[Ip-health] Economist: Going large-A wave of new medicines known as biologics will be good for drugmakers, but may not be so good for health budgets

Thiru Balasubramaniam thiru at keionline.org
Mon Jan 5 06:40:58 PST 2015


PharmaceuticalsGoing largeA wave of new medicines known as biologics will
be good for drugmakers, but may not be so good for health budgets

Jan 3rd 2015 | CHICAGO | From the print edition

IN PHARMACEUTICALS, the 20th century was the era of the small molecule. The
industry thrived by identifying a steady stream of relatively simple
compounds that treated lots of people, patenting them and making a fortune.
In the early 21st century it has become harder for drugmakers to find new
cures quickly enough to replace those on which the patents are expiring.

Many drugmakers, both established ones and startups, have sought salvation
in biotechnology—the adaptation or exploitation of processes found inside
living organisms. As in other areas of drug research, there have been
setbacks as well as successes. But steady progress is being made in
creating “biologics”, drugs that consist of giant molecules, hundreds of
times the size of a conventional drug molecule, which are manufactured
inside animal cells or micro-organisms such as bacteria. In the coming year
a fresh wave of biologics is expected to be approved for use by general
practitioners (see table).

Several of these will treat the millions of people who find that statins,
the conventional treatment for high cholesterol, do not work well enough.
Amgen’s drug, evolocumab, may be first, followed by alirocumab, from Sanofi
and Regeneron. Pfizer also has a contender, bococizumab, at an advanced
stage of development.

Drugmakers have been encouraged to keep working on new biologics by the
success of Humira, a treatment for rheumatoid arthritis and related
conditions, which won approval in America in 2002 and is made by an
American firm, AbbVie. Humira has become the world’s leading prescription
drug, with sales of $11 billion in 2013, according to EvaluatePharma, a
research outfit.

Damien Conover of Morningstar, an investment-research firm, reckons that
biologics provided 22% of the big pharma companies’ sales in 2013, and he
thinks this will rise to 32% by 2023. They will provide an even bigger
share of revenues at those firms which have concentrated on them, such as
Bristol-Myers Squibb, Merck, Eli Lilly and Sanofi. In America more than 900
biologics are in development, for more than 100 diseases.

Over the next five years, a further generation of biologic drugs will start
to deliver cures by using viruses to deliver “gene therapy”—the replacement
of a faulty gene in a patient’s body cells with the correct version. China
has had one such treatment, for some forms of cancer, since 2003. But in
2015 the West’s first gene therapy, Glybera, for a rare genetic disease
that clogs the blood with fat, will go on sale in Germany. The treatment,
created by uniQure, a Dutch firm, is expected to cost €1.1m ($1.3m) for a

Pfizer has a new partnership with a biotech company, Spark Therapeutics, to
give haemophiliacs the correct gene to produce blood-clotting factor.
Scientists have already reported that ten patients with severe haemophilia
B have remained cured for a number of years. Milo Biotechnology, another
gene-therapy company, is developing treatments for muscle-wasting diseases
such as muscular dystrophy.

Len Schleifer, the boss of Regeneron, which has several biologics close to
approval, says the big advantage of such drugs is their specificity: they
do only what they are supposed to do, rarely causing the sort of
side-effects that are frequently discovered in conventional, small-molecule
drugs, and lead to them being abandoned.

However, biologics are hard to make and, at present, difficult to take.
They must be injected, infused or inhaled, as they are destroyed in the
stomach when swallowed. This may discourage doctors from prescribing them
in some cases. That said, José-Carlos Gutiérrez-Ramos, a senior scientist
at Pfizer, says improvements will keep being made to how the drugs can be
delivered. If so, biologics that can be popped as pills may be possible one

Biologics, like all other drugs, are not immune to setbacks. Shares in
Roche, a Swiss drugs giant, fell sharply on December 19th when it disclosed
disappointing results from tests on cancer patients of a combination of two
of its biologics, Kadcyla and Perjeta. Four months earlier Britain’s
National Institute for Health and Clinical Excellence had decided that
Kadcyla should not be prescribed routinely on the National Health Service
for women with breast cancer, since its list price is around $140,000 a

As with all new drugs, it is not just a matter of how well a biologic works
compared with existing treatments, but also whether it is affordable.
Biologics for rheumatoid arthritis, which patients have to keep taking for
the long term, cost more than $12,000 per patient a year. Some, like
Humira, cost far more than this. Paying this sort of money is hard enough
for rich countries’ health systems; for poorer countries, it is out of the

As biologics increase their market share, their cost and efficacy will come
under greater scrutiny. Already, the governments of Italy and France have
noted that Avastin, a biologic developed for cancer, also treats macular
degeneration, a cause of blindness. And it is far cheaper than Lucentis, a
biologic for that condition sold by the same companies, Roche and Novartis.
To its makers’ chagrin, the two governments have approved the use of
Avastin for macular degeneration, a move which, according to one French
legislator, will save his country’s health service $273m a year compared
with using Lucentis.

When the patents on conventional drugs expire, other firms are free to
start selling “generic” copies of the same chemical; and when the makers of
biologics lose patent protection, rival companies are allowed to make
equivalents of them, known as “biosimilars”. This is harder than copying
conventional drugs. Furthermore, says Ben Perkins of EY, a consulting firm,
biosimilars will be (as their name suggests) similar rather than identical:
they may be significantly worse, or even better, than the original. In
America, a lack of clarity in the regulations for the approval of
biosimilars has slowed the development of a market for them, in those cases
where biologics have come off patent.

However, things are beginning to move: for instance, in December Apotex, a
Canadian firm, said America’s Food & Drug Administration (FDA) had agreed
to consider its biosimilar of Neulasta, a biologic made by Amgen, an
American firm, which helps cancer patients fight infection. A study
published in November by the RAND Corporation, a research institute, said
that on current assumptions about how the FDA’s regulations will develop,
biosimilars could save America’s health system a total of $44 billion over
the coming decade.

That would be a useful sum, but the overall savings from biosimilars will
not be as dramatic as those from replacing branded conventional drugs with
generic versions. First, biosimilars will also be costly to make. Second,
since they will not be identical copies, doctors and patients may be slow
to accept them as substitutes.

All this will be good news for those drugmakers who create successful
biologics, for it will allow them to continue selling at higher prices for
longer. They may thus find that the “patent cliff”, the slump in revenues
they have been suffering as older remedies lose patent protection, is not
as steep as feared. But health-service bosses the world over will find that
their job gets even harder than it is now: new treatments for
once-intractable ailments will keep being invented, but their costs will be
cripplingly high.

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