Patent Cliff

Patent Cliff: A patent cliff refers to the point at which a pharmaceutical company’s exclusive rights to produce a drug expire, leading to the loss of market exclusivity. This allows generic manufacturers to produce and sell cheaper versions of the drug, often resulting in a significant decline in sales and Revenue for the original patent holder.

Examples and Cases:

• Lipitor: The cholesterol-lowering drug Lipitor, developed by Pfizer, faced a patent cliff in 2011. After its patent expired, generic versions flooded the market, causing Pfizer’s sales of Lipitor to drop from $12 billion in 2011 to less than $2 billion in subsequent years.
• Plavix: Bristol-Myers Squibb’s blood thinner Plavix experienced its patent expiration in 2012. Following the introduction of generics, the drug’s Revenue plummeted from approximately $9 billion in 2011 to less than $1 billion in later years.
• Avandia: GlaxoSmithKline’s diabetes drug Avandia faced a patent cliff in 2012. After its patent expired, generic versions were introduced, leading to a sharp decline in the company’s Revenue from the drug, which had previously generated billions in sales.