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Mergers and innovation in the pharmaceutical industry

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  • Comanor, William S.
  • Scherer, F.M.
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    Abstract

    Conflicting trends confound the pharmaceutical industry. The productivity of pharmaceutical innovation has declined in recent years. At the same time, the cohort of large companies who are the leading engines of pharmaceutical R&D has become increasingly concentrated. The concurrent presence of these trends is not sufficient to determine causation. In response to lagging innovation prospects, some companies have sought refuge in mergers and acquisitions to disguise their dwindling prospects or gain R&D synergies. On the other hand, the increased concentration brought on by recent mergers may have contributed to the declining rate of innovation. In this paper, we consider the second of these causal relationships: the likely impact of the recent merger wave among the largest pharmaceutical companies on the rate of innovation. In other words, have recent mergers, which may have been taken in response to lagging innovation, represented a self-defeating strategy that only made industry outcomes worse?

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    File URL: http://www.sciencedirect.com/science/article/pii/S0167629612001221
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Health Economics.

    Volume (Year): 32 (2013)
    Issue (Month): 1 ()
    Pages: 106-113

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    Handle: RePEc:eee:jhecon:v:32:y:2013:i:1:p:106-113

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    Web page: http://www.elsevier.com/locate/inca/505560

    Related research

    Keywords: Pharmacuetical mergers; Innovation;

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    References

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    1. Comanor, William S & Scherer, Frederic M, 1969. "Patent Statistics as a Measure of Technical Change," Journal of Political Economy, University of Chicago Press, vol. 77(3), pages 392-98, May/June.
    2. Mansfield, Edwin, et al, 1977. "Social and Private Rates of Return from Industrial Innovations," The Quarterly Journal of Economics, MIT Press, vol. 91(2), pages 221-40, May.
    3. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2003. "The price of innovation: new estimates of drug development costs," Journal of Health Economics, Elsevier, vol. 22(2), pages 151-185, March.
    4. Cockburn, Iain M. & Henderson, Rebecca M., 2001. "Scale and scope in drug development: unpacking the advantages of size in pharmaceutical research," Journal of Health Economics, Elsevier, vol. 20(6), pages 1033-1057, November.
    5. William J. Abernathy & Richard S. Rosenbloom, 1969. "Parallel Strategies in Development Projects," Management Science, INFORMS, vol. 15(10), pages B486-B505, June.
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