Generic drug prices are falling. For confirmation, look no further than the recent earnings reports from generic manufacturers and pharmaceutical wholesalers whose profits from distributing generic pharmaceuticals are also declining. The generics industry is facing several key challenges, including declining prices, increased competition, and a dwindling number of blockbuster pharmaceuticals going generic. Within the past few weeks, three of the largest generic manufacturers — Teva, Mylan, and Sandoz — all released results that highlight these issues.
Moving forward, pricing pressure will likely increase because of actions recently announced by the FDA. In June, the FDA announced it was taking steps to increase competition for prescription drugs and ease the entry of lower-cost alternatives. Specifically, the FDA published a list of off-patent branded drugs without approved generics, and announced a new policy to expedite the review of generic drug applications where competition is limited.
While faster approvals and more competition will likely result in further commoditization of the generics business, the longer-term trend toward biologics will add downward pressure on generic firms because there will be fewer blockbuster pharmaceuticals going generic. According to Genetic Engineering and Biotechnology News, four of the five top-selling drugs in 2016 were biologics. Biologics are complex molecules produced by living systems such as microorganisms, or plant or animal cells. Because biologics are complex molecules, there are no “generics,” only “biosimilars.” Biosimilars are nearly identical copies of an innovator drug. Because of the complexity of development and manufacture, biosimilars are reviewed and approved via a different FDA regulatory pathway than generic pharmaceuticals.
Because of these complexities, plus higher capital requirements for manufacturing and the greater need for commercialization capabilities, the biosimilar market likely will be a more profitable and attractive segment in the long run for companies with the resources and expertise to compete. Three key factors will make biosimilars more attractive and profitable than generics:
- There will be fewer competitors. The relatively high barriers to entry mean that for any given molecule, there will likely be far fewer biosimilar competitors compared with the number of generic competitors for an innovator pharmaceutical with comparable revenues.
- The starting point for biologics prices is generally much higher than it is for pharmaceutical prices. Because of this, it should be possible for biosimilar manufacturers to sustain profits even with relatively high discounts.
- Unlike generics, most biosimilars will not be interchangeable, at least for several years. This is because the guidance for interchangeability is still being promulgated and the requirements to achieve interchangeability will likely deter some manufacturers from seeking this designation. Unlike with generic drugs, pharmacists will not be able to dispense a biosimilar when the originator was prescribed without consultation of the prescriber.
Only companies with strong commercialization capabilities are likely to be successful. This view is based on observations and analysis as to what has enabled companies in Europe to be successful. The companies that have achieved the greatest success with biosimilars are those that have deployed customer-facing organizations, including commercial and medical personnel. To succeed in the U.S., companies will also need customer-facing infrastructure. While the requirements will vary depending on the therapeutic area and mode of administration, biosimilars will need managed care account executives, sales representatives, and/or customer account managers, plus medical science liaisons (MSLs). This is a departure from the usual generic approach for commercialization and will require additional expense. Unlike with generics, the “selling” of biosimilars is far more complex and involves more decision makers and stakeholders. For example, managed care account executives will be necessary to obtain inclusion on managed care formularies. For infusion products, account managers will be essential to driving utilization via group purchasing organization (GPO) contracts and negotiating “carve-out” contracts. In many situations, sales representatives will also be required to inform healthcare providers (HCPs) about biosimilars, promote their brands, and “pull through” managed care contracts. Finally, MSLs will be essential to educating clinicians and managed care customers about biosimilars and their specific products. As biosimilars become more widely accepted and used, the need for MSLs will likely diminish.
Furthermore, it will be essential to provide consistent high-quality supply, device, and service offerings comparable to the innovators, while offering innovative pricing and contracting solutions. One of the greatest challenges facing biosimilar companies will be obtaining access to managed care formularies. When a biosimilar is added to a managed care formulary, the rebates the managed care organization receives from the innovator product will be withdrawn, resulting in an immediate increase in the cost of the innovator product. These rebates are considerable and generally range from 20 to 40 percent of list price. For example, Merck recently disclosed that its average rebate from list price was 40.9 percent in 2016. Given the importance of these rebates, payers will closely evaluate the risks of adding biosimilars to formularies and how long it will take them to break even. This is no different than what happens with small molecule pharmaceuticals. However, because biosimilars are not yet interchangeable, the process of switching from the innovator to the biosimilar will require much more time and effort than what is required for a generic.
It is in this area where innovative contracting approaches can help address this challenge. Examples of innovative contracts include capitation agreements, where the managed care organization pays a per-member rate and can use as much product as they like. Another type of agreement is a “risk share,” where both the managed care organization and the biosimilar company have incentives to rapidly drive conversion to the biosimilar. Finally, companies with portfolios of products can utilize portfolio contracts to create strong incentives for managed care to switch to biosimilars.
In conclusion, ….
Continue at: https://www.bioprocessonline.com/doc/can-biosimilars-increase-the-profitability-of-generics-manufacturers-0001?vm_tId=2026875&user=ecdedf82-5ca8-4e3a-ae85-2fb49dc5c2f0&utm_source=et_6212871&utm_medium=email&utm_campaign=BIO_10-09-2017&utm_term=ecdedf82-5ca8-4e3a-ae85-2fb49dc5c2f0&utm_content=Can+Biosimilars+Increase+The+Profitability+Of+Generics+Manufacturers%253f
The text above is owned by the site bellow referred.
Here is only a small part of the article, for more please follow the link