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 are transformative events for both the pharmaceutical industry and patients. When a blockbuster drug loses patent protection, generic manufacturers file ANDAs and typically launch within months. Prices can fall 80-95% within 2-3 years as multiple generics compete. For a drug like Lipitor, which had $13 billion in peak annual sales, the patent cliff meant billions in lost revenue for Pfizer but massive savings for patients and the healthcare system. Drug companies prepare for patent cliffs by developing new drugs, reformulating existing ones, or acquiring companies with promising pipelines.
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.
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About This Definition
This definition is part of the DrugPrice Drug Pricing Glossary — 34 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.