TABLE OF CONTENTS · biopharmaceutical innovation will be key in addressing future health care challenges and helping patients lead better lives. 3 . 1 • Advances in Treatment

TABLE OF CONTENTS

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

Chapter 1 Advances in Treatment . . . . . . . . . . . . . . . . . . 3

Chapter 2 Research and Development . . . . . . . . . . . . . 21

Chapter 3 Spending and Costs. . . . . . . . . . . . . . . . . . . . 43

Chapter 4 Outcomes and Savings . . . . . . . . . . . . . . . . . .59

Chapter 5 Communications with Patients and Health Care Providers. . . . . . . . . . . . . . . 77

Chapter 6 Economic Impact . . . . . . . . . . . . . . . . . . . . . . 89

INTRODUCTION

This chart pack provides facts and figures about prescription medicines and their role in the health care system. Topics include medicines’ impact on health and quality of life, the drug discovery and development process, health care spending and costs, the challenge of treatment gaps and improving use of prescribed therapies, communications with patients and health care providers, and the role of the biopharmaceutical sector in the U.S. economy.

Data and information found in this publication were drawn from a wide range of sources, including government agency reports, peer-reviewed journals, and the Pharmaceutical Research and Manufacturers of America’s (PhRMA’s) own research and analysis. PhRMA hopes this publication provides useful context for discussions about the role of medicines in the U.S. health care system.

1

1 • Advances in Treatment

1 ADVANCES IN TREATMENT Medicines’ Impact on Health and Quality of Life Prescription medicines continue to yield important advances against serious disease, helping patients live longer and healthier lives. Over the last 25 years, prescription medicines have transformed the trajectory of many debilitating diseases, including HIV/AIDS, cancer, and heart disease, resulting in decreased death rates, improved health outcomes and often better quality of life for patients. Recent advances continue to improve outcomes for patients across a broad range of chronic conditions — including, for example, diabetes and hepatitis C. Medicines today are at the forefront of science with an increasing number of targeted therapies that, in some cases, are providing the very first treatments for patients suffering from a number of rare diseases. Continued advances in biopharmaceutical innovation will be key in addressing future health care challenges and helping patients lead better lives.

3


Increases in U.S. Life Expectancy

4

While nutrition, sanitation, other public health measures, and expanded access to care have been major sources of increasing human health, innovative medicines have also played a profound role in this progress.

— The President’s Council of Advisors on Science and Technology1

Source: President’s Council of Advisors on Science and Technology1; CDC2

71.1 73.1

74.7

77.4 78.8 79.3

81.1

65.6 66.6 67.1

70 71.8

74.1

76.3

60

65

70

75

80

85

1950 1960 1970 1980 1990 2000 2011

At B

irth

(in Y

ears

)

Women

Men

*Life expectancies prior to 1997 were calculated using a slightly different methodology than for those post-1997.

U.S. Life Expectancy 1950–2011*

“ “

1 • Advances in Treatment 5

A Decade of Advances

Sources: FDA3; Analysis Group4


Multiple Sclerosis Oral and biologic treatments approved over the past 15 years have dramatically improved outcomes for MS patients, slowing disability progression and offering fewer relapses.

HIV/AIDS In the last two decades, advances in treatment have contributed to a more than 80% decline in death rates and transformed the disease from an acute, fatal illness to a chronic condition.

Medicines Are Transforming the Treatment of Many Difficult Diseases

6

Sources: National Multiple Sclerosis Society5; Boston Healthcare6; CDC7; American Cancer Society8

Cancer New therapies have contributed to a 20% decline in cancer deaths since the 1990s. Today, 2 out of 3 people diagnosed with cancer survive at least 5 years.

Rheumatoid Arthritis Therapeutic advances have transformed the RA treatment paradigm over the last 20 years, from focusing on symptom management to now aiming for slowed disease progression and even disease remission.


Rheumatoid Arthritis: Medicines Are Transforming the Lives of Patients

7

THEN: Treatments for RA were effective at reducing joint inflammation but were limited to treating the symptoms of the disease, allowing for steady progression from disease onset to disability fairly rapidly.

NOW: Biologic disease-modifying antirheumatic drugs (DMARDs) can target the underlying sources of inflammation, which improves physical functioning and prevents irreversible joint damage — making disease remission possible.

Source: Boston Healthcare9

HEALTHY JOINT HAND WITH RA


HIV/AIDS: Decline in Death Rates The number of U.S. AIDS deaths decreased dramatically following the introduction of highly active antiretroviral treatment (HAART). Today, research shows that 20-year-olds diagnosed with HIV can expect to live into their early 70s — a life expectancy close to that of the general population.10

8

Sources: H. Samji, et al.10; CDC11

16.2

6.0 5.3 5.0 4.7

4.2 3.7

3.1 2.5

0

2

4

6

8

10

12

14

16

18

1995 1997 1999 2001 2003 2005 2007 2009 2011

1996: HAART becomes widely available

Deat

hs P

er 1

00,0

00 P

opul

atio

n

Annual Number of AIDS Deaths in the United States


HIV/AIDS: Treatment Advances Build over Time

9

Dramatic declines in death rates did not occur with one single breakthrough, but rather through a series of advances providing important treatment options for patients over time.

Source: Boston Healthcare12


Cancers: Decline in Death Rates

10

According to the American Cancer Society, improvements in treatment contributed to the increase in cancer survival.13

Source: R. Siegal, et al.13; CDC14

4.7% 3.9%

-7.6%

-15.5% -16%

-11%

-6%

-1%

4%

1970–1980 1980–1990 1990–2000 2000–2011

Percent Change by Decade in U.S. Death Rates from Cancer


Chronic Leukemias: Increased Survival Rates

11

When imatinib was first approved in 2001 to treat chronic myeloid leukemia (CML), the full value of the medicine had not been completely realized.

Sources: Boston Healthcare15; C. Gambacorti-Passerini, et al.16; American Cancer Society17; B. Druker, et al.18; FDA19; CDC20

• After initial approval, continued research revealed that imatinib had an even greater impact when initiated earlier in the progression of the disease.

• Further research also revealed that imatinib was effective in combating other devastating forms of leukemia, as well as gastrointestinal stromal tumors.

• Today, survival rates have improved dramatically and CML patients are living close to normal life spans.17

31%

89%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Prior to Introduction ofImatinib

After Introduction ofImatinib

5-Year Survival Rates for CML Patients19,20


0

50

100

150

200

250

300

350

400

450

500

Number of Drug Approvals for Rare Diseases*

Cumulative Prior Orphan Drug Approvals New Orphan Drug Approvals

Rare Diseases: Drug Approvals for Rare Diseases Have Increased Rare diseases are those that affect 200,000 or fewer people in the United States. There are nearly 7,000 rare diseases affecting a combined 30 million Americans.

12

Source: FDA21

1983: Orphan Drug Act passed

*Approvals for rare diseases include initial approvals of new medicines and subsequent approvals of existing medicines for rare disease areas.


402 397 389 375 356

332 314 310 296

280 267 248

232 211

191 180 174

0

50

100

150

200

250

300

350

400

450

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Age-

adju

sted

Dea

th R

ates

per

100

,000

Cardiovascular Disease: Declining Rates of Death and Heart Failure

Factors contributing to the decline in heart disease and stroke mortality include better control of risk factors, improved access to early detection, and better treatment and care, including new drugs and expanded uses for existing drugs.

— U.S. Centers for Disease Control and Prevention22

U.S. Death Rates Due to Diseases of the Heart*

*Age-adjusted death rates based on Year 2000 U.S. Standard Population. 1980–1998 causes of death are classified by the Ninth Revision International Classification of Diseases (ICD-9). Beginning in 1999, causes of death are classified by the Tenth Revision International Classification of Diseases (ICD-10).

“ “

Source: CDC22,23

13


Hepatitis C: Recent Treatment Advances Dramatically Improve Outcomes for Patients With baby boomers representing 75% of adults infected with Hepatitis C,24 in the absence of recent treatment advances the impact of the disease would be expected to grow substantially in coming years.

14

Sources: CDC24; Cleveland Clinic25; B. Horoldt, et al.26; E. Lawitz, et al.27

• Hepatitis C kills 5 times as many Americans as AIDS and is the leading cause of liver transplants and liver cancer.24

• With the recent introduction of direct-acting antiviral (DAA) medicines:25

Cure rates have reached 90% or higher Treatment duration has been cut from

48 weeks to as low as 12 weeks Side effects have gone from debilitating

to few.

50%

90%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Interferon-basedTherapy*(2000s)

DAAs(2013)

Potential Cure Rates for Hepatitis C Patients26,27

*Previous standard treatment option.


Future Impact: Need for New Treatments for Alzheimer’s Disease The development of a new treatment that delays the onset of Alzheimer’s could reduce Medicare and Medicaid spending on patients with Alzheimer’s by more than $100 billion annually by 2030.*

Source: Alzheimer’s Association28

15

*Assumes research breakthroughs that delay the average age of onset of Alzheimer’s disease by 5 years beginning in 2010. **Projected savings to Medicare and Medicaid assume research breakthroughs that slow the progression of Alzheimer’s disease. This would dramatically reduce spending for comorbid conditions and expensive nursing home care.

$122 $174

$297

$529

$805

$122 $140 $157

$276

$443

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

2010 2020 2030 2040 2050

Proj

ecte

d M

edic

are

and

Med

icai

d Sp

endi

ng

(in B

illio

ns)

Current Trajectory

Projection with Delayed Onset Treatment Advance

Projected Annual Medicare & Medicaid Spending, with and Without New Treatment Advances (Billions)**


Notes and Sources

16

1. President’s Council of Advisors on Science and Technology. “Report to the President on Propelling Innovation in Drug Discovery, Development, and Evaluation.” Washington, DC: PCAST, September 2012.

2. U.S. Department of Health and Human Services (HHS), CDC, National Center for Health Statistics (NCHS). "Health, United States, 2008 with Chartbook." Hyattsville, MD: HHS, 2009; 1950–2006 data from M. Heron, et al. "Deaths: Final Data for 2006." National Vital Statistics Reports 2009; 57(14): 5. Hyattsville, MD: NCHS. Available at www.cdc.gov/nchs/data/nvsr/nvsr57/nvsr57_14.pdf (accessed June 2010); 2007 data from J. Xu, et al. "Deaths: Final Data for 2007." National Vital Statistics Reports 2010; 58(19): 13. Hyattsville, MD: NCHS. Available at www.cdc.gov/nchs/data/nvsr/nvsr58/nvsr58_19.pdf (accessed June 2010); 2008–2009 data from K. Kochanek, et al. "Deaths: Final Data for 2009." National Vital Statistics Reports 2011; 60(3): 1. Hyattsville, MD: NCHS. Available at www.cdc.gov/nchs/data/nvsr/nvsr60/nvsr60_03.pdf (accessed March 2013); 2010–2011 data from D.L. Hoyert and J. Xu. "Deaths: Preliminary Data for 2011." National Vital Statistics Reports 2012; 61(6): 5. Hyattsville, MD: NCHS. Available at www.cdc.gov/nchs/data/nvsr/nvsr61/nvsr61_06.pdf (accessed December 2012).

3. U.S. Food and Drug Administration. Available at www.fda.gov (accessed February 2014). U.S. Food and Drug Administration (FDA). “Drugs@FDA: FDA Approved Drug Products.” Available at: www.accessdata.fda.gov/scripts/cder/drugsatfda/.

4. G. Long and J. Works. “Innovation in the Biopharmaceutical Pipeline: A Multidimensional View.” Boston, MA: Analysis Group, Inc., January 2013. Available at www.analysisgroup.com/uploadedFiles/Publishing/Articles/2012_Innovation_in_the_Biopharmaceutical_Pipeline.pdf (accessed December 2013).

5. The National Multiple Sclerosis Society. “The MS Disease-modifying Medications: General Information.” Washington, DC: National Multiple Sclerosis Society, April 2013. Available at www.nationalmssociety.org/NationalMSSociety/media/MSNationalFiles/Brochures/12-3-7_DiseaseModifyingDrugs.pdf.

6. C. Augustyn, B. Walker, and T.F. Goss. “Recognizing the Value of Innovation in the Treatment of Rheumatoid Arthritis.” Boston, MA: Boston Healthcare Associates, March 2013. Available at www.phrma.org/sites/default/files/1888/rawhitepaperfinal2.pdf.

7. U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Health Statistics. “Health, United States, 2010: With Special Feature on Death and Dying, table 35.” Hyattsville, MD: HHS, 2011. Available at www.cdc.gov/nchs/data/hus/hus10.pdf#045 (accessed February 2014).

8. American Cancer Society. “Cancer Treatment and Survivorship Facts & Figures 2012−2013.” Atlanta, GA: American Cancer Society, 2012.


Notes and Sources

17

9. C. Augustyn, B. Walker, and T.F. Goss. Op cit.

10. H. Samji, et al. “Closing the Gap: Increases in Life Expectancy Among Treated HIV-Positive Individuals in the United States and Canada.” PLoSONE 2013; 8(12): e81355. Available at www.plosone.org/article/info%3Adoi%2F10.1371%2Fjournal.pone.0081355;jsessionid=13B02C0B1D51F789C26E04085D6CB98 (accessed March 2014).

11. HHS, CDC, NCHS. "Health, United States, 2003 with Chartbook on Trends in the Health of Americans." Hyattsville, MD: HHS, 2003; HHS, CDC, NCHS. "Health, United States, 2009 With Chartbook on Medical Technology." Hyattsville, MD: HHS, 2010; 2007 data from J. Xu, K.D. Kochanek, and B. Tejada-Vera. "Deaths: Preliminary Data for 2007." National Vital Statistics Reports 2009; 58(1): 5. Hyattsville, MD: NCHS. Available at www.cdc.gov/nchs/data/nvsr/nvsr58/nvsr58_01.pdf (accessed December 2009); 2009 data from K.D. Kochanek et al. "Deaths: Final Data for 2009." National Vital Statistics Reports 2011; 60(3): 41. Hyattsville, MD: NCHS. Available at www.cdc.gov/nchs/data/nvsr/nvsr60/nvsr60_03.pdf (accessed December 2012); 2011 data from D.L. Hoyert and J. Xu. "Deaths: Preliminary Data for 2011." National Vital Statistics Reports 2012; 61(6): 38. Hyattsville, MD: NCHS. Available at www.cdc.gov/nchs/data/nvsr/nvsr61/nvsr61_06.pdf (accessed December 2012).

12. C. Augustyn, B. Walker, and T.F. Goss. “Recognizing the Value of Innovation in HIV/AIDS Therapy.” Boston Healthcare Associates, December 2012.

13. R. Siegel, et al. “Cancer statistics, 2014.” CA: A Cancer Journal for Clinicians; 64(1): 9–29. Available at http://onlinelibrary.wiley.com/doi/10.3322/caac.21208/pdf (accessed March 2014).

14. HHS, CDC, NCHS. "Health, United States, 2011 with Special Features on Socioeconomic Status and Health." Hyattsville, MD: HHS, 2012; K.D. Kochanek et al. "Deaths: Final Data for 2009." National Vital Statistics Reports 2011; 60(3): 32. Hyattsville, MD: NCHS. Available at www.cdc.gov/nchs/data/nvsr/nvsr60/nvsr60_03.pdf (accessed December 2012); D.L. Hoyert and J. Xu. "Deaths: Preliminary Data for 2011." National Vital Statistics Reports 2012; 61(6): 28. Hyattsville, MD: NCHS. Available at www.cdc.gov/nchs/data/nvsr/nvsr61/nvsr61_06.pdf (accessed December 2012).

15. T.F. Goss, E. H. Picard, and A. Tarab. “Recognizing the Value in Oncology Innovation.” Boston, MA: Boston Healthcare Associates, June 2012. Available at www.phrma.org/sites/default/files/flash/phrma_innovation_oncology.pdf (accessed March 2014).

16. C. Gambacorti-Passerini, et al. "Multicenter Independent Assessment of Outcomes in Chronic Myeloid Leukemia Patients Treated with Imatinib." Journal of the National Cancer Institute 2011; 103(7): 553–61.


Notes and Sources

18

17. Thirty-one percent 5-year survival rate reported for cases diagnosed during 1991−1992. American Cancer Society. “Cancer Facts and Figures 2012.” Atlanta, GA: American Cancer Society, 2012.

18. B.J. Druker, et al. “Five-Year Follow-up of Patients Receiving Imatinib for Chronic Myeloid Leukemia.” New England Journal of Medicine 2006; 355(23):2408−17.

19. FDA. "Helping Rare Disease Patients Find Their Voice." 16 November 2013. FDA.gov. At www.fda.gov/ForConsumers/ConsumerUpdates/ucm293213.htm (accessed March 2014); FDA, Office of Orphan Product Development. “Orphan Drug Designations and Approvals Database.” Available at www.accessdata.fda.gov/scripts/opdlisting/oopd/index.cfm (accessed March 2014).

20. HHS, CDC, NCHS. “Health, United States, with Chartbook on Trends in the Health of Americans.” Hyattsville, MD: HHS, 2006. Available at www.cdc.gov/nchs/data/hus/hus06.pdf (accessed December 2012).

21. FDA. "Helping Rare Disease Patients Find Their Voice." 16 November 2013. FDA.gov. At www.fda.gov/ForConsumers/ConsumerUpdates/ucm293213.htm (accessed March 2014); FDA, Office of Orphan Product Development. “Orphan Drug Designations and Approvals Database.” Available at www.accessdata.fda.gov/scripts/opdlisting/oopd/index.cfm (accessed March 2014).

22. HHS, CDC, NCHS. “Health, United States, with Chartbook on Trends in the Health of Americans.” Hyattsville, MD: HHS, 2006. Available at www.cdc.gov/nchs/data/hus/hus06.pdf (accessed December 2012).

23. CDC, NCHS, National Vital Statistics System. "Unpublished table NEWSTAN 79–98S created on 00/03/02: Age-Adjusted Death Rates for 72 Selected Causes by Race and Sex Using Year 2000 Standard Population: United States, 1979–98." Mortality. Atlanta, GA: CDC, 2002. Available at www.cdc.gov/nchs/data/mortab/aadr7998s.pdf (accessed February 2013); D.L. Hoyert, et al. “Deaths: Final Data for 1999.” National Vital Statistics Reports 2001; 49(8): 1–3. Hyattsville, MD: NCHS. Available at www.cdc.gov/nchs/data/nvsr/nvsr49/nvsr49_08.pdf (accessed February 2013); K.D. Kochanek, et al. "Deaths: Final Data for 2009." National Vital Statistics Reports 2011; 60(3): 32. Hyattsville, MD: NCHS. Available at www.cdc.gov/nchs/data/nvsr/nvsr60/nvsr60_03.pdf (accessed December 2012); D.L. Hoyert and J. Xu. "Deaths: Preliminary Data for 2011." National Vital Statistics Reports 2012; 61(6): 28. Hyattsville, MD: NCHS. Available at www.cdc.gov/nchs/data/nvsr/nvsr61/nvsr61_06.pdf (accessed December 2012).


Notes and Sources

19

24. CDC. “Hepatitis C: Why Baby Boomers Should Get Tested.” Atlanta, GA: CDC, March 2013. Available at www.cdc.gov/knowmorehepatitis/Media/PDFs/FactSheet-boomers.pdf (accessed March 2014).

25. Cleveland Clinic. “Top 10 Medical Innovations for 2014: #4 New Era in Hepatitis C Treatment.” October 2013. Available at http://summit.clevelandclinic.org/Top-10-Innovations/Top-10-for-2014.aspx (accessed March 2014).

26. B. Horoldt, et al. "Results of Combination Treatment With Pegylated Interferon and Ribavirin in Cirrhotic Patients With Hepatitis C Infection." Liver International 2006; 26(8):650-659.

27. E. Lawitz, et al. “Sofosbuvir in Combination with Peginterferon Alfa-2a and Ribavirin for Non-cirrhotic, Treatment-Naive Patients with Genotypes 1, 2, and 3 Hepatitis C Infection: a Randomised, Double-Blind, Phase 2 Trial.” The Lancet Infectious Diseases 2013; 13(5): 401−408.

28. Alzheimer's Association. “Changing the Trajectory of Alzheimer's Disease: A National Imperative.” Washington, DC: Alzheimer's Association, May 2010.

2 • Research and Development

2 RESEARCH AND DEVELOPMENT The Process of Drug Discovery and Development More than 5,000 medicines are in development globally with the potential to aid U.S. patients. PhRMA member companies invested $51.1 billion in biopharmaceutical research and development (R&D) in 2013, accounting for the majority of private biopharmaceutical R&D spending. Development of new medicines is a rigorous and long process, and it has become more costly and complex over the last decade. Even among the new drug candidates reaching Phase III trials, about one-third fail. Companies “race” to bring the first medicine in a class to market, and just two in ten approved drugs are ultimately commercial successes. Recent biopharmaceutical advances — driven by scientific research and creative ingenuity — would not have been possible without a system of laws that provide the structure, stability, and opportunity for the needed investment.

21


Medicines in Development by Regulatory Phase Globally In 2011, 5,408 medicines* were in clinical development worldwide with the potential to aid U.S. patients.

22

Source: Analysis Group1 *Defined as single products which are counted exactly once regardless of the number of indications pursued.

Phase I 2,164

Phase II 2,329

Phase III 833 Regulatory

Review in the United States, 82


58

13

30

38

39

34

176

30

25

26

28

58

43

71

0 50 100 150 200 250 300 350

Other

Transplantation

Skin Diseases

Respiratory Disorders

Neurologic Disorders

Musculoskeletal Disorders

Infectious Diseases

Genetic Disorders

Eye Conditions

Digestive Disorders

Diabetes/Related Conditions

Cardiovascular Disease

Cancers/Related Conditions

Blood Disorders

Autoimmune Disorders

More than 900 Biologic Medicines in Development in 2013 Biologic medicines — large, complex molecules derived from living cells — frequently represent novel strategies that have the potential to transform the clinical treatment of disease.

23

Source: PhRMA2

Source: Biotechnology Research Continues to Bolster Arsenal Against Disease with 633 Medicines in Development. PhRMA, 2008.

*Some medicines are being explored in more than one therapeutic category.

338


Personalized Medicines Increasingly Shape the R&D Pipeline Biopharmaceutical companies have increased R&D investment in personalized medicine by 75% between 2005 and 2010.3

24

Sources: Tufts CSDD3; J.T. Aquino4; D. Nelleson, et al.5

Personalized Medicine Trials by Therapeutic Area Initiated on or Before January 20095

Therapeutic Area No. of Trials

Cardiovascular 16

Central Nervous System/Neurology/Behavior

20

Dermatology 1

Endocrinology/Metabolics 8

Gastrointestinal 3

Infectious Disease 10

Oncology/Hematology 85

Ophthalmology 2

Renal 3

Respiratory/Pulmonary 7

Total 155

“

“

Oncology is on fire with [personalized medicine], with treatment selections based on individual molecular characteristics. This is also happening with chronic infectious diseases, and genetic diseases are not far behind.

— Janet Woodcock, Director Center for Drug Evaluation and Research,

U.S Food and Drug Administration4


Potential First-in-Class Medicines in the Pipeline An average of 70% of drugs across the pipeline are potential first-in-class medicines.

25

Source: Analysis Group6

Percentage of Projects in Development that Are Potentially First-in-Class Medicines in Selected Therapeutic Areas, 2011

57%

69%

71%

72%

79%

80%

81%

84%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Infections

HIV/AIDS

Diabetes

Immunology

Psychiatry

Cancer

Cardiovascular

Neurology


0

50

100

150

200

250

300

Antisense RNAiTherapies

CellTherapies

GeneTherapies

ConjugatedmAbs

Cutting-Edge Research Drives Development of Medicines Tomorrow’s medicines are often born from innovative scientific approaches.

26

Source: Analysis Group7

Select examples include:

Antisense RNA interference (RNAi) targets RNA in order to silence gene expression associated with certain diseases.

Cell therapy is a type of regenerative medicine, introducing new cells into a tissue in order to treat a disease.

Gene therapy involves the alteration of genes within cells and tissue, often to counteract genetic defects.

Conjugated Monoclonal Antibodies (mAbs) target and kill tumors while sparing nearby healthy cells.

Medicines in Development by Select Scientific Approach, 2011*

*Medicines in development as of December 2011.


The Research and Development Process Developing a new medicine takes an average of 10 to 15 years.

27

Source: PhRMA8


Government and Industry Roles in Research & Development Government and biopharmaceutical industry research complement one another.

28

Sources: PhRMA9; NIH Office of Budget10; adapted from E. Zerhouni11

Clinical Research

Translational Research

Basic Research

Clinical Research

Translational Research

Basic Research

National Institutes of Health: $29.2 Billion*

PhRMA Member Companies: $51.1 Billion

*NIH spending is for FY 2012. PhRMA member companies’ spending is estimated for CY 2012. PhRMA member companies account for the majority of private biopharmaceutical R&D spending. Nonmember company data are not included.


Innovative Biopharmaceutical Companies Sit at the Heart of a Dynamic R&D Ecosystem in the U.S. While research-based biopharmaceutical companies are responsible for bringing new medicines to patients, they are part of an ecosystem marked increasingly by collaborations with academic institutions, government agencies, venture capital firms, nonprofit foundations, patients and others, as illustrated.

29

Source: PhRMA12


Corporate Venture Capital Helping to Fill Early-Stage Funding Gap Venture capital investments in emerging biotech companies have dropped 22% from 2007 to 2013, with the most rapid declines seen in first-round deals. The corporate venture capital (CVC) arms of established biopharmaceutical companies are helping fill this growing gap. The share of early-stage biotech companies receiving CVC investment has doubled since 2007.

Source: PwC and National Venture Capital Association13

Share of Early-Stage Biotech Deals Involving CVC Funds, 2007 vs. 2012

15%

30%

0%

5%

10%

15%

20%

25%

30%

2007 2012

30


PhRMA Member Company R&D Investment The pharmaceutical industry is one of the most research-intensive industries in the United States. Pharmaceutical firms invest as much as five times more in research and development, relative to their sales, than the average U.S. manufacturing firm.

— Congressional Budget Office14

31

$15.2 $16.9 $19.0

$21.0 $22.7 $26.0

$29.8 $31.0 $34.5

$37.0 $39.9

$43.4

$47.9 $47.4 $46.4 $50.7

$48.6 $49.6 $51.1*

$0

$10

$20

$30

$40

$50

$60

Expe

nditu

res (

Billi

ons o

f Dol

lars

)

PhRMA Member Company R&D Expenditures: 1995–2013

“ “

*Estimated FY 2013. Source: Congressional Budget Office14; PhRMA15


Drug Development Costs Have Increased According to a 2007 study, it costs an average of $1.2 billion to develop one new drug.16 More recent studies estimate the costs to be even higher.17

32

Sources: J.A. DiMasi and H.G. Grabowski16; J. Mestre-Ferrandiz, et al.17; J.A. DiMasi, et al.18

$140M

$320M

$800M

$1.2B

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

mid-1970s mid-1980s late 1990s early 2000s

Billi

ons (

Cons

tant

Dol

lars

, Yea

r 200

0)

The Average Cost to Develop One New Approved Drug — Including the Cost of Failures


Complexity of Clinical Trials Has Increased During the last decade, clinical trial designs and procedures have become much more complex, demanding more staff time and effort, and discouraging patient enrollment and retention.

33

Source: K.A. Getz, et al. and Tufts CSDD19

2000–2003 2008–2011 Increase in Complexity

Total Procedures per Trial Protocol (median) (e.g., bloodwork, routine exams, x-rays, etc.) 105.9 166.6 57%

Total Investigative Site Work Burden (median units) 28.9 47.5 64%

Total Eligibility Criteria 31 46 58%

Clinical Trial Treatment Period (median days)* 140 175 25%

Number of Case Report Form Pages per Protocol (median) 55 171 227%

*These numbers reflect only the “treatment duration” of the protocol.

Trends in Clinical Trial Protocol Complexity


Illustrative Pharmaceutical Lifecycle New pharmaceutical medicines face competition after a relatively short period on the market.

34

Sources: PhRMA20; H. Grabowski, et al.21

Drug Development

FDA Approval

Generics Enter Market

Average time to develop a new medicine

= 10–15 yrs

Average time on market before generic entry

= 12.6* yrs

Brand Drug Lifespan Generics

*For brand medicines with more than $100 million in annual sales in 2008 dollars, which account for 97% of sales of the brand medicines analyzed.

Most brand drugs face competition

from other brands


Earlier and More Frequent Patent Challenges by Generic Companies As early as 4 years after brand launch, a generic company may file with FDA a Paragraph IV certification to “challenge” patents associated with the brand-name medicine, often allowing generic market entry before the patent expiration date.

35

Sources: H.G. Grabowski, et al.22 All numbers are three-year moving averages.

Patent challenges are occurring earlier…

Average Time from Brand Launch to Paragraph IV Patent Challenge

… and are more common

Share of Brand Products Experiencing at Least One Paragraph IV Patent Challenge Prior to Generic Entry

15.6

7.7 6.9

0

5

10

15

20

25

1996 2004 2012

14%

41%

81%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1996 2004 2012

Num

ber o

f Yea

rs

Brands by Year of First Generic Entry Brands by Year of First Generic Entry


Competing Medicines Race for Approval By 1995, nearly all first-in-class medicines being approved already had potential competitors in Phase II clinical testing.

36

Source: J.A. DiMasi and L.B. Faden23

23%

50%

71% 77%

90%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1970s 1980–1984 1985–1989 1990–1994 1995–1999

Percentage of First-in-Class Medicines with a Competitor Already in Phase II Clinical Testing at Time of Approval


Increasing Competition Within Therapeutic Categories The time a medicine is the only drug available in its therapeutic class has declined dramatically — from a median of more than 10 years in the 1970s to less than two years by 1998.

37

Source: Tufts CSDD24

10.2

4.1

1.2 0

2

4

6

8

10

12

1970s 1980s 1990–2003

Med

ian

Num

ber o

f Yea

rs

Year of Approval of First-in-Class Medicine

Time Between Approval of First and Second Drugs in a Therapeutic Class


$1,880

$701

$434 $299

$162 $87 $39 $21 $6

$0

$500

$1,000

$1,500

$2,000

1 2 3 4 5 6 7 8 9 10

Afte

r-Ta

x Pr

esen

t Val

ue o

f Sal

es

(Mill

ions

of 2

000

Dolla

rs)

New Medicine Introduced Between 1990 and 1994, Grouped by Tenths, by Lifetime Sales

-$1

After-Tax Average R&D

Few Approved Medicines Are Commercially Successful Ongoing investment in R&D depends on the commercial success of a few products that must make up for all the rest, including those that never reach the market.

38

Source: J.A. Vernon, et al.25

Just 2 in 10 Approved Medicines Produce Revenues that Exceed Average R&D Costs


Notes and Sources

40

1. Analysis Group. "Innovation in the Biopharmaceutical Pipeline: A Multidimensional View." Boston, MA: Analysis Group, January 2013. Available at www.analysisgroup.com/uploadedFiles/Publishing/Articles/2012_Innovation_in_the_Biopharmaceutical_Pipeline.pdf (accessed March 2014).

2. Pharmaceutical Research and Manufacturers of America. "Medicines in Development: Biologic Medicines." Washington, DC: PhRMA, 2013.

3. Tufts Center for the Study of Drug Development. “Personalized Medicine Is Playing a Growing Role in Development Pipelines.” Impact Report. 2010; 12(6).

4. J.T. Aquino. “Personalized Medicine: Targeted Therapies Said Now Mainstream; Reimbursement, Clinical Trial Hurdles.” Life Sciences Law and Industry Report, 31 May 2013. Available at www.personalizedmedicinecoalition.org/sites/default/files/files/BloombergBNA.pdf (accessed March 2014).

5. D. Nellesen, et al. “Personalized Medicine: Trends in Clinical Studies Based on National Registry Data.” Poster presented at the 14th Annual International Meeting of the International Society of Pharmacoeconomics and Outcomes Research, Orlando, FL, May 16–20, 2009. Available at www.analysisgroup.com/personalized_medicine_trends (accessed March 2014).

6. Analysis Group, Op. cit.

7. G. Long and J. Works. “Innovation in the Biopharmaceutical Pipeline: A Multidimensional View.” Boston, MA: Analysis Group, January 2013. Available at www.analysisgroup.com/uploadedFiles/Publishing/Articles/2012_Innovation_in_the_Biopharmaceutical_Pipeline.pdf (accessed March 2014).

8. Pharmaceutical Research and Manufacturers of America. "Drug Discovery and Development: Understanding the R&D Process." Washington, DC: PhRMA, 2014.

9. Pharmaceutical Research and Manufacturers of America. “PhRMA Annual Membership Survey.” 2014.

10. National Institutes of Health, Office of Budget. 2013 Budget Appropriations. Bethesda, MD: NIH 2013. Available at http://officeofbudget.od.nih.gov/pdfs/FY13/FY%202013%20Full-Year%20NIH%20Mechanism%20Table%20Posting%20.pdf (accessed March 2014).

11. Adapted from E. Zerhouni. “Transforming Health: Fulfilling the Promise of Research.” Washington, DC, 16 November 2007. Keynote Address. Available at www.researchamerica.org/transforming_health_transcript (accessed March 2014).

12. PhRMA 2014.


Notes and Sources

13. PricewaterhouseCoopers and the National Venture Capital Association, 2013 MoneyTree™ National Data, 2014.

14. Congressional Budget Office. “Research and Development in the Pharmaceutical Industry.” Washington, DC: CBO, October 2006. Available at www.cbo.gov/sites/default/files/cbofiles/ftpdocs/76xx/doc7615/10-02-drugr-d.pdf (accessed March 2014).

15. Pharmaceutical Research and Manufacturers of America. PhRMA Annual Membership Survey, 1996–2014.

16. J.A. DiMasi and H.G. Grabowski. "The Cost of Biopharmaceutical R&D: Is Biotech Different?" Managerial and Decision Economics 2007; 28: 469–479.

17. More recent estimates range from $1.5 billion to more than $1.8 billion. See J. Mestre-Ferrandiz, J. Sussex, and A. Towse. “The R&D Cost of a New Medicine.” London: Office of Health Economics, 2012; S.M. Paul, et al. “How to Improve R&D Productivity: The Pharmaceutical Industry’s Grand Challenge.” Nature Reviews Drug Discovery 2010; 9: 203–214.

18. J.A. DiMasi, et al. “The Price of Innovation: New Estimates of Drug Development Costs.” Journal of Health Economics 2003; 22: 151–185. Study findings originally reported in 2005 dollars. Based on correspondence with the study author, these figures were adjusted to 2000 dollars.

19. K.A. Getz, R.A. Campo, and K.I. Kaitin. “Variability in Protocol Design Complexity by Phase and Therapeutic Area.” Drug Information Journal 2011; 45(4): 413–420; updated data provided through correspondence with Tufts Center for the Study of Drug Development.

20. Pharmaceutical Research and Manufacturers of America. "Drug Discovery and Development: Understanding the R&D Process." Washington, DC: PhRMA, 2014.

21. H. Grabowksi, G. Long, and R. Mortimer. “Recent Trends in Brand-Name and Generic Drug Competition.” Journal of Medical Economics 2014; 17(3): 207–214. Available at http://informahealthcare.com/doi/abs/10.3111/13696998.2013.873723 (accessed March 2014).

22. Ibid.

23. J.A. DiMasi and L.B. Faden. "Follow-On Drug R&D: New Data on Trends in Entry Rates and the Timing of Development." Tufts Center for the Study of Drug Development Working Paper. Boston, MA: Tufts Center for the Study of Drug Development, September 2009.

24. Tufts Center for the Study of Drug Development, unpublished data, March 2010. Median data for shorter time periods published in: Tufts Center for the Study of Drug Development. “Marketing Exclusivity for First-in-Class Drugs Has Shortened to 2.5 Years.” Impact Report 2009; 11(5).

25. J.A. Vernon, J.H. Golec, and J.A. DiMasi. “Drug Development Costs When Financial Risk Is Measured Using the Fama-French Three-Factor Model.” Health Economics 2010; 19(8): 1002–1005; Drug development costs represent after-tax, out-of-pocket costs in 2000 dollars for drugs introduced from 1990 through 1994. The same analysis found that the total cost of developing a new drug was $1.3 billion in 2006. Average R&D costs include the cost of the approved medicines as well as those that fail to reach approval.

41

3 • Spending and Costs

3 3 SPENDING AND COSTS Understanding Spending on Medicines Prescription medicines represent a small share of national health spending. Since 2000, growth in prescription drug spending has slowed markedly, while prices for prescription medicines have risen in line with overall medical inflation.

Innovator pharmaceutical companies produce medical advances through pioneering scientific work and large-scale investments. The innovators’ work and investment lead both to new medicines and, over time, to generic copies that consumers use at low cost for many years.

Health plans use many tools — such as tiered formularies and cost sharing — to steer use toward generics and lower-cost medicines. Payers also typically require patients to pay a higher share of the costs of medicines out of pocket compared with other health services.

43


Sharply Declining Prescription Medicine Spending Growth: 1999–2011* Spending growth for prescription medicines has slowed dramatically over the past decade, with historically low rates of growth observed in recent years.

44

Source: CMS1 *Total retail sales including brand medicines and generics.

15.4% 14.7%

14.0%

11.9%

9.0%

6.4%

9.3%

5.1%

2.8%

4.9%

0.4%

2.5%

0.4% 0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


Medicines Account for a Small and Declining Share of Health Spending Growth

Growth in Health Care Expenditures Attributable to Prescription Drugs, 1998–2012

45

Source: CMS2

84% 89% 95%

16% 11% 5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1998–2002 2003–2007 2008–2012

Prescription Drugs

All Other Health care


Retail Spending on Prescription Medicines Is a Small Share of Total U.S. Health Care Spending

46

Source: PhRMA analysis based on CMS3 *Other includes dental, home health, and other professional services as well as durable medical equipment costs.

Prescription Drugs $0.09

Hospital Care $0.32

Physician and Clinical Services

$0.20 Home Health and

Nursing Home Care $0.08

Government Admin. & Net Cost of Private Health

Insurance $0.07

Other* $0.23

Health Care Dollar, 2012


95

115

135

155

175

195

Growth in Prescription Medicine Prices Has Been in Line with Other Health Care Prices

Consumer Price Index (2003 = 100)

47

Source: PhRMA analysis based on Bureau of Labor Statistics4

Prescription Medicines

All Medical Costs

Hospital & Related Services

Consumer Price Index


More Than Four Out of Five U.S. Prescriptions Are Filled with Generics

48

Source: IMS Health5

19%

33%

43%

52%

72%

86%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1984 1990 1996 2002 2008 2013

Generic Share* of Prescriptions Filled 1984–2013

*Generic share includes generics and branded generics. “Other” category from IMS NPA not included in calculation.


Innovator pharmaceutical companies produce medical advances through pioneering scientific work and large-scale investments. The innovators’ work and investment lead both to new medicines and, over time, to generics that consumers use at low cost for many years.

49

*Ten therapeutic classes most commonly used by Part D enrollees in 2006 were: lipid regulators, ACE inhibitors, calcium channel blockers, beta blockers, proton pump inhibitors, thyroid hormone, angiotensin II, codeine and combination products, antidepressants, and seizure disorder medications. Source: M. Kleinrock6

Daily Cost of Top 10 Therapeutic Classes* Most Commonly Used by Medicare Part D Enrollees

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

Cost

Per

Day

($) $1.00

$0.47

$1.50

Actual Estimated

The U.S. Prescription Drug Lifecycle Promotes Innovation and Affordability


Insurance Covers a Lower Share of Prescription Drug Costs than of Other Medical Services On average, privately insured consumers pay out-of-pocket more than 20% of their total prescription drug spending, compared to 4% of spending for inpatient hospital care and 7% on hospital outpatient care.7

50

Sources: PhRMA analysis based on Medical Expenditure Panel Survey (MEPS)7; P.J. Cunningham8

4% 7%

9%

17%

22%

0%

10%

20%

30%

40%

Hospital Inpatient Hospital Outpatient Emergency Room Physicians Prescription Drugs*

*Includes brand & generic.

Average Patient Cost-Sharing by Type of Service in the Commercial Market7


Powerful Purchasers Negotiate on Behalf of Patients

51

A small number of large purchasers dominate the U.S. prescription drug market.

*Figures may not sum to totals due to rounding. **Medco was acquired by Express Scripts in April 2012. Figure for Express Scripts/Medco is the sum of the individual script totals for each entity for the most recently reported 12-month period in 2012.

Company Number of Prescriptions Market Share (%)*

1. Express Scripts/Medco Health Solutions** 1,411 million 29.5%

2. CVS/Caremark 775 million 16.2%

3. Argus Health Systems 504 million 10.5%

4. OptumRx, Inc. 319 million 6.7%

5. ACS, Inc. 250 million 5.2%

Top 5 PBMs Total 3,259 million 68.2%



All PBMs in U.S. 4,780 million 100%

Source: Atlantic Information Services, Inc.9

Prescription Volume by Pharmacy Benefit Management (PBM) Companies, 2012


In the U.S. System, Health Plans Have Powerful Tools to Reduce Spending on Medicines

52

Payers drive nearly all use of medicines to generics and

“preferred” brands.

Formularies List of covered drugs

Tiered Copays Higher cost to patients for

brands than for generics and preferred brands

Prior Authorization Physicians required to justify

medicine’s use before it’s covered

Concentrated Purchasing Power Individual Pharmacy Benefit Managers buy medicines for more people than

in entire European countries

Source: IMS Health10

Financial Incentives Payments to physicians and/or

pharmacies for generic prescribing or switching patients to preferred drugs

Step Therapy Patients must try and fail on alternatives before certain

medicines are covered


Plans Increasingly Subject Certain Medicines to Higher Cost Sharing Patients taking medicines placed on a 4th tier or higher can be subject to higher cost sharing relative to lower tiers. Patients needing these medicines commonly face serious and challenging health conditions.

53

Source: KFF/HRET11

23%

14%

14%

13%

11%

7%

7%

5%

4%

3%

0% 5% 10% 15% 20% 25%

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

Share of Plans with Four or More Tiers


Newly Introduced Generics Are Adopted Rapidly

54

When a generic version of a medicine becomes available for the first time, it capture an average of three quarters of the market within 3 months,12 and some capture as much as 90% by that time.13

Sources: H. Grabowski, et al.12; Express Scripts13

0%

20%

40%

60%

80%

100%

Mo.BeforeGeneric

Entry

Mo. ofGeneric

Entry

First FullMonth

2 3 4 5 6 7 8 9 10 11 12

Number of Months After First Generic Entry

Gene

ric U

se R

ate

Average Generic Share of Total Use Following Launch of a Brand Medicine’s First Generic, 2011–2012*

*Average monthly generic share of total standardized units of a unique molecule/form combination.


Medicines Account for a Small Share of Health Spending Differences Between the United States and Other Countries

Per Capita Health Care Spending 2011 in United States, Canada and Germany

55

Source: PhRMA analysis based on Organisation for Economic Co-operation and Development14

Rx Medicines Rx Medicines Rx Medicines

All Other Health Care



$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

United States Canada Germany

$8,508

$4,521 $4,495

For example, medicines account for 6% of the difference in total health care spending between the U.S. and Canada, and 9% between U.S. and Germany.


Notes and Sources

56

1. Centers for Medicare & Medicaid Services (CMS). "National Health Expenditures by Type of Service and Source of Funds, CY 1960–2011." Baltimore, MD: CMS, 2012. Available at www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/NHE2011.zip (accessed March 2014).

2. Ibid.

3. PhRMA analysis based on CMS. "National Health Expenditures by Type of Service and Source of Funds, CY 1960–2012." Baltimore, MD: CMS, 2013. Available at www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/NHE2012.zip (accessed March 2014).

4. PhRMA analysis based on U.S. Bureau of Labor Statistics. “Consumer Price Index—All Urban Consumers, History Table.” Washington, DC: BLS, 2013. Available at www.bls.gov/cpi/#tables (accessed March 2014).

5. PhRMA analysis based on IMS Health. “IMS National Prescription AuditTM.” Danbury, CT: IMS Health, 2014.

6. M. Kleinrock. Daily Cost of Medicare Part D December 2013 Update. December 2013. IMS Institute for Healthcare Informatics.

7. PhRMA analysis of Agency for Healthcare Research and Quality, Medical Expenditure Panel Survey, 2009. Available at www.meps.ahrq.gov/mepsweb/ (accessed March 2014). Prescription drug spending includes brand and generic ingredients, pharmacy, and distribution costs. Estimates are not restricted to individuals who have private coverage that includes prescription coverage, which can be expected to account for less than 2%.

8. P.J. Cunningham. “Despite the Recession's Effects on Incomes and Jobs, the Share of People with High Medical Costs was Mostly Unchanged.” Health Affairs 2012; 31(11): 2563–2570.

9. Atlantic Information Services, Inc. (AIS). “Pharmacy Benefit Survey Results: 4th Quarter 2012.” 2012. AIS Health (blog). At www.AISHealth.com (accessed February 2013).

10. IMS Health, Inc. “IMS National Prescription Audit™.” Danbury, CT: IMS Health, 2004–2012.

11. Kaiser Family Foundation/Health Research & Educational Trust. “Employer Health Benefits: 2013 Annual Survey.” August 2013, p. 150.


Notes and Sources

57

12. H. Grabowksi, G. Long, and R. Mortimer. “Recent Trends in Brand-Name and Generic Drug Competition.” Journal of Medical Economics 2014; 17(3): 207–214. Available at http://informahealthcare.com/doi/abs/10.3111/13696998.2013.873723.

13. For example, a new generic version of an osteoporosis treatment launched in 2009 captured more than 90% of the mail-order market in the first week, and more than 90% of all prescriptions in the first 3 months. See: Express Scripts, Inc. “2009 Drug Trend Report.” St. Louis, MO: Express Scripts, April 2010. Available at www.express-scripts.com/research/research/dtr/archive/2009/dtrfinal.pdf (accessed March 2014).

14. PhRMA analysis based on Organisation for Economic Co-operation and Development. “OECD Health Data 2013—Frequently Requested Data.” Paris: OECD Publishing, November 2013. Available at www.oecd.org/health/health-systems/oecdhealthdata.htm (accessed March 2014).

4 • Outcomes and Savings

4 4 OUTCOMES AND SAVINGS Overcoming Gaps in Treatment, Improving Outcomes, and Reducing Costs Through Better Use of Medicines Undertreatment of chronic disease and suboptimal use of prescribed medicines are significant public health problems, costing the U.S. economy hundreds of billions of dollars each year. An ever growing body of evidence demonstrates that improved use of prescribed medicines recommended to treat chronic conditions can result in better health outcomes, lower costs for other health care services, and increased worker productivity.

59


Most Americans Use Few or No Medicines — a Small Share of People Fill the Majority of Prescriptions The top 20% of people who used medicines accounted for almost two-thirds of all prescriptions filled in 2010.

60

Source: PhRMA analysis based on MEPS1

80%

36%

20% 64%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

% of Population % of Prescription Fills

(39% of the population

uses no medicines)


Medicines’ Changing Role in Recommended Care

61

Revisions to clinical guidelines based on the latest research have resulted in appropriate increases in the use of medicines in recent years.

Source: R.W. Dubois and B.B. Dean2


Failure to Prescribe the Indicated Treatment Is the Most Common Prescribing Quality Problem RAND researchers report that failure to prescribe an indicated treatment is a far more common quality problem than is inappropriate medicine use.

62

Source: RAND Health3 *Quality indicators were developed and implemented based on systematic literature reviews and multiple layers of expert judgment.

3%

19%

36%

50%

0% 10% 20% 30% 40% 50% 60%

Inappropriate medication

Inadequate education/continuity/documentation

Inadequate monitoring

Failure to prescribe whencalled for by guidelines

Percentage of Quality Indicators Failed*

Quality Problems Among Vulnerable Older Patients


Diabetes: An Example of Underdiagnosis and Undertreatment

63

Uncontrolled diabetes can lead to kidney failure, amputation, blindness, and stroke.

Sources: CDC4; Analysis based on National Health and Nutrition Examination Survey (NHANES)5

4 • Outcomes and Savings 64

Better Use of Medicines Improves Patient Health

Source: T.B. Gibson, et al.6

4.0%

8.0%

10.1%

15.9%

10.8%

15.7%

1.8%

4.0%

7.8%

11.8%

5.8%

13.0%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Acute MyocardialInfarction

Amputation/ Ulcer CerebrovascularDisease

Neuropathy Renal Events Retinopathy

Like

lihoo

d of

Eve

nt

Nonadherent Patients Adherent Patients

Diabetes patients who take their medicines as prescribed experience fewer diabetes-related complications.


Recommended Medicines Can Save Lives and Dramatically Improve Health

...achieving effective blood pressure control would be approximately equivalent to eliminating all deaths from accidents, or from influenza and pneumonia combined.

— David Cutler, Ph.D., Harvard University

65

Source: D.M. Cutler, et al.7

Annual Hospitalizations Avoided Annual Premature Deaths Avoided

Prevention Achieved: Based on Current Treatment Rates 833,000 86,000

Potential Additional Prevention: If Untreated Patients Received

Recommended Medicines 420,000 89,000

Annual Hospitalizations and Deaths Avoided Through Use of Recommended Antihypertensive Medications

“ “


Prescription Medicines Are Part of the Solution to Reducing Medical Spending Better use of medicines reduces use of avoidable medical care, resulting in reductions in medical spending.

66

Source: M.C. Roebuck, et al.8

$1,058

-$8,881

$656

-$4,413

$429

-$4,337

$601

-$1,860

-$10,000

-$8,000

-$6,000

-$4,000

-$2,000

$0

$2,000Drug Spending Medical Spending

Congestive Heart Failure Diabetes Hypertension Dyslipidemia

Adherence to Medicines Lowers Total Health Spending for Chronically Ill Patients

Diffe

renc

e in

Ann

ual S

pend

ing

Betw

een

Ad

here

nt a

nd N

onad

here

nt P

atie

nts


Gaining Drug Coverage Reduced Other Medical Spending

67

The Medicare drug benefit increased access to medicines for those previously without drug coverage, resulting in reduced non-drug medical spending9 and overall savings of $13.4 billion in 2007, the first full year of the program.10

Sources: J.M. McWilliams, et al.9; C.C. Afendulis and M.E. Chernew10

*Home health, durable medical equipment, hospice, and outpatient institutional services.

Average Reduction in Medical Spending in 2006 and 2007, for Beneficiaries Gaining Drug Coverage Through Part D

-$816

-$268

-$140

-$1,224

Average Total

Spending Reduction

per Beneficiary


Improving Adherence Could Yield Large Savings

68

Improving adherence to congestive heart failure (CHF) medicines could result in federal savings of $22.4 billion over 10 years.

Source: T.M. Dall, et al.11

$0

$10

$20

$30

$40

$50

$60

Billi

ons

$26.9 Billion

Additional savings to Medicare if adherence reached recommended levels

$22.4 Billion

Savings to Medicare from gaining Part D Coverage

Estimated 10-Year Savings to Medicare from Improved Adherence to CHF Medications, 2013–2022


Better Use of Medicines Yields Significant Health Gains and Savings on Other Services Due to a growing body of evidence, CBO’s budget estimates now recognize reductions in other medical expenditures associated with increased use of prescription medicines in Medicare.

69

Sources: CBO12; J.E. Bailey, et al.13; A.K. Jha, et al.14; J.F. Van Boven, et al.15; L. Simoni-Wastila, et al.16; R. Halpern, et al.17; M.C. Roebuck, et al.18; A. Bitton, et al.19; B.C. Stuart, et al.20; and W.H. Shrank, et al.21

Numerous studies demonstrate that medicines can improve health outcomes and reduce use of other medical services:

• Better adherence to antihypertensive medications could save approximately 200,000 lives over 5 years.13

• Improved medication adherence among diabetes patients could prevent more than 1 million emergency department visits and hospitalizations annually, for potential savings of $8.3 billion each year.14

• Nonadherence has also been linked to excess hospitalizations for conditions such as chronic obstructive pulmonary disease,15,16 osteoporosis,17 congestive heart failure, hypertension, diabetes, and dyslipidemia,18,19,20 with costs of roughly $170 billion per year.21

Pharmaceuticals have the effect of improving or maintaining an individual’s health...adhering to a drug regimen for a chronic condition such as diabetes or high blood pressure may prevent complications…taking the medication may also avert hospital admissions and thus reduce the use of medical services.

— Congressional Budget Office12

“

“


High Cost Sharing Reduces Adherence

70

RAND researchers found that doubling co-pays reduced patients’ adherence to prescribed medicines by 25% to 45% and increased emergency room visits and hospitalizations.

Source: D.P. Goldman, et al.22

-45% -44%

-34% -33% -32%

-26% -26% -25%

-50%

-45%

-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

Percent Change in Adherence from Doubling Medicine Co-Pays

Perc

ent C

hang

e in

Day

s Sup

plie

d of

Med

icin

e


Patients Facing High Cost Sharing Commonly Abandon Their Medicines Patients taking medicines on a specialty tier, such as medicines to treat rheumatoid arthritis and multiple sclerosis, face higher out-of-pocket expenses than patients taking medicines not on this tier. These patients also commonly abandon their medicines at the pharmacy.

71

Source: A. King and L. Mitchell23

56% 55%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Rheumatoid Arthritis* Multiple Sclerosis*

Average Abandonment Rates, 2009–2011

*Select therapies include those treating patients with Parkinson's disease and dyslipidemia.

Abandonment rate for select oral therapies*


Improving Adherence Increases Productivity

-6

-3.6

-6.3

-9.8

-3.6 -3.1

-2.7 -3.6

-10

-9

-8

-7

-6

-5

-4

-3

-2

-1

0Diabetes Hypertension High Cholesterol Asthma/COPD

Miss

ed D

ays P

er Y

ear

Absenteeism Short-Term Disability

72

Fewer Days of Absence and Short-Term Disability for Adherent Patients as Opposed to Nonadherent Patients

Adherent patients miss fewer days of work and experience less short-term disability. For workers with Asthma/COPD alone, adherence averages over $3100 in savings per worker annually.

Source: G.S. Carls, et al.24


Notes and Sources

1. IHS Global Insight analysis based on Agency for Healthcare Research and Quality, Medical Expenditure Panel Survey, 2010. Available at http://meps.ahrq.gov/mepsweb/ (accessed March 2014).

2. R.W. Dubois and B.B. Dean. “Evolution of Clinical Practice Guidelines: Evidence Supporting Expanded Use of Medicines.” Disease Management 2006; 9(4): 210–223.

3. RAND Health. "U.S. Healthcare Facts About Cost, Access, and Quality." Santa Monica, CA: RAND Corporation, 2005, citing T. Higashi, et al. "The Quality of Pharmacologic Care for Vulnerable Older Patients." Annals of Internal Medicine 2004; 140(9): 714–720.

4. Centers for Disease Control and Prevention. "National Diabetes Fact Sheet: National Estimates and General Information on Diabetes and Prediabetes in the United States, 2011." Atlanta, GA: CDC, 2011. Available at www.cdc.gov/diabetes/pubs/pdf/ndfs_2011.pdf (accessed March 2014).

5. IHS Global Insight analysis based on 2010 National Health and Nutrition Examination Survey (NHANES).

6. T.B. Gibson, et al. “Cost Sharing, Adherence, and Health Outcomes in Patients with Diabetes.” American Journal of Managed Care 2010; 16(8): 589–600.

7. D.M. Cutler, et al. “The Value of Antihypertensive Drugs: A Perspective on Medical Innovation.” Health Affairs 2007; 26(1): 97–110.

8. M.C. Roebuck, et al. “Medication Adherence Leads to Lower Health Care Use and Costs Despite Increased Drug Spending.” Health Affairs 2011; 30(1): 91–99.

9. J.M. McWilliams, A.M. Zaslavsky, and H.A. Huskamp. “Implementation of Medicare Part D and Nondrug Medical Spending for Elderly Adults with Limited Prior Drug Coverage.” Journal of the American Medical Association 2011; 306(4): 402–409.

10. C.C. Afendulis and M.E. Chernew. “State-Level Impacts of Medicare Part D.” American Journal of Managed Care 2011; 17 Suppl 12:S.

11. T.M. Dall, et al. "The Economic Impact of Medicare Part D on Congestive Heart Failure.” American Journal of Managed Care 2013; 19: S97–S100.

12. Congressional Budget Office. “Offsetting Effects of Prescription Drug Use on Medicare’s Spending for Medical Services.” Washington, DC: CBO, November 2012.

13. J.E. Bailey, et al. “Antihypertensive Medication Adherence, Ambulatory Visits, and Risk of Stroke and Death." Journal of General Internal Medicine 2010; 25(6): 495–503.

74


Notes and Sources

75

14. A.K. Jha, et al. “Greater Adherence to Diabetes Drugs is Linked to Less Hospital Use and Could Save Nearly $5 Billion Annually.” Health Affairs 2012; 31(8): 1836–1846.

15. J.F. Van Boven, et al. “Clinical and Economic Impact of Non-Adherence in COPD: A Systemic Review.” Respiratory. Medicine 2014; 108(1):103−13.

16. L. Simoni-Wastila, et al. “Association of Chronic Obstructive Pulmonary Disease Maintenance Medication Adherence With All-Cause Hospitalization and Spending in a Medicare Population.” American Journal of Geriatric Pharmacotherapy 2012; 10(3): 201–210.

17. R. Halpern, et al. “The Association of Adherence to Osteoporosis Therapies with Fracture, All-Cause Medical Costs, and All-Cause Hospitalizations: A Retrospective Claims Analysis of Female Health Plan Enrollees with Osteoporosis.” Journal of Managed Care Pharmacy 2011; 17(1): 25–39.

18. M.C. Roebuck, et al. “Medication Adherence Leads to Lower Health Care Use and Costs Despite Increased Drug Spending.” Health Affairs 2011; 30(1): 91–99.

19. A. Bitton, et al. “The Impact of Medication Adherence on Coronary Artery Disease Costs and Outcomes: A Systematic Review.” American Journal of Medicine 2013; 126(4): 357.e7−357.e327.

20. B.C. Stuart, et al. “Increasing Medicare Part D Enrollment in Medication Therapy Management Could Improve Health and Lower Costs.” Health Affairs 2013; 32(7): 1212−1220.

21. W.H. Shrank, et al. "A Blueprint for Pharmacy Benefit Managers to Increase Value." American Journal of Managed Care 2009; 15(2): 87−93.

22. D.P. Goldman, et al. “Pharmacy Benefits and the Use of Drugs by the Chronically Ill.” Journal of the American Medical Association 2004; 291(19): 2344–2350.

23. A. King and L. Mitchell. “Who Pays for Specialty Medicines?” Pharmaceutical Executive 2012; 32(11): 38–42. Available at www.pharmexec.com/pharmexec/Article/Who-Pays-for-Specialty-Medicines/ArticleStandard/Article/detail/796497 (accessed March 2014).

24. G.S. Carls, et al. "Impact of Medication Adherence on Absenteeism and Short-Term Disability for Five Chronic Diseases." Journal of Occupational and Environmental Medicine 2012; 54(7): 792–805.

5 • Communications with Patients and Health Care Providers

5 5 COMMUNICATIONS WITH PATIENTS AND HEALTH CARE PROVIDERS Informing Consumers and Providers About Medicines

Biopharmaceutical marketing and promotion are important and extensively regulated ways of informing consumers and health care professionals about medicines.

Biopharmaceutical company representatives help speed the dissemination of advances in medical care, and many physicians value this information.

Direct-to-consumer advertising (DTCA) by biopharmaceutical companies often leads patients to seek additional information and consult their doctors about previously untreated conditions; it also informs patients about medicines’ risks and benefits.

While effective communication can increase awareness of medical treatment options, other factors, including formulary design and utilization management strategies, often have a greater impact on prescribing decisions.

77

5 • Communications with Patients and Health Care Providers 78

Many Factors Affect Physicians Prescribing Decisions

Source: KRC Research1

Factors Influencing Prescribing Decisions in the United States in 2013

10%

10%

11%

38%

39%

48%

50%

89%

91%

35%

53%

47%

54%

44%

44%

42%

9%

8%

Information from insurance and prescription benefitsmanager representatives

Information from pharmaceutical company representatives

Pharmaceutical company-sponsored educational programsfeaturing physician speakers, not CME

Information from colleagues and peers

Patient's insurance coverage and formulary

Clinical practice guidelines

Articles in peer-reviewed medical journals

Patient's particular situation, including drug interactions,side effects, and contraindications

Clinical knowledge and experience

A great deal Some


Physicians Find Biopharmaceutical Representatives’ Information Up to Date, Useful, and Reliable

79

Source: KRC Research2

Up to date and timely 94%

Useful 92%

Reliable 84%

43%

22%

22%

52%

71%

55%

Strongly agree Somewhat agree

Physicians’ Assessment of Biopharmaceutical Representatives’ Information


Direct-to-Consumer Advertising Often Prompts Patients to Seek Additional Information

80

Source: Princeton Survey Research Associates International3

47%

27%

14%

8%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Sought Information Initiated Conversationwith Doctor

Newly Aware ofMedical Condition

Requested SpecificMedication

Consumer Responses to Viewing Advertisements for Prescription Medicines


Direct-to-Consumer Advertising Increases Awareness of the Benefits and Risks of New Medicines

76%

55%

87%

70%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Seen/heard Pay a lot/someattention

Seen/heard Pay a lot/someattention

Perc

enta

ge o

f Pop

ulat

ion

Awareness of Benefit Information Awareness of Risk Information

81

Source: Prevention Magazine National Survey Data4

Awareness of Benefit and Risk Information Among People Who Saw an Advertisement on TV

5 • Communications with Patients and Health Care Providers 82

Physicians Respond to Patients’ Requests for Specific Treatments with a Broad Range of Alternatives

Source: Kaiser Family Foundation5

When Asked by a Patient About a Specific Treatment, Physicians Frequently...

5%

14%

14%

18%

50%

0% 10% 20% 30% 40% 50% 60%

Give prescription for requested drug

Recommend a different prescription drug

Recommend no treatment

Recommend over-the-counter drug

Recommend lifestyle or behavior changes


Direct-to-Consumer Advertising Encourages Appropriate Use of Medicines Study finds Direct-to-Consumer Advertising (DTCA) promoted appropriate use of oral breast cancer therapies and did not promote inappropriate use.*

83

Source: G.A. Abel, et al.6

*Study measured the effect of DTCA on patients and doctors regarding the use of aromatase inhibitors (AIs) consistent with medical practice guidelines. Study found that DTCA spending on AIs was associated with an overall new AI prescription increase of 0.18% after 3 months (approximately 118 new AI prescriptions per million dollars spent). There was “no significant change associated with DTCA spending for AIs for those aged 40 years or less at any time from 0 to 6 months.”


Patients Benefit from Direct-to-Consumer Advertising

84

DTCA increases the likelihood that patients will seek and receive treatment for undiagnosed conditions.

Source: J. Jayawardhana7 *“Consumer welfare” refers to the population-wide net value to consumers (patients) from their use of health care services.

• A study examining DTCA and cholesterol-reducing medications found that patients between the ages of 50 and 70, who are more likely to have high cholesterol levels, experienced the greatest welfare gains of 12–13% of the average cost of a prescription.

• The study’s author notes that “DTCA helps bring the under-diagnosed consumers to physicians' offices, which in turn helps to improve consumer welfare.”

8%

12–13%

0%

2%

4%

6%

8%

10%

12%

14%

Average welfare gain of overallpopulation

Average welfare gain of patientsbetween 50 and 70 years old

Percentage Increase in Consumer Welfare* from DTCA for Cholesterol-Reducing Medicines


According to Government and Academic Experts, Marketing Costs Do Not Add to Prescription Drug Prices

85

Sources: Federal Trade Commission8; J.P. Newhouse9

[Direct-to-consumer advertising] can empower consumers to manage their own health care by providing information that will help them, with the assistance of their doctors, to make better informed decisions about treatment options.... Consumers receive these benefits from DTC advertising with little, if any, evidence that such advertising increases prescription drug prices. 8

— Federal Trade Commission One sometimes hears it said that the industry would have more money for R&D if it would cut down its marketing costs. This comment reflects misunderstanding of the economics of the industry. If a firm did so, it would be less profitable and would attract less capital for R&D or would have fewer internally generated funds to invest [in R&D]. 9

— J.P. Newhouse, Harvard University

“

“

“

“


Notes and Sources

87

1. KRC Research. “Survey of Physicians About Pharmaceutical and Biotech Research Company Activities and Information.” Washington, DC: KRC, March 2011. Available at www.phrma.org/sites/default/files/pdf/krcsurveyofphysicians_1.pdf (accessed March 2014).

2. Ibid.

3. Princeton Survey Research Associates International for Prevention Magazine, Men’s Health, and Women’s Health. “Consumer Reaction to DTC Advertisements of Prescription Medicines.” 10th Annual Presentation, 2007.

4. “National Survey on Consumer Reaction to DTC Advertising of Prescription Medicines.” Prevention Magazine, 2012.

5. Kaiser Family Foundation. “National Survey of Physicians, Toplines.” November 2006. Available at www.kff.org/kaiserpolls/upload/7584.pdf (accessed March 2014).

6. G.A. Abel, et al. “Impact of Oncology-Related Direct-to-Consumer Advertising: Association with Appropriate and Inappropriate Prescriptions.” Cancer 2013; 119(5): 1065–1072.

7. J. Jayawardhana. “Direct-to-Consumer Advertising and Consumer Welfare.” International Journal of Industrial Organization 2013; 31(2): 164–180.

8. Federal Trade Commission. Comments of the Staff of the Bureau of Consumer Protection, the Bureau of Economics, and the Office of Policy Planning of the Federal Trade Commission in the Matter of Request for Comments on Consumer-Directed Promotion, Docket No. 2003N-0344. 1 December 2003.

9. J.P. Newhouse. “How Much Should Medicare Pay for Drugs?” Health Affairs 2004; 23(1): 89–102.

6 • Economic Impact

6 6 ECONOMIC IMPACT The Biopharmaceutical Sector’s Role in the Economy America’s biopharmaceutical research companies serve as the foundation for one of the country’s most dynamic innovation and business ecosystems. The biopharmaceutical industry is among the most R&D-intensive industries in the United States and accounts for 20% of all domestic R&D funded by U.S. businesses. The industry and its large-scale research and manufacturing supply chain supports high-quality jobs across the U.S. economy.

American biopharmaceutical research companies are leaders in charitable contributions, including significant support for education efforts in science, technology, engineering, and mathematics (STEM).

89


The Biopharmaceutical Sector is the Single Largest Funder of Business R&D in the United States The biopharmaceutical sector accounts for the single largest share of all U.S. business R&D, representing nearly 20% of all domestic R&D funded by U.S. businesses.

90

Source: National Science Foundation1

*The remaining 43% share of business R&D spending is conducted by other industries including subsectors of the machinery sector, the electrical equipment sector, and the professional, scientific, and technical services sector among others.

20%

12% 10%

5% 5% 5%

0%

5%

10%

15%

20%

25%

Pharmaceuticals andMedicines

Software Semiconductors Automobiles CommunicationsEquipment

Aerospace

Share of Total U.S. Business R&D by Industry, 2010*


The Biopharmaceutical Sector is the Most R&D-Intensive in the United States Biopharmaceutical companies invested more than ten times the amount of R&D per employee than manufacturing industries overall.

91


R&D Expenditures per Employee, by Manufacturing Sector, 2000–2010

$11,222

$15,294

$19,772

$46,888

$63,975

$104,567

All manufacturing

Motor vehicles, trailers, parts

Aerospace products

Semiconductors

Communications equipment

Pharmaceuticals and medicines

6 • Economic Impact 92

The Economic Reach of the U.S. Biopharmaceutical Industry

Source: Battelle Technology Partnership Practice3


U.S. Leads in Biopharmaceutical Intellectual Property

United States, 52.6%

European Union, 25.9%

Japan, 9.9%

All Others, 7.3% Asia,* 3.6%

China, 0.7%

93


The intellectual property related to more than half of new medicines resides in the United States.

U.S. Patents Granted in Pharmaceutical Technology, Selected Years 1997–2012, Location of Inventor by Region/Country

*Asia includes India, Malaysia, Singapore, South Korea, Taiwan and others (but excludes China and Japan).


U.S. Biopharmaceutical Exports Have Grown Biopharmaceutical exports have nearly doubled over the 10-year period between 2004 and 2013, accounting for 3.2% of all U.S. exports by 2013.

94

Source: U.S. Dept. of Commerce, International Trade Administration5

$28

$38

$49 $52

$0

$10

$20

$30

$40

$50

$60

2004 2007 2010 2013*

U.S. Biopharmaceutical Goods Exports (Billions)

*Estimated


Accounting Treatment of R&D Overstates Biopharmaceutical Profits

Correctly accounting for R&D as a long-lived investment tends to reduce substantially, if not to eliminate altogether, the inference that pharmaceutical companies are on average achieving supranormal profit returns. 7

— F.M. Scherer, AEI-Brookings Joint Center for Regulatory Studies

...the standard accounting measure of profits overstates true returns to R&D-intensive industries, such as pharmaceuticals, and makes it difficult to meaningfully compare profit levels among industries. Accounting measures treat most R&D spending (except for capital equipment) as a deductible business expense rather than as a capitalized investment. But the intangible assets that research and development generate — such as accumulated knowledge, new research capabilities, and patents — increase the value of a company’s asset base. Not accounting for that value overstates a firm’s true return on its assets. 8

— Congressional Budget Office

Usual profit figures greatly overstate the industry’s economic profit rate. 9

— J.P. Newhouse, Harvard University

95

Sources: F.M. Scherer6; CBO7; J.P. Newhouse8

“

“

“

“

“

“


Biopharmaceutical Industry Advancing STEM Education in the U.S. The science, technology, engineering, and mathematics (STEM) workforce accounts for over 50% of the nation’s sustained economic growth. Over the past 5 years, PhRMA member companies and their foundations have supported over 90 STEM education programs across the U.S., impacting over 1.6 million students and 17,500 teachers.

96

Source: Battelle Technology Partnership Practice9

PhRMA member company and foundation contributions to STEM education in the U.S. include:


Biopharmaceutical Companies Lead Corporate Giving Biopharmaceutical companies led corporate giving* in 2011. Nearly 90% of these contributions were in the form of in-kind product donations.

97

Source: Committee Encouraging Corporate Philanthropy10

Average Corporate Giving by Sector Total Giving as % of Pre-Tax Profit Total Giving per Employee

All Companies 1.0% $695

Biopharmaceuticals 13.0% $18,273

Energy 0.5% $2,766

Utilities 1.1% $1,027

Information Technology 0.8% $702

Consumer Staples 1.2% $673

Industrials 0.7% $255

*Domestic giving makes up the largest portion of total corporate giving across all sectors surveyed. Domestic giving comprised 79% of total giving in 2012.


Notes and Sources

1. PhRMA analysis of National Center for Science and Engineering Statistics. “Business Research and Development and Innovation: 2008–2010.” Washington, DC: National Science Foundation, 2013; PhRMA analysis of National Center for Science and Engineering Statistics. “Business Research and Development and Innovation: 2008–2010.” Washington, DC: National Science Foundation, 2013.

2. PhRMA analysis of National Science Board. “Science and Engineering Indicators.” Washington, DC: National Science Foundation, 2012. Available at www.nsf.gov/statistics/seind14/ (accessed March 2014).

3. Battelle Technology Partnership Practice. “The U.S. Biopharmaceuticals Sector: Economic Contribution of the Nation.” Columbus, OH: Battelle Memorial Institute, July 2013.

4. PhRMA analysis of National Science Foundation. “Science and Engineering Indicators.” Washington, DC: National Science Foundation, 2014.

5. PhRMA analysis of data from U.S. Department of Commerce, International Trade Administration. “TradeStats Express™: National Trade Data.” Export.gov. At http://tse.export.gov/TSE/TSEhome.aspx (accessed March 2014).

6. F.M. Scherer. “Pharmaceutical Innovation.” AEI-Brookings Joint Center for Regulatory Studies Working Paper 07–13. July 2007.

7. Congressional Budget Office. “Research and Development in the Pharmaceutical Industry.” Washington, DC: CBO, October 2006. Available at www.cbo.gov/sites/default/files/cbofiles/ftpdocs/76xx/doc7615/10-02-drugr-d.pdf (accessed March 2013).

8. J.P. Newhouse. “How Much Should Medicare Pay for Drugs?” Health Affairs 2004; 23(1): 89–102.

9. Battelle Technology Partnership Practice. “STEM: Building a 21st Century Workforce to Develop Tomorrow’s New Medicines.” Columbus, OH: Battelle Memorial Institute, January 2014. Available at www.phrma.org/sites/default/files/pdf/stem-education-report-2014.pdf (accessed March 2014).

10. Committee Encouraging Corporate Philanthropy. “Giving in Numbers: 2013 Edition.” New York: CECP, 2013. Available at www.philanthropynw.org/s_pnw/bin.asp?CID=6398&DID=63878&DOC=FILE.PDF (accessed March 2014).

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TABLE OF CONTENTS · biopharmaceutical innovation will be key in addressing future health care challenges and helping patients lead better lives. 3 . 1 • Advances in Treatment