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David Deere is the chief commercialization officer for PaizaBio, a US-based contract manufacturing organization and consulting group with in-country aseptic fill-and-finish operations in Hangzhou, China. Deere is a veteran global pharmaceutical executive whose career path includes Valeant Pharmaceuticals International, F. Hoffman-La Roche and Genentech.
While food, shelter, and clothing are the primal essentials for life, hope-as embodied by modern medicine-has now become part of that human expectation.
Irrespective of political system, health care is now a universal obligation for both developed and developing countries. The growing complexity of medical technologies and healthcare services have created a costly and labor-intensive system that, when combined with the ensuing increased life expectancy, challenges governments across the globe.
The “baby-boom” generations in the United States, European Union (EU), and Japan are beginning to consume healthcare assets at a record pace and countries are straining national budgets to meet these demands.
China, with a population larger than all World War II nations combined, is hardly immune from a similar challenge. Post-Mao, since 1978, China’s economic miracle has led to a 50-fold increase in gross domestic product (GDP) per capita, lifting the country from one of the lowest to a middle-tier economy (1).
Concurrent with this economic transition, China’s single-child policy was in force. While the population remains comparatively young, the mother of all aging booms is evolving and will ultimately lead to unprecedented demands on what is an inefficient, fragmented, and grossly underfunded healthcare system.
Fortunately, China has two critical things in their favor. First, they recognize the impending healthcare demand. Second, they can learn from the divergent approaches that European countries and the US have taken to address this resource crisis and can adopt the most effective components that best meet their national interest.
While achieving similar clinical outcomes, the cost of health care in the US is running at 18% of GDP, or roughly twice the EU mean average (2), with the cost of individual healthcare components-pharmaceuticals, hospitals, physician/professional care-often multiples of EU levels (3). Contributing to the cost chasm is the disparate cost of globally marketed healthcare products; the same products are far more expensive in the US than they are in the EU. Pharmaceuticals should be the most transparent of these costs, yet they remain the most opaque with large variation in average prices paid.
In the case of China, drug costs, proportionally, are up to four times the Western average. Accordingly, China could dramatically increase their healthcare investment efficiency if they learn from the differing approaches the US and EU have taken when it comes to pharmaceutical acquisition and use. Considering the magnitude of potential savings, nowhere is there a more exemplary and fiscally meaningful comparison that China can learn from than that of the problematic evolution of the biosimilar sectors in the EU and US.
Modern pharmaceutical drugs generally fall into one of two categories based on size and the way they are manufactured: small-molecule drugs that can be chemically synthesized and large-molecule biologics that are up to 1000 times larger than small-molecule drugs and are produced by living cells using advanced manufacturing techniques.
While traditional small-molecule drugs have been around for decades and comprise the core of essential medicines used daily, modern biologics began in the 1980s with most adopted for use in clinical practice since 2000.
High efficacy, often in chronic, recalcitrant, and age-associated diseases is characteristic of biologic therapies. With an aging population, usage in developed countries has proliferated, even though the drugs are dramatically more expensive than traditional therapies.
However, this has not been the case in much of the developing world where traditional small-molecule drugs dominate drug formularies with patients having limited access to therapeutic biologics.
Even with this exception, while small-molecule drugs account for more than 80% of global prescriptions, nine of the top 12 selling drugs are biologics, which account for the most brand profit and represent half of the industry’s late-stage drug research portfolios according to industry research (4) and the annual reports of top 15 R&D companies.
The consequences of this reliance on biologic drugs are significant. With treatment costs reaching more than 20-times that of small-molecule drugs, biologics are decimating hospital and insurance pharmacy budgets as evidenced by their blockbuster domination of league sales tables (5). And, considering that only 2% of patients account for this expenditure, biologics-40% of total drug US costs and forecasted to be the fastest growing segment-are thrusting drug pricing to the forefront of national healthcare policy debates (6).
There is a fiscally indispensable silver lining. The principal patents for most of these blockbuster biologics have expired, or will soon expire, making way for biosimilar copies (Table I).
($ in billions)
($ in billions)
Change in Sales: 2017 vs. 2016
Primary Patent Expiration
Rheumatoid arthritis and inflammation (injection)
Rheumatoid arthritis and lymphoma (injection)
(Amgen, Pfizer, Takeda)
Rheumatoid arthritis and inflammation (injection)
Deep vein thrombosis/Pulmonary embolism (oral)
Macular Degeneration/Diabetic Retinopathy (injection)
Diabetic Neuropathy/Postherpetic Neuralgia (oral)
Sources: STATISTA; Generic Engineering & Biotechnology News
Unlike synthetically derived small-molecule generic drugs, biologics are produced from natural processes and like leaves on a tree are all individual by nature but biologically very similar in all respects. Coupled with the fact that they are large, environmentally sensitive complex molecules that are difficult to characterize and manufacture, exceptionally demanding regulatory pathways have been instituted to ensure that any biosimilar demonstrates similar safety and efficacy as the innovator biologic with no clinically meaningful differences.
Biosimilar drugs don’t come cheap. Abbreviated confirmatory clinical trials in principally targeted patient populations are mandatory, a level of investigational requirements well beyond the standard pharmacological bioequivalence sufficient for a small-molecule generic drug, and greatly increases development costs for sponsoring companies.
While their respective biosimilar regulatory pathways are similar and the composition of matter patents comparable in coverage, the evolution of biosimilars in the EU and US reflect markedly different histories, and any review should provide clear insight into what strategies proved successful in approval and clinical adoption of biosimilars.
The EU was the first regional body to develop the legal framework for the review and approval of biosimilar drugs. Beginning with a white paper in 1998 followed by EU legislation in 2001, fully enacted in 2004, the European Medicines Agency (EMA) along with other oversight bodies, created the guidelines for biosimilar registration in 2006.
The Committee for Medicinal Products for Human Use (CHMP), under the EMA, provides technical assessments for marketing authorization applications (MA) that are ultimately approved via the centralized procedure. The first biosimilar MA approved was Sandoz’s copy of somatotropin (Omnitrope) in 2006. Since then, 39 out of 44 applications covering 16 molecular entities have been approved (7). The most prolific year for biosimilars was 2017, when 14 were approved. As of April 10, 2018, MA applications for 16 biosimilars were under review, including pegfilgrastim, as a first in the category (8) (Table II).
|Drug Product||Reference Product Proprietary Name||Reference Product Sponsor||Number of Applications|
With three biosimilars already approved, 2018 will likely be a banner year.
The EU biosimilar approval process is fragmented. While sponsor companies apply to the EMA for a centralized review and approval of their biosimilar product, 30 national drug administrative bodies are involved to ensure local regulatory requirements are met prior to commercial launch. Additionally, government pricing and reimbursement negotiations vary significantly and can delay or restrict clinical access. Adding to this ponderous process, the novelty of biosimilars and uncertainty among clinicians as to the validity and role of a biosimilar versus the innovator biologic product they are accustomed to prescribing initially proved problematic for biosimilar introduction and adoption.
The decentralized nature of the EU member states presented multiple battlegrounds for adoption of biosimilar products as alternatives to innovator biologic drugs. However, commonality of the value proposition of biosimilars prevailed (i.e., lower prices with the same efficacy and safety as the original drug, the opportunity to reduce healthcare costs while broadening patient access).
To ensure broad market adoption of biosimilars, education and cost accountability were identified as critical success factors. Among prevailing concerns was the fact that biologics, unlike small-molecule generic drugs, cannot be identical. This created the perception that biosimilars could not possess the same product profile as the innovator drug that clinicians relied upon and therefore they chose not to experiment with their patients.
Second, establishing transparency in pricing between biosimilars versus the branded product and incentivizing cost savings at all levels proved essential.
The educational component was addressed at both EU and national levels to varying degrees of success.
The regulatory criteria of assessing biosimilars as having “no clinically meaningful difference in safety or efficacy when compared to the innovator drug in confirmatory clinical trials” was relatively straightforward for new patients. However, safety concern was expressed about switching patients from the innovator to the biosimilar since the registration trials were head-to-head in naïve patients. Thus, the belief was formed that biosimilar products were not interchangeable with the innovator, which, in practice, implied that biosimilars were inferior just as clinicians were being introduced to biosimilars. Also, the traditional detachment physicians maintain between patient care and the cost of the care has always been difficult to resolve.
Moreover, pharmaceutical companies brand marketed biosimilars, positioning the products as a competitive alternative to the innovator drug, instead of a biosimilar for the innovator, with a meaningful discount as the principal benefit. This led to the value proposition falling flat in many countries, especially where generic penetration had historically remained low.
With its socialized medical system, Scandinavia, in particular Norway, took an aggressive “Viking” approach toward achieving the biosimilar value proposition as a means of lowering healthcare costs. Two key events helped propel general adoption of biosimilars.
To determine if there was any meaningful clinical difference in switching patients from innovator to biosimilar, the Norwegian Ministry of Health conducted a multicentered trial (NOR-SWITCH) comparing the innovator TNF-inhibitor infliximab with a biosimilar that concluded that there was no difference (9). Also, as increased use and costs grew, Norway transferred reimbursement from a general fund to individual hospital pharmacy budgets whose directors rapidly switched all patients to the biosimilar.
With education and cost accountability addressed, the biosimilar infliximab now accounts for more than 90% of the market in Scandinavia, excluding Sweden where they are still “confused” over interchangeability (10).
Having these milestone examples, biosimilar adoption in major EU countries has increased and, because of competition, some tender bids achieved more than 70% discounts off the original brand price.
Overall biosimilar penetration varies by country due to the numerous price competitive forces and policies restricting interchangeability. However, broader adoption is now the norm and biosimilars are ascending as the alternative to off-patent innovator biologics (11).
An academic analysis of the history of the Biologics Price Competition and Innovation Act of 2009 describes the process as follows: “One could tell the story from 1999 to 2010 as a story of steadily mounting pressure on FDA and Congress, culminating in House and Senate passage of bills in 2009 and enactment in March 2010. The truth is more nuanced. In fact, while there were considerable pressures on the agency and the legislature to move forward, there were also some false starts at and mixed signals from the agency, and the legislative process stalled several times (12).
To read this academically sanitized recount as a layman is to see how a vacillating FDA, duplicitous Congress, and litigiously mercenary pharmaceutical industry battled over something truly in the public interest: establishing a biosimilar regulatory review and approval process for access to lower cost biologics.
After a decade of discussions, meetings, and multiple legislative proposals, the Biologics Price Competition and Innovation Act (BPCIA), which created the 351K regulatory pathway for biosimilars, finally achieved Congressional approval and statutory life as an addition to the significant Patient Protection and Affordable Care Act in March 2010.
While the EU went from white paper to regulatory pathway in six years with the first biosimilar approval in 2006, it took twice as long in the US, with the first biosimilar approved in 2015, 24 years after the innovator drug hit the market. As of July 21, 2018, the EMA has approved 40 biosimilars covering 16 molecular entities, while the FDA has approved 12 and eight, respectfully. Even more telling, only three biosimilars are commercially available in the US.
None of the US biosimilars are considered interchangeable as defined by the BPCIA, a designation not even acknowledged by the EMA. In fact, despite repeated congressional enquiry as to progress, a reticent FDA has yet to issue final guidance on how a biosimilar can demonstrate interchangeability with the innovator biologic, an acknowledged critical prerequisite for broad clinical adoption for any biosimilar (13).
Furthermore, on June 21, 2018, FDA withdrew the draft guidance entitled Statistical Approaches to Evaluate Analytical Similarity, which was intended to advise biosimilar sponsors on evaluating their biosimilar relative to the innovator comparator (14).
Two distinct strategies have emerged among Big Pharma: a research-driven business model and companies that, in addition, are developing biosimilars in parallel.
While Roche is the flagship example of a pure research company, their neighbor, Novartis, has the largest global biosimilar portfolio in the industry. In the US, Amgen and Pfizer both pursue the bifurcated biologic strategy.
Regardless, none will accept biosimilar erosion of $50 billion of industry sales of branded biologics and have mounted an unprecedented array of strategies and tactics designed to delay or slow biosimilar introduction.
Because of their complex and evolutionary biomanufacturing history, biologic blockbusters have dozens of process patents extending far beyond their composition of matter patent. Add to that proprietary formulations, dosage regimens, and dispensing devices, companies have layers of potential protection.
For each of the top 12 selling drugs in 2017 (nine biologics), an average of 125 patents have been filed with 71 granted. At $18.4 billion, AbbVie’s Humira is the global top-selling drug, accounts for the bulk of corporate revenue, and has 247 patents (15).
Threat of patent litigation is primarily why only three of 12 biosimilars approved in the US have commercially launched. In fact, three companies have chosen to delay US introduction of their competitor biosimilar and entered licensing pacts with AbbVie for commercial considerations (16).
This strategy has been compared to the generic practice of pay-for-delay and recently elicited Congressional challenge and regulatory scrutiny (17).
Since lowering costs is the raison d' étre for biosimilars, a Byzantine system of pricing has evolved illustrated by multiple prices for the same innovator drug with no price transparency across the drug chain, making it nearly impossible to compare pricing of biosimilars and their branded counterparts. A complex system of list price-average wholesale and negotiated arrangements among institutional customers and pharmacy benefit managers (PBMs)-ensure that no one price for the drug is the same.
Combine this with the ubiquitous, yet confidential rebates pharmaceutical companies pay to ensure formulary inclusion and placement, and potential savings from biosimilars become opaque to all payors, creating yet another obstacle for adoption.
Since a percentage of the initial manufacturer’s price is used to calculate compensation for the various links in the drug chain, a perverse incentive for higher priced drugs influences all decisions, and biologics account for the lion’s share.
PBM middlemen generate 85% earnings before interest, tax, depreciation and amortization (EBITDA), twice that of distributors and three times that of pharmacies. PBMs have come under intense scrutiny for capitalizing on these rebate schemes, especially considering that much of the multi-consumer price index level, bi-annual drug price increases by manufacturers appear to be consumed by these rebates (18–19).
With the competitive threat of a biosimilar, various contractual and bundling practices can be employed to reduce the value that PMBs and other payers might gain from price savings. This is at the heart of Pfizer’s litigation against Johnson & Johnson’s commercial practices involving Remicade (infliximab) versus Pfizer’s biosimilar, Inflectra (infliximab-dyyb) (20).
Hospitals are not immune from drug-price distortion, with exploitative unintended consequences as evidenced by an accounting of the 340B drug-discount program originally designed to help low-income and uncompensated care but is wrought with overpricing and improper use (21).
While Congress has failed to take meaningful actions that would enhance adoption of biosimilars to reduce health expenditure, state legislatures and administrative agencies have commenced. Forty-five states have passed laws governing biosimilar substitution and 24 states have passed 37 laws this year to curb prescription drug costs (22–23).
It is administrative action involving the Department of Health and Human Services (HHS) and FDA, however, where the heavy lifting on removing obstacles to biosimilar adoption is occurring. While Congress prohibited HHS’s Centers for Medicare & Medicaid Services the ability to negotiate Medicare drug prices, HHS is actively pursuing multiple administrative avenues to enhance market competition for biosimilars within their domain as payer, including injectable/infused drugs under Medicare Part B, indication-specific formulary inclusion in Medicare Part D, elimination of drug rebates, and disincentivizing abuse of the 340B drug discount program (24–26).
On July 18, 2018, FDA Commissioner Scott Gottlieb released the Biosimilar Action Plan: Balancing Innovation and Competition outlining concrete steps FDA is initiating to accelerate biosimilar development, review, approval, adoption, and competition in the market. An office-level department will be dedicated to the execution of these objectives using simplified templates and providing full clarity on biosimilar interchangeability as well as establishing a Biosimilar Educational and Outreach Campaign. This is timely considering Pfizer’s FDA Citizen Petition charging biosimilar misinformation dissemination to patients and healthcare professionals by competitor companies (27).
In 2015, Chinese patients had access to about 20% of the novel drugs available to patients in Western countries and minimal use of therapeutic biologics. Since then, China has staffed and trained the National Medical Products Administration (NMPA), rewritten laws and policies governing all aspects of the pharmaceutical industry, and taken economic development steps that are catapulting the industry toward global modernity.
Specific objectives of NMPA reforms (formerly China Food and Drug Administration and State Drug Administration) are three-fold. First, obtain rapid access to cost-effective innovative foreign drugs. Second, ensure domestic manufacturing of high-quality generic drugs that meet generic consistency equivalency (GCE) testing and are readily accepted by all citizens. Lastly, foster a world class biomanufacturing and innovation environment in China to allow Chinese competitive participation in the high-value global drug industry.
In less than three years, the net result has been a six-fold increase in novel drug launches, regulatory review times comparable to FDA, and an explosion-25-fold in five years-in biomanufacturing and biotech investment (28).
Frost and Sullivan have projected China’s biologic drug sales, already the second largest national market, will expand five-fold, with a seven-fold increase in monoclonal antibodies since 2011; over 20% and 25% compound annual growth rate, respectively. However, most of the biologic sales involve bio-generic copies that do not meet NMPA 2015 Biosimilar Development Guidelines comparable to EMA/FDA.
While new innovative biologics and biosimilars must now meet current applicable standards and many potential drugs are in clinical development, to date no biosimilars have been approved in China. Thus, while a biomanufacturing revolution is emerging, China’s biosimilar market is a tabula rasa, yet to be created.
Both the US and EU had long histories of good manufacturing practices of biologics as a baseline expertise prior to biosimilar emergence; China does not. cGMP in China has been mandated only since 2016, and there are few domestic companies with extensive experience in biologics and even less with the technical and clinical development capabilities required to meet the new Biosimilar Pathway guidelines. Accordingly, while NMPA regulatory reforms have been enacted, full implementation and enforcement is lacking while manufacturing capacity is dramatically increasing.
Therefore, the first prerequisite for success in China is to focus and ensure quality manufacturing and clinical development of biosimilars to the global standards that China has adopted as managing members of the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH).
Next, China should emulate Scandinavia by incorporating biosimilars as a formulary standard of therapy, replacing higher cost innovator and therapeutically questionable bio-generic drugs. Of course, extensive professional educational campaigns are essential considering the limited clinical use of biologics.
Finally, with newer Chinese biotechs’ focus on biosimilars, competition will intensify over the next two to five years. Quality should be rewarded, but at significant discounts to innovator drugs. Premium pricing should be reserved for the truly cost-effective, novel products emerging from R&D portfolios with fresh patents to reward the innovation. As the subtitle of the US FDA’s new biosimilar plan succinctly states, “Balancing Innovation and Competition.” That should be the goal for the pharmaceutical industry in all countries.
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14. FDA, “FDA Withdraws Draft Guidance for Industry: Statistical Approaches to Evaluate Analytical Similarity,” Press Release, June 21, 2018.
15. A Liu, “AbbVie, Roche and Pfizer the Worst Patent 'Offenders,' Says Nonprofit,” FiercePharma.com, Aug. 6, 2018.
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19. E. Sagonosky, “Half-off Sale at Eli Lilly as Drug Rebating Climbs to 51% in 2017,” FiercePharma.com, March 30, 2018.
20. E. Sagonosky, “J&J Loses Early Bid to Escape Pfizer's Remicade Biosimilars Lawsuit,” FiercePharma.com, Aug. 13, 2018.
21. T. Abraham, “Azar Says 'Change Is Coming' for 340B,” BiophamaDive.com, July 9, 2018.
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24. J. De Leon, “CMS to Overhaul Part B Drug Purchasing,” BioCentury.com, July 26, 2018.
25. Y. Abutaleb, “US Health Secretary Says Agency Can Eliminate Drug Rebates,” uk.reuters.com, Aug. 20, 2018. h
26. E.S. Eaton, “Part D to Allow Indication-Driven Formularies,” BioCentury.com, Aug. 29, 2018.
27. Z. Brennan, “Pfizer Calls for FDA Guidance to Address False and Misleading Biosimilar Ads,” RAPS.org, Aug. 28, 2018.
28. D. Deere, “China: An Emerging Biomanufacturing Epicenter,” 15th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production (2018).