Talk about unintended consequences. "I did not run for office to be helping out a bunch of fat-cat bankers on Wall Street," Barack Obama said in December 2009, before meeting with bosses of some of the biggest financial institutions to discuss pay in the industry and the still-developing Dodd-Frank reform proposals. As it happens, the US President's hallmark health care reform did just that.
In the process of providing health care insurance to more than 15 million Americans who weren't previously covered, the Affordable Care Act - known as Obamacare - sparked a merger frenzy across the medical sector. Two mega-deals in recent weeks illustrate the trend: Anthem's $48 billion agreed acquisition of rival insurer Cigna and Teva's $41 billion proposal to buy Allergan's generic drugs business.
Hospitals, drug distributors, insurers, device makers and pharmaceutical companies all have been getting together -mostly with their own kind within the sector - to cut costs and, more significantly, to boost their negotiating power. Worldwide health care M&A activity this year has already hit the $400 billion mark, surpassing the full-year record established in 2014, according to Thomson Reuters data.
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Obama may not exert as much influence over deals between drugmakers, which have a longer list of motives to merge, but his rain-making powers should persist elsewhere. Hospital operators such as HCA Holdings, Community Health Systems and Tenet Healthcare could yet catch the consolidation bug. Pharmaceutical middleman PharMerica, device maker Smith & Nephew and insurers Centene and WellCare may, too, as hospitals further squeeze prices.
The President essentially called the post-crisis bottom for stock prices during a March 2009 press conference. Since then, they have been on the rise, with shares of health care companies, gripped by M&A fever, substantially outperforming the broader S&P 500 Index. Just call Obama the banker-in-chief.
