“CAN ANYONE TELL US THE YEAR WHEN THE FIRST BIOSIMILAR IN THE WORLD WAS APPROVED? JUST SHOUT IT OUT.”
We’re at the 2020 BIO CEO & Investor Conference (Feb. 8 and 9, 2020) at the New York Marriott Marquis for a Monday morning fireside chat with Carol Lynch, president of Sandoz U.S. and head of North America. The above question was posed to session attendees, and, after a moment of silence, audience members begin blurting out various years. The answer is 2006, which is when Omnitrope (a biosimilar human growth hormone) was approved in the EU by the EMA. Nearly a decade later (i.e., 2015), Zarxio (a prescription medication to reduce the risk of infection in certain cancer patients) becomes the first biosimilar approved by the FDA in the U.S. This noticeable gap between biosimilar approvals makes you wonder if the United States is as innovative as the biopharmaceutical industry would have us believe. Might the U.S. FDA be a bit more conservative than other countries’ drug approval regulatory bodies? Why such a difference?
The first biosimilar approvals were garnered by Sandoz (a division of Novartis). Combined with the fact that Sandoz has eight biosimilar medicines currently being marketed around the world, the company has become a global leader in the space. So, when offered the chance to moderate a fireside chat with one of the company’s top leaders during BIO CEO, I jumped at the opportunity. What follows is an edited transcript of the conversation.
GIVE US AN OVERVIEW OF BIOSIMILAR TRENDS TAKING PLACE IN THE U.S.
It’s an exciting time now for biosimilars in the U.S. Since our first approval and launch, we’ve certainly seen an acceleration of the market. But I think it’s fair to say that it’s probably been slower than most anticipated, and that’s for several reasons. However, this past summer we saw multiple new approvals and launches that took place near each other, which hasn’t necessarily happened in the past. As a result, we are starting to see an adoption rate in the U.S. market akin to that of Europe, which tells me, certainly in the Medicare Part B setting, that we’ve cracked the code and now know what we’re doing.
HOW MANY BIOSIMILARS ARE THERE IN THE U.S.?
Twenty-six have been approved, and I believe 15 are being marketed. Though it’s begun to accelerate, we still have a gap between those that have been approved and those being launched.
A question is posed from the audience.
IT’S SURPRISING TO HEAR THAT THERE ARE 26 APPROVED BIOSIMILARS AND ONLY 15 BEING MARKETED IN THE U.S. WHERE ARE YOU SEEING RESISTANCE?
Some have been approved ahead of patent expiry, meaning they are simply waiting for the patent to expire before they can launch. This will become a growing trend. But the other reason for the gap between biosimilar approvals and marketed products is litigation, as most branded companies use litigation to protect their patented biologics. This is often extensive and expensive, and yet there’s a lot of biosimilar litigation going on right now. The Biologics Price Competition and Innovation Act (BPCIA), enacted in March 2010, lays out a pathway about how to litigate patents in the biosimilar realm. Sandoz is currently seeking clarification around various aspects of challenging via the BPCIA, as we anticipate litigation will continue for decades. That being said, one of the things the BPCIA did clarify was that the patent dance between the originator and the biosimilar could only start after submission. While I’m pretty certain this legislation was intended to help bring biosimilars to market in a timely fashion, such is not turning out to be the case. For example, Sandoz has ongoing litigation for Erelzi, a biosimilar with five approved indications that has yet to launch in the U.S., and that has been ongoing since about 2015.
The moderator encourages the audience to search for information on the “biosimilar patent thicket” to learn more.
ANY TOP BIOSIMILAR TRENDS FROM OTHER AREAS AROUND THE GLOBE YOU CAN SHARE?
Europe obviously has a well-functioning biosimilar market, both on a regulatory and commercialization side, and that’s been in play for several years. Since the first biosimilar was launched in 2006 in the EU, there are now more than 50 approved and marketed. This is what we aspire for in the U.S. As for biosimilars in Japan, this has been coming along faster than anticipated. But the one that’s still a little bit of a wild card is China. However, the CFDA (China Food and Drug Administration) has been evolving and evaluating its biosimilar regulations across the board and appears interested in trying to harmonize to get closer to EU and U.S. regulations.
THERE HAVE BEEN SEVERAL POLICIES PROPOSED THAT WOULD CREATE INCENTIVES FOR BIOSIMILAR USAGE, PARTICULARLY IN MEDICARE. WHICH ARE YOU THE MOST OPTIMISTIC ABOUT, AND WHY?
The reason Europe is a well-functioning market is there are a lot of incentives to drive biosimilar adoption. There are clear explanations as to why patients, physicians, and the system can be benefited by biosimilars. That’s the part that’s been missing in the U.S. However, there are multiple proposed legislation reforms to Medicare and Medicaid drug reimbursement that could be winners, with one of those being average selling price (ASP) plus 8 percent. As this seems to have approval, this will increase the add-on payment for a biosimilar from 6 percent of the reference product’s ASP (average sales price) to 8 percent over a five-year period starting in January 2020. This is a temporary fix for biosimilars that go through the buy-and-bill channel via Medicare Part B. Another proposal is ASP minus 22.5 percent, which is a proposal to incentivize adoption by physicians, and this seems to have bipartisan support. The other piece is making sure that Medicare Part B and Part D are fixed. To that end, a 900-page document was recently published on this, and while we’ve been plowing our way through that, it looks as though the proposed fixes could impact biosimilars more in the community setting. Right now, we’re looking at having a specialty tier for biosimilars, so they don’t get blended in with the originator products at the time of reimbursement. This is important for patients because right now they don’t have an incentive to take a biosimilar over the brand when in a blended tier. If you have a specialty tier for biosimilars, then you can start to look at $0 co-pays, which clearly benefits patients.
THE INTERNATIONAL PRICING INDEX (IPI) IS ONE POLICY THAT IS MAKING MANY PEOPLE IN THE BIOSIMILAR SPACE WARY. HOW DO YOU ANTICIPATE THIS POLICY, WHICH AIMS TO BRING DOWN U.S. DRUG PRICES, WILL IMPACT BIOSIMILARS, ESPECIALLY AS THE INDUSTRY STRIVES FOR PRICING SUSTAINABILITY?
In relatively broad brush strokes, IPI would be a basket of products that would be priced relative to a basket of country prices. This is going to be rather tricky to implement because pricing in different countries is relative to their market dynamics. For example, some countries pay for healthcare through taxation and have a single source for payment, while others have a reimbursement system not too dissimilar to that of the U.S. Then the question becomes, what price are you comparing to, because the list price is visible, while net prices tend to be invisible. List prices are very hard to do biosimilar comparisons with, as these tend to be very high before the various discounts are applied, and these vary across each system. To my understanding, IPI resides with H.R. 3 [an act to establish a fair price negotiation program, protect the Medicare program from excessive price in-creases, and establish an out-of-pocket maximum for Medicare part D enrollees, as well as for other purposes]. If you think about what the consequences of such price controls could be, clearly these represent a disincentive to biosimilar developers. You must fund innovation. But you also don’t want biosimilars to go away from a lack of financial incentives.
“Since the first biosimilar was launched in 2006 in the EU, there are now more than 50 approved and marketed. This is what we aspire for in the U.S.”
Another question is received from the audience.
HAVE YOU THOUGHT ABOUT ENGAGING IN A HEAVY REBATING STRATEGY TO COUNTER BRANDED BIOLOGICS?
There were some proposals toward addressing rebating policies, but those have since been dropped, and I don’t think there is any active legislation that specifically targets the rebate component. But rebates are an important consideration whenever moving a biosimilar forward to commercialization. Rebates tend to be an issue in Part D and commercial plans rather than in the buy-and-bill setting. The FDA is working more closely with the FTC, as there’s a lot of appetite to understand what practices are at play in the world of biosimilars. These regulatory bodies are starting to look at the disinformation put out there by biologics originators, beginning with communication policies, to make sure everything’s on the up and up. In our discussions with payers, we see a huge amount of interest and motivation to get over this hurdle to make sure they can actually drive adoption of biosimilars, as most have biosimilars built into their long-term plans, and they see them as a means to drive down healthcare costs. I don’t want to give any trade secrets away, but we’re in deep conversations about how to make this happen, as the ability to drive a switch to a biosimilar is a big part of getting past rebate traps.
An additional question is posed from a member of the audience.
FOR SANDOZ, IS IT ALL ABOUT BIOSIMILARS? WHAT ABOUT SOME OF THE COMPANY’S OTHER TRADITIONAL BUSINESSES?
Biosimilars make up around 20 percent of Sandoz sales right now, though we do expect that to grow to perhaps as high as 40 percent. Biosimilars are a key growth driver for Sandoz. Once the transaction that is currently underway (i.e., Sandoz U.S.’s divestment of its dermatology business and generic oral solids portfolio) is concluded, I think many will view Sandoz as a pure biosimilar play. But that shouldn’t be the case, as we still have other complex generics and a specialty business. Biosimilars are becoming a bigger component of the Sandoz business, but it’s not our only business.
WHAT’S IT BEEN LIKE FOR SANDOZ TO MOVE FROM SMALL MOLECULES INTO BIOLOGICS?
I was part of Novartis for a long time prior to joining Sandoz in 2014. By that point we had already had biosimilars approved in Europe, which were doing fairly well. Back then, it was difficult to accommodate the cost of developing biosimilars, as the cost is multiple times that of a small molecule. This means having to make some tough choices, as you can’t simply increase your investment base significantly. Where do you want to invest your development dollars? Where do you invest your commercialization dollars? When I first joined, working through such questions was still painful. The only way Sandoz could succeed in biosimilars was to consider the longer cycle times required, and this necessitated having an isolated business unit with a separate P&L. We wanted to protect it from the rest of the business, but then join it back up at the top of the organization again. Success in biosimilars requires having a firm belief in the promise the market holds.
Commercializing a biosimilar requires a different set of skills than those of the typical small molecule generic model, as you don’t want to approach as a pure play on price. We learned the importance of being able to interplay skillsets from generics and what I refer to as “brand light,” as a biosimilar can operate like a brand until a market becomes more commoditized. As this happens at different paces for different products in different countries, you must be agile in making the right investment choices. For example, in most countries Sandoz has a customer-facing team (i.e., sales reps). In addition, we have medical science liaisons (MSLs) and account teams, which is very similar to how branded companies approach commercial efforts. Account teams do the economic side. MSLs do the science-education piece, while traditional field reps do features and benefits, explaining why a biosimilar is essentially the same as the originator product.
Another question comes from the audience.
IS SANDOZ USING REAL WORLD EVIDENCE (RWE) TO COMMUNICATE THE SAFETY AND EFFICACY OF BIOSIMILARS?
The use of RWE with biosimilars is incredibly effective from a commercial and regulatory perspective. If you were tuned in to the approval of the biosimilar Zarxio, you would have heard references to its safe use given the number of patient years exposure, along with the fact that there’s been no adverse events witnessed that you wouldn’t expect to see with the originator product. That scenario has played out pretty much the same for every biosimilar after launch and is certainly something we track and monitor. In fact, if you go to the Sandoz website, you’ll see lots of factoids about the number of patient years of experience with all our biosimilars, which supports why a patient gets the drug in the first place.
WHAT WILL THE BIOSIMILAR INDUSTRY LOOK LIKE IN FIVE TO 10 YEARS?
Five years ahead, I hope we see a well-functioning U.S. biosimilar marketplace like what we are now seeing in Europe. But as it stands, the United States currently has an order-of-entry effect happening, which is related to the timing of approval, timing of litigation, and the ability to start commercializing. In five years, we’re probably going to be past some of these issues, and we can anticipate biosimilars having vertical takeoffs on day one of launch. In fact, I expect to see that to some degree as early as 2023 and anticipate launches of multiple biosimilars to an originator product taking place on the same day, which has already happened in Europe. When everybody comes into a market on the same day, it creates a different dynamic and is like that of generics. I believe we are in the early stages of that already.
Ten years from now, I think we’ll be celebrating how much innovation is being funded by the benefits biosimilars have brought to the market, and patients will no longer have access issues to innovative products. Still, challenges tend to arise out of left field that you didn’t anticipate. Consider biobetters. What happens when a biologic product developed to compete for market share with a biologic originator proves to perform better than an originator? Would that drug then be considered a biobetter, and if so, what might that mean for biosimilars? There are known events around interchangeability, but what impact could biobetters have on the market in terms of the perception of biosimilars? There seems to be this misconception that an interchangeable biosimilar is of higher quality than a noninterchangeable biosimilar. People need to understand that an interchangeability label for a biosimilar is the result of a company conducting additional tests (costing more money) to deliver the data required to get such a label. In the early days of biosimilars, we spent more time explaining why something’s called a biosimilar than talking about the benefits they can bring. You can’t call them bioidenticals because anything derived from a living organism won’t be truly identical to the original. Further, we know there are differences from batch to batch in both biosimilars and originator biologics. If we focus on education and preventing the spread of misinformation, then people will begin to understand that not being perfectly identical doesn’t mean that a biosimilar won’t work as well as an originator biologic and do so at a more affordable price.