For years, Pfizer (PFE) has been trying to prepare for the "patent cliff" it's heading for in 2011. That's when its cholesterol drug Lipitor -- the biggest-selling drug ever with $12 billion in annual sales -- will fall off the rolls of protected drugs. Mindful of that date, the world's No. 1 drugmaker has pursued a variety of different strategies. It restructured with massive layoffs, it completed a megamerger with Wyeth, it made a big push into generics and, more recently, it moved into treating rare diseases.
The latest pursuit? Pfizer is now planning to enter the business of making cheaper copies of pricey, injectable biologic drugs, or biosimilars, Bloomberg reports. With Pfizer reportedly hatching plans to sell the first copies of medicines developed by the world's largest independent biotech Amgen, says Bloomberg, the move is causing concern not just at Amgen, but at other biotechs that fear such competition.
Generics Makers Scoff at 12-Year Exclusivity
The European Union has a specially adapted approval procedure for certain biologicals since 2006, but there is no such procedure in the United States, where the Food and Drug Administration has left the issue to legislators to resolve.
There are now several amendments regarding biologics in the yet-to-pass health care reform bill. Opinions differ as to their effect. While the biotech trade group known as the Biotechnology Industry Organization found the two major bills "strike the appropriate balance," generic-drug makers and many industry watchers rejected the proposals. The main concern was they would give biologics makers 12 years of exclusivity before going off patent.
Many believe biogenerics would reduce health costs for Americans, so naturally, there is some pressure to pass a bill. A 2006 congressional report found that anemia medications are the single biggest drug expense for Medicare, Medicaid and other taxpayer-funded insurance programs.
The Congressional Budget Office estimated that biosimilars may save $6.6 billion over 10 years, with most of that amount coming after 2013. And according to Decision Resources, a market research firm, biosimilars of only five drugs would save health care systems $17.3 billion in the next decade.
Amgen Has Big Pharma in the Rearview Mirror
So far, Amgen (AMGN), the largest independent biotech in the world, has been quite vocal in its lobbying against many of the amendments. While it has managed to fend off some of the legislation, now, it seems it may have to worry about Pfizer, and other pharmas, too.
David Simmons, head of Pfizer's Established Products Business Unit, told Bloomberg that Pfizer may sell its first copies of medicines like Amgen's anemia therapy Epogen, or Sanofi-Aventis's (SNY) blood thinner Lovenox, in four to five years. It may eventually market 10 to 15 such drugs, as it also looks to ally with, or buy companies, that possess the technology as part of a new strategy. This doesn't come as a complete surprise following the Wyeth acquisition, which expanded Pfizer's ability to make biologic drugs.
There is a strong case to be made in favor of a follow-up biologics market. Biotech therapies are among the most expensive drugs: Genzyme's (GENZ) Cerezyme for Gaucher Disease costs an average of $200,000 a year. Roche Holding AG's cancer drug Avastin can cost as much as $100,000. Update: Genentech offers a patient assistance program that caps the cost of Avastin at $55,000.
Overall, biotech therapies generated $120 billion in sales last year. Patents for many biologics are set to expire. And with the legislative process now in place, it could open a market worth $10 billion in the next decade, according to IMS Health.
Amgen, obviously, is not the only biotech that could see biosimilar competition. Decision Resources forecasts that insulin biosimilars will cut $6.1 billion worth of brand-name sales by 2018. Sanofi-Aventis' Lantus could be the most affected.
And Pfizer is not the only one seeing the field's potential. Merck (MRK) announced plans last year to start a generic-biologic drug unit and said it would sell at least six biogeneric drugs by 2017. And lest we forget, there is Teva Pharmaceutical (TEVA). The generic-drug maker just last week said it is seeking U.S. approval to market a biotechnology medicine that is similar to Amgen's big-selling Neupogen.
The Teva drug is already being sold in several European countries, but in the U.S., Teva had to submit approval for a new biotech medicine. Should an easier approval process arise, no doubt Teva will be on the prowl. Novartis (NVS), too, has won approval in Europe for biosimilars of Epogen and Pfizer's growth hormone Genotropin.
So while Pfizer and other pharmas could gain from entrance to a market where they haven't been strong players, Amgen and other bitoechs may lose.