Beyond basics
In 1785, poet William Cowper penned the famous phrase, “Variety is the very spice of life, that gives it all its flavor.” Almost 250 years later, his words still ring true, particularly in the $134 billion U.S. generic drug industry. Plagued by a cavalcade of “me-too” products and rock bottom competitive pricing, suppliers are taking several steps to diversify offerings beyond standard generics to boost profits.
Some are emphasizing niche products and complex pharmaceuticals. Others are moving more manufacturing processes in house, letting them lower prices without sacrificing margins. And a handful of companies are aggressively targeting the biosimilars market, where products are costly to develop but yield big rewards. Patient services are another focus, including financial assistance, support groups and last mile delivery.
[Read more: The latest in generics]
“The biggest challenge has been price compression,” said Sam Goodman, associate vice president of marketing, Unichem. “The number of manufacturers has grown and the number making certain molecules has grown. Margins are getting compressed and pricing is falling. For retailers, it can get to the point where the manufacturer stops making those products and it can cause market disruption.”
Eighteen months ago, Ipca Labs acquired a significant stake in Unichem, whose specialty is oral solid dose generics. By leveraging Ipca’s expertise in manufacturing, technology and other areas, Unichem plans to manufacture its own active pharmacy ingredients , said Goodman, and the key starting materials that are the “building blocks” involved in making API’s. Unichem is also investing in its own pipeline manufacturing capabilities, which involves new equipment.
“Ipca has significant expertise in these areas,” he added. “The more we can control costs by using in-house APIs and KPIs, the more competitive we’ll be.” Unichem will also diversify offerings, with plans to introduce one new molecule monthly. The timeline for these processes is two to four years.
[Read more: Hims & Hers Health plans to launch generic of Novo Nordisk's Victoza]
Greater flexibility will let Unichem better respond to market needs. “We’ll be able to constantly change what we’re producing depending on what the market is doing,” said Goodman. “From a retailer’s perspective, more market entries mean lower costs and more suppliers, giving them a secondary or tertiary resource.”
Competitors’ hardships could be Unichem’s gains. “We’re constantly looking for weaknesses, like competitors experiencing regulatory disruptions or DSCSA [Drug Supply Chain Security Act] compliance issues” Goodman added. “They must be ready to track and trace all products by November. Another weakness is stockouts.” Unichem’s pharmaceuticals are made in the United States, India and Bangladesh.
The eyes have it
Since its 2002 launch, Amneal Pharmaceuticals also has varied its portfolio, “diversifying into complex pharmaceuticals” in various categories and launching 30 products annually, said Tony DiMeo, vice president, investor relations. Focus areas have become increasingly complex, particularly when it comes to injectables and ophthalmics.
Amneal also benefits from the fact that ophthalmic shortages are “now at record levels and lasting longer,” said DiMeo. “It’s three years, not two years. But we have extremely high customer fulfillment for retail pharmacies and want to ensure a consistent supply.”
According to a recent post on the FDA’s website, one ophthalmic drug was discontinued and two others are in short supply. As it is, the number of companies producing ophthalmics is limited.
Somerset Pharma offers more than a dozen ophthalmics and has been producing them since 2016. But the category is anything but simple. “They require really sterile manufacturing, which is more challenging, and there’s fewer players in that space,” said Arun Menon, chief commercial officer. “There’s also been continuing supply challenges.”
Somerset also plans to enter new segments, which it will announce in 2026. “Growing business involves entering new categories,” he added. “Competition is growing.
Biosimilars
One big topic of discussion is biosimilars, a relatively new segment. In 2015, Zarxio (filgrastim-sndz) became the first biosimilar to receive FDA approval. But developing biosimilars is a lengthy and costly process. For companies in this category, however, rewards can be high.
Annual biosimilar sales are about $18.41 billion, indicated Research & Markets’ report “US Biosimilar Market: Insights & Forecast (2024-2028).” The market is projected to reach $71.04 billion by 2028, experiencing growth at a CAGR of 40. The Association for Accessible Medicines’ annual U.S. Generic & Biosimilar Medicines Savings Report, in partnership with the IQVIA Institute, noted that total savings from biosimilars totaled $12.4 billion in 2023. Total savings since the first biosimilar entry in 2015 is $36 billion.
“Biosimilars are all about providing access to high quality, essential medicine,” said DiMeo. “It’s the next wave of affordable medications. There’s definitely a higher degree of value. It’s a competitive market, but there’s fewer players. There’s three to five competitors for biosimilars compared to six in regular generics. But biosimilars require investment.”
Amneal works with partners to guarantee supplies and control costs. “It would be much more expensive to do on our own,” added DiMeo, “although development costs are coming down over time.” To date, Amneal offers three biosimilars for treating cancer patients: Releuko (filgrastim-ayow) and Fylnetra (pegfilgrastim-pbbk), both developed in collaboration with Kashiv Biosciences, LLC, and Alymsys (bevacizumab-maly), created under a partnership with mAbxience. DiMeo said five more biosimilars are “in the pipeline.”
At Dr. Reddy’s, emphasis is on biosimilars in the immunology and oncology areas, said Brian Mulnix, commercial head, biologics North America. The company has several biosimilars under development, including Denosumab, for treatment of postmenopausal women with osteoporosis (who are at high risk for fractures), and for prevention of skeletal-related events in patients with bone metastases from solid tumors. It is also developing Abatacept, for treatment of adults with moderately to severe active rheumatoid arthritis.
“We expect to launch them in one to three years,” Mulnix added. “These will be followed by others between now and 2035. We have very advanced manufacturing and believe we can bring savings to the healthcare system. Our goal is to be recognized as the biosimilar partner of choice by offering a strong basket of products and excellence in commercialization and supply chain reliability. We want to make sure pharmacies have more choice, particularly when there’s shortages and difficult to obtain products.”
A tough road
The launch of biosimilars has been slow. According to IQVIA, more than 200 biologic drugs are marketed in the United States. Only 15 have seen biosimilar competition. McKinsey estimates that it costs $100 to $300 million to develop a biosimilar and that it takes between six to nine years to go from analytical characterization to regulatory approval. Comparative clinical trials (Phase III) account for most of the cost (~65%), with comparative PK/PD studies making up 10% and drug product development, including comparative physicochemical and vitro preclinical studies, accounting for about 20% of the total budget.
“There’s a significant cost outlay,” said Mulnix. “But there’s laws pending that may streamline some of this [see sidebar]. Companies are being very thoughtful about what products to introduce, making sure there’s demand. We’re very committed to this space, entering it for the long term and willing to take on financial considerations.”
The complexity of biosimilar molecules adds to the long timeframe. “It can be quite a bit longer than with a simple molecule, which takes a few years,” said DeMeo.
CVS Health has sped up the process somewhat in August 2023 when it launched Cordavis, a wholly owned subsidiary that works directly with manufacturers to commercialize and/or co-product biosimilars for the U.S. market. The move, CVS said in a statement, is part of its plan to bring innovative products to market, lower drug costs and ensure people have access to necessary medications. The company plans to offer a comprehensive portfolio of products.
“For drugs that were ‘going’ biosimilar, initial adoption curves were very low,” said Jeff Jones, portfolio manager at Gabelli Funds. “But we’re finally getting traction. Part of it was getting manufacturing up and ready, part was getting financial backing from retailers. It started happening when CVS set up Cordavis.”
Beyond pills & potions
For some companies, honing a competitive edge involves more than developing and launching new drugs. Dr. Reddy’s recently began emphasizing patient services for conditions like Cushing’s Disease, metabolic disorders and other specialized conditions. The company believes services will bring more value to pharmaceuticals.
“Patient therapies go beyond taking pills,” said Priyanko Basu, head of marketing, specialty and health systems (North America). “We can help support patients with certain services, consequently driving value of pharmaceuticals.” Services can include financial assistance with co-pays, nutritional counseling, support groups and financial help for patients that must eat certain foods.
Physicians are Dr. Reddy’s key contacts. Currently, the company is building teams that can reach out to them. For eligible patients, doctors fill out enrollment forms. “Patients have never been front and center of stakeholders we reach out to,” added Basu. “It’s important to communicate with physicians with specialty therapies. The group we must reach out to is not as wide as for, say, a diabetes product.”
Since 2021, Dr. Reddy’s has also emphasized last mile delivery. If a retail pharmacy cannot obtain a product through a wholesaler, it can reach out directly to Dr. Reddy’s. “It’s important when there’s widespread supply shortages,” said Basu. “Wholesalers also have priority customers. We have over 150 customers lined up on a portal.”
Looking ahead, suppliers expect companies to continue exiting the market when it is no longer viable to produce generics being sold at rock bottom prices. At the same time, marketing opportunities for other products, capabilities and services will continue to present themselves. But manufacturers cannot sit on their haunches when it comes to diversification. “The ability to start early in the journey helps,” said Mulnix.
- Legally speaking
Pending federal legislation, along with the FDA’s Biosimilar Action Plan, could make it faster, easier and less costly for companies to launch biosimilars and for consumers to obtain and pay for them.
- The FDA’s Biosimilar Action Plan , developed in 2018, is designed to encourage innovation and competition. It states that all biosimilars, upon FDA approval, shall be deemed interchangeable without the requirement of switching studies. It maintains the ability for the FDA to require a switching study if the FDA deems it necessary.
- S.2305 - Biosimilar Red Tape Elimination Act (Sen. Lee, Mike [R-UT], introduced 07/13/2023): This bill removes certain requirements for biosimilars to be designated as interchangeable. (Biosimilars that are designated as interchangeable may be substituted for the reference product at a pharmacy without a new prescription, depending on state pharmacy laws).
- H.R.1352 - Increasing Access to Biosimilars Act of 2023 (Rep. Hudson, Richard [R-NC-9], introduced 03/03/2023): This bill requires the Centers for Medicare & Medicaid Services to establish a demonstration project to evaluate the benefits of providing additional payments to providers of biosimilars under Medicare. Specifically, under the demonstration project, participating providers receive an additional payment based on the difference between the costs to the provider of furnishing the biosimilar and the cost if the provider had furnished the underlying reference biological product instead.
“By streamlining the regulatory paradigm and approval process, more biosimilars will be brought to the market, which will ultimately lower costs to the healthcare system and patients,” said Brian Mulnix, commercial head, biologics North America, Dr. Reddy’s. “Many branded biologics don’t have biosimilars in the pipeline largely due to the cost of biosimilar development.”
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Source: Research & Markets, August 2024
