Chapter 11: Mergers and Alliances in Pharmaceuticals: Effects on Innovation and R & D Productivity
11. Mergers and alliances in pharmaceuticals: eﬀects on innovation and R&D productivity Henry Grabowski and Margaret Kyle I INTRODUCTION The pharmaceutical industry provides a good laboratory to investigate the eﬀects of mergers and alliances on innovation and R&D productivity. Over the past few decades, the industry has been characterized both by signiﬁcant consolidation of large pharma ﬁrms as well as the vertical disintegration of the R&D process. The latter is associated with signiﬁcant entry into the discovery and development process by early stage biopharmaceutical ﬁrms. Since the early 1990s, an evolving marketplace for new technologies through licensing agreements and joint ventures has emerged, accompanied by the growth of contract research organizations that specialize in implementing clinical trials for new drug candidates. To put some of these changes in historical perspective, it is useful to chronicle some of the key dynamic forces aﬀecting the pharmaceutical industry since the early 1980s. While the 1980s were a period of rising prices and proﬁts for the industry, many challenging developments also occurred for the vertically integrated, multinational drug industry. These developments included rising R&D costs (DiMasi et al., 1991; 2003), the expiration of patents on major commercial products, and the beginning of intensive price competition from generics. The passage of the Waxman–Hatch Act in 1984 was a key legislative change that allowed generics to enter the market by demonstrating bioequivalence (that is without the need to do clinical tests of safety and e...
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