For a period, the regulated copycat market enjoyed the entry of large innovator pharma who succumbed to the allure of the monoclonal antibody (mAB) biosimilars. Less than a decade later, several disillusioned pharma exit the space, and Indian “generic” players are filling the biosimilar void. As drug modalities increase in complexity, the copycat market cannot sustain without the manufacturing expertise of large pharma. Can the US healthcare system ensure that the exodus of large pharma from the copycat market is merely a respite before a crucial comeback when the first CAR-T has to face its loss of exclusivity (LoE) destiny?
Let’s start at the beginning…
The costly generic development process that reigned in the US pre-1984 led to a stunted generic industry. In response, the Hatch-Waxman Act streamlined the generic drug application process, slashing development cost and timelines. This prompted the advent of US companies, like Watson Laboratories, whose business model centered around the commercialization of solid oral generics. Emboldened by negligible barriers to entry, players from the East recognised a viable competitive formula steeped into lowered manufacturing costs – and so the solid oral dosage market quickly eroded in value.
Naturally, Western generic companies, like Hospira, started focusing on the harder-to-manufacture sterile injectables. While this had an initial upside, as many Eastern manufacturers could not achieve the required quality standards; not all players could be eluded, and the competition continued to increase. From there, the hopes of reclaiming the regulated copycat market hinged on the clinical hurdles that the biosimilar pathway (established in 2010) presented to those eying a piece of the mega mAB blockbuster pie.
A dream come true… with difficulty and only for a little while
As the 2010s rolled in, it brought with it the highly anticipated LoE of major mABs like Remicade. Many Eastern generic companies struggled to make biosimilars, and as they lagged, the higher margins of reduced competition were almost tangible. Propelled by their biologics manufacturing expertise and clinical acumen, large pharma bought into the biosimilar promise and entered.
Infliximab biosimilars were first to launch. Despite the limited number of competitors, volumes suffered. The lack of substitution policies coupled with HCP prescription hesitancy, crippled the uptake of biosimilars. Also, the contracting prowess of originators prevailed, seeking formulary exclusivity in return for not withholding rebates on other drugs. Early biosimilar entrants invested in reducing anti-competitive practices, educated prescribers, and laid the groundwork for biosimilar acceptance. Worth it, so long as the number of competitors remained limited and margins were preserved.
In reality, the time spent reducing the unknowns of the biosimilar world, gave a chance for additional manufacturers to catch up. Biosimilar competitor numbers doubled and tripled for most mABs pushing prices down. The US launch of Humira biosimilars in 2023 elucidated the steepness of discounts with some manufacturers offering 85% cut to the originator. Biosimilar manufacturers found themselves being squeezed in these price wars that they were begrudgingly pulled into, thereby obliterating the biosimilar dream.
Pharma disillusioned… until the next big thing?
Large pharma started to exit: Merck spun off its biosimilar portfolio into Organon and Novartis spun off Sandoz. Why? Well, rather than biosimilars being positioned as an elite class of drugs they drifted to mirror the low generics margins, only with added development time and commercial effort. While great for healthcare systems (for now), the return on investment is no longer compelling for pharma despite the looming LoE of a brand like Keytruda. Companies who have tailored their business models to be copycat-centric may be able to relish in the margins left after 85% discount, but for the innovators, the opportunity cost of reserving manufacturing capacity and sales force for biosimilars instead of redirecting it towards new modalities is just not worth it.
Where does this leave the remaining players like Pfizer and Amgen? They could follow suit and spin off their biosimilar portfolio or divest it to East-based copycat-centric manufacturers who can maximise margins. Alternatively, they could try reversing the tide away from price erosion, however, this is likely to require policy change at the healthcare system level. Another possibility is differentiating biosimilars through improved formulations to command a premium; although this would require more investment than pharma is potentially willing to prioritise for biosimilars. Lastly, they may choose to catch the wave of upcoming biosimilar opportunities early and jumping off before it breaks.
As the biosimilar market matures, one can’t help but wonder how the fading interest of innovator pharma in the copycat market will impact the next chapter of LoEs: cell and gene therapies. Healthcare systems would certainly welcome cheaper copycat versions of these treatments. However, to date, East-based generic/biosimilar -centric companies are far from acquiring the necessary infrastructure to produce and commercialize these therapies in developed markets (click here for our series on complex therapies commercialization dynamics). Will this tempt innovator pharma to rejoin the copycat market? Maybe, but clear clinical guidelines, adoption incentives, and support from healthcare systems must be established to avoid another race to the bottom.
If not, where could this leave us? We could be toying with the following future reality where innovators continue to focus on innovating, and the only way to reduce costs of complex therapies is through in-market competition from other innovative assets that move away from this modality (click here for our series on ADCs). Meanwhile, if Eastern healthcare systems manage to crack the nut of copying complex therapies, we may find medical tourism increasingly flowing East.