COMPETITION AND RISK

[...]when exercising investigative and enforcement discretion, the agencies should focus on those mergers that would likely increase systemic risk by creating especially large or economically central firms. According to the U.S. Government Accountability Office, a decrease in suppliers over the prior two years is the single most important variable in explaining drug shortages, which in turn typically lead to significant price increases.6 Prior shortages have also been associated with increased mortality for patients who must receive alternative medicines.7 Among the drugs Teva stopped producing in 2019 was a sedative used to manage patients on ventilators, which went into shortage soon after Covid-19 struck the United States, and a pediatric oncology drug with no known substitutes that physicians were forced to ration because of the lack of supply.8 Even today, almost a decade after the merger, Teva continues to stagger under its debt burden. Because Teva suffered an idiosyncratic blow soon after the merger, the deal ultimately harmed customers by subjecting them to shortages, price increases, and reduced competitive choice across the range of the integrated firm's portfolio. [...]firms facing limited competition are generally less likely to be disrupted by shocks insofar as their higher profits give them greater incentive and ability to invest in resilience. Because competition has crosscutting effects on risk, this article shows how the antitrust agencies can focus on mergers that pose the clearest danger of increasing risk and which do so in ways that enforcers can most readily analyze.22 The agencies should pay special heed to mergers that threaten production mavericks-firms that produce goods or services using differentiated processes-and those that significantly increase customer exposure to a particular firm across multiple products or services in which the merged entity has market power.