Revenues fall off the patent cliff, rain down on generics firms.

When patents run out, generic pharmaceutical companies reap the benefits.

When we think about the patent cliff, an image along the lines of a massive waterfall, with companies’ revenues in free fall comes to mind. What we usually forget to consider, though, is that the waterfall is nourishing a fertile, green valley below. For while big pharmaceutical companies are scrambling to bolt-on smaller biotechs with marketed drugs to protect themselves, generics manufacturers are reaping windfall profits. While the industry has been nervous about the patent cliff for years, it is turning out to be a blessing in disguise. Patients are benefitting the most by gaining access to the innovative drugs of the past few decades at generic prices. Biotech companies are benefitting from a frenzied M & A environment, and generics companies are reporting record profits. Big pharmaceutical companies, meanwhile, have been forced to respond to the challenge by refocusing their attention and honing their business strategies.

As an example of this phenomenon, it’s worth looking at the biggest loss of the edge of the cliff, Pfizer’s cholesterol drug Lipitor. The company recently released its first quarter earnings, and reported Lipitor sales of $1.4bn, a 42 per cent plunge from the same period in 2011. The drugmaker can hardly complain, though, as the drug recorded cumulative sales of $128bn for Pfizer through the end of 2011. Meanwhile, Watson Pharmaceuticals was the first to begin selling generic Lipitor in November, 2011. As a result of strong generic Lipitor sales, as well as other generic launches including generic versions of Concerta and Lovenox, Watson’s first quarter revenue increased 74 per cent to $1.5bn, compared to $877m for the corresponding period in 2011. Increased sales drove an 87 per cent increase in net income, from $112m in Q1 2011 to $209m in 2012. As a result of its newfound financial heft, Watson was able to expand its geographic reach with the purchase of the European generics firm Actavis. Watson announced the €4.25bn ($5.6bn) acquisition was announced on April 25, and should lead to 2012 pro forma revenue of $8bn for the combined company in 2012, compared to $4.6bn for Watson in 2011 and $6bn in 2012 based on annualized first quarter revenue. Mylan, another major generics company, reported an 18 per cent increase in earnings for the first quarter compared to 2011, to $0.52/share from $0.44/share. This gain was due to a 9 per cent increase in revenue from $1.45bn in Q1 2011 to $1.58bn in 2012.

Pfizer and other big pharmaceutical companies, meanwhile, appear to be on course to successfully navigate the rapids. Although Pfizer saw its earnings drop 19 per cent in the first quarter compared to 2011, there are bright lights on the horizon. The FDA is set to decide on its rheumatoid arthritis drug tofacitinib by August 20, and the drug has the potential to generate up to $1.5bn in revenue before the end of 2012. The company has another drug before the FDA for review, with a decision expected by June 28. Eliquis was co-developed with Bristol-Myers Squibb for the prevention of strokes in patients with arterial fibrillation, and also has blockbuster potential. Finally, Pfizer is flush with cash after selling its infant nutrition unit to Nestle for $11.9bn, and ready for another round of acquisitions that could range from small, bolt-on biotech purchases to another pharmaceutical mega-merger.

The biggest development regarding the patent cliff will be watching large pharmaceutical companies’ attempts to maintain growth in the face of expiring patents. But regardless of how whether Big Pharma stays atop its mountain or goes over the cliff, generics firms will continue to reap the profits of major pharmaceutical patent expirations.

Dr. Jerry Isaacson is the head of GlobalData healthcare industry dynamics. Their website can be found at

Photograph: Getty Images

Dr. Jerry Isaacson is head of GlobalData healthcare industry dynamics.

Photo: Getty
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Like it or hate it, it doesn't matter: Brexit is happening, and we've got to make a success of it

It's time to stop complaining and start campaigning, says Stella Creasy.

A shortage of Marmite, arguments over exporting jam and angry Belgians. And that’s just this month.  As the Canadian trade deal stalls, and the government decides which cottage industry its will pick next as saviour for the nation, the British people are still no clearer getting an answer to what Brexit actually means. And they are also no clearer as to how they can have a say in how that question is answered.

To date there have been three stages to Brexit. The first was ideological: an ever-rising euroscepticism, rooted in a feeling that the costs the compromises working with others require were not comparable to the benefits. It oozed out, almost unnoticed, from its dormant home deep in the Labour left and the Tory right, stoked by Ukip to devastating effect.

The second stage was the campaign of that referendum itself: a focus on immigration over-riding a wider debate about free trade, and underpinned by the tempting and vague claim that, in an unstable, unfair world, control could be taken back. With any deal dependent on the agreement of twenty eight other countries, it has already proved a hollow victory.

For the last few months, these consequences of these two stages have dominated discussion, generating heat, but not light about what happens next. Neither has anything helped to bring back together those who feel their lives are increasingly at the mercy of a political and economic elite and those who fear Britain is retreating from being a world leader to a back water.

Little wonder the analogy most commonly and easily reached for by commentators has been that of a divorce. They speculate our coming separation from our EU partners is going to be messy, combative and rancorous. Trash talk from some - including those in charge of negotiating -  further feeds this perception. That’s why it is time for all sides to push onto Brexit part three: the practical stage. How and when is it actually going to happen?

A more constructive framework to use than marriage is one of a changing business, rather than a changing relationship. Whatever the solid economic benefits of EU membership, the British people decided the social and democratic costs had become too great. So now we must adapt.

Brexit should be as much about innovating in what we make and create as it is about seeking to renew our trading deals with the world. New products must be sought alongside new markets. This doesn’t have to mean cutting corners or cutting jobs, but it does mean being prepared to learn new skills and invest in helping those in industries that are struggling to make this leap to move on. The UK has an incredible and varied set of services and products to offer the world, but will need to focus on what we do well and uniquely here to thrive. This is easier said than done, but can also offer hope. Specialising and skilling up also means we can resist those who want us to jettison hard-won environmental and social protections as an alternative. 

Most accept such a transition will take time. But what is contested is that it will require openness. However, handing the public a done deal - however well mediated - will do little to address the division within our country. Ensuring the best deal in a way that can garner the public support it needs to work requires strong feedback channels. That is why transparency about the government's plans for Brexit is so important. Of course, a balance needs to be struck with the need to protect negotiating positions, but scrutiny by parliament- and by extension the public- will be vital. With so many differing factors at stake and choices to be made, MPs have to be able and willing to bring their constituents into the discussion not just about what Brexit actually entails, but also what kind of country Britain will be during and after the result - and their role in making it happen. 

Those who want to claim the engagement of parliament and the public undermines the referendum result are still in stages one and two of this debate, looking for someone to blame for past injustices, not building a better future for all. Our Marmite may be safe for the moment, but Brexit can’t remain a love it or hate it phenomenon. It’s time for everyone to get practical.