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Potential pitfalls for biosimilars

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Fusion is the natural process used by the sun to produce its own energy. For decades, scientists have been working to harness nuclear fusion to produce power for human use. The exciting idea driving this effort is that, if we could successfully capture fusion, we could have cheap, unlimited, pollution-free energy from seawater for billions of years.1

Problem is, reproducing the concentrated heat and radiation found inside the sun is proving to be extremely difficult here on earth. The only way we’ve been able to do it so far is inside a thermonuclear explosion.1

So, the joke goes that fusion is the power of the future – and always will be.2

Here’s another case of high expectations that’s a little closer to home. Many people are counting on huge cost savings from new biosimilar versions of biologic drugs – over $100 billion within the next few years.3

However, the process of creating and marketing biosimilar drugs is just now getting underway. As we have seen in the previous installments of this series here and here, there are serious questions about what will happen next:

  • What will happen as biologic drugs start to lose their patent protections and begin the transition to lower-cost biosimilar versions?
  • Will we see a smooth and orderly transition to less-expensive biosimilars , similar to the way we see now with generics?

It certainly is possible that we will eventually see a relatively stable and predictable glide-path that governs the transition from biologics to biosimilars. Perhaps that will require additional legislation, as was the case when the Hatch-Waxman Act created a faster and simpler way for generic manufacturers to produce approved forms of traditional branded drugs.4

The other possibility is that we will see and indefinite period during which biologic manufacturers will use every possible legal stratagem to prolong their multitude of patents for years. In the example previously given of Humira®, we are speaking potentially of many years past the initial FDA market exclusivity period.5

infographic diagram to inform

The most obvious consequence of a prolonged patent battle between Humira and a biosimilar is cost. It is not yet known where Amgen will price their Humira biosimilar if and when it comes to market, but some analysts predict a discount of roughly 15%.6

But for however long the court proceedings drag on, there will be no discount. Millions of RA patients and their plan sponsors will continue to pay some of the highest prescriptions prices of any RA medicines.

If this second possibility becomes the norm, we may find a new, bitter joke making the rounds: “Biosimilars are the lower cost drugs of the future – and always will be.”

Implications

The problem is that the Humira legal strategy could spread to other biologics facing patent loss. And in fact, this may already be the case.

Recall our earlier discussion about Zarxio, the first biosimilar product approved in the U.S. A full year passed before there was a second (Inflectra®, a biosimilar to Remicade) which was approved in April of this year.7

Despite the FDA approval, Inflectra is not yet for sale in the U.S. And Johnson & Johnson has said it plans to defend Remicade's patents against competition. During a recent investor call, Johnson & Johnson said that the company doesn't expect biosimilar competition in 2016.8

As a result, Zarxio is still the only biosimilar for sale for any product in the U.S.7

But the main point we learn here is that Johnson & Johnson is looking to several patents that they intend to defend, including one which extends to 2018 and another that extends to 2027.

Will litigation change competitive incentives?

If this technique of indefinitely extending patent litigation becomes the norm, there could be a follow-on effect with serious consequences for competition in these markets. The graph below explains why.

Looking to the left under “Traditional generic,” the graph shows that a typical generic drug can come to market in just a few years for between $2-5 million.9 Meanwhile, on the right we see that developing a biosimilar might cost between $100 - $200 million, and take eight to ten years.10

Both generic makers and biosimilar makers must build these costs into the financial assumptions that drive their business decisions.

Graphic comparing development time and costs for traditional generics and biosimilars

We already know that the high cost to bring a biosimilar to market will limit how many of them we see compared with ordinary generics.4 There are only a handful of companies with the resources to spend that kind of time and money, and even they will be forced to carefully choose which drugs they can attempt to make.9

Adding another 5 or 6 years to the end of this process, as the Humira example is suggesting above, would substantially increase the development time.

If biosimilar makers have to assume spending prolonged periods in legal limbo, waiting for the chance to recover their investment, it could change their financial calculation about whether it makes sense to enter the market in the first place. This would lead to reduced competition and higher prices over the long term.10

Other possible responses

As noted, only a relative handful of companies have the financial and intellectual resources to compete in the biosimilar market. For the most part these will tend to be part of a small group of companies, including those already established in the generic market, such as Teva, Sandoz, Cangene, Biocon, and Dr. Reddy’s.4 Either working alone, or in collaboration with even bigger traditional pharmaceutical manufacturers, these companies will have options for how they will enter the biosimilar or follow-on marketplace.

These options might include declining to fight an existing branded biologic on its own terms, when the result would only be lower prices and an open market. For example, they could decide to simply enter an application for a new biologic drug, emerging with all new patents and new market exclusivities. The new drug would be closely patterned after the existing one, but with enough of a difference to be classed as a new drug.4

Another option begins by reasoning, “We are committed to spending between $100 million to $200 million to bring a biosimilar to market. Why spend it to just copy someone else?”

This logic argues instead for what are called biobetters.

Biobetters are drugs developed to compete with existing biologic drugs.11 Like biosimilars, they are not identical to the original biologic, but unlike biosimilars, it is not their goal to see how closely they can resemble a reference product. Instead, biobetters seek to go a step beyond the original drug.11 They may aim to improve a drug’s clinical profile by altering the drug’s structure and/or improving its formulation. These changes might make a drug easier to administer and last longer in the body.11

Biobetters start with a validated biologic drug target with an established market. They are also able capitalize on any advances in science and genetic engineering that have transpired in the years since the original drug was developed.4

The goal is to innovate a relatively simple change in the development process or molecule design that results in a different and improved drug that could actually replace an existing biologic and take all of its market share, rather than simply compete for a slice of that market. If successful, this strategy would make developing a biosimilar a rather pointless exercise.12

This chart summarizes the main considerations in determining the costs and risks of biosimilars versus biobetters:

Biobetters do face some potential drawbacks. For one thing, they would need to undergo all of the trials and other testing as any other new drug, with their attendant costs. This will further limit the number of companies that can offer replacements to existing biologic drugs.11

Another potential drawback is the “me-too” question. Once the biobetter reaches the market, the question becomes, ”Just how much better is it, after all?”

As previous generations of traditional “me-too” drugs have found, doctors and insurance companies are not always impressed enough to start using/covering the new drugs.12

In the U.S., biobetters would be considered completely new drugs, and so all new patents and market exclusivities would apply to them.12 These approaches have obvious appeal for the drug makers, but they would leave patients and payers with fewer competitive options.

What to look for

Certainly there is no shortage of thoughtful observers who are optimistic about the potential for biosimilars. They may point to the much-anticipated final guidance recently released by the FDA as promoting a new certainty around the biosimilar regulatory regime.13, 14 Based on these and other considerations, these experts are confident that we are poised to see rapid growth in the number of new biosimilar drugs entering the US market in the next few years.14, 15, 16

Supporting this view, the biosimilars pipeline seems very robust. For example, there are some 160 drugs in development just for the half-dozen or so most popular biologic drugs facing patent loss by 2020.16

It will be very interesting to monitor the future numbers of biosimilars in the pipeline compared to new biologic compounds. If the number of biosimilars stays flat or shrinks, it could be a sign that manufacturers see a weakening financial incentive to invest here.

One possible clue about the near future is that Amgen apparently does not plan to take their biosimilar to market at or near the time of the AbbVie patent expiration on Humira (late 2016).17 Instead, Amgen has been reported saying that they don’t expect to reach the market until sometime between 2017 and 2019.17 This could indicate that they have reconciled themselves to a prolonged legal struggle.

No one can say how this situation will unfold. Even experienced lawyers who specialize in biotechnology patent law are unwilling to make firm predictions.16, 18

However, with so many billions of dollars at stake, it seems reasonable to think that companies will eventually prefer to avoid lengthy and expensive litigation and try to reach other arrangements. (For one example, we can just refer back to the compromise arrangement between Crestor and its generic competitor.)

Those of us who work for or with the entities responsible for the financial risk side of this business are naturally anxious to see a rapid expansion of less-expensive biosimilar drug options. However, there are at least some signs that it may take years for the FDA, the legal establishment and drug manufacturers of all types to work their way through all of the scientific, financial, and legal issues at stake.

References

  1. National Academy of Engineering. Grand Challenges: Provide Energy from Fusion. Accessed at: http://www.engineeringchallenges.org/challenges/fusion.aspx on 05.18.2016.
  2. BBC. Will We Ever Have Reliable Nuclear Power? Nov. 18, 2014. Accessed at: http://www.bbc.com/future/story/20130726-will-we-ever-have-nuclear-fusion on 05.18.2016.
  3. Pharmaceutical Commerce. Biosimilars represent a $56-110-billion savings potential in 2016-2020, says IMS Institute. Updated: April 16, 2016. Accessed at: http://pharmaceuticalcommerce.com/latest-news/biosimilars-represent-a-56-110-billion-savings-potential-in-2016-2020-says-ims-institute/ on 04.20.2016.
  4. Congressional Research Service. Follow-On Biologics: The Law and Intellectual Property Issues. Jan. 15, 2014. Accessed at: https://www.fas.org/sgp/crs/misc/R41483.pdf on 03.24.2016.
  5. Bidness Etc. Why AbbVie was not Impacted by Amgen Humira Biosimilar Submission. Nov 30, 2015. Accessed at: http://www.bidnessetc.com/58311-why-abbvie-was-not-impacted-by-amgen-humira-biosimilar-submission/ on 02.19.2016.
  6. Bloomberg BNA. Amgen's Humira Biosimilar Accepted for FDA Review. Jan. 27, 2016. Accessed at: http://www.bna.com/amgens-humira-biosimilar-n57982066621/ on 05.23.2016.
  7. Biopharma Reporter. Zarxio one year on: US biosimilars market still riddled with uncertainty, expert. March 9, 2016. Accessed at: http://www.biopharma-reporter.com/Markets-Regulations/Zarxio-one-year-on-Questions-remain-around-US-biosimilar-market on 03.21.2016.
  8. FiercePharma. Celltrion threat on Remicade in U.S. no sweat for J&J. Apr 20, 2016. Accessed at: http://www.fiercepharma.com/pharma-asia/celltrion-threat-on-remicade-u-s-no-sweat-for-j-j on 04.20.2016.
  9. Health Affairs, 33, no.6 (2014):1048-1057. Regulatory And Cost Barriers Are Likely To Limit Biosimilar Development And Expected Savings In The Near Future.
  10. Matrix Global Advisors. The Economic Viability of a U.S. Biosimilars Industry. Feb. 2015. Accessed at: http://static1.1.sqspcdn.com/static/f/460582/25983845/1424796699187/MGA_biosimilars_2015_web.pdf?token=8q2Fgfqbg6uB1MtMzDGIfsmfcBs%3D on 04.15.2016.
  11. Bioprocess Online. Where Did The Biobetters Buzz Go? April 2, 2015. Accessed at: http://www.bioprocessonline.com/doc/where-did-the-biobetters-buzz-go-0001 on 04.15.2016.
  12. Biopharma Reporter. Generation of biobetters could push out biosimilar development, says expert. April 23, 2014. Accessed at: http://www.biopharma-reporter.com/Bio-Developments/Generation-of-biobetters-could-push-out-biosimilar-development-says-expert on 04.15.2016.
  13. Biopharma Reporter. US FDA finalizes three guidance documents tied to biosimilar science, quality. May 5, 2015. Accessed at: http://www.biopharma-reporter.com/Markets-Regulations/US-FDA-finalizes-three-guidance-documents-tied-to-biosimilar-science-quality on 03.21.2016.
  14. Nature Reviews/ Drug Discovery. Patent Watch: Have the biosimilar floodgates been opened in the United States? Vol. 14, May, 2015.
  15. PharmExec.com. Patent Strategy Implications in the Biosimilars Space. Apr 11, 2015. Accessed at: http://www.pharmexec.com/patent-strategy-implications-biosimilars-space on 02.29.2016.
  16. Intellectual Property Magazine. Maximising potential. July/August 2013. Accessed at: http://www.smart-biggar.ca/files/030-031-IPM_July_August_2013-FO-pharma.pdf on 02.29.2016.
  17. Reuters. U.S. patent office rules against Amgen Humira challenge. Jan 14, 2016. Accessed at: http://www.reuters.com/article/us-amgen-abbvie-humira-idUSKCN0US2WV20160114 on 02.19.2016.
  18. PharmExec.com. Biosimilars: The Litigation and Patent Challenges to Come. May 4, 2015. Accessed at: http://www.pharmexec.com/biosimilars-litigation-and-patent-challenges-come on 02.29.2016.