The biosimilars dance:
How drugmakers game the US patent system

When the primary patent on a blockbuster drug expires, affordable generic or biosimilar competition is expected to balance the market, offering relief to patients who could not afford the high price tag associated with the brand-name drug.

However, in reality, this is not always the case.

Major pharma companies use an extensive array of legal manoeuvres to keep competition at bay for years, if not decades, after the first licensure expires. These “patent games” come in many forms, each contributing to the stunted growth seen in the US biosimilars market, compared to its international counterparts.

According to The Initiative for Medicines, Access & Knowledge (I-MAK), three drugs – Humira, Eliquis, and Enbrel – launched in Europe an average of 7.7 years before their belated US entries, costing American patients an estimated $167 billion during that competition gap.

While generics manufacturers are well prepared to navigate the challenges involved in getting copycat drugs from approval to patients, in the growing biologics space, the path to market is far more complicated for biosimilars.

As more blockbuster biologics start facing patent expirations, Pharma’s efforts to protect their exclusive pricing power are coming under heightened scrutiny.

Generics vs biosimilars

When the first biosimilar therapeutic launched in the US back in 2015, the news was heralded as the start of a tectonic shift in pharma. Albeit the decision came almost a decade after the European Medicines Agency approved the first biosimilar in Europe, the news of a “generic” copy of Amgen’s cancer drug Neupogen (filgrastim) paved the way for an entire class of costly drugs to enter the US market.

Yet, despite being touted as cost-effective alternatives to biologic drugs, biosimilars have faced significant challenges in gaining market share in subsequent years. According to Goldberg Distinguished Professor of Law, and Director of the Center for Innovation at the UC Law San Francisco, Professor Robin Feldman, a decade after the Biosimilars Act, only 18 biosimilars corresponding to seven biologic drugs had entered the US market as of 2020. Even by 2023, just 27 biosimilars for 11 biologics had launched.

UK leader of Pharma and Life Sciences at PwC, Stephen Aherne, highlights that biologics, including advanced therapies like cell and gene therapies, now make up nearly 50% of the drug development pipeline. In fact, many of today’s blockbuster drugs, including Merck’s Keytruda and BMS’ Opdivo, are biologics. However, whereas generic drugs for small molecule therapeutics are a ubiquitous part of the industry, for biologics, the emergence of non-brand name options has been dramatically slower.

There are many reasons for this disparity. Primarily, there are stringent regulatory requirements for biosimilars. Unlike small molecules, which are clinically like-for-like replicas of a brand-name drug, biosimilars (once known as bio-generics) cannot be exact replicas due to their large, intricate molecular structure and manufacturing variations. “They are never exactly the same,” explains Aherne.

Consequently, biosimilars must demonstrate that their product is “highly similar without meaningful clinical differences,” says Feldman; however this requires clinical trials and development, which, according to Pfizer, “may take five to nine years and cost more than $100 million, not including regulatory fees.” Compare these numbers to generics, which take approximately two years to develop and cost between $1-2 million, and you begin to see the problem.

Further complicating biosimilar adoption is the “interchangeable” subcategory requiring switching studies to prove alternating use doesn’t diminish efficacy or increase risk.

“With US generics, the pharmacist can substitute for a prescription that has the brand without contacting the doctor,” explains Feldman. “With biosimilars, the pharmacist can only substitute without contacting the doctor for the subcategory of interchangeables. Even then, only if there’s a state law permitting it.”

At the time of writing, only seven US biosimilars have achieved this holy grail of interchangeable status.

Ultimately, Feldman laments the “deeply disappointing” market penetration and price reductions for biosimilars, describing it as “more of a trickle than a waterfall.”

The biologics patent dance

In the US, biologics are granted a 12-year period of exclusivity from the date of first licensure. On paper, that sounds like a long time. This exclusivity is crucial, as it compensates for the extensive costs and risks associated with the development of biologics; however, when you account for the time needed to develop the drug after the initial discovery, which can be upwards of 10 years, by the time the product reaches patients, the exclusivity period can be nearing its end.

But as many pharma companies have discovered, there are ways to game the system to extend exclusivity beyond a product’s initial protection term. Key strategies include “evergreening”, which Feldman defines as “artificially extending the period of monopoly from the core patent rights”, and “patent thicketing”, which involves accumulating secondary patents to artificially extend the monopoly period of time on aspects such as dosage forms, manufacturing methods, or minor molecular modifications, elements that can make a big difference in biologics.

In the biologics space, companies have been known to file for hundreds of patents on a biologic drug, with large swathes of such patents filed after the drug has been approved. I-MAK argued in a 2023 report titled “Overpatented, Overpriced”, that patenting activity today “extends well beyond the time-limited monopoly intended by the Constitution”, with drugmakers filing more than 140 patent applications on average per drug.

“Patent thickets can also serve to deter potential competitors from even developing a competing version of a patent product if they feel the patent barriers are too difficult to navigate. In both cases, competition is affected and consumers end up paying higher prices for longer during the branded drugmaker’s extended market monopoly,” explains I-MAK founder and CEO, Tahir Amin.

Even if a company can afford the costs and resources needed to develop and market a biosimilar, it first must navigate a minefield of dispute resolution in a process known as the patent dance.

“At the heart of the biosimilar entry process is the patent dance,” says Feldman. “With the patent dance, the brand and the biosimilar follow an intricate structured set of steps to exchange information about patent rights that the brand could assert against the biosimilar.

“If a biosimilar company wants to enter the market, it has to answer four simple questions. What’s the drug? How do you make it? What patents apply? When do those patents expire?” Feldman explains. “These should be relatively simple to answer under the current system. They’re not.”

The challenge is that the brand does not have to publish patent information until after a biosimilar has requested approval, and it doesn’t have to submit information unless the parties reach certain stages in the processes. As a result, Feldman explains, companies face an information desert where, “the biosimilar company has to enter in the dark, in terms of patent rights.”

Cushioning the fall

From a business perspective, it makes a lot of sense for pharma companies to employ aggressive legal tactics to extend exclusivity for as long as possible, as they ultimately face significant revenue declines once biosimilar competition enters the market. AbbVie, maker of the blockbuster biologic Humira and infamous patent chaser, provides a stark example. Although Humira sales reached $20.6 billion in 2021, its revenue dropped by 36.2% in Q3 2023 as its exclusivity erosion accelerated.

Industry analysts expect company-wide revenue to decline for at least a year due to Humira biosimilar competition. Executives have even walked back earlier predictions of growth returning in 2024, indicating sales may remain sluggish. As Aherne explains, “Typically, whether it’s a patent expiry date, or the data exclusivity, or the market exclusivity period, it allows for competition in the space…the more competitors… it’s going to typically drive the price down.”

The impact of biosimilar entry can be severe but more gradual compared to small molecule generics. Take Pfizer’s cholesterol-lowering drug Lipitor, for example. Once heralded as the pinnacle example of a blockbuster drug, Lipitor held the top-selling drug spot for many years. That was until 2012 when Pfizers’ revenue fell from $68 billion to $59 billion after generics launched for the statin. In contrast, AbbVie is forecasted to retain over one-third of its 2022 US Humira sales in 2024 and over $2 billion through 2030, according to Evaluate Pharma.

This underscores why branded firms vigorously pursue patenting tactics to delay competition. As I-MAK states, “Humira’s patent thicket fostered a legal environment perfect for pay-for-delay” settlements with biosimilar makers. Despite its primary Humira patent expiring in 2016, AbbVie continued aggressive patenting, accumulating a thicket of at least 166 granted patents, according to Amin.

“Notably, two-thirds of AbbVie’s total US revenue earned on Humira since the drug was approved, was made in the additional seven years of monopoly after its main patent expired,” he explains.

While financially rewarding for AbbVie, garnering an estimated $100 billion post-patent expiry, such practices directly oppose societal interests of affordable access that Feldman highlights.

“This is certainly manipulation of the existing systems. However, pharmaceutical companies are profit-making,” she says.” If a CEO of a pharmaceutical company were to stand before the board and say, ‘I’m going to lower prices, because it’s the right thing to do,’ one would see a new CEO shortly.”

As patent cliffs loom, all eyes on Big Pharma

With blockbusters such as Keytruda and Opdivo facing patent expirations before 2030, scrutiny on pharma’s exclusivity games will likely intensify, particularly in the run up to the US presidential election in November. But how can we begin to unravel the tangled web created by the current system to encourage innovation in biosimilars?

“Markets thrive on information,” says Feldman. “For a robust biosimilar market, brand companies have to put their rights into a public data set and update changes over time.”

Acknowledging that this would likely be rejected by brand companies due to the sheer number of patents in existence, Feldman offers an alternative, which would require designating a restricted patent list for biosimilar challenges at approval. This “one-and-done” approach would enhance transparency, she says.

Ultimately, she argues that regulatory reforms are essential to balance innovation incentives with affordable access. “It’s society’s job, it’s government’s job to make sure company incentives align with ours,” Feldman states. “If not, the result is skyrocketing prices and difficulty accessing medications.”

In recent years, attempts to curb the costly and time-consuming switching study requirements for biosimilars to achieve interchangeability have tried, and failed, to make an impact. Most notably Republican Senator Mike Lee’s proposed original (and subsequently amended) Red Tape Elimination Act, which did not pass Congress. However under the combined spotlight of a presidential election and a rapidly approaching patent cliff, we are likely to see further proposals to change the system in the near future.

Whatever the outcome, the decisions made over the coming years will set a precedent for the future of biosimilars. And for the millions of patients priced out of potentially life-saving treatments by patenting gambits, the stakes are very high.

Eloise McLennan is the editor for pharmaphorum’s Deep Dive magazine. She has been a journalist and editor in the healthcare field for more than five years and has worked at several leading publications in the UK.

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The biosimilars dance: How drugmakers game the US patent system