Biosimilars in the US: the next frontier for big pharma

August 2017 | PROFESSIONAL INSIGHT | SECTOR ANALYSIS

Financier Worldwide Magazine

August 2017 Issue

The market for biological drug products is forecast to reach a global value of $400bn per year by 2025. Major pharmaceutical companies are investing noteworthy amounts of resources into both research and development of biological drug products, as well as in the construction of manufacturing facilities for their commercial production. Naturally, the interest in this market extends also to those companies that wish to enter the market by copying an already approved biological drug product. This article explores some of the challenges in the biological drug market and how those challenges differ from those faced by a generic pharmaceutical manufacturer.

What is a biosimilar?

A biological drug product or ‘biologic’ is a therapeutic that originates from a biological source. Although the term can be broadly defined to include anything produced from a biological source, such as whole blood, stem cells or even an organ for transplant, the term is used typically to reference drug products that are created using recombinant DNA technology. Such technology makes it possible to produce a drug product, such as an antibody, by taking advantage of the cell’s natural biological processes. Biologics are literally grown in cells as opposed to the chemical synthesis route used for generic pharmaceuticals.

Because biologics are produced in living cells, biologics may exhibit different characteristics depending on a number of factors including the choice of cell and conditions used to grow the cells. Moreover, the particular processes used to manufacture and purify a biological product induce variability into the biological product. As a result, it is not possible to produce an ‘identical’ copy of a biologic reference product. In stark contrast, ‘generic’ pharmaceuticals are identical to their pharmaceutical reference products because chemical synthesis processes are capable of achieving the same result every time.

Because making an ‘identical’ copy of a biologic reference product is impossible, the term ‘biosimilar’ is used to refer to the copy. A biosimilar is a biological product that has been shown to be ‘highly similar’ to an already approved biological reference product. A biosimilar drug should have no clinically meaningful differences in terms of safety or efficacy when compared to its biological reference product.

The marketing approval process for a biosimilar in the US

In the US, there was no expedited approval pathway for biosimilars until the Biologics Price Competition and Innovation Act (BPCIA) was enacted in 2010. The intention of the BPCIA is to balance the often competing interests of innovation and consumer pricing. In this respect, the BPCIA serves the same function for biologics as the Hatch-Waxman Act does for small molecule pharmaceuticals. Indeed, these two pieces of legislation share some important features in common, but there are also important distinctions between the two.

Importantly, the data required by the US Food and Drug Administration (FDA) to approve a biosimilar is very different than for a generic pharmaceutical. Generic pharmaceuticals only need be ‘bioequivalent’ to the branded version. Bioequivalence requires a demonstration that the generic has no significant difference in the rate and extent of absorption of the active pharmaceutical ingredient. Although not trivial, the studies required to demonstrate bioequivalence are relatively straightforward, well-defined and comparatively inexpensive.

Demonstrating ‘biosimilarity’ to a biological product is not as straightforward and the showing required to meet the FDA requirements may vary from product to product. For example, the FDA requires significant structural and functional characterisation of the proposed biosimilar product due to the complexity of the molecule and the inherent variation that can occur from batch to batch. The FDA also requires the biosimilar applicant (also called a ‘sponsor’) to demonstrate there are no toxicity issues via animal studies, and then, once a lack of toxicity has been shown, the FDA requires human studies for the purpose of determining pharmacokinetics and verifying there are no adverse side effects. In some instances, the FDA may also require the sponsor to conduct a clinical trial comparing the proposed biosimilar to the reference product. Such studies usually are not required for generic drugs because the active ingredient in a generic is identical to that in the reference product. This process can be significantly more expensive and complicated as compared to the analogous process for a generic drug.

There are also important differences in how generics and biosimilars are prescribed. A generic drug may be freely substituted for the branded reference product without intervention of the medical provider. But a biosimilar cannot be freely substituted – it must instead be specifically prescribed by a medical professional. The only exception is if additional clinical studies have been conducted to demonstrate that the biosimilar product is ‘interchangeable’ with the reference product. The studies required to meet the interchangeable standard are more extensive than that required for biosimilarity and effectively amount to a full clinical trial. The interchangeable classification should provide an enormous competitive advantage to any sponsor that is able to meet the standard, but biosimilar sponsors are not required to seek that classification. To date none of the US approved biosimilars have been deemed interchangeable.

Biological reference products enjoy a longer period of marketing exclusivity than small molecule pharmaceuticals. Pioneers of new biological drug product will be granted 12 years of market exclusivity in the US. That means the FDA will not approve any biosimilars until 12 years have elapsed from the FDA’s approval of the biologic reference product. In contrast, a branded pharmaceutical company receives only five years of marketing exclusivity for its small molecule pharmaceuticals. The 12-year period of exclusivity is independent of any possible patent protection that the biological drug product developer may have, which can extend market exclusivity beyond the 12 years.

Patent protection for biological drug products

Since companies will likely invest vast amounts of time and resources to develop and bring biological drugs to market, they should invest commensurate resources in protecting those products. Due to the nature of the product, patent protection affords the best protection, although trade secret could be considered for certain proprietary techniques. Patent protection can extend not only to the molecule itself but also to the manufacturing process employed to produce the product. Indeed, given the number of steps, and the possible variation in those steps involved in producing a biologic drug product, the manufacturing process is fruitful ground for obtaining patent protection. For example, patents may be obtained on everything from the specific culture conditions used to grow the cells to the specific process used to fill the final delivery device on an industrial scale.

Companies should try to design their patent portfolio to cover more than their specific processes employed for a biologic. Companies should seek broad patent protection to cover a number of possible growth conditions, thereby blocking competitors attempting to design around the specific processes employed. In some cases, manufacturing patents may be as valuable to the reference product manufacturer as the patent covering the actual product. For example, the biological drug developer will most likely have found the most efficient or economical way to produce the particular biological drug product. Thus, even if a biosimilar applicant could find a way to design around a patent, it may make the overall process more expensive and inefficient, which itself can act as a barrier to entry.

The potential for patent protection also extends to a biosimilar product sponsor. For example, a biosimilar manufacturer should also seek patent protection over the particulars of its manufacturing process to prevent subsequent biosimilar applicants from using its process. In that way, the first biosimilar successful applicant may be able to capture valuable market-share by preventing or delaying competitors from entering the market by using its process.

Patent litigation and enforcement

Given the potential size of the market for biologics and biosimilars, it should be no surprise that there will be patent wars. The BPCIA permits the early resolution of patent disputes in two ways. First, similar to the Hatch-Waxman Act, the BPCIA creates an ‘artificial act of infringement’ that allows filing of patent infringement suits prior to commercial marketing of the biosimilar. Thus, a biologic developer is not forced to wait until a competing biosimilar producer is brought to market before commencing litigation. This benefits both the biologic reference product sponsor (reducing lost profits) and the biosimilar sponsor (reducing risk).

Second, the BPCIA established a complex series of steps – commonly referred to as the ‘patent dance’ – for the exchange of information regarding patents between a biosimilar applicant and the reference product sponsor. The idea behind the patent dance is to exchange information early so that patent disputes can be identified and focused. This is necessary because there is no biosimilar equivalent to the ‘Orange Book’ listing of patents that a branded pharmaceutical company believes covers its branded pharmaceutical. Consequently, a biosimilar applicant will not be certain of the identity of the patents that may be asserted against it until it has filed its application and provided the reference product sponsor confidential access to its manufacturing process. The reference product sponsor is then expected to limit the number of patents in dispute.

There is currently some debate as to whether it is mandatory for the biosimilar product sponsor to turn its application over to the reference product sponsor. A recent Supreme Court decision determined that federal law does not require the biosimilar sponsor to turn over its application, but left open the question as to whether individual state law would make it mandatory. This issue will bear watching in the coming months or years to see how the courts ultimately resolve this question. The consequences of the decision will affect the scope and timing of litigation between the parties. For example, if the biosimilar sponsor is not required to turn over its manufacturing process, substantive litigation may begin immediately after an application for a biosimilar is filed and could involve any or all patents that cover the biological product or methods of its use. However, if the biosimilar sponsor turns its manufacturing process over and participates fully in the patent dance, it could take up to 250 days before commencement of any substantive litigation, but on a fewer number of patents.

Because a biosimilar sponsor will not be certain which patents a biological reference product sponsor may assert until the patent dance, biosimilar sponsors can and should proactively monitor the patent landscape by commissioning patent specialists to search and analyse potentially relevant patents. This will be money well spent for many reasons. First, management will want an accurate assessment of the potential risk. Second, it allows one to more efficiently focus its research and development efforts (i.e., to avoid potential infringement). Third, it provides a better understanding of one’s competitors.

Patent litigation under the BPCIA must take place in a Federal district court because that is the only forum in which a biosimilar sponsor may be found to infringe a patent. But that is not the only avenue available to biosimilar sponsors who seek to challenge a patent outside the confines of the Federal district court. Sponsors may challenge the validity of a patent using a process called an Inter Partes Review (IPR) that takes place before the US Patent and Trademark Office (PTO). This process, while more complex and involved, is analogous to European opposition proceedings.

There are several potential benefits of an IPR in the biologic and biosimilar arena. First, an IPR can be filed earlier in the product development process than litigation, because unlike the BPCIA, there is no need to wait for the FDA to accept an application for review before the process begins. The process is also typically completed faster than district court litigation. Second, the overall cost of an IPR is far less than the cost of district court litigation. Third, some of the legal standards that apply in an IPR are different than in federal court and this can provide an advantage to a challenger. For example, the burden of proving unpatentability at the PTO is by a preponderance of the evidence, which is a lower burden than the clear and convincing evidence standard required to prove invalidity of a patent claim in district court.

Biosimilar product sponsors should strongly consider the IPR process to help pave the way to market entry. Indeed, several biosimilar applicants have taken advantage of this option and have commenced proceedings. This number is expected to grow as more and more biosimilar sponsors seek to enter the market.

Brian A. Tollefson is a partner and Seth E. Cockrum is an associate at Rothwell, Figg, Ernst & Manbeck. Mr Tollefson can be contacted on +1 (202) 783 6040 or by email: btollefson@rfem.com. Mr Cockrum can be contacted on +1 (202) 783 6040 or by email: scockrum@rfem.com.

Brian A. Tollefson and Seth E. Cockrum

Rothwell, Figg, Ernst & Manbeck