Silver lining for veterinary medicine in failed union of pharmaceutical giants
With the plan of Merck and Sanofi-Aventis to combine their respective Intervet and Merial animal health units no more, veterinarians and industry observers are left to wonder what it means for the veterinary community.
Merck, of Whitehouse Station, N.J,. and Sanofi-Aventis, of Paris, France, threw in the towel on March 22, conceding that regulatory hurdles they would face in winning approval for the joint venture had proven more daunting than expected. Together, the companies would have been the market leader in the animal health sector, but the arrangement would have needed the Federal Trade Commission's (FTC) go-ahead.
“The reason for the split is that regulators looked askance at the deal, which usually has to do with market concentration issues,” said Les Funtleyder, a health industry analyst at Miller Tabek in New York City. “It was seen as bad for consumers. Unwinding the deal may be better for veterinarians in terms of pricing. They won’t be dealing with a big new player in the market.”
Collapse of the proposed joint venture should ease fears about concentration in certain critical animal drugs, said John Volk, senior consultant for Dallas-based Brakke Consulting. Animal vaccines were one area of concern, he said. Both Merial and Intervet marketed vaccines, although Volk believes that the FTC might have required some of those to be divested if the two companies had elected to press forward with the combination.
“I think overall it was a net benefit for veterinarians because of the failure of the combination,” Volk said. “Now there will be two strong companies instead of one. Competition is good for the development of new products.”
Merial and Intervet both sponsor continuing education and conferences for veterinarians. Volk suspects that such giving might have decreased had the two companies united.
Michael Johnson, an industry insider working with the Veterinary Information Network, an online professional community, said veterinarians have lived through considerable industry change and consolidation. They are less concerned about who makes their favorite products than whether they can get those products in a timely manner and at a reasonable price.
“No one has great love for Merial. They just want their Heartgard," Johnson said, referring to a popular Merial drug designed to prevent heartworm infestation in dogs.
Dr. John Daugherty, owner of the Poland Veterinary Centre in Poland, Ohio, about 80 miles southeast of Cleveland, doesn’t think either the failure or the success of the Merial-Intervet union would have meant much to veterinarians like him. To merge or not to merge, he said, “just doesn’t matter.”
What does matter, Daugherty says, is the ebb and flow of drug pricing. Sharp price increases are sometimes a product of major drug-company mergers, but other times, they're a factor of the generics manufacturing market and tied to supply and demand.
For example, Daugherty and his colleagues have been battered by price hikes on drugs such as the old warhorse antibiotic metronidazole. He said the price for a bottle of those pills has risen tenfold, while a standard ointment he uses on his animal patients now costs nearly four times what it formerly did. All of the generic drug manufacturers seem to be raising their prices by about the same amounts, Daugherty said.
“We’ve complained about it,” he said. “As vets, we feel powerless to do anything. Sometimes I write prescriptions so they can yell at the pharmacist and not me.”
Funtleyder at Miller Tabek is positive about the future of the animal health sector, saying that as emerging markets around the world move away from plant-based diets, they will need to raise more animals and consequently will need more animal medications. There may be occasional shortages of animal drugs, just like there occasionally is for human drugs.
“But as long as there is demand for a product, someone will produce it,” he said.
David DeKok is a freelance journalist based in Harrisburg, Penn.
VIN News Service commentaries are opinion pieces presenting insights, personal experiences and/or perspectives on topical issues by members of the veterinary community. To submit a commentary for consideration, email email@example.com.