Executive Summary
- What’s new: FDA has updated its policy to reduce requirements for demonstrating biosimilarity, emphasizing analytical assessments over clinical studies for therapeutic proteins. FDA has also promised to drop the need for switching studies for interchangeable products.
- Why it matters: These changes allow biosimilar companies to submit products to FDA sooner, potentially accelerating market entry and increasing biosimilar adoption, but challenges remain due to patent issues and state substitution laws.
- What to do next: Biosimilar and reference product manufacturers should consider adjusting development and patent litigation strategies to account for shorter development timelines and consider earlier resolution of patent disputes to facilitate timely product launches.
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The Food and Drug Administration (FDA) recently announced changes to its policy on when a comparative efficacy study would be required to demonstrate biosimilarity. In essence, FDA is lopping off the top of the “biosimilarity pyramid,” which was used for years to explain the requirements for establishing biosimilarity. Biosimilar sponsors have been arguing for some time that the comparative analytical assessment, especially for therapeutic proteins, is sufficiently sensitive to characterize biosimilars and makes clinical studies unnecessary. To put it simply, a protein is a protein. If one can prove through in vitro scientific testing that the biosimilar protein is identical to the reference product protein, clinical studies are irrelevant. FDA has finally accepted this argument and issued guidance saying as much.
FDA has also indicated that the Agency will be finalizing guidance on interchangeability, codifying its policy that switching studies are no longer needed to demonstrate interchangeability. This policy has already been quietly implemented over the past few years. Sponsors of biosimilar products would find, upon submission, that the Agency was open to designating them as interchangeable based on the evidence provided, even though they did not seek the designation. We have seen an automatic interchangeability designation for most of the biosimilar products licensed in the past few years. At its press conference, FDA declared that it does not need Congress to change the Public Health Service Act for the Agency to independently declare biosimilar products interchangeable based on the evidence submitted. In other words, FDA has concluded that the evidence to demonstrate biosimilarity also establishes that the product “can be expected to produce the same clinical result as the reference product in any given patient.”
Changes to Biosimilars Pathway Are Intended To Mirror Generics Pathway
In the press conference announcing this policy change, FDA Commissioner Marty Makary and Health Secretary Robert F. Kennedy Jr. stated that their goal is to make the biosimilar pathway more akin to the pathway for small-molecule generics, which generally do not require clinical studies. Makary also made a pointed statement about biosimilar pricing in remarks at the Association for Accessible Medicines GRx+Biosimilars conference. He said, “Once a biosimilar comes to market, I do ask that you lower the price significantly beyond the biologic price. Sometimes, when there’s one or two biologics on the market, we don’t see the prices come down that much. There’s sometimes an implied price collusion that goes on. We want to see lower drug prices for everyday Americans.”
The promise of biosimilars to reduce costs has not yet been fully realized in the way the administration envisions. This is due to multiple factors, many outside of FDA’s control. While the changes to eliminate comparative efficacy studies will allow companies to submit biosimilar products to FDA sooner, there are distinct differences between the biosimilar and generic pathways that leave challenges for biosimilar products to drive down health-care costs in the same way as small-molecule generics.
First, substitution at the pharmacy for small-molecule generics is automatic for A-rated generics under most insurance plans. The pharmacist does not have to ask the patient’s consent before substituting a generic as long as FDA has deemed it therapeutically equivalent. The same is not necessarily true for biosimilars. Many state laws require patient consent for biosimilar substitution and prevent automatic substitution of even interchangeable products without additional steps. For FDA’s plan to work, interchangeable products would need to be treated by insurers and state boards of pharmacy in the same way as A-rated generics.
Second, the regulatory approval process for generics includes a 30-month stay during which the generic and brand sponsors can resolve any litigation related to the patents listed in the Orange Book for the branded drug. The biosimilar pathway involves no similar process. For biosimilars, FDA approval is divorced from the patent litigation process, so FDA can license a biosimilar or interchangeable product after the reference product exclusivity period has expired even when the patent issues have not been resolved. This means that even though a biosimilar or interchangeable product has received FDA’s stamp of approval, it may not be able to launch until patent litigation is resolved. Because biologics are generally more complex to manufacture and administer to patients, branded biologics tend to be protected by a significantly higher number of patents (sometimes referred to as “patent thickets”) that make challenges more complex. This is a marked difference from the process for small-molecule generics, which generally do not receive FDA approval until the generic can establish that patent litigation has been resolved or settled. This allows generics to launch soon after approval, whereas biosimilars may not launch for months or years after licensure, depending on how the patent litigation process plays out. As the biosimilar pathway matures, with biosimilar pipelines beginning earlier and development timelines becoming shorter, biosimilar product launches may begin to look more like those of generics. For example, if biosimilar applications are routinely filed after the four-year data exclusivity period for the reference product, patent issues may be resolvable within the eight-year market exclusivity period so the biosimilar can launch soon after approval.
In addition, Makary’s remark that if there are one or two biologics on the market the price does not go down is also true for generics. The race-to-the-bottom pricing pressure for generics also tends to happen after six or more products enter the market, although prices tend to reduce substantially as soon as two more generics launch. It may be unfair for the commissioner to blame biosimilar manufacturers for higher prices when the issue may be that there are insufficient numbers of biosimilars on the market to drive prices down. Even for molecules where multiple biosimilars or interchangeable products are licensed, only a fraction of them may be on the market and they also may not be readily available to patients due to formulary placement or state law restrictions. For some older molecules where the patent landscape has cleared, we have seen significant savings with multiple biosimilar and interchangeable products launched.
Benefits for Therapeutic Proteins vs. More Complex Biologics
There is no question that the elimination of comparative efficacy studies will have an effect on the biosimilar market for therapeutic proteins like monoclonal antibodies (MAbs). The process to develop and comparatively analyze these products has become clearer and better established since the passage of the Biologics Price Competition and Innovation Act in 2013. For the smaller MAbs that are well-understood by FDA we may see a development process closer to that for generics in the sense that biosimilar manufacturers may be able to develop and test these products to seek FDA approval along a shorter time frame. While that does not resolve the patent litigation issue, the time and cost of development for biosimilar MAbs and other therapeutic proteins is going to get shorter. For the manufacturers of the branded product that were counting on a few extra years of de facto exclusivity, those days may be over.
While we have not yet seen this play out publicly, the shorter time frame for development of biosimilars also creates more of an incentive to quickly resolve patent litigation to get to launch, which could also include settlements with defined entry dates. This can be a win-win for manufacturers of biosimilars and reference products. A settlement allows for a predictable launch date and could also be timed to coincide with the anticipated year of negotiation for the branded drug under the Inflation Reduction Act (IRA). Indeed, the majority of drugs that trigger the negotiation provisions under the IRA are biologics as they tend to be more expensive than their small-molecule brethren and treat conditions that are likely to afflict the Medicare population. One way to avoid IRA negotiation is to have generic or biosimilar competition. A settlement that allows for biosimilar competition just before IRA negotiations benefits both the reference product and the biosimilar in that the price of the reference product may not fall as precipitously, leaving room for a more profitable discount for the biosimilar. As IRA negotiations advance and biosimilar development speeds, we may see more creative settlements along these lines.
While the streamlined process that FDA announced will benefit therapeutic biologics, such as MAbs, it is not going to change the biosimilar development process for all product types. We have not yet seen a wave of biosimilars for cell and gene therapy products or more complex proteins — but it is only a matter of time. The guidance makes clear that, for those types of products, comparative efficacy studies will likely be required. In addition, one unique aspect of the biosimilar pathway that is different from the generic pathway is that biosimilars can be administered via a different delivery mechanism if they are the same dosage form and route of administration as the reference product. For example, an individually injected product could be developed as a biosimilar via an on-body injector. Or, a vial presentation could be developed as a biosimilar in an auto-injector. For those types of changes, it is not clear that FDA would always waive comparative efficacy studies.
Overall, the changes that are within FDA’s control — in particular the level of evidence necessary to establish biosimilarity or interchangeability — will likely lead to more licensure of biosimilars for therapeutic proteins in the next few years. Manufacturers of branded biologics that have been monitoring biosimilar development programs with comparative efficacy studies and factoring the studies into FDA approval timelines may need to adjust those expectations accordingly.
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.