Big pharma M&A may be killing off new medications and raising drug prices
- Pharmaceutical companies have a strategy to block out competition to their prescription drugs.
- According to a new study, about 7% of all pharma mergers and acquisitions from 1989 to 2011 are so-called "killer acquisitions," meaning they're used strategically by big pharma to eliminate competition from smaller companies.
- The practice could drive up prices on existing therapies, the study says.
Big pharmaceutical companies may have developed a strategy to block out competition to their prescription drugs.
A recent study by researchers at the Yale School of Management and London Business School noted a trend of mergers and acquisitions made by big pharma to strategically eliminate competitors. The researchers dubbed these deals "killer acquisitions."
For example, a large pharmaceutical company with a successful drug brand might acquire a new, smaller company making a drug to treat the same disease. This way, the large pharma company can terminate the new drug's development and it can continue to control market share. The researchers estimated that 7% of pharma deals were so-called killer acquisitions.
In a recent example of this, Mallinckrodt Pharmaceuticals settled with the Federal Trade Commission in 2017 after it was charged with violating anti-trust laws over its specialty drug Achtar. Several years earlier, Questcor (a company that Mallinckrodt later acquired) bought a competitor to Acthar called Synacthen. The FTC alleged that this kept other companies from selling the competing drug at a lower price.
The study suggested that large drug companies sometimes buy up smaller companies only to shut down their production and ongoing development. An analysis of more than 60,000 drug developments in the U.S. market from 1989 to 2011 gave insight into how these types of deals are reshaping the R&D process at companies.
Drugs acquired by other large pharma companies were more likely to be terminated than non-acquired drugs, particularly when the parent company already had a similar product, the study found. If these deals hadn't taken place, the number of drugs continuing development each year would increase by 5%. This means killer acquisitions may be preventing a large number of medical treatments from being developed, the study said, and it may also drive up the price of existing drugs.