Biosimilars Are the New Black
AbbVie is one of the largest biopharmaceutical companies in the world with $24 billion in annualized sales. More than 60% of that comes from one drug, Humira, which is approved for the treatment of rheumatoid arthritis, chronic plaque psoriasis, Crohn’s disease, ankylosing spondylitis, psoriatic arthritis, and polyarticular juvenile idiopathic arthritis.
Humira is the best-selling drug in the world. While it hasn’t beaten the $13 billion-plus that Pfizer’s cholesterol-lowering drug Lipitor brought in during its heyday, Humira generated $12.54 billion in sales in 2014, representing 19% operational growth year over year. Through the first two quarters of 2015, Humira’s sales totaled $6.65 billion, putting it on pace to log the highest sales total ever for a prescription drug in a calendar year. All good things must come to an end, the saying goes, or does it? The market exclusivity for the drug ends in the U.S., Canada, and China in 2017, and in major EU countries and Japan in 2019. Normally when patents expire, generic drugs can come on the market, financial analysts get nervous, and CEOs start pumping up future drug pipelines.
However, Humira is a biologic drug, which makes it difficult for companies to produce a generic version. Amgen is creating a biosimilar threat for Humira and is looking to get it approved in November 2016 but is coming up against patent issues. AbbVie does not seem to be worried. At the recent 34th Annual J.P. Morgan Healthcare Conference in San Francisco, AbbVie addressed its investors saying essentially, “What biosimilar threat? We don’t see that happening anytime soon.” AbbVie’s management seems to be very confident that methods of use patents that protect Humira into the early 2020s will keep these biosimilars at bay. And if that’s the case, then AbbVie is saying that its sales for Humira won’t fall in the next few years, but will actually grow (The Motley Fool, January 2016)*.
AbbVie is not alone. A number of blockbuster biologics worth an estimated $52 billion in global sales are set to lose patent protection over the next five years. Biosimilar sales are thus expected to blossom from about $1.9 billion to $2.6 billion in the U.S. next year to a staggering $25 billion by 2020, representing a 7.7% compound annual growth rate.
Biologics have taken the pharma world by storm over the past decade or so. Five of the top 10 best-selling drugs in 2014, for example, were biologics indicated for either autoimmune disorders or cancer. Biosimilars, by the nature of their development process, cannot be exact replicas of approved biological drugs. This issue has left considerable room for pharmaceutical companies to defend their star products in the patent arena, or through novel formulations or changes in delivery devices that leave biosimilar sponsors in no-man’s land on the regulatory front, so to speak.
Biosimilars also don’t come with a huge pricing advantage compared to generics for small-molecule drugs. While generics are often priced at a discount in the 90% range from branded drugs, the high cost of bringing a biosimilar to market and producing it on a commercial scale leads to a discount of only about 20% to 30% compared to the branded version.
Doctors might not be as keen on prescribing a generic version simply for pricing reasons. The fact that biosimilars rarely take more than 30% of market share from branded drugs in Europe, where they have been commercially available since 2006, lends some validity to this theory.
Most major pharmaceutical companies such as Amgen, Merck, Pfizer (via its acquisition of Hospira), Novartis, and Teva Pharmaceutical all have their shoulder to the wheel to tap into the biosimilar market.
* (2016, January 30). AbbVie: There ain’t no stinkin’ biosimilar threat. The Motley Fool. Retrieved from http://www.fool.com/investing/general/2016/01/30/abbvie-there-aint-no-stinkin-biosimilar-threat.aspx
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