Randy Hillard was supposed to be dead by now.
But Hillard, now 63 years old, lucked out. Around the same time he received his diagnosis, a breast cancer drug called Herceptin was approved to treat some forms of stomach cancer. For more than four years, a Herceptin infusion taken once every three weeks has kept Hillard alive — at a cost of $1 million, he estimates, with about $100,000 coming from his own pocket.
“I can barely afford that, and I’m a doctor,” he said.
So the vote that Hillard cast on a Food and Drug Administration panel earlier this month had some extra significance. Meeting at the FDA’s Silver Spring campus, the panel recommended the approval of the first in a new class of drugs called “biosimilars” – a type of generic drug that’s never before been available in the United States and would potentially save him and patients like him thousands of dollars.
The specific drug in question was a copycat version of the blockbuster drug Neupogen, which is primarily used to help chemotherapy patients fight off infection. Like Hillard’s Herceptin, Neupogen belongs to a class of drugs known as biologics — complex and costly treatments made from living organisms that help patients battle some of the most severe diseases. Biosimilars undergo an identical manufacturing process, and drug companies and regulators say they can provide patients the same help.
The FDA’s almost-certain approval of the Neupogen copycat will open the door to a new range of biosimilar drugs that will offer lower-cost competition. These drugs are arriving as the United States faces the dual challenge of expanding patient access to treatments while constraining how much the country spends on health care.
While traditional generic drugs have long been commonplace in America, the health-care industry and regulators are still battling over the guidelines for biosimilars. The decisions they make will ultimately affect how broadly these drugs — on the market for the past decade in Europe and elsewhere — will be available in the United States and just how much of the billions of dollars in expected savings will eventually materialize.
All that’s standing in the way are concerns about introducing patients and doctors to these new drugs, drug company efforts to protect their bottom lines, and an anxious health-care industry looking to keep spending from spiraling out of control.
“Really, truly, we are betting our lives on these new biosimilars,” Hillard said.
A new regulatory pathway
Americans have had broad access to generic versions of traditional drugs for more than 30 years now, thanks to the 1984 Hatch-Waxman Act. That landmark law established a scheme for regulating the generic drug market, which has now grown to about 85 percent of all prescriptions dispensed in the United States. Generics, on average, are discounted about 75 percent from the price of the brand-name drug.
Biologics, however, are much different, more complicated and more expensive to produce than traditional drugs, and they have a pricetag to match. For example, the arthritis treatment Remicade, which recorded $8.4 billion in sales in 2013, can cost up to $2,500 per injection. The eye treatment Lucentis, one of the world’s best-selling drugs, costs about $2,000 a dose.
The Hatch-Waxman law only applies to what’s known as small-molecule drugs, which are chemically synthesized products. When those drugs come off patent, drugmakers are able to offer their own generic versions in accordance with the FDA review process outlined by the 1984 law.
However, no similar process for biologic imitators to compete with brand-name drugmakers existed until 2010, when a new regulatory pathway was authorized under the Affordable Care Act. For a drug to be deemed biosimilar, that law requires that the copycat drug is “highly similar” to the original, or “reference” drug, and doesn’t have “clinically meaningful” differences to it.
“The FDA has to make a determination that it will behave the same way, it will have the same clinical profile,” said Leah Christl, FDA associate director for therapeutic biologics,
It’s a tougher standard than the one for traditional generics, making it harder to enter this new biosimilar market. Biosimilar products on average will take eight to 10 years to develop and cost the manufacturer between $100 million and $200 million, according to the Federal Trade Commission. By comparison, traditional generic drugs cost just between $1 million and $5 million to develop over three to five years.
An overseas market for biosimilars has existed for almost a decade in the European Union and other countries, including Canada, India and Japan. Though it’s hard to predict what biosimilars will cost in the United States, they tend to cost about 20 percent to 30 percent less than the branded biologic in these countries. That’s far less than the discounts for traditional generic drugs, but it still could mean tens of thousands of dollars in savings for the most expensive biologics.
Big costs, big savings
The United States spent a combined $271.1 billion on prescriptions drugs in 2013, which comes to almost $1 for every $10 the country spends on health care. Biologics accounted for about 28 percent of drug spending that year, up from 21 percent five years earlier, according to the IMS Institute for Healthcare Informatics.
Notably, spending on prescription drugs had slowed in recent years, largely thanks to a number of traditional brand-name drugs coming off patent and getting cheaper generic competition. But more new drugs were launched in 2013 than any of the previous 10 years, and health-care payers are bracing for higher spending on drugs. They spent the better part of 2014 condeming drug companies for the prices of these new medications.
Nowhere has this tension been more apparent than in the very public dispute over three new hepatitis C treatments released over the past year. The drugs all represent a significant improvement over previously available therapies, but they carry sticker prices of no less than $84,000 for a disease that can now be cured for the vast majority of patients within 12 weeks.
The drug companies say the treatments are worth the cost and will save the health-care system money in the long-run, but insurers, employers and state budget officials have raised concerns about how the country can afford these medications. They say hepatitis C drugs are just the tip of the iceberg, and in many cases they had set up barriers to slow access to these medications to just the neediest.
That’s the backdrop against which biosimilars will enter the U.S. market, with hopes that the new classification of drugs will translate to major savings and new access for patients. Express Scripts, the nation’s largest manager of pharmacy benefits, has been advocating for policies that would speed biosimilar entry into the United States. The company projects that biosimilar competition for the 11 most-popular biologics would save the United States $250 billion on health care over a decade.
Others have offered more tempered estimates. The Rand Corporation says biosimilars will likely mean the U.S. spends $44.2 billion less on drugs through 2024
Rand’s projections, though, outline 10-year savings ranging from $13 billion to $66 billion depending on a number of factors. The most important – and the most uncertain – is how competition in this market develops.That’s largely going to count on decisions that regulators are still debating and drugmakers are fighting over five years after Congress created this biosimilar pathway.
The first U.S. biosimilar
The biosimilar drug Randy Hillard voted for will be known as Zarxio. It’s Sandoz’s copycat version of Amgen’s blockbuster drug Neupogen, which helps cancer patients fight off infection after chemotherapy depletes their immune systems. Neupogen racked up $1.2 billion in sales last year.
The 14-member FDA advisory panel concluded that Zarxio met the statutory requirement for biosimilars — it is was “highly similar” to Neupogen, with “no clinically meaningful differences” between the two. The panel recommended, 14-0, that the FDA approve Sandoz’s application, which the agency is expected to do.
The biotech industry has been closely watching how the agency deals with the first-ever biosimilar application from Sandoz, a division of the Swiss drugmaker Novartis.
One thing that seemed to work in Sandoz’s favor was that the company submitted reams of sophisticated data related to the experience of its biosimilar in overseas markets. It markets Zarxio in more than 40 countries, and Sandoz said it’s already more prescribed than the brand name drug.
That drug, Neupogen, has FDA approval for use of five different medical “indications.” The FDA advisory panel recommended that the agency similarly approve the Sandoz biosimilar for all five indications based on its review of just some indications, which could mean major cost savings to companies trying to bring biosimilars to market.
“That’s important from a timing and cost perspective,” said Christopher Betti, who heads the biosimilar practice for the Chicago-based law firm K&L Gates LLP. “Having the FDA require other extensive experimentation with those other disease states, you’re talking about a huge capital investment from the biosimilar applicant, as well as a huge investment of time.”
Inside the industry fight
Battle lines were being drawn across the industry long before Zarxio came up for a vote. The biologic manufacturers Amgen and Genentech for the past couple of years had staged a flurry of lobbying activity at the state level that generic manufacturers claimed would have limited pharmacists’ ability to substitute biosimilars for the original product. Amgen said it supported the pathway for biosimilars but with appropriate mechanisms for tracking the copycat drugs.
The sides reached an agreement last month on state legislation regarding a category of biosimilars known as “interchangeables.” These will have to meet a different standard than other biosimilars — they must produce the same result as the original drug without presenting additional risk if a patient is switched between the two in the middle of his or her treatment.
While four biosimilar applications have been filed with the FDA since last summer, no company has yet filed an interchangeable application. That type of biosimilar would offer potentially greater savings because a larger set of patients could receive those drugs. Subject to differing state laws, pharmacists would be able to automatically swap out the brand-name biologic for the interchangeable drug, similar to the way traditional generics are substituted today. More FDA guidance on interchangeability is expected this year.
“It’s not even clear how [interchangeability] will be proven,” said Ken Taymor, executive director of the Berkeley Center for Law, Business and the Economy, who’s studied the biosimilar market.
The FDA must still also decide whether biosimilars will have unique names distinguishing them from the original drug they’re copying. The large biotech companies have urged unique identifiers for biosimilars, arguing that would make the drugs easier to track. But biosimilar manufacturers say requiring unique names would slow the takeup of biosimilars because the products wouldn’t be as recognizable to doctors and pharmacists.
“If it’s essentially the same drug, why would you call it something different?” said Mark McCamish, global head of biopharmaceutical and oncology injectable development at Sandoz.
The brand names and generics are still waging other fights that will influence how widely and quickly biosimilars are adopted in the United States. Amgen filed the first-ever biosimilar lawsuit last year charging that Sandoz was required by law to share its application for the Neupogen biosimilar so the company could determine whether there’s been patent infringement. Sandoz contends it wasn’t required to share the application, and the outcome of the litigation could set the tone for drugmakers’ future biosimilar lawsuits.
Brand name manufacturers famously fought the entry of traditional generic drugs. However, Ralph Neas, president and chief executive of the Generic Pharmaceutical Association, thinks things will be less contentious this time.
He points to broad public acceptance of generic drugs, and the fact that brand-name biologic manufacters themselves are pursuing biosimilars. For example, Amgen has nine biosimilars in development and expects to launch five of them between 2017 and 2019.
“That’s an important distinction from the ’80s and ’90s, and even some of the present-day skirmishes,” Neas said. “You are going to have more of a unified front on biosimilars. I don’t want to overstate it, but it seems to be markedly different from 25 or 30 years ago.”
Herceptin, the drug that’s kept Hillard alive these past few years, is already getting biosimilar competition overseas, and its patent in the United States will expire in 2019. A number of blockbuster biologics have recently come off patent or are expected to over the new few years.
That presents an opportunity that could spur smaller biotech companies and startups to join the biosimilar market, said Betti of K&L Gates.
“The biggest thing for a biosimilar manufacturer is trying to gather market share,” he said. “They certainly don’t want to be the last one to the game.”