www.Medtipster.com Source: The Wall Street Journal, 1.31.2011 – By Goran Mijuk
Generic drug makers are expecting copies of complex biological drugs to become a multibillion dollar market in the near future. But a lack of clear regulation, intense scrutiny from makers of the original drugs and the high cost of research may damp their prospects.
Hopes that the U.S. and European market for these copies, known as biosimilars, will thrive are based on the fact that biological drugs with more than $60 billion in annual sales will lose patent protection by 2015, according to research firm Datamonitor.
Should the market develop according to plan, copies of these complex drugs alone could make up around 50% of the expected $10 billion biosimilars market by 2016, according to data compiled by Capgemini Consulting. The rest will come from simpler biosimilars, such as copies of insulin and human growth hormone.
Biological drugs are made of larger molecules than chemical drugs. They are generally more effective in treating diseases such as cancer but are more expensive because of the high costs involved in making them.
Among those with patents due to expire soon are Roche Holding AG’s blood cancer and rheumatoid arthritis medicine Rituxan, also known as MabThera, anti-inflammatory drug Remicade, which is co-marketed by Merck & Co. and Johnson & Johnson, and Amgen Inc.’s and Pfizer Inc.’s rheumatoid-arthritis drug Enbrel. Each drug had more than $5 billion in annual peak sales.
The European expiry in 2014 of Roche’s Rituxan, a complex monoclonal antibody, which allows for the direct targeting of affected cells, has recently prompted three generic players to start research on a copy. Novartis AG’s generics unit, Sandoz, said it has started midstage trials for the drug, following similar steps by U.S.-based Spectrum Pharmaceuticals Inc. in early January and Israel-based Teva Pharmaceutical Industries last year.
Sandoz, which is leading the market for biosimilars with a roughly 50% market share, ahead of Teva and U.S.-based Hospira Inc., expects the entire biosimilars business could reach more than $20 billion by 2020, up from a current $250 million. Swiss chemicals company Lonza Group AG, which is teaming up with Teva in its biosimilars venture, expects solid growth because patients, insurance companies and governments want drugs to be cheaper.
The generics companies base their argument on the high price of many complex biological medicines. Treatment with Roche’s lung and kidney cancer drug Avastin and the colorectal cancer drug Erbitux from Germany’s Merck KGaA can cost thousands of dollars a month. But some experts question the generics companies’ pricing rationale, saying the current constraints could even force larger generic producers such as Sandoz or Teva to rethink their operating models.
“Much will depend on how the price of these drugs will develop,” says David Kaegi, pharmaceuticals analyst at Bank Sarasin. “Depending on the price, operating models will have to be adjusted.”
He says prices for biosimilars could be just 30% lower than the prices of the originals, because only a couple of generics firms will compete against an original drug. “It thus won’t be like in the case of the simple generics, where many firms moved into the market and prices were aggressively cut. It will be more difficult,” he says.
Since generics of chemical drugs, which are made of small molecules, are relatively simple to copy, the market for generic drugs attracted a flurry of players and this brought prices down sharply.
The main risk, analysts say, is that if prices don’t come down much, original drug producers will be able to retain a large market share. On the other hand, if prices fall too fast, generics firms’ margins could suffer.
A Sandoz spokesman said the company expects pricing to continue to vary according to product and market, saying the entry bar for complex products would be high, which would limit competition and keep prices from falling too fast. Lonza’s chief executive, Stefan Borgas, said that even if prices fell by 50%, margins and growth would still be healthy.
Industry insiders and management consultants are also concerned the market may need longer than expected to establish itself, as research and development for these complex drugs is difficult and costly, and doctors and patients may be wary about their safety.
One of the main problems with generic versions of complex biological drugs is that, unlike simple-to-produce generics of chemical drugs, which are identical to the originator product, these medicines aren’t exact copies. Complex biological drugs such as Rituxan are genetically engineered and consist of large molecules produced in live cells.
Because the manufacturing process is difficult, requiring extensive genetic expertise, and it is also prone to errors, continuous testing and controlling is needed. At best, a generic copy can only be similar to the original protein.
Because biosimilars aren’t identical copies, “biotech and big pharma are looking to squash the movement by throwing bioequivalent issues and quality-control issues,” says Mary Ann Crandall, an independent pharmaceutical analyst at research firm Kalorama Information. “I think that will continue to hinder things. These products are too much of a cash cow to just let generics come in and cannibalize it.”
World-wide sales of all biological drugs reached $130 billion in 2009, according to research firm IMS Health, and are expected to grow much faster than conventional chemical drugs.
Another factor keeping the biosimilars market in check is the lack of clear regulatory guidelines.
While the European Medicines Agency has so far approved 13 simpler biosimilar drugs such as insulin, final guidelines for complex biosimilars are still pending. Analysts say they may be introduced next year.
In the U.S., regulators are currently working to establish how intensive testing for biosimilars needs to be and how the traditional three-phase drug-approval process for originals can be abbreviated. A key concern is to make sure that biosimilar drugs are safe and effective.
“I had predicted that it would be in place by 2009 but now, although there has been progress, there are still numerous regulatory hurdles. Big pharma is very influential and not about to go quietly,” Ms. Crandall says.
Roche, which has already prepared for generics competition but expects the impact from biosimilars on Rituxan to be limited, says that while it supports the development of regulatory frameworks for biosimilars, patient safety is of the utmost importance.
“Specific processes, data, research and experience are needed to ensure that a biosimilar monoclonal antibody has the same profile, efficacy and safety as the originator product,” Roche says.
This may prove too difficult for many players. Michael Frizberg, vice-president of Lonza Generics, said that developing a complex biosimilar can take up to eight years and cost more than $100 million.
Sandoz’s head, Jeff George, put the cost as high as $250 million for difficult-to-copy large-molecule drugs.
Although small U.S. biotech Spectrum Pharmaceutical, which has teamed up with Viropro Inc., says it has enough funds to develop a copy of Roche’s Rituxan—financial constraints may keep many smaller firms from entering the market. “It may cost too much time and money for a number of small to midsized generics manufacturers to embark on biosimilars production,” says Stephane Dutu, asset manager at Vernes & Associés in Geneva.
“Furthermore,” Mr. Dutu says, “doctors may be reluctant to use biosimilars as it is a new class of products with no track record in terms of safety and benefits.” A poll conducted in summer 2010 by GMS Dr. Jung GmbH, Gesellschaft für Markt- und Sozialforschung, found that more than 50% of physicians in Germany have heard or read little or nothing about biosimilars.