Affordability matters to the branded drug industry just as much — if not more — than scientific innovation. Skeptical? Look no further than the trio of biosimilar deals in December 2011.
On Dec. 6, Biogen Idec announced a $300m development and manufacturing joint venture with Korea’s Samsung. A couple of weeks later, Momenta, an expert in product characterization, signed a biosimilars development deal with Baxter that may include up to six products.
But most significant in our minds was the deal in the middle: Amgen’s Dec. 19 announcement that it, too, was jumping on board the biosimilars bandwagon, via a long-term, cancer-focused biosimilars tie-up with generics firm Watson. Even this innovative biotech sector pioneer, whose past position was often interpreted as vehement opposition to biosimilars, is acknowledging that cheap copies have their place.
And not just a place; Amgen thinks doing biosimilars create shareholder value. It thinks they’re a win-win, offering ‘’affordable” medicines to the health care system. (Though not, we assume, implying that other biologics aren’t affordable). So “I’m happy about it [the deal] as an Amgen shareholder, and as a citizen,” declared Scott Foraker, VP and general manager, biosimilars, at Amgen.
So is this, then, the new kind of innovation – value-based innovation– that’s needed in our payer-driven universe? Could biosimilars soon become an equal, or even the greater, part of Amgen’s business?
No. “I don’t see a day when biosimilars could be a bigger or even equal part of the business for Amgen than its innovative business, which will always be the heart and soul,” insists Foraker, keen to emphasize that biosimilars shouldn’t be confused with innovation. “It [biosimilars] is innovative in a different way,” he conceded, hesitant about applying the i-word at all to this copy-cat activity.
But there will be obvious overlaps between Amgen’s biosimilars and innovative businesses, however separate they’d like to keep the concepts. And those in large part are why the Watson deal, in which the generic partner provides up to $400m in development costs, is so financially attractive.
Synergies will arise from using Amgen’s oncology branded sales force, with their “terrific” relationships with oncologists and payers; indeed, to not take advantage of that, by throwing some good-value copies of others’ (not Amgen’s own) drugs into the offering, would seem like a missed opportunity. So would not leveraging Amgen’s new status as a supplier of less expensive but reliable copies in order to boost expansion plans in international markets (thereby broadening the portfolio, and spreading fixed costs). Indeed, “I’ve become the best friend of some of our international expansion leaders here at Amgen,” said Foraker.
He may lose some pals in development, though, if, through seeking ways to develop drugs faster, better, and cheaper, as is necessary in the lower-margin biosimilars business, he highlights inefficiencies in the regular business. But such an exercise would be good for shareholders — and it provides outreach, “a way to keep things fresh,” concedes Foraker.
The potential synergies between Amgen’s biosimilars business and its never-to-be-displaced core of traditional, new molecule innovation would appear to mirror those touted by other recent innovator entrants into biosimilars, such as Pfizer and Merck. But Amgen considers its position to be quite apart. “I would not put us in the same category at all,” as Pfizer or Merck, said Foraker. “We have 30 years’ experience of producing biotech drugs. We’ll be able to distinguish ourselves from any single player in the biosimilars world by saying you can trust an Amgen biosimilar the same as you trusted an Amgen biologic. Others can’t say that.”
So it boils down to trust, which has been a key issue blocking such drugs’ uptake in Europe. But it probably won’t be for much longer, assuming no major safety scares. Then it’ll be all about money again.
Amgen’s got that covered too, though. Amgen won’t say what percentage price discount is likely on its eventual portfolio of oncology biosimilars. For Amgen, though, securing a partner allows it to share significant cost and risk – indeed, “the missing piece was financial,” admits Foraker. That said, Watson’s more generic-style commercial capabilities (including reliability of supply) may come in handy in the future, when the market evolves from more branded-like, to more generic-like, as many expect it to do over time.
Indeed, Amgen will use this investment as a springboard to bigger things. “We will pursue opportunities in biosimilars beyond oncology, without the need for a partner, because we have secured the financial arrangements we need.” That’s not silly. It’s also a sign that Amgen knows biosimilars will play a key role in the value-focused future drug landscape.