Cliff Diving

Originally posted Feb 2011

With drug patents expiring left and right, Big Pharma stares into the abyss.

The patent cliff: Market watchers have been talking about it for years (as this Reuters article shows) and it’s finally here. This is the year that a huge number of patents on big-money drugs start running out, and, deprived of their cash cows, major pharmaceutical companies start to have serious cash flow difficulties. Among the drugs with patents expiring in the next 24 months are cholesterol drug Lipitor, the anti-clotting drug Plavix, asthma drug Singulair, and, well, Viagra.

In the US, drug patents are good for 17 to 20 years, after that anyone can create a generic version. Generic drugs are usually far less expensive than the original, of course. One such case is the sleep drug Ambien, which costs $159 per 30-day prescription. Generic zolpidem tartrate (the drug's chemical name) costs $3 for the same amount.

Cheap generic drugs for patients mean big losses for pharmaceutical companies. The drugs that are going off patent have been major sources of revenue for these companies. And at least thirteen of the biggest money-maker drugs are going off the market by 2012, taking millions of dollars of profit with them. Decreasing revenues for pharmaceutical companies may mean decreasing spending on R&D which translates into fewer new drugs. Already these companies are finding it difficult to get new drugs approved by the FDA, and its just going to get worse.

The facts are pretty stark, and everybody knows it. Here is an (almost) random sample of the headlines: “Patent Cliff Means Panic Time For Big Pharma”, “Big Pharma Hits the Panic Button...”, “Big Pharma Patent Expirations to Sock 2012 US Drug Sales.”

I don’t want to be a party-pooper here, but I have an impolite question for you: Is the apocalypse really such a bad thing?

Think about it. Why don’t those headlines say, “Lives to Be Improved By Cheaper Medication!”, “Generics Increase to Make Treatment Easier for Patients and Doctors”, and the like. (Full Disclosure: There was one “10 Biggest Selling Drugs Could Become Cheaper” from a CBS affiliate in Pennsylvania). Because if you take the broad view, society will probably be better off after Patent Armageddon. Life will be better for the sick and underfunded, and the doctors that treat them, and the taxpayer in general -- which includes all of us. So, here’s to the cliff...it can’t come fast enough.