Developing World Healthcare Blog

South Korea Emerging as a Leader in Biosimilars

As biologics with $79 billion of revenue lose patent protection over the next four years, biosimilars will emerge and change the biotechnology industry’s competitive dynamics. The increased competition should lead to lower prices. At the same time, biosimilars won’t drive the overnight commoditization of the original product that is typical of small molecules (traditional drugs). As Indian companies have carved out a leading position in the generic drug industry, South Korean companies are poised to take leading positions in the biosimilars industry. These changes reflect the significant differences between biosimilars and generics.

Biosimilars versus Generics: Key Differences

Generic drugs are “copies” of branded, small molecule drugs. In contrast, biosimilars can only be "similar" to the original biologic. The reason (in oversimplified terms) is that the manufacturing processes for biologics involve growing cells, which are very difficult to replicate. Also, generic drugs do not require clinical trials while biosimilars do. As a result, development of a biosimilar is an expensive undertaking. Manufacturing facilities cost US$250 - 400 million, and the required clinical trials cost US$200 - 400 million.

The USFDA doesn’t recognize biosimilars as interchangeable with the reference biologics. As a result, the biosimilar manufacturer must have access to a salesforce to market the product to doctors and payers. The end result is that the U.S. biosimilars market will resemble the branded drug market. Prices for biologics will not drop like a stone as they do when generic drugs enter the market. Ironically, most companies developing biosimilars are multi-national brand drug and biotechnology companies. The development and marketing costs are too high for most generic drug companies to pursue on their own.

South Korea Supplanting India in This Emerging Market

Among emerging markets, India has established a leading position in the global generic drug industry. Now South Korea is emerging as a leading source of biosimilars with Celltrion and Samsung the top players at this early stage of the market’s development. To be clear, India has an active domestic biosimilar industry. The difference is that South Korea is pulling ahead on the global stage. Only three Indian companies have announced plans to develop biosimilars for the developed world. All three rely on partnerships with other drug companies (Biocon/Mylan; Dr. Reddy’s/Merck KGaA; and Intas/Apotex).

Celltrion and Samsung Bioepis Are at the Forefront

In particular, two South Korean companies have emerged as leaders in biosimilar development:

Celltrion – The company manufactures a biosimilar for JNJ and Merck’s Remicade (Remsima) that is approved in over 31 countries (including Europe and the U.S.). In the U.S., Pfizer (Celltrion’s partner) has suggested that they will launch the product in late 2016/early 2017 as INFLECTRA. Celltrion also has biosimilars for Herceptin and Rituxan in various stages of development.

Samsung Bioepis – This unit of Samsung has JVs with Merck and Biogen for several products (Enbrel, Remicade, Humira, Herceptin, and Lantus). The Enbrel biosimilar has launched in Europe, and the Remicade biosimilar has launched in Korea (Europe should be soon.) Samsung Bioepis had considered a U.S. listing, but shelved the idea as the biotechnology indices declined. Instead, Samsung may list its Biologic division (which includes Bioepis) in Korea later this year.

Don’t Extrapolate Biosimilars’ Success in Europe to the U.S.

The biosimilar market in Europe and elsewhere is much more developed than in the US. The European Medicines Agency (EMA) has approved 20 products since 2007. Uptake of biosimilars has varied by product and country. In general, uptake is substantially higher (and prices are lower) in countries that use tender systems. Further, uptake is much higher for acute treatments than for chronic treatments.

Uptake in the U.S. probably will be relatively slow for the next few years for several reasons. The FDA hasn’t fully clarified rules around labeling and “extrapolation” of indications from the reference biologic to a biosimilar. Most importantly, there is an absence of clinical trial data that demonstrates interchangeability between the original drug and a biosimilar. Physicians are accustomed to seeing data from two Phase III trials before prescribing any drug. Payers aren’t willing to force biosimilars on doctors and patients at this stage for the same reason. We expect physicians’ and payers’ comfort with biosimilars to increase over time with clinical experience. We expect this situation to change in several years, but the early entrants (such as Samsung and Celltrion) should have a substantial advantage over later entrants.