Amgen Inc., the Thousand Oaks biotech giant, has for decades sold some of the nation’s top-selling drugs with little competition.
That ended Friday as the FDA approved a competitor’s knockoff version of Amgen’s chemotherapy recovery drug, Neupogen, heralding a new era of fierce competition — and lower prices — in the multibillion-dollar biologic drug market.
The FDA’s decision was the first approval of a so-called biosimilar in the U.S., a move set in motion in 2010 by Affordable Care Act provisions designed to cut the cost of biologics to patients.
Biologics, unlike chemical drugs, are made from living cells, blood or tissue. They have until now enjoyed U.S. regulatory protection from copycats, or biosmilars, because biologics were not included in the 1984 law that cleared the way for low-cost generic pharmaceuticals.
The changes are upending the U.S. market for these drugs, potentially stripping Amgen and other major biologic makers of billions in revenue — but they offer huge new opportunities too. Many companies are already selling successful biosimilars overseas.
The newly approved knockoff — Zarxio, made by Sandoz, a unit of Novartis — is only the first of many Amgen drugs being copied. Sandoz also is pursuing FDA approval of two more Amgen drugs: Neulasta, which like Neupogen boosts white blood cell counts, and Enbrel, which treats rheumatoid arthritis. Another company, Hospira Inc., has applied to the FDA for approval of a biosimilar version of Amgen’s anemia drug Epogen.
Those four drugs generated nearly $11 billion in U.S. sales for Amgen last year, according to Amgen financial statements.
Amgen’s response? Start copying competitors’ biologic drugs as quickly as possible. Amgen may make as much or more money copying biologic drugs than it loses to the companies targeting its original drugs.
Amgen has plans for nine biosimilars based on competitors’ drugs, with the first landing on the market in 2017 and four more by 2019. Together their sales totaled $52 billion last year.
“The biosimilar market we’re going after is dramatically larger” than what the company stands to lose, said Tony Hooper, Amgen’s executive vice president for global commercial operations.
Founded in 1980, Amgen employs about 18,000 people, 5,000 of them on its sprawling campus 45 miles northwest of downtown Los Angeles. It is a key supplier of high-paying Southern California jobs and one of the largest biotech companies in the world, with about $20 billion of revenue last year.
The company’s size and expertise should position it well in the scramble for biosimilar market share. Biologics are harder to develop and harder to replicate than many chemical-based pill medicines. Amgen has the scientists and the facilities necessary to tear apart other companies’ medications and figure out how to duplicate them, company officials said.
Amgen and Novartis are not the only companies that see the potential for biosimilars. Underscoring their enormous potential, Pfizer in February agreed to pay $17 billion to acquire Hospira, which has built a growing biosimilar business globally and is working to break into the U.S.
Eric Schmidt, a biotech analyst with Cowen & Co. in New York, said Amgen will be a key focus of the changing industry.
“They’re one of the few companies that’s playing both sides of the battle,” Schmidt said. “We’ll see in the next couple of years how it plays out.”
Even with biosimilars now in the U.S. market, Amgen and other biopharmaceutical companies intend to continue developing new drugs. Under the law, they’ll still have exclusive rights to sell newly developed drugs for 12 years. Biosimilars will affect drugs only after their patents expire — as with many of Amgen’s top-selling drugs.
Consumers are expected to benefit from the competition. A Rand Corp. study last year estimated that the new competition would lead to a $44.2-billion reduction in spending on biologic medication by 2024.
The prices, however, won’t drop as much as with name-brand pharmaceuticals and their generic counterparts. Outside the United States, where biosimilars are already common, they have typically sold at a 20% to 30% discount to the original drug. Generic pills, by contrast, often sell at discounts of as much as 90%.
The knockoffs are called biosimilars because it’s impossible to create identical versions, as with generics.
Biologic drugs are complex and protein-based. They usually must be injected by patients. Although they have transformed the treatment of rheumatoid arthritis, cancer and other serious diseases, insurers and consumer advocates have grown increasingly concerned about their high cost.
Neupogen, for instance, can cost $315 to $500 for a single injection. Novartis declined to say how much its version of the drug would cost.
Biosimilars have been available outside the United States for several years. Sandoz sells versions of several biologic drugs — including Amgen’s — in 60 countries. The company reported sales of $514 million of biosimilars outside the U.S. last year, more than any maker in the world.
Amgen has been trying to slow Sandoz’s entry into the U.S. market. It sued Sandoz in October, accusing the company of patent infringement for failing to share its recipe for the biosimilar. The company is seeking a court order that would block the sale of the drug until the lawsuit is resolved. A hearing is scheduled for March 13 at the federal courthouse in San Francisco.
Sandoz denies wrongdoing, saying in a statement that “we disagree with Amgen’s interpretation” of the law.
Amgen decided to enter biosimilars several years ago — the company won’t say exactly when — as it became clear that new regulations would open up new opportunities.
“It was a natural extension of our biologic capability,” said Richard Markus, Amgen’s vice president of global development of biosimilars.
Geoffrey Eich, executive director of external affairs for Amgen’s biosimilars division, gave a “ballpark estimate” for the cost to copy another company’s biologic. It would take about eight years and $250 million, he said, compared with about one to three years and $5 million for most kinds of generic pills.
Amgen identified competitors with expired patents whose drugs treated the same diseases as some Amgen drugs, areas in which Amgen had expertise. Then it ordered the drugs, took them to the laboratory and began the long process of attempting to figure out their biologic recipes.
The new competition is likely to bring down costs, but it’s unclear how much consumers will benefit, as opposed to their employers, insurers and the drug companies. The lower prices for copycat drugs could also limit patient choice for the more expensive originals.
Mariah Leach, 32, a Colorado woman who uses biologics to treat rheumatoid arthritis, said she hopes pharmacies and insurers don’t force her to take a biosimilar version.
“The opportunity to have a less expensive treatment option is fabulous,” she said. “I just don’t want to be put on it without my choice. I don’t want a pharmacy to substitute a biosimilar without telling me, and without telling my doctor, so I know what I’ve been given.”