Pfizer bets big on Medivation's cancer drug Xtandi but we'll all be paying the price
Drugs giants are paying huge premiums to buy up treatments. We'll be expected to provide the returns they're seeking through higher healthcare costs
Your support helps us to tell the story
As your White House correspondent, I ask the tough questions and seek the answers that matter.
Your support enables me to be in the room, pressing for transparency and accountability. Without your contributions, we wouldn't have the resources to challenge those in power.
Your donation makes it possible for us to keep doing this important work, keeping you informed every step of the way to the November election
Andrew Feinberg
White House Correspondent
After spending the last couple of years hunting down deals designed to lower its tax bill (it failed) US pharmaceutical giant Pfizer has changed tack and is back buying drugs again.
The company has announced that it is to pay $14bn (£10.7bn) to buy Medivation, the main reason being that it wants to get its hands on blockbuster prostate cancer drug Xtandi, although there are a couple of other experimental treatments waiting in the wings.
It’s just possible that a counter-bidder could try to crash the party. When Medivation put itself up for sale it created the sort of fight you’ll have seen during the Olympic open-water swimming competition. Pfizer’s French rival Sanofi, which got the party started, will be feeling particularly bruised at the outcome.
However, the reaction of Medivation's share price – it was just a smidgeon below Pfizer's offer price in pre-market trading – suggests that Pfizer will get the gold.
It isn’t gold that Medivation will be expected to produce, it’s green, billions of green dollar bills. Not to mention Euros, and Pounds, and, well, insert your currency of choice here. It’ll have to to justify the blockbuster price Pfizer is paying for its blockbuster drug.
Big pharmaceutical companies have struggled to create treatments of their own in recent years so they’ve been busily buying up those produced by others. Even loss-making little biotechs with potential have fetched huge sums. Profitable companies with blockbusters that are actually on the market like Medivation are in another league, hence the huge takeout price.
The $81.50 a share Pfizer is proposing to pay is more than double the level the shares were trading at before Sanofi got the ball rolling with an opening bid of $52.50, which led to Medivation putting itself up for sale.
It isn't only Pfizer that is paying a heavy price for the current difficulties the pharameutical industry is having when it comes to developing new super treatments. It’s us. Pfizer and the other drugs giants will be expecting high returns from having committed so much capital to buying up companies like Medivation.
We will be expected to provide those returns through our taxes or through the price we pay for health insurance, depending on the system used to provide healthcare where we live.
This deal, like the string of recent pharma deals, will help to turbocharge healthcare cost inflation. But that’s the free market for you.
Still think it’s a good idea?
Subscribe to Independent Premium to bookmark this article
Want to bookmark your favourite articles and stories to read or reference later? Start your Independent Premium subscription today.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments