[PPT] - The Value of Medical Innovation Council of State Governments PowerPoint Presentation

SLIDE 1

The Value of Medical Innovation

Council of State Governments September 20, 2013 Rich Bagger, Senior Vice President Celgene Corporation

SLIDE 2

The Paradox of Medical Innovation: The Promise of Medical Science Has Never Been Greater …

2

SLIDE 3

…Yet There is Great Concern About Whether Innovation is Affordable and Sustainable

Doctors Denounce Cancer Drug Prices

f $100,000 a Year

Editorial Exorbitant Prices for Leukemia Drugs By THE EDITORIAL BOARD Published: May 1, 2013 3

SLIDE 4 Source: Celebration of Science. Available at www.celebrationofscience.org/about. Accessed 9/10/12.

A MAJOR PARADOX

The potential

f science is

greater than

ever …

R&D Investment Longer, Better, Healthier Lives

But the outlook for

investment has

never been more

uncertain We Are at a Critical Crossroads for Medical Innovation

4

SLIDE 5

The Value of Medical Innovation: Living Longer, Better & Healthier Lives

Medical Innovation Involves High Risks and Long Time Horizons Track Record of Success The Promise of Medical Science Medical Innovation Drives Economic Growth and Societal Benefit Delivering on the Promise for Patients

5

SLIDE 6

It Takes 12 Years or Longer to Bring a New Treatment to Patients

The Drug Development Pyramid 1 2 2-5 5-10 10-20 Substances 10,000-30,000 Substances Synthesis, Examination & Screening Preclinical Tests (Animal) Clinical Tests (Human) Product surveillance Phase IV Phase III Phase II Phase I Basic Research Development Introduction Registration 2 3 4 6 9 8 11 12 5 7 10 1 Years 6 Source: Briggs A. Effective Use of Health Technology Assessment to Maximize Market Access: Start Early and Update Often. Oxford Outcomes (an ICON plc Company). Available at http://www.iconplc.com/icon-files/insight-newsletter/June11/effective.html. Accessed 11/16/12.

SLIDE 7 $140m $320m

$800m $1.2b

The average cost to develop one new approved drug – including the cost of failures –

increased approximately 50% between the late 1990s and

early 2000s Source: DiMasi JA, Hansen RW, and Grabowski HG. The Price of Innovation: New Estimates of Drug Development Costs. J Health Economics. 2003 (22); 151–185. Note: Data for early 2000s is adjusted to 2000 dollars based on correspondence with study author. DiMasi JA and Grabowski H. The Cost of Biopharmaceutical R&D: Is Biotech Different? Managerial and Decision Economics. 2007 (28): 469–79. Drug Development Costs

Drug Development Costs Reach New Highs

7

SLIDE 8 Source: BIOtech Now. Clinical Success Rate by Disease Area. Available at http://www.biotech-now.org/events/2011/02/release-of-biobiomedtracker-drug- approval-rates-study/attachment/clinical-success-rate-blog-pic-2. Accessed 11/15/12. Higher Overall Success by Disease 15% 14% 12% 13% 12% 7% 11% 3% 2% 7% 2% 4% 3% 2% Infectious Disease Endocrine Autoimmune Respiratory Neurology Cardiovascular Oncology Lead Indications Secondary Indications

New Cancer Therapies Face High Clinical Hurdles

8

SLIDE 9

Even After Approval, Few Medicines Recover Their R&D Costs

500 1000 1500 2000 1 2 3 4 5 6 7 8 9 1 After-T ax Average R&D Costs New Medicines Introduced Between 1990 and 1994, Grouped by Tenths, by Lifetime Sales Just 2 in 10 Approved Medicines Produce Revenues that Exceed Average R&D Costs $M 9 Source: Vernon JA, Golec JH and DiMasi JA. Drug development costs when financial risk is measured using the Fama-French three-factor model. Health Economics. 2009; 002-5.

SLIDE 10

Limited Time for Innovators to Recover R & D Investment

Source: Drug Discovery and Development: Understanding the R&D Process. Available at www.innovation.org. Accessed 11/15/12. CBO, Research and Development in the Pharmaceutical Industry, 2006. Developing a new medicine takes an average of 10 – 15 years; the Congressional Budget Office reports that “relatively few drugs survive the clinical trial process.” Clinical Trials 6 – 7 Years I II III 20- 100 100- 500 1,000- 5,000 5 Compounds IND SUBMITTED Generic Brand Commercializatio n Indefinite 10 – 12 Years Pre- Discovery FDA Review & Scale- up to Mfg. 0.5 – 2 Years 3 – 6 Years ~5,000 – 10,000 Compound s NDA SUBMITTED PHASE Number of Volunteers Preclinical Discovery and Development One FDA- Approved Therapy 10

SLIDE 11

Majority of Biotechnology Investors Fail to Recoup Their Investment 44% 56%

Investors who recouped at least their initial investment Investors who failed to recoup their investment In a study of 180 biotechnology companies, less than half of the investors recouped the money they had invested Source: Biotech M&A Review. Windhover Information 2008 11

SLIDE 12

The Value of Medical Innovation: Living Longer, Better & Healthier Lives

Medical Innovation Involves High Risks and Long Time Horizons Track Record of Success The Promise of Medical Science Medical Innovation Drives Economic Growth and Societal Benefit Delivering on the Promise for Patients

12

SLIDE 13

Longer Life Through Better Medicines 1900-2010

13 1908 – First large- scale adoption of water chlorination 1921 – Diphtheria and TB vaccines 1930s – Pertussis vaccine 1936 – Yellow Fever vaccine 1935 - Sulfa drugs (first antibiotic) 1940s – Penicillin first used as a treatment 1955 – Polio vaccine 1963 – Measles vaccine 1974 – Meningococcal disease vaccine 1985 – Influenza vaccine 1995 – Hepatitis A vaccine 1987 – Azidothymidine (first HIV treatment) Deaths per 100,000 people Life Expectancy >96% Decrease >62% Increase Source: The Hamilton Project at the Brookings Institution. Available at http://www.hamiltonproject.org/multimedia/charts/deaths_from_major_infectious_disease/. Accessed on 11/1/12.

SLIDE 14

New Therapies are the Greatest Contributor to Increased Life Expectancy

45% 73%

New drugs account for 45% in the increase in life expectancy New therapies account for 73% in the increase in life expectancy Source: Lichtenberg FR. NBER Working Paper No. 18235. Pharmaceutical innovation and longevity growth in 30 developing and high-income countries, 2000-2009. 14

SLIDE 15

Impact of New Therapies on Death Rates

Source: Centers for Disease and Prevention’s National Center for Health Statistics. Health, United States, 2011: With Special Feature on Socioeconomic Status and Health. Available at http://www.cdc.gov/nchs/. Accessed 11/16/12. PhRMA Annual Reports 1960-2010. Available at www.phrma.org. Accessed 11/16/12. Millions

f Dollars

100 300 500 700 900 1,100 1,300 1,500 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 Deaths Per 100,000 R&D in Millions Mortality Rate (All Causes) 15

SLIDE 16

Decline in Death Rates from Leading Causes 1960-2011

2011 1960 Deaths Per 100,000 559 194 178 23 54 13 173 169 38 22 15 10 100 200 300 400 500 600 Heart Disease Cancer Stroke Diabetes Pneumonia & Influenza Liver Disease 16 Source: Centers for Disease Control and Prevention and National Center for Health Statistics. National Vital Statistics System. 2011. Available at http://www.cdc.gov/nchs/data/nvsr/nvsr61/nvsr61_06.pdf#page1. Accessed 11/12/12.

SLIDE 17

The Value of Medical Innovation: Living Longer, Better & Healthier Lives

Medical Innovation Involves High Risks and Long Time Horizons Track Record of Success The Promise of Medical Science Medical Innovation Drives Economic Growth and Societal Benefit Delivering on the Promise for Patients

17

SLIDE 18

Investment in Medical Innovation: Outpacing Moore’s Law

0.001 0.01 0.10 1.00 10.00 100.00 1,000.00 10,000.00 100,000.00 1990 2001 2007 2009 2012 <2 weeks ~$10,000 13 years ~$3,000,000,000 Moore’s Law $ Millions Today, it takes 6 hours and $900 to read 150 million bases of genetic code Source: Life Technologies. Available at http://www.lifetechnologies.com/us/en/home.html . Accessed 11/16/12. National Center for Human Genome Research Institute. Available at http://www.genome.gov/. Accessed 11/16/12. 18

SLIDE 19

Medical Innovation is Increasing Patient Survival

140 160 180 200 220 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

As Cancer Patients Live Longer

49 49 50 53 56 60 61 63 67 40 50 60 70 80 1975-1977 1978-1980 1981-1983 1984-1986 1987-1989 1990-1992 1993-1995 1996-1998 1999-2008 5-Year Survival Rates (%) Source: National Cancer Institute, Surveillance Epidemiology and End Results (SEER). Available at http://seer.cancer.gov/faststats/selections.php?. Accessed 11/1/12.

Cancer-Related Death Rates Have Declined Since 1990

Deaths per 100,000 19

SLIDE 20

Cancer Innovation Tells the Story

Annual Percent Change in Death Rate from Cancer Death Rate from Cancer Has Been on the Decline for Over 30 Years Source: Kort EJ, Paneth N, Vande Woude GF. Cancer Res. 2009;69:6500-6505. 0.0 0.5 1.0

1.5
1.0
0.5
2.0

U.S.

War on Cancer – 1972 20

SLIDE 21

Case Study: Survival Rate for Multiple Myeloma Patients Soar with New Innovative Therapies

5-year relative survival rate, myeloma Year of diagnosis 5-Year Survival Rates (%)

50%

INCREASE 1992-2008 Source: National Cancer Institute, Surveillance Epidemiology and End Results (SEER). Available at http://seer.cancer.gov/csr/1975_2009_pops09/browse_csr.php?section=18&page=sect_18_table09.html. Accessed 10/31/12. 21

SLIDE 22

The Value of Medical Innovation: Living Longer, Better & Healthier Lives

Medical Innovation Involves High Risks and Long Time Horizons Track Record of Success The Promise of Medical Science Medical Innovation Drives Economic Growth and Societal Benefit Delivering On The Promise for Patients

22

SLIDE 23

Increasing Life Expectancy Sustains Economic Growth

U.S. Life Expectancy vs. Real GDP per Capita 1929 to 2010 56 60 64 68 72 76 80 8.4 8.8 9.2 9.6 10.0 10.4 10.8 Years Real GDP per Capita Real GDP per Capita (Log) Life Expectancy 23 Source: Professor Mark J. Perry's Blog for Economics and Finance. Carpe Diem blog. Available at http://mjperry.blogspot.com/. Accessed 11/14/12.

SLIDE 24

Medical Innovation = Tremendous Contributions to Economic Growth

24 Source: Murphy KM and Topel RH. The Value of Health and Longevity. J Polit Econ. 2006: 114(4); 871-904.

1

f all economic growth

Over the past 50 years, medical innovation has been the source of more than

2

SLIDE 25

$500 Billion

In Societal Value

A 1%

REDUCTION

In CANCER- related DEATHS in the U.S. Source: Murphy KM and Topel RH. The Value of Health and Longevity. J Political Econ 2006: 114; 5; 871-904. *Extended survival contributes to economic stimulus by affording people more time to purchase and enjoy leisure activities Stimulates economy* Improved quality of life Maximized life expectancy

Living Longer, Better and Healthier Benefits Society

25

SLIDE 26

Spending on Biopharmaceuticals in Perspective: US Spending on Medicines Declined 3.5% Per Capita in 2012

:

Source: CMS National Health Expenditures Jul 2012; IMS Health, National Sales Perspectives, Dec 2012; U.S. Census Bureau Jan 2013; Economic Intelligence Unit Nov 2012; IMS Market Prognosis Apr 2013 Chart Notes: Measures total value of pharmaceutical spending, including generics, branded products biologics, small-molecules, retail and non-retail channels. Value measured at Trade Price – the price paid to wholesalers or manufacturers by retail and non-retail channels and excluding off-invoice discounts and rebates that lower net prices received by the manufacturers. Real Per capita adjustments based on data from U.S. Census Bureau and U.S. Bureau of Economic Analysis.

5%

0% 5% 10% 2002 2007 2012 2017 Growth Real Per Capita Spending Growth 2002-2017 Healthcare Spending Medicines Spending 26

SLIDE 27 250 260 270 280 290 300 310 320 330 340 2011 2012 U.S. Prescription Drug Spending in 2011 and 2012 $ Billion Savings in 2012 due to loss

f exclusivity

Total 2012 spending on

ncology drugs

$28.9 $25.9 $ BIllion Source: IMS Institute for Healthcare Informatics, Declining medicines Use and Costs: For Better or Worse, May 2013. 2012 U.S. Prescription Drug Spending 27 Spending on Biopharmaceuticals in Perspective: Savings from Patent Expirations in 2012 Exceeded Entire US Market for Oncology Products

SLIDE 28

Cost of Treating Cancer Remains a Small and Stable Portion of Total Health Care Expenditures

Source: U.S. Department of Health and Human Services. Centers for Medicare and Medicaid Services. Available at http://www.cms.gov/. Accessed 11/16/12. 4.4 5 6 4.8 4.5 4.7 4.7 4.5 4.9 1 2 3 4 5 6 7 1963 1972 1980 1985 1990 1995 2004 2006 2010 % 28 Spending on Cancer Care within this stable portion of health care expenditures shifting from inpatient treatment to

utpatient treatments, including medicines taken orally

SLIDE 29

New Cancer Therapies: Small Cost, Large Benefit for Patients and Society

~1%

Only 9% of U.S. healthcare spending is dedicated to new therapies, with cancer treatments accounting for ~1%. All Healthcare-Related Costs Prescription Drugs Cancer-Related Therapies Source: Centers for Medicare and Medicaid Services. National Health Expenditure Data. Available at https://www.cms.gov/Research-Statistics-Data-and- Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/Proj2011PDF.pdf. 2011. 29

SLIDE 30

The Value of Medical Innovation: Living Longer, Better & Healthier Lives

Medical Innovation Involves High Risks and Long Time Horizons Track Record of Success The Promise of Medical Science Medical Innovation Drives Economic Growth and Societal Benefit Delivering on the Promise for Patients

30

SLIDE 31

Maximizing the Promise of Science: 5,000+ Medicines in Development

98 Alzheimer’s and Other Dementias 198 Arthritis and Related Conditions 245 Cardiovascular Disorders 200 Diabetes Mellitus 88 HIV/AIDS and Related Conditions 36 Parkinson’s and Related Conditions 383 Respiratory Disorders 460 Rare Diseases 250 Mental and Behavioral Disorders Reflects number of compounds in clinical trials or under review by the FDA for approval through New Drug Application (NDA) or Biological License Application (BLA) pathways. Medicines with multiple indications may appear in more than one category but are counted only once for total (3,091). Source: PhRMA. The Biopharmaceutical Pipeline: Evolving Science, Hope for Patients. Available at http://phrma.org/sites/default/files/2435/phrmapipelinereportfinal11713.pdf. Accessed 1/18/13.

932 Cancer

129 Breast Cancer 84 Colorectal Cancer 140 Lung Cancer 119 Leukemia 82 Skin Cancer 31

SLIDE 32

More People are Surviving Cancer as More New Therapies are Developed

Cumulative number of new cancer therapies Cancer Survivors 20 40 60 80 100 120 140 2 6 8 10 12 14 4 15 43 85 129 11.7 9.5 6.6 4.57 Number of Cancer Therapies Millions of People Source: National Cancer Institute, Surveillance Epidemiology and End Results (SEER). Available at http://seer.cancer.gov/csr/1975_2009_pops09/index.html. Accessed 10/31/12. U.S. Food and Drug Administration’s Drug Approval Database. Available at http://www.accessdata.fda.gov/scripts/cder/drugsatfda/index.cfm. Accessed 11/16/12. 32

SLIDE 33

In 2005, a man diagnosed with multiple myeloma asked me if he would be alive to watch his daughter graduate from high school in a few months. In 2009, bound to a wheelchair, he watched his daughter graduate from college. The wheelchair had nothing to do with his cancer. The man had fallen down while coaching his youngest son's baseball team.

“

The Emperor of All Maladies Author

Dr. Siddhartha Mukherjee

33