Prescription medicines

trends: an overview
and perspective on two
therapy areas

Sarah Rickwood, Vice President, IQVIA

Copyright © 2017 IQVIA. All rights reserved.

We will discuss four issues

Global prescription medicine volume growth is decelerating

Global prescription medicine value spend has also decelerated

Antibiotics are a therapy class challenged by unmet need but innovation

deficit

Orphan drugs for rare diseases see high levels of innovation but budget
challenge

1
A word on value measurements
Where IQVIA data is expressed at value level in this presentation, this is at ex-Manufacturer level, list price
List price
• List price is a price level for a medicine either publically available or estimated from public sources, from which non-
publically available discounts or rebates may be made, meaning the actual price the manufacturer realises is in fact
lower.
• These non publically available rebates/discounts can be substantial- it is now estimated that the average discount in
the US to private insurers is now 41%, up from 28% in 2012*.
• These rebates and discounts are also almost entirely non transparent, with confidentiality agreements between buyer
and supplier frequent.
Ex-manufacturer level
• This means that margins added by wholesalers, retail pharmacies and any other elements of the distribution chain to
the patient are not captured, nor are any other tariffs of taxes. In many countries these are regulated margins. In some
countries they are not.
• A certain level of mark-up added by distributors is the necessary cost of delivering medicines to patients safely,
securely, and reliably by commercial enterprise. However, in some countries where distribution margins are
unregulated and/or distribution is inefficient and involves many actors, mark-ups can substantially increase the cost
of medicines to the patient.

2
* Wells Fargo report, January 2018
Global prescription medicines volume growth slows;
Pharmerging markets have seen the strongest slowdown
CAGR 2007-2012 CAGR 2012-2017 CAGR 2017-2022
5,000

2%

4,000
2%
Total world, audited and unaudited

3,000 5% 3%
Standard Units,

4%
Trn

8%
2,000

1,000
2% 0% 1%

0
2007 2012 2017 2022

Pharmerging Others

Source: IQVIA Institute, Oct 2017. Pharmerging is a group of IQVIA defined pharmerging markets characterized by less than $30k GDP/capita and greater than $1bn absolute prescription medicines market growth potential between 2014 and 2019. The markets are: China Brazil India Russia Mexico
Turkey Poland Saudi Arabia Indonesia Egypt Philippines Pakistan Vietnam Bangladesh Argentina Algeria Colombia South Africa Chile Nigeria Kazakhstan
 Pharmaceutical volume per capita varies widely in pharmerging
countries, as does the potential for growth
Pharma SU volume per capita index for
Pharmerging countries for 2017 and 2022
RUSSIAN FEDERATION
POLAND
KAZAKHSTAN
BRAZIL
CHILE
TURKEY
EGYPT
COLOMBIA
SOUTH AFRICA
SAUDI ARABIA
ARGENTINA
Original branded high income markets’
ALGERIA
products (protected or Volume in SU per capita =
VIETNAM
100
THAILAND unprotected) represent 7-
PAKISTAN 2017 = 1,457
15% of pharmerging 2022 = 1,487
CHINA
INDIA
medicine volumes and
BANGLADESH 19-34% of list price ex
MEXICO manufacturer value; most
PHILIPPINES volume/value is non-
INDONESIA original
NIGERIA
-20 0 20 40 60 80 100 120 140
Index of SU Per Capita to Developed Markets Average in 2017 SU Per Capita Incremental to 2022
Source: IQVIA Institute, Oct 2017. Pharmerging is a group of IQVIA defined pharmerging markets characterized by less than $30k GDP/capita and greater than $1bn absolute prescription medicines market growth potential between 2014 and 2019. The markets are: China Brazil India Russia Mexico Turkey Poland
Saudi Arabia Indonesia Egypt Philippines Pakistan Vietnam Bangladesh Argentina Algeria Colombia South Africa Chile Nigeria Kazakhstan Note: High Income markets are known for wider adoption of newer therapies whose clinical importance is often understated
in Standard Units. Pharmerging markets are known for historically less well resourced health systems and often use oral and older medicines to a greater extent. The index may overstate the gains being made by Pharmerging markets relative to more clinical or
health outcomes based measures. Although the South African market has been strongly affected by weak economic growth, changes in data coverage may also affect this market’s recent history.
Global Market Spending, based on list price, to grow 3-6% in
value in the next five years

Global pharma spending and growth 2016 IQVIA estimate of

1,600 12%
difference between list
2007 -2022
price and net sales for
1,400 Resurgence of spend on the US=33%, or $148bn
10%
innovative medicines in
1,200 high income markets,
list price growth in US, 2016 IQVIA estimate of

Growth Constant US$

8%
peak Hepatitis C spend difference between list
Spending US$Bn

1,000
and net for rest of world=
18% or $96bn
800 6%

An estimate of the
600 difference between list
4%
Moderating price and net value is
400 Heavy small molecule growth of therefore 25% globally,
genericisation pharmerging but with substantial
2%
200 Economic austerity in medicine spend caveats.
US/Europe/Japan
0 0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Spending Growth

5
Source: IQVIA Market Prognosis, Sept 2017; IQVIA Institute, Oct 2017- Outlook for Global Medicines through 2021
Below this list price picture, rebates and discounts have grown
strongly, although recently moderating in US
Rest of World Data
Global and US difference between gross (MIDAS list price) and estimated net
• Calculation based on the ratio of MIDAS
pharmaceutical market value (2009-16)
Rest of World US sales and company reported Net sales on a
35%
product by product basis
• Starting universe of 297 products
30% representing 11% of MIDAS sales (2016)
and 9% of RoW sales
25% • 2016 RoW value (18% discount)
constructed from 112 data points
20%
Caveats
15% • Crude calculation – no distinction possible
between high and low income economies
10% outside US, but this is likely skewed to
high income countries
5% • Starting universe of products are company
reported – so typically new products or
0% those with significant sales for a publically
2009 2010 2011 2012 2013 2014 2015 2016 quoted company. No Generics
contribution.
Notes: US calculation from IQVIA Institute; RoW calculation using a universe of 297 products representing 21% of MIDAS sales in 2016; Anomalous products excluded 6
Source: IQVIA Thought Leadership Analysis, IQVIA Analytics Link, IQVIA Institute; IQVIA MIDAS MAT Q2 2017
Inefficient use of existing medicines generates avoidable costs:
non compliance is the biggest cost, antibiotics misuse third

• The inefficient use of existing medications, whether on or off

Estimated avoidable costs (2012) bn USD
patent, incurs substantial, avoidable costs for healthcare
systems Non-adherence 57% 269

• Non-adherence to prescribed medicines regimens is the single Delayed evidence-based

13% 62
treatment practise
greatest avoidable cost- although a perennially challenging
Antibiotic misuse 11% 54
issue, even small improvements would result in substantial
savings Medication errors 9% 42

• Antibiotic misuse (antibiotic use for non bacterial infections) Suboptimal generic use 6% 30

was the third largest source of waste, and, although it has Mismanaged polypharmacy
4% 18
in the elderly
seen recent substantial effort to address, cost 2012
healthcare systems $54bn in avoidable spend Total avoidable costs 100% 475

7
Source: IQVIA European Thought Leadership; IQVIA Institute 2012 “Responsible use of Medicine”
 Antibiotics and orphan drugs: opposite ends of the innovation
spectrum
How do medicines challenge healthcare systems? What is the impact of regulation and commercial activity?

Antibiotics Orphan drugs

• High prevalence conditions, acute • Extremely low individual prevalence conditions
• Established treatment paradigm (although there are many of them) chronic
Market features • High share of generic standard of care • Emerging/radically changing treatment paradigm
• No or low share of generics
• Focus on generics for the broadest population • Cost per patient is high and a growing concern in high income
Payer/provider • Focus on reducing unit cost (where payers are institutions or markets
actions governments) • Individual products can have low sales, but collectively treatments for
• Action to reduce mis-use (but still a major problem and source of rare diseases are a growing element of high income market medicine
unnecessary medicine spend) spend
• New products may see restricted use as “antibiotic of last resort”- sales • Orphan drugs increasingly the subject of strict price negotiation and
are low health technology assessment
• Commercial launch of new antibiotics was • Commercial launch of new orphan drug treatments was historically
Commercial
historically frequent but is now rare rare but is now frequent and increasing
impacts • However, only an estimated 5% of rare diseases currently have a
pharmacotherapy
• Significant global legislation and action to manage antibiotic use and • 1983 Orphan drug act (US) , 2000 Regulation (EC) 141/2000 (EU)
Regulation/policy contain resistance both have given substantial encouragement to companies
• GAIN provision as part of 2012 FDA safety and innovation act (US) aims developing drugs for rare diseases
to improve commercial attractiveness with additional 5 years exclusivity • Japan, Singapore and Australia have also enacted legislation which
• EU Innovative Medicines Initiative ND4BB program and setting up of encourages development of orphan drugs
JPIAMR since 1999

8
Usage of systemic antibiotics declines in high income markets;
from 2016 we see the same trend for pharmerging markets

Systemic antibiotics* Sales in Volume (Bn SU) Standard Unit volume for Systemic
antibiotics falls in both pharmerging
100 markets (low/middle income) and
90 -2.7% high income markets
+1.7%
80
Global
70 Volume decreases 2015-17 in
60 +1.9% -3.4% China, Brazil, Turkey, South Africa,
50 Pharmerging Thailand, Philippines, Saudi Arabia,
Poland, Vietnam and Chile (10/20
40
pharmerging markets)
30
20 -1.0% -2.3%
Volume rises 2015-17 in
Top7
10 Kazhakstan, Algeria, Egypt,
0 Pakistan, Russia, India,
2012 2013 2014 2015 2016 2017 Bangladesh, Argentina, Colombia,
Mexico

9
Source: IQVIA European Thought Leadership; IMS MIDAS Q3/2017; *only systemic antibiotics (ATC J1)
Global New Active Substance launch has seen very little activity
from systemic antibiotics

60
NAS launches 2010 - 2017
3 # Antibiotic NASs
50 3
0
40 1
1
2 0
30 0

20

10

0
2010 2011 2012 2013 2014 2015 2016 2017

Note: 2017 NAS data is provisional and is subject toc change ; NAS=New Active Substance; Antibiotics include the following ATC3s J1A,B,C,D,E,F,G,H,K,L,M,P,X,J3A,J8 10
Source: IQVIA MIDAS NAS analysis Q3 2017
In contrast, orphan drug approvals in Europe have risen
substantially since 2000 legislation

Orphan drugs in Europe with European Market

Authorisation by approval year (2008-16) – 135 in total
were approved between 2001 and 2016
20
20
18 • 146 medicines were reviewed by
the EMA for orphan designation
15 14 since 2001-2016.
• As of 2016:
11
10
10 10 • 90 are approved Orphans

7 • 45 have been withdrawn

6 • 11 were refused designation
5
5 4
• 91% (82) of approved Orphan
drugs in 2016 (90) have sales in
0
Europe in MIDAS
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*

Source: European Medicines Agency October 2017; *to Oct 2017 only 11
Growth of orphan drug sales value decelerates in Europe, share
of total pharmaceutical list price spend is 3.5%
Orphan drug share of total sales of pharmaceutical use in Europe has increased from 1.5% in 2007 to 3.5% In
2016

Growth of drug sales (LC €)

70%
60%
50%
40%
30%
PPG%

20%
10%
0%
-10% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

-20%
-30%

Orphans growth rate Non Orphans growth rate

Share of Drug
1.5% 1.9% 2.2% 2.7% 2.2% 2.3% 2.6% 3.0% 3.3% 3.5%
Sales (€)

Note: Products are classified as “Orphan” in any given year,

but after this year may have been withdrawn, and before this 12
Source: IQVIA MIDAS MAT Dec 2016 year may have been “non-orphan”
Concluding points
• There is currently both volume and value deceleration in spend on Rx medicines globally

• Many pharmerging markets (where majority of volume and value is off patent) are substantially
behind the high income markets in terms of use per head of modern medicines, and current
growth rates will not close that gap

• Avoidable costs to healthcare systems of mis-use of prescription medicines equated to 49% of

total list price Rx market value in 2012, with compliance the leading cost and antiobiotic mis-use
third

• Orphan drugs see growth of innovation with enabling legislation but costs challenge high income
markets

• Antibiotics see innovation dearth and yet to see impact of policy on new drug approvals
13
IQVIA’s definition of Pharmerging Markets: middle-low income countries
that have significant potential for list price, ex-manufacturer market growth

China Brazil Mexico Bangladesh

India Turkey Argentina
Russia Poland Algeria

21 countries
Pharmerging Definition Saudi Arabia Colombia
Indonesia South Africa
GDP per capita less than $30,000
Egypt Chile
>$1Bn US$ or LCUS$ in absolute Philippines Nigeria
5yr growth (2014-2019)
Pakistan Kazakhstan
Vietnam

Tier 1 Tier 2 Tier 3

>1Bn US$ or LCUS$ in absolute 5yr

Tier > 100Bn US$ >15Bn US$ sales
growth
definition sales in 2014 in 2014
(2014-2019)

Source: IQVIA Market Prognosis