“Patent Cliff” is a term used when a number of lucrative pharmaceutical patents are all on the verge of expiry at the same time. What it results in is a huge drop in revenue, due to both, decrease in sales volumes as well as a price erosion of up to 70% within months resulting from the generic intrusion. The patent cliff is going to brunt major Pharma companies big-time in the near future. IMS Health Midas estimates revenues of about $89.5 billion USD from drugs whose patents are about to expire over the period of 2010-15, the majority of them being small molecules. While, according to a report by Datamonitor, the impending patent cliff will mean that global branded pharmaceutical companies are estimated to lose $82bn in sales by the end of 2014.
The year 2011 alone will see $30 billion in sales face generic competition for the first time in the major developed markets. The world’s biggest selling drug, Lipitor by Pfizer, will go off protection in 2011. Other major drugs that would be experiencing Patent Expiry in 2011 are Plavix, used to inhibit blood clots; Leavquin, used to treat a variety of different infections; and Zyprexa, used to treat bipolar disorder. These four major drugs contributed $17 billion in the US alone. Revenues lost by patent cliffs can only be partially compensated by newly launched products, e.g. in indications such as osteoporosis, respiratory illnesses, thrombosis, multiple sclerosis and cancer.
Although, the patent cliff is a challenge that the Global Pharmaceutical Industry can’t do without facing in the coming, there are other drivers also that one has to see to see the complete picture. The much-talked about concern eases in two years. The cliff is steepest in early years, with an estimated $58.6 billion in expirations through 2010-12. The year 2012 alone is estimated to cause the industry a loss of $28.7 billion due to impending patent expiry. The cliff moderates over the following years and it estimated to reach as low as $1.3 billion in the year 2017.
While so much of furor has been created of the imminent “Patent Cliff” and about $81 billion loss that the industry is going to face due to Patent Expiry during 2011-2015, in actuality the Pharmaceutical Industry is not facing an unprecedented patent expiration, but rather a continuation of a trend that has been in place for a decade. In the five-year period from 2005-2009, this value was $90.5 billion US for sales exposed to generic competition according to the same data source. There has been no mention of the patent cliff of 2005-2010, whereas the Patent Cliff of the near future has been widely publicized, in spite of it being about 11% less than the previous period in terms of value.
The problem might be big, but the solution is simple for the major Pharmaceutical companies - fully exploit their intellectual properties and kick-start their drug pipelines with innovative new drug candidates.
1. The patent cliff is set to drive global generic uptake despite tougher market conditions - Datamonitor
2. A View from a Cliff – Frankel Group
3. Pharmaceuticals & Biotech Industry Global Report — 2011, IMAP