For pharmaceutical manufacturers, patents are vital stepping stones that allow companies to recover large investments and fuel future research and breakthroughs. They motivate manufacturers to invest in the development of innovative and effective treatments that can significantly improve patient health outcomes. But as the products approach the end of patent protection, manufacturers face a challenge known as the patent cliff.
This period can reduce the profitability of drugs as the market opens up to other companies focusing on manufacturing generic drugs, driving down the price. However, it also makes life-saving medications accessible to a wider population, particularly in low-income countries who rely on medicines that are off patent or ‘generic’. This balance is crucial. Patents encourage investment in new drug development, while their expiration makes life-saving medicines more affordable.
This raises an important question: how can manufacturers manage patent cliffs to sustain their business and continue providing life-saving medications?
Managing product lifecycles to avoid patent cliffs
Pharmaceutical companies use several common strategies to manage the challenges of patent cliffs. One approach is to time new product launches to coincide with the patent expiration of existing products, maintaining a steady income.
But this strategy is fraught with challenges because of the unpredictable nature of drug discovery and development. Developing a new drug is a high-risk, high-cost endeavour, with only 1 in 500 drugs making it to market. The extensive research, clinical trials and regulatory approvals required often take over a decade and cost billions. Aligning product launches with patent expirations, while ideal, is easier said than done.
Another strategy is to further develop the existing drug to extend its lifecycle. For example, companies can develop new formulations or delivery systems for existing drugs, such as shifting from an oral tablet to an injectable form to reach more patient groups. Constant reinvention also allows companies to provide high-quality, best in class products.
A different approach involves expanding the use of an existing drug to treat a new patient group, which can result in additional approved indications. For example, the diabetes drug Ozempic was further developed and studied in other patient groups, eventually launching as a treatment for obesity, which helped secure extended patent protection.
Logistics after patent expiration
As drugs reach the end of their patent life, a thorough review and adjustment of logistics becomes essential to adapt to the new reality of increased competition.
One key consideration is likely changes in shipping volumes in line with new market conditions. The intense competitive landscape post-patent expiration puts even greater pressure on finding cost-effective solutions that do not compromise product integrity. Manufacturers might look for lightweight, durable packaging that maximises cargo space as this will help reduce shipping costs without sacrificing product protection.
While high-performance solutions are vital throughout a drug’s lifecycle to maintain product quality and patient safety, packaging choice may also be guided by stability data and risk assessments depending on the stage of the product being shipped.
For example, a product being newly introduced to the market may have little stability data available or may be shipped on a relatively unknown tradeline. In such cases, a solution with real-time monitoring is crucial for immediate intervention should the unexpected occur, helping maintain temperature control, product efficacy, and cost-effectiveness. This approach can also accelerate time-to-market and provide a competitive edge.
In contrast, a mature product approaching patent expiry may have a well-established shipping history and extensive stability data so its behaviour during transit is far more predictable. In this instance, a solution with real-time monitoring and extended autonomy, for example, may not be necessary but the focus may be instead on improving logistics efficiencies.
Another key consideration is partnering with trusted distribution partners with efficient logistics operations and a large enough fleet size to ensure timely delivery and reduced transportation costs. For example, regions with many generic manufacturers may experience increased competition, requiring even more efficient and cost-effective distribution solutions. Collaborating with logistics partners that can adapt to these regional challenges and offer flexible, scalable services becomes vital in sustaining profitability.
Preparing for unexpected events, such as the disruptions in the Red Sea, is essential. In a post-patent environment, the focus should shift to building resilience in the supply chain to handle increased competition and potential shocks. This means finding alternative transportation routes and using advanced risk management tools to keep the supply chain robust and adaptable to real-time changes in demand and transport conditions.
Additionally, managing inventory levels at distribution centres becomes critical to prevent stockouts or accumulating excess stock. By carefully analysing sales data and market trends, companies can adjust their distribution network to better match demand fluctuations after patent expiration. This helps keep products available when needed without overstocking, which would tie up valuable resources.
Looking ahead, technologies like IoT, blockchain for traceability and AI for predictive analytics will significantly enhance logistics operations, making pharma distribution more robust and reliable. Using data analytics to simplify processes, cut costs and boost performance will be especially important in the post-patent cliff landscape. These advancements will help companies better navigate the complexities of increased competition and market pressures, helping them stay competitive and efficient.
As the pharmaceutical landscape evolves, efficient logistics, particularly cold chain logistics, will become increasingly important. Currently, about one in three medicines requires cold storage[i], and this proportion is expected to rise. Nearly half of all new medicines in the next three years will require cold storage and distribution[ii].
Manufacturers need to bear this in mind and use the coming decade to prepare for the patent cliff. By establishing robust, adaptable cold chain processes now, companies can help future-proof the drugs’ cost-efficiency and product integrity when these reach the end of their patent life.
Beyond the patent cliff
As medicines approach the end of their patent life, pharmaceutical manufacturers must make critical decisions on how to manage these patent cliffs. The goal is to continue providing quality medications while sustaining their business to be able to support the next generation of life saving medicines
In this context, improving logistics is one reliable and effective method for navigating this challenging period. The end of a patent may appear daunting, but it doesn’t have to mark the end of a product’s lifecycle. With smart logistics and innovative strategies, it can be an opportunity for a fresh start.
By Diane Onken, Head of Sales, Americas at Envirotainer
References
[i] Pharma’s Frozen Assets: Cold chain medicines – IQVIA whitepaper, 2023
https://www.iqvia.com/-/media/iqvia/pdfs/library/white-papers/iqvia-pharmas-frozen-assets_final.pdf
[ii] Outlook for medicine use and spending through 2027 – IQVIA infographic, 2023
