Economic challenges weighed heavily in the air at the annual meeting of the Association for Accessible Medicines (AAM) called Access2024. These economic challenges cast a pall over both the generic and biosimilar presentations. Although the two areas are related in objective, they are experiencing enormous pressure from multiple sides.
The generic drug industry is facing strong headwinds, primarily because of its challenges in maintaining the drug supply chain in numerous important pharmaceutical categories. Several factors have lately contributed to the drug shortage issue, but the principal underlying reason is economics. Other important factors include relatively slow plant inspection rates by the US Food and Drug Administration, tornado damage at a major Pfizer manufacturing site, and reliance on off-shore facilities for production of active ingredients. However, the economic argument stands out: According to Doug Long, VP, Industry Relations at IQVIA, 58% of current drug shortages have been unresolved for at least 2 years, 84% involve generics drugs, and they mostly involve generic agents that cost less than $1.00 a pill.
Generic drug revenues, unlike those of the specialty pharmaceutical segment, have actually decreased in the last 10 years. Allan Oberman, President & Chief Executive Officer of Apotex, Inc, pointed out that the market is now valued at $55 billion, down $1 billion from 2014, but with many more competitors (around 300) seeking a share of that pie. “And 10 years ago, there was $98 billion in [drugs losing exclusivity] within 5 years. The future was very bright,” he said. “Today, fewer companies have significant marketshares. Competition has driven us to the bottom on price. And there is still $120 billion in [drugs losing exclusivity] in the next 5 years.” Clearly, if manufacturers are forced to work with unsustainable unit prices, they will not invest and develop generics in the future.
Mr. Long noted that fully 39% of approved generics never get marketed, which he suspects is mostly based on economic feasibility.
Biosimilar Competition Testing Manufacturers
This difficult scenario may sound familiar to biosimilar makers. In at least one category, the average sales price of a biosimilar has fallen below the manufacturer’s floor, causing them to reevaluate. Competitive pressures and failures of uptake for the pharmacy benefit–covered agents have put some manufacturers in the position of rethinking their future in biosimilars, including Pfizer and Coherus. Others may be contemplating the exits as well.
One big difference between the biosimilar and generic industries is the magnitude of competition. There are approximately 300 generic drug manufacturers, and the current number of biosimilar manufacturers worldwide who might commercialize in the US is around 30; this includes biosimilar manufacturers and their marketing partners, and several of which are also prominent generic manufacturers. Yet we’ve seen intense competition in certain biosimilar categories, and no one seriously believes that there will be nine adalimumab competitors heading into 2025.
The conference offered several views as to why the biosimilar companies seeking to make pharmacy benefit–covered agents may be handicapped in the US market. Pramod John, PhD, CEO, VIVIO Health, pointed out biosimilar manufacturers were wrong “to try to play the PBM rebate game (with Coherus Biosciences being the exception). Until the desire for rebates changes, there will be limited biosimilar uptake.” He noted that Coherus’ Yusimry®, available through CostPlus Pharmacy has a net price that is currently about one-third of that for Humira®, with virtually no uptake. “The intermediaries make more money on Humira than what Yusimry costs!” he said.
Pharmacy benefit manager rebates are being shifted towards administration and service fees, according to Nick Adolph, IQVIA’s Principal, US Market Access Strategy Consulting. This shift began a few years ago when there were specific initiatives to remove the pharmaceutical rebate safe harbor. Mr. Adolph added that biosimilar makers competing with AbbVie on rebates will have to match AbbVie’s sales teams. “And you will still need to obtain preferred positioning with the big 3 PBMs.”
Brian Hoffman, President, US Generics, Hikma Pharmaceuticals USA, remarked on the similarity in challenges between that the lack of uptake of biosimilar adalimumab and that for complex generics.
Whether the critical factors for biosimilar market uptake are truly rebate-related, or also involve the slow assignment of CMS coding, site-of-care payments, misaligned incentives, or the lack of additional incentives, one of the greatest issues facing the pharmaceutical financing system today is the lack of PBM transparency. Our next post will summarize remarks at the meeting addressing this issue.
