The Real Story: American Pharma's Tangled Web

There's still good money to be made in medicine. Just ask Dr. Patrick Soon-Shiong, a former surgeon from UCLA who founded generic-drug maker American Pharmaceutical Partners (APPX Quote). With a net worth of $2.2 billion in 2005, Dr. Soon-Shiong was ranked the 116th-richest American in the Forbes 400. The good doctor likely will see himself catapult into the top 100 after American Pharma acquires privately owned American BioScience in an all-stock deal worth $4.1 billion.

First, let's be clear: I believe in capitalism and the marketplace. I think there is nothing wrong with captains of industry profiting from their creations -- especially in the biotech/pharma area, where incentives should be great to encourage costly research that can ultimately add to the common good. However, the American Pharma-American BioScience deal raises questions about incestuous corporate relationships that enrich executives and their minions at the expense of average shareholders.

You see, Dr. Soon-Shiong is the chairman, CEO and founder of both companies and owns over 80% of American BioScience. American BioScience currently owns approximately 64% of American Pharmaceutical Partners. The merger proposal was submitted to American Pharma by American BioScience. Think about that for a minute. A private company (owned by Dr. Soon-Shiong) approaches a public company (majority owned by Dr. Soon-Shiong) with a proposal to be acquired. ...