The Biosimilars are Coming: Is it a Good Thing?
- The Knowledge Group
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For years there were two types of drugs: brand name pharmaceuticals and generics. Both were made by the same company, essentially generating two revenue streams with the same product, either directly or through licensing. However, in recent months a new trend has been developing and taken hold that now looks to fundamentally disrupt the traditional pharmaceutical market internationally – that is the introduction of biosimilars.
A biosimilar is produced through a very different process than a traditional pharmaceutical. Where a traditional drug, including generics, involves the interaction of various chemical materials, biosimilars are products grown in living cells, similar to how the flu vaccine is produced in eggs. Bio similar have actually been present and in production for almost 20 years. However, the industry is really coming into its own now, with Celltrion represent a $34 billion stake and a direct challenge to big name traditional drugmakers. The timing couldn’t be better; with companies seemingly jumping on the bandwagon of driving up drug prices for commonly used products, a viable and effective substitute is exactly the primary answer an open market delivers to companies that get too greedy with a needed product.
Celltrion itelf already has two major factories and it is now in process to bring a third factory online. And the South Korean company is only one of many representing a major competition challenge to the old guard. And a major defense the traditional market has depended on to slow new market entries, that being government regulation, was suddenly very open to new substitutes. European regulators embraced biosimilars quickly, shocking traditional companies who thought they had years of delay to enjoy before direct competition became evident.
Much of the shift is due to governments actively looking for direct ways to drive drug prices down, a reaction that was kicked into high gear after drug prices were driving to outrageous levels by CEOs like now-convicted Martin Shkreli (former CEO of Turing Pharmaceuticals) and similar. It’s also practice; big savings are possible for government health programs when cheaper substitutes effectively replace pharmaceutical government programs have to pay for. The savings can translate into billions of dollars avoided in taxpayer costs. The U.S. has been holding off on full adoption of biosimilars, much to the relief of its traditional drug companies, but the pressure is building and only a matter of time before the benefits clearly outweigh lobbyist efforts to stave off the inevitable.