Do Mergers Save Lives?

47 Pages Posted: 7 Sep 2019

See all articles by Alice A. Bonaime

Alice A. Bonaime

University of Arizona

Ye (Emma) Wang

University of Arizona - Department of Finance

Date Written: August 30, 2019


Using novel data from the pharmaceutical industry, we study the impact of mergers on product prices and innovation. Drugs produced by acquiring firms increase in price approximately 5% more than drugs sold by matched non-acquiring firms. Price increases are more pronounced for deals resulting in greater market power consolidation and within drugs whose consumers are less price sensitive, but absent for drugs already shielded from competition. Rival drug prices rise as well, consistent with a spillover effect into the broader product market. We find no evidence of mergers facilitating or incentivizing innovation — a potential tradeoff to higher product prices. In sum, the average pharmaceutical merger increases drug prices without expanding new drug development.

Keywords: Mergers and acquisitions, product market competition, innovation, pharmaceuticals, drug prices, new drug approval

JEL Classification: G30, G34, H51, I18

Suggested Citation

Bonaime, Alice A. and Wang, Ye, Do Mergers Save Lives? (August 30, 2019). Available at SSRN: or

Alice A. Bonaime (Contact Author)

University of Arizona ( email )

Eller College of Management
Department of Finance
Tucson, AZ 85721
United States

Ye Wang

University of Arizona - Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tuscon, AZ 85721
United States

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics