Economic Analysis of Availability of Follow-on Protein Products. Results

07/27/2009

From the 10 original categories of biologics considered, 6 categories of biologics were selected for further analysis based on input from experts and the results of our initial research, including:

  • Erythropoietin (EPO)
  • Cancer monoclonal antibodies (MAbs)
  • Anti-tumor necrosis factor (anti-TNF) agents
  • Interferon beta
  • Granulocyte-colony stimulating factor (G-CSF)
  • Interferon alpha

Within these categories, only individual products that ranked in the top 20 biologics according to 2006 sales were evaluated. Among the categories considered, the following biologics were selected as the most likely candidates for FoPPs:

  1. Procrit®/EPOGEN® (EPO)
  2. Rituxan® (MAb)
  3. Herceptin® (MAb)
  4. Avastin® (MAb)
  5. Enbrel® (anti-TNF)
  6. Remicade® (anti-TNF)
  7. Avonex® (interferon beta)
  8. Rebif® (interferon beta)
  9. Neupogen® (G-CSF)
  10. Pegasys® (interferon alpha)

Projected cost savings associated with establishing a regulatory pathway for FoPPs are based on modeling the anticipated experience with FoPPs for these 10 products.

Under the base case scenario:

  • Biologic markets are assumed to open to FoPP competition after patent expiry and the expiry of a data exclusivity period of 12 years.

    • FoPP entry is therefore assumed to occur no earlier than 2012.
    • Our model projects that the number of FoPP entrants will range from zero (for Pegasys®) to three (for the EPOs, and Avastin®) over the period 2009-2019. 

  • The small number of entrants is estimated to be accompanied by maximum FoPP price discounts of 20% (for Avastin) and FoPP market shares of 54% (for Neupogen).  
  • The price discounts associated with FoPP entry are estimated to result in an additional (induced) increase in the overall demand for these products of at most 4%. 
  • Under these base case assumptions, cost savings from entry of FoPPs total $9.97 billion dollars over the period 2009-2019.

    • $5.3 billion of this is estimated to accrue to private payers.
    • $4.65 billion of this is estimated to accrue to public payers.

These estimates are most sensitive to assumptions about the size of eventual FoPP price discounts and brand price inflation in the context of FoPP competition. 

  • For example, assuming FoPP price discounts of 40% increases the estimate of cost savings by a factor of four, to $44 billion.  
  • Assuming decreases in brand prices averaging 1.5% per year also increases the estimate of cost savings, to approximately $40 billion.
  • In contrast, the effect of varying assumptions on the rigor of the regulatory process, modeled by varying the time to first entry of FoPPs and the fixed cost of FoPP entry, has smaller effects on estimated cost savings. 

    • Delaying entry of FoPPs by five years lowers the estimate of overall cost savings for the period 2009-2019 by $7.9 billion.
    • Assuming that all FoPP entrants will be required to field the equivalent of a 900-person clinical trial lowers the estimate of overall cost savings by $1.5 billion. 

  • The estimate of cost savings is sensitive to additional FoPP entries in years after the biologic markets first open to competition, as well the manner in which the fixed costs of entry for FoPPs are estimated. 

    • Assuming that, in years subsequent to the first year of opening of the markets, there will be two additional FoPP competitors for each product increases the estimated cost impact to $16.5 billion.
    • Assuming that potential FoPP manufacturers generally would be required to build entirely new production facilities rather than take advantage of existing capacity significantly reduces the estimated number of FoPP entrants and resulting cost savings to negligible levels, i.e., less than $0.5 billion.

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