How AbbVie Escaped the Patent Cliff

Since 2012, Humira has been the cash cow for AbbVie, generating over $200 billion in revenue. However, the expiration of its patents has left a massive hole that is difficult to fill.

In 2022, Humira reached its peak sales of $21.2 billion, which means that after reaching the patent cliff, AbbVie had to face a gap of over $20 billion.

With the emergence of biosimilar drugs, Humira has fallen from its throne. In the first three quarters of this year, Humira's sales were $11.1 billion, a 29.1% decrease compared to the previous year.

In contrast to the steep patent cliff, the decline in Humira's performance seems relatively moderate. No wonder AbbVie stated that the Humira crisis will not bother them for too long.

The key lies in their efforts to extend the lifespan of Humira and buy more time for its replacements. Currently, AbbVie's two other self-developed products, IL-23 monoclonal antibody Skyrizi and JAK1 inhibitor Rinvoq, are rapidly filling the gap left by Humira's declining sales. In the first three quarters, Skyrizi and Rinvoq generated revenues of $5.369 billion and $2.714 billion, respectively, with revenue growth rates of 49.6% and 54.9% compared to the previous year.

In terms of growth trends, both products indeed resemble Humira's early development. AbbVie's President, Rob Michael, stated in a conference call that with this growth rate, the total revenue of Skyrizi and Rinvoq is expected to surpass Humira's peak sales by 2027.

This implies that AbbVie has resolved the Humira crisis. So how did they escape from the patent cliff?

Extending Humira's Lifespan as much as possible

It is not an easy task to fill a patent cliff of over $20 billion.

In fact, AbbVie has been preparing for the patent cliff for many years, and the first step is to extend Humira's lifecycle as much as possible to buy more time and money for future development.

Although several patents related to Humira expired as early as 2016, AbbVie submitted more than 250 patent applications to create an impenetrable jungle of patents, covering various indications.

Through this patent jungle, AbbVie pushed the launch of generic versions of Humira to 2023, which not only brought in hundreds of billions of dollars in revenue but also bought valuable time for AbbVie to confront the patent cliff. This was not the only effort AbbVie made to extend Humira's lifespan.

Even after the introduction of biosimilars, AbbVie has been working to maintain Humira's market share and make the impact of the patent cliff as mild as possible. One specific strategy they employed was collaboration with pharmacy benefit managers (PBMs) in the United States.

In the United States, a coalition of "pharmaceutical companies + wholesalers + PBMs" monopolizes drug distribution and influences drug prices. PBMs have powers such as reviewing prescriptions, formulary development, and drug price negotiations. Data shows that the top three PBMs in the United States control 85% of prescription drug sales.

Therefore, to ensure good sales of a medication, it is crucial to establish a relationship with PBMs.

AbbVie understands this well and provides PBMs with billions of dollars in rebates each year. Due to this financial relationship, Humira maintains a dominant position in the PBM's formulary.

Even though Humira's patents have expired, AbbVie's collaboration with PBMs still exists. According to Ralph Pisano, President of RemedyOne, AbbVie has clear rebate agreements and plans with PBMs, which prevent PBMs from providing more favorable conditions for the biosimilars of Humira, such as reducing patient copayments.

Currently, two of the three major PBMs in the United States, Express Scripts and OptumRx, have reached similar agreements with AbbVie. Although they include biosimilars of Humira in their formularies, the prices are the same as Humira.

With the prices being the same, doctors and patients have little incentive to switch to biosimilars. In this situation, although Humira's patents have expired and its price has been reduced due to competition from biosimilars, its sales decline is not too rapid. This also buys time for the introduction of Humira's replacements.

In summary, AbbVie has successfully navigated through the Humira patent cliff. They extended Humira's lifespan as much as possible through an extensive patent portfolio and maintained a favorable position with PBMs. These strategies have allowed them to mitigate the impact of biosimilars and ensure a smoother transition to Humira's replacements.