Biosimilars: One answer to cheaper healthcare

07 November 2025

Key takeaways

• The world has a healthcare cost problem - biosimilars and generics are part of the solution
• The US government is streamlining biosimilars approval which could boost the market
• Around USD 300 billion of originator biologic drugs come off patent in the next decade, driving growth ahead of legacy pharma
• We own Sandoz Group AG and Fresenius SE in our European equity strategies

The Trump Administration is making progress on cutting drug costs

The arrival of the second Trump Administration in January and the appointment of Robert Francis Kennedy (RFK) Jr as Secretary of Health and Human Services (HSS) created panic and opportunity in the healthcare industry. A key focus of the new administration has been to equalise the wide gap for prescription medicines between US and rest of world, currently called the 'most favoured nation' approach.

According to IQVIA¹, the total US expenditure on pharmaceuticals (pharma) rose from USD 437 billion in 2023 to USD 487 billion in 2024², larger than the GDP of Denmark. The government estimates that Americans pay up to three times more for prescription drugs than other developed countries³. While previous administrations have pledged to address this gap in price, progress was limited. This time it appears to be different.

Figure 1: Pharmaceutical spending per capita in selected countries as at 2023 (in US dollars)

One preferred lever has been looking to the generics and biosimilars industry for cost savings. Today, 80% of all drugs consumed are generic versions of list medicines, but at a substantial discount. The US government has followed other regions and embraced the generics industry, excluding it from tariff negotiations, and is looking to streamline biosimilars regulation to speed up launches and get the drug bill down.

What is a biosimilar drug? In Sandoz' own words:

A prime example is Humira, the world’s largest biologic drug by sales, which generated USD 21.2 billion in 2022. Used to treat rheumatoid arthritis, the drug was a blockbuster success and money spinner for AbbVie, with a list price in the US of circa USD 80,000 per patient per year. The drug fell off patent in 2023, and biosimilars have rapidly gained traction, now accounting for circa 65% of the market at an average discount of 80% compared to the original list price. This shift has delivered significant savings for payers and patients. Sandoz, Europe’s largest biosimilars company, has a 14% market share with their Humira biosimilar, Hyrimoz as at Q2 2025.

US HSS is streamlining biosimilar development - a major boost for the industry

At the end of October, the US Department of Human Services (HSS) hosted a conference on Biosimilar Reform, focused on simplifying and streamlining the process for launching a biosimilar drug. RFK Jr commented that proposed changes could contribute to halving the timeline for biosimilar development to 2.5 to 5 years and reduce development costs by circa USD 100 million (from USD 200 to 250 million). We think this is positive for the established players in the industry, lowering cost to market, reducing development time and enabling the launch of biosimilars for smaller drugs that would otherwise be uneconomical. Cutting development costs may lower barriers to entry and increase competition, but, even after the reduced trial costs, barriers to entry remain high, particularly around manufacturing expertise, commercial footprint and medical affairs. This is helpful for the established players.

Figure 2: RFK Jr and Dr Mehmet Oz, the 17th Administrator of the Centers for Medicare & Medicaid Services (CMS), announce 'bold actions' to make 'biosimilar' and generic drugs affordable

Sandoz is a leader in the emerging biosimilars industry

Sandoz AG, a Swiss-based global leader in generic and biosimilars, spun out of Novartis in 2023. It is now Europe's largest generics and biosimilars company with 27 biosimilar assets in development, targeting USD 200 billion of originator sales, representing 64% of expected patent expiries over the next decade⁵. We believe Sandoz is uniquely placed as Europe's biosimilars leader. Europe is a complex region, with circa 49 different markets, each with their own domestic healthcare procurement systems. Sandoz has worked with these healthcare systems for decades and has commercial scale in each through its existing generics business. This has made Europe difficult and uneconomical to enter for competitors from India and the US. The strength and stability of Europe allows Sandoz to launch approved biosimilars from Europe into the US market, which is more competitive and more streamlined, often dealing with a handful of PBMs (pharmacy benefit managers) and hospital groups.

Sandoz' biosimilars growth has been phenomenal. In 2024, the biosimilars business grew 30% (in constant currencies)⁶, well ahead of legacy pharma companies, which averaged around 4-5%. With the long list of upcoming new launches, we believe this momentum can continue. Any regulatory streamlining from the US government is likely to serve as a further catalyst.

Figure 3: US regulatory streamlining could boost pipeline growth

Fresenius SE – Building momentum in next-gen biosimilars

Fresenius Kabi, an operating company of Fresenius SE, is transforming from a traditional generics and infusion-business into a meaningful biosimilar player, through the acquisition of mAbxience. The company has gone from just EUR 8 million of biopharma sales in 2019 to an estimated EUR 840 million in 2025. As an upstart, the business only turned profitable in 2024 now that the platform is sufficiently scaled. Fresenius' biosimilars platform has 11 products launched globally. In Q3 2025, Fresenius' biopharma business grew 37% year-over-year⁷, a stark contrast to legacy pharma peers, which typically grow at around 4-5%.

Why so cheap? Despite strong growth, biosimilars still look cheap

2025 has been a difficult year for legacy pharma companies, with uncertainty around US drug pricing, and slower than normal growth. This means big pharma companies are trading historical steep discounts relative to the broader market. In some instances, we think this is unjustified, particularly for names where there is an attractive growth pipeline, such as AstraZeneca. Even after their strong runs, Sandoz and Fresenius continue to look attractive compared to legacy pharma peers on a PEG multiple⁸ basis. (See Figure 4 below)

Figure 4: PEG ratios - Sandoz, Fresenius versus legacy pharma

We think the market still needs to reappraise the quality of the biosimilars business. Traditionally, the patent moat of legacy pharma has protected it. With pricing pressure in the US, this has looked less entrenched. For biosimilars, the risk is not trial success (since they are copying existing medicines) but in the ability to successfully develop and commercially roll out a new biosimilar at scale.

We are shareholders of both Sandoz Group AG and Fresenius SE in the European equity strategies.

Tom O’Hara, Jamie Ross and David Barker manage European Equities strategies at GAM Investments. You can find out more information on the team and the strategies they are responsible for here.