On a recent episode of the ABA Antitrust Podcast Our Curious Amalgam, Dr. Penka Kovacheva, Cornerstone Research Vice President and lead author of a paper recently published in Concurrences, “The Impact of Pharmaceutical M&A on Innovation,” discusses many ways in which mergers and acquisitions (M&A) can contribute to biopharmaceutical innovation.
Highlighting the unique and differentiated market dynamics in the biopharmaceutical industry, Kovacheva underscores the need for a thoughtful and comprehensive approach to appropriately assess the impact of M&A on life sciences innovation.
Key quotes from Kovacheva and takeaways from the discussion are included below:
1) Biopharmaceutical innovation is driven by unique and complex market dynamics.
- “[Pharmaceutical innovation] is a complex process, and it can mean many different things. Most commonly people think of pharmaceutical innovation being the process of bringing a new drug, a new vaccine to the market. But it can also mean innovations in the manufacturing process that can make it cheaper or faster to bring those drugs to market, or it could mean finding a new use for a drug.”
- “Innovation in terms of new diseases that can be treated with the same drug, or new patients who can benefit from that drug, is also considered innovation. And it is this complexity that is causing trouble to both economists as well as federal agencies in thinking about innovation and potential impacts.”
2) M&A can play an important role in bringing new life sciences innovations to market.
- “Mergers between a big pharmaceutical company and a small biotech company can have quite beneficial effects in terms of improving the small company’s access to funding for research and development activities, can stimulate knowledge sharing, and therefore actually help come up with more innovation and with bringing new drugs to the market.”
- “There are quite a few studies that do actually test this hypothesis and demonstrate that, indeed, such mergers lead to more drugs on the market, and lead to higher likelihood of a drug going through the very long process that is required to bring a new medicine to the marketplace.”
3) A nuanced and thoughtful approach is key to accurately assessing the impacts of M&A on life sciences innovation.
- “If you only look at a few years after a merger, you will not capture the full potential impact of that merger. It takes over a decade to bring a new drug to the market, so it is key to have this long-term perspective in order to assess the impacts of mergers and acquisitions.”
- “The other key aspect of this process to come up with a good measure, is to really think carefully about this idea of a ‘market’…Sometimes pharmaceutical companies start with an idea of how a compound can be used and research it in a particular therapeutic space. But then it turns out that, years after the fact, [they] discovered a very different use for that drug that may end up being much more important.”
Kovacheva asserts that future research is needed to better articulate the full range of impacts that M&A can have on biopharmaceutical innovation. Ultimately, the discussion underscores the critical need for federal regulators to recognize the unique and complex dynamics in the biopharmaceutical ecosystem and take a balanced and bipartisan approach to M&A enforcement in the life sciences.
To listen to the full episode, click here.