Express Scripts Holding Company (ESRX), Teva Pharmaceutical Industries Ltd (ADR) (TEVA): How Obamacare’s $20 Billion Bonanza Is Bombing

What about the Teva program touted by IMS Health as “poised to compete” in the new world of biosimilars — development of a knock-off of Rituxan? In late 2012, Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) and partner Lonza stopped late-stage development for the drug. The companies stated that they were “evaluating the path forward for a Phase III trial based on the latest changes in the regulatory environment.”Lonza CEO Richard Ridinger told Reuters that the cost of developing biosimilars was “considerably more” than first anticipated.

Part of the problem is that the FDA has moved in slow motion. As of April 2013, only four draft guidance documents have been released. Regulatory uncertainty has been a primary reason that no company has even applied yet for biosimilar approval through the new pathway.

Another issue is that current makers of blockbuster biologic drugs aren’t going down without a fight. AbbVie Inc (NYSE:ABBV), which makes the world’s top-selling drug Humira, petitioned the FDA last year to prevent approvals of biosimilars for Humira because the agency would have to use the company’s trade secrets to do so. The company also plans to battle against potential competitors for possible patent violations.

Some roadblocks for biosimilars can’t be easily solved. Manufacturing the drugs is complex and requires large investments. Companies entering the biosimilar market face significant technological and financial hurdles.

Beyond the minefield
So far, the introduction of biosimilars in the U.S has not been so good. However, the problems are not insurmountable.

Most importantly, the federal government needs to get its act together. Clear guidelines for the biosimilar approval process would enable more companies to move forward with seeking approval for biosimilars. The potential benefits can still be obtained, with investors and the U.S. public emerging as winners. For now, though, the hoped-for $20 billion biosimilar bonanza is bombing.

The article How Obamacare’s $20 Billion Bonanza Is Bombing originally appeared on Fool.com and is written by Keith Speights.

Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Express Scripts Holding Company (NASDAQ:ESRX).

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.