At the start of the last decade, big pharma was getting smaller. Blockbuster medicines that had fueled years of growth were losing patent protection, exposing the industry’s largest companies to generic competitors. The resulting impact was so substantial it temporarily stalled the relentless upward march of U.S. drug spending.

Today, big drugmakers are facing an even larger “patent cliff,” with more than $200 billion in annual revenue at risk through 2030. But this time around, many of the brand name drugs losing market exclusivity are biologic products, manufactured from living cells, rather than the chemical pills that previously dominated the ranks of pharma top-sellers.

These biologic drugs, like AbbVie’s anti-inflammatory treatment Humira and Merck & Co.’s top-selling cancer medicine Keytruda, will face competition from so-called biosimilar drugs that, unlike generics, may not be as easily substitutable. Still, it will be a treacherous period for drugmakers to navigate, as they will need to replenish their research pipelines and carefully manage new product launches to replace lost revenue.

“This is of tectonic magnitude,” Arda Ural, health sciences markets leader at the consultancy EY. The looming patent expirations "capture most blockbusters," he added.

Besides Humira and Keytruda, drugs like Bristol Myers Squibb’s immunotherapy Opdivo, Johnson & Johnson’s immune disease medicine Stelara and Regeneron’s eye treatment Eylea will reach the end of their patent protection this decade.

The launch of Amgen’s copycat version of Humira in January represented a start of sorts for this looming industry-wide patent cliff. Nine other Humira biosimilars are set to arrive by mid-year. As a result, U.S. sales of the drug, which totaled $18.6 billion in 2022, are predicted to steadily shrink.

A different sort of cliff

The pattern of sales decline for Humira and other blockbuster biologics like it is expected to be different for several reasons, though.

Many biosimilars won’t be interchangeable, or directly substitutable, by pharmacists, for example. Physicians, meanwhile, may be reluctant to switch patients who are stable on the branded drug, meaning that initially it will be newly diagnosed patients with chronic diseases who are most likely to receive biosimilars. And because biosimilars are more expensive to develop and make, their manufacturers won’t be able to afford cutting prices by nearly as much as with generic pills.

“If you track the sales of a typical small molecule that goes generic it really goes off the cliff — 80% of the market can be gone in 30 to 90 days and the price goes down even more,” said Richard Kelly, a senior partner with the law firm Oblon, McClelland, Maier & Neustadt who specializes in life sciences intellectual property.

“[Biosimilars] have to be sold,” he added. “[Salespeople] have to go around to the doctors to sell a drug. It’s just another product in the detail-man’s bag.”

Take the statin Lipitor, once the world’s most lucrative drug. Sales fell from nearly $11 billion in 2010, the year before it faced generics in the U.S., to $4 billion in 2012. Pfizer’s overall revenue fell from $68 billion to $59 billion over the same period.

In the case of Humira, the fall is expected to be more gradual, with the company forecast to retain more than one-third of its 2022 U.S. revenues in 2024 and hold onto more than $2 billion through 2030, according to Evaluate Pharma.

The impact will be felt, nonetheless: AbbVie and analysts alike expect company-wide revenue to fall for at least a year because of Humira competition. And AbbVie executives recently indicated sales are likely to be sluggish in 2024, too, walking back earlier predictions that the company would see a return to growth then.

Humira’s sales erosion will be closely watched throughout the industry as executives and investors try to understand the long-term effects of biosimilar entry. Early biosimilars didn’t impact prices the way that payers and lawmakers had hoped, in part because there weren’t many of the copycat drugs. (While 40 biosimilars are now approved in the U.S., only 26 are available on the market.) Branded drugmakers also successfully used contracts and rebates to stave off competition.

However, analysts and industry experts believe the sheer number of Humira copycats and the entry of interchangeable products will allow them to take share from AbbVie.

The chief question facing AbbVie is how quickly it can recover through two replacement products: Skyrizi for psoriasis and Crohn’s disease, and Rinvoq for rheumatoid arthritis and several other inflammatory disorders. The company has upgraded its forecasts for both drugs, which it now says will earn $21 billion combined in 2027, approximately equalling Humira’s peak sales.

One major reason Humira achieved its massive sales was the many different autoimmune disorders for which it gained approval. With follow-on biologic drugs, however, the incentives to do so may be limited by the Inflation Reduction Act, which gives the federal government the power to negotiate lower prices within Medicare, said Mara Goldstein, Mizuho Securites’ senior biopharma analyst.

“We’re living through this real time and it’s a little challenging,” she said. “Does it truly create a disincentive to develop indications? Will companies continue to invest in new clinical trials right up to patent cliffs? How does [the law] change the value of dollars invested over time?”

New lessons to learn

AbbVie followed the lessons of the previous patent cliff by merging with Allergan in a 2019 deal that gave it enough new revenue to withstand the expected erosion of Humira's sales. Its approach was similar to large pharmaceutical companies’ strategy ahead of the 2010s patent cliff, which spurred the megamergers of Pfizer with Wyeth and Merck with Schering-Plough.

Megamergers might not be the answer this time, however. For one, current pharma executives have expressed reluctance to do big deals because of the complexity of combining two companies. There is debate, too, over the effects such deals have on market valuation and R&D productivity afterwards.

Another reason is that, after years of industry consolidation, there are not many major large drugmakers left as attractive merger targets. Those that remain have patent cliffs of their own, Goldstein said.

Instead, the hunt for new products will either be in big drugmakers’ own laboratories or in those of smaller biotechnology companies. By having two successor blockbusters already in waiting, AbbVie has shown it can execute on the former approach.

Yet, across the industry, big drugmakers’ “R&D productivity is not necessarily corresponding to the R&D investment,” Ural said. R&D productivity and returns have, with a few exceptions, steadily declined each year over the past decade, according to data from both IQVIA and Deloitte.

Meanwhile, in biotech, “there may not be enough assets out there,” Ural added. “It’s going to be a fight for established assets, of which there aren’t that many.”

That fight will be fueled by large cash holdings. Jefferies analyst Michael Yee estimates big drugmakers have $500 billion in cash to spend on acquisitions and other pipeline-building transactions. Small and mid-sized biotechs have simultaneously seen their valuations drop, limiting their financial options, Yee wrote in a Feb. 5 note to clients.

The experimental drugs large pharma companies chase, through acquisition, licensing or inside research, might need to be different, too. They could find advantages in development platforms that can generate multiple new medicines like messenger RNA, gene editing or next-generation antibody technology, or in drugs that have promise across multiple indications.

Humira-sized blockbusters may become harder to achieve, though, which will change how drugmakers develop and commercialize new products, said Bill Coyle, global head of biopharma at consulting firm ZS. AbbVie, for example, needs two drugs — Sykrizi and Rinvoq — to replace sales of Humira.

“I think we’re potentially entering an era of fewer blockbusters and a lot more smaller products,” he said. “The other shift for many of the big pharmas is that their cadence of launch needs to be more efficient and frequent. They need to become more effective launchers of new assets.”

Patent thicket-ing

For drugs further from patent expiration, extending the date of generic or biosimilar entry through the construction of a “patent thicket” is another tactic drugmakers are pursuing. By surrounding Humira with dozens of patents in the U.S., for example, AbbVie pushed off biosimilar entry by seven years after the drug’s principal patent expired.

Others in the industry are seeking to do the same. Merck is testing a subcutaneous version of the intravenous Keytruda, which could potentially merit a separate patent and extend its market exclusivity by years.

A trial of subcutaneous Keytruda in lung cancer is due to deliver results this spring. While subcutaneous Keytruda would likely still be delivered by physicians, it could be more convenient. “It’s not the same as having to get an IV, where you have to sit in a chair for an hour or two,” Kelly said.

Other drugmakers sought to push out the entry of biosimilars using this strategy, including Johnson & Johnson with its multiple myeloma medicine Darzalex and Bristol Myers with its Keytruda rival Opdivo.

Already, Bristol Myers has benefited from such intellectual property practices with its medicine Revlimid. The blood cancer drug’s exclusivity was protected by patents held by its original developer, Celgene, that were strong enough to keep most generic competition at bay through 2026. That will give Revlimid, a small molecule drug, a pattern of sales decline that looks more similar to biologic drugs, at least for a few years.

Tahir Amin, founder and executive director of the Initiative for Medicines, Access & Knowledge and a critic of pharma companies’ intellectual property practices, said he expects drugmakers with approaching cliffs to use late-earned patents to delay competition.

Striking limited distribution deals with copycat drugmakers, as Celgene did with Revlimid, could also be a tactic to stave off government drug price negotiation, because the Inflation Reduction Act limits that authority to only those products with no competition.

“At the end of the day the patent system is going to define how they shape the market,” he said.

For years, copycat competition failed to significantly lower the costs of some of the best-selling prescription medicines in the U.S.

The launch of the first lookalike biologic drug in 2015 was heralded as a shift in large pharmaceutical companies’ pricing power, holding the promise of deep discounts on expensive, injectable treatments like Humira, Remicade and Herceptin. Yet years of disappointment followed, as the new competitors were either blocked from entering the market or unable to gain traction once they got there.

Now, experts say these so-called biosimilars are beginning to have a bigger impact.

More have poured onto the market after a slow start. The arrival of biosimilars in areas like cancer and autoimmune disease, where the annual cost of brand name drugs can exceed $100,000 annually, has given patients, doctors and insurers added incentive to make the switch. And, perhaps most importantly, the looming loss of patent protection on several lucrative branded biologics could give biosimilar makers a needed market opportunity.

“I think when the first ones came out … there was a hope for deeper discounts and more rapid adoption,” said Sonia Oskouei, vice president of biosimilars at drug distributor Cardinal Health. “As we went into the biosimilar experience we found that there was more to it than just price.”

Barriers to entry

Patents held by branded drugmakers have blocked some of the first biosimilars to be approved in the U.S. Erelzi, a biosimilar of Amgen’s anti-inflammatory drug Enbrel, was approved in August 2016. But due to the high patent walls Amgen built to shield Enbrel from competition, it won’t launch until 2029, more than a decade later.

The first wave of biosimilars has also been held back by aggressive rebating and pricing strategies by branded drugmakers, as well as insurer policies that together helped nullify the 15% to 30% discounts typically offered at first by the copycat drugs.

The anemic uptake of the first few biosimilars even spawned a high-profile court battle, pitting large pharmaceutical companies against each other. Pfizer, maker of the Remicade biosimilar Inflectra, sued Johnson & Johnson over alleged anticompetitive business practices, claiming its rival won preferred insurer status by threatening to withhold rebates if Inflectra was used before Remicade. The two parties settled the lawsuit in 2021.

Inflectra, the second biosimilar launched in the U.S., has now grown into a $600 million-a-year product. It has eaten into Remicade sales, which have dropped by nearly half since Inflectra’s first full year on the market in 2017. Two other Remicade biosimilars have launched since, with initial discounts of 34% and 57%. (Remicade is known scientifically as infliximab.)

Yet when compared to generic drugs, which can cost as much as 80% to 90% less then branded pills, the impact of biosimilars remains modest at best. For example, sales of Pfizer’s cholesterol drug Lipitor fell by more than half, from nearly $10 billion, in the first full year after generic entry in 2012.

The example of Lipitor hints at why generics have had a bigger impact on the price of small molecule drugs than biosimilars have had on biologics. The Food and Drug Administration has approved 18 Lipitor generics, while the most biosimilars approved and launched for any biologic drug is five, for Roche’s Herceptin. (There are seven approved biosimilars to Humira, yet none have launched due to patents.)

The estimated $100 million to $300 million cost to develop a biosimilar also acts as a deterrent to entrants, leading to a lower overall number of competitors and making biologic drugs “natural monopolies”, according to some analysts. By comparison, developing a generic small molecule drug can cost as little as several million dollars, and doesn’t require human trials to gain FDA approval as biosimilars do.

(Generic drugs are exact copies of their brand name predecessors, while biosimilars, being derived from cells, are not considered identical, only “highly similar.”)

“It appeared that the investment hurdle was preventing many of the biologics from having a biosimilar competitor,” Mark Trusheim, strategic director of the Massachusetts Institute of Technology’s New Drug Development Paradigms program, said of the early days of biosimilar research and development.

In one notable example, Momenta Pharmaceuticals in 2018 laid off half its workforce and discontinued biosimilar drug development, pivoting toward rare disease treatments in a move that later paid off with a $6.5 billion buyout by J&J. That same year, Merck & Co. and partner Samsung Bioepis stopped developing a biosimilar of Sanofi’s insulin Lantus.

Different markets

A shift may be underway, however, as biosimilar versions of cancer drugs arrive and new payment models reward doctors for prescribing them, experts said.

The models were driven in part by the U.S. Medicare program, which from 2016 through the middle of 2022 paid some cancer clinics via a reimbursement system that incentivized doctors to use lower-price drugs. As of June 30, 126 practices and five commercial payers were involved in the program.

“If you just look at standard Medicare, when you give a drug that’s more expensive and you get paid on the margin, you make more money,” said Lalan Wilfong, vice president of payer solutions and practice transformation for the U.S. Oncology Network at drug distributor McKesson.

Wilfong’s organization adopted biosimilars because it embraced the “value-based” care system that Medicare was trying to promote. “We learned very quickly that these drugs were safe and effective. We’ve also been able to markedly decrease the cost of care by switching to biosimilars,” he said.

Wilfong noted that some doctors initially hesitated to use biosimilars for patients whose cancers could be cured and any reduction in efficacy, however small, might reduce their chance of living. Those concerns eased as doctors gained experience with them.

Sales of cancer drug biosimilars have increased as a result. In 2021, Amgen recorded $826 million and $479 million in U.S. sales for its Avastin lookalike Mvasi and Herceptin biosimilar Kanjinti, respectively. Roche’s sales for both have declined by more than half.

While adoption is rising, cancer drug biosimilars have typically entered the market with smaller discounts to their branded rivals, however.

Medicare’s oncology care model has since ended, but will be replaced in July 2023 with another five-year program. Wilfong said his organization will continue to use biosimilars as it has signed value-based care contracts with non-Medicare insurers.

Medicare now has a further mandate to save money because of the recently enacted Inflation Reduction Act, which will allow it to negotiate with drugmakers over the price of some high-cost medicines, including biologic drugs. The Alliance for Accessible Medicines, which represents biosimilar manufacturers, opposes the law, arguing that market competition is the best way to lower prices.

A competitive test case

Outside of oncology, industry experts are watching the entry of biosimilars to AbbVie’s $20-billion-a-year inflammatory disease drug Humira for signs the balance of power might be shifting.

Unlike many of the biologic drugs that lost market exclusivity over the past seven years, Humira has within six months of its patent expiration faced seven biosimilar competitors, including Amgen’s Amjevita and Boehringer Ingelheim’s “interchangeable” copy Cyltezo. Another company, Alvotech, is seeking, but has so far not succeeded in winning approval of another, interchangeable Humira biosimilar. 

“We do anticipate the U.S system is going to shift significantly as [Humira] biosimilars enter the market,” said Chad Pettit, executive director of marketing and the global biosimilars commercial lead for Amgen.

The interchangeability designation sought by Alvotech would permit pharmacists to substitute the biosimilar for the biologic without a specific prescription for it from physicians.

While important, the designation might not immediately translate into more prescriptions, said Ming Li, chief strategy officer at Alvotech. A small number of wholesalers and distributors typically buy most generic pills, while health insurers are the main customers for biosimilars.

“The go-to-market strategy is very much a branded strategy,” Li said.

In launching Humira copycats, biosimilar manufacturers will have to overcome physicians’ reluctance to switch stable patients. They will also compete with the most recent and popular formulation of Humira, which features a higher concentration of the drug, a thinner needle and removes a stabilizing chemical that is linked with injection pain.

Alvotech’s biosimilar duplicates this formulation of Humira, while Boehringer’s version uses the lower concentration formulation. (The FDA in June rejected Alvotech’s biosimilar for a third time, citing manufacturing shortcomings.) 

A survey conducted in 2022 by the investment firm Bernstein found that 62% of rheumatologists are concerned about switching to biosimilars if insurers mandate it through contracts with drugmakers. Of those, nearly a quarter wanted to see clinical trial results and professional guidelines before accepting switching as a practice.

Bernstein’s survey also found rheumatologists were most concerned about the interchangeability of a biosimilar, followed by its formulation.

Competition will intensify further in 2024 as companies sign annual contracts, pressuring Humira sales more significantly.

Bernstein analysts believe the high number of available biosimilars will cause Humira price declines to resemble what typically occurs with generics, modeling a 60% decline by the end of 2025. At 10% of Humira’s current list price of nearly $80,000 a year, Bernstein analysts wrote, a biosimilar manufacturer could still earn a 35% gross profit margin.

Exception that proves the rule

Still, some remain more skeptical about the potential for biosimilars to significantly reduce healthcare costs on their own. “My suspicion is that Humira will be the exception that proves the rule,” Trusheim said.

He argued most biologics won’t draw as many competitors as Humira because there is less revenue at stake. Drugs that now make less than $1 billion a year may not face any competition at all, as biosimilar manufacturers focus their efforts on top-sellers.

One that might is J&J’s rheumatoid arthritis drug Stelara, which is being targeted by nine biosimilars in development. Others, however, have fewer. AstraZeneca’s rare disease drug Soliris, once the most expensive drug in the world, has just two, while Biogen’s multiple sclerosis drug Tysabri has only one.

If only one or two competitors emerge, steep price declines may not materialize. While modest discounts could save insurers money, it may not translate to patients, who would still face deductibles and coinsurance.

“If there is no financial benefit to the patient because copays are still going to be high, then what does a physician tell a patient?” said Trusheim.

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References

1. Biopharmaceuticals Market - Growth, Trends, and Forecast (2019 - 2024). Rep. Mordor Intelligence. 2019. Web. 
2. Van Arnum, Patricia. "Market View: Parenteral Drug." DCAT Value Chain Insights. 23 Oct. 2019. Web. 
3. Branch, Emilie. "Market on the Rise: Parenterals." Contract Pharma. 13 Nov. 2018. Web.  
4. Global Parenteral Packaging Market Will Reach USD 18.20 Billion By 2024: Zion Market Research. Zion Market Research. 4 Sep. 2018. Web. 
5. Parenteral Packaging Market by Product Type (Bags, Bottles, Ampoules, Vials, Prefilled syringes & cartridges), Material (Glass, Polymer, PVC, Polyolefin), by Region: Industry Analysis, Market Share, Revenue Opportunity, Competition and Forecast 2026. Rep. Futurewise Research. 2019. Web. 
6. Parenteral Packaging Market Analysis: Prefilled Syringes and Bags Collectively Account for More Than 55% of the Overall Market Value During the Forecast Period: Global Industry Analysis (2013-2017) & Opportunity Assessment (2018-2028). Future Market Insights. 28 Aug. 2018. Web. 
7. Prefilled Syringes Market Value to hit $9.7 Billion by 2025. Global Market Insights. 29 Jul. 2019. Web. 

Taking on one of the world’s most lucrative drugs isn’t easy. The problem is so thorny that, among the companies challenging AbbVie’s arthritis treatment Humira with low-cost copies in the U.S., several strategies have emerged in the first months of direct competition.

The manufacturers of these generic biologics, or biosimilars, are battling to gain a place on insurers’ coverage lists. Success could mean a bigger slice of the $19 billion in U.S. sales that Humira earned AbbVie last year.

So far, most have chosen to price their biosimilar Humiras at only a small public discount, banking instead on offering insurers rebates in private negotiations. A few are trying something more radical with steep upfront price cuts.

The contrasting tactics highlight the intricacy of U.S. drug pricing, as well as reasons for why biosimilars have so far disappointed in making expensive biologic medicines more affordable and accessible to patients. That promise has, with a few exceptions, not materialized as quickly or as broadly as had been hoped.

Price split

While generic copies of pharmaceutical pills typically enter the market at prices well below their branded competitor, the same hasn’t been true of biosimilars.

Four of AbbVie’s new challengers have set a discount of just 5%, betting that behind-closed-door negotiations with insurer middlemen known as pharmacy benefit managers will result in rebate deals sufficient to gain coverage.

Two launched their copies at deep discounts to Humira, as low as 15% of the drug’s nearly $7,000 list price for a four-week supply.

Others, though, are hedging their bets. Amgen, Biocon and Sandoz have all gone with high- and low-price products to suit different types of healthcare buyers. (Amgen, which was the first to launch a biosimilar Humira in January, chose a narrower split than Biocon and Sandoz did.)

“There are definitely some dynamics here that are creating an obvious divide,” Fran Gregory, vice president of emerging therapies at pharmaceutical distributor Cardinal Health. “It’s highly influenced by the payers and PBMs.”

Boehringer Ingelheim, which launched its biosimilar at a 5% discount to Humira, claims it is “competitively priced.” Called Cyltezo, Boehringer’s drug is the only biosimilar approved so far as an “interchangeable,” or able to be substituted directly by pharmacists without a specific prescription.

“We recognize the potential benefits of a two-price strategy and are pursuing this approach for implementation in 2024,” said Stephen Pagnotta, Boehringer’s biosimilar commercial lead, in an email. “This approach will allow us to provide different pricing options to meet the diverse needs of patients and improve accessibility.”

Competitive lessons

Pharma companies will be watching the post-monopoly market for Humira closely, in part because no biologic drug has faced so much competition in such short order.

How pricing for Humira biosimilars shifts over time may carry wider lessons as more biologic copycats pour onto the market in the coming years. For AbbVie, the competitive balance could determine whether the sales decline it expects results from lower prices it can match, or whether it loses volume it can’t replace.

Christopher Raymond, an analyst at Piper Sandler, recently surveyed around 400 physicians, and concluded Humira is currently retaining market share in rheumatoid arthritis, its main indication. According to the findings, declining use of the drug in digestive and skin conditions has been offset by a new product, Skyrizi, that AbbVie introduced as a Humira successor.

“Based on this feedback, while price is clearly a drag on this franchise, we think Humira as a brand is likely to be stickier than investors may anticipate,” Raymond wrote in a July 20 note to clients.

Such scenarios have been commonplace with biosimilar launches. Inflectra, an alternative to Johnson & Johnson’s Remicade and one of the first biosimilars launched in the U.S., struggled to make headway when it first arrived. Its maker, Pfizer, eventually sued J&J alleging anticompetitive practices. They settled the case in 2021.

Over time, competition has had more of an impact. Nearly seven years after the launch of Inflectra, the average sales price of Remicade and its biosimilars has dropped by 68%, according to a report from biosimilar manufacturer Samsung Bioepis. Biosimilars now account for nearly half of the market.

Other factors may play a role, too. According to Samsung, biosimilars of cancer treatments have made greater inroads more quickly than those for immune-related disorders, like Humira and Remicade. Lookalikes to Roche cancer drugs Avastin and Herceptin have taken, respectively, 85% and 83% market share, for instance.

That’s due in part to “value-based” payment models, which reward doctors for reducing overall costs. Autoimmune drugs like Humira and Remicade are also taken for many years, making it harder to switch patients stable on branded drugs to a biosimilar.

“Providers are ready, able and willing to prescribe biosimilars to patients who are naive to treatment,” said Gregory. But branded products may be harder to replace among patients already taking them. Many of those drugs remain on PBM formularies, she said.

PBM choices

Two of the three largest PBMs in the U.S., Cigna Healthcare’s Express Scripts and United Healthcare’s Optum, have already updated their coverage lists in the wake of Humira biosimilars launching.

Both Express Scripts and Optum chose Cyltezo and Novartis’ Hyrimoz, along with an unbranded Novartis product, to add to their earlier selection of Amgen’s biosimilar.

In a July statement, Aetna’s CVS Caremark said it is “reviewing the availability of additional entrants and plan[s] to recommend coverage of one or more of these products.”

The choices PBMs make can significantly impact consumers’ out-of-pocket costs. For example, they can end up paying more for deeply rebated products because cost-sharing is sometimes based on drugs’ list price. In response, policymakers have called for greater transparency into PBM practices and how they pass on rebates.

“The PBMs have a financial model that they’ve been living with for years,” Gregory said. “That financial model will not change overnight. But I think it will change over time.”

The most lucrative pharmaceutical monopoly in industry history has reached an end.

In January 2023, the first copycat version of Humira, an injectable drug approved for an array of inflammatory diseases, launched in the U.S. Its arrival marked the end of a two-decade run of market exclusivity during which Humira's maker, AbbVie, has earned nearly $200 billion from sales of the drug.

Seven more biosimilars — as copies of biologic drugs are called — have become available through September, putting AbbVie under pressure. Anticipating the competition, the company has spent the past several years attempting to lessen its reliance on Humira, which as recently as 2019 accounted for more than half its revenue.

While pharmaceutical companies periodically confront these "patent cliffs," none have been steeper than what AbbVie faces with Humira. Until now, the most lucrative product to go generic was Pfizer's cholesterol drug Lipitor, which at its height sold about $13 billion a year. In 2022, sales of Humira totaled $21.2 billion.

The launch of Humira biosimilars also is a major moment for the broader industry, as their arrival is the biggest test yet of whether biosimilars can save the healthcare system significant amounts of money. So far, the biosimilars currently available have not lived up to previously high expectations of their impact.

The question will matter to more companies than just AbbVie, as several drugs like Humira, such as Enbrel and Stelara, also will lose their patent protection this decade.

"The sheer number of biologics facing competition is quite significant through the next decade," said Joe Azzinaro, commercial lead for biosimilars at drugmaker Organon, which expects to launch a Humira biosimilar in 2023.

Replacing a blockbuster

AbbVie sells Humira today because its former parent company, Abbott Laboratories, in 2000 acquired Knoll Pharmaceuticals, the drugmaking business of German chemicals company BASF. At the time, Humira was called D2E7 and analysts believed it might someday make between $500 million to $1 billion annually.

Yet Abbott and then, after a 2013 spinout, AbbVie proved Humira could work for many more diseases than rheumatoid arthritis, the condition it was first approved to treat, and steadily expanded its use. At the same time, AbbVie meticulously built a wall of intellectual property — sometimes called a "patent thicket" — around Humira and each new indication.

All told, AbbVie filed about 250 patent applications for Humira in the U.S., 90% of them following the drug's 2002 approval, according to the advocacy group Initiative for Medicines, Access & Knowledge. One hundred and thirty have been granted.

The strengthened patent shield has stretched AbbVie's legal monopoly in the U.S. for six years beyond the expiration of Humira's main patent in 2016. Since then, AbbVie has earned nearly $75 billion in U.S. Humira sales, bolstering the company's share price and allowing it to pay billions of dollars to investors in dividends. (The story is different in Europe, where biosimilars arrived in 2018 and quickly ate into Humira's market share.)

Moreover, the added revenue — padded by price hikes that increased Humira's price to Medicare by 41% between 2016 and 2020 — enabled AbbVie to spend money on deals, research and development to replace Humira.

Most notably, AbbVie paid $63 billion to acquire Allergan and its blockbuster product Botox, which in 2021 earned almost $5 billion. Other deals have been less successful, such as the $5.8 billion takeout of Stemcentrx for an experimental lung cancer drug that ultimately failed.

Humira's extended patent protection also gave AbbVie time to launch two new immune disease drugs, Skyrizi and Rinvoq, which it believes will make up for lost Humira revenue.

Company executives now claim the hit to AbbVie's balance sheet will be short-lived.

"Following the U.S. Humira [biosimilar entry] in 2023, we expect to quickly return to growth in 2024 and deliver a high single-digit growth from 2025 to the end of the decade," CEO Richard Gonzalez said on a company earnings call in February 2022. That outlook has shifted somewhat since, as Gonzalez told investors in January that 2023 should represent a “floor” for revenue, with a “path to strong sales growth in 2025." 

Negotiating tactics

The entry of Humira biosimilars has been gradual in 2023. This raises questions about whether enough drugmakers will have signed big enough contracts with insurers to influence the market by next year.

While AbbVie will primarily be negotiating against Amgen for 2023, the situation will shift for 2024 contracting when more biosimilar makers will have their drugs on the market.

Ronny Gal, formerly a Bernstein analyst who covered AbbVie and closely followed the biosimilar market, said last year the drugmaker therefore might be guessing wrong on the impact of biosimilars.

"I think the odds are that the erosion will be slower in 2023 and faster in 2024," he said. Gal is now an executive at Novartis.

AbbVie may have some say in the matter, depending on the negotiating tactics it chooses to use in its efforts to keep Humira the preferred treatment choice on insurer formularies in 2023.

Drugmaker tactics in these negotiations can be aggressive and, in at least one case, allegedly anticompetitive. In a 2017 lawsuit, Pfizer accused Johnson & Johnson of using exclusionary contracts and threats to withhold rebates if insurers made Pfizer's biosimilar of J&J's drug Remicade a "preferred" option. The two companies later agreed to have the suit dismissed.

As Remicade is administered at hospitals and other healthcare facilities, J&J had more leverage in retaining market share. For example, Pfizer claimed those facilities had no incentive to purchase its biosimilar if insurers wouldn't reimburse them.

By contrast, pharmacists can provide Humira to patients directly, potentially giving biosimilar makers more opportunities to make inroads. Gal says that rather than threaten to cut rebates if Humira isn't preferred, AbbVie "will use Humira discounts to protect Skyrizi and Rinvoq," its two newer drugs that are approved to treat some of the same conditions.

Nonetheless, biosimilar makers are anticipating that AbbVie won't give up easily. "Our expectation is that AbbVie will be very aggressive in protecting its product," Organon's Azzinaro said.

Price won't be the only factor. AbbVie's experience in navigating the immune drug market will give it advantages as well.

One tool AbbVie has on its side is its patient support program known as Humira Complete, which includes assistance such as nurse advocates, help with insurance and injection training. This assistance has been controversial at times and was cited in a 2018 lawsuit by the California insurance commissioner.

"Humira to my mind has never been just a drug," said A. Mark Fendrick, director of the University of Michigan's Center for Value-Based Insurance Design, who has consulted for AbbVie. "With Humira and Humira Complete, you have high utilization of a high-priced drug. With biosimilars, you might have low utilization of a lower-priced drug."

"I want to see the biosimilars have the exact same thing: not just a Humira biosimilar but a Humira biosimilar plus," he added.

But it's unclear how helpful such programs are and how much insurers might value them in weighing coverage.

"If there is actually evidence that these efforts improve real-world adherence that would lead to better clinical outcomes, there would be data," said Steve Pearson, president of the Institute for Clinical and Economic Research, a nonprofit organization that evaluates the cost-effectiveness of drugs and other medical interventions. "We have yet to be presented with actual data on it."

Pharmacy swap

Complicating forecasting of Humira's diminution are the different labels biosimilars can carry as well as the differences in device and formulation for the most popular form of Humira.

For example, some of the later biosimilar entrants will have an "interchangeable label" from the Food and Drug Administration, allowing pharmacists to choose the biosimilar over Humira when filling prescriptions, rather than requiring the prescribing doctor to specify one.

Amgen's biosimilar isn't approved as an interchangeable — at least not yet — nor does it come in the most-used Humira formulation. The first interchangeable biosimilar, from Boehringer Ingelheim, premiered in July 2023, with another from Alvotech still in development. Of those two, only Alvotech’s, which was recently rejected by the FDA for a third time, is in that more popular formulation.

How interchangeable Humira biosimilars perform versus other biosimilars should reveal how important that designation is to insurers. The designation was created by the legislation that authorized the FDA's biosimilar regulations, and doesn't exist in the European market.

"It's really important to know what interchangeability is and is not," said Steven Selde, director of the Biosimilars Council at the Association for Accessible Medicines. "It's not an indication of superior quality. It's just a regulatory designation. It's expensive to pursue the interchangeable designation, and it's unclear how many will incorporate it into their business model."

So far, the looming loss of Humira doesn't seem to be bothering AbbVie executives much. They talk confidently of Skyrizi and Rinvoq earning a combined $17.5 billion in sales by 2025, up from $4.6 billion in 2020, and forecast that top sales of the two products combined will exceed Humira's $20 billion peak.

Insurer CVS Health is getting into the market for lookalike biologic drugs, announcing in late August the founding of a subsidiary called Cordavis to work directly with manufacturers of biosimilars in the U.S.

Alongside the announcement, CVS said it’s contracting with Novartis’ Sandoz division to sell under a private label its biosimilar to AbbVie’s Humira, called Hyrimoz, at an 80% discount to Humira’s price of nearly $7,000 a month, beginning in 2024. When Sandoz launched Hyrimoz, it set a price of about $6,600 a month.

Among the three big U.S. pharmaceutical benefit managers, only CVS Caremark hadn’t committed to covering a Humira biosimilar from the wave that entered the market in July. The insurer has now signaled its intent to invest more deeply by transforming from just a buyer into a commercialization partner as well.

While biosimilars have thrived overseas, the U.S. market hasn’t been nearly as favorable to these biologic drugs, which are “highly similar” to branded products and have no clinically meaningful differences.

The peculiarities of the U.S. drug market have served as barriers, including the number of payers, manufacturers’ practice of offering volume-based discounts to payers and the difficulty in switching stable patients from one product to another. One area in which biosimilars have been adopted more quickly is in cancer, due in part to insurer incentives.

The market for Humira biosimilars is unique by virtue of the number of entrants, with eight separate companies now marketing a low-cost alternative to the top-selling arthritis drug in the U.S. Humira’s tens of billions of dollars in U.S. sales last year helped spur that competition, as developing biosimilars is a far more expensive endeavor than making generic pills. Smaller markets, therefore, haven’t been as attractive.

With Cordavis, CVS appears to be testing ways to counter some of those headwinds. “Through our direct involvement, we will expand the supply chain and ensure biosimilar availability in the market,” said Prem Shah, CVS’ Chief Pharmacy Officer, in a statement. CVS noted that it might work with companies to co-produce biosimilars as well.

Even with the difficulties biosimilars have faced, analysts project their sales could reach $100 billion by 2029. A “patent cliff” of some of the pharmaceutical industry’s biggest sellers like Merck & Co.’s Keytruda, Johnson & Johnson’s Darzalex and Amgen’s Enbrel will put $200 billion in annual revenue at risk by the end of the decade.

By and large, doctors appear to be comfortable prescribing biosimilar drugs, the copycat version of biologic medicines like inflammatory disease drug Humira or eye treatment Lucentis. But they aren’t yet sure the discounts offered are enough to justify switching patients who are stable on the brand-name products, according to an annual report from healthcare distributor Cardinal Health released in mid-February.

The report’s authors surveyed 300 specialists in rheumatology, gastroenterology and dermatology who have patients eligible to use Humira biosimilars. In all three specialties, more doctors agreed than disagreed with the statement, “today, the economics of biosimilars are not favorable enough to motivate me to switch from the reference products,” including a majority of rheumatologists. A large portion of physicians in each specialty neither agreed nor disagreed.

Separately, just under one third of 64 surveyed ophthalmologists said “not enough financial incentive” was a primary concern with prescribing biosimilars to Lucentis.

Yet a majority of physicians from the three Humira-prescribing specialties said they were “very” or “somewhat” comfortable prescribing biosimilars, including 100% of gastroenterologists. Among the ophthalmologists, 48% said they were “uncomfortable from a clinical standpoint” among their primary concerns prescribing biosimilars.

When asked which patients they are most likely to prescribe a biosimilar, the most common response among the Humira-prescribing specialists was “existing patients for whom payers have mandated a biosimilar,” suggesting that insurers’ policies will drive uptake. However, 40% of rheumatologists said “new patients” would be the most likely people to get a biosimilar prescription.

Publication of the report came just three weeks after the launch of Amgen’s Amjevita, the first biosimilar to AbbVie’s Humira available in the U.S., and seven months after the launch of Biogen and Samsung Bioepis’ Byooviz, the first biosimilar to Lucentis available in the U.S.

Early biosimilar uptake in the U.S. has disappointed as prices, rebates, patient assistance and insurance coverage have allowed original branded products to retain substantial market share. Cancer drugs have seen some of the fastest adoption patterns, in part because of value-based payment models that encouraged the use of lower-cost medicines.

Competition among Humira biosimilars could give a glimpse of how quickly non-cancer biosimilars can take market share, as nine copies of the world’s biggest-selling drug are set to launch this year, some of which wil be directly substitutable by pharmacists.

Three decades ago, a scientist at the University of Texas named Bruce Beutler asked the U.S. government to grant him a patent for a new invention.

Beutler, who would later win the Nobel Prize for his research, had come up with a way to shut down certain types of inflammation in cells. His discovery became the foundation of the arthritis drug Enbrel, among the highest-selling pharmaceutical products in history and the backbone of one of the industry’s largest companies, Amgen.

In 2029, an incredible 37 years after Beutler first sought his patent and 17 years after it expired, Enbrel could finally face lower-cost competition in the U.S. That longevity is due to Amgen’s efforts to build an interlocking wall of intellectual property protection that’s often referred to as a “patent thicket.”

The practice can stretch pharmaceutical company monopolies on their drugs far beyond the standard 20-year patent term. Increasingly, these patent thickets are cited by a diverse group of policymakers as contributors to high U.S. drug prices.

“It’s easier to keep the monopoly on an old one than it is to find a new blockbuster drug,” said Matthew Lane, executive director of the Coalition Against Patent Abuse. “The cost to pay patent attorneys to file applications is a drop in the bucket,” he added, compared to the cost of research and development.

Enbrel’s decades-long run is due to luck and high-stakes litigation as much as standard drug-patenting practices. But the patent thicket around Enbel isn’t as much of an outlier as it may seem. Instead, it’s an example of how vital intellectual property is to large drugmakers and how much money can be wrung from stretching patents beyond the spirit of the law.

Amgen didn’t make an executive available for an interview with BioPharma Dive. In a statement, the company said, “Biopharmaceutical research is an incremental process driven by the science, and ongoing innovation after product approval can lead to meaningful medical advances and improving the patient experience.”

“We believe that protecting intellectual property is critical to fully develop a medicine’s therapeutic potential for patients,” the company added.

Defending a blockbuster

Drugmakers often gauge the potential of their products by whether annual sales can eclipse $1 billion. Large pharmaceutical companies have a handful of these “blockbusters,” while successful biotechs might have one or two.

Drugs that earn many billions of dollars in sales each year turn companies like Amgen — once an upstart biotech called Applied Molecular Genetics — into industry titans.

Enbrel wasn’t Amgen’s first; two other blockbuster drugs, Epogen and Neupogen, grossed over $45 billion and $25 billion, respectively, before their patents lapsed in the U.S. But Enbrel could be Amgen’s longest-lasting and highest-earning product due to the dozens of patents that protect the drug from copycat rivals.

Cumulative sales have already topped $74 billion and, by 2029, could approach $100 billion — an incredible sum matched only by a few other pharmaceutical products in history.

The profits drugs like Enbrel generate help pharmaceutical companies grow and, as they often argue, can fund the development of new medicines. But drugmakers end up depending on them so heavily that they protect them with patents covering even the smallest differences in how their products work, are made and are administered.

Biologic drugs are more complex than chemical pills, too, allowing their makers to construct denser thickets that keep low-cost competitors at bay for longer, as was the case with Enbrel.

How Amgen built a 'patent thicket' around Enbrel

The table below illustrates the dozens of patents Amgen was able to use to stretch its monopoly on Enbrel beyond 30 years. Each bar reflects a patent and its period of effectiveness. The dark blue bars are the seven crucial patents that have preserved Amgen’s pricing power.

A new approach to autoimmune disease

Enbrel’s origin lies in a rush of research at universities and pharmaceutical laboratories in the 1980s and 1990s to improve on immunosuppressive drugs like methotrexate and leflunomide, which were helpful, albeit flawed treatments for conditions like rheumatoid arthritis.

“They had a lot of side effects and they weren’t really outstanding therapies,” Beutler said in an interview.

Beutler and other researchers had a different idea. By blocking a protein called tumor necrosis factor, or TNF, they could better control the inflammation and pain experienced by patients with autoimmune diseases.

Beutler’s team at University of Texas-Southwestern sought to develop a medicine that combined one TNF-blocking protein with another derived from human antibodies. That so-called fusion protein approach was different from much of the research from that era, which focused on making larger drugs known as monoclonal antibodies. (Humira and Remicade, two hugely successful medicines, are prominent examples of the type.)

Beutler’s invention was described in U.S. patent number 5,447,851, which his institution then licensed in 1995 to a Seattle-based biotech called Immunex. Three years later, the Food and Drug Administration approved the resulting drug, which was called etanercept and Immunex sold as Enbrel.

The approval, incidentally, put Immunex in a challenging position. Though Immunex already made one biologic drug, approved in 1991 and known as Leukine, it needed different manufacturing capabilities to mass-produce Enbrel. So Immunex scrambled to find a solution, according to Michael Kranda, the company’s chief operating officer from 1984 to 1996. The company first built an annex in the parking lot near Leukine’s production facility, and then outsourced production to a Boehringer Ingelheim factory in Germany.

But in the rush to get Enbrel to market, patenting manufacturing methods or how the drug was formulated was not a high priority for Immunex, as it would later become for Amgen.

“We were just in a position of asking, ‘Can somebody make this and hit our window to launch?’” said Kranda, now a senior vice president at gene therapy developer Asklepios BioPharmaceutical.

Immunex did make one crucial patent decision amid its manufacturing push, however. In 1999, it acquired rights from Roche to a method for making a TNF-blocking fusion protein. The Swiss drugmaker had sought a patent in 1990 but hadn’t yet been granted one. That turned out to be a lucky break, for it would eventually end up as the final defense against future rivals.

Amgen’s attorneys go to work

By 2001, Immunex, buoyed by hundreds of millions of dollars in Enbrel sales, was an acquisition target, and it fell to Amgen in one of the biggest biotech deals of the time.

Amgen immediately went to work protecting Enbrel. The company filed for one patent after another, building an intellectual property estate that grew to at least 68 granted patents, according to an analysis by the advocacy group Initiative for Medicines, Access and Knowledge, or I-MAK.

“

They have 12 years without competition. I think that should be enough.

Tahir Amin, I-MAK

”

Many of them claimed manufacturing processes and formulation — expanding on Immunex’s intellectual property defenses — as well as methods of use and administration devices. Together, they formed a thicket of legal protection that made it exceedingly difficult for would-be competitors to break Amgen’s monopoly, even decades after the drug’s first approval.

In its statement, Amgen argues the growth of Enbrel’s intellectual property estate reflects hundreds of millions of dollars worth of research that has led to “meaningful medical advances and [improvements in] the patient experience,” as well as manufacturing advances that have ensured steady supply.

In filings with the Securities and Exchange Commission, Amgen lists seven chief patents among those 68. Four of them, including Beutler’s original discovery, have expired, but three remain.

The most important is the intellectual property that Immunex licensed from Roche in 1999 and finally won patent protection for in 2012.

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How that particular invention stretched Enbrel’s exclusivity is due to a quirk in international patent law. Because Roche applied before a World Trade Organization agreement on patent rights known as TRIPS went into effect, the patent received 17 years of protection from the date of publication. Had TRIPS rules, which brought the U.S. into conformity with the rest of the world, been applied to that application, the patent would have expired in 2010.

The result was a massive windfall for Amgen. But Tahir Amin, cofounder and co-executive director of I-MAK, noted that pharmaceutical industry lobbying helped shape TRIPS. “Is it luck or is it by design? Because in the end they were pushing for those changes,” he said.

The 22-year span between Roche’s first application and the eventual grant also reflects how U.S. patent law leans heavily in favor of granting monopolies to corporations, Amin said. Patent applications can be kept alive for many years by filing paperwork that adds to the original invention as well as requests for further review after a rejection. By comparison, a refusal can only be appealed twice in Europe.

“The U.S. is an outlier in that aspect,” Amin said. “You don’t ever have to give up a patent application.”

Competition ready, but not launched

As Amgen built a fortress around Enbrel, the U.S. government tried to encourage companies to develop lower-price alternatives to expensive biologic drugs like TNF inhibitors. In 2010, Congress passed the Biologics Price Competition and Innovation Act, or BPCIA. The law created an FDA approval pathway for so-called biosimilars, the copycat versions of biologic medicines.

But biosimilars haven't had their intended impact, in part because of patent thickets.

Enbrel, then earning Amgen more than $3 billion per year, was a top target for would-be biosimilar competitors. Novartis’ Sandoz division began developing an Enbrel copy in 2012 and four years later, won FDA approval for Erelzi, the third biosimilar to be cleared by the agency.

But five years later, Erelzi still hasn’t launched, even as 30 other biosimilars have won U.S. approval and 21 of them have reached market. Standing in the way of Erelzi, and Samsung Bioepis' subsequently approved Eticovo biosimilar, is Amgen’s patent thicket.

Enbrel's path to $74 billion in revenue

Amgen acquired Enbrel when it bought Immunex in 2002. Over nearly two decades it has earned more than $70 billion in cumulative revenue and could be on track to exceed $100 billion. (Figures in millions of dollars)

Amgen used the Roche invention as well as a second manufacturing patent to challenge Erelzi. In response, Sandoz claimed the intellectual property wasn’t different from earlier, expired patents.

A U.S. district court sided with Amgen in 2018, however, a ruling later affirmed by the Court of Appeals for the Federal Circuit. Novartis appealed to the Supreme Court, which declined to take the case, closing down the Swiss pharma’s legal options and ensuring Amgen’s patent defenses remained in place.

Without copycat competition, Amgen can better command pricing power in the U.S. through 2029. In 2017, Enbrel’s annual list price was about $53,000, according to a report prepared by staff of the U.S. House Oversight and Reform Committee.

Amgen says that, in spite of the price, it has spent $7 billion since 2008 on patient support programs to help ensure access to people who can't afford its drugs.

In Europe, meanwhile, biosimilars to Enbrel launched in 2016 and have won about 40% share of the market, helping drive the drug’s price down to as little as $9,200 in the Netherlands in 2017, according to the House committee report.

Amgen doesn’t market Enbrel in Europe, however. That task belongs to partner Pfizer, which booked $1.4 billion in 2020 sales, a number that had shrunk by nearly $300 million from 2019 because of “continued biosimilar competition,” the company said.

Enbrel’s continued U.S. exclusivity beyond 2016 — when key patents would have lapsed if not for Amgen’s efforts — could end up costing the U.S. tens of billions of dollars, I-MAK estimated.

The industry lobbying group BIO, of which Amgen is a member, takes a different view, arguing that patents aren’t as much of a barrier to biosimilar entry as they seem. The organization analyzed biosimilars that have launched in the U.S. and found on average, they reached patients less than a year after FDA approval. (Launches of Enbrel and Humira biosimilars, both expected many years after first approvals, could significantly change that finding, however.)

Moreover, BIO hasn’t found a correlation between the number of patents a company asserts in litigation and the length of time until a biosimilar comes to market, according to Melissa Brand, the organization’s director of intellectual property policy. Several have launched at risk of litigation, she added, suggesting the threat of lawsuits does not always deter biosimilar makers.

Ironically, among those launched at risk were two biosimilars from Amgen: Kanjinti and Mvasi, which respectively mimic Roche’s cancer drugs Herceptin and Avastin.

The government takes notice

As long as investors continue to reward companies for sustaining profit-making patent monopolies, drugmakers will likely continue to use legal means to do so. But they may find themselves challenged more frequently amid continued pressure from lawmakers.

The House Oversight committee’s report, for instance, is a sign that patent thickets and their effect on drug prices are gaining greater attention on Capitol Hill. At a hearing in May 2021, Democratic and Republican lawmakers criticized AbbVie CEO Richard Gonzalez over the company’s patent estate protecting its top-selling drug Humira until this year.

“You have the right to make your profit, give many billions to research and develop new pharmaceuticals," Rep. Clay Higgins, R-La., told Gonzalez at the hearing. “But it's a question of whether or not it's an honest profit.”

Legislation to limit patent thickets is in the works. Bills voted out of the Senate and House Judiciary Committees would limit the number and types of patents that makers of biologic drugs like Enbrel can assert in lawsuits against biosimilar developers, and would apply to products on the market as well as ones still in development.

Achieving a legislative victory would be a very tall order, given the problems multiple presidential administrations have had enacting any type of drug price reform. But more aggressive challenges could come too. The Biden administration has signalled that federal agencies might take a closer look at patent thickets. Both the FDA and U.S. Patent and Trademark Office have been directed to help speed development of biosimilars. And President Joe Biden was reportedly pressed to nominate a PTO director willing to challenge drug patents. (He picked Kathi Vidal of the law firm Winston & Strawn last week, but it’s unclear what tack she might take on issues related to pharmaceutical patenting practices.)

While these moves could help prevent the next Enbrel, they won’t bring an earlier end to Enbrel's exclusivity. That, for now, is fixed by the court judgments, an outcome not lost on industry critics.

"They have 12 years without competition," I-MAK's Amin said, referring to the exclusivity window granted to biologic drugs by the FDA. "I think that should be enough."