Momenta Pharmaceuticals’ recent decision to reduce its investment in biosimilars could be a “harbinger” of things to come in the industry as a whole, an expert said.
The Cambridge, Massachusetts-based company said Monday that after completing a strategic review to reduce the costs of biosimilar development, it will focus its efforts on only two in late-stage clinical development, namely biosimilars of Regeneron’s retina disease drug Eylea (aflibercept) and AbbVie’s autoimmune disease drug Humira (adalimumab), the former of which Momenta is developing with Mylan. Meanwhile, it plans to halt its development of five other biosimilars in partnership with Mylan. It also plans to eliminate 110 positions, while this month five top executives – including CFO Scott Storer and COO and Chief Scientific Officer Ganesh Kaundinya – will leave the company, which expects to save $250 million over the next five years.
CEO Craig Wheeler said in a statement that the goal is to reduce Momenta’s involvement in biosimilar development in order to refocus resources on developing novel drugs.
But the reduction in biosimilar investment in particular may point to a broader trend over the next few years, said Pratap Khedkar, managing principal at ZS Associates, in an in-person interview.
While initial estimates for the savings from biosimilars were in the 15-20 percent rage, Khedkar said that is insufficient to generate payer interest. Consequently, manufacturers have to start with discounts of 30-35 percent, but it remains to be seen if even discounts at that level will move the needle. Still, the expectation is that initial discounts will continue to get larger, such that in a year or two there will be discounts in the 40 percent range.
Related to the discounts is the disparity between what manufacturers, providers and payers want, he said. That the biosimilars’ reported average sales prices start off relatively high and drop over time works well for doctors because they are reimbursed based on the ASP from six months prior, meaning that they pay less, but are themselves paid more. However, after six months, the lagged ASP catches up, and the biosimilar loses that margin advantage. Payers, on the other hand, want the reimbursement rates to start off as low as possible. But while no one price works for both payers and providers, manufacturers are forced to question whether they are able to recoup their expenses as the discounts keep growing. At the same time, the percentage of the market that biosimilars can corner – new patients – is smaller than many originally thought, constituting perhaps 25-30 percent, because of physicians’ reluctance to switch established patients from the originator to a biosimilar due to concerns about potential issues like adverse immune system reactions.
Taken together, he said, all of this will likely result in many smaller biosimilar companies pulling back as they find their potential return on investment is not as high as originally thought. “I think the market will slowly move the way everybody wants it to, but it will be much smaller,” he said. Pointing to a chart from ZS showing the next wave of biosimilars under development – as opposed to those currently Food and Drug Administration-approved – by a wide range of companies – versions of products like Alexion’s blood disorder drug Soliris (eculizumab), Bristol-Myers Squibb’s cancer immunotherapy drug Yervoy (ipilimumab) and others – he said he suspects a lot of those companies will have left the market. “But savings from biosimilars will take a long time to materialize,” he said.
Photo: Dmitrii_Guzhanin, Getty Images