Consolidation Within The Diagnostics Industry

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IN THIS ISSUE WE ARE GIVING COVERAGE to the acquisition of Coulter Corporation by Beckman Instruments, Inc. for an important reason. I believe this merger is first evidence of impending and significant changes to the diagnostics industry.

During the next 18 to 24 months, a deluge of mergers, acquisitions and joint ventures will be announced. Why? Because consolidation is about to hit the diagnostics industry with the same vengeance as it hit clinical laboratories and hospitals. The Beckman-Coulter deal is a major event. No less a major event was the Roche-Corange transaction last May, which gave ownership of Boehringer Mannheim to Roche. These are important market signals telling us what is about to happen.

Consolidation will be the overarching theme in the diagnostics industry during the next few years. It is the inevitable consequence to the widespread consolidation that clinical laboratories underwent from 1985 through 1994, as well as the recent tidal wave of hospital mergers, acquisitions and alliances which occurred over the last three years. If customers and users of diagnostics instruments and kits are consolidating, it is inescapable that a fragmented diagnostics industry must respond. Their marketplace has fewer buyers. The buyers who remain are large, if not huge, and want their increased buying clout to bring them lower prices, volume discounts and improved services.

For diagnostics companies, these evolving market dynamics can only be successfully addressed by increasing their own size and resource base. Few existing diagnostics companies have the internal capital necessary to finance such growth. Thus, they will go outside and either acquire or use joint ventures to build the resource base necessary to serve the remaining laboratory and hospital buyers. Either way, consolidation within the diagnostics industry results.

Along with my prediction that consolidation is about to radically transform the diagnostics industry, I would like to add a warning to laboratory executives. For owners of independent commercial laboratories, the time has come to consider “consolidation strategies” which ally your laboratory with strong regional players. For laboratory administrators in hospitals, it would be timely to involve your laboratory in some type of regional laboratory provider system. The day is fast-approaching when size will be just as important as excellent service and longstanding physician relationships.


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