Global Pharmaceutical companies expect hard price competition in the rising Biosimilars segment

Bi-annual survey among more than 80 executives from globally active pharmaceutical companies based in 16 countries and spread over four continents

18-Dec-2013 - Germany

The feared “patent cliff” is shifting: While it has passed its peak in the small molecule segment, it is going to be a huge issue for Biologicals in the coming years. Nine of the ten top-selling Biologicals will lose patent protection by 2020. For the segment of Biologicals this means a potential threat for a market volume worth more than 62 billion USD in global sales every year for these Top 10 products alone. Nevertheless, the market actors do not expect the upswing of biosimilars to fundamentally change the entire pharmaceutical industry. This is one of the results of the second CAMELOT Management Consultants PHARMA Management Radar, a survey among more than 80 global industry executives that serves to examine the general climate in the pharmaceutical industry and additionally take an in-depth look at a varying current management topic. One reason for that estimation is that Biosimilars are not expected to be priced as highly as the patent protected originals. The market seems to be divided as far as the expectation of the impact of Biosimilars is concerned: More than half of the companies don’t feel affected at all, be it directly through their own activities in the Biosimilars segment, be it indirectly through the impact on their product portfolio. Besides, half of the panel members expect the prices of Biosimilars to decline rapidly to a third after launch compared to the patent protected originator prices. Some even expect a price competition like in the classical generics segment. In addition, the necessary R&D poses a difficult hurdle for many companies, especially those from the Generics segment.

“While the pharmaceutical industry is still suffering from the Eurozone crisis in various regions, some of the established markets outside Europe seem to be coming back: Demand expectations for Japan and North America - which may also be positively affected by re-elected President Obama’s healthcare reform - are showing some considerable growth,” says Michael Jarosch, Head of Industry Segment Pharmaceuticals & Life Sciences at CAMELOT Management Consultants. After the surprisingly positive estimation of the current business climate registered in the first Management Radar survey published half a year ago the experts generally remain satisfied. This particularly applies to the Generics executives, all of whom rate the business climate as “mostly good”. Considering the business climate in the next 12 months the overall estimation has brightened up slightly, especially among Innovators who had been considerably more pessimistic at the beginning of this year. “It seems as if at least some of the Innovators had found a way to cope with the “additional benefit/outcome topic” and thus had developed a slightly more positive assessment in the course of the year,” says Jarosch. The stabilization of the Generics’ positive assessment – more than 80 percent expect the climate to remain positive or even improve – might, among other factors, also be explained with the new market potential in the upcoming Biosimilars business.

These are some of the results of the second “CAMELOT Management Consultants PHARMA Management Radar”, a bi-annual survey that serves to examine the general climate in the pharmaceutical industry and additionally take an in-depth look at a varying current management topic – “Biosimilars” in this issue. A striking difference between Generics’ and Innovators’ expectations regarding the demand for their products can be found in emerging regions such as China and Africa where the Generics segments are much less optimistic. This clearly has to do with the fact that in these regions innovative products are mainly available for wealthy self-pay patients who can afford even higher prices than are paid by the healthcare systems in the developed countries.

Biosimilars: The industry’s top trend with high requirements

Asked for the most important industry trends in the pharmaceutical industry, two thirds of the Generics and almost 40% of the Innovators name the impact of Biosimilars. Given that the Biosimilars business requires far more R&D than the traditional Generics business, it is rather logical that the R&D aspect is seen as the other important trend by as many Generics as Innovators. “Although Biosimilars are considered one of the most important industry trends, large parts of the industry do not even feel affected,” explains Dr. Axel Sinner, Head of Competence Center Pharmaceuticals & Life Sciences Commercial at CAMELOT Management Consultants. Biologicals play no big role for nearly three fourths of Generics and even half of the Innovators. The figures are quite similar when it comes to the future development of Biosimilars within the companies’ product portfolios. Jarosch: “This reflects the mature phase of the decision-making process: Generics that are engaged in the Biologicals/Biosimilars business today will by tendency keep up or even increase these activities. Innovators that are not yet in the Biologicals business will most probably not enter the Biosimilars market either.” When asked for the biggest limits that might impact the success of Biosimilars, both Generics and Innovators name “High R&D and regulatory approval cost” as the top problem. It is not too surprising, however, that this hurdle is considered much more challenging by Generics as they are not as used to the complicated development and approval processes that Biosimilars require.

“All in all the market seems to be divided in the expectation of the impact of Biosimilars,” says Sinner. “More than half of the companies don’t feel affected at all. In addition, half of the panel members expect the prices of Biosimilars to decline rapidly to a third compared to the patent protected originator prices after launch.” Besides, around half of the interviewed also expect the price levels in-between the Biosimilars segment of the same originator to decline massively. These two developments will considerably limit the value of the multi-billion USD market of Biologicals coming off-patent in the near future. Sinner: “It remains interesting to see how prescribers will handle the substitution of Originator-Biologicals and how payer organizations will play the price game in the competitive area between Originator-Biologicals and their Biosimilars, as well as in-between the Biosimilars segment itself.”

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