Monday, May 01, 2023

Info On What It Costs To Make Insulin API's Offshore (Courtesy of China's Gan & Lee Pharmaceuticals Ltd.)

When pharma companies refer to API's, they are referring to "Active Pharmaceutical Ingredients" (which is different from what an internet company means when they say API; to internet companies, the acronym API means "Application Programming Interface"). Regardless, pharma API's are commonly made offshore in places like India, Malaysia, China and elsewhere because its cheaper for them and therefore helps their own bottom lines. Its unclear to me exactly how they manage issues including transporting the products across the world for some items which must be temperature-controlled, but if it fattens pharma's bottom lines, they figure it out.

Beijing, China-based Gan & Lee Pharmaceuticals Ltd., which in 2018 signed a cooperation agreement with Sandoz to sell biosimilars of the three bestselling insulin analogues currently sold in the U.S. (specifically for glargine, aspart and lispro) has made news in 2023 largely due to the company's Sandoz agreement. (Incidentally, I believe Sandoz also intends to commercialize made by Gan & Lee of a GLP-1 receptor agonist FDA approved for the treatment of Type 2 diabetes [designated as GZR-1] which is a copy of the old Victoza formerly sold by Novo Nordisk.)

Regardless, on February 23, 2023, Gan & Lee made news when the company disclosed it had become the first-ever China-based insulin manufacturer to formally file a Biologics License Application (BLA) with the U.S. Food and Drug Administration for an insulin biosimilar (specifically for insulin glargine injection rDNA origin U-100) intended to be sold in the U.S. 

Evidently, Gan & Lee's BLA application for insulin glargine injection had been formally submitted to the FDA via the 351(k) pathway which was done sometime in December 2022 and the FDA formally accepted the BLA on February 23, 2023 (see the company press release on the news at for more). Recall that the U.S. FDA formally reclassified insulin as a biologic in March 2020; prior to that, insulin was stuck in a regulatory neverland because historically, it was governed as a "drug" rather than a biologic (insulin was the first-ever FDA approved biologic medicine), but in 2020, FDA formally fixed that regulatory anomaly.

No doubt, Sandoz helped guide Gan & Lee through the laborious application process in an effort to help prepare the company how to handle its BLA's for U-300 glargine, aspart U-100 and lispro U-100. It is necessary to ensure the applications themselves leave no room for matters which could be grounds for clinical trial dismissals, hence seasoned applicants such as Sandoz know pitfalls to avoid. As we know from national academic performance records, many Chinese applicants pride themselves on being outstanding students, hence we can presume Gan & Lee used its own learning from Sandoz to help guide the company's future BLA filings for insulin aspart, insulin lispro and also for patent-expired GLP-1 inhibitors, although Sandoz will be available to its partner to formally review its BLA applications.

Of note is both Gan & Lee's insulin lispro and insulin aspart injection BLA submissions are also now "in their final critical stage of preparation" according to Gan & Lee's financial statements. When submitted, each BLA will reportedly include the application for interchangeability as well.

My followers may also recall that the primary reason that Sandoz chose to partner with Gan & Lee as its offshore partner to make biosimilar insulin API's in the U.S. (Sandoz was more than capable of making the insulins themselves) was, according to Sandoz SEC filings (under the ownership of Novartis), due to its "attractive Cost of Goods Sold [COGS]". However, I really did not have much detail beyond that to know exactly what that entailed. My presumption was that Sandoz initially expected it would be forced to pay rebate kickbacks to PBM's which consumed most of those margins in order to secure formulary placement. Now that the insulin rebate kickback scheme has been abandoned by Lilly, Novo Nordisk and Sanofi, it would appear to put further pressure on biosimilars since they will no longer be significantly less costly to payers (which includes patients). Price is a powerful point of differentiation; once that is no longer so large, how do biosimilars compete then? We know that two biosimilar-makers including Amphastar (which has a Chinese-based operating unit known as ANP and as well as a France-based API manufacturing unit) and Lannett Company (which is partnering with China-based HEC Pharmaceuticals) have noteworthy "white label" (also known as "private label") businesses whereby they sell their products under their retail pharmacy partners' names. Civica, meanwhile, will use a partner named GeneSys Biologics based in Hyderabad, India.

However, I never knew (nor did Sandoz ever disclose) exactly what the Gan & Lee insulin COGS actually were (we just knew it was cheaper than it would be by making the insulins themselves or they wouldn't have partnered with another company). However, Gan & Lee is trying to become more transparent in an effort to expand into the U.S., Canada, Europe and elsewhere in the world. Hence, Gan & Lee has started to formally publish quarterly and annual reporting information which would theoretically suitable for submission to the U.S. Securities and Exchange Commission (SEC) if its commercial partners require it.

I recently read Gan & Lee's 2022 Annual Report (see for the report) and fast forward to page 62 of 375. There, I found some interesting factual details which Sandoz never disclosed about its biosimilar insulin development program. Throughout the Gan & Lee annual report itself, the company repeatedly refers to "volume based" production, which is evidently something Gan & Lee views as a point of differentiation for the company.

In Gan & Lee's annual report, there is some disclosure about actual costs. While there's disclosure of the impact of the Chinese government's national drug preparation (insulin special) which it says was organized by the State in 2021, and the impact of that discounting on the company's revenues. It writes (in the English language translations; the report is both in Chinese and English):

Price before the centralized procurement (RMB/Unit; note that when it says "per unit", I must presume the company means the cost of a 10 mL vial since there are no quantity measurements disclosed, but if it were the cost of an actual unit measurement in a syringe, the cost would be FAR above even what Sanofi, Novo Nordisk and Lilly charge for their branded innovator insulins) and it reveals that the costs (disclosed in Chinese Yuan, referred to as "CNY") so I've used the current conversion rate to U.S. Dollars ("USD") using Forbes' currency conversion tool at

  • Insulin glargine injection 143.97 CNY = $20.83 USD
  • Insulin aspart injection 59.63 CNY = $8.62 USD
  • Insulin lispro injection 60.00 CNY = $8.68 USD

Also note: the company notes that after the Chinese-government mandated insulin discounts, it then gives discounts ranging from 60% to 67% off the price of these three most commonly-prescribed insulin analogues.

Although Gan & Lee has not formally filed BLA's for prandial insulin analogue biosimilars yet, for whatever reason, basal insulin glargine is more than twice as expensive as aspart and lispro are even though we know unequivocally that the actual manufacturing costs are NOT materially more. There, I attribute that to Sanofi's longstanding premium pricing on that which was aimed at the massive Type 2 patient market. But, comparing the cost of prandial insulin analogues aspart to lispro, we find that insulin aspart is clearly slightly less costly while lispro costs marginally more to make and sell (aspart costs $8.62 while lispro costs $8.68, so a $0.06 price difference). That may partially explain why there are so many glargine and aspart biosimilars in development while there are considerably fewer of lispro. Lilly's aggressive price-cuts on its unbranded lispro product (which since last year has sold at a cost of $35/vial with a Lilly Insulin Value Program coupon from Lilly) don't explain prices outside the U.S., but they may explain why we're seeing fewer lispro biosimilars in development. Remember: Humalog's U.S. patents all expired several years ago.

Obviously, the Gan & Lee's insulin prices are quite low compared to what it would otherwise cost Sandoz to manufacture the biosimilar insulins themselves either in the U.S. or in Europe, and volume-based production is something Gan & Lee is very proud to discuss. In fact, in its annual report, Gan & Lee discusses how in China, the government mandates volume-based discounts as all commercial healthcare insurance companies (via their PBM's) do in the U.S. primarily via rebates. In effect, the Chinese government says "Look, we're buying XXX units of insulin; hence we DEMAND you provide us discounts and we will pay no more than YYY for that". Pharma does that everywhere the do business (including in the United States), and that also applies to China. Gan & Lee (and partner Sandoz) still makes a profit; the discounts are a part of doing business. Novo Nordisk sells its products in China, but its exclusive patents have all expired in China (including on GLP-1 inhibitors for Type 2 diabetes), therefore biosimilar-makers such as Gan & Lee are now allowed to copy those products and sell them for less money. The open question remains: just how low will they actually sell for in the U.S.?

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