Mergers and acquisitions (M&As) may trigger adjustments to firms’ marketing decisions and their outcomes. Yet, prior literature provides little empirical insight regarding the nature of these adjustments. The authors address this gap in the context of the biopharma industry, analyzing data on sales, prices, and detailing spending for 375 branded drugs acquired in 73 M&A deals between 2007 and 2020. They find that, on average, acquiring firms (1) reduce detailing spending on target drugs, (2) increase target drug prices, and (3) achieve increases in detailing elasticity for target drugs after the M&A, compared with before. The younger the target drugs and the more experience the acquirer has in marketing drugs in the drugs’ therapeutic category, (1) the greater the likelihood that detailing will be reduced and prices raised, and (2) the greater the likelihood that acquirers will experience larger increases in detailing elasticity and reductions in price elasticity. For the investigated 375 target drugs, acquirers generated over $23 billion more in revenue in the two years postdeal while spending over $1 billion less on detailing compared with the two years predeal. The article provides a framework for firms regarding commercial returns on M&As and informs the debate on regulatory responses to M&As.
AggarwalVikas A.HsuDavid H. (2014), “Entrepreneurial Exits and Innovation,” Management Science, 60 (4), 867–87.
2.
AlbersSönkeMantralaMurali K.SridharShrihari (2010), “Personal Selling Elasticities: A Meta-Analysis,” Journal of Marketing Research, 47 (5), 840–53.
3.
AllenJasonClarkRobertHoudeJean-François (2014), “The Effect of Mergers in Search Markets: Evidence from the Canadian Mortgage Industry,” American Economic Review, 104 (10), 3365–96.
4.
AllenbyGreg M.RossiPeter E.McCullochRobert E. (2005), “Hierarchical Bayes Models: A Practitioners Guide,” SSRN, https://dx.doi.org/10.2139/ssrn.655541.
5.
AshenfelterOrleyHoskenDanielWeinbergMatthew (2014), “Did Robert Bork Understate the Competitive Impact of Mergers? Evidence from Consummated Mergers,” Journal of Law and Economics, 57 (S3), S67–S100.
6.
BahadirS. CemBharadwajSundar G.SrivastavaRajendra K. (2008), “Financial Value of Brands in Mergers and Acquisitions: Is Value in the Eye of the Beholder?” Journal of Marketing, 72 (6), 49–64.
7.
BaiJohnJinWangSerflingMatthew (2022), “Management Practices and Mergers and Acquisitions,” Management Science, 68 (3), 2141–65.
8.
BenaJanLiKai (2014), “Corporate Innovations and Mergers and Acquisitions,” Journal of Finance, 69 (5), 1923–60.
9.
BiragliaAlessandroFuchsChristophMairaElisaPuntoniStefano (2023), “When and Why Consumers React Negatively to Brand Acquisitions: A Values Authenticity Account,” Journal of Marketing, 87 (4), 601–17.
10.
BommarajuRaghuAhearneMichaelHallZachary R.TirunillaiSeshadriLamSon K. (2018), “The Impact of Mergers and Acquisitions on the Sales Force,” Journal of Marketing Research, 55 (2), 254–64.
11.
CapronLaurence (1999), “The Long-Term Performance of Horizontal Acquisitions,” Strategic Management Journal, 20 (11), 987–1018.
12.
CapronLaurenceHullandJohn (1999), “Redeployment of Brands, Sales Forces, and General Marketing Management Expertise Following Horizontal Acquisitions: A Resource-Based View,” Journal of Marketing, 63 (2), 41–54.
13.
ChandraAmitabhGruberJonathanMcKnightRobin (2010), “Patient Cost-Sharing and Hospitalization Offsets in the Elderly,” American Economic Review, 100 (1), 193–213.
ChingAndrew T. (2010), “Consumer Learning and Heterogeneity: Dynamics of Demand for Prescription Drugs After Patent Expiration,” International Journal of Industrial Organization, 28 (6), 619–38.
16.
ChintaguntaPradeep K.DesirajuRamarao (2005), “Strategic Pricing and Detailing Behavior in International Markets,” Marketing Science, 24 (1), 67–80.
ClarkeRogerDaviesStephenWatersonMichael (1984), “The Profitability-Concentration Relation: Market Power or Efficiency?” Journal of Industrial Economics, 32 (4), 435–50.
DalenDag MortenStrømSteinarHaabethTonje (2006), “Price Regulation and Generic Competition in the Pharmaceutical Market,” European Journal of Health Economics, 7 (3), 204–11.
22.
DanzonPatricia M.CarrierMichael A. (2022), “The Neglected Concern of Firm Size in Pharmaceutical Mergers,” Antitrust Law Journal, 84 (2), 487.
23.
DanzonPatricia M.EpsteinAndrewNicholsonSean (2007), “Mergers and Acquisitions in the Pharma and Biotech Industries,” Managerial and Decision Economics, 28 (4–5), 307–28.
24.
DemsetzHarold (1973), “Industry Structure, Market Rivalry, and Public Policy,” Journal of Law and Economics, 16 (1), 1–9.
25.
DuchinRanSchmidtBreno (2013), “Riding the Merger Wave: Uncertainty, Reduced Monitoring, and Bad Acquisitions,” Journal of Financial Economics, 107 (1), 69–88.
26.
EckboB. Espen (1983), “Horizontal Mergers, Collusion, and Stockholder Wealth,” Journal of Financial Economics, 11 (1-4), 241–73.
27.
ElzingaKenneth G.MillsDavid E. (2011), “The Lerner Index of Monopoly Power: Origins and Uses,” American Economic Review, 101 (3), 558–64.
28.
FarronatoChiaraFongJessicaFradkinAndrey (2024), “Dog Eat Dog: Balancing Network Effects and Differentiation in a Digital Platform Merger,” Management Science, 70 (1), 464–83.
29.
FeeC. EdwardThomasShawn (2004), “Sources of Gains in Horizontal Mergers: Evidence from Customer, Supplier, and Rival Firms,” Journal of Financial Economics, 74 (3), 423–60.
FocarelliDarioPanettaFabio (2003), “Are Mergers Beneficial to Consumers? Evidence from the Market for Bank Deposits,” American Economic Review, 93 (4), 1152–72.
32.
FokDennisHorváthCsillaPaapRichardFransesPhilip H. (2006), “A Hierarchical Bayes Error Correction Model to Explain Dynamic Effects of Price Changes,” Journal of Marketing Research, 43 (3), 443–61.
33.
GarenJohn (1984), “The Returns to Schooling: A Selectivity Bias Approach with a Continuous Choice Variable,” Econometrica: Journal of the Econometric Society, 52 (5), 1199–218.
34.
GhoshMrinalDuttaShantanuStremerschStefan (2006), “Customizing Complex Products: When Should the Vendor Take Control?” Journal of Marketing Research, 43 (4), 664–79.
35.
GolderPeter N.DekimpeMarnik G.AnJake T.van HeerdeHarald J.KimDarren S.AlbaJoseph W. (2023), “Learning from Data: An Empirics-First Approach to Relevant Knowledge Generation,” Journal of Marketing, 87 (3), 319–36.
36.
GönülFüsun F.CarterFranklinPetrovaElinaSrinivasanKannan (2001), “Promotion of Prescription Drugs and Its Impact on Physicians’ Choice Behavior,” Journal of Marketing, 65 (3), 79–90.
GulerAli UmutMisraKanishkaSinghVishal (2020), “Heterogeneous Price Effects of Consolidation: Evidence from the Car Rental Industry,” Marketing Science, 39 (1), 52–70.
39.
HamiltonBarton H.NickersonJackson A. (2003), “Correcting for Endogeneity in Strategic Management Research,” Strategic Organization, 1 (1), 51–78.
40.
HariharanVijay GaneshLandsmanVarditStremerschStefan (2024), “Branded Response to Generic Entry: Detailing Beyond the Patent Cliff,” International Journal of Research in Marketing, 41 (3), 567–88.
41.
HausmanJerry (1978), “Specification Tests in Econometrics,” Econometrica, 46 (6), 1251–71.
HomburgChristianBuceriusMatthias (2005), “A Marketing Perspective on Mergers and Acquisitions: How Marketing Integration Affects Postmerger Performance,” Journal of Marketing, 69 (1), 95–113.
44.
HüschelrathKaiMüllerKathrin (2015), “Market Power, Efficiencies, and Entry Evidence from an Airline Merger,” Managerial and Decision Economics, 36 (4), 239–55.
45.
KamakuraWagner A.KossarBruce S.WedelMichel (2004), “Identifying Innovators for the Cross-Selling of New Products,” Management Science, 50 (8), 1120–33.
KappeEelcoStremerschStefan (2016), “Drug Detailing and Doctors’ Prescription Decisions: The Role of Information Content in the Face of Competitive Entry,” Marketing Science, 35 (6), 915–33.
48.
KappeEelcoVenkataramanSriramStremerschStefan (2017), “Predicting the Consequences of Marketing Policy Changes: A New Data Enrichment Method with Competitive Reactions,” Journal of Marketing Research, 54 (5), 720–36.
49.
KremerSara T.M.BijmoltTammo H.A.LeeflangPeter S.H.WieringaJaap E. (2008), “Generalizations on the Effectiveness of Pharmaceutical Promotional Expenditures,” International Journal of Research in Marketing, 25 (4), 234–46.
50.
KupcikJan (2022), “Firm’s Own Price Elasticity of Demand in Dominant Position Analysis,” Journal of European Competition Law & Practice, 13 (3), 187–99.
51.
LandsmanVarditStremerschStefan (2011), “Multihoming in Two-Sided Markets: An Empirical Inquiry in the Video Game Console Industry,” Journal of Marketing, 75 (6), 39–54.
LilienGary L.RaoAmbar G.KalishShlomo (1981), “Bayesian Estimation and Control of Detailing Effort in a Repeat Purchase Diffusion,” Management Science, 27 (5), 493–506.
LopezRigoberto A.YouZhikang (1993), “Determinants of Oligopsony Power: The Haitian Coffee Case,” Journal of Development Economics, 41 (2), 275–84.
58.
LuanY. JackieSudhirK. (2010), “Forecasting Marketing-Mix Responsiveness for New Products,” Journal of Marketing Research, 47 (3), 444–57.
59.
MaddalaGangadharrao Soundalyarao (1983), “Methods of Estimation for Models of Markets with Bounded Price Variation,” International Economic Review, 24 (2), 361–78.
60.
ManchandaPuneetChintaguntaPradeep K. (2004), “Responsiveness of Physician Prescription Behavior to Salesforce Effort: An Individual Level Analysis,” Marketing Letters, 15 (2), 129–45.
61.
ManchandaPuneetRossiPeter E.ChintaguntaPradeep K. (2004), “Response Modeling with Nonrandom Marketing-Mix Variables,” Journal of Marketing Research, 41 (4), 467–78.
MizikNatalieJacobsonRobert (2004), “Are Physicians ‘Easy Marks’? Quantifying the Effects of Detailing and Sampling on Prescriptions,” Management Science, 50 (12), 1704–15.
64.
MooiErik A.GhoshMrinal (2010), “Contract Specificity and Its Performance Implications,” Journal of Marketing, 74 (2), 105–20.
NarayananSridharDesirajuRamaraoChintaguntaPradeep K. (2004), “Return on Investment Implications for Pharmaceutical Promotional Expenditures: The Role of Marketing-Mix Interactions,” Journal of Marketing, 68 (4), 90–105.
67.
NarayananSridharManchandaPuneetChintaguntaPradeep K. (2005), “Temporal Differences in the Role of Marketing Communication in New Product Categories,” Journal of Marketing Research, 42 (3), 278–90.
68.
PalepuKrishna G. (1986), “Predicting Takeover Targets: A Methodological and Empirical Analysis,” Journal of Accounting and Economics, 8 (1), 3–35.
69.
ParkM. (2013), “Understanding Merger Incentives and Outcomes in the Mutual Fund Industry,” Journal of Banking & Finance, 37 (11), 4368–80.
70.
ParsonsLeonard J. (1975), “The Product Life Cycle and Time-Varying Advertising Elasticities,” Journal of Marketing Research, 12 (4), 476–80.
71.
PetrinAmilTrainKenneth (2010), “A Control Function Approach to Endogeneity in Consumer Choice Models,” Journal of Marketing Research, 47 (1), 3–13.
PrabhuJaideep C.ChandyRajesh K.EllisMark E. (2005), “The Impact of Acquisitions on Innovation: Poison Pill, Placebo, or Tonic?” Journal of Marketing, 69 (1), 114–30.
74.
RaoVithala R.YuYuUmashankarNita (2016), “Anticipated vs. Actual Synergy in Merger Partner Selection and Post-Merger Innovation,” Marketing Science, 35 (6), 934–52.
75.
RémuzatCécileUrbinatiDuccioMzoughiOlfaEl HammiEmnaBelgaiedWaelToumiMondher (2015), “Overview of External Reference Pricing Systems in Europe,” Journal of Market Access & Health Policy, 3 (1), 27675.
76.
RichmanBarakMitchellWillVidalElenaSchulmanKevin (2016), “Pharmaceutical M&A Activity: Effects on Prices, Innovation, and Competition,” Loyola University Chicago Law Journal, 48, 787–819.
77.
RizzoJohn A. (1999), “Advertising and Competition in the Ethical Pharmaceutical Industry: The Case of Antihypertensive Drugs,” Journal of Law and Economics, 42 (1), 89–116.
RoganMichelle (2014), “Too Close for Comfort? The Effect of Embeddedness and Competitive Overlap on Client Relationship Retention Following an Acquisition,” Organization Science, 25 (1), 185–203.
80.
RossiPeter E.AllenbyGreg M.McCullochRobert (2005), Bayesian Statistics and Marketing. John Wiley & Sons.
81.
SabooAlok R.KumarV.ParkInsu (2016), “Using Big Data to Model Time-Varying Effects for Marketing Resource (Re) Allocation,” MIS Quarterly, 40 (4), 911–39.
82.
SabooAlok R.SharmaA.ChakravartyA.KumarV. (2017), “Influencing Acquisition Performance in High-Technology Industries: The Role of Innovation and Relational Overlap,” Journal of Marketing Research, 54 (2), 219–38.
83.
SchampChristinaHeitmannMarkPeersYuriLeeflangPeter S. (2024), “Cause-Related Marketing as Sales Promotion,” Journal of Marketing Research, 61 (5), 955–74.
84.
SchmalenseeRichard (1987), “Collusion Versus Differential Efficiency: Testing Alternative Hypotheses,” Journal of Industrial Economics, 35 (4), 399–425.
85.
ShahrurHusayn (2005), “Industry Structure and Horizontal Takeovers: Analysis of Wealth Effects on Rivals, Suppliers, and Corporate Customers,” Journal of Financial Economics, 76 (1), 61–98.
86.
ShaverJ. MylesMeziasJohn M. (2009), “Diseconomies of Managing in Acquisitions: Evidence from Civil Lawsuits,” Organization Science, 20 (1), 206–22.
87.
SheenAlbert (2014), “The Real Product Market Impact of Mergers,” The Journal of Finance, 69 (6), 2651–88.
88.
SinghHarbirMontgomeryCynthia A. (1987), “Corporate Acquisition Strategies and Economic Performance,” Strategic Management Journal, 8 (4), 377–86.
89.
SoodAshishKappeEelcoStremerschStefan (2014), “The Commercial Contribution of Clinical Studies for Pharmaceutical Drugs,” Int. Journal of Research in Marketing, 31 (1), 65–77.
90.
SorescuAlina B.ChandyRajesh K.PrabhuJaideep C. (2007), “Why Some Acquisitions Do Better Than Others: Product Capital as a Driver of Long-Term Stock Returns,” Journal of Marketing Research, 44 (1), 57–72.
StillmanRobert (1983), “Examining Antitrust Policy Towards Horizontal Mergers,” Journal of Financial Economics, 11 (1–4), 225–40.
94.
StremerschStefanGonzalezJorgeValentiAlbertVillanuevaJulian (2023), “The Value of Context-Specific Studies for Marketing,” Journal of the Academy of Marketing Science, 51 (1), 50–65.
95.
SwaminathanVanithaMurshedFeisalHullandJohn (2008), “Value Creation Following Merger and Acquisition Announcements: The Role of Strategic Emphasis Alignment,” Journal of Marketing Research, 45 (1), 33–47.
96.
SyversonChad (2019), “Macroeconomics and Market Power: Context, Implications, and Open Questions,” Journal of Economic Perspectives, 33 (3), 23–43.
97.
UmashankarNitaBahadirS. CemBharadwajSundar (2022), “Despite Efficiencies, Mergers and Acquisitions Reduce Firm Value by Hurting Customer Satisfaction,” Journal of Marketing, 86 (2), 66–86.
VakratsasDemetriosWangWei-Lin (2024), “Scientific Evidence Production and Specialty Drug Diffusion,” Journal of Marketing, 88 (1), 116–37.
100.
Van den BulteChristopheLilienGary L. (2001), “Medical Innovation Revisited: Social Contagion Versus Marketing Effort,” American Journal of Sociology, 106 (5), 1409–35.
101.
Van LinArjenGijsbrechtsEls (2014), “Shopper Loyalty to Whom? Chain Versus Outlet Loyalty in the Context of Store Acquisitions,” Journal of Marketing Research, 51 (3), 352–70.
102.
Van LinArjenGijsbrechtsEls (2019), “‘Hello Jumbo!’ The Spatio-Temporal Rollout and Traffic to a New Grocery Chain After Acquisition,” Management Science, 65 (5), 2388–2411.
103.
VenkataramanSriramStremerschStefan (2007), “The Debate on Influencing Doctors’ Decisions: Are Drug Characteristics the Missing Link?” Management Science, 53 (11), 1688–1701.
104.
VerniersIsabelStremerschStefanCrouxChristophe (2011), “The Global Entry of New Pharmaceuticals: A Joint Investigation of Launch Window and Price,” International Journal of Research in Marketing, 28 (4), 295–308.
105.
WangRuiSabooAlokGrewalRajdeep (2015), “A Managerial Perspective on Chief Marketing Officer Succession,” International Journal of Research in Marketing, 32 (2), 164–78.
106.
WebsterThomas J. (2002), “Retail Consolidation and the Price Elasticity of Demand for Books,” International Business and Economics Research Journal, 1 (12), https://doi.org/10.19030/iber.v1i12.4005.
107.
WetzelHauke A.HammerschmidtMaikZablahAlex R. (2014), “Gratitude Versus Entitlement: A Dual Process Model of the Profitability Implications of Customer Prioritization,” Journal of Marketing, 78 (2), 1–19.
WilesMichael A.MorganNeil A.RegoLopo L. (2012), “The Effect of Brand Acquisition and Disposal on Stock Returns,” Journal of Marketing, 76 (1), 38–58.
110.
WittinkDick R. (2002), “Analysis of ROI for Pharmaceutical Promotion (ARPP),” paper presented to the Association of Medical Publications (September 18).
111.
WooldridgeJeffrey M. (2010), Econometric Analysis of Cross Section and Panel Data. MIT Press.
112.
WooldridgeJeffrey M. (2015), “Control Function Methods in Applied Econometrics,” Journal of Human Resources, 50 (2), 420–45.
113.
YeungKaiBasuAnirbanHansenRyan N.SullivanSean D. (2018), “Price Elasticities of Pharmaceuticals in a Value Based-Formulary Setting,” Health Economics, 27 (11), 1788–1804.
Supplementary Material
Please find the following supplemental material available below.
For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.
For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.
