👉 Background: Pharmaceutical companies around the world spend billions each year to find the next game-changing drug. In fact, in 2022, research & development in the pharma industry stood at nearly $240 billion USD.

👉 What happened: When these companies develop a successful drug, it's like striking rich in the lottery. Some of these drugs generate $21 billion USD in sales each year. However, many drug companies are facing a loss of tens of billions in sales between now and 2028.

👉 What else: A new report by EY believes the top 20 pharmaceutical companies will lose $180 billion USD in sales due to major drugs hitting the patent cliff.

What's the key learning?

💡The patent cliff refers to the expiry of patents for a company. When a pharmaceutical company releases a new drug, they submit a patent over it. That means they own the rights to sell the drug and its chemical compound, to the exclusion of every other company.

💡But in the US and Australia, a patent cliff lasts for 20 years from the date it was filed, But when this patent expires, it opens up the door for competitors to sell copycats of those drugs often at a lower price.

💡Patent cliffs are unavoidable for pharmaceutical companies, so their goal is to always 'replenish' older top-selling drugs with new ones to offset the loss of the patent. And if they don't manage to do it, they can face a huge revenue hole.

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