CEO SUMMARY: After nearly two years of legal battles, Abbott Laboratories’ acquisition of Alere concluded on Oct. 3. Despite antitrust requirements to divest several of Alere’s diagnostic businesses to Quidel and Siemens Healthineers, the merger makes Abbott the world’s largest provider of point-of-care testing systems. Hospitals and clinical laboratories buying POC products from Abbott and Alere can expect changes as Abbott integrates the two businesses.
BIG CHANGES ARE COMING TO THE POINT-OF-CARE TESTING MARKET now that Abbott Laboratories is the new owner of Waltham, Mass.-based Alere Inc.
The acquisition was finalized on Oct. 3 and combined the number two and number three biggest companies in the point-of-care (POC) market. The merger now makes Abbott Laboratories the world’s largest POC testing company, according to Kalorama Information.
This acquisition is the latest example of consolidation in the in vitro diagnostics industry. Laboratories and hospitals that purchase POC systems and consumables from the two companies can expect to see many changes over the next year or two as Abbott Laboratories integrates the two companies; realigns Alere’s sales and service staffs with their counterparts at Abbott; and develops new marketing strategies for the combined POC systems, tests, and related products.
Abbott’s purchase of Alere proved to be a complicated transaction. In February 2016, Abbott confirmed an agreement to acquire Alere for $5.8 billion. A month later, however, the federal Department of Justice subpoenaed documents from Alere regarding sales and distribution practices in foreign markets—including Africa, Asia, and Latin America.
Problems Delayed Merger
Abbott then wanted to terminate the acquisition agreement, but Alere’s board of directors refused that request. In July 2016, Alere received another DOJ subpoena related to alleged illegal government billing and payments to doctors at Alere Toxicology Services—Alere’s pain management laboratory in Austin, Texas. Alere also issued a permanent recall for its INRatio and INRatio2 Prothrombin Time and International Normalized Ratio Systems.
More bad news hit Alere when, in November 2016, Arriva Medical, a subsidiary of Alere, lost Medicare reimbursement privileges following allegations the company sought reimbursement for 211 dead people.
Following these accusations and recalls, Abbott sought to cancel the merger in a lawsuit triggering the material adverse effect clause of its initial agreement in December 2016. According to GenomeWeb, the two companies reached an agreement—including a lower acquisition cost—in April 2017 and dismissed lawsuits against each other.
Bloomberg Gadfly reported on the DOJ subpoenas and criminal accusations involving Alere, reporting that Alere settled with the SEC regarding “improper revenue recognition practices at foreign subsidiaries.” Separately, Arriva Medical continues to appeal its suspension of its Medicare billing privileges.
Still, Alere faced another challenge because both Abbott and Alere held significant shares of the POC market, leading the Federal Trade Commission to require divestment of two point-of-care testing devices before it would approve the acquisition.
In September, the FTC said, “According to a complaint filed by the FTC, the proposed acquisition would result in market concentration and likely harm competition in the U.S. for the sale of two types of devices: point-of-care blood gas testing systems (which measure blood pH, oxygen, carbon dioxide, and electrolyte levels) and point-of-care cardiac marker testing systems (which measure specific proteins in the blood to assess whether a patient is having a heart attack or experiencing congestive heart failure).”
Divesting POC Test Lines
To meet the FTC’s divestiture requirements, Alere struck deals with Quidel and Siemens Healthineers. Quidel will acquire Alere’s Triage BNP assay and Triage MeterPro cardiovascular and toxicology assets. Siemens Healthineers will acquire Alere’s Epocal point-of-care blood gas testing and diagnostics system.
Some of the required divestitures were ordered because Abbott owned and sold similar technologies. FierceBiotech noted, “Epocal sells products including the handheld, wireless epoc blood analysis system. As Abbott sells the competing i-STAT, antitrust regulators are uncomfortable with the prospect of the company owning both businesses after it acquires Alere.”
New Selling Opportunities
Among the reasons Abbott was interested in buying Alere is that the combined businesses would create new selling opportunities for Abbott. Zacks Equity Research, a web site, reported that the combined company will enable Abbott “to gain access to new channels and geographies, including entries into fast-growing outlets, such as doctors’ offices, clinics, pharmacies, and at-home testing.” Also, Alere’s complementary portfolio of diagnostic products, comprising tests for infections such as HIV, tuberculosis, malaria and dengue, will be added to Abbott’s portfolio, Zacks wrote. Significantly, Alere develops simple, rapid tests, including Alere i—the molecular test for flu and strep—to deliver reports in less than 15 minutes.
The shared business will allow Abbott to pursue testing in the areas of infectious disease, molecular, cardiometabolic, and toxicology, the web site reported. Also, the union of the two companies would allow Abbott Laboratories’ platforms to include benchtop and rapid strep tests, Zacks concluded.
Now that Abbott owns Alere, the hospital and lab customers of Alere will likely see significant changes as Abbott integrates Alere’s POC products with its own POC products.
Strategically, Abbott’s acquisition of Alere continues what is now a trend of IVD consolidation that stretches across three decades. Since the early 1990s, the world’s largest IVD manufacturers have regularly swooped down to buy any IVD company that had promising technology and was building market share at a steady pace.