Internal And External Risks To Biosimilar Companies And The Path Forward
By Edric Engert, Managing Director, Abraxeolus Consulting
Biosimilars in the U.S. have encountered a wide range of challenges since their beginning in the U.S. There are many to walk through to truly understand the opportunity, the risks, and the best path forward, but the best thing would be to start by realizing there are both external and internal risks that likely every player in the space is facing.
There are many ways we could define and even focus on external factors but the biggest external challenges as I see them are:
- IP/Legal
- Commercial tactics
- Misinformation
Large Patent Estates Raise Questions
In IP/Legal, it comes down to the abuse of the patent system to delay the launch of biosimilars. It’s interesting to note that of the 12 biosimilars that have been approved by the FDA, only five of them have launched. One of the reasons for this is that there are still active patents. Given the risk of owing damages to the originator, a biosimilar firm is not willing to launch until the patent disputes have been resolved. Keep in mind, these therapies have already had a minimum of 12 years of market exclusivity before they can face any competition.
However, many patents are filed years after product development is completed to trigger delay and nothing more. Patents at the end of the day are intended to protect objects of value; hence, the patent itself should refer to some additional component of value. Unfortunately, this is not always the case.
Humira or adalimumab is a perfect case study for this. Does each of the 132 patents contain such a true additional component of value or are a significant number of these patents nothing more than an attempt to block competition far beyond market exclusivity? I’d argue this also serves as a means of continuing to heighten biosimilar manufacturers’ concerns about launching and developing biosimilars in the first place.
Unfortunately, although the risk is clearly there, very little has been done in both press coverage and solutions-building to address this systemic problem squarely.
Branded Commercial Tactics as a Defense
Then of course come commercial tactics – not just IP/Legal ones – to block biosimilars. These commercial tactics are rooted in the depth of knowledge, relationships, and contracts that branded pharmaceutical firms have of the key stakeholders in the space, following step-by-step the product and any dollars from their plants to the patient. It’s this combination of deeply understanding incentives and having all the mechanisms in place to influence such incentives that allow originators to do this so successfully. But in the case of blocking biosimilars, these tactics are not being used to bring a product that satisfies an unmet medical need to market; it’s simply a clever and well-established means to poach additional value from the system.
The Pfizer-Janssen case is a perfect example of this. In fact, Law360 in August of this year stated, “Pfizer Inc. has credibly shown that Johnson & Johnson may have flouted antitrust laws by coercing health insurers into not covering biosimilar versions of biologic Remicade, a Pennsylvania federal judge said in a ruling.”
Methods that may be used are additional rebates, significant price increases coupled with an additional rebate, long-term binding contracts, and bundled negotiations, just to name a few. And, unfortunately, once again, although the risk is clearly there, very little has been done in both press coverage and solutions-building to address this systemic problem squarely.
Misinformation Abounds
The third external challenge or risk that I mentioned is misinformation, which is often produced by originators – or other entities funded by originators – under the guise of “education.” They do this by lowering the confidence and trust that people have in biosimilars. For example, I’ve personally spoken with people publicly who tried to raise the importance of and need for switching studies to such heights, it appeared they were questioning the very safety and efficacy of products approved by the FDA.
Now all of this can be quite overwhelming and, in some cases, cause some to even revisit the fundamental question, “Is this investment worth the risk?”
The good news is that much can be done to combat these trends effectively. Through a combined use of a company’s dedicated resources in policy and government affairs, focused efforts with company-dedicated lobbyists and consultants, and working with trade associations and alliances, progress can be made. This is now more the case than ever before given not only the focus of the current Administration on biosimilars but also the open invitation by some including even HHS to step up and help them find solutions.
So challenges, yes, but with the proper strategy, expertise, and dedicated personnel, they are surmountable. However, this is where the internal risks emerge so steps must be taken to address them.
Internal Challenges: Policy Is Just As Critical As Product Strategy
To me, step one is for the leadership of every biosimilar firm focused on the U.S. market to recognize there are development risks, regulatory risks, and risks of competition, but that these larger, broader external risks also need to be addressed and with great effort. In other words, now is the time to not just work on products but to influence and shape policy as the current Administration has now turned these challenges into opportunities.
Step two would be to arrive at concrete plans as to how to use internal resources, the trade association, and company-dedicated lobbyists and consultants to affect change.
I think the key to making step two a reality is to establish greater connectivity and communication. I’ve experienced the challenge here firsthand. When I was responsible for biosimilars in a past life, I was so busy rebuilding the strategy, choosing new products and reformulating the selection process itself, managing the pipeline, and building a new BD solution for near-term needs, I was close to entirely removed from the DC office responsible for policy and government affairs. While the changes may have been incredibly effective, for the long-term they fell under “necessary but not sufficient.” I’ve learned that if there are policy and government affairs resources within the company, one must ensure they are properly connected to the highest management levels, keeping them informed as well as driving discussions and decisions that need to be made beyond near-term priorities for a long-term sustainable future.
Step three would be to acknowledge the biggest systemic risks we are facing and to come up with actionable plans, linked to various scenarios if necessary, to effectively combat them. Identification of a problem is necessary but certainly not sufficient. Solutions need to be built and executed.
One Key Area Biosimilar Firms Still Have Yet To Master
However, there are internal needs beyond these systemic risks and the steps needed to combat them effectively. Much needs to be done outside the space of policy and government affairs as well. We have all understandably focused on excellence in development and regulatory affairs. Now what is needed is a comprehensive review of all that is needed to deliver products successfully to the market.
One component of this that stands out is commercialization of biosimilars. It’s not the same as generics and it’s not the same as branded product approaches. What’s key is mastering how the products and dollars flow in the biosimilar business and finding ways to incentivize all key stakeholder to adopt biosimilars. The originators know this space well. Biosimilar firms must build the same depth. Only by understanding and modeling such dynamics can one start to address questions rigorously such as which channel to target, what price and contract terms to start with. Think about it: It’s true that only five of 12 biosimilars approved have been launched. But what of those five that have launched? What commercialization improvements could be considered to further improve uptake on these products and for launches in the future?
All these internal risks in execution are surmountable. They simply require dedication, focus, the right mix of expertise, and the determination to succeed in the long-term in a comprehensive way.
In summary, there are certainly challenges, but there are also solutions. Some will take time, but no successful biosimilar firm will be a one-product play in the near-term. It’s about a portfolio, a pipeline, and sufficient scale. All of this must grow over time giving us some runway for solutions.
We find ourselves facing an unexpected opportunity to shape the future with the current administration. Let’s jump in and make it happen. Biosimilars are a strategic imperative, not only for many pharmaceutical firms but for the U.S. healthcare system as a whole.
About The Author
Edric Engert is Managing Director of Abraxeolus Consulting and has over 20 years of experience in the healthcare industry. He offers problem solving leadership and expertise in such areas as strategy, its operationalization, business development/in-licensing, portfolio strategy, selection, and management, operational improvement programs and turnarounds, and M&A. He has advised a broad range of clients in such industries as Biosimilars, Generics, Branded Pharmaceuticals, API, Healthcare Information Exchanges, medical supply companies, distributors, trade associations, and not-for-profit agencies.
Prior roles included Head of the Biosimilars Business at Teva, Global Head of Portfolio Management & In-licensing for Teva’s Generics business, Global Head of Portfolio Management & In-licensing at Sandoz, VP of Strategic Planning, Portfolio, and API Sourcing at Geneva Pharmaceuticals, and consultant at McKinsey & Company’s health care practice. Edric holds an MBA from Wharton and a BS in Mathematics from MIT.