Strategic options to tackle patent expiration: theoretical framework and case studies

Patents grant patent holders a temporary monopoly, excluding other parties from making commercial use of the patented invention without authorisation and thereby allowing their owners to recoup investment. In many industries, the loss of patent-protected exclusivity and the ensuing market entry of competitors are known to be followed by a severe decline of the incumbent’s sales and profit. This paper investigates strategies, which incumbents can adopt to cushion these adverse effects. Taking the pharmaceutical industry as an example, we explore the strategy space available to firms in situations of patent expiration, providing a comprehensive analytical framework. The study is based on expert interviews and secondary data of key effort and performance variables. Four prominent case studies from the German market analyse strategy choice, implementation and success in large pharmaceutical companies. Implications for industry and policy-making as well as the transferability of the proposed strategic framework to other industries are discussed.