Impact of Biosimilar Approvals on the Pharmaceutical Market

Biosimilars are an emerging area in the specialty pharmacy community and beyond. As the pharmaceutical industry continues to feel outside pressure from costly drugs, strategies to reduce health care spend are being sought.

Although biologics account for less than 1% of all dispensed prescription drugs in the United States, it accounts for one-fourth of all prescription spending. Concern surrounding high price tags of biologics continues to rise, and biosimilars offer the potential to provide patients with less costly alternatives.

In an interview with Specialty Pharmacy Times, Yogesh Soneji, a partner at Trinity Partners, discusses the future of pharmacy and the effect of biosimilar approvals.

SPT: What impact can biosimilar approvals have on the pharmaceutical marketplace?

Soneji: I think these are exciting times. It’s almost a new era for the industry in general, [with] the launch of recent biosimilars and some uncertainty around what happens in the near term.

When you think about the marketplace there are so many different players. A way I think about this is there are going to be 2 camps: the brand to whom a biosimilar is being launched against and then the biosimilars themselves. The impact is going to be different depending on what side of the fence you are on.

For the branded companies that have biologics today, it’s going to be a little more uncertain in the near term of what happens, because besides the upcoming launch timing of biosimilars, they also have to have to guess what the pricing (of biosimilars) is going to be, what the biosimilars will discount their drugs at, and there is going to be some uncertainty, at least in the near term, on how to mitigate that. On the other hand, for the companies that are actually launching these biosimilars, that represents a whole world of opportunities. As you may know, the biologic space in the drug industry is huge in terms of how big (revenue) these drugs are. So, it really presents a vast opportunity for some of these companies who are pursuing biosimilars, once the patent expires, to have their own products and create more competition. It’s also an opportunity for an opening of markets for some of these players.

What is important for us to understand is unlike small molecule generics—–if you can think of the old drugs––they were branded companies, and the generic companies only did generics and they didn’t do anything else. It was a very distinguished camp. In the biosimilar space, it’s not very clear. Inflectra for instance, is launched by Pfizer who is also a big branded company, so this dynamic is emerging a little bit when it comes to biosimilars. Branded companies are also the companies that are actually (going to compete) in that biosimilar space, so, in some ways, there’s going to be a lot of opportunities for companies that can now enter into the market that couldn’t before.

It really depends on what side of the fence you are on, some are going to lose in some way and some are going to be gainers in some way, but at the end of the day I think there’s going to be opportunity. If you think about the broader marketplace of providers, patients, and physicians, and competition that gives them more options. I think we have to take a different lens to think about the entire implication of what biosimilars mean to the pharmaceutical marketplace.

SPT: How will biosimilars affect future drug prices?

Soneji: Only time will tell, but if you even see what is going on recently, you have biologics with different price points, with one in the 15% discount list price and another over 30% discounted list price. I think it’s already been mentioned that the branded players, like Remicade, have been more aggressive on contracting on their own drug and getting better contracting in order to safeguard their business in the near term. I think there is no doubt that we will see prices go down and spiral, but the question isn’t about whether they will or not. I think the question is how fast and what that path looks like. If it’s going to happen very quickly or if it’s going to happen in a steadier manner over time.

I do think in the long run, biosimilars will drive down prices. One key aspect with pricing that’s a little more complicated in the drug industry, as you might have seen, is it is not very transparent about what the price of the drug is.

We see list prices mentioned regularly in press releases about Inflectra and what their list price is compared to the list price of Remicade. But I think the key here is for us to keep an eye out for not just the list price, but what is the net price, which takes into account the rebates and discounts which can be negotiated on a payer basis, and what happens to those and what path those take. Because that is what drives decisions, especially from the payer side. Which drugs they put on formulary, which drugs they prefer to use at the end of the day, what really matters with pricing is net price that payers have to pay including contracts/rebates and discounts.

SPT:Biosimilar uptake has been slow, what changes need to be made to increase use?

Soneji: We have to think about a few different changes. Number one, heavier price discounts to encourage biologics. I think pricing is going to be the biggest driver for biosimilars, I think it’s going to be important. At the same time, I think there are other ways of having comfort with the biosimilars, and physicians and patients understanding what biosimilars really mean. There is a lot of confusion around what biosimilars are and are not, and some companies are spending a lot of time just educating people on biosimilars. This is new ground for everyone, having awareness and understanding of what these drugs can do and what that means is important.

The biggest question on adoption will center around, not just what the biosimilar companies do, but also what the origin companies do in response to biosimilars. We can’t think of it really from the aspect of what Merck and Pfizer and the other companies are going to do with their biosimilars, but then you have to now think, “Okay, if they do this what does this company do. And if they do this, what does the other company do?” So again, it goes back to really thinking about it from that perspective.

I think the biggest question is, are these companies that have original drugs, are they going to play ball with the biosimilar companies? Are they going to compete with them on the pricing or are they going to give up and then let their business erode over time? What are the big industry players doing who have the branded agents. Are they going to let that erode, or are they going to try to protect it by playing in the discounting and contracting game? Instead of just giving up on their business, they might see a slow decline, which might be very different than what you see in the generic space. You’re talking about drugs that are $5 billion and Humira that’s $15 billion, so I think you have to think about what original companies might do.

SPT: Why is the recent approval of Renflexis so important?

Soneji: It’s important in several ways. I think it shows that there is going to be a trend towards a change in price for these biosimilars. For Renflexis, it’s more the emergence of biosimilars—–so we’re not done yet, it’s still in the early stages. To me this is an important event, but it’s more of a start of an evolution of a new industry dynamic.

We are talking about Remicade with this drug now but there are other TNFs, some big ones that are upcoming. What happens with Amjevita and that litigation is sorted out, and then they get biosimilars, and their pricing. I think that’s going to be as important an event as the one we have right now (the approval of Renflexis). To me this is more the beginning of getting other biosimilars to come and their strategies and what they do. It’s really the start.

SPT: Anything you want to add?

Soneji: I think our experience and understanding is that this is not as straight forward, in terms of what happens in the future. Everybody must be ready to adapt to different situations as situations evolve. There is no one specific way this industry is going to evolve, and I think it’s important for us to take a very holistic view about not just the companies and pricing, but also perhaps what the government does. The government has some regulations put into place on what biosimilars are and what biosimilar interchangeability is—–those might change in the future too. So, it is important to really think of biosimilars in the context of holistic health care.

If you look at what is happening abroad, different markets have really taken different paths for biosimilars. It is important that we be open and adaptive, because given the number of players and the number of biosimilars and drugs in the market, we are likely looking at some uncertain times, at least in the near term. We have to adapt as we go through this first big round of biosimilars coming out that are setting the stage for biosimilars in the future­­—–for future drugs.