competitive-response-strategy

The way to a competitive response strategy – how pharmaceutical companies optimally prepare for the biosimilar competition

Over the next few years, some of the best-selling biopharmaceutical active ingredients will lose their patent protection. While the volume of expired biopharmaceutical patents in Germany in 2014 was still € 117 million, it will be 11 times higher in 2015 at € 1,339 million. The introduction of biosimilars will intensify competition and increase pressure on original equipment manufacturers. The question of how original equipment manufacturers can optimally prepare for the new market situation and loss of exclusivity at an early stage is therefore becoming increasingly important.

 

The path to a successful competitive response defined by the management consultancy Homburg & Partner comprises three phases:

1. Define the Threat

The aim of the first phase is to gain a clear understanding of the market situation in order to determine the risk to which the original equipment manufacturer is exposed. We focus on two topics: the attitude of relevant stakeholders towards biosimilars and the market entry strategy of biosimilar manufacturers.

The attitudes of health policy stakeholders and physicians can strongly influence the success of a drug. While there are still many questions among physicians with regards to therapeutic equivalence and thus the interchangeability of the original and the biopharmaceutical imitator, payers are positive about the use of biosimilars primarily because of their economic advantages. In order to support the establishment of biosimilars on the market, they introduce instruments such as biosimilar target quotas or discount agreements. Since a thorough understanding of this initial situation in the stakeholder landscape is crucial, we recommend to develop a stakeholder map as basis for strategy development, which represents the most important stakeholders, their networks and motives.

Another important role is anticipating the launch strategy of biosimilar manufacturers. Based on our project experience, we suggest executing a competitive simulation workshop to simulate the launch situation.

The following questions are decisive: For which indications do biosimilar manufacturers present clinical studies? Where will the manufacturers position themselves in terms of price? Will they actively market their products via a sales force and offer further services? Which innovative business models or go-to-market approaches can be expected? With regards to go-to-market, three approaches are currently being discussed:

(a) Biosimilar manufacturers act like generic drug manufacturers and differentiate themselves only on price.

(b) Biosimilar manufacturers try to differentiate themselves through service with their own sales force and supporting offers.

(c) Biosimilar manufacturers follow a hybrid approach, as pure differentiation via price is not sufficient and performance leadership is left to the original manufacturer.

If the original manufacturer succeeds in understanding how the biosimilar manufacturers will appear in the market, he will be able to better assess the risk and thus prepare himself more purposefully.

 

2. Develop the Defense

In the second phase, the original equipment manufacturer must derive a strategy for long-term positioning in the market. In addition to measures that extend patent protection, such as studies in a paediatric indication, two instruments are often considered: the company’s own range of products/services and the price of the product.

Differentiating range of products and services:

Product innovations are the best means of differentiating from the competition. Current examples show that biologics manufacturers are working to differentiate themselves from the competition through new products or new formulations that provide increased benefits for patients: Shortly before Herceptin’s patent expired in 2013, Roche received EU approval for a subcutaneous formulation. According to AbbVie, the biopharmaceutical company is also currently working on a new formulation of Humira, the world’s best-selling drug, whose patent expires in Europe in 2018.

Especially in the specialist market, the efficacy and safety of a substance proven in broad study programmes is of great importance. It is to be expected that the original manufacturers will also start here, as the “extrapolation”, which permits the approval of a biosimilar in all indications of the reference product (if manufacturer could prove sufficient clinical effectiveness in one indication) is still viewed critically by many doctors.

Price management:

The price difference between original and biosimilar, which market experts expect, is 20-30% and is significantly lower than for generics. On the price side, original manufacturers have the following options: (1) Conclusion of discount agreements, (2) Price reduction to the reference price level or (3) Maintenance of the price at a constant level.

(1) Original manufacturers, like biosimilar manufacturers, have the possibility to enter into non-exclusive discount agreements with health insurance companies after patent expiration. In this case, the same conditions apply to all suppliers, which means that the price advantage of biosimilars is lost. In this early phase, in which hardly any physician is familiar with biosimilars, the original drug has a good chance of being preferred under the same conditions.

(2) After patent expiry, a reference price group will be formed by the GKV-Spitzenverband. If the original manufacturer lowers the price to the reference price level of the biosimilars, the prices of the original and biosimilars will also be adjusted. For example, a reference price regulation in the case of Epoetine has made it considerably more difficult for biosimilars to enter the market.

(3) Not only in the pharmaceutical industry it has been shown that it can also be profitable to keep the price constant and forego market shares. Keeping the price constant implies that the product may no longer be fully reimbursable. This could be useful if the manufacturer wants to position a successor product in the market. At this point, we recommend a quantitative assessment of the effects of keeping the price constant in a business case.

3. Defend the Market Position

The aim of the third phase is to implement the strategy. Our recommendation is to develop concrete measures and to record them in a project plan. From our perspective, the readiness of the original manufacturer to adjust to market changes is a success factor of this phase, because it is certain: Biosimilars are still a new “phenomenon” and so far it remains to be seen how biosimilar manufacturers will actually operate in the market.

Metrics or KPIs should be defined and regularly measured in order to gain transparency about market developments. In the event that the metrics fall short of expectations, a backup plan with measures should be drawn up in advance, which can be quickly activated. A good action plan includes answers to the following questions: Which metrics do the measures affect? Who is responsible for implementation? When can the measures be implemented, taking into account the preparation time? How high are the costs? What effect do we expect from the measures?

Conclusion

The article intended to show what is important for original manufacturers when active ingredients run out of the patent. The topic is not new, but it is gaining importance against the background of the expiration of patent protection for the biopharmaceuticals with the highest sales. In our opinion, the most important success factor in the development of the biosimilar response strategy is to allow sufficient time and space for the post-patent phase at an early stage.

Our experts for the pharmaceutical sector

Partner

Christian Zuberer

christian.zuberer@homburg-partner.com
Tel.: +49 621 1582-212

Managing Director & Partner

Dr. Michael Scholl

michael.scholl@homburg-partner.com
Tel.: +49 621 1582-0