The Effects of Mergers and Acquisitions on Marketing Decisions and Effectiveness: Evidence from the Biopharma Industry

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. We 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. We 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 to before. The younger the target drugs and the more experience the acquirer has in marketing drugs in the drugs’ therapeutic category, (1) the more likely we are to see reductions in detailing and increases in prices, and (2) the greater the likelihood that acquirers experience larger increases in detailing elasticity and reductions in price elasticity. For our 375 target drugs, acquirers generated over 23 billion more in revenue in the two post-deal years while spending over 1 billion less on detailing compared to the two pre-deal years. The paper provides a framework for firms regarding commercial returns on M&As and informs the debate on regulatory responses to M&As.