Has the US Biosimilar Market Reached a Tipping Point?
Author: John Bujnoski
The adoption of biosimilars has been very slow in the United States compared with other countries, especially in Europe; however, that could be about to change. Like generics, biosimilars have the potential to create huge costs savings by giving payers and consumers lower cost options to existing innovator brands.
Merck recently announced it would be launching Renflexis (infliximab-abda), their biosimilar version of Johnson & Johnson’s (J&J) blockbuster drug Remicade (infliximab). Renflexis is the second biosimilar to Remicade. The first, Inflectra (infliximab-dyyb) from Pfizer, was launched late last year.
So why is the launch of Renflexis a potential tipping point for biosimilars? First, the stakes are high given that Remicade generates more than $4 billion in sales for J&J in the United States alone. Second, Remicade will be the first product to face multiple biosimilar competitors in the United States.
Third, Merck announced it will be entering the market at a 35% discount to the list price of Remicade. This level of discount will surely catch the attention of payers and is significantly higher than the 15% discount to list offered by Pfizer for Inflectra.
Because of these factors, the strategies innovators, such as J&J, have used up until now to stave off biosimilar competition will probably not work in the current environment. Recently, J&J disclosed that Q2 2017 sales of Remicade were down only 5% (excluding rebate accruals) to $1.35 billion.
Many observers were expecting a much greater decrease, including J&J CFO Dominic Caruso, who said on the company’s second-quarter earnings call that the decline was much less severe than “us or any of you had expected,” and indicated that "we all targeted [erosion] to be somewhere between 10% or 15%."
The success J&J had was largely attributed to their contracting strategy, which relied heavily on volume-based and bundled contracts, in addition to providing additional discounts to selected infusion centers.
This strategy may have worked against Pfizer’s Inflectra at a 15% discount, because customers would rather take a small guaranteed rebate rather than switch to a biosimilar for a small savings. However, discounts of 35% will be much more compelling to most customers.
Furthermore, at a 35% discount, the costs of competing using a contracting strategy becomes very expensive and J&J may be better off not giving additional discounts and utilizing a “milking” strategy to maximize profits with a diminishing number of patients at a higher price.
So, have we reached a tipping point for biosimilar adoption? Given the presence of 2 biosimilars, aggressive pricing by Merck, and the likelihood of additional discounts by Pfizer, I believe that we have, in fact, reached a tipping point.
Does this mean that all biosimilars will achieve rapid and substantive adoption? Of course not, there will be differences in biosimilar adoption based on the strategies and tactics of innovator and biosimilar companies.
However, in the case of Remicade, biosimilars are here to stay.
About the Author
John Bujnoski is Managing Director of Pangea Advisory and Consulting, LLC, a strategic marketing consulting firm focused on the specialty biopharmaceutical and biosimilar market segments. John has extensive global biopharmaceutical industry expertise including extensive knowledge and understanding of the global market environment including pricing, market access and reimbursement systems.