October 20, 2023
The future of pharmaceutical antitrust litigation will likely focus in large part on biologics and biosimilars. Cases involving the delayed market entry of generic pharmaceuticals have traditionally focused on small-molecule generic drugs.
In recent years, though, the U.S. drug market has come to be dominated by biologics. Biologics — and their generic counterparts, called biosimilars — are prescription drugs derived from living cells; examples include insulin, vaccines and antibody drugs.[1]
Following five years of double-digit annual growth, in 2022 biologics captured 46% of U.S. prescription drug spending — approximately $261 billion.[2]
Generic-delay cases involving small-molecule drugs are familiar territory for many pharmaceutical antitrust litigators, though the same is not yet true for biosimilar-delay cases.
Whereas small-molecule generics have been regulated by the Hatch-Waxman Act for nearly 40 years, biosimilars have been authorized under U.S. law for just over a decade. And new evidence indicates that while biosimilar markets are largely akin to small-molecule generic markets, there are also important differences.
Those differences have been well illustrated by 2023’s launch of biosimilar versions of Humira. Humira was the single-largest line item in the 2022 U.S. pharmaceutical budget.[3] Americans spent over $18 billion on the biologic, which treats conditions such as rheumatoid arthritis.[4]
Why the high prices? Humira’s manufacturer, AbbVie Inc., long maintained a monopoly on the drug. In mid-2023, however, a wave of biosimilar Humira competitors finally came to market, with the most recent launching in October.[5]
This article identifies the emerging ways in which biosimilar markets differ from traditional small-molecule drug markets, and recommends how pharmaceutical antitrust litigators can account for these market dynamics in biosimilar-delay cases.
Generic-Delay Cases and Biosimilars: Overview
Generic-delay litigation involves claims that pharmaceutical companies have improperly delayed the market entry of lower-priced generic versions of a drug, thereby causing payers — e.g., wholesalers, self-insured employers or patients — to overpay for a period of time.
Perhaps the most well-known type of generic-delay case is the “reverse-payment,” or “pay-for-delay,” case, which was recognized by the U.S. Supreme Court in FTC v. Actavis.[6]
Pharmaceutical companies can also face liability for other misconduct that delays generic competition, such as abusing the Orange Book system,[7] refusing to sell essential inputs to prospective generic competitors,[8] or filing sham patent litigation.[9]
Generic-delay cases have traditionally focused on small-molecule, chemically derived drugs — which are governed by the 1984 Hatch-Waxman Act. But an increasingly large share of prescription drug payments now goes toward biologics. Biologics are derived from living cells, and their therapeutic equivalents are called biosimilars.
The statute authorizing biosimilars — the Biologics Price Competition and Innovation Act — was enacted in 2010.[10]
The biosimilar market is thus relatively nascent: Whereas the U.S. Food and Drug Administration approved 722 small-molecule generic drugs in 2022,[11] it has approved a total of just 43 biosimilars since the BPCIA was enacted in 2010.[12]
Despite their relative nascency, biologics and biosimilars now account for approximately 46% of U.S. prescription drug spending — $261 billion per year.[13]
With such substantial revenues at stake, pharmaceutical companies have strong motivations to use anti-competitive tactics to delay the onset of biosimilar competition, just as they have to delay the entry of small-molecule competition.
Differences between small-molecule generic markets and biosimilar markets, however, may warrant special attention from practitioners, as the same litigation strategies that have successfully policed small-molecule delay cases may require adjustment in biosimilar cases.
Same-Tier Formulary Coverage
Payers, and pharmacy benefit managers acting on their behalf, use several tools to incentivize the use of lower-priced generic drugs rather than more expensive branded drugs. One tool is the formulary, a list that organizes drugs into tiers, which render drugs more or less expensive for plan members.
For example, a formulary may impose a $10/$30/$50 copay for drugs on the first/second/third tiers, with generic drugs usually on the least-expensive first tier.[14] The formulary and other mechanisms[15] have contributed to small-molecule generics rapidly capturing the vast majority of brands’ market share in competitive generic markets.[16]
Despite biosimilar versions of Humira carrying a markedly lower list price than the branded product, many biosimilars are nonetheless being placed on formulary tiers equal to those of the name brand.[17] Placing biosimilars on the same formulary tier as their branded counterparts means that biosimilars may not capture the same high level of market shares as do small-molecule generics, as patients will not be incentivized to use the biosimilar by the promise of lower copays.
If biologics do maintain a greater share following biosimilar entry — as appears to be occurring with Humira[18] — one consequence in biosimilar-delay cases will be an increased importance of brand-brand damages.
As with small-molecule drugs, biosimilar competition can drive down the price of the branded drug compared to what the name brand’s price would be without competition.[19] Thus, even where payers would have purchased the branded drug had competition not been improperly delayed, they would have paid less for it and were thus damaged. These are called brand-brand damages.[20]
Practitioners should expect that brand-brand damages may be a meaningful part of the damages claims in biosimilar-delay cases, and be sure to prepare the fact and expert discovery necessary to establish, or respond to, claims for brand-brand damages.
One Biosimilar, Two Prices
Another unique dynamic that has appeared in biosimilar markets, including for Humira, is companies launching the same product at two different price points: one with a high list price and substantial rebates, and a second with a lower list price but few or no rebates.
Biosimilar versions of Humira have generally coalesced around 5% off and 85% off Humira’s list price — just under $7,000 for a month’s supply as of 2023 — with multiple companies offering both a high-list price and low list-price version.[21]
For example, Boehringer Ingelheim Vetmedica Inc.’s Oct. 3 launch of an unbranded biosimilar at an 81% discount follows its July 2023 launch of a branded biosimilar priced at a 5% discount.[22]
A post-generic entry pricing regime with multiple list prices will affect how plaintiffs calculate their damages in biosimilar-delay cases. In small-molecule delay cases, experts generally identify what the name-brand price is and what the generic price would have been at a given time in the but-for world absent the defendants’ anti-competitive conduct.
Identifying a generic price is possible because small-molecule generics in competitive markets tend to coalesce closely around a prevailing price.[23] Unlike in small-molecule cases, however, the launch of biosimilar Humira products shows that there will be biosimilars marketed with markedly different list prices.
Plaintiffs might address this dynamic in different ways. One could be to group together the name brand with the high-priced biosimilars as being the branded price and consider the lower-priced drugs as representing the biosimilar price.
It is no concern that one company may offer two differently priced products; branded manufacturers already do this with small-molecule drugs in marketing authorized generics.
From this perspective, biosimilar markets resemble small-molecule markets with the only difference being that multiple products are marketed around the name brand’s price point instead of only one.
Another approach could be to model the market as having three price points: a branded price, a high-priced biosimilar and a low-priced biosimilar.
While requiring an additional layer of analysis as compared to the first approach, this carries the benefit of acknowledging that even the high-priced biosimilars are marketed at a slight list-price discount to the brand — in Humira’s case approximately 5%.
Whatever strategy is ultimately taken, practitioners should be mindful that biosimilar market pricing structures differ from small-molecule markets. Counsel should coordinate early in the case with experts to understand the different biosimilar players and their prices, and develop a strategy for modeling the prices that payers would have paid in the but-for world absent the anti-competitive conduct.
Product-Specific Differences
While small-molecule generics can be automatically substituted at pharmacies for their branded counterparts, the same is true of biosimilars only when they have received an interchangeable designation.[24] As of October 2023, only two Humira biosimilars have received such a designation.[25]
There are thus product-specific differences among the biosimilars which one might not typically see in small-molecule generics. For example, some, but not all, Humira biosimilars contain citrate — an ingredient that can cause pain at the injection site. Some, but not all, Humira biosimilars are marketed in a high-concentration formula, which accounts for about 85% of prescriptions.[26]
Importantly, none of these differences should take the products outside of the relevant antitrust market — i.e., they all compete on price and will drive down overall spending on these drugs. Indeed, in a recent earnings call, AbbVie CEO Richard Gonzalez said the company is “competing very effectively with the various biosimilar offerings.”[27]
Nonetheless, defendants may attempt to seize on such product-specific differences to resist efforts to hold them accountable for anti-competitive conduct.
For example, defendants in private class action litigation could seek to argue that the product differences limit plaintiffs’ abilities to demonstrate elements of their case on a classwide basis.
Defendants could also attempt to argue that variation among biosimilars means the products do not fall within the same relevant antitrust market.
Practitioners should be prepared to account for these product-specific differences in addressing issues of market power, classwide proof and otherwise throughout the litigation. In order to address these issues, practitioners should consider retaining a medical expert.
Medical experts, who are often, though not always, used in generic-delay cases, may be especially crucial in providing the fact finder with expert analysis on why these product-specific differences do or do not matter for a party’s positions.
Conclusion
The emergence of biosimilars is a beneficial development for the U.S. health care system, as these affordable medicines stand to save Americans approximately $180 billion over the next five years.[28]
Thus, cases policing anti-competitive delay of biosimilar competition will remain an important tool for antitrust enforcers to promote competition in health care markets.
However, practitioners should remain mindful that biosimilar markets are relatively nascent, and successful enforcement of the antitrust laws against companies that improperly delay biosimilar competition will require thoughtful consideration of the specific dynamics that prevail in the emerging biosimilar market.
Read Lessons For Biosimilar and Biologic Antitrust Litigation.