Production costs of biosimilars

Costs of API and excipients

Per-kilogram prices of API exported from India were collected from an online database of exports data published pursuant to Indian customs regulations (www.infodriveindia.com), for the period 1 January 2013 to 1 November 2016. After data cleaning to exclude any non-API product (eg, final finished product shipments) and censoring outliers (a small number of low-volume shipments at very low prices, ≤US$5 000/kg for human insulin and ≤US$10 000/kg for insulin glargine; see online supplementary figure 1), linear regression models were used to calculate average API prices for 1 November 2016 (online supplementary figures 1 and 2).

For insulins where API export data were unavailable or insufficient, we took two further approaches to arrive at an estimated cost of API: direct solicitation of price quotes from API manufacturers, and inference of cost of production based on similarities in method of synthesis to APIs for which price information was available from other sources.

API manufacturers were identified and contacted through the Alibaba and IndiaMART online wholesaler market-places (www.alibaba.com, www.indiamart.com). Internet searches were done to identify additional insulin analogue manufacturers, who were contacted by email. Manufacturers identified in a published survey of the global insulin market-place were contacted if their websites indicated that they produce insulin analogues.11

In the ‘competitive’ formula, we subtracted 20% from the estimated API price to account for prices of exported API likely including numerous mark-ups that could be avoided by inhouse manufacture or by domestic procurement. Although little data are available on API mark-ups, this assumption is based loosely on mark-ups of 15%–30% reported for API of HIV medicines.12 As the HIV medicines API market is highly competitive, one would expect that this is a low estimate with regard to the less competitive insulin API market, making this assumption conservative in the context of this analysis. The considerations in estimating API price are further outlined later in the methods.

The cost of API required to manufacture one 1000-unit phial was calculated by multiplying the milligram amount contained in 1000 units of the given insulin type (online supplementary appendix) by the per-kilogram API price.

Excipient contents by insulin type, and their average prices, are given in online supplementary appendix.

Manufacturing process

At the molecular level, insulin analogues are different from human insulin only in a few amino acids (online supplementary figure 3). The manufacturing process is very similar for regular human insulin (RHI) and insulin analogues.13 14 An insulin precursor, expressed by the altered host cell genome, accumulates in the form of inclusion bodies, which are purified from the bacterial culture. The precursor is then cleaved to insulin in vitro using proteases.3 This method is common to RHI and insulin analogues.3 15–18 Similarly, the methods used for purification and refolding of RHI are also viable for insulin analogues.19 20

In confidential communications, biosimilar manufacturers confirmed that for recombinant molecules that have a high level of similarity, it is likely that the inherent cost of upstream processing is very similar.

Formulation costs

A range of estimates for the average cost of formulating API into phials are available.

Studies of antivenom production cost have assumed a formulating cost of US$1 and US$5 per phial, the latter noting that the estimate was very high.21 22 A recent study of human papilloma virus vaccine production reported, based on confidential consultation with industry, a wholesale cost of the phial and packaging materials of US$0.31 per 0.5 mL phial.23

Another source formulation costs are the ‘conversion cost norms’ published in 2012 by the Indian government, as part of price control legislation.24 These norms were used by the government to calculate ceiling prices for medicines until 2013. The conversion, packing and packing material cost ‘norms’ combined were US$0.09 for a 10 mL phial (online supplementary appendix). The ‘norms’ prescribed an assumed wastage rate for raw materials during formulation at 4.5% of API, which we included in our formulae.

Lastly, the prices of the lowest priced products formulated as phials, sold in the UK, can be used as high estimates of their formulating costs (assuming they are not sold at a loss). The prices of the five lowest priced products formulated as phials ranged US$0.64–0.85/phial (online supplementary appendix).

We assumed a range of cost levels for 10 mL phial formulation, which include the phial itself and the cost of filling: a higher level of US$1.00/unit in the ‘conservative’ formula, based on the prices of the cheapest phial formulation products in the UK, and a lower level of US$0.09/unit in the ‘competitive’ formula, based on the values prescribed in the Indian government ‘norms’.

Biosimilar development costs

An estimate by the US Federal Trade Commission put the cost of bringing a biosimilar to market (development, capital expenditure and regulatory costs) at US$100–200 million in markets with stringent regulatory authorities.25 The cost of bringing a biosimilar to market in India has been estimated to be 90% lower than this.26 We assumed that the cost of bringing a biosimilar to market was US$100 million, recouped over 5 years. Additionally, we assumed that 1 million patients (or about 5% of the estimated number of patients with type 1 diabetes globally)1 would purchase insulin from any new biosimilar manufacturer—approximately equivalent to the yearly rate at which insulin analogues have displaced human insulin from the market in high-income countries.11 Therefore, an additional US$20 per patient per year would be added to the cost of production, for the first 5 years that the hypothetical biosimilar is available.

Other costs for mass production

Costs of excipients were added based on prices listed online by large chemical manufacturers and typical excipient composition (online supplementary appendix). We added an additional 20% margin for operating expenditures and profit. We undertook a sensitivity analysis on these cost assumptions.

An analysis by IMS Health estimated that for diabetes medicines, importation and distribution costs added 23% to the manufacturer price in Brazil, 23% in India, 41% in Indonesia and 11% in South Africa.27 Therefore, to allow comparison of estimated prices with reported government procurement prices, we added 20% to represent the cost of importation and distribution.

Estimated biosimilar prices based on companies’ reported costs of production

Some insulin manufacturers report the total expenses in cost of production (termed ‘cost of goods sold’) as a percentage of sales. While it is not possible to definitively calculate per-unit costs of production from these reported percentages, we separately estimated the cost of production based on these reported expenses (online supplementary appendix). Sufficient data were available only for Novo Nordisk, but not for Sanofi or Lilly.

Patient and public involvement

Neither patients nor the public were involved in the research.