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Wall Street Journal / Life - Entertain

How Blockbuster Drugs Fight Off Cheaper Competition

A lower-priced version of blockbuster Remicade hasn’t sold well; will an even cheaper drug upend the obscure pricing of the drug industry?
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Charley Grant

Powerful Incumbents / Quarterly U.S. revenues for Enbrel, Humira and RemicadeSources: the companies

A new drug launch meant to save the health care system money could instead spotlight why high drug prices are so persistent.

Merck & Co. and Samsung Bioepis began selling anti-inflammatory drug Renflexis in the U.S. on Monday. The new drug is the second non-branded version of Johnson & Johnson ’s blockbuster drug Remicade to hit the U.S. market. Renflexis will sell for one-third below Remicade’s list price. That is significantly cheaper than the first biosimilar to Remicade, which sells at a 15% discount to list price.

The news would appear problematic for Johnson & Johnson. The company booked more than $2.2 billion in U.S. Remicade sales in the first half of this year, which accounted for more than a fifth of total U.S. pharmaceutical sales over that period. In a normal commercial market, a product that does the same thing and sells with a big discount would fly off the shelves.

But sales of the first Remicade biosimilar were just $17 million in the first quarter. And while U.S. Remicade sales were down nearly 14% in the second quarter, Johnson & Johnson said biosimilar sales have been weaker than they expected. It is more likely that the company has lost market share to rivals in what is the best-selling class of drugs in the world, AbbVie ’s Humira and Amgen’s Enbrel. Both companies report results this week.

Biosimilars are fairly new to the U.S., and unlike traditional generic drugs, aren’t exact copies of the prescription drugs. That could limit enthusiasm among doctors and patients for switching treatments. Yet biosimilars have long been sold in Europe, and there is no evidence they haven’t worked just as well as branded drugs.

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Johnson & Johnson’s blockbuster drug Remicade is facing another threat from cheaper competition.Photo: © mike blake / reuters/Reuters

A much bigger obstacle to biosimilar use is the convoluted U.S. system of rebates and discounts from the sticker price. It is impossible to tell from the outside what kind of savings these new drugs actually offer, despite the high list discount. A recent paper in the Journal of the American Medical Association said that rebates offered by drug companies to payers such as insurance companies could halve the price of the branded drug for a patient. But if a payer does use the biosimilar, the drugmaker could pull its rebate for all of its patients.

That means if some, but not all patients switch to the cheaper drug, the payer’s total drug expense could actually rise. And for all the outrage over high profile episodes of generic price gouging, U.S. sales of Remicade and its two branded peers were nearly $21 billion last year.

Politicians of all sorts have spent the past two years investigating and decrying the high price of prescription drugs. One answer to their criticisms could be to pull the veil off rebates and other efforts by drugmakers to obscure how much their products really cost.

Write to Charley Grant at charles.grant@wsj.com

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