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

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-todevelopment 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.