|Norwegian Medicines Agency medical director Steinar Madsen|
Conventional thinking is that the complexity of biosimilars will keep their discounts to just 20% to 30% of the branded price. Think again. In Norway a biosimilar of Merck's ($MRK) arthritis blockbuster Remicade is going for a discount of nearly 70%, upsetting conventional wisdom and competitors.
Finnish drug company Orion Oyj, which licenses the biosimilar Remsima from South Korea's Celltrion, started with a 39% discount in February 2014 for the drug. The arthritis drug has a list price of about $10,600 a year, Bloomberg reports. The biosimilar captured about 6% to 7% of the market. By February 2015, the discount reached 69% and the biosimilar moved on to grab 50% of the market.
"The price is so low that everybody is switching," Steinar Madsen, medical director at the Norwegian Medicines Agency, told Bloomberg. "The doctors are saying, 'We can't throw money out the window with the more expensive Remicade.' "
Merck, which has the most to lose, has been urging doctors to think twice before prescribing the biosimilar, pointing out in a medical journal blog posting that while approved, little is yet known about switching one for the other. The New Jersey-based company licenses the drug from Johnson & Johnson ($JNJ) and has rights to sell it in Europe, Russia and Turkey, then the two split the profits 50-50. Merck's sales of Remicade were actually up 4% last year to $2.4 billion, and that was based on growth in Europe. But the drugmaker warned in a financial filing this year that it anticipated "a more substantial decline in Remicade sales" when it lost market exclusivity in many markets in February of this year.
If Norway is any indicator of what is to come in other developed markets, branded pharma companies facing potential biosimilar competition may have to remake their financial projections going forward. Bloomberg figures about $50 billion in annual sales are at risk. The expectation had been that since biosimilars provide similar results but are not necessarily the same, that market erosion would come slowly, unlike small-molecule generics which can suck up to 90% of a market within months of a launch.
In fact, the uptake in Europe had been so slow for the biosimilars already being sold there that in late 2013, Norway said it would fund its own study pitting Remicade against Celltrion's biosimilar in hopes of giving doctors some confidence.
Hospira ($HSP), which sells the same biosimilar under the Inflectra brand, has been irked by Orion's move, Bloomberg reports. "This price is extraordinary," Ann Fahey-Widman, a spokeswoman, said in an email. "We do not believe this price will allow sufficient profit to maintain a sustainable biosimilar business in Norway in the future."
But Orion said it had to drop the price to compete because Hospira won nearly all of the public tenders for the drug last year with its own price cuts.
"We only won the one tender in Norway last year, which tells you something about the competitive environment," Liisa Hurme, Orion's senior vice president of specialty products, told Bloomberg. This year, Orion reversed the tables on Hospira for public contracts because its discount was so much deeper than the 51% price cut that Hospira offered.