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Impending Patent Cliff Threatens Billions of Global Prescription Drug Sales

By Elizabeth Doughman | June 6, 2019

Over $198 billion in global prescription drug sales are at risk between 2019-2024 from patent expirations, according to a  new report from EvaluatePharma. Experts are now warning that the pharmaceutical industry is on the brink of a second patent cliff.

Worldwide prescription drug sales are expected to grow at a CAGR of 6.9 percent to $842 billion during the 2019-2024 time period. This number—which is triple the CAGR seen for 2010-2019—is driven by an increase in FDA approvals for novel drugs and growth in the oncology therapies and orphan drugs markets.

However, the billions of dollars at risk because of prescription drug patent expirations is restricting growth of worldwide prescription drug sales. The report forecasts that $198 billion worth of sales are at risk during 2019-2024, with $114 billion dollars of revenue expected to be lost, signs that a patent cliff might be pending.

“A patent cliff is what happens when a company’s revenue starts plunging, or falling off a cliff, because an established product’s patent reaches its expiration date and competitors can then start selling that product,” said The Motley Fool.

The pharmaceutical industry experienced the first “patent cliff” during the years 2011-2016. During this time period, hundreds of billions of brand name drugs—some of which accounted for large percentages of big pharma company sales—lost patent protection. Patent cliffs have tremendous impacts on the revenue of big pharma companies, forcing them to find new and innovative ways to cut costs, increase prices or find new profit sources.

Patents for medications typically last for 20 years. They serve as a property right granted by the United States Patent Office and can encompass a wide range of claims. When a patent on a branded drug expires, it opens the market for competitors to manufacture and sell generic treatments at lower prices.

“This system of incentives keeps the biotechnology innovation engine churning, rather than allowing it to milk cash-cow drugs forever,” explained an article in STATnews earlier this year.

Pfizer’s Lyrica, GlaxoSmithKline’s Advair, Roche’s Rituxan and Gilead’s Harvoni are examples of some of the drugs facing patent expirations this year.

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