The biosimilar market is expected to grow between 22% and 30% annually in Europe within the coming years. The main driver of this growth is quite obvious: the need. In fact, the impact of biological products on the pharmaceutical ecosystem in Western European countries is already being noticed, and this is just the beginning. As I pointed out in another post, representing only 3% of the total units sold, biological products are already 30% of the total market for cancer products in Germany. But it is also the segment that grows the most, about 30%, which means that in a few years if the trend continues, these products drag the market to growth levels that are difficult to bear.
Apparently, the development and commercialization of biosimilars is, therefore, an interesting business to exploit. Many pharmaceutical companies have included these products in their strategic plans, from the large companies that develop biological drugs seeking to defend their brand and why not, stealing a piece of cake from another competitor if possible, the large generic manufacturers who do not want to lose this segment, medium companies that see in this field an opportunity to grow and compete with top pharmaceuticals, even small pharmaceutical companies in search of a niche to dominate.
"Some companies and analysts are warning that the issue is not so simple and that the great opportunity could become a big trap for many of the players."
However, from a commercial point of view, some companies and analysts are warning that the issue is not so simple and that the great opportunity could become a big trap for many of the players. The problem lies in the special characteristics of biosimilars. It is true that developing them is not as expensive as producing an innovator, nor as risky. €80 or € 100 million, which is estimated to cost the clinical development of a biosimilar, is an important entry barrier...but not so much. Bringing to market an innovative product can cost ten times more and, in many cases, it collapses in the last clinical phases, when most of the investment has already been made. In 2004 I attended a dinner in which JF Dehecq, then CEO of Sanofi, told us about the promising results of Acomplia (Rimonabant), the first drug against metabolic syndrome and, using his words, the first mega-blockbuster that would reach 20 billion € in annual sales. Only a few months later, two suicides by patients of clinical trials, supposedly linked to the effect of the drug resulted in the rejection of the FDA and later of the other agencies. Sanofi took several years to recover.
The "middle size" companies and biosimilars
Investing 1,000 million euros in developing an innovative product is not feasible for any company, but 100 is a different story. Companies that can withstand maintaining innovative developments over time are few and proof of this is that the ranking has not changed substantially in the last 20 years. Only 3 of the Top10 companies in 1999 are no longer among the 10 largest in 2019, and two of them (Pharmacia and Aventis) were acquired by others that are in the ranking (Pfizer, Sanofi). We can say that at the top of the ladder the changes have been minimal.
However, in the "middle class" there have been significant variations, especially in the rank between 500 and 5,000 million dollars. The development of companies from emerging countries has been significant in this segment. These have managed to survive the landing of the large multinationals in their territories and this natural selection process has endowed them with remarkable efficiency. On the other hand, by becoming stronger and more competitive, it was a matter of time before this "middle class" decided to go the opposite way and began to consider their entering developed markets, particularly Europe and the USA. It was only necessary to be able to certify your plants in accordance with the required quality standards (GMPs) and get the necessary local experience. They found an important ally in the crisis that shook Western economies between 2008 and 2013, especially in Europe. The need for cheap drugs to control the pharmaceutical budget caused European MOHs (Ministries of Health) to begin an unprecedented promotion of the use of generics, and within these, the cheapest ones came from outside.
"The irruption of “emerging companies” in the European generic market has had a significant impact in recent years. Since 2016, Indian companies, for example, have been gaining about 1% market share yearly to reach 11% in 2019"
The irruption of “emerging companies” in the European generic market has had a significant impact in recent years. Since 2016, Indian companies, for example, have been gaining about 1% market share yearly to reach 11% in 2019. Although still far from leadership, they are getting a large portion of the giants (Teva, Myla, Sandoz…) out of the sector. But this is just the beginning. A recently published report forecasted India a 20% global market share by 2025. Not to mention China, which is still taking its first steps. Leaving India and China to a side, recent years also are witnessing the landing of companies from other emerging markets. In Asia, Malaysia, Indonesia, and Bangladesh, in emerging Europe, Turkey, in MENA Saudi Arabia and Egypt and in LATAM Brazil and Argentina.
At first, the entry of these companies into European markets seemed limited to covering the need of Western governments to free up resources with cheaper generics. Although It is still true in most cases, on some occasions, things are slightly different. Some companies from China, particularly Taiwan and Hong Kong, Korea and also recently Malaysia or Indonesia, and of course India, have established with the support of their respective governments, strong collaboration alliances with world-renowned research centers. As a result, they have become well-reputed experts in biotech development. Something similar is happening, although to a lesser extent, in Latin America. These companies are firmly committed to innovation, although their structure still does not allow them to compete in that first world division.
However, the cost of developing biosimilars is an affordable toll that these companies are willing to pay in exchange for entering Western markets and gaining experience. The proof that it is an intermediate step towards greater goals is that there are few who do not have new molecules in their pipelines, in addition to biosimilars. Also, the possibility of starting clinical trials with the biosimilar even before the patent has expired, something that has been happening particularly in India and China, has allowed some of these companies to reach the market earlier, acquiring, therefore, an interesting competitive advantage.
These and other reasons explain why there are currently more than 1,000 biosimilars in different clinical phases of development. Only from Adalimumab, there are more than 30 biosimilars, 12 have already been approved by the EMA, of which 3 have been discontinued at the request of the MA holders, possibly aware of reaching an already saturated market. With so many products, the possibility of a price war is high, as was the case with generics in the past. In 2018 a vial of oxaliplatin 50 mg was being sold at € 2.25 to all hospitals of the Community of Madrid, about the cost of a bottle of beer in any bar in the capital of Spain.
Making a mistake with biosimilars doesn't have the same implications than with generics.
Are there reasons to think that something like this ends up happening with biosimilars? In the same auction mentioned above Filgrastim was awarded Pfizer at a value equivalent to 7.9% of the original Neupogen price before the patent expired. It is true that this product has been in the market for more than 10 years and there are a large number of competitors, but in any case, it sets a dangerous precedent, as biosimilars are not the same as generics, nor is their cost structure. Let's see why.
In the case of generics, working with reduced margins is possible if low production costs are available and an efficient local distribution and conditioning system is put in place. The costs of release and analysis can be a problem if they are outsourced and the batch size is small, hence several companies (Intas, Aurobindo) have chosen to do it in-house, for which they have acquired laboratories, CROs or CMOs in Europe. At a regulatory level, the decentralized process (DCP) allows registering only in the most profitable markets. Finally, the cost of commercial management can become almost non-existent in a generalized tender system that is the one becoming more usual. A small team in charge of presenting the documentation can be more than enough since in most cases the price is practically the only decisive factor.
The case of biosimilars is different. In the first place, costs of clinical development can be 20 or 30 times higher representing a considerable burden in the p&l. The second differential point is the registration process. In Europe, they must follow a centralized process, which is essentially more expensive and does not allow eliminating unprofitable markets. Pharmacovigilance requirements and other control processes are also tighter than in the case of generics.
Last but not least, commercial strategy has also to be different. The promotion of generics has not placed the doctor in the center for a long time. First, because it hardly retains any decision-making capacity since the prescription model works by active substance, and secondly, because the almost only criterion for its use is price and whoever awards it tends to be public or private hiring tenders. However, in the current context the prescription of a biosimilar still seriously implies the figure of the doctor. In the first place, because it must write the name of the biosimilar, the prescription for active substance is not accepted and also because it still retains in most cases the right to veto the change of product at the pharmaceutical level by writing “non-substitutable drug” in the prescription. In addition, the role of the doctor is essential to convince the patient to accept the change to a biosimilar if he is being treated with the original drug. As we have written in other articles, at the individual level there is no tangible benefit to the patient so that, if the doctor does not adequately explain the reasons, there could be what has been called "Nocebo" effect, that is a negative association of any deterioration that the patient could experience, for any cause, with the switch from the biologic to the biosimilar, creating a negative perception about the product.
Putting the doctor back in the center requires restoring medical reps that, as mentioned, have been gradually being abandoned and are very expensive. In addition, the other stakeholders implied should not be forgotten: hospital pharmacists, regional authorities, managers of institutions ... each of them with a different profile and motivations, but all necessary for the product to be found available when the doctor decides to prescribe it.
In addition, and here lies the basic problem, the aforementioned environment is far from stable. European MOHs are aware that difficult times are approaching and it will be necessary to activate new savings policies such as to accelerate the adoption of biosimilars, not only in new patients but also in promoting the switch in those already under treatment, as well as to lowering prices as much as possible. In Nordic countries, formulas for the automatic switch are already being established “de facto”, in Germany an attempt is made to follow a similar path and it is a matter of time before other more reluctant countries follow. Spain or Italy seems to be slower, but they will be the first to take the lead in the event that the next crisis decides to bait them especially, as happened in the previous one.
"In this scenario, as complex as it is changing, companies willing to sell biosimilars in European markets have a significant challenge when it comes to sizing their commercial structures and also defining profiles and roles"
In this scenario, as complex as it is changing, companies willing to sell biosimilars in European markets have a significant challenge when it comes to sizing their commercial structures and also defining profiles and roles. In addition, they must do so in a context of strong competition and with an eye on what the authorities say about the capacity for the automatic switch and doctor’s autonomy to prescribe. A legislative change in a market like the German, for example, can make it necessary for a total reorganization of the commercial structure in order to continue keeping competitiveness. To make the panorama even more complicated, there are currently at least 76 companies developing and / or marketing biosimilars, so that competition will become fierce and probably not all players will survive in the mid-term.