There’s a quiet ticking beneath the surface of the pharmaceutical industry – and it’s getting louder. Over half a trillion dollars in blockbuster drug sales are inching toward the patent cliff. As those protections fade, Big Pharma faces a reality check that could reshape everything from pricing power to pipelines.
Patents Are Expiring – and Fast
Medications like Keytruda (Merck), Eliquis (Pfizer), and Humira and Rinvoq (AbbVie) are all on the chopping block. Their patent protection is set to unravel between 2027 and 2036. These aren’t niche therapies; they’re revenue powerhouses. For AbbVie, just two of them made up nearly half of its income in 2024.
When those patents expire, generic and biosimilar versions are poised to swoop in – and take massive bites out of Big Pharma’s margins.
Tangled Webs of Patents – Now Under Fire
For years, drugmakers used “patent thickets” to keep competitors at bay. By filing dozens, even hundreds, of overlapping patents – sometimes after FDA approval – they built legal fortresses around single products.
But a 2024 JAMA study exposed that 75% of those patents had little to do with active ingredients – they were just legal padding. And now, Washington is cracking down. In 2025, lawmakers pushed forward bills aimed at capping how many patents can be weaponised in court. If passed, it could drastically shorten how long drugmakers can keep rivals out.
Cash-Rich… but Nowhere to Spend?
Pharma’s pockets are deep – really deep. With over $700 billion in M&A capacity ready to go, you’d think the next wave of biotech deals would be booming. Except… there’s a catch.
The ideal acquisition targets – biotechs with real revenue and not just “science experiments” – are rare. And when deals do happen, they don’t always pan out. Since 2018, around 80% of biotech IPOs have flopped, wiping out billions in investor capital and leaving M&A teams spooked.
A Policy Storm Is Brewing
It’s not just patents. A new proposal could slap a 1-5% IP tax on biotech patents – a sharp departure from the current flat structure. This change would affect how companies (and investors) value intellectual property, and how aggressively they pursue R&D.
Even elite academic institutions are under scrutiny. Harvard, sitting on 58,000+ patents and hundreds of licensing deals, is now facing a federal probe for alleged lapses in federally funded research disclosures. If the investigation leads to sanctions, the entire model of university-to-industry innovation may be shaken.
So, What Happens Next?
To survive this shift, Big Pharma has to juggle three tough demands:
- Keep innovation alive – through internal R&D and external deals;
- Defend their patent arsenals – without triggering legal or political backlash;
- Deploy capital wisely – in a market that no longer rewards hype.
Valuations may look cheap, but investors beware: some of these stocks are sitting on quicksand. The patent cliff isn’t just a calendar event – it’s a map of who’s exposed, who’s scrambling for new growth, and who’s quietly building resilience.
Algorithms vs Patients: How AI in Insurance Is Rewriting Healthcare
AI was supposed to transform healthcare-and in some ways, it has. But revolutions aren’t always tidy. Quietly, insurers have rolled out artificial intelligence not to heal, but to trim costs. Increasingly, that translates into a single word for patients: “no.”
Denials at Machine Speed
Here’s the crux: many insurers now run prior authorizations – the “will we cover this?” gate – through AI systems. And the twist is brutal: these tools aren’t recommending care; they’re rejecting it.
In one prominent case, an insurer’s PXDX system plowed through more than 300,000 claims in two months. Human doctors “reviewed” files at a pace of 1.2 seconds each. That isn’t clinical judgment; that’s automation with a strobe light.
Try appealing? Odds are bleak. Fewer than 0.2% of denials in ACA marketplace plans are appealed, and an even smaller share prevail.
Black Boxes, Thin Oversight
These algorithms aren’t regulated like drugs or medical devices. They’re proprietary and opaque. The FDA doesn’t touch them. There’s no mandated transparency, no common fairness standard, no assurance that bias has been rooted out.
And the harm is not hypothetical. Physicians report patients abandoning care after denials. An estimated 94% say prior authorization delays needed treatment; one in four have witnessed serious harm tied to those delays.
The Slow Pushback
Yes, there’s noise. More than 50 insurers have pledged to streamline prior auth – fewer hoops, clearer rules. Industry has made promises before.
Meanwhile, the No Surprises Act reshaped the battlefield. Providers filed roughly 1.5 million disputes in 2024, far beyond forecasts. The administrative toll of that fight? North of $300 million.
When Algorithms Get Overruled
Here’s the kicker: when these AI-driven denials are challenged by lawyers – not patients – they often crumble. A major insurer’s model, nHPredict, saw about 90% of its decisions overturned by federal judges. That signals more than error; it signals a broken process.
Appeals take time, though. Months, sometimes years. Too many patients don’t have that runway. Some never live to see a reversal.
Can AI Be Trusted With Care Decisions?
AI can streamline paperwork and flag errors. But when algorithms dictate care without real human oversight, it gets dangerous. Accountability is missing. Regulation lags. And patients are trapped in a system optimized less for health than for savings.
Who Pays for Science? The Political Fight for America’s Research Future
Science isn’t supposed to be campaign fodder, yet here we are. In 2025, the institutions behind gene editing, pandemic vaccines, and decades of biomedical wins are being pulled into budget brawls and ideological trench wars.
Public Science on the Chopping Block
NIH. CDC. NSF. BARDA. Once the crown jewels of U.S. research. This year, each took a hit – some, a heavy one. BARDA alone canceled 22 public-private projects in 2025, the same agency that helped rocket mRNA vaccines from lab bench to clinic.
At the FDA, leadership churn looks like a revolving door. And the CDC’s vaccine advisory committee? Swept aside in one stroke by RFK Jr. It’s not only about dollars anymore; it’s about who holds the steering wheel.
What Happens When You Defund Discovery?
Cracks show quickly. Measles outbreaks are the worst in more than thirty years. Vaccine hesitancy is back on front pages. Biotech pipelines slow – not for lack of ideas, but for lack of grants to push them forward.
Even the academic heavyweights aren’t insulated. Harvard – yes, that Harvard – is under federal investigation over how federally funded research translates into patents. If regulators come down hard, the university-to-industry bridge could wobble, maybe break.
The Private Sector Can’t Do It Alone
Here’s the uncomfortable bit: private capital rarely bankrolls the earliest, murkiest stages of discovery. It waits until risk is sanded down. mRNA? That took decades of public support before venture money arrived.
Cut that base layer now, and you don’t just slow science – you erase futures that never get the chance to exist.
Why Are We Doing This?
Politics, mostly. Science has no voting bloc, no quick wins. It’s slow, technical, occasionally maddening – and expensive. When the budget knives come out, research is often first on the cutting board.
What’s at Stake Is Resilience
The capacity to meet the next virus, the next antibiotic failure, the next unknown. Hollow out the ecosystem and we’ll be flying with instruments off.
A Call for Recommitment
If the U.S. wants to lead in life sciences, it needs more than brilliant labs – it needs political will. Ring-fence research budgets from election cycles. Treat the NIH and its peers as strategic assets, not chew toys.
Investors, health leaders, voters alike have skin in this game. Funding isn’t only a line item; it’s a statement of values about the future we plan to have.
Why You’re Getting Sicker: The Quiet Collapse of American Healthcare Access
It isn’t a new virus, and it isn’t a tech shortfall. It’s something duller, more structural. Health outcomes in the U.S. are sliding, and the culprit isn’t medicine so much as the on-ramp to it. In 2025, that on-ramp is cracking.
Shrinking Coverage, Rising Costs
Start with the basics. Medicaid enrolment has rolled backward – more than 10 million people dropped after pandemic protections ended, many for paperwork glitches that should be fixable with a phone call… except the call center is jammed and the deadline passed.
Meanwhile, employer plans cost more and cover less. Deductibles creep up. Out-of-pocket maxes bite. Being “insured” often means paying a premium for the privilege of still being exposed.
It’s Not Just You – It’s the System
Across the map, people are using less care – not because they’re suddenly healthier, but because they’re bill-shy. Screenings slip. Preventive visits get punted. Conditions smolder until they become five-alarm fires.
And yet the industry’s profit engine hums: healthcare EBITDA is projected to swell by $300B+ by 2028. The system earns more even as patients receive less.
The AI Denial Machine
To rub salt in it, AI is now a quiet gatekeeper. Insurers deploy automated prior-auth and claims tools that swat down approvals at scale. Some life-saving therapies get flagged “no” by default. Appeals exist on paper; in reality, they’re rare, slow, and punishing.
Efficient? Extremely. Profitable? Yes. But it pushes people off the care path.
Winners and Losers
The split widens. Wealthier patients still find concierge slots, experimental meds, even offshore surgeries if needed. Everyone else navigates shrinking networks, surprise bills, and long delays.
This isn’t merely an affordability hiccup; it’s structural failure – the richest healthcare system on Earth struggling to deliver basic access to millions.
The Real Cost
When access erodes, the downstream flood follows. Chronic disease goes unmanaged. Mental health worsens. Life expectancy falls – three years in a row in the U.S., recently. Productivity sags, innovation slows, inequality digs in.
So yes, Americans are getting sicker. And no, that’s not bad luck – it’s policy, process, and design.
5 trading and investment ideas
Here are 5 trading and investment ideas directly inspired by insights from the article – spanning pharma, biotech, healthcare policy risk, and long-term innovation exposure:
💡 1. Long: Oversold Large-Cap Pharma (Deep Value Play)
Examples: Merck (MRK), Bristol Myers Squibb (BMY), AbbVie (ABBV)
Why: Trading at 8-10× forward earnings – near historic crisis valuations – despite strong pipelines and dividend support. The patent cliff is real, but largely priced in. Watch for rebound as investor focus rotates back to fundamentals.
Catalyst: Legislative compromise on IP reforms; surprise M&A deals; pipeline readouts.
💡 2. Short: AI-Dependent Health Insurers (Policy Risk Play)
Examples: UnitedHealth (UNH), Cigna (CI), Elevance Health (ELV)
Why: AI-powered prior-authorisation tools face regulatory scrutiny and potential lawsuits. Denial-based profit models may be unsustainable. Legal pushback and patient backlash could compress margins.
Catalyst: Federal intervention, class-action lawsuits, No Surprises Act enforcement expansion.
💡 3. Long: Science Infrastructure ETFs & Contract Research Orgs
Examples: IBB, XBI (biotech ETFs); Thermo Fisher (TMO), Charles River Labs (CRL)
Why: Public science cuts create white space for private R&D enablers. If NIH/NFS budgets shrink, CROs and toolmakers may gain from outsourced innovation.
Catalyst: Shifts in federal budget allocations; rising private sector research funding.
💡 4. Event-Driven Play: Biotech M&A Targets
Criteria: Revenue-generating, derisked Phase III biotechs; undervalued after IPO crashes
Screeners: Look for sub-$5B names with cash on hand and late-stage oncology, immunology, or CNS pipelines.
Why: Big Pharma is sitting on >$700B in firepower but struggling to find digestible targets. When the logjam breaks, takeovers will be fast and rich.
💡 5. Long-Term Thematic: Global Health Access + Digital Health
Examples: Teladoc (TDOC), Doximity (DOCS), Philips (PHG); emerging market hospital chains
Why: Structural decline in US access creates a tailwind for alternative models. Global demand for affordable, digital-first care is rising. Countries outside the US may leapfrog broken models.
Catalyst: International health investment, AI-healthcare platforms, developing-market adoption.
Volity: Where Any Volume Finds Agility
At Volity, we believe health and finance are connected. When people can’t access care, they can’t engage in opportunity. That’s why we support transparent markets and informed decision-making.
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