In October 2018, the EU market will face the momentous launch of six Humira (adalimumab)biosimilars. Given the importance of this product for patients and its prominence in the tumor necrosis factor (TNF) space, competing companies have their work cut out for them when establishing their market strategies. In , Jorge Santos da Silva, partner, and Jennifer Heller, associate partner, who lead McKinsey & Company’s global services on biosimilars, unpacked the forthcoming players, and shared their thoughts on which markets will be the biggest battle grounds for market share. However, as they describe here, there are several critical pricing and market considerations for companies as this highly anticipated product becomes available in the EU.
Anna Rose Welch: What are your expectations of pricing in this market? How low can it go, and what impact will this have on individual companies and/or the industry as a whole?
Jorge da Silva & Jennifer Heller: Our opinion is that biosimilars present options to manage costs in the overall healthcare system and increase treatment rates. List prices are one component impacting the cost of treating a patient. Other components include the level of investment in the form of discounts and rebates versus an agreed list price, as well as investments in ensuring products are distributed consistently and developing services that help patients and physicians/nurses manage and maintain long-term therapy.
If the focus is only on price, there is a risk that overall value-add to the patient — and thus the long-term impact of the therapies — will be impacted. Similarly, if the price gets too low, the market share required to offset the investments would be quite high and would further drive a volume trade-off. This can ultimately impact the overall dynamic and bring on what we could call “Humirageddon,” the state at which biosimilars become less available to patients and the prospect of investing in biosimilars becomes highly unattractive. For example, if the industry standard of 15 percent internal rate of return or above is applied, then rebates above 50 percent to 70 percent versus the originator’s list price would require market shares of above 30 percent of the overall market for an average European player.
While these are theoretical estimations, it does illustrate the point that with at least five companies vying for a market where one is the incumbent right now, large rebates could lead to imbalances in sustainable approaches. As mentioned, this could result in less-than-ideal scenarios with downward-spiral pricing that could jeopardize the market and the sustainability of biosimilar investments. No doubt, in Europe today there are regions and channels wherein the discount versus the original list price (on infliximab) is already close to or even above 70 percent (e.g., some tenders in Finland, national tenders in Norway, and some regions in Italy). Thus, it is increasingly clear that sophisticated price and volume modelling and balance across countries, regions, and channels will be a key element for incoming players to launch and manage their biosimilar products. This is particularly important as not all market volume is available at all times, due to tenders and variable-length contracts. Similarly, patients often remain on a single therapy for a number of years. This means volume and investment balances need to be carefully planned, monitored, and adjusted. In the case of adalimumab biosimilars, payers’ approaches to reimbursement and adoption will be an important swing factor to stabilize competition.
Welch: Outside of price, what are your biggest concerns about October’s upcoming launches?
da Silva & Heller: There are some areas that, if well done, should contribute to a more stable (less concerning) market situation. One dimension is the continued education of all stakeholders on particular biosimilar products and brands and the respective offerings. It also includes collaboration and planning with regional payors and providers to ensure proper implementation, acceptance, and pull-through. In our experience on the ground, we would suggest this has greatly contributed to the success of other mAbs, like rituximab in the U.K. This, along with a selected go-to-market model for specific countries, regions, and channels that balances price, volume, investments, service, and product specifications, etc., has proven to be the foundation for the success of biosimilars in Europe. We do not expect much to be different for adalimumab launches — but there will be more at stake. Obviously, other concerns could arise should product quality be jeopardized or patients lose support and value by being prescribed or switched to a biosimilar version of Humira. But, to our knowledge, there is a strong regulatory and control base in place and a keen interest from the biosimilar companies to “do it well” to succeed. Also, over time, the assessment of key stakeholders (e.g., physicians) has shifted to suggest that at new launches, greater than 50 percent of naïve patients would be elected for therapy initiation with biosimilars and another 20 to 25 percent for switching (depending on country and indications). These are higher percentages compared to a few years back, which may indicate a larger addressable market at launch. Considering the value at stake, not just for adalimumab, but for biosimilars in general, this situation will indeed be a testing ground for the resilience and sustainability of the market.
Welch: For companies still developing biosimilars of Humira, what should they pay attention to as the product takes root in Europe? How could these takeaways be geared toward companies waiting until 2023 to launch in the U.S. market?
da Silva & Heller: All companies are learning as they launch their products and observe competitors launch biosimilars. There has not been a player (or players) that consistently launches first in the biosimilar market. The “observation field” will be wide in that players will look to all aspects referred to in the previous responses. This should allow them to correct course, refine the approach coming in later, and even change course (including not launching). Beyond strong differentiation, with five players readily competing from day one, it is hard to imagine how subsequent entrants will succeed in capturing share in the EU (but applies to other countries, as well).
The adalimumab biosimilar players launching now or, potentially, later in Europe are also vying for entry in the U.S. market, so all lessons are likely to be scrutinized in detail as there is ample time to prepare for U.S. entry. In principle, all the aspects discussed throughout our previous responses will be important for U.S. market strategies. But how to compete against volume-based contracts and how to accrue value from alternative go-to-market models will be critical elements to get right, as these will be key to success in the U.S.
For Humira specifically, we can imagine that litigation will be less intense, as arrangements have been made to balance European entry and U.S. entry. However, the U.S. market is still limited from a biosimilars perspective, so the barriers as they are today will still be challenging for biosimilar competition in 2023. However, with the various changes being discussed and proposed by the FDA commissioner and his team and the succession of Citizen’s Petitions, we might have a very different picture by the time we get to 2023.
The FDA recently calculated that if approved biosimilars were all launched in the market, overall healthcare costs could have dropped by upwards of $4.5 billion. Based on this data alone, the pressure will be high to shift the paradigm in the U.S. in the next four to five years.