Mergers, Product Prices, and Innovation: Evidence from the Pharmaceutical Industry - Alice Bonaimé

Finance

Speaker : Alice Bonaimé (Univ of Arizona)

Using novel data from the pharmaceutical industry, we study product prices and innovation around mergers. Exploiting within-deal variation in product market consolidation, we show prices increase more within drugs in consolidating markets than within matched control drugs. Estimates indicate a 2% average price effect that persists for about one year. Price increases are more pronounced for drugs in concentrated markets and without generic competition. Examination of trade-offs reveals these deals generate significant shareholder value and spur labeling and other manufacturing-related innovation, but not new drug approvals.

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