Risks and Rewards in the U.S. BioSimilars Pipeline

Too many products, price pressures and other things that “Go Bump in the Night” will challenge those pursuing this potentially lucrative market segment

By By Eric S. Langer, Bioplan Associates

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Many companies will soon be marketing a variety of competing biosimilar products for the U.S. and other major markets. Yet specific guidance from U.S. regulatory authorities is lagging, and this is creating disruptive pressures. Congress has recently pushed the FDA to release guidance documents on biosimilar drug approvals. A group of senators wrote to HHS in August about the implementation of the “Biologics Price Competition and Innovation Act” (BPCIA), enacted in 2010 to push the FDA for a framework to review and approve biosimilars. Although the FDA just recently accepted the first biosimilar application for review (Sandoz), it has not released specific guidance. This delay has heightened concerns about just exactly how biosimilars will affect patients, insurers, the drug companies and even suppliers.

Research in biosimilars and the industry for more than 25 years indicates among the roughly 4,500 biopharmaceutical candidate products in the pipeline, around 20 percent of those products — about 900 — are follow-on biopharmaceuticals, mostly biosimilars (>500), but also biobetters. In the course of Bioplan Associates’ studies, analysis shows only a percentage of these will make it to the market.

Along with the attrition rates for biosimilars candidates, factors such as prices and discounts for biosimilars (relative to long-established reference products), remain poorly defined. These questions may well determine success or failure of biosimilar products in the United States. Biosimilars competition will include multiple biosimilars that sooner or later will be competing for each major biosimilars reference product target, and with other products for the same indication. But how many biosimilar players and products will there be in the U.S.? Will there be too many products competing for sales in relatively small markets or disease categories?

To better understand the issues at hand, what follows focuses on genuine biosimilars, those approved through a formal biosimilars regulatory mechanism involving rigorous analytical and clinical testing to prove biosimilarity. The discussion does not include the perhaps 200 biogenerics, (by regulated country standards), now available or being approved in lesser-regulated international commerce¹.

The current market for biosimilars remains rather small and under-developed, with the U.S. not yet involved. To date nearly all biosimilars market development has occurred in Europe, with smaller biosimilar markets developing in Australia, Japan and other highly developed, highly regulated countries. The global market for biosimilars is only about $500 million, on the order of 1/10th the market of just a single major targeted reference blockbuster (≥$1 billion/year) product. With over a dozen biosimilar products approved in the EU, the average market for each biosimilar is trivial by most standards. Despite biosimilars being approved in the EU since 2006, most European countries have moved slowly in adopting biosimilars. Overall, in EU and other countries, biosimilars are priced at about 25-30 percent discount relative to their reference products.

But it is still early in the game. There are currently nearly 40 blockbuster (>$1 billion/year sales) recombinant protein reference products, with 60 generating sales over $.5 billion, prime targets for biosimilars development. Most of these reference products have patents expiring starting in a year or two, a time when a flood of applications can be expected (discussed below).

For a number of reasons, many involving politics and some countries’ centrally managed healthcare systems, the EU experience with biosimilars market development can not be readily extrapolated to the U.S. Uptake and adoption of biosimilars in the EU has been slow, with Germany the only country with biosimilars capturing significant market share from innovator reference products. This is partly due to the reason that government regulations establish quotas for physicians, requiring them to prescribe biosimilars. European market development has been slowed by the diffuse nature of this market, e.g., with 28 different countries being members of the EU. EU biosimilar approvals still have to be adopted by each member state, along with guidelines implemented for use and insurance coverage; all this complicated by many European countries controlling prices and having socialized health care systems. In these contexts, the EU experience in biosimilars market development is not relevant to U.S. market development, where the market is much more open and competitive.

The biosimilars development pipeline is relatively large. BioPlan databases track over 650 candidate biosimilars in development; plus another 450 biobetters in development². Biobetters are products, like biosimilars, incorporating much the same active agent as a reference product but with significant modifications such that it is regulated and considered a new innovative product. The current status of biosimilars in the pipeline (those not yet approved anywhere) is shown in Figure 1.BioFig1

As is normal with pharmaceutical pipelines, most products are in the earliest stages of development, with most yet to enter clinical trials. Essentially, all of these products are targeting the U.S and other major markets. Over 300 companies worldwide are already involved (in various aspects, e.g., development, marketing agreements). Most of the companies involved in biosimilars are either large international (bio)pharmaceutical companies or small new and foreign-based entrants. Classic venture capital-funded and other mid-sized biotechnology-type companies are generally not involved in biosimilars, with these companies targeting new, innovative products. Small company biosimilar developers can be expected to license product marketing to larger established marketers. So at least in terms of marketing, current major players will dominate the U.S. biosimilars scene, at least marketing, in the early years.

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