The pharmaceutical industry is approaching a significant "patent cliff," expected to occur between 2025 and 2030. During this period, patents on several blockbuster drugs will expire, putting an estimated $236 billion in annual sales at risk as nearly 70 high-revenue drugs lose their market exclusivity (GeneOnline, 2025). This situation closely resembles the early 2010s, when a similar wave of expirations forced the industry to undergo rapid transformation. Today, the challenge is intensified by growing regulatory scrutiny, evolving payer demands, and heightened global competition.

Understanding the Patent Cliff

A patent cliff occurs when the patent protection of a pharmaceutical product ends, allowing generic or biosimilar alternatives to enter the market. This leads to a sharp revenue decline, often up to 90 percent for branded drugs, within a few months of generic entry. The loss of exclusivity significantly reduces profitability and can result in cuts to research and development (R&D), workforce reductions, and corporate restructuring (PatentPC, 2025; ProClinical, 2025).

Key drugs facing upcoming patent expirations include:

• Stelara (Johnson & Johnson) – Immunology, expiring in 2025 (annual sales: $10.9 billion)
• Keytruda (Merck & Co.) – Oncology, expiring in 2028 (annual sales: $25 billion)
• Eliquis (Bristol Myers Squibb/Pfizer) – Cardiovascular, expiring in 2027–2028 (annual sales: $12 billion)
• Xarelto (Bayer/J&J) – Cardiovascular, expiring in 2025–2026 (annual sales: $4.5–$6.4 billion)
• Opdivo (Bristol Myers Squibb) – Oncology, expiring in 2028 (annual sales: $9 billion)
• Trulicity (Eli Lilly) – Diabetes, expiring in 2027 (annual sales: $7 billion)

Revenue Impact and Market Dynamics

Once patents expire, generic or biosimilar versions quickly enter the market at significantly reduced prices—often more than 80 percent lower. Small molecule drugs typically lose about 90 percent of market share within the first year, while biologics may see a 30 to 70 percent reduction. This impact is most pronounced in the United States, where the regulatory and insurance systems enable rapid substitution (Certara, 2024).

An illustrative case is AbbVie’s Humira, which experienced a drop in revenue from $21.2 billion in 2022 to $9 billion in 2024 following its loss of exclusivity. Such losses not only cut into immediate profits but also shrink future R&D budgets.

Strategic Management Approaches

To manage the patent cliff, pharmaceutical companies must adopt comprehensive and forward-thinking strategies. These include:

1. Lifecycle Management and Product Extension

Companies can prolong a product’s lifecycle through new formulations, alternative delivery mechanisms, or expanded therapeutic indications. This practice, often referred to as evergreening, helps delay generic competition. For example, AstraZeneca successfully launched Nexium as a follow-up to Prilosec. Similarly, Merck is developing subcutaneous formulations of Keytruda to maintain market presence.

Other tactics involve transitioning products to over-the-counter (OTC) markets, securing patent term extensions, or creating innovative combination therapies with new intellectual property protection (DrugPatentWatch, 2025).

2. Strengthening Research and Development Pipelines

Investing in R&D is essential to replenish the pipeline and offset losses from expiring patents. Companies like Merck are bolstering their immunotherapy portfolios and leveraging technologies such as artificial intelligence to accelerate drug discovery.

Diversifying pipelines into emerging areas such as gene therapies, RNA-based treatments, and rare disease drugs also helps reduce dependency on a few blockbuster products. Firms are reallocating resources toward high-priority candidates and trimming lower-value projects (EY Insights).

3. Mergers, Acquisitions, and Strategic Partnerships

M&A activity offers a swift way to expand product portfolios and gain access to new technologies. Bristol Myers Squibb’s acquisition of Celgene, which brought in Revlimid, is a notable example. Pfizer’s acquisition of Seagen and Amgen’s purchase of Horizon Therapeutics demonstrate similar strategic foresight (Acuity Knowledge Partners, 2024).

In addition, smaller-scale acquisitions, licensing agreements, and co-development partnerships can fill portfolio gaps with fewer risks.

4. Market and Product Diversification

Expanding into new geographic markets and therapeutic areas provides a buffer against revenue loss from patent expirations. Growth in emerging markets such as China, India, and Latin America can offset declines in mature markets where generics dominate quickly.

Diversifying into adjacent sectors like biosimilars, diagnostics, consumer health, and digital health also offers alternative revenue streams and spreads business risk (Esko, 2025).

5. Pricing and Contracting Strategies

Optimized pricing strategies can help maximize remaining revenue before exclusivity ends. These include targeted price increases, tailored discounts, and patient loyalty programs such as copay assistance.

Companies can also employ value-based pricing models and engage with payers to secure preferred formulary placement. Strategies like real-world evidence submissions and risk-sharing contracts support continued brand use despite generic alternatives (Certara, 2024).