Market Outlook for Biosimilars

This article is part of PharmTech's supplement "API Synthesis and Formulation 2009."

Biosimilars, also known as follow-on biologics, generic biologics, and biogenerics, remain somewhat controversial, but their potential to yield cost savings is inspiring pro-biosimilar legislation in developed pharmaceutical markets such as Europe and the United States. Key patents for several first-generation biologics are set to expire, or have already done so, in the seven major markets (i.e., France, Germany, Italy, Japan, Spain, the United Kingdom, and the United States). Although these drugs represent the low-hanging fruit of the biologics world in terms of ease of development and commercialization, they are unlikely to provide biopharmaceutical manufacturers with the monetary gains that complex biologics bring. First-generation biosimilars will likely provide indirect benefits such as allowing the key biosimilars players to establish themselves within the industry. Europe, Germany in particular, is emerging as the testing ground for biosimilars, but the US market will prove to be the real prize for biosimilars manufacturers.

(ARTBOX IMAGES/GETTY IMAGES)

Biosimilars uptake set to grow

To date, three biosimilars have entered the European market: somatropin, epoetin alpha, and granulocyte-colony stimula-ting factor. These products have yet to have a significant effect on the market, however. Despite this slow start, biosimilars are expected to garner peak sales of $2 billion in 2014 in the seven major markets (1). Given that major-market sales of branded epoetin market totaled $9.9 billion in 2008, it is not surprising that biosimilar epoetin alpha is forecast to dominate the biosimilars market. Biosimilar insulin-glargine is expected to be the second-largest product. Yet, with the exception of insulin-glargine, the biosimilars uptake is forecast to decline after 2014, primarily because second-generation biosimilars will enter the market at that time (see Figure 1).

Figure 1: Prediction of biosimilar sales by product in seven major markets (i.e., France, Germany, Italy, Japan, Spain, the United Kingdom, and the United States) during 2008–2019. HGH is human growth hormone. IFN is interferon. A hyphen indicates that a product was not launched. Sources: 2008 sales data are from MIDAS, IMS Health, March 2009; forecast for 2009–2019 is from Datamonitor. (FIGURE COURTESY OF THE AUTHOR)

One of the major advantages of epoetin alpha is that it is a small, simple biologic (it contains 165 amino acids), with a relatively inexpensive and well-established manufacturing process. These considerations facilitate molecule development and characterization and therefore reduce perceived risk.

In contrast, standard human insulin is a poor commercial prospect for biosimilars because new insulin analogs are available. But human insulin biosimilars may provide an attractive market entry point for companies that plan to build a reputation in diabetes treatment as part of a long-term strategy. Standard human insulin does not have patent protection and, as one of the simplest and best-characterized biologics, it is simple and inexpensive to manufacture. In fact, numerous companies in the emerging markets of Eastern Europe, India, and China already market generic human insulin. In 2008, the insulin-analog market was worth $7.2 billion and accounted for 77% of all insulin sales in the seven major markets (2). This market is a lucrative opportunity for biosimilars companies. sanofi aventis's (Paris) long-acting Lantus (insulin-glargine), which represented 38% of all seven major markets' sales of insulin analogs in 2008, is the most lucrative product in this class. Datamonitor anticipates that biosimilars for this product will enter the market first in the US and Germany in 2014. Adoption of biosimilars in these markets and in the UK is predicted to result in peak sales of $530 million by 2019.

US market set to dominate

The US market represents the greatest opportunity for the emerging biosimilars industry and is forecast to constitute nearly 90% (or $1.75 billion) of the biosimilars market in 2014 (1). The size of the US market and the generic erosion that characterizes it make it an attractive prospect for would-be biosimilars manufacturers. Success in this market, however, is contingent on the establishment of a biosimilars approval pathway. Datamonitor anticipates a pathway to be in place by 2010 and expects the first biosimilar to enter the US market in 2013.

In July 2009, an approval pathway came one step closer to reality when the House Energy and Commerce Committee overwhelmingly approved the America's Affordable Health Choices Act. This act would guarantee manufacturers of branded biologics an exclusivity period of 12 years. These terms are similar to those attached to a bill passed by the Senate's Health, Education, Labor, and Pensions (HELP) committee, on July 13 (4).

The historically low generic drug use in France, Italy, and Spain will contribute to slower and more limited biosimilar adoption in these markets, which are collectively forecast to constitute a maximum of 25% of biosimilar sales in the seven major markets in 2012. High brand loyalty and physicians' greater discretion in prescribing mean that marketing will be critical to promoting biosimilar uptake. Therefore, only the large and established companies with high brand recognition are anticipated to succeed in those markets.

Although guidance for biosimilar approval was issued in Japan in 2009, this market is unlikely to experience significant biosimilar sales. It is expected to contribute at most 2% to sales in the seven major markets in 2012. The slow acceptance of conventional small-molecule generics in Japan suggests that biosimilars will face an uphill struggle there. The key stakeholders' distrust of the quality and efficacy of generic drugs has hindered uptake to date (see Figure 2).

Figure 2: Sales of biosimilars by country in the seven major markets during 2008–2019. US is United States. UK is United Kingdom. Sources: 2008 sales data are from MIDAS, IMS Health, March 2009; forecast for 2009–2019 is from Datamonitor. (FIGURE COURTESY OF THE AUTHOR)

Although the growth of the biosimilars market has been slow, particularly in the US, global pharmaceutical trends, combined with increasing healthcare expenditures, have created momentum that could make the biosimilars market even more lucrative than the generics market. Figure 3 outlines some of the major reasons for and against the acceptance of biosimilars.

Figure 3: Causes for (orange) and obstacles to (blue) the uptake of biosimilars. (FIGURE COURTESY OF THE AUTHOR)

Market advantages

The high cost of biologics will spur payers to look to bio-similars for cost savings. Specialty drugs are often priced at a premium to recoup development costs from a limited market size, and the absence of generic-drug competition has given biologics manufacturers freedom to set prices as they see fit. Specialty biologics are among the most expensive medicines, ranging in price from $5000 to more than $300,000 per year. Annual consumer expenditure for specialty biologics has grown by 12–15%, which is double the rate of nonspecialty drugs in the US (3). The high price of branded biologics and the expectation that their use will overtake that of small-molecule drugs provide a significant reason for biosimilars adoption.

The number and use of biologics are expected to grow, thus expanding the potential biosimilars market. Specialty biologic drugs are used by 3% of the US population. This proportion will increase as more biologics are approved and the indications for those already on the market are expanded (3). Demographic trends are also increasing the use of biologics. As the global population ages, the incidence of complex and chronic diseases that require specialty biologic treatments grows accordingly. The number of approved or soon-to-be-approved biologics in the US has more than doubled every five years since 1990. More than 800 biologic drugs are in the pipeline, and the number of biologics on the market will continue to climb (3).

The need to contain rising healthcare costs is the primary motive for regulatory and legislative reform aimed at promoting the use of biosimilars. Datamonitor expects that biosimilars uptake will mirror that of generic drugs and occur more rapidly in the mature generic-drug markets (i.e., Germany, the UK, and the US) but face obstacles in France, Italy, Japan, and Spain.

Market obstacles

Providing sufficient demonstration of biosimilarity to alleviate fears and promote acceptance remains one of the major issues facing biosimilars manufacturers. Demonstration of biosimilarity will increase physicians' willingness to prescribe biosimilars and reduce patients' resistance to these products. In principle, biosimilarity should be relatively easy to prove for the simple and well-characterized biologics such as insulin, epoetin, and human growth hormone. The larger and more complex biologics such as monoclonal antibodies (mAbs), however, present a challenge. These biologics tend to be the most lucrative and attractive prospects for biosimilar manufacturers, who must establish sophisticated development processes to realize their potential.

Rebates and service agreements between branded manufacturers and healthcare providers or insurers are likely to be a considerable deterrent to the adoption of biosimilars. Biosimilars manufacturers must either offer better incentives than the branded companies do or offset them through competitive pricing. Datamonitor anticipates that branded companies will defend their market share aggressively against biosimilars, probably through competitive pricing. Biosimilar manufacturers must therefore contend with the frequently longstanding relationships between branded companies, healthcare providers, and patients, and find a way to mitigate them. The strategy may be straightforward for biosimilar manufacturers that are affiliated with branded companies. But the traditional generic-drug company that is not accustomed to the marketing and promotion that will almost certainly be required in the emerging biosimilars market faces a substantial challenge. Moreover, these companies may lack the logistical and financial power to offer the same level of service and support that branded companies routinely offer. In an environment such as this, a collaboration that unites the technical know-how of small companies with the marketing prowess of larger companies will be critical.

Lessons from Europe

As the first region to introduce guidelines for the approval of biosimilars, Europe has emerged as the testing ground for these products. In 2008, the European Medicines Agency (EMEA) said that a biosimilar approved through the pathway is as safe and effective as any other EMEA-approved drug (5). Not surprisingly, all of the biosimilars were first launched in Germany, the largest generic-drug market in Europe. Although a European regulatory pathway now exists, general acceptance and a path to market—in terms of pricing, pricing, reimbursement, and distribution systems—remain to be established (6). Creating demand among the key stakeholders is critical and requires information that counters branded companies' promotional efforts.

Lessons learned from Europe's hospital and retail markets should also be considered. Biologics in Europe tend to be dispensed in hospitals, although there is considerable regional variation for molecules such as epoetin and filgrastim. In a hospital, pharmacy managers and payers are likely to influence physicians' prescribing behavior, making this setting an attractive one for biosimilars manufacturers. Moreover, anecdotal evidence suggests that patients are often unwilling to switch drugs after leaving the hospital (1).

But drug acquisition through the tender process may make it difficult for biosimilars manufacturers—who may be less familiar with the process or lack the established relationships—to sell to hospitals. Acquisition in the retail sector, while more fragmented, is far more transparent, and competition based on price is a real possibility. This conclusion is partly borne out by biosimilar epoetin alpha sales in 2008 in Germany, where uptake was almost eight times faster in the retail sector than in hospitals (2).

Lessons from Japan

Although Japan is the second market to establish an approval pathway for biosimilars, the products are not expected to enter the Japanese market until 2012 at the earliest. Biosimilars in Japan will be subject to the same approval process as branded drugs, with the concomitant delays to which branded manufacturers have grown accustomed. The median approval time for new drugs in Japan was 34.3 months in 2007 (7). Therefore, Datamonitor assumes that biosimilar approvals in Japan will take at least three years. Only one biosimilar, epoetin, is known to have been submitted for approval, and market entry is likely to occur significantly later than in the other markets.

Major players

Because the development and marketing of biosimilar drugs is much more demanding than it is for traditional generic drugs, the number and types of players entering the market will be limited.

Sandoz. In 2007, Sandoz (Holzkirchen, Germany) was the first company to launch a biosimilar—Omnitrope (human growth hormone)—in Europe. Although Omnitrope failed to gain significant market share, the move enabled Sandoz to establish itself as a major biosimilars player in an industry where gaining physicians' trust is as important as price. The company reinforced its position by being the first to launch biosimilar epoetin in 2007. Sandoz's parent company Novartis (Basel) lends it the marketing experience and infrastructure of a branded organization.

Teva. It is unsurprising that Teva (Petach Tikva, Israel), one of the largest generic-drug companies in the world, is looking to establish itself in the biosimilar arena. Although the company is initially concentrating on Europe, it perceives the US biosimilars market as a genuine, albeit tougher, opportunity and expects it to boom in the middle of the next decade (8). Teva has three biologic manufacturing facilities and sells biosimilar interferon alpha 2b in some of the less-regulated markets such as China and Lithuania. In partnership with Savient Pharmaceuticals (East Brunswick, NJ), Teva markets Tev-Tropin (recombinant human growth hormone) in the US. Many view the product as a biosimilar despite the fact it was granted full approval.

Branded pharmaceutical companies. Some branded biologic companies have begun to produce biosimilars in hopes of maintaining their market share. Manufacturing biosimilars would be relatively quick and easy for most branded companies. In December 2008, Merck & Co. (Whitehouse Station, NJ), AstraZeneca (London), and Eli Lilly (Indianapolis, IN) announced their intention to enter the biosimilars arena. Merck & Co. plans to launch six biosimilars between 2012 and 2017 (9).

All three companies are using the biotech expertise they gained through acquisitions. Merck & Co. acquired GlycoFi in 2006, whose technology enables control of glycosylation during biopharmaceutical production. Merck bought the biosimilars portfolio of Insmed, which includes drugs for patients undergoing chemotherapy, in February 2009. AstraZeneca acquired MedImmune, whose products include the FluMist influenza vaccine, in 2007, and Eli Lilly acquired ImClone, maker of the Erbitux cancer therapy, in 2008.

The importance of an established marketing presence has particular significance for biosimilars because companies need to assure physicians that their products are as safe and efficacious as branded products. Initial adoption will greatly depend on physicians' opinions. Companies that already have relationships with physicians will have an edge over smaller enterprises focused on small-molecule generic drugs for whom marketing is less important. As a result, branded pharmaceutical companies will be able to take advantage of their marketing infrastructure and their reputation to promote acceptance.

GlaxoSmithKline and Johnson & Johnson. Although Glaxo-SmithKline (London) produces biologics and aims to establish a biopharmaceuticals operation, the company decided that biosimilars are a high-risk venture that requires too much investment for too little return, at least for the present (10). Johnson & Johnson (New Brunswick, NJ) has taken a similar line, stating that the considerable investment required for conducting clinical trials would drive up costs excessively (11).

The US outlook

Cutting healthcare spending by promoting generic drugs and biosimilars is at the heart of President Obama's healthcare agenda (12). One of the biggest hurdles to a biosimilars pathway, however is determining the marketing exclusivity period for branded biologics. Branded biologics manufacturers state that 14 years is required to recoup costs, stimulate innovation, and attract future investors. The Generic Pharmaceutical Association strongly opposes this view and instead favors an exclusivity period of three to five years (13). Obama has voiced support for a seven-year exclusivity period.

On March 17, 2009, Rep. Anna G. Eshoo (D-CA) introduced a biosimilars bill titled the Pathway for Biosimilars Act (HR 1548) in the House of Representatives. The bill's goal was to provide the US Food and Drug Administration with a process to review and approve biosimilars. The issues of interchangeability and market exclusivity were highly contentious. The Eshoo bill provides 12 years of data exclusivity for a new biologic and extends that period to 14 years if the biologic is approved for a new indication during the first eight years after its original approval. The bill includes a six-month exclusivity period for pediatric use. The Eshoo bill also requires new clinical trials comparing the immunogenicity of the biosimilar to that of the branded biologic to be submitted in the biosimilar approval application.

The Eshoo bill, which was favored by small- and large-molecule innovator companies, gained strong bipartisan support in the House. The bill gained further momentum when the Senate HELP Committee approved an amendment that incorporated the Eshoo bill's key principles, including a minimum of 12 years' data exclusivity for biologics. In July 2009, the House included the Eshoo bill in its healthcare-reform legislation, marking another step forward toward a US regulatory pathway for biosimilars (4).

Interchangeability

Some believe that the ability of pharmacists to substitute a biosimilar for a branded biological is vital to promoting biosimilars and creating a viable market. Given the novelty, the inherent molecular complexity, and the associated safety concerns about biosimilar drugs, automatic substitution or interchangeability will not occur in the short term. Sufficient clinical data may be generated to make interchangeability a possibility in the long term. All of the five major European markets (France, Germany, Italy, Spain, and the UK) have banned automatic biosimilar substitution. Physicians in the UK are encouraged to prescribe brand-name biologics. The Eshoo bill does not permit outright interchangeability and recommends that FDA issue guidance on this topic.

The advent of the biosimilars market has spawned a flurry of ill-defined terms to describe the relationship between bio-similars and their reference products. Although EMEA focuses on comparability and not interchangeability, the US bills make a distinction between the two. FDA defines interchangeability as "the situation where scientific data convincingly demonstrate that two products with very similar molecular compositions or active ingredient(s) can be safely substituted for one another and have the same biologic response and not create adverse health outcomes" (14). Therefore, automatic substitution, which has spurred the growth of the generics market, is unlikely to have a prominent role in biosimilars uptake in Europe or the US.

Looking forward

The first biosimilars introduced to the market represented the low-hanging fruit of the biologics world. They were relatively simple molecules with established safety profiles, compared with mAbs, which have considerably higher barriers to entry. Although mAbs are currently the most profitable biologics, biosimilar mAbs are still a long way off. In addition to their complexity and the hurdles to their manufacture, mAbs still enjoy patent protection because they were introduced fairly recently (15).

At least three Indian companies have launched or are developing mAbs. Dr. Reddy's (Hyderabad, India) and Biocon (Bangalore, India) both brought biosimilar versions of Roche's (Basel) Rituximab to market. Specialty generic-drug company Zenotech Laboratories (Hyderabad, India) claims to be developing a range of at least six biosimilar versions of mAbs already, including Rituximab (which is ready to enter Phase III) and Herceptin (trastuzumab) (16). The degree to which these monoclonals are similar to their respective reference products is unclear, and the products would warrant considerably more clinical testing before approval in any of the major markets.

Biologics such as Amgen's (Thousand Oaks, CA) rheumatoid arthritis drug Enbrel (etanercept) are expected to lose sales to biosimilars earlier than will mAbs. The market for biosimilar Enbrel is potentially more lucrative than that for first-generation biosimilars, and its high cost is already prompting payers to limit drug use in markets such as that in the UK. A biosimilar could therefore erode not only sales of branded Enbrel, but also sales of newer branded competitors (17).

Undoubtedly, the level of biosimilars adoption will have as much to do with the outcome of a public relations battle as with practical matters such as biosimilars' price and performance compared with those of biologics. Competition from biosimilars manufacturers will prompt innovator companies to modify their strategies to sustain revenue growth. Attaining biotech expertise through partnering and acquisitions will be one technique for success, but some branded companies will solidify their own presence in the biologics space. Regardless of the approach, product-positioning strategies will be imperative in a market where building reputation and trust among physicians, patients, and payers will be key to acceptance in the short term.

Bornadata Bain, PhD, is the director of strategic development for healthcare at Datamonitor, 111 Devonshire St., Boston, MA 02109, tel. 617.722.4606, fax 617.523.6993, bbain@datamonitor.com

References

1. P. Narang, Datamonitor Biosimilars Series 2008: Forecast Analysis (DMHC2477, Datamonitor, London, June 2009).

2. IMS Health, MIDAS sales data (Norwalk, CT, March 2009).

3. S.W. Schondelmeyer, L. Purvis, and D.J. Gross, Rx Watchdog Report: Trends in Manufacturer Prices of Specialty Prescription Drugs Used by Medicare Beneficiaries 2004 to 2007 (AARP Public Policy Institute, Washington, DC, 2008), http://assets.aarp.org/rgcenter/health/2008_15_specialty_q407.pdf, accessed March 2009.

4. S. Sutter, "US House Panel Adopts 12-Year Exclusivity," Scrip (3457), 1 (2009).

5. I. Schofield, "EC Defends Biosimilar Safety," Scrip (3358), 1 (2008).

6. I. Schofield, "Biosimilars Struggling with the Market," Scrip (3359–3360), 23 (2008).

7. Business Monitor International, "First Biosimilar Submitted for Approval," in BMI Industry Insights—Pharma and Healthcare, Asia (London, November 27, 2008).

8. W. Marth, remarks at Bank of America Securities Health Care Conference (Las Vegas, NV, 2008).

9. E.F. Licking, "Merck's Ambitious Plans for Follow-On Biologics," BioPharma Today (2008), www.biopharmatoday.com/2008/12/mercks-ambitious-plansfor-follow-on-biologics.html, accessed August 18, 2009.

10. A. Witty, remarks at Goldman Sachs CEOs Unscripted Healthcare Conference (New York, 2009).

11. T. Staton, "J&J Says 'Not Now' on Biosimilars" FiercePharma April 8, 2009, www.fiercepharma.com/story/j-j-says-not-now-biosimilars/2009-04-08, accessed August 20, 2009.

12. I. Schofield, "Biosimilars Regulation Finds Its Feet," Scrip (100), 63–64 (2008).

13. N. Faigen, "No End in Sight for Biosimilar Data Exclusivity Debate," Scrip Online (November 27, 2008), www.scripnews.com/policyregulation/No-end-in-sight-for-biosimilar-data-exclusivity-debate-9064?autnID=/contentstore/scripnews/codex/7f1db720-bc67-11dd-9174-39d0f0d8ae6e.xml, accessed August 20, 2009.

14. FDA, "US FDA Considerations: Discussion by National Regulatory Authorities with World Health Organization (WHO) on Possible International Non-Proprietary Name (INN) Policies for Biosimilars," (Center for Drug Evaluation and Research, Silver Spring, MD, 2006), www.fda.gov/cder/news/biosimilars.htm, accessed March 26, 2009.

15. S. King, "Big Pharma Turns to Biologics for Growth" (DMHC2190, Datamonitor, London, May 2006).

16. "Zenotech Builds Pipeline of 'Generic' Monoclonals," Scrip (3237), 10 (2007).

17. T. Ignjatovic, Biosimilars Series: Strategic Issues—Potential Remains Uncertain (DMHC2337, Datamonitor, London, October 2007).