Other studies have drawn a link between pharmaceutical mergers and higher drug prices, lower innovation and decreased competition. However, as the University of Iowa researchers pointed out, “large-sample rigorous analysis of the impact of mergers on drug prices is scarce.”
They examined 125 pharmaceutical mergers between 2007 and 2020 and, using data on Medicaid-covered drugs, found contrasting results. Highly innovative firms with brand-name therapies, such as Eli Lilly and Novo Nordisk, increase prices by an average 6.3% after a merger.
It is a different situation for generic manufacturers: When these companies merge, drug prices fall 5.8%, according to the study, published in the Journal of Corporate Finance in August.
The researchers suggested that this average price decline after a merger is because of overlapping medications between the companies, as well as a divestment in research and development.
“The starkly different post-merger pricing behavior of less innovative firms warrants further investigation because generic drugs and me-too brand name drugs account for a significant share of the U.S. market,” they wrote.
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