NEW YORK, July 8, 2015 /PRNewswire/ -- Aetna's announced merger with Humana, Inc. for a combination of cash and stock valued at $37 billion is the latest Illustration of a trend toward mergers of immense scale in the healthcare industry, according to Kalorama Information. The combined company would have projected 2015 operating revenue of approximately $115 billion, according to media reports. With approximately 56 percent of revenues from government sponsored programs (including Medicare and Medicaid), Kalorama suggests the proposed merger can help to offset any expenditure cuts with improved efficiencies and establish create value-based payment agreements.
The combined company would have over 33 million medical members, based on memberships as of March 31, 2015.
Kalorama Information tracks acquisitions in the pharmaceutical, medical device and diagnostic industries in its Knowledge Center, a regularly updated healthcare business intelligence research subscription service. To learn more about the Kalorama Information Knowledge Center, visit: http://kc.kaloramainformation.com/about-ki.
"No matter the market –insurance, medical devices or pharmaceuticals – we see healthcare companies seeking combinations to build revenue growth," said Bruce Carlson, Publisher of Kalorama Information. "Partially, these are to offset any government decreases in expenditure. That will certainly be the case with the Aetna/Humana merger, assuming they gain regulatory approval."
Mergers and acquisitions (M&A's) among healthcare-related companies in 2014 contributed to $1.41 trillion in deal activity, which has been called a record high. In 2015, the frantic pace of M&A's among healthcare-related companies has continued with the finalization of Medtronic's purchase of Covidien for $43 billion, Dublin drugmaker Shire's agreement to acquire NPS Pharmaceuticals for $5.2 billion, Roche's acquisition of a $1 billion stake in Foundation Medicine to develop cancer-fighting drugs, and the completion of Cardinal Health's purchase of The Harvard Drug Group for $1.115 billion, among others.
The reasons for mergers are often simple enough, though the resulting fallout of mergers is just as often complex. This deal is expected to close in the second half of 2016, though there is concern that the deal will face heavy antitrust scrutiny. From Aetna and Humana's standpoint, however, the deal has been struck for the same reasons that other M&A deals are consummated.
"In the healthcare marketplace, companies merge to build revenue growth and present combined offerings to hospital and physician customers," Carlson said. "The goal may also be to access a new technology and/or market or to curb research and development costs. Companies merge to face shared market challenges due to issues of economics, demographics, technology, and international opportunities."
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About Kalorama Information
Kalorama Information, a division of MarketResearch.com, supplies the latest in independent medical market research in diagnostics, biotech, pharmaceuticals, medical devices and healthcare; as well as a full range of custom research services. Reports can be purchased through Kalorama's website and are also available on www.marketresearch.com and www.profound.com.
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SOURCE Kalorama Information