the us pharmaceutical market

The US Pharmaceutical Market Looking back and looking ahead! Prepared for SLA By Doug Long VP Industry Relations March 19, 2012

All reproduction rights, quotations, broadcasting, publications reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any information storage and retrieval system, without express written consent of IMS HEALTH.

2012 Strategic management presentation

Copyright IMS Health; All rights reserved 2

7.1% 7.1% 6.4% 7.1% 4.6% 4- 5% 3-5% 4 -6% 5-7% 4-7%

$656 $727 $799 $832 $876 $940-950

$960-970

$990-1,010

$1,055- $1,075

$1,120- $1,150

Global sales growth is 3-6%

•Global Sales and Growth, 2006-2015

•2011-15 CAGR (f) 3-6% •2006-10 CAGR 6.4%

•Source: IMS Health, Market Prognosis, October 2011 2011

Copyright IMS Health; All rights reserved

Key shifts within the pharmaceutical market change the nature and mix of future growth areas

•Stakeholders •Traditional medicines

•Specialty/biologics

•(Niche/orphan)

•Geographic markets •U.S. and other developed

•China and other pharmerging

•Intellectual property •Protected •Generics

•Lower growth

•More constraints •Different drivers / Different constraints •Pharma market

•Product profile •Small molecule/orals/ blockbusters

•Biologics /injectable/ personalized

•Challenges to win on “value”

•But mostly generic

•And new brands compete with generics

•But with greater risk

•Historic drivers •… But •Future drivers


Pharmerging markets and generics are the only drivers of global growth

Components of Change in Total Spending

•$1,065-1,095Bn

•*Other includes Rest of World +$27Bn, Other developed market growth +$17Bn, Exchange rate change -$15Bn

•Developed markets

Source: IMS Market Prognosis, Apr 2011

•$856Bn


By 2015, China will replace Japan to be the second largest market

•Change in ranking over 5 years

Rank 2005 Index Rank 2010 Index Rank 2015 Index 1 United States 100 1 United States 100 1 United States 100

2 Japan 36 2 Japan 33 2 China 36

3 France 15 3 China 18 3 Japan 35

4 Germany 14 4 Germany 15 4 Germany 15

5 Italy 9 5 France 14 5 Brazil 14

6 China 8 6 Italy 9 6 France 13

7 Spain 7 7 Brazil 8 7 Italy 9

8 UK 7 8 Spain 8 8 India 8

9 Canada 7 9 Canada 7 9 Russia 7

10 Brazil 5 10 United Kingdom 7 10 Spain 7

11 Mexico 4 11 Russia 5 11 Canada 7

12 Australia 4 12 Australia 4 12 United Kingdom 6

13 South Korea 3 13 India 4 13 Venezuela 6

14 India 2 14 Mexico 4 14 Australia 5

15 Turkey 2 15 South Korea 4 15 Turkey 4

16 Russia 2 16 Turkey 3 16 Mexico 4

17 Netherlands 2 17 Poland 2 17 South Korea 4

18 Belgium 2 18 Netherlands 2 18 Argentina 3

19 Poland 2 19 Belgium 2 19 Poland 3

20 Greece 2 20 Greece 2 20 Belgium 2

•3

•2

•1

•3

•1

•2

•5

•3

•2

•1

•2

•1

•1

•2

•1

•5

•2

•2

•2

•2

•9

•1

•2

•2

•9

•2

•1

•1

•1

•3

•1

•3

•4

•1

•2 •7

•12

•2

•1

•1

•1

•1

•2

•Source: IMS Health, Market Prognosis, October 2011. Market size ranking in constant US$


Pharmerging markets will show the most growth

•Global Sales and Market Growth Developed Markets

CAGR 2011-2015

US 1 - 4%

Japan 2 - 5%

Germany 1 - 4%

France -1- 2%

Italy 0 - 3%

Canada -2 - 1%

Spain -2 - 1%

UK -1- 2%

S. Korea 1- 4%

Developed 1 - 4%

•Source: IMS Health, Market Prognosis, October 2011

Pharmerging Markets

CAGR 2011-15

Tier 1 (China) 16-19%

Tier 2 12-15%

Brazil 12-15%

Russia 11-14%

India 14-17%

Tier 3 10-13%

Pharmerging 13-16%


$5-6Bn

$8-10Bn

$9-11Bn $9-11Bn

$9-11Bn $10-12Bn

$11-13Bn

$12-15Bn

$13-16Bn

$13-16Bn

$18-22Bn

$18-22Bn

$18-22Bn

$20-24Bn $27-32Bn

$28-33Bn $29-34Bn

$41-46Bn $43-48Bn

$75-80Bn

0 10 20 30 40 50 60 70 80 90

Glaucoma

Antivirals excl. HIV

Alzheimer's

Erythropoeisis stimulating agents

Attention Deficit Hyperactivity Disorder

Narcotic analgesics

Osteoporosis

Multiple sclerosis

Anti-epileptics

Antidepressants

Anti-ulcerants

Platelet aggregation inhibitors

Antipsychotics

HIV antivirals

Autoimmune

Angiotensin inhibitors

Lipid regulators

Respiratory

Antidiabetics

Oncology

Leading therapy classes in 2015

Spending in 2015 and 2011-15 CAGR

Source: IMS Institute for Healthcare Informatics; Therapy Forecaster, May 2011

5-8% 4-7% 2-5%

-2 to -5% 1-4% 6-9% 5-8%

-3 to -6% 4-7%

-5 to -8% -5 to -8%

1-4% 5-8%

8-11% 0 to -3%

4-7% 0 to -3%

1-4% 1-4%

0 to -3%


3.8%3.2%

1.8%

1.1%

5.3%

2.1%2.6%

1.1%

3.7%

0.8%

0%

5%

10%

Sales TRx

% G

RO

WTH

US$

2007

2008

2009

2010

2011

The total market grew 3.7% in 2011

Source: IMS Health, National Sales Perspectives, Dec 2011 IMS Health, National Prescription Audit, Dec 2011

% Growth of prescription products Total market


Reasons for Moderation in the Growth of Drug Expenditures

• Increased cost sharing for consumers

• Economic downturn

• Innovation drought

• Safety concerns for various drugs

• Rx to OTC conversions

• Ongoing introduction of first time generic drugs


Generics and Specialty outperformed the market in 2011

3.2%

4.4%3.7%3.7%

2.1%2.8%

13.8%

6.7%

0%

5%

10%

15%

MAT Dec 2011

% G

RO

WT

H

Total Market Brand Branded Generic

Generic Primary Care Driven Atcs Specialist Driven Atcs

Biologic Molecules Oncologics

Twelve months ending Dec 2011 % Growth US$

Source: IMS Health, National Sales Perspectives, Dec 2011


Generics continue to post strong growth

3.7%

2.0%

11.6%

0%

5%

10%

15%

YTD Dec 2011

% G

RO

WT

H

0.8%

4.5%

-9.8%

-15%

-10%

-5%

0%

5%

10%

YTD Dec 2011

% G

RO

WT

H

Source: IMS Health, National Prescription Audit, Branded generics disaggregated, Dec 2011

Source: IMS Health, National Sales Perspectives, Branded generics disaggregated, Dec 2011

Jan 2011 to Dec 2011 Jan 2011 to Dec 2011 % Growth US$ % Growth TRx

Total market Brands Generics


Generics account for 54% of the dollar growth in 2011

2007

Brands

79%

21%

MAT Dec 2011

Brands

46%Generics

54%

Source: IMS Health, National Sales Perspectives, Branded generics disaggregated, Dec 2011

AC = +$11bn AC = +$10bn

% Contribution to growth US$


Spend grew 3.3% but largest segments grew slower or declined

$0 $50 $100 $150 $200 $250 $300

Total market: +3.3%

Brands: +1.3% Branded generics: +4.3%

Generics: +15.1%

Traditional Pharma: +1.4% Specialty: +6.3%

Small molecules: +1.2% Biologics: +7.0%

Spending Growth (MAT Sep 2011)

Retail: +3.0% Institutional: +4.0%


Source: IMS Health, National Disease and Therapeutic Index, Nov 2011, 95% confidence interval (+/-3.9%)

Patient visits down 4.1% through Nov 2011 but recent periods consistent with expected recovery


DollarsAC

US$mn Total Rx dispensed

AC

TRxs mn

Antipsychotics,oth 2039.2 Anti-depressants 9.2

Lipid regulators 1355.8 Codeine & comb 7.4

Analogs of human insulin 1241.3 Synth non-narc analg 6.2

Analeptics 1139.4 Seizure disorders 6.1

Neurological disorders 1137.8 Analeptics 4.1

Antiarth,biol resp mod 962.5 Antiarth,plain 3.4

Hepatitis Antivirals 932.5 Influenza 3.1

Dpp-4 Inhib 792.2 Antinauseant 5HT3 antag 2.5

Platelet Inhibitors 750.8 Calcium blockers 2.4

Platinum coordination 574.1 Dpp-4 Inhib 2.4

Top 10 Therapy Classes- Absolute Growth

Source: IMS Health, National Sales Perspectives, Dec 2011, National Prescription Audit, Dec 2011


Dollars%

GrowthTotal Rx dispensed

%

Growth

Hepatitis Antivirals 256 Influenza 78

Vitamin K Antagonists 176 Antinauseant 5HT3 antag 31

Antiarth,gout spec 173 Ophth corticoids 25

Potassium suppl,chloride 63 Dpp-4 Inhib 23

Platinum coordination 58 Synth non-narc analg 15

Neurological disorders 49 Non-narc cough alone 13

Antineo enzyme recept 48 Specific antagonists 13

Miscellaneous,oth 40 Hyperosmolar lax 10

Anti-Diab Hormone Analog 38 Morphine/opium deriv 9

Monoclonal antibodies 34 Analeptics 9

Top 10 Therapy Classes- Relative Growth



DollarsAC

US$mn Total Rx dispensed

AC

TRxs mn

Antihistamines alone -475.1 Quinolones, systemic -1.2

Glitazones -529.7 Diuretics,loop -1.4

Herpes Antivirals -568.1 Hormones,estrogens -1.4

Anti-depressants -703.2 Beta blockers -1.9

Quinolones, systemic -753.5 Diuretics,comb -2.0

UT benign prostate -801.9 Ace inhibitors -3.7

Erythropoietins -985.9 Glitazones -4.0

Angiotensin II antagonists -1061.8 Osteoclast Inhibitors -6.6

Alzheimer-type dementia -1612.8 Antihistamines alone -9.3

Proton pump inhib -1850.5 Synth narc,analg -14.7

Top 10 Therapy Classes- Absolute declines



Top 10 Therapy Classes- Dollar basis

US$mn% Market

Share% Growth

US Industry 319,849 100.0 3.7

1 Lipid regulators 18,624 5.8 7.9

2 Antipsychotics,oth 18,120 5.7 12.7

3 Anti-depressants 10,878 3.4 -6.1

4 Proton pump inhib 9,601 3.0 -16.2

5 Analogs of human insulin 8,762 2.7 16.5

6 Antineo monoclonal antib 8,619 2.7 3.3

7 Antiarth,biol resp mod 7,957 2.5 13.8

8 Analeptics 7,854 2.5 17.0

9 Platelet Inhibitors 7,764 2.4 10.7

10 Angiotensin II antagonists 7,394 2.3 -12.6

Top 10 105,573 33.0 4.1

MAT Dec 2011

Leading classes



Top 11-20 Therapy Classes- Dollar basis

US$mn% Market

Share% Growth

11 Steroid,inhaled bronch 6,061 1.9 3.3

12 GI anti-inflam 5,885 1.8 9.6

13 HIV antiviral combination 5,849 1.8 10.8

14 Erythropoietins 5,110 1.6 -16.2

15 Codeine & comb 4,789 1.5 -8.3

16 Leukotriene agents 4,656 1.5 12.0

17 Immune system adjuncts 4,365 1.4 7.6

18 Immunologic interferons 4,157 1.3 4.6

19 Glitazones 4,100 1.3 -11.4

20 Seizure disorders 4,034 1.3 1.8

Top 20 154,580 48.3 3.0

MAT Dec 2011

Leading classes



Top 10 Products- Absolute growth


DollarsAC

US$mnTotal Rx Dispensed

ACTRxsmn

Eloxatin® (S.A) 952 simvastatin (a6d) 9.5

enoxaparin sod (sdz) 907 furosemide (rox) 7.3

Incivek® (Vre) 838 amoxicillin (sdz) 6.6

methylphenidate er (wts) 771 hycd/apap (qlt) 6.6

Copaxone® (Tvn) 702 lisinopril (wok) 6.3

Crestor® (Azn) 638 omeprazole (rx) (drl) 6.3

Abilify® (Ots) 631 citalopram hbr (am9) 6.2

Plavix® (Bsa) 626 sertraline hcl (cm7) 6

Humira® (Abt) 602 amoxicillin (w-w) 5.3

gamunex-c (gfl) 556 lisinopril (qlt) 5.3


Top 10 Products- Relative Growth


Dollars%

GrowthTotal Rx Dispensed

%Growth

Incivek® (Vre) >999 lisinopril (qlt) >999

methylphenidate er (wts) >999 metoprolol succin (wok) 560

Pradaxa® (B.I) >999 lisinopril (wok) 537

gamunex-c (gfl) >999 amoxicillin (w-w) 512

atorvastatin ca (wts) >999 simvastatin (a6d) 499

Gilenya® (Nvr) >999 furosemide (rox) 399

Xgeva® (Aai) >999 zolpidem tart (qlt) 209

Yervoy® (Bmp) >999 fluticasone prop (hit) 167

docetaxel (ho&) >999 alprazolam (qlt) 160

Colcrys® (Asc) 811 citalopram hbr (am9) 140


Top 10 Products- Dollar basis

Products Company US$mn% Market

Share% Growth

US Industry 319,849 100.0 3.7

1 Lipitor® PFZ 7,664 2.4 5.7

2 Plavix® BSA 6,765 2.1 10.2

3 Nexium® AZN 6,151 1.9 -2.7

4 Abilify® OTS 5,187 1.6 13.9

5 Advair Diskus® GSK 4,633 1.5 -1.8

6 Seroquel® AZN 4,630 1.4 6.4

7 Singulair® MSD 4,588 1.4 12.6

8 Crestor® AZN 4,401 1.4 17.0

9 Cymbalta® LLY 3,663 1.1 16.0

10 Humira® ABT 3,530 1.1 20.5

Top 10 51,211 16.0 8.4

MAT Dec 2011



Top 11-20 Products- Dollar basis

Products Company US$mn% Market

Share% Growth

11 Enbrel® AAI 3,506 1.1 6.5

12 Remicade® CTO 3,472 1.1 5.1

13 Actos® TAK 3,435 1.1 -3.0

14 Neulasta® AAI 3,315 1.0 10.1

15 Rituxan® GTC 3,005 0.9 8.8

16 Zyprexa® LLY 2,963 0.9 0.1

17 Copaxone® TVN 2,955 0.9 31.2

18 Lexapro® FOR 2,923 0.9 3.9

19 Oxycontin PUF 2,877 0.9 -6.8

20 Epogen® AAI 2,770 0.9 -16.7

Top 20 82,433 25.8 6.2

MAT Dec 2011



Top 10 Growth Companies- Absolute Growth

Dollars AC US$BN TRx AC TRx mn

Watson Pharma 1.4 Camber Pharma 22.5

Novartis (incl Sandoz) 1.2 Lupin Pharma 22.5

Bristol-Myers Squibb 1.1 Endo Pharma Inc. 22.1

Mylan Labs, Inc. 0.8 Boehringer Ingelheim 17.9

Gilead Sciences 0.8 Zydus Pharma 17.8

Merck & Co 0.8 Amneal Inc 16.0

Novo Nordisk 0.8 Wockhardt America 15.6

Vertex Pharma 0.8 Watson Pharma 15.3

Roche (incl Genentech) 0.7 Northstar Rx 14.0

Shire Us Corp 0.7 Accord Healthcare 11.3



2007

Top 11-

20

20.6%

Top 10

59.9%

All

Others

19.5%

Top 10 Pharma only contributed 4.1% of the market’s dollar growth in 2011

MAT Dec 2011

Top 10

4.1%

Top 11-

20

42.7%

All

Others

53.2%


% ABSOLUTE CHANGE US$


52%

-3%

23%

48%

25%

55%

-20%

0%

20%

40%

60%

80%

100%

120%

% Market share US$ % Absolute change US$

All others

Top 11-20

Top 10


MAT Dec 2011

Top 10 Pharma posted a 3% loss in 2011


Top 10 Companies- Dollar Basis

US$mn% Market

Share% Growth

US Industry 319,849 100.0 3.7

1 Pfizer (incl Greenstone) 25,121 7.9 -7.7

2 Astrazeneca 19,897 6.2 2.0

3 Merck & Co 19,343 6.0 4.1

4 Novartis (incl Sandoz) 19,242 6.0 6.9

5 Teva 15,062 4.7 -5.3

6 Lilly 14,868 4.6 4.2

7 Roche (incl Genentech) 14,468 4.5 5.1

8 Amgen Corporation 13,075 4.1 3.1

9 GlaxoSmithKline 12,864 4.0 -6.7

10 Johnson & Johnson 11,948 3.7 -5.9

Top 10 165,888 51.9 -0.3

MAT Dec 2011

Leading corporations



Top 11-20 Companies- Dollar Basis

US$mn% Market

Share% Growth

11 Sanofi-Aventis 11,765 3.7 -3.9

12 Abbott 11,470 3.6 5.6

13 Bristol-Myers Squibb 10,851 3.4 11.2

14 Boehringer Ingelheim 6,970 2.2 9.5

15 Takeda 5,975 1.9 -0.4

16 Gilead Sciences 5,480 1.7 17.2

17 Mylan Labs, Inc. 5,461 1.7 17.1

18 Novo Nordisk 5,253 1.6 17.3

19 Otsuka America Ph 5,250 1.6 13.6

20 Forest Lab 5,185 1.6 9.5

Top 20 239,548 74.9 2.0

MAT Dec 2011

Leading corporations



Top 10 Generic companies- Dollar basis

US$mn% Market

Share% Growth

US Industry 44,112 13.8 13.8

1 Teva 6,313 14.3 -23.0

2 Mylan Labs, Inc. 4,836 11.0 18.0

3 Sandoz (Novartis) 4,774 10.8 15.0

4 Watson Pharma 3,556 8.1 59.7

5 Hospira Inc 1,497 3.4 30.9

6 Greenstone (Pfizer) 1,419 3.2 -2.4

7 Par Pharma 1,363 3.1 2.3

8 Boehringer Ingelheim 1,260 2.9 23.6

9 Fresenius Kabi 999 2.3 19.3

10 Actavis US 905 2.1 -7.3

Top 10 26,922 61.0 5.9

MAT Dec 2011

Sales of unbranded generics by leading corporations



• Can reputation for innovation and value be built or restored?

• What activities need to be stopped and which started? • What partnerships are required to support this position?

• How to tackle R&D spending and raise productivity?

• What commercial footprint is needed (salesforce, social media, inaccessible/closed networks, etc?) • How to cut next 25% of costs to reflect the 2010s, not 90s?

• Stakeholder influence and perceptions are having an increasing

influence on the value of future therapy areas • How do you manage the portfolio when products’ lifecycle is even less certain?

• How is value defined in terms of real world evidence? • Whose perspective of value to balance? • What to do with non-valuable products?

• Few if any launches have been “excellent”

• Market access is critical and includes different approaches for regulators, payers, providers and patients

In this context, manufacturers have five areas to focus on and resolve

Reputation and relationships

Cost reduction

Business portfolio

Definition of “value”

Launch fundamentals


Retail and Mail grew 0.6% on scripts in 2011

Channels TRxs mn% Market

Share% Growth

Retail 3,695 91.8 0.6

Chain/Mass 2,212 55.0 1.8

Independents 740 18.4 -1.1

Mail service 260 6.5 -1.7

Food stores 483 12.0 -1.1

Non retail channels 329 8.2 3.1

LTC 329 8.2 3.1

Total 4,024 100.0 0.8

MAT Dec 2011

Source: IMS Health, National Prescription Audit, Dec 2011


Retail grew 3.6% and Institutional 3.7% in 2011

Channels US$bn% Market

Share% Growth

Retail 227.3 71.1 3.6

Chain/Mass 112.5 35.2 4.1

Mail service 55.1 17.2 6.4

Independents 38.1 11.9 0.3

Food stores 21.5 6.7 0.9

Institutional 92.5 28.9 3.7

Clinics 38.4 12.0 4.5

Hospitals 32.4 10.1 1.2

Long-term care 15.2 4.8 3.0

Home health care 2.7 0.9 8.2

HMO 2.7 0.8 27.7

Others 1.0 0.3 0.6

Total 319.8 100.0 3.7

YTD Dec 2011



86.4% 86.1% 85.8% 85.3% 83.1% 81.8%

40.3%36.5%

32.1% 29.4% 26.0% 23.3%

13.6% 13.9% 14.2% 14.7% 16.9% 18.2%

59.7%63.5%

67.9% 70.6% 74.0% 76.7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2006 2007 2008 2009 2010 MAT

Dec 2011

2006 2007 2008 2009 2010 MAT

Dec 2011

% M

AR

KE

T S

HA

RE

%Dollars %Total prescriptions dispensed

Brands Generics

Generics have reached an all-time high share

Source: IMS Health, National Sales Perspectives, Dec 2011, National Prescription Audit, Dec 2011, Branded generics disaggregated


11.6 13.6

6.4

15.812.4

18.6

30.2

6.2

21.2

10.97.8

2.12.3

2.4

3.6

4.3

3.5

5.4

2.6

3.3

3.8

1.9

0

5

10

15

20

25

30

35

40

45

50

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

SPEN

DIN

IG U

S$BN

Non-retail Retail

16.0

22.1

8.8

Value of products at risk 2006-2016, MAT Sep 2011 (US$B)

Source: IMS Health, MIDAS, Market Segmentation, Sep 2011; For 2006-2011 spending in year prior to expiry shown; For 2012-16 MAT Sep 2011 values are shown and are not projected to reflect expected future sales

$93B exposed to generic competition by 2016, ~80% from retail

13.7

8.9

19.4

16.6

35.6

24.6

14.7

9.7

2012-2016 LOE exposure: $93B


8

12 12

4 5

1

1

1

2

3

1

4

1

11

9

8

6

2

2 1

108

19

10

2525

15

19

10

1614 13

0

5

10

15

20

25

30

35

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

CO

NSTAN

T U

S$BN

Biologics protection expiries

Small molecule protection expiries

Long term LOE exposure

Value of products at risk 2004-2020

Source: IMS Health, MIDAS, Market Segmentation, Jun 2010


Expiries in 2010 were largely exclusive; potential exclusivities to trend down through 2015

Source: IMS Institute for Healthcare Informatics, Aug 2011. Sales from prior years included.

US Protection Expiry Exposure And Market Exclusivity Potential 2010-2015


Prescriptions to become more generic through 2015 with generic share reaching 87%

2015 Market Share, TRX TRX Volume BN (Retail, Mail & Long Term Care)

Source: IMS Institute for Healthcare Informatics, 2011


Source: IMS National Prescription Audit Weekly, January 6, 2012

2011 expiries continue pattern of rapid brand erosion

Total Total Total Total ATORVASTATIN DISPENSED PRESCRIPTION SHARE (TRx) Brand Prescription Share of Molecule Post-Expiry (Top Expiries 2010/2011)

WEEKS SINCE PATENT EXPIRY


FDA Approval Highlights- 2011

Highlights

35 new drugs

2nd highest total over the last decade

2 new Hepatitis C drugs

A new drug for late stage prostate cancer

1st new drug for Hodgkin’s lymphoma in 30 years

1st new drug for Lupus in 50 years

7 of the new drugs provide major advances in cancer treatment

Almost 50% were significant advances over existing treatments for heart attack, stroke, and kidney transplant rejection

10 were indicated for orphan diseases, which frequently lack any therapy

2 drugs (1 for melanoma and 1 for lung cancer) represent breakthroughs in personalized medicine

45

Recent and future novel therapies do address unmet patient needs

Selected Product Launches 2009-2013

Source: IMS Institute for Healthcare Informatics, Apr 2011

Disease area Launched Upcoming

Arrhythmia Brinavess™ (vernakalant) Multaq® (dronedarone)

Autoimmune Simponi® (golimumab) Stelara™ (ustekinumab)

tofacitinib (JAK inhibitor)

Diabetes Nesina® (alogliptin, DPPIV) Onglyza™ (saxagliptin, DPPIV) Victoza® (liraglutide, GLP-1) Bydureon™ (exenatide, GLP-1)

canagliflozin (SGLT2) dapagliflozin (SGLT2) lixisenatide (GLP-1) Tradjenta™ (linagliptin, DPPIV)

Hepatitis C Victrelis™ (boceprevir, NS3-4A PI) Incivek® (telaprevir, NS3-4A PI)

Lupus Benlysta® (belimumab)

Melanoma Yervoy™ (ipilimumab) vemurafenib

Multiple sclerosis Ampyra® (fampiridine, oral) Gilenya® (fingolimod, oral)

laquinimod (oral) ocrelizumab teriflunomide (oral)

Osteoporosis Prolia® (denosumab)

Thrombosis/ Acute coronary syndrome

Brilique™ (ticagrelor, P2T), Effient® (prasugrel, Xa) Pradaxa® (dabigatran etexilate, Xa)

Eliquis® (apixaban, Xa)

Prostate cancer Firmagon® (degarelix) Jevtana® (cabazitaxel) Provenge® (sipuleucel-T) Zytiga™ (abiraterone acetate)

Copyright IMS Health, All rights reserved 46

Medicaid Vs All Prescriptions

Vector One ®: Payer (VOPA)

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

Total

Medicaid

9%

91%

FFS Medicaid vs Managed Medicaid

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

Medicaid - Other

Managed Medicaid

Vector One ®: Payer (VOPA)

AZ, GA, KY, MA, MD, MI, NJ, NV, PA, SC

Commercial Third Party and Medicare Part D gained share in 2011

11.5% 10.9% 8.3% 7.7% 6.9% 6.4%

7.5% 6.8%7.0% 7.5% 8.4% 8.1%

66.4%63.9% 64.4% 64.1% 62.9% 63.3%

14.6% 18.4% 20.3% 20.7% 21.8% 22.2%

2006 2007 2008 2009 2010 2011

Cash Medicaid Commerical Third Party Medicare Part D

Source: IMS Health, National Prescription Audit, Dec 2011 ; Note Includes only retail pharmacies

Retail (excluding Mail) Dispensed Prescriptions by Payment Type

+0.4%


The most certain impacts are negative in the short term but more positive or uncertain longer term

Closure of donut hole

Upside Expanded coverage of current uninsured

Expanded Medicaid coverage

Medicaid rebate increases

Part D donut hole subsidy

Annual fees Biosimilar regulatory pathway

Downside

2010 2019 2014

IM

PA

CT

TIMING

Reform of insurance practices

Independent Payment Advisory Board Patient Centered Outcomes Res. Inst. Pilots, demonstration projects Preventive care incentives Physician payment

sunshine rules


0

50

100

150

200

250

300

350

400

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

NU

MBER O

F P

EO

PLE (

MIL

LIO

NS) Exchanges

Uninsured

Nongroup/Other

Employer

Medicaid/CHIP

Medicare

Source: CMS, CBO Healthcare Reform Reconciliation Bill Analysis, Mar 2010

25-30mn people will get coverage under reform but questions remain about how they will use it

COVERAGE AFTER REFORM

+24 +24

-32 -27

-5 -2

-4 +8

+16 +11

0 +14

Impact on 2019 (mn)

Vs. no-reform Vs. 2010


We believe biosimilars will succeed because payers will increasingly see biologics as their main cost driver Savings from small molecule generics to decline after 2015

Source: IMS MIDAS, MAT 12/2010, IMS Institute for Healthcare Informatics

138

+62 200

+53 253

+7.7% 2010-15 CAGR

+4.8% 2015-20 CAGR

Total pharma

+4.5 - 5.0%

Total branded

+0.5 - 1.1%

2010-15 CAGR Conservative estimates –

depending on the successful outcomes of PharmaCos pipeline 2015-20 CAGR could ever exceed

the 2010-15 CAGR figures

What savings from

generics?

Only a few core small

molecules to potentially

yield savings in the future

(Diovan, Lipitor, Seretide, Spiriva,

Seroquel, ...)

Continuous price reduction

of existing generics

Savings from small

molecules to decline

after 2015


0

20

40

60

80

100

120

118

0

40

4 2 9 6

43

12

30

5 2

15 11

26 20 19

5 2

22

9

Risk Evaluation and Mitigation Strategies (REMS) by Complexity

March 2011-March 2012

Mar-11

Sep-11

Mar-12

MG= Medication Guide CP= Communication Plan ETASU= Elements to Assure Safe Use IS= Implementation System

Complexity

Source: Center for Healthcare Supply Chain Research

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0

50

100

150

200

250

300

350

400

2005

2006

2007

2008

2009

2010

2011 (

f)

2012 (

f)

2013 (

f)

2014 (

f)

2015 (

f)

GRO

WTH

CO

NST U

S$

SALES U

S$BN

Sales Mar 2011 edition Draft Sep 2011

US forecast to 2015 up slightly; 2011 slightly ahead of prior forecast, HC reform impact up slightly

Source: IMS Health Market Prognosis Mar 2011 and draft Sep 2011

Sales and growth forecast

•Reduced role of brands in therapy areas where high quality generics are available

•Impact of 2010 expiries deeper than expected on brands but generic price discounts were not fully realized

Key drivers of changes to 2010/11

•HC reform incremental demand in 2014 1.9% impact up from 1.5% in prior edition

•Timing of patent expiries shifts; peak impact years now 2012 to 13

•New product contribution improving, but market overall continues to be hampered by the cumulative effects of lower levels of innovation entering 2006-10

Key drivers of changes 2012-14

1-4%

0-3%


What’s in for Pharmaceuticals?

• Slower market growth

• Generics & Patent Cliff

• Specialty is growing but at a slower pace

• RX to OTC

• Private label OTC

• Chain & Mass, Mail service, Clinics, & LTC

• Medicaid & Medicare Part D

• Cough, Cold and Flu

• Price Increases

• REMS

• Drug Shortages

• Specialty Innovation

• S&D


What’s out and what’s ahead for Pharmaceuticals???

What’s Out?

• Brand growth

• Primary Care Innovation

• R&D

• Office visits

• Elective surgery

• Adherence???

• Government − Medicaid

− Medicare Part D

− Health Care reform

− Generic User fees

− Generic approval backlogs

− More FDA inspections

− AMP

− Biosimilar Pathway

− REMS

− Patent Settlements

− DEA enforcement

What’s Ahead?


Branded pharma challenges


Source: Morgan Stanley Research

Generic pharma challenges

Source: Morgan Stanley Research


Longer-term upsides to pharma growth are possible

65

Growing share of healthcare budget for

pharmacotherapy

Accelerated uptake of healthcare information

technology

Increased diagnosis of asymptomatic conditions

Improved compliance and persistency rates

Expanded patient access to healthcare

Greater clinical evidence of drug efficacy

Emergence of new therapeutic platforms

Aging population and economic development


The US Pharmaceutical Market Looking back and looking ahead! Prepared for SLA By Doug Long VP Industry Relations March 19, 2012

the us pharmaceutical market

Documents