Biopharmaceuticals are large, complex molecules, which require a high degree of technical difficulty to manufacture. In addition, biopharmaceuticals must meet very stringent purity and quality standards. As technology improves and as the demand for biopharmaceuticals increases, the technical hurdle in manufacturing these products is becoming increasingly higher. The manufacturing process for these products is capital intensive. Also, it requires a large amount of space and state-of-the-art facilities. The average cost to build a biopharmaceutical manufacturing plant is $400 million, which only a few large companies are able to afford. Hence, a large number of companies are relying on contract manufacturing organisations to actually make their biopharmaceuticals.
According to research from Frost & Sullivan, over 50 per cent of global biopharmaceutical companies are outsourcing some form of their biopharmaceutical production. Biopharmaceuticals are approved under the Public Health Act, which requires the filing of a biologics licensing application (BLA).
The large product pipeline for biopharmaceuticals helps ensure the future of this market and provides a steady stream of innovation to the market.
The credit crisis of 2008 has resulted in several new trends in the biotechnology industry. One trend is that investors are investing less money into biotechnology companies. This in turn has led biotechnology companies, particularly the smaller ones, to invest less money into R&D in order to preserve their liquid assets.
INDUSTRY CHALLENGES
Second line therapy: The majority of biopharmaceuticals receive Food and Drug Administration (FDA) approval as treatments that should be used only after a patient has tried conventional therapies. Even if a biopharmaceutical receives FDA approval as a first line therapy, physicians often only prescribe these products after a patient has tried and failed on traditional medications. Factors that lead to the view of biopharmaceuticals as second line therapies are the lack of studies that compare biopharmaceuticals to traditional medications and the high cost of biopharmaceuticals.
High cost of production: Biopharmaceuticals are complex, large molecules that require a great amount of technical expertise and specialised equipment to manufacture. As such, biopharmaceuticals are very expensive to produce in large quantities. Because of the high production costs, an increasing number of companies are relying on contract manufacturing organisations to make their biopharmaceuticals. Although this saves the company the initial set up costs of building a biopharmaceutical plant and equipment, it still contributes to significant production costs. The high production costs associated with biopharmaceuticals limits the amount of biopharmaceutical companies that are able to afford to enter this market.
High cost of clinical development: As with the development of traditional pharmaceutical products the development of a biopharmaceutical is very expensive and time consuming.
The most costly part of the development phase is clinical trials which may take ten years to complete. It is estimated that it costs between $1.0 billion and $2.0 billion to develop a biopharmaceutical for the US market. Few companies can afford the high price associated with clinical development of new compounds which limits the amount of companies that can enter this market.
One solution that some biopharmaceutical companies are utilising, particularly smaller ones, is collaboration with other companies. Because phase III clinical trials are very expensive to run, some smaller companies have been seeking out partners to either carry out phase III clinical trials or to become equal partners at this phase of development.
High incidence of safety warnings: A large amount of approved biopharmaceuticals eventually receive some sort of safety warning. A new study published in October 2008 found that 23.6 per cent of the 174 biopharmaceuticals approved in the US and Europe had at least one warning. A large amount of these safety warnings were issued after the product had been approved. In addition, 11 per cent of biopharmaceuticals have received a black box warning from the FDA. In the treatment of diseases that have safer treatment options, the inclusion of a safety warning may deter patients from using these products and doctors from prescribing them.
FDA delays: In 2007 very few new drugs were approved by the FDA - only 19 in total. Of these, only two were biopharmaceuticals. This is the lowest amount of new drug approvals since 1983. Although 2008 has had more new drug approvals, the number still lags behind the amount approved in past years. Some possible reasons for the lag in approvals by the FDA include lack of funding and stricter approval standards.
MARKET DRIVERS
High amount of unmet medical needs: Traditional pharmaceuticals are able to treat a wide variety of diseases and disorders. However, there are still high unmet needs and adverse side effects associated with the treatment of a large amount of diseases, including cancer, metabolic disorders and autoimmune disorders. For some diseases there are no conventional pharmaceutical options available. Biopharmaceuticals are able to help treat some of these traditional complex diseases and provide a new therapeutic approach.
For example, for the treatment of certain rare diseases, biopharmaceuticals are the only FDA approved treatment options available. To illustrate, the rare metabolic disorder Pompe disease results from complete absence or low amounts of the enzyme alpha-glucosidase (GAA) which breaks down glycogen. The only approved treatment for this disease a biopharmaceutical called Myozyme which is an enzyme replacement therapy.
Expansion of indications increases patient pool & revenue: An increasing number of marketed biopharmaceuticals are being approved for multiple indications, which increases the potential patient pool for these products. This trend is also seen within the pipeline where a large amount of pipeline compounds are being researched for several indications, which maximises their possibility of getting approved.
An example of this phenomenon is Centocor's Remicade, a therapeutic monoclonal antibody that has a total of seven FDA approved indications. Remicade is approved to treat plaque psoriasis, rheumatoid arthritis, psoriatic arthritis, adult Crohn's Disease, pediatric Crohn's disease, ulcerative colitis and ankylosing spondylitis. Remicade is also in phase III clinical trials for the treatment of juvenile rheumatoid arthritis and in phase II clinical trials for the treatment of sarcoidosis, chronic obstructive pulmonary disease (COPD), cachexia and asthma.
This trend can be seen in other biopharmaceutical products as well. Specifically, the fusion protein Enbrel has been approved for the treatment of rheumatoid arthritis, juvenile idiopathic arthritis, ankylosing spondylitis, psoriatic arthritis and plaque psoriasis.
The expansion of product line through the inclusion of additional indications allows for more patients to use these therapies. This in turn promotes market growth and revenue expansion.
Lack of marketed generics promotes revenue expansion: Although there are FDA approved follow-on proteins, there isn't any true generic biopharmaceuticals (biosimilars) in US market. Follow-on proteins are considered "sufficiently similar" to a product already on the market. However, the FDA has made it clear that follow-on proteins are not generic biopharmaceuticals because they have not been rated as therapeutically equivalent. Thus, they are not substitutable for the original product.
There are several reasons why generic biopharmaceuticals are not in the market and won't be there in the near future. The main reason is that it has not been established if there can be an exact generic version of a biopharmaceutical. Traditional pharmaceutical products must meet strict bioequivalence standards in order to be considered therapeutically equivalent. For biopharmaceuticals, it may not be possible to exactly copy a biological process, because for most of these products the process makes a difference in the final product. In addition, there are safety concerns stemming from the FDA not establishing whether or not a biopharmaceutical could meet a safe level of equivalence without additional clinical studies.
Additionally, the FDA is currently having issues establishing if the same brand made in different plants by the same company can qualify as the same drug for marketing purposes. If there is not yet a pathway for determining the question of equivalence for that type of basic question, then the approval hurdle of generic/brand comparison for biotechnology drugs is something that could remain unanswered for some time.
The lack of a generic threat limits competition and leaves only higher-priced products in the market. In addition, it helps promote revenue expansion of the biopharmaceuticals market.
Strong biopharmaceutical pipeline: According to the pharmaceutical research and manufacturers of America (PhRMA) off the over 2,000 new products in clinical development, 633 are biopharmaceuticals. These products cover a wide array of indications and are being developed to treat over 100 diseases. The large product pipeline for biopharmaceuticals helps ensure the future of this market and provides a steady stream of innovation to the market. With the overall drug industry currently facing a pipeline shortage in general, the fact that the biotechnology pipeline is still robust showcases the potential importance of these drugs to the industry in the future.
Patent protection promotes revenue security: Off the over 150 biopharmaceuticals approved in US, only a few (less than 20) have lost patent protection, including Humulin and Omnitrope. Moreover, the majority of the top selling biopharmaceuticals are still protected by patents that are not set to expire soon.
The patent protection for high selling products means that even if a pathway was established for the approval of biosimilars, a large majority of products will still be protected from generic threat.
MARKET RESTRAINTS
High cost of biopharmaceuticals discourages patient use: Biopharmaceutical products are in great demand because they have greatly improved the treatment of several diseases. However, these therapies are significantly more expensive than traditional medications.
For example the annual cost of therapy (ACT) for Soliris, the only FDA approved treatment for the very rare disease paroxysmal nocturnal hemoglobinuria (PNH), is $389,000. Another example is Ceredase, which is used to treat type I Gaucher disease. This product has an ACT of $300,000. Likewise, Raptiva, a monoclonal antibody that is used to treat plaque psoriasis, has an ACT of around $24,000. This price is significantly higher than other treatment options such as methotrexates, which has an ACT of around $1,700.
As private insurance companies and medical groups are paying a larger percentage of their budgets on biopharmaceutical, the high cost of these drugs is being more closely scrutinised.
For instance, according to the Federal Trade Commission, in 2005 the Centres for Medicare and Medicaid Services spent around 17 per cent of the Medicare Part B carrier drug spending on two biopharmaceuticals for anemia, Epogen and Aranesp. It is expected that in diseases that have a large amount of treatment options available, the insurance companies and Medicare/ Medicaid are going to limit the amount of high cost products (including biopharmaceuticals) that are covered.
For diseases, which have a variety of treatment options, biopharmaceuticals could therefore be used very little than for diseases that have few or no treatment options.
Competition from traditional pharmaceuticals: The biopharmaceuticals market is growing at a healthy pace. However, they still face fierce competition from traditional small molecule compounds. Contributing to the allure of small molecule drugs are the view of biopharmaceuticals as a second line therapy that is reserved for patients, who have tried and failed on all other conventional medications.
In addition, small molecules are typically easier to administer and in most cases can be taken orally, whereas most biopharmaceuticals are administered through injection or an intravenous infusion. Additionally, biopharmaceuticals tend to be significantly more expensive than traditional small molecule pharmaceuticals. The benefit of biopharmaceuticals over traditional therapies is not well documented or advertised. As a result, most choose the less expensive option unless the benefit of the more expensive products is known.
High incidence of adverse side effects: Many biopharmaceuticals come with a high amount of adverse side effects that may dissuade patients from using these products. This is particularly true for patients who have chronic diseases or disorders that may require them to take biopharmaceuticals for long periods of time. According to a study published in October 2008, around a quarter of all biopharmaceuticals approved in US had at least one safety warning, while 11 per cent received a black box warning from the FDA.
For therapeutic monoclonal antibodies, the FDA has issued safety warnings for all the marketed drugs in that class. The most common severe warning is the risk of fatal allergic reactions following treatment with some of these products. Therapeutic monoclonal antibodies have a variety of side effects that vary from product-to-product. For example, Tysabri has an FDA mandated warning that warns about the possibility of developing the potentially fatal disease, progressive multifocal leukoencephalopathy.
Adverse side effects can dissuade patients from maintaining a short-term or a long-term regimen of biopharmaceuticals.
Increased competition among biopharmaceuticals: Initially very few biopharmaceutical products were approved for individual indications leaving each approved product with a virtual monopoly of that area of the biopharmaceutical market. Today, with more and more biopharmaceuticals receiving FDA approval and a greater number of them gaining multiple indications, there is a market with similar products. This has also lead to a product differentiation hurdle for developers.
For example, as of 2008, 20 different human growth hormone products were in US market compared to 20 years ago when only two were in the market. Similarly, the US recombinant insulin market has witnessed intense competition with ten different products in the market. This phenomenon is also seen in markets with high growth potential that are less mature. For example, the first TNF-alpha blockers were approved by the FDA in 1998. As of 2008, two more have been approved. They are Remicade, Humira, Cimzia and Enbrel.
Biopharmaceuticals are therefore beginning to face intense competition from other biopharmaceutical products, which could limit the overall market potential for a particular brand. This closely mirrors what has historically happened in the traditional pharmaceuticals market.
Competition from follow-on proteins limits growth potential: Although there are no FDA approved biosimilars (generic biopharmaceuticals), there are approved follow-on proteins. According to the FDA, follow-on proteins are protein and peptide products that are sufficiently similar to a product already approved. Although these products are not viewed by the FDA as biosimilars and are not substitutable for the original product, they still provide competition among these products. Effectively, follow-on proteins are like separate biopharmaceutical products. However the longer these products are on the market the more their sales increase.
FDA approved follow-on proteins are:
● GlucaGen (glucagon recombinant)
● Hylenex (hyaluronidase recombinant human)
● Hydase (hyaluronidase)
● Amphadase (Hyaluronidase)
● Fortical (calcitonin salmon recombinant)
● Omnitrope (somatropin)
Inconvenient drug delivery method deters patient usage: Most of the biopharmaceuticals on the market are administered through subcutaneous injection or intravenous infusion. In regard to intravenous infusion, most patients do not like this route of administration because of the inconvenience of going into a medical setting for treatment. In addition, intravenous infusion is time consuming and uncomfortable. On the contrary, traditional medications come in a wide variety of drug delivery options, like oral, which most patients tend to prefer. The inconvenience of the drug delivery options for biopharmaceuticals could dissuade patients from using these products and may result in patient non-compliance. New dosing options should be developed that are more convenient to the patient.
(Courtesy: Healthcare Practice, Frost & Sullivan. For feedback contact remi.chaterjee@frost.com)