A view from the Center


Deloitte's Life Sciences & Health Care Blog

Five barriers that could keep biosimilar manufacturers from cracking the US market

The biosimilars market in the US has lagged well behind the European market for more than a decade.1 While a recent push from the White House could help expand the use of biosimilars in the US, manufacturers could still face some significant challenges there.

In April, the administration released its “blueprint” for lowering drug prices and reducing out-of-pocket costs for US consumers. Biosimilars are an important component in this strategy. One idea outlined in the blueprint would be to let Medicare Part D negotiators help determine prices for biologics. This could give hospitals or physicians a stronger financial incentive to choose a lower-cost biosimilars over a name-brand biologic.

But can greater adoption of biosimilars lower drug spending? Consider this: A 2017 analysis from Rand Corporation estimates that biosimilars in the US could trim direct spending on biologic drugs by $54 billion by 2026 (about 3 percent of total estimated biologic spending over the same period).2

As part of the recently passed federal budget, biosimilar manufacturers can now participate in Medicare Part D’s Coverage Gap Discount Program. The discounts do not change the out-of-pocket share consumers pay, but they do reduce the total cost of the drugs paid by the Part D prescription drug plans.

Can the US catch up to Europe?
Biosimilar manufacturers have had a substantial head-start in the European market. The first biosimilar drug was approved in Europe almost 10 years ahead of the first US approval. As a result, far more biosimilar drugs are available in Europe, and overall penetration there is substantially higher.3

In France, for example, biosimilar penetration is expected to reach 80 percent by 2022—up from a previous target of 70 percent. Last year, France launched a biosimilar registry after revamping its drug-substitution policy. France has set a goal of prescribing biosimilars over biologics to 70 percent of patients when they begin a new treatment. The country is looking to shift patients already undergoing treatment from biologics to biosimilars.4

Biologics are among the newest and most expensive therapies available, and they generally treat more intractable diseases. While generic pharmaceuticals are chemically identical to brand-name drugs, biosimilars are clinically similar biologic formulations (it is impossible to duplicate the biologic manufacturing process exactly).

Here are five challenges that could be keeping biosimilar manufacturers from gaining more traction in the US market:

  1. Pricing: Like generics, biosimilars are priced lower than the original biologic product. However, while a generic drug might cost 70 percent less than a branded drug, often biosimilar manufacturers have been unable to offer prices that are that much lower than the originator biologic. This is typically because manufacturing costs for biosimilars are much higher, and manufacturers must invest in marketing and sales (see below). The small discounts generally have not been enough to significantly shift demand away from the branded biosimilar. And margins could suffer if discounts are too large. The entry of multiple biosimilars for the same reference product could lead to steeper discounts (and potentially a price war).
  2. Sales and marketing: A generics manufacturer typically doesn’t need a sales force to call on physicians and explain the products. Price is the only difference between a generic drug and the original, and manufacturers generally rely on retailers and distributors. But physicians in the US tend to be more cautious about biosimilars. Doctors whose patients are being successfully treated for serious conditions are often more reluctant to switch a patient to a biosimilar than they would be for a generic drug, especially if they have limited experience with it. This is why biosimilar manufacturers commonly need to continually invest in sales and marketing (and market access) to communicate the clinical and economic benefits of their medicines. This overhead can keep costs (and prices) relatively high. While the gap between biologic and biosimilar prices has been growing in recent years, the price point typically isn’t enough to get physicians to switch. As physicians become more comfortable with biosimilars, manufacturers that are slower to market could wind up being more profitable than the early movers that invested in sales and physician education. This reality does not create an incentive to move fast.
  3. Physician acceptance: European physicians tend to be more comfortable prescribing biosimilars than US physicians. This is partly because biosimilars have been available in Europe far longer and physicians there are more familiar with them. That could change if health plans or health systems mandate biosimilars. And it might be easier for physicians to make the jump if discounts were on par with generics—in the 70-percent range. There also is some skepticism among physicians when it comes to the value of biosimilars. The Food and Drug Administration (FDA) has launched a website, and has also developed educational materials, to give physicians a better understanding of biosimilars as a cost-saving option and to learn more about the approval process for the drugs.
  4. Legal issues: Lawsuits filed by biologic originators against biosimilar manufacturers might also be impeding the growth of biosimilars in the US. Not only can litigation delay the launch of new biosimilars, it also could keep US prices higher compared to those in Europe. Patent litigations against biosimilar manufacturers continue to play a key role in manufacturer defense strategies.5 But some biologic manufacturers are facing scrutiny over perceived anti-competitive practices aimed at preventing uptake of biosimilars.
  5. Regulatory barriers: Biosimilar substitution guidelines are evolving to favor biosimilar access across markets. A growing number of states have enacted laws that allow a pharmacist to substitute a biosimilar for a prescribed biologic therapy if the biosimilar has been approved by the Food and Drug Administration (FDA) as being interchangeable. So far, FDA hasn’t made that determination for any biosimilars.

Biosimilars do not have the same level of acceptance in the US as they have in Europe. Not even close. But many health systems and health plans see potential in biosimilars to create a competitive market that could help push down the cost of some biologics. The door for new biosimilars could open even wider as more patents expire for blockbuster biologic drugs. And new emphasis from the White House, federal agencies, and states could further increase penetration in the US. However, biosimilar manufacturers should consider developing strategies to break through the barriers that have been keeping them from breaking into the US market at the same levels seen in Europe.

1 Journal of Clinical Pathways, December 13, 2017:
2 Rand Corporation: www.rand.org/pubs/perspectives/PE264.html
3 The Pharmaceutical Journal, January 9, 2015
4 Stratégie nationale  de santé 2018-2022
5 American Health & Drug Benefits, February 10, 2017

Author bio

James is a director in Monitor Deloitte’s consulting practice in London and has been with the firm for over 10 years. James has worked with life science companies on challenges such as pricing, and brand and marketing strategy.

Cam is a principal at Monitor Deloitte and a member of the Life Sciences and Health Care strategy practice.  He has over 20 years of corporate, business unit, and commercial strategy experience in the United States, Europe, and Asia. Cam works with companies to develop business strategy, design commercial plans, launch products and develop market access strategies. He has advised companies on biosimilar strategies, for originators as well as companies facing biosimilar competition.