Economic Impact of Patent Expiration: When Drug Prices Drop

When a drug’s patent expires, it doesn’t just change who can make it-it changes how much you pay for it. That’s the moment when a medicine goes from being a monopoly product to something anyone can copy. And that’s when prices start to fall-sometimes dramatically. In the U.S., a brand-name drug like Eliquis (apixaban) cost patients $850 a month before its patent expired in 2020. After generics hit the market, the same dose dropped to $10. That’s not an outlier. It’s the rule.

Why patents matter-and why they expire

Patents give drug companies exclusive rights to sell a medicine for 20 years from the date of filing. But that’s not the full story. Most drugs take 10-12 years to develop and get approved by the FDA. That means companies often have only 8-12 years of actual market exclusivity before generics can enter. To protect their profits, many companies file dozens of secondary patents on minor changes-like a new pill coating, a different dosage form, or a slightly altered delivery system. These aren’t new drugs. They’re legal tricks. In fact, 78% of new patents filed for top-selling drugs between 2010 and 2023 were for existing products, not breakthroughs. This practice, called "evergreening," delays generic competition by years.

The Hatch-Waxman Act of 1984 was designed to fix this imbalance. It created a faster, cheaper path for generic manufacturers to get approval, as long as they prove their version works the same as the brand-name drug. In return, the original company gets a short extension on its patent to make up for time lost during FDA review. The system was meant to balance innovation with affordability. But over time, the balance tipped.

How prices drop after patent expiration

Price drops don’t happen all at once. They follow a pattern. The first generic company to enter usually cuts the price by 15-20%. That’s a big deal, but not earth-shattering. The real drop comes when the second, third, and fifth generics arrive. By the time 10 or more companies are selling the same drug, prices often fall by 80-90%.

Take Humira (adalimumab). Its main patent expired in 2016. But AbbVie filed over 130 secondary patents. It wasn’t until January 2023-seven years later-that the first biosimilar, Amjevita, hit the market. Even then, prices didn’t crash right away. Why? Because AbbVie signed secret deals with insurers and pharmacy benefit managers, locking in rebates that kept the original drug on formularies. Patients didn’t see savings until more biosimilars entered-by late 2023, nearly a dozen were available. Only then did prices begin to tumble.

Compare that to the U.S. market for generic atorvastatin (Lipitor). After its patent expired in 2011, over 100 companies jumped in. Within two years, the price per pill dropped from $4.50 to $0.05. That’s a 99% decline. The more competitors, the faster the race to the bottom.

International differences: Why prices drop faster in some countries

Not all countries play by the same rules. A 2023 study of 505 drugs across eight wealthy nations showed huge differences in price drops after patent expiration:

• United States: 82% drop over 8 years
• United Kingdom: 60%
• Australia: 64%
• Germany: 58%
• France: 53%
• Canada: 48%
• Japan: 42%
• Switzerland: just 18%

Why the gap? It’s about how governments control prices. In the U.S., insurers negotiate individually. That means big buyers like CVS or UnitedHealth can push for discounts, but smaller ones can’t. In Europe, governments set price caps. Germany and France use reference pricing-they look at what other countries pay and match it. That forces manufacturers to lower prices to stay competitive. Switzerland, by contrast, lets companies set their own prices and only steps in if costs become "excessive." That’s why prices there barely budged.

Another factor: speed of generic entry. In the U.S., generics typically arrive 30 months after patent expiry. In Europe, it’s 12-18 months. That extra time lets brand-name companies milk profits longer.

The rise of biosimilars and why they’re different

Not all drugs are created equal. Small-molecule pills like Lipitor or Eliquis are easy to copy. Their chemical structure is simple. But biologics-drugs made from living cells like Humira, Enbrel, or Ozempic-are far more complex. You can’t just reverse-engineer them. That’s why copycats are called "biosimilars," not generics. They’re similar, but not identical.

Getting a biosimilar approved takes longer and costs more-often $2-5 million per product. That’s why fewer companies enter this space. It also means price drops are slower. Even after the first biosimilar launched for Humira in 2023, it took a year for prices to fall 30%. By comparison, generic pills often drop 80% within 12 months.

And here’s the catch: even when biosimilars are approved, they don’t always get prescribed. Doctors are often hesitant. Pharmacies may not stock them. Insurers may still favor the original drug because of rebates. So while the patent expired, the market didn’t fully open.

Who wins-and who loses-when patents expire

Patients win. Insurers win. Taxpayers win. In the U.S., the Congressional Budget Office estimates that generic and biosimilar competition will save the healthcare system $1.7 trillion over the next decade.

But the original drugmakers? They lose market share-but not always revenue. Many of them now own generic divisions. Pfizer, Novartis, and Johnson & Johnson all have big generic businesses. So when a patent expires, they may sell the brand-name drug for a while, then switch to making the generic version themselves. That’s how they stay profitable.

Pharmacists win too. Generic substitution is legal in 49 U.S. states. If a prescription says "dispense as written," they can’t swap it. But if it doesn’t, they can give the cheaper version-and patients usually don’t even notice.

But patients still lose when:

• Insurance formularies delay switching to generics
• Rebates keep the brand-name drug on the preferred list
• Complex drugs like semaglutide (Ozempic) are protected by 142 patents, delaying generics until 2036

That’s not competition. That’s a legal barrier.

What’s changing-and what’s next

Regulators are starting to push back. In 2023, the U.S. Patent Office cracked down on "patent thickets," rejecting dozens of low-quality patents on existing drugs. The European Commission proposed limiting how long companies can extend protection through supplementary certificates. The FDA approved 870 generic drugs in 2023-a 12% jump from 2022-and is prioritizing approvals for complex generics.

Meanwhile, Medicare’s new drug price negotiation program is forcing manufacturers to think twice. If a drug is going to be negotiated down to a low price, why wait for generics? Some companies are now pulling their brand-name drugs from the market early, letting generics take over before Medicare steps in.

The future? More biosimilars. More generics. But also more legal games. The biggest threat isn’t the patent expiring-it’s what happens after. If the system doesn’t change, the savings will be delayed. Patients will keep paying high prices. And the promise of competition? It’ll remain just a promise.

What you can do

If you’re on a brand-name drug with an expiring patent, ask your doctor or pharmacist: "Is there a generic or biosimilar available?" Don’t assume your insurance will switch you automatically. Sometimes, you have to ask.

Check your formulary. If your drug isn’t covered-or it’s on a high tier-call your insurer. Ask why. Sometimes, a simple appeal gets you switched to the cheaper version.

And if you’re paying over $100 a month for a drug that’s been off-patent for more than two years, you’re likely overpaying. That’s not normal. That’s a system glitch.

Patent expiration isn’t magic. It’s economics. When competition arrives, prices fall. But only if the system lets it.