The biosimilars market in the U.S. will not grow large overnight. However, over the next 4 to 10 years, a lot of companies are going to become players. During this same period, health plans, pharmacy benefit managers, Medicare, and Medicaid are going to start reaping savings by buying less expensive biosimilars. By a decade from now, sales of biosimilars will be creating new winners and losers in the overall biopharmaceutical marketplace.
In light of this, I was recently asked: what should a developer or investor be looking to achieve over the next year in the area of biosimilars? What should they be looking to achieve in the years after that?
Over the next year: Assuming the U.S. biosimilar law survives the upcoming Supreme Court decision (concerning the constitutionality of the President Obama’s health reform program), then the last roadblock to creating a biosimilar marketplace in the U.S. will have been eliminated.
The key, then, becomes: how quickly can FDA complete the multiple steps necessary to establishing a viable system for evaluating and approving biosimilars. Here are some key indicators to watch in judging the agency’s progress:
- the number of investigational new drug applications (IND's) being issued for biosimilars, which would be a “leading indicator” of slowdown or snags in FDA’s initial intake process;
- publication of draft policy guidances dealing with critical details such as nomenclature, label warnings, unique names, etc. (until these issues are settled, FDA will be reluctant to approve anything);
- revised estimates of how many fees the FDA expects to collect each year under the new biosimilars user fee program (a rough gauge of FDA’s view of its timeframe for approvals).
For those looking to be active in the biosimilars market, the next year provides an opportunity to build and strengthen relationships with payers (especially purchasing groups). Payers are going to be focused on the strength of clinical, animal and laboratory data comparing the biosimilar to the original biologic product. There will be a need for biosimilars to be offered at a discount to the cost of the original, but high-quality biosimilars with a 15%-20% discount will dominate the market over biosimilars of questionable quality with 30% to 40% discounts.
Similarly, it is not too soon for companies developing biosimilars to start working with practicing physicians—to calm their fears that they will be forced to use inferior biosimilar products that will result in treatment failures. While payers, not physicians, will drive this market—payers will avoid products likely to generate criticisms and resistance from physicians.
Finally, for those interested in the biosimilars market–stay cool over the next year. Biosimilars are a sure bet for the long-term. However, it will (quite legitimately) take FDA some time to create the new complex approval pathway that is required.
Looking beyond one year. Stay cool is still good advice. Some companies are going to slip behind or drop their investments because of corporate pressures for short-term return on investment (ROI). The biosimilars market is a battle for the long-haul and will belong to those who are prepared to stay the course through the several years it will take for FDA to develop policies and implement them consistently.
Another potential restraint on developers’ and investors’ commitments over the next several years is the persistent allegation that the U.S. biosimilars market will be limited unless FDA makes a determination that a biosimilar is interchangeable with the original product. However, FDA has placed a low priority on establishing a pathway for determining that an approved biosimilar is also interchangeable with the original biologic product.
This “controversy” is a throwback to the implementation of Hatch-Waxman in the 1980’s. At that time, substituting copies for originals was a new concept, quality was low, purchasing was decentralized, and doctors had no incentive to prescribe generics. Allowing forced substitution of FDA-approved generic drugs because they were “interchangeable” was an important dynamic in the growth of the generic drug industry.
However, none of these same underlying conditions are present at the beginning of the U.S. biosimilars market—substitution is widely accepted, quality biosimilars will be available, purchasing is far more centralized, and physicians will have incentives to prescribe biosimilars. FDA designation of "interchangeability," key to generic drugs, is almost irrelevant to biosimilars.
As a final thought: the rise of generic drugs made it necessary for innovators to work harder to develop new, patent-protected products that were better than drugs available generically. The same dynamic is going to play out over the next 10 years for biologic products. The biosimilars pathway adds further urgency for innovator companies to be refilling their pipelines with products that are better than ones currently available.