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High costs of new drugs

High costs of new drugs. Carin A. Uyl-de Groot, PhD Professor of health technology assessment iBMG/iMTA, Erasmus University Rotterdam Uyl@bmg.eur.nl Thanks to Maureen Rutten and Marc Koopmanschap. Content. Introduction Chronology of drug innovation The life cycle of a drug

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High costs of new drugs

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  1. High costs of new drugs Carin A. Uyl-de Groot, PhD Professor of health technology assessment iBMG/iMTA, Erasmus University Rotterdam Uyl@bmg.eur.nl Thanks to Maureen Rutten and Marc Koopmanschap

  2. Content • Introduction • Chronology of drug innovation • The life cycle of a drug • Pricing of new drugs • Challenges facing several stakeholders • Reimbursement

  3. Cancer http://www.youtube.com/watch?v=LEpTTolebqo

  4. Examples prices of new drugs Pompe disease: Myozyme: - Cost: Euro 500,000 - Outcome: difficult to assess - ICER: around 1 mln Melanoma: Vemurafenib: • Progression free survival: 5.3 vs 1.6 months mnt months • Cost: 8.471 euro per month Melanoma: Ipilimumab: • 10-20% patients benefit • Cost: € 84.000,- per patient • Budget impact: €20-40 mln

  5. System objectives Sustainability Equity Quality of care 6 Policy goals in health care Goal: Ensuring affordable and equitable access for (all) patients to effective medicinces in a sustainable manner

  6. Policy goals, criteria and HTA aligned?

  7. Cost-effectiveness vs drug reimbursement • many EU countries: CE a formal reimbursement criterium, BUT: no country (except UK) has strict & transparant threshold (range) for acceptable cost per QALY NL 2005-11: only 30% (=19/63) of drugs with positive 1B decisions had pharmacoeconomic evidence!! (Franken et al 2012) • Many exemptions: 24 orphan drugs, 7 HIV drugs (Scotland stricter on PE evidence) • 4 “insufficiently founded” evaluations got a positive decision

  8. INTEREST HOUSING DEFENSE ROADS EDUCATION HEALTH CARE SECURITY EMPLOYMENT DEVELOPMENT AID ENVIRONMENT

  9. Development drug expenditure (in mln), 2002-2009 Expensive drugs Other drugs 10

  10. Question: Why are the prices of new drugs high? • Development process • Succes rate • Uptake of innovation • Reimbursement

  11. Development phase: a long and winding road to registration and Medical Devices and Technologies Pfizer -- http://www.pfizer.co.uk/pfizer_uk/navigation/research_frame.htm

  12. Development phaseFrom discovery to patient Patent application Acute toxicity Pharmacology Phase I clinical trials Chronic toxicity Registration and transparency Phase II Phase III Reimbursement Pharmacovigilance Price 1 medicinal product 0 5 years 10 years 15 years 20 years Patent expiry 10 years of research 2 to 3 years of administrative procedures Source: “Recherche & Vie”, LIM (AGIM)

  13. Life cycle of a drug development introduction growth decline maturity ↑ Sales Time → Ellery and Hansen, Pharmaceutical Lifecycle management, Wiley 2012

  14. Development phase: clinical trials (phase 1 to 3) in humans € €€

  15. Development phaseDiscovery and development of a successful drug YEARS 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 INTRODUCTION /REGISTRATION POST-MARKETING SURVEILLANCE Phase IV 1 CLINICAL TEST (HUMANS) Phase I to III DEVELOPMENT 2 2 - 5 5 - 10 PRECLINICAL TEST (ANIMALS) BASIC RESEARCH SYNTHESIS, EXAMINATION & SCREENING 3,000 – 10,000 QUANTITY OF SUBSTANCES

  16. Costs of development new molecular entity (NME) • Estimation: 1 billion euros Cost factor: • R&D (including failures): 17% • Manufacturing • Marketing and promotion: 23% • More is spent on marketing than on R&D

  17. Costs per clinical phase in percentage of total R&D, period 2000-2007

  18. Declining number of NME approved by FDA Source: www.fda.gov

  19. Introduction phaseDifferences in the uptake of innovation

  20. Growth phase • Slower rate of growth than typical industrial product • Switching patients to other drugs may be risky • Me-too’s or established drug classes are doing well • Promotion limited • Health authorities cautious about letting new drug be introduced initially to a broad population because of safety issues • More and more biologics that target multiple smaller indications, which are introduced successively over the life of a drug • Cost containment policies affecting supply, demand, price

  21. Growth phase: International Reference Pricing (IRP) is used in some form in most European countries IMS HEALTH Pharmaquery Sept 2012

  22. Growth in real per capita pharmaceutical expenditure, 2000-09 (or nearest year) OECD (2011), “Pharmaceutical expenditure”, in Health at a Glance 2011: OECD Indicators, OECD Publishing.

  23. Challenges • Pipeline NME drying • Cancer: need for more therapeutic value (not only end of life drugs) • Higher development costs • Increased regulatory requirements because of safety concerns • Tougher environment for pricing, reimbursement, listing • Increased competition • Earlier generic drugs • Poor image

  24. Tougher environment for pricing, reimbursement, listing Regulatory Quality Efficacy Safety Pricing, Reimbursement Comparative effectiveness in real world Cost-effectiveness (trial-based and model-based) Purchase, listing Budget impact analyses

  25. What is our “Product”? - Product Positioning • A molecule is not a product…..for price estimation purposes we must define its “positioning” • “Positioning” (here) = place in the treatment regimen Positioning variables …different implications for….. Line of therapy? Negative Differentiation Value Positive Differentiation Value D Target Patients? V Prevention or treatment? Reference Price R Perceived Value Monotherapy or combination?

  26. 2. Overlay global context and optimize 3. Implement and maintain a Global Pricing Strategy Optimization Modeling Individual Demand curves Cohesive Global Strategy • Global floor or corridor • Launch sequence • Price targets Cross Market Interactions Price Optimization across countries 1. Assess individual market price/demand dynamics US France Germany UK Canada etc

  27. Recent turbulence, turning point in NL? “CvZ to delist 2 expensive ultra-orphan drugs” (Pompe/Fabry, after 5 yrs conditional reimbursement) Fueled discussion (“finally….”) => • Ethical to stop treatment? • Ethical to value health monetarily? • Ethical to deny the scarcity of resources? • Better options to limit cost explosion? • Why are these orphan drugs so expensive? • Negotiate on prices with industry? 9/2012 CvZ, struggle-> advise “reimburse”, but not in regular benefit package…………

  28. Recent turbulence ultra orphans in NL Argument contra reimbursement: • Cost per QALY too high (up to 1 mln € per QALY) Argument pro: • For subgroup that benefits it is established treatment for several years (“acquired right on care”) Lesson: maybe conditional reimbursement of these orphan drugs 5 years ago was unwise?

  29. A proposal for ultra orphans in NL Say: WTP/QALY for normal drugs up to 80,000 € per QALY, Say: for ultra orphan drugs WTP 300,000 € per QALY For sub group that really benefits say a gain of 0.75 QALY per year Given max WTP/QALY -> max drug costs per year: = 225,000 € (as 225,000/0.75= 300,000). Message of reimbursement authorities to producers: “Don’t develop drugs with annual treatment costs of more than 225,000 €, we will not even allow conditional reimbursement”.

  30. Reimbursement (1) Coveragewithevidence NL: finalreimbursementdecisionafter 4 years, based on cost-effectiveness in dailypracticeandappropriate drug use (extended in 2013); • Quitecomfortable arrangement for producers: 4 years a high price (t=0-4, risk forpayer);

  31. Reimbursement (2) • Volume-price agreements (France ea) • sales < Y price P1; sales > Y lower price P2 Advantages: • less uncertainty on budget impact • industry can cover R & D costs (Price1*Volume1) Disadvantages: • does not address value for money • negotiations not transparant

  32. Reimbursement (3) • Contract : reimbursement depend on treatment success (outcomes based risk sharing, Pay for performance) • August 2012 CVZ omalizumab (severe asthma) • Advantages: • “no cure, no pay” => value for money • application on best patient sub groups • after contract new decision possible • Disadvantages: • transaction costs contract • clear outcome indicator crucial • cost of monitoring/registration

  33. Equal access: dynamics in treatments multiple myeloma (I)

  34. Equal access: non small cell lung cancer patients receiving 1st line Iressa or Tarceva (II) <25% 25% - 50% 50% - 75% >75%

  35. Thank you!

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