Teva's Schultz Sees Stability Ahead for US Biosimilar, Generic Marketplace

The rebating landscape is among the factors that have made it tough for biosimilars to penetrate the US marketplace, but the launch of its biosimilar rituximab, Truxima, shows that Teva Pharmaceuticals has learned to navigate the system, the company’s chief executive officer said during his presentation at the 38th annual J.P. Morgan Healthcare Conference Monday.

Kåre Schultz took the audience through a review of Teva’s restructuring over the past 2 years, which called for dumping $3 billion in spending, trimming 12,000 employees, and selling or closing 13 manufacturing sites to address the company’s debt load. With the bad news out of the way, Schultz said, things are looking up for the leader in generic drug manufacturing.

For Teva, it’s “very interesting that we are now getting more into the biosimilar space,” he said.

Biosimilars have made less of an impact than they have in Europe “most likely due to the lack of understanding of the whole commercial setup, and what it takes to penetrate the US marketplace due to the complexity of rebating and contracting and so on,” Schultz said. An analysis published in the last week found that the legal barriers to market entry have hurt biosimilars uptake in the United States, compared with Europe.

Teva, Schultz said, has the volume and the contacts to overcome these challenges, as evidenced by the Truxima launch, which came in November 2019 at a 10% discount to Rituxan, the reference drug.

“I said at the previous third quarter announcement that we were aiming for double-digit share in this marketplace and sustainable profitability,” Schultz said. “We are not trying to take away everything, but we wanted the fair share of the market at a reasonable profitability, and I think that's exactly what we're going to prove with Truxima and future biosimilar launches.”

In recent years, official FDA policies have encouraged growth in the biosimilars market, but Schultz offered a different take. “There's a strong future, the way I see, it for both traditional generics and biosimilars in the US marketplace,” he said. “The pricing has now stabilized this debt spiral to the bottom, which got ignited by FDA approving more [abbreviated new drug applications] and by Indian and Chinese players getting into the marketplace; that has all stabilized. So, now we have a stable supply-demand situation working to the benefit of patients and the manufacturers.”

During the question-and-answer period, he elaborated on the dynamics of a biosimilars launch. “We see a stabilization of the margins in US generics, and we see biosimilars having, you could say, a slightly higher margin,” he said. “If you launch first with a chemical compound, you have a very good margin in the beginning and then it slows down pretty fast if you get a lot of competition.

“On biosimilars, you typically get less competition, your launch margin is probably little less than you could have on a traditional generic, but it stays longer because the pricing is much more stable due to less competition in that field and the fact that the barriers of entry to biosimilars are a lot higher.”

“Looking sort of into the future, we think that the basic supply and demand in US generics and biosimilars are favorable and are stable. That doesn't mean that we'll see a dramatic increase in margins, but we do believe that the plans we have for our whole manufacturing footprint will result in some improvements on the gross margin,” he said, adding that there will be more specifics during the company’s investor call on February 12, 2020.

Schultz chided media coverage of the pharmaceutical industry’s high prices and “taking advantages” of patients, saying that “the hard facts of the generic industry in the US is that it's actually the opposite that's taking place. The annual saving from generics and biosimilars in the US is around $300 billion. Teva alone supplies products with an annual saving of around $43 billion.”

“So,” he said, “the idea that generics are not sort of helping make pharmaceuticals and medicines affordable is basically flawed and not correct.”

Unmentioned was the lawsuit that 44 state attorneys general filed against Teva in May, which accused the drug maker of pricing fixing. Teva has denied the states’ allegations. Humana filed its own price-fixing claims in October.

Teva and Celltrion have also developed a biosimilar for trastuzumab, Herzuma. The companies settled litigation in July 2019 with Genentech, maker of the reference product, Herceptin. No US launch date for Herzuma has been disclosed.