The New Biosimilar Era: The Basics, the Landscape, and the Future
By Stanton J. Lovenworth, O’Melveny & Myers LLP
The worldwide market for biologics—therapeutic proteins and other biologically engineered drug products—now tops $100 billion a year. These pioneering medications, which are expensive to develop and manufacture, generate far higher revenues than traditional pharmaceutical, or chemically synthesized small-molecule, drug products. Blockbuster biologics include such widely prescribed medications as Humira®, Avastin®, Herceptin®, Remicade®, and Enbrel®, therapeutic standards for treatment of diseases such as rheumatoid arthritis and cancer.
Although biologics and pharmaceutical innovators alike face the specter of competition brought on by the expiration of their patents, until recently the generics industry has focused only on pharmaceutical substitutes, which have enjoyed the simplified path to approval created by the Hatch-Waxman Act1 in 1984. The simplified path has allowed manufacturers of generic pharmaceuticals to satisfy U.S. Food and Drug Administration (FDA) requirements without repeating clinical trials, which otherwise represent an enormous expenditure of time and money.
Would-be biologics competitors, on the other hand, have been hampered in their ability to take advantage of these same market opportunities for generic “biosimilars” or “biobetters.” Their prospects did not improve until Congress passed the Biologics Price Competition and Innovation Act2 (Biologics Act) in 2010, which granted the FDA authority to approve follow-on biologics: products similar to, or in some cases interchangeable with, biologic products already approved for sale. Creating a simplified path for biosimilars, however, is anything but simple; the molecular structure of biologics, compared to that of pharmaceuticals, is vastly more complex, and the data sought from applicants are far from abbreviated.3
Despite these difficulties, Congress and the health care community believe the effort is worthwhile. Biosimilars have the potential to deliver substantial savings to both U.S. consumers and a federal government struggling to rein in health care costs. They also present tremendous economic opportunities—not just for competitors taking advantage of the industry’s impending patent cliff, but also for innovator drug companies with the foresight to adopt new strategies for a shifting marketplace.
Below we will discuss the following series of related topics, which taken together present a broad survey of biosimilars: the basics, the landscape, and the future:
• the Biologics Act, the new pathway for biosimilars it establishes, and what it changes;
• the FDA’s draft guidelines for the key clinical testing element of the new pathway;
• the controversy over names for biosimilars;
• the European experience in biosimilars;
• the impending boom in biosimilar development and manufacturing in Asia; and
• how some of today’s blockbuster biologics are preparing for the challenge.
B. THE NEW LAW
As part of its sweeping overhaul of the American health care system, the Patient Protection and Affordable Care Act (ACA) granted the FDA the authority to create a regulatory scheme intended to foster the development of generic biologics. The Biologics Act, a subtitle of ACA, enables the FDA to approve the registration of follow-on biological products that are similar to, and in some cases interchangeable with, products already approved for sale. In essence, the Biologics Act aims to serve a purpose similar to the Hatch-Waxman Act, which provides an abbreviated pathway to approval for generic small-molecule pharmaceuticals, and is the foundation of the generic drug industry. However, the complexity of biologics, and differences between the statutory schemes, present regulatory challenges.
1. Biologics and Follow-on Biologics
Biologics are biotechnology products intended for therapeutic use. The Biologics Act defines “biological product” as “a virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood component or derivative, allergenic product, protein (except any chemically synthesized polypeptide), or analogous product, or arsphenamine … applicable to the prevention, treatment, or cure of a disease or condition of human beings.”4
Most currently available biologics are protein products, though the Biologics Act definition encompasses a significantly broader class of materials.5 Early protein products were purified and extracted from human or animal tissues, but advances in biotechnology allow their manufacture through other means. Today, the majority of these proteins are made utilizing recombinant DNA technology, which involves reprogramming yeast or bacterial cell lines to produce specific, desired biological products.
Follow-on biologics are similar to the brand-name product offered by a biotechnology or a biopharmaceutical company. Unlike generic small molecules, however, exact substitutes for biologics are difficult to produce. Owing to the complexities of biotechnology, biologics depend on complex manufacturing processes, and even slight variations such as temperature or chemical media can result in different final products. This potential for variation is a source of concern for both manufacturers and regulators because even minor differences in a protein can significantly impact its function, potentially causing dangerous side effects.6 Thus, the manufacturer of a follow-on biologic must demonstrate to the FDA that its product functions in a manner highly similar to the brand-name product.
2. Application Issues: Biosimilarity and Interchangeability
To address these safety concerns, the Biologics Act requires manufacturers of follow-on biologics to demonstrate that their product is “biosimilar” to the “reference product,” the approved biological product against which their follow-on biologic is to be compared and for which it will be marketed as an alternative.7 Biosimilarity must be proven in the application for approval by showing that the follow-on biologic is “highly similar” to the reference product and that there are “no clinically meaningful differences” between the reference product and the follow-on biologic in terms of safety, purity, and potency. The Biologics Act establishes that this biosimilarity must be proven using data from (a) analytical studies to demonstrate similarity, “notwithstanding minor differences in clinically inactive components”; (b) data from animal studies, including toxicity; and (c) “clinical studies (including the assessment of immunogenicity and pharmacokinetics or pharmacodynamics) that are sufficient to demonstrate safety, purity, and potency in one or more appropriate conditions of use for which the reference product is licensed and intended to be used and for which licensure is sought for the biological product.”8
Furthermore, an applicant must show that its biologic product “utilize[s] the same mechanism or mechanisms of action for the condition or conditions of use prescribed, recommended, or suggested in the proposed labeling, but only to the extent the mechanism or mechanisms of action are known for the reference product.”9 Similarly, the “conditions of use prescribed, recommended, or suggested in the proposed labeling” must match those previously approved for the reference product.10 Both drugs must have the same “route of administration, … dosage form, and … strength.”11 Last, the “facility in which the biological product is manufactured, processed, packed, or held” must “meet … standards designed to assure that the biological product continues to be safe, pure, and potent.”12
Interchangeability, by contrast, is a higher standard. Whereas a biosimilar is considered to have a related but distinct active ingredient, an interchangeable active ingredient will be considered to be the same active ingredient as that of the reference product.13 An applicant must submit data showing that the biological product is “biosimilar to the reference product” and “can be expected to produce the same clinical result as the reference product in any given patient.”14 For a biological product that “is administered more than once to an individual,” there cannot be any additional risk caused by “alternating or switching between use of the biological product and the reference product,”15 meaning that a given follow-on biologic should truly be interchangeable and readily substitutable.
If the FDA believes the information in the application is sufficient to demonstrate the follow-on biologic’s biosimilarity or interchangeability with the reference product, and if the applicant consents to an inspection of the manufacturing site, then approval will issue.16
3. Exclusivity Provisions
Perhaps most controversially, the Biologics Act prescribes substantial statutory periods of data exclusivity for biologics.17This is separate from the protection that a patent provides. During the period of data exclusivity, would-be follow-on biologics manufacturers are prevented from referring to the data submitted by the reference product manufacturer in its original application for FDA approval. As a result, the brand name, or reference product, obtains a period of exclusive marketing, which may last longer than patent exclusivity.
This period of exclusivity means that no application for a follow-on biologic product may be submitted to the FDA until four years after “the date on which the reference product was first licensed.”18 Approval, and thus marketability, of the follow-on product cannot be effective until 12 years after the date the reference product was first licensed by the FDA.19 This 12-year exclusivity period was fought for by the biotechnology industry.
4. Patent Provisions
The Biologics Act establishes a complex process to govern patent disputes. The statutory regime contrasts sharply with that provided under the Hatch-Waxman Act by requiring a process of information exchange between the applicant and the “reference product sponsor,” meaning the holder or assignee of patents covering the reference product. (There is no “Orange Book,”21 so the parties are left to determine the relevant patents on an ad hoc basis.) First, within 20 days of the follow-on biologic’s acceptance for review, the applicant must provide the reference product sponsor with a copy of the submitted application.22 This information is to be kept confidential.23
Then begins a period of targeted correspondence: within 60 days after receipt of the application, the reference product sponsor must provide a list of patents “for which the reference product sponsor believes a claim of patent infringement could reasonably be asserted,” and “an identification of the patents on [that] list that the reference product sponsor would be prepared to license” to the applicant.24 After receiving this list, the follow-on applicant has 60 days to provide the reference product sponsor with “a detailed statement that describes … the factual and legal basis of the opinion of the … applicant that such patent is invalid, unenforceable, or will not be infringed by the commercial marketing” of the follow-on biologic, or “a statement that the … applicant does not intend to begin commercial marketing of the biological product before the date that [the] patent expires.”25 Additionally, the follow-on biologic applicant must provide a response for each patent the sponsor identified as being willing to license.26 Last, after receiving the applicant’s response, the reference product sponsor has another 60 days to provide a legal opinion as to why the sponsor believes each particular patent “will be infringed by the commercial marketing of the biological product that is the subject of the … application and a response to the statement concerning validity and enforceability.”27 This last requirement has no equivalent in the Hatch-Waxman Act.
After this correspondence, the parties must engage in “good faith negotiations to agree on which, if any patents … shall be the subject of an action for patent infringement.”28 If the parties reach agreement, the sponsor must file a complaint within 30 days.29 If no agreement is reached, then procedures vary, but a complaint is still required to be filed in a timely manner.30
Last, before bringing the follow-on biologic to market, the applicant must provide the reference product sponsor with at least 180 days’ notice.31 This allows the sponsor to seek a preliminary injunction against the “commercial manufacture or sale of such biological product until the court decides the issue of patent validity, enforcement, and infringement” regarding any patents in dispute.32
Given the unusual degree of consultation between applicant and sponsor, the above process lends itself to a high degree of strategizing, and even gamesmanship, which almost certainly will become subtler and more sophisticated with the certain-to-follow extensive litigation experience.
C. THE FDA FINALLY CHIMES IN
After holding public meetings and establishing a docket33 to seek input from industry stakeholders as well as the general public, the FDA finally released initial drafts of guidance on Feb. 9, 2012.34 Although they are not yet finalized,35 these guidelines are aimed at the implementation of the Biologics Act and reflect the agency’s current positions on certain aspects of its provisions. The drafts encompass three complementary components: (1) a series of answers to “common questions” describing the FDA’s “current interpretation of certain statutory requirements,”36 (2) guidelines explaining the scientific evidence and support necessary for an applicant to demonstrate biosimilarity with a reference product,37 and (3) guidelines explaining the additional data required to assess the quality of a biosimilar product.38
In this proposed framework, the FDA “intends to consider the totality of the evidence provided by an [applicant] to support a demonstration of biosimilarity, and recommends that [applicants] use a stepwise approach in their development of biosimilar products.”39 The agency will require additional studies once it reviews initial submissions of analytical data. The FDA, though, has not yet released guidelines specific to any particular class of products,40 and it recommends that biosimilar manufacturers meet with agency officials in the application process to determine which studies are necessary.41
The guidance also clarifies the relevant statutory authority under which different products will fall. Although the Biologics Act intends to provide a mechanism for the registration of all biologics, it proposes to exempt two classes, allowing them instead to use the traditional new drug application (NDA) pathway for pharmaceuticals: “proteins” shorter than 40 amino acids,42 and “chemically synthesized polypeptides,” which are “alpha amino acid polymer[s] that (1) [are] made entirely by chemical synthesis; and (2) [are] less than 100 amino acids in size.”43 These definitions are significant because their eventual adoption by the FDA could prevent manufacturers from using the traditional BLA process if their products fall outside the Biologics Act’s safe harbors.
Notably, the drafts leave several issues unresolved. The FDA did not address what standards would be necessary to demonstrate a follow-on biologic’s interchangeability with a reference product. Instead, the FDA noted that, at this time, it would be difficult for an applicant to demonstrate interchangeability in an original application, given the statutory requirements and sequential nature of the assessment.44 The agency did not provide specific requirements, such as the scope, size, and number of clinical tests, or the quantity of production lots to be tested. Nor did the FDA address biosimilar naming conventions. (See Section D below.) Last, the guidelines do not interpret the Biologics Act’s provisions addressing exclusivity periods or patent dispute resolution procedures.
44Id. at 11. That is, the follow-on biologics manufacturer must first demonstrate that the product is biosimilar to a reference product, after which the manufacturer may be able to establish, through additional submissions, the product’s interchangeability.
The distance still to go before the Biologics Act becomes a practical reality for generic drug manufacturers was demonstrated in an FDA advisory committee meeting in August 2012. There, the FDA conceded that its progress in completing and finalizing rules has been slower than it had hoped, and that it has still not provided the industry with many details. In particular, the FDA noted that it has not yet dealt with interchangeability.
1. The Guidelines
To streamline the regulatory approval process, the FDA strongly recommends that applicants follow a “stepwise approach” to developing “the data and information necessary to support a definition of biosimilarity.”45 This will allow the applicant to evaluate any uncertainty about the biosimilarity of the proposed product by giving the follow-on manufacturer the opportunity to gear subsequent tests toward addressing any potential issues.46 Applicants should start with “extensive structural and functional characterization of both the proposed product and the reference product.”47 The more comprehensive this analysis, the more useful it will be in determining what additional studies are needed.48 The agency also encourages manufacturers to test multiple manufacturing lots to ensure that results are generalizable across different batches.49 It is clear that extensive testing will be required, as briefly described below.
The FDA intends to use a “totality of the evidence” standard when it reviews applications.50 Overall, applicants will be responsible for conducting and submitting “structural and functional characterization[s], nonclinical evaluation[s], human pharmacokinetic51 and pharmacodynamic52 data, clinical immunogenicity data, and clinical safety and effectiveness data.”53
a. Structure and Function
Since “extensive characterization of both products serves as the foundation for a demonstration of biosimilarity,” the FDA asks applicants first to provide structural analyses.54 To the extent it can be adequately evaluated,55 the FDA expects that biosimilars will have the same basic protein structure as the reference product. At a minimum, the FDA expects that biosimilars will have the same amino acid sequence as the reference product.56 The FDA requires the applicant to provide information about the manufacturing process, noting that there are likely to be fewer differences between the products if the applicant uses the same production mechanism or expression system as the reference product.57
When assessing the biosimilar product’s properties, the applicant should consider “all relevant characteristics of the protein product,” including all levels of protein structure, as well as its functional activity.58 The FDA does not dictate which analytical methods must be used, but notes that “particular analytical methodologies can be used to assess specific physicochemical characteristics of proteins.”59 It is therefore up to the applicant—though this could be a topic of discussion with the agency—to determine, consulting scientific literature, regulatory guidelines, and other sources, which tests are essential. Since slight differences between a biosimilar and the reference product could significantly affect the biosimilar’s performance, functional testing provides another metric to assess a biosimilar’s integrity.60 Functional assays serve to highlight the biologic activity of the products, and this information also may complement data gleaned from animal and human studies.61
b. Possible Animal Studies
Unless the FDA determines otherwise, applicants must submit data from animal studies.62 Animal studies can minimize the risk to human test subjects. Possible areas of inquiry for applicants to study include toxicity, pharmacokinetic and pharmacodynamics data, and immunogenicity.63
c. Clinical Data
Since the statutory standard requires that there be “no clinically meaningful differences between the biological product and the reference product in terms of the safety, purity, and potency of the product,”64 the agency requires applicants to assess these factors through clinical (human) studies.65 The FDA will determine the precise scope and magnitude of the studies based on “residual uncertainty” about the product’s biosimilarity.66
Generally, applicants will be required to perform pharmacokinetics and pharmacodynamics studies. The FDA acknowledges that, “in certain circumstances,” these studies “may provide sufficient clinical data to support a demonstration of biosimilarity.”67 Applicants must scientifically justify the aspects of their study design, including the temporal length of the study, the selection of subjects, dosage levels, and route of administration.68
Because it is especially difficult to predict how the human immune system will react to foreign compounds, applicants should plan to submit at least one clinical study that compares the biosimilar to the reference product in terms of immunogenicity.69 Immunogenicity study designs can be highly intricate, so the FDA suggests discussing study design with agency officials.70 The FDA acknowledges that adverse immune responses do occur, albeit rarely, so there may be situations in which the FDA will recommend that a biosimilar manufacturer continue testing even after the approved product is brought to market.71
d. Post-Market Safety Monitoring
Even after a biosimilar is approved and brought to market, the FDA will require manufacturers to monitor their products’ usage and safety. Since these monitoring plans will be highly product-specific, the FDA encourages manufacturers to consult the agency when formulating a plan.72 Monitoring efforts should be able to identify whether an adverse effect has been previously known to occur with the reference product, or whether it is novel to the biosimilar.73 The FDA also reserves the right to require additional post-market studies if it believes safety risks justify this regulatory burden.74
e. Comparisons with Non-U.S.-Licensed Product Data
All analytical studies, and at least one pharmacokinetics and pharmacodynamics study, must compare the biosimilar product with a U.S.-licensed reference product.75 However, perhaps in a nod to the increasingly globalized biopharmaceutical industry, the FDA will allow applicants to use a non-U.S.-licensed reference product in certain additional studies, like animal and perhaps phase III clinical data, if the applicant can establish “an acceptable bridge to the U.S.-licensed reference product.”76 This bridging likely would require a three-way comparison between the biosimilar and both the U.S- and non-U.S-licensed products.77
f. Allowable Differences
The FDA addresses ways in which biosimilars may differ from reference products. Clinically inactive components may differ, so long as the applicant can demonstrate that there are “no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency.”78 Proposed biosimilars also may have some differences in the design of the “delivery device or container closure system,” provided that the product is otherwise biosimilar, there is no clinically meaningful difference between the products, and the applicant can demonstrate adequate performance data.79 Biosimilar manufacturers may obtain licensure for fewer than all routes of administration, delivery devices, or conditions of use for which a reference product may be licensed.80 These points are presented with little elaboration, so it is expected that manufacturers will engage in discussions with the FDA in such circumstances.
2. Industry Response
Though not monolithic, industry response to the FDA’s proposed guidelines was relatively consistent. The industry generally commended the FDA’s first attempt, but requested more specifics. Industry representatives, speaking both for their companies and through the Biotechnology Industry Organization (BIO), requested that the FDA work toward developing and publishing product-specific guidelines.81 Product-specific guidelines would provide more targeted guidance than the current general guidelines. Additionally, BIO expressed concern with several of the agency’s determinations, including provisions about preclinical and clinical testing, labeling, and post-market monitoring.
Several stakeholders framed their comments in terms of protecting public safety. Drug manufacturers and patient groups alike opined that the FDA should require more extensive testing than the regulations generally provide. For instance, BIO questioned allowing the intentional use of different manufacturing processes, because the industry claims this unnecessarily (and unethically) introduces the risk of adverse effects. Similarly, the Colon Cancer Alliance asked for more extensive clinical testing to better understand the risks associated with biosimilars. Noting the difficulty in understanding the many factors that affect immune responses, BIO called on the FDA to enhance its immunogenicity assessment requirements. BIO also discouraged the agency about its proposal to allow applicants to extrapolate results across patient populations.
Addressing the use and substitution of biosimilars, BIO questioned the FDA’s proposed practice of allowing biosimilars to be approved for fewer than all routes of administration and conditions of use. The industry emphasized that these differences must be clearly labeled and communicated to health care professionals. Noting that reference product manufacturers could still gain FDA approval for additional uses, BIO asked the FDA to clarify the requirements for a biosimilar applicant seeking to add those new uses to its label.
In further comments, stakeholders questioned definitions and uses of terminology. BIO and Genentech both objected to the FDA’s frequent use of the word “should,” which risks framing requirements as suggestions rather than necessities. BIO also asked the FDA to explain better the term “fingerprint-like” analysis, which the agency uses to explain its expectations for the scope of scientific and quality testing. Last, stakeholders such as BIO, Pfizer, and Novo Nordisk viewed the definitions of “protein” and “chemically synthesized polypeptide” as arbitrary; instead, the industry would prefer the FDA to implement a more flexible standard that would consider, among other factors, the presence of higher-order protein structures.
If implemented, some of these comments may lead to difficulties for biosimilar manufacturers. For instance, while close adherence to the reference product’s manufacturing procedures would minimize the regulatory burden on biosimilar applicants, it also would substantially increase the likelihood of patent infringement litigation. Also, although public safety may necessitate increased testing burdens, this should be balanced with the costs, benefits, and risks. Nevertheless, the comments also reflect a desire to hold the agency to its statutory mandates. For instance, the industry called on the FDA to enforce provisions to protect the reference product manufacturers’ trade secrets and confidential information, and to require biosimilar applicants’ timely compliance with the Biologics Act’s information-sharing provisions.
D. WHAT’S IN A NAME?
Now that the Biologics Act has provided a regulatory pathway for biosimilars, market participants have turned to issues of marketability. One critical issue is whether biosimilars are entitled to the same nonproprietary name as their reference products.82 A drug’s name significantly influences the degree to which it is embraced and prescribed by health care professionals, which in turn affects the drug’s financial viability. If a biosimilar’s name matches its reference product’s name, physicians likely will feel comfortable substituting it, and pharmacy systems are more likely to integrate the biosimilar, a particularly significant and thorny issue in the case of non-interchangeable biosimilars. Nevertheless, the Biologics Act does not address this issue and leaves an important element of biosimilars development unresolved.
1. Preexisting Regulatory Environment
The debate on names focuses specifically on the nonproprietary names given to drugs. Names serve a critical role, of course, in identifying, prescribing, and dispensing drugs.83 They are distinct in sound and spelling in order to avoid confusion with other names, and reflect a system of naming that uses roots and suffixes to indicate a particular drug’s relation to similar drugs.84 Significantly, these names cannot be registered as trademarks for exclusive use. In the United States, two naming systems are most relevant: U.S. Adopted Names (USAN) and International Nonproprietary Names (INN). A council of industry representatives (USANC) devises USANs, though all names require FDA approval before they can be used for marketing in the United States.85 The World Health Organization (WHO) controls the INN system and accepts submissions for names globally. Ongoing collaboration between WHO, USANC, and other name programs provides health care professionals worldwide with common names for drugs.
Current USAN and INN policies identify drugs based on their “active substances” irrespective of other structural features that are typically negligible in conventional drugs.86 These other structural features, however, are more prominent in biologics and can more significantly impact effectiveness. Recent nonproprietary names for biologics contain additional numbers and Greek letters to provide an extra level of “uniqueness.” But even those names are not unique. For example, “interferon beta-1á,” the name for a biologic product used to treat multiple sclerosis, applies to multiple products sold in the United States, despite different manufacturing conditions.
The increasing volume of new drug applications for biologics globally prompted a 2006 WHO “consultation” to address whether INN policy should be amended for biosimilars. The 2006 consultation resulted in a firm decision to leave INN policy unchanged.87 Notably, at the time, the FDA stated that “INNs should not be used to differentiate biological products … when credible scientific data demonstrate that no pharmacologically relevant differences exist.”88 But a decision to maintain current practice did not end the debate. WHO revisited the issue at subsequent conferences, most recently in October 2011, and has demonstrated that it likely will defer to the FDA’s determination on the issue.89 Therefore, new FDA guidance regarding naming likely will affect INN policy and the names of biosimilars worldwide.
2. Market Participants’ Response
With so much at stake, market participants have tried to influence FDA guidelines on naming, responding vigorously to the FDA’s request for comments. The innovator, R&D-based research companies—which make brand-name drugs—understandably take the position that biosimilars should have names that are different from those of the reference biologics. Conversely, the generic manufacturing companies, intending to leverage their generics experience in the biosimilars market, urge the FDA to allow biosimilars to use the same name as their reference products. Both sides characterize their arguments as a matter of safety and cost.
The innovator industry generally argues that unique names for biosimilars are necessary to ensure appropriate levels of patient safety, particularly with respect to “pharmacovigilance,” the safe monitoring of medicinal products.90 These companies argue that biologics are more sensitive than conventional drugs, such that small changes in manufacturing, storage, and handling can lead to adverse side effects for patients.91 Tracking adverse events associated with the use of biologics is difficult if the specific manufacturer cannot be easily identified. Clear identification requires unique and unambiguous names. Moreover, the innovator industry argues that on a broader, public health level, biologics with unique names will enable public health authorities to identify the specific patients to whom certain drugs were dispensed and who, as a result, suffered adverse events.92 The innovator industry insists that distinct names would establish a trigger for pharmacists to communicate to physicians when different products are prescribed.93 These additional levels of detail are said to be critical for preventing unwarranted caution in prescribing drugs and for keeping authorities better informed about drugs on the market. From both a public health and a cost perspective, unique names are useful for preventing a scenario in which regulatory action affects a whole class of products rather than a specific drug.
The innovator industry’s position is aligned with that of non-U.S. regulatory agencies and certain patient safety organizations. Japan’s Ministry of Health Labour and Welfare states that the “nonproprietary names and brand names of follow-on biologics should be readily distinguishable from the nomenclature of originator [biologics] and other follow-on [biologics].”94 The European Medicines Agency (EMEA) emphasizes the importance of unique names and, in support, notes that “[t]he EU recognizes the complexity of [biologics] and that variability may exist between innovator biological products with the same INN or even within the same manufacturer.”95 In their response to the FDA’s request for comments, patient safety organizations such as the National Kidney Foundation (NKF) and Immune Deficiency Foundation (IDF) state their support for unique nonproprietary names while expressing concern over the ability of current technologies to ensure patient safety. The NKF notes that the kidney community has been especially cautious about the development of an approval pathway for biosimilars.96 In its response, the IDF expresses skepticism over the ability of studies to demonstrate that “two different products will provide the exact same clinical result in a large cohort of patients.”97 These organizations’ cautionary approach to biosimilars effectively supports the innovator industry’s position on names as well as indicating a certain skepticism about the biosimilars path in general.
Generic manufacturers respond to innovator industry concerns regarding safety by arguing that the Biologics Act’s approval of thresholds for biosimilarity should allow biosimilars to take the same name as their reference products. Generally, generic manufacturers express confidence in modern science for controlling the levels of variability among competing versions of a biologic product. In a letter to FDA Commissioner Margaret Hamburg, the trade group Generic Pharmaceutical Association (GPhA) claims that “any biosimilar product approved by the FDA will provide the same safety and clinical benefits for patients as the originator reference product.”98 The biosimilar industry argues that unique names may compromise patient safety, as these names do not sufficiently convey the pharmacological similarity between biosimilars and their reference products.99
Citing accessibility concerns, generics manufacturers note that automatic substitution of medications is critical for managing health care costs—a stated goal of the ACA. Data supports the tremendous cost savings of generics generally, although it is believed that the cost savings with biosimilars will be significantly less dramatic. According to a report by the IMS Institute for Healthcare Informatics on medicine use in 2011, patent expiration had saved U.S. health care payers $65.2 billion over the previous five years.100 A separate IMS report notes that in the European Union, where more biosimilars have been introduced than in the United States, reference product prices have fallen only 30 percent, compared with a 70 percent to 80 percent drop for conventional generics.101 In June, a coalition of labor unions and health care payers, including the AFL-CIO and Blue Cross Blue Shield Association, sent Commissioner Hamburg a letter supporting an FDA policy against unique names.102
Current naming practice bolsters the generic manufacturers’ position. Under current INN policy, the same INN for a given biologic may be bequeathed to its follow-on version. GPhA asserts that the Biologics Act’s lack of guidance on naming “was not an oversight by Congress,” but rather was intended to support INN policy.103 Generic manufacturers argue that FDA adoption of an alternate naming policy would disrupt an established system and cause marketplace confusion.
Pharmacists’ trade associations also support a policy that allows biosimilars to take the same names as their reference products. Citing public health, pharmacists raise concerns that more names would increase the risk of “therapeutic duplication”—that is, a physician inadvertently prescribing similar products with different names, causing a patient to receive a double dose.
3. The Prospect of Compromise
Advocates on each side of the naming issue have sought to address their opposition’s concerns. The innovator industry has expressed support for a naming system whereby biosimilars share a common root with their reference products, while also having a unique suffix to indicate the manufacturer.104 Pharmacists’ trade associations disagree with this approach, insisting that it will not avoid confusion, and that, as a practical matter, suffixes may complicate information technology systems. According to testimony from the APhA, “suffixes may not be included in [a]…prescription[;] they may fall off an electronic drop down menu for product selection, [and] may not fit into the data field in a database.”105
Rather, pharmacists’ trade associations suggest that the FDA’s National Drug Codes (NDC) system is sufficient for reference products to maintain their unique identity.106 Pursuant to the Federal Food, Drug, and Cosmetic Act, the FDA requires detailed information on every drug marketed in the United States.107 Each NDC number consists of 10 digits and provides a level of specificity down to specific dosage and packaging.108 In a nod to accessibility, the entire NDC database is available online at a website hosted by the FDA.109 Cutting against the use of NDC numbers as primary identification, however, are the facts that certain non-pharmacy dispensing settings do not currently track by NDC number and that such numbers are less communicable in conversation.110
At this point in the evolution of biosimilars, both sides anxiously await the FDA’s verdict on nonproprietary names. In the meantime, we can expect controversial USANs and INNs, with little consistency or predictability. Another factor, on which we can only speculate, is the number of biosimilars manufacturers that will brand their products, relying primarily on their own marketing efforts.
E. THE EUROPEAN EXPERIENCE
The Biologics Act brings the United States in line with other jurisdictions that already have enacted similar measures. The European Union pioneered biosimilar legislation in 2005.111 Building on this enactment, the EMEA developed a series of guidance documents to provide manufacturers with information about the criteria it uses in evaluating applications. While the FDA has begun promulgating its own regulatory guidelines,112 their content and impact remain to be fully understood. Therefore, assessing the structure of the European regulatory framework and the market for biosimilars may prove instructive.
1. The European Regulatory Framework
In the European Union, all biologics, including both brand-name and follow-on biologics, must be submitted for approval to the EMEA.113 The EMEA’s decision is binding on all 27 EU member states, which must allow sales of approved biologics.114 The agency’s Committee for Medicinal Products for Human Use (CHMP) issues guidelines, which help manufacturers navigate the requirements. Essentially, manufacturers must (1) provide clinical data to show that the follow-on product is effective and safe, and (2) demonstrate the product’s similarity to the reference product in terms of quality, safety, and efficacy.115 These tests can be quite burdensome as “extensive comparability exercise[s] will be required” in order to demonstrate the similar profiles of the products.116 Testing should “focus on highlighting the differences between the reference and the biosimilar molecules,” which may be accomplished through comparative clinical studies.117 The EMEA will determine exactly what testing to require on a case-by-case basis.118 Beyond providing clinical data, biosimilar manufacturers must demonstrate that their products are similar in pharmacokinetic qualities, such as stability, purity, and efficacy.119 While the Biologics Act recognizes that some biosimilars may be “interchangeable” such that a pharmacist could substitute the product without a physician’s consent or knowledge,120 the EMEA refuses to consider any biosimilars interchangeable.
Additionally, manufacturers must develop and implement monitoring and risk-management plans to ensure the continued safe usage of the biosimilar product. While U.S. regulators require some post-market surveillance, reporting requirements generally are far greater in Europe. Implementing these plans can significantly increase entry costs for biosimilar manufacturers; in some cases, manufacturers have been required to educate physicians about the use and administration of their biosimilars.
Last, the EU grants brand-name biologics manufacturers periods of market and data exclusivity. Under what is commonly referred to as the 8+2+1 rule, innovators receive eight years of data exclusivity starting from the date of the EMEA’s approval of the reference product, during which time no biosimilar manufacturer may submit an application relying on the innovator’s data.121 Additionally, the innovator receives an additional two years of market exclusivity, meaning that the biosimilar may not be sold until 10 years (8+2) after the EMEA’s authorization of the reference product. Last, if the reference product manufacturer is able to attain authorization for new therapeutic uses, the manufacturer may be able to gain another year, totaling a maximum of 11 (8+2+1). These provisions contrast with the Biologics Act, which provides four years of data exclusivity122 and an additional eight years of market exclusivity, totaling 12 years from the date the product was first licensed by the FDA.123
2. The European Market for Biosimilars
Assessing the economics of biosimilars proves difficult in part because, so far, relatively few biosimilars have been approved and brought to market; as of October 2010, the EMEA has approved only 14 biosimilar applications out of 18 submitted. However, data drawn from this pool indicate success. Sales of biosimilars have increased rapidly; in 2007, sales of biologics totaled €3.3 million, while in 2009, sales totaled €65.5 million. Over this interval, biosimilars saw an increase in market share from 0.34 percent to 6.64 percent of the biologics market in the entire European Union. Still, relative to the overall European biologics market, biosimilars represent a small proportion of sales. Preliminary data indicate that biosimilars have been more successful in some countries, such as Germany, where biosimilars represent a greater proportion of overall biologics sales. If trends continue, the market likely will expand. Fueling this projected growth, manufacturers will become more familiar with regulatory processes, physicians will become more familiar with prescribing biosimilars, and technology will continue to develop such that biosimilars can be developed for a wider range of biologics than is currently available.124 Additionally, the EMEA’s recent decision to grant drug researchers access to clinical trial data may significantly lower barriers to entry for biosimilars manufacturers.
Despite these signs of progress, hurdles remain. Developing a biosimilar is considerably more expensive than developing a generic drug; the upfront costs present significant barriers to entry.125 Costs result both from the price of research and development, which is considerably more expensive with biologics than with traditional small-molecule pharmaceuticals, and from the regulatory burden, the costs of complying with testing and monitoring requirements.126 Because biosimilars are costly to produce and market, they do not sell at marked discounts like generic drugs; so far, biosimilars are at best 30 percent less expensive than the reference products.127 Physicians are often unfamiliar with biosimilars, so they may not prescribe them.128 Coupled with anti-substitution laws, manufacturers currently face an uphill battle encouraging the use of biosimilars.
The biosimilar industry will continue to grow in Europe. Many companies are entering the field or partnering in joint ventures.129 Already, many manufacturers are looking to the emerging markets of Brazil, India, and China, which may require less burdensome testing to register biosimilars.130 Navigating the regulations will be important in an increasingly globalized market.
F. ASIA MOVES TO THE FOREFRONT
Given the uncertainty that surrounds the clinical and regulatory pathways in the United States, biopharmaceutical companies in India, Korea, and China may have significant advantages over potential competitors from other regions. The advantages include lower costs, huge markets, and greater government support. As a sign of this potential, U.S. leaders in biologics and generics have been rushing to partner with Asian companies, thus gaining access to these advantages, and at the same time, hedging their bets via a joint-venture strategy. Japan also is active in this area, although without the cost advantage.
India is well known for its low-cost manufacturing, in both pharmaceuticals and biologics, paired with a skilled workforce. For its domestic market, India has relatively speedy and cost-effective clinical trial requirements and a practice of a high interchangeability rate between reference products and biosimilars. The domestic market is huge.
Biocon, India’s largest biotech, is already active in the biosimilars space. In 2009, Biocon partnered with U.S.-based Mylan to jointly develop biosimilars. Two years later, it was disclosed that the joint venture had developed a portfolio of biosimilars for biologics going off patent in 2015 that is estimated to have a market potential of more than $30 billion. The first product is expected to be a biosimilar version of Roche’s Herceptin®.
Then, in 2010, Biocon entered into a collaboration with Pfizer, to sell biosimilar insulin. However, Pfizer terminated the agreement in March 2012, saying that Pfizer was not abandoning biosimilars but was going to concentrate on oncology, pain, and rare diseases.
In June 2012, Dr. Reddy’s Laboratories, a leading Indian generics company, announced to great fanfare a partnership with Merck Serono, the Swiss affiliate of Merck KGaA of Germany, to develop a portfolio of biosimilars in the oncology space focused on monoclonal antibodies. Dr. Reddy’s, which already is marketing several biosimilars, will initiate development, and Merck will follow with further development and, interestingly, manufacturing at its new biologics facility in Switzerland. The parties are leveraging Merck’s biologics expertise and Dr. Reddy’s generics and biosimilars experience.
A number of other Indian pharmaceutical companies and biotechs, such as Cipla, Reliance Life Sciences, Lupin, and Bharat Biotech, have biosimilars in their pipelines and are primed for similar partnerships.
2. Republic of Korea
The potential of biosimilars has been recognized by the government of the Republic of Korea, which already has a mature biologics industry. Development and manufacturing costs are relatively low, while quality compliance is high. The government is giving significant support, both financial and otherwise, to the biosimilars industry in its infancy in order for it to become a major world player within the next decade. Korea’s goal is a 22 percent global market share by 2020. The government’s aim is to achieve this share through extremely competitive pricing. As stated by Minister of Knowledge Economy Choi Kyung-hwan: “The local generic pharmaceutical industry failed to advance to the global market because it just settled for the domestic market. We need to make this an opportunity for Korea to become a leader in the global bio and pharmaceutical industry.”131 Korea also has named biosimilars as a “core green” industry.
In 2009, a biosimilars regulatory pathway was established in Korea. That year, Samsung Group, one of the world’s largest electronics companies, announced a $389 million investment in biosimilars over the next five years. While it may be surprising to hear of an electronics company entering the biosimilars market, Samsung Biologics’ president Tae-Han Kim told the Financial Times: “Biopharmaceutical companies are good for sales, and biotech companies for innovation, but neither is good for manufacturing. It is in Samsung’s DNA to produce products at low prices while meeting legal and industry requirements.”132 In Samsung’s view, low-cost, quality manufacturing is the key to biosimilar success.
Samsung has been active in partnering. In 2011, U.S.-based Quintiles invested $30 million, or 10 percent, of the capital for Samsung’s entry into biologics. Later that year, Samsung announced an agreement with Biogen Idec, a leader in the treatment of biodegenerative diseases, to form a joint venture to develop, manufacture, and market biosimilars. The Korean-based joint venture, named Samsung Bioepis Co., will partner Biogen Idec’s biologics expertise with Samsung’s manufacturing capabilities.
Celltrion, a biopharmaceutical company and not a conglomerate, is widely viewed as the leader in biosimilars in Korea. It scored a triumph in July 2012 with the approval by the Korean Food and Drug Administration of the first biosimilar monoclonal antibody, Remsima®, a biosimilar version of Remicade®, Johnson & Johnson’s blockbuster in rheumatoid arthritis and other autoimmune diseases. Approval is pending with the EMEA. Celltrion is also developing a biosimilar version of Herceptin®. It has a strategic alliance with Chicago-based Hospira, the world leader in generic injectable drug products, for eight biosimilars in Europe, North America, and several other jurisdictions.
Another Korean pharmaceutical company that has entered the biosimilars market is Dong-A Pharmaceuticals through a joint venture with Japan’s Meiji Seika Pharma. It, like Celltrion, is developing a biosimilar version of Herceptin®, along with other biosimilars. In addition, Hanwha Group recently partnered with the Korean branch of U.S. Merck to develop a biosimilar of Amgen’s Enbrel®.
China is, of course, potentially the largest market for biosimilars. It has a burgeoning pharmaceutical industry, bolstered by low costs, that is turning increasingly outward. China also enjoys a certain degree of technical competence in biologics, starting in the 1990s, for the domestic market. The government, like Korea’s, has taken steps to provide capital support.
Companies such as 3S Bio and Shanghai Celgen are developing biosimilars and planning to market not only domestically but also in emerging markets—and eventually in Brazil, the United States, and Europe. Concerned about enforcement of intellectual property laws, as well as the lack of a clear regulatory pathway, global pharmaceutical and biologics producers so far have been reluctant to partner with Chinese companies. An exception is a joint venture between Hong Kong-based biotech BioMab and Cipla to construct manufacturing facilities in India and China for the production of at least 12 biosimilars.
Notwithstanding the fragmentation of the industry, Chinese firms produce a number of biosimilars. There is potential, given the cost structure and market size, for China’s role in the biosimilar sector to grow.
Japan has a mature pharmaceutical and biologics sector and is, consequently, unlike India, Korea, and China. Two Japanese companies—Kyowa Hakko Kirin, which specializes in biologics, and Fujifilm, best known for its photographic products—recently established a biosimilars joint venture. Their initial goal is a biosimilar of Humira®. Fujifilm’s contribution is its production, quality control, and analysis technologies. Fujifilm has entered into a generics joint venture in Japan with India-based Dr. Reddy’s.
G. THE BRANDED BIOPHARMACEUTICAL INDUSTRY GETS READY
With the introduction of the Biologics Act, large biopharmaceutical companies with high-selling biologics products stand to lose significant market share for their branded innovator products—losses that also could save U.S. consumers and the federal government billions of dollars.133 In an effort to thwart potential attacks on their market share by competing biosimilars, biopharmaceutical companies have been actively devising ways to fortify their position. Over the past several years, these tactics have included a campaign to exclude certain biologic drugs from the reach of the Biologics Act, a focus on research and development to strengthen product portfolios, improvements to drug formulations and delivery, and the formation of alliances between biopharmaceutical companies and generics-focused companies in an “if you can’t beat ’em, join ’em” strategy.
1. Constitutional Challenge to the Biologics Act
Abbott Laboratories has sought to shield Humira®, the blockbuster drug that earned the biopharmaceutical giant almost $8 billion in U.S. sales in 2011, from the Biologics Act entirely. On April 2, 2012, Abbott submitted a “citizen petition” to the FDA, mounting a Constitution-based challenge to the application of the Biologics Act to Humira® and certain other products. Abbott argues that approval of a biosimilar application would require the FDA to reveal, as part of the approval process, clinical, analytical, and manufacturing data from a reference product sponsor’s BLA—data that are regarded as that sponsor’s trade secret.134 Consequently, a competitor’s use of those trade secrets would amount to a taking of property under the Fifth Amendment because it would frustrate a sponsor’s investment-backed expectations for protecting its data, and such taking would require just compensation of billions of dollars.135 Abbott, therefore, urges the FDA to avoid the constitutional issue by applying the Biologics Act only prospectively, and not for products for which a BLA was submitted to the FDA before the Biologics Act’s enactment on March 23, 2010.136
Thus, at least for certain biologics, the strategy of large innovators is to defeat the Biologics Act completely. If Abbott’s interpretation is accepted by the FDA, and in light of the 12-year exclusivity period afforded biologic drugs for which a BLA is filed after March 23, 2010, the first biosimilars would not emerge in the U.S. market until 2022—a significant delay in efforts to provide the public with substantial prescription-drug cost savings. Whether the FDA finds Abbott’s legal arguments persuasive remains to be seen; its response to Abbott’s petition is expected by October 2012.
A finding in favor of Abbott would provide a similar delay for Amgen, whose patent rights in Epogen®, an anemia drug used to treat dialysis patients, expire in 2013. In the meantime, with the impending expiration of the Epogen® patent, Amgen has locked in the dialysis business by entering into seven-year term supply contracts with two major dialysis providers, covering two-thirds of the Epogen® customer base.
2. Second-Generation Drugs versus First-Generation Precursors
Biopharmaceutical companies also are focusing on ways to expand and improve drug formulations, expression systems, dosing, delivery methods, and the overall perception of superiority of branded innovator drugs over their biosimilar counterparts. Biopharmaceutical companies are finding that improvements to the first-generation products, reducing the frequency of dosing schedules, and providing more convenient administration technologies may extend patent protection for their biologic drugs even apart from data exclusivity. Extension of patent protection was the saving grace for Amgen’s rheumatoid arthritis and psoriasis drug, Enbrel® (exclusively licensed from Roche), whose patents originally were set to expire in October 2012. The patent was extended another 16 years beyond the original expiration date by the U.S. Patent and Trademark Office. In addition, developing unique or novel expression systems for biologic products may make it more difficult for other companies to copy those products using other systems. And if these expression systems are subject to exclusive licenses, this adds another defense for innovator drug companies against competing biosimilar products. Supplemental therapies for various indications allow a biopharmaceutical company to offer alternatives to its original drug, with the hope of decreasing the impact of the introduction of a biosimilar in the marketplace. With improvements to the biologic drugs themselves, implementation of unique expression systems, and the development of alternate formulations as an “evergreening” strategy, biopharmaceutical companies are expanding their defensive arsenal.
In the case of Roche, biosimilar versions of its Herceptin® product are expected to be introduced in 2014 in Europe and in 2019 in the United States. In response to the anticipated competition, Roche has focused on a more efficacious delivery method by developing a subcutaneous formulation of Herceptin®. Improved delivery methods can add significant value to first-generation products. Innovator drug companies like Roche can take advantage of arranging exclusive strategic alliances with drug delivery companies to provide enhanced product differentiation. Consequently, in addition to the added benefit of potentially extending protection for advances in delivery techniques, improvements to biologic drugs can be potentially marketed as safer, easier to administer, and more efficacious, substantially impacting clinical practice in a manner that encourages prescription and use of these improved variants.137
Timing of the introduction of a second-generation product also can be viewed as part of Roche’s strategy to improve its position in the market, as it currently plans to introduce its subcutaneous formulation in 2013, ahead of the introduction of biosimilars of the drug in Europe. In addition, with its establishment of two new HER2-positive therapies known as Perjeta™ and the experimental T-DM1, Roche has adopted a strategy to combat the introduction of biosimilar versions of Herceptin® by increasing the range of treatment lines in a strengthened product portfolio.138
The development of second-generation biologic products appears to offer a number of advantages to innovator drug companies. By trumpeting the availability of superior second-generation products, an innovator may very well influence physician-drug choices when the physician’s only alternative is a biosimilar competitor’s seemingly inferior first-generation version. Another consideration for innovator drug companies is the control of pricing for its first- and second-generation products. By offering second-generation biologics at competitive prices, innovator drug companies can force biosimilar manufacturers to compete for market share against superior products.139 While Roche has declined to share details of its planned defense against biosimilars, it is likely employing these strategies on behalf of its other blockbuster drugs, including Avastin® and Remicade®.
3. Entering the Biosimilar Market
Other biopharmaceutical companies have taken a different approach to fending off intrusions on their market share—one aimed not at defeating the efforts of biosimilar manufacturers, but at entering the biosimilar market themselves for drugs of other companies. This allows innovator drug companies to leverage their drug development and commercialization expertise by forming strategic alliances with generic drug companies, or even electronic product manufacturers, that have experience in selling and marketing generic drugs and producing complex products. Merck struck an alliance with a contract research organization, Parexel, to provide biosimilars to Merck BioVentures, which, according to Merck, is “one of a number of strategic steps” being taken by the company in the biosimilars area.140 Similarly, Amgen announced that it would collaborate with Watson Pharmaceuticals Inc. to develop and commercialize several oncology antibody biosimilar medicines. As announced in July 2012, Synthon entered into an agreement with both Amgen and Watson Pharmaceuticals for commercialization of trastuzumab, the biosimilar to Herceptin®, in Europe. Novartis, through Sandoz International GmbH, its wholly owned subsidiary focused on generics development and manufacturing, is actively pursuing the development of biosimilars and the conduct of clinical trials. According to Sandoz, it is the only company with three marketed biosimilars in Europe with a pipeline of eight to 10 molecules at various stages of development.141 To prevent biosimilar approvals from encroaching on the market share for their own branded products, these companies have recognized the need to leverage their commercial expertise to develop biosimilars for the innovative products of their competitors.
This white paper is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented and may not be relied upon as legal or investment advice. The views expressed in this white paper are those of the author, and do not purport to represent the views of O’Melveny & Myers LLP or its clients, affiliates, members, principals, partners, other employees, agents, or contractors.
Stanton J. Lovenworth is a counsel and a member of the Health Care and Life Sciences Practice with O’Melveny & Myers LLP, New York.
The author wishes to thank Gilbert J. Villaflor, counsel, and Stuart Schussel and Calvin Kung, summer associates, at O’Melveny & Myers, for their substantial assistance in the preparation of this white paper.
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