1 Europe: Market trends during the current economic crisis - - PowerPoint PPT Presentation

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Europe: Market trends during the current economic crisis

Victor Lino Mendonça, EGA 15th Annual IGPA Conference Kyoto, December 2012

Life in the Red Zone Annual deficit by country

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Source: European Commission

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First time health spending has fallen in Europe since 1975

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Pharmaceutical expenditure growth rate turned negative in several countries in 2010

Cost containment measures in the pharmaceutical market

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Source: European Commission

 External reference pricing  Reference price system  Discounts/rebates, payback and clawback policies  Price freezes and cuts  Public tendering

External Price Comparison (ERP)

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Definition: when a country authority or payer organisation sets a price on pharmaceuticals based on the price of another country or group of countries.

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European picture Country basket for ERP

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Impact External Price Comparison

Creates a downwards price side spiral  Reduces the availability of medicinal products  provokes shortages

Source: Global Insights

Reference Price System

Source: PPRI

Reference pricing system means determining the maximum price for generics and the maximum reimbursement rate for each medicine.

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European picture Reference Pricing System

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Impact of Reference Pricing System

• Reduces the price of medicines;
• Can increase generic medicines usage;
• If not correctly implemented, significant cost

can be transferred to patient.

Source: Prof. Steven Simoens

Payback and clawback

Source: EC - DG ECFIN

Mechanisms requiring manufacturers and pharmacists to return a part of their revenue to third party payers.

• Payback policies require manufacturers to pay back a share
• f their revenue, if a pre-specified budget ceiling for public

pharmaceutical expenditure is exceeded.

• Clawback policies are usually applied to pharmacies, to

capture discounts which increase pharmacies' profits, and to pass them on as income/revenues to the public

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European picture Payback and clawback policies

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Impact of Payback and clawback policies

Generic medicines are on the cost containment

• side. Generic medicines contribute to the

decrease of pharmaceutical expenditure (and not to the increase), therefore these kinds of agreements should not apply to generic medicines.

Source: EMAC – European Market Access Committee – EGA

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• Price freezes and cuts are set unilaterally by

public authorities, with the objective of achieving short-term savings;

• Widely used in Europe, in 2010 and 2011,

they have been applied in: Czech Republic, United Kingdom, Spain, Germany, Slovenia, Lithuania, Portugal, Ireland, Malta and Turkey.

Price freezes and price cuts

Source: EC - DG ECFIN

“They have further implications on price evolution in other countries through external reference pricing” EC - DG ECFIN Introducing price cuts after intense price competition in the market creates supply problems for the industry. Prices should not go beyond the sustainable price level.

Impact of Price freezes and price cuts

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Tendering

Tendering is a mechanism whereby a purchaser buys medicines based on a competitive bidding process. The contract is granted to the manufacturer who offers the best bid following strict criteria.

• Stakeholders with a financial interest in

savings are the driving force for tendering, like health insurance funds or governments;

• Currently applied in Germany, the

Netherlands, Sweden and Denmark;

European picture: Tendering

Impact of Tendering

Pharmaceutical savings can be achieved in the short term, but also…..

• threaten the long-term sustainability of the generic

medicines industry;

• Lead to shortages in the market;
• Create new costs related to logistics for medicine

procurement, for substitution management and data processing costs;

Impact of Tendering

Reduces competition in the market:

• "It appears that instead of intensifying competition,

as desired, tendering has led to increased seller concentration (...)" *

• "(...) manufacturers that are not preferred have an

incentive to stock-out or even exit the market."*;

• products not being launch because of their low

profitability;

• Difficulties for small and medium sized companies

leading to market concentration;

* Panos Kanavos, Tender systems for outpatient pharmaceuticals in the EU, 2012

Italy France UK Portugal Netherlands Spain Germany Norway Denmark Sweden Ireland Czech Republic Finland Expected future direction of change Germany Belgium Austria Poland Greece Hungary Slovakia Prescription Distribution

Market drivers

Low complexity High complexity

Distribution characteristics

Tender Substitution

European generic medicine markets heading towards tender and commodities market types

At the same time… the regulatory burden is increasing.

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New regulatory costs

Anti-Falsified Medicines Initiative by the EC

• Safety features € 1 billion in implementation costs
• € 200 million per year for the EU generic industry

EMA Pharmacovigilance database

• > € 20 million per year for an average sized generic

medicines company

Source: EGA and EC - Sector Inquiry

Unsustainable challenge

More Regulation/ Increased Costs Price Decrease

National level National + EU level

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Positive trends in Europe

Source: IMS MIDAS MAT Mar 2012. RX only.

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Market still growing

+ 5,4% in Value ($43.1bn) + 4,5% in Units

(235.7bn)

Opportunities

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Pate tent nt Expir Expiry Expe Expensiv nsive ne e new w th ther erapies pies Ne New w ma markets ts

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EC Transparency Directive Price & Reimbursement EC initiative

• Lost savings of about € 3 billion for health

systems during 2000 to 2007 for the chosen sample of medicines facing patent expiry in 17 Member States

Better regulation can improve Generics market

Improved use of Generic medicines could save 30bn USD

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• Introduction of budgets (e.g. Germany,

Ireland, UK);

• Instruments to support generic

medicine e-prescribing (e.g. Portugal, Greece);

• Introduction of a remuneration schema

for pharmacists that incentivises the dispensing of generic medicines (e.g. Germany);

• Creation of incentives for patients to

buy generic medicines, such as co- payment.

• Price differential between generic and
• riginator.

Opportunities

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Victor Lino Mendonça victor@egagenerics.com

“To understand Europe, you have to be a genius - or French.” Madeleine Albright