Biosimilars, Come Fly With Me

Seven out of the top ten drugs are biologics. All will lose patent protection by 2020, representing an underlying pool of $60 billion in branded sales to grab for biosimilars. Are biosimilars the new El Dorado of the pharma industry? If only it was that simple to strike gold! The biosimilars market is a challenging business, where players have to deal with high R&D costs, unclear regulatory pathways, and uncertainty around business models.

First, let’s review the key characteristics of the biosimilars game. To play, large investments are required; companies need to invest $150-300 million over an eight-year time frame just to come up with a valid biosimilar compound. Next, a further $50-100 million is needed to set up reliable manufacturing capacity – unless the player can leverage existing biologic manufacturing capacity.

On top of the minimum investments, players have to deal with many uncertainties, particularly in the US. The US accounts for half of the opportunity today, but regulatory pathways are still being clarified. For example, there are no clearly defined provisions for interchangeability or substitution, and although indication extrapolation may be possible, it is still uncertain. Additionally, originators are filing lawsuits to block or delay the entry of biosimilars, and there is still a need to further educate payers and the medical profession about the safety and benefits of biosimilars. Finally, it is unlikely that any one player will be able to offer a one-stop shop with a complete portfolio of all the biosimilars. Fragmentation will force providers to source from many players, which means duplicative efforts to source the biosimilars versus if a player could offer all the biosimilars at once.

In my view, biosimilars companies could learn a thing or two from the airline industry when it comes to de-risking, optimizing costs, and maximizing sales. Before 2000, each airline was “flying solo” across the entire value chain of the business; for example, each company had their own procurement, maintenance and repair, booking system and frequent flyer program. In the year 2000, however, the airline industry was hit by a major crisis – skyrocketing oil prices. Plus, the advent of the Internet allowed consumers to easily compare prices online, which eventually led to a price war and a downward spiral of profitability. Finally 9/11 brought le coup de grace as traffic drastically decreased in a matter of months with public fear of flying.

The airline industry has survived and, indeed, flourished. One of the main problems plaguing the airline industry was waste in terms of duplicated efforts between the different airlines. Part of the solution was consolidation – many companies merged while others went bankrupt. The second part was collaboration and improved efficiencies. American Airlines led the initiative with the creation of One World, which comprises 16 permanent partner airlines. Lufthansa led the second biggest alliance, with Miles & More, which comprised 13 permanent partner airlines. These alliances allowed contributing partners to share procurement; for example, pooling the purchase of airplanes led to bulk discounts. Each alliance has a shared center of excellence, leading to substantial economies of scale in maintenance, repair and booking systems. Finally, each alliance offers a pooled frequent flyer program, incentivizing passengers to fly with airlines within the alliance.

So what can the biosimilars industry learn from the airline industry?  First of all, it is important to review the development chain for biosimilars since this will allow us to see where costs occur and where further investments are needed. I believe that there are six areas of investment for any biosimilars player:
 

• R&D, including cell-line and process development, reference material sourcing, analytics and manufacturing/scale-up. 
• Manufacturing. This step is directly linked to the first step, as process development and the manufacturing scale-up should preferably be examined early on. 
• Regulatory. It is critical to obtain FDA and EMA green lights. The US and Europe account together for over 70 percent of the total biosimilar potential. 
• Market access. It is not sufficient to put a product on the market. The drug also needs to be made available from payers. Establishing strong payer relationships is key to ensure the drug gets on the formulary and gets reimbursed. 
• Marketing. There is a need to adopt a branded mentality to win stakeholder trust – it’s an expensive commercial approach to build from scratch unless the player has prior biologic experience.
• Intellectual property. This is an important element that should span every other step. It’s advisable to invest in an in-house legal team to ensure no valid patents are infringed throughout development. It also implies significant investment in legal battles to neutralize originators’ defense strategies against biosimilars.

In my opinion, the players who master these steps will be best equipped to master the biosimilars environment.

At the moment – just like the airline industry in 2000 – the biosimilars industry is duplicating efforts and under-utilizing assets. Players are working in silos. For example, there are over 20 companies working on a biosimilar of Humira. Instead, we could (and should) be building alliances and partnerships that allow us to leverage asset utilization. Why can’t we collaborate on sourcing reference materials and aligning standards for analytics?

But what would such a collaboration look like? First, there would need to be at least three companies in the cooperation and data would need to be shared not as a package, but as and when they become available. Finally, outsourcing general analytical characterization for each partners’ compounds would be helpful since it would decrease the amount of cross-validation. In this context, a firewall between the participating companies would be crucial so as not to destroy the competition and to equalize the timing.

The bottom line is that to turn the biosimilars opportunity into sustainable success, it must be profitable – and that could well mean working together.