The Era of Patent Cliffs: New Drug Launches Need to Be Planned Years in Advance

Drug launches are undergoing a profound transformation, with patent cliffs, regulatory scrutiny, and a tight investment environment pressuring every step of commercial strategy.

Amid these headwinds, the pharmaceutical industry is entering a recognizable cycle, said Jim Lang, CEO of commercial services company Eversana. In this cycle, companies are streamlining R&D investments and putting budget-conscious thinkers into leadership roles.

"We're actually excited about a movement we see in large pharma, where they're focusing attention at the CFO and procurement level, looking at the entire commercialization cycle," he said.

Intensifying competition in the personalized and precision medicine market, along with a shift toward patient-centric care models, is driving these changes, he said. Examining the ongoing challenges facing drug launches in emerging therapeutic areas offers a glimpse into how corporate strategies may take shape for the remainder of 2024 and into 2025.

Here, we spoke with Lang about the challenges of pharmaceutical commercialization, why drug launches fail, and why launch strategies need to be planned years before a drug reaches the market.

This interview has been edited for length and style.

What has changed recently in the commercialization market?

2021 and early 2022, and even going back to 2019, were exceptionally positive periods for our industry. The percentage of revenue loss due to patent expirations was very low at that time, while biotech funding was extremely abundant—in hindsight, many would now say it was overabundant. Naturally, after a peak, a trough cycle often follows.

We've been through a period of about 18 months with very low biotech financing, and it's now starting to recover. At the same time, the entire industry is digesting the impact of increased patent expiration losses. These loss of exclusivity (LOE) events account for about 4% to 6% of revenue annually, compared to just 1% to 2% in previous years.

Over the past few years, hundreds of companies have experienced layoffs or even outright closures. Pfizer and Bristol Myers Squibb (BMS) have also recently announced cutback plans. I believe that by the end of this year, we'll see the last batch of companies make decisions on portfolio allocation and cost reductions, and 2025 will return to normalcy.

What challenges do drug launches face?

The industry is tackling rare diseases, which is exciting, but as the name implies, these conditions have smaller patient populations. This inherently means a smaller target patient group, and companies must be more agile. When reshaping business models, they need to be more frugal and nimble. When peak sales are $300 million rather than $5 billion, achieving economic success is clearly much more difficult.

Have there been typical commercialization failures in the past few years that serve as important lessons for the industry?

Drug commercialization is no easy task. In fact, nearly two-thirds of launched products fail to meet expectations. However, two cases stand out to our team, underscoring the magnitude of this challenge.

The first case is a blockbuster drug from about five years ago intended to treat macular degeneration, an eye disease. It brought tremendous potential to the market, but safety risks hindered its launch. Analysts expressed concerns, and six months after launch, the American Society of Retina Specialists issued a warning about the therapy, creating significant challenges for growth. The drug ultimately failed to meet expectations.

The second case is a drug designed to prevent hallucinations in Parkinson's disease patients. This drug also had safety issues, and the company invested in educational awareness campaigns to support its growth, but this instead triggered federal litigation, bringing more challenges.

Successful launches involve many factors, but ensuring the product is ready to meet patient needs and has support throughout the launch process—from educating healthcare professionals, patient groups, payers, and more—is critical.

As a product category, digital therapeutics have struggled to prove their value to payers. Over the past eight years or so, they were a darling of investors, but they've fallen out of favor over the last year and a half. I think the reason is that they focused far less on the payer side than on health economics arguments.

How do you view Wall Street's expectations ahead of launches? Research shows that about 40% of drugs miss sales forecasts.

The research conclusions often show that experienced launchers perform better than inexperienced ones. If it's a nascent biotech company attempting its first launch and navigating alone, the odds are lower compared to an experienced launcher.

Research also finds that starting preparations two and a half years before launch leads to vastly different commercialization success compared to companies that start only about a year in advance. Large pharma knows this well, so their processes begin three years before launch. The challenge for emerging biotech companies is that nearly all rely on financial investment to survive, and the past two years have made it worse. So, their odds of success are naturally lower.

These studies always have what I call an inherent bias, because expectations are merely the collective forecasts of analysts, including the companies themselves, about the drug. Early on, there are many reasons that inflate forecasts. Their core narrative until now has been attracting talent and raising capital, so they naturally paint a high-expectation scenario.

What advice do you have for emerging biopharma companies that rely on investment?

Don't wait. Even with limited funding, start with what we recognize as the most critical path: medical affairs or key opinion leaders to warm up the market, engage with payers, and ensure the product can secure reimbursement. These efforts are typically not costly, but they are the critical path, and people often wait too long to begin.

What other trends are there in the commercialization space?

There's a lot of discussion right now about direct-to-patient models. In the past, it was a healthcare professional-centric design, with physicians at the core of commercialization thinking. Of course, there are other groups that must be influenced, such as payers, regulators, patients themselves, and systems around doctors like integrated delivery networks. But now a major shift is needed toward patient centricity. If you talk to leading companies that want to do this, they realize that thinking around the patient and delivering an excellent patient experience leads to better outcomes and can achieve substantial product sales at lower cost.