M&A, Competition, and Innovation in Medical Technology

Matthew Grennan, Health Care Management, The Wharton School; Ashley Swanson, Columbia Business School; and Thomas Wollman, University of Chicago

Abstract: Innovation in medical technology has played a large role in the growth in welfare benefits and monetary costs due to health care over the last half century. Like many industries that rely on innovation, medical technology has an active market for corporate mergers and acquisitions (M&A). The relationship between M&A and innovation is complex, generating incentives for innovation as well as barriers to entry and “killer” acquisitions. This project uses previously untapped FDA data to construct a comprehensive panel of M&A in the medical technology sector over the last 20 years. This panel contains 2-5X the activity documented in other sources, mainly due to activity that went unscrutinized due to antitrust authority automatic review thresholds. We will use these thresholds to estimate the causal impact of M&A on innovation, leveraging heterogeneity across product categories to understand the mechanisms driving this relationship. The results will have important implications for potential innovators, industry observers, and policy makers in antitrust, innovation, and health care.