Why haven't biosimilars gained ground in the U.S.?

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In 2015, biosimilar hype had reached an all-time high. The first biosimilar, Novartis' Zarxio, had just been approved. Later, CVS Health's chief medical officer, Troyen Brennan, declared that biosimilars could ultimately drive down the prices of expensive biologics by 40% to 50%.

Two years later, the emergence of biosimilars in the U.S. has been sluggish at best, characterized by tepid sales and slow adoption. At the same time, according to two recent reports, biosimilars are still on track to contribute to a significant reduction in U.S. healthcare spending. Additionally, an increasing number of these drugs may be on the way to pharmacy shelves in the near future — that is, if a price war doesn't threaten the incentive to bring them to market. 

See also: Merck educates doctors about biosimilars, long before it will sell one in the U.S.

According to Pratap Khedkar, managing principal at ZS Associates, there is intense competition on the horizon among biosimilars. He points to a rich and expanding market for copycat versions of lucrative TNF-inhibitors like AbbVie's Humira, Johnson & Johnson's Remicade, and Amgen's Enbrel as well as CD20-directed antibody, Genentech's Rituxan. Forty-two potential biosimilar copycats of those drugs are in various stages of development, all courting their cumulative $25 billion in sales.

“Let's say that one-fifth of those 42 gets approved,” Khedkar explained. “After the fifth or sixth drug, what choice do [drugmakers] have but to drop the price?.... Someone will run for the door and take down everyone down with them.”

If that happens, Khedkar added, “Everyone will stop innovating in this space... It's not [going to be] sustainable.” To that point, Merck and Samsung's Remicade biosimilar, known as Renflexis, launched in July with a 35% list-price discount.

See also: Amgen, Sandoz argue biosimilar patent case to the Supreme Court

Khedkar points out that some makers of biosimilars may be able to stand out — and potentially circumvent a price war — through better customer service. “If you don't want to compete on price, you have to compete on something else,” he explained.

Still, that impending competition could significantly bring down spending on biologics going forward. Rand Corp. estimates that the expanded presence of biosimilar drugs may reduce U.S. health spending by $54 billion over the next decade. That savings estimate is 20% higher than a similar one produced by the research organization three years ago.

According to a late-September research report from Moody's Investor Service, the number of applications for biosimilars and approvals are expected to surge during the next 12 to 18 months. Additionally, Moody's anticipates that the FDA will work to improve the pace at which biosimilars come to market through the second iteration of the Biosimilar User Fee Act. As part of that legislation, the FDA could implement “a number of enhancements to the biosimilar approval process over the next several years. This includes higher staffing levels and faster turnaround times."

See also: What do physicians think about biosimilars?

The FDA is also taking steps to improve the education around biosimilars for doctors. On Wednesday, the agency unveiled new educational materials to give doctors a better understanding of these products and how they come to market. A SERMO poll of physicians conducted in May 2016 found that 84% of 1,789 respondents said they “need more educational information on biosimilars.”

Slow uptake of biosimilars cannot solely be pinned on doctors not fully understanding them, however. Take Inflectra, Pfizer's biosimilar of Johnson & Johnson's Remicade. One year after Inflectra's October 2016 launch, Remicade has lost only 5% of its U.S. sales. It generated $1 billion in sales in the second quarter of 2017, while Inflectra had sales of just $23 million in the same period.

Pfizer has since filed a lawsuit against J&J for anticompetitive practices, alleging that J&J threatened to withhold rebates from payers that slated Inflectra as an alternative to Remicade. J&J has denied the allegations. 

See also: Drugmakers battle for slice of Humira's billions

Other drugmakers have had less success staving off biosimilar competition. Amgen's cancer drug Neupogen has lost 44% of its volume share to biosimilars Zarxio and Granix (marketed by Teva). U.S. sales of Neupogen were down 36% in the second quarter of 2017, compared to the year-ago period.

A Rand analysis of QuintilesIMS data found that Granix and Zarxio claimed 30% percent of the total Neupogen market as of the last three months of 2016. It also found that Granix was being offered at a 30% discount, while Zarxio was discounted by 45%.

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