While filling out the consent form for my annual flu vaccination at a local drugstore, a brand-specific question caught my eye:

Are you currently on home infusions, weekly injections such as Humira® (adalimumab), Enbrel® (etanercept), high-dose methotrexate, azathioprine or 6-mercaptopurine, antivirals, anticancer drugs or radiation treatments or Remicade® (infliximab)?

Representing three of the four largest selling drugs worldwide (US $30 billion annually), these complex biologic specialty pharmaceutical products are used for treating small patient populations.¹ They have vaulted to the forefront as dominate brands, positions historically reserved for primary care blockbusters used to treat common medical conditions.

What made this innocuous question so poignant is that by the time this article goes to press, the FDA will have approved biosimilar copies (the generic equivalent of a biologic) for all three drugs. These new biosimilars will be available at a fraction of the cost of the originals.

As pharmaceutical professionals, the transformational role these biosimilars and others will have on our industry in the imminent future cannot be overstated. The question is: is your company ready?

Prescient Regulatory Actions

The FDA was granted regulatory authority by the US Congress to develop the guidelines and processes required to approve biosimilar copies of biologic innovator drugs as an inclusive part of the Affordable Care Act passed in 2010.² To date, the first and only commercially available biosimilar was approved in 2015, nearly a decade after biosimilar drugs were first used in the European Union.

In general, a biologic copy of an innovator drug must be deemed biosimilar, meaning that there are no clinically meaningful differences in either the safety or efficacy profile between the biosimilar and the original innovator drug. There is a second, more expansive designation called interchangeability, which mandates that the drug be the same in any given patient, including switching a patient’s therapy from the innovator drug to the biosimilar. However, while statutorily authorized, to date, the FDA has not provided formal guidance nor a final pathway for companies to seek interchangeability approval status of their biosimilar product, despite Congressional inquiry last year as to the reason for the delay.

On July 12-13, 2016, companies representing two anti-TNF (tumor necrosis factor) biosimilar drugs went before the U.S. FDA’s Arthritis Advisory Committee seeking recommendation for approval of their 351K applications to market their products as biosimilar copies of original innovator drugs, one a copy of Amgen’s Enbrel® and the other a copy of Abbvie’s Humira®, which have been used to treat multiple diseases, beginning in 1998 and 2002, respectively.

After reviewing a plethora of data including clinical efficacy data not required for simpler, small molecule generic drugs that have been available for years, the committee unanimously recommended approval of both drugs and for all treatment indications. Additionally, for the first time, both biosimilar applications contained clinical data supporting the clinical switching of patients from the branded/innovator drug to the biosimilar, a regulatory prerequisite for interchangeability, where a pharmacy can automatically substitute the biosimilar for the branded.

On August 2, 2016, a meta-analysis of 19 studies involving anti-TNF biosimilars for Enbrel, Humira, and Johnson & Johnson’s Remicade®, the latter representing the second approved biosimilar by the U.S. FDA on April 5, 2016, was published in the Annals of Internal Medicine and concluded the following: “[p]reliminary evidence supports the biosimilarity and interchangeability of biosimilar and reference TNF-α inhibitors.”³

Following the Advisory Committee’s unanimous recommendations to approve in July, the FDA approved the biosimilar for Amgen’s Enbrel on August 30, 2016, with Humira to be formally approved by September 26, 2016.⁴

There are three noteworthy items about these two regulatory actions:

1. First, the FDA announced they found the drug applications biosimilar in advance of the Advisory Committee meetings.
2. Second, the Advisory Committee was unanimous in recommending approval of multiple indications based upon extrapolation of the limited indications clinically studied as part of the application.
3. Finally, the data supporting interchangeable was reviewed by the committee, even though the FDA has not issued definitive guidance on the matter.

The U.S. FDA is currently advising companies developing approximately 60 biosimilar projects representing more than 20 innovative biologic drugs already off patent or soon to be off patent. If last fall’s introduction of the first biosimilar in the United States—a copy of Amgen’s Neupogen® —was a watershed moment, FDA approval of the biosimilars for Enbrel and Humira will open the floodgates to an irreversible price-erosion tsunami.

A Perfect Storm

While it is certainly true that the manufacture of these large biologic drugs is much more complicated and cost intensive than that of simpler small molecule generics, that will not always be the case. Manufacturing processes are becoming standardized, yields are markedly higher, and disposables allow for rapid entry and quick turnaround of these limited quantity specialty drugs. Stainless steel could additionally offer volumetric multiplier capability if the market is large enough to justify (e.g. China).

On average, the price of biologic branded/innovator drugs is more than 20 times that of traditional small molecule therapeutics, thus providing a lot more flexibility for meaningful discounting.⁵

As the U.S. FDA reported about generic versions of traditional small molecule branded drugs, once multiple copies are available in the market, price erosion will be significant: as much as an 80 percent reduction of the original branded/innovator price.⁶ Thus, the standard script, parroted by pharmaceutical executives that biosimilars will only be 15-30 percent cheaper, will be wishful thinking at best.

In anticipation of the introduction of cheaper biosimilars, the list price of Enbrel was increased nearly 40 percent since 2015 and Humira’s price has increased 18 percent this year alone.⁷ These types of predatory price actions, involving expensive specialty drugs, have become commonplace in the United States and largely account for the multi-fold drug pricing differential when compared to other countries (TABLE 1).

It’s also why pharmaceuticals have become a dominant category in total United States healthcare costs.⁸

TABLE 1

Average Monthly Cost of Humira®
United States	$2,669
United Kingdom	$1,362
Switzerland	$822
South Africa	$552

Seeking to counter the reality that many first generation biologics no longer have primary patent monopolies protecting the molecule, the industry has responded with a multitude of patent defense strategies. And while secondary and process patents can be employed in an attempt to delay commercial launch that strategy is problematic.⁹

Additionally, one must always keep in mind that 50 percent of U.S. healthcare expenditure is consumed by five percent of the population, the aging, and that 10,000 Baby Boomers enroll in Medicare each day. With 18 percent of U.S. GDP consumed by healthcare, more than 50 percent higher than the next advanced country, this costly burden must be significantly reduced. And it will not be hospital staffing nor physicians who take the first “haircut.”

The Safe Harbor

So what does all of this portend for the global biopharmaceutical sector:

• Rapid emergence and adoption of biosimilars in the United States with substantial price erosion should be operationally accounted for.
• Optimization of bio-manufacturing will become even more paramount as the cost: price ratio declines.
• New products are likely to launch in an environment of standardized cost benefit analysis and where price flexibility will face increased limitations.
• With R&D portfolios weighted toward a specialty/orphan patient-base, rapid geographic market expansion into countries with large patient pools should be targeted in order to spread development costs and increase profitable volume turnover.

With the bulk of total emerging markets dominated by China, a country with a healthcare consumer base larger than North America, South America, and the European Union combined, it is imperative that multinational companies (MNC) fully participate is this soon to be dominant, market.

In a recent survey regarding biopharmaceuticals and biopharmaceutical manufacturing among industry executives, while North American and the European Union are perceived as the current market, emerging markets led by China represent the future.¹⁰ However, to date, no global MNC derives even 10 percent of their revenue in China.

The Chinese government appears to want to change this. Mandated healthcare reforms in China have led to a host of significant changes in its drug regulatory policy.¹¹ The Chinese FDA is working feverishly to implement these policies, which ultimately will make it easier for western pharmaceuticals MNC’s to enter China, register, and sell their products.¹²

As the U.S. biosimilar tsunami begins to wash away corporate revenue from balance sheets while government and payer cost containment is seriously implemented to moderate unsustainable healthcare costs, sage multinationals will accelerate their footprint in China, the indispensable market for future growth.

About the Author

David Deere is the chief commercial officer of PaizaBio, Inc., a China-based pharmaceutical contract manufacturing (fill/finish) organization and consultancy.

References

1. Dezzani, Luca. “Top 25 Pharmaceutical Products in 2015.” www.igeabub.com. https://igeahub.com/2016/04/30/top-25-pharmaceutical-products-in-2015/ (Accessed September 15, 2016)
2. “Information on Biosimilars.” www.fda.gov. http://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/ApprovalApplications/TherapeuticBiologicApplications/Biosimilars/  (Accessed September 15, 2016)
3. Chingcuanco, Francine. “Bioequivalence of Biosimilar Tumor Necrosis Factor-α Inhibitors Compared With Their Reference Biologics: A Systematic Review.” www.annals.org. http://annals.org/article.aspx?articleid=2540851 (Accessed September 15, 2016)
4. Brennan, Zachary. “FDA Approves Third Biosimilar in US, First for Amgen’s Blockbuster Enbrel.” www.raps.org. http://www.raps.org/Regulatory-Focus/News/2016/08/30/25739/FDA-Approves-Third-Biosimilar-in-US-First-for-Amgens-Blockbuster-Enbrel/ (Accessed September 15, 2016)
5. “Small molecule versus biological drugs.”  www.gabionline.net. http://www.gabionline.net/Biosimilars/Research/Small-molecule-versus-biological-drugs (Accessed September 15, 2016)
6.  “Generic Competition and Drug Prices” www.fda.gov. http://www.fda.gov/AboutFDA/CentersOffices/OfficeofMedicalProductsandTobacco/CDER/ucm129385.htm (Accessed September 15, 2016)
7. Walker, Joseph. “Drugmakers’ Pricing Power Remains Strong.” www.wsj.com. http://www.wsj.com/articles/drugmakers-pricing-power-remains-strong-1468488601 (Accessed September 15, 2016)
8. Altman, Drew. “Prescription Drugs’ Sizable Share of Health Spending.” www.wsj.com. http://blogs.wsj.com/washwire/2015/12/13/prescription-drugs-sizable-share-of-health-spending/ (Accessed September 15, 2016)
9. Stanton, Dan.“We can’t stop Pfizer launching Remicade biosimilar in the US.” BioPharm Reporter. September 14, 2016.
10. Stanton, Dan. “The future of the biopharm industry: Emerging markets and biosimilars.” BioPharm Reporter. September 7, 2016.
11. “Major Regulatory Policy Changes in China Will Impact Western Drug Development.” www.paizabio.com. http://paizabio.com/news/press-releases/major-regulatory-policy-changes-in-china-will-impact-western-drug-development-and-manufacturing-strategies/ (Accessed September 15, 2016)
12. “China Approves Drug Market Authorization Holder Pilot Plan.” www.paizabio.com. http://paizabio.com/news/press-releases/china-approves-drug-marketing-authorization-holder-pilot-plan-green-lights-pharmaceutical-contract-manufacturing-sector/  (Accessed September 15, 2016)

Follow us on Twitter and Facebook for updates on the latest pharmaceutical and biopharmaceutical manufacturing news!