be to move away from purely tactical regulatory submissions to improve the chances of a drug being approved, and more towards planning the entire market access strategy from Phase I all the way through to the post-launch period. Medical technology and even medical device companies are now having to go through these same regulatory hurdles, too. The attractiveness of market access specialists in acquisition terms will surely only increase in coming months and years.

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About the author:

Hemavli Bali has spent over 13 years working in financial services and has over 8 years of experience as a corporate finance specialist. She began her career in investment banks, working as a risk analyst at Nomura International plc and credit research analyst at Royal Bank of Canada Capital Markets. In Jan 2005, she joined Ernst &amp, Young, where she worked in Transaction Advisory Services across a number of industry verticals, advising on corporate restructurings, mergers and acquisitions and performing valuation, business modelling and due diligence services. Hemavli joined Results International in 2008 and is currently a director in the Results Healthcare division. Since joining Results, Hemavli has advised on a number of high-profile transactions, focused mainly in the healthcare sector.

Recent deals include:

• The sale of Abacus International to Decision Resources Group, a subsidiary of Piramal Healthcare.

• The sale of Total Healthcare Group to United BioSource Corporation.

• The sale of Synergy to DDB, Omnicom.

• The sale of Retail Eyes to MarketForce Information Inc.

• The sale of D2D to Aegis Group plc.

Hemavli is a Chartered Accountant and holds a BSc in Economics from the London School of Economics. In her spare time she enjoys painting, dancing and squash. She is also a black belt in the martial art of Choi Kwang-do and danced in the London Olympics 2012 opening ceremony.

Contact:-

+44 (0) 207 514 8251

hbali@resultsig.com

How will market access services develop over time?