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When manufacture of biogenerics is a legal reality, brand manufacturers will still retain a strong market share for several years.
When - and it is increasingly likely to be when, not if - legislation allows the manufacture of biogenerics, who among manufacturers will win market share? The answer, according to some analysts, is surprising: Brand manufacturers will remain very strong, at least for several years.
A June 2009 report by the Federal Trade Commission (FTC), titled "Emerging Healthcare Issues: Follow-on Biologic Drug Competition," concluded that competition between a biologic drug and what the FTC calls "follow-on biologics" (FOB) is "much more likely to resemble brand-to-brand competition than the dynamics of brand-generic competition." (Biogenerics are commonly called both biosimilars and follow-on biologics. No single, commonly used term has yet emerged.)
What that means to the healthcare industry - especially to pharmacy benefit management companies - is that even after legislation is passed and an exclusivity period is determined (and the Food and Drug Administration implements regulations), the cost of biologics will not fall sharply, certainly not within the first decade or so.
"The entire industry is very interested in this issue," said Steve Miller, MD, chief medical officer for Express Scripts, a leading pharmacy benefits manager (PBM). "But what it will mean to competition and drug prices remains unclear. Biosimilars are complicated [to manufacture], and that has consequences for the market."
There is a lot of money involved. IMS Health reports that global biotech sales grew 12.5 percent in 2007, exceeding $75 billion. U.S. sales accounted for 56 percent of world sales that year, according to IMS - an estimated $42 billion. And IMS predicts that U.S. biotech sales will reach $60 billion by the end of next year.
That kind of money encourages innovation, and so do current legislative proposals to permit the use of biosimilars in this country. But what the FTC report, other studies, and the experience in the European Union (where biosimilars are allowed) point out is that for manufacturers, consumers, and providers, follow-on biologic innovation and competition will differ significantly from current U.S. experience with generics.
An analysis published last year by "The RPM Report," a trade publication that studies the effect of federal regulatory changes on markets, goes further than the FTC prediction. It concludes that "as Congress works on an approval pathway for follow-on biologics, generic drug companies are jockeying for investor attention. But given that most generic manufacturers are ill-equipped to handle the development of follow-on proteins, some analysts think that the real opportunity is where you'd least expect, inside Big Pharma and biotech."