Global Pricing and Reimbursement Trends in the Pharmaceutical Industry New York, NY September 29, 2008 Bonn Office Haydnstrasse 36, D-53115 Bonn, Germany Tel. +49/228/98 43-105, Fax +49/228/98 43-120 e-mail: Thomas.Buchholz@simon-kucher.com Thomas Buchholz, Partner Internet: www.simon-kucher.com
Overview 1. Market Access, Pricing and Reimbursement 2. Key Market Access Hurdles 3. Top 10 P&R Trends 4. Implications NY Pharma Forum 2008 - 2 -
Pricing, Reimbursement, Market Access: What is a “market access strategy”? � “A strategy that gets you broad and favorable reimbursement?” � “A strategy that gets you reimbursement at the highest possible price?” � “A strategy that get you on formularies without restrictions?” � “A strategy that makes the product available to patients without major hurdles?” � “A strategy that gets the physician to prescribe your product to " Market access " patients?” is not a uniformly � defined term! “A strategy that includes generating the right clinical and economic data to justify your price?” � “It means a profit-maximizing pricing & reimbursement strategy?” � “A strategy which maximizes company success and the quality of the access?” � “A strategy which maximizes the value the product can bring to the market?” NY Pharma Forum 2008 - 3 -
What should a “market access strategy” be aimed at? Ultimate Goal of a Market Access Strategy? Resulting Strategy Market share Profit Market m share Profit u M m a i x x e i a u m S M n h u e a m v r e e R m u m i x a e M c i r P Price New Pricing Pricing Pricing leading to leading to leading to maximum maximum maximum market share revenue price NY Pharma Forum 2008 - 4 -
Overview 1. Market Access, Pricing and Reimbursement 2. Key Market Access Hurdles 3. Top 10 P&R Trends 4. Implications NY Pharma Forum 2008 - 5 -
Drugs have to overcome many hurdles to be successful After regulatory approval the real fight starts. Full revenue potential NEW Local decision Regional Access National Access Physicians, Gaining formulary hospitals, patients inclusion on regional also need to be Achieving national formularies (Italy/Spain/ convinced, and price reimbursement UK) or on Managed may be important without severe Care formularies restrictions Source: SKP Research NY Pharma Forum 2008 - 6 -
Future developments There will be additional hurdles that companies have to overcome to achieve the full revenue potential Full revenue potential NEW � Allowing regions in Spain and Italy to set up their own formularies � Rebate contracts with sick funds in Germany � Price negotiations in the US (price protection) � Giving doctors hypothetical budgets to force cost consciousness on them � Generic substitution forces manufacturers to also contract with pharmacies � Introduction of copayments for patients to have them as an additional barrier Source: SKP Research NY Pharma Forum 2008 - 7 -
Future developments At the same time the hurdles become higher increasing the requirements of manufacturers to overcome them Full revenue potential NEW � Requirement of health economic data in more countries on all levels to facilitate access � Stricter data requirements, e.g. head to head study, comparisons with SoC, etc. � Required product or global budget agreements � Request for observational studies � Increased use of price referencing to restrict prices Source: SKP Research NY Pharma Forum 2008 - 8 -
However, “payers” are not the enemy of the pharmaceutical industry � They have a role to fulfill and just happen to be on the other side � They have to provide healthcare to patients and they have seen drug budgets growing stronger than many other healthcare sectors and stronger than GNP � At the end of the day they have to balance their budgets. � They have seen many pharmaceutical companies overstating the therapeutic value of their new products and have become skeptical regarding all claims of the industry � They have seen the pharmaceutical industry becoming one of the most profitable industries in the world. � They want what everybody wants: Value for money . � The key questions are - how to determine what is fair money for value - who is best suited for determining fair money for value Source: SKP Research NY Pharma Forum 2008 - 9 -
Industry perspective on innovations: Everything is innovative and we deserve a premium Industry View “If it is covered by a patent, it is a significant innovation”. Level of Innovation Low High Important to major Therapeutic improvement over current Moderate gold standard No to minor Me-too First-in-class Generic substances substances NCEs Source: SKP Research NY Pharma Forum 2008 - 10 -
Payers are willing to accept price premiums, however only for at least moderate therapeutic improvements Payer View Level of Innovation Low High Important to major Therapeutic improvement over current Moderate gold standard No to minor Me-too First-in-class Generic substances substances NCEs Price premium Price parity Price discount Source: SKP Research NY Pharma Forum 2008 - 11 -
How payers think & act : Some examples • Avastin marketed for CRC, Lucentis indicated for wet AMD Avastin vs. Lucentis • Targeted price/mg difference: Lucentis = 712x Avastin The AIFA's solution... : Payers are • Lucentis in Class C (= no reimbursement) Italy creative • Avastin authorized via Law 648 for off-label use in wet AMD = the first case of a drug on Law 648 list without the manufacturer having asked for it! Exubera "The efficacy of Exubera is comparable to s.c. human insulin. However, Exubera increases the therapy cost fivefold. Exubera is uneconomical . In addition, due to the missing Payers are long term data and the unclear risk in comparison to s.c. Germany insulin, a recommendation for prescribing Exubera cannot be honest given. Patients or patient subgroups that could benefit clinically from Exubera could not be identified in clinical studies." (Therapy Advice of G-BA, Oct. 2006) Velcade Janssen-Cilag suggested a risk-sharing scheme: • Minimum response rate of 25% needed for full NHS funding Payers are • NICE endorsed the following scheme: min. response rate of demanding UK 50% for full NHS funding Source: SKP Research NY Pharma Forum 2008 - 12 -
Another example: Most targeted oncology drugs have not been UK granted market access in the UK recently Since many oncology therapies deliver only a few months of survival benefit, they come in at an incremental cost-effectiveness ratio of above £30,000 per QALY and thus are rejected by NICE or SMC. Summary of Cost per QALY for targeted oncology drugs £100 £90 Cost per QALY (000) "But isn't £80 that a UK £70 problem?" £60 £50 £40 £30 £20 £10 £0 Herceptin - Herceptin Glivec -CML MabThera - Glivec-GIST Herceptin Sutent - Nexavar Erbitux** Avastin - Avastin - Sutent - Alimta - mono combo high grade* adj GIST IFL 5FU/LV RCC MPM*** Date of Mar-02 Mar-02 Oct-02 Sep-03 Oct-04 Aug-06 Sep-06 Nov-06 Jan-07 Jan-07 Jan-07 Jan-07 Sep-07 appraisal Accepted by NICE Rejected by NICE or SMC Source: SKP Research, NICE, SMC * In combination with CHOP, average of cost per QALY results for over 60 and under 60 population** Broad range of cost/QALY estimates – £77- £370 ***In combination with cisplatin; recommendation only in people who have a WHO performance status of 0 or 1, who are considered to have advanced disease and for whom surgical intervention is considered inappropriate - result shown for most favorable subgroup NY Pharma Forum 2008 - 13 -
There is another answer: The oncology drug manufacturers cannot "afford" to lower the prices in the UK… …simply because they would sacrifice pan-EU profits. From that standpoint, the lacking market access of targeted oncology drugs in the UK is actually a regional pricing and access problem. Current situation If prices were cost-effective in the UK… Price Price Country-specific Country-specific Conceptual Conceptual optimal price optimal price Loss High price SP but no access UK IT Lower price but access SP IT FR Price corridor based on referencing and parallel trade FR Price corridor based on referencing and parallel trade GER GER Germany Italy UK France Spain Profit Germany Italy UK France Spain Source: SKP. NY Pharma Forum 2008 - 14 -
Overview 1. Market Access, Pricing and Reimbursement 2. Key Market Access Hurdles 3. Top 10 P&R Trends 4. Implications NY Pharma Forum 2008 - 15 -
Top 10 pricing & reimbursement trends 1 Shift in negotiation balance of power from manufacturer to payers in the US 2 Global rise in patient cost-sharing US media scrutiny shifting away from mass market products, and towards 3 previously untouched specialty products “Conditional pricing & reimbursement” on the rise in the EU and often tied 4 to post-launch re-assessments 5 Cross-national cooperation of payers & authorities Source: SKP Research NY Pharma Forum 2008 - 16 -
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