AN INNOVATORS VIEW THE PURSUIT OF CERTAINTY IN AN UNPREDICTABLE MARKET

DAVID GALLAGHER, MANAGING DIRECTOR, PFIZER AUSTRALIA

Overview o  New medicines and vaccines have been one of the greatest contributors to

increased life expectancy in Australia over the last 50 years Ø  Universal access through the PBS has enabled this to occur across the population

o  New medicines come from sophisticated and expensive research, extensive and expensive clinical trials and a large manufacturing investment.

Ø  Many thousands of drug candidates fall by the way side never getting to market o  The bio-pharmaceutical industry invests its resources in this research, bears the

risk and then needs to generate a return over the patent life to continue to invest o  Future advances in life expectancy and quality of life are dependent on innovation

which is dependent on society’s recognition and encouragement of that innovation o  Society recognises and encourages innovation through intellectual property rights

and a reimbursement environment that supports this o  All of these are critical dependent elements in generating improved health and

societal wealth for tomorrow

I . THE VALUE OF INNOVATION

The  first  vaccine  for  rubella  came  onto  the  market  

The miracles of modern medicine

Insulin  tested  in  humans  

1922 1941

Florey  undertakes  clinical  trials  of  penicillin  the    first  modern  an:bio:c    

The  first  effec:ve  cancer  chemotherapy  drug  -­‐  nitrogen  mustard  -­‐  was  discovered  

1946 1952

The  first  polio  vaccine  was  developed  

1957

Thiazides  diure:cs    for  heart  failure  and  hypertension  

1962

Beta  blockers    angina  ,  hypertension    and  heart  failure  

1964

The  first  measles  vaccine  released  

1970 1972

The  insulin  pump  was  invented  

1976

First  H2  blocker  launched  

HIV  now  a  chronic  disease,  not  a  death  sentence  

The miracles of modern medicine

Eradica:on  of  smallpox  

1978 1980

Hepa::s  B  diagnos:c  test  and  vaccine  developed  

First  an:-­‐retroviral  (AZT)  for  HIV  becomes  available  in  Australia  

1987

The  first  sta:n  approved  for  use  by  the  US  FDA  

2000

Americas,  Europe,  Western  Pacific  and  China  declared  Polio  –  free  

2006

The  first  HPV  vaccine  to  be  approved    (Dr  Ian  Fraser)  

2013

Several  new  melanoma  treatments  listed  on  PBS  

2014

Medicines and vaccines have made a critical contribution to life expectancy for Australians

Source:  Australian  Ins:tute  of  Health  and  Welfare,  Australia’s  Health  2012,  Figure  3.6 Source:  Australian  Bureau  of  Sta:s:cs,  Catalogue  3303.0  Causes  of  Death,  Australia,  2010

16% fall in cancer deaths

•  Australians have one of the highest life expectancies in the world •  Over the past few decades Australia has achieved significant gain in

cancer, infection disease and cardiovascular death rates

Medicines and vaccines have made a critical contribution to life expectancy for Australians

79% fall in cardiovascular deaths

96% fall in the infections disease

death rate

Source:  Australian  Bureau  of  Sta:s:cs,  Catalogue  3303.0  Causes  of  Death,  Australia,  2010

•  Advances in medicines and vaccines have contributed to the dramatic decline in infectious disease death rates – a 96% fall

•  Cardiovascular deaths have fallen from 831 deaths per 100,000 of population in 1968 to 174 deaths per 100,000 in 2010

New medicines are transforming Australian lives Dear Pfizer, I am writing to you a letter of appreciation for the access you gave us from March - October 2013.

It is a terrible thing to experience life hanging in the balance and know that your fate is being dictated simply by just being in the right place at the right time, when there happens to be a compassionate use program available. Fortunately for us ....We were in the right place at the right time. But I understand these programs are unsustainable long term, and I truly hope that government funded access be available to patients very soon. It would be nice to know that patients’ lives in the future aren't relying on the stars being aligned, luck and short bursts of company generosity to live, as my husband was. I experienced anticipatory grief, as did our immediate and extended family. And this was not a pleasant experience. Frequent hospital visits were exhausting, parking, petrol, medications, and all associated hospital costs were very stressful. Being able to work, play and live a normal life under the circumstances is an absolute gift that your company gave us through access and was incredibly life changing. The generosity your company has shown us we can never repay....

Economic value •  Employment. Over 15,000 people employed directly in the Pharmaceutical sector* •  Exports. Total exports in the 12 months to the end of February 2014 $3.44Bn** •  Productivity, welfare and tax. Mitigating the impact of avoidable illness

• *=  source:  ABS,  Cat.  5368.0,  Interna:onal  Trade  in  Goods  and  Services  • **=source:  IBIS  World,  Pharmaceu:cals  Products  Manufacturing  in  Australia,  December  2013  

Recent  studies  conducted  by  a  team  led  by  Dr  Deborah  Schofield,  from  the  NHMRC  Clinical  Trials  Centre  and  School  of  Public  Health  at  the  University  of  Sydney.  Dr  Schofield  indicate  that  persons  out  of  the  labour  force  due  to  avoidable  illness  had  significantly  lower  incomes  ,received  significantly  higher  support  payments,  and  paid  significantly  less  tax  than  those  employed  full-­‐:me  or  part-­‐:me.    This  results  in  an  annual  na:onal  loss  of  income  of  over  $17  billion,  an  annual  na:onal  increase  of  $1.5  billion  in  spending  on  government  support  payments,  and  an  annual  loss  of  $2.1  billion  in  taxa:on  revenue.#    #  Schofield  et  al.  BMC  Public  Health  2011,  11:418    

II . THE ENABLERS OF INNOVATION

Enablers of innovation

1.  Excep:onal  research  and  

science  

2.Interna:onally  aligned  IP  standards  

3.  A  robust  and  stable  pricing  

and  reimbursement  

pathway  

Good research and science is a long & unpredictable process

Source:  Source:  Medicines  Australia  Factbook  2013  

The journey is only getting longer and harder

Aspirin (21 atoms)

Growth Hormone (3,000 atoms)

Immunoglobin antibody

(25,000 atoms)

Bike (10 kg)

Race car (1,000 kg)

Fighter Jet (10,000 kg)

SMALL MOLECULE SMALL BIOLOGIC LARGE BIOLOGIC

SIZ

E

CO

MP

LEX

ITY

2. Internationally aligned IP standards

1.  Excep:onal  research  and  

science  

2.Interna:onally  aligned  IP  standards  

3.  A  robust  and  stable  pricing  and  reimburse  

pathway  

Why is it so important?

•  Patents are essential for securing investment capital to fund innovation and development

Patients and Society

•  Creates a robust policy environment to enable innovation Government

Innovative Pharma/Biotech industry

•  Through the appropriate protection of IP there will be continued investment in new medicines/therapies benefitting all

but...resist supporting the infrastructure that enables

it (patent term restorations,

data exclusivity etc)

We want innovation...

THE CONFLICT

•  “No matter how brilliant a new idea or discovery is, it can never flourish unless someone takes a bet on it”

•  “Free and open knowledge without the profit motive sounds like the

quickest way to help the world, but this often slows down the ability for knowledge to help”

•  “ To change the world through innovation, having the best academics, researchers and scientist only get you half way. In Australia it’s what we do after we find a discovery or think of a new idea that lets us down”

The Australian, Ben McNeil, 28th August 2013 , ARC QEII Research fellow, UNI NSW

THE DANGER

•  Evergreening - the constant renewal of a patent through incremental innovation.

•  A false and misleading concept - No later patent can be issued for the same invention, and no later granted patents can extend the term of an earlier one.

•  Generic companies are free to use the information in the original patent for their own commercial gain upon its expiry.

•  Merits of the innovation can only be decided by patients and medical professionals.

•  Incremental innovation is just as important to development in medicines as major scientific breakthroughs (antibiotics, statins, ACE- inhibitors, antiepileptic drugs, anti cancer agents, treatment for HIV and diabetes)

Misconceptions at play

I.  Follow-on patents

•  Duration of standard patent 20 years – ‘effective patent life’ of 15 yrs

•  Enacted in 1998 – PTE up to 5 years. Why? -  In recognition of the unique nature of regulatory requirements for

pharmaceuticals to gain market approval -  To provide an effective patent life more in line with that available to

inventions in other fields of technology; and -  To ensure Australia remains competitive.

However.... •  Average ‘effective life’ for pharmaceutical products remains

between 11 & 12 yrs •  Breadth of Australian PTE limited in comparison to EU, UK

and US (additional paediatric extension)

Misconceptions at play

II.  Patent term extensions

•  5 years, among the lowest among OECD (and other developed) countries

Misconceptions at play

III.  Data exclusivity

Source:    Frost  &  Sullivan,  The  Impact  of  Australia’s  Data  Exclusivity  Regime  on  Australia’s  Healthcare  System,  2013;    and,  Interna:onal  Federa:on  of  Pharmaceu:cal  Manufacturers  and  Associa:ons,  Data  Exclusivity:  Encouraging  Development  of    

New  Medicines,  2011.    

Misconceptions at play

III.  Data exclusivity

Benefits for Australia’s Economy -  Australian biotech companies currently face a competitive

disadvantage to the US and EU. -  Extending data exclusivity would bring Australia in line

with global best-practice, giving Australian companies the opportunity to compete more effectively for global R&D investment dollars .

Benefits for Australian Patients -  Early access to medicines via clinical trial programs. -  Without equivalent data exclusivity and IP, patients are

delayed access with companies launching in countries with superior IP protection first.

-  Data exclusivity encourages investment in researching further indications of existing medications.

“Patents aren’t the oppressive force that they’re often claimed to be. In reality they are often part of a strategy that fosters innovation and promotes the search for new technologies that benefit us all.” IP

Australia May 2012

The 2013 Review of Health and Medical Research stressed that there is an urgent need for the Australian government to ensure

the strength and stability of Australia’s IP system.

McKeon Review - Strategic Review of Health and Medical Research – Better Health through Research

Enablers of innovation

1.  Excep:onal  research  and  

science  

2.Interna:onally  alighted  IP  standards  

3.  A  robust  and  stable  pricing  and  reimburse  

pathway  

3. A robust, stable pricing and reimbursement pathway

The partnership with both Labor and Coalition Governments has ensured the sustainability the PBS and savings are accumulating

Simplified price disclosure will deliver further savings from 1 Oct 2014

96% fall in the infections disease

death rate

Australia – Right level of investment?

0.0   0.5   1.0   1.5   2.0   2.5   3.0  

Hungary  

Greece    

United  States  

Japan  

Canada  

France  

Belgium  

Germany  

Ireland  

OECD31  

Australia  

Pharmaceu)cal  Expenditures  as  a  %  of  GDP  

Public   Private  

Source: Expenditure on pharmaceuticals per capita and as a share of GDP, 2011 – Health at a Glance OECD Indicators 2013

PBS Expenditure – Where to from here?

0  

2  

4  

6  

8  

10  

12  0.57%  0.59%   0.56%   0.57%  

NaPonal  Commission  of  Audit,  April  2014  

AUS$BN

 

0.58%  

The Market View from IMS

26

Source:  IMS  Health  Market  Prognosis  (Published  March  2014).    IMS  forecast  is  built  upon  GDP  forecasts  as  well  as  our  assessment  of  specific  pharmaceu:cal  dynamics  and  demographic  impacts  

Australia  Pharmaceu)cal  Market  Forecast  2013-­‐2018  (at  actual  prices)      

Retail  +  Hospital    

0.0%

0

1.0%

1.5%

10

5

-1.0%

-0.5%

0.5%

15 13.8  

Growth  (%

)  

2018 (f)

14.0  

2017 (f)

Sales  (Billion

 AUD)  

2016 (f)

13.9  

2015 (f)

13.7  

2014 (f)

13.6  

2013 (a)

13.7  

Retail  +  Hospital  sales  Retail  +  Hospital  growth

CAGR  2013-­‐2018  

Retail   -­‐0.1%  

Hospital   2.7%  

Total   0.5%  

Annual Growth(%)

2013   -0.6% 2014   -0.5% 2015   0.3% 2016   0.8% 2017   1.0% 2018   0.8%

The generics are predicted to grow faster than all other categories including OTC

27

Source:  IMS  Health  Market  Prognosis(Published  March  2014),  2014-­‐2018  Australia  (*)  at  ex-­‐manufacturer  price  levels,  not  including  rebates  and  discounts  

Segment  Sales  +  Forecast  (AU$  -­‐  ex  manufacturer)  

Non-­‐generics:  Sales  of  ‘protected’,  ‘no  longer  protected’  and  ‘never  protected’  products    Generics  :  Sales  of  generic  products  Other:  Sales  of  OTC,  non-­‐categorized  and  other  products  

               2013-­‐2018  CAGR  Non-­‐generics  -­‐1.8%  Generics    5.5%  Others    1.4%  Total      0.5%  

0%  

100%  

80%  

60%  

40%  

20%  

%  sh

are  of  aud

ited  market  

2018  

52%  

23%  

25%  

2017  

53%  

22%  

24%  

2016  

54%  

22%  

24%  

2015  

55%  

21%  

24%  

2014  

56%  

20%  

24%  

2013  

58%  

18%  

24%  

2012  

60%  

17%  

23%  

2011  

64%  

14%  

21%  

2010  

66%  

14%  

20%  

Generics  Others   Non-­‐generics  

However access is an issue

Source: Wonder Drug Consulting Jan 2014

Positive progress, more work to be done

•  Health Minister Peter Dutton has kept pre-election commitments –  Increasing the PBS listing Cabinet threshold to $20million –  Listing the backlog of medicines previously recommended by the PBAC

•  The recent reinvigoration of the Access to Medicines Working Group (AMWG)

•  Consultation is important for certainty.

The question of sustainability

Financially  

Meet  future  health  needs  of  Australians  

Timely  and  affordable  access  

III . THE BENEFITS OF CERTAINTY

What does uncertainty produce ?

•  Reduced R&D spend •  Reduced innovative medicines •  Reduced foreign direct investment •  Reduced employment •  Poorer health outcomes •  Loss of economic value

Certainty delivers a virtuous circle

1.  Excep:onal  research  and  

science  

2.Interna:onally  aligned  IP  standards  

3.  A  robust  and  stable  pricing  

and  reimbursement  

pathway  

Summary o  New medicines and vaccines have been one of the greatest contributors to

increased life expectancy in Australia over the last 50 years

o  The bio-pharmaceutical industry invests the resources over the long term, bears the risk and then generates a return over the patent life

o  To continue to see similar advances in life expectancy and quality of life society needs to recognise and fairly reward pathways of innovation

o  That desirable and beneficial outcome will only occur in the right regulatory, intellectual property and reimbursement environment

o  This can be achieved delivering sustainable improvements in healthcare within a sustainable PBS

Patients are relying on innovative medicines to address a broad range of health issues