Patent expiry marks a significant milestone in the lifecycle of a pharmaceutical product. When a drug is first developed, the manufacturer is granted a patent that typically lasts for 20 years, providing market exclusivity and enabling the company to recoup its research and development costs through higher pricing. During this period, the drug manufacturer has the sole right to produce and sell the medication, allowing it to set premium prices.
Once the patent expires, other companies can develop and market generic or biosimilar versions of the drug, usually at much lower prices. This influx of competition leads to a reduction in the price of both the original branded drug and its generic counterparts. The extent and speed of the price decline depend on various factors such as the number of competitors, market demand, and the complexity of the drug.
Impact of Drug Patent Expiry on Prices: A Look at the Recent Trends :
In recent years, several notable trends have emerged concerning drug prices after patent expiry:
Less Dramatic Price Drops: Historically, drug prices fell sharply when generic versions entered the market, often decreasing by 80–90%. However, recent trends show that price reductions post-patent expiry are less dramatic for some drugs. This is due to:
Fewer generic manufacturers: Increased consolidation in the generic drug industry has led to fewer competitors producing generics for the same drug, which slows down the rate of price reduction.
Rising costs of generic drug development: Higher regulatory standards and manufacturing complexities are leading to increased production costs for generics.
Branded Drug Price Maintenance: Some brand-name manufacturers have maintained higher prices even after patent expiration. This is due to strategies such as:
Brand loyalty and perception: Certain patients and physicians prefer sticking with the original branded drug due to perceived quality or trust.
Evergreening strategies: Pharmaceutical companies use "evergreening" tactics, such as reformulating drugs or introducing new delivery systems to extend market exclusivity, thus keeping prices higher.
Authorized generics: Some companies launch "authorized generics" (generic versions of their own brand-name drugs) at a slightly lower price but not as low as competing generics, thus keeping some market control.
Slower Market Entry for Generics and Biosimilars: Regulatory and legal delays in approving generic and biosimilar versions have extended the time it takes for cheaper versions to enter the market. Companies often file patent infringement lawsuits or secure additional patents to delay the launch of competing generics. This trend can keep prices higher for longer periods post-patent expiry.
Impact of Biosimilars on Biologics: Biologics have shown a different trend after patent expiry. Unlike traditional small-molecule drugs, where generics sharply reduce prices, biosimilars have led to more modest price decreases around 10–30%. Mostly due to the complexities of biologic drugs, the high cost of developing biosimilars, and the regulatory hurdles involved in their approval. Biosimilar competition has generally not resulted in the same level of price erosion seen with conventional drugs.
Government and Payer Pressure: Increased scrutiny from governments and health insurance providers is leading to calls for price reductions for both branded drugs and their generic counterparts. In markets like the U.S., recent initiatives like Medicare price negotiations are aimed at reducing drug prices, especially for drugs post-patent expiry.
Emergence of Competitive International Markets: In certain international markets, particularly India and China, generics are being introduced more rapidly and at lower prices than in more regulated markets like the U.S. and Europe. This has led to more aggressive price competition in these regions.
Increased Focus on Specialty Drugs: Specialty drugs, such as those used in oncology or rare diseases, tend to retain higher prices even after patent expiry. This is because these drugs often have complex formulations or delivery mechanisms, making it harder for generics to penetrate the market or lower prices as significantly.
Recent Patent Expiries and the Market Dynamics
Several notable drugs have faced patent expiry since 2020, impacting their prices and market dynamics. Here are some key examples:
Humira (adalimumab) – AbbVie : Patent Expiry: 2023 in the U.S. (Europe - 2018): Humira, one of the best-selling drugs globally, faced biosimilar competition in Europe after 2018, resulting in significant price reductions. In the U.S., biosimilars launched in 2023. Though price reductions in the U.S. are not as steep as in Europe due to the complexity of biologics and biosimilar competition, multiple companies (e.g., Amgen, Pfizer) have launched biosimilars, putting downward pressure on Humira’s price.
Revlimid (lenalidomide) – Bristol Myers Squibb : Patent Expiry: 2022 in the U.S.
The entry of generic versions of Revlimid in 2022 led to a gradual decrease in its price, though the company has negotiated specific terms to limit the availability of generics until 2026. As a result, the price impact was less immediate compared to other drugs. Revlimid continues to generate significant revenues for Bristol Myers Squibb despite generics.
Eliquis (apixaban) – Bristol Myers Squibb and Pfizer : Patent Expiry: 2026 (expected): While Eliquis has not fully faced patent expiry, there has been significant anticipation regarding when generics will enter the market. Patent challenges could bring generics to market earlier, and when they do, they are expected to lead to significant price reductions due to its widespread use.
Xarelto (rivaroxaban) – Johnson & Johnson : Patent Expiry: 2024 in the U.S.
Similar to Eliquis, Xarelto is expected to face generic competition soon. The price will likely drop significantly when generics enter the market, making the drug more accessible but cutting into Johnson & Johnson’s revenue.
Vimpat (lacosamide) – UCB : Patent Expiry: 2022 in the U.S.
Generic versions of Vimpat were introduced in 2022, reducing the cost of treatment for epilepsy patients. The market saw significant price drops as multiple generic manufacturers, including Teva and Lupin, launched their versions of the drug.
Xtandi (enzalutamide) – Astellas and Pfizer : Patent Expiry: 2027 in the U.S.
Xtandi, used in prostrate cancer, is still under patent protection in the U.S., but it is anticipated that biosimilars and generics will enter the market soon after its patent expires.
Gilenya (fingolimod) – Novartis : Patent Expiry: 2022 in the U.S.
The expiration of Gilenya's patent opened the door for generic manufacturers to enter the market, which has led to lower prices. Several companies, including HEC Pharma and Biocon, have launched generics.
The landscape of patent expiry and its impact on drug prices is continuously evolving, shaped by regulatory frameworks, market forces, and innovations in drug development. As these trends unfold, both challenges and opportunities will emerge for pharmaceutical companies, patients, and healthcare systems alike.
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References:
Sacks, L., Lee, M., Kesselheim, A. (2021). Effect of Biosimilar Competition on Price Trends of Biologic Drugs. JAMA.
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