Pfizer Sues J&J, Accuses it of Preventing Inflectra Uptake

Pfizer, Inc. PFE has filed a lawsuit in a U.S. district court alleging that Johnson & Johnson JNJ is resorting to unfair practices to prevent sale of Inflectra - Pfizer’s biosimilar version of J&J and Merck& Co., Inc.’s MRK blockbuster rheumatoid arthritis drug, Remicade. Pfizer’s biosimilar version is available at a Wholesale Acquisition Cost (WAC), which is 19% lower than J&J’s referenced product.

Pfizer’s shares were up 1.6% on Wednesday while J&J’s shares were down 1.5%. However, Pfizer’s shares have underperformed the industry this year so far. The stock has returned 10.8% during this period, comparing unfavorably with an increase of 16.7% for the industry.

Pfizer alleged in a complaint filed in the U.S. District Court for the Eastern District of Pennsylvania that J&J has entered into “biosimilar-exclusion” contracts with U.S. insurers. These contracts encourage insurers not to cover Inflectra, thereby making it non easily-accessible to patients and protecting its referenced product. Pfizer also claimed that anticompetitive contracts were being offered to hospitals, which encouraged discounts on purchase of Remicade on the condition that they do not buy the biosimilar versions. Pfizer claims these unfair practices benefit sales of J&J’s referenced product, which is a key revenue generator for the latter.

We remind investors that at the second quarter conference call held in August, Pfizer had said that Inflectra penetration in the United States has been slower than expected as it was experiencing access challenges among national commercial payers.On the other hand, J&J had said at its second quarter conference call held in July that the rate of penetration of Inflectramay be modest. The latest lawsuit suggests that J&J could be responsible for the slow sales of Inflectra.

Please note that in April this year, Samsung Bioepis’ biosimilar version of Remicade also received FDA approval.

Pfizer had launched Inflectra in the United States in November last year and the biosimilar is also marketed in ex-U.S. markets. Inflectra generated sales of $23 million in the United States and $94 million globally in second quarter.

Biosimilars are essentially cheaper versions of expensive biologic drugs but are complex to make unlike traditional generic drugs. While biosimilars have been available in the EU for quite a while, there was no regulatory pathway for biosimilars in the United States for a long time. However, this changed with the passing of The Biologics Price Competition and Innovation Act of 2009 (BPCI Act) as part of the Affordable Care Act that President Obama signed into law in March 2010.

Several pharma as well as biotech companies are involved in the development of biosimilars.

The first biosimilar to gain approval in the United States was Sandoz’s Zarxio, a biosimilar version of Amgen Inc.’s AMGN Neupogen. Zarxio was launched in the United States in September 2015. Inflectra was the second biosimilar to gain approval.

Other approved biosimilars in the country. include Sandoz’s Erelzi, a biosimilar to Amgen’s Enbrel (etanercept) and Amgen’s Amjevita, a biosimilar version of Abbvie’s Humira. However, these have not been launched yet due to ongoing litigation.

Earlier this month, FDA approved the first cancer biosimilar, Amgen and Allergan’s Mvasi, a biosimilar version of Roche’s blockbuster cancer drug, Avastin.

Biosimilars were expected to reduce health care costs and provide a large number of patients with access to much needed biologic treatments. However, so far biosimilars have not seen much commercial success and are yet to make a significant dent in referenced product sales in the United States.

The fight between these two drug giants is likely to aid efforts to lower drug prices through increased biosimilar availability.

Pfizer carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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