From The Editor | August 12, 2015

Could Birth Of "Big Generic" Be Foreshadowing "Big Biosimilar?"

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By Anna Rose Welch, Editorial & Community Director, Advancing RNA

Big Pharma

In 2015, the generics market saw several players jump ship and one company grow significantly — and to some, alarmingly — larger. First to take the plunge was Allergan, which sold off its portfolio of generic drugs to goliath Teva for $40 billion. This followed Teva’s fairly relentless but failed pursuit of Mylan, which used its own chase of Perrigo to fend off Teva’s unwanted advances. Similarly, just a day after Teva became an even bigger player in the generics game, Boehringer Ingelheim announced it was taking a page from Allergan’s book and selling off its U.S. generics company, Roxane Laboratories to Jordan’s Hikma Pharmaceuticals. (Hikma also bought Boehringer’s generic injectables business last summer.)

This movement in the generics space is just the beginning. As buyers and distributors of generics continue to consolidate, Bloomberg Business says generics companies need to merge in order to gain negotiating leverage. In fact, Allergan’s CEO Brent Saunders told NBC News in an interview that consolidation among buyers was a key influence on the company’s decision to sell its generics division, and Teva has gained quite a bit more leverage as a result.

Of course, companies make moves to divest business divisions all the time if these divisions no longer suit an overall business goal. In Allergan’s case, Saunders singled out Allergan’s branded business in particular as being the company’s target focus moving forward, especially in the aesthetics, eye care, gastrointestinal, women’s health, urology, and infectious disease therapeutic areas. Novartis’ CEO Joe Jimenez put it well after the company swapped its vaccines division for GSK’s oncology business: “Our view has to be based on how healthcare is going to change. If you look at what led to the transformation that we just went through, it was a view of what’s going to happen in 10 years externally.”  

And now, following the first U.S. approval of a biosimilar, as well as the recent ruling on the Amgen vs. Sandoz case, it’s clear healthcare is headed down a new path. A few months ago, several of my colleagues, BioProcess Online’s Trisha Gladd and Pharmaceutical Online’s Ken Congdon, attended ISPE’s Quality Manufacturing conference, where MedImmune’s EVP of Operations Andy Skibo addressed the pharma industry’s gravitation toward biologic treatments. According to Skibo, “While bio products account for only 4.7 percent of total sales in the top 100 drugs today, they are poised to account for 52 percent of sales by the end of the decade. Currently, BLAs [Biologics License Applications] make up more than 50 percent of the pharmaceutical pipeline, and that figure is expected to grow to 75 to 80 percent by 2020.”

So, after seeing two big companies (Teva and Boehringer) divesting their small molecule generics businesses within the same week, I can’t help but wonder if all this consolidation in the generics space isn’t just another sign of the impending “biologics tidal wave” I’ve heard so much about. Similarly, could these moves be foreshadowing the future of the emerging and, hopefully soon-to-be-established, U.S. biosimilars market? If buyers are consolidating and causing generics companies to consolidate, isn’t it natural to expect a similar trend to hit the biosimilars market when it’s more established?

It’s an impossible question to answer right now, of course, given the small size of the U.S. market today, as well as the fact many biologics’ patents still have a few years left. But I’m not alone in wondering how the generics and biologics industries will parallel or diverge from each other. Several articles I’ve read have questioned — and expressed doubt — that the biosimilar market will promote the same cost-savings as the generics industry.

But I dare say we’re beginning to see some signs of consolidation in the biosimilar space, despite its small U.S. footprint. Pfizer bought Hospira for its biosimilars pipeline,(and got a big boost in its injectable generics portfolio in the process). European regulators approved this merger, but on the condition that Pfizer would divest its rights to its Remicade (infliximab) biosimilar in order to avoid anti-competition issues, Bidness Etc. reported. (The company will keep marketing rights in the U.S., however.) Following this news, Bidness Etc. proffered the argument we could see Novartis’ Sandoz snap up Pfizer’s biosimilar for its own growing biosimilar pipeline. After all, Sandoz is currently working on biosimilar versions of Enbrel, Procrit, Rituxan, Humira, and Neulasta, all of which Bloomberg Intelligence have pegged will be the most successful biosimilars (along with Remicade). As of yet, however, Sandoz doesn’t have a Remicade biosimilar in its pipeline. Pfizer’s candidate, currently in late stage trials, would be a particularly appealing asset to the company — especially if it wants to have a full house of the prospective top-earning biosimilars.  

While analysts, economists, and even pharma CEOs remain skeptical that the two markets will be economically comparable, I’m still left with the sneaking suspicion that, in terms of consolidation and market presence, the emerging players in the biosimilar industry will be on the lookout for candidates to flesh out pipelines and to maintain market dominance and negotiating power. As Decision Research Group’s (DRG) John Jaeger told BioPharma DIVE, “As they see their customers continue to consolidate, particularly health insurers and hospitals, biopharma manufacturers are moving away from diversification and focusing more on expanding their core offering to achieve efficiency, focus, and dominant scale. This deal highlights that urgency for manufacturers as they continue to reexamine their commercial models in the new era of U.S. healthcare.” (This adds a new level to the rumors Pfizer might split in two, with one business built from its Established Products unit and the other built from the company’s innovative products. Following the Hospira deal, the established products unit has seen a significant boost and, should this be the side of the business where biosimilar development ends up, it could lead to a more focused biosimilar effort in the future.)

Obviously, small molecule generics aren’t going anywhere, regardless of which companies are choosing to divest them. But this consolidation and the birth of “Big Generic” could be an interesting trend to keep our eyes on as we usher in a new age of cost-effective medicines.