Healthcare dealmaking is off to a strong start in 2018.
Through the first quarter of the year, announced mergers and acquisitions have reached a record $156 billion, according to data compiled by Bloomberg. Some of the biggest deals include GlaxoSmithKline agreeing to pay $13 billion for Novartis AG's stake in their consumer healthcare joint venture and Cigna agreeing to purchase pharmacy benefit manager Express Scripts for $67 billion.
Meanwhile, Walmart, the world’s largest retailer, is rumored to be in preliminary talks to buy health insurer Humana. The two companies already offer a co-branded prescription drug plan that steers members toward Walmart's pharmacy.
But healthcare's hot start has been accompanied by growing concerns about squeezing out competition and harming consumers. After shareholders at CVS and Aetna voted to approve the proposed merger, groups including the American Medicaid Association, Consumers Union and American Antitrust Institute (AAI) cautioned that the proposed merger would hurt both patients and competition. The AAI also raised similar concerns about the Express Scripts-Cigna merger.
M&A fervor across the healthcare sector comes in the wake of Amazon’s plans to form an independent healthcare venture with JPMorgan and Berkshire Hathaway. The technology giant is Walmart's main competitor in the retail space and has also shown signs of entering the pharmacy market as a drug distributor.
With a strong start in Q1 2018, the healthcare sector can expect to see continued M&A activity, according to experts.
“Debt is freely available to fund ambitious M&A, confidence is riding high and the balance has tipped in favor of taking action for fear of missing out,” Christopher Sullivan, a partner at London-based Clifford Chance LLP, told Bloomberg.