As the news of Baxter's acquisition of Gambro gains publicity, the question is: "Is bigger better?" Recall that Baxter and Grambro are number 2 and 3 respectively as manufacturer's of dialysis equipment (Fresenius is number 1). The answer, I think, is almost never.
The reasons for the merger are obvious and are considered in an article in the Economist: worldwide demand for dialysis is growing - both because of the epidemic in diabetes - if estimates are to be believed then a 50% growth in the number of diabetics from 2011 to 2030 and because of the increasing buying power of people around the world as Asian and South American economies roar. Bank of America Merrill Lynch estimates a 6%/year growth in dialysis from 2011 to 2020. However, consolidation has the danger of stifling innovation because it removes one more competitor from the marketplace in order to reduce cost.
In an article by Porter and Teisberg in the Harvard Business Review about competition in heathcare they make the point: "Competition... has been exacerbated by pursuit of the wrong objective: reducing cost. The right goal is to improve value (quality of health outcomes per dollar expended), and value can only be measured at the disease and treatment level."
So while the business reasons for Baxter acquiring Gambro may be sound, the jury is out on whether it will benefit dialysis patients.
