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meaning of Patent cliff?
2 Jul 2016

What is the meaning of Patent cliff? How to do sales forecast after patent expiry?

The term patent cliff refers expiration of the patent protection and following that decrease in sales of the research brand, due to market introduction of the generic drugs. Most of the time for blockbuster drugs, once the patent expires, sales or revenue of the drugs falls of drastically. This phenomenon of falling revenue after patent expiration is known as patent cliff. 

Lipitor Sales Decrease pattern with patent cliff

 

Lipitor Decreased Sales due to patent cliff

 

Is there any approximation how much sales will decrease after patent cliff?

Here is a formulae which approximate the sales after patent cliff.
Decreasing sales after patent cliff –
Sales = SP/YR
SP= Max. Peak Sales value before patent expiration
YR=  No. of years from the expiry of patent
  • So, if peak sale is 12.9 billion.
  • At the end of 4th year of patent expiry it will be 12.9/4 = 3.2 billion
  • In above example you can find peak sale is 12.9 billion and year of patent expiry is 2011. by 2014 (2011,12,13,14 – total four years) sales should be around 3.2 Billion.
  • In actual sales was 2.76 Bn.

pharma strategic management

various factors which affect the sales post patent expiration

There are various factors which affect the sales post patent expiration.
Few of them are –
1. Entry of generics.
2. Strategy or brand plan adopted by research molecule after patent expiry.
3. Evergreening strategy
4. Branded Generics tactical planning etc.

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