Biosimilars (generic version of biologics) were projected to have an increasingly higher share in the large molecules market but have not achieved the kind of penetration that was envisaged. In 2007, it was forecast that biosimilars would form a significant market in 2011 ($16 billion) however biosimilars sales in 2011 were quite low ($0.6 billion – Source IMS MAT 09-2011).  

Why did biosimilars disappoint so far?
There are a variety of reasons why biosimilars market did not grow as per expectations;  the most notable ones being an overall skeptism due to safety considerations, absence of a US market where the legislative pathway for biosimilars is recently approved but yet unproven and comparatively limited price reduction vis~a~vis traditional generics.  

Why is there a renewed interest in biosimilars?
Biosimilars are approaching a turning point with renewed interest as both the mature as well as the emerging economies are looking at biosimilars. Mature economies look at them in the attempt to stem costs; emerging ones to ensure access and sustainable growth.

The key demand side drivers for biosimilars are:

• Approx. $67 billion worth of biologics (from 12 compounds) will go off-patent by 2020
• Biologics market is growing at double the rate of pharmaceuticals (valued at $165 billion in 2011 and growing at ~9%)
• Biosimilars are priced 25%-40% below original branded products
• Developed economies consider biosimilars as cost saving levers limiting pressure on existing stretched resources
• Emerging economies consider biosimilars which would provide broader access to medicines
• Regulatory framework is fragmented across various regions
• The key supply side drivers are:
• Access to capital in increasing with players ranging from innovator companies (Astrazeneca and Sanofi are potential entrants in the space where Pfizer, Merck, Amgen, Baxter, Lilly etc. are already present) to generics companies (Sandoz, Teva, Mylan etc.) to diversified unusual players (Samsung, Fujifilm, GE Healthcare etc.) emerging markets local players (Biocon, Zydus, Wockhardt etc.) and CRAMS providers (Quintiles, Parexel etc.)
• Increasing specialization along the value chain unlocking the potential of successful partnerships
• Biologics capacity oversupply, pushing manufacturers to find ways to leverage unexploited capacity

How is the market changing?
Market dynamics, regulatory considerations and economics have brought out three different geographic clusters for biosimilars

• Cluster 1 – US: Potential leading market for biosimilars – US is the largest biologics market (~$73 B) with 44% worldwide share. Biologics market growing at a single digit growth rate of ~7%. Biosimilars do not have an established framework and face very slow uptake
• Cluster 2 – Advance economies of European Union, Canada, Japan, CEE, Turkey – Capture 40%-45% of worldwide biologics market and individual countries growing at ~ 10%-14%. This cluster has established framework for biosimilars but uptake is slow (though faster than US).
• Cluster 3 – Emerging economies like Brazil, China, India, Kora, Vietnam etc – Biologics market is fast growing (~20%-40%) with biosimilars being established as the regulatory frameworks are less stringent and uptake of biologics is high. The emerging markets are anticipated to be a potential growth driver due to local policies and ‘biosimilar’ attitude.

To tap the nascent opportunity in emerging markets, bio-clusters are being formed in Eastern Asia (especially China and South Korea) aided by favorable local Government initiatives.

What does the future hold for biosimilars?
The biosimilars opportunity will really take off once US plays a bigger role wherein there is guidance on setting clearer framework for biosimilars. There is evidence that the latest legislative pathway in the US could favour the approval of biosimilars marketed in other geographies based on totality of evidence. In the short term, there would be slow uptake in the US as the innovators would delay the approval process of new biosimilars. However, from 2015-2016 onwards it is possible that US presents a key upside.

IMS conducted a detailed analysis and predicts the opportunity in biosimilars is expected to be between $1.9 billion -$2.6 billion in 2015 and could rise to a huge range between $11 billion - $25 billion by 2020 depending on the uptake in the  US. In Europe, in the short term, uptake of biosimilars will accelerate due to a more mature framework. Beyond 2015 the share of EU could reduce as the US takes over. The emerging markets specifically Asian countries would ramp up based on strong growth drivers.

Successful development of some of the key biological blockbusters (e.g. infliximab, rituximab, trastuzumab) would be critical to achieve such growth.   

How could this be realized?

• At present, lower price is the biggest differentiator of biosimilars. However for biosimilars to realize the huge opportunity in coming years, business models and go-to-market strategy would play an increasingly important role.  The key learning drivers that companies need to focus on and expand as the biosimilar market evolves are:
• Business model design and alliance management
• Economies of learning on manufacturing and R&D
• Pre- and post-launch stakeholder management
• Branding and go-to-market strategy

The Go-to-market models will continuously require adaptation to evolving competitive arena and complex biosimilar portfolios. The maturity curve of models would be as follows:

Wave 1 – Payer driven model – Least complexity

• Focus on creating awareness and building trust among stakeholders (payer focus)
• Price-driven value proposition
• Tender-based competition
• Simple portfolio (maximum three  products)

Wave 2 – Branded specialty model – Medium complexity

• More complex portfolio to manage
• Higher incidence of differentiated products
• Increasing and more diverse competition (Generics and pharma companies)
• Go-to-market shifting towards branded infrastructure
• Need to consider the broader marketing mix

Wave 3 – Innovative go-to market model – Highest complexity

• Need to offset the value losses from price competition by growing demand pools
• (e.g. Expanded access, new developing geographies)
• Promote one-stop-shop for affordable medicines (generics + biosimilars)
• Shift focus away from drugs to solution (to differentiate the value proposition in a commodity-like environment)

Conclusion
Biologics would play an increasingly bigger role in future in medicine. Biosimilars have shown potential but not delivered so far. However, the changing market landscape as well as evolving regulatory framework indicates a positive future for biosimilars. The US uptake of biosimilars will lead to a significant upside in the market. Finally, the biosimilar model needs evolution beyond price and focus on differentiated go-to-market strategy.