Pfizer-Al­ler­gan deal could re­duce biosim­i­lar cost sav­ings

Modern Healthcare - - NEWS - By Steven Ross John­son

Pfizer’s $160 bil­lion deal to ac­quire Ir­ish drug­maker Al­ler­gan got a lot of at­ten­tion for the tax ad­van­tages Pfizer would enjoy from mov­ing its New Jer­sey head­quar­ters over­seas to Dublin.

There wasn’t much talk, though, about how much the deal would ex­pand Pfizer’s foot­print in biosim­i­lars, a bur­geon­ing busi­ness in which the com­pany has al­ready made sig­nif­i­cant in­roads with its $15 bil­lion ac­qui­si­tion of Hospira in Septem­ber.

As the field of com­peti­tors be­gins to nar­row, a hand­ful of com­pa­nies will gain sig­nif­i­cant lever­age to set higher prices on biosim­i­lars, medicines that some ex­perts say could help save more than $40 bil­lion in drug costs over the next decade as the cheaper al­ter­na­tive to bi­o­log­ics.

Pfizer it­self has at least five prod­ucts in Phase 3 clin­i­cal tri­als. They in­clude ver­sions of Ab­bVie’s block­buster Hu­mira, John­son & John­son’s Rem­i­cade, and Ge­nen­tech’s big sell­ers Avastin, Her­ceptin and Ri­tuxan. Hospira had been de­vel­op­ing ver­sions of those same drugs as part of a col­lab­o­ra­tive agree­ment with Cell­trion, caus­ing Pfizer to di­vest some of those prod­ucts to avoid an an­titrust chal­lenge from the Fed­eral Trade Com­mis­sion.

Still, the com­pany gained a num­ber of other biosim­i­lars by ac­quir­ing Hospira, in­clud­ing ver­sions of Am­gen’s can­cer drugs Epogen and Ne­u­pogen, as well as Ge­nen­tech’s in­jectable diabetes med­i­ca­tion Lu­cen­tis.

Al­ler­gan, mean­while, is col­lab­o­rat­ing with Am­gen to de­velop four on­col­ogy biosim­i­lars, in­clud­ing ver­sions of Avastin, Her­ceptin and Ri­tuxan.

An Am­gen spokes­woman said the agree­ment with Al­ler­gan pro­vides “pro­tec­tions” that would al­low Am­gen to re­tain the rights to those prod­ucts. But the Pfizer-Al­ler­gan deal is likely to al­ter the tim­ing of the projects, ac­cord­ing to Tim Gam­ble, an an­a­lyst at Data­mon­i­tor Health­care, a phar­ma­ceu­ti­cal in­dus­try re­search firm.

“Pfizer is cur­rently com­pet­ing with Am­gen to lead the biosim­i­lars cat­e­gory, and Al­ler­gan is in part­ner­ship with Am­gen to de­velop sev­eral biosim­i­lar on­co­log­i­cal prod­ucts,” Gam­ble said. “By tar­get­ing Am­gen’s part­ner for ac­qui­si­tion, Pfizer would dis­rupt their pre-launch com­mer­cial ac­tiv­i­ties.”

The moves are al­low­ing Pfizer to roll up a sig­nif­i­cant share of a mar­ket that some an­a­lysts es­ti­mate will be worth more than $20 bil­lion by 2020.

Pfizer’s ac­qui­si­tions re­flect a broader uptick in merg­ers and ac­qui­si­tions among phar­ma­ceu­ti­cal com­pa­nies. The value of trans­ac­tions in the sec­tor reached $221 bil­lion in the first half of 2015, which was triple the tally for the same pe­riod in 2014, ac­cord­ing to a July re­port by re­search and con­sult­ing firm KPMG.

The pace of phar­ma­ceu­ti­cal deals is likely to con­tinue be­cause larger com­pa­nies are look­ing to off­set ex­pected de­clines in rev­enue as patent pro­tec­tions ex­pire on some of their big­gest-sell­ing drugs.

Some view the pur­suit of promis­ing biosim­i­lar pipe­lines through M&A as a smart way for big drug­mak­ers to fi­nance the re­source-in­ten­sive de­vel­op­ment of their own spe­cialty medicines. Oth­ers see the strat­egy as pri­mar­ily aimed at head­ing off com­pe­ti­tion.

“It is a sign of a lot of flux within the biosim­i­lar mar­ket right now,” said An­drew Mulc­ahy, a pol­icy re­searcher for RAND Corp. “Ev­ery­one and their brother got into biosim­i­lars a few years ago, and there’s now some shak­ing out of the mar­ket.”

The trend to­ward con­sol­i­da­tion could re­peat what hap­pened among the de­vel­op­ers of bi­o­logic medicines. Com­pa­nies like Am­gen and Ge­nen­tech have dom­i­nated that mar­ket for years with prod­ucts that are among the most ex­pen­sive prescription drugs. “Fewer play­ers mean less in terms of price re­duc­tion,” Mulc­ahy said.

But he added that the cur­rent num­ber of play­ers in the mar­ket is still ro­bust. Sev­eral of them plan to in­tro­duce an ar­ray of copy­cat bi­o­log­ics over the next sev­eral years.

“We really would be con­cerned if we were go­ing from three to two, or two to one for sure,” Mulc­ahy said. “But go­ing from five to four or six to five com­peti­tors is much less of a con­cern.”

But the con­sol­i­da­tion may dampen al­ready di­min­ish­ing hopes that biosim­i­lars will be a sig­nif­i­cant source of cost sav­ings for con­sumers and pay­ers.

Septem­ber’s in­tro­duc­tion of the first biosim­i­lar in the U.S. was widely seen as the be­gin­ning of a new era of price com­pe­ti­tion that would yield the kind of sav­ings gen­er­ated by generic al­ter­na­tives to brand-name small mol­e­cule drugs over the past three decades.

But that first drug—a biosim­i­lar version of Am­gen’s Ne­u­pogen made by No­var­tis sub­sidiary San­doz—was priced just 15% lower than the orig­i­nal can­cer drug.

“Pfizer is cur­rently com­pet­ing with Am­gen to lead the biosim­i­lars cat­e­gory, and Al­ler­gan is in part­ner­ship with Am­gen to de­velop sev­eral biosim­i­lar on­co­log­i­cal prod­ucts.”

TIM GAM­BLE An­a­lyst Data­mon­i­tor Health­care

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