In the last year or so, the crystal ball for biosimilar sustainability has become less cloudy. That is only to say that with approvals and launches of some biosimilars, we have a better understanding of the factors that will define viability of the American marketplace.
It seems that, for certain drug categories at least, biosimilar entry will be successful. The filgrastim, pegfilgrastim, and likely the trastuzumab and bevacizumab markets have multiple viable competitors. Rituximab may well be in that category as well, but it is very early in the game. For the G-CSF agents, biosimilar market share is significant and still growing according to the latest data. As a result, net costs have dropped for payers, providers, and purchasers. The extent of discounts are variable, and in the case of the cancer treatments (15% to 20%) very recent and likely to change.
This is still not the case for biosimilar infliximab. The European market is competitive, but the US market is still dominated by Janssen’s Remicade®, for reasons outlined often in the past. A significant nail in the coffin for this product could be the future introduction by Celltrion of the subcutaneous form of infliximab, which will pull interest and any hard-fought marketshare gained by the biosimilar manufacturers (of which the Celltrion/Pfizer partnership is the biggest player).
These are rather short-term considerations, however. The real question is whether biosimilars will be an important bastion against the rising tide of biologic costs down the road? To understand what could happen, we’ll have to make a few critical assumptions about the future. If we don’t consider them, or make the wrong assumptions, the conclusions will be worth far less than the cost of writing this piece.
ASSUMPTION 1: THE AFFORDABLE CARE ACT STANDS IN THE FACE OF CURRENT LEGAL CHALLENGES
If the State of Texas v. USA case somehow results in erasure of the Affordable Care Act and by relation, the biosimilar approval pathway, the viable biosimilar market is highly dubious. Let’s get past this immediately, and assume that the Biologics Price Competition and Innovation Act will stand.
ASSUMPTION 2: MEDICAL RESEARCH IS NOT STAGNANT
Over the course of time, clinical research will continue to reveal new mechanisms of action if not genetic causes of disease development. Should we assume that IL-23 inhibitors be the best, final word in the treatment of autoimmune disease? The TNF-alpha inhibitor infliximab was developed in the late 1990s, and it was a revolution in the treatment of Crohn’s disease. Shortly after, several other anti-TNF inhibitors were introduced in other formulations, and the first interleukin inhibitors were tested for the same indications.
In cancer therapy, with a multitude of tumor targets, therapeutic evolution has been even faster. Conventional chemotherapies came first. The development of the first tyrosine kinase inhibitors, monoclonal antibodies for HER-positive tumors, and VEGF-targeted biologics preceded checkpoint inhibitors of various types. Today, we are witnessing the infancy of CAR-T genetic therapies.
The result of this assumption, if correct, is that once the patent expires for a biologic product and is open to biosimilar competition, utilization for that product has already started a decline. A prospective biologic manufacturer will need to consider this in terms of future sales potential (in the face of other biosimilar competition as well).
ASSUMPTION 3: PATENT LITIGATION WILL BE SORTED OUT
Manufacturers will learn from the first generation of biosimilar-related patent lawsuits and inter partes review decisions. The federal government will have found a way to invalidate (or at least short circuit) patents that exist only to extend the reference product’s life cycle. If this is not accomplished, smaller firms will continue to avoid biosimilar development.
Assuming that this is accomplished, however, biosimilar firms will have a better understanding of true (1) costs to develop and (2) time to commercialization. These will be key drivers of the decision to commit to developing biosimilars.
ASSUMPTION 4: THE BLOCKBUSTER DRUGS OF TOMORROW WILL NOT GENERATE THE SALES OF THE BLOCKBUSTERS OF TODAY
In 2018, AbbVie’s Humira® had $13.7 billion in US sales and was the revenue leader in this country. Enbrel® had $4.8 billion in sales and was number 3. These revenue figures are partly the result of far extensions of their intended patent lives and marketing exclusivities. According to FiercePharma, Revlimid® was 2018’s second-highest grossing drug in the US at $6.5 billion, and its patent is supposed to expire in 2023.
When biosimilars do launch for these agents, manufacturers will not have to carefully estimate their sales potential. Even with six adalimumab competitors, for example, there will be many profitable pieces of the pie available, at least at first. Once prices are driven down through competition (and potentially lower demand based on assumption 1), will drug makers be as satisfied with the results? Even if adalimumab net prices decline by 70%, that still means a total US pie of $4.1 billion, enabling several, if not most, drug makers to gain revenues of at least $500 million annually.
Only biosimilar pegfilgrastim acquired this level of interest in the US. No other biologics seem to have this sales potential. If biosimilar makers want to meet this high bar on profit, the number of biosimilar suitors must match the future sales figures of reference drugs.
Another factor supporting this assumption is the negative pressure on drug pricing at the federal level. The push for the use of pricing indexes and/or broader use of negotiation in Medicare can be powerful limiting factors. Paralleling this trend is that of tighter formulary controls by payers, which could result in wider use of drug exclusions from coverage.
Payers played a strong role in limiting the use of the PCSK-9 inhibitors for patients with hypercholesterolemia. Originally considered by investment analysts as surefire biologic blockbusters, payers placed tight restrictions on their use, forcing their manufacturers to dramatically downgrade their profit estimates. Today, price cuts and low utilization have limited sales to less than $500 million per year in the US.
It will be interesting to see how the interleukin competition, for example, plays out. The autoimmune category (along with the oncology drug category) seems to be fertile ground for sprouting biologic products with greater than $1 billion in sales. Oral type 2 diabetes drugs (e.g., SGLT-2 inhibitors) have much blockbuster potential, but these eventually will face generic not biosimilar competition.
ASSUMPTION 5: THERE WILL BE FEWER NOT MORE BIOSIMILAR MAKERS IN THE LONG TERM
Over the past 5 years, we have seen names like Momenta, Epirus, Baxalta (Shire), Adello, and others exit the arena. A few players, like Fujisawa and Formycon, have declared their intention to enter the US playing field. Others, like Pfizer and Boehringer Ingelheim, have cut back on the number of biosimilar products they are developing. Therefore, the trend has been for fewer players at present. This could represent only an initial shakeout, especially if drug patent reform and other problems (like drug rebates) are addressed, which could entice other pharmaceutical developers to join the game.
In any case, it may be wise for companies to consider these assumptions and the resulting biosimilar sales expectations over the long term. Companies like Sandoz and Mylan (with a legacy of generics and now biosimilars) may be able to accept and manage the risk of a larger, future biosimilars portfolio. They may be less negatively affected by a biosimilar earning $300 million than other R&D-based firms.
Merck’s decision to spin-off its lower-revenue brands and biosimilars into a separate company may be an underlying strategy to address the future. It will allow the parent to focus on its mission of innovation (and potential blockbusters), while collecting marketing agreements on lower-earning biosimilars.
Pfizer and Amgen have created internal structures that allow them to focus separately on their biosimilars and reference brands, without demanding unreasonable performance from the former (at least so far).
A company like Coherus Biosciences is unique, beginning as a biosimilars-only firm. It has hedged its bets with research on an innovator product for the treatment of a liver disorder.
It does seem that the future of the US biosimilar market will rely on several somewhat arguable assumptions. As the patents for new biologic classes expire, industry watchers will focus their attention on both new players and the interest of established firms. One thing will remain sure though—the US biosimilars market will continue to evolve on a different path than that of Europe.