Celltrion Expects Expansion of Biosimilar Prescriptions as U.S. Moves to Lower Drug Prices

Three Opportunity Factors: Simplifying Intermediary Distribution Structure and Expanding Portfolio
"Positive Effects Expected"

A view of Celltrion Plant 2 in Songdo, Incheon./Incheon Photo by Hyunmin Kim kimhyun81@

On May 12 (local time), Celltrion commented on U.S. President Donald Trump's signing of an executive order aimed at lowering the prices of prescription drugs in the United States to levels equivalent to those in other countries, stating that it "expects positive effects" and presented three opportunity factors.

The executive order announced this time is intended to lower the prices Americans pay for prescription drugs to the same levels as those in other countries. The main points include: the Secretary of Health and Human Services is to promote a program that allows American patients to purchase drugs directly from pharmaceutical companies at the most-favored-nation price; and the Secretary of Health and Human Services is to communicate the most-favored-nation price target for American patients to pharmaceutical companies within 30 days.

Through this, it is ultimately expected that improvements will be made to the intermediary distribution structure, such as pharmacy benefit managers (PBMs), and that prices for high-cost pharmaceuticals will be reduced. Celltrion stated, "This executive order may provide a better business environment," and specifically outlined the expected impact on Celltrion and three opportunity factors.

Opportunities for Simplifying Intermediary Distribution Structure and Accelerating Biosimilar Prescriptions

First, among the announced executive orders, the improvement of intermediary distribution structures, such as PBMs, is expected to present positive opportunities for the company's U.S. business operations. The distribution dominance established by high-profit pharmaceutical companies based on original products through intermediary structures is expected to weaken, which could provide an opportunity for market expansion for biosimilar companies that compete on the basis of competition.

In particular, biosimilar manufacturers are expected to have the opportunity to negotiate drug prices directly with the government, rather than through intermediaries such as PBMs, creating a mutually beneficial situation for both the government and manufacturers.

Another key aspect of this executive order, the reduction of prices for high-cost pharmaceuticals, is also expected to have a positive impact on the company's U.S. business. Currently, the U.S. insurance and PBM system is structured so that high-cost original pharmaceuticals are first listed in formularies, followed by limited competition among biosimilar products, resulting in the addition of two to three more products. Due to rebate issues with intermediaries, biosimilar prices are set at levels similar to originals when prescribed in hospitals, providing little real benefit to patients. As a result, the market expansion of biosimilars in the U.S. has been extremely limited compared to Europe. In fact, the prices of biosimilars that Celltrion currently supplies to the U.S. are not higher than those in Europe.

However, if the intermediary distribution structure is improved through this newly announced executive order and the actual prescription price of biosimilars is reduced, the benefits to the government and patients will be clear, and the expansion of biosimilar prescriptions is expected to accelerate to levels similar to those in Europe.

Opportunity to Expand Portfolio

If, as part of the announced executive order, parallel imports are activated to supply drugs at the most-favored-nation price, Celltrion is expected to secure opportunities to introduce additional products that have not previously been launched.

In this case, since the company already has a direct sales network in the U.S., it is expected that Celltrion will be able to accelerate sales by expanding its product portfolio and leveraging marketing synergies based on its extensive experience in the European market.

Celltrion's autoimmune disease treatment, Jimptentra (RemsimaSC). Photo by Celltrion

A Celltrion representative stated, "As a result of a comprehensive review of this executive order, we believe it will be advantageous for biosimilar manufacturers," adding, "In particular, for companies like Celltrion that directly sell biosimilars in the U.S., this could be another significant opportunity."

The representative continued, "We will continue to reflect the specific implementation procedures and policy directions of the U.S. government going forward, and will respond with flexible and agile strategies tailored to changing circumstances. Through this, we will strive to respond swiftly to changes in global healthcare policies, including those in the U.S., and deliver tangible results, thereby repaying the continued trust and support of our shareholders."