Major pharmaceutical companies, including J&J and Merck, are facing a pivotal moment as they brace for significant revenue declines due to the impending loss of sales from their blockbuster drugs.

Major pharmaceutical corporations such as Bristol Myers Squibb, Merck, and Johnson & Johnson are bracing for a significant challenge that could jeopardize tens of billions of dollars in sales by 2030. This impending threat stems from the expiration of patents on blockbuster drugs, a phenomenon commonly referred to as the “patent cliff.” As patents expire, rival companies can introduce generic versions of these drugs, often at lower prices, leading to a decline in revenue for pharmaceutical giants and increased affordability for patients.

Facing this inevitable challenge, pharmaceutical companies are adopting various strategies to counter potential losses. Some companies are actively building robust drug pipelines and engaging in acquisitions or partnerships with other entities. Industry analysts suggest that successful navigation through patent cliffs requires the introduction of new drugs that not only sustain but also expand sales.

The impact of losing exclusive rights to a drug varies among companies, depending on the proportion of sales attributed to the product and its nature. Additionally, certain drugs facing patent expiration may be subject to the Biden administration’s Medicare drug price negotiations, posing an additional threat to revenue streams.

Estimates indicate that the top 20 biopharma companies could face $180 billion in sales at risk due to patent expirations between now and 2028. While some companies seem well-prepared to weather these challenges, others may need to fill revenue gaps caused by expiring patents.

Several notable drugs, including Merck’s Keytruda, Bristol Myers Squibb’s Eliquis and Opdivo, and Johnson & Johnson’s Stelara, are set to lose exclusivity in the coming years, leading to potential declines in sales. The impact of patent cliffs can vary based on whether the drug is a small-molecule or a biologic, with many high-profile drugs falling into the latter category.

Biosimilars, which mimic biologic drugs, face challenges in gaining market share compared to generics. Biosimilars are not identical copies of branded biologic drugs, making them non-interchangeable, and they often require more substantial investments in research and development.

Pharmaceutical companies are proactively taking steps to offset potential losses. JPMorgan analysts view the upcoming patent cliffs as manageable, citing improvements in drug pipelines. Companies like Merck, Bristol Myers Squibb, and Johnson & Johnson are diversifying their portfolios, making strategic acquisitions, and focusing on late-stage development to position themselves for growth after patent expirations.

To protect revenues, pharmaceutical companies are exploring various tactics, such as developing new formulations of existing drugs to extend patent protections. For example, Merck is testing a more convenient version of Keytruda, while Bristol Myers Squibb is exploring a new form of Opdivo.

While the threat of Medicare drug price negotiations looms, the extent of its impact remains uncertain. Analysts suggest that negotiated prices may have a less pronounced effect on drugs already expected to see revenue decline due to expiring patents. Regardless, the overarching concern for pharmaceutical companies remains the entry of competitors into the market, which poses a more significant threat to revenue than potential pricing negotiations.