Biosimilars, as commonly phrased in Europe, or follow-on biologics, as used in the United States, represent a niche, but a
potentially important, segment of the pharmaceutical industry. Their potential, however, depends on a myriad of issues, including
market, regulatory, and technical considerations that are unique compared with chemically synthesized small-molecule generic
drugs. The establishment of a regulatory pathway for biosimilars in the United States, drug-reimbursement practices for biosimilars,
and the cost and time of clinical and process development of a biosimilar are some crucial considerations in assessing the
financial viability of such products.
A macro view
The US now lacks a regulatory pathway for biosimilars. However, as that issue is resolved, the market opportunities are significant
because healthcare expenditures, including prescription-drug sales, are expected to increase, and biologic-based drugs are
expected to assume a greater role in those expenditures. US healthcare spending is projected to account for roughly 15% of
US gross domestic product by 2015, and prescription pharmaceuticals in 2015 are projected to account for approximately $446
billion or more than 10% of total healthcare expenditures, according to data from the Center for Medicare and Medicaid Services,
as presented by Patricia Seymour, senior consultant with BioProcess Technology Consultants. Seymour spoke in December 2009
at the Biosimilars Manufacturing and Sourcing Dynamics conference, which was organized by the Drug, Chemical, and Associated Technologies Association (DCAT). Biologic drugs account
for approximately 14% of current pharmaceutical spending, and more than 33% of all drugs in development are biologics, she
noted. By 2015, the market for biosimilars is projected to reach $20 billion.
Risks and rewards of biosimilars
Despite the market potential, the risks and rewards for competing in the biosimilars market are different compared with participation
in the market for chemically synthesized small-molecule generic drugs. Seymour offered some statistics to illustrate those
differences. There are key differences in the cost and time to develop a biosimilar product compared with a traditional generic
drug. The average time to develop a traditional generic drug is short, approximately three to four years. Some industry estimates
say that the development time for a biosimilar product would be longer, approximately 8 to 10 years. Given greater complexity
in clinical and process development of biosimilars, the cost of developing a biosimilar product is estimated between $100
million and $200 million compared with less than $5 million for traditional generic drugs, pointed out Seymour. Although the
clinical and process development time may be greater for a biosimilar than for a traditional generic drug, in assessing the
development of a biosimilar, the key comparision is between the biosimilar and the innovator biologic, pointed out Gillian
R. Woollett, chief scientist at the law firm Engel & Novittt LLP in Washington DC. Woollett also spoke at the DCAT biosimilar
conference in December. "Is the delta for a generic drug to its innovator reference necessarily that much less than a biosimilar
to its biologic reference," said Woollett.
Given the higher cost structure and greater technical and capital barriers to entry in the biosimilars market, the potential
reward is higher. Traditional generic drugs are more commoditized with little or no product differentiation, but biosimilars
would be a more valued-added product with some differentiation. The operating profit margin of traditional generic drugs is
roughly 20%, but depending on the biosimilar product, profit margins have the potential to be somewhat higher, as much as
30%, said Seymour.
In assessing the market potential of biosimilars, however, there are certain unknowns, particularly reimbursement strategies.
"The payor role in the utilization of biosimilars is not yet clear," said Woollett. A crucial consideration will be whether
a biosimilar would be deemed to be interchangeable with the reference product. "An FDA designation of interchangeability can
give options for automatic substitution with the reference product, similar to the current generic-drug model," said Woollett.
"However, the absence of an interchangeability designation may give greater or fewer choices for payors, and this will depend
on the reimbursement infrastructure," she said. Options could include copayment incentives for patients under a tiering approach,
prior authorization requirements for physicians, and step therapy and/or switching. She added that the role of government
payors, and their related purchasing power, will also be very influential in determining the market viability of biosimilars.