By Michael Turner and Magnus Franzen
This is the third article in a series on biosimilars. The first two pieces layout the background of the biosimilar market to date and the challenges shaping the market. This article sets out to explain how biosimilar companies are achieving differentiation and what it will take to establish market share.
Price Is Not Enough
The underlying rationale for biosimilars is very similar to generics – by introducing competition into a previously monopolized market prices will be pushed down.
When generics enter a market, prices tend to drop up to 80-90% of the branded drug price, usually within months of patent expiry. However, to date, this dynamic has not been as pronounced for biosimilars and the price erosion so far has fallen short of the initial expectations.
Instead of up to 80-90% price decreases, biosimilars have been introduced with a price discount of approximately 20-30%. In some cases, the discount has been closer to 10%, although these situations are highly market dependent.
Experience to date suggests that although price is still the most important competitive advantage for a biosimilar company, current discount rates are not enough to automatically convince key stakeholders of a biosimilar’s value.
The Ways Biosimilar Companies Are Earning The Right To Play: Experience, Evidence And Engagement
To “earn the right to play” in the biologics market biosimilar companies are looking at three new areas to achieve differentiation:
Biosimilar companies are trying to improve the healthcare professional’s (HCP) and patient’s experience with their products in two main ways: value-added services and improvements in the delivery device or mode of administration.
Value-added services are an important part of many originator companies’ strategies to build brand loyalty and differentiate in the market place. Therefore, biosimilar companies are often confronted with filling the gap that may appear from the loss of these services if prescribers were to switch to the biosimilar.
One example of how a biosimilar company has tried to match the considerable service offering of the originator is Hospira Canada’s infusion clinic program. The originator of Remicade, Janssen Pharmaceuticals, has an established program of infusion clinics where patients can go to receive their Remicade infusions more conveniently than having to go to a hospital.
Hospira created a similar clinic program for its biosimilar version of infliximab, Inflectra. To drive the acceptance of Inflectra in the market, Hospira felt it needed to make up for the the value that Janssen had offered stakeholders by providing these infusion clinics.
Another example where a company provided service programs is Sandoz’ Omnitrope patient support program, Omnisource. The program offers nurse support as well as online resources and a support center for both the child taking the drug and the caregiver.
Improvements in the delivery device offer great potential for the biosimilar company. While the service programs of originators may sometimes be hard to match as they can often be resource intensive or well established in the market, the devices have often been neglected by the originator company as the drug is reaching the end of its lifecycle and significant investment in improving the device may be difficult to justify.
In addition, the device is also the differentiator that is most closely linked to the actual drug. The device may provide differentiation without any specific additional promotional efforts or operating costs to maintain it (unlike service programs).
The best example of how a biosimilar company has managed to take advantage of the device as a differentiator is Samsung’s Benepali. Benepali, which is a biosimilar to Pfizer/Amgen’s Enbrel (also commercialized in Europe by Biogen Idec) was launched with a delivery device that was much better received by both nurses and patients than the originator’s device. Enbrel has been in some markets for almost 20 years, and the device had not been updated in quite some time, creating an opportunity for Benepali to create a point of differentiation through the improved device.
A biosimilar receives marketing approval with more limited evidence requirements than an originator drug. The clinical studies aim to prove similarity in efficacy and safety and are usually focused on one indication. From those studies, the regulator then extrapolates to the other approved indications of the originator drug. This often makes the biosimilar approval process quicker and easier.
Nonetheless, there are two important factors that the biosimilar company needs to take into consideration. First, even though the regulator may accept limited evidence, the biosimilar company may have to further convince healthcare professionals, who may not have the same faith in extrapolations as the regulator does.
Second, the FDA recently published long-awaited guidelines for substitution of biosimilars. Substitution in this context means that the biosimilar can be used interchangeably with the biologic and substitution can take place at the pharmacy without pre-approval by the doctor (like with AB-rated generic drugs in the US). However, the guidelines state that the company must prove that the biosimilar produces "the same clinical result as the reference product in any given patient," and in all the approved indications. This may make it increasingly more difficult to get approval that allows for substitution as it would likely require additional (or expanded) trials and data.
Both these factors highlight the need for additional evidence meaning companies often need to continue evidence generation after receiving marketing approval. One example is Celltrion, which has conducted ongoing switching/substitution studies to support its infliximab biosimilar, for example, the NOR-SWITCH study conducted by the Norwegian government.
The final area of differentiation found in the analysis is in the creation of meaningful relationships with key stakeholders and customers. As mentioned above, healthcare professionals often want and demand data and evidence that goes beyond the regulator’s requirements, which means that doctors will have to be engaged to communicate the value, safety and efficacy of the biosimilar.
However, the physician is not the only stakeholder who needs to be engaged. It is also important to create relationships with payers and other institutional customers, such as pharmacists at larger hospitals. These relationships are important to drive market share against the originator, but also to assert the position of early biosimilars against latecomers, who may be more likely to go into the market at a lower price point and with a more ‘hands-off’ approach.
Finally, and to date a somewhat unexplored stakeholder, is the patient. Patient groups are often engaged by biosimilars at a superficial level to merely get their tacit approval so they will not act as roadblocks. Few companies appear to have recognized the patient as a driver for biosimilar adoption beyond demonstrating to them the cost savings that may pass through to them. This is something that may change as biosimilars try to find innovative ways of differentiating – for example through devices.
Biosimilar products are coming to the market at a lower price than the originator drugs. However, the price erosion has not been as substantial as expected and often not significant enough to automatically convince key stakeholders to switch to the biosimilar. This has meant that, in many markets, companies have had to ‘earn the right to play’ by adding value and/or differentiating in three areas: improving the customer experience, producing additional evidence to support the safety and efficacy of the product, and engaging and creating closer relationships with key stakeholders.
The different archetypes of biosimilar companies (Bio powerhouses, Biosimilar machines, Generic giants, Opportunitsts, Bio-wizzes and Genericists) are likely to continue to react differently to this environment.
The Bio powerhouses will try to ride on their reputation in the market and promote requirements for high quality. This could position them well as high quality manufacturers and make it easier to continue the defense of their own originator businesses. A fairly subtle example of this is how Amgen is leveraging its reputation in the naming of its first biosimilar - Amjevita.
The Biosimilar machines will also try to leverage the brand of their parent company, to the extent this is possible, to build credibility. Recent experimentation also shows that the Biosimilar machines are dedicated to differentiation in all three categories described above: customer experience, evidence and engagement.
The Generic giants may seek to approach their biosimilars as generics and try to compete heavily on price. This would probably mean a focus on assets they can easily drive through development without necessarily being first to market. That way they can keep costs down and ride on the work of others to convince the healthcare professionals about the value of biosimilars.
The Opportunists are usually familiar with both the competition of the biologic market and the operations needed to differentiate themselves in that market. Therefore, they may embrace differentiation rather than price cuts. Keeping prices high would also be more compatible with their own biosimilar defense strategy.
Bio wizzes and Genericists will likely continue to leverage their clinical strengths and local relationships, respectively, as well as look to partner with some of the larger players to help support required biosimilar investments at the level required.
In summary, different company archetypes are predisposed and prepared to engage in different activities. But regardless of the levers that each biosimilar company in the end decides to use, it is likely that the competitive environment of the key therapy areas, such as Rheumatoid Arthritis, will require a mix of several levers, if not all available levers, to help the biosimilar company “earn the right to play.”.
Michael Turner is a life sciences expert at PA Consulting Group, with over 17 years of commercial strategy experience. Michael partners with clients to address strategic product and portfolio challenges and implement strategies to maximize asset value.
Magnus Franzen is a life sciences expert at PA Consulting Group. With a background in strategic and market research, Magnus leverages a deep knowledge of the dynamics of commercializing pharmaceuticals in a changing healthcare environment to support clients in key strategic areas, such as customer engagement, multichannel marketing and value beyond the pill.