Fitch: Gradual Conversion Begins as First Biosimilar Hits US Market

By Chris Lange Published Sep 16, 1:20PM EDT

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According to Fitch Ratings, biosimilars are beginning to take share from their reference biologics. This is seen in the debut of the first biosimilar drug in the United States. Ultimately this could affect the beginning of a gradual conversion for the domestic pharmaceutical drug market.

Zarxio, the first U.S. biosimilar drug, has entered the market at a reported 15% price discount to Neupogen, its reference biologic drug that is produced by Amgen Inc. (NASDAQ: AMGN). The U.S. Food and Drug Administration (FDA) approved Zarxio back in March as the first biosimilar to successfully navigate the new 351(k) pathway, and a favorable federal appeals court ruling green-lighted the delayed launch.

The 15% price discount compared to the reference product is smaller than Fitch’s rough estimate of U.S. biosimilar discounts of 20% to 30%. It is worth pointing out that Zarxio has no biosimilar competition. Fitch expects pricing to become more competitive when the number of biosimilars vying for the share of a specific reference biologic increase.

According to Fitch:

The relatively small price differential between Zarxio and Neupogen is a sharp contrast to the experience for traditional small molecule drugs, where generic products are typically offered at much greater price discounts. The smaller discount is part of the reason Fitch expects the market for biosimilar drugs develop slowly in the US. In contrast to the small molecule market, health insurers and pharmacy benefit managers have less incentive to aggressively manage formularies to substitute use of the biosimilar product to drive costs lower.

There is a limited incentive provided to payors to save on drug costs, in addition to other issues that impede the rapid development of the U.S. market. Technically speaking, biosimilars are difficult to produce and do not benefit from “interchangeability” with their reference products.

This lack of interchangeability has the potential to be a headwind against market share gains for biosimilar products, considering the related issue of physician and patient preference for reference products with established efficacy and safety records.

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Amgen shares were down 0.8% at $151.00 Wednesday afternoon. The stock has a consensus analyst price target of $186.00 and a 52-week trading range of $127.67 to $181.81.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.