How often do you hear about Dodge & Cox, SSgA Funds Management, BlackRock, Mawer Investment or The Vanguard Group? Well, if you recently popped a Tylenol for a headache, took a Lantus insulin shot or got your kid a flu shot at the local clinic - then you’ve probably come across these investment funds as they own the pharmaceutical firms that made those drugs.
In the last two decades, private equities and investment management companies — known as institutional investors — have mopped up the majority shareholding in the world’s largest medicine-makers.
Many of these investors simultaneously hold stakes in more than one large pharmaceutical company and their generic counterparts, something known as “common ownership”. This has raised concern that it undermines competition and as a result consumers end up paying more.
A recent paper co-authored by researchers Albert Banal-Estanol, Melissa Newham and Jo Seldeslachts for DIW Berlin found that large pharmaceutical companies have become connected to each other through their shareholders.
“Public companies are increasingly owned by a handful of large institutional investors so we expected to see many ownership links between companies — what was more surprising was the magnitude of common ownership,” the authors told TRT World in an emailed response.
“We frequently find that more than 50 percent of a company is owned by ‘common’ shareholders who also own stakes in rival pharma companies.”
For instance in 2014, the same investors collectively owned half the shares of Switzerland-based Novartis and Germany’s Bayer, the maker of Aspirin.