TEXT-Fitch:FDA proposed guidelines open the door to biosimilars

(The following statement was released by the rating agency)

Feb 10 - Fitch Ratings believes the US Federal Drug and Administration's proposed biosimilar pathway regulations provide the necessary framework to allow drug companies to develop generic versions of biologically-derived medicines, thus granting patients access to cheaper versions of high-cost drugs. On Thursday, the FDA issued draft regulations that require both clinical and laboratory studies to prove drug maker's versions of biological drugs are highly similar, or biosimilar, to originals. Regulators have debated specifics of the pathway over the past few years and several drug companies have begun development of biosimilar recreations in the U.S. The U.S. approved small molecule or chemically-based generics since enactment of the Hatch-Waxman Act in 1984 but has not approved the sale of biosimilar drugs due to a lack of a formal regulatory approval process and their complex nature. Unlike chemically-based generic drugs, biosimilar drugs are derived from living cells making duplication much more difficult. We believe drug makers participating in the biosimilar market stand to gain from the loss of patent protection for biologically-derived pharmaceuticals with profitability based on two factors. First, they must satisfy proposed regulations with human clinical information to prove "equivalence" to the originator biological medicine. The current generic drug pathway does not require that standard of proof for small-molecule therapeutics. The extent of the clinical work is expected to be determined on a case-by-case basis. Second, once it gains approval, the multisource drug must prove "interchangeable" with the original medicine. Essentially, a pharmacist must be able to substitute the specialty branded drug for the generic version without a prescription. Interchangeable medicines require much less marketing investment to capture market share. The global market for biosimilars was $311 million in 2010, which was mainly generated in Europe, and is expected to increase to $2 billion-$2.5 billion in 2015, according to IMS Health. The European Medicines Agency (EMA), the FDA's European counterpart, had previously issued a means to approve biosimilars in 2005, which has since been utilized to launch copycats of Epogen (epoeitin alfa) and Neupogen (filgrastim) throughout Europe.

We feel the expertise gained by the largest players (Teva, Hospira, and Sandoz) via the European marketplace will offer drug makers a running start in the U.S. Recently, some U.S. brand name drug competitors have shown interest in biosimilars. Amgen established a partnership with Watson to develop generic versions of cancer drugs, Baxter paid Momenta Pharmaceuticals to develop six biogeneric drugs, and Biogen and Samsung set up a new biosimilar joint venture. (Caryn Trokie, New York Ratings Unit)