Predicting the ‘Patent Cliff’
Patents are particularly common in life sciences, semiconductors, and software industries.
A patent gives a product developer a monopoly market position for several years. Patents are critical to profitability, product renewal and growth. In addition, patents allow a manufacturer to recoup its R&D, production- and sales investments to bring a new product to market.
Once the patent expires, competitors are free to enter the market with, what are known as, generic products. Consequently, this can cause a severe and immediate drop in the market share and revenues of the branded product. In the life sciences industry this is known as the ‘patent cliff’.
Problem to be Solved
We helped our client, a global pharmaceutical company, predict the impact of the patent expiry in the coming year with a purely data-driven approach.
To begin, we analysed numerous drugs whose patents had expired since 2002. Secondly, we were able to identify clear trends within comparable groups. We did this by looking at the characteristics of the products, such as their type, dosing form, distribution methods, number of competitors and the preference policy conducted by insurers. Finally, by identifying the trends, we could investigate the causal effects for the different patent cliffs.
Furthermore, the data consisted of a large dataset made available by our client in addition to several opensource databases. The result was an elaborate database which we could use to analyse the trends and causal effects.
We delivered a data-driven solution to predict the market share drop in the six to twelve months after the expiry of our client’s product. The solution was based on the analysis of 20 different products and their historical sales volumes.
Moreover, the client received an extensive document with a clear summary of our main findings, as well as the results of our deep dives into the products we analysed.
Impact and Benefits for our Client
Our insights disclosed an objective and valuable prediction, which our client could use to better prepare for the upcoming patent cliff.
These insights not only gave our client a better understanding of the future situation, but also opened up further internal discussions about which actions must be taken to minimize potential drawbacks.
This project shows that a data-driven approach is crucial, especially in times of impactful events that demand strategic decisions. By “doing the math,” we validate our visions and often identify trends that improve strategic decisions worth millions of euros.
Ways of Working
The project was delivered on time in only two weeks. As a result, we ensured our client could use the findings in their budget discussions for the coming next year.