International Biopharmaceutical Association Publication

The Current Market for Generic Biologics

 

 

 

 

 

 

Compiled by:

Gurdeep Singh Shah

gurdeeps@rogers.com

 

 

 

 

 

Abstract

The current market presents potentially rewarding opportunities for companies that are well-positioned to enter the generic biologics sector. Due to expected strong competition among generics manufacturers, price erosion will likely occur, thereby negatively affecting brand name manufacturer revenue. However, generic market expansion will be limited by regulatory and manufacturing hurdles, as well as competition from the introduction of next-generation biologics.

Due to the uncertainties surrounding biogeneric regulation, expected average wholesale prices, patient population penetration rates, and possible brand biologic patent extensions will have direct impact on the market of generic biologics.

Several factors will drive outsourcing of biotechnology operations to contract manufacturing organizations (CMOs). First, the supply of certain critical biologics is not meeting market demand due to the unexpected success of various therapeutics and second, many generic manufacturers of small-molecule drugs are expanding to include the promising area of biopharmaceuticals. Because manufacturing biologics requires different processes and quality controls than traditional pharmaceuticals, outsourcing is a financially prudent strategy. Third, small biotechnology companies do not have the in-house capacity to conduct clinical trials and market the product due to a lack of infrastructure, resources, and expertise needed for successful product manufacture. Therefore, despite technical and cost related hurdles, the CMO industry is likely to experience strong growth in the near future due to a strong biologics and emerging generic biologics pipeline.

Since biogeneric is a new term combining biologic and generic. Biopharmaceuticals are synthetic or recombinant versions of natural biologic substances, including proteins such as enzymes or antibodies and nucleic acids such as DNA or RNA. Generic products are non-patented chemical and therapeutic equivalents of brand name drugs. However, given these two definitions, biogenerics are not technically generic biologics because there can be no true generic form of biologics. The complex process of creating biologics and the complex nature of the molecules themselves make “equivalence” an inappropriate concept in the context of biologics. Hence, it is difficult to find the appropriate name for these hybrid forms of biologics that will be created by the generic companies.

The biopharmaceutical market is expanding rapidly. It is no longer confined to growth hormones, insulin and red blood cell stimulating agents but targeting a range of diseases from growth deficiency to arthritis, to multiple sclerosis and in the field of oncology.

There are a number of biopharmaceuticals that will be targets for biogeneric development identified as potential targets for generic development. Many of these biopharmaceutical patents are due to expire in immediate future, over the next 4 years. The generic biologics market reached to $30M in 2003 and growth is expected to continue at an aggressive compound annual rate of 135% to 2010. By 2010, the market will grow to approximately $12B worldwide with a majority of these revenues generated in the U.S. and the EU.

Many of these products have sales of over $10 billion, presenting a ripe opportunity for generic manufacturers, it is expected that there will considerable confrontation from the innovator companies in allowing generic capitalization and consequently approvals.

 

Difference between biologic and “generic” biologic

Biologics or biopharmaceuticals or biological drugs are large, complex, synthetic or recombinant versions of natural biologic substances, including proteins such as enzymes or antibodies and nucleic acids (DNA or RNA) derived from the living cells. It involves transferring of genes from human DNA into another organism such as mammalian cell, bacteria (E.coli), yeast, insect or plant cells or animal cells using the recombinant DNA technology.

So a biological drug differs from a pharmaceutical drug in its overall structure and in the way it is produced. In short Biologics are therapies based on living cells as opposite to traditional pharmaceuticals, which are comprised of chemicals. Because of this, biologics must be manufactured in highly specialized plants that adhere to strict manufacturing processes.

Compared to pharmaceuticals, the complexity of the process required to develop a biologic is far greater. Additionally, since there are many materials of mammalian derivation used in the production of these types of drugs, a substantial cost is incurred in the assurance that potential pathogens (viruses and bacteria) are prevented from entering the production process. Biologics manufacturing requires a large amount of capacity and not surprisingly, biologics also tend to be far more costly than traditional pharmaceuticals.

A generic biologic (also named generic biologic, multisource biologic, subsequent entry protein, biosimilar protein etc.) is similar to a generic pharmaceutical in that it is an analogous version of an existing drug. The barriers to entry into the biologicals marketplace are substantially higher from a technical perspective. Generic products are non-patented chemical and therapeutic equivalents of brand name drugs. However biogenerics are not true generic biologics, because there can technically be no generic form of biologics. The complex process of manufacturing biologics means that traditional definitions of bioequivalence used in the generic drug industry do not apply. So these should be called the hybrid forms of biologics that will certainly be created by the generic companies.

 

Generic Biologics instead of new drugs

With new drug prices soaring, the generic biopharmaceutical industry should be manufacturing the new generic biological medicines. Generic biologicals are significantly less costly than brand name biologic drugs. In some cases such as genetic disorders and many will need enzyme, hormone and protein therapies that are biologics, not traditional drugs. Most biotech companies are start-up firms. These companies charge very high prices for their patent products to recover a return on their costly investments during the product development. But as biotechnology treatments flourish, the health care system could be broken down as a result of these unexpected costs. That’s the reason there is a need for less expensive so the generic drugs.

 

The lack of competition in biologics may hold back new treatment advances. If biotechnology companies are able to continue to charge very high prices for their products, without competition from generic manufacturers, there may be little encouragement to continue to innovate and make better and safer biologics.  [2]

 

Current market for generic biologic drug

Most of the biological drugs are patent drugs. Once the patents on traditional brand-name drugs expire, the generic companies are free to manufacture the generic versions of expensive drugs selling at half the price of their branded counterparts. Although the generic biologics are never recognized by the FDA, existing law provides important guidance for biopharmaceutical innovators and manufacturers. Specifically, patent law provides a defense for activities that would otherwise constitute patent infringement if those activities are "solely for uses reasonably related to the development and submission of information" to the FDA. (3)

Patent laws are provided to make it reasonably practicable for this type of research and development to take place. These laws allow the innovative company to recover its investment. After patent expiry, which is often after more than a decade, the market should be served by new and cheaper versions of the drug from other suppliers. But this is not the case these days.

When a patent is about to expire, many brand name companies do what they do best - they innovate. They develop long-acting versions of their old drugs, or they make oral versions of old injectable drugs, or they develop skin patches instead of pills, etc. These are improvements that consumers want and need. The patent law provides an opportunity to extend the term of certain patents that claim an active ingredient of an FDA-approved "new drug, antibiotic drug, or human biological product."(4)

Branded biologic medicines represent the fastest growing group of medicines, this is because of high demand, high prices and the absence of generic competition. However growth could be held up by price erosion due to generic competition, complications with biologics manufacturing and the introduction of superior, second-generation brand products.

This market can be separated into biopharmaceuticals that have lost patent protection and biopharmaceuticals that will lose patent protection in the future.

The biopharmaceuticals that have lost patent protection and are likely to be the first products that will be attempted by generic companies and hit the market. Some of these products are the insulin and human growth hormones, while others are extremely difficult to process. The insulin and human growth hormones will be the first to be approved.

 

Selected Biotechnology Drugs Faced Patent Expiration in the U.S

 Source: http://www.touchbriefings.com/pdf/955/ACFB481.pdf (1)

 

There are a number of biopharmaceuticals that are identified as potential targets for generic development. Many of these biopharmaceutical patents are due to expire in immediate future, over the next 4 years. Many of these products sport manufacturer sales of over $10 billion, presenting a ripe opportunity for generic manufacturers. However, because many of these products demonstrate sales of over $1 billion per year, it is anticipated that there will considerable resistance from the innovator companies in allowing generic capitalization and consequently approvals.

 

 

U.S contribution to Generic Biologics market

U.S. pharmaceutical and biotech companies spend more than $30 billion a year on R&D to develop useful medications. Only a small fraction of those compounds investigated are considered sufficiently promising to enter clinical trials. The average cost of researching, developing, and testing drugs that receive FDA approval is shocking: $800 million per drug. Even though the high cost of manufacturing, several generic biologics manufacturers are on the edge to enter the US marketplace. A number of generic companies such as Dragon, BioGenerix, and STADA, are planning to manufacture generic biologics that have large existing markets. For example the recombinant human insulin and erythropoietin are anticipated to account for 27% and 36% of the biogenerics market respectively by 2010 in US market.

As we all know that the European Commission has granted its first generic biologic approval for Sandoz's Omnitrope. In addition to the European Union, Australia approved Omnitrope sales last year.

The active substance of Omnitrope is somatotropin, a growth hormone produced by recombinant DNA technology. Somatotropin is a growth hormone and also important for the metabolism of lipids, carbohydrates and proteins.

Sandoz has asked the FDA to approve Omnitrope in the U.S. So far no action has been taken by FDA and has not approved Sandoz' 1994 application to make and sell Omnitrope in the U.S despite the fact that regulators in Australia and the European Medicines Agency found Omnitrope showed comparable quality, safety and efficacy to Pfizer's Genotropin.

The regulatory process for the approval of generic biotechnology drugs is not crystal clearing the U.S market and ultimately it is going impact the non-patent exceptionality enjoyed by many pioneer biotechnology manufacturers created by the FDA's inability to efficiently handle generic applications.  Once patent protection expires, market exclusivity may still exist for the pioneer if the FDA has yet to approve a generic.  FDA must act on all generic drug applications promptly which will ultimately lead to a faster path to market for generic biotechnology drugs. 

 

The environment for the Generic biologics in Europe

Many companies are focusing their efforts on Europe, because the regulatory environment is less inhibiting than the US. However, even within Europe, there are still significant barriers to market entry The European Medicines Agency (EMEA) is on the edge of completing its guidelines for the approval of the biosimilar drugs early this year.

Since biologics are chemically different from small molecule drugs and it is not complicated to produce two batches of active pharmaceutical ingredient (API) as chemically identical to one another, with sufficiently similar impurity profiles. Full clinical trials are therefore not needed. A generics company can use an abbreviated registration procedure, and carry out bioequivalence studies to prove that its product is therapeutically equivalent to the branded drug.

But in case of biologics, even a small change to the biotech process used to make a drug can have a huge impact on the efficacy and safety of the resulting product. So EMEA has established guidelines to deal with comparability when companies introduce changes into their manufacturing processes. Al the eyes are on EMEA's new guidelines that will establish what tests will be required.

According to European Generics Association, the average cost of generic medicines is €10,000 to €100,000 per person which is 25 to 40 percent less than the branded drug.

EMEA is working on the guidelines to ensure that biosimilar medicines do not compromise safety. It is critical that the regulatory standards for the approval of biosimilar products are firmly based on the protection of public health and patient safety. The biogenerics market is different from the generics market. There will be fewer companies because of the complex manufacturing processes, difficulties in gaining approval and the high cost of successfully marketing products. But still there is need for the development of a vigorous system for product identification, pharmacovigilance, consistent naming systems and labeling practices to distinguish between branded and generic products.

The EMEA is taking a watchful approach to biogenerics after the Omnitrop case in 2003. For example EMEA’s Committee for Proprietary Medicinal Products (CPMP) approved Sandoz’s human growth hormone (hGH) Omnitrop, but European Commission rejected the CPMP’s recommendation saying that there were some filing irregularities. The accurate situation is not unclear but there appears to be some confusion between the CPMP and the EC over the appropriate regulatory pathway for Omnitrop.

The Omnitrop case demonstrates that the development of the regulatory framework is an ongoing project. The EU is clearly ahead of the US. Even though growth hormones and human insulin, for example, are simple proteins. The FDA believes interchangeable generic biologics are inevitable, provided there is a safe path to generic or follow-on biologics.

A two-tiered approach is expected. Tier one will outline the requirements for an abbreviated data package for approval. And tier two will be a more rigorous characterization of approval requirements for interchangeability.  [5]

 

Development of generic biologics in Asia

The generic biologics market is set to develop slowly in Asian countries. These countries are obviously cost-effective in terms of producing biologics with a high degree of biotechnology potential. In addition labour costs for such R&D experts are surprisingly low. Therefore the biotechnology companies may have the potential to expand in order to deal with manufacturing generic biologics in a way that proves competitive in Europe and the US. However, this means that they must first overcome financial difficulties in terms of funding. Once the market does begin to evolve, the generic biologics companies entering the market early will derive significant value.

 

Japan

Japan has been slow to approve to the "generics concept" compared to the US and European countries. Recently Japan is witnessing growth in this market with the Japanese government talking about supporting generics. This has been encouraged by an increasing elderly population and the pressure on the government to control healthcare expenses. Most of the generic drugs in Japan are sold directly by companies to hospitals and medical centers. Generics companies offer the biggest discounts to doctors - up to 50% or more of the National Health Insurance (NHI) price. However, with the increasing pressure on generic manufacturers for price discounts, on time delivery of goods to medical centers, the quality of the generic products is suffering. Now the Japanese government is almost set to amend the policies to reduce discounts. The biogeneric pharmaceutical companies are developing and manufacturing biologics but high cost of manufacturing has forced them to be less active in the generic biologics market and that is main cause of being less competitive with European and US companies. The generic biologics industry is looking for the cheap manufacturing.

 

India

Now Indian companies are in the new age with the introduction of product patent law. It means that the companies would no longer be allowed to reverse engineer molecules that are under patent protection globally. As a result the only option left for them would be to either operate in the generics market or invest in R&D and invent new chemical entities and dosage forms to be successful in the long run. And those biopharmaceutical companies who do not have strong R&D capabilities are turning to become contract manufacturers for other companies local both at national and international level.

Indian generic biologic market is now developing these days. The domestic market sale for the recombinant biotech products is much more than the expectation and Indian companies are into both manufacturing and marketing of these products. Some of the products manufactures by these companies include  These companies have already introduced as many as seven biotech drugs Hepatitis B vaccine, Streptokinase, Insulin, G-CSF, Erythropoietin, Human Growth Hormone and Interferon alpha 2b under many brands. As expected there was drastic drop in the price with the introduction of these generics biologics.

In order to be successful at international level, Indian manufacturers are actively looking at the US generic market and they are following the FDA guidelines or setting up collaborations with the multinational companies for the same.

 

China

The Chinese situation is similar to India with generic biologics players and is looking at the US biogenerics market. China entered into the WTO in 2001 to be more open to the market and have fair competition in the market. In preparation for entry into the international market, many companies are planning to acquire FDA-certified manufacturing facility.

The growth of this modern industry is being motivated by Chinese entrepreneurs returning from the USA to set up new companies and China's advantage as a dynamic, fast-moving economy. [6]

 

Biopharmaceuticals and patent challenges

Patents are designed to produce "surplus" profit. Such increased profits arise in the absence of competition. Free competition sets a market price were producers settle for the minimum profit that they can tolerate. Patent systems are maintained because of the belief that they bring into existence products that would not otherwise come into existence if it weren't for the incentive of surplus profit. But how much profit is enough?

Is 20 years too long for some inventions? And do some inventions control such market power that people will pay anything in order to obtain access to the product? These are concerns that arise when government actions operate under a one-size-fits-all patent law.

Most profitable brand-name drugs eventually lose their patent protection, opening the market to generic products with lower prices, except one class of drugs called generic competition.

These drugs are made using genetic engineering, and at present there are no regulations allowing for generic versions.

Generic drugs can sell for a fraction of the price of the equivalent brand-name drugs.  The generic drugs can be approved for sale without lengthy clinical trials, all these companies have to show that they are they safe and effective chemically identical and act the same in the body as the brand-name equivalent.

But this applies to most of the drugs but there is no procedure to approve generic versions of biologics -- drugs made from living cells like vaccines, blood factors and genetically engineered proteins -- because these drugs are regulated under a different law. [7]

 

Generic manufacturers under the influence of new regulations

Biotechnology companies plan to fight any new regulations because  most of the that biologics are mainly proteins made by implanting genes into bacteria, yeast cells or hamster cells and are  hundreds or thousands of times larger and more complex than chemical drugs. This makes it virtually impossible for a generic drug maker to show that its product is the same as another biotechnology drug.

Living things cannot be easily standardized like chemical processes. Slight differences among generic biologic drugs can have a big impact on their safety and effectiveness. The FDA also has uncertainties about generic biologics.

All the biopharmaceuticals are proteins which are not easy to duplicate. In addition to primary structure (amino acid sequence), biochemists must worry about secondary, tertiary and quaternary structures which may coexist in any combination. Since post-translational modifications such as glycosylation, acetylation and several other biochemical transformations are unique to the cell line in which each protein is manufactured. So it is very important to have the unique cell line to begin with so that the finished product has the same set of modifications to have the desired effect on the body. Early market entry in the USA is not a practical suggestion, this is because of the nature of the current regulatory system precludes approval in most cases. The FDA has yet to issue detailed guidance on the biogenerics. [8]

On the other hand the European Union is ahead of the USA, on paper at least. The 2003 EU regulatory reforms made specific provision for biogenerics and the EMEA issued guidance documents on most of the major products. But there are still some questions which the biogeneric manufacturers have in mind such as:

·         What are the regulatory hurdles to be overcome?

·         How might the political environment affect development?

·         How might companies overcome technical issues related to, for example, bioequivalence?

·         US/Europe regulation: USA in the slow lane but for how long?

·         What products have recently been approved and which are under consideration?

·         Where are the best opportunities?

·         The commercial/competitive cost of biogenerics: when is it worth it?

 

 

Limited competition among the biologics manufacturers

The biopharmaceutical market has expanded rapidly. No longer is it confined to growth hormones, insulin and red blood cell stimulating agents. Innovative science is accelerating the market into targeting a huge range of diseases from growth deficiency to arthritis, to multiple sclerosis and orphan diseases such as Fabry's disease. One thing is clear that if the costly and long-drawn-out trials are required, competition will be limited and the resulting drugs will not be priced significantly below the originals. Also if the generic drugs are not considered fully equivalent to the brand-name drug, doctors and pharmacists will not be able to easily substitute the generic for the original.

It should be possible to show equivalence between two biologics, though these tests are more complicated than for chemical drugs. U.S. Pharmacopeia, a non-profit organization that sets quality standards for pharmaceuticals, has set up a committee to search how the comparisons could be done.

There are several strategies that research-based companies use to delay generic competition. These companies do so only to protect their patent exclusivity and also follow other options such as litigation, reformulation, new isomeric forms, changing manufacturing processes or releasing generics under subsidiary names.

On the other hand the strategies those generics companies can employ to sustain market growth including an R&D strategy to capitalize on the most profitable therapeutic category, efficient manufacturing capabilities, high profile marketing campaigns and robust relationships with distributors to ensure timely delivery and distribution of products. [9]

 

Challenges and Promise for Biogeneric market

Because of nature of biopharmaceutical drugs it almost impossible for a generic company to show that its product is therapeutically similar to the patent biotechnology-based drugs.

Many companies appear to be focusing their efforts on Europe because of the relaxed regulatory environment than the US. However even within Europe there are still important barriers to market entry. It is likely to be several years before generic competition has a significant effect on the market than most potential players came into existence. Promotion of biogenerics is encouraging price competition to ease the burden of payment for biotechnology-derived treatments which are usually viewed as expensive. However the early biogeneric entrants will have to invest significantly to:

·        Bring their products to market

·        Gain market acceptance for their products.

Some of these companies have already introduced as many as seven biotech drugs (Hepatitis B vaccine, Streptokinase, Insulin, G-CSF, Erythropoietin, Human Growth Hormone and Interferon alpha 2b) under many brands. With the introduction of these biogenerics, there will be a drastic drop in the prices. It is expected that biologics are growing ahead of the overall pharmaceutical market, the forecast: "In 2010, nearly 50% of all new approved pharmaceuticals will be of biotechnological origin."

 

 

Biopharmaceuticals’ share of global prescription sales

Source: IMS Health, BioGeneriX

© 2001 IMS Health Inc.

 

With the expiry of first generation biologics, the future for biogenerics appears great in US market. But still there are still doubts in the future of biogenerics. This is due to uncertainty in the regulatory position.

Blockbuster biotechnology products with patent expiry before 2007

Product

Innovator company

Active substance

Patent expiration

Global sales, 2002

Humulin

Lilly

Human insulin

2001

$1.0bn

Intron A

Schering-Plough

Alpha-interferon

2002

$2.5bn

Procrit

Amgen/J&J

Erythropoietin

2004

$4.3bn

Epogen

Amgen

Erythropoietin

2004

$2.3bn

Neupogen

Amgen

Filgrastim (GCSF)

2006

$1.4bn

 

Source: Generic Pharmaceutical Association, USA

© 2001 IMS Health Inc.

 

As biopharmaceuticals are defined by their production process, any change can impact safety and efficacy and therefore demands new approval. It is impossible to replicate the biological process exactly, which makes it difficult to prove essential similarity, or equivalence.

Proof of bioequivalence in an abbreviated process is not accepted by the EMEA or the FDA. The European comparability guideline indicates that a complete new filing and clinical trials are required for each new case. What that means in practice that "biogenerics don’t really exist". It is preferred to use the term ‘biosimilars’ because, as the regulations stand, therapeutically similar products must be different to the original. As a result, biosimilars will need to be branded and marketed very differently to existing generics and biosimilars will not be substitutable for originals. It is expected that generic competition for biotech pharmaceuticals has the potential to offer consumers dramatic and substantial savings, while also lowering healthcare bill. [10]

 

Potential impact of increasing development of

biotechnology-derived drugs on prescription spending [11]

 

Reductions in clinical requirements for biogeneric products have the potential to significantly reduce the cost of finished products compared to those of the original patented products.

Current progress on the introduction of biogenerics worldwide

The science to create affordable generic biotech drugs exists today. Generic companies have highly sophisticated R&D organizations and manufacturing capabilities and many have developed and marketed proprietary products just as brand companies do. Continued advances in analytical methods will ultimately enable the characterization of all biotechnology products. Finally, brand biologic companies claim that there is magic to the process of manufacturing biotech drugs. This may have been true when manufacturing processes were not fully validated and analytical methods were not advanced enough to characterize the final product.

This is no longer the case. Utilizing replacement measurements to confirm that the amended drug will provide the same results is the very process that is used today in traditional pharmaceutical manufacturing to ensure the safety and efficacy of a generic drug. The following table provides a brief list of famous potential players in generic biologic medicines in the European Union, United States and the rest of the world.

 

A List of Competitive Potential Players worldwide

 

Source: http://www.touchbriefings.com/pdf/955/ACFB481.pdf

 

 

The above table summarises the competitive manufacturers all over the world are capable of producing biological materials. Several generic drug makers currently have the expertise and resources to develop, test and manufacture a comparable biologic and the number is growing rapidly. The Market for Generic Biologics takes an in-depth look at the major issues facing the biogenerics pharmaceutical market such as legal and regulatory, scientific, pricing, barriers to entry, bioequivalence, innovator strategies and challenges and international regulations. [11]

 

 

 

References

 

  1. http://www.touchbriefings.com/pdf/955/ACFB481.pdf
  2.  http://www.microbix.com/0204.html
  3. Infringement of Patent. U.S. Code, Section 35, Title271 (e), (1), 2002
  4. Extension of Patent Term. U.S Code, Section 35, Title 156(a), (f) 2002
  5. http://www.pharmexec.com/pharmexec/article/articleDetail.jsp?id=301751&sk=&date=&pageID=2
  6. http://www.pharmabiz.com/article/detnews.asp?articleid=16463&sectionid=50
  7. http://feeds.feedburner.com/patentbaristas/rnib
  8. http://www.espicom.com/prodcat.nsf/Product_ID_Lookup/00000012?OpenDocument
  9. http://www.marketresearch.com/product/display.asp?productid=1170930&g=1
  10. http://open.imshealth.com/IMSinclude/i_article_20040518a.asp
  11. http://www.bioportfolio.com/cgi-bin/acatalog/rbhc0134m.pdf