Good news – bad news

Good news – bad news

Typically, when a drug goes generic physicians don’t have an issue switching the patient from the branded option to the generic.  This practice is also strongly encouraged by payors as generics offer a lower cost to the branded option. Yet when it comes to a biosimilar, like Lilly’s Basaglar a biosimilar version of Lantus, some have speculated that physicians wouldn’t embrace this option. Unlike generic medicines in which the active ingredients are identical to the reference small molecule drug, biosimilars will not be identical to the reference biologics.

Now it should be noted that we do not consider Basaglar a typical biosimilar given Lilly’s deep experience in diabetes. Lilly has been manufacturing insulin for decades and is not some no name company that physicians have never heard of before. This is one reason we have long believed that physicians would feel very comfortable switching patients from Lantus to Basaglar. The same goes for patients as any patient who does even a minimal amount of checking will take comfort that Basaglar is from Lilly.  Still there are some who remain skeptical.

Well in what can only be described as good news for Lilly and very bad news for Sanofi (NYSE: SNY) are the results of a survey of European Crohn’s and Colitis Organization members which noted that 44.4% of physicians taking the survey considered the Remicade biosimilar, a mAb, interchangeable with the original product. That compares to only 6% who that felt that way in 2013. Granted this is not insulin but it does show how physicians are becoming more comfortable using biosimilars.

According to story on the FiercePharma web site:

“Only 19.5% of respondents had little or no confidence in the use of biosimilar monoclonal antibodies, down from 61% who gave that response in 2013. The key advantage of using biosimilars is to save money, 92.4% of respondents said, while 69% said their key concern with using them is immunogenicity. The survey was done by researchers in Europe.”

The harsh reality is this survey just confirms what everyone has long suspected, that the long dreaded price war that no one wanted is about to explode. As we noted last week Sanofi is telling their reps to sell Lantus again, while the folks at Novo Nordisk (NYSE: NVO) have been aggressively pushing their newest long-acting insulin Tresiba.  Although Basaglar isn’t available in the US just yet, the drug has been well received in Europe.

The truth is there is no happy ending for Sanofi and the future of Lantus. While we don’t see physicians recklessly switching patients using Lantus to Basaglar, they won’t have much of a problem if this is what the patient’s payor wants.  As we have noted in the past Sanofi will have little choice but to capitulate to payors demands for lower pricing and/or greater rebates. Novo is also in an uncomfortable position as they too will be forced to play the price card. Lilly for their part is for the moment in the catbirds seat as they have nothing to lose and everything to gain. Given how they have handled Basaglar in Europe it appears they will no problem undercutting the competition.

Now before everyone starts feeling sorry for any of these insulin companies remember they will still be making money just not as much in the past. That like everything else in diabetes nowadays scale is critical and all three insulin companies have scale. It’s not like Lilly, Novo or Sanofi have to build new capacity to meet demand, newer production facilities although can increase manufacturing efficiencies which is another way to maintain margins.  So even when the price war becomes an all-out fist fight between heavyweights the pie is large enough to support all three players.

When the dust settles we see Sanofi holding onto the majority of existing Lantus users provided they don’t do something very stupid. Now given their track record in diabetes we cannot discount the possibility of this happening. Keep in mind this is the same company who brought us Afrezza, the iBGStar and its latest failure Toujeo. The same company who now thinks the sales reps they once publicly threw under the bus will be motivated to sell Lantus again.

We also see Novo and Lilly doing just fine, Novo should hold onto existing Levemir patients while Lilly gains the upper hand in new patient starts.

This of course assumes that all three companies behave in a rational manner, that they don’t over react and let their egos get the best of them. Although we would not claim that price wars are winnable we would however state they are manageable, again provided no one goes completely off the deep end. Should one company completely leave the reservation and go hog wild cutting price or bulking up rebates all bets are off and this will get very ugly.

That’s the real question that we cannot answer whether cooler heads will prevail or not. Given the respective track records of the various players we aren’t overly optimistic. Time will tell, this is going to get very interesting.