How regulation, competition law and the UPC could impact biosimilar medicines

Navigating these issues will be important for biosimilar manufacturers at a time when the global biosimilar market is entering a new, rapidly expanding phase. This change is happening because some of the best-known biologic medicines will lose patent protection over the next five years, allied to the expected cost savings biosimilar medicines are likely to offer health services that are under increasing financial pressures. 

Understanding the regulatory framework, potential adaptation of competition law and the impact of the Unified Patent Court will be vital to biosimilar manufacturers as they develop innovative strategies to overcome barriers to market entry, which must also reflect complex patent landscapes and include commercial strategies, to take advantage of growth opportunities.

Evolution of biosimilar regulatory pathways: new opportunities

Following the UK’s departure from the EU, the authorisation of medicinal products for the UK market is now regulated by the UK’s Medicines and Healthcare products Regulatory Agency (MHRA). This has enabled the UK to diverge its regulatory practice in relation to biosimilars, as set out in the recent guidance on the licensing of biosimilar products (MHRA guidance). The MHRA guidance aligns with the UK government’s plan to promote the UK as an attractive market for life sciences companies, and the NHS’s strategy to adopt biosimilars faster. 

No comparative clinical trials

In the MHRA guidance, the requirements for certain clinical tests, previously required by the European Medicines Agency (EMA), have been relaxed. In particular, the MHRA no longer requires certain ‘in vivo’ testing – studies in living organisms – or comparative clinical trials in most cases, which should accelerate not only the review process at the MHRA, but also allow biosimilar companies to submit applications for UK marketing authorisations at an earlier juncture.

The MHRA guidance acknowledges that biosimilar companies will still need to carry out comparative clinical efficacy trials for other parts of the world, but successes arising out of the UK approval pathway may ultimately lead the EMA, and even the US Food & Drug Administration (FDA), to remove the requirement for such studies. Over the next 10 years, it is possible that the regulatory scrutiny of biosimilars may become more flexible and more aligned with the approval process for generic medicines.

As more biosimilar products are assessed and approved, more data to evidence comparability to the reference product via in vitro testing – studies performed in a laboratory with cultured cells, rather than a whole organism – is becoming available, not least because of improved analytical capabilities which now enable biosimilar manufacturers to fully characterise the structure and function of new biosimilar products and rely on knowledge generated from prior biosimilar approvals. This is also likely to streamline the regulatory process.

From a UK perspective, the removal of the requirement for comparative clinical efficacy studies offers a great cost saving in terms of biosimilar development and may enable companies to get their product out to patients at a much earlier time point, potentially before other markets. This makes the UK attractive to biosimilar manufacturers as they can start to recoup their development costs earlier for reinvestment. It will also bring about faster savings to the NHS, and, for a healthcare provider which is already stretched on budgets, having that money to spend on other services and treatments will be an attractive proposition and no doubt drive biosimilar growth in the UK. 

Incentivisation and increased competition

On a wider scale, the anticipated convergence and streamlining of global regulatory pathways and increased availability of comparable data may incentivise more biosimilar manufacturers to invest in the development of these medicines, and to enter the market quicker. Increased competition will reduce prices, which will therefore assist in reducing costs for healthcare systems across the globe. This is a huge incentive, particularly following the Covid-19 pandemic, which placed additional financial strain on health services worldwide. 

However, the flip side to increased competition is potentially greater levels of price erosion, and therefore reduced profits, as we have seen with generic medicines. It will clearly be important overall that future revisions to the regulation of biosimilars continue to incentivise the long-term investment in the sector. 

Interchangeability of biosimilar medicines: an area for development in the EU and UK

As the number of biosimilar medicines increase, national regulators may begin to look more at the effect of switching from one biosimilar to another. At present, the FDA in the US is the only national regulatory authority which can provide an ‘interchangeability’ designation, which may permit a biosimilar to be switched for the innovator product by the pharmacist without the knowledge or intervention of the clinician.

Although auto-substitution is standard practice for small-molecule generics, the FDA only approved the first interchangeable product, the insulin Semglee produced by Mylan which can be substituted for Lantus produced by Sanofi in July 2021. This is expected to increase the use of Semglee and increase price competition between Semglee and Lantus. However, there may be a longer road to achieving an interchangeability status for more complex biosimilar molecules, such as antibodies. There is currently no equivalent procedure in the EU or the UK, but as more data relating to biosimilar medicines is generated, and cost pressures on national health services increase, switching patients between an originator and a biosimilar may become more likely.

However, this will inevitably lead regulators to consider the issue of multiple switching, i.e. switching patients from one biosimilar to another biosimilar. Unlike generic medicines, the use of multiple different biosimilars may lead to different immune responses in patients. At the present time, there is not enough data to evaluate the effect of multiple switches on the immune system. Due to cost pressures and the anticipated increased availability of competing biosimilars over the next 10 years, regulators will inevitably have to consider this issue.  

Competition law

Few biosimilar medicines have, to date, been the subject of scrutiny by competition authorities. However, as the market evolves and the profitability of such medicines increases, this may change.

Benefit-for-delay?

Patent settlement agreements which include a “pay-for-delay” element have been subject to investigations by the European Commission and national competition authorities. These arrangements have arisen in the context of small molecule generic medicines, where an originator company offers the competitor generic a payment or other benefit in return for the generic agreeing not to enter the market for an agreed period of time.  Such arrangements have been viewed as anti-competitive.

The higher costs associated with the development of biosimilars, including the more complex regulatory pathway, along with the lack of interchangeability, may support the contention that there is less likely to be an immediate price erosion and loss of sales for the biologic, and therefore less of an incentive to pay biosimilars to stay off the market. This type of agreement may therefore be less likely in the biosimilar space, but nonetheless will likely raise competition issues if implemented.

However, ongoing litigation in the US in respect of Abbvie’s Humira branded product for the biologic adalimumab, goes one step further in terms of assessing what constitutes ‘value’ or a ‘benefit-for-delay’, rather than a payment. The core issue is whether an agreement in which biosimilars would receive early access to the European market in return for an agreement to stay out of the US market until a later date is considered anti-competitive. In other words, the biosimilar manufacturer does not receive a direct payment from the supplier of the biologic for the delay in entry for a particular market but will instead benefit indirectly by gaining early access in another valuable market. If the position was reversed and it had been EU market entry that had been delayed in return for early entry into the US, it is possible that an EU competition law regulator would also consider this type of agreement to be an illegal form of market sharing.

From a competition law perspective, it remains to be seen whether ‘benefit-for delay’ arrangements will be considered anti-competitive or simply part of doing business. While these issues have not yet been fully considered in the US, or at all in Europe, given the value of the biosimilars market they should be watched with interest.

Anti-competitive guidance?

Innovator companies are looking for ways to limit biosimilar market entrance, but such methods may also pose issues under competition law. Again, to date, such issues have only arisen in the US, where AbbVie has introduced a high-concentration version of Humira. This new version of the medicine is now capturing market share, which poses a problem for biosimilar manufacturers with approved adalimumab biosimilars in the original concentration that have launched or are yet to launch. Under current FDA guidance, such biosimilars would not be considered interchangeable with the higher concentration form of Humira, which causes an issue for biosimilar manufacturers. Boehringer Ingelheim has raised a red flag, arguing that this guidance therefore facilitates anti-competitive tactics, and has issued a Citizen’s Petition calling on the FDA to reinterpret its guidance. 

In the generic space, the introduction of a new version of a drug prior to generic entry and tactics to force patients to switch product are known as “product hopping”. The conduct may be anti-competitive where the new version of the drug has limited or no patient benefit and, it is argued, was instead motivated by the originator as part of a strategy to avoid generic competition.

Given the challenges posed in reformulating biologics, such product hopping claims seem less likely to gain traction in biosimilar markets. It may therefore be the case that the relationship between biologic and biosimilar companies cannot be viewed as equivalent to that of small molecule originators and generic manufacturers, and that different competition issues arise. Given the rapid expansion of the biosimilars market, however, we expect such issues to be given consideration in the coming years.

Unified Patent Court

Patent litigation in Europe is expected to evolve in the years ahead. The proposed Unified Patent Court (UPC) may provide biosimilar manufacturers with a more cost-effective way to challenge secondary patent protection. 

At present, infringement and validity of European patents is assessed by national courts. Validity can also be challenged at the European Patent Office in parallel for European patents, but this process is lengthy and therefore national proceedings may provide commercial certainty at any earlier time point. While national litigation in Europe is well-established and robust, it inevitably leads to litigation in multiple countries in parallel, particularly in respect of high value products such as pharmaceuticals, which can be expensive and risks divergent decisions in different jurisdictions. In Europe, the proposed unitary patent (UP), and UPC aims to address these issues by creating a specialised single patent court with exclusive jurisdiction for litigation relating to UPs and European patents, though holders of European patents can opt those patents out of the jurisdiction of the UPC.

The UPC has been in development for a number of years and has been the subject of a number of legal challenges, but a point now appears to have been reached where it may become a reality, sooner rather than later. 

At the time of writing, only one more EU member state is required to ratify the Protocol on the Provisional Application of UPC Agreement (PAP-Protocol) and the UPC Agreement itself, after which the provisional application phase for the UPC will begin. This phase will see the final steps for the establishment of the UPC take place, including the approval of secondary legislation, budgets, testing of IT systems and appointment of judges. This phase is expected to take approximately eight months, and while the UPC history tells us that no timescale can be set in stone, it is looking more and more likely that the UPC will come into effect during the second half of 2022 or early 2023.

The UPC has the advantage of one patent litigation action leading to one decision for all participating member states, offering parties a cost-effective way of obtaining legal certainty. However, one disadvantage is the fact that, post-Brexit, the UK is unlikely to be part of the UPC system. The UK is a large biosimilars market and therefore any litigation in respect of UK designations of European patents will continue to be conducted before the UK courts. 

It is, of course, too early to say how attractive the UPC will be in practice for biosimilar companies, and it is likely that test cases, certainly in respect of complex, high value matters will take years to reach a resolution. It also remains to be seen how the timescales for litigation in the UPC and national courts will compare and whether judgments from national courts will influence the decisions of judges in the UPC.

With contributions from Robert Vidal, Sarah Taylor and Becky Ellis of Pinsent Masons. David Lancaster and Tracey Roberts will be attending Festivals of Biologics, a three-part conference focused on biosimilars, antibodies and immunotherapies, taking place in Basel on 9-11 November. The conference will bring together international senior biologics professionals to showcase their research, collaborate on challenges, forge new connections and ultimately advance the industry to improve patient health. David will be speaking on “How to bypass legal challenges and bring a biosimilar to market” on the third day of the World Biosimilar Congress.