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- Title
Challenges with Defining Pharmaceutical Markets and Potential Remedies to Screen for Industry Consolidation.
- Authors
Feldman, Robin; Fulton, Brent D.; Godwin, Jamie R.; Scheffler, Richard M.
- Abstract
Context: Dramatic increases in pharmaceutical merger and acquisition (M&A) activity since 2010 suggest we are in the midst of a third wave of industry consolidation. Methods: The authors reviewed 168 economic. legal. medical, industry, and government sources to examine the effects of consolidation on competition and innovation and to explore how industry attributes complicate M&A regulation in a pharmaceutical context, Findings: The authors find that, in spite of certain metrics that might argue otherwise, consolidation consistently reduces innovation and harms the public good. They also find that several factors within the pharmaceutical industry impede proper evaluation of proposed mergers. Because consumer choice across substitutes is limited, pharmaceutical markets frustrate conventional methods of defining markets. Volume bargaining in the pharmaceutical supply chain and asset managers' common ownership of pharmaceutical firms further complicate the definitional process. Hence, the Herfindahl-Hirschman Index (HHI). one measure used by the Federal Trade Commission and the Department of Justice to screen for concerning M&A activity, sometimes depends on faulty market definitions and fails to capture the implications of consolidation for future market share. Conclusions: The authors describe ways to improve how pharmaceutical markets are defined. highlight quantitative alterations to HHI to account for common ownership, and propose areas requiring further research.
- Subjects
UNITED States; PHARMACEUTICAL industry &; economics; MERGERS &; acquisitions law; ECONOMIC competition; DRUG approval; GOVERNMENT regulation; CONSUMER attitudes; ORPHAN drugs; PHARMACEUTICAL services insurance; QUALITY assurance; DIFFUSION of innovations; INSURANCE
- Publication
Journal of Health Politics, Policy & Law, 2022, Vol 47, Issue 5, p583
- ISSN
0361-6878
- Publication type
Article
- DOI
10.1215/03616878-9978131