Biosimilars: A threat to pharma cash cows?

Biosimilars are generic copies of biotech drugs that, once passed through a rigorous regulatory process, provide the same efficacy as their original counterparts while offering considerable cost savings. Whereas generic drugs, which are copies of small molecule medications, have existed for decades, biosimilars are far more recent. There are several reasons why commercially available biosimilars have taken so long to become available, including:

  1. The capital and knowledge required by companies to manufacture them;
  2. The reluctance of government agencies like the US Food & Drug Administration (FDA) to yield to market entrants in favor of prudent caution;
  3. Doctors’ resistance to the idea of switching their patients from proven biotech drugs that, while expensive, do save lives.

However, the environment has changed meaningfully in the recent past. Well-capitalised, well-known biotech firms are investing more in the requisite equipment and people to make biosimilars, the FDA has become increasingly accepting as the industry rises to meet its high standards, and doctors have grown to trust their effectiveness. Given this progress in the US, which has the largest market opportunity for the medications, coupled with the existing widespread acceptance in Europe, the long-term prospects associated with a growing biosimilar market have never been more inviting.

Dave Borah – The Boston Company Asset Management, a BNY Mellon company

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One Comment on “Biosimilars: A threat to pharma cash cows?”

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