Innovation Suffers When Drug Companies Merge_an HBR Article

Düsseldorf Institute for Competition Economics (DICE) in Germany scientists have concluded that the mergers are having a sizable negative impact on innovation and R&D at the combined firm’s rivals in pharmaceutical industry. The details were published on Harvard Business Review. 

Please see the details at: https://hbr.org/2016/08/research-innovation-suffers-when-drug-companies-merge

The team analyzed 65 pharma mergers that were all scrutinized, but eventually approved, by the European Commission and also other jurisdictions.

The results very clearly show that R&D and patenting within the merged entity decline substantially after a merger, compared to the same activity in both companies beforehand. Then we applied a market analysis, the same one used by the European Union in its models, to analyze how the rivals of the merging firms change their innovation activities afterward. On average, patenting and R&D expenditures of non-merging competitors also fell — by more than 20% — within four years after a merger. Therefore, pharmaceutical mergers seem to substantially reduce innovation activities in the relevant market as a whole.