Health

Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

2017 or 2022: That five-year difference could decide whether the pharmaceutical industry falls off a disastrous patent cliff in the next few years or enjoys a prolonged bunny slope beforehand.

2022 is when AbbVie says anti-inflammatory treatment Humira, the best-selling drug in the world, will first face generic competition in the U.S. 2017 is when Amgen wants that competition to begin. It filed for FDA approval of a copycat version of Humira last week and is pushing the legal system for a relatively quick launch. Amgen is making a big bet on "biosimilars" -- close but inexact versions of biologic drugs, which are treatments made with living cells as opposed to mixed chemicals -- even as it faces the same threat to its own bestselling drugs. In the fight over Humira alone, billions of dollars and the future of two very different strategies are at stake.

AbbVie has focused on doing its utmost to protect Humira, while chasing successors through acquisition and research. Amgen is playing both sides aggressively. It's fighting simultaneous lawsuits against three companies to protect its own products against biosimilars, while trying to get five copycat drugs targeting hugely lucrative medicines to market by 2019. If regulators and judges favor biosimilars, Amgen will have a far softer landing.

Beginning the Patent Dance
Amgen's share price jumped after submitting a Humira copycat to the FDA
Source: Bloomberg
Intraday times are displayed in ET.

Humira is by far the most important drug threatened by biosimilars. It's projected to do about $14 billion in sales this year, a billion more than Amgen's four biosimilar-threatened drugs combined. AbbVie projects extreme confidence about its ability to protect it. But the moment a Humira biosimilar gets to market in the U.S., it's going to be a watershed for the industry. If it happens quickly and is embraced by physicians, it will be a sign that no drug is safe.

The industry-wide impact in the U.S. will be large. The first big patent cliff, affecting Pfizer's Lipitor and other blockbuster drugs starting in 2011 and 2012, will cost firms an estimated $127 billion through 2016, according to IMS Health. The next cliff could be even more costly for drugmakers: Pharmacy benefit manager Express Scripts has predicted that just 11 biosimilars could result in $250 billion in lost revenue for the original makers of the drugs (which, on the upside, translates into savings for the health care system) by 2024. Right now, consensus analyst forecasts compiled by Bloomberg are fairly sanguine about the outlook for sales, with a few exceptions. They could use a bit more pessimism.   

Under the Biosimilar Gun
Prior and forecasted sales for drugs with biosimilar competition on the horizon
Source: Bloomberg

Firms are filing lawsuit after lawsuit attempting to delay competitors, and have an elaborate web of patents designed to extend drugs' lives. The baroque exchange of litigation and information that results from attempting to get a biosimilar on the market in the U.S. has been coined, depressingly, the "patent dance."

The dance could extend until 2020 or beyond for Humira. Amgen is trying to knock out two of AbbVie's patents on Humira, which could speed things up. We'll know by mid-January if the patent office will conduct a review, and may find out if the challenge works before the end of 2016. 

A wave of other litigation, which has turned several patent dances into patent brawls, will shake out early next year. They will give a sense of how successful companies are likely to be at delaying biosimilars. But for now, the sales declines projected by analysts for biologics are gentle compared to the speedy faceplant a traditional small-molecule drug -- which is simpler to make than a biologic -- suffers when it goes off-patent:

Now There's a Cliff
Source: Bloomberg

The eventual result for biologics will likely be somewhere in the middle. Current sales projections may be overoptimistic; AbbVie's projection of $18 billion in Humira sales in 2020 certainly looks to be. But a Lipitor scenario, where sales drop more than 60 percent within two years, is highly unlikely. Beyond the messy legal environment, it's unknown whether doctors' eagerness to cut costs will overcome uncertainty about these new drugs. Unlike chemically simple small-molecule generics, biosimilars require extensive development and clinical trials, so they're offered at a smaller discount. 

But there are some early signs from Europe that the switch to biosimilars, once they're on the market, can be quite rapid. Pharmacy benefit managers and insurers will be eager to negotiate discounts on expensive drugs.

AbbVie may be able to stretch its Humira patents long enough to find a successor, instead of seeing as much of 33 percent of its sales go down the drain by 2018. But Amgen was smart enough to see the next patent cliff coming and build a parachute. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Max Nisen in New York at mnisen@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net