Archive: Biosimilars: Financial Predictions of an Emerging Market

The first biosimilar drug recently received FDA approval, and the introduction of this class of specialty pharmaceuticals into the U.S. market will affect prices at all points along the pipeline, from development to end use.

“Biosimilars are going to insert competition into the space, into the therapeutic modalities used today in different disease states,” says Russel Allinson, CEO and Chief Clinical Officer of Therigy. Based in Maitland, FL, Therigy creates web and mobile applications, provides consulting services, and delivers business intelligence for the specialty pharmaceutical market.

Biologics are typically derived from living cells. Used in the diagnosis, treatment and prevention of disease, they include therapeutic proteins, DNA vaccines, monoclonal antibodies and fusion proteins. Because of their size (they are often referred to as “large-molecule” medicines), they are generally presented in injectable form.

Biosimilars, sometimes called follow-on biologics, are biological products that are copies of an original and, as is the case with generic chemical-based drugs, can be manufactured only after the patent for the original medication has expired. Biosimilars must have no clinically meaningful differences from the branded, U.S.-licensed original in terms of purity, potency, and safety for the consumer.

Only one, Zarxio, by Novartis, has received FDA approval. Another 11 are in the development pipeline.

Experts and agencies forecast market potential slightly differently, but they all foresee large growth coupled with significant profit potential for the manufacturer, as well as savings for pharmacy managers and consumers. With many original biotech drugs on the verge of losing their exclusivity, biosimilars stand to be market winners.

Biologics as a whole, including both originals and biosimilars, are expected to outpace overall pharma spending and could represent as much as 20 percent of the total market value by 2017.

Market potential for biologics could reach $100 billion by the end of the decade, according to a recent article in Barron’s, with biosimilars accounting for a quarter of those sales.

Allinson’s prediction is similar.

“It’s been surprising. We are working with several manufacturers that have biosimilars in the pipeline,” he said. “Based on what we’re seeing here at Therigy, it’s possible that biosimilars could account for $20 billion in market potential over the next five to seven years.”

Biological products are expensive to produce as well as to use. Millions are spent in research and development for the original. Development of a biosimilar can take $100 million and as long as eight to ten years – compared to less than $5 million and three to five years work for a chemical generic. Unlike generics, biosimilars must undergo extensive testing, both non-clinical and clinical, to be considered safe and effective.

Biosimilars almost have to repeat the original trials, Allinson notes, to prove their safety and efficacy.

Treatment prices are correspondingly high. Overall, annual treatment in the U.S. with an original biologic can cost anywhere from $25,000 to $200,000 or more a year. Hepatitis C medications can cost $1,000 a day, Allinson says.

The Wall Street Journal recently reported that a single dose of the oncology drug Neupogen, a recombinant granulocyte colony-stimulating factor that can reduce the incidence of infections in cancer patients receiving immunosuppressant regimens, manufactured by Amgen, can cost between $300 and $500. Many patients receive multiple injections a week.

Novartis, maker of Zarxio, a biosimilar of Neupogen, has said it will not disclose the price of the drug until it becomes commercially available, commenting only that it would be “competitively priced.”

A patent infringement suit by Amgen has delayed Zarxio’s entry onto the market.

Nevertheless, biosimilars represent significant savings for people whose lives or quality of life depends on biologic medications. Express Scripts has projected savings of some $250 million between 2014 and 2024 if the 11 likeliest biosimilars make it to market.

In Europe, where biosimilars have been allowed for nearly a decade, both access and affordability have seen positive correlations. In Germany, for instance, an EPO biosimilar resulted in a €60 million annual savings in the first year on the market. Estimates put the savings for biosimilars in Germany alone as high as €1 billion annually by 2017.

Shrinking healthcare budgets contributed to the impetus to bring biosimilars to market. The Patient Protection and Affordable Care Act (Affordable Care Act), signed into law by President Obama on March 23, 2010, included the Biologics Price Competition and Innovation Act (BPCI Act). The BPCI, an amendment to the Public Health Service Act, created an abbreviated path to licensure for biological products that demonstrate that they are “biosimilar” to or “interchangeable” with an FDA-licensed biological product.

The market is complex and predictions must, of necessity, take into account what Allinson called “a lot of moving parts.”

The threat of legal action, the need for manufacturers to provide services to support their products and the importance of having a robust pipeline all will be factors in whether biosimilars can stay competitive in the market.

“At the end of the rainbow,” Allinson said, “this is a huge financial opportunity for manufacturers of biosimilars as well as for those responsible for paying for them."

“New original biologic products will continue to come to market at ever increasingly expensive price points. The potential to reduce or attenuate the overall cost escalation of biologics through the approval of biosimilars is a necessary and worthwhile goal.”