There are a number of drivers for the growth of the biosimilars market worldwide. Key among them are a shift to chronic diseases like cancer and diabetes, the rising cost of innovator biologics, almost $26 billion worth of biologics going off-patent in the next 10 years, and the evolutionary pressure to merge the boundaries between pharmaceutical and biotechnology companies.
In India the interest in biosimilars is additionally spurred on by multiple factors. First, under the 2005 TRIPS agreement, Indian firms are allowed to manufacture biosimilars to products patented prior to 1995. Second, biotechnology drugs besides insulin are free from the government’s price control act, allowing independence in price setting. Third, an increase in the number of biotechnology parks, some of them publicly funded, have acted as a catalyst for the industry. Finally, there seem to be signs of acceptance of locally manufactured biosimilars among healthcare professionals within the country.
The made-in-India biosimilars market, which comprises domestic sales plus exports, was around $200 million in 2008. It is expected to reach about $580 million by 2012. The size of the innovator biologics market, which is composed of imported drugs, was just a little larger at around $220 million.
Replicating the Pharma-Generics Model
India, due to its expertise in low cost small molecule manufacturing and highly skilled, reasonably priced workforce has had some success in the global small molecule generics marketplace. Various factors have conspired to create a generics powerhouse albeit not without its quality control problems in recent times. These advantages include the ability to manufacture generics at a substantially lower cost than the small molecule innovators, the second largest number of FDA-approved manufacturing plants, strong reverse chemical engineering skills acquired under a favorable regulatory framework, plentiful talent, and a domestic market that is hungry for affordable medicines.
The current theory is that India, in the not-too-distant future, will replicate the success of its pharma generics industry (though small in absolute dollar terms) in the biosimilars market worldwide. The reality may well turn out to be quite different, with a broad and deep chasm that lies ahead.
The Five Bridges to Span
To understand if Indian biosimilars will succeed globally, we need to clearly understand how wide the chasm is and the bridges that must be crossed: affordability, assets, approvability, acceptability, and availability.
All of them are equally important to success and need to be inspected to assess the level of effort, financial requirements, and time needed to cross the chasm. The ability to safely span these gaps will determine the fate of the Indian biosimilars industry.
Bridge 1: Affordability
The ability of the population to pay for biosimilars has to be seen from both a domestic and a global perspective. Almost 75% (approx 848 million) of India’s population lives in rural areas. Here affordability and awareness of even the basic medical care is suspect. Additionally, only 1% of the population has an income greater than $20,000 per annum. To make matters worse, 971 million people (86% of the population) have no health insurance.
Biosimilars like erythropoietin, G-CSF, and streptokinase that are currently manufactured and sold in India can be anywhere between 25% to 50% cheaper than the imported innovator products. While not having the larger price differential that is seen between small molecule innovator drugs and their generics, this is still a reasonable saving.
Compared to traditional generics, the population that can currently afford Indian-made biosimilars is a thin sliver. This, however, affects pricey innovator biologics firms who may plan to sell their products in India more than local companies.
The key question to ask about the Indian markets is not whether a biosimilar will be a preferred substitute to an innovator biologic but whether a small molecule generic will be the preferred substitute to a biosimilar.
In markets outside the country, the potential does exist to sell Indian biosimilars in unregulated and semiregulated markets. The approval process in regulated markets, though, may prove to be larger barriers than anticipated. Undoubtedly, the higher cost of clinical trials and other requirements to meet all the regulatory approvals will erode the price arbitrage that Indian biosimilars currently possess compared to the innovator biologics.
Bridge 2: Assets
There are two key assets that must be in place for success in the biosimilars industry: research manpower and manufacturing infrastructure.
Research Manpower – India is reputed to produce a large number of Ph.D.s: almost 7,700 in 2007—the same number as the U.S. and slightly shy of China figures. Around 35% of Indian graduate students go overseas for their Ph.D.s, however, due to inadequate academic infrastructure, lower quality of faculty, and poor academic resources in the country.
A trickle of a reverse migration from the hallowed halls of western universities and research labs of biopharma corporations, however, has resulted in a slow and steady build up of overseas-trained talent in the country. The net impact is that while Indian expertise for gene manipulation and fermentation exists domestically, capabilities in cell-line development and process development are still nascent. There is a reasonable amount of R&D activity, however, around cancer therapeutics and diabetes.
Manufacturing Infrastructure – There are five biopharmaceutical manufacturing clusters that seem to be emerging around the country: New Delhi, Ahmedabad, the Mumbai-Pune corridor, Bangalore, and Hyderabad. The Indian government too is attempting to create an environment conducive for the growth of the industry. The Biotechnology Industry Partnership Program, the Biotechnology Industry Research Assistance Council, biotech parks, and some tax incentives are all designed to encourage investments and progress in this sector.
With a 30% expected CAGR, especially from exports into foreign markets, investments specifically into biosimilar manufacturing capabilities are increasing. Significantly more will be needed, however, to build the scale, research capabilities, and the manufacturing ecosystem needed to create a global powerhouse in biosimilars.
While there are almost 300 biotech and biopharma companies in the country, only 40–45 companies focus on biologics, of which around 16–20 companies market biologics (many imported), but only 7–10 firms actually produce biosimilars. Contract manufacturing so far appears to be limited to insulin. There are roughly 40 biologics marketed in India, but only around 25 of them (all biosimilars) are manufactured in the country.
Bridge 3: Approvability
A clear regulatory pathway for biosimilars in India is likely to be introduced in 2010. Currently, Indian regulators consider biologics on a case-by-case basis and recommend extensive clinical trials only if deemed essential. Phase I and Phase II trials are typically not required, since the Drug Controller General of India (DCGI) provides approval based on global clinical trial data.
A large number of regulatory bodies are involved in the approvals of biosimilars in India. These include the Institutional Bio Safety Committee, the Review Committee on Genetic Manipulation, the Recombinant DNA Appraisal Committee (RDAC), the DCGI, the Central Drug Standards Control Organisation, and the Genetic Engineering Approval Committee (GEAC.) A single umbrella organization, the National Biotechnology Regulatory Authority, is now also being set up.
The regulatory pathway for biosimilars is still unclear in the U.S. As the fog lifts, it will be critical for Indian companies to adapt to the evolving landscape. The ability to understand, adjust, and comply with the regulatory and administrative requirements in the U.S. and the EU will be the acid test of the deftness of Indian biosimilar players.
Bridge 4: Acceptability
Will biosimilars that are made in India ever be recognized and accepted in the advanced western markets that are highly regulated? Will these biosimilars meet the stringent quality, safety, and efficacy norms that are hallmarks of reputable international biopharmaceutical brands?
In an effort to climb the quality ladder and imbibe significantly better research skills, Indian players have started collaborating with public scientific institutions at home as well as academics overseas. To get a grip of the complex regulatory processes, a number of Indian companies have also set up strategic alliances and joint ventures with foreign biopharma firms. Additionally, to ensure direct access to a marketing and distribution channel, some have acquired companies in regulated markets.
The key to acceptability, however, lies in the answer to the question: Will physicians and patients accept a biosimilar that is made in India? The growth of locally produced biosimilars in India as well as in certain less-regulated markets shows that acceptability of the Indian brand is reasonable, allowing fairly rapid penetration.
In the EU, prescription and interchangeability of biosimilars will be the physicians’ responsibility. The regulatory body might even compel physicians to prescribe branded biosimilars only. This will mean that Indian biosimilar firms will have to invest substantially in building relationships with physicians to improve brand recognition and recall as well as with key constituents in the government-run healthcare systems.
In the U.S. similar constraints will be in existence with respect to working with physicians. Additionally, Indian companies will have to develop brand-recognition with the insurance firms.
Bridge 5: Availability
Biologics, unlike most chemical generics, are highly temperature-sensitive. This poses tremendous distribution challenges. In the regulated western markets the presence of extensive end-to-end cold-chain distribution infrastructure ensures that fragile biological material is delivered in perfect condition.
Unfortunately, this cold-chain logistics network is weak in India. While the urban distribution network is more reliable, albeit by no means perfect, the rural distribution network is fragmented. Primary distribution from the manufacturer’s warehouse to the regional distribution center is by air. The secondary distribution to and from the local distribution center is by road and thus unreliable as well as irregular.
Bridging the Chasm
As Indian biosimilar manufacturers prepare to cross these five bridges, it would be worthwhile for top management to ponder the challenges that lie ahead. Developing a set of strategies that allows them to bridge the chasm of affordability, assets, approvability, acceptability, and availability should clearly be on the top of their agenda.
The path they seek to travel over the next few years could very well be the single biggest hurdle that Indian biopharma will ever face. If executed with strategic foresight, however, as well as meticulous planning and patience, it could lead to a bloom that they can fully harvest.