What happens to a drug’s profitability after its patent goes away?
Pharma often try to evergreen the drug coming off-patent through follow-on patents. Examples include researching better production processes, producing better forms of the drugs (e.g. getting rid of impurities or combining them with other drugs). Pharma often do this research shortly after a drug is a commercial success, and then they keep this information highly confidential until immediately before a patent is to expire and then file new patents to these improvements.
Even if a drug cannot be evergreened, most of the big Pharma have generics arms that take over manufacture, distribution and marketing of off-patent pharmaceuticals. They have a short lead time to market as they are already fully familiar with the drug and its manufacturing requirements as well as having strong trade marks around the drug (that do not expire with the patents). Generics is a different market segment with different considerations, price points, strategies and profits. Pharma have recognised this, and that is why they generally keep the generic arm separate from the patented drug arm of the company.
Some Pharma have been caught up in criminal activity in a desperate attempt to keep profits rolling after a drug has come off patent and they do not have another blockbuster in the wings. Schering-Plough had to pay $345 million to resolve criminal and civil liabilities for illegal marketing of Claritin.
Sometimes, the lack of foresight by a Pharma can result in its demise. This happened to Schering-Plough Corporation who had no blockbusters left and were heavily penalised after Claritin was off patent. Schering-Plough was merged into Merck in 2009.