Mass. biotechs leaping into generic drug market
Biotechnology companies spent years lobbying against allowing generic versions of their expensive cutting-edge medicines, warning that copying complicated drugs made from living cells could put patients at risk and undermine innovators.
But that was then.
Bowing to the inevitability of low-cost competition as federal officials push to contain health care spending, biotechs are now scrambling to secure a piece of the discount market for themselves. And Massachusetts, known for its influential cluster of biotechnology companies, is at the center of the action.
Over the past month, three formidable players - Momenta Pharmaceuticals Inc. of Cambridge, Biogen Idec Inc. of Weston, and Amgen Inc. of Thousand Oaks, Calif., which operates a research lab in Cambridge - have started separate ventures to develop, make, and market generic biotech drugs, known in the industry as “biosimilars.’’
Their efforts raise the prospect that cheaper generics, long seen as a threat to one of the highest-profile industries in Massachusetts, could instead spur new growth in the sector when the first biosimilars are made available in the next several years.
“Boston is already a hub for the biotechnology business, and now there’s a lot of potential for Boston companies to get into’’ the biotech generics market, said Momenta chief executive Craig A. Wheeler. Last month, the company formed a generics collaboration with medical products giant Baxter International of Deerfield, Ill.
Biotech drugs are made from live organisms, in contrast with traditional medicines, which are derived from chemicals. While generic versions of conventional drugs have taken an increasingly larger slice of the pharmaceutical market over the past 25 years - outstripping sales of brand-name medications - biosimilars aren’t yet available in the United States, in part because the manufacturing process is so complex and expensive. But under a 2010 law, the US Food and Drug Administration is developing a process by which they could be approved, and a set of regulations is expected to be released this year.
“Everyone was resisting it tooth and nail until legislation was passed, but now the starting gun has been fired,’’ Wheeler said. “I’m personally not of the view that this is going to undermine the industry. I think it’s going to spark innovation.’’
Biosimilars already are sold in some European countries, but the market is relatively small. Still, the IMS Institute for Healthcare Informatics, a Norwalk, Conn., research firm, has projected global spending on generic alternatives to biotech drugs will increase from $311 million in 2010 to between $2 billion and $2.5 billion in 2015.
It’s easy to see why there is such growth potential: Biotech drugs that now ring up total sales of $60 billion will lose patent protection by 2017, creating an opening for low-cost generics. But it’s unclear how many cheaper alternatives will be ready to take advantage of that chance.
Leading generic drug companies such as Hospira Inc. of Lake Forest, Ill., and Israel’s Teva Pharmaceuticals Industries Ltd. are preparing for a push into the biosimilar market. So is Sandoz, the generics division of Swiss drug maker Novartis AG, which is expanding its global research headquarters in Cambridge.
But biotechnology companies believe their experience in making drugs from living cells puts them in a better position to capitalize on the emerging market. Indeed, regulators have been struggling with how to measure “bioequivalence,’’ the molecular composition of a biosimilar that would let it qualify as a substitute for a branded biotech drug already on the market. Unlike with conventional treatments, it is extremely difficult to engineer a precise copy of a biotech drug.
“We can use our analytics to understand the complex molecules and mixtures and have the information to make equivalent products,’’ said Momenta’s Wheeler. However, “the upfront technical investment is high,’’ he acknowledged.
Some industry analysts have estimated it could cost more than $100 million to develop a generic biotech drug, at least 10 times as much as a traditional generic drug, made through a more straightforward chemical process. The process for biosimilars, which involves engineering cell lines, is expected to take longer.
To defray the expense and share the risk, biotechnology companies have struck alliances with deep-pocketed partners. Momenta has paired with Baxter. Biogen Idec is teaming with South Korean conglomerate Samsung Group. Amgen, the world’s largest biotechnology company, is working with Watson Pharmaceuticals Inc. of Parsippany, NJ.
Pricing discounts on biosimilars are expected to vary widely, just as discounts for traditional generics do. But with many biotech drugs costing more than $10,000 per patient per year, and some costing hundreds of thousands of dollars, lower-cost versions could help rein in health care spending.
Executives at Biogen Idec, which is shepherding several drugs through late-stage clinical trials, are candid about trying to share the risk and limit their own investment in generic biotech treatments. Despite their expertise in engineering and manufacturing, they have let Samsung base the joint venture in South Korea. Samsung will invest $355 million in the project, while Biogen Idec is spending just $45 million. But the Weston company has an option to boost its stake from 15 percent to 50 percent.
“Samsung is an ideal partner,’’ said George Scangos, chief executive of Biogen Idec, the largest biotechnology company in Massachusetts. “We’re putting up capital. But if turns out to be a longer, harder slog than people think, we don’t want to have too much skin in the game.’’
Cubist Pharmaceuticals Inc., based in Lexington, has yet to enter the generics market. But it has found another way to profit from the emerging offshoot of the biotechnology industry. Under a deal reached last year to end a two-year patent dispute with Teva, Cubist granted the Israeli company a license to sell a generic version of daptomycin, an antibiotic Cubist markets under the brand name Cubicin, starting in 2017 - or 2018 if Cubist wins an exclusivity extension from the FDA. The agreement obliges Teva to buy its daptomycin from Cubist, giving it another source of revenue even after its patent expires.
“We went from adversary to partner,’’ said Cubist chief executive Michael W. Bonney. “We tried to get to the point of pulling the emotion out of it.’’
The outcome illustrates a more pragmatic attitude being adopted in the biotechnology industry as cheaper alternatives to its treatments emerge. Rather than wait for sales of their drugs to erode, many companies are working to get ahead of the curve - often by developing biosimilars that will hurt their competitors’ sales.
“You want to fight biosimilars against your own products,’’ Biogen Idec’s Scangos said, “but make them against others.’’
Robert Weisman can be reached at email@example.com.