What happened to the innovation and competition Zarxio was supposed to spark?

A year ago, healthcare providers, plans and pharmacy benefit managers thought they were on the brink of a new era of competitive drug prices. The federal approval of the first biosimilar for sale in the U.S. was supposed to foster new products that offered big discounts on some of the most expensive treatments.

But there's been no flood of new drugs and no lower prices since the Food and Drug Administration's approval of Sandoz's drug Zarxio.

In fact, after a year of speculation over the growth of the market, Zarxio, an alternative to Amgen's cancer therapy Neupogen, remains the only biosimilar for sale in the U.S. Just one other product is in the wings.

Stakeholders say a number of regulatory issues present hurdles in the biosimilar market, which was once estimated to result in savings of up to $44 billion over a decade.

Since January, 59 biosimilars of 18 reference products have been enrolled in the FDA's Biosimilar Product Development Program, Dr. Janet Woodcock, director of the agency's Center for Drug Evaluation and Research, said in February during congressional testimony.

Woodcock then said the agency was actively recruiting additional staff to meet the demand.

According to consulting firm Eastern Research Group, the FDA spent about $81.7 million on biosimilar-related work during the first three fiscal years of the product-development program. That resulted in a workload equivalent to 295 full-time employees.

The FDA has cautiously reviewed biosimilars, drugs which, like generics, are designed to be cheaper alternatives to name brands. Biosimilars, however, are not identical to the biologics they copy because they are derived from living organisms. The agency has been struggling with how to address interchangeability, or the ability to switch a patient to a biosimilar drug from an original biologic, and vice versa, without affecting safety or efficacy. Some predict the agency will require drugmakers to conduct clinical trials to prove interchangeability, and that would take millions of dollars and years to conduct.

Naming conventions are another hot-button issue. Critics want biosimilars to carry vastly different names from biologics to avoid confusion and prevent adverse reactions. Biosimilar makers say carrying the same non-proprietary name would help boost confidence about the safety and efficacy of their products. The FDA sought middle ground last August when it proposed adding a four-letter suffix to the non-proprietary names shared with brand-name biologics. The agency has not yet finalized guidance on naming.

These hurdles raise questions as to whether the biosimilar market could ever reach its potential.

From a financial perspective, sales of Zarxio have not “lit the world on fire,” said Chris Raymond, biotechnology analyst for equity research-investment firm Raymond James.

That might be because Amgen has diverted patients away from Neupogen in favor of its longer-acting version, Neulasta. Medicare's current reimbursement for biosimilars doesn't help. Payment to doctors for prescribing outpatient drugs is a product's average sales price plus 6%. That creates an incentive for physicians to use more expensive medications.

Zarxio's third challenge came when its wholesale price was listed only 15% lower than Neupogen's. Sandoz had projected it to be 30% cheaper.

Experts say biosimilar producers will have to market their products to new patients rather than persuade those who have been using their brand-name counterparts to switch.

Dan Mendelson, president of Avalere Health, said that while he estimated the biosimilar market will eventually be worth tens of billions, growth will occur slowly in the U.S., as consumers get more comfortable with choosing such drugs over their originator counterparts.

“It's not like the whole thing is going to take off like a rocket ship,” Mendelson said. “This is going to be measured in a slow change in the marketplace.”