Firm size and pharmaceutical mergers: A cross-national, cross-sector perspective

Standard merger analysis, which focuses on the proposed merger’s potential to raise prices or reduce innovation in individual product markets, ignores the potential for horizontal mergers to increase size-related leverage and anticompetitive cross-market effects that can arise out of the multiproduct portfolios of large firms. These advantages of firm size depend on the structure and institutional details of price/reimbursement, marketing and selling pharmaceuticals, which differ across countries and between originator and generic drugs within countries. This paper examines this potential for anticompetitive leverage and cross-market effects in mergers of originator firms and generic firms in the US and Europe, respectively. It concludes that the risk of anti-competitive cross-market effects is of greatest concern for mergers of large originator firms in the US and, to lesser extent, for generics mergers in the US, because firm size conveys advantages in contracting, marketing and selling in the market-driven US healthcare system. By contrast, the various regulatory features of European pharmaceutical markets substantially mitigate the potential for size-related leverage and anticompetitive cross-market effects in both originator and generics mergers in Europe.

I. Introduction 1. A new working group has recently been formed by the European Commission, the US Federal Trade Commission (FTC) and Department of Justice (DOJ), Canada’s Competition Bureau and Britain’s Competition and Markets Authority, to address pharmaceutical mergers. “The number of mergers in the pharmaceutical sector has grown in recent years, and there is the need to scrutinise closely to detect those that could lead to higher drug prices, lower innovation or anticompetitive conduct. (. . .) The goal of the working group is to identify concrete and actionable steps to update the analysis of pharmaceutical mergers.” [1] In the words of FTC Acting Chair Rebecca Slaughter, “Given the high volume of pharmaceutical mergers in recent years, amid skyrocketing drug prices and ongoing

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  • University of Pennsylvania - The Wharton School (Philadelphia)


Patricia Danzon, Firm size and pharmaceutical mergers: A cross-national, cross-sector perspective, September 2021, Concurrences N° 3-2021, Art. N° 101387,

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