Dan Mendelson Discusses How Mergers and Acquisitions Are Affecting the Market

Mergers and acquisitions are occurring in response to a change environment where organizations are trying to deliver a more comprehensive service, explained Dan Mendelson, MPP, founder, Avalere Health.

Transcript

How are mergers and acquisitions affecting the market, and do you think this is where the future of healthcare is headed?

Mergers and acquisitions really stem out of this change environment, and you see really the larger organizations—CVS, Aetna, and the like—responding to this change environment. They’re trying to figure out how do we deliver a more comprehensive service offering that really accomplishes what government and other major payers want us to deliver. So, to me this is really fundamental for retail pharmacy. Now, retail pharmacy has not been a bright spot economically, really, for anyone operating it, and that’s not secret.

So, reinventing the pharmacy and kind of reimagining what can be done in that context to engage patients is really important, and I think that we are likely to see a lot of M&A activity that is really focused around that so the idea of a combination of health plan and a drug store, for example, kind of speaks to that.

Then, we have some mergers and acquisitions that are just about creating scale, just getting larger. And if you get larger, you can reduce your cost basis and be a more effective player in the marketplace. So, we will continue to see that both in the pharmacy area, as well as in the health plan area, as well as in the provider area. A lot of activity, we expect it really to continue. In fact, it might even intensify over time as the demands of the payers become a bit more strenuous.