Analysis: Cheaper biotech drugs in U.S. still years away

WASHINGTON Mon Nov 1, 2010 4:51pm EDT

WASHINGTON (Reuters) - U.S. health regulators are kicking off plans to build a new approval system for cheaper, copycat biologic drugs, but it will still take years for patients or insurers see lower-priced products on the market.

Drugmakers say protein-based drugs that treat conditions such as arthritis and cancer cost tens of thousands of dollars a year because their complex structure can make them expensive to develop and produce.

Traditional medicines have faced generic competition for decades. But under the healthcare law passed in March, the Food and Drug Administration must now establish a path forward to allow approval for generic rivals, known as biosimilars.

FDA officials hold their first public meeting on the issue starting on Tuesday, but there is no deadline for the agency to act. Even when a system is in place, experts say it could take at least 5 years for new biosimilars to emerge, although some simpler or already established products could come sooner.

"People will be frustrated," said Ian Spatz, a Washington policy consultant and former Merck & Co Inc (MRK.N) executive. "It's not going to be a clear pathway for everything."

Less expensive versions of various biotech drugs have been sold for years in Europe and other countries where biosimilars have managed to grab a significant share of sales.

At stake is billions of dollars in wider U.S. sales for generic drugmakers such as Novartis AG (NOVN.VX) Sandoz unit, Teva Pharmaceutical Industries Ltd (TEVA.TA) and Hospira Inc (HSP.N) and potential savings for health insurers and consumers.

Brandname drugmakers such as Merck and AstraZeneca Plc (AZN.L) are also eyeing the potential new market.

At the same time, blockbuster biotech drugs from Amgen Inc (AMGN.O), Genzyme Corp GENZ.O and others face market losses.

Biologic drugs may be seen as the future for the industry, but sales still lag behind Big Pharma. Globally, biotechs are a roughly $134 billion market compared with nearly $840 billion for traditional drugs, according to the research firm IMS Health.

Biosimilars so far are a $235 million slice of the biotech sector with sales in Europe, Japan, Canada and Australia, but not the United States, the largest potential market.

Still, it could take months or even years for the FDA to hammer out its approval pathway, although it could still issue early guidelines and approve drugs on a case-by-case basis.

"It's a complex challenge. I can't put dates on our timelines for implementation," FDA Commissioner Margaret Hamburg told a National Press Club audience in October.

UNCERTAIN PATH FORWARD

Most makers agree that biosimilars, unlike current generic chemical drugs, are not exactly identical and will need more data to get approved than current generic drugs.

Drugmakers also could win 12 years of exclusive sales if they use the traditional pathway, compared with no protection if they seek approval as a follow-on product.

That could lead some companies to shun the new abbreviated pathway and seek approval simply as a new biotech drug -- or even a "biobetter" that improves upon a current option -- rather than wait for FDA to act.

At least one company, Teva, has already pledged to do so.

An abbreviated approval process "may never be used," according to analysts for inThought Research, which follows the health industry for financial and pharmaceutical clients.

Bruce Babbit, a biotech consultant for Parexel Consulting (PRXL.O) , said biosimilars already sold elsewhere -- growth hormones, erythropoiesis-stimulating agents for anemia, and white blood cell boosting colony stimulating factors -- could see approval as soon as one to two years depending on how FDA proceeds.

Either way, developing a clear way forward "is not going to happen overnight after the (FDA) meeting," Babbitt said. "I think it's going to be an evolving process."

HIGHER PRICES?

Even when biosimilars reach the U.S. market, consumers and insurers likely will not see huge savings on drugs that already can cost tens of thousands of dollars a year per patient.

In promoting the health law last year, U.S. Health Secretary Kathleen Sebelius said a new FDA process to approve biosimilars would lead to "significantly lowering drug costs."

But so far that has not panned out, especially in other countries where biosimilars are grabbing a significant portion of brandname drug's sales and volume, but prices have dipped just 15 percent to 30 percent. In comparison, generics for current chemical drug can cost just pennies on the dollar.

Any biosimilars that come along and claim to be better than the original drug also have little incentive to cut prices.

InThought recently pointed to 10 percent price increases of multiple sclerosis biotech drugs that are very similar, although they are not follow-ons: Biogen Idec Inc's (BIIB.O) Avonex, Pfizer Inc (PFE.N) and Merck KGaA (MRCG.DE) affiliate EMD Serono Inc's Rebif and Bayer AG (BAYGn.DE) Betaseron.

"It's exactly opposite of what the spirit of biosimilars is supposed to be," Ben Weintraub, inThought's research director, told Reuters in an interview. "They're supposed to be decreasing costs, but that's not the direction we're heading."

(Reporting by Susan Heavey; editing by Andre Grenon)