The Road to Market Access

The Road to Market Access From Concept to End of Lifecycle April 2017 CAHR MA 101

ROUBAIX STRATEGIES INC. Roubaix [ru-bae]: The Paris-Roubaix is one of the most difficult single-day professional cycling races in the world. At more than 250km, cyclists must transition between paved roads and centuriesold cobblestone paths. Just like market access in Canada, negotiating these challenging conditions requires strategic planning, careful preparation, superior teamwork, and a bit of courage.

The Road to Market Access 1. Overview 2. Regulatory 3. Pricing 4. Budgets 5. Health Technology Assessment (HTA) 6. Patients 7. Pan-Canadian Pharmaceutical Alliance (pcpa) 8. Private Drug Plans

OVERVIEW

Access to Innovative Medicines in Canada: From Concept to Market PMPRB / PRICING HC HTA pcpa PLAs pcpa Renegotiations? LOE Thousands of candidates Pre-Clinical Clinical (Ph1-3) Public Drug Plan Reimbursement Private Drug Plan Reimbursement Roubaix Strategies Inc. All rights reserved. 20-YEAR PATENT TERM 8-12 YEARS 12-8 YEARS PMPRB = Patented Medicines Prices Review Board; HC = Health Canada; pcpa = pan-canadian Pharmaceutical Alliance PLAs = Product Listing Agreements; LOE = Loss of Exclusivity; HTA = Health Technology Assessment;

Access to Innovative Medicines is Generally Longer in Canada vs. Countries with Comparable Healthcare Systems Source: Innovative Medicines Canada, Access to New Medicines in Public Drug Plans: Canada and Comparable Countries, 2016 Annual Report

Market Access: The Most Important Function in Canadian Drug Reimbursement Specialty Drugs Account for 80% of New HTA Submissions No Amount of Marketing Can Overcome a lack of Drug Plan Funding Stakeholder Description 2008 2013 2018 Practitioners: Physicians FP/GPs 1, specialists, residents 5.0 3.0 2.0 Pharmacists Hospital/community pharmacy 0.5 0.5 0.5 Nurses RNs, nurse practitioners 0.0 0.0 0.0 Payers/Managers: Government Drug Plans Drug Approval/Advisory Groups Regional Health Authorities Private Drug Plans Consumers: Consumers/Disease Groups Federal/provincial/territorial (includes cancer agencies) pcpa, Common Drug Review, pcodr 2 and government drug expert groups Different provincial models (e.g. Alberta Health Services, LHINs 3 ) Source: IMS Brogan 1 Family physicians/general practitioners and others who prescribe drugs in different settings, including the hospital environment 2 pan-canadian Oncology Drug Review 3 Local Health Integration Networks in Ontario 4 Includes organizations set up to advise insurers/employers such as pharmacy benefit managers, benefit advisors 3.0 3.0 2.5 0.5 1.5 2.0 0.0 0.0 0.0 Insurers, employers and other third parties 4 1.0 1.0 1.5 Consumers at large, and organizations (seniors /women s groups, disease associations, consumer groups) 0.0 1.0 1.0 Total 10.0 10.0 10.0 Courtesy Janssen Pharmaceuticals 3.5 5.5 1.0

REGULATORY

By the Time a Patented Drug/Biologic is Approved by Health Canada, it has ~10 years of Market Exclusivity PMPRB / PRICING HC HTA pcpa PLAs pcpa Renegotiations? LOE Thousands of candidates Pre-Clinical Clinical (Ph1-3) Public Drug Plan Reimbursement Private Drug Plan Reimbursement Roubaix Strategies Inc. All rights reserved. 20-YEAR PATENT TERM 8-12 YEARS 12-8 YEARS PMPRB = Patented Medicines Prices Review Board; HC = Health Canada; pcpa = pan-canadian Pharmaceutical Alliance PLAs = Product Listing Agreements; LOE = Loss of Exclusivity; HTA = Health Technology Assessment;

Health Canada Reviews Health Canada reviews Drug Safety, Efficacy, and Manufacturing Quality NOC = Notice of Compliance; NOC/c = NOC with Conditions Product Monographs provide information on approved indications for use, (claims that can be made by the manufacturer) clinical data, safety data Regulatory Transparency is Evolving HC reviewer reports: CADTH requires and is granted access to review these. List of drug and health product submissions under review (SUR) has been posted since April 2015 On March 9, 2017 proposes to proactively make certain submitted clinical information publicly available following completed reviews

PRICING WHEN DOES IT BEGIN? AND WHAT IS CONSIDERED?

Pharmaceutical Pricing Occurs in a Global Market Which Affects Decisions Made Here Canada represents ~2% of global pharmaceutical market1 Source: PMPRB 2015 Annual Report (published 2016)

Canadian Patented Medicines Drug Price YOY Changes Consistently Below the CPI CPI = Consumer Price Index Source: PMPRB 2015 Annual Report (published 2016)

Canadian Patented Medicines Drug Prices are at Par or Lower Than Three Comparator Countries Source: PMPRB 2015 Annual Report (published 2016)

There is Growing Attention on Canadian (and Global) Drug Pricing PMPRB is considering unprecedented changes to its scope and mandate, asking: Is PMPRB relevant in today s market? Is their mandate appropriate for ensuring non-excessive pricing? Does it need to change to address questions of affordability?

BUDGETS EVEN BEFORE SUBMISSIONS ARE MADE FOR DRUG REIMBURSEMENT, BUDGET IMPACT AND VALUE FOR MONEY ARE THE GROWING FOCUS OF DRUG PLANS

Drug Costs Are Rising Slightly, But Their Share of Total Health Costs is Diminishing 250 17.0% 16.8% 200 16.6% 16.4% 150 16.2% $B % Drugs 16.0% 100 15.8% 15.6% 50 15.4% 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014f 2015f 15.2% 15.0% Total Health Expenditures Total Drug Expenditures Drugs % Share of Total Health Expenditures 1. Source: CIHI,NHEX database, posted at Industry Canada, 2016.

Public Healthcare Spending Close to 40% of Program Spend The proportion of government expenditures allocated to healthcare has stabilized over the last decade. Note Financial Management System data is estimated for 2009 to 2015. Sources National Health Expenditure Database, Canadian Institute for Health Information; Financial Management System, Statistics Canada; provincial public accounts, budgets, main estimates.

Spending on Healthcare Continues to Grow

Provinces Continue to Struggle With Debt Courtesy Janssen Pharmaceuticals

HEALTH TECHNOLOGY ASSESSMENT

The Road to Pharmaceutical Market Access in Canada is Complex, Travelling Through Various Channels to Patients Health Canada Approves Product for Sale Notice of Compliance (NOC) Manufacturer Reimbursement Submissions Pre-NOC? Requirements vary by type of drug plan Public Rest of Canada (ROC) Public (Quebec) CADTH/pCODR before public drug programs will review & reimburse INESSS Reviews before Quebec will reimburse Pan-Canadian Pharmaceutical Alliance (Negotiate Letters of Intent) Provincial, Territorial & Federal Public drug plans (Negotiate Reimbursement Agreements) Criteria Harmonization? Variability? Listing Delays? Value-Based Agreements? Private Insurers Reimbursement can vary by plan

In Canada, There is a Gap Between Drug Approval and Public Reimbursement Percentage of new medicines launched and publicly reimbursed by country (IMC 2016 Annual Report) Percentage of new biologic medicines launched and publicly reimbursed by country (IMC 2016 Annual Report) IMC: ACCESS TO NEW MEDICINES IN PUBLIC DRUG PLANS: Canada and Comparable Countries (2016)

PATIENTS

Formal Patient Input Occurs For HTA Reviews; Yet Engagement Extends Throughout Drug Lifecycle PMPRB / PRICING HC HTA pcpa PLAs pcpa Renegotiations? LOE Thousands of candidates Pre-Clinical Clinical (Ph1-3) Public Drug Plan Reimbursement Private Drug Plan Reimbursement Roubaix Strategies Inc. All rights reserved. 20-YEAR PATENT TERM 8-12 YEARS 12-8 YEARS PMPRB = Patented Medicines Prices Review Board; HC = Health Canada; pcpa = pan-canadian Pharmaceutical Alliance PLAs = Product Listing Agreements; LOE = Loss of Exclusivity; HTA = Health Technology Assessment;

PCPA

Reimbursement Strategy & Negotiation Development Timelines HTA Submission Provincial Submissions pcpa Negotiations -2yrs -3-6 mos. NOC +3-6 mos. +6 mos. +1 yr. Pre-sub strategy Process HTA Recommendation Provincial Listings Reimbursement strategy considerations Value Proposition Anticipated market dynamics and competitive set Commercial strategy Payer environment Health Economic Modeling Data gaps/plans to address Courtesy Janssen Pharmaceuticals 27 27

Negotiation Timeframes Can Vary, and Closed Deals May Be Revisited as Market Changes PMPRB / PRICING HC HTA pcpa PLAs pcpa Renegotiations? LOE Thousands of candidates Pre-Clinical Clinical (Ph1-3) Public Drug Plan Reimbursement Private Drug Plan Reimbursement Roubaix Strategies Inc. All rights reserved. 20-YEAR PATENT TERM 8-12 YEARS 12-8 YEARS PMPRB = Patented Medicines Prices Review Board; HC = Health Canada; pcpa = pan-canadian Pharmaceutical Alliance PLAs = Product Listing Agreements; LOE = Loss of Exclusivity; HTA = Health Technology Assessment;

The pcpa is Facing Greater Numbers of Drugs Waiting for Negotiations pcpa Negotiation Mix: As of Dec 31, 2016 81% of drugs under negotiations with the pcpa are Specialty Drugs. Currently ~40+ Drugs in Active Negotiations More waiting Wait-times are going up: some estimates indicate ~ three months Unclear Operating Framework for pcpa s Mandate and Objectives Specialty drugs are generally defined as those products with an annual cost > $10,000

4 of 10 Drugs Remain in pcpa Negotiations Six Months After Engagement 100% % of Drugs Remaining In pcpa Negotiations After Index Date 22 drugs 24 drugs 22 drugs 75% 50% 25% 0% 75% 68% 64% 45% 46% 41% 23% 25% 23% 14% 8% 5% INDEX MONTH 3 MONTHS 6 MONTHS 9 MONTHS 12 MONTHS* 18 MONTHS* Sep 2015 Dec 2015 Mar 2016 *12 & 18 months: three and one drug respectively ** As of December 31, 2016 Roubaix Strategies Inc. 2017 contact: JPD@roubaixstrategies.com Now 43 drug products in Active Negotiations**

Are pcpa Objectives Clear? pcpa Objectives (Website): 1. Increase access to drug treatment options; 2. Achieve lower drug costs and consistent pricing, and 3. Improve consistency of coverage criteria across Canada.

PRIVATE DRUG PLANS

The Road to Pharmaceutical Market Access in Canada is Only Becoming More Complex Health Canada Approves Product for Sale Notice of Compliance (NOC) Manufacturer Reimbursement Submissions Pre-NOC? Requirements vary by type of drug plan Public Rest of Canada (ROC) Public (Quebec) CADTH/pCODR before public drug programs will review & reimburse INESSS Reviews before Quebec will reimburse Private Insurers Reimbursement can vary by plan Pan-Canadian Pharmaceutical Alliance (Negotiate Letters of Intent) Provincial, Territorial & Federal Public drug plans Employer Drug Plans Coordination? (Negotiate Reimbursement Agreements) Criteria Harmonization? Variability? Listing Delays? Value-Based Agreements? Delays? Caps? Prior-Authorizations? Pharmacy Networks?

The Private Stakeholders 34 23 Insurers 3 PBMs ~3K Benefit Advisors Payer ~500K Plan Sponsors ~23M Plan Members Courtesy Janssen Pharmaceuticals

Payer value expectations increase with shifting cost: But Cost Management Actions Should Differ Based on Volume and Risk 35.0% 30.0% 25.0% Private Plan Specialty Drug Expenditure 24.2% 29.9% Public Plan Specialty Drug Expenditure 29.2% 20.0% 15.0% 13.2% <3% of claimants 16.4% 10.0% 5.0% 0.0% 2007 2013 2015 2015 Sources: ESC Drug Trend Reports (2014, 2016); PMPRB, NPDUIS

Private Plans Talk About Integrating into the Public Reimbursement Process. It is Plausible? CDR REVIEW PCPA NEGOTIATIONS UP TO 15 SEPARATE FPT NEGOTIATIONS HOW MANY PRIVATE PLAN NEGOTIATIONS? The pcpa does not negotiate product reimbursement. It negotiates the intention for product reimbursement 1 6 12 18 On market ESTIMATED MONTHS AFTER HEALTH CANADA APPROVAL Roubaix Strategies Inc. contact: JPD@roubaixstrategies.com

The Current Landscape ueconomic slowdown + Chronicity of disease + Cost of meds = pressure on employers = pressure on Insurers = pressure on Pharma manufacturers Prior/Special Authorization Step Edits Mandatory Generic/Therapeutic substitution Tiered formularies Case management Preferred pharmacy networks upayers seeking SUSTAINABILITY = OPPORTUNITY for pharmaceutical manufacturers

Private Insurance Coverage for 23 Million Canadians SSQ and Desjardins 10% Others 11% Sun Life 18% GreenShield 4% Pacific Blue Cross 6% Great West Life 18% Alberta Blue Cross 7% ClaimSecure 5% Medavie Blue Cross 3% Manulife 19% Source: Janssen Pharmaceuticals