Abstract
This article describes the causes and consequences of changes in the organization of the pharmaceutical industry. There are several important trends. First, the industry has undergone consolidation by large firms, driven by efforts to achieve economies of scale and scope, build global capabilities, and quickly replenish product pipelines. Empirical analysis of large mergers yields little evidence of long-run gains in R&D performance, however. Recent decades have also witnessed the entry of a large number of small firms, often founded by academics, many of which focus on emerging technologies such as biotechnology and genomics. The use of alliances has increased dramatically, particularly alliances between large firms and these smaller biotechnology firms. These alliances allow firms to exploit gains from specialization in different parts of the pharmaceutical value chain. There is empirical evidence that large, experienced firms have an advantage in the later stages of clinical development, with small R&D ‘boutique’ firms better positioned in the discovery and early phases of development. However, contracting frictions may reduce the realized gains from alliances, and this industry structure relies on the availability of capital for small start-up firms. It is concluded with a discussion of several policy considerations, including antitrust issues and public–private programs to improve the technology transfer process.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.