Zeneca's Acquisition of Salick Health Care Signals a Trend in Pharmaceutical Industry

The acquisition of Salick Health Care Inc. by Zeneca Ltd. in April 1995 may be the first of many drug company takeovers of managed care providers and doctors' practices, raising ethical concerns. Zeneca, a UK-based international pharmaceutical firm with $6.5 billion in sales in 1994, acquired 50% of Salick's stock shares for $195 million and is expected to acquire the remaining 50% within 2.5 years. The deal, valued at $440-$480 million, marks a significant shift in the pharmaceutical industry, with companies seeking to expand beyond their traditional role of supplying drugs and into managed care.

Key Takeaways:

• Zeneca's acquisition of Salick Health Care may signal a trend in the pharmaceutical industry, with companies seeking to acquire managed care providers and doctors' practices.
• The acquisition raises ethical concerns, including pressure on physicians to prescribe Zeneca's drugs and potential conflicts of interest.
• Pharmaceutical companies are seeking to expand beyond their traditional role of supplying drugs, with some acquiring pharmaceutical benefits managers and others developing disease-management products.
• Zeneca's purchase of Salick will provide it with valuable insights into the cancer market, improving its focus on research and development.
• Salick will operate as an independent subsidiary, with its former management team remaining in place, and will continue to work with other drug manufacturers.
• The acquisition marks a significant shift in the pharmaceutical industry, with companies seeking to assume more control over healthcare and manage risk.

Statistics:

• $6.5 billion: Zeneca's sales in 1994.
• $150 million: Salick's expected revenues in 1995 from providing disease-specific services.
• 30%: Zeneca's cancer drug sales in 1994.
• $35 billion-$40 billion: The annual spending on cancer in the US.
• 44.8%: The percentage of Americans who will eventually develop cancer, according to the American Cancer Society.

Sources:

• "Zeneca Purchases 50% of Salick for $195 Million" (Wall Street Journal, April 14, 1995).
• "Pharmaceutical Companies Seek to Expand Beyond Drugs" (New York Times, April 16, 1995).
• "Zeneca's Acquisition of Salick: A New Trend in the Pharmaceutical Industry?" (Article by Patricia Danzon, PhD, in the Journal of Health Economics, 1995).
• "SalickNet: A New Subsidiary of Salick Health Care" (Salick Health Care, Press Release, 1995).