By Ajay Raju
President Trump escalated pressure on the pharmaceutical industry last week by sending letters to 17 major drug companies demanding they lower U.S. drug prices to match international levels, with a September 29 deadline. The companies—including Pfizer, Merck, J&J, and others already facing a pending patent cliff—must provide their full drug portfolios to Medicaid patients at prices aligned with other wealthy countries and guarantee new drugs will be offered at these lower prices to Medicare, Medicaid, and commercial payers. This regulatory pressure compounds the industry’s existing $400 billion revenue crisis – a looming patent cliff of historic proportions.
Between 2025 and 2030, nearly 200 blockbuster drugs will lose patent protection, triggering the most severe patent cliff in history and a catastrophic revenue hemorrhage. Big Pharma stands to lose $400 billion in revenue, and potentially $236 billion in pharma sales between now and 2030, as patents expire for Keytruda, Eliquis, and other blockbusters. The current patent cliff dwarfs previous challenges facing the pharmaceutical industry, with financial losses potentially ranging from $6 billion to $38 billion per company. Five of the top 10 pharmaceutical firms face exposure exceeding 50% of their current revenue.
What makes this cliff particularly treacherous is its composition. Unlike previous patent expirations that primarily involved small-molecule drugs, many of the brand name drugs losing market exclusivity are biologic products, manufactured from living cells, which historically faced less generic competition due to manufacturing complexity. The peak impact could hit in 2029, when industry sales at risk reach their highest point. By that year, pharmaceutical executives may witness the steepest single-year revenue decline in industry history, with consequences rippling through every aspect of their operations—from R&D budgets to dividend policies.
This unprecedented revenue cliff is already reshaping corporate strategies across Big Pharma, with biopharma companies signing more deals in 2024 than the previous year as executives scramble to fill looming gaps in their portfolios. Who will be the big winners and losers and who will emerge on the other side of this consolidation wave?
Let’s dive deeper:
The Blockbuster Casualties
Several mega-blockbusters anchor this revenue cliff, each representing billions in annual sales that will evaporate as generics and biosimilars flood the market.
Merck’s cancer immunotherapy Keytruda stands as perhaps the most consequential patent expiration in pharmaceutical history. With annual sales exceeding $30 billion globally, Keytruda single-handedly drives much of Merck’s profitability. The drug’s biosimilar competition begins arriving in 2028, potentially erasing the majority of these revenues within 2-3 years as competing products capture market share. Trump’s latest pricing demands add another layer of pressure, as Merck must now consider lowering Keytruda prices for Medicaid patients to international levels while simultaneously preparing for biosimilar competition.
Bristol Myers Squibb faces a dual crisis with Eliquis, its blockbuster blood thinner. Revenue could slump to $2.6 billion by 2030 from current levels exceeding $12 billion annually. European markets have already begun experiencing generic competition, providing a preview of the devastating impact headed for U.S. markets by 2028. The company recently announced it will start selling Eliquis directly to patients at lower prices, a strategy that aligns with Trump’s push for direct-to-consumer distribution models but may further compress margins.
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J&J’s $12 billion multiple myeloma franchise built around Darzalex faces patent expiration by 2029. Darzalex/Faspro (daratumumab) represents one of the most successful cancer drug launches in recent history, making its patent cliff particularly painful for the company’s oncology division.
Perhaps most surprisingly, Novo Nordisk’s Ozempic—the GLP-1 diabetes and weight loss phenomenon—faces key U.S. intellectual property expirations in 2029. This represents a seismic shift in the diabetes market, where Novo has maintained dominant positions for decades. Novo Nordisk was among the companies that received Trump’s pricing letters and had already begun selling some medications directly to cash-paying patients at lower prices.
Novartis faces immediate pressure as Entresto, its heart failure blockbuster, confronts generic competition arriving in mid-2025. This represents one of the earliest major hits in the patent cliff timeline, serving as a harbinger for the broader industry trauma ahead.
The pharmaceutical industry has weathered patent cliffs before, but never at this scale or concentration. The “patent cliff” of the early 2010s, which included blockbusters like Pfizer’s Lipitor and Merck’s Singulair, resulted in significant industry consolidation and strategic pivots. However, the current crisis presents unique challenges. First, unlike the small-molecule drugs of previous cliffs, many current blockbusters are complex biologics. While this initially provided some protection from generic competition, the maturation of biosimilar manufacturing capabilities now threatens these revenues. Second, today’s patent cliff is more concentrated among fewer, larger drugs. Keytruda alone represents more revenue than several entire therapeutic categories faced in previous patent cliffs. Third, the cost of developing replacement drugs has skyrocketed, making it increasingly difficult for companies to organically replace lost revenues through internal innovation alone. Fourth, the Trump administration’s aggressive pricing policies add regulatory pressure that compounds the patent cliff crisis, potentially accelerating revenue declines and limiting pricing flexibility during the transition period. Lastly, heightened regulatory scrutiny around drug pricing and market competition has made it more challenging for companies to extend patent exclusivity through traditional strategies.
The New Regulatory Reality
Trump’s July 31 letters to 17 major pharmaceutical companies represent a paradigm shift in how the industry must approach pricing strategy. The administration’s demands for “most-favored nation” pricing—matching U.S. prices to the lowest levels offered in wealthy OECD countries—could fundamentally alter the economics of drug launches and patent transitions.
The industry’s response has been swift but divided. PhRMA, the industry trade group, warned that lowering U.S. drug prices as Trump demanded “would undermine American leadership, hurting patients and workers.” They argue the focus should be on healthcare middlemen rather than pharmaceutical companies. However, Pfizer responded more diplomatically, stating it is working with the administration to “increase access and affordability for American patients.”
The enforcement mechanism remains unclear. Trump’s letters don’t specify legal authority to require lower prices, instead contain warning that the administration will deploy every tool in its arsenal to protect American families from “continued abusive drug pricing practices.” This ambiguity creates uncertainty for companies trying to navigate both patent expirations and pricing pressures simultaneously.
Financial analysts are already adjusting their outlook. Leerink analyst David Risinger wrote that Trump’s demands are “unachievable,” given the “significant negative implications” for U.S. drugmakers and their ability to compete globally. He noted that because Medicaid prices are linked to the 340B drug discount program, the financial impact could be widespread across the industry.
M&A Strategy in a New Environment
The pharmaceutical industry’s response to the looming patent cliff was clear until now: buy, buy, buy.
But Trump’s pricing policies may complicate acquisition strategies and valuations.
In the global pharmaceutical industry, there were 420 M&A deals announced in Q3 2024, worth a total value of $32.4B, showing robust transaction volume despite some analysts noting deal values decreased 8% year-over-year, while deal volume dropped by 2% over the same period for the full year 2024.
While the overall volume of pharma and life sciences M&A activity was healthy in 2024 versus historic levels, deals trended toward the smaller side, reducing the total deal value observed for the year. This reflects pharmaceutical companies’ focus on acquiring specific assets and capabilities rather than pursuing transformational mega-mergers. Despite the trend toward smaller deals overall, M&As in the biopharmaceutical industry showed a 20% increase in total deal volume in Q1 2024 compared to Q1 2023, with both the second half of 2024 and the first half of 2025 seeing a higher number of deals with a value of more than $1 billion.
Approximately a third of in-licensed molecules were from Chinese biotechs in 2024, underscoring China’s increasing influence on global biopharma innovation. This represents a significant strategic shift as Western pharmaceutical companies increasingly look to Asian markets for innovation and manufacturing capabilities.
Major pharmaceutical companies have accumulated substantial cash reserves during the patent-protected periods of their current blockbusters. This provides the financial flexibility necessary to pursue large acquisitions before revenue declines. However, companies must now factor potential pricing pressures into their acquisition models, as targets with significant Medicaid exposure may face compressed future revenues.
Strategic Responses: Beyond M&A
While M&A represents the most visible response to the patent cliff, pharmaceutical companies are pursuing multiple strategies simultaneously, now complicated by the need to address Trump’s pricing demands.
For starters, companies are dramatically increasing R&D spending to accelerate internal drug development timelines. However, the lengthy drug development process means that internal innovation alone cannot address near-term revenue gaps. Second, pharmaceutical companies are investing heavily in extending the commercial life of existing drugs through new formulations, delivery methods, and indication expansions. While these strategies can provide some revenue protection, they typically cannot fully offset generic competition and may be further constrained by pricing pressures on Medicaid markets. Third, companies are accelerating expansion into emerging markets where patent protection may last longer or where branded competition remains viable even after patent expiration. This strategy becomes more attractive as domestic pricing pressures intensify. Lastly, some companies are exploring vertical integration strategies, acquiring manufacturing capabilities or supply chain assets to reduce costs and improve margins on remaining products.
A new strategic response is emerging: direct-to-consumer sales models. Companies like Eli Lilly, Pfizer, and Novo Nordisk had already begun selling some medications directly to cash-paying patients at lower prices. Following Trump’s demands, Bristol Myers Squibb and Pfizer announced they’ll start selling their blood thinner Eliquis directly to patients at reduced prices. This model could help companies maintain market share while complying with pricing pressures.
Winners and Losers
The regulatory environment shifts the winner-loser calculus significantly.
Likely winners include generic and biosimilar manufacturers like Teva, Sandoz, and emerging biosimilar specialists who stand to capture significant market share as blockbuster drugs lose patent protection. They also benefit from pricing pressure on branded drugs, which accelerates the shift to lower-cost alternatives. Other winners could be cash-rich pharmaceutical companies, like Roche, AbbVie (post-Humira transition), and potentially Eli Lilly, who are well positioned to make strategic acquisitions during this crisis. Companies with diversified portfolios and limited Medicaid exposure may also outperform. Lastly, smaller biotech companies with promising pipeline assets will command premium valuations as larger pharmaceutical companies compete for acquisition targets.
Likely losers are companies most exposed to the patent cliff without strong pipeline replacements. Merck (Keytruda exposure) and BMS (Eliquis exposure) face particular challenges, now compounded by direct pricing pressure from the Trump administration. Also, organizations with significant debt burdens may struggle to finance acquisitions while simultaneously managing revenue declines and potential margin compression from pricing policies. Companies with high Medicaid exposure across their portfolios face additional risk from the most-favored nation pricing demands. Lastly, some therapeutic areas may see consolidated market dynamics that reduce competition and profitability for remaining players.
The patent cliff presents both risks and opportunities for various stakeholder groups. First, stock prices will likely reflect the timing and severity of patent expirations as well as regulatory compliance costs and pricing pressures, creating volatility and potential value opportunities. Companies that successfully navigate the transition through strategic acquisitions or pipeline success will likely outperform. Second, credit quality will vary significantly based on patent cliff exposure and regulatory pricing risk. Companies with diversified portfolios and strong balance sheets will maintain favorable credit profiles, while highly exposed companies may face downgrades. Third, the industry consolidation will likely result in significant job displacement, particularly in overlapping functions like sales, marketing, and administration. However, R&D and business development roles may see increased demand. Lastly, the combination of generic/biosimilar competition and regulatory pricing pressure should reduce drug costs significantly, providing substantial savings for healthcare systems and patients, particularly Medicaid beneficiaries. However, reduced pharmaceutical industry profitability may slow innovation in some therapeutic areas.
Future Outlook
Looking beyond 2030, the pharmaceutical industry that emerges from the patent cliff will likely look dramatically different from today’s landscape, shaped both by market forces and regulatory intervention.
The industry will likely see significant consolidation, with fewer, larger companies dominating major therapeutic categories. This consolidation may improve operational efficiency but could potentially slow innovation in some areas. Companies will likely focus increasingly on therapeutic areas with high unmet medical need and limited generic competition potential. This could accelerate development in areas like gene therapy, cell therapy, and rare diseases.
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The regulatory environment will likely influence strategic priorities. Companies may increasingly focus on therapeutic areas where pricing pressures are less severe or where international price differences are smaller. The traditional blockbuster drug model may give way to more diversified approaches, including platform technologies, service-based offerings, and subscription-like healthcare models.
Direct-to-consumer distribution models may become more prevalent as companies seek to maintain margins while complying with pricing demands for government programs. The relative importance of different geographic markets may shift as companies seek growth in regions with stronger intellectual property protection or less generic competition.
The Trump administration’s approach to pharmaceutical pricing may establish precedents that persist beyond his presidency, creating a permanently altered regulatory landscape that companies must navigate alongside traditional patent cliff challenges.
Final Word
The pharmaceutical industry’s $400 billion patent cliff represents more than a financial challenge—it’s a fundamental inflection point that will reshape the industry for decades to come, now complicated by unprecedented regulatory pressure on pricing. Winners will navigate this transition through strategic M&A, internal innovation, operational excellence, and adaptive pricing strategies that comply with evolving government demands.
The Trump administration’s July 31 letters to major pharmaceutical companies add a new dimension to the patent cliff crisis. Companies must now simultaneously manage patent expirations, biosimilar competition, and regulatory pricing pressures—a triple threat that could accelerate industry consolidation and strategic pivots.
The surge in M&A activity we’re already witnessing is just the beginning. As patent expiration dates approach and revenue pressures mount—now amplified by pricing demands—dealmaking will likely accelerate dramatically. The companies that act decisively—whether as acquirers seeking to fill pipeline gaps or as targets positioning themselves for strategic partnerships—will determine the industry’s post-cliff competitive landscape.
For investors, the regulatory overlay creates additional complexity in evaluating pharmaceutical companies. Traditional patent cliff analysis must now incorporate potential pricing pressures and compliance costs. Companies with strong balance sheets, diversified portfolios, and limited government program exposure may outperform those heavily dependent on Medicaid revenues.
For patients and healthcare systems, the combination of patent cliffs and regulatory pressure presents unprecedented opportunities for cost savings. The patent cliff should drive generic and biosimilar adoption, while Trump’s pricing policies could reduce costs for government programs like Medicaid. However, the ultimate result should be a more efficient, innovative, and sustainable pharmaceutical industry better equipped to address global healthcare needs.
The next five years will witness the most dramatic transformation in pharmaceutical industry structure since the biotech revolution, now accelerated by active government intervention in pricing. The companies and leaders who embrace this change and act strategically—adapting to both market forces and regulatory demands—will not only survive the patent cliff but use it as a launching pad for the next era of medical innovation.