In less than two decades, the pharmaceutical industry has been in a race against time to maximize profits before the inevitable patent cliff hits them. In spite of their impressive efforts to maintain the success of their leading blockbuster drugs, Big Pharma can no longer ignore the stark reality that the patent cliff is fast approaching and that it could spell disaster for their most successful medications. This article will explore the patent cliff and its potential impact on the pharmaceutical industry.
1. Prognostications of Big Pharma’s Inevitable “Patent Cliff”
Decreasing Patent Losses
The introduction of generic copies of blockbuster drugs, otherwise known as the “patent cliff,” has many Big Pharma executives in a tight spot. Companies have already taken preventative action by introducing new products and researching new areas with patentable drugs, but the reality is that dozens of patents will expire in 2020. Big Pharma companies are taking steps to minimize losses and make up for the projected revenue shortfall. These steps include:
- Expanding products with in-line patents
- Partnering with companies for joint drug development
- Exploring new delivery systems and combination therapies
- Pumping up generic drug development
These initiatives determined by the extraordinary leadership of this industry are likely to result in increased revenue in the following year. Unfortunately, it won’t completely prevent the the patent cliff from wreaking substantial damage on the pharmaceutical industry in 2020. According to experts, the industry can expect to incur losses amounting to billions of dollars due to patent expiration.
2. How Pharmaceutical Companies Are Bracing for the Drop
The pharmaceutical industry is feeling the strain of the recent economic downturn, so companies worldwide are having to come up with ways to adjust to the changing climate. Here are a few of the strategies they’re employing in this difficult time.
- Cutting Costs: Companies are looking to streamline their operations and reduce their overall expenditure. Some areas targeted include slashing staff, outsourcing services and cutting back on research projects.
- Developing Generics: Companies are looking to capitalize on the demand for generics, which have a greater profit margin than their branded counterparts. As a result, many of them are shifting resources to generics and discounting the prices of their branded drugs.
The fact remains that the global economy is shifting, and companies of all types are having to adjust accordingly. Pharmaceutical companies are no different, and they need to come up with innovative strategies to stay afloat in these tumultuous times.
3. Opportunities to Ride the Tide or Weather the Storm
The stock market offers many opportunities, no matter what stage you are in your investment journey. For those who wish to ride the tide of the market, there are options of short-term investments in which you can take advantage of the short-term rises in stocks. On the other hand, those who wish to weather the storm of the stock market have the choice of investing in stocks in the long-term. Both strategies come with their own set of risks and rewards.
Short-term Investment Opportunities:
- Day Trading: A popular option in which one tries to take advantage of any short-term price movements through buying and selling over the course of a day.
- Derivatives: Contracts that take a longer view in trying to capture price movements. Derivatives can also be used to hedge against any portfolios that have been invested in.
Long-term Investment Opportunities:
- Blue Chip Stocks: These stocks often have prices that may stagnate for months or even years but their long-term trajectory is usually up.
- Dividend-focused Stocks: Companies that may not have strong growth prospects, but tend to make up for it with steady dividend payments.
4. An Uncertain Future: What Will Big Pharma Look Like Post-Patent Cliff?
As the patent cliff approaches, the big question on everyone’s mind is: What will big pharma look like on the other side? While there is no surefire answer, the landscape is sure to shift dramatically. Both the industry and its stakeholders must be prepared for a number of changes.
Firstly, big pharma’s game plan will have to shift from relying on blockbuster drugs to finding new ways of creating products that are increasingly personalized and cost-effective. This will also mean consolidating certain aspects of the development process, such as focusing more resources on drug-testing, research and development. In addition, the focus for drug manufacturers will be on creating immunizations, cancer drugs and antivirals, as well as drugs that combat lifestyle diseases.
- Personalized medicines: These medicines, tailored to specific individuals’ needs, will be the wave of the future.
- Consolidation: Drug manufacturers will focus their resources on streamlining the development process.
- Focus: The main focus of drug development will be on immunizations, cancer drugs, & antivirals.
It remains to be seen how big pharma will adjust to the upcoming changes, but one thing is clear – the industry must be prepared to shift their strategies to keep up with an ever-changing healthcare environment. The forces that are driving the patent cliff are not going away anytime soon, so big pharma must find new ways to take advantage of the opportunities that come with it. As the days go by, we are ever closer to the patent cliff. It remains to be seen what will happen when everyone’s timelines meet, but one thing is for certain: there will be big changes in the world of big pharma. People are sure to be watching with bated breath as the future of the industry hangs in the balance.