High-value US insulin market in focus as drug regulator for biosimilar pushes to rein in prices
Globally, the number of diabetes patients is at around half a billion with over 30 million in the US alone, the most sought after market for diabetes care companies, especially those into insulin.
Diabetes is a real problem and a growing one at that. It is a bitter truth confronting the modern world. In India alone close to 73 million people are living with the ailment. Globally, the number is at around half a billion with over 30 million in the US alone, the most sought after market for diabetes care companies, especially those into insulin, a hormone in the body that regulates sugar metabolism.
While prices in India for diabetes medicines are among the lowest in the world, patients who need to take insulin on a regular basis still end up spending on an average Rs 3000 a month and those using insulin analogs - modified insulin for greater efficacy and quicker and long lasting action, taking a hit between Rs 8000 to Rs 10,000 a month. The price in US is several times this.
Today, there are enough stories in the cyberspace on the high insulin price in the US; serious enough to concern the drug regulator in the US. In fact, Scott Gottlieb, the Commissioner of the US drug regulator, the US Food and Drug Administration, in a statement issued just about a month ago points out: Today, insulin list prices regularly increase by double digits annually. In mid-November, the Congressional Research Service reported that the list price of one type of insulin had increased nearly 600 per cent between 2001 and 2015, from $35 dollars a vial to $234. Another study from the Schaefer Center at USC found out that the average US list price of [four insulin categories] increased by 15 per cent to 17 per cent between 2012 and 2016.
Talk to analysts or refer to some investor presentations of innovator companies and they all talk of challenges of operating in this space. They mention competition, a growing anticipation of the market getting increasingly crowded. All of it is expected to trigger increased pricing pressures and shrinking returns on investment. But, there are not many players today. Consider this: It was only in 2016 that the USFDA approved the first biosimilar insulin in the US. Part of the reason is that insulin business is capital intensive considering that it is a volume game and not everyone's cup of tea. Also, the innovator companies - like Novo Nordisk, Sanofi and Eli Lilly- that are fairly entrenched in the market are not likely to give up space to competition. Scott Gottlieb in that statement, which is significant for the policy announcements it makes (we come to that in a moment), also says, "Limited competition in the insulin market has helped keep prices artificially high. Today, according to the Congressional Research Service, three firms (Eli Lilly, Sanofi and Novo Nordisk) control 90 per cent of the global insulin market, and produce all the insulin used in the US."
But, it appears the things could change. The USFDA Commissioner also underlined a major policy shift in dealing with insulin. "Starting March 2020, the approved marketing applications for the small subset of biological products such as insulin and human growth hormone - which for complex historical reasons were previously approved as drugs under section 505 of the FD&C Act - will deemed to be biologics licenses under section 351 of the PHSA (Public Health Service Act)," he pointed out. This transition of biological products currently regulated as drugs to being regulated as biologics will enable, he says, for the first time, products that are biosimilar to or interchangeable with the products to come to market.
So, what does it all mean for biosimilar space that Indian companies like Biocon-Mylan and others want to tap? While it settles the issue of the attractiveness of the market, at least for the moment, given the price scenario in the US, it clearly points towards what we need to watch out for: the ability of the biosimilar players to now monetise the available market as an early mover.
Insulin requires a high upfront investment because it is a large volume game. Eli Lilly, analysts point out, was launched at around 15 per cent discount to the innovator price. In the volumes game, for Biocon and Mylan, which have together invested huge sums - $300 million or thereabouts -what will matter is the extent to which they can monetise the insulin market with their entire pipeline of products. Or the extent to which they can make a dent in the market, where they may have to launch products at discount to gain market share. But, they will still be among the early ones to operate in a scenario where the prices of insulin in US are still higher than those in other markets and therefore are yielding a better return on investment.