The Big Business of Biosimilars

Uptake of biosimilars to the market – and the potential savings – will depend on physician education and confidence.

To gain approval from the U.S. Food and Drug Administration (FDA), a biosimilar must be proven to have  highly similar pharmacologic, safety, and efficacy profiles to an already approved biologic product. The hope is that biosimilars will carry a very different price tag, though.

“This is a very important opportunity for the health system to save billions in a way that maintains the highest standards of care for patients and their loved ones,” said Caleb Alexander, MD, co-director of the Johns Hopkins Center for Drug Safety and Effectiveness in Baltimore, Maryland. “There are exciting opportunities ahead for patients, providers, and the health system to get better value for their health-care dollar.”

To speed approval, the Affordable Care Act included an abbreviated licensure pathway for biosimilars through the Biologics Price Competition and Innovation (BPCI) Act of 2009. According to the FDA, the goal was analogous to that of the Drug Price Competition and Patent Term Restoration Act of 1984 (Hatch-Waxman Act), which encouraged generic competition for drugs, but provided incentives for new drug innovation.1

ASH Clinical News spoke with Dr. Alexander and other experts about how biosimilars might affect the pharmaceutical marketplace.

“This is a very important opportunity for the health system to save billions in a way that maintains the highest standards of care for patients and their loved ones.”

—Caleb Alexander, MD

The Economics of Biosimilars

Unlike conventional medications, which are made through a synthetic chemical process, biologics are derived from nature and cannot be cloned. “Biosimilars are considered highly similar but not an exact copy,” said Joseph P. Fuhr Jr., PhD, adjunct professor of pharmaceutical and health-care business at the University of the Sciences in Philadelphia. “Biologics are generally liquids made in batches, and those batches can vary from one to the next.”

There also is a vast economic difference between traditional pharmaceuticals and biologic products.

The average daily cost of a conventional, chemical drug in the U.S. is $2. At $45 per day, biologics cost approximately 20 times that amount.2 In 2016, Roche, the manufacturer of bevacizumab, reported a group revenue of about $25 billion, driven largely by three of its biologic cancer drugs: rituximab, trastuzumab, and bevacizumab.3 If a biosimilar to any of those products acquired even a small share of the market, it would stand to earn a large sum.

“Pharmaceutical manufacturers consider several factors when deciding whether to enter the market, including the risks and costs of entry and the expected return,” Dr. Alexander said. “But for a $6 billion drug like bevacizumab, for which the first cancer biosimilar was approved, I would expect to see other biosimilars down the pipeline soon.”

Biosimilar manufacturers are not the only ones who stand to benefit from the introduction of more biosimilars to the marketplace. In theory, consumers win when there is increased competition.

“We have limited experience in the U.S. with biosimilars,” said Dr. Alexander. “We don’t know exactly how they will be priced and how they will ultimately affect the economics of the pharmaceutical marketplace.” However, basic laws of economics suggest that biosimilars will affect the pricing of their reference drugs, he added.

“Biologics are generally liquids made in batches, and those batches can vary from one to the next.”

—Joseph P. Fuhr Jr., PhD

Biosimilars Pricing

Observations from the chemical drugs market, of which generic drugs make up 84 percent, suggest that health-care savings tend to accrue over time, according to Carlos Sattler, MD, vice president and head of clinical development and medical affairs at Sandoz, a division of Novartis that specializes in the development of biosimilars.

“During the first six months after a manufacturer loses exclusivity of its branded product, the market typically has three players maximum: the generic producer who was first to file for marketing authorization, the authorized generic manufacturer, and the originator,” he explained. “Following the exclusivity period, we typically see a dozen or more competitors entering the market, which causes rapid price erosion.

“The situation is different for more complex generics, where there are fewer players,” Dr. Sattler said. “The decline in originator sales tends to occur over a longer period. We expect a similar dynamic with biosimilars in the U.S.”

Sandoz is the manufacturer of the first FDA-approved biosimilar, filgrastim-sndz, which is a biosimilar to filgrastim, a granulocyte-colony stimulating factor.4 Filgrastim-sndz launched at a roughly 15 percent discount from its reference product.

Compared with the discounted prices of generic drugs for traditional medications, a 15 percent reduction may seem modest. But according to Dr. Sattler, that price reflects the complexities of developing and producing biosimilars. These products require high investment and long-term commitment; it might take an average of seven to eight years and $200 to $300 million to bring a biosimilar to market.

Dr. Fuhr added that developers of biosimilars may compete with second-generation versions of their reference products. “If biologics are going to cut prices [in response to competition with biosimilars], manufacturers of the reference drugs may develop second-generation products that theoretically improve on the originals,” he explained. “If they are that much better, then the biosimilar is left competing against a second-generation drug.”

Ideally, though, the introduction of biosimilars at discounted prices will increase access to many life-saving medicines.

A study referenced by Dr. Sattler estimates that 1.2 million U.S. patients could gain access to biologics by 2025 as the result of biosimilar availability.5 “These data suggest that women, lower-income [patients], and elderly patients would particularly benefit from access to biosimilar medicines,” he said.

Gaining Traction

For patients to benefit from access to biosimilars, clinicians need to start prescribing them. “Price is only one aspect driving uptake of biosimilars,” Dr. Sattler said.

Dr. Alexander agreed, adding that pricing may be determined by the degree to which systems facilitate or hinder the substitution of biosimilars for the branded or reference products. “The more friction in the market, and the more friction that prevents biosimilars from being substituted for branded biologics, the less discount we should expect,” he said.

This friction may result from provider concern about the comparability of the products. The FDA has strict safety and efficacy standards so that health-care professionals can reliably use biosimilars in practice. However, unlike generic drugs, they lack automatic substitution and interchangeability.

“Thus far, the FDA has not approved a biosimilar deemed to be interchangeable, which is a higher burden of proof than the regulatory threshold used for a biosimilar,” Dr. Alexander noted.

Building physician confidence through education will be a key factor driving adoption of biosimilars, Dr. Sattler added.

“We are beginning to see healthy, competitive pricing markets as a result of lower list prices and lower average selling prices for reference products with approved biosimilars in the U.S., but this is a nascent market,” he said. “It is important to keep educating physicians, payers, and other key stakeholders about the important role that biosimilars play in the future of health care.” —By Leah Lawrence

References

  1. U.S. Food and Drug Administration. Information on biosimilars. Accessed October 2, 2017, from https://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm576112.htm.
  2. Blackstone EA, Fuhr PJ Jr. The economics of biosimilars. Am Health Drug Benefits. 2013;6:469-78.
  3. Pagliarulo N. Roche sales buoyed by cancer drugs. Accessed October 4, 2017, from http://www.biopharmadive.com/news/roche-sales-buoyed-by-cancer-drugs/423032/.
  4. U.S. Food and Drug Administration. FDA approves first biosimilar product Zarxio. Accessed October 3, 2017, from https://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm436648.htm.
  5. Association for Accessible Medicines. Biosimilars in the United States: providing more patients greater access to lifesaving medicines. Accessed October 4, 2017, from http://biosimilarscouncil.org/press-releases/aam-biosimilars-council-releases-2017-report-on-patient-access-to-biosimilars-in-the-united-states.