Transcript Orphan drug pricing

How Do Pharmaceutical Companies
Price Drugs?
PDIG Summer Symposium
Coventry, June 5th, 2008
Donald Macarthur
Global Pharmaceutical Business Analyst
Agenda
•
UK in an international context
•
P&R strategy development for new drug
•
Examples with orphan drugs
Donald Macarthur
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Changing Paradigm
Old paradigm
Registration approval
“the race is finished”
Donald Macarthur
New Paradigm
New Hurdles:
• Safety, Quality, Efficacy
…..and……
• Cost-effectiveness
• Affordability
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Marketing Approval vs P&R Approval
Key Feature
Registration
P&R
Basis
Science
Economics/politics
Transparency
Good
Poor
Speed
Accelerating
Slowing down
National differences
Lessening
Little change
Pre-submission dialogue
Good
Rare
Guideline documents
Good
Poor
Appeal mechanism
Well-defined
Poor
Attitude to NCE
Advance in treatment
Budget buster
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What is so special about price?
UK offers free pricing to all new molecular entities and automatic
reimbursement from launch, but also…..
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Profit control (PPRS)
Periodic across-the-board price cuts
Slow uptake of new drugs/’postcode prescribing’
Cost-effectiveness demands (NICE/SMC/AWMSG)
Cash limited PCT budgets/indicative GP budgets
Very high generic penetration
High parallel import penetration
Impact of devolution
Powerful, vertically-integrated chains
PbR in England
Wholesale margin under review
Pharmacy clawback
Volatility with generic reimbursement
Inequitable and illogical prescription charge system
Encouragement given to POM-to-P switches
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UK price in important for pharma industry
UK represents less than 4% of world demand for
prescription medicines, but…
…other countries that set prices with reference to those
in the UK (including Japan, France, Italy, Canada,
Belgium, Switzerland, Poland, Netherlands, Finland,
Hungary, Norway and Ireland) together account for
25%
…but it is not all-important
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Aims of European P&R strategy
• Access to reimbursement
– full or maximum reimbursement
– reasonable co-payment
• At an optimal price
– revenue optimising price
– trade-off price and volume
• Without undue delays
– minimise administrative delays in getting P&R approval
– reasonable uptake
• Or excessive restrictions
– patients/indications according to MA
– avoid step therapy
– funding made available
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Success is based on contribution of P&R strategy to
revenue optimisation
• Revenue = price x volume
• Focus on EU-5 (Germany, France, UK, Italy & Spain) as
account for >70% of total European sales
• Optimum approach for each country may require
different trade-offs, and different stakeholders are key to
success
Donald Macarthur
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Dual Perspective on Price
Market
Perspective
• Perceived value to customer in
context of alternatives
• Places downward pressure on price
“what the market will bear”
Sets upper limit price achievable
VIABLE PRICE
RANGE
Sets lower limit price required
Company
Perspective
• Reasonable gross margin and
ROI
• Places upward pressure on price
“what the company needs”
• A viable price range will balance both the market and company needs
and perspectives
• The market perspective is generally the starting point for developing
pricing strategy…
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One big advantage of UK – No delays to market
(P&R timelines [days], Feb 2007 data)
Donald Macarthur
Czech Republic
517
Belgium
447
Italy
431
France
390
Hungary
338
Greece
281
Spain
271
Portugal
235
Netherlands
210
Sweden
156
Switzerland
148
Ireland
104
Germany
0
UK
0
US
0
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Agenda
•
UK in an international context
•
P&R strategy development for new drug
•
Examples with orphan drugs
Donald Macarthur
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Three core analytical constructs form the
basis of P&R strategy development
Understanding the
relationship between
the offering and
perceived value
Understanding the
“buying system”
Value
Based
Pricing
Purchase
Decision
Analysis
Global
Optimisation
Understanding the
tradeoffs within and across
products and markets
Donald Macarthur
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Core analytical process
LOOP BACK AND REVISE IF NECESSARY
2. Reference
Analysis
1. Product
profile and
positioning
options
4. Value based
price
target/range
3. Differential
Value
Analysis
5.Assess Role
of purchase
decision
makers in
enabling
market
access (MA)
6.Assess MA
barriers &
strategies
to
overcome
7.Identify and
assess
cross
market
impacts
8.Price
targets/
policy,
rationale
and support
strategy
needs
Value Based Pricing Estimation
Purchase Decision
Analysis
Global Optimisation
Proactively determines
a rational, value based
price target or range
Pressure tests likely
“system reaction” to
price
Optimizes P&R strategy
across markets
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Value based pricing
Understanding the
relationship between
the offering and
perceived value
Value
Based
Pricing
Purchase
Decision
Analysis
Global
Optimisation
Donald Macarthur
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Value based pricing
The perceived value of a product to a customer is based
on….
Differential
Value
(Value of the
differentiation)
V
Perceived
Value
Donald Macarthur
D
V = R +/- D
Reference
Value
(Price of the
Best Alternative)
R
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Value based pricing and pharma
challenges
Pharma challenges..…
V = R +/- D
• What is your product?
• “V” differs depending on indication, positioning,
target patients
• What is “R”?
Negative
Differentiation
Value
D
Positive
Differentiation
Value
• What if you have a breakthrough product?
• What about generics?
• What drives “D”?
• How do you measure it?
R
Reference
Price
Donald Macarthur
V
Perceived
Value
• How do you prove it?
• Value to whom? Who is the customer?
• Payer? Prescriber? Pharmacist? Patient? Who
really counts?
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Value across segments
ILLUSTRATION
Smaller patient segments
may yield higher economic
value and higher
revenues/profits
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Understanding and framing the reference
“R” is critical
Negative
Differentiation
Value
D
R
Positive
Differentiation
Value
Reference
Price
The Reference:
• is usually the current “standard of care”…
• may not be a drug
• may be old and generic, or go generic before
we get to market
• may be indirect – an analogue
• may vary across countries
• may still be in development in a competitor’s
pipeline
• is dynamic and changes with competitive or
environmental developments
There
always is a
reference!
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Differential value - “D”
• Value of differentiating attributes must be:
• Relevant to the customer – especially the payer
Negative
Differentiation
Value
D
Positive
Differentiation
Value
Reference
Price
R
• Payer perspective should be incorporated prior to
finalizing Phase 3 endpoints
• Robustly supported by data – both clinical and,
increasingly, outcomes and economic
• Adopting the “4th hurdle” requirement is the
payers’ way of formalizing and quantifying their
computation of differential value
• Effectively communicated to customers  timely
preparation of the “payer market” is increasingly
important
• Particularly important where large drug budget
impact anticipated
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Purchase Decision Analysis
Understanding the
“buying system”
Value
Based
Pricing
Purchase
Decision
Analysis
Global
Optimisation
Donald Macarthur
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Purchase Decision Analysis
Payer
Prescriber
Patient
• Understanding the system/identifying the stakeholders
• What are their decision criteria?
• How do they influence each other?
• How does this product proposition and target price map against those
criteria?  what will be the system reaction to our product?
• What hurdles might need to be overcome?
• What leverage points in the system do we have?
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Affordability/budget impact is increasingly
a payer barrier
The 2 main payer concerns are:
1. Is it worth it? (value for money)
2. Can we afford it? (budget impact)
 Requires careful
consideration of options and
trade-offs:
Potential
Budget
Impact
Available
Budget
 Price vs patient access
(consideration of
subpopulations)
 Strategies to facilitate
increase in budget
headroom
 Requires early assessment
and build into development
& commercial strategy
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Global Optimization
Value
Based
Pricing
Purchase
Decision
Analysis
Global
Optimization
Understanding the
tradeoffs within and across
products and markets
Donald Macarthur
Page 23
Global optimization
• Global optimization across different “entities”  a key part of
pharma pricing strategy development:
• Geographic price optimization – across countries, managing
• Price referencing
• Parallel trade
• Indication price optimization – same molecule, >1 indication
• Dose price optimization – same formulation, different doses
• Formulation price optimization – new formulations, line extensions
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Many countries refer to prices for same product
in other market
UAE
Canada
Western
Europe
USA
Turkey
Korea
Egypt
Pakistan
Mexico
Saudi
Arabia
China
Taiwan
India
Hong Kong
Philippines
Key to
Reference Types
Periodic Formal
Japan
Kenya
Thailand
Brazil
Sri Lanka
Periodic Informal
Bangladesh
Australia
Launch only formal
South
Africa
Launch only Informal
Informal reimb/mkt
access
Donald Macarthur
Singapore
New
Zealand
Source Country
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Loss of revenue from PIs
• Price fluctuations and
favourable incentives have
enabled PIs to flourish in 2007
• Value at MSP €4.7 bn (+12.7%
vs +3.6% for total market)
• 9.2% share of main importing
markets
• 3.3% share of EU-27
(including Norway, Finland,
Belgium, Ireland, Austria,
Poland, France, etc.)
Source: IMS Health
Donald Macarthur
country
PI market
share %
UK
16 (€1.3 bn)
3
8 (€1.8 bn)
28
Germany
Growth
(%)
Netherlands
15
10
Sweden
12
9
Denmark
12
4
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Response: Price management
• Launch sequence (high priced countries first)
• Price corridor or more usually target price with ‘hard’ floor and ‘soft’
ceiling (differentiate prices as much as possible, harmonise prices
as much as necessary)
ILLUSTRATION:
Ex Manufacturer Price Corridor for Product X in €:
24
20
€ 16.0 16
European ex
manufacturer price
corridor:
€ 14.4
12
France
Donald Macarthur
Germany
Italy
Spain
UK
Page 27
Agenda
•
UK in an international context
•
P&R strategy development for new drug
•
Examples with orphan drugs
Donald Macarthur
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Orphan drugs: Concerns by payers
•
Little negotiating power
•
Surge in orphan drug R&D
•
Limited data, small trials, short in comparison to natural history of disease.
no comparative or dose-finding studies, surrogate end points.
Prevalence of orphan condition expands when treatment available
Genomics may disaggregate current common diseases into many
genetically defined distinct conditions
Need for life-long treatment. Need for new medical education
Non-orphan indications found for orphan drugs
Issues of equity
….orphan drug costs might reach 6-8% of pharmaceutical budgets in EU by
2010 (Alcimed, Study on Orphan Drugs for European Commission, 2004)
•
•
•
•
•
–
–
–
–
high unmet medical need
no suitable references
medical benefit still under investigation
pressure from rare disease KOLs and patient groups
– by established pharma & biotech companies and new entrants
– 23% of MA applications to EMEA in 2006 were for orphan drugs
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Orphan drug pricing: Views of the Italian authority
‘In national negotiation, orphan drugs are always
handled separately. The most critical point is that while
standard drug pricing procedures are not applicable to
orphan drugs, other methods are unavailable; as a
result, the decision on the price seems to be based on
no rules at all.’
Andrea Messori, AIFA
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Donald Macarthur
UK
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Fr
an
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G
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G
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Approx. MSP Glivec 100mg x 60, March 2008
€
1,600
1,400
1,200
1,000
800
600
400
200
0
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UK has lowest prices for orphan drugs among
major EU countries
• Total of 44 EU-designated orphan drugs had received
marketing authorisation from EMEA by end-2007
• 34 identified on UK market in March 2008 using publiclyavailable data sources
• 28 of these 34 had the lowest MSP among EU-5
countries
• Not entirely due to £’s weakness against €
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Conclusions: Factors critical to a pharmaceutical
company’s future performance
• ‘Price’ is just one aspect:
 Speed of market access (time from MA to launch)
 Speed of market penetration (market share growth in
major markets over first five years)
 Premium pricing (price realised versus therapeutic
class comparator)
 Price consistency (narrow official price band across
Europe and other relevant markets)
Donald Macarthur
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Thanks for you attention, any questions please?
[email protected]
www.justpharmareports.com
phone +44 (0)1444 811888
P&R strategy development slides reproduced with
permission from PriceSpective Ltd
(www.pricespective.com)
Donald Macarthur
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