An article recently published on BioProcess Online identified and described six company archetypes that currently make up the biosimilar market: opportunists, bio powerhouses, biosimilar machines, generic giants, bio wizzes, and genericists. We liked this concept so much that we reached out to biosimilar experts from several prominent management consulting firms to ask for their perspectives on these archetypes, emerging biosimilar development and business strategies (as well as mistakes to avoid), and the market’s future. First up is Mark W. Ginestro, principal in KPMG's Healthcare and Life Sciences strategy team.
Based on your understandings of current market players, which of the biosimilar archetypes do you expect to be most successful in the market, and why?
Each archetype brings a unique set of capabilities necessary to bring biosimilar products to market. The capabilities required for a given product/market launch vary based on several factors, including the regulatory environment, market dynamics, science, and others. As an example, a product/market that has interchangeability requires very different capabilities from one that does not. Likewise, a product/market where the newly launched biosimilar is the first to market — as opposed to the third or fourth — requires different capabilities. As the necessary capital investments are high and the needed capabilities vary, in most situations we’ve seen partnering to better manage risk. My view is that the most successful companies will be those who excel at assessing the capabilities required in a given situation, making the determination on what to do in-house vs. partner, and executing in-house activities and/or partnerships. Specific to the archetypes, I could see any one of these archetypes being successful if they maintain a disciplined focus on their chosen strategy.
Do you see other archetypes emerging into the market, today or in the future?
I tend not to define companies by strict archetypes; rather, I view the market by capabilities required in the value-chain and companies that can fulfill those required capabilities. From this perspective, I could see a scenario where a traditional pharma company with strong commercial capabilities could become the marketing partner of choice for companies with little or no commercial capabilities or with limited commercial capabilities in a particular therapeutic area. Whether we label this group an “archetype” or not is a matter of opinion. Merck is fulfilling this role for Samsung Bioepis, yet it is also developing its own biosimilars. However, I could also see someone like Merck being the commercialization arm and choosing not to develop its own biosimilars.
Regulatory capability — the ability to get a product through the FDA approval process — is another area that has been an acute need, particularly in the U.S. This includes having intimate knowledge of the requirements stated by the FDA as well as an understanding of what the FDA truly wants, because the requirements are still forming. The FDA is learning about how it wants to treat biosimilars as it goes along, just like manufacturers. Leaders in this capability will be working to align with what the FDA is looking for, and bringing insights to the FDA on what they should be looking for. The case law around biosimilars is being written now, so the leaders are making the investments in the overall biosimilar sector to get clarity in how they will be treated. We have seen some rejections by the FDA, and some were surprises (most recent being Coherus). It's not fair for me to judge the relative competencies of a given company's regulatory capability, but I can say that regulatory capabilities are important.
What biosimilar business strategies have you noted as being particularly effective in the U.S. and EU markets?
Because the EU market generally has a more consolidated payer base with governments playing that role, we’ve seen regulatory hurdles cleared more quickly, along with stronger uptake. One of the reasons the U.S. has been successful as an economy is, in part, because of strong intellectual property protection. Of course, the downside is that it’s taken longer to get clarity on the patent landscape. The models that have been successful in the EU are those that have fostered strong relationships with the centralized payer landscape there, and that have been attentive to payer needs and interests. To date, there have been limited launches in the U.S., and those that have been successful have been, in my opinion, due to strong regulatory capabilities.
Have you noted any particularly effective strategies companies are employing in emerging markets — either in development or commercialization?
Emerging markets have their own unique set of circumstances and regulatory approaches to biosimilars. Some nations — India and Brazil, for example — have policies that encourage the use and adoption of biosimilars. In emerging nations with national health plans/programs, the policies aim to encourage biosimilar use. Also, many of these nations are looking to domestic manufacturing of biosimilar products to boost their own economies while addressing patient demands for treatments.
Indian biosimilar manufacturers have done well in emerging markets. These markets are small, so the larger players tend not to focus on them, creating more open space for smaller players. Also, the regulatory requirements and patent controls in emerging countries are less onerous, which has made them attractive for smaller players. Lastly, some Indian players have established commercial success in emerging markets through their traditional pharmaceutical businesses.
What are the biggest mistakes you see biosimilar companies making today?
In the U.S., I would have to say underestimating the regulatory requirements required to get a product approved and underestimating the intellectual property complexities associated with unbundling the products’ patents.
What concerns do these mistakes raise for you in terms of surviving in specific markets?
While not a concerns, strictly speaking, my counsel to companies is, as noted above, to have a clear understanding of the product/market situation and dynamics and be honest about your capabilities vis-a-vis the required capabilities. This seems obvious, but there is an inherent self-bias toward believing you can do something when it may actually be better to partner.
Flash forward 10 years down the road. Companies will need to be creative to differentiate their biosimilars from the others on the market. Besides price, what specific incentives will companies need to offer to stand out?
It will very much depend on the market dynamics. In 10 years, we will likely be in a situation where interchangeability is established at least for some subset of products. With interchangeability, it will become imperative for biosimilar companies to get products to market quickly and shift quickly with market demand. The risk for biosimilars is that a next-generation branded product will come out to render the legacy technology redundant. This would, of course, be a good thing for the overall healthcare system, as it would mean better solutions are available. However, the biosimilar manufacturer will already have made a significant investment. Hence, to quickly pivot and manage the portfolio of investments and risks will be essential. With speed to market, I see an ecosystem that is oriented toward partnering to focus investments on key capabilities.
In part 2 of this three-part series, we get insights from three experts from McKinsey & Company.