Vision 2020: a roadmap to healthcare reform and improvement

of investment attractiveness

August 19th, 2014

Project is conducted by the Chamber and APRAD in collaboration with the PwC

Agenda:

2

Current situation in Ukraine. What is the Vision 2020 for Ukraine: a healthcare

reform.

Agenda

3

Current situation in Ukraine

4

Ukrainian healthcare is heavily underfinanced with the low share of government funding, especially in pharmaceuticals

Source: State Statistics Committee of Ukraine; Worldbank; WHO; OECD; PwC analysis

528

Ukraine

4%

60%

Poland

4.0854.371

Latvia

3%

3.322

5%

83%

56%

8%

France China

1.316

UK Russia

58%

4%

1.179

8%

52%

4%

432

9%

1.423

71%

76%

Germany

77%

Total Health Expenditure, 2011Share of Public Financing in Total Expenditure on Medicines (incl. hospital segment), 2011 or latest available

Government Health Expenditure as % of GDP

Overall health expenditure in Ukraine is far below the level of other European countries; recent economic and consequent budget restraints put further pressure on the government financing

10%14%

34%37%39%

68%76%

85%

UkraineUK RussiaPolandFrance Latvia ChinaGermany

The share of public financing in the Ukrainian pharmaceutical market is extremely low due to lack of out-patient drug reimbursement programs and low share of the hospital segment in the market

Government health expenditure per capita, PPP constant $

Private health expenditure per capita, PPP constant $

Ukraine lags behind many developed nations in terms of vital healthcare indicators

5

Life Expectance, years, 2011 Mortality Rate per 1000, 2011Infant Mortality Rate per 1000 Live Births, 2011

82.6

81.9

81.8

81.3

78.6

73.9

70.8

69.0

Turkey

US

EU

Israel

Singapore

Japan

Russia

Ukraine

9.9

4.5

5.3

9.3

8.1

5.5

14.5

13.5

2.4

2.0

3.5

3.4

6.4

11.5

8.7

9.8

14.5

82,6

11,5

Key health indicators in Ukraine – where we are?

Indicator Ukraine Spain

population 45.6 47.27

Life expectancy 71.1 82.45

Birth rates 11.04 births/1,000 population

10.2 births/1,000 population

Crude death rate 14.6 /1,000 population 8.4 /1,000 population

Excess mortality: 280,000

6

86.03% of all deaths in 2012 (WHO-Euro, 2014) have been linked to cardiovascular disease, cancer and external causes (66 percent of the deaths due to CVDs; 14 percent to cancer, and 6 percent to external causes) Ukraine: Data and statistics. Available at: http://www.euro.who.int/en/countries/ukraine/data-and-statistics,

Agenda

7

What is Vision 2020 for Ukraine: healthcare reform

Ukrainian government has plans to reform the healthcare system

8

• President set up clear goals on reforming health sector • Signed Associate Agreement and further integration in

EU requires reforms, including on health, and harmonization of regulatory environment

Who can support the Government?

How Vision 2020 can contribute to health reform?

9

Harmonized System to Approve Clinical ResearchCT regulation and tax environment is attractive for a investment in all stages of CT

Efficient and Predictable Regulatory SystemRegulatory system ensures fast and predictable drug registrationRegulation provides IP rights safeguards, and allows delivering up-to-date information to HCPs

Balanced and Sufficiently Financed Reimbursement SystemPricing and reimbursement system values biopharmaceutical innovation and covers significant proportion of the population

Sufficient Healthcare FinancingSufficient level of healthcare financing with effective payment and co-payment mechanisms

Efficient Healthcare ServicesHigh quality and standardized healthcare services based on the real need of the population

Confident and Informed PatientsTransparent and easy access to necessary treatment and trust to the public healthcare

Healthcare System Pharmaceutical Industry

Key Vision 2020 Objective: Provide the Roadmap how to Create

Effective Healthcare System with Easy and Transparent Access to Breakthrough Treatment

Expected benefits

10

Improving the competitiveness of Ukraine for getting more FDI from the innovative pharmaceutical sector could be an over-arching aim

Understanding of Key Areas for

Improvement

Increased Efficiency of the

Whole Healthcare

System

Actionable Steps

for Improvement

Transparent Access to

Healthcare Services

Improved Access to the

Innovative Drugs

Trust in the Ukrainian Healthcare

System

• Complete picture of the areas for improvement in the healthcare and pharmaceutical industries regulations based on the internationally recognized best practices

• Up-to-date approaches to manage costs, allow efficient financing and deliver required healthcare services for the vast majority of patients

• Actionable steps for regulations improvement

• Overview of the ways how to improve patients’ access to the required services, how to make it transparent and predictable

• Additional ways to finance and deliver up-to-date medicines to patients

• Impetus to increased trust in the healthcare system from patients based on the availability of transparent and easy access to innovative treatment methods and medicines

Benefits to the Government

Benefits to Patients

11

How the report was done: methodology

Methodology consists of 5 different and complementary work streams:

1. Pharmaceutical industry and healthcare system assessmentAnalysis of the pharmaceutical industry and healthcare system in Ukraine – current status, assets and trends.2. Regulatory landscape analysisBiopharmaceutical Competitiveness Index survey (in cooperation with Pugatch Consilium Ltd.) to identify key areas for improvement in the Ukrainian healthcare and pharma regulation that affect innovation and investment.3. Benchmark analysisInternational comparison of the position of Ukraine vs. international best practices to identify key areas for improvement in policies and regulation;Analysis of the international best practice examples in specific areas of regulation and identification of the rationale for improvement.4. Strategic roadmap developmentDetailed recommendations and road maps to close gaps in areas for improvement and leverage best practice.5. Stakeholder engagementInterviews and workshops with the government authorities, academia, pharmaceutical and healthcare experts.

Healthcare reforms in Poland, Turkey, Latvia and Czech Republic included similar initiatives across all of the healthcare system elements, however the healthcare financing schemes vary across the countries

Source: WHO’s Health Systems in Transition12

Payers

Providers

Healthcare Reform Content:National Health Insurance

Healthcare Reform Content:Pluralistic Model

Patients

Suppliers

1

2

3

4

• Patient Education• Update of the immunization programs• Introduction of patient right to choose physician / medical institution

• Introduction of the mandatory national insurance program with universal coverage

• Increase in private healthcare financing through introduction of mandatory fees and co-payment for medical services

• Separation of providers and payers of healthcare services• Shift to the activity-based payment models: fee-for-service in out-patient segment and DRG-system in in-

patient• Introduction of prescription drug reimbursement

• Reform of medical education• Optimization of the number and composition and gradual privatization of hospitals• Optimization of the number and composition of medical staff and shift to the private labor regulation

and self-employment of the individual practitioners• Focus on the primary care development• Creation of the health information system

• Harmonization of pharmaceutical market regulation with EU

Healthcare Reform Content:Socialized Health Insurance

• Universal health insurance provided by a number of health insurance funds

One of the best practices of the realization of strategic programs in pharmaceutical industry with the intensive collaboration between the government and the industry could be Singapore and Ireland that demonstrate impressive investment results

Source: Jones Lang LaSalle; World Bank; PwC analysis

13

1313141517192327

455053

112

0

20

40

60

80

100

120 4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

Chin

a

0.2%

Irela

nd

3.1%

USA

0.1% 0.1%

Spai

n

0.2%

Fran

ce

0.1%G

erm

any

0.1%

Sing

apor

e

3.8%USD B

Russ

ia

0.1%

Braz

il

Cana

daUK

Italy

% in GDP

Foreign direct investment (FDI) attracted in the pharmaceutical sector in 2003-2010

FDI in 2003 - 2010, USD BFDI in 2003 - 2010, share in GDP, %

More than 70% of global FDI in the pharmaceutical sector

Leaders of the FDI volumes attracted in the pharmaceutical sector, given the size of the economy

Increase in the life expectancy in the selected CEE countries that went through the health system reforms

6967

716969

7372

7373 74747575

76777778

80

60

65

70

75

80

+5

Slovenia Romania

Life

Expe

ctan

cy a

t Birt

h, y

ears

+4

Croatia Hungary

+7

+4

+5

LatviaPoland

+5

+7+6

Czech Republic

Estonia

+7

Lithuania

Pre-reform state 2011

Source: World BankComparison of the current government plans on the healthcare reform in Ukraine with the common elements of the reforms based on the CEE countries example

14

Contribution of new drugs to life expectancy: OECD

15

Scientific Capabilities & Infrastructure

ClinicalEnvironment

Manufacturing & Logistics

Regulatory Framework

HealthcareFinancing

Effective MarketAccess Activities

Overall Market Conditions

6.49.5

7.9

7.8

6.0

8.0

7.0

Ukraine's Score 2013 Series2

However, the market in Ukraine is not very lucrative for international investment: there are significant opportunities for improvement across the whole value chain

Source: Pugatch Consilium, PwC

16

BCI Survey Overall Score, 2012-13

Morocco

Algeria 53.9

Ukraine 2013

Turkey 55.0

55.8

Saudi Arabia 57.3

Russia

Israel 70.0

Norway 71.4

Sweden 74.9

Canada 75.3

US 75.9

Switzerland 77.6

59.7

China 59.8

Greece 62.8

53.1

Lithuania 64.7

South Africa 64.9

UAE 65.6

Argentina 66.6

India 67.3

Poland 69.0

Denmark 83.2

Strongly competitive

Reasonably competitive

Limited ability to compete

Struggling to compete

Ukraine BCI survey scores by section, 2013 (min 3.5, max 14.0)

Number of innovative drugs registered in Ukraine is still very low compared to the EU

17

369

-49%

727

192

-61%

488 67

18

-73%

44

-34%

29 7

29

-76% -72%

10

36EU

Ukraine

Total,Brand Names

Total,INNs

Orphan Diseases

Anti-viral (AIDS, Hepatitis C) Oncology

BloodDiseases

29

-55%

65

CardiovascularDiseases

Number of drugs registered in Ukraine vs. EU by type of drugs, 2013

Source: State Administration of Ukraine on Medicinal Products

Expected health reform results

18The twin objectives of the document are to provide a Vision for how Ukraine can develop a strong pharmaceutical sector through attraction of foreign direct investment and improve the health of population through patient access to efficient medications.

Import-dependent Generic-oriented Pharma Industry

Pharma Industry with Attractive Innovation Environment and Access to

Breakthrough Drugs

Current State Vision 2020

Attractive Conditions for CTsCT regulationand tax environment is attractive for a investments in all stages of CT

Balanced and Sufficiently Financed Reimbursement SystemPricing and reimbursement system values biopharmaceutical innovation and covers significant proportion of the Ukrainian population

Efficient and Transparent Market Access for New Health Technologies Regulation guarantees IP rights safeguard during the launch and marketing of new drugs and ensure the knowledge on their use is disseminated fast among HCPs

Uncompetitive Clinical Trials (CT) EnvironmentDelays in the CT authorization and cumbersome regulatory procedures limit attractiveness of the country for CT conduct

Need to Increase Population Coverage by MedicinesInsufficient options of healthcare financing and access to new drugs

Restrained Market Access for Innovative Health TechnologiesCurrent IP rights regulation and CME system limit the opportunity to launch and market new molecules effectively

Inefficient Drug Registration SystemDelays in the drug registration process and gaps in the regulation limit adoption of new molecules and investment attractiveness of the country

Efficient and Transparent Drug Registration SystemFast track for approval of new molecules and fully harmonized regulation

19

To address current issues, the Vision 2020 initiatives suggest roadmap of changes considering the best international experience

• Enforce education of the specialists attracted as experts

• Introduce incentives for CTs’ sponsors

• Increase number of CTs facilities that are compliant with legislation requirements

• Simplify procedure to import/export CTs equipment

• Recognize GMP certificate issued by PIC/S• Introduce accelerated procedure of marketing

authorization for EU-approved innovative drugs

• Further development of the legal framework on biosimilars evaluation

• Develop a unified positive drug reimbursement list• Develop the rules for INN / brand name prescription• Review existing system of maximum retail and

wholesale mark-ups• Introduce separate procedures for pricing of innovative

drugs and generics / biosimilars• Ensure sufficient financing of the reimbursement

programs• Introduce risk-sharing agreements and differentiated

patient co-payment schemes

• Develop the national health insurance system • Introduce obligatory publication of the information on

drug availability

• Develop hospital-based waiting lists• Develop the hospital drug formulary system• Introduce regulations to ensure drug interchangeability

• Review regulatory data protection periods• Develop effective mechanism to enforce patent rights

protection

• Develop procedure for preliminary injunctions against infringements

• Specify grounds for compulsory licencing

• Review the amount and frequency of CME required• Ensure constant evaluation of CME programs

• Ensure efficient participation of business in CME• Develop online educational programs

Clinical Trial Environment

Drug Registration

System

Pricing & Reimbursement

System

Intellectual Property Rights

Hospital Drug Procurement

Continuing Medical

Education

Key Vision 2020 Recommendations

Conclusions:

20

Recommendations offer a pathway to a globally-competitive innovative pharmaceutical industry in Ukraine, improvement of the health of the Ukrainian citizens and increase in the welfare of the country.

Using the Vision 2020 and its recommendation as a platform for health reforms in Ukraine.

Providing of experts and other support to the work of the Strategic Group on the health reforms.

We propose: