9

Hepatitis 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

Figure 1: Total new to brand prescriptions (NBRx) for telaprevir, boceprevir,

simeprevir and sofosbuvir

Total new to brand prescriptions

100,000
telaprevir & boceprevir
52 weeks post-launch

80,000

simeprevir
& sofosbuvir
launches

60,000

40,000

telaprevir
& boceprevir
launched in May 2011

Total NBRx
39 weeks
post-launch
105,579

20,000

52-week rolling period

2
3
4
11 011 011
14
12
11
13
12 013
13
13
14
12
12
13
14
12
14
20 e 20
2
20 y 20 l 201 p 20 v 20 n20
20 y 20 l 201 p 20
20 y 20 l 201 p 20 v 20
2
2
20
r
r
r
y
v
p
n
n
a
a
a
a
a
a
n
a
Ju
Ju
Ju
Ja
Ja
Ja
Se
Se
Se
Se
M
M
M
No
No
No
M
M
M
M
Ju
Source: IMS NPA Market Dynamics, September 2014

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

15

Breakthrough Vaccines Become Available

Figure 1: Proportion of neglected tropical diseases

100%

Percentage of total DALYs

80%

60%

40%

20%

0%
Global DALYs

Malaria

Diarrhea

Typhoid

Africa DALYs

Cholera

Leishmaniasis

Schistosomiasis

Others

22 diseases were selected consisting of NTDs, malaria, diarrea, cholera and diptheria due to amount of burden in Africa relative to other continents. 3
Source: Institute for Health Metrics and Evaluation 2014

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.

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16

Breakthrough Vaccines Become Available

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

Phase II

Phase I

Diseases

Total
Candidates

Vaccines

Total
Candidates

Vaccines

Phase III

Total
Candidates

Vaccines

Malaria
Cholera
Schistosomiasis
Leishmaniasis
Typhoid
Dengue

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

Source: IMS LifeCycle, R&D Focus. August 2014.

Vaccines is the number of vaccines in the pipeline and contributes to total candidates.

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
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.

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20

Biologics Reach Patients in Pharmerging Countries

Figure 1: Use of biologics

100%

7
80%

DDD in billions

6
5

60%

4
40%

3
2

20%

1
0

0%
2003

2005

Developed countries

2007

2009

Pharmerging countries

2011

2013

Proportion of pharmerging to developed

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

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.

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

Proportion of pharmerging to developed

30

Medicine Spending Growth Returns to Developed Countries

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

Percentage of generic cost efficiency

Figure1: Developed market evolution of generic cost efficiency

90%

75% 76%

80%
70%
60%

55%

58% 59%

64%
54%

50%

40%

36%

40%

49%

57%

50%

44%

30%

21%

34%

29%

20%

17%

17%

10%
0%

Germany

U.K.

U.S.

Canada

Highest cost efficiency and little recent change

France

Italy

Japan

Spain

South Korea

Substantial change in generic cost efficiency in the last three years

2008-2010

2011-2013

Source: IMS MIDAS, December 2013

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

31

Medicine Spending Growth Returns to Developed Countries

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).

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

% growth const US$

10

-5

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

YTD
June 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)
Source: IMS MIDAS, June 2014

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.

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49

China Loosens Price Caps

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

Sweden

Price cuts on off-patent

products with no
competition January 2014
became law July 2014

Canada

Price caps on generics including

rosuvastatin, simvastatin,
pantoprazole and citalopram

Ireland

Expansion of
reference pricing
August 2014

Spain

Mexico

Internal reference pricing

proposed April 2014 and
approved by lower house

Ecuador
Expanding
price caps*

Revised reference
price system
July 2014

Hungary

Cuts due to
reference pricing
and tenders
January & April 2014

Japan

Greece

New price caps and

cuts for off-patent
originals and generics
following patent expiry
January & June 2014

Brazil

India

Reimbursement price cuts

April 2014

Expands price caps

108 medicines
including diabetes
and cardiac drugs
July 2014

Retail price cuts

July 2014

Argentina

Annual limits on drug price

increases February 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.

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