In light of this week’s news that one of the biggest pharmaceutical companies, AstraZeneca, will be selling off $1.5billion worth of manufacturing assets in order to counteract the patent expiration of Crestor, AstraZeneca’s top selling drug. The $5 billion drug (in sales) is now very vulnerable due to the imminent expiry of its patent.

The ‘Patent Cliff’ is a term to describe the time between, 2011 – 2016 as hundreds of billions of dollars are lost in expired patents. When a patent expires it allows generic drug companies to come along and replicate the same drug for the fraction of the cost (sometimes up to 85% cheaper).

AstraZeneca’s ‘streamlining’ news has come in addition to the other closures of manufacturing plants that are owned by AstraZeneca. A plant in Bristol, U.K and Westborough, MA – causalities to drugs being uniquely designed, becoming a part of the generics supply chain.
Where there is an expired patent, there becomes a more laser focus on areas that are more profitable for large drug manufacturers. AstraZeneca has said to of invested over $200 million into a brand new, market leading biologics plant. In addition to this they are also building a new biologics plant located in, Sweden – creating hundreds of jobs.

Drug companies’ slice of the profit pie does not last forever and it is clear to see there are consequences in losing the patents on major drug developments they have received large revenues for, over the past 8-12 years. Downsizing is an option and strategically moving investment into other areas of the business to reduce risk of personnel losses and manufacturing assets, as we have seen recently with AstraZeneca.

Patent expirations through 2016 is predicted to lower brand spending by $127 Billion – patent expirations for over 36 major brands, slower market uptake for new technology around molecule entities, and efforts from health plans and regulators to persuade drug spending to reduced, will shrink brand dollars in the U.S. market through 2016. It is an alarming reduction and also highlights the ‘slowdown’ in R & D projects that are taking place to replace these drugs that are being released to the generics businesses across the globe.

Loss of exclusivity on drugs are driving the large pharmaceutical companies to invest more in R&D, taking out the old and in with the new! They are focussing on the niche areas of drug development and not seeking out the big blockbuster drugs, creating a more of a diverse range of drugs in smaller batches.

A new strategy for the larger conglomerates, the generics companies replenishing their old lines with newly ‘expired’ brands – the drug manufacturing industry could not be in a happier place… or is it?
So when is the next ‘patent cliff’? Time will only tell and will the big pharma’s be ready for another match up with the talented generics companies.