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Patent Cliff

A sharp drop in a drug's revenue when its patent expires and generic competitors enter the market, often cutting prices by 80% or more.

How It Works

Patent cliffs transform pharmaceutical market economics more abruptly than almost any event in business. When a blockbuster loses exclusivity, ANDA-approved generics typically launch within days or weeks, and within 12-24 months list prices fall 80-95% and brand market share collapses below 20%. Lipitor lost exclusivity November 2011 at $13 billion peak annual sales; within three years Pfizer's atorvastatin revenue had fallen by roughly 80%. Plavix (clopidogrel) followed a similar pattern in 2012. Crestor (rosuvastatin) lost exclusivity May 2016 with $5 billion in U.S. sales; generic prices dropped 90% within 18 months. The pharma industry uses the phrase "2028 patent cliff" or "LOE wave" (Loss of Exclusivity) to describe the period 2025-2031 when roughly $200+ billion in annual branded drug revenue faces generic or biosimilar competition, including Keytruda (Merck, ~$25B, primary composition patent 2028, with patents on methods of use extending longer), Eliquis (BMS/Pfizer, already entering negotiated pricing January 2026 and composition patent expiring November 2026), Stelara (J&J, first biosimilars launching 2024-2025), Opdivo (BMS), and Ozempic/Wegovy (Novo Nordisk, key patents 2031-2033). Biologic patent cliffs produce more muted price drops than small-molecule cliffs, typically 15-30% biosimilar discounts vs. 80-95% generic discounts, because biosimilar development cost and clinical trial requirements are substantially higher than for small-molecule ANDAs, and because prescriber substitution lags.

Related Terms

  • Patent Expiration, The date when a drug's patent protection ends, allowing generic or biosimilar manufacturers to produce competing versions.
  • Generic Drug, A medication that contains the same active ingredient, dosage, and form as a brand-name drug, approved after the original's patent expires, typically costing 80-95% less.
  • Evergreening, Strategies drug manufacturers use to extend patent protection beyond the original expiration, including new formulations, delivery methods, or minor modifications.
  • Biosimilar, A biologic product that is "highly similar" to an already approved reference biologic, with no clinically meaningful differences in safety, purity, or potency.

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About This Definition

This definition is part of the DrugPrice Drug Pricing Glossary, 49 terms explaining how prescription drug pricing works in the United States. All definitions are written in plain language for patients, caregivers, journalists, and healthcare professionals.

this entity is one of the U.S. Medicare prescription-drug pricing concepts that recurs across this site. The definition above is the technical answer; the paragraphs below add the practical context for how the concept connects to the CMS Medicare Part D Drug Spending data data behind every per-entity page on the site.

In the CMS Medicare Part D Drug Spending data data, this concept shapes one or more of the fields that drive the per-entity grades and rankings on this site. The methodology page describes which fields feed into which output; this glossary entry documents the underlying term.

Source: CMS Medicare Part D Spending, 2026.