Observers were left surprised by the size of the decline in US sales at Sandoz during the fourth quarter. Richard Francis, CEO of Novartis' generics division, told Scrip about plans to turn the business around in which biosimilars will figure largely.
Source: Shutterstock RESHAPING SANDOZ: CEO BACKS BIOSIMILARS TO TRANSFORM THE BUSINESS
There was one blot on the landscape as incoming Novartis AG CEO Vas Narasimhan unveiled his future plans for the Swiss major, with the group's financials revealing an underwhelming performance in the US at its generics unit Sandoz Inc.
Overall fourth-quarter turnover at Sandoz was flat at $2.6bn but eyebrows were raised by a 17% decline in US sales. In an interview with Scrip at the Novartis annual press conference in Basel Jan 24., Sandoz CEO Richard Francis explained that the company, like the rest of the industry across the Atlantic, was having to deal with falling prices for generics amidst "massive consolidation" in the sector.
He said that 85% of drugs go through three customer channels "who are fighting each other" and driving down prices. Also FDA approvals of generics have reached record levels as the agency works its way through the backlog of abbreviated new drug applications that had built up, which has led to a market flooded with small-molecule generics, putting even more pressure on prices.
Furthermore, that situation is not going to change any time soon, Francis said, as it would require the channels unconsolidating – "I don’t think that’s going to happen" – or fewer FDA approvals, which is highly unlikely given that commissioner Scott Gottlieb has regularly talked about prioritizing generic drugs as a way to reduce drug costs.
So how to respond? Francis told Scrip that for the past couple of years, Sandoz had been reshaping and evaluating the business in the US, which had involved discontinuing or divesting products. The question now is whether it will accelerate that process.
The company is currently focused on making copies of more complex compounds and Francis highlighted Sandoz' version of GlaxoSmithKline PLC's blockbuster asthma drug Advair (fluticasone/salmeterol). He noted that making the product was "incredibly difficult" but the company was hopeful of a launch sometime this year, although it may not be first to market.
What will ultimately turn the business around in the US, however, will be biosimilars, Francis stressed, a point echoed by Narasimhan on the results conference call. As opposed to Europe, where Sandoz is enjoying strong uptake, the incoming CEO noted that the pathway for biosimilars was still blocked with regulatory and payment barriers. (Also see "New Dawn At Novartis As Narasimhan Demands Breakthroughs" - Scrip, 24 Jan, 2018.)
However Narasimhan insisted that the US healthcare system "desperately needs biosimilars to be successful to create fiscal space for new medicines," and he is confident there is going to be significant uptake for these medicines, providing a multi-billion dollar opportunity for the company.
Francis echoed Narasimhan's enthusiasm about the long-term prospects for the US business but called for more guidance from the FDA. When asked about the possibility of more switching studies to show biosimilars are interchangeable with its reference product, he said they would be difficult and expensive to do; for example, would the biosimilar need to be tested for all the different indications that approval was being sought for?
Francis went on to say that the US experience showed that "as much as this is a global business, it's a very local business model, the US is different but Italy is also different to Germany." As such, Sandoz makes decisions "on a product-by-product and market-by-market basis."
Supply A Service, Not Just Drugs
When asked about the environment for biosimilars in Europe, Francis told Scrip that "pricing is often the headline, but we are finding health systems are looking very closely at the comprehensive service you offer," not just supplying drug. He added that with the diseases for which biosimilars are being indicated, physician and patient support are particularly important, giving the example in the UK of Sandoz providing nurses to help patients inject Erelzi, the company's biosimilar of the immunology blockbuster Enbrel (etanercept).
"There are lots of ancillary services you have to be able to deliver, and while price is part of it, what we are seeing more and more, which is why Sandoz is often the preferred partner, is governments are saying, 'You have to help us look after the patient population not just supply us with the drug,'" Francis said.
He noted that while a number of biosimilar providers, particularly in Scandinavia, got into the market early by offering huge discounts compared with the reference product, in the last 18 months they have been forced to go back to governments to renegotiate as the model they offered was not sustainable. "You don't have to drive the price down ruthlessly; there is so much opportunity to save money in the system without just going down that one direction."
Francis concluded by talking about Sandoz' recent link-up with Indian generics major Biocon Ltd.Explaining the rationale behind the deal, he said, "We are currently number one in biosimilars and we intend to stay number one – to do so, we need an even broader portfolio."