Final version : 21/09/2015 Sustainable healthcare systems Sustainability

Final version : 21/09/2015

Sustainable healthcare systems

www.efpia.eu

Sustainability

2

Sustainable Healthcare systems – Rationale

The purpose of this document is to address some of the key questions related to the sustainability of healthcare systems.

The document has been divided in three sections which gather a rich and robust collection of evidence aiming at tackling these questions. The objective is to facilitate an evidence-based discussion amongst the different stakeholders including payers, policymakers and regulators.

How to improve health outcomes while maintaining the financial sustainability of healthcare systems ?

What are the recent trends in pharmaceutical and healthcare expenditure?

How can a more differentiated approach to pricing across European Member States contribute to more sustainable healthcare systems ?

3

Index

Sustainable Healthcare systems – Rationale…………………………………………………………………………………………………………………………….………………Index……………………………………………………………………………………………………………………………………………………………………………………..…………………

Part 1: How to improve health outcomes while maintaining the financial sustainability of healthcare systems ?....................................Workforce reduction and increasing dependency ratio put increased pressure on society’s healthcare financing and reinforce the need to keep working age healthy……………………………………………………………………………………………………………………………………………………….The EU needs new approaches to maintain the sustainability of its public finance to mitigate the effects of an aging population…………….Significant disparities in terms of life expectancy persist in Europe……………………………………………………………………………………………………..For many conditions, outcomes vary widely among developed countries……………………………………………………………………………………………Proactively initiated care for patients at risk result in better outcomes and lower costs for the health system…………………………………...Early use of medicines in mental health can delay the need for nursing home placements………………………………………………………………….Improvement in disease progression could lead to significant returns to society…………………………………………………………………………………Innovative new medicines enable to reduce per capita expenditure on hospitalisation……………………………….............…………………………Preventive approaches with early and appropriate use of medicines is key to improve outcomes and avoid costs……………………………..A tool to achieve better outcomes & less resource usage are accountability-based payments…………………………………………………………….Geisinger bundle scheme for coronary bypasses led to reduced mortality and complications at lower costs compared to feefor service……………………………………………………………………………………………………………………………………………………………………..…………………….Data allows identification of high risk patients and targeted intervention, leading to better outcomes at lower costs…....………………….Heart failure program in Sweden shows that more follow-up can lead to 30% reduced costs………………………………………….………………….Helping patients adhere to medicines regimes can yield substantial returns to the health system……………………………..….……………………

23

6

7 89

10111213141516

17181920

4

Index

Part 2: What are the recent trends in pharmaceutical and healthcare expenditure?.........................................................................Pharmaceuticals and other medical non durables represent 17% of total expenditure in Europe although variances exist between therapy areas……………………………………………………………………………………………………………………………………………………………….The growth of retail pharmaceutical spending decreased from 2009 to 2012……………………………………………………………………………..Retail pharmaceutical spending per capita decreased by 2% on average between 2009 and 2012………………….............................Throughout Europe medicines are only reimbursed if value can be comprehensively proven across multiple dimensions…………Across Europe growth of retail pharmaceutical expenditure is lagging behind growth in total healthcare expenditure………………Retail pharmaceutical spending per capita is more contained than growth in health care expenditure per capita (2000-2012).......................................................................................................................................................................................Within cardiovascular, industry’s innovation model ensures clinical effectiveness in the short and major social surplusin the longer term……………………………………………………………………………………………………………………………………………………....................Combination of generic price erosion & price regulation resulted in a 19% decline in nominal medicines prices vs. a 24% rise in consumer prices…………………………………………………..........................................................................................................On average the volume of share of generics has increased by 11% in the last four years, showing improved efficiency in European pharmaceutical markets…………………………………………………...............................................................................................Generic volume share in selected countries vary widely across European countries……………………………………………........................ In the mid-term, biosimilars will contribute to the continued sustainability of medicines spending………………..………………………….

21

2223242526

27

28

29

30

3132

5

Index

Part 3: How can a more differentiated approach to pricing across European member states contribute to more sustainable healthcare systems?...................................................................................................................................................

Health expenditure is a function of wealth and varies by a factor of 6 across Europe………………………………………...................External reference pricing is widely used to establish and regulate medicines prices in Europe………………………………………….Countries mostly construct their pricing baskets referencing slightly poorer economies, however this leads over time to an ‘averaging down’……………………………………………………………………………………………………………………...……………………………………In a single trading zone, price disparities across borders can create significant supply chains disruptions and product shortages………………………………………………………………………………………………………………………………...............................................Out of pocket expenditure on healthcare is higher in markets with comparatively low GDP………..………….…………………………The current and future wave of multi-indication products will require a more flexible approach to value definition and price evaluation………………………………………………………………………………………………………………………………….………………………………

Bibliography…………………………………………………………………………………………………………………………………............................................

333435

36

3738

39

40

6

Part 1: key messages

Part 1: How to improve health outcomes while maintaining the financial sustainability of healthcare systems ?

Workforce reduction and increasing dependency ratio put increased pressure on society healthcare financing and reinforce the need to keep the population healthyThe EU needs new approaches to maintain the sustainability of its finance to mitigate the effect of an aging populationSimply cutting back on healthcare at a time when Europe needs it most is likely to be counter productive. If outcomes in chronic disease do not improve the smaller proportion of working age people in future will struggle to pay for those who need care. A different approach is neededSignificant disparities in terms of life expectancy and health outcomes exist across OECD countriesOutcome-focused healthcare systems can be a solution to those challenges by focusing management effort on the overall quality of care and rationalize spendingProactively initiated care for patients at risk can result in better outcomes and lower costs for the health systemEarly use of medicines in mental health can delay the need for nursing home placementsImprovements in disease progression could lead to significant returns to societyInnovative new medicines enable to reduce per capita expenditure on hospitalisationPreventive approaches with early and appropriate use of medicines is key to improve outcomes and avoid costsA tool to achieve better outcomes & less resource usage are accountability-based paymentsGeisinger bundle scheme for coronary bypasses led to reduced mortality and complications at lower costs compared to fee for serviceData allows identification of high risks patients and targeted intervention, leading to better outcomes at lower costs.Heart failure programme in Sweden shows that more follow-up can lead to 30% reduced costsHelping patients adhere to medicines regimes can yield substantial returns to the health system

7

Part 1: outcomes-focused HCS

Workforce reduction and increasing dependency ratio put increased pressure on society’s healthcare financing and reinforce the need to keep working age people healthy

Source: The European Commission (2015). The aging report.

Social Impact: Decline in workforce due to demographic changes (mn people)*

Ratio of workers to pensioners will decrease

335

328

323

317

311

306302

299297 296

270

280

290

300

310

320

330

340

2013 2020 2025 2030 2035 2040 2045 2050 2055 2060

-12%

4 workers / 1 pensioner

2 workers / 1 pensioner

2013 2060

-50%

8


The EU needs new approaches to maintain the sustainability of its public finance to mitigate the effects of an aging population

Note: For the EU, NMS (new member states) and the EA (euro area) the average are weighted according to GDP. European Commission (2015). The Aging report.

Projected increase in public expenditure in healthcare due to demographic change (2013-2060) (% of GDP)

34.2 3.8 4 3.8 4.4 4.6 4.2 4.7 4.6

6 6.1 5.9 5.7 5.7 66.9

5.7 5.77 6.6 6.9

5.77.1 7.2 7.6

6.9 7.56

7.7 7.8 8.1 7.80.3

0.1 0.6 0.4 1.10.8 0.7 1.3

1 1.2

0.5 0.8 1 1.2 1.4 1.30.6

2 2.20.9 1.4 1.1

2.51.1 1.2 0.7 1.6

1.22.8

1.1 1.1 1 1.5

0

1

2

3

4

5

6

7

8

9

10

CY LT LV BG RO EE LU PL HU

NM

S BE IT ES CZ SI IE SE HR SK EA EL EU MT

EU15 N

L

DE AT NO PT FR FI DK

UK

2013 Change between 2013 and 2060

9


Significant disparities in terms of life expectancy persist in Europe

Source: Eurostat database (accessed in May 2015)

Life expectancy at birth in EU28 (2013)

10


For many conditions, outcomes vary widely among developed countries

1. Deep Vein Thrombosis 2. Acute Myocardial InfarctionNote: Latest available data for 2012, 2011 or 2010. Mexico not includedSource: BCG analysis based on OECD Stat Extracts

2010-2012 OECD Health outcomes indicators

4.617 4.24.2 2.7 1.31.4 1.1Variation factor between best

and worst

3x OECD mean

AMI2

30 day mortality(in hosp.)

2x OECD mean

Post-operative pulmonary

embolism or DVT1

Post-operative sepsis

2010-2012OECD mean

0.5x OECD mean

Breast cancer5y survival

Cervical cancer5 years survival

Colorectal cancer5y survival

Hemorrhagic stroke 30 days mort.

(in hosp.)Ischemic stroke 30 day mortality

(in hosp.)

Better performance than OECD mean

Worse performance than OECD mean

11


Proactively initiated care for patients at risk can result in better outcomes and lower costs for the health system

Note: 1. Dual-energy X-ray Absorptiometry 2. Men 70 and olderSource: ACHP, Building Healthier Communities: Kaiser Permanente Southern California , 2012

Kaiser Permanente's Osteoporosis Disease Management Programme

200

150

100

50

0

# DXA Scans (thousands)

+473%

2009

124

2002

22

200

150

100

50

0

# Enrollees treated (thousands)

+214%

2009

104

2002

33

KP proactively identifies, screens and treats risk group patients...

...leading to a reduction in hip fractures for risk group of 47%

• Saving 250 lives per year

• Saving ~$40M per year– $39k per hip fracture– Compared to ~$5M programme costs

0.000

2.500

2010

Hip fracturesin risk group >1000 fractures

-47%

2011

Targeting enrollees based on set criteria:• Fragility fracture but no recent DXA1 scan• Fractured a hip or diagnosed with osteo-porosis but not on

medication or not refilled• 65 or older2 but never had DXA scan

12


Early use of medicines in mental health can delay the need for nursing home placements

Source: Lopez, O et al: Clinically meaningful outcome in Alzheimer’s disease (2005); † Getsios D et al.: Economic evaluation of early assessment for Alzheimer’s disease in the UK (2012)

% of patients placed in nursing homes* Cost-effectiveness of early treatment (£ per patient) †

Patients taking cholinesterase inhibitors were 5 times less likely to be admitted to a nursing home after 3 years of treatment after controlling for multiple factors that can alter the course of the disease

Treatment initiated for early-stage (mild-to-moderate) Alzheimer’s disease followed by 7-year treatment proves more cost-effective than current standards of care

In addition to cost savings, the QALY per patient were 9% higher with early treatment of Alzheimer’s Disease

13


Improvements in disease progression could lead to significant returns to society

Source: Johnson, SJ et al. Economic value of slowing Parkinson’s Disease in Germany, (2012)

Economic Value to Society of slowing Parkinson’s Disease Progression

Example: Parkinson

Study objective: Model PD progression over the complete course of disease and to assess economic consequences of slowing down PD progression Methodology:

Model length spanned 25 years Cost and benefits were discounted at 3% Patient progression based on Hoehn and Yahr (H&Y) stages of

disease development Direct and Indirect medical costs were taken from published

German studies Conclusion: Net savings of €54,000 achievable by slowing PD progression per patient by 20% rising to €327,000 per patient by fully arresting disease progression

If this potential is to be realized more innovation within the area of Parkinson’s disease should be encouraged.

14


Innovative new medicines enable to reduce per capita expenditure on hospitalisation

Source: Lichtenberg, F: Have Newer Cardiovascular Drugs Reduced Hospitalization? Evidence from Longitudinal Country-level Data on 20 OECD Countries, 1995–2003 (2008)

Cost of new cardiovascular medicines compared to savings in hospitalizations in 20 OECD countries 1995 - 2003

Example: Cardiovascular

Study objective: Assess the effects of introductions of innovative cardiovascular medicines on total healthcare spending Methodology:

Data used for 1100 cardiovascular medicines in 20 OECD countries during the period 1995 – 2003 and based on drug vintage (i.e. the first year the medicines was available in any market)

Controlling for demographic variables, quality of cardiovascular medicines consumption, consumptions of other medical innovations (e.g. CT scanners and MRI units), cardiovascular risk factors and prevalence

Conclusion: Per capita expenditure on hospitalization would have been $89 higher in 2003 had new cardiovascular medicines not been introduced in the period 1995 – 2003. This increase was almost four times as high as the per capita increase on expenditure on cardiovascular medicines ($24)

15


Preventive approaches with early and appropriate use of medicines is key to improve outcomes and avoid costs.

Note: 1. Extrapolated from the likelihood of patients on insulin with delayed insulinazation from IMS Disease Analyzer; 2. Average cost for treating stroke and myocardial infarctionSource: IMS Institute for Healthcare Informatics: Advancing the responsible use of medicines (2012)

Estimated avoidable macrovascular events, absolute numbers, 20101

Estimated avoidable healthcare cost, € 000s, 20102

Example: Diabetes

0 100 000 200 000 300 000 400 000 500 0000 2 000 4 000 6 000

% of total diabetes spending

13%

8%

4%

16


A tool to achieve better outcomes & less resource usage are accountability based payments

Note: 1. CAD coronary artery disease, CKD chronic kidney disease, COPD chronic obstructive pulmonary disease. Based on an analysis of claims data and demographic information from 2011 for ~3M Medicare patientsSource: Alternative Payer Models Show Improved Health-Care Value, BCG, 2013

Based on Medicare data from patients in different programs

11.5 0.30

15

30

40.5 19.70

100

Amputations in diabetes patients (average per 1,000 patients)

16.5

2.1

14.9

3.110.3

2.66.3

1.96.4

1.70

20Lower mortality

rate

Fewer emergency visits

Fewer complications

Patients who visited the emergency room (%)

Single-year mortality (%)

-51%

-97%

Capitated health networksFee for service

Higher accountabilityHigher accountability

OverallCADDiabetesCOPD

CKD

17


Geisinger bundle scheme for coronary bypasses led to reduced mortality and complications at lower costs compared to fee for service

Note: 1. Coronary Artery Bypass Graft Source: BCG based on “ProvenCareSM”: a provider-driven pay-for-performance program for acute episodic cardiac surgical care, Ann Surg 2007; Geisinger Health System, Successful Case Studies in Accountable Care, ACO Oct 2010; press articles

Impact on outcome: proven positive effect on mortality and complications

BackgroundBackground

ProvenCare launched as a bundle scheme

• Incl. CABG1 surgery since 2006

• A package price for elective CABG, including pre-operative evaluation to follow-up care within 90 days

• Actionable to-do's based on clinical guidelines and outcome measurement

Impact on resources: 45% less re-admission and 28-36% lower costs than other providers

Reduced readmissions Reduced mortality

1.5% 038% 30%

In-hospital mortality (%)Any complication (%)

Before After Before After

-100%-21%

Reduced readmissions Reduced costs

6.9%3.8%

Before

30 days readmission (%)

After

-45%Cost/patient

Total claims vs other providers

– 4.8%

– 28-36%

1. Coronary Artery Bypass Graft

18


Data allows identification of high risks patients and targeted intervention, leading to better outcomes at lower costs

Source: BCG based on Schmier, J. K. et al (2007) Evaluation of Medicare Costs of Endophthalmitis among Patients after Cataract Surgery, Vol. 114, No. 6, pp.1094-1099; Friling et al, Six-year incidence of endophthalmitis after cataract surgery: Swedish national study, J Cataract Refract Surg., 2013; County of Uppsala (Landstinget i Uppsala Län).

Impact on outcomes: registry findings saved over 500 people from the risk of blindness

BackgroundBackground

• A national Cataract Registry was established in 1992 in Sweden

• The aim was to identify and implement best practices to avoid PE

• PE: postoperative endophthalmitis (PE) is a severe inflammation leading to blindness

Impact on resources: Savings from reduction of PE rate estimated at ~$6M during 2000-2009

Incidence of PE (%)

1998 2009

0.025

0.050

0.075

0.125

0.100

0.000

0.106

0.021

-80%

218

With PE

Claims / patient US ($k)

Without PE

-61%

Estimated savings inmedical costs ($m) , '99-'091

500 cases prevented

Savings0

2

4

6Actual societal

cost by patient is much higher and varies by patient6

19Source: BCG based on Agvall B, et al. (2014) Resource use and cost implications of implementing a heart failure program for patients with systolic heart failure in Swedish primary health care, International Journal of Cardiology, vol 176, n°3.

Heart failure program initiated Ratio of workers to pensioners will decrease


Heart failure program in Sweden shows that more follow-up can lead to ~30% reduced costs

• Study in Sweden randomizing patients to be enrolled in a heart failure program or continue with conventional treatment (control group)

• Patients received information by nurse and multimedia program

• Medication reviewed and titrated thoroughly

• Regular follow-up by phone or in person with HF nurse to optimize treatment according to current guidelines

Total cost of health care / patient (Euro)

481.0

453.0

1764

1257

2761

4471

4393

6638

8000

6000

4000

2000

0Control group Group enrolled

in the programme

MedicationPrimary health care

Hospital care

-33%

Main effect through feweradmissions and fewer GP visits

20


Helping patients adhere to medicines regimes can yield substantial returns to the health system

Note: Calculations are marginal effects from linear fixed-effects models of services cost. Main drivers for cost savings were inpatient hospital days and emergency department visitsSource: Roebuck et al: Increased Drug Spending Medication Adherence Leads To Lower Health Care Use And Costs Despite increased drug spending (2011)

Total Healthcare Spending: Adherent vs. non-adherent patients, 2005 - 2008

2x

6x

7x

9x

21

Part 2: key messages

How have pharmaceutical expenditures in the healthcare system evolve ?

Pharmaceuticals and other medical non durables represent 17% of total expenditure in Europe although variances exist between therapy areasThe growth of retail pharmaceutical spending decreased from 2009 to 2012Throughout Europe medicines are only reimbursed if value can be comprehensively proven across multiple dimensionsAcross Europe growth of retail medicines expenditure is lagging behind growth in total healthcare expenditureWithin cardiovascular, industry’s innovation model ensures clinical cost effectiveness in the short- and major social surplus in the longer termCombination of generic price erosion & price regulation resulted in a 24% decline in nominal medicines prices vs. a 30% rise in consumer prices in EuropeOn average, the volume share of generic has increased by 11% in the last four years, showing improved efficiency in European pharmaceutical marketsIn the mid-term, biosimilars will contribute to the continued sustainability of medicines spending

Throughout Europe, medicines are only reimbursed if value can be comprehensively proven across multiple dimensionsRetail pharmaceutical spending per capita has decreased by 2% between 2009 and 2012Throughout Europe medicines are only reimbursed if value can be comprehensively proven across multiple dimensionsAcross Europe growth in medicines expenditure is lagging behind growth in total healthcare expenditureCombination of generic price erosion & price regulation resulted in a 19% decline in nominal medicines prices vs. a 25% rise in consumer pricesPatent expiries and biosimilars will continue to contribute to the continued sustainability of medicines spending

22

Part 2: pharmaceutical expenditure

Pharmaceuticals and other medical non-durables represent 17% of total expenditure in Europe although variances exist between therapy areas

Source: *EFPIA, the industry in figures, edition 2015 (OECD health data 2014, extracted in 2015, EFPIA calculations, non weighted average for 21 EU & EFTA countries). † A.T. Kearney analysis (2012); Δ Schwarzkop et al. (2010); Damm el al. (2012). ♯

Breakdown of total healthcare expenditure in Europe – 2012*

Medicines contribution to disease cost (2011, various diseases)

36.6%

46.5%

16.9%

Inpatient careOutpatient care & otherspharmaceuticals & other medical non durables

Cost factor COPD† Diabetes† CHF† Alzhei-mers∆

Prostate Cancer

Care 21% 8% 6% 9% 34%

Hospitalisation 30% 22% 64% 11% 31%

Indirect Cost 22% 35% 18% 76% N/A

Other Cost 14% 20% 6% 1% 2%

Medication 14% 15% 5% 3% 34%

23


The growth of retail pharmaceutical spending decreased from 2009 to 2012

Note: *According to the OECD definition, pharmaceutical spending include expenditures on prescriptions medicines and over-the-counter products. Pharmaceuticals consumed in hospitals are excluded.Source: OECD (2014), Current health expenditure by function, 2012 (or nearest year), in Health at a Glance: Europe 2014, OECD Publishing, Paris. DOI: http://dx.doi.org/10.1787/health_glance_eur-2014-graph129-en (accessed via the OECD e-library in April 2015)

Annual growth rates of spending for selected components (real term, 2012, EU average)

6.4%

8.6% 8.7%

1.9%

5.7%

2.5%2.2%3.2%

5.4%

1.8%

8.2%

-3.5%

-1.3%

0.7%

6.5%

-1.7%

-3.8%

0%-0.4%

1.0%

-0.3%

-1.3%

0.5% 0.2%

1.5%

-0.3%

1.9%

-2.7%

1.8%

2.9%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Inpatient care Outpatient care Long-term care Pharmaceuticals Prevention Administration

2007/08

2008/09

2009/10

2010/11

2011/12

http://dx.doi.org/10.1787/health_glance_eur-2014-graph129-en

24


Retail pharmaceutical spending per capita decreased by 2% on average between 2009 and 2012

Source: OECD (2014), Expenditure on pharmaceuticals per capita and as a share of GDP, 2012 (or nearest year), in Health at a Glance: Europe 2014, OECD Publishing, Paris. DOI: http://dx.doi.org/10.1787/health_glance_eur-2014-graph131-en

Average annual growth rates in pharmaceutical expenditure per capita or nearest year (2000-2012, in real terms)

10

0.9 1.3 1.6 2.2

-0.6 -0.3

3.3

8.5 8.0 8.0

3.4 3.71.9 2.4 3.1

1.7

4.83.1

2.04.6

1.8 2.2

4.9

10.2

2.5

-0.2

1.2

-12

-7.2-6.1 -6.1 -5.2

-3.9 -3.5 -3.3 -2.9 -2.9 -2.4 -2.2 -2.2 -1.7 -1.6 -1.3 -1.3 -1.0 -0.4

0.1 0.9 0.9 1.83.2

6.1

-4.9

-1.2 -1.0

-15

-10

-5

0

5

10

15

2000-2009

2009-2012

25


Throughout Europe medicines are only reimbursed if value can be comprehensively proven across multiple dimensions

Source: * EFPIA: Role and impact of Health Technology Assessment (2011); † Sorensen et al.: Ensuring value for money in health care (2009)

Countries with formal HTA systems in place*

Reimbursement criteria across countries†

Countries with formal HTA process for reimbursement in placeCountries with no formal HTA process for reimbursement

AT BE GE FI FR NL SE UKTherapeutic

benefits

Innovative Characteristics

Availability of therapeutic alternatives

Patient benefits

Cost-effectiveness

Budget Impact

Equity considerations

Public health impact

R&D

Included in HTA process

26Note: Countries included: Austria, Belgium, Czech Re Austria Belgium Czech Republic Denmark Estonia Finland France Germany Hungary Ireland Italy Luxembourg Poland Slovak Republic Slovenia Spain Sweden United KingdomSource: OECD Health Statistics Database (accessed in April 2015).

Total healthcare expenditure per capita and pharmaceutical expenditure per capita (2006 – 2012, 21 EU OECD Countries, population-weighted, current prices, PPP, $)


Across Europe growth of retail medicines expenditure is lagging behind growth in total healthcare expenditure

116

127

27


Retail pharmaceutical spending per capita is more contained than growth in total health care expenditure per capita (2000-2012)

Countries included are Greece, France, Romania, Austria, Poland, Cyprus, Lithuania, Czech Republic, Slovenia, Netherlands, Estonia, Finland, Germany, Latvia, Croatia, Denmark, Sweden, Luxembourg, Belgium, Hungary, Portugal, Spain, Slovak Republic, Norway, Iceland, Switzerland. OECD health statistics database and Europe at glance 2014 (accessed via elibrary in April 2015)

Annual average growth rate in per capita healthcare and pharmaceuticals expenditures (in real terms between 2000-2009 and 2009-2012)

4.3%3.7%

-0.8%

-2.2%-3

-2

-1

0

1

2

3

4

5

Gro

wth

in e

xpen

ditu

re in

%

Growth in total health expenditure per capita

Growth in retail pharmaceutical expenditure per capita.

2000-2009

2009-2012

28


Within cardiovascular, industry’s innovation model ensures clinical cost effectiveness in the short- and major social surplus in the longer term

Source: Lindgren et al.: Cost–effectiveness of statins revisited: lessons learned about the value of innovation, (2011)

Simvastatin patients treated and total associated cost of treatment

Patient- and manufacturer surplus in on- and off-patent period

0

10

20

30

40

50

60

70

80

90

0

100

200

300

400

500

600

700

1985 1990 1995 2000 2005 2010

Treated Patients Simvastatin Cost

Zocor® patent expiry

Patients (‘000) €mn.Off-patent

period

54

237

454

40 4 5

-

50

100

150

200

250

300

350

400

450

500

1987 - 2002 2003 - 2008 2009 - 2018

Patient Surplus Manufacturer Surplus

On-patent period

29


Combination of generic price erosion & price regulation resulted in a 24% decline in nominal medicines prices vs. a 30% rise in consumer prices in Europe

Note: Countries included: Belgium, Finland, France, Germany, Italy, Spain, Sweden, Netherlands. For Spain, only data available until 2012 (include only big countries)Source: various OECD databases (accessed in April 2015), Austria: pharmig based IFP; Belgium: Pharma.be; Finland: Pharma Industry Finland based on Statistic Finland; France: Leem based on INSEE; Germany: vfla based on GKV; Greece: SFEE based on Eurostat; Italy: farmindustria based on ISTAT; Spain: Farindustria based on INE; Sweden: LIF Sweden based on Apotekens Service, Netherlands: Farmingform based on the Central bureau of Statistics

Consumer Price Index (CPI) vs. Medicines Price Index, population weighted, year 2000 = Index 100

70

80

90

100

110

120

130

140

2000 2013

CPI Medicines Price Index

76

Population-weighted - Europe

130

30


On average, the volume share of generic has increased by 11% in the last four years, showing improved efficiency in European pharmaceutical markets

Note: countries included: Romania, Poland, Slovakia, Germany, Czech Republic, Netherlands, UK, Hungary, Sweden,Italy, Finland, Portugal, Norway, France, Spain, Switzerland, Greece, Ireland, Austria, Belgium. Average non weighted.Source: IMS MIDAS data (accessed in April 2015)

Generic volume share of the Prescription bound, un-protected retail market, 2009-2012 (SU,%)

54% 55% 56% 57% 58% 60%

0%

10%

20%

30%

40%

50%

60%

70%

2009

2010

2011

2012

2013

2014Europe, non weighted average

+11%

Ireland

• Reference price reimbursement and generic substitution implemented in 2013

• Increase of 10% of the generic volume share in the unprotected retail market between 2009 and 2011.

42% 43% 45% 48%52%

57%

0%

10%

20%

30%

40%

50%

60%

2009 2010 2011 2012 2013 2014

+36%

Portugal

• The government and the National Association of Pharmacies (ANF) concluded an agreement in April 2014 which contains measures to promote generic dispensing

47% 50% 53% 56% 59% 60%

0%10%20%30%40%50%60%70%

2009 2010 2011 2012 2013 2014

+28%

31


Generic volume share in selected countries vary widely across European countries

Source: IMS MIDAS data (accessed in April 2015)

Generic volume share of the Prescription bound, un-protected retail market, 2014 (SU, %)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90% X 2.3

32


In the mid-term, biosimilars will contribute to the continued sustainability of medicines spending

Source: * IMS Health: Global Outlook for Medicines through 2018, November (2014) † Parexel Statistical Yearbook 12/13

Sales in 2018 ($bn.) by Therapeutic Area* Disease Indications for biosimilar mAbs currently in clinical trials†

$7-9Bn$10-12Bn$12-14Bn$13-15Bn$14-16Bn$15-17Bn$16-19Bn

$19-22Bn$20-23Bn$21-24Bn$21-24Bn$22-25Bn$22-24Bn

$21-24Bn$33-38Bn$33-38Bn

$38-43Bn$47-52Bn

$61-71Bn$71-81Bn

ADHDImmunosuppressantsOther cardiovascular

VaccinesAltiulcerants

AntibioticsImmunosuppressants

other CNSAnticoagulants

CholesterolHIV antiviralsDermatology

Viral HepatitisHypertension

RespiratoryMental Health

PainAutoimmune

DiabetesOncologics

Top 20 Global Therapeutic Areas (42% of total)

51%

24%

10%

10%

5%

Oncology Rheumatoid Arthritis Acute Coronary Systems

Thrombotic Disorders Other

33

Part 3: need for differential pricing in Europe

How can a more differentiated approach to pricing across European member states contribute to more sustainable healthcare systems ?

Health expenditure is a function of wealth and varies by a factor of 6 across EuropeExternal reference pricing is widely used to establish and regulate medicines prices in EuropeCountries mostly construct their pricing baskets referencing similar or slightly poorer economies, however this leads over time to an ‘averaging down’In a single trading zone, price disparities across borders can create significant supply chain disruptions and product shortagesOut-of-pocket expenditure is higher in markets with comparatively low GDPThe current and future wave of multi-indication products will require a more flexible approach to value definition and price evaluation

34


Health expenditure is a function of wealth and varies by a factor of 6 across Europe

Note: Cyprus, Latvia 2009 data. Denmark 2010 data. Netherlands, Portugal Slovenia Slovakia Lithuania Bulgaria in 2011 data. Source: Eurostat database (accessed in March 2015)

GDP per capita and Healthcare Spend per capita (€ 2012)

Positive and very strong correlation between expenditures on healthcare and overall wealth across Europe

6-fold difference in healthcare expenditure per capita between the highest and lowest

R² = 0.9439

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Hea

lthca

re S

pend

per

Cap

ita (€

2012

)

GDP per Capita (€ 2012)

Luxembourg

Greece

Denmark

Spain

RomaniaLatvia

France

FinlandBelgium Germany

Sweden

Netherlands

Austria

Cyprus

Portugal

Lithuania

35


External reference pricing is widely used to establish and regulate Medicines prices in Europe

Source: Leopold, C et al.: Differences in external price referencing in Europe (2012).

Usage of External Reference Pricing (23 out of 27 EU Member States)

Variations in constructions of pricing baskets

Countries using external price referencing

Countries not using external price referencing

Average Basket Pricing

Lowest basket PricingAverage Basket pricing minus 5%

91% of the average of the basketAverage of 3 lowest

36


Countries mostly construct their pricing baskets referencing lower GDP per capita economies leading over time to an ‘averaging down’

Source: WorldBank database (accessed 2013); Leopold, C et al.: Differences in external price referencing in Europe (2012).

GDP per Capita and Average GDP per capita of “pricing basket countries”

Out of 23 EU-27 countries using external price referencing, 15 (65%) have constructed their pricing basket to reference countries with lower affordability (measured as GPD / Capita)

Ongoing re-referencing drives prices down on an ongoing basis (‘a gift that keeps on giving’).

0

10,000

20,000

30,000

40,000

50,000

60,000

0 10,000 20,000 30,000 40,000 50,000 60,000

Avg.

GD

P pe

r cap

ita o

f bas

ket c

ount

ries

GDP per Capita

Average Pricing Lowest Pricing Average of 3 Lowest Average Pricing minus 5% 91% of the average of the basket

Italy

Spain

Slovenia

Slovak RepublicRomania

Portugal

Poland

Netherlands

Malta

Lithuania

Latvia

Ireland

Greece

France

Finland

Estonia

Hungary

Cyprus

Bulgaria

Belgium

AustriaCzech Republic

37


In a single trading zone, price disparities across borders can create significant supply chain disruptions and product shortages

Source: IMS Health (2013)

Current overview of supply chain imbalances - 2013

Primarily imports

Net importer

Net exporter

Primarily exports

Norway with PE/PI, but mainly exports and top destinations are SWE and DNK

UK is a mixed market. High level of retail trading compared to other import markets

Ireland has relatively high prices and mainly an importer typically from UK, exports on some brands may grow

Portugal and Spain are mainly exporters of primary care products classically but not exclusively to UK.

Sweden the main importer in Nordic, significant growth in latest year, driven by currency and likely to grow further up to 2014, and then some price cuts are expected

Baltic, new and growing export source

Poland with significant exports, also some imports, pharmacy export is illegal

Czech, Romania and Hungary are major exports due to their low prices,

Italy trade mainly on primary care typically into UK and Germany

38


Out-of-pocket expenditure is higher in markets with comparatively low GDP

Source: World Bank latest figures (accessed in March 2015). Available at/http://databank.worldbank.org/data/views/reports/tableview.aspx#

Out of pocket expenditure as a % of total health expenditure (2012)

In general, a correlation between the level of wealth and the state’s willingness to fund medicines can be observed

0% 10% 20% 30% 40% 50% 60%

NetherlandsFrance

United KingdomLuxembourg

SloveniaDenmark

European UnionCroatia

Czech RepublicAustriaIreland

SwedenEstoniaFinland

BelgiumItaly

SpainRomania

PolandSlovak Republic

HungaryLithuania

GreecePortugal

MaltaLatvia

Cyprus

Out of Pocket Expenditure as % of total health expenditure

39


The current and future wave of multi-indication products will require a more flexible approach to value definition and price evaluation

Note: Representation of the change in clinical value over time as additional data and evidence became available such as new clinical benefits, new possible use or combination useSource: Goss et al.: Recognizing value in oncology innovation (2012)

Clinical Value over Time

Example: Oncology

Examples of added clinical value over Time 2001: Initial Indication: Patients with chronic myeloid leukemia 2002: Patients with KIT positive inoperable or GISTs 2003: Pediatric patients with Ph+ CML-CP after stem cell transplant 2006: Adults with relapsed Ph+ ALL and with myelodysplastic diseases 2008: Treatment of adult patients following resected Kit positive GIST 2012: 36 months post-surgery in patient with resected KIT positive GIST

Examples of added clinical value over Time 2004: Initial Indication: Combination treatment of EGRF metastatic

cancer 2006: Combination with radiation therapy for treatment of squamous

cell carcinoma 2007: Single treatment of EGRF metastatic colorectal carcinoma 2011: 1st line treatment of recurrent locoregional disease or metastatic

squamous cell carcinoma

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Imatinib (Glivec®)

Clinical valueover time

Ealier treatment pathway or disease stage usageNew disease indication

2004 2005 2006 2007 2008 2009 2010 2011 2012

Cetuximab (Erbitux®)

New combination Initial FDA indication

Clinical valueover time

40

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B-1050 Brussels * Belgium

Tel: + 32 (0)2 626 25 55

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Final version : 21/09/2015 Sustainable healthcare systems Sustainability