Pharmaceutical companies Pfizer and Allergan have started initial negotiations for a possible merger in which the former will be the sole surviving company. The proposed deal was uncovered this week by the media.

According to The Wall Street Journal, it was Pfizer that started sending feelers to Allergan on the possibility of combining the two drug companies.

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If this merger pushes through, it will easily be the largest merger and will dwarf the buy outs and takeovers happening in the pharmaceutical sector this year. Allergan is reportedly worth more than $112 billion based on its market capital.

The negotiations could be tough since Ian Read Pfizer's CEO remarked during a recent conference call that Allergan's share price may be overvalued.

The deal will have to make provisions for the workers who will be laid off and facilities that will be closed down as a result of the merger. Aside from the rank and file, Allergan's chief executive officer Brent Saunders will most likely demand a good deal for himself as his company as it is swallowed by Pfizer.

Allergan is the maker of Botox, an anti-wrinkle medication, and Restasis, which is used to dry eyes, as well as several other profitable drugs.

Meanwhile, drugstore chain Walgreens Boots announced on Tuesday that it is acquiring its its biggest competitor Rite Aid for almost $10 billion, according to the Los Angeles Times.

Rival drugstores chains are rushing to combine their resources in order to fend off grocery stores chains, who already have their own pharmacies as well those offering drugs through mail.

Expert say pharmaceutical and medical insurance companies, drug stores, hospitals and other medical related organizations have started consolidating with one another in order to become more competitive with the passage of the Affordable Care Act.

Companies and organization providing health care and medicine have seen their revenues reduce and merging with one another can help them cope. By pooling their resources, they can reduce their expenses and negotiate for better prices with suppliers.

The merger will also help them provide better care to the increasing number of people who have signed up for the Medicare and Medicaid plan.

Tagspfizer allergan merger, Affordable Care Act, health care company merger, walgreens boots, reta aid, Medicaid, medicare