Lemon

You may say the idea of acquiring successful small drug companies may not be a bad idea for the general public, because the cost of new drug is reduced, and, hopefully, we may enjoy new treatment at a lower price.

Alas, in the short term, that may be the case. However, the detrimental long term effect would gradually surface with time.

Where's the catch? Just imagine, small firms with a really promising product would not be eager to sell their business - they would prefer a ripe time to maximize their profit. In contrast, firms with an apparently good product would only be happy to sell it early to big companies if the small owner know, behind the closed door, that their new product would likely fall apart in the pipeline. Since big companies could not distinguish good products from bad ones, they would only be willing to pay an average price. With time, good products are driven out of the market by bad ones.

Alas, this is, in fact, a classical example of information asymmetry in economics. It is also called the Market of Lemon hypothesis after George Akerlof, who, for his work in this area, won the Nobel Prize in Economic Sciences in 2001.

PS. You may ask: How about the really good products that are kept by the small companies? Alas, either they do not have the resource to get it fully developed, or their launching would be hindered by regulatory bodies, which, in general, favor big companies.

You think the regulatory bodies and big companies are all but one group? Well...