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Biosimilars in the US – Will They Deliver on the Promise?

Research presented from Mylan Pharmaceuticals at the recently held 2016 annual meeting of the American Society of Clinical Oncology (ASCO) generated excitement within the medical community in demonstrating comparable clinical trial results of their biosimilar drug Myl-14010 to Herceptin from Roche.1 This is the first biosimilar drug to show comparable effects to a biologic drug in the treatment of cancer. Herceptin has been a game-changer in the treatment for about 25% of breast cancer patients.1 The hope and promise is that biosimilars will bring less expensive copies of many biologic cancer drugs, thereby increasing affordability and expanding access of these therapies around the world and not just in developed economy pharmaceutical markets. While this is the hope, the question is whether biosimilars will deliver on this promise? What does economic analysis predict regarding the price effect of biosimilars in the US drug market?

While many people may regard the relationship between biologic and biosimilar drugs as similar to branded and generic drugs, and thus so too are price prediction effects, most comparisons would be false. Small molecule chemical-formulated generic drugs are seen by healthcare professionals as equivalent copies of their branded originator drug, with bioequivalent outcome effects being very close according to FDA guidelines. A biosimilar on the other hand is not an exact copy of a biologic since the underlying development mechanism is a living organism. Acceptance by healthcare professionals that biosimilars will produce the same effects as biologics will require greater evidence and confidence before such interchangeability can occur. Given this different mechanism of development, replicating that exact process to produce the same outcome effect is very difficult, complex, costly, and subject to variation, adding to the non-interchangeable nature of biosimilars to biologics.2

While producing a generic drug is fairly easy, the production of a biosimilar requires highly specialized labor knowledge and expertise, and capital equipment. While generic company production facilities can be used to produce multiple lines of small molecule generic drugs, biosimilars are mostly injected or infused, meaning their production facilities are highly specialized and are not easily transferrable to the production of other drugs. This means companies producing biosimilars face higher upfront fixed costs in development, establishment of facilities, and higher marginal costs in production. These factors also mean that the longer run competitive dynamics in biosimilar markets are fundamentally different than generic drug markets. Given the relative ease to produce small molecule generic drugs, additional firm entry into markets after the initial 180-day 1st generic drug exclusivity ensures aggressive competition, driving down generic drug prices, thus accelerating brand to generic substitution, until generic drug prices equal marginal cost. With biosimilars, the specialized labor and capital equipment requirements increase upfront costs, thereby limiting future dynamic competition, and thus limiting future price erosion. Weaker statutory incentives for biosimilar manufacturers may also mean higher barriers to entry and thus less competition to drive down prices of biologics as seen in small molecule branded-generic drug markets.3

What does prior experience suggest as to future price effects from the introduction of biosimilars? For the US, experience is very limited given only two biosimilars have been approved, and none for the treatment of cancer which represents the therapy drug class with the second highest spending.4 Biosimilars have been available within the European Union since 2006, with 22 having been approved, being widely utilized, and generating savings to healthcare systems.2 Using the European experience as a predictor for the US market, the key factor on estimating the price effect is the degree to which a biosimilar is deemed as “interchangeable” to the original biologic. Recent published evidence concluded the following from the European experience of biosimilars:

The European experience suggests, however, that once these are in place, the US biosimilar market may well emerge as bimodal: Initially modestly discounted biosimilars deemed noninterchangeable with the original products will compete to become the initial treatment of choice in new patients. Subsequently, a second market may be anticipated for those products able to meet the FDA’s higher standard for “interchangeability.” In that market, discounts may be more dramatic.5

Thus the analytics of predicting future price effects will depend on “interchangeability” as evidenced by the FDA and acceptance by healthcare professionals. Therefore, it would be a mistake today to assume a small molecule brand-generic drug pricing model to the biologic-biosimilar relationship. Quality control systems need to catch up to the science of reproducing biologics, and biosimilars require receiving FDA and healthcare professional acceptance on bioequivalency. Thus, while biosimilars may not deliver on the promise today, the future still holds that the promise can be delivered. Only time will tell.




References

1. Winslow R and Loftus P. Cancer drug passes milestone. Wall Street Journal 2016; June 4-5; B1, B4.
2. Collis S. Biosimilars are complex, costly to produce. Wall Street Journal 2016; May 27: A10.
3. Falit B, Singh S and Brennan T. Biosimilar competition in the United States: statutory incentives, payers, and pharmacy benefit managers. Health Affairs (Millwood) 2015; 34: 294-301.
4. IMS Institute for Healthcare Informatics. Medicine use and spending in the U.S.: a review of 2015 and outlook to 2020. Parsippany, NJ: April 2016.
5. Megerlin F, Lopert R, Taymor K, et al. Biosimilars and the European experience: implications for the United States. Health Affairs (Millwood) 2013; 32: 1803-1810.

Tags: Sales and Marketing, Pharmaceuticals, biosimilars, Pharma Analytics

George A. Chressanthis

Dr. George A. Chressanthis is currently Principal Scientist at Axtria. His research focuses on pharmaceutical commercial issues and their intersection to drug industry business, public policy, clinical treatment decisions, patient outcomes, and cost of care. He spent 14.5 years from 1995-2009 working in the pharmaceutical industry, with the majority of his time at AstraZeneca Pharmaceuticals LP US headquarters leading teams in support of sales force strategy, sales operations, sales analytics, and other commercial analytical functions as well as leading numerous special projects for senior leadership.

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