OREANDA-NEWS. The debut of the US's first biosimilar drug this week could mark the beginning of a gradual conversion for the domestic pharmaceutical drug market as biosimilars begin to take share from their reference biologics, according to Fitch Ratings.

Significant variance is possible in predicting the size of the US biosimilar market at this early stage, given that only one product is currently in the market and sizable challenges could slow the growth of biosimilars.

Zarxio, the US's first biosimilar drug, has entered the market at a reported 15% price discount to Neupogen, its reference biologic drug. The FDA approved Zarxio on March 6, 2015 as the first biosimilar to successfully navigate the new 351(k) pathway, and a favorable federal appeals court ruling greenlighted the delayed launch.

The 15% price discount versus the reference product is smaller than Fitch's rough estimate of US biosimilar discounts of 20%-30%, but Zarxio has no biosimilar competition. Fitch expects pricing to become more competitive when the number of biosimilars vying for the share of a specific reference biologic increase.

The relatively small price differential between Zarxio and Neupogen is a sharp contrast to the experience for traditional small molecule drugs, where generic products are typically offered at much greater price discounts. The smaller discount is part of the reason Fitch expects the market for biosimilar drugs develop slowly in the US. In contrast to the small molecule market, health insurers and pharmacy benefit managers have less incentive to aggressively manage formularies to substitute use of the biosimilar product to drive costs lower.

In addition to the limited incentive provided to payors to save on drug costs, other issues impede the rapid development of the US market. Biosimilars are technically difficult to produce and do not benefit from "interchangeability" with their reference products. This lack of interchangeability will likely be a headwind against market share gains for biosimilar products, especially when considered with the related issue of physician and patient preference for reference products with established efficacy and safety records.