The generics and biosimilars sector is critical to delivering healthcare worldwide, but how is economic downturn aggravating existing challenges facing the sector?
Words by Isabel O’Brien
Economic instability wasn’t on anyone’s wish list this Christmas, but following the financial haemorrhages caused by the pandemic and the ongoing Russian invasion of Ukraine, many companies are receiving an unwelcome lump of coal in their stockings.
On the whole, the pharmaceutical industry is resilient to headwind threats such as economic downturns, but the nature of current market pressures has embroiled them in difficulties alongside other sectors. All pharma companies are being affected by rising costs due to inflation, but generics and biosimilars manufacturers are arguably most at risk of destabilisation.
Effects of global instability
While originator companies are the undisputed experts of innovation, generic and biosimilar drugs are healthcare systems’ bread and butter. “Without our industry, there would be no healthcare systems,” says Richard Saynor, CEO, Sandoz, at FT Live’s Global Pharma and Biotech Summit. “Quite frankly, they’d be bankrupt.”
In fact, off-patent medicines currently represent 70% of dispensed medicines in the EU. And Saynor adds that they also treat patients at “20-30% of the cost”. There is clearly a need for governments and policy makers to support the sector at this time so it can continue to deliver vital therapies to patients.
“Our sector has a moral and a legal obligation to maintain the supply of medicines to Europe and we are fully committed to do so,” says Elisabeth Stampa, President, Medicines for Europe, and CEO, Medichem, in an open letter to European Energy Ministers and responsible European Commissioners. “However, we cannot operate in an environment combining rampant cost inflation with policies that continuously lower prices,” she adds.
Rising energy bills are placing the most significant strain on operations. “It is imperative that the EU introduces measures to lower energy costs for the generic medicines sector,” Stampa continues. Unlike originator companies, it is hard for these companies to pass inflated costs onto customers. Particularly in the case of over-the-counter generics, customers could simply switch to a competitor.
Bad deal for biosimilars
Even before the most recent economic instability hit the world, biosimilar firms were facing challenges to the detriment of their productivity and profit levels. “One clear challenge in biosimilars is the development costs,” explains Saynor. “It costs about $200m to bring a biosimilar to market.” He attributes this to a number of factors, but largely the regulatory hurdles biosimilars companies must clear to get their therapies approved.
While generics companies simply must prove their product is identical in properties to the original drug, regulatory bodies ask biosimilar firms to conduct a Phase 3 trial into their therapy’s safety. The UK is an exception to the rule, but it also taxes each biosimilar brand as both an innovator and as a generics company.
Without our industry, there would be no healthcare systems
The environment is complex, and at times hostile, and that has led to disillusionment from the sector in developed markets like the UK and US. “If you regulate an additional tax on a competitive market, all you’re doing is either reducing supply or increasing price,” affirms Richard Torbett, Chief Executive, Association of the British Pharmaceutical Industry, also at the FT Live event. “Neither of which are good for patients.”
Future outlook
By 2025, 19 global blockbuster brands are set to lose their patent exclusivity, according to McKinsey, and between 2026 and 2032, a further 39 blockbusters will lose theirs, too. Global health is clearly reliant on the world maintaining a thriving generics and biosimilars sector, so action must be taken now to ensure smooth passage for these companies to take advantage of patent expirations and deliver patients access to medicines.
