"I Pray for the Welfare of Your Company..." - Pharmaceutical Executive

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"I Pray for the Welfare of Your Company..."
And why not? Big Pharma's drugs fill Teva's pipeline. CEO Isræl Makov says he's not the enemy. To prove it, he offers lessons in survival.


Pharmaceutical Executive


"It is going to be a bit of a test of Teva's marketing ability to drive Azilect in the US," says Milton, "particularly in a competitive disease area like Parkinson's Disease."

LESSON #6

Don't Look Now: Biogenerics Are Here

Today's innovations are tomorrow's generics. So companies like Teva are increasingly focused on biologics.

Without a clear understanding of how changes in the manufacturing process affect the structure and biological activity of proteins, critics say, protein-based drugs can't be replicated like small molecules. Makov doesn't buy that argument. "The biotech industry confuses everybody with, 'The production is the product,'" says Makov. "I was in that business. It's not true."

Indeed, Teva is already producing and selling biogeneric human growth hormone (hGH), interferon beta, and colony stimulating factors (CSFs). But it manufactures those drugs in Lithuania, Mexico, and China and sells them in markets outside the United States and the European Union. Now, Teva is collaborating with Bio-Technology General and Savient to produce biogeneric versions of recombinant hGH, for which it intends to seek regulatory approval in Western countries.

Amir Elstein, Teva's group vice president of biogenerics, says it is just a matter of time before biogenerics are accepted. "The concept of 'Let's first be careful' with biogenerics is reasonable," he says. "But within two or three years, there will be good proof in the marketplace that the products delivered by the biogeneric community are not only essentially similar, but equivalent. You cannot fight gossip without facts."

Elstein says manufacturers already have the technical expertise to produce biogenerics. In China alone, 17 companies produce generic epoetin. But for biosimilars, FDA has established no regulatory shortcut similar to the ANDA process for small molecules—so the economics of biogenerics are riskier and more complex. Generic companies need to fund clinical trials, which are very expensive—as much as 80 percent of the innovator's trials. Few generic companies have the resources to take the risk. Elstein estimates that nine companies are capable of producing follow-on proteins, but he thinks several will be acquired, leaving four or five players.

On the other hand, less competition means less downward pressure on price, and better margins. Teva is well positioned, thanks to its acquisition of Sicor. "We are doing a lot of things in biogenerics which we don't talk about," says Makov. "We are going to be a major, major player in biogenerics when the market is open."

When follow-on biologics come to the market, they won't be cheap—the high cost of manufacturing and the relative lack of competition will see to that. For example, Sandoz's Omnitrope is priced just 25 percent lower than the innovative drug. However, Elstein expects biogenerics to eventually carry a 30-to-40 percent discount. When that happens, countries, particularly in Europe, will use reference pricing (a system that reimburses a class of drugs at a single price) to drive down the cost of biologics.

This new category of generic drugs will require new marketing strategies. Instead of fighting to be first to market, some biogeneric manufacturers may hang back to avoid an uphill battle with regulators. "In biogenerics, strategizing the first steps is important because it can be an endless chess game," says Elstein. "It's not straightforward and we don't have a textbook."

Tomorrow's biogeneric launches will resemble today's branded launches because companies will need to establish bioequivalence in physicians' minds. Teva will have to rely on the marketing skills it is developing in its innovative division—and be willing to invest in promotional strategies to battle with branded manufacturers for market share.

"I expect some companies to be detailing physicians and advertising in journals," says Andrew Merseth, an analyst for Decision Resources. "Once the clinical trials that biogenerics go through begin to be published in medical journals, it is going to be a pretty hot topic."


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