IMS Brogan Private Drug Plan Drug Cost Forecast Commissioned by Rx&D Canada s Research-Based Pharmaceutical Companies

Transcription

1 IMS Brogan Private Drug Plan Drug Cost Forecast Commissioned by Rx&D Canada s Research-Based Pharmaceutical Companies

2 Overview 1. Who are Rx&D and IMS Brogan? 2. Environment 3. Background 4. Forecast 5. Methodology 6. Forecast Limitations 7. Commentary 8. Questions and Discussion 2

3 Who are Rx&D and IMS Brogan? Rx&D Association of over 50 leading research-based pharmaceutical companies dedicated to improving the health of Canadians through the discovery and development of new medicines and vaccines IMS Brogan Largest pharmaceutical consulting firm in Canada and a business unit of IMS Health, the world s largest healthcare Information, services and technology company with operations in over 100 countries *Improving the Health of Canadians: the contribution of the innovative pharmaceutical industry. SECOR,

4 Environment Employers are faced with cost pressures and other challenges, e.g. an aging workforce, and a rapidly changing economy and business environment Concerned that: specialty and biologic medicines are a growing proportion of their plan costs private plan expenditures on new medicines might threaten the sustainability of private plans Some employees are becoming increasingly concerned about their coverage to treat chronic conditions 4

5 Background Rx&D commissioned IMS Brogan to develop an independent, objective, evidence-based forecast Purpose: to inform public discussion about future drug costs using transparent analysis Result: Forecast future costs by incorporating a variety of costs drivers and high/low scenarios High confidence in data quality, methodological rigor, reasonable assumptions, transparent model 5

6 Forecasting Challenges Many dynamics make it challenging to estimate future costs and predict the success of pharmaceutical pipeline products: Science of new products Uncertainty in clinical trial outcomes Unanticipated disease profile Patient profile Regulatory issues Pricing Utilization Government policy changes Business decisions of manufacturers Competitive landscape Patent life Economic environment 6

7 Why a Five Year Forecast? Last 5 years is best predictor of next 5 years Five-year forward looking forecasts are typical for most credible forecasts (i.e. governments, economic) IMS Market Prognosis (global and Canadian markets) also forecasts a 5-year period Five years is an actionable period for businesses, anything beyond is unpredictable 7

8 Forecast: What was Forecasted? Overall private market: ~70% of claims Drug cost = Ingredient cost + mark-up Eligible drug cost: after allowable drug cost/mark-up adjusted, before plan design (i.e. incl copayments) Utilization changes at therapeutic level Displacement of therapy by innovation Impact of generics Included Population demographics size/age Excluded Individual plan experience Other plan costs: plan advisor commissions, administration fees, trend factors, etc Dispensing fees (except for Quebec) Reimbursement (pay & submit) claims Total cost of new specialty medications in isolation 8

9 Forecast 9

10 IMS Brogan Private Drug Plan Drug Cost Forecast: Key Findings Scenario Compounded Annual Growth Rate (CAGR) 2017 Drug Costs* High scenario 2.8% $7.7 billion Low scenario 1.6% $7.3 billion *IMS Brogan data represents 70% of the private market drug claims * Drug cost = ingredient cost + markup 10

11 Methodology 11

12 Methodology 2 Forecast Events 1. Baseline forecast of Drug Costs ( ) a. Analysis of Historical Trends ( )* A 1 Generic Impact Event 2. Forecast Events ( ) a. Generic Impact Event B C New Drug Entry Event b. New Medicine Entry Event c. Aging Event Aging event * When year over year growth was measured, 2007 was referenced to measure the growth in

13 Baseline Forecast Developed baseline forecast for based on historical trends from Forecasts most appropriately done at therapeutic level to capture dynamics within each therapeutic class 16 therapeutic classes that represent 90% of private drug costs and other category representing 10% Classes segmented based on: share of private cost experienced notable growth classes of interest Analysis of brand-generic composition, and key chemicals within each class 13

14 Baseline Forecast Share of Private Drug Plan Drug Costs 2012 Cardiovascular Biologic Disease Modifiers Anti-Dep & Anti-Psych Gastrointestinal Anti-infectives Hormones Bronchopulmonary Other CNS Antidiabetic Analgesics Other Immunomod./Immuno Blood Form & Coag. Anticonvulsants Skin and mucous Antineoplastic Autonomic Agents Others 1% 3% 3% 3% 3% 4% 5% 5% 5% 5% 6% 7% 7% 8% 10% 10% 14% 0% 2% 4% 6% 8% 10% 12% 14% 16% Biologic Disease Modifiers class consists of products for rheumatoid arthritis, inflammatory bowel disease, and psoriasis Other Immunomodulating Agents/ Immunosuppressants includes MS therapies and other interesting/rare disease products Antineoplastic Agents includes cancer treatments Autonomic Agents includes products for Alzheimer's, Parkinson's disease and dementia Others includes ear nose and throat preparations, diabetes test strips, erectile dysfunction, vaccines, and vitamins 14

15 Drug Cost, Millions Historical Data and Baseline Forecast of Private Drug Plan Drug Cost $10,000 PDP Historical Data and Baseline Forecast, f 12.00% $9,000 $8,000 Historical Drug Cost Forecast Growth (Right Axis) 10.00% $7,000 $6,000 $5, % 6.00% CAGR: 5.3% $4,000 $3, % $2, % $1,000 $ f 2014f 2015f 2016f 2017f 0.00% Based on historical volumes with no adjustments for future market events (generics, new drugs, aging) 15

16 2 Forecast Events Forecast Events 16

17 Adjustment for Forecasted Events Key events anticipated to impact private plan drug costs beyond historical trends were identified and applied to the baseline to predict out to 2017 A. Generic Impact Event B. New Medicine Entry Event C. Aging Event 17

18 Generic Impact Event A 1 18

19 Generic Impact Event 1. Pricing policies on generic products 2. Savings for major brands anticipated to be genericized during forecast period Potential savings not considered Subsequent Entry Biologics (SEBs) (biosimilars) and genericization of major inhaler brands were excluded Uncertainty around when SEBs and generic version of inhalers will enter Canadian market 19

20 Generic Impact Event Two scenarios were considered: 1. High Scenario: Latest known generic pricing policy of provinces (2014) extends to 2015, 2016 and 2017 and assumes a national generic pricing ratio of 25% of brand name price 2. Low Scenario: Provinces continue to reduce generic pricing and private plans follow. Assumes a national generic pricing ratio of 20% of brand name medicine prices in 2016 and

21 Generic Impact Event The forecasted impact of Generic Event (incremental savings from baseline): Impact of Generic Event on Baseline, Annual (%) Scenario Description 2013f 2014f 2015f 2016f 2017f High Scenario Latest known generic pricing policy of provinces (2014) extends to 2015, 2016 and % -6.92% -9.66% % % Low Scenario Provinces continue to reduce generic pricing and private plan follows -4.41% -6.92% -9.66% % % 21

22 $ Millions (Impact on Baseline Forecast) % (Impct on Baseline Forecast) Incremental Impact of Generic Event on Baseline Forecast F 2014F 2015F 2016F 2017F 0% (200) High Low High Low High Low High Low High Low -2% (400) -4% (600) (800) (1,000) (1,200) (1,400) Pricing LOE % Impact - High (Right axis) -6% -8% -10% -12% -14% -16% (1,600) % Impact - Low (Right axis) -18% (1,800) -20% % of generic savings attributed to LOE vs generic pricing reform LOE = Loss of exclusivity = genericization 22

23 PDP Costs ($Millions) In the Generic Event, the value of top 57 brands expected to lose exclusivity during the forecast period was $947 million in 2012 alone PDP Costs of Branded Medicines Expected to Lose Exclusivity During Forecast Period $300 $250 $200 $150 $100 $50 $- 2013F 2014F 2015F 2016F 2017F 15 LOE Drugs 8 LOE Drugs 16 LOE Drugs 9 LOE Drugs 9 LOE Drugs PDP Costs = private drug plan costs in 12 month period prior to losing exclusivity Year of LOE LOE = Loss of Exclusivity = genericization 23

24 New Medicine Entry Event B New Drug Entry Event 24

25 New Medicine Entry Event 1. Historical analysis of the impact of new medicines from on private drug plan drug costs, by molecule type 2. Analysis of current phase III pipeline molecules and key products identified to be near launch in Canada 3. Incremental impact of new medicines on the baseline forecast: a. Assumes relative cost impact by molecule type in the historical period will be similar in the forecast period b. Overall impact of new drugs depends on the relative distribution of the molecule types in the forecast period Small molecule Cancer Specialty Simpler chemical structures and manufacturing processes Primary indication is cancer therapy (antineoplastic class) Private drug plan drug cost >$10,000 per claimant per year 25

26 New Medicine Entry Event Historical Analysis 1. IMS Brogan estimated the net incremental impact of new medicines to overall growth in private drug costs in each year of the historical period: The estimated incremental impact was 7.9% for the entire period ( ) New drugs = New molecular entities (new active ingredients) that have claims activity in the private drug plan market 26

27 % (NMEs Share of PDP Drug Cost & Net Impact) Total 98 NMEs launched in period Share Of Private Drug Plan Drug Cost of New Medicines Launched In and Net Impact on Drug Cost 9.0% 8.0% 7.0% Each bar represent the combined cost of New Molecular Entities (NMEs) launch in the year and preceding year(s). For example, 2010 bar is the value of NMEs launched in 2010 along with NMEs launched in 2009 and % Specialty Cancer 5.0% Small Molecule Impact of NMEs 4.0% 3.0% 2.0% 1.0% 0.32% 0.96% 1.11% 1.84% 2.25% 0.0% NMEs 22 NMEs 19 NMEs 17 NMEs 21 NMEs 27

28 New Medicine Entry Event Pipeline Analysis 2. IMS Brogan analyzed products in Phase III pipeline: IMS Lifecycle with pipeline input and confirmation from Rx&D member companies Key products identified to be near launch were derived from: IMS global forecasting team Patented Medicine Prices Review Board's New Drug Pipeline Monitor Methodology Accounted for the molecule mix of pipeline products and changes to mix 28

29 New Medicine Entry Event 3. Impact of new medicines analyzed using two possible scenarios: 1. Low Scenario: New medicines in the forecast follow same molecule distribution as # of new medicines coming to market same as High Scenario: From pipeline analysis, new medicines launched in the forecast have a greater proportion of cancer and specialty products # of new medicines coming to market by 12% 29

30 New Medicine Entry Event Mix of New Medicines in Low Scenario Small molecule 62% Cancer 20% Specialty medicines 18% Mix of New Medicines in High Scenario Small molecule 48% Cancer 31% Specialty medicines 21% 30

31 $ Millions (Baseline & Impact on Baseline % (Impact on Baseline) The Impact of New Medicine Entry is an Incremental Cost to the Baseline Forecast of Private Drug Plan (PDP) Drug Cost 9,500 9,000 8,500 8,000 7,500 7,000 Incremental Impact of New Drug Entry on Baseline Forecast Baseline $ Impact-High (Left axis) $ Impact-Low (Left axis) % Impact - High (Right axis) % Impact - Low (Right axis) 2.1% 1.8% 2.5% 2.3% 3.0% 2.5% 2.0% 1.5% 6,500 6,000 5,500 5, % 1.1% 1.0% 1.1% 0.4% 0.3% High Low High Low High Low High Low High Low 2013F 2014F 2015F 2016F 2017F 1.0% 0.5% 0.0% Total incremental impact of new medicines for entire forecast period: $530 million (7.9%) in Low Scenario $592 million (8.8%) in High Scenario 31

32 Aging Event C Aging event 32

33 Aging Event The impact of aging on private plan drug costs was estimated based on utilization trends in the historical period Changes in the age distribution of claimant population will impact volume and utilization, thus drug costs Claimant population split into 4 age groups: 0-39 years, years; years and 65 years+ Each age group s contribution to the historical cost impact estimated based on the share of private plan population and drug cost 33

34 Aging Event The contribution of aging in historical period is used to estimate the impact of aging in the forecast period. Two scenarios were used: Low Scenario - distribution of age groups in the forecast period continues at recent trend (captured in the baseline forecast of drug costs), i.e. no incremental impact High Scenario - distribution of age group based on Statistics Canada population high growth scenario*, with stronger growth amongst older population (55+) *Statistic Canada Population projections (up to 2036): 34

35 $ Million (Impact on Baseline Forecast) % (Impact on Baseline Forecast) The Impact of Aging is an Incremental Cost to the Baseline Forecast of Private Drug Plan (PDP) drug cost Incremental Impact of Aging Event on Baseline Forecast $16.0 $14.0 $12.0 $10.0 $8.0 $6.0 $4.0 $ Impact - High % Impact - High (Right Axis) 0.12% 0.12% 0.12% 0.12% 0.12% 0.16% 0.14% 0.12% 0.10% 0.08% 0.06% 0.04% 0.02% $ % $- 2013f 2014f 2015f 2016f 2017f -0.02% The incremental impact due to aging for the entire forecast period is $48 million (High Scenario) and $0 (Low Scenario) High Scenario - the impact of aging in the forecast period annualized to provide the yearly impact of 0.12% on each baseline forecast year Low Scenario - 0% impact 35

36 Overall Results C Aging event 36

37 Private Drug Plan (PDP) drug cost in High-Low scenarios after impact of events to the baseline forecast 12% Drug Cost* Growth Forecast - High and Low Scenarios 10% 8% 6% 10.3% 8.3% Low Scenario Actual/Baseline High Scenario Compounded Annual Growth Rate (CAGR) Low: 1.6% High: 2.8% 4% 2% 4.6% 3.3% 2.7% 4.05% 4.1% 2.9% 2.82% 4.0% 2.61% 2.9% 0% 0.0% -0.15% -1.07% -2% *Drug cost = ingredient cost + markup 37

38 Factors that Make the Forecast Conservative Private payers exposure to paid claims drug costs likely to be substantially lower than the eligible drug costs used for the forecast due to the impact of co-payments Magnitude of the generic event likely to be larger: As Subsequent Entry Biologics (SEBs) enter the market SEBs were excluded from the forecast model due to unpredictability Cost containment strategies implemented as of 2012 are included in the baseline but any future cost containment measures are not part of the Forecast 38

39 Conclusions Overall private drug plan drug cost market will experience low single digit year over year growth during the forecast period, remaining sustainable Generic entry and pricing reforms will have largest impact on private drug costs, offsetting cost pressures of new medicine entry event Cost of new medicines is offset by the displacement of previous therapies, so the net marginal impact on the total market is mitigated 39

40 Conclusions Very high-cost specialty medicines treat small patient populations and the proportional impact of these products on the total market is mitigated New medicines for cancer save lives. The impact of these new medicines on private drug plan drug costs is moderated mainly due to the fact that these costs are often paid by hospitals, cancer care agencies and provincial programs This forecast provides directional trend to the overall private drug plan market, experience of an individual payer may be different 40

41 Commentary The Forecast shows we have an opportunity to take a pause and consider solutions as all stakeholders want to ensure patient access to best available treatments Private payers have concerns about sustaining drug costs, and especially the impact of specialty products Rationing access to innovative medicines is counter-productive through promotion of good health, adherence and prevention, drug costs can be sustained and value generated Utilization of specialty medicines is within small patient populations and use of these products confers dramatic improvement in outcomes for employees and their families, enabling greater workplace productivity Affordability solutions for individual plans: full insurance, drug cost pooling agreements, patient-centred plan design, health promotion strategies 41

42 Questions and Discussion For a report on the IMS Brogan Private Drug Plan Drug Cost Forecast go to Rx&D s website: