The US healthcare industry will continue to be hit with the unprecedented wave of consolidation.
This is according to rating agency Moody’s Investors Service in its latest edition of Healthcare Quarterly.
In the first issue of the year, the rating agency looks at six subsectors of the industry in which mergers and acquisitions will be a key driver of credit quality. Among other topics covered are the Affordable Care Act, pressures on reimbursement and new product launches.
"Branded pharmaceutical companies will continue to be active acquirers in 2015, with large and diverse companies looking to supplement their pipelines with high-potential products developed by smaller firms," said senior vice president, Michael Levesque. "We consider this to be credit negative because of the high financial leverage associated with acquisitions and the risks that come with acquired assets, which are often still in the pipeline."
Moody's also expects consolidation to continue among generic drug makers, with Teva and Mylan expected to be the most active acquirers.
Jessica Gladstone, vice president - senior credit officer, added: "As operating costs rise and major customers consolidate, scale is becoming increasingly important for small to midsize firms. Large-scale consolidation will be difficult for the biggest companies due to antitrust concerns, but these players likely will be on the hunt for branded assets in the US or branded generics elsewhere." Among companies,
Moody’s added that the larger, for-profit operators HCA, Tenet and Community are likely to continue looking for targets that fill out existing markets or provide opportunities to enter new ones. Hospitals in general will continue to benefit from a reduction in the number of patients without health insurance as the Affordable Care Act continues to gain traction.
US, Moody's, Healthcare Quarterly, Affordable Care Act, Michael Levesque, Jessica Gladstone, Risk Management