Shakespeare said it best: to be or not to be? It’s decision time for Big Pharma on entering the biosimilar space.
Biosimilars are the pharmaceutical industry’s story not yet told: the field is touted as bright with promise but regulatory uncertainties and gaps in the competitive turf for individual companies continue to dampen the roots of growth.
But this may be changing, with consensus at a September 14 conference hosted by Decision Resources [DR] that the segment will finally seize momentum over the next few years, paced by the growing dominance of biologic drugs as top industry revenue producers and the scheduled launch of a few high profile biosimilars in 2014. The basic forecast from DR data crunchers: by 2016, seven of the 10 top selling brands will be biologics, opening up new pathways in the biosimilars space, and resulting in biosimilars accounting for roughly a quarter of the total biologics market in 2019, or $14 billion annually. Another factor likely to accelerate prospects for biosimilars is that nearly all the revenue growth in biologics through 2019 will be driven by therapies already on the market.
What still makes it hard to assess prospects for biosimilars is the challenge of defining the terms of engagement. The concept itself is open to interpretation, which leads to definitional problems. In addition to “biosimilars,” which are essentially generic versions of branded off-patent biologics, there are “biobetters,” which are conceived to differ from the originator in formulation or delivery mode with the overall aim of obtaining an improved pharmacokinetic profile. This leads in turn to a lack of clarity in figuring where the real opportunities are and defining a strategy to exploit them.
One conclusion from the conference is that building a biosimilars business cannot be approached from the same perspective as small molecule generics. The barriers to entry are actually quite high, and only a handful of companies — chiefly Teva and Sandoz as well as a few of the diversified Big Pharmas — currently have the combination of regulatory expertise, manufacturing capabilities, global market reach and deep financial pockets to capture the competitive advantage. Said Decision Resources principal Michael Malecki, “there are significant up-front investments required to secure approval and build market share for a biosimilar, much more than in the case of a traditional generic.” He said the commitment is equivalent to that of a branded entry, with companies likely to see as long as a decade go by before breaking even on their investment.
Perhaps the biggest contrast with small molecule generics is that no biosimilar is likely to be substitutable at the pharmacy level. DR research finds this holding true even in Europe where biosimilar products have been available for prescribing and reimbursement for the past 5 years. Physician resistance to interchangeability tends to be high and it escalates with the urgency and scope of the condition being treated. This means that any company taking a stake in biosimilars knows it will have to put millions into marketing and promotion activities supplemented by corporate branding to establish confidence in the product.
Four Building Blocks for a Biosimilars Strategy
Following are some additional impressionistic conclusions from the September 14 DR program, which embellish previous editorial coverage by Pharm Exec on the biosimilars issue.
Biosimilars are a classic “disruptive technology” that will change the competitive landscape in unforeseen ways.
DR experts took a stab at identifying key “winners and losers” in the business, tagging J&J and Amgen as suffering the biggest revenue hit as lower-priced biosimilars challenge their brand biologics toward the end of the 2019 forecast period. Teva is seen as the evolving leader in the field, but some company executives suggested that Chinese and Indian companies – including players not even known outside their respective countries today – would emerge as “dark horse definers” of the trade. Industry consultant Stan Bernard emphasized that China has been producing equivalent biosimilars for more than 20 years: when it comes to biosimilars, the US, Europe and Japan are actually the “emerging” markets, with much to learn from the others. Likewise, the reaction of originator companies to the biosimilars threat has to be weighed, as an added “disruptive” element of instability to the market. “We know they won’t stand inert,” Bernard said.
The biggest companies may be having second thoughts about entering the biosimilars space.
The sector is viewed as too rich for the smaller generic houses, but a more surprising conclusion is that the giants like Pfizer and Merck may end up hedging their bets and engage on a piecemeal basis or not at all. Pfizer is struggling to establish an internal consensus around adding biosimilars to its business model, Astra Zeneca has backtracked on a commitment it made last year through the MedImmune acquisition, while Merck seems to be reducing its footprint to focus principally on its own idiosyncratic definition of “biobetters.” Roche has disavowed the space entirely.
Pricing and market access remain unsettling questions for strategists.
Conference participants struggled to get a conclusion from DR experts on how to handle a contradiction: if biosimilars are expected to be priced like a generic, at a solid discount against the originator, while the product itself has to be commercialized with all the expenses associated with a high-profile brand, then where is the profit margin? The consensus that interchangeability will be hard to secure for biosimilars is also going to create challenges in differentiating these products from established biologics. It will be a particularly important issue in Europe, where payers put a high premium on evidence that a new medicine really adds therapeutic value — few biosimilars are going to be able to make that case. And for oncology products, efficacy is closely associated with safety, a point of sensitivity for many clinicians in the field that will limit uptake.
Key policy issues must be resolved before the sector can truly obtain its market potential.
Most critical in the short-term is defining a clear regulatory testing and approval pathway in the US that compliments what exists already in Europe. The FDA has scheduled a hearing on November 2–3 to begin crafting an approach, but expect a long, drawn out process because the competitive implications of its actions will prevent industry-wide consensus on what to support. Its every man — or woman — for themselves: the capacity of companies to succeed will thus depend on making timely investments in in-house capabilities to track and shape the actions of regulators, payers, clinicians and patients across and within markets.
A proactive policy stance is especially important in key emerging markets, where new regulatory guidance is now being written and which in many cases may end up biasing the playing field toward local biosimilar producers.