EXL PHARMA’S 6TH PHARMACEUTICAL

& MEDICAL DEVICE PRICING& REIMBURSEMENT

CONFERENCE HIGHLIGHTS

July 26-27, 2010Bridgewater, NJ

Questions to address with pricing and pharmaceconimic modeling…

How do manufacturers price a product?

What constitutes a “value proposition”?

How is healthcare reform going to affect pricing in the future

WHAT’S THE RIGHT PRICE?

How do manufacturers price products?

TooHigh

TooLow

Offensive!

$$ Lost

Step 1: Determine the perceived value of the product

Clinical advance (dosing, delivery, etc.)

Improved Safety Improved Efficacy Unmet Medical Need

Vested interests motivating perceptions

Brand Value Product Attributes

(efficacy, safety, MOD)

Unmet Need Untreated Disease High Volume Market

Perceived Benefits Clinical advance

Economic Value

Cost Effectiveness RxEcon Studies

Cost Savings Medical Cost Offset

Budget Impact PMPM Increase

PAYERSPHYSICIANS

Step 2: Consider Market Factors

Market Access Tier Placement = Market Share?

Distribution fees Wholesaler PPD and FFS rates on rise SPPs becoming more aggressive

Healthcare legislation Medicaid Med D

Is Tier Placement a Function of Market Share Success?

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Product A Product B Product C

2nd Tier Access Mkt Share

Focus on Net Revenue vs. Access At All Costs

21%

15%

5%

0%

5%

10%

15%

20%

Tier 2 Tier 3 Tier 4

Assumptions: A $1000 price point and a 25% rebate

Gross $210.00 $150.00 $50.00Rebates $52.50 $0.00 $0.00Net $157.50 $150.00 $50.00

Focus on Net Revenue vs. Access At All Costs

20%

16%

5%

0%

5%

10%

15%

20%

Tier 2 Tier 3 Tier 4

Gross $200.00 $160.00 $50.00Rebates $50.00 $0.00 $0.00Net $150.00 $160.00 $50.00

Assumptions: A $1000 price point and a 25% rebate

Inelasticity of Price Points

Thresholds may be evident when the price goes above $400 and $700 WAC per month.

12%12%12%12%

79% 56%56%56%

79%86%

21%

32%32%

12%

2%9%

32%

$1,083$900$700$600$400$200

2nd tier

3rd tier

4th tier

Middlemen Everywhere!

What’s the “value proposition”?: Pharmacoeconomics

Key Organizations Driving Quality

PQA

AQA

AHRQ

NQF & SupplierCouncil

QIOs

CMS

AHIP

NCQA(& HEDIS)

Quality

Adopting Measures for

Reporting and Payment

Quality Metrics

• National Committee for Quality Assurance (NCQA)

• URAC (Utilization Review Accreditation Commission)

• Pharmacy Quality Alliance (PQA)

• National Quality Forum (NQF)

• Joint Commission Accreditation of Healthcare Organizations (JCAHO)

• AMA Physician Consortium for Performance Improvement

• National Quality Forum (NQF)

• Ambulatory Quality Alliance (AQA)

• Hospital Quality Alliance (HQA)

• Pharmacy Quality Alliance (PQA)

• NCQA-HEDIS*

• Bridges to Excellence

• Integrated Healthcare Association

• Hospital Compare

• Medicare Physician Voluntary Reporting Program (PVRP), now PQRI

• HHS Value-Driven Health Care Initiative

Developing Consensus

Measurement Development

Two Approaches to Pharmaceconomic Modeling

Establish Predictability of Cost Outlay Budget Impact Analysis

Market Share Changes Drug Volume/Market Penetration

Provide Evidence for Potential Cost Offsets Pharmacoeconomic Analysis

Cost Minimization Cost Effectiveness Cost Utility Cost Benefit

Publication of RxEcon Data Has Impact on Formulary Decision Making

Survey included 95 key decision makers

77% of responders always/often rely on journals for formulary decision making

HE&OR and MC journals rated highest for symptomatic diseases

Clinical journals rated highest for chronic diseases

Source: Journal Use for Formulary Decision-making in Managed Care. Presented at AMCP 20th Annual Meeting & Showcase, San Francisco, CA, April 16-19 2008.

Health Outcomes to Support Pricing and Reimbursement

The Question of “Effectiveness”

Will the product work under real-world conditions?

Concomitant disease

Patient adherence

Real world prescribing patterns

Key Pricing and Effectiveness Questions

How is our product truly unique? Mechanism of action Route, frequency, onset, duration Efficacy, tolerability, safety

How does this translate into clinical outcomes? Real world populations, subpopulations Ease of use

Who will value the differentiation? Patient/caregiver Quality organization Payer/Purchaser Provider

How much do these stakeholders influence our target market?

Value of Product Differentiation

High Interchangeability

Low Interchangeability

Price Pressure

Price Pressure

“Fail First”

“Open Access”

All patients

Responders

Responders

All patients

Responders

All patients

Responders

All patients

“Own a patient type”

Quality and Health Reform

National strategy for quality improvement HHS Secretary to develop by 1/1/2011

$95million/year 2010-2014 Development, endorsement, dissemination of

quality measures Reduced payments for readmissions

AMI, HF, Pneumonia To begin 10/1/2012

Quality will be tied to reimbursement

Performance Measurement Life Cycle

ValueDemonstration

Validation

Use

Evidence Generation

Development

•RCTs

•HTAs

•Observational studies

•Practice Guidelines

•Consensus Statements

•Field testing

•Revision

•Endorsement

•Publication

•Dissemination

•Campaigns

•Coverage and reimbursement

•Accreditation

•Public reporting

•Data standards

•Operational definitions

•Numerator/denominator

Start with the End in Mind

What do we want to say? What evidence would support that claim? What studies would yield this evidence? When would we need this evidence? When would we need to start?

Health Outcomes and Drug Development

LaunchGeneric Entry

Generic Entry

•Unmet needs• Burden of illness

• Real world treatment patterns• Quality gaps

• Early economic modeling

Prelaunch LCM

Shape the Landscape

Define the Product

•Economic trial endpoints• Economic modeling

• Pragmatic trials, prospective cohorts• Comparative effectiveness

• Real world treatment patterns

-12 mo-24 mo +12 mo +24 mo

Still have any questions? For additional information on ExL Pharma’s Pricing &

Reimbursement Conferences, please visit www.exlpharma.com