Big Pharma’s Newest Headache: Rival Drugmakers
The world’s best-selling drugs face new competition
One of big pharma’s most lucrative markets is starting to attract a crowd.
Drugs known as TNF inhibitors, used to treat maladies such as rheumatoid arthritis, have long been among the industry’s best sellers. Major brands include AbbVie’s Humira, Amgen’sand Pfizer’s Enbrel and Johnson & Johnson’s Remicade.
These drugs have been a blessing for pharma investors. Analysts expect the medications will account for more than $8 billion in fourth-quarter drug revenue when the companies announce earnings starting next week. Humira, the world’s best-selling drug, regularly accounts for more than half of AbbVie’s total revenue.
But U.S. competition is set to heat up. That includes new branded drugs as well as biosimilar drugs—similar versions of complex biological drugs that sell for a discount to the branded version.
Pfizer and Celltrion launched a biosimilar for Remicade late last year at a 15% discount to the Remicade list price. The Food and Drug Administration has approved biosimilar versions of Enbrel and Humira, although those launches haven’t yet taken place. A host of competitors are developing biosimilars of their own.
Meanwhile, Sanofi and Regeneron are likely to bring their new rheumatoid arthritis drug, sarilumab, to market later this year. Sarilumab showed greater efficacy than Humira in one trial that Sanofi and Regeneron conducted.
There are reasons to think the incumbent products won’t immediately face a steep decline. For starters, legal challenges have delayed biosimilar launches. Amgen said last fall it doesn’t expect to launch its Humira biosimilar in 2017 as a result.
These drugs also have years of real-world treatment success to their credit. Doctors are comfortable with prescribing them. It remains to be seen whether doctors will prescribe biosimilars as freely.
And on the branded front, sarilumab is awaiting FDA approval for just rheumatoid arthritis. The older drugs are approved for several other major indications.
However, investors shouldn’t get too comfortable with the idea that the good times won’t ever slow down. As more competition hits the market, the temptation grows to offer more rebates and discounts to maintain market share. That can cause revenue to drop even if a given drug’s market share is held constant. These drugs are important enough to the industry that small dips in sales can hit share prices.
This risk isn’t merely theoretical. While a price for sarilumab won’t be announced until regulators approve the drug, Regeneron Chief Executive Leonard Schleifer told investors at a conference last week that to compete in such a well-established market, his company would consider using price “as a weapon.” Those comments came before President-elect Donald Trump vowed to crack down on high drug prices at a news conference.
At a moment when the health-care industry’s attention is focused on the murky future of health-care policy, investors shouldn’t overlook the potential risks posed by old-fashioned competition.