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. 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.