Biopharma firms face $275b patent cliff as returns stall

BCG says pricing pressure, tariffs, and MFN policies are reshaping business models.

Biopharma companies face mounting pressure from pricing reforms, tariffs, and a steep patent cliff that is putting about $275b in revenue at risk across the top 15 players, according to Boston Consulting Group (BCG).

The report said the sector’s average total shareholder return was 0% from 2021 to 2025, compared with 16% for the S&P 500, with only six of the top 20 companies outperforming over the five years.

BCG cited the combined impact of US tariffs on branded products, provisions of the Inflation Reduction Act, and the potential expansion of most-favoured-nation pricing frameworks as intensifying margin pressure and increasing uncertainty around long-term business model viability.

Innovation remains concentrated in blockbuster drugs, which accounted for almost 90% of 2025 sales among the top 20 firms, but the focus is shifting towards therapies for large-population diseases such as obesity and Alzheimer’s.

More than 100 obesity compounds are in development, including over 35 with a GLP-1 component, increasing competition within crowded pipelines.

Deal-making activity is accelerating, with mergers and acquisitions increasingly targeting marketed and post-proof-of-concept assets, whilst licensing deal values are rising even as overall volumes decline.

Transactions involving China represented almost half of licensing activity in 2025, reflecting the country’s growing role in global biotech innovation.

China now contributes about 30% of the global biotech pipeline and accounts for roughly half of new antibody-drug conjugates, whilst India is emerging as a hub for artificial intelligence, data, and manufacturing capabilities.

Geopolitical shifts are also reshaping manufacturing strategies, with major companies announcing plans to invest more than $350b in new US capacity by 2030 in response to tariff threats and supply chain risks.

At the same time, rising commercial complexity and pricing constraints are prompting companies to front-load product launches, deploy AI-driven sales strategies, and explore direct-to-patient and direct-to-employer models.

Seven of the top 20 companies have announced cost optimisation programmes targeting reductions of 5% to 16% in the cost base and 2% to 8% in workforce levels, as firms seek to protect margins whilst investing selectively in AI capabilities. 

BCG concluded that traditional advantages of scale in R&D and commercial operations are eroding, forcing biopharma companies to rethink their business models across the value chain to sustain growth and competitiveness.