shutterstock_430299556Within a fortnight, the operational environment for many global pharmaceutical companies will be indelibly changed forever.

On July 12-13, 2016, two anti-TNF (tumor necrosis factor) biosimilars went before an independent scientific advisory committee to the U.S. FDA seeking recommendation for approval of their 351K applications to market their products as biosimilar copies of  original innovator drugs, one a copy of Amgen’s Enbrel® and the other a copy of Abbvie’s Humira®, which have been used to treat multiple diseases, beginning in 1998 and 2002, respectively. Both branded drugs are certifiably multi-billion dollar global blockbusters; Humira at $14 billion is the largest selling drug in the world with Enbrel ranking third at $9 billion.

After reviewing a plethora of data including clinical efficacy data not required for simpler, small molecule generic drugs that have been available for years, the committee unanimously recommended approval of both drugs and for all treatment indications.

Additionally, for the first time, both biosimilar applications contained clinical data that supports the clinical switching of patients from the branded/innovator drug to the biosimilar, a regulatory prerequisite for interchangeability where a pharmacy can automatically substitute the biosimilar for the branded.

On August 2, 2016, a meta-analysis of 19 studies involving anti-TNF biosimilars for Enbrel, Humira and Johnson & Johnson’s Remicade®, the latter representing the second approved biosimilar by the U.S. FDA on April 5, was published in the Annals of Internal Medicine and concluded:

Preliminary evidence supports the biosimilarity and interchangeability of biosimilar and reference TNF-α inhibitors.

Following the Advisory Committee’s unanimous recommendations to approve in July, the FDA formally approved the biosimilar for Amgen’s Embrel on August 30 with Humira to be formally approved by September 26.

Currently, the U.S. FDA is advising companies developing approximately 60 biosimilar projects representing more than 20 innovative biologic drugs already off patent or soon to be off patent.

If last fall’s introduction of the first biosimilar in the United States – a copy of Amgen’s Neupogen®  – was a watershed moment, FDA approval of the biosimilars for Enbrel and Humira will open the floodgates to a irreversible tsunami.

While it is certainly true that the manufacture of these large biologic drugs are much more complicated and cost intensive than that of simpler small molecule generics, the process is becoming standardized and considering the price of biologic drugs are over 20 time higher than traditional small molecule therapeutics, the flexibility for price discounting will be as large. Thus, the standard rote script parroted by pharmaceutical executives that biosimilars will only be 15-30 percent cheaper than the price of the branded/innovator drug will be wishful thinking at best.

As the U.S. FDA reported about generic versions of traditional, less expensive, small molecule branded drugs, once multiple copies are available in the market, price erosion will be significant; i.e. 70-80 percent reduction from original price.

Since last year, Enbrel’s list price has been increased nearly 40 percent and Humira’s by 18 percent. These types of predatory price increases have become commonplace in the United States and largely accounts for the multi-fold differential in pricing when compared to other developed countries for the same drug. It’s also why pharmaceutical costs have become a dominate category in total United States healthcare costs.

For example, the cost of AbbVie’s Humira varies widely around the world. In the United States, Humira costs an average of $2,669 compared to $1,362 in the United Kingdom, $822 in Switzerland, and just $552 in South Africa. Is there any wonder that Humira’s U.S. broadcast advertising spin has been in the $30 million/month range for months!

As the multitude of patent defense strategies seek adjudication in an attempt to delay and subterfuge the simple fact that the first generation of biologics no longer have patent monopolies protecting the molecule, one might expect everyone to kick the can down the road despite the reality that it has grown to the size of an oil drum.

However, let’s keep in mind the brutal metric that 50 percent of total U.S. healthcare expenditure is consumed by five percent of the population, principally, for the aging and that the United States is at the base of a very steep hill, with 10,000 baby-boomers enrolling in Medicare each day. Like the legend of Sisyphus, it will become obvious that pushing this boulder uphill is futile.

With 18 percent of U.S. GDP absconded by healthcare, more than 50 percent higher than the next advanced country, the burden must be significantly reduced; and it will not be hospital staffing and physicians who take the first “haircut.”

With more than 60 percent of their total corporate sales attributed to Humira, whose principal patent expires this year, it is no surprise that Abbvie recently made their first strategic manufacturing investment to support geographic expansion in Asia, formed a corporate China Team last year and diligently seeks to expand their presence in the second largest pharmaceutical market, one that continues to grow by double digits for most Western companies, in spite of emerging healthcare reform mandated price discounts.

As the U.S. biosimilar tsunami begins to wash away corporate revenue from balance sheets next year and government and payer cost containment is seriously implemented to moderate unsustainable healthcare costs, sage multinationals will accelerate their footprint in China, the indispensable market for future growth.