Consolidation in Drug Markets: Impact on Prices and Access
This project aims to provide an exhaustive analysis of how pharmaceutical mergers and acquisitions affect market competition and prices of patent-protected branded drugs involved in the deal. So far, little direct evidence exists about the impact of mergers and acquisitions activity on pharmaceutical market outcomes, partly because reliable data on prices and ownership of drugs is very difficult to obtain. The scholars will assemble a comprehensive dataset tracking the ownership of new products. This will be one of the major contributions of this project since there are no data sources that systematically track the marketing rights of each pharmaceutical product. The project examines whether prices, sales, and formulary coverage of acquired products increase after acquisition and, if so, what types of acquisitions are more likely to lead to changes in these market outcomes. This project will be the first to examine the differences in how list and net prices of pharmaceuticals respond to changes in market structure and competition. It also asks why market outcomes change. Economic theory predicts that within-market (substitute products) mergers will lead to higher prices. More recent evidence suggests that cross-market (noncompeting products) mergers also may generate upward pricing pressure in markets. The project tests these theories in the context of the pharmaceutical market. It also explores alternative explanations, such as shifts in marketing strategy, by incorporating advertising data into the analysis. Finally, the project also investigates anticompetitive effects of acquisitions in the patent-protected branded drugs market and what types of deals are more likely to have an anticompetitive effect.