Staying ahead of the competition

The pharmaceutical trade has a competitive streak. As an industry leading the way in improving the health and wellbeing of people the world over, this is no surprise.

The rivalry among competitors has long been a force for innovation and development, something we are seeing most recently in the development of biological drugs. This includes a wide range of products such as vaccines, blood components, allergenics, somatic cells, gene therapy, tissues, and recombinant therapeutic proteins.

Biologics can be composed of sugars, proteins, or nucleic acids or complex combinations of these substances, or may be living entities such as cells and tissues. They often represent the cutting-edge of biomedical research, offering untold potential to combat a variety of currently untreatable medical illnesses and conditions.

As these new drugs come onto the market, biosimilars are also being developed. These are near-identical versions that can be sold at a reduced price. The long-awaited first US biosimilar was Sandoz’s Zarxio, which prevents infections in cancer patients. It received FDA approval in 2015, and entered the market at a 15 per cent discount.

Four biosimilars have now been approved, while a further 50 are at varying stages in the process. According to PwC, this trend has the potential to be as disruptive as generic drugs following the Hatch-Waxman Act of 1984.

Proposed by Senators Orrin Hatch and Henry Waxman, the bill altered the pharmaceutical field substantially as it made it easier for generic drugs to enter the market, at a lower cost than their branded counterparts.

Biosimilars are expected to bring significant price discounts compared with branded versions of biologics. This is set to have a big impact on the traditional pharmaceutical space, shaking up the market and complicating pricing structures.

But, is the pharmaceutical industry ready? Recent Tungsten Network research on UK businesses found that the industry was the least likely to reduce prices to undercut competitors (38% of those surveyed, compared to the average of 50%) and 13% had never conducted a spending review of their suppliers to drive down costs.

This may need to change. Drug prices receive considerable public and political scrutiny. In 2007, the patent rights to 42 blockbuster products ran out, representing $82 billion in sales. This has caused a fundamental market shift, with copycat versions of Viagra and other drugs now commonplace.

In response to this mounting pressure, many foresee the pharmaceutical industry taking preventative action and regulating itself more. In its review of the top industry issues of 2017, PwC predicts that drug companies will put the brakes on price increases.

In September 2016, Allergan CEO Brent Saunders published details of a plan to limit price increases to single-digit percentages, no more than once a year. Similarly, in April that year, KaloBios Pharmaceuticals announced a new pricing model that would limit price increases to no more than the rate of inflation, no more than once a year.

Speaking to The New York Times in October, GlaxoSmithKline CEO Andrew Witty said: “We have to be thoughtful and engaged about how we explain our position and how we try and make the [pricing] situation better.”

These limits on price increases will likely bring transparency and accountability into focus, as businesses seek to get their hands on the information they need to be more profitable and stay one step ahead of the competition, predicts Ruud van Hilten, Tungsten Network’s SVP Sales.

“Pharma businesses would do well to look closely at opportunities to reduce unnecessary outgoings,” he said. “While keeping one eye on the competition, the other could delve deeper into the supply chain, which is only going to get more complicated. This has the knock on effect of making cost management more complex.

“An overview of purchase orders and what money is being spent against is important, as is clarity about the invoices being sent out and where they are in the payment cycle. Combined, they offer a deeper understanding of the relationships and pinch points that exist within supply chains.”