Healthcare transactions: latest trends and potential challenges

Matthew Poulter

matthew.poulter@linklaters.com

Linklaters LLP, São Paulo

Caroline Aguiar Malatesta

caroline.aguiar@linklaters.com  

Linklaters LLP, São Paulo

Paula Marky Sobral

paula.sobral@linklaters.com

Linklaters LLP, São Paulo

In the past few years, the healthcare sector has faced many challenges, from the lack of resources to the existence of an unknown and harmful virus. For instance, the rapid increase in the number of Covid-19 patients quickly overwhelmed healthcare service providers, and the restrictions imposed by several governments, such as social distancing and lockdowns, hindered access to routine check-ups as well as the provision of other healthcare services that were not directly related to Covid-19. Meanwhile, the pharmaceutical industry had to work under extreme time pressure to develop the highly expected vaccines to contain the pandemic.

In this scenario, healthcare service providers, healthcare maintenance organisations and pharmaceutical companies worldwide had to invest in innovative ideas, break paradigms and rethink their business models as well as their operational structures. Accordingly, the players from the healthcare industry developed strategies to expand their range and the reach of their services along with their products, which likely resulted in increased access to healthcare as well as in the optimisation of costs.

According to the Bloomberg Law Health-Care Advisory Panel, the total healthcare deal volume announced for 2021 amounted to nearly 3,000 deals in the United States alone. Within this scenario, the following sectors, each responsible for at least 100 deals, were the most active: life sciences, healthcare IT, physician practices, medical devices, cannabis, home health and behavioural health.[1]

The needs arising from the pandemic boosted the development of digital health and consequently the expansion of the healthcare market. According to the Digital Health Business & Technology public report, in 2021, digital health M&A funding was at its highest when compared to the past 11 years.[2] Furthermore, in 2021, the acquisition of a Brazilian healthcare maintenance organisation by a company that offers credit card payment solutions led to the launch of a new telemedicine service with the ability to monitor up to 150 patients online simultaneously.[3]

Additionally, in 2022, a multinational technology corporation producing computer software, consumer electronics and related services acquired a computer software technology company for US$19.7bn in the United States. This acquisition combined expertise to deliver new cloud services and enhanced artificial intelligence capabilities in the healthcare sector.[4]

As deals in the life sciences and healthcare sectors continue to be in the spotlight, their participants should be aware of the main issues and evaluate the risks, so they are able to make informed decisions.

Regarding strategic partnerships for the development of new drugs or vaccines, which is a type of transaction that has been extremely prominent in the last few years, regulatory issues and intellectual property concerns are at the heart of the matter. Also, it is important to clearly define the responsibilities of the parties that will act in collaboration, and to determine the key performance indicators and the events of default that would affect the transaction.

If an acquisition is being considered, in addition to performing due diligence and analysing the operational agreements to define their impact on the transaction, the participants must consider potential difficulties arising from increasing antitrust scrutiny from regulators. Furthermore, approvals from health regulatory agencies might be required as a condition. Moreover, when facing a cross-border deal, it is important to pay attention to local regulations, which must be carefully considered because standards may vary depending on the jurisdiction involved.

In addition to benefitting the parties involved, transactions in the healthcare sector have the potential to play a key role in the development of overall access to healthcare. They may contribute to an increase in the variety of products being offered, to the availability of a wider range of services, to the offering of new technologies and to the development of alternative treatments.

With respect to challenges, the main legal issues vary according to the type of transaction being pursued. Each case should be evaluated according to its particularities, as the one-size-fits-all approach is not recommended. Ultimately, all healthcare transactions present a considerable level of risk. As there are many industry-related aspects, attention to detail and industry-specific knowledge are key for a successful transaction.

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