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Structural Change in Pharmaceuticals:
The Growth of Biologics and Emergence of Biosimilars
Henry Grabowski
Duke University
Conference on Structural Change, Dynamics and
Economic Growth
Livorno, Italy
September 12-14, 2013
Biologics Trends and Policy Issues
• Biological therapies have been targeted to life threatening and
disabling diseases including various cancers, multiple sclerosis,
neutropenia, and rheumatoid arthritis
• Substantial improvements in survival, morbidity and quality of
life have been documented
• At the same time biologics often cost tens of thousands of
dollar per course of treatment
• Biologics account for a growing share of overall drug
expenditures with increasing concerns for policymakers
Pharmaceuticals vs. Biologics
Pharmaceuticals
Biologics
Size (MW)
Small (<1000)
Large (>10,000)
Source
Chemical synthesis
Cultures of living cells
Form
Generally oral solids
Often injected or infused
Dispensed by
Usually retail pharmacies
Often by doctors or hospitals
Lipitor (anti-cholesterol)
Herceptin (breast cancer)
Example
LIPITOR
MW = 558.64
HERCEPTIN
MW = 185,000
Characteristics of Biological Innovation
•
Biologics account for a large share of novel and first in
class therapies over the past two decades1
•
There are more than 600 biologics in clinical testing –
more than 250 for oncology uses alone
•
Many biologics have multiple indications across diverse
therapeutic areas
Source: H. Grabowski and R. Wang. “The Quantity and Quality of Worldwide
New Drug Introductions 1982-2003,” Health Affairs, March/April 2006, 25(2):452460
1
Biologic Drugs Make Up a Large Percentage of the
Drug Pipeline
5
US Sales of Leading Biological Products and Earliest Reported Years of Patent Expiry
Drug
Product Type
Company
Humira (Adalimumab)
Enbrel (Etanercept)
Remicade (Infliximab)
Neulasta (Pegfilgrastim)
Rituxan (Rutuximab)
Epogen/Procrit (Epoetin alpha)
Avastin (Bevacizumab)
Lucentis (Ranibizumab)
Herceptin (Trastuzumab)
Avonex (Interferon beta-1a)
Rebif (Interferon beta-1a)
Aranesp (Darbepoetin)
Neupogen (Filigrastim)
Monoclonal antibody
Monoclonal antibody
Monoclonal antibody
G-CSF
Monoclonal antibody
Erythropoetin
Monoclonal antibody
Monoclonal antibody
Monoclonal antibody
Interferon
Interferon
Erythropoetin
G-CSF
Abbott
Amgen
J&J
Amgen
Biogen
Amgen and J&J
Genentech
Genentech
Genentech
BiogenIdec
Merck
Amgen
Amgen
2011 US sales ($ mil)
$3,531
$3,507
$3,474
$3,316
$3,005
$2,854
$2,662
$1,767
$1,656
$1,558
$1,056
$986
$945
Earliest Reported Year
of Key Patent Expiry
2016
(1)
2018
2015
2016-2018
2013
2019
2019
2019
2013
2013
2024
2013
Source: IMS Health; Epogen, Procit, and Aranesp are based on 10-K SEC filings given extensive rebates provided to dialysis centers and hospitals not captured in the IMS audits.
Note:
1. Enbrel's patent expiration was widely reported as 2012, but based on November 2011 issued patent, Amgen now claims protect ion until 2028.
2. Other top selling biologic drugs including the insulin products Humalog, Novolog, and Lantus, may lose protection from key p atents by 2016, but were approved through NDAs and are
eligible for approval under an abbreviated pathway through the Hatch-Waxman process.
New Regulatory Pathways for Biosimilars
•
Biosimilars must be highly similar to their reference product
in terms of potency, purity, and safety
•
Establishing that a biosimilar has comparable therapeutic
effects is a challenging task for regulators and companies
•
EU has had a regulatory framework in place since 2005,
and has approved biosimilars in three product classes –
human growth hormones, epoetins, and filigrastims
•
US biosimilar legislation was passed in 2010 and there are
several biosimilar products in the pipeline
Key Factors Determining How Biosimilar
Competition Evolves
•
•
•
•
•
Market size and Commercial Opportunity
Patent and Exclusivity Provisions
Regulatory Standards for Biosimilarity
Actions of Insurers, Physicians, and Patients
Introduction of Next-Generation Products
Development Costs for Biosimilars
•
Biologics are complex molecules derived from cell
cultures where source materials and manufacturing
can be critical to therapeutic outcomes
•
Biosimilar manufacturers have undertaken clinical
trials to demonstrate comparable safety and
efficacy to their reference biologics
•
European regulators require this on a case by case
basis in the guidelines published to date
Cost of Developing A Biosimilar Product
• Development costs will vary across product classes
• Even less complex biologics (epoetins, filigrastims) are
likely to cost tens of millions of dollars
• More complex biologics (MABs, interferons) have estimated
costs of development ranging from $75 to $150 million
• By contrast, cost of completing bioequivalence studies for
generic drugs is estimated to be $1 - $5 million
Manufacturing and Marketing Costs
• Manufacturing costs will be significantly greater for
biosimilars than for generics
• Marketing costs may be necessary if biosimilars compete
as therapeutic alternatives rather than equivalent products
• Post-approval pharmacovigilance studies will be a likely
additional expense for biosimilars
“Entry and Competition in Biosimilars”*
• First paper is to analyze the sensitivity of entry and prices
to higher fixed costs for biosimilars
• We combined a theoretical model with empirical findings
on generic pharmaceuticals
• A key finding is that higher fixed costs result in fewer
entrants and smaller discounts compared to generic drugs
*
Grabowski H, Ridley D, and Schulman K. Managerial and Decision Economics, 2007
Biosimilars:
↑ fixed costs → ↓sellers & ↑prices
100%
generic price / branded price
estimate with 150%
higher fixed costs
80%
60%
estimate with 100%
higher fixed costs
40%
regression results for
pharmaceuticals
20%
0%
0
200
400
600
market size ($m)
Source: Grabowski, Ridley, & Schulman, 2007
800
13
1000
Average Generic Share of Molecule
By Complex Drug Characteristic
100%
Generic Share of the Molecule
(percent of Rx)
80%
60%
40%
Drugs w ith 2 or m ore Com plex Characteristics
20%
Drugs w ith 1 or No Com plex Characteristics
0%
0
3
6
9
12
15
18
21
Months Follow ing Initial Generic Entry
Duke University/Analysis Group September 2007 Working Paper
http:/www.econ.duke.edu/Papers/PDF/The Effect on Federal Spending of Legislation Creating a
Regulatory Framework for Follow-on Biologics: Key Issues and Assumptions.pdf
14
24
Average Generic Price Discount from Brand for
the Molecule by Complex Drug Characteristic
100%
Generic Price Discount from Brand Price
(percent)
Drugs w ith 2 or m ore Com plex Characteristics
80%
Drugs w ith 1 or No Com plex Characteristics
60%
40%
20%
0%
0
3
6
9
12
15
18
21
Months Follow ing Initial Generic Entry
Duke University/Analysis Group September 2007 Working Paper
http:/www.econ.duke.edu/Papers/PDF/The Effect on Federal Spending of Legislation Creating a
Regulatory Framework for Follow-on Biologics: Key Issues and Assumptions.pdf
1
5
24
Generic Competition vs Biosimilar Competition
•
Generic competition for small molecule drugs has been
characterized by low cost entry and interchangeability
(based on same chemical structure and bioequivalence)
•
By contrast, biosimilar products face higher costs of
entry and competition as therapeutic alternatives
•
Biosimilar competition more likely to resemble “brand to
brand” competition rather than “brand to generic”
competition for the foreseeable future.
Decisions of Physicians, Patients, and Insurers
Factors Influencing Biosimilar Use
• Nature of disease
• New vs continuing patients
• Short term vs maintenance therapy
• Insurers incentives – quotas, co-pays,
reference pricing, etc.
What Type of Firms are Potential Entrants
• Large established generic firms like Teva and Sandoz
• Global research-intensive biopharmaceutical firms
including Merck and Pfizer as well as Amgen and Biogen
• Many partnerships have been formed with specialty
expertise at different stages of development,
manufacturing, and marketing
European Biosimilar Sample
•
Two major biologic products with biosimilars
― Eprex–Epotein alpha
― Neupogen–Filigrastim
•
Five European countries in our sample
― Germany, France, UK, Italy, and Sweden
•
IMS quarterly data over 2009–2011 period on sales
and standard units
Incentives Relevant to Biosimilars Utilization
Germany
High
Generic
Usage

Quotas

Reference
Price
System for
Biosimilars
Price
Relative to
Reference
Brand
Patient
Co-Pays
France
Italy
UK
Sweden




Variable
Fixed
Fixed
Variable
Variable
Capped
Mixed
Mixed
No
Capped
European Experience With Biosimilars
•
For epoetins and filigrastims, approved biosimilars reference
first generation products (Eprex and Neupogen)
•
Number of biosimilar entrants and prices generally consistent
with economic models and simulations
•
Biosimilar market shares of first generation products vary across
countries and reflect economic as well as medical factors
Count of Biosimilars
By Category and Country
Category
Erythropoietin
Erythropoietin
Erythropoietin
Erythropoietin
Erythropoietin
G-CSF
G-CSF
G-CSF
G-CSF
G-CSF
Source: IMS MIDAS data.
Country
Germany
France
Italy
UK
Sweden
Germany
France
Italy
UK
Sweden
Biosimilar Entry Date
October-07
July-08
October-08
May-09
August-07
November-08
March-09
June-09
October-08
September-08
QTR 1 2009 QTR 4 2009 QTR 4 2010 QTR 4 2011
5
5
5
5
1
2
2
2
1
2
3
3
0
2
2
2
2
2
1
1
3
3
4
4
1
2
3
4
0
1
3
4
1
3
5
5
0
1
3
3
European Experience With Biosimilars
•
Biosimilar shares of therapeutic category defined to
include next generation products are relatively small
•
Patient utilization has shifted in most countries to longer
lasting, next generation products (Aranesp and Neulasta)
•
Potential cost savings from biosimilars may be reduced
as a result of next generation products with quality
advantages and/or savings to other medical costs
Development of Next-Generation Products
•
Competition in biopharmaceuticals is dynamic and many
biologicals have next generation products in development
•
Roche is developing subcutaneous injection presentations
for its Rituxan and Herceptin products
•
Biogen is developing a PEGylated version of its interferon
beta 1-a product for multiple sclerosis
•
Next generation products may be in the planning stages
for Avastin and Remicade
Summary and Conclusions
•
Biologics represent a major structural change in terms of
innovation, new indications, costs, and competition
•
Biosimilars have large potential commercial opportunities
but they also face high regulatory and other hurdles
compared to generic drugs for chemically derived drugs
•
Biosimilar cost savings are expected to be modest, but
scientific advances eventually could lead to easier entry and
more robust price competition