Pharmaceutical Pipeline Divestitures Study: Preliminary Results

In evaluating mergers between pharmaceutical companies, the FTC frequently requires divestiture of drug products that are in the pipeline — that is, they have yet to be approved by the FDA or brought to market. This study examines the effectiveness of such pipeline mergers to ask whether the drugs in the pipeline, indeed, have created effective competition. The results suggest that pipeline divestitures fail to provide an effective measure of competition. Our study found that only 20 of the 56 pharmaceutical products divested as pipeline products between 2008 and 2018 are actively marketed today (36%). In other words, these pipeline divestitures only made it to market 36% of the time, let alone creating the type of active competitive balance one might hope for. It is a disappointing result for a frequently used policy, and it suggests that competition agencies might wish to rethink pipeline mergers as effective antidote to market consolidation as well as to create a “second look” policy for mergers that have relied on this mechanism.