At October’s GRx+Biosims meeting, we sat down with Joshua Salsi to discuss how a company like Biocon Biologics is facing the rapidly evolving regulatory and biosimilar market access environment. The conversation involved the difficulties in making strategic decisions about molecules that may launch many years in the future, as well as the sustainability of the industry through challenging times.
Biosimilars Review & Report: Within the past two years, the biosimilar industry has been subjected to several significant initiatives that will affect the future of this sector. The Inflation Reduction Act, the stunted sales of adalimumab biosimilars and the introduction of private labeling models for access and sales are just some examples. I’m interested in how senior industry executives are viewing future opportunities for biosimilar development. Has it changed the calculus for potentially high-value biosimilars like Opdivo® or mid-value products Simponi®? How are you approaching these decisions based on the environment today?
Joshua Salsi: In the U.S. biosimilar market, we are definitively at an inflection point. The promise of biosimilars is well understood. At Biocon Biologics, we are now responsible for the commercialization of our own products after the acquisition of the biosimilars business from Viatris, we’ve focused heavily on access to affordable medicines and on the patients themselves. That’s the foundation for what we do.
Then, we look at this increasingly complex market. In the first phase of biosimilar origination, we look at the IQVIA data: What’s the value of the market for a specific reference drug? What’s the opportunity? Should we pursue that market? That approach likely applies throughout the industry, not just at Biocon Biologics.
That straightforward approach is evolving now, for a few reasons. First, we must consider who is the manufacturer of the reference product under review—each manufacturer is competing differently. They continue to compete differently in the marketplace, and that ultimately influences how these biosimilars convert.
Second, who will be the competitors and how many will be in the space? The order of entry is important here. We’ve seen that from historical data, whether it’s been on the pharmacy coverage or medical coverage side; they’re converting at different rates for different reasons. But the opportunity is variable, based on the number of competitors and your order of entry into the category. So, that’s important to evaluate as well.
Third, we have to continue to look at the landscape and how it is changing from an innovator perspective. This is really hard to do, because we’re making decisions 10 years in advance for molecules and spending hundreds of millions of dollars. We want to be sure there will be a market for us to compete in 10 years from now. Meaning, the market opportunity cannot be dissolving, by moving on to more innovative therapies or different formulations by the time we commercialize.
So, I think the decision making has to be done in a predictive, analytic way, where we are balancing quantitative and qualitative information and stage-gating that process, breaking down the entire development sequence into a series of stages with check points throughout. This is necessary to ensure that we’re getting a return on our investment.
Are there further opportunities for us to be more selective in our reference product targets? Yes, we are taking a thoughtful approach to identification to make sure that we’re understanding where those opportunities are moving forward and what’s the best fit for our organization.
BR&R: Does this have the effect of driving companies such as your own to start looking more at lower-revenue reference products, which may have less market competition at launch?
Salsi: This is an option. A lower-valued product may have one or two competitors versus a product with very high revenues, which may have up to 15 potential biosimilar competitors in development. It must be a factor, especially for an organization like ours. We have to be very thoughtful and strategic about the decisions that we’re making, because we are a completely vertically integrated biosimilars organization—from bench through manufacturing to regulatory to commercial to the patient.
On the other hand, we aren’t a novel-drug manufacturer that has additional and incremental resources, so we have to be very thoughtful about how we select those drug targets. It goes back to my point about really making sure that we’re maximizing the value and the opportunity in that marketplace from a data perspective when we’re making these decisions for molecules that are going to our pipeline.
Managing ASPs and Pricing Floors in General
BR&R: Do you view the co-branding or private labeling models that were introduced this year as contributing to biosimilar industry sustainability or are they a barrier to the health of biosimilar makers?
Salsi: Our market will continue to evolve, and we will continue to look for areas and opportunities to capitalize on the various stakeholders and channel partners that we have…
BR&R: That’s a very diplomatic response!
Salsi: But that’s also the reality, right? Every company continues to evolve in the space. We are definitively seeing the medical benefit side and the pharmacy benefit side evolving in very different directions. The medical benefit side, I would say that biosimilar adoption, especially in some of the traditional monoclonal antibodies for oncology treatment being at about 80% is a great feather in the biosimilar adoption cap.
The challenge on the medical benefit side, as you know well, is average sales price (ASP) management. It’s very complex, and it is something we need to manage every quarter, because the market is experiencing ASP declines at a rapid rate. Ultimately, the ASP calculation is built on a branded model that is more sustainable. For biosimilars, ASPs and subsequently the “net per unit” for a given product will diminish over time as the contract prices fall, so that accounts are not underwater.
On the pharmacy benefit side, we need to find ways to continue to put pressure on the reference manufacturers. How do we get to a place where we find ourselves in a “biosimilars-first” environment? I don’t have the exact answer for this.
Nobody is thrilled with the speed of conversion from Humira® to biosimilars, so how can we change that? How can we bend that curve to drive that level of sustainability for the industry and the cost savings that patients deserve, because back to a point that we discussed a bit earlier, the investment is significant, and the time commitment is significant. We have to continue to look for ways to mitigate the cost of getting these assets to market and the time it takes to get these assets to market—and then make sure there’s a market for us to truly compete in. Are we competing with the reference manufacturer or are we competing with other biosimilars? It’s a challenge.
BR&R: Yes, which brings me to a more practical question. As you’ve mentioned with the medical benefit biosimilars, there’s a bit of difficulty in some drug categories in managing the lowest an ASP will go and retain profitability. Yet, it has taken several years for these medical benefit products to reach that point.
On the pharmacy benefit side, we’ve seen how quickly adalimumab prices fell in terms of overall discounting, whether it’s through rebates or through net prices, or a combination (to 85% or more below the wholesale average cost of the reference drug). Now, it seems we’ll likely follow a similar path with Stelara® biosimilars.
How do you manage that almost immediate drop-off in biosimilar value? Of course, if you have marketing partners, you might be sharing revenue with them as well, further squeezing margins.
Salsi: I absolutely agree with you. The multimillion-dollar question is: what does sustainability look like in these categories? I don’t have the final answer. What we’ve seen in the U.S. is that it is truly a hybrid market, with elements of traditional generic contracting and elements of branded pharmaceuticals with commercial teams, sales teams, marketing, and patient-support programs. And that only increases the pressure.
To your point, everybody is playing with contractual ideas, how we identify channel partners, and who has control in the category to make those decisions and have that level of influence. No one has identified the silver bullet yet.
BR&R: It looks to me that if you’re big pharma, biosimilars may not be your area of interest anymore. Eight years ago, you may have expected to earn $1 billion in a quarter on an adalimumab biosimilar, compared with the $50 million you’ve actually earned. How do you justify that to shareholders? On the other hand, it may be a very different story for a company that has a large portfolio of lower-revenue products, and even generics. Then expending resources on each new incremental product makes more sense, just adding to that portfolio. That’s one mechanism for biosimilar sustainability. But it has to be for the right type of company.
Salsi: You hit on a key factor, that we’ve definitely seen that not all biosimilar manufacturers are created equal. Some of them are hybrids with generic organizations, some of them are hybrids with brand organizations, and then some are standalone. I think that’s one of the things that puts Biocon Biologics in a unique position, the fact that we are truly vertically integrated and global in nature. It gives us that scale and that capacity to be flexible, make quick decisions, and try and drive to those levels of sustainability. But that’s where we are currently.
