One prominent story in Missouri health care in 2014 was the acquisition of companies and the effects of those acquisitions. Mergers and acquisitions are only the starting point for corporate integration, and many of the state’s top companies felt the effects this year.
For example, Express Scripts, which employs 30,000 people in the U.S., made No. 20 on the Fortune 500 list and was Missouri’s only company in the top 100, is still digesting its $29.1 billion acquisition of Medco in 2012. The company made continuous adjustments throughout the year to help with cost control.
Read more: Check out the rest of Missouri Business Alert’s Stories of the Year for 2014.
Shuttering two facilities, Express Scripts cut 2,290 jobs nationwide in separate layoffs in May and November. Also, to further curb costs, it planned to exclude more than 1,000 ingredients used in prescription drugs from its coverage. However, three pharmacies sued Express Scripts for denying payments for compounded drugs, which the lawsuit said were previously covered.
Express Scripts reshuffled executives, too. CEO George Paz vowed to stay at the helm for another three years in January. Tim Wentworth was promoted from vice president to president. Cathy Smith, named vice president and interim CFO in January, left the company in December.
Even with the shakeups and downsizing, Express Scripts struggled to increase its sales revenue as the volume of filled prescriptions continued declining. Though revenue stagnated, Express Scripts had a 34 percent increase in its third-quarter profit year-over-year. The company’s potential upside, together with its $56 million expansion plan, attracted $35 million stock investment from Warren Buffett’s investment group Berkshire Hathaway.
Another aggressive mover was Mallinckrodt Pharmaceuticals, which spun off from Ireland-based Covidien in 2013 and announced two buyouts in the first half of the year. The moves began in March when the company made a $1.4 billion cash buyout of Cadence Pharmaceuticals, at a 26 percent premium, and continued with a $5.6 billion cash-and-stock acquisition of California-based Questcor Pharmaceuticals, which closed in October. Mallinckrodt used the moves to bulk up its specialty pharmaceuticals business with Cadence’s pain-management product Ofirmev and Questcor’s Acthar gel, both of which presented strong sales revenue.
Another Missouri company was the one being acquired. Sigma-Aldrich received shareholder approval in December to complete a $17 billion buyout by German pharmaceutical giant Merck KGaA. The deal is expected to close in mid-2015.
Merck, which suffered from multiple drug development failures, hopes to benefit from Sigma-Aldrich’s client base and lab supplies business. The acquisition will also allow Merck to have more exposure in the North American and Asian markets. However, St. Louis is concerned about the future of the 1,800 Sigma-Aldrich employees living in the city.
North Kansas City-based Cerner also got in on the health care merger and acquisition action. In August, the health IT company announced plans to close a buyout of Siemens Health Services in early 2015. The $1.3 billion deal is expected to bring Cerner $4.5 billion in revenue and expand its worldwide employee base of 20,000.