Biosimilar matters

Biosimilar competition is getting fierce. A biosimilar is a biological medicine highly similar to another already approved biological medicine, or also known as the reference medicine.​ With eight biosimilars of a blockbuster drug Humira, used to treat inflammatory diseases such as rheumatoid arthritis, or adalimumab biosimilars, entering the United States, we expect to see the market embrace biggest biosimilar competition. This is more evident in Europe. In the five years prior to 2022, a total of 18 molecules have direct biosimilar competition with an average of 3.8 competitors, led by adalimumab, which alone has 10 marketed biosimilar medicines authorized in Europe, according to IQVIA’s report. With this exponential growth, we are seeing many competitors out in the market stepping on each other to grab market shares. It is an expected scene.

Europe has the most mature biosimilar market in the world.

Europe has the most mature biosimilar market in the world. History of biosimilar usage which goes back 15 years with 2.5 times more biosimilars products approved than in the U.S. The EU biosimilar market size is estimated at €9 billion annually (estimate based on 2022) — needless to say, with fierce competition on price. So, how is biosimilar valued and where is this market going? 

Value of biosimilars

Biosimilars play three vital roles within the European health care system. They balance spending by generating savings for payers. As of 2022, the cumulative savings at list prices from the impact of biosimilar competition in Europe reached over €30 billion, the IQVIA report noted. Biosimilars create headroom for innovation, which has led to over 90 biosimilars being approved by the European Medicines Agency (EMA). The European biosimilar market benefited from research by a broad spectrum of companies from across the globe, willing and able to develop complex biologic molecules. And last but not least, biosimilars expand access to high-value biologic therapy for patients at affordable cost.

De-valuing of biosimilars

Biosimilars will continue to contribute to health care spending. Based on history we see that once biosimilar products hit the market, there are typically two types of price erosions, one which occurs due to competition within the biosimilar market. For products that have multiple competitors or molecules, a price war occurs, biosimilars and originators alike. There are also expectations that are instilled within the procurement market where criteria place heavier values on price, rather than qualitative factors which foster higher price erosions.

Biosimilars play three vital roles within the European health care system.

The other price erosion occurs when governments carry out health care budget control by relying on companies to share burdens of budget deficit by lowering medicine expenditures, thus causing double taxation for generic or biosimilar products. This is exemplified in the Voluntary Scheme for Branded Medicines Pricing and Access (VPAS) rebates in the U.K. and French ‘clawback’ scheme under the French Social Security Finance Bill (PLFSS), where governments mandate companies to pick up the overspending medical budget that a government has spent during certain periods, making biosimilar suppliers face doubled price erosion.

Factors driving high development costs

Biosimilar product development is costly. When it comes to getting approvals from the agencies, biosimilars do not get a free pass. There are requirements to demonstrate efficacy and safety and, in the U.S., sometimes additional studies are required for biosimilars to be designated as ‘interchangeable’ with reference products. In addition to development technology, commercial expertise is needed to ensure market uptake. Although efficacy and effectiveness are demonstrated through regulatory approval and clinical trials, biosimilar adoption is usually not automatic.

Inflation has also impacted biosimilar sustainability due to increasing manufacturing costs. In the midst of global inflation sparked by COVID, all aspects of cost for development and manufacturing biosimilars — raw material, energy, and logistic costs — have increased. Combined with downward price pressures, drug production is jeopardized, causing some biosimilar manufacturers to choose to exit markets, thus causing greater demand than supply.

This was more prominent in the generic market, causing consequent medicine shortages and health inequalities. Drug supply disruptions were common issue all over the EU and across all types of medication, from antibiotics to cardiovascular drugs. Some reasons for supply disruption include surge of demand from the health care, logistic difficulties from COVID lockdowns and the war in Ukraine, or production related issues from manufacturing sites. Mechanisms to ensure supply continuity must be in place via collaboration across every stakeholder, and minimal profitability for the manufacturers must be ensured so that patients can continue to receive the treatments they need. Losing business viability for manufacturers resulted in discouraging life science investments in the long term, leaving no room for innovation.

What should be done?

Highly-resilient pricing models should be promoted to counteract raising inflation and address market challenges.

Adequate budget target should be set, based on epidemiological numbers and demand, not historical expenditure. Aging population and increasing demand for biologics, as well as macroeconomic trends such as inflation impacts, should be considered, along with schemes to exempt biosimilars from discounts or payback policies, as they are already discounted from existing market competitions.

Competition only exists if biosimilars are used. Increasing biosimilar market share is the first step to achieving long-term savings in health care systems and improving health outcomes. A short-sighted approach in reducing the medication cost without a long-term investment deters sustainable growth of the industry. Making leeway for innovation, reducing pricing pressure will add value to biosimilars.

Less price is not more, finding the right balance for all is the key.

Early conversations among stakeholders are needed to find middle ground in policy shaping. We are looking forward to the successor of VPAS that incentivizes developers to create more biosimilar product opportunities, which will benefit everyone within the supply chain from developers to manufacturers, commercial providers all the way to the patients.

Why biosimilar business matters:

To sum up, the virtuous cycle that is provided by biosimilars should go on. Business that is being proposed should be valued for what it provides to patients, better products at a fraction of the cost, however that fraction should be enough to sustain and maintain the business for the ones that are developing, manufacturing and commercializing the products. As long as there is an equal balance for all and margins guaranteed for all, we can see healthy competition and increased health care equity. Less price is not more, finding the right balance for all is the key.