Going the biosimilars way….

While on the surface, the market for biosimilars may seem very attractive, several significant obstacles seem to threaten its smooth growth. The PricewaterhouseCoopers report on biosimilars highlights the opportunities and hindrances anticipated for generic companies in the long run. The Express Pharma Team provides you with a snapshot of the report

Biopharmaceutical drugs (or biologics) have outperformed the pharmaceutical market because they address areas of clinical need, which are unmanageable with conventional therapeutics (including many cancers and genetic diseases), and they are able to command a premium price. At some point the patents protecting the successful biologics will expire and the potential of a sizeable market will attract generic companies. However the process to develop a biosimilar is more complex than that of developing a generic copy of a chemical-based compound.

PwC has recently released a report titled Opportunities and Barriers in the Biosimilar Market: evolution or revolution for generics companies? The report discusses the commercial implications and the market entry requirements for biosimilars by reviewing the commercial factors driving the market and the ways in which conventional generics companies are required to reconfigure their business models to compete in the biosimilars market.

The obstacles

Although the sales of most biopharmaceuticals are highest in the USA, there is unlikely to be a regulatory pathway there for most biosimilars until after 2010. The commercial decision about which products to develop will depend on the level of sales a biosimilar can generate in Europe. Also, according to European guidelines, prescribers should specify the International Non-proprietary Names (INN) or brand. This hinders generic prescribing and substitution.

The biosimilar market will have a lot of price competition, even when there is only one or very few players for a given product, hence constraining the commercial opportunity. The consensus seems to be that a 20-25 percent discount is enough to increase the switch back to first generation products. In many cases, the same companies market the original and second generation products and there may not be a marked difference in price. So, several potential biosimilars will also face competition from second generation products having more convenient administration schedules.

Since, there is a lower probability of a successful launch, the company's R&D investment comes under high risk as developing biosimilars is costlier than developing chemical-based generics, so is the required capital investment and operating costs of manufacturing. As if this wasn't enough, the report says that the manufacturers of branded products are more likely to use sophisticated defensive tactics, including the development of complex biopharmaceuticals, to maintain share.

Generic companies tapping the biosimilars market for the first time, will face competition from existing "innovator" companies, who have already learnt to manage the risks inherent to biological drugs.

As biopharmaceuticals are less stable than chemical based pharmaceuticals, they have a shorter shelf life and so require cold chain distribution. This automatically increases the cost and complexity of distribution. Brand development will also be very important, which will make direct marketing to small numbers of specialists highly competitive. Another problem is that there are a limited number of drug delivery companies, many of which are already working exclusively with the branded incumbents, which makes the improvisation of delivery devices difficult and will hinder the enhancement of product differentiation.

Since the effects of the biosimilars differ from those of the chemical-based generics, physicians are bound to question the relative safety and efficacy and so, high promotional investment will also be required. Therefore, the market may develop slowly, which is one reason why the commercial rewards are likely to be limited in the short term. Not only that, but also the difference in composition and the lack of established methods to determine bioequivalence indicates that regulators will be much stricter when considering an application for marketing approval of biosimilars. This will require more extensive clinical testing for biosimilars than for conventional generics. Even post-approval safety monitoring is expected to be compulsory, at least for the first few biosimilar products approved.

The biopharmaceutical market

Today, biopharmaceuticals account for between 10 percent and 15 percent of the world pharmaceutical market, with sales in the USA alone reaching around $30 billion (Table 1). According to Frost & Sullivan, the biosimilars markets in Europe and the USA has the potential to generate sales of $16.4 billion by 2011 at an average annual growth rate of 69.8 percent. However, the commercial and scientific hurdles facing biopharmaceuticals hinder the entry of generic biopharmaceuticals.

Many commercially important biopharmaceuticals, including monoclonal antibodies (MAbs) such as Herceptin (trastuzumab), Rituxan (rituximab) and Humira (adalimumab), were launched fairly recently and won't be open to generic competition for long and many are protected by a complex series of patents that even the biggest, most experienced generics companies find impenetrable. Nevertheless, Table 1 shows that several 'blockbuster' biopharmaceuticals have reached, or are reaching, the end of their patent protection.

Commercial drivers for biosimilars

Some of the world's most successful drugs are biologicals. Biopharmaceuticals' commercial value derives from their ability to address otherwise unmet needs. The potential savings for healthcare payers and consumers is, potentially, a huge driver of demand for biosimilars. Cheaper versions would result in greater utilisation of biological products, especially in Europe. In addition, some products may be used in indications where they are not currently considered cost-effective. Nevertheless, in the short-to medium-term, the commercial opportunity for biosimilars will likely be limited to six products. Table 2 summarises the current sales, growth, percentage of market share accounted for by the USA and predicted sales in 2010 for six leading biosimilar targets.

Figure 8: Core competencies that biosimilar companies need to survive

Severe price competition also reduces sales significantly after the first year on the market, hence, constantly eroding the product portfolio (see Figure 7).

What generics need to do

The companies need to balance the risks and rewards when considering whether to enter the biosimilars market. The risks in the biosimilars market fall somewhere between those of standard generics and New Chemical Entities. According to the report, the generic companies will need to build or acquire:

Regulatory expertise to navigate the evolving regulatory pathways in Europe and in the US.
Product development and clinical trials expertise to demonstrate bioequivalence and develop new delivery devices. A biosimilar can add significant value and enhance product differentiation by using an improved delivery device.
Sales and marketing exp-ertise to develop a brand without the backup of an INN that is used by prescribers and to compete effectively with strong market defence strategies from the branded players. Many leading generics players already have experience in marketing their products, especially in Germany. Others will need to set up a sales team, either fully in-house, using a contract sales force or both. They could also partner with a bigger pharmaceutical or generic company.
PricewaterhouseCoopers expects to see increased partnering for R&D, manufacturing and sales, and therefore, increased supplier power.
Post-approval safety moni-toring skills. While the practicalities of setting up this post-approval monitoring are achievable, they represent a barrier to entry. As most biosimilars will have different INN to the originator, drugs cannot be prescribed generically or undergo generic substitution.
A financial structure capable of making investments in manufacturing assets or securing third party manufacturers before the product is launched. For example, cell culture facilities require sizeable capital and labour investment, taking, on average, three to five years to construct and costing $250-$450 million.

Where can they go?

The report analyses six countries that can offer a little or a lot of scope for biosimilars in their pharma market.

Germany has a very well developed generics market, with high prices and high biopharmaceuticals usage, high growth and widespread acceptance of generics, which makes it a very attractive European market for biosimilars. This is a key advantage for generics firms already in the German market—promotion and detailing is expected to be crucial to success in the biosimilars market.

The United Kingdom also has a well-developed generics market and high prices. Nevertheless, it imposes considerable downward pressure on prices because of which the value of generic sales had declined in 2005. On one hand, the cost pressures and a well developed existing generics market indicates that the UK is likely to be a fast adopter of biosimilars. On the other hand, relatively low usage of biologicals reduces UK's attractiveness as a biosimilars market.

In France, generics do not account for a significant proportion of the pharmaceutical market. However, government policies to reduce the healthcare budget deficit provided new impetus to the generic sector in the last few years. Generics entering the market from 2006 onwards must be priced 50 percent below the original brand price. So, the companies considering entering the French market need to balance the high biologicals use and high generic market growth, against low prices and low acceptance of generics. This makes the French generics market less lucrative than that in, for example, Germany.

In Italy, brands dominate the market and the generics market is poorly developed. Despite the absence of strong pro-generic policies and negative attitudes to generics among doctors, branded generics helped boost generics' share of the market in recent years. In summary, the Italian market is characterised by high use of biologicals, rapid uptake of new products, acceptance of branded generics and medium growth.

In Spain, the legacy of counterfeit products and low medicine prices impeded the development of the generics market. Reference pricing, which erodes price differentials between off-patent brands and generic versions, as well as the few incentives for doctors to prescribe generics or for pharmacists to dispense cheaper alternatives, undermines the market. Hence, generic consumption in Spain remains among the lowest in the EU, although the Spanish market is characterised by high use of biologicals and a rapid uptake of new products.

The USA is the world's most dynamic generics market. However, the US market is also one of the toughest, with strong competition exerting considerable pressure on margins. The lack of a regulatory pathway means a market for most biosimilars will not develop before 2010.

editorial.ep@expressindia.com