The opportunity for India in the global biosimilars market
Dr. Reddy’s Laboratories (DRL) of India launched its first biosimilar product, Grafeel (filgrastim), in 2001 in India. Subsequently, its second biosimilar product, Reditux, was launched in the domestic market in 2007. The company now has many more biosimilars in the pipeline, which are expected to be launched in the next few years in the local Indian market. In addition to India, it markets such products in Sri Lanka, Ukraine, and Brazil, but currently none in Europe. DRL initiated talks with European regulators back in 2006 but has yet to launch a biosimilar product in the European market. It seems that Indian companies are finding it hard to crack the code and enter into Europe’s highly regulated biosimilars market.
A closed market combined with a flexible regulatory system that did not recognise product patents helped the development of an affordable healthcare system in India during the decades that followed its independence. This also created generations of chemists with strong organic chemistry skills in the country. Reverse engineering skills of the Indian generic companies have since made them successful players in the global generic drugs market. However, reaching the same level of success in the global biosimilar markets is not such an easy task for these same companies.
A recent report by BioPortfolio estimates that the global biosimilars market may be worth $19.4 billion by 2014, growing at an expected CAGR of 89.1% from 2009 to 20141. How much of this opportunity can be tapped by Indian biogeneric companies? Is the market ready to accept a ‘made-in-India’ biosimilar drug? To analyse the potentials of Indian players in this global market, we need to consider two market segments: the unregulated/ semi-regulated markets of developing countries and the highly regulated developed markets.
The biosimilars market in India
The Indian biosimilars market in 2008 was estimated to be worth around $200 million2 by Universal Consulting – an India-based market research firm. This is forecasted to reach $580 million by 2012. There are more than 130 companies in the biopharmaceutical market in India. However, only 7-10 companies are involved in the manufacture of recombinant products.
“…the global biosimilars market may be worth $19.4 billion by 2014, growing at an expected CAGR of 89.1% from 2009 to 2014.”
India has commendable domestic expertise in gene manipulation and fermentation. However, bioprocess development and cell-line development are still in nascent stages. Of the limited number of biosimilar companies involved in recombinant product manufacturing, only two have generated their own clones and cell lines.
Locally manufactured biologics include insulin, epoetin, filgrastim, streptokinase, and rituximab. Over 40 biologics are marketed in India, of which around 25 are biosimilars that are manufactured locally2. Another 25 biosimilar products are in the final stages of development.
Opportunities in the domestic market
Historically, India had certain inherent advantages in the traditional generics market place such as low cost manufacturing and a highly skilled, reasonably priced workforce. However, the relevance of these factors specifically with respect to the biosimilars market is unclear.
India is a semi-regulated market with respect to biosimilars. Phase I-II trials are typically not required for biosimilar approval in India unless it is found necessary in special cases. Phase III trials with a minimum of 100 patients are mandatory for establishing bioequivalence. The total cost to develop a biosimilar in India can therefore range from $10 – 20 million, which helps Indian companies to offer their products at a 25-40% cheaper price than the original biologics. However, the Indian government is planning to make process patents for biosimilar products mandatory and if it happens then the profitability for Indian biosimilar companies will be impacted.
Affordability is one of the key challenges faced by the biosimilar companies in India. Of the 1.1 billion population, more than 85% do not have any form of health insurance2. Approximately 1% of the population has more than $20,000 income per annum. So, even at 25-40% lower prices3, the percentage of the population that can afford such products is marginal. Hence, it is often stated that the fair comparison in the Indian market is not between an innovator brand and various biosimilar brands – but it is rather between traditional generic drugs versus biosimilar drugs.
The acceptability of biosimilars is certainly higher in the domestic market. Biosimilar substitution is automatic, which can take place as soon as a biosimilar is launched. The choice of a biosimilar brand is normally made by the physician, in consultation with the patient. Hence, biosimilar companies focus on physicians for improving brand recall and sales potential.
Price plays a key role in brand decisions. Hence, new biosimilar launches are often followed by price revisions of the existing products. For example, DRL launched its rituximab biosimilar Reditux in 2007 at $243 for a 100 mg dose in a 10 ml vial, about 50 percent lower than the price of the original drug, Mabthera (also known as Rituxan in the US). More recently, Roche has brought down its prices and is also promoting its drug heavily with various schemes, thus reducing the effective price difference between Mabthera and Reditux. Similarly, the launching price of Grafeel was Rs. 2,500 for a 300 microgram vial – 50 percent lower than the innovator product price.
“Historically, India had certain inherent advantages in the traditional generics market place such as low cost manufacturing and a highly skilled, reasonably priced workforce.”
There are two key factors that can work favourably for Indian biosimilar companies in the domestic market. One is the relative cost advantage of biosimilar development compared to their competitors elsewhere, hence reducing the appeal of imported biosimilars. This helps them to maintain their competitive edge. The second factor is the relatively lower regulatory requirements for establishing bioequivalence, which also helps to keep their development costs low.
Launching in India also offers the companies an opportunity to develop their post-marketing safety and efficacy data. This is particularly important for biosimilar products as slight changes in manufacturing processes may lead to serious health issues. One of the key concerns regarding biosimilar products is immunogenicity. Studies comparing innovator biologics and biosimilars often report differences in aggregate levels, protein concentration, stability, conformational states, and impurity profiles. However, the market is too new to pin-point which of these differences is crucial in determining the safety and efficacy impacts.
Opportunities in the unregulated / semi-regulated markets
Indian biosimilar companies are targeting unregulated (e.g. some of the African, Eastern European and Latin American countries) and semi-regulated markets, such as China, India, Brazil and South Korea in the short term. Indeed, most of these companies have already launched their biosimilar products in many of these markets. As entry barriers to developed markets are much higher due to stringent regulatory requirements, these markets provide these companies with an interim opportunity to recover their development costs.
Opportunities in regulated markets
Over-burdened by the rising healthcare costs, developed nations are interested to explore the cost saving potentials offered by biosimilars. For instance, the American Congressional Budget Office (CBO) estimates that potential savings on biologics in the U.S. could be around $25 billion between 2009 and 20184 if a pathway for approval and marketing biosimilars is implemented.
In Europe, the sales strategies of biosimilar companies dictate the need to target physicians as well as the government healthcare agencies. Companies with an existing sales network may be able to leverage their strengths, but for new entrants market penetration can be a challenge. The reluctance of physicians to switch to biosimilars in these markets also poses another big challenge.
Moreover, since price differences are much smaller compared to those for traditional generics, innovator companies may be able to retain a certain percentage of their market shares by opting for price discounts or affordable schemes. These factors will add to the already existing high entry barriers for Indian players.
Companies such as Sandoz have already established their presence with various biosimilar products in Europe whereas no Indian biosimilar product, other than insulin, has received approval by the European Medicines Agency (EMA) as yet. This delay in entering the market makes it challenging to get prescribers to switch to their products for Indian companies.
“It seems that Indian generic companies will therefore be focusing on unregulated and semi-regulated markets in the short term.”
The extra investment required by the Indian companies for additional clinical trials allowing entry into European markets could also compromise their price advantage over competitors. The investment involved is a key factor in making Indian companies focus on semi-regulated markets in the short-term, which will further delay their entry to European markets.
The fact that big generic companies such as Sandoz, with established sales network, contacts with healthcare agencies in Europe, strong skills in the biopharmaceutical sector, and good financial back up have already made early entries will make it much more difficult for late entrants due to the reluctance of physicians to switch to new biosimilar brands.
Companies with strong financial back up and technical skills stand a good chance to win out in the regulated biosimilar markets. For instance, large generic companies with established networks in developed markets may become major biosimilar players in these markets – at least in the short term. Another potential category is the big pharmaceutical companies that are considering investments in biosimilar development. The emerging regulatory conditions post the healthcare reform legislation in the United States may also have an impact and lead to a reversal of some of these historic strategic decisions by big pharma.
It seems that Indian generic companies will therefore be focusing on unregulated and semi-regulated markets in the short term. Serious players in these markets such as Ranbaxy, DRL, Biocon, and Reliance Life Sciences are only planning to enter into the European markets either through strategic partnerships with European companies or through merger and acquisitions.
Considering the limited short-term prospects of Indian biosimilar companies in regulated markets, how many of them will be able to surmount the unique challenges posed by these markets in the long term is something we need to wait and watch with interest.
1. “Biosimilars (2009 – 2014)” report by BioPortfolio – www.bioportfolio.com
2. J.P. Desai, “Bridges to Bloom: The Future of Indian Biosimilars” by Universal Consulting India (Pvt) Ltd., September 2009. (www.universalconsulting.com)
4. S. 1695: Biologics Price Competition and Innovation Act of 2007, Congressional Budget Office Cost Estimate, June 2008
About the author:
Syamala Ariyanchira, PhD is an independent industry analyst focusing on the pharmaceutical and biotechnology industry. She has more than 15 years of experience in the industry and combines her technical background with business sector issues. Her clients include investment firms, government agencies, and chemical and pharmaceutical companies. Syamala holds a PhD from the Indian Institute of Science in Bangalore, India. She can be contacted by e-mail firstname.lastname@example.org.
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