Seeking efficiency or price gouging? Evidence from pharmaceutical mergers

Mosab Hammoudeh and Amrita Nain

Journal of Corporate Finance, 2024, vol. 87, issue C

Abstract: We examine the impact of mergers on drug prices and document significant differences between the post-merger pricing strategies of highly innovative pharmaceutical firms and other firms. While the former raise prices of overlapping drugs, especially brand name drugs that tend to be first-in-class and patented, we find pervasive evidence of price reductions by generic manufacturers. Our evidence suggests that the price reductions are due to cost cuts realized by less innovative firms in overlapping product spaces. We also show that less innovative acquirers cut R&D and shift product development from high-novelty products to cheaper, less-risky products.

Keywords: Mergers; Acquisitions; Market power; Product prices; Health finance (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:87:y:2024:i:c:s0929119924000853

DOI: 10.1016/j.jcorpfin.2024.102623

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