Consolidation and Innovation in the Pharmaceutical Industry: The Role of Mergers and Acquisitions in the Current Innovation Ecosystem

Joanna Shepherd, Emory University School of Law discusses Consolidation and Innovation in the Pharmaceutical Industry: The Role of Mergers and Acquisitions in the Current Innovation Ecosystem.

ABSTRACT: Recent changes in the pharmaceutical industry have spurred an unprecedented wave of mergers and acquisitions. Some researchers and agencies have questioned whether pharmaceutical consolidation could impede drug innovation. However, as I explain in this Article, these concerns are largely based on an outdated understanding of the drug innovation ecosystem. Whereas a few decades ago almost all drug discovery took place inside traditional pharmaceutical companies, today most drug innovation is externally-sourced from biotech companies and smaller firms. Internal R&D is no longer the primary source, or even an important source, of drug innovation. As a result, analyses that focus on the impacts of pharmaceutical consolidation on internal drug innovation are incomplete and missing the point. Instead, merger analyses should examine whether consolidation increases demand for externally-sourced innovation and, ultimately, strengthens aggregate drug innovation.