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Tenders and long term sustainability of biosimilars in Europe.



As we insist on almost all our articles, biosimilars are not an option, but a need. As commented in our presentation last Thursday at Pharma Synergy -Virtual, the top 10 pharmaceutical products launched in 2019 will generate sales, according to analyst consensus, above 20 bn USD in 2024. There are more than 1,100 products and vaccines against cancer, 300 treatments for skin diseases, more than 500 products to treat neurodegenerative diseases, 566 for rare diseases, etc under development. This therapeutic arsenal will make the difference between life and death, or between a certain quality of life and permanent suffering for many people, but at the same time, it can jeopardize the sustainability of health systems in Europe. Biosimilars are one of the few effective measures to reduce costs, as are doing generics.


However, we should learn from experience to create models that are sustainable over time. Coming back to the case of generics, the huge savings needed to push the purchasing model of these products to the limit for the manufacturers. The “winner takes all (WTA)” system, where the best price gets all, which has been imposed in many countries, has proven to produce the highest savings in the short term, as it forces companies to bid as low as possible, so the penalty of being exposed to a zero sales scenario for one or two years. However, it has on many occasions caused the presentation of reckless offers (impossible or exceedingly difficult to meet), leading to a shortage of episodes or even quality problems. It has also made many companies give up, unable to compete for a long time in such an extreme scenario, and generating that in the end the tenders are split between two or three participants and prices stabilize and may even rise again as a result of the lack of competition.



"the final objective of the tender is to make it easier for the pharmaceutical products demanded to be offered at the intended prices, in the quantities required, and meeting all the quality criteria required now and in the future. In short, it is not only about identifying the most suitable model, but also making it sustainable in the medium and long term"

Two years ago, IQVIA proposed a multifactorial definition of a biosimilar market sustainability model for all the stakeholders involved: should generate better and greater access to products for patients, preserve doctor's prescription autonomy and provide adequate quality products at an acceptable price, determining adequate levels of competition. Apparently, the centralized purchasing model through auctions/tenders seems to be the one that offers the best prospects, but for this, some prerequisites should be met:

  • The process should be transparent, regarding the award mechanism and the selection of participants

  • The duration period must be clearly established

  • Should avoid providing any competitive advantage that may discourage competition. As an example, Germany has been considering the bidding price as part of the know-how and such data is not disclosed, which gives the winner an advantage for the next tender.


We should not forget that the final objective of the tender is to make it easier for the pharmaceutical products demanded to be offered at the intended prices, in the quantities required, and meeting all the quality criteria required now and in the future. In short, it is not only about identifying the most suitable model, but also making it sustainable in the medium and long term.


From a commercial point of view, biosimilars are complicated products to handle. On the one hand, up to the present moment, in the EU Top 5 the prescription must bear the name of the product, not just the active ingredient as it happens with generics. As doctors must be informed about the products, direct promotion is required. However, the molecules are well known as having been long in the market, so an intensive SOV (share of voice) at levels comparable with products under patent protection is probably not required.


Active promotion is important if the prescription is to be based on a product name, but how does it will work, if based on tenders? In countries where biosimilars are hospital products like Spain or Italy, can we expect a specialist to prescribe a biosimilar that did not win and therefore might not be available? If the answer is no, does visiting doctors make any sense in the terms we know? The topic is extremely sensitive since the need or not for active promotion will depend on whether the price offered is one or the other. The commercial structure must be correctly dimensioned to ensure a minimum ROI.


Tenders: Is it just a matter of reducing prices?

It seems that what is expected of biosimilars is basically that they contribute to the sustainability of the system generating savings. Not only because they are cheaper, but because the impact of their launch also means that the companies that market the original drugs are forced to reduce prices. In Turkey, the first biosimilar of infliximab reduced prices of the innovative drug (Remicade) by 22%. In addition, Remsima was sold 6% below Remicade, making the cheapest option around 30% below the original. The cases of Etanercept, Adalimumab, or Trastuzumab in Europe show that biosimilars have significant effects on price reductions.


As reflected in the IQVIA report to which we have referred before, the WTA system is the one that generates the greatest discounts in the short term, but there is a reasonable doubt as to whether it is sustainable in the medium or long term. It should not be forgotten that developing a biosimilar can cost many tens of millions of euros, even hundreds. It is not the same to go wrong here than to do it with a generic. Serious mistakes could end up with a company.

For payers, getting fast adoption and deep price discounts as soon as possible is the goal, which is why these types of WTA models are so popular. In times of crisis like the current one, the urgency is even greater. In the following graphs, we can see the differences between the two models with some examples.


For companies, on the other hand, the multi-winner model can be much more sustainable in the medium term since it limits the risk of losing everything in a single bet. A company with a suitable structure can perfectly accept not winning once as long as it can use the experience for a second or third test and guarantee a sufficient number of victories in the end.


Tenders with multiple winners can be designed in many ways: sometimes setting a maximum price proposal, and all those companies that accept and meet the criteria of quality and solvency are accepted. Another option is a limited number of winners accepted, usually 3, those having submitted the most advantageous offers. These three winners can be assigned quotas (for example, 60% came first, 30% second, and 10% the third) or again organize an auction in which only these companies can participate.


The great difference between a “WTA” model and another with several winners occurs when the participating company must decide the price to offer. If the system does not allow “second chances”, the decision to offer a price in the rank is more likely than if it aspires to be “among the three winners”. In the latter case, companies tend to offer a price so as not to be ruled out, which in practice is higher than in the WTA case. This model, less effective in the short term, means that more competitors remain in the market and that they dare to introduce more products increasing competition in the middle term.


Is it possible to propose a value-added service (VAS) in the case of biosimilars?

Recently, an article with the interesting title “tendering and biosimilars, the role of VAS” was published, which reviewed the role of other not strictly economic criteria in the European tendering process and its practical utility. According to this review, national guidelines from most countries recommend that VAS should be taken into account and offer a couple of examples of how certain hospitals in France and Ireland have implemented it. However, the work concludes that to date there are large differences between countries without a harmonized model for the inclusion of VAS so that the award criteria for most tenders is purely economic.


"It should not be ignored that a large part of the stakeholders involved seek, above all, short-term results, since it is possible that in the future if they do not balance the budget, others will take their place"

At the present time, considering VAS in the tenders has pros and cons. As pros, it could serve to improve access to these drugs for both doctors and patients by offering added services such as information or education. Also, the VAS can act on the entire value chain, generating improvements in the delivery systems (most biosimilars are injectable products), supply, or pharmacovigilance. Among the cons, the absence of a harmonized system with clear rules could reduce the level of transparency of the tender, which results in greater complexity of the process and the possibility that the auctions were subsequently legally challenged. However, the main cons under the view of the payer are that the inclusion of VAS as valuation elements can prevent the cheapest offer from winning, which means fewer savings in the short term. It should not be ignored that a large part of the stakeholders involved seek, above all, short-term results, since it is possible that in the future if they do not balance the budget, others will take their place.


The Spanish case

In Spain, to date, all products with biosimilars on the market are for hospital dispensation. This fact, which does not happen in other countries like Germany or France, has a cost control purpose. It has its origin in the launch of protease inhibitors in 1997 to treat HIV. Since then, most products of high cost have been under hospital control, even though many of these products are oral and could be perfectly dispensed in pharmacies.


In this environment, the decision on the action protocols and the therapeutic place of the biosimilars is established in a committee made up of representatives of the medical group, but also of the hospital pharmacy and the political-health field. In Spain, there are 27 regions (Comunidades Autonomas) with decision-making capacity on health issues.


Hospital tends for products in high demand are organized under the umbrella of large framework agreements, called “Acuerdos Marco” managed by a public state body, INGESA, to which the autonomous communities that wish may adhere. These agreements preselect the companies that meet the requirements and order them according to the prices offered.


Although strongly dependent on what happens with the COVID- 19 crisis,  there is a draft ongoing proposing the call for an auction that would affect 10 molecules with biosimilars on the market and to which 10 Comunidades Autonomas have subscribed for the moment, representing approximately 40 % of the national territory. This is a Framework Agreement in which all bidders who meet the minimum requirements for accreditation, authorization from Regulatory Agencies, and solvency, both technical and financial, will be accepted. The order award will be determined by a single criterion: milligram price. The subsequent phase, in every region, will be generally without a second tender, so they are obliged to select the cheapest supplier. However, this cheaper price can be modified at any time by any of the winners. Then, they are obliged to communicate any price improvement they may make, and it must be extended to all the bodies, being processed as a modification of the Framework Agreement. In this way, we could speak of a continuous tender in which the order of awarded suppliers, therefore, the compulsory purchase of a certain medicine changes depending on the offers that may be made throughout the life of the agreement. This model, not yet approved, would represent a new scenario whose repercussions are being studied with concern by the affected companies. A small reduction in price by any winner would be a change in the order of preference, which immediately moves to the market and would represent an obvious scenario of uncertainty for businesses. The political environment and the crisis that is coming may have a great influence on how measures like this could become general, although it may be premature to say so.


This type of tender also calls into question the current concept of prescription regarding biosimilars. As we wrote above, the main difference with generics, the need to include the name of the product, would be totally irrelevant if the doctor can only prescribe the existing one. In Italy, for example, the health authorities have solved the problem by establishing, at least as of today, that the prescription of a certain biosimilar is the prerogative of the doctor, so hospitals must have stocks of all the products available regardless of which one won the tenders. Not to say, a strong pressure can be expected on prescribers working in a hospital where a specific biosimilar has been approved. In Germany for instance, doctors are subject to quotas that limit their prescription autonomy to specific cases that must be explained.


Effect of the tenders on the price. Biosimilars or biogenerics?

Continuing with the Spanish case, the following graph shows the effect of the penetration of biosimilars on the price of filgrastim since the first biosimilar was launched. Filgrastim was included in the centralized purchasing system from the beginning.



It is obvious that time has had an important role in the impact on prices. After more than ten years, these have dropped below 10%, a scenario that occurs much earlier in the case of generics. As an extreme example, the first generic of Imatinib was awarded to Dr. Reddy’s in Spain for less than 3% of the original price of the innovative.

In the following graph, it is possible to see the different erosion between generics and biosimilars released in similar periods. 


It seems clear that generics undergo faster and deeper erosion than biosimilars, although it is still too early to say. According to the data from the last Biopharmalinks’ panel, there are at least 35 adalimumab biosimilars in different stages of development. It is hard to believe that, if at least a third of these reach European markets, a price war similar to the one that had existed with small molecules with a high number of generics available will not happen.


Some takeaways for companies playing in biosimilars.


"Monitoring the market and trying to identify trends is key in a constantly changing environment."

The first is quite clear: monitoring the market and trying to identify trends is key in a constantly changing environment. Developing a biosimilar takes some years and changing horses halfway through the race is simply not possible. Therefore, it is important to anticipate what could happen and establish contingency plans.


A second takeaway is that the products with the greatest potential market are not always the most interesting. In our experience, price erosion when there are few competitors is only 20-30%, while in overcrowded markets it can go above 90%. No comments.


The third conclusion is that it is convenient to maintain a high level of flexibility in the commercial approval of this type of product. A rigid structure is a guarantee of failure if regulatory conditions change, as it is expected.


Last but not least, there are different models that could be applicable: it is not clear even if a model based on the concept of a biosimilar is that they cover different therapeutic areas offers more guarantees than one based on specialization in certain areas so that biosimilars they would be one more product in the portfolio.

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