Abstract
Which acquisitions lead to higher prices? We answer this question using a novel dataset of pharmaceutical acquisitions of branded, on-patent drugs from 2007–2019. Our results uncover two patterns. First, we exploit regulation that exempts low-value deals from being disclosed to antitrust authorities to show that regulatory scrutiny minimizes the effect of horizontal acquisitions, likely through a screening mechanism. Low-value deals that fall below the disclosure threshold led to an average 60 percent increase in net price, whereas remaining deals only result in a small and statistically insignificant increase in net price. Second, we find that cross-market acquisitions by large pharmaceutical companies do not lead to higher prices on average—although we cannot reject the possibility that they might have a small inflationary effect.
Invited by: BHEPPE
Local Organizer: Pietro Biroli