Pharmaceutical M&A Activity: Effects on Prices, Innovation, and Competition

33 Pages Posted: 1 Jun 2017

See all articles by Barak D. Richman

Barak D. Richman

Duke University, School of Law

Will Mitchell

Duke University - Fuqua School of Business; University of Toronto - Rotman School of Management

Elena Vidal

City University of NY, Baruch College, Zicklin School of Business

Kevin A. Schulman

Duke University - Medical Center

Date Written: May 30, 2017

Abstract

The rise of blockbuster pharmaceutical acquisitions has prompted fears that unprecedented market concentration will weaken competition. Two of the most prominent concerns focus on the upstream and downstream ends of the pharmaceutical industry: (1) the concern that these mergers will concentrate the market for discovery and will therefore lead to fewer discoveries; and (2) the concern that merging large marketing, sales, and distribution forces will strengthen the hands of select pharmaceutical manufacturers and weaken downstream competition. Having considered potential dynamic effects in the industry and conducted a series of preliminary interviews with knowledgeable observers, though, this Article argues that neither of these common fears is systematically warranted. There are, however, potential dangers in market concentration at an intermediate stage during the discovery-to-development path: the stage for regulatory approval. These preliminary findings are a product of dramatic changes that are currently reshaping the structure of the pharmaceutical industry. This Article discusses how these structural changes contribute to the current merger wave, how dynamic responses by industry players in response to the merger wave mitigate the potential harm from competition, and how the political arena might still offer threats to market concentration.

Keywords: Pharmaceutical M&A, Pharmaceutical Innovation, Drug Prices

JEL Classification: I18, K21, L11, O31

Suggested Citation

Richman, Barak D. and Mitchell, Will and Vidal, Elena and Schulman, Kevin A., Pharmaceutical M&A Activity: Effects on Prices, Innovation, and Competition (May 30, 2017). Rotman School of Management Working Paper No. 2977703; Loyola University Chicago Law Journal, Vol. 48, 2017; Duke Law School Public Law & Legal Theory Series No. 2017-43. Available at SSRN: https://ssrn.com/abstract=2977703

Barak D. Richman (Contact Author)

Duke University, School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States
919-613-7244 (Phone)
919-613-7231 (Fax)

Will Mitchell

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

University of Toronto - Rotman School of Management

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Elena Vidal

City University of NY, Baruch College, Zicklin School of Business ( email )

One Bernard Baruch Way
New York, NY 10010
United States

Kevin A. Schulman

Duke University - Medical Center ( email )

100 Fuqua Drive
Durham, NC 27715
United States

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