AS THEY announced the proposed merger of Pfizer and Allergan to create the world’s biggest drugmaker, on November 23rd, the two firms’ bosses stressed the scale that is needed to keep inventing blockbuster treatments. As Ian Read, Pfizer’s boss, put it, the merger will create “a leading global pharmaceutical company with the strength to research, discover and deliver more medicines and therapies to more people around the world.”

A more convincing explanation for the deal is that, by shifting Pfizer’s tax domicile from America to Ireland, where Allergan is domiciled, the combined group’s tax rate will fall from about 25% to 17-18%. But even leaving that aside, the common suggestion that size is needed to create a research-driven powerhouse does not stack up. The figure of $2.6 billion cited by PhRMA, the American drugmakers’ lobby, for the cost of developing a new drug, is questionable. And the industry is in any case moving away from a model in which giant firms throw huge sums at in-house research in a quest for ground-breaking new treatments.

Start with the $2.6 billion figure. Two years ago, when the number being bandied…Continue reading