Between 2025 and 2029, there is going to be a profound impact on the Pharmaceutical industry, catalysed by the Loss of Exclusivity. The loss of exclusivity signifies the expiration of the patents of biologics, causing a systemwide erosion of the market exclusivity held by several major pharmaceutical companies, resulting in a revenue contraction for these companies.

This article assesses the fiscal magnitude, structural barriers, and policy divergence shaping the biologics patent cliff, and explains why a projected USD 117 billion opportunity for savings is likely to translate into barely USD 43 billion in realised reductions unless regulatory and legal frameworks are corrected. The analysis draws on IQVIA, I-MAK, and cross-jurisdictional evidence to identify where healthcare systems are losing value and what global best practices suggest can still be recovered.

I. Fiscal Magnitude

The pharmaceutical market is divided into two segments: the small molecule treatment market and the biologics treatment market. Small molecules are those treatments which are chemically synthesised and are easily replicated, while biologics are inherently complicated to replicate as they are complex treatments or therapies derived from living cells. According to IQVIA’s Global Use of Medicines 2025-2029 report, the total value of the combined market is expected to be $2.4 trillion by 2029 at invoice price levels. It is essential to note that these invoice projections reflect gross spending, excluding off-invoice discounts and rebates. However, for public benchmarks and uninsured populations, these list prices remain the defining economic reality driving the perception of inflated costs.

The biotech segment, which primarily acts as the biologics market, is projected to capture ~34% that is around $820 billion, while the remaining market share is for small molecules. The loss of exclusivity for the entire market is nearly $300 billion, with $117 billion solely for Biologics. However, unlike the small molecules whose ~98% of risk will convert into losses ($180 billion into $176.9 billion), the biologics see only ~37% translate into fiscal reductions. A total of $43 billion is predicted to be the loss amount, underscoring a phenomenon of ‘fiscal toxicity,’ where the monetary burden of biologics persists long after patent expiration, unlike their small-molecule counterparts.

II. The Structural Barrier – “The Biosimilar Void”

118 patents are set to expire by 2034, 60 patents by 2029, and yet there are 12 biosimilars that are ready to challenge the biologics in the market once the patent expires. From 2015, the total value that the biosimilar market saved US healthcare $36 billion, this caused increase in the patient access at a lower cost. Despite the fact that $117 billion is the original chance for reduction, the savings convert is only $43 billion. Even though this increases the savings for the healthcare systems across the world, the biosimilar competition is not guaranteed. Putting pressure on the biosimilar market, though, simply limits prospects as per the reports by IQVIA in its “Assessing the Biosimilar Void in the U.S.” report.

This phenomenon can be explained by the financial risks that are to be incurred for forming biosimilars. As per Pfizer’s bio-similar development data, a small molecule will take ~2 years to create with an investment of ~$1-$2 million, which therefore presents a relatively low risk. This is disproportionately less than that of forming biosimilars, which, without including the costs of failures, will take ~5-9 years and ~$100 million worth of investment.

This, in turn, causes the biosimilar market to target large “blockbuster biologics” and have a tendency to avoid smaller biologics. Even when the biosimilars are being produced, major companies tend to delay the effect of the patent expiration or even make it obsolete by deploying a legal tactic of patent thicketing.

III. Keytruda – Case Study

Keytruda is the most sold medicinal drug in the world in terms of revenue; it’s a biologic produced by Merck. The key patents on this biologic are set to expire by 2028. To prevent the loss of exclusivity, Merck filed 129 patents related to Keytruda, effectively creating a thicket of patents which are supposed to extend the span for exclusivity. Certain patents were filed well after that initial biologic was approved for the treatment of melanoma cancer. This was done to extend the lifespan of the protection. As per I-MAK’s Report, these patents give an exclusivity protection of 34.6 years for Merck.

Out of the 129 patents filed, 50% of them were filed after 2014, when the drug received the FDA’s approval. The situation is only made worse because 33% of the total patents are still undergoing verification and are yet to be approved. I-MAK approximates that this extension of the patent timeline is going to cause the US healthcare system alone an estimated $137 billion. This situation is further exacerbated because right now the biosimilars are preparing for the IV infusion method for biologic’s administration, Merck meanwhile is preparing a switch to Subcutaneous injection means of administration. This will cause the biosimilars to be commercially obsolete before they are even released as their product will, by then, be an older version of the medicine.

IV. Systemic Divergence : Europe vs US

There is a significant difference between the policies of the United States of America and Europe on the switching of biologics and the biosimilars which affects the impact of the biologic patent cliff by a pronounced fiscal difference and uptake difference. The US declared a complete ban on automatic pharmacy substitutions from 2010 unless they have an “interchangeable status”. The interchangeable status signifies clinical studies were done to prove the interchangeability of the biosimilar with that of the originator or the biologic.This increases the cost of development of the biosimilar and also the time taken to develop it. Meanwhile the Europe (EMA) in an EU wide official statement back in 2022 had already declared the automatic substitution of the biosimilar. There already were nationwide laws in Denmark and Germany from 2018 onwards

The measure of divergence can be seen by observing the case of Humira, a biologic drug used to treat autoimmune diseases. When the Humira patents expired, the policies in US and Europe caused the uptake and the cost of the biosimilar to diverge. In the US, the requirement for clinical trials caused a 5 year delay for the release of the biosimilar into the market with only 1 out 9 biosimilar possessing the interchangeable status. While in Germany and Denmark where the automatic substitution was already ready, the uptake was over 60% wherein in the US it was less than 2%. In Denmark there was an 82% price drop within the first 3 months while the US barely had any price change. This is exactly why the FDA in June 2024 in a draft guidance proposed the removal of the “switching studies” making it a more automatic switching process.

V. Conclusion

The biosimilar and biologic market is a very important market with the lives of many at stake. They are the sources of hope for many patients suffering from cancer to various autoimmune diseases. The loss of exclusivity, which is supposed to be increasing an overall savings of ~$117 billion, is left uncaptured due to a convergence of biosimilar void and the aggressive legal strategies, such as patent thickets. This is causing an over 60% loss of savings simply due to inefficiencies in the policy formations.

 The US Congress has proposed a limit for patent thickets to a maximum of 20 patents in the “Affordable Prescription for Patients Act”. This will mirror some systems present in Europe that restrict biologics companies from placing various secondary patents. This, combined with the finalisation of the draft guidance by the FDA for the removal of switching studies, are two policies that can be seen as an alignment with the benchmark presented by Europe. These can lead to a systemwide savings of $180 billion as per IQVIA.

As former FDA Commissioner Scott Gottlieb warned, “Rebating schemes and patent thickets designed purely to deter entry are not business strategies they are toxins that spoil competition at the expense of patients.”

Tatvita Insight

The biologics patent cliff is not a pricing problem. It is a governance problem. Systems that treat competition as an outcome of design, rather than an assumption of markets, are the only ones capturing its benefits.