Patent expirations promise opportunities for generics makers
Patent expirations on branded drugs are the generics industry’s bread and butter — and the years to come hold a lot of promise. QuintilesIMS projects that by 2021, the loss of patent protection is set to reduce spending on branded drugs by $140 billion from current levels. The potential impact is markedly larger than the $93.6 billion that loss of patent protection cost branded medicine companies between 2012 and 2016.
Earlier in 2017, Lilly’s attention deficit hyperactivity disorder treatment Strattera lost patent protection, with four generics hitting the market in early June. But Strattera — whose sales hovered around $590 million in 2016 — was not the heaviest hitter to come off patent this year.
That title goes to Teva’s Copaxone, which brought in $4.1 billion in invoice-price spending in 2016. In early October, Mylan received approval for both the 20- and 40-mg/ml dosage strengths of the relapsing multiple sclerosis treatment and immediately launched the product. QuintilesIMS vice president industry relations Doug Long noted in a recent presentation that the generic competition — which include both Mylan’s generic and Sandoz’s 20-mg/ml generic offering — could carve a $1 billion to $1.3 billion hole in branded Copaxone profits.
Also coming up on their patent expiries are the two biggest erectile dysfunction drugs — Eli Lilly’s patent for Cialis expires Nov. 21 and Pfizer’s Viagra patent expires Dec. 11. Cialis had sales in the United States of $1.5 billion in 2016, and could be seen over-the-counter soon. Meanwhile, analysts expect Viagra’s $1 to drop to $359 million as generics — including Greenstone’s authorized generic — get substituted in its place.
Perhaps this year’s largest open question has been Allergan’s Restasis. The dry-eye treatment brought the company $1.5 billion in 2016 U.S. sales, and Allergan has been trying to retain patent protection on the drug. An October court ruling called the patent into question and gave generics makers — Mylan, Teva and Akorn were listed as co-defendants — hope by ruling that the Restasis patent expired in 2014.
Though Allergan indicated that it would continue to fight for patent protection on the drug, it did not stopped ophthalmology-focused Imprimis Pharmaceuticals from bringing a compounded cyclosporine-based dry eye treatment to market two days after the decision was handed down. Approval for the generics from Mylan, Teva and Akorn is still pending.
Biosimilars poised to bring savings — if they get to launch
Getting biosimilars to market remains an obstacle course for manufacturers and could result in higher prices for consumers and less profits for retailers.
Even as more approvals roll in and industry officials talk about how biosimilars will bring significant savings in the coming decade, there is a concern that regulatory and reimbursement hurdles could prevent the industry from realizing the full savings of the less-expensive alternative to biologics.
In 2016, the market size of biologic drugs subject to competition from biosimilars was $3.2 billion, according to the most recent QuintilesIMS’ report on use of medicines. In the coming five years, the Danbury, Conn.-based QuintilesIMS projects that more than $30 billion will be up for grabs as biologic drugs lose patent protection. On a longer-term scale, an October analysis from RAND estimated that biosimilars could bring about a $54 billion reduction in direct spending on biologic drugs between now and 2026 — roughly 3% of the projected total biologic spending for that period.
However, these savings come with various caveats, including whether a biosimilar can make it to market without violating its reference product maker’s intellectual property rights and how much a biosimilar manufacturer will be paid for its products. These hurdles have real stakes, as slowdowns eat into the potential market for the products that offer a 10%-to-15% discount over their reference drugs.
The difficulty that has captured headlines since the first biosimilar was approved in 2015 has been the question of intellectual property and patent infringement on the part of biosimilar makers.
“What you see in a word is litigation,” said Chip Davis, president and CEO of the Association for Accessible Medicine, which includes the Biosimilars Council. “Less than half the number of biosimilars that have been approved in the United States by the FDA are currently on the market, and the reason for that is the other ones are still tied up in litigation.”
Though the Supreme Court in June allowed a biosimilar maker to provide its legally mandated notice of commercial marketing to the original biologic’s manufacturer while approval is pending — making it possible to immediately launch a biosimilar upon approval — subsequent cases have impacted time to market. In October, Humira maker AbbVie settled its lawsuit against biosimilar maker Amgen, delaying the biosimilar’s launch until 2023 and stipulating that AbbVie receive a portion of sales from Amgen’s alternative once it does launch.
Litigation, though, is not the only hurdle biosimilar manufacturers will need to overcome, as Sheila Frame, vice president of North American biopharmaceuticals at Sandoz — whose Neupogen biosimilar Zarxio was the first to launch in the United States — recently acknowledged in a post on the company’s website. The less headline-grabbing difficulties Frame identified are centered on regulatory initiatives that are impacting biosimilar makers.
Frame noted that regulatory murkiness with regard to both naming conventions and the interchangeability of biosimilars with their reference products remain. The FDA in April released its first draft guidance on interchangeability, but it has not yet said when it plans to issue a final one. Payment rates remain a sticking point, with RAND pointing out that Medicare has created a payment policy that sets a reimbursement price for biosimilars at a blended average sales price for all biosimilars that share a reference drug, plus a fixed percentage of the reference drug. QuintilesIMS data points to the effect the confusion, coupled with litigation tie-ups, can have on the biosimilars marketplace. Biologics that were eligible for biosimilar competition made up a $3.2 billion market in 2016, but biosimilars only brought in $300 million that year.
RAND noted that a revised payment policy could encourage biosimilar uptake, and it’s an idea that manufacturers espouse themselves.
“Unique reimbursement codes are necessary to foster a competitive marketplace and support direct and indirect cost savings that will make our health system more sustainable,” Shields wrote. “Additionally, we must put the patient at the center of the FDA’s guidance for naming and interchangeability to reduce confusion and unreasonable requirements that ultimately impact patient access.”
Amid challenges, generics industry gets FDA assist to ID new areas of need
Despite the challenges that manufacturers have faced from slowing generics spending growth, generics saved the U.S. healthcare system more than ever, and the past year has seen a record number of approvals. It also has seen more biosimilars getting regulatory approval, and the Food and Drug Administration carving out new and speedier paths for companies to enter areas where there is a market need for the products.
The generics industry saved the healthcare system roughly $253 billion in 2016, bringing the 10-year savings from generics to $1.67 trillion, according to the QuintilesIMS Institute's "Generic Drug Access and Savings in the U.S." report, compiled annually on behalf of the Association for Accessible Medicines. And though generic drugs comprised 89% of all prescriptions dispensed, they only accounted for 26% of drug costs in 2016. The savings that generics dispensing brought the government totaled more than $100 billion, with Medicare saving $77 billion — or $1,883 per enrollee — and Medicaid seeing $37.9 billion in savings, which comes out to $512 per enrollee.
As the savings from generics increase, though, generics manufacturers are facing market pressures. At the National Association of Chain Drug Stores Total Store Expo, QuintilesIMS vice president-industry relations Doug Long highlighted some of the challenges facing the industry, including a 13-month decline in generic dollar sales and negative growth among many of the top generics companies. These difficulties are in addition to larger buyers cornering the market, with Long noting that three buyers currently make up 85% of generics purchasing.
But even in spite of the recent challenges, manufacturers have several reasons to eye 2018 and beyond with a sense of optimism as more high-dollar drugs begin to lose patent protection and the FDA accelerates the speed with which it approves an increasing number of generics applications annually.
In a recent report examining the drivers of U.S. drug spending, the QuintilesIMS Institute noted that in the coming five years, loss of exclusivity around traditional small-molecule generics and biologics is set to have a market impact of $140.4 billion through 2021. This projected impact is 50% higher than the $93.6 billion impact that loss of exclusivity has had on the prescription drug market in the past five years, and includes $33.4 billion from high-dollar biologic drugs losing their patent protection.
Renewed potential for big-ticket generics comes as the Food and Drug Administration has been approving more and more generic drugs, breaking approval records with each new fiscal year. In the Office of Generic Drug's activity report for the 2017 fiscal year, the regulator approved 763 abbreviated new drug applications — a 17.2% increase over the record-setting 651 approved in fiscal year 2016, which itself marked a nearly one-third increase over the 493 drugs approved in fiscal 2015.
As more drugs are approved, the FDA's new commissioner, Dr. Scott Gottlieb, has aligned the agency to be an ally of the industry, having made increasing generic competition a top priority. Measures he has put in place since his May confirmation as part of his Drug Competition Action Plan include identifying drugs that are off patent and have no generics available, as well as promising a speedier pathway to approval and a clear backlog, among other efforts.
As it identifies areas of need that manufacturers can capitalize on, the FDA also has signaled that it will work to make the approval of complex generics — a large potential revenue stream for generics in the coming years — a more straightforward process.
"Being able to "genericize" a complex drug can be a high-value opportunity for a generic drug maker that helps underwrite the costs of other generic application," Gottlieb wrote in a post on the FDA Voice blog. "In other words, because brand-name versions of complex drug products are often higher-priced than many other brand-name drugs, any steps we can take to encourage the development of generic competitors to complex drugs will have an outsized impact on access and prices."
The potential for a complex generic to serve as a cash infusion for companies is evidenced in the latest complex generic to hit the market — Mylan's generic of Teva's relapsing multiple sclerosis treatment Copaxone, which will be available in both dosage strengths of the drug. For the full-year 2016, the 20- and 40-mg/ml-strength Copaxone brought in $4.1 billion on an invoice-price basis — a number that excludes off-invoice discounts and rebates — and was the drug that saw the 11th-largest amount spent on it.
"As the science has evolved over the last decade or so, there's been a lot of talk about the onset of targeted or personalized medicine in the branded biologics space," Chip Davis, president and CEO of the Association for Accessible Medicines, said. "And over time, as those innovative or branded products head toward patent expiry, those become very relevant discussions for the generic and biosimilar sectors. So we›re seeing them happen now. What you realize is the historical-value proposition of generics, in terms of creating commoditized markets that benefit patients, providers and payers, is still there. At the same time, even though it'll look different, we're going to need to create competition for high-priced specialty and biologic drugs, for instance."
Davis, in discussing the potential of complex generics, included another growing sector for the generics market — biosimilars, which have seen more approvals roll over the course of 2017. Their main barrier to adoption has been interchangeability — on which the FDA this year released a draft guidance that stakeholders have been weighing in on — and litigation over intellectual property. Most notably, Amgen and AbbVie reached a settlement in September that delayed the introduction of Amgen's Humira biosimilar Amjevita until 2023, and gives AbbVie a cut of Amjevita's sales once it does launch. Even with these potential hurdles, such biosimilars as complex generics offer manufacturers a possible slice of blockbuster drug sales, while offering the healthcare system the option to save money.
"Biosimilars and complex generics are … very much the future in terms of ensuring they are developed by our members to provide competition to these products, which are really two things — from a scientific point of view they've really advanced medicine tremendously, but they are often, when still under patent and still have exclusivity, extremely expensive," Davis said. "Therefore, the need to create competition and alternative therapies is mission critical for our members moving forward."