Pressure from the emerging markets on pricing of patented products is mounting fast. This time the country involved is China.
Recently, the Health Minister of China who stepped down last month after a seven-year stint in the top health job reportedly commented that western drugmakers will require to give hefty subsidies and forgo significant amount of profit on expensive cancer drugs, if they want access to huge market of China. He further voiced as follows:
“If the cost (of patented drugs) is too high, maybe only a few percent of patients can benefit. If we can arrange an appropriate, acceptable, affordable price, then you can have a huge market.”
‘Glivec deal’ in China:
In the same report, it was indicated that in China Novartis ultimately agreed to donate three doses of its leukemia drug Glivec for every one sold to the government.
It is expected that many more such deals will take place in China.
The situation to get more challenging in the emerging markets:
Many experts believe that due to high cost of patented drugs, especially biologics, negotiating hefty discounts with the Governments may be the best alternative for the innovator companies to avoid any possibilities of Compulsory Licensing (CL), like what happened to Bayer’s cancer drug Nexavar in India.
An opportunity in biosimilar drugs:
Biologic drugs came to the international market slightly more than three decades ago, in 1980s. Growing at a scorching pace, the value turnover of these products exceeded US$ 138 billion in 2010 (IMS Health).
Launch of biologics like, Recombinant Insulin, Human Growth Hormone (HGH), Alteplase, Erythropoietin (EPOs), Granulocyte Colony Stimulating Factors (G-CSFs) and Monoclonal Antibodies (MAbs) kept fueling the market growth further.
Patent expiry of a number of biologic drugs over a period of next five years, especially in areas like, various types of cancer, diabetes and rheumatoid arthritis, besides many others, will help opening a huge window of opportunity for the global biosimilar players, including from India, to reap a rich harvest.
Global innovators joining the bandwagon:
After a dream-run with high priced patented drugs for a reasonably long time, now stung by the current reality in various developed and emerging markets and factoring-in the width/depth/robustness of their own research pipeline, many global players have started taking a hard look at the emerging opportunities offered by biosimilar drugs.
Moreover, high price of original biologic drugs, cost containment pressure by various Governments, encouragement of generic prescriptions, large number of such drugs going off patent and growing demand of their low cost alternatives across the world, are making biosimilar market more and more lucrative from the global business perspective to all interested players, including from India.
According to Bloomberg Industries (2013), during the next six years biologic drugs with a total annual sales turnover of US$ 47 billion in 2012, will go off patent.
Sniffing opportunities for business growth, as stated above, many hard-nosed large research-based global pharmaceutical companies, currently fighting a challenging battle also in the ground of a tougher ‘patent cliff’, have started venturing into the biosimilar market, that too in a mega scale.
Some of them have already initiated developing biosimilar versions of blockbuster biologics, as reported below:
|Originator||Product||Indication||Biosimilar development by:|
|Roche/Genentech||Rituxan||Rheumatoid arthritis||Boehringer Ingelheim|
|Roche/Genentech||Herceptin, Rituxan||Breast Cancer, Rheumatoid arthritis||Pfizer|
|Johnson & Johnson||Remicade||Rheumatoid arthritis||Hospira|
Source: Bloomberg BusinessWeek
Thus, I reckon, continuous quest for development of cost-effective alternatives to high-priced biologic medicines would keep on propelling the growth of biosimilar drugs, across the world.
Glivec maker Novartis fought a court battle to launch the first ‘Biosimilar drug’ in America:
In mid-2006, US FDA approved its first ‘biosimilar drug’-Omnitrope of Sandoz, the generic arm of the Glivec maker Novartis, following a Court directive. Omnitrope is a copycat version of Pfizer’s human growth hormone Genotropin. Interestingly, Novartis had also taken the US FDA to court for keeping its regulatory approval pending for a while in the absence of a well-defined regulatory pathway for ‘biosimilar drugs’ in the USA at that time.
More interestingly, having received the US-FDA approval, the CEO of Sandoz (Novartis) had then commented as follows:
“The FDA’s approval is a breakthrough in our goal of making high-quality and cost-effective follow-on biotechnology medicines like, Omnitrope available for healthcare providers and patients worldwide”.
Biosimilar market started shaping-up:
Internationally most known companies in the biosimilar drugs space are Teva, Stada, Hospira and Sandoz. Other large research based global innovator pharmaceutical companies, which so far have expressed interest in the field of biosimilar drugs, are Pfizer, Astra Zeneca, Merck and Eli Lilly.
Following are examples of some biosimilar drug related initiatives of the global players as the market started developing:
- Merck announced its entry into the biosimilar drugs business on February 12, 2009 with its acquisition of Insmed’s portfolio for US$ 130 million. The company also paid US$ 720 million to Hanwha for rights to its copy of Enbrel of Amgen.
- Samsung of South Korea has set up a biosimilars joint venture with Quintiles to create a contract manufacturer for biotech drugs.
- Celltrion and LG Life Sciences have expressed global ambitions in biosimilar drugs.
- Some leading global innovator biotech companies also like, Biogen Idec and Amgen have reportedly been mulling entry into biosimilar market.
According to Reuter (June 22, 2011), Merck, Sandoz, Teva and Pfizer are expected to emerge stronger in the global biosimilar market, in the years ahead.
Why is still so low penetration of lower cost biosimilar drugs?
Although at present over 150 different biologic medicines are available globally, just around 11 countries have access to low cost biosimilar drugs, India being one of them. Supporters of biosimilar medicines are indeed swelling as time passes by.
It has been widely reported that the cost of treatment with patented biologic drugs can vary from US$ 100,000 to US$ 300,000 a year. A 2010 review on biosimilar drugs published by the Duke University highlights that biosimilar equivalent of the respective biologics would not only reduce the cost of treatment, but would also improve access to such drugs significantly for the patients across the globe. (Source: Chow, S. and Liu, J. 2010, Statistical assessment of biosimilar products, Journal of Biopharmaceutical Statistics 20.1:10-30)
Now with the entry of global pharma majors, the biosimilar market is expected to get further heated up and develop at a much faster pace with artificial barriers created by vested interests, if any, being removed.
Recent removal of regulatory hurdles for the marketing approval of such drugs in the US will indeed be the key growth driver.
Other growth drivers:
According to a study (2011) conducted by Global Industry Analysts Inc., besides recent establishment of the above regulatory guidelines for biosimilars in the US, the key growth drivers for global biosimilar market, will be as follows:
▪ Patent expiries of blockbuster biologic drugs
▪ Cost containment measures of various governments
▪ Aging population
▪ Supporting legislation in increasing number of countries
The business potential in India:
The size of biotech industry in India is estimated to be around US$ 4 billion by 2015 with a scorching pace of growth driven by both local and global demands (E&Y Report 2011).
The biosimilar drugs market in India is expected to reach US$ 2 billion in 2014 (source: Evalueserve, April 2010).
Recombinant vaccines, erythropoietin, recombinant insulin, monoclonal antibody, interferon alpha, granulocyte cell stimulating factor like products are now being manufactured by a number of domestic biotech companies like, Biocon, Panacea Biotech, Wockhardt, Emcure, Bharat Biotech, Serum Institute of India and Dr. Reddy’s Laboratories (DRL), besides others.
DRL is the largest biosimilar player in India with an impressive product portfolio. Reditux of DRL is the world’s first Biosimilar monoclonal antibody, which is a copy version of Mabthera/ Rituxan of Roche and costs almost 50 percent less than the original brands.
Some of the Biosimilar products of the Indian Companies are as follows:
|Dr Reddy’s Lab||Grafeel, Reditux, Cresp|
|Intas||Neukine, Neupeg, Intalfa, Epofit|
|Shantha Biotech/Merieux Alliance||Shanferon,Shankinase,Shanpoietin|
|Reliance Life Sciences||ReliPoietin, ReliGrast, ReliFeron, MIRel|
|Biocon||Eripro, Biomab, Nufil, Myokinase, Insugen|
(Source: Stellarix Consultancy Services)
The cost of development of Biosimilars in India is around US$ 10-20 million, which is expected to go up, as “Biosimilar Guidelines” are now in place for marketing approval of such products in India.
The ultimate objective of all these Indian companies will be to get regulatory approval of their respective biosimilar products in the US and the EU, either on their own or through collaborative initiatives.
Indian players making rapid strides:
As stated above, biosimilar version of Rituxan (Rituximab) of Roche used in the treatment of Non-Hodgkin’s lymphoma has already been developed by DRL in India. It also has developed Filgastrim of Amgen, which enhances production of white blood cell by the body and markets the product as Grafeel in India.
Similarly Ranbaxy has collaborated with Zenotech Laboratories to manufacture G-CSF.
On the other hand Glenmark reportedly is planning to come out with its first biotech product soon from its biological research establishment located in Switzerland.
Indian pharmaceutical major Cipla reportedly has invested around US$ 60 million in 2010 to acquire stakes of MabPharm in India and BioMab in China and is planning to launch a biosimilar drug in the field of oncology by 2013.
Another large pharmaceutical company of India, Lupin signed a deal with a private specialty life science company NeuClone Pty Ltd of Sydney, Australia for their cell-line technology. Lupin reportedly will use this technology for developing biosimilar drugs in the field of oncology, the first one of which, will reportedly be launched in India by 2013.
The global Market:
In 2011 the turnover of Biologic drugs increased to over US$ 175 billion in the total market of US$ 847 billion. The sale of Biosimilar drugs outside USA exceeded US$ 1 billion.
Six biologic drugs featured in the top 10 best selling global brands in 2012 with Humira of AbbVie emerging as the highest-selling biologics during the year. Roche remained the top company by sales for biologics with anticancer and monoclonal antibodies.
According to IMS Health report, by 2015, sales of biosimilars are expected to reach between US$ 1.9 – 2.6 billion. The report also states that this market has the potential to be the single fastest-growing biologics sector in the next five years.
Cost of biosimilar development in the developed markets:
The process of developing a biosimilar drug is complex and requires significantly more investment, technical capabilities and clinical trial expertise than any small molecule generic drug. As per industry sources, average product developmental cost ranges between US$ 100 and 250 million in the developed markets, which is several times higher than the same associated with development of small molecule generics, ranging around US$ 1to 4 million.
All these factors create a significant market entry barrier for many smaller players with similar intent but less than adequate wherewithal.
Even higher market entry barrier with ‘second generation’ biosimilar drugs:
Emergence of second generation branded biosimilar products such as PEGylated products and PegIntron (peginterferon alpha), Neulasta (pegfilgrastim) and insulin analogs have the potential to reduce the market size for first generation biosimilar drugs creating significant entry barrier.
Negotiating the entry barriers:
As stated above, the barriers to market entry for biosimilar drugs are, in general, are much higher than any small molecule generic drugs. In various markets within EU, many companies face the challenge of higher development costs for biosimilar drugs due to stringent regulatory requirements and greater lead-time for product development.
Navigating through such tough regulatory environment will demand different type of skill sets, especially for the generic companies not only in areas of clinical trials and pharmacovigilance, but also in manufacturing and marketing. Consequently, the investment needed to take biosimilar drugs from clinical trials to launch in the developed markets will indeed be quite significant.
The future potential:
According to an IMS Health study, the emerging markets will drive biosimilar market growth with significantly more number of patients. The report estimates that over a period of time US will emerge as the number one global biosimilars market.
By 2020, emerging markets and the US are expected to register a turnover of US$11 billion and US$ 25 billion representing a share of 4 percent to 10 percent of the total global biologics market, respectively.
The report estimates that overall penetration of biosimilars within the off-patent biological market will reach up to 50 percent by 2020, assuming a price discount in the range of 20 to 30 percent.
Is 12 years exclusivity in the US a significant entry barrier?
In the US, the innovator companies get 12 years exclusivity for their original biologic drugs from the date of respective marketing approvals by the USFDA.
The BPCI Act clearly specifies that applications for ‘biosimilar drugs’ to the USFDA will not be made effective by the regulator before 12 years from the date of approval of the innovators’ products. In addition, if the original product is for pediatric indications, the 12-years exclusivity may get an extension for another six months.
The key point to note here is, if the USFDA starts its review process for the ‘biosimilar drugs’ only after the ’12 year period’, the innovator companies will effectively get, at least, one additional year of exclusivity over and above the ’12 year period’, keeping applicants for ‘biosimilar drugs’ waiting for that longer.
As stated above, with around 40 percent cost arbitrage and without compromising on the required stringent international regulatory standards, the domestic ‘biosimilar’ players should be able to establish India as one of the most preferred manufacturing destinations to meet the global requirements for such drugs, just as small molecule generic medicines.
With experience in conforming to stringent US FDA manufacturing standards, having largest number of US FDA approved plants outside USA, India has already acquired a clear advantage in manufacturing high technology chemical based pharmaceutical products in the country. Now with significant improvement in conformance to Good Clinical Practices (GCP) and honed skill sets in the field of biologics, Indian biosimilar players are clearly poised to catapult themselves to even a higher growth trajectory, either on their own or with appropriate collaborative arrangements with the international partners.
Thus, the initiatives of joining the biosimilar bandwagon by the hard-nosed research based global players, I reckon, will ultimately get translated into a win-win advantage for India in the rapidly evolving pharmaceutical space of the world.
Besides, like what they had to do in China, working with the Government to put in place a robust and win-win mechanism of ‘Price Negotiation for Patented Drugs’ in India could augur well for the global players of pharmaceutical and biologic drugs. This mechanism may also help putting forth even a stronger argument against any Government initiative to grant CL on the pricing ground for expensive patented drugs in India.
With all these developments, patients will be the ultimate winners having much greater access to both innovative medicines and biosimilar drugs than what they have today, fetching a huge relief to all right thinking population in the country.
By: Tapan J. Ray
Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.