BROWSE

Patent Cliff

Definition

The term patent cliff refers to the phenomenon of patent expiration dates and an abrupt drop in sales that follows for a group of products capturing high percentage of a market. Usually, these phenomena are noticed when they affect blockbuster products—a blockbuster product in the pharmaceutical industry, for example, is defined as a product with sales exceeding 1 billion USD per year.

What is 'Patent Cliff'

A colloquialism to denote the potential sharp decline in revenues upon patent expiry of one or more leading products of a firm. A patent cliff is when a firm's revenues could "fall off a cliff" when one or more established products go off-patent, since these products can be replicated and sold at much cheaper prices by competitors. While it is applicable to any industry, in recent years the term "patent cliff" has come to be associated almost exclusively with the pharmaceutical industry.

Explaining 'Patent Cliff'

The world's biggest pharmaceutical firms such as Pfizer and GlaxoSmithKline stand to lose billions of dollars in revenues from the patent expiration on such blockbuster drugs as cholesterol drug Lipitor and asthma medication Advair respectively. There are numerous firms that have established profitable businesses by manufacturing "generic" alternatives to off-patent drugs, which can be sold at a fraction of the price of branded drugs. The "patent cliff" threat has spurred increasing consolidation in the pharmaceutical industry, as companies strive to replace blockbuster drugs whose patents are expiring with other drugs that have the potential to become big sellers.


Further Reading


Patent cliff mitigation strategies: giving new life to blockbusters
www.tandfonline.com [PDF]
… were supplemented by lower strength Silenor tablets, which were subsequently patented for a … sustained revenue generation and breaking the descent of blockbusters beyond the patent cliff … honoraria, stock ownership or options, expert testimony, grants or patents received or …

New financing methods in the biopharma industry: A case study of Royalty Pharma, Inc.New financing methods in the biopharma industry: A case study of Royalty Pharma, Inc.
papers.ssrn.com [PDF]
… were supplemented by lower strength Silenor tablets, which were subsequently patented for a … sustained revenue generation and breaking the descent of blockbusters beyond the patent cliff … honoraria, stock ownership or options, expert testimony, grants or patents received or …

Patents and R&D expenditure effects on equity returns in pharmaceutical industryPatents and R&D expenditure effects on equity returns in pharmaceutical industry
www.tandfonline.com [PDF]
… were supplemented by lower strength Silenor tablets, which were subsequently patented for a … sustained revenue generation and breaking the descent of blockbusters beyond the patent cliff … honoraria, stock ownership or options, expert testimony, grants or patents received or …

Patent indicators: a window to pharmaceutical market successPatent indicators: a window to pharmaceutical market success
www.tandfonline.com [PDF]
… were supplemented by lower strength Silenor tablets, which were subsequently patented for a … sustained revenue generation and breaking the descent of blockbusters beyond the patent cliff … honoraria, stock ownership or options, expert testimony, grants or patents received or …

Knowledge spillovers and patent citations: Evidence from a survey of inventorsKnowledge spillovers and patent citations: Evidence from a survey of inventors
pubs.aeaweb.org [PDF]
… were supplemented by lower strength Silenor tablets, which were subsequently patented for a … sustained revenue generation and breaking the descent of blockbusters beyond the patent cliff … honoraria, stock ownership or options, expert testimony, grants or patents received or …



Q&A About Patent Cliff


How can revenues fall off a cliff?

Revenues can fall off a cliff when one or more established products go off-patent, since these products can be replicated and sold at much cheaper prices by competitors.

Why do companies strive to replace blockbuster drugs whose patents are expiring with other drugs that have the potential to become big sellers?

To avoid losing billions of dollars in revenues from the patent expiration on such blockbuster drugs as cholesterol drug Lipitor and asthma medication Advair respectively.

Who are some firms that have established profitable businesses by manufacturing "generic" alternatives to off-patent drugs?

There are numerous firms that have established profitable businesses by manufacturing "generic" alternatives to off-patent drugs, which can be sold at a fraction of the price of branded drugs.

What does it mean for something to be patented?

It means an inventor has been granted exclusive rights for its use and distribution for 20 years (in most countries).

Can anyone copy patented inventions without permission from the inventor during this period ?

No; they cannot because they would be infringing on someone else's intellectual property rights (copyright) if they did so.

What does "the world's biggest pharmaceutical firms" refer to?

The world's biggest pharmaceutical firms such as Pfizer and GlaxoSmithKline.

What is a patent cliff?

A patent cliff is a colloquialism to denote the potential sharp decline in revenues upon patent expiry of one or more leading products of a firm.

When do patents expire?

Patents expire after 20 years from their filing date in most countries including Canada, Europe, Japan, Australia etc.