2016 A Profile of Bio-pharma Consolidation Activity 39
significantly reduced. 30 The Pfizer-Allergan conglomerate would have boasted over 100 drugs in late- and mid-stage development and would save $2 billion by combining operations over the first three years. 31 However, as a result of stricter government rules regarding corporate inversions announced in April 2016, the two companies abandoned the deal. 32 This is not an exhaustive list. The industry and academic literature reveals myriad driving factors for consolidation. The literature also identifies winners and losers, couched in terms of positive and negative impacts of these consolidations on a variety of actors. These actors include the U.S. market, competitors, consumers and patients, federal and state insurance programs, researchers and scientists, and company employees. Regularly cited as tangible negative impacts are large-scale job losses, 33 outsourcing of manufacturing to other countries, 34 decline in research and development, 35 shifts in resource allocation away from early-stage investigations, 36 elimination of certain types of product development, general stalling of innovation, 37 drug shortages resulting from removal of products from the
30. Puzzanghera & Masunaga, supra note 29. 31. Melissa Lipman, Antitrust Concerns Won’t Derail $160B Pfizer-Allergan Deal, LAW360 (Nov. 23, 2015, 8: 43 PM), http://www.law360.com/articles/730724/antitrust- concerns-won-t-derail-160b-pfizer-allergan-deal. 32. Caroline Humer & Ankur Banerjee, Pfizer, Allergan Scrap $160 Billion Deal After U.S. Tax Rule Change, REUTERS (Apr. 6, 2016, 7: 47 PM), http://www.reuters.com/article/us- allergan-m-a-pfizer-idUSKCN0X3188. 33. Sy Mukherjee, 3 Major Trends Driving Layoffs in Biotech and Pharma, BIOPHARMADIVE (May 27, 2015) http://www.biopharmadive.com/news/3-major-trends- driving-layoffs-in-biotech-and-pharma/399484/. 34. Global Contract Manufacturing Companies: Pharmaceutical and Biotechnology, PHARMALIVE (Nov. 11, 2011), http://www.pharmalive.com/global-contract-manufacturing- companies-pharmaceutical-and-biotechnology/ (“Moving forward, pharma companies are expected to outsource growing amounts of manufacturing as companies concentrate on R&D and marketing activities.”). 35. Robert Thong, Root Causes of the Pharmaceutical R&D Productivity Crisis, SCITECHSTRATEGY (Mar. 31, 2015), http://scitechstrategy.com/2015/03/root-causes-of-the- pharmaceutical-rd-productivity-crisis/ (noting that “consolidation in the pharmaceutical industry and the concomitant scaling up and industrialization of its R&D infrastructure had created diseconomies of scale, severely reducing the innovative culture of the R&D organizations and the creative risk-taking of their scientists.”). 36. Chris Lo, Pharma Mergers: Big Business, Bad Science?, PHARMACEUTICAL TECH. (Jan. 7, 2015), http://www.pharmaceutical-technology.com/features/featurepharma-mergers- big-business-bad-science-4467897/ (explaining that consolidation among pharmaceutical companies can lead to the termination of research and development activity that doesn’t fit with the larger company’s broader goals or early-stage research that is deemed too risky to continue). 37. Id. (arguing that consolidation hinders innovation because it has led to a cost-saving, research-cutting pattern resulting in the elimination of research sites, programs, and scientists. Also, the article argues that consolidation decreases healthy competition, which fuels innovation).