IMS_Biosimilars Whitepaper

Shaping the biosimilars opportunity: A global perspective on the evolving biosimilars landscape IMS HEALTH1 • SHAPING THE BIOSIMILARS OPPORTUNITY • December 2011 Shaping the biosimilars opportunity: A global perspective on the evolving biosimilars landscape After several years in the slow lane, important changes are driving new momentum in the market for biosimilars, paving the way for their accelerated growth over the next decade and beyond. Although currently small and narrowly focused on a few disease areas and countries, the biosimilars opportunity is set to expand as patents expire on leading biologics, US legislation comes into effect, and payers push for their wider adoption to manage burgeoning costs. The signs are there, but questions remain. How will the commercial prospects play out? Where is the greatest potential? And what will be the optimal go-to- market model for entrants? Analysis from IMS suggests that companies looking to take advantage of the evolving landscape will need carefully planned strategies, strong commitment and the resilience to overcome some formidable barriers, especially in the short-term, to maximize return on investment. By 2015, sales of biosimilars are expected to reach between US$1.9-2.6 billion, up from US$378 million for the year to the first half of 2011. Potentially, this market could be the single fastest-growing biologics sector in the next five years – albeit from a small base – spurred by the convergence of major dynamics that will see new biosimilars enter the US market by 2014, bring additional molecules to Europe through 2015, and open up oncology and autoimmune disease areas to biosimilars for the first time ever. Cost pressures key The changing outlook for biosimilars comes at a time when the global pharmaceutical market is feeling the combined impact of two key events: a period of unprecedented patent expirations on many of the world’s largest pharmaceutical brands, and a financial crisis that has required healthcare systems to make significant and sustained cost reductions. For payers in the advanced markets, limited economic growth and pressures on healthcare make the patent cliff a true generic dividend, enabling much needed savings to be realized. However, as potential savings from generics start to decline in these countries over the next 5-10 years while the imperative to reduce expenditure continues to grow, payers face an urgent need to find new ways of rationalizing resources. Biologics – among the most expensive pharmacotherapies available and now approaching their own swathe of patent expirations – potentially represent the most lucrative source of savings on drug expenditure for Western nations after 2015. Biosimilars may be the key that helps them to realize this opportunity. Biosimilars also bring clear potential for payers in the emerging pharmaceutical or “pharmerging” markets, such as Brazil, India and China. Here, the need to broaden healthcare coverage to large populations increasingly must be balanced against limited budgets and growing demand for innovative drugs. Biosimilars offer one way of widening access and enabling better value to be obtained from the money spent on healthcare. In some cases (such as South Korea, India and Brazil) they are seen as a key macroeconomic driver of growth, attracting foreign capital by creating manufacturing and R&D centers of excellence. ➜ IMS HEALTH2 • SHAPING THE BIOSIMILARS OPPORTUNITY • December 2011 Growing demand for biologics The imperative to find cost-effective alternatives to biologics reflects the growing demand for these specialty drugs. Since their origins in the 1980s, biologics have prospered into a US$138 billion market (2010), fuelled by such key launches as recombinant insulins, human growth hormone (HGH), alteplase, erythropoietins (EPOs), granulocyte colony stimulating factors (G-CSFs) and then monoclonal antibodies (MAbs), among others. Currently accounting for 16% of global pharmaceutical expenditure and significantly out- pacing total branded sales, biologics will continue to out-perform the global market as more innovative products deliver new treatment options for a growing range of indications. Patent expiries driving new potential A number of top-selling biologic brands, including Herceptin, Enbrel, Humalog, MabThera, Remicade and Aranesp, are due to lose product patent protection over the next five years, opening up a wealth of new possibilities for biosimilars players. Key therapy areas such as cancer, diabetes and rheumatoid arthritis (RA) will spearhead this new wave of biosimilars, with attention focused on the real prizes of anti-TNF MAbs, MAbs for oncology, and insulins (Figure 1). Diverse competitive landscape A diversified competitive arena for biosimilars is already emerging, with generics manufacturers, R&D-based pharma, and biotech companies poised to compete: Teva is approaching the end of Phase II trials for a biosimilar version of Roche’s rituximab (MabThera/Rituxan);1 Pfizer recently signed a deal with Biocon (India) to manufacture biosimilar insulins;2 AstraZeneca and Eli Lilly have both signaled intentions in this area;3 Boehringer Ingelheim is creating a dedicated division for developing and commercializing its own biosimilars;4 and a Merck&Co deal with CRO Parexel is expected to yield five late-stage biosimilars by 20125. Plans to develop biosimilars are also being mooted by leading innovator biotech companies, including Biogen Idec and Amgen – which has particularly called-out emerging markets in South America and Asia.6 Interest in the sector has even extended beyond the realms of pharma: digital technology leader Fujifilm and electronics giant Samsung have both now joined the race, securing biosimilar deals with Merck and Quintiles respectively. Samsung is planning to pursue further biotech ventures in its effort to achieve target revenues of US$1.8 billion from biopharmaceuticals by 20207. The entry of these players may not necessarily herald similar actions from more companies in other industries, but it does bring a fresh inflow of cash to fund development programs and atypical branding models that have already paid off in other industries (Figure 2). The commitment is clearly there, but how and where will the promise be fulfilled? Defining the market The biosimilars sector has reached very different stages of evolution around the world. Clarity of guidelines is variable and regulatory pathways diverse, leading to various definitions of biosimilars (or the broader group of follow-on biologics) across countries and regions. Europe has by far the best-established framework, with which the US is now more or less aligned. Whether the US opportunity is realized is the single most important differentiator between success and failure for biosimilars in the next decade. ➜ 1 http://www.tevapharm.com/en- US/Products/ProductsPipleine/Pages/default.aspx 2 Pfizer to sell biosimilar insulins in Biocon deal. Accessed 3 Nov, 2011 at http://in.reuters.com/article/2010/10/18/idINIndia- 52267720101018 3 Astra Zeneca eyes move into biosimilars. Accessed 11 Nov, 2011 at http://www.ft.com/cms/s/0/9740a42e-d064-11dd-ae00- 000077b07658.html#axzz1dO1hLirT 4 Boehringer Ingelheim expands its business with biosimilars. Accessed 2 Nov, 2011 at http://www.boehringer-ingelheim.co.uk/news/press_re- lease-Boehringer-Ingelheim-expands-its-Business-with- Biosimilars.html 5 Merck & Co in deal with Parexel to develop biosimilars. Accessed 3 Nov, 2011 at http://www.firstwordplus.com/Fws.do?src=corp_site&articleid=411C A68F1931475B92F0A475730DE0CA 6 Copying biotech medicine attracts more drugmakers. Accessed 3 Nov, 2011 at http://uk.reuters.com/article/2011/01/13/healthcare-biosimi- lars-idUKN1313681520110113?rpc=401&feedType=RSS&feed- Name=governmentFilingsNews. 7 High-tech companies buy into biomanufacturing. Accessed 10 Nov, 2011 http://www.genengnews.com/analysis-and-insight/high-tech- companies-buy-into-biomanufacturing/77899375/ Insulins Anti-TNF Oncology (MAb) EPO Multiple sclerosis CFS-G Blood coagulation Ocular antineovasc. Antiviral (no-HIV) Other Core Therapy Areas for biologics (MAT 12/2010) 15.9 15.8 12.5 7.6 7.3 5.0 3.1 2.0 1.5 16.5 0 10 Billions $ 20 •Top 5 therapy areas account for about 70% of the total market FIGURE 1: KEY AREAS SUCH AS CANCER, DIABETES AND RA WILL BE AT THE FOREFRONT OF THE NEW WAVE Big PharmaCos, not only generics companies, are ready to compete A diversified competitive arena is emerging • Teva developing its first biosimilar version of rituximab (Mabthera/Rituxan) • Pfizer recently signed a deal with Biocon (India) to manufacture biosimilar insulins • Merck signed a deal with CRO Parexel to provide biosimilars to Merck BioVentures (5 late stage biosimilars are expected by 2012) • Biogen Idec ready to enter the biosimilars arena as well (“the company is in the perfect position...biosimilars market as a low risk” Biogen’s CEO Scangos) Source: IMS Health IMS HEALTH3 • SHAPING THE BIOSIMILARS OPPORTUNITY • December 2011 Outside these markets, definitions of agents and pathways to approval are less precise. It is clear that follow-on or modified biologics already exist in China and India as well as in other countries. Some of these agents would fit the definition of existing biosimilars well; many are essentially copy versions of patented agents; others fail to meet either categorization, yet clearly are not original. For instance, Reditux, a copy of rituximab manufactured by Dr Reddy’s, has been available in India since 2007, but its approval has been based on a smaller body of evidence than is likely to be required in Europe or the US. To enable consistent analysis across geographies, therapies and manufacturers, IMS has established an industry-verified standard market definition for the biosimilars sector. This classifies biosimilars (also known as follow on biologics in the US and subsequent entry biologics in Canada) as biologic products approved in a country which has an abbreviated approval process for biologic products that references an originator biologic in the regulatory submission. Products marketed in countries without a biosimilar approval pathway and for which the originator has not granted a license are not considered true biosimilars. A tale of three geographies Geographically, the market for biologics and biosimilars falls into three distinct clusters: the US, the other advanced economies (Europe, Japan and Canada) and the pharmerging markets (Figure 3). The US accounts for most of the global spending on biologics and will be a key driver of long-term biosimilars market potential. The advanced economies have the advantage of an established framework for biosimilars but to date uptake has been slow; Europe is the most progressive. Some of the highest growth rates for biologics are currently seen in the pharmerging markets, where biosimilars already exist (albeit through a looser regulatory pathway) and where much of the immediate growth will be found. In Japan, biosimilars guidelines have been recently established and follow the principles of the EU Framework; biosimilar epoietin alfa has taken over a quarter of the market by volume in a period of 12 months, but somatropin has done less well. US: The big opportunity Devoid of a specific regulatory pathway, the US currently has no established industry for biosimilars. At present, there is only one product on the market that could potentially fit this description – Omnitrope (somatropin/HGH) which was launched by Sandoz in 2007 under a special ruling. However, all this is set to change in 2014 when the country’s new framework for biosimilars, set out by The Patient Protection and Affordable Care Act of March 2010, comes into effect. With leading manufacturers including Pfizer and Merck already positioned to compete, and patients and health insurers stepping up the pressure for access to low-cost, high-value drugs, the US is forecast to be the single biggest opportunity for biosimilars by 2020. Whether this opportunity is realized is therefore the most important differentiator between success and failure for biosimilars in the next decade. UNDERSTANDING THE ISSUES The future market for biosimilars in the US will be shaped by a number of factors, not least the reaction of managed care and the play-out of pricing dynamics. While many of the uncertainties remain to be categorized, experience from analogous situations offers important pointers. ➜ FIGURE 2: ATYPICAL BRANDING MODELS HAVE PAID OFF IN OTHER INDUSTRIES 20 16 12 8 4 0 1. US Potential leading market for biosimilars Biologics, 2005-10 CAGR 2. Advanced economies Established framework for biosimilars, but slow uptake 3. Pharmerging economies Biosimilars* already established (looser regulatory pathway) and fast-growing biologics market US JP SEU CAN CEE TUR BRA MEX CHI KOR IND VTN 9% 6% 10% 14% 19% 21% 14% 13% 24% 16% 19% 39% Bi ol og ic s M ar ke t, L C$ b il 60% 50% 40% 30% 20% 10% 0% U pt ak e, % Biologics Market Sales Biosimilars* Uptake, % FIGURE 3: THREE GEOGRAPHICAL CLUSTERS ARISE, WITH US REPRESENTING A SIGNIFICANT PORTION OF MARKET POTENTIAL (~60%) Pharmerging economies anticipated to be a potential growth driver Wanted to sell its electronics in the US in the ’80s Best Buy and Home Depot initially refused assuming low quality Entered into the US through second-tier, regional retailers (e.g. HHGregg, P.C. Richard) Transformed its brands, from Lucky Goldstar to Life’s Good Now LG can be found at all the top big-box stores Enter in the developed markets Disparaged by many western incumbents as more fattening (“Mexican Lemonade”) Long-term focus in educating consumers and aggressively branding the product as a lifestyle beer Downplayed “hecho en Mexico” effect World’s 10th best-selling beer and number 1 imported in the US Focus on likely early adopters (blockbuster- type global launch strategy not necessarily the most suitable) Invest on branding and patient education Takeaways for biosimilars incumbents Source: Adapted from Harvard Business Review, December 2010 Source: IMS Health MIDAS, 2005-2010 * Biosimilars in Europe and Japan defined by regulatory pathway, in pharmerging markets looser approval processes apply for products that resemble biosimilars IMS HEALTH4 • SHAPING THE BIOSIMILARS OPPORTUNITY • December 2011 Among the most interesting analogs for biosimilars in the US are the heavily contracted, narrow provider populations around erythropoietins and the G-CSFs where the influence of managed care is strong and payers have considerable sway over contracting and the defined treatment paradigm for a disease. This set-up closely parallels, and is likely to mirror, the institutional contracting environment in Germany (the most advanced biosimilars market) where a very limited group of doctors administer erythropoietins in a small number of centers. 1 Price: For originator companies, one of the key challenges is to anticipate the way in which biosimilars will act on price. Heavy price discounting in the institutional sector provides a strong incentive for biosimilars to target a list price that is very close to the originator’s and subsequently gain their advantage through contracts. 2 Established experience: In classes such as EPOs and G-CSFs, where there is general acceptance of high similarity between biosimilars and original brands, and established experience of their use in Europe, the technical bar is likely to be cleared relatively smoothly. Likewise, if there is a hospital network or relatively limited number of clinic/treatment centers, usage decisions will be faster. By contrast, biosimilars targeting autoimmune diseases are likely to meet reticence in switching patients unless and until they fail on current treatment. Without a significant financial or co-pay advantage, there is likely to be little interest from managed care in starting new patients on these medicines – at least until the safety and substitutability of the biosimilars are demonstrated. 3 Duration of therapy: The nature of drug use will be also be a key consideration for the adoption of biosimilars in the US: those intended for chronic conditions such as RA and psoriasis, for example, may face particular scrutiny by payers in considering the impact of potential financial exposure to possibly lifelong therapy. Conversely, if the use of biosimilars were to enable significant savings in these areas, payers may be more favorably inclined towards them – provided of course that safety and efficacy are demonstrated. Much could depend on the relative influence of the prescribing physicians and the degree to which patients express a preference for a lower-cost therapy. 4 Familiarity and trust: Doctors are already familiar with the concept and cost benefits of initiating treatment with generic versions of non-biologic agents in such conditions as RA, but they will need to trust and believe that biosimilars are an effective, safe and cheaper option to follow suit with biologics. Given that these biologics remain on the Tier 4 formulary level with 30% patient co-pay, this is likely to be a slow build. 5 Uncertainties: For US patients and payers, the key issues around biosimilars are the uncertainties. In large patient and provider populations, the level of co-pay will be crucial: unless they are significantly lower there will be little incentive for use. The possibility of moving biosimilars to a separate formulary tier is an option, but one that is likely to be heavily dependent on a stronger perception of safety around MAbs. In the event that a track record of success is established in Europe before market entry in the US, and some form of medical consensus is reached on switching patients to biosimilars, this may change. The real key for biosimilar manufacturers within this broader provider community is that it will take longer to convince individual doctors one- by-one, versus contracting. There is also the potential in the US for greater biologic volume arising from the use of biosimilars – a phenomenon which has already been observed in Europe (see Figure 6, page 7). This could put at risk systemic “savings” with higher utilization, particularly if price discounting for biosimilars is only in the region of 20-30%. 6 Patient role: Increasing co-pays and the growing role of patients in treatment decisions will also be important for biosimilars: manufacturers may choose to differentiate their products through the use of patient assistance programs (PAPs) setting their list price at a similar level to the originator brand and offering co-pay assistance to the patient through social networking, thus bringing them into play into the decision making process. SIGNIFICANT POTENTIAL – OVER TIME Notwithstanding the significant potential for biosimilars in the US, their establishment in this market will be a slow process: stringent clinical requirements and an involved, potentially drawn- out procedure for resolving patent disputes are likely to delay the speed of uptake in the near future: behind every product patent there are several potential lines of defense for originator companies, including process patents, which may slow the entry of biosimilar versions when new markets open. Given the highly technical issues involved and lack of legal precedent to date, predictions are difficult to make and questions remain as to whether biosimilar versions of the more complex biologics (MAbs) will reach the US market before 2015. ➜ IMS HEALTH5 • SHAPING THE BIOSIMILARS OPPORTUNITY • December 2011 It will also take time for th