For years, copycat competition failed to significantly lower the costs of some of the best-selling prescription medicines in the U.S.
The launch of the first lookalike biologic drug in 2015 was heralded as a shift in large pharmaceutical companies’ pricing power, holding the promise of deep discounts on expensive, injectable treatments like Humira, Remicade and Herceptin. Yet years of disappointment followed, as the new competitors were either blocked from entering the market or unable to gain traction once they got there.
Now, experts say these so-called biosimilars are beginning to have a bigger impact.
More have poured onto the market after a slow start. The arrival of biosimilars in areas like cancer and autoimmune disease, where the annual cost of brand name drugs can exceed $100,000 annually, has given patients, doctors and insurers added incentive to make the switch. And, perhaps most importantly, the looming loss of patent protection on several lucrative branded biologics could give biosimilar makers a needed market opportunity.
“I think when the first ones came out … there was a hope for deeper discounts and more rapid adoption,” said Sonia Oskouei, vice president of biosimilars at drug distributor Cardinal Health. “As we went into the biosimilar experience we found that there was more to it than just price.”
Barriers to entry
Patents held by branded drugmakers have blocked some of the first biosimilars to be approved in the U.S. Erelzi, a biosimilar of Amgen’s anti-inflammatory drug Enbrel, was approved in August 2016. But due to the high patent walls Amgen built to shield Enbrel from competition, it won’t launch until 2029, more than a decade later.
The first wave of biosimilars has also been held back by aggressive rebating and pricing strategies by branded drugmakers, as well as insurer policies that together helped nullify the 15% to 30% discounts typically offered at first by the copycat drugs.
The anemic uptake of the first few biosimilars even spawned a high-profile court battle, pitting large pharmaceutical companies against each other. Pfizer, maker of the Remicade biosimilar Inflectra, sued Johnson & Johnson over alleged anticompetitive business practices, claiming its rival won preferred insurer status by threatening to withhold rebates if Inflectra was used before Remicade. The two parties settled the lawsuit in 2021.
Inflectra, the second biosimilar launched in the U.S., has now grown into a $600 million-a-year product. It has eaten into Remicade sales, which have dropped by nearly half since Inflectra’s first full year on the market in 2017. Two other Remicade biosimilars have launched since, with initial discounts of 34% and 57%. (Remicade is known scientifically as infliximab.)
U.S. infliximab sales, branded and biosimilar
In millions USD
Note Remicade (brand) is sold by Johnson & Johnson, while Inflectra and Renflexis (biosimilars) are sold by Pfizer and Organon, respectively. U.S. exports of Remicade reported by J&J are excluded. SOURCE: Data from companies.
Yet when compared to generic drugs, which can cost as much as 80% to 90% less then branded pills, the impact of biosimilars remains modest at best. For example, sales of Pfizer’s cholesterol drug Lipitor fell by more than half, from nearly $10 billion, in the first full year after generic entry in 2012.
The example of Lipitor hints at why generics have had a bigger impact on the price of small molecule drugs than biosimilars have had on biologics. The Food and Drug Administration has approved 18 Lipitor generics, while the most biosimilars approved and launched for any biologic drug is five, for Roche’s Herceptin. (There are seven approved biosimilars to Humira, yet none have launched due to patents.)
The estimated $100 million to $300 million cost to develop a biosimilar also acts as a deterrent to entrants, leading to a lower overall number of competitors and making biologic drugs “natural monopolies”, according to some analysts. By comparison, developing a generic small molecule drug can cost as little as several million dollars, and doesn’t require human trials to gain FDA approval as biosimilars do.
(Generic drugs are exact copies of their brand name predecessors, while biosimilars, being derived from cells, are not considered identical, only “highly similar.”)
“It appeared that the investment hurdle was preventing many of the biologics from having a biosimilar competitor,” Mark Trusheim, strategic director of the Massachusetts Institute of Technology’s New Drug Development Paradigms program, said of the early days of biosimilar research and development.
In one notable example, Momenta Pharmaceuticals in 2018 laid off half its workforce and discontinued biosimilar drug development, pivoting toward rare disease treatments in a move that later paid off with a $6.5 billion buyout by J&J. That same year, Merck & Co. and partner Samsung Bioepis stopped developing a biosimilar of Sanofi’s insulin Lantus.
Branded biologic drugs with most FDA approved biosimilars
|Branded drug||# of approved biosimilar competitors||Year of first entry||2021 U.S. branded drug sales|
Note: Humira biosimilar are set to launch next year, while two of the approved Neulasta biosimilars and one of the approved Remicade biosimilars haven’t been launched. *Sales converted from Swiss francs. SOURCE: FDA, companies
A shift may be underway, however, as biosimilar versions of cancer drugs arrive and new payment models reward doctors for prescribing them, experts said.
The models were driven in part by the U.S. Medicare program, which from 2016 through the middle of 2022 paid some cancer clinics via a reimbursement system that incentivized doctors to use lower-price drugs. As of June 30, 126 practices and five commercial payers were involved in the program.
“If you just look at standard Medicare, when you give a drug that’s more expensive and you get paid on the margin, you make more money,” said Lalan Wilfong, vice president of payer solutions and practice transformation for the U.S. Oncology Network at drug distributor McKesson.
Wilfong’s organization adopted biosimilars because it embraced the “value-based” care system that Medicare was trying to promote. “We learned very quickly that these drugs were safe and effective. We’ve also been able to markedly decrease the cost of care by switching to biosimilars,” he said.
Wilfong noted that some doctors initially hesitated to use biosimilars for patients whose cancers could be cured and any reduction in efficacy, however small, might reduce their chance of living. Those concerns eased as doctors gained experience with them.
Sales of cancer drug biosimilars have increased as a result. Last year, Amgen recorded $826 million and $479 million in U.S. sales for its Avastin lookalike Mvasi and Herceptin biosimilar Kanjinti, respectively. Roche’s sales for both have declined by more than half.
While adoption is rising, cancer drug biosimilars have typically entered the market with smaller discounts to their branded rivals, however.
U.S. trastuzumab sales, branded and biosimilar
In millions USD
Note: Herceptin sales are converted from Swiss francs. SOURCE: Companies
Medicare’s oncology care model has since ended, but will be replaced in July 2023 with another five-year program. Wilfong said his organization will continue to use biosimilars as it has signed value-based care contracts with non-Medicare insurers.
Medicare now has a further mandate to save money because of the recently enacted Inflation Reduction Act, which will allow it to negotiate with drugmakers over the price of some high-cost medicines, including biologic drugs. The Alliance for Accessible Medicines, which represents biosimilar manufacturers, opposes the law, arguing that market competition is the best way to lower prices.
A competitive test case
Outside of oncology, industry experts are watching the entry of biosimilars to AbbVie’s $20-billion-a-year inflammatory disease drug Humira for signs the balance of power might be shifting.
Unlike many of the biologic drugs that lost market exclusivity over the past seven years, Humira will within six months of its patent expiration have as many as seven biosimilar competitors, including Amgen’s Amjevita and, if approved by the FDA, an “interchangeable” biosimilar, Alvotech’s Hukyndra.
“We do anticipate the U.S system is going to shift significantly as [Humira] biosimilars enter the market,” said Chad Pettit, executive director of marketing and the global biosimilars commercial lead for Amgen.
The interchangeability designation sought by Alvotech would permit pharmacists to substitute the biosimilar for the biologic without a specific prescription for it from physicians. So far only one interchangeable biosimilar, Mylan and Biocon’s Semglee, has been launched in the U.S.
While important, the designation might not immediately translate into more prescriptions, said Ming Li, chief strategy officer at Alvotech. A small number of wholesalers and distributors typically buy most generic pills, while health insurers are the main customers for biosimilars.
“The go-to-market strategy is very much a branded strategy,” Li said.
In launching Humira copycats, biosimilar manufacturers will have to overcome physicians’ reluctance to switch stable patients. They will also compete with the most recent and popular formulation of Humira, which features a higher concentration of the drug, a thinner needle and removes a stabilizing chemical that is linked with injection pain.
Alvotech’s biosimilar duplicates this formulation of Humira, while a version from Boehringer Ingelheim that is approved as interchangeable uses the lower concentration formulation.
(Pfizer is seeking an interchangeable designation for its Humira copy and expects a decision by the end of the year. Alvotech is due an FDA verdict on interchangeability in December, although an initial application was rejected this month.)
A survey conducted earlier this year by the investment firm Bernstein found that 62% of rheumatologists are concerned about switching to biosimilars if insurers mandate it through contracts with drugmakers. Of those, nearly a quarter wanted to see clinical trial results and professional guidelines before accepting switching as a practice.
Bernstein’s survey also found rheumatologists were most concerned about the interchangeability of a biosimilar, followed by its formulation.
Competition will intensify further in 2024 as companies sign annual contracts, pressuring Humira sales more significantly.
Bernstein analysts believe the high number of available biosimilars will cause Humira price declines to resemble what typically occurs with generics, modeling a 60% decline by the end of 2025. At 10% of Humira’s current list price of nearly $80,000 a year, Bernstein analysts wrote, a biosimilar manufacturer could still earn a 35% gross profit margin.
Exception that proves the rule
Still, some remain more skeptical about the potential for biosimilars to significantly reduce healthcare costs on their own. “My suspicion is that Humira will be the exception that proves the rule,” Trusheim said.
He argued most biologics won’t draw as many competitors as Humira because there is less revenue at stake. Drugs that now make less than $1 billion a year may not face any competition at all, as biosimilar manufacturers focus their efforts on top-sellers.
One that might is J&J’s rheumatoid arthritis drug Stelara, which is being targeted by nine biosimilars in development. Others, however, have fewer. AstraZeneca’s rare disease drug Soliris, once the most expensive drug in the world, has just two, while Biogen’s multiple sclerosis drug Tysabri has only one.
If only one or two competitors emerge, steep price declines may not materialize. While modest discounts could save insurers money, it may not translate to patients, who would still face deductibles and coinsurance.
“If there is no financial benefit to the patient because copays are still going to be high, then what does a physician tell a patient?” said Trusheim.
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