Edric Engert, managing director, Abraxeolus Consulting
We have come a long way in the U.S. biosimilars industry. Though it is still growing and challenges remain, it is no longer a nascent market. Not that long ago, the key questions were about creating a regulatory pathway and demonstrating similarity through development and clinical development.
However, recently, it is much less about regulatory affairs and R&D and much more about portfolio selection, rigorous forecasting, business development (BD), and commercialization. In fact, although there is a broad range of issues and questions we’ve addressed at Abraxeolus over the years, the current focus can be captured in 10 pivotal questions under selection and operations:
- Should we pursue this particular biosimilar?
- How much value could it bring?
- What are the various scenarios that could develop, and what are the risk-adjusted forecasts for each?
- What is the best sales and marketing strategy for our biosimilar?
- Should we build a commercialization infrastructure or establish a BD deal?
- Is this the right BD partner for commercialization?
- How do we position ourselves as the optimal BD partner for commercialization?
- What kind of commercialization infrastructure does a company need both internally and from external vendors and partners?
- How much does building such a commercialization infrastructure cost and how do the costs change by year, pre- and post-launch for a product?
- What does the resulting profit and loss (P&L) potentially look like?
The correct answers to each of these questions require a fundamental understanding of the market in commercial terms and, lately, great changes are afoot. I’d like to walk you through my view as to what has been, what has changed, and what the new flexible biosimilar business model of the future will look like.
What Has Been
In the past, companies would pick products based on the branded products’ sales, technical risk, or the therapeutic area that was best aligned with existing commercialization infrastructure. This, along with the fact many of the branded products were in the oncology and rheumatology spaces, often led to a therapeutic area (TA)-centric selection method.
Products were viewed like a brand. There would be no pharmacy-level substitution at launch. The resulting focus was on building trust and confidence with physicians, so sales reps were key components of sales and marketing. As a result, those without large sales forces opted for BD partners and those with large sales forces saw themselves as necessary and optimal partners to others.
Forecasts and P&L assumptions were made based on what peak penetration would be and the number of years it would take to reach peak penetration. These analyses would be coupled with what the discounts offered over time, starting small and growing over time as more competitors entered the space.
What Has changed
Much has developed and changed since these early days. Soon after launch, the product starts behaving more like a generic than a brand, not from a pricing standpoint, but from a commercialization perspective. For example, when focusing on Trade and Marketing, generic firms are more focused on converting share from existing brands to their products, which is precisely the objective for biosimilars today as well. The skills of generic companies can therefore be effectively leveraged for biosimilars.
Physician comfort and trust has improved considerably, making adoption less of a challenge. There have been a number of surveys over the past few years showing greater physician acceptance of biosimilars, generally speaking, and amongst specific physician specialties. This data was further supported by primary market research Abraxeolus has done for specific products, with physicians explaining to us: “Most of us defer to the FDA process of approval,” and “Biosimilars will cause no concern if they have gone through the regulatory approval process.” For this reason, the industry has pushed less on sales and marketing to providers and even more on the basics of channel strategy, payor strategy, and pricing tactics.
Increased power of the payor was expected but perhaps not to the degree we have seen. We’ve always anticipated the payer would be critical for improving biosimilar uptake particularly in the pharmacy benefit. But today, even as a majority of the launched biosimilar products are reimbursed under the medical benefit, Abraxeolus has heard physicians say, “The physician has no control, it’s all determined by payors.” Pharmacists say, “We really don’t engage in purchasing strategies. If the health plan covers it, we will provide it.”
There have also been some less expected changes — for example, the rise of the CSO (Contract Sales Organization), which is even being used by well-established branded players. Branded and biosimilar companies’ central focus is now on utilization management, efficiencies, and flexibility. After all, the sales force is a necessary enabling function of the product, but it is not the biologic or biosimilar product itself. This move to CSOs allows for greater flexibility when developing strategy and portfolio strategy. Companies can select products with lower sales and marketing (S&M) costs; they don’t have to constrain their focus solely on those products that fall inside the TAs where a substantial field force is already present. In turn, companies can have greater options for strategy and selection while simultaneously lowering S&M costs per product making the business cases that much more tenable.
Furthermore, telehealth is something many in the industry have been pursuing and over time has shown some gradual uptake. However, with Covid-19, not only has telehealth taken off but tele-detailing as well (aka “remote detailing” and “web calls”). The efficiencies of such an operating model are enormous, forcing us to re-examine the question: how many reps do we really need? Tele-detailing allows a Biosimilars company’s commercialization arm to have far more reach with much fewer reps. And to put this into perspective as to why it has such significance: during a launch year, the field force alone can make up nearly 2/3rds of your total internal commercialization costs.
Finally, another new dynamic allowing for greater diversity of commercialization build-out models is the fluidity of the labor market. The rate of turnover is higher than ever before and many more are evaluating and pursuing independent and hybrid career paths for their future. Access to such fluid expertise is an enormous value-driver and once again fundamentally changes our future approach to the question “Should we build or buy?”
A New Flexible Model For The Future
These new dynamics significantly change how we should be building models of commercialization which has vast implications for potential BD partnerships as well. The answer to “build vs. buy” is no longer driven by the size, scale, and cost of a sale force leading to outdates product P&L’s.
The optimal answer could at times still be a pure build or a pure buy. But it more and more will be the case that a partial build plus skilled, experienced contractors plus CSO for sales reps will be the optimal answer. Such a hybrid solution may need to be customized based on which horizon of market entry and biosimilar entry your company finds itself in. For example, your optimal answer may be different based on if its your first entry in a specific market, if you’ve previously launched products, if it’s a launch year or well beyond, and if the product space in which you are launching is already well-positioned with biosimilars.
Such a hybrid model could allow for greater uptake and more efficient uptake. The greater uptake would come from, among other things, leveraging the change in payor dynamics to its full extent. The more efficient uptake would come from using less costly FTEs for commercialization and not necessarily needing to share significant royalties with a BD partner. The end result would be the potential for significantly greater value capture for those in the CDMO space. But such changes could also lead to opportunities for the more entrenched, full-scale, fully integrated players since they would now have the opportunity to treat their human resources more like truly fungible assets. Using tele-detailing while continually refining their sales force network optimization models would allow such players to place their bets and their resources on the best product opportunities within their pipeline more effectively than ever before.
I’ve talked in the past about the Triad for Success: 1) the need for a clear vision and strategy, 2) agility, and 3) the importance of excellence in execution. 2020 has been an incredibly challenging year, but thankfully, some of the changes afoot will enable the corporate agility we need for success in biosimilars. For those with deep understanding of the market, the result will be commercialization models that lead to the seemingly impossible — more value capture at lower cost.