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‘The biosimilar thing’: Supreme Court decision could mean setbacks for burgeoning drug market
BY CARLY HELFAND
MAY 31, 2012

Cancer survivor Linda Tate remembers one hospital roommate well.

Tate, whose treatment was covered by insurance, struck up a conversation one day with a fellow patient who was in her early 30s with two young children. While the woman was upbeat about her condition, she told Tate she’d reached her million-dollar limit on her insurance.

“She just broke down,” Tate said. “For her, it wasn’t the cancer that was upsetting her so. It was the fact that her husband had to take an extra job. You can’t handle that kind of stress when you have cancer.”

Reaching that insurance limit is not so inconceivable considering the price of most cancer drugs. Tate’s medication, the injectable Herceptin made by California-based Genentech Inc., is a biological drug – a complex category which encompasses compounds made of material such as proteins, sugars or even living cells – and costs $3,491.99 per vial.

The Food and Drug Administration is finally making strides toward bringing generic equivalents of these oftentimes life-saving biologic drugs – or “biosimilars” – to market. Nearly two years after their development was legalized, the FDA released draft guidance for these drugs on Feb. 9, and earlier this month it held a public hearing to seek feedback.

But the Supreme Court could unravel the recent progress with one fell swoop.

The legal basis for the production of biosimilars in the U.S. is written into President Barack Obama’s health care reform bill, and as the country awaits the Supreme Court’s decision on the bill’s constitutionality, the foundation for U.S. biosimilars development hangs in the balance. After three days of hearings in late March, the Supreme Court is expected to rule before the end of June, and if it decides to scrap the entire bill, biosimilars legislation will go with it.

“With the health care reform, there are really three outcomes that are possible from the Supreme Court,” said Michael Matson, an analyst for Mizuho Securities Co. Ltd. “One would be just completely shooting down the law. I really can’t predict what’s going to happen, but it did seem like the way the hearings went that it was skewed more toward some type of change.”

While members of the court did not express any opinions about generic biologics, biosimilars clearly were not the focus of the objections to the Patient Protection and Affordable Care Act (PPCA) – at one point during oral arguments, Justice Stephen Breyer even referred to the BPCI as “the biosimilar thing.” But without a severability clause written in, an overturning of the PPCA would result in a roadblock for biosimilars that could hurt producers and consumers alike.

“I guess it would in fact require then special legislation to basically put that legislation back into effect,” said John Putnam, an analyst for Capstone Investments Inc. “It would slow things down.”

The regulatory process for biosimilars approval is not a fast one to begin with. After its introduction in 2007 by Senator Edward Kennedy of Massachusetts, the Biologics Price Competition and Innovation Act (BPCI) went through several iterations before it was signed into law by Obama in early 2010.

By comparison, Europe established a legal framework for approving biosimilars in 2003, with the first approval coming in 2006. Robert Goldman, an analyst for CL King & Associates Inc., said Europe is often ahead of the U.S. in terms of approval of healthcare products.

“We do have tougher regulatory burdens in the U.S.,” Goldman said. “It’s not uncommon that the companies will first go to Europe and seek regulatory approval for products because there’s a faster pathway, and that’s been the case for biosimilars as well.”

But while the approval of biosimilars in the U.S. may be going slowly, the expansion of the biologics market is happening quickly. Biologics totaled $112.93 billion in worldwide sales in 2011, according to a report from La Merie Business Intelligence, a $5 billion, or 4.6 percent increase over 2010 sales.

So it comes as no surprise that companies are racing to be at the forefront of biosimilars development. Since the BPCI became law in 2010, several companies have been positioning themselves to be major players in the market.

The past six months alone have seen multiple partnerships announced between generics producers and larger companies with more marketing power. Other companies that currently market biosimilars overseas are already well into the testing stages in the U.S., looking to have their products out as fast as possible once patents for their competitors begin to expire.

It’s these pioneers of biosimilars that would feel the financial effects of stymied legislation. For companies already in Phase III human testing, such as Sandoz AG, the Germany-based generic arm of Swiss pharmaceutical Novartis AG, and Lake Forest-based Hospira Inc., Putnam said the decision could threaten market share.

“It should theoretically shorten the gap between them coming to market and another competitor coming to market,” he said.


If the uptake of biosimilars in Europe is any indication, a lot of money will be at stake.Hospira’s epoetin alfa or “EPO” biosimilar Retacrit – used to treat anemia resulting from kidney failure and chemotherapy – is already in use in Europe and Australia, and worldwide EPO sales totaled $3.73 billion last year.

Putnam said that upon a generic EPO entering the U.S. market, the initial discount would probably be about 35 percent or 40 percent below the list price, and he would expect the market to decline by that amount. But if there are other generic competitors out there, Putnam said, the decline can be “even more intense.”

“They’re the only ones who have a generic form of EPO, and that’s overseas,” Putnam said. “Are there other companies working on it? I’m sure they are. It’s a fairly large market, and I’m sure they don’t want to cede it completely to Hospira.”

But should it become necessary, there may be a Plan B – an alternative to the biosimilars pathway being outlined by the FDA. Hospira spokesman Dan Rosenberg said if the entire healthcare law is overturned, Hospira will potentially look to a Biologics License Application – the same pathway currently in use for the approval of non-generic biologics.

For companies not as far along in biosimilars development, Matson said a complete overturning of the healthcare law could even have a positive financial impact by eliminating certain taxes. Deerfield-based Baxter International Inc., which announced a joint biosimilars venture with Cambridge, Mass.-based Momenta Pharmaceuticals Inc. in mid-December, is one such company.

“From an investor, Wall St. perspective, no one really has that in their models,” Matson said. “Ten years from now, maybe it could be something meaningful. If they came out tomorrow and said, ‘We’re not doing biosimilars anymore,’ I don’t think the stock would even move up or down.“

One thing remains certain: no matter what the Supreme Court’s outcome, companies like Baxter and Hospira will continue to forge ahead with biosimilars development.

“Under the guidelines, Baxter will continue to research and develop new biologic treatments for patients,” wrote Deborah Spak, Baxter’s external communications director, in an email.

“Baxter believes the policy discussions underway around the pathway for the approval of follow-on biologics strike the right balance between promoting lower costs for biological therapies that have been marketed for a significant period of time, protecting patient safety and preserving incentives to innovate.”

That’s good news for biologics consumers hoping to see lower prices on the drugs they need. “We believe even with an overturning of the law, biosimilars are an important market development for the U.S. government and consumers to reduce costs and increase access to these life-saving medicines for patients,” Rosenberg said in an email.

“If the Supreme Court strikes down all of healthcare reform, we will ask the President and Congress to move quickly to pass new biosimilars legislation. The country needs biosimilars.”

http://news.medill.northwestern.edu/chicago/news.aspx?id=206377