The debate over whether or not lower cost, “generic” versions of biologics and biotechnology drugs ought to be brought to market has been a very long and contentious one. However, rising healthcare costs and demands for greater access to biotechnology drugs have finally induced Congress to consider legislation to guide approval of these products.

Discussions about these molecules began in earnest in the late 1990s when generic manufacturers determined that several blockbuster biotechnology drugs, including human growth hormone (hHGH), erythropoietin (EPO), and granulocyte colony stimulating factor (G-CSF), would soon lose patent protection. This prompted a careful review of the U.S. Drug Price Competition and Patent Term Restoration Act (better known as the Hatch Waxman Act) to determine whether or not generic biologics could be approved by this legislation. It quickly became apparent that Hatch Waxman didn’t provide a clearly defined, regulatory approval process for so-called biogeneric drugs. This marked the beginning of an almost decade-long and often acrimonious debate that pitted innovator biotechnology companies against generic drug manufacturers.

Inexplicably, from about 2001 to 2004, the debate mainly focused on defining, classifying, and naming these new molecules. The early moniker, biogenerics, was eschewed in favor of the more apt follow-on biologics, as they are called in the United States, or biosimilars, as they are known in the European Union. Steve Bende, Ph.D., a biotechnology expert who followed the debate from the beginning, contends that the confusion over the classification and naming of these products hindered substantive discussions about them. “Early on, both sides were very willing to engage in public debates about how to classify and what to call these new molecules. Unfortunately, this detracted from discussions aimed at identifying the medical, regulatory, and safety hurdles that had to be overcome for their approval,” says Bende. However, all of this began to change in late 2004, when regulators at European Medicines Agency (EMEA), under pressure from generic manufacturers and national governments, decided to address many of the scientific, medical, and regulatory issues surrounding approval of biosimilars. By 2005, EMEA officials had carefully and painstakingly crafted a regulatory framework that they believed would allow biosimilars to come to market without compromising drug safety or efficacy. This was in marked contrast to the follow-on biologics debate that was taking place in the United States at the time. Unlike EMEA, the FDA surprisingly declined a leadership role and instead, chose to leave it to the American Congress to craft legislation guiding approval of follow-on biologics.

While a regulatory framework for U.S. approval of follow-on biologics still doesn’t exist, a review of recent trends in the global biosimilar market may provide insights into some of the economic and business considerations that may influence the outcome of the follow-on biologics legislation currently being considered by Congress.

BIOSIMILARS IN UNREGULATED EMERGING MARKETS
Generic versions of EPO, G-CSF, and hHGH have been available for over a decade in countries with less-regulated biologics markets, including China, India, Brazil, and many others. The market for these products is growing as the middle class in many developing nations continues to expand, and demand for improved medical care and modern treatment options increases. Abe Abuchowski, Ph.D., president of Prolong Pharmaceuticals, a company that specialized in PEGylating biosimilar proteins, says, “There are at least 10 different versions of EPO on the Indian market today. This has drastically driven down the price of these products to the point where it may not make sense to continue manufacturing them. Unfortunately, this is what happens when price and not therapeutic efficacy drives an unregulated market — nobody makes money and access to potentially life-saving drugs is hindered.”

Sumanth Kambhamm, a Frost and Sullivan biosimilar expert based in India, agrees with Abuchowski. Further, he says, “Large, well-capitalized Indian biologics companies, like BioCon, Wockhardt, and Dr. Reddy’s Laboratories are using their internal markets to critically evaluate their biosimilar products with the intention of seeking regulatory approval in the EU and eventually in the United States after legislation is enacted.” Also, he says, “The ability of these companies to exploit growing unregulated markets in the short term and ultimately penetrate larger, more lucrative and regulated markets may afford them economic and business advantages over their non-Asian competitors who are focusing almost exclusively on Western markets.”

While most of the debate over generic biopharmaceuticals has centered on therapeutic proteins like EPO and hHGH, there is an emerging market for generic versions of monoclonal antibodies (MAb). At present, there are approximately 25 different monoclonal antibodies on the market — several of which will lose patent protection over the next few years. Bassil Dahiyat, president and CEO of Xencor, a company that specializes in MAb engineering, says that “Dr. Reddy’s is already marketing a generic version of Rituxin, Biogen/IDEC’s B cell non-Hodgkin’s lymphoma and leukemia treatment.” Also, other industry experts reported that generic versions of anti-Tumor Necrosis Factor MAbs, similar to Remicade, Enbrel, and Humira, are currently being sold in India. Expect to see a lot more “generic activity” in the MAb space over the next few years as the market for these products continues to expand.

THE EUROPEAN BIOSIMILAR MARKET
Since 2006, EMEA has granted marketing authorization for 13 biosimilar products — hHGH (2), EPO (5), and G-CSF (6). To date, there is very little information available about adverse events or the safety and tolerability profiles of these products. However, it is important to note that the size of the patient population using these products is still very small. Further, despite price reductions, the reception to biosimilars by European physicians has been lukewarm. And, contrary to innovator companies’ expectation, their use has not cut into the market share or profits of existing branded products.

Kambhamm, the Frost and Sullivan analyst, says, “Physicians are hesitant to prescribe new drugs even though they may be cheaper, because they know and trust the brands that they have been prescribing for years.” Nevertheless, Kambhamm predicts that biosimilars will continue to slowly penetrate the European market and expand 25% to 30% annually over the next few years.

One of the most contentious issues facing the biosimilar industry is whether or not these molecules can be substituted or are interchangeable with branded products. This is standard practice with generic pharmaceuticals because — as part of the approval process — generics have to be proven to be structurally identical and “bioequivalent” to branded counterparts. While biosimilar manufacturers are pushing hard for interchangeability and substitution, the batch-to-batch variation in product attributes — that occurs during commercial manufacturing of protein drugs — suggests that establishing bioequivalence between biosimilars and branded drugs will be extremely difficult. Consequently, it is highly unlikely that European regulators will consider the substitution or interchangeability of branded products with biosimilars. Finally, recognizing the inevitability of “generic MAbs,” EMEA recently organized a July 2009 meeting to discuss guidelines for marketing authorization of biosimilar MAbs.

Draft guidelines for Japanese biosimilars were published by its regulatory agency in September 2008. Kissei Pharmaceutical filed an application for a generic EPO product in November of that year — Japan’s first biosimilar. In 2005, Australia was the first developed country to approve biosimilars, and recent reports indicate that Canada is drawing closer to drafting guidelines for approval of biosimilar products.

THE FOLLOW-ON BIOLOGICS MARKET IN THE UNITED STATES
Despite the EU’s regulatory framework and availability of biosimilars in many countries, the United States had been reluctant (until late 2007) to consider regulatory guidelines or legislation to bring follow-on biologics to the American market. However, promises of healthcare reform and the realization by pharmaceutical and biotechnology companies that follow-on biologics are inevitable prompted legislators to introduce bills (earlier this year) outlining different regulatory options for U.S. approval of follow-on biologics.

The Pathways for Biosimilar Act (H.R. 1548) introduced by Representatives Anna Eshoo (D-CA), Jay Inslee (D-WA), and Joe Barton (R-TX) requires clinical data, rigorous immunogenicity testing, and limits on interchangeability and substitution provisions for follow-on biologics. Further, it calls for a minimum of 12 years of data exclusivity for innovator companies — a period during which the FDA can’t rely on innovator data to approve follow-on biologics. For example, if a biotechnology drug was approved in 2009, the earliest that FDA could approve an application for a competing follow-on product is 2021. In contrast, The Promoting Innovation and Access to Life-Saving Medicines Act (H.R.1427) introduced by Representatives Henry Waxman (D-CA), Frank Pallone (D-NJ), and Nathan Deal (R-GA) calls for an abbreviated development pathway (at the discretion of the agency), the possibility of substitution or interchangeability (if the follow-on biologics manufacturer can prove a high degree of structural similarity and an identical mode of action), and five years of data exclusivity. The five years of data exclusivity proposed in H.R. 1427 is identical to the period of exclusivity outlined for generic pharmaceuticals in Hatch Waxman.

Not surprisingly, big biotech, its lobbyists, and trade organizations like the Biotechnology Industry Organization (BIO) and Pharmaceutical Manufacturers Association (PhRMA) support the Eshoo-Barton bill, whereas generic manufacturers, healthcare reform and patient advocacy groups, and third-party payors and insurance companies favor the Waxman-Deal Proposal. While it is anybody’s guess what the final legislation will look like, Bende, the biotechnology expert, says, “Compromises will be reached on data exclusivity limits, and follow-on biologics legislation will likely be passed at the end of the current or next legislative session.”

LOOKING TO THE FUTURE
The biologics and biotechnology market represents the fastest growing sector of the life sciences market, and lower cost biosimilars/follow-on products will undoubtedly play an integral role in the future development of this market. Because of this, a number of large, established generic drug manufacturers, and more recently, several major pharmaceutical companies, have been positioning themselves to compete in the biosimilars/follow-on biologics markets.

In Europe, generic manufacturers Sandoz, Biopartners, Stada, Teva, Hexal, and Ratiopharm have emerged as industry leaders. Several smaller biosimilar players include Medice, Hospira, and CT Arzneimittel. Likewise, in India, major generic companies like Dr. Reddy’s Laboratories, BioCon, and Ranbaxy have emerged as dominant players — although several other companies like Intas and Zydus Cadila also have products on the Indian market. Coming late to the game is UK-based AstraZeneca and two major U.S. pharmaceutical companies, Eli Lilly and Merck.

Surprisingly, Merck, a company with little experience in biotechnology drug development, is the only major U.S. pharmaceutical company that is aggressively pursuing a follow-on biologics drug development strategy. It recently established Merck BioVentures and purchased Insmed, a small Richmond, VA-based company with commercial biomanufacturing capabilities and a portfolio of follow-on biologics candidates. Also, it has been quietly developing a humanized yeast platform to produce low cost biologics after the 2006 acquisition of GlycoFi. The company has ambitious plans and intends to bring 10 follow-on products to the U.S. market by 2017.

Despite an almost decade-long debate, biosimilars and follow-on biologics are now a reality. Like it or not, these products represent a lower cost option to expensive, branded, and potentially life-saving biopharmaceuticals. The actual size of the biosimilar/follow-on market remains to be determined. However, contrary to early assertions, it is highly unlikely that smaller, under-financed generic manufacturers will have the resources to enter the biosimilars/follow-on marketplace. “They simply won’t be able to compete with the large generic and pharmaceutical companies who have the money, marketing, and distribution capabilities to dominate the market,” says Frost and Sullivan’s Kambhamm. And, as Prolong Pharmaceuticals’ Abuchowski aptly points out, “The only companies that will survive in the biosimilar/ follow-on space are regulatory-compliant ones that produce products that offer competitive advantages from both a cost and therapeutic perspective.”