{"id":33348,"date":"2025-07-09T04:30:36","date_gmt":"2025-07-09T04:30:36","guid":{"rendered":"https:\/\/financialrush.com\/?p=33348"},"modified":"2025-07-09T04:30:36","modified_gmt":"2025-07-09T04:30:36","slug":"the-looming-patent-cliff-facing-big-pharma","status":"publish","type":"post","link":"https:\/\/financialrush.com\/?p=33348","title":{"rendered":"The looming \u2018patent cliff\u2019 facing Big Pharma"},"content":{"rendered":"

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Every year, thousands of patients sit in doctors\u2019 offices with needles in their arms receiving a dose of a wonder drug called Keytruda. The cancer medicine is one of the world\u2019s best sellers, earning Merck $29.5bn in sales last year. But drip by drip, the US pharmaceutical company\u2019s time is running out. <\/p>\n

In 2028 Keytruda\u2019s patent ends, allowing rivals to sell the same drug at a cheaper price. Investors are spooked and Merck\u2019s shares have sunk 35 per cent over the past 12 months. While the company has been at pains to show it is prepared, Daina Graybosch, an analyst at Leerink, says the so-called patent cliff is hanging over the business. Merck has a \u201cmassive hole\u201d in its revenue to fill. \u201cThey can\u2019t fill it with one drug,\u201d she adds.<\/p>\n

Losing the intellectual property<\/a> rights for blockbuster drugs is a long-standing ritual for pharmaceutical companies. Drugmakers can earn fortunes when new discoveries are first sold to patients. Governments grant them about 20 years of patent life per drug. <\/p>\n

But up to half of that time can be used before the drug gets to market, during development. When the patent is up, competitors are allowed to release generic rivals, potentially wiping out billions of dollars of revenue for the original proprietor.\u00a0<\/p>\n

Merck is not alone. The pharmaceutical industry is facing some of its steepest patent cliffs to date. Drugs worth about $180bn of revenue a year are going off patent in 2027 and 2028, according to research firm Evaluate Pharma, representing almost 12 per cent of the global market.\u00a0Bristol Myers Squibb and Pfizer are also facing 2028 patent expirations for top-selling drugs. <\/p>\n

While patent cliffs are visible years ahead, investors are often not that \u201cfar sighted\u201d and can be \u201csurprised\u201d when they come, says Tim Opler, a managing director in Stifel\u2019s global healthcare group. \u201cThe pressure on pharma to find some way to augment the revenues is extremely high.\u201d\u00a0<\/p>\n

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The boom and bust cycle is the result of an uneasy compromise in how we fund innovation that is expensive to create but cheap to copy. Governments would rather grant limited monopolies to the private sector than fund much of this essential but risky work themselves. Stephen Haber, a professor of political science and history at Stanford, says that without patents, medicines would not exist.<\/p>\n

But often no one is entirely happy with the compromise. Investors and pharma companies<\/a> do not always feel adequately rewarded in a sector where failure is common. They particularly resent other measures to cut drug prices during the patented period, feeling these undermine the deal.<\/p>\n

Healthcare systems balk at expensive new drugs, given to more people as populations age. Developing countries struggle to access the innovation until patents expire. <\/p>\n

Policymakers tweak around the edges, often proposing adjustments to the number of years of patent protection. Yet few are committed to a completely different model. <\/p>\n

Bhaven Sampat, an economist at Johns Hopkins, says the current system is \u201ca blunt tool to incentivise innovation\u201d. \u201cIt overcompensates some inventions and undercompensates other things,\u201d he says. \u201cNo one thinks we have it exactly right.\u201d<\/p>\n

To get through bust periods historically, pharma companies would go on spending sprees, buying up smaller biotechs, where many innovative drugs are discovered, to fill their pipelines ahead of the patent expiry.\u00a0<\/p>\n

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The current system overcompensates some inventions and undercompensates other things. No one thinks we have it exactly right<\/p>\n