Oligopoly The Future For The Pharma Industry

In 1994, the major players in the pharmaceutical industry have responded to pressures on pricing, cost containment and health care reform by joining in the consolidation of the industry. Smaller companies are finding it increasingly difficult to compete in terms of product lines and market share and the larger companies are moving in and forming even larger organizations through acquisition and merger.

The acquisition in 1993 by Merck & Co of Medco Containment Services has been followed by other major players acquiring pharmacy benefit managers in order to access the US formularies, ensure market share and focus on managed care. SmithKline Beecham bought Diversified Pharmaceutical Services and Eli Lilly has acquired PCS Health Systems. However, the latter deal raised antitrust questions which resulted in the US Federal Trade Commission deciding to bind Lilly to strict conditions.

Lilly and PCS have to maintain open drug formularies and Lilly has to establish a "fire wall" to protect sensitive information on its competitors. Furthermore, the commission is keeping a watchful eye over how the two other PBM acquirers conduct their business.