Future strategies for pricing and market access in ... strategies for pricing and market access in ... Business as usual? Historically ... biosimilar entry next? New ACO channel and

BOSTON CHICAGO DALLAS DENVER LOS ANGELES MENLO PARK MONTREAL NEW YORK SAN FRANCISCO WASHINGTON

October, 2014

Future strategies for pricing and market access in oncologyDiscussion document

PAGE 1MARKET ACCESS USA ■ OCTOBER 2014

We review the situation of pricing and market access (PMA) in oncology in 3 steps:

Agenda

1. Historical perspective

2. Recent changes / situation today

3. Future developments


Value seen primarily in extending survival (OS)

Focus on US market:

High value market (bulk of sales, “free” pricing and price increases)

Key role of NCCN guidelines and copayment support

Ex-US focus on EU-5:

Increasing use of patient restrictions by payers to limit budget impact/burden

NICE often key EU market access focus, however standard “by-pass” through Cancer Drug Funds

Not representative of broader EU response/opportunity

Japan often an afterthought (limited MA barriers/regulated pricing)

Little or no focus on emerging markets (e.g. pricing mostly in line with EU)

Historically, oncology PMA has been an “exception”

Oncology sales 2013 by region (% of total)

US41%

EU-524%

Japan10%

ROW25%

Source: IMS MIDAS

Total = $90.8bnin 2013


Gleevec

Avastin

HerceptinRevlimid

Velcade

Alimta

Zytiga

Rituxan

Afinitor

Effient

Tracleer

VentavisLetairis

Gilenya

Avonex

Rebif

Betaseron

CopaxoneNeulasta

AranespProcrit

Simponi

Remicade

Orencia

Cimzia

Victoza

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$0 $50 $100 $150 $200 $250 $300 $350

Oncology

CV

MS

Supp. Care(oncology)Immunology

Other CNS agents

Other therapeutics

Historically, oncology PMA has been an “exception” (cont.)Sa

les

in $

mill

ions

Cost per day (in $) – Unit basis

US drug sales and price of therapies across selected therapeutic areas

• Similar picture observed for EU-5• Oncology top therapeutic area

spend (>># 2 diabetes)• Oncology over 30% of preclinical

and phase I R&D activity

Oncology products stand out in their ability to achieve “high prices” and sales

HumiraEnbrel


The price of oncology drugs has increased rapidly over the past 20 years, and a new launch product now typically exceeds $10,000 per month

US

pric

e pe

r mon

th (i

n 20

13 $

)

Time

US launch price per month (in 2013 dollars)

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

1965 1975 1985 1995 2005 2015

Yervoy ‐ BMS (ipilimumab)

Provenge ‐ Dendreon(sipuleucel‐T)

Campath ‐ Sanofi(alemtuzumab)

Arranon ‐ GSK(nelarabine)Proleukin ‐ Nestle

(aldesleukin)

Adcetris ‐ Seattle G.(brentuximab)

Cyramza ‐ Lilly(ramucirumab)

Source: Memorial Sloan Kettering (Peter Bach)


Oncology PMA today at a cross-road

Oncology PMA has been an

“exception”

Future

Business as usual?Historically

Oncology PMA evolves yet remains

an exception?

Transition to “standard PMA”?


Pricing in the US in the spotlight: We are now in the post-Zaltrap era

CEOs under pressure -- may be the target of investigations (e.g. Sovaldi)

Increasing US payer appetite for managing oncology category

Clinical pathway experimentation

Impact of oral oncology on pharmacy budgets

Generic substitution; biosimilar entry next?

New ACO channel and physician practice/provider consolidation

Oncology PMA today at a cross-road – US vs EU vs EM

EU = post-AMNOG world

Germany: from open access to highly constrained access with AMNOG

France: Introduction of economic considerations in HAS assessments

Italy: Systematic use of “risk-sharing” (only reimburse for responders)

Spain: Budgetary pressures on new oncology spend

UK: Cancer drug funding extended till March 2016

Emerging markets

Brazil: mandated coverage for oral therapies by private sector and private/government tiered-pricing

China: End of high quality = “high prices”?

Russia: DLO/regional access critical yet trends murky


Zaltrap demonstrated broadly KOLs’ ability to impact price and access

At Memorial Sloan-Kettering Cancer Center, we recently made a decision that should have been a no-brainer: we are not going to give a phenomenally expensive new cancer drug to our patients.The reasons are simple: The drug, Zaltrap, has proved to be no better than a similar medicine we already have for advanced colorectal cancer, while its price — at $11,063 on average for a month of treatment — is more than twice as high.In most industries something that offers no advantage over its competitors and yet sells for twice the price would never even get on the market. But that is not how things work for drugs. The Food and Drug Administration approves drugs if they are shown to be “safe and effective.” It does not consider what the relative costs might be once the new medicine is marketed.

In an unusual move, a big drug company [Sanofi] said on Thursday that it would effectively cut in half the price of a new cancer drug after a leading cancer center said it would not use the drug because it was too expensive.The move — announced by Sanofi for the colon cancer drug Zaltrap — could be a sign of resistance to the unfettered increase in the prices of cancer drugs, some of which cost more than $100,000 a year and increase survival by a few months at best.Zaltrap came to market in August at a price of about $11,000 a month. Soon after, Memorial Sloan-Kettering Cancer Center in New York decided not to use the drug, saying it was twice as expensive but no more effective than a similar medicine, Avastin from Genentech. Both drugs improved median survival by 1.4 months, doctors there said.


Pricing needs to be more rigorous, evidence-based

Need to manage PR/advocacy opportunity/risk proactively

Portfolio approach needed - need to be consistent from asset to asset

ASCO’s “value algorithm” - a significant PMA risk?

Key role of high impact evidence development

PMA needs to come in early - Pricing and market access considerations should be brought in the clinical decision making early in the process

Need for integrated approaches that maximize opportunities while providing a robust/step-wise factbasefor pricing decisions

Need to prioritize – e.g. key geographies / other key issues

Developing economies: A growing need for tier-pricing and other innovative approaches

Future – End of the “oncology exception”?


Are KOLs/clinicians the main potential barrier to access for the future?

ASCO task force on “Value in Cancer” Care is developing an algorithm scorecard to evaluate drugs’ value based on their: Cost

Efficacy

Side effects

Right now the value framework is intended for doctors to use exclusively on an individual basis with their patients

ASCO does not intend to publish rankings or any other generalizable information about the overall value of specific treatments

Could ASCO’s algorithm transform the US into France or Germany?

Timing uncertainty (i.e. 1st version may not bite but the 2nd could…)

Post-Zaltrap, there is a significant risk that payers use physicians to reduce costs (if physicians don’t do it on their own…)

We are trying to be an honest broker in helping oncologists and patients make their best-informed treatment decisions based on

effectiveness and cost—Lowell E. Schnipper, MD

Chair of ASCO’s Value in Cancer Care Taskforce and Chief of Hematology/Oncology at BIDMC in Boston


$1,000

$3,000$1,000

$200

$200

$200

$400

Prod

uct X

val

ue v

s. S

oC(6

-mon

th tr

eatm

ent

basi

s, k

$)

SoC Cost Product Xvalue

∆ Survival benefit

∆ burden of administration ∆ RW

survival due to longertreatment duration

∆ AE costs

∆ qualityof life

Evidence-based articulation of the value generated is likely to become key for a new therapy to achieve significant premium pricing, particularly in Europe

Key role of high impact evidence development

For such value-based pricing approaches, the “monetization” is typically based on current payments

made by payers for similar level of outcomes

Potential upside from incremental evidence


Conduct appropriate PMA situation analysis prior to initial clinical investments

Identify PMA-specific evidence needs

Update as clinical development progresses

Establish early PMA representation on GPT and GBT teams

Explicit consideration of market access and pricing challenges and opportunities

Clear accountability for local data initiatives

Develop common framework across portfolio

PMA needs to be brought in early in decision-making

Emerging “early PMA” best practicesCommon past PMA pitfalls

Late and/or rushed assessment of potential market access barriers/considerations Sub-optimal pricing and launch decisions

Poorly designed clinical programs that don’t address payer needs, particularly ex-US

Pursue local data initiatives (key for local advocacy)

Lack of consistency from asset to asset, and across geographies

What works for today’s asset may hurt the next company’s blockbuster


Need for integrated approaches that maximize opportunities while providing a robust/step-wise factbase for pricing decisions

Project Summary: Approach

Pricing needs to be rigorous

Payers1

Patients3

Quantitative Research (option for qualitative research)Estimate preference share for Product X: impact of formulary (e.g. restrictions and – for the US - copayment tiers) on physician prescribing behavior

Qualitative and Quantitative Research Impact of product benefits and price on Product X market access (e.g. restrictions and – for the US - copayment tiers) by price point and payer (type)

Quantitative Research (US only)Impact of patient out-of-pocket costs on patient preferences and requests for a lower cost alternative therapy or non-compliance

Model Integration Steps

Fully integrated share –Apply impact of price on physician-driven shares to patient share based on out-of-pocket costs estimate patient demand, therapy requests, and physician compliance. Combines and

Research and Analysis Steps

Physician-driven share – Apply market access outcome (e.g. restrictions and – for the US - copayment tiers) to estimate physician therapy preference shares based on price-access relationship. Combines and .

Fully IntegratedShare and Price5

4 Physician-Driven Share

3 4

1 2

Physicians2


US60%

EU-58%

Japan11%

ROW21%

The “No brainer”: Avoid the time wasters (e.g. Australia)

“More difficult yet key”: Assess launch sequencing / timing options from a PMA perspective

EU pricing barriers – Now bypassing/delaying entry in some EU-5 countries a real consideration

Challenging innovation/clinical benefit ratings and economics (Germany post-AMNOG, France, etc.)

Pricing spillovers on other countries (e.g. Japan)

Japan matters (potential bigger than EU-5?, HTA risk?)

Keep it simple!

Need flexibility as things change

Sales volume uncertainty will remain (even for big countries like Brazil, Russia and China)

Managing price differentials is challenging (exchange rate fluctuations, US price increases,…)

Need to prioritize – e.g. key geographies / other key issues

Data inputs Outputs

Market Share, Revenue, Profit

Financials

Impact of Price on Access

Calculations

Impact of Access on Utilization

0

100

200

300

400

500

600

700

800

900

1,266 2,743 4,219 5,696 7,172 8,649 10,125

Profit (per Patient)

Optimal Price

User Selected Price

0%10%20%30%40%50%60%70%80%90%

100%

1,266 2,683 4,101 5,518 6,936 8,353 9,771

13.3%

86.7%

0.0%

31.8%

68.2%

0.0%0%

20%

40%

60%

80%

100%

Specialist & GP

Specialist only Not Reimbursed

Specialist & GP

Specialist only Not Reimbursed

Distribution of Payer Access

0%

5%

10%

15%

20%

25%

30%

HeFH

Seve

re PAD

High risk C

AD

Acute AC

S

Statin intolerant

Stroke

Type

2 Diabe

tes

All Patient

Segm

ents

11.3%

9.4%

38.9%

32.5%

23.6%

19.7%

0% 20% 40% 60% 80% 100%

At Optimal Price (€6,050)

At User Selected Price (€ 4,010)

Market Share by segment

Prof it-maximizing Price

US Calculations

EU Calculations

Market share by segment

Market share by segment

Distribution of access by segment

Distribution of access by segment

Other assumptions

Scenario analysis controls

Definitions/new molecule customization

Sensitivities to Payer Access

Clinical Trial ResultsHigh Impact 30.0%Medium Impact 20.0%Market Access TrendsHigh Reduction 10.0%Small Reduction 5.0%

% Increase in Price where 0% of Patients are Reimbursed

Sensitivities to Utilization

Patient SensitivitySevere 5.0% 10.0%Clinical Trial ResultsHigh Impact 7.0% 10.0%Medium Impact 3.0% 5.0%Copay AssistanceAssistance 0.0% 0.0%SamplingHigh Sampl ing 0.0% 0.0%

Percentage Point Increase in Specialist & GP Market Share

% Decrease in Δ Market Share

between Prescriber Types

UtilizationUtilization of Less Severe Patients (Assuming Default Clinical Trial Results, Copay Assistance, and Sampling)

Special ist & GP Market Share if First Entrant (% of Patients)

50%

Special ist & GP Market Share for Order of Entry Selected in Outputs Tab (4th)

25%

Market Share (% of Patients) Specialist & GP Special ist only

Not Reimbursed at

Pmin

Not Reimbursed at

PmaxDecrease in Market Share Relative to Specialist & GP

0.0% 60.0% 95.0% 95.0%

Market Share by Prescriber Type 25.0% 10.0% 1.3% 1.3%

Distribution of Payer Access by Patient Segment (Assuming Default Clinical T

Patient Segment Specialist & GP Special ist onlyHeFH € 1,266 € 7,594Severe PAD € 1,898 € 7,594High risk CAD € 1,898 € 7,594Acute ACS € 6,328 € 5,063Statin intolerant € 5,063 € 6,328Stroke € 5,063 € 7,594Type 2 Diabetes € 3,797 € 7,594

Price where 0% of Patients are Reimbursed

Access

Data Type Patient

Minimum Price € 1,266Maximum Price € 10,125

Patient Segment

Number of LDL>100 Patients

Number of LDL>130 Patients

Sensitivity to Util ization

HeFH 986 493 SevereSevere PAD 451 173 SevereHigh risk CAD 3,400 1,700 SevereAcute ACS 1,511 570 Less SevereStatin intolerant 687 344 Less SevereStroke 1,112 438 Less SevereType 2 Diabetes 1,125 563 Less SevereAll Patient Segments 9,272 4,281

Ranges of Price s to Consider

Patient Segment Assumptions

Patient segment characteristics

DirectionsLight green boxes allow you to enter new names that will be used throughout the model.Delete extra Patient Segments if you do not want to include them in the model.

Competitive Landscape Terms Assumption Terms

Least Restrictive Tier Tier 2 Large Population LDL>100Moderately Restrictive Tier Tier 3 or Restricted Small Population (Default) LDL>130Most Restrictive Tier Not Reimbursed

Very Sensitive SevereTier 1 (Highest Tier) Specialist & GP Less Sensitive (Default) Less SevereTier 2 Specialist onlyTier 3 (Lowest Tier) Not Reimbursed

Significantly Positive Results High ImpactModerate Results Medium Impact

Segment 1 HeFH Less Significant Results Low ImpactSegment 2 Severe PADSegment 3 High risk CADSegment 4 Acute ACS Assistance AssistanceSegment 5 Statin intolerant Limited Assistance (Default) No/Limited AssistanceSegment 6 StrokeSegment 7 Type 2 DiabetesSegment 8 High Sampling High SamplingSegment 9 Low Sampling (Default) No/Limited SamplingSegment 10

High Reduction in Access High ReductionMedium Reduction in Access Small ReductionNo Change in Access (Default) None

Copay Assistance

Sampling

Market Access Trends

US Payer Access Tiers

EU Payer Access Prescriber Types

Patient Segments

Targetable Population

Patient Sensitivity to Payer Access & Utilization

Clinical Trial Results ( Impact on Access & Utilization)

PMA scenario modeling can help!

Product X expected peak net sales


Developing economies: A growing need for tier-pricing and other innovative approaches

Bubble size proportional to region’s category

market size

Income per capita (in USD/annum)

Prod

uct X

mar

ket s

hare

(% o

f tot

al)

In this example, high correlation between a

region’s Product X performance and income per

capita

High share performance in cities where income is highest

Low share performance in poorer regions/rural areas

Subsequent analysis helped identify new price

approaches to increase the value of Product X in India

and other developing countries

As drug budgets rise in emerging markets, so is pressure on manufacturers to enable more patients to have access to

modern medicine


Physician/patient advocacy require formalized processes

Critical importance of advocacy is generally recognized

Still few companies have adequate processes for it

Some accountability for performance of advocacy support required

Develop local data early on [for key geographies]

Key enabler for advocacy and innovative pricing

Can help reduce evidence hurdle (e.g. achieve access with Phase II data)

Innovative pricing approaches (MEAs, risk-sharing, etc.)

Win-wins and PR deals?

Italy risk-sharing model spillover to other countries?

Need to ensure outcomes are maximized for payers

The rising importance of effective collaborations with a broader set of stakeholders

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

0.0% 7.5% 15.0% 22.5% 30.0% 37.5% 45.0% 52.5% 60.0% 67.5% 75.0%

Net Costs ($m)

Annual Rate of Relapse

Payer Perspective

Without Contract

With ContractBase Value

12.2%

n/aBreakeven value:

Base value:

100

110

120

130

140

150

160

170

180

190

200

0.0% 7.5% 15.0% 22.5% 30.0% 37.5% 45.0% 52.5% 60.0% 67.5% 75.0%

Net Sales ($m)

Annual Rate of Relapse

Manufacturer Perspective

Without ContractWith ContractBase ValueBreakeven Value

12.2%

29.6%Breakeven value:

Base value:

Assessing and Evaluating Options both from your and payers’ perspective

KOL advocacy can greatly facilitate achieving access with payers, particularly ex-US


In conclusion:

Move early

Early PMA involvement, KOL/local data advocacy development

Be bold

“High stakes” in PMA in oncology as in other high value-based pricing

Think local

Delegate / develop effective early collaborations with key geographies (provide tools and processes to support these collaborations)

Monitor access and key initiatives (e.g. local data generation)

Keep it simple

You can’t do everything

Learn from other therapeutic areas!

Oncology has traditionally been insular…However, no need to reinvent the wheel or revisiting errors from other TAs…

If you don’t, stakeholders (e.g. payers) may do it at your expense…


THANK YOU!

Christian FroisVice-PresidentAnalysis Group, Inc.Boston, MA USATel: 617 425 8304Email: [email protected]

Documents

Future strategies for pricing and market access in ... strategies for pricing and market access in ... Business as usual? Historically ... biosimilar entry next? New ACO channel and