Acquiring companies raised prices and cut promotion for a majority of the branded drugs in a study of biopharmaceutical deals, highlighting how commercial decisions can change after a takeover.
Researchers Vardit Landsman and Stefan Stremersch examined 375 branded drugs involved in 73 mergers and acquisitions. For 54% of the drugs, buyers combined higher prices with reduced spending on promotion to physicians, an approach the researchers call an extraction strategy.
The Journal of Marketing Research study looks at a particular set of products and transactions. It does not establish that every acquired medicine becomes more expensive or that every reduction in promotional spending harms patients.
What happens to marketing after a deal?
Acquisitions give a buyer control over products, staff and commercial resources. The buyer can keep existing sales arrangements, combine them with its own operations or change how much it spends supporting individual products.
In drug marketing, “detailing” refers to promotional contacts with physicians, often through sales representatives. Reducing that activity can lower costs, but promotional spending is only one part of a medicine’s commercial and clinical environment.
An American Marketing Association discussion published November 5 says the researchers observed lower detailing spending and higher revenue across the deals in the two years following acquisition. The authors also found that remaining marketing expenditure was more effective per dollar in their analysis.
Those results should not be treated as proof that cutting promotion caused all of the revenue increase. Product portfolios, competition, pricing and other changes can affect sales at the same time.
Price is not the same as a patient’s bill
A drug’s reported price and the amount a patient pays can differ. Insurance coverage, discounts, rebates, pharmacy arrangements and the design of a health plan can all influence the final cost.
The study’s results therefore do not calculate how much a particular patient or insurer paid because of an acquisition. Higher prices can still matter to buyers and payers, but assessing that effect requires information beyond the study’s broad commercial pattern.
For executives evaluating a deal, the findings illustrate why a product’s value cannot be assessed solely from its current marketing budget. The buyer also needs to consider customers, competitive alternatives, sales capabilities and the cost of integrating operations.
Separate research on why firms choose acquisitions or alliances examined a different question: how a company’s strategic emphasis relates to the type of transaction it pursues. Neither study provides a formula for whether a particular deal will succeed.
