David Lin

Head of Market Access

Novartis Oncology

National Cancer Institute, Putrajaya

24 Nov 2014

Drug Purchasing & Pricing

The Pharmaceutical Industry Perspective

Disclaimer

Full-time employee of Novartis Corporation.

Information shared in this presentation does not

necessarily represents the sole position of

Novartis Corporation.

Previous employment includes Pfizer,

AstraZeneca, Bayer Healthcare, Genzyme and

Sanofi.

Contents

Introduction

Pricing Context in Malaysia

National Medicine Policy (DuNAS)

Pharmaceutical Pricing

External Reference Pricing

Drugs availability – patients access

Access of the Future & Conclusion

Introduction

Introduction

Demand for more and better healthcare grows faster

than resources available to meet the demand

Facing growing ageing population

More chronic diseases developed and diagnosed

More new innovative treatments

Healthcare is a great political topic

More countries recognize good health is an economic

asset and are finding ways to improve the healthcare

system (e.g., designing and implementing Universal

Coverage)

Introduction

Payers face increasingly complex decision-making

challenges in the oncology treatment due to the pace

of groundbreaking scientific advances e.g. targeted

therapy, cell therapy.

Such challenges requires:

Systematic understanding of value of clinical endpoints

Incorporating valuable endpoints in reimbursement

Evidence to demonstrate valuable endpoints

The pace of new treatment discoveries and increasing number of

therapeutic options requires new frameworks for payers to evaluate

for reimbursement

Pricing Context in Malaysia

Medicine Pricing

Malaysia has a free pricing system: manufacturers,

distributors and retailers are allowed to set their

own prices.

Public’s perception of high medicine prices and

subsequent perceptions of inequitable access and reduced affordability of

medicines

In the public sector, medicine prices are indirectly controlled through tenders and price negotiations.

Private sector free market competition governs prices of

medicines, although the Pharmaceutical Services

Division has been monitoring private sector prices through

the Medicines Price Monitoring System (MedPrice).

Private sector prices have come under scrutiny more

recently due to growing concern regarding affordability of

medicines for middle to low income patients.

How much are we spending on

pharmaceuticals? Pharmaceutical expenditure as a share of total health expenditure, 2009

• In Asian countries, pharmaceutical expenditure share of total health expenditure range between 8% -50%.

• For Malaysia, pharmaceutical expenditure is 8.8% of total health expenditure.

Are we effective in

spending our $$$

or we are not

spending enough?

National Medicine Policy (DuNAS)

Industry collaborating with MOH to achieve goals of National Medicine Policy

Policy 2: Access to medicines

Policy 2: Access to medicinesStrategy 2 – Affordability of medicines

Pharmaceutical Pricing

From the lab to the patients

The balancing act

Understanding payer’s perspectives in order for the industry

to position the acceptable price to encourage access

Public health benefits

Economic benefits

Clinical and humanistic benefits

Functional consequences

Product attributes

Payer benefits

• Unmet need for the targeted population• Existing treatment options: not optimal results and risky • Rare disease that has no other approved drug therapy

• Significant cost offsets: lower monitoring and AE costs, savings in medical visits, co morbidity management and productivity

• Limited budget impact: 2nd-line / last-line option, very small patient population

• QoL, DFS, PFS, OS

• Tumor size shrinkage, slow down disease progression, improve survival

• Key product attribute that differentiate its value

Payer goals

Margin

Distribution cost

Functional Costs /

OverheadsImport Tax

Freight & Insurance

Functional Costs /

Overheads

Production Cost

Country costs

HQ costs

Selling Price• Discounts

• Rebates

• Bonus

• Free goods

• Access models

• MEA

Net Selling Price

International Selling Price

Lowest net selling price

PRICE APPROACH AT TIME OF LAUNCH –INDUSTRY’S APPROACH

Includes the cost of the drug development (lab, clinical trials etc.)

THE «MAGIC PRICING TRIANGLE»: OBJECTIVES IN PRICING IS NOT ABOUT PRICE ONLY!

19

Find the right balance that maximizes patient access and a sustainable business

INDUSTRY

WHO Guideline on Country

Pharmaceutical Pricing Policies

1. Use health technology assessment (HTA) as a tool

to support reimbursement decision-making as well

as price setting/negotiation.

2. Combine HTA with other policies.

3. Using HTA: review of reports from other countries;

review of reports submitted by industry; conduct

assessments based on local information and local

data.

Source: WHO, 2014

WHO Guideline on Country

Pharmaceutical Pricing Policies

4. Take a stepwise approach to develop legislativeand technical capacity to take full advantage of thepotential utility of HTA in pharmaceutical pricesetting.

5. Clearly define the roles and responsibilities of thedecision-makers and other stakeholders, and theprocess of decision-making.

6. Ensure that HTA processes are transparent andthat the assessment reports and decisions shouldbe made publicly available and effectivelydisseminated to stakeholders.

7. Collaborate to promote exchange of informationand develop common requirements for HTA.

Source: WHO, 2014

External Reference Pricing

External reference pricing According to the Organisation for Economic Co-operation and

Development (OECD), External Price Referencing, also referred to

as External Price Benchmarking or International Reference Pricing,

is defined as “the practice of comparing pharmaceutical prices

across countries” and it is further indicated that, “There are various

methods applied and different country baskets used”1.

4 main components to consider:

Country basket

Product basket

Reference price calculation

Infrastructure and implementation processes

1. Pharmaceutical Pricing Policies in a Global Market. OECD Health Policy Studies, OECD, 2008.

Friend or foe? Is Malaysia paying more than

others? Will this hamper access?

Example of Countries Referencing Germany

Formally, Informally and Indirectly

Comparative Pricing analysis of top 5 therapy

areas across Asia Pacific countries

Drug availability – patients access

Drug Availability There is evidence that availability of medicines may be

a challenge, with patients not receiving treatments

despite reimbursement on the MoH formulary 1.

The public sector uptake showed limited growth, despite

listing on the MoH Formulary in 2009.

In the case of the oncology product, the growth in public

sector uptake over the 4 years since 2009 had been

about 7.5%.

This analysis tends to suggest that despite MoH

Formulary listing status, access to certain medicines

through public channels remains unchanged or low.

1. Babar ZU, Ibrahim MI, Singh H, Bukahri NI, Creese A. Evaluating drug prices, availability, affordability, and price components: implications for access to drugs in Malaysia. PLoS medicine. 2007;4(3):e82.

Volume uptake of branded original drugs

after inclusion in the MoH formulary in 2009

Source: IMS PADDS data, Full year 2008-2014,

Volume uptake of branded original drugs

after inclusion in the MoH formulary in 2009

Source: IMS PADDS data, Full year 2008-2014,

Volume uptake of branded original drugs

after inclusion in the MoH formulary in 2009

Source: IMS PADDS data, Full year 2008-2014,

Drugs availability – patients

access

Access of innovative drugs to critically ill patients

should not be delayed though no perfect solutions

Access Models

Broadly speaking there are three types of drug

reimbursement listing models depending on how

clinical and cost factors are used in decision

making.

Clinical effectiveness evaluation alone

Clinical effectiveness evaluation and budget impact

analysis

Cost effectiveness and budget impact analyses

Solving access through innovative

access program

Industry introduced Patients Assistant Program (PAP) and other form of access program to help patients gain early access to innovative medicines, ultimately increase affordability.

Example: Imatinib for CML was introduced in Malaysia in 2002

through GIPAP (Glivec International Patients Assistant Program) and later transition to MYPAP (Malaysia Patients Assistant Program) since 2008.

MYPAP is an example of Budget Impact Access Model where it is based on cost capitation model.

Since then, many other pharmaceutical companies had introduce access program, some successful, some not.

Access strategies

Various pricing policies and strategies exist, however,

it’s challenging to determine which to implement.

All have strengths and weaknesses, just as all

countries have unique medicine needs and

challenges.

Each country must assess its own medicines situation

and implement different combinations of policies and

interventions.

Industry is open to collaborate.

Access of the Future

The Paradigm of Cancer Treatment is Changing

General Cytotoxic Targeted TherapyPersonalized

Cellular Therapy

37

Dramatic and exciting advances keep coming!

The future of cancer treatment – how are

we preparing for it?

What

would be

the right

price?

Proprietary and Confidential

Sunitinib(RCC)

Bevacizumab(RCC)

Lapatinib(BC)

Trastuzumab(BC)

Ixabepilone(BC)

Bevacizumab(BC)

Everolimus(RCC)

Panitumumab(CRC)

Sorafenib(RCC)

Bortezomib(MCL)

Gemcitabine(ovarian)

Pemetrexed(NSCLC)

Bevacizumab(NSCLC)

Docetaxel(NSCLC)

Bevacizumab(CRC)

Bortezomib(MM)

Erlotinib(pancreatic)

Sorafenib(HCC)

Irinotecan(CRC)

Gemcitabine(pancreatic)

Erlotinib(NSCLC)

Oxaliplatin(CRC)

PFS INCREASINGLY ACCEPTED AS A BASIS FORREGULATORY APPROVAL

39

Approval based on OS

Approval based on PFS/TTP

1995 2000 2005 2010

Source: www.cancer.gov/cancertopics/druginfo

What are the views of the regulatory agencies on clinical trial endpoints?

“Acceptable primary endpoints

include OS and PFS/disease free

survival […] While it is generally

acknowledged that the aim of

treatment is to improve quality of life

and survival, restraints on the

conduct of clinical trials may make

these goals unattainable.”

EMA Guideline on the Evaluation of

Anticancer Medicinal Products in Man

“The analysis of OS may be

confounded by crossover and/or

subsequent therapies.

PFS, measured prior to the

introduction of other therapies,

may more accurately depict a

treatment’s therapeutic effect.”

FDA Oncology Head

Richard Pazdur

“PFS can reflect tumour growth and be assessed before the

determination of a survival benefit. Its determination is not

confounded by subsequent therapy.”

FDA Guidance for Industry: Clinical Trial Endpoints for the

Approval of Cancer Drugs and Biologics

EMA Guideline 2009; FDA Guidance For Industry 2009

Conclusion

Conclusion

There are future challenges to address as public financing and quality of care needs to be in pace with population growth, disease and lifestyle trends.

Hence, availability or access to medicines in the public sector has become increasingly difficult leading to an affordability challenge for low and middle income patients who do not have access to medicines through the public sector and cannot afford private sector prices.

This undermines the fundamental principle upon which Malaysia’s health care system has been based – that access to quality health care should not depend upon ability to pay.

Low prices can reduce the attractiveness of certain countries to manufacturers and importers which might result in important products not being produced and marketed in a particular country or at least, being marketed with substantial delays.