When a drug’s patent runs out, prices don’t just dip-they crash. It’s one of the clearest examples of how competition reshapes markets. Take apixaban, the blood thinner sold as Eliquis. Before its patent expired in 2020, patients in the U.S. paid around $850 a month out of pocket. A year later, the generic version cost $10. That’s not a sale. That’s a collapse. And it’s not an exception. It’s the rule.
Why Patents Exist-and Why They End
Pharmaceutical patents give companies a 20-year window to recoup the cost of research and development. Developing a new drug can cost over $2 billion and take more than a decade. Without patent protection, companies wouldn’t invest. But once that 20-year clock runs out, the law opens the door for others to make the same drug. That’s the trade-off: innovation now, affordability later. The Hatch-Waxman Act of 1984 created the modern system that balances this. It lets generic manufacturers apply to sell the same drug without repeating expensive clinical trials. All they need to prove is that their version works the same way. This system was designed to cut prices fast. And it usually does.How Prices Really Drop-It’s Not Linear
The moment the first generic hits the market, prices start falling. But the biggest drops don’t happen right away. They come later. - The first generic usually cuts the price by 15% to 20%.- The second and third generics push it down another 30% to 50%.
- By the time five or more companies are selling the same drug, prices often fall 80% or more. A 2023 study in JAMA Health Forum tracked 505 drugs across eight countries. In the U.S., prices fell 32% in the first year after patent expiration and 82% over eight years. In Australia, the drop was 64%. In Switzerland, it was only 18%. Why the difference? It’s not about the drug. It’s about the system.
Country by Country: Who Gets the Biggest Savings?
The U.S. leads in price drops-not because it’s more generous, but because it’s more competitive. There are no government price controls. Once generics enter, pharmacies and insurers shop for the cheapest option. That drives prices down fast. Europe works differently. Countries like Germany and France use reference pricing. If a generic is cheaper than the brand, insurers pay only the generic price. That pushes manufacturers to lower prices early. But the process is slower. Generic entry takes 12 to 18 months in Europe. In the U.S., it’s about 30 months on average. Japan and the UK fall in between. Canada saw a 48% price drop after eight years. Australia’s 64% drop shows that even with some regulation, competition still wins.
The Exception: Biologics and Patent Thickets
Not all drugs follow the same path. Biologics-complex drugs made from living cells, like Humira or Ozempic-are harder to copy. That’s why they get extra protection. Humira, for example, had its original patent expire in 2016. But AbbVie filed over 130 secondary patents on minor changes-dosage, delivery methods, packaging. These didn’t make the drug better. They just blocked competitors. Generic versions didn’t meaningfully enter the market until January 2023, seven years later. The same happened with Eliquis and Ozempic. Even though the base patent expired in 2020 and 2026 respectively, manufacturers piled on dozens of additional patents. According to I-MAK’s 2025 report, blockbuster drugs now average 10 to 15 secondary patents. These extend market control by 12 to 14 years beyond the original term. This is called a “patent thicket.” It’s legal. But it’s not what the system was meant for.Who Pays the Price? Patients, Insurers, and Hospitals
When prices drop, savings flow to different places. In the U.S., Medicare and private insurers get the biggest cuts. Patients see lower copays. A 2023 Kaiser Family Foundation survey found 68% of insured adults paid less after generics arrived. But here’s the catch: formularies matter. Even if a generic is cheaper, your insurance might not cover it right away. Some insurers keep the brand drug on their preferred list because of rebates from the manufacturer. That’s what happened with Humira biosimilars in 2023. The generics were available. But many patients still paid full price because their plan didn’t switch. Doctors notice it too. Rheumatologist Dr. Sarah Kim in Chicago says she saw rapid adoption of biosimilars for infliximab after 2016. For Humira? “The transition has been slow,” she says. “Payers are locked into contracts.”
Manufacturers Fight Back-With Legal Tricks and New Formulations
Originator companies aren’t sitting still. When a patent expires, they often launch a “reformulated” version-new pill shape, extended release, different packaging. Sometimes it’s better. Sometimes it’s just a trick to keep patients on the brand. They also bundle deals with pharmacies and insurers. If a hospital agrees to buy 90% of its Humira from AbbVie, they get a discount. That makes it harder for generics to compete, even if they’re cheaper. The result? In 2023, 78% of new patents filed for drugs weren’t for new medicines. They were for old ones. And 70% of the top 100 prescribed drugs had their exclusivity extended at least once.What’s Changing? Regulatory Pressure Is Growing
Governments are starting to push back. In 2023, the U.S. Inflation Reduction Act let Medicare negotiate prices for some high-cost drugs. That gave manufacturers a new incentive: delay generic entry to avoid negotiation. The FDA approved 870 generic drugs in 2023-a 12% jump from 2022. They’re prioritizing complex generics that used to take years to approve. The European Union’s 2024 Pharmaceutical Package proposes limiting how long companies can extend patents with supplementary certificates. The U.S. Patent Office has also started reviewing “patent thickets” more closely. The Congressional Budget Office estimates that generic and biosimilar competition will save the U.S. healthcare system $1.7 trillion over the next decade. But I-MAK warns: without reform, those savings will be delayed by an average of 4.2 years per drug.The Bottom Line: Competition Works-If It’s Allowed
Patent expiration isn’t magic. It’s economics. When more companies can sell the same thing, prices fall. The more competitors, the faster and deeper the drop. The system works best when:- Generic manufacturers can enter quickly
- There are no legal roadblocks like patent thickets
- Insurers and pharmacies are free to choose the cheapest option
- Patients aren’t locked into expensive brands by rebates or contracts
When a drug’s patent ends, the market doesn’t just change. It resets. And for patients, that reset can mean the difference between paying $800 a month-or $10.