Less Spending, Higher Revenue: How Mergers and Acquisitions Affect Marketing Decisions in the Biopharma Industry

Marketing is traditionally understood as a way to create and deliver value to customers, stakeholders, and society. However, in the context of mergers and acquisitions (M&A), that logic is inverted. Marketing becomes a value extraction mechanism, whereby firms cut promotional spending and raise prices on the acquired product. M&As are complex phenomena with uncertain outcomes, yet the marketing decisions that drive post-deal commercial performance remain surprisingly underexamined compared with R&D, financial returns, and management integration. This gap matters because marketing decisions play a crucial role in whether an acquisition ultimately succeeds.

In a recent Journal of Marketing Research study, researchers Vardit Landsman and Stefan Stremersch investigate what happens to marketing decisions following a merger or acquisition. Using 73 biopharma M&A deals and 375 branded drugs as their sample, they find that acquiring firms consistently cut promotional spending on acquired products, yet the remaining marketing spending becomes more effective per dollar spent. Rather than relying on larger budgets, acquiring firms appear to allocate marketing resources more efficiently.

The findings point to an interesting phenomenon: after a deal, the dominant strategy is to raise prices and cut promotional spending on the acquired product. This “extract” strategy accounts for 54% of the 375 target drugs in the authors’ sample. Across all deals, acquiring firms collectively spent $1.19 billion less on promoting the drugs to the physicians (detailing) while generating $23 billion more in revenue during the two years post-deal.

Acquiring firms collectively spent $1.19 billion less on promoting the drugs to the physicians (detailing) while generating $23 billion more in revenue during the two years post-deal.

Acquiring firms also increased prices following an acquisition. Intuitively, one would expect higher prices to reduce demand. However, the researchers found that customers became less sensitive to these price increases. The underlying mechanism is that firms with greater expertise in a particular therapeutic area are better equipped to position their products, communicate their value, and manage their portfolios. As a result, stronger marketing capabilities enable them to command higher prices without risking customer loss. In this way, marketing’s role expands from generating sales to strengthening the firm’s pricing power and extracting greater value from its activities.

We contacted the authors to learn more about their study and gain additional insights on how to navigate the marketing function in an M&A context – in terms of what to expect, how to implement, and how to make sense of the broader consequences.

Q: Do you think the pattern of acquirers cutting detailing and raising prices on target drugs after a deal would hold if you compared them to the acquirer’s own parallel products over the same period? Or would we see that acquirers protect their house brands while squeezing the acquired ones?

A: Probably, but I would expect the pattern to be stronger for acquired drugs than for the acquirer’s own “house” brands. The paper shows that target drugs are often treated in an “extract” mode: prices go up while detailing goes down. Compared with the acquirer’s own brands, acquired products may have fewer internal champions and may be easier to rationalize commercially. Moreover, the acquired drugs are the only ones undergoing change (in this case, the owner), so they would be more likely to be examined more closely. Also, from a capability angle, acquired drugs would have more room for optimization by a “smarter” acquirer, while the existing drugs in the portfolio would already have been optimized by this smart acquirer.

That said, the paper does not directly test acquired drugs against the acquirer’s parallel products, so this would be a useful follow-up. I expect acquirers may protect their core brands while using acquired brands more opportunistically, especially when the target drug is in a category where the acquirer already has experience. On the other hand, competing logics exist. For instance, the newly merged firm may want to examine all opportunities for savings, also on its own drugs. Alternatively, the merger dynamics may push the firm to treat both portfolios more equally, especially if it is a merger of equals. In sum: interesting question!

Q: What is the role of competitive intensity in the target drug’s category—does it constrain the extract strategy the paper posits? Say a category is already crowded with generics and branded alternatives, could acquirers still raise prices and cut detailing?

A: The second-layer parameters suggest that competition does not clearly work against the extract strategy. Generic competition is associated with lower post-deal prices, which is consistent with competition constraining price increases. However, branded competition is associated with higher post-deal prices and lower post-deal detailing, which is more consistent with the extract strategy rather than a constraint on it. So, the evidence is mixed, but overall, it does not support a simple story that competitive intensity prevents extraction. If anything, branded competitive intensity seems compatible with acquirers cutting detailing and raising prices, while generic competition appears to be the more meaningful constraint on price increases.

Q: How much of this M&A is really about killing the competition versus milking from it?

A: Based on the paper, it looks more like milking existing assets than simply killing competition. The key pattern is not that acquired drugs disappear, but that acquirers often raise prices, reduce detailing, and improve returns on the remaining marketing effort. That said, competition-reducing effects remain, especially when acquirers already have experience or products in the same therapeutic category. In those cases, the acquisition may both soften competition and allow the acquirer to extract more value from the target drug. The drug industry also contains differentiated products with a valuable franchise that is IP-protected, typically with high margins. In such a setting, we expect more milking than killing of the acquired product portfolio, which we think is more likely when it concerns undifferentiated products with low margins.

Q: What stereotypes about marketing do you think your findings most strongly challenge?

A: The findings challenge the stereotype that marketing is mainly about spending more to sell more. Here, firms often spend less on detailing after acquisition but get better returns from the remaining spending. They also challenge the idea that marketing effectiveness is fixed. The acquirer’s capabilities, category experience, and portfolio position appear to change how effective marketing becomes. Finally, the findings complicate the stereotype that pharmaceutical marketing is just aggressive promotion. In this case, value creation often comes from a combination of pricing power, reduced promotion, and portfolio optimization. This fits a broader picture that the drug industry is reducing promotional spending to a greater extent than the public may perceive.

The findings challenge the stereotype that marketing is mainly about spending more to sell more.

Q: Better marketing efficiency is usually considered to be a positive development. In the pharmaceutical industry, where access and affordability are matters of public health, should we evaluate marketing success differently from other industries?

A: Yes. In most industries, higher marketing efficiency sounds clearly positive. But in pharmaceuticals, marketing success has public health consequences. If efficiency gains come with higher prices, reduced access, or greater burden on insurers and patients, then firm-level success may not equal social welfare. A better evaluation would include not only revenue and returns on detailing, but also affordability, appropriate prescribing, patient access, and whether detailing provides useful medical information. Reduced detailing may be good when it cuts wasteful promotion, but it is more concerning if it reduces useful information for newer drugs.

Q: Your paper suggests that value creation after mergers may depend less on producing entirely new value and more on extracting greater value from existing assets. Do you think the pharmaceutical industry rewards optimization and scale over innovation? If so, what does that mean for smaller biotech firms trying to compete primarily through scientific discovery?

A: The paper suggests that M&A can create substantial value through optimization of existing assets: acquirers often raise prices, reduce detailing, and improve detailing returns after the deal. This points to the importance of scale, category experience, and commercial capabilities. However, we should be careful not to conclude that this necessarily comes at the expense of innovation. The paper does not show whether the additional value extracted after acquisition is later reinvested in R&D. If those gains finance future drug development, then the extract strategy could indirectly support innovation. Therefore, the safer conclusion is that the industry rewards commercial optimization and scale, but this evidence does not show whether that weakens or supports innovation overall. For small biotech firms, this means that scientific discovery may not be enough on its own; capturing full value may still require access to the commercial infrastructure and market power of larger firms.

Source: Vardit Landsman and Stefan Stremersch (2026), “The Effects of Mergers and Acquisitions on Marketing Decisions and Effectiveness: Evidence from the Biopharma Industry,” Journal of Marketing Research, 63 (2), 298–321. doi:10.1177/00222437251389509

Go to the Journal of Marketing Research