9HEpATITIS c cluSTER oF InnovATIon TRIggERS nEw THInkIng on FInAncIng oF cuRES

Specifically, low diagnosis rates (50% of infected patients) and the social stigma associated with HCV prevents many of those infected from seeking treatment. Since the previous standard of care (pegylated interferon and ribavirin) was largely associated with safety and tolerability concerns, relatively low efficacy30-40% SVR compared to over 70% in newer regimens and a year-long treatment course, physicians frequently warehoused patients or advised them to delay treatment in expectation of better treatment options or the worsening of their disease.11 The impact on the number of treated patients has been substantial and the number of annualized new patients (using new to brand prescriptions as a proxy for new patients) is now five time higher than prior to the launch of the most recent new therapies in late 2013 (see Figure 1). This clearly indicates that in addition to the most severely affected patients, warehoused patients and possibly less severe patients are now seeking and receiving care.13,14

Source: IMS NPA Market Dynamics, September 2014

Tota

l new

to b

rand

pre

scrip

tions

100,000

80,000

60,000

40,000

20,000

52-week rolling period

May 2

011

Sep 2

011

June 2

011

Nov 2

011

May 2

012

Jul 20

12

Sep 2

012

Nov 2

012

Jan 20

13

May 2

013

Mar 2

013

Jul 20

13

Sep 2

013

Nov 2

013

Jan20

14

Mar 2

014

May 2

014

Jul 20

14

Sep 2

014

Mar 2

012

Jan 20

12

telaprevir & boceprevir52 weeks post-launch

simeprevir & sofosbuvir

launches

Total NBRx 39 weeks

post-launch105,579

telaprevir & boceprevirlaunched in May 2011

Harbingers of change in healthcare. Report by the IMS Institute for Healthcare Informatics.

Figure 1: Total new to brand prescriptions (nBRx) for telaprevir, boceprevir, simeprevir and sofosbuvir

15

Harbingers of Change in Healthcare. Report by the IMS Institute of Healthcare Informatics.

15BREAkTHRougH vAccInES BEcoME AvAIlABlE

The renewed R&D focus in the first decade of the 21st century, prompted by philanthropy, has begun to deliver results, with not just new therapies for a range of neglected diseases, but the first vaccines for malaria and dengue fever. Multiple vaccines for malaria, schistosomiasis, leishmaniasis, dengue fever, cholera and typhoid are also in the pipeline as well as new drug molecules and drugs with novel delivery mechanisms for the treatment of malaria. Cipargamin is one such new molecule not based on quinine or artemisinin. Produced by Novartis and Medicines for Malaria Ventures (MMV) and currently in phase II clinical trials, it demonstrated median parasite clearance of just 12 hours in adult patients with P. falciparum and P. vivax infections.5

Driving these innovations are collaborations formed among pharmaceutical manufacturers, governments, private charities (e.g. Bill and Melinda Gates Foundation), international groups (e.g. WHO, Global Fund, Centers for Disease Control and Prevention [CDC], Medicines for Malaria Ventures, PATH Malaria Vaccine Initiative, GAVI Alliance) and many research institutions.

Figure 1: proportion of neglected tropical diseases

Source: Institute for Health Metrics and Evaluation 2014

22 diseases were selected consisting of NTDs, malaria, diarrea, cholera and diptheria due to amount of burden in Africa relative to other continents. 3

Malaria Diarrhea Typhoid Cholera Leishmaniasis Schistosomiasis Others

Perc

enta

ge o

f tot

al D

ALY

s

Global DALYs Africa DALYs

100%

80%

60%

40%

20%

0%

Harbingers of change in healthcare. Report by the IMS Institute for Healthcare Informatics.

16

Harbingers of Change in Healthcare. Report by the IMS Institute of Healthcare Informatics.

16BREAkTHRougH vAccInES BEcoME AvAIlABlE

Together, these collaborations have nearly doubled annual R&D funding for malaria from $320 million in 2004 to $610 million in 2011, with the Gates Foundation, U.S. National Institutes of Health, the pharmaceutical industry, european Commission and U.S. Department of Defense as the top funders.6 In the five-year period from 2007 through 2011, total R&D funding for malaria was $2.65 billion, with 38% ($1 billion) going to drugs, 28% ($742 million) going to vaccines and 28% ($745 million) going to basic research.7

The Implications:While the economic growth lost due to these diseases is immeasurable, some of the

exhibit 1: Clinical trial phase of drug candidates for selected diseases

Phase I pHASE II pHASE III

Diseases Total Candidates vaccinesTotal

Candidates vaccinesTotal

Candidates vaccines

MalariaCholeraSchistosomiasisLeishmaniasisTyphoidDengue

19 3 1 4 0 4

16 3 1 3 0 4

15 3 2 1 3 3

8 3 1 0 3 3

7 1 0 4 0 1

1 1 0 3 0 1

Total 31 27 27 18 13 6

Source: IMS LifeCycle, R&D Focus. August 2014. Vaccines is the number of vaccines in the pipeline and contributes to total candidates.

costs and economic effects from these diseases can be measured. The CDC estimates that malaria results in direct costs of $12 billion a year.7 This translates to an approximate share of $7.2 billion a year in Africa (60% of malaria DALYs occur in Africa; see Figure 1). Some of the costs associated with malaria and NTDs for the individual include travel to the hospital, medicines, absence from work and school, hospital admission and costs of buying preventive measures such as insecticides and nets. Governments also experience costs from lost tourism, public health intervention, purchase of drugs and hospital admissions due to complications from these diseases when left untreated.8 An individual living in an endemic region may experience indefinitely repeating acute episodes due to chronic or repeated infection, which results in repeated costs for the individual and the government.

Harbingers of change in healthcare. Report by the IMS Institute for Healthcare Informatics.

20

Harbingers of change in healthcare. Report by the IMS Institute for Healthcare Informatics.

BIologIcS REAcH pATIEnTS In pHARMERgIng counTRIES

Figure 1: use of biologics

Source: IMS MIDAS 2014, WHOCCC ATC/DDD Index 2014

Proportion of pharmerging to developedPharmerging countriesDeveloped countries

DD

D in

bill

ions

Prop

ortio

n of

pha

rmer

ging

to d

evel

oped

0%

20%

40%

60%

80%

100%

1

0

2

3

4

5

6

7

8

2003 2005 2007 2009 2011 2013

The largest drivers of biologic usage in both developed and pharmerging markets are insulins, and they consist mostly of original biologics. Pharmerging markets are driven by therapy areas that have nearly complete non-original usage. Therapies such as monoclonal antibodies for cancer and antitumor necrosis factor (TNFs) for autoimmune diseases, where there are not yet non-originals in great numbers even in pharmerging markets, contribute to the overall usage of these molecules being much lower than in developed markets. International variations in disease prevalence also drive differences in biologic usage; for example, anti-TNF usage is lower in pharmerging markets, as they have lower prevalence of rheumatoid arthritis, Crohns disease, ulcerative colitis and psoriasis. Another driver of biologic usage in pharmerging markets has been the launch of non-originals preceding the originals in some countries. The level of non-original usage in some countries is extremely high for the molecules where they are available, but there are currently only non-original products approved through biosimilar regulatory pathways for four biologic molecules (erythropoietin alfa, filgrastim, somatropin and infliximab). While the level of non-original competition in developed markets is quite high, particularly in europe, the lack of approved biosimilars in the U.S. for two of these molecules (erythropoietin alfa and infliximab), and the limited number of molecules with expired patents and non-original competition, means that most biologics in developed markets will continue to be original products for most of the next decade.

MEDIcInE SpEnDIng gRowTH RETuRnS To DEvElopED counTRIES 30

The change:Drivers of growth in spending on medicines are changing as the impact of patent expiries recedes, and volume and price growthsupported by demographics and epidemiology and, to a lesser extent, innovationdrives higher levels of overall growth. The historic low growth between 2007-2013 was driven predominately by the cost efficiencies derived from the genericization of a generation of products from the late 1990s, and the policies introduced to maximize those savings and, to a lesser extent, the economic crisis and policy responses to it. In an analysis of the cost efficiency of markets, defined as the extent to which markets reduce spending post-patent expiry compared to pre-expiry pricing levels, every developed market has dramatically increased its savings due to cost efficiency in the past decade, many associated with dramatic policy shifts to maximize those savings.2 These savings coincided with exceptionally high numbers of patent expiries and therefore amplified the cost savings in the recent past. It remains to be seen whether further savings can be derived from these approaches, but the reduced scale of patent expiries in the coming five years will no doubt reduce the return on those efforts (see Figure 1).3

Source: IMS MIDAS, December 2013

2008-2010 2011-2013

Perc

enta

ge o

f gen

eric

cos

t e

cien

cy

55% 59%

75%

36% 40%

44%

21% 17% 17%

58% 64%

76%

54% 49%

57%

29%

50%

34%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Germany U.K. U.S. Canada France Italy Japan Spain South Korea

Highest cost eciency and little recent change Substantial change in generic cost eciency in the last three years

Figure1: Developed market evolution of generic cost efficiency

Harbingers of change in healthcare. Report by the IMS Institute for Healthcare Informatics.

Harbingers of Change in Healthcare. Report by the IMS Institute of Healthcare Informatics.

MEDIcInE SpEnDIng gRowTH RETuRnS To DEvElopED counTRIES 31

Developed markets medicine spending grew in aggregate at or below 5% every year since 2007, and reached its lowest point in 2012, when growth was near zero (see Figure 2).

While there was significant variation between developed countries growth during these periods, they share a consistent trajectory and all have recovered from the lowest growth of the so-called patent cliff. It is notable that some countries are generating higher growth sooner, particularly the U.S., Germany and the U.K., which all have year-to-date (June 2014) growth in excess of 5%, while other developed markets continue with lower (but accelerating) growth rates.

Figure 2: Developed market spending growth 2004-yTD June 2014

Source: IMS MIDAS, June 2014

% g

row

th c

onst

US$

-5

0

5

10

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTDJune 2014

High recent growth, average 8.6% (U.S., Germany, U.K.) Moderate recent growth, average 2.4% (Canada, France, Italy, Japan, Spain, South Korea)

Harbingers of change in healthcare. Report by the IMS Institute for Healthcare Informatics.

cHInA looSEnS pRIcE cApS 49

The shortages faced in China indicate that price caps intended to minimize profit can actually eliminate incentives for production completely. Indeed, accepted economic theory dictates that the regulation of prices can distort markets, prevent them from acting efficiently, lead to shortages or deteriorating quality and dampen innovation. Although China has come to understand that price caps can lead to such distortions and are now carefully correcting for these, other countries are in the process of initiating price caps or expanding them.

While all countries face the issue of how to secure affordability of essential medicines for their population, these countries must be careful that they do not repeat Chinas mistake of eliminating the options they intended to secure.

Other types of price regulation exist in other countries (see exhibit 2), which may similarly create unsustainable situations for manufacturers or cause them to reassess maintaining supply or making new therapeutic options available. As countries work to ensure the value and affordability of medicines, it will be important that a sustainable price, negotiated among stakeholders, can also be attained.

Exhibit 2: countries increasing pricing restrictions in 2014

Source: IMS PharmaQuery, August 2014. Shaded countries indicate price controls - data as of Q2/2013.*Ecaudorian government introduces price controls for essential medicines. HIS. 2014 Jul 21.

Available from: http://www.ihs.com/products/global-insight/industry-economic-report.aspx?ID=1065991469.

CanadaPrice caps on generics including

rosuvastatin, simvastatin,pantoprazole and citalopram

SwedenPrice cuts on o-patent

products with nocompetition January 2014

became law July 2014

IrelandExpansion of

reference pricingAugust 2014

SpainRevised reference

price system July 2014Mexico

Internal reference pricingproposed April 2014 andapproved by lower house

EcuadorExpandingprice caps* BrazilRetail price cuts

July 2014

ArgentinaAnnual limits on drug price

increases February 2014

HungaryCuts due to

reference pricingand tenders

January & April 2014

IndiaExpands price caps

108 medicinesincluding diabetesand cardiac drugs

July 2014

JapanReimbursement price cuts

April 2014

GreeceNew price caps andcuts for o-patent

originals and genericsfollowing patent expiry

January & June 2014

Harbingers of change in healthcare. Report by the IMS Institute for Healthcare Informatics.