The Impact of R&D Cooperations and Mergers in Pharmaceuticals on Research Activities and Drugs Offered on the Market

In the last ten years, the pharmaceutical industry has experienced steep, unprecedented price increases. Pharmaceutical companies engage in R&D cooperations to cope with rocketing research and development (R&D) expenses.We study the impact of R&D cooperations on firms' research activities and drugs offered on the market. Using a comprehensive dataset, we find that the impact of R&D cooperations on technology and product market activities depends on the research stage in which the cooperations are formed. Results show that R&D cooperations formed at the early stage of the drug development process increase the number of R&D projects and the number of drugs offered on the market. Late stage R&D cooperations, formed among larger firms in technology and product markets, increase firms' research activities, but reduce the number of drugs launched on the product market. Result suggests that large firms cooperating in the late research stage re-optimize their R&D pipelines and eliminate similarly aligned research projects