Svetainei health & growth evidence compendium_sent(1)

HEALTH & GROWTH - Evidence Compendium

October 30th, 2013

Foreword

HEALTH & GROWTH 2

I am delighted to welcome you to EFPIA’s first “Evidence Compendium”. As our industry is facing a period of

unprecedented change and challenges, it is all the more important that we demonstrate the value of our medicines

to people’s lives, and the value of the industry to Europe’s economy. This Review is part of that commitment to

patients, to Europe and to transparency.

This document provides fact, figures and evidence about innovative medicines and the research-based

pharmaceutical industry in Europe. The focus is on the impact of medicines on health and the healthcare system,

lifecycle of medicines, the future challenges of the current healthcare system in Europe and the current and future

state of the innovative-based pharmaceutical industry in Europe.

From EFPIA’s perspective, it is the intention that this evidence compendium can provide a joint platform for the

industry towards which more evidence-based discussions around the future of the innovation-based

pharmaceutical industry in Europe can take place. Discussions that are becoming increasingly imminent in the

current environment of high unemployment, shrinking healthcare budgets and financial austerity.

I hope that you will find this evidence-based compendium useful in providing a required evidence-based platform

in which we, in cooperation with all our stakeholders can support and co-create solutions to secure a thriving

innovation-based pharmaceutical industry in Europe.

HEALTH & GROWTH 2

Richard TorbettChief Economist

Purpose of the document

HEALTH & GROWTH 3

The purpose of this evidence compendium is largely two-fold. Firstly, it is intended to serve as a comprehensive

and robust collection of evidence made available to the member companies and associations of EFPIA in order to

build compelling and inter-linked arguments when interacting with our stakeholders, for example payers,

policymakers and regulators. Secondly, it is intended as a frame within which EFPIA and its member companies

and associations can better align their ‘policy asks and gives’ and strive towards talking and acting with ‘one

industry voice’

The structure of the document highlights an overarching narrative around three main areas in which regional and

national policymakers and the pharmaceutical industry have critical current and future interfaces:

1) Health & Wealth

2) Sustainable Financing

3) Growth & Competitiveness

Embedded in the above three sections is a sequential flow that could be used as a platform for building a

compelling industry story and alignment, however the ambition has been to ensure that each slide can ‘present

facts on its own’ and ‘speaks for itself’. This provides enhanced flexibility to EFPIA and its member companies and

associations in order to create tailor-made storylines.

Index

HEALTH & GROWTH 4

Foreword …………………………………………………………………………………………………………….....………….

Purpose of the Document …………………………………………………………………………………………...………….

Index ………………………………………………………………………………………………………...………...……………

Glossary ……………………………………………………………………………………………………………....……………

Part I: Health & Wealth ………………………………………………………………………………......................................

Introduction ………………………………………………………………………………………...……………….

Europe has made great strides in improving health outcomes and medicines played an

important part, but inequalities exist …………………………………………………………......………………

Addressing demographic challenges and improving health outcomes will increase

economic productivity and wealth creation…………………………………………………....…………………

Innovative medicines have been key to address unmet needs in the past and will be in

the future ………………………………………………………………………………………...………………….

Sources ……………………………………………………………………………….........………………………

2

4

7

9

3

10

22

38

51

11

Index

HEALTH & GROWTH 5

Part II: Sustainable Financing ….….….….….….…………………………………………………......................................

Introduction ………………………………………………………………………………………...……………….

Medicines promote efficiency of healthcare by reducing cost of care for

patients and society ..….….….….….….….….….….….….….….….….….….….….…….......………………

Appropriate use of medicines can be a self sustaining model .….….….….……………....

…………………

Medicines innovation contributes to the financial sustainability of health system

through its investments and partnership working .….….…………………………………...

………………….

More flexible pricing models could improve access and financial

sustainability ……………………………………………………………………………………………………….

Sources ……………………………………………………………………………….........………………………

58

61

78

99

59

105

118

Index

HEALTH & GROWTH 6

Part III: Growth & Competitiveness ..……….….…………………………………………………......................................

Introduction ………………………………………………………………………………………...……………….

Healthcare provides a triple play (social, economic, innovation) .….…………...….…….......………………

Healthcare eco-system is amongst the best growth opportunities

for Europe .……………………….….….….……......….….….….….….………..............................................

Pharma plays a key role in European healthcare eco-system …..….……....….….….….….….…...........…

Europe has many of the right foundations but needs to lift its game to be

competitive ..….….………………………………………………………………………………………………….

Sources ……………………………………………………………………………….........………………………

Back Up ..……….….…………………………………………………...................................................................................

Methodology based on OHE Research .….….….….….……….…….………………………...……………….

Methodology to calculate multiplier effect ….….….….….……....……….……............….….….….….…......

123

126

144

155

124

169

185

195

197

196

Glossary

HEALTH & GROWTH 7

European Countries

Other

Global

China CN

Portugal PT

Romania

Slovakia

Slovenia

Spain

Sweden

United Kingdom

RO

SK

SI

ES

SE

UK

Latvia

Lithuania

Luxembourg

Malta

Netherlands

Poland

LV

LT

LU

MT

NL

PL

Canada CA

Finland

France

Germany

Greece

Hungary

Ireland

Italy

FI

FR

DE

EL

HU

IE

IT

United States US

Austria

Belgium

Bulgaria

Cyprus

Czech Republic

Denmark

EstoniaAT

BE

BG

CY

CZ

DK

EE

Europe EU

Switzerland CH

Japan JPRussia RUAustralia AU

8HEALTH & GROWTH

Evidence Review – Overview

Appropriate use of

innovative medicines is

essential to ensuring a

sustainable health

budget

Appropriate use of



sustainable health

budget

Pharma could have a vital

role in Europe’s growth

and future

competitiveness



and future

competitiveness

Sustainable

Financing

Sustainable

FinancingGrowth &

Competitiveness

Growth &

Competitiveness

Why Europe needs a thriving

pharmaceutical industry



2 3

By ensuring uptake of

innovation Europe has

the potential to further

improve health outcomes

and wealth creation





and wealth creation

Health & WealthHealth & Wealth

1

9HEALTH & GROWTH

Evidence Review – Health & Wealth

Appropriate use of



sustainable health

budget

Appropriate use of



sustainable health

budget



and future

competitiveness



and future

competitiveness

Sustainable

Financing

Sustainable

FinancingGrowth &

Competitiveness

Growth &

Competitiveness





2 3





and wealth creation





and wealth creation


1

Over the last 60 years Europe has made huge strides in improving health outcomes and life

expectancy by over 9 years. Medicines have played a key role in achieving extension of life expectancy

in general and healthy life years by helping to address the challenges of infectious diseases, chronic

conditions and, more recently, cancer.

However, major inequalities to medicines access persist across Europe. In addition to an ageing

demographic, degenerative diseases are becoming the next major challenge for most healthcare

systems across Europe. The number of Europeans over the age of 65 will increase by 75% over the

next 50 years, and incidence of dementia will more than double.

Continuing to improve the wellbeing and productivity of Europeans will be even more important in light

of the demographic change. Without new effective solutions, health and social expenditure will become

unsustainable.

Through its R&D activities and partnership initiatives, the pharmaceutical industry is committed to

addressing these challenges.

By ensuring access and uptake of innovation, Europe can continue to improve wealth creation in a

changing demographic environment.

Health & Wealth – Introduction

HEALTH & GROWTH 10



HEALTH & GROWTH 11

By ensuring uptake of innovation Europe has the potential to further improve health outcomes and wealth creationBy ensuring uptake of innovation Europe has the potential to further improve health outcomes and wealth creation


Europe has made great strides in improving health outcomes and

medicines played an important part, but inequalities exist



Addressing demographic challenges and improving health outcomes will increase economic productivity and wealth creation


Innovative medicines have been key to address unmet needs in the past

and will be in the future



1.1 1.2 1.3

Medicines has played a important part in the increases in life expectancy

Uptake of innovation differs within the European Union; both between countries and within countries

Health inequalities exits within the European Union; both between countries and within countries

Increase in disabilities resulting in productivity loss are a future economic burden for society

Diseases of old age are the next major health challenge and medicines represent a cost-effective health intervention

Medicines reduce the economic burden of illness through allowing patients to return to productive activities

1

New medicines have made significant contribution to reduction in deaths of critical disease areas

Industry innovation agenda reflects diverse medical and economic requirements

Industry provides solutions to improving patient compliance and adherence


This section reviews the achievements that have been made in improving health outcomes in Europe

and the challenges that still face us, and the role that innovative medicines and industry can play in

continuing to support improvements in the Health & Wealth of Europe.

Over the last 60 years Europe has made great strides in improving health outcomes resulting in a 14-17 % increase in life expectancy

Europe has shown substantial improvements in life expectancy during the last 60 years Life expectancy continues to improve today – and medicines usage has made major contribution to

recent advances However wide variations in health attainments remain across Europe, amounting to almost a decade of

life expectancy Drug spending is highly correlated with life expectancy at birth and adult mortality Across Europe there are wide variations in usage of innovation which cannot be solely explained by

differences in GDP per capita Innovative medicines are showing superior results in health outcomes and cost-effectiveness

compared to existing treatments Even within countries access to innovation is highly variable for chronic diseases For cardiovascular diseases, access to innovation varies significantly within countries

Europe has made great strides in improving health outcomes and medicines played an important part, but inequalities exist

HEALTH & GROWTH 12


Key Headlines

Over the last 60 years Europe has made great strides in improving health outcomes resulting in a 14-17 % increase in life expectancy

HEALTH & GROWTH 13

Life expectancy at birth for EU27 countries (1950-2010)

During the last 60 years, both male and female life expectancies have improved substantially across Europe.

Source: United Nations: World Population Prospects – The 2010 Revision (2011)


Life Expectancy(years)

Time Period

+17%

+14%

0

Europe has shown substantial improvements in life expectancy during the last 60 years

HEALTH & GROWTH 14

Life expectancy at birth for EU27 countries (1950-2010)


Source: United Nations: World Population Prospects – The 2010 Revision (2011)


Time Period

EU 27 countries

EU Average

Japan

USEU 15

Life expectancy continues to improve today – and medicines usage has made major contribution to recent advances

HEALTH & GROWTH 15

Contribution of innovative medicines to increase in life expectancy (2004-2009)


From 2000 – 2009, an improvement in population weighted mean life expectancy at birth of 1.74 years was seen across 30 OECD countries.

Innovative medicines are estimated to have contributed to 73% of this improvement once other factors are taken into account (e.g. income, education, immunization, reduction in risk factors, health system access).

Source: Lichtenberg, F: Pharmaceutical innovation and longevity growth in 30 developing OECD and high-income countries, 2000 - 2009 (2012)

0

+1.74 years


However wide variations in health attainments remain across Europe, amounting to almost a decade of life expectancy

HEALTH & GROWTH 16

Life expectancy at birth – 2011


Life Expectancy at birth in 2011 (years))

While health outcomes have improved throughout Europe over the last 50 years, a 12% variation (equal to 9 years) in life expectancy exists between country with highest and lowest life expectancy.

Cumulative differences in life expectancy between each country and highest life expectancy amounts to over 1.22 billion life years.

While variations are most observable with recent accession markets, wide variations also exist in markets with highest life expectancy.

Source: World Health Organization (WHO): Database on life expectancy; The World Bank: Database on life expectancy at birth (both accessed 2013)

+12%

Pharmaceutical spend per capita and life expectancy at birth, 2010

Drug spending is highly correlated with life expectancy at birth and adult mortality

HEALTH & GROWTH 17

Pharmaceutical spend per capita and adult mortality, 2010


Source: World Health Organization (WHO): Database on adult mortality (2013); ESPICOM: Pharmaceutical Markets Fact Book (2011)

Note: Adult mortality rate (probability of dying between 15 and 60 years per 1 000 population)

Netherlands

Life

expectan

cy at birth

(years)

Spain

Denmark

Sweden

Germany

Drug spend per capita (US$)

ItalyFrance

Greece

BelgiumIreland

Finland

Romania

Bulgaria

Lithuania

PolandEstonia

Hungary

Austria

Latvia

United Kingdom

Czech

Slovakia

Portugal

Romania

Bulgaria

Lithuania

Poland

Estonia

Latvia

Hungary

United Kingdom

Czech

Germany

Austria

FranceDenmark

SwedenSpain

Greece

Belgium

Ireland

Finland

Slovakia

ItalyA

du

lt mo

rtality (# o

f death

per ’000 o

f po

pu

lation

)

Netherlands

Portugal

Drug spend per capita (US$)

Across Europe there are wide variations in usage of innovation which cannot be solely explained by differences in GDP per capita

HEALTH & GROWTH 18

Volume consumption of innovative therapies / 100 000 people indexed to European Average (2012)


Source: Eurostat: Population figures (2012); IMS Health: MIDAS MAT Q2 (2012)

Innovative Anti-diabetics Innovative Anti-Coagulants Innovative “wet” AMD therapies

Ran

ked

acc

ord

ing

to

in

com

e (G

DP

/ c

ap

ita)

Innovative medicines are showing superior results in health outcomes and cost-effectiveness compared to existing treatments

HEALTH & GROWTH 19

Innovative Medicines vs. existing treatments: Liraglutide (GLP-1 class) [approved 2009 by EMA]


Example: DiabetesExample: Diabetes

Source: EMA; * Garber, A et al: Liraglutide versus glimepiride monotherapy (2009); † Davis, MJ et al: Cost–utility analysis of liraglutide (2012)

Medicines efficacy Quality-adjusted life expectancy Cost-effectiveness

1 Improved efficacy vs. existing treatment (sulfonylurea) in a randomized, Phase III clinical trial*

2 Improved body weight vs. existing treatment (sulfonylurea) in a randomized, Phase III clinical trial*

Mean increases in quality-adjusted life expectancy vs. existing treatment (sulfonylurea) in patients with Type 2 diabetes (added to metformin monotherapy)†

Incremental cost-effectiveness ratios vs. existing treatment (sulfonylurea) in patients with Type 2 diabetes (added to metformin monotherapy)†

8,2% 8,2% 8,2%

liraglutide (1.2mg)

liraglutide (1.8mg)

sulfonylurea

sulfonylurealiraglutide (1.8mg)

liraglutide (1.2mg)

Baseline HbA1c

Body weightchange from baseline

HbA1c change from baseline

Mean increasein QALY Cost-effectiveness

ratio per QALY (in £)

Cha

nge

in

bod

y w

eig

ht

(kg)

Even within countries access to innovation is highly variable for chronic diseases

HEALTH & GROWTH 20

Regional uptake of innovative Anti-diabetes medicines (DDD/100 000) - 2012


Example: Diabetes Example: Diabetes

Sweden Italy UK

Source: IMS Health MIDAS MAT Q3 (2012); SCB population statistics; Population statistics Istat; Statistics from NHS IC GP registered populations

+580%DDD/100 000

+37 569%

DDD/100 000 +100%DDD/100 000

For cardiovascular diseases, access to innovation varies significantly within countries

HEALTH & GROWTH 21

Regional uptake of innovative Anti-coagulants (DDD/100 000), 2012


Example: CardiovascularExample: Cardiovascular

UKSweden

Source: IMS Health MIDAS MAT Q3 (2012); SCB population statistics; Population statistics Istat; Statistics from NHS IC GP registered populations

+ 1 700%

+341%

DDD/100 000 DDD/100 000


HEALTH & GROWTH 22













1.1 1.2 1.3







1





This section reviews the current and future challenges due to demographic change and impact on

productivity and wealth creation, and the role that innovative medicines and industry can play in

continuing to support populations staying healthy and productive.

Chronic diseases are already a major part of the healthcare bill and, unmanaged, risk factors indicate it will keep rising

Forecasts show an acceleration in lost output due to illness; high income economies like Europe are the most exposed

Looking to the future, Europe needs to find solutions to pressing demographic challenges that will impact health and social spending

Health-related disability increases sharply with age and across Europe there is an increase in reported disabilities

With an ageing population living with disabilities focus needs to shift from preventing mortality to improving quality of life and function

Without new approaches the EU itself acknowledges that demo-graphic challenge will render healthcare systems unsustainable

Workforce reduction and increasing dependency ratio put increased pressure of society’s healthcare financing


HEALTH & GROWTH 23


Key Headlines – 1

Keeping the population healthy and productive is a critical priority and medicines have and can continue to play a part

Reducing disability and sickness transfers, by improving outcomes, can further contribute to Europe’s ability to fund future investments

Health is a major cause of productivity loss and early labour market exit, with many causes being addressable

For many diseases the real cost to the system is lost productivity and new medicines are making a difference

Medicines offer an opportunity to reduce the cost of productivity loss and disability by improving workforce health

Relative to the economic cost of lost productivity, medicine and healthcare are very cost effective


HEALTH & GROWTH 24


Key Headlines – 2

Impact of chronic diseases on distribution of healthcare bill

Chronic diseases are already a major part of the healthcare bill and, unmanaged, risk factors indicate it will keep rising

HEALTH & GROWTH 25

Development of risk factors (obesity, urbanisation, aging)


~75% of Europe’s healthcare bill is spent on chronic diseases amounting to €700 bn*.

Chronic diseases like heart disease, diabetes, lung disease, and Alzheimer's Disease are overwhelming healthcare with soaring annual costs.

Increased Adult Obesity†

Increased Urbanisation Rates∆

Aging♯(65+ years)

Forecast Ranges

Source: * The Economist Intelligence Unit (2012); † NSCN (2006); ∆ PRB (2007); ♯ European Commission (2012)

Population (mn)

Urbanisation rate (%) +8%

+28%

% of population

Projected Output Losses, 2011 – 2030*(Breakdown of NCD cost by disease)

Forecasts show an acceleration in lost output due to illness; high income economies like Europe are the most exposed

HEALTH & GROWTH 26

Share of Disability Life Years and Healthy Life Years in Europe†


Source: * World Economic Forum /Harvard School of Public Health (2011); † Eurostat: various databases (accessed 2013); A.T. Kearney analysis

Lost output, trillions (2010 US$)

Note: NCD = Non-communicable Diseases; Analysis based on EPIC model

Total EU disability life years (bn)

77.583.2

Years

Demographic Development*

Looking to the future, Europe needs to find solutions to pressing demographic challenges that will impact health and social spending

HEALTH & GROWTH 27

System Impact: Severity, length and increased incidence


87mn

152mn+75%

65+ Years

Source: * European Commission (2012); † Brookmeyer R et al. (2007); ∆ UK Dept. of Health (2010), European Commission; ♯ WHO (2013)

Increase in severity of Degenerative Diseases†

Extended impact of Chronic Diseases∆

Increased incidence of Cancer♯

+16%

+16%

+136%Mn people

years

Mn cases

Prevalence of disability among working age people (2009), EU27 Average*

Health-related disability increases sharply with age and across Europe there is an increase in reported disabilities

HEALTH & GROWTH 28

Increase in reported disability, EU27†


Population (in %)

year

% reporting long-term restrictions in daily activities

Source: * European Commission: Situation of working-age people with disabilities across the EU (2011); † OECD: Sickness, Disability and Work (2010)

Disability (% of population

by gender) +6%

With an ageing population living with disabilities focus needs to shift from preventing mortality to improving quality of life and function

HEALTH & GROWTH 29

Male Disability Life Years as a % of total life expectancy in 1990 and 2010


Source: Lancet: Healthy life expectancy for 187 countries, 1990–2010 (2010); A.T. Kearney analysis

In all 27 EU countries, disability life years as % of life expectancy has increased in the period 1990 – 2010.

Going forward the old-age dependency ratio and the impact of chronic diseases on disability could result in additional increases going forward with productivity losses and increases in incapacity benefits as outcomes.

Disability life years in % of total life expectancy

12.2%12.3%

12.4%12.6%

12.8%12.8%

12.8%12.9%12.9%13.0%

13.1%13.2%

13.3%13.4%13.4%13.4%13.4%13.5%13.5%13.5%

13.7%13.8%13.8%

13.5%

14.1%14.2%

15.4%

Without new approaches the EU itself acknowledges that demo-graphic challenge will render healthcare systems unsustainable

HEALTH & GROWTH 30

Healthcare Expenditure (% of GDP, EU27 average) under different scenarios


Pure Demographic scenario:

Gains in life expectancy are assumed to be spent in disabled health while the number of years spent in good health remains constant. In this, the assumption is that health care cost per capita for each year of age remains constant in GDP per capita-adjusted terms over the whole projection period.

Constant Health scenario:

For each year and for each age/gender, the age-related expenditure profile is shifted outwards – i.e. providing modified values of cost per capita, which are then applied in the same manner as the pure demographic scenario. For the constant health scenario, the scale of the outward shift in the age-related expenditure profile is directly proportional to the increase in life expectancy for each cohort.

Improved Health scenario:

Similar to the constant health scenario, only the same outward shift is assumed to be multiplied by a factor of 2.

Source: European Commission: Projecting future healthcare expenditure at European level (2010)

-23%

Healthcare expenditure in % of GDP

(EU27 average)

year

Social Impact: Decline in workforce due to demographic changes*

Workforce reduction and increasing dependency ratio put increased pressure of society’s healthcare financing

HEALTH & GROWTH 31

Social Impact: If no alternative financing is identified, taxes will rise to unseen levels†


Absolute size of the workforce will decline over the next decades, leading to a smaller tax base.

Tax burden in Europe is rising (per cent on wages).

Source: * European Commission: The 2012 Aging Report (2012); † Government Office for Science: The Burden of Ageing (2011)

Decline in workforce

(mn people)

year

-11%

Tax in %

year0

% of GDP lost due to chronic diseases*

Keeping the population healthy and productive is a critical priority and medicines have and can continue to play a part

HEALTH & GROWTH 32

Disability prevalence at working age

(EU countries) †


Source: * Suhrcke M, Urban D: Are cardiovascular diseases bad for economic growth (2006) in WHO (2010); † OECD (2010)

Note: Disability prevalence defined as: “chronic health problem for at least six months limiting daily activities”

Cost-of-illness studies illustrate that cost of chronic diseases and their risk factors had a sizeable impact on high-income country’s GDP, ranging from 0.02% to 6.77%.

Disability prevalence(in %)

% of GDP

6.77%

Social protection expenditure*

Reducing disability and sickness transfers, by improving outcomes, can further contribute to Europe’s ability to fund future investments

HEALTH & GROWTH 33

Disability and sickness transfers as a factor of unemployment transfers†


Old age38%

Other benefits9%

Family/children8% Administration costs

3%

Other expenditure1%

Unemployment6%

Disability8%

Sickness/Healthcare28%

Structure of social protection expenditure, EU-27, 2010

Source: * Eurostat: Structure of social protection expenditure, EU-27 (2010); †OECD: Sickness, Disability and Work (2010)

0,81,01,1

1,11,61,7

2,52,72,72,83,23,2

3,53,74,6

5,5

9,910,9

11,3

0

3

6

9

12

15

Irela

nd

ItalyC

zech Re

publicD

enma

rk

Hu

ngary

Factor

Greece Luxem

bourg

Finla

ndP

ortugal

France

Po

landS

wede

n

Slova

kia

Ne

therland

s

United

Kingdom

1.0

Germ

anyS

pain

Belgium

Au

stria

Disability and Sickness transfers as

a factor of unemployment transfers

Health as a cause of leaving job

Health is a major cause of productivity loss and early labour market exit, with many causes being addressable

HEALTH & GROWTH 34

Determinants for health-related early labour market exits in Austria (% of exists)


Note: Percentage of people that were previously employed and answered the main reason for leaving their job was ‘Own illness or disability”

Health related causes for loss of output

2/3 of lost output are due to mental health and cardiovascular diseases.

Source: European Commission: Health of People of Working Age( 2011); European Commission: Health Systems and Health care in the EU (2012)

Left last job forreasons of health

Age Group

% of market exists

Distribution of Multiple Sclerosis cost (EU27 + Norway, Iceland and Switzerland)*

For many diseases the real cost to the system is lost productivity and new medicines are making a difference

HEALTH & GROWTH 35

Arthritis: Improvement in functioning and productivity due to new medicines†


Source: * Kobelt, G, Kasteng F: Access to Innovative Treatments in Multiple. Sclerosis (2009); †Strand, V: Function & Health-Related Quality of Life (1999)

More than 1/3 of Multiple Sclerosis cost in Europe are due to productivity loss

% of patients

Avoidable Productivity Losses, U.S., 2023*

Medicines offer an opportunity to reduce the cost of productivity loss and disability by improving workforce health

HEALTH & GROWTH 36

COPD in selected European countries: % of GDP lost due to chronic disease†


Source: * Milken Institute: The Economic Burden of Chronic Disease (2007); † Respiratory Medicines Journal (2003)

Across Europe, a significant amount of people with chronic diseases had either gone into early retirement or were contributing less than productive peers.

Disease Area % of GDP

US$ bn

Relative to the economic cost of lost productivity, medicine and healthcare are very cost effective

HEALTH & GROWTH 37

Cost of Medical and Medicines cost vs. Productivity Loss


Source: Loeppke, R: Health and Productivity as a Business Strategy (2009)

Study objective:

To assess business implications of a full-cost approach to managing health.

Methodology:

Questionnaire study with more than 50.000 employees participating combined with medical claims data. Regression analysis were used to estimate impact of health-related absenteeism and presenteeism.

Results:

Health-related productivity cost are significantly greater than medical and medicines cost combined (on average 2.3 times across 25 therapy areas).

Parameter (cost vs. productivity loss)


HEALTH & GROWTH 38













1.1 1.2 1.3







1





This section reviews the current and future trends in epidemiology and R&D , and the role that

innovative medicines and industry can play in continuing to support patients staying healthy and

improving adherence and compliance.

Medicines innovation has made major contribution to reducing mortality rates in many priority conditions

In areas like cancer, medicines innovation continues to play a key role in increasing life expectancy The pharmaceutical industry remains firmly committed to investing in finding solutions to key unmet

needs With over 16 000 compounds currently in development, over 80% of projects are focused on

degenerative diseases, NCDs and cancer For degenerative diseases, NCDs and Cancer balanced mix can be found across all phases of

compound development Industry pipelines have historically been targeting the major unmet needs of the European society Beyond medical conditions, medicines adherence continues to present major challenges for many

healthcare systems Lack of compliance is estimated to cost the European governments €125 bn / year The development of insulin injection devices has increased compliance rates in diabetes The industry continues to invest in innovating new oral forms in line with patient preference The advent of social media and more connected patients are opening up new opportunities to support

patients and physicians

Innovative medicines have been key to address unmet needs in the past and will be in the future

HEALTH & GROWTH 39


Key Headlines

Medicines innovation has made major contribution to reducing mortality rates in many priority conditions

HEALTH & GROWTH 40

Death rate decreases for diseases treated with pharmaceuticals 1965 - 1995


De

ath

rate

de

cre

as

es

by d

ise

as

e

Source: US National Center for Health Statistics (1998); PhRMA (2012)

-80%

-75%

-68%

-67%

-61%

-41%

-31%

Increases in life expectancy 1980 - 2008

In areas like cancer, medicines innovation continues to play a key role in increasing life expectancy

HEALTH & GROWTH 41

Contribution to increased life expectancy from new treatments incl. new medicines


Source: Smith, B: The Future of Pharma (2011)

Life expectancy of cancer patients(0 = base value)

Increase in life expectancy

(in years)+ 3 years

Contribution to increased life expectancy in %

Share of EMA Marketing Approvals 1995-2000

The pharmaceutical industry remains firmly committed to investing in finding solutions to key unmet needs

HEALTH & GROWTH 42

Share of EMA Marketing Approvals 2007-2012


Infectious Diseases dominating the overall picture. NCDs emerging.

Cancer, NCDs and mental health on a rise

Source: EMA (European Medicines Agency): Database (accessed 2013); A.T. Kearney analysis

With over 16 000 compounds currently in development, over 80% of projects are focused on degenerative diseases, NCDs and cancer

HEALTH & GROWTH 43

Registered Pipeline Compounds end of year 2011


Source: Business Insight Database end Year 2011 via Lifescience Analytics (2012); A.T. Kearney analysis

Finding solutions for unmet needs in cancer has been a major recent focus for the industry.

Growth in early stage investment in CNS reflects appreciation for the need to identify breakthroughs in major challenge of degenerative mental health diseases.

Decreasing activity in areas like cardiovascular care reflect the adequate nature of existing standards of treatment in some areas (e.g. hypertension) and some residual unmet needs (e.g. stroke prevention).227

329

346

490

507

581

716

769

1012

1178

1887

2125

6317

Registered Pipeline Compounds

For degenerative diseases, NCDs and Cancer balanced mix can be found across all phases of compound development

HEALTH & GROWTH 44

Registered Pipeline Compounds per phase end of year 2011


Source: Business Insight Database end Year 2011 via Lifescience Analytics (2012); A.T. Kearney analysis

Industry pipelines have historically been targeting the major unmet needs of the European society

HEALTH & GROWTH 45

Share of EMA approvals 1995 – 2009 and share of DALYs per 100,000 in EU-25


Size of bubble illustrates share of DALYs per 100 000 in EU-25

Source: Catala-Lopez, F. et al: Development of new medicinal products in the European Union (2010); A.T. Kearney analysis

The pharmaceutical industry have to a large extent focused their innovation on the unmet needs of EU-25 countries.

A minor ‘innovation gap’ can be identified within neuropsychiatric conditions where the share of DALYs lost still exceed the share of new product approvals.

Especially for infectious and parasitic diseases and diabetes mellitus, the identified ‘innovation overload’ could be explained by the fact that these diseases largely occur in developing countries where the DALYs (and thus the need for innovation) is substantially greater than in EU-25.

Optimal Value for society

Adherence rates for selected treatment areas*

Beyond medical conditions, medicines adherence continues to present major challenges for many healthcare systems

HEALTH & GROWTH 46

Global Dimensions of non-adherence†


Source: * National Council on Patient Information and Education (2007); † EFPIA: Annual Review of 2011 and Outlook for 2012 (2012); A.T. Kearney Analysis

1 in 3 patients don’t fill the prescriptions they are given

1 in 2 forget to take prescribed medicines

3 in 10 stop taking a medication before their supply run out

1 in 4 take less than the recommended dose

Adherence rate in %

Time period

Lack of compliance is estimated to cost the European governments €125 bn / year

HEALTH & GROWTH 47

Avoidable cost for the National Healthcare System


Note: €125 bn /year is an A.T. Kearney estimate based on US avoidable cost data

Source: New England Healthcare Institute: A System-wide Approach to Improving Patient Medication Adherence for Chronic Disease (2009)

14% of total healthcare expenditure are cost arising due to the complications of poor adherence.

Higher focus on adherence would lead to significant cost long-term savings especially in terms of decreased hospital admissions.

Avoidable costfor NHS (in %)

The development of insulin injection devices has increased compliance rates in diabetes

HEALTH & GROWTH 48

Development and Impact of Insulin Injection Devices


Case StudyCase Study

Improved compliance

Situation Industry’s Response Impact Conclusion

In 1985, the first insulin delivery device was invented by the pharmaceutical industry (NovoPen)

Since then, numerous additional devices and device-related innovation have been brought to the market to the benefits of patients and society. New features have included:

Lowered injection force Ergonomic grip Memory function Children specific devices

Diabetes management requires intensive glycemic control to prevent macro- and microvascular complications

Glycemic control complicated by cumbersome and inaccurate vial and syringe administration

Low compliance rates with vial and syringes was regarded a large barrier to improve glycemic control

Clear patient preference

Health economic impact

Continuous innovation during more than 25 years in the area of insulin devices exemplifies continued commitments by the pharmaceutical industry to support efforts to reduce healthcare cost and improve health outcomes

Source: Selam, J. (2010); Lee, W et al (2006); Pawaskar MD, et al (2007); IMS Health (2012)

Medication compliance

Total Healthcare Cost

-53%

+ 11%

The industry continues to invest in innovating new oral forms in line with patient preference

HEALTH & GROWTH 49

Preference of Treatment Schemes (cancer, diabetes)



Examples

In terms of adherence, oral drugs have a potential advantage over injected therapies, generally, they are perceived to be better tolerated, physically and psychologically.

Studies involving patients with diabetes or cancer have shown that patients prefer receiving medication in the form of inhaled or tablet preparations, rather than an injectable.

Treatment preference in patients with advanced colorectal cancer

Treatment preference in patients with Type 2 diabetes

Source: Twelves, C et al (2006); daCosta DiBonaventura, M et al ( 2010)

Treatment preference

The advent of social media and more connected patients are opening up new opportunities to support patients and physicians

HEALTH & GROWTH 50

Development of mobile disease management tools



Situation Situation

Diabetes relies heavily on self-management†, but the majority of patients are not adhering to their recommended SMBG therapy∆.

Diabetes patients across Europe are not in good glycemic control resulting in elevated risks for severe macro- and microvascular complications*.

Regular SMBG increases the proportion of individuals achieving their glycemic targets♯

Industry’s Response

The pharmaceutical industry has responded to the need for a more integrated way of blood glucose monitoring by establishing new paradigms around mobile and seamless disease management.

Example: ‘iBGStar system’ – an integrated system of blood glucose monitoring, data capture, -storage, and –transmitting and management tool as integrated into an iPhone

Source: * Changingdiabetesbarometer.com; † Peyrot, M. (2005); ∆ Vincze, G et al (2004); ♯ Blonde, L. et al (2002)

Health & Wealth – Sources (1/7)

HEALTH & GROWTH 51


Blonde, L. et al (2002)Frequency of blood glucose monitoring in relation to glycemic control in patients with type 2 diabetesDiabetes Care 2002; 25: 245-246

Brookmeyer R. et al. (2007)Forecasting the Global burden of Alzheimer’s diseaseJohns Hopkins University, Dept. of Biostatistics Working Papers. Paper 130. 2007

Catalá-López, F. et al. (2010)Does the development of new medicinal products in the European Union address global and regional health concerns?Population Health Metrics 2010, 8:34 al

daCosta, M. et al. (2010)Multinational Internet-based survey of patient preference for newer oral or injectable Type 2 diabetes medicationPatient Preference and Adherence 2 November 2010

Davis, M.J. et al. (2012)Cost–utility analysis of liraglutide compared with sulphonylurea or sitagliptin, all as add-on to metformin monotherapy in Type 2 diabetes mellitusDiabeticMedicine: DOI: 10.1111/j.1464-5491.2011.03429.x

EFPIA (2011)Annual Review of 2011 and Outlook for 2012


HEALTH & GROWTH 52


EFPIA (2010)Patients W.A.I.T. Indicator - Report (2010)

ESPICOM (2011)Pharmaceutical Markets Fact Book (2011)

European Commission (2011)Health of people of working age - Full Report. (2011)European Commission Directorate General for Health and Consumers. Luxembourg. ISBN 978-92-79-18526-7

European CommissionHealth Systems and Healthcare in the European UnionPresentation by Paola Testori Coggi, Director General for Health and Consumers

European Commission (2010)Projecting future healthcare expenditure at European levelEconomic Papers 417 / July 2010

European Commission (2011)The 2012 Aging Report: Underlying Assumptions and MethodologiesEuropean Economy 4/2011

European Commission (2011)The situation of working-age people with disabilities across the EUResearch Note 5/11


HEALTH & GROWTH 53


European Medicines AgencyDatabase on EMA Medicines Approvals

EurostatDatabase on population figureshttp://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tps00001&plugin=1 (accessed April 2013)

EurostatDatabase on structure of social protection expenditurehttp://epp.eurostat.ec.europa.eu/statistics_explained/index.php?title=File:Structure_of_social_protection_expenditure,_EU-27,_2009_(1)_(%25).png&filetimestamp=20130102113739 (accessed April 2013)

Garber, A. et. al. (2009)Liraglutide versus glimepiride monotherapy for type 2 diabetes (LEAD-3 Mono): a randomised, 52-week, phase III, double-blind, parallel-treatment trialLancet 2009; 373; 473 – 481

Government Office for Science (2011)The Burden of Ageing (2011)http://www.sigmascan.org/Live/Issue/ViewIssue/121/4/the-burden-of-ageing-economic-impacts-of-changing-demographics/

IMS HealthMIDAS database


HEALTH & GROWTH 54


Kobelt, G. Kasteng, F. (2009)Access to innovative treatments in multiple sclerosis in EuropeEFPIA 2009

Lee, W, et al (2006)Medication adherence and the associated health-economic impact among patients with type 2 diabetes mellitus converting to insulin pen therapy: an analysis of third-party managed careClinical Therapy 2006;28(10):1712–25; discussion 1710–11

Lichtenberg, F. (2012)Pharmaceutical Innovation and Longevity Growth in 30 Developing and High-income Countries, 2000-2009NBER Working Papers 18235, National Bureau of Economic Research, Inc. (2012)

Loepke, R. et al. (2009)Health and Productivity as a Business Strategy: A Multiemployer StudyDOI: 10.1097/JOM.0b013e3181a39180. JOEM • Volume 51, Number 4, April 2009

Milken Institute (2007)An Unhealthy America: The Economic Burden of Chronic Disease2007

National Social Marketing Centre (2006)Key Health and Lifestyle Areas – Current rates and past trendsNSCM Report 12 - 2006


HEALTH & GROWTH 55


OECD (2010)Sickness, Disability and Work. Breaking the BarriersOECD 2010

Pawaskar, M, et al (2007)Health care costs and medication adherence associated with initiation of insulin pen therapy in Medicaid enrolled patients with type 2 diabetes: a retrospective database analysisClinical Therapy 2007;29 Spec No:1294–305

Peyrot, M, et al (2005)Psychosocial problems and barriers to improved diabetes management: results of the Cross-National Diabetes Attitudes, Wishes and Needs (DAWN) StudyDiabetes Medicines, 22 (2005), pp. 1379 – 1385

Selam, J, (2010)Evolution of Diabetes Delivery DevicesJournal of Diabetes Science and Technology. Volume 4, Issue 3, May 2010

Smith, B. (2011)The Future of PharmaGower Publishing Limited (2011)

Strand, V. et al. (1999)Function and Health-related quality of lifeArthritis & Rheumatism 42, No. 9, September 1999, pp. 1870–1878 1999, American College of Rheumatology


HEALTH & GROWTH 56


Suhrcke M., Urban, D. (2006)Are Cardiovascular diseases bad for economic growth?CESifo Working Paper No. 1845

The Economist Intelligence Unit (2012)Never too early: Tackling chronic disease to extend healthy life years (2012)

The World Bank Database on life expectancyhttp://data.worldbank.org/indicator/SP.DYN.LE00.IN (accessed April 2013)

Twelves, C. et al. (2006)

A randomized cross-over trial comparing patient preference for oral capecitabine and 5-fluorouracil/leucovorin regimens in patients with advanced colorectal cancer

Annals of Oncology 17: 239–245, 2006

UK Department of Health (2010)Equity Audit of Diabetes Services in Lothian – 2010

United Nations, Department of Economic and Social Affairs (2011)World Population Prospects – The 2010 Revision; released on 3 May 2011http://esa.un.org/wpp/index.htm (accessed April 2013)


HEALTH & GROWTH 57


Vicenze, G. et al. (2004)

Factors associated with adherence to self-monitoring of blood glucose among persons with diabetes

Diabetes Educator 2004; 30 (1) 112 – 15

WHO

Database on adult mortality

http://apps.who.int/gho/data/node.main.11?lang=en (accessed April 2013)

WHO (2010)

Tackling chronic diseases in Europe

Observatory Studies Series No 20

WHO (2013)

The European Health Report 2012: Charting the way to well-being

2013

World Economic Forum (2011)

The Global Economic Burden of Non-communicable Diseases

September 2011

58HEALTH & GROWTH




and future

competitiveness



and future

competitiveness

Growth &

Competitiveness

Growth &

Competitiveness





3





and wealth creation





and wealth creation


1

Appropriate use of



sustainable health

budget

Appropriate use of



sustainable health

budget

Sustainable

Financing

Sustainable

Financing

2

Appropriate medicines usage has been a major contributor to the improved productivity of health

systems across Europe. Overall medicines usage represents less than 15% of total costs, and yet

medicines are at the heart of many of the most effective pathways of any health system, such as

respiratory complications, diabetes and cardiovascular disease.

Early and appropriate use of medicines reduces the need for much more expensive healthcare

interventions, which, for example in the case of cardiovascular disease, may result in a three-fold

return on investment, releasing capacity in the acute and informal care sector and headroom to support

patients at the end of life.

Over the last decade, medicines expenditure in Europe has grown at a third of the rate of overall

healthcare expenditure. The combination of cost controls and more competitive off-patent markets has

led to an average decrease – albeit in absolute terms – in the unit costs of medicines, relative to a rise

in the consumer price index in many markets of up to 20-30%.

Medicines expenditure tends to follow a sustainable life cycle model and represents one of the best

investments a health system can make and will continue to be so in the future.

Sustainable Financing – Introduction

HEALTH & GROWTH 59

Sustainable FinancingSustainable Financing

Through its clinical trial and partnership activities, the industry contributes to the revenues of the

system and co-funds many initiatives – in the case of oncology it may subsidise up to 15% of the costs

of treatment in areas of high unmet need.

Europe’s rigid approach to medicines pricing is driving inequalities as those least able to pay are

bearing the major burden of an inflexible pricing system.

Sustainable Financing – Introduction

HEALTH & GROWTH 60


Evidence Review – Sustainable Financing

HEALTH & GROWTH 61

This section reviews the role of medicines in different treatment pathways and in particular highlights

the benefits that can achieved through the appropriate use of medicine, both within the healthcare

system and more broadly across society.


Appropriate use of innovative medicines is essential to ensuring a sustainable health budgetAppropriate use of innovative medicines is essential to ensuring a sustainable health budget

Medicines promote efficiency of healthcare by reducing cost of care for patients and society


Good early use of medicines reduces the need for alternative high cost interventions later

Medicines are only reimbursed if value can be proven

Sustainable FinancingSustainable Financing2

Appropriate use of medicines can be a self sustaining

model


model

Medicines innovation contributes to the financial

sustainability of health system through its investments and

partnership working



partnership working

More flexible pricing models could improve access and

financial sustainability



2.1 2.2 2.3 2.4

The problem of sustainable health funding is not medicines

Price control creates a built in deflationary effect and have only increased in line with CPI

Industry has played a part in creating innovative commercial models to smoothen impact of introduction of new technologies

System of patent protection and –expiries create headroom for innovation

Pharmaceutical companies contribute to ‘system’ revenues

Pharmaceutical companies are engaging in novel types of partnerships with a variety of stakeholders to enhance financial sustainability

Differences in affordability of healthcare exist across Europe

More flexible approaches to pricing by indication could improve access to innovation

Pharmaceutical companies have shown a willingness to adjust prices to reflect differences in affordability

Price rigidity driven by reference pricing and free movement of goods is creating inequalities to access in Europe

Health systems across Europe have improved productivity with treatment volumes increasing faster than costs

Overall medicines across Europe represent less than 15 % of total expenditure although variances exist between therapy areas

Throughout Europe medicines are only reimbursed if value can be comprehensively proven across multiple dimensions

Pharmaceuticals have been and will continue to be a major contributor to efficiency gains leading to better outcomes and lower pathway costs

Investment in prevention has been long recognized as good value Early and appropriate use of medicines reduces costs even in therapy areas with treatments readily

available Analysis of compliance data clearly shows substantial returns that can be achieved through appropriate

medicines usage Relative to costs of hospitalisation, cost of innovative new medicines are a good investment


HEALTH & GROWTH 62


Key Headlines – 1

At a time of pressure on healthcare spending, appropriate medicines usage can create additional capacity throughout the health system

In light of demographic change and burden of mental health, innovative medicines have the potential to reduce expenditure

For many conditions that will become more important with an ageing population, informal care is the major cost driver

Even in a high-treatment cost area like oncology, around 60% of total cost arrive from productivity losses and informal care across the EU

Appropriate and early use of medicines in mental health can delay the need for nursing home placements and reduce total costs

Even modest future improvements in disease progression could lead to significant returns to society Effective usage of medicines throughout the pathway ensures that systems can also afford to invest in

improving end of life treatment


HEALTH & GROWTH 63


Key Headlines – 2

Total patients treated and total healthcare expenditure (2004 = Index 100)*

Health systems across Europe have improved productivity with treatment volumes increasing faster than costs

HEALTH & GROWTH 64

Total patients treated and total healthcare expenditure (2004 = Index 100)†


Note: Total patients treated includes in-patients and out-patients

Source: *NHS (2012); † Department of Health, Ireland (2011), OECD Health Statistics Database (accessed 2013)

Total healthcare expenditure by function (2010, pop.-weighted, current prices, PPP, $)*

Overall medicines across Europe represent less than 15 % of total expenditure although variances exist between therapy areas

HEALTH & GROWTH 65

Medicines contribution to disease cost(2011, various diseases)


Cost factor

COPD† Diabetes† CHF† Alzhei-mers∆

Prostate Cancer♯

Care 21% 8% 6% 9% 34%

Hospitali-sation 30% 22% 64% 11% 31%

Indirect Cost

22% 35% 18% 76% N/A

Other Cost 14% 20% 6% 1% 2%

Medication

14% 15% 5% 3% 34%

Source: * OECD Health Statistics Database (accessed 2013); † A.T. Kearney analysis (2012); ∆ Schwarzkop et al. (2010); ♯ Damm el al. (2012)

Countries with formal HTA systems in place*

Throughout Europe medicines are only reimbursed if value can be comprehensively proven across multiple dimensions

HEALTH & GROWTH 66

Reimbursement criteria across countries†


Countries with formal HTA process for reimbursement in place

Countries with no formal HTA process for reimbursement

AT BE GE FI FR NL SE UK

Therapeutic benefits

Innovative Characteristics

Availability of therapeutic alternatives

Patient benefits

Cost-effectiveness

Budget Impact

Equity considerations

Public health impact

R&D

Included in HTA process

Source: * EFPIA: Role and impact of Health Technology Assessment (2011); † Sorensen et al.: Ensuring value for money in health care (2009)

Contribution of medicines to efficiency gains

Pharmaceuticals have been and will continue to be a major contributor to efficiency gains leading to better outcomes and lower pathway costs

HEALTH & GROWTH 67

UK Programme Budgeting Costs (2008)∆


Patient Pathway Cost per QALY

(2008, £)Rank

Respiratory 1 998 1

Endocrine 3 124 2

Neurological 5 480 3

Circulatory 7 039 4

Gastro-intestinal 7 293 5

… ...

Cancer 16 997 6

Musculo skeletal 20 254 8

Infectious diseases 20 829 9

… …

Mental health 49 835 12

Poisoning & AE 163 766 20

Relative role of pharmacological

treatment in pathway

Value benefits gained from delaying onset of Alzheimer’s Disease†

Low birthweight infants (1950 to 1990)*

Delay AD Onset by 1 Year

Delay AD Onset by 3 Years

Delay AD Onset by 5 Years

Note: 1. Dollar values by year of AD onset delay for all new cases from 2010 to 2050; calculated with $50’000 per QALY; 2. NHS England Programme Budget Category

Source: * Cutler, D et al: Technology of birth (2000); † Vernon, J et al: Alzheimer’s Disease and Cost-effectiveness Analyses (2010); ∆ Claxton K. et al: “Methods for the estimation of the NICE cost effectiveness threshold (2012); A.T. Kearney analysis

Polio: Now largely eradicated in Europedue to investments in vaccines*

Investment in prevention has been long recognized as good value

HEALTH & GROWTH 68

Hepatitis B: Cost of Vaccinations vs. Clinical Savings†


Reported cases

Source: * WHO: Vaccine-preventable diseases: monitoring system: (2009); † Boccalini et al.: Economic analysis of the first 20 y of universal hepatitis B vaccination program in Italy (2013)

Estimated avoidable macrovascular events, absolute numbers 20101

Early and appropriate use of medicines reduces costs even in therapy areas with treatments readily available

HEALTH & GROWTH 69

Estimated avoidable healthcare cost, € 000s, 20102


Example: Diabetes Example: Diabetes

% of total diabetes spending

13%

8%

4%

Note: 1. Extrapolated from the likelihood of patients on insulin with delayed insulinazation from IMS Disease Analyzer; 2. Average cost for treating stroke and myocardial infarction

Source: IMS Institute for Healthcare Informatics: Advancing the responsible use of medicines (2012)

Analysis of compliance data clearly shows substantial returns that can be achieved through appropriate medicines usage

HEALTH & GROWTH 70

Total Healthcare Spending: Adherent vs. non-adherent patients, 2005 - 2008


9x

Return on Investment

7x

6x

2x

Note: Calculations are marginal effects from linear fixed-effects models of services cost. Main drivers for cost savings were inpatient hospital days and emergency department visits

Source: Roebuck et al: Increased Drug Spending Medication Adherence Leads To Lower Health Care Use And Costs Despite increased drug spending (2011)

Relative to costs of hospitalisation, cost of innovative new medicines are a good investment

HEALTH & GROWTH 71

Cost of newer cardiovascular medicines compared to savings in hospitalizations in 20 OECD countries 1995 - 2003


Example: CardiovascularExample: Cardiovascular

Study objective:

Assess the effects of introductions of innovative cardiovascular medicines on total healthcare spending

Methodology: Data used for 1100 cardiovascular medicines in 20

OECD countries during the period 1995 – 2003 and based on drug vintage (i.e. the first year the medicines was available in any market)

Controlling for demographic variables, quality of cardiovascular medicines consumption, consumptions of other medical innovations (e.g. CT scanners and MRI units), cardiovascular risk factors and prevalence

Conclusion:

Per capita expenditure on hospitalization would have been $89 higher in 2003 had new cardiovascular medicines not been introduced in the period 1995 – 2003. This increase was almost four times as high as the per capita increase on expenditure on cardiovascular medicines ($24)

Source: Lichtenberg, F: Have Newer Cardiovascular Drugs Reduced Hospitalization? Evidence from Longitudinal Country-level Data on 20 OECD Countries, 1995–2003 (2008)

At a time of pressure on healthcare spending, appropriate medicines usage can create additional capacity throughout the health system

HEALTH & GROWTH 72

Full Time equivalent hospital staff savings by use of innovative medicines for avoidance of hospitalizations for chronic diseases


Total patients Total hospital admissions

Introduction of innovative medicines (# of innovative medicines in analysis)

Total FTE Hospital staff savings by hospital admission avoidance

Disease Area

Effective management of early-stage disease in the community could release between 4% and 7% of hospital resources in specific areas.

Source: Tsichristas, A et al.: Medical innovations and labor savings in health care (2009)

COPD 316 400 19 422 (6%)

Mental Disorders 902 658 87 690 (10%)

Coronary Heart Disease 675 000 95 277 (14%)

1

3

3

2 591 FTEs

2 077 FTEs

2 292 FTEs7,4% of total personel in mental hospitals

3,4% of total personel in hospitals

In light of demographic change and burden of mental health, innovative medicines have the potential to reduce expenditure

HEALTH & GROWTH 73

Projected Spending on Alzheimer’s Disease in Europe (€ bn)


Example: AlzheimerExample: Alzheimer

Note: Assumes research breakthroughs that delay the average age of onset of Alzheimer’s disease by five years beginning in 2010

Source: A.T.Kearney analysis based Alzheimer’s Association: Changing the trajectory of Alzheimer’s Disease (2010)

Delaying the onset of Alzheimer’s disease could reduce the cost of the disease by almost 50%

Potential cost savings are based on the introduction of innovative and effective medicines at Year x leading to a delay of AD onset by 5 years

For many conditions that will become more important with an ageing population, informal care is the major cost driver

HEALTH & GROWTH 74

Mean cost of Alzheimer’s Disease (Average € per month)


Example: AlzheimerExample: Alzheimer

Source: Rapp, T: Exploring the relationship between Alzheimer’s disease severity and longitudinal cost (2012)

Sample of patients consisted of 1 131 diagnosed with mild to moderate Alzheimer’s disease followed during a 2-year period in 50 French memory clinics. To assess business implications of a full-cost approach to managing health.

Data were collected at three time points: baseline visit, 1. year visit and 2. year visit

15% of patients were institutionalized during the study period

Even in a high-treatment cost area like oncology, around 60% of total cost arrive from productivity losses and informal care across the EU

HEALTH & GROWTH 75

Costs of cancer in the European Union in 2009, by country (%)


Example: OncologyExample: Oncology

Source: Luengo-Fernandez, R. et al: Economic burden of cancer across the European Union: a population-based cost analysis (2013)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

33,6

20,8

32,6

13,0

FI

35,8

11,0

42,8

10,4

ES

36,8

51,4

17,2

20,7

10,8

CY

53,2

13,8

12,8

20,2

SI

53,9

10,3

14,6

IE

46,0

11,2

34,0

8,8

PL

46,5

15,1

31,1

7,3

HU

47,4

12,5

17,6

22,6

BG

48,3

10,3

26,7

14,7

UK

47,6

16,2

29,0

13,5

DE

39,3

18,3

34,7

7,7

EU

41,2

18,4

29,6

10,8

SK

42,7

8,5

30,9

17,9

FR

43,2

15,1

23,8

17,9

CZ

45,9

9,2

30,3

RO

57,6

8,9

17,2

16,3

PT

59,4

13,1

15,5

12,1

LT

61,4

AT

17,5

28,8

16,8

EL

38,7

13,4

30,5

17,5

LU

39,1

13,5

33,9

60%

IT

25,0

33,4

31,5

10,1

MT

34,2

23,7

23,7

18,4

12,7

21,9

3,9

DK

62,0

12,4

16,5

9,1 7,3

SE

50,6

14,3

26,7

8,4

NL

50,8

15,5

28,1

5,6

BE

24,1

11,6

EE

54,9

9,8

29,5

5,8

LV

56,5

12,0

25,7

5,8

%

Productivity LossesOther Healthcare Cost Informal CareMedicines Cost

% of patients placed in nursing homes*

Appropriate and early use of medicines in mental health can delay the need for nursing home placements and reduce total costs

HEALTH & GROWTH 76

Cost-effectiveness of early treatment (£ per patient) †


Patients taking cholinesterase inhibitors were 5 times less likely to be admitted to a nursing home after 3 years of treatment after controlling for multiple factors that can alter the course of the disease

Treatment initiated for early-stage (mild-to-moderate) Alzheimer’s disease followed by 7-year treatment proves more cost-effective than current standards of care

In addition to cost savings, the QALY per patient were 9% higher with early treatment of Alzheimer’s Disease

Source: * Lopez, O et al: Clinically meaningful outcome in Alzheimer’s disease (2005); † Getsios D et al.: Economic evaluation of early assessment for Alzheimer’s disease in the UK (2012)

Even modest future improvements in disease progression could lead to significant returns to society

HEALTH & GROWTH 77

Economic Value to Society of slowing Parkinson’s Disease Progression


Example: ParkinsonExample: Parkinson

Study objective:

Model PD progression over the complete course of disease and to assess economic consequences of slowing down PD progression

Methodology: Model length spanned 25 years Cost and benefits were discounted at 3% Patient progression based on Hoehn and Yahr

(H&Y) stages of disease development Direct and Indirect medical costs were taken from

published German studies Conclusion:

Net benefits of €54,000 achievable by slowing PD progression per patient by 20%m rising to €327,000 per patient by fully arresting disease progression

If this potential is to be realized more innovation within the area of Parkinson’s disease should be encouraged.

Source: Johnson, SJ et al.: Economic value of slowing Parkinson’s Disease in Germany, (2012)

Effective usage of medicines throughout the pathway ensures that systems can also afford to invest in improving end of life treatment

HEALTH & GROWTH 78

QALYs across health life cycle


Source: * QQUIP (2007); † NICE (2006); ∆ Dept. of Health, UK (2002); ♯ Ruger et al (2008); Ω Gillick (2004); ∑ RIVM (2007); + Buddingh (2007);§ NICE (2006)

Creating Life

Preventing ill health

Treating ill health Prolonging life

Preventing Death

£

Smoking cessation advice in pregnant mother ♯

£424/QALY

Reduced infant mortality with

rotavirus vaccination∑

Cost Saving

Suicide prevention*,∆

Cost Saving

Effective usage of statins*,†

~£2 300/QALY

Intense glycose control in Type 1

diabetes*

Cost Saving

Breast Cancer screening§

£2 050/QALY

PET for Alzheimer’s diseaseΩ

£250 000/QALY

Herceptin for early stage HER2+

breast cancer§£18-33 000/QALY

GM-CSF in elderly with Leukemia+

£118 000/QALY


HEALTH & GROWTH 79

This section reviews the historical and projected expenditure development within the healthcare system

and highlights how the expenditure of medicines has been and can continue to be a self-sustaining

system, providing the right measures for creating headroom for innovation are in place.









model


model



partnership working



partnership working





2.1 2.2 2.3 2.4











Across Europe growth in medicines expenditure is lagging behind growth in total healthcare expenditure

Medicines have only contributed to 15% of increased health costs in Europe – with hospitalizations and elderly care being the key drivers

In all but a few markets across Europe, medicines expenditure is growing 30% slower than overall health investment

In many European countries medicines is the slowest growing category of any other areas of healthcare expenditure

Savings from generic expiries have ensured that the global medicines bill is sustainable and will continue to be so

For many therapy areas the average cost of medicine has decreased over time, while more patients are being treated

Based on recent history the impact of generics on volume and pricing will result in substantial and rising budget savings

Combination of generic price erosion & price regulation resulted in a 16% decline in nominal medicines prices vs. a 25% rise in consumer prices

Within cardiovascular, industry’s innovation model ensures clinical cost effectiveness in the short-, and major social surplus in the longer term

Appropriate use of medicines can be a self sustaining model

HEALTH & GROWTH 80


Key Headlines – 1

Even for more complex hospital products, patent expiries expands capacity for treatment while decreasing treatment cost

Within oncology, generics also create headroom for innovation as a sustainable model can be established

While the share of generic usage has increased by 50%, there is still scope to improve the effectiveness of medicines usage in many markets

Even over a short 12 month period average costs of genericized treatments have declined, with ‘efficient’ markets making dramatic gains

The industry’s lifecycle model will ensure that medicines expenditure will continue to be sustainable in the future

Patent expiries will continue to create headroom for innovation in Europe, while ensuring the medicines bill stays in control

Like small molecules, biosimilars have also created headroom for innovation as treatment cost decreases after patent expiries

In the mid-term, biosimilars will contribute to the continued sustainability of medicines spending

Appropriate use of medicines can be a self sustaining model

HEALTH & GROWTH 81


Key Headlines – 2

Across Europe growth in medicines expenditure is lagging behind growth in total healthcare expenditure

HEALTH & GROWTH 82

Total healthcare expenditure per capita and total medicines expenditure per capita (2004 – 2010, 21 EU OECD Countries, population-weighted, current prices, PPP, $)


Note: Countries included: Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, UK

Source: OECD Health Statistics Database (accessed 2013); Eurostat Database (accessed 2013)

Medicines have only contributed to 15% of increased health costs in Europe – with hospitalizations and elderly care being the key drivers

HEALTH & GROWTH 83

Share of Growth per healthcare category (2004 – 2010, 15 EU OECD Countries, population-weighted, current prices, PPP, $)


Note: Countries included: Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Hungary, Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden

Source: OECD Health Statistics Database (accessed 2013); Eurostat Database (accessed 2013)

54% 16% 5%14% 4% 3%4% 0% 100%

In all but a few markets across Europe, medicines expenditure is growing 30% slower than overall health investment

HEALTH & GROWTH 84

Growth in total medicines expenditure per capita vs. growth in total healthcare expenditure per capita


In 17 of the EU21, medicines expenditure is growing at least 30% slower than health expenditure

Medicines can support efficiency gains in the healthcare sector by reducing expensive hospitalization and rehabilitation cost

Source: OECD Health Statistics Database (accessed 2013)

30% slower medicines

growth

In many European countries medicines is the slowest growing category of any other areas of healthcare expenditure

Healthcare segments Growth 2004 - 2010

Source: OECD Health Statistics Database (accessed 2013)

HEALTH & GROWTH 85


CAGR 2004 - 2010

Patent exposure over time and ratio of new product sales vs. generic expiries*

Savings from generic expiries have ensured that the global medicines bill is sustainable and will continue to be so

HEALTH & GROWTH 86

Components of change in total medicines spending†


$bn %

Total Spend($ bn)

CAGR: +1%

Source: * EvaluatePharma Database (accessed 2013); † IMS Market Prognosis, April 2011 (2011)

For many therapy areas the average cost of medicine has decreased over time, while more patients are being treated

HEALTH & GROWTH 87

% Change in price per treatment day vs. % Change in number of treatment days


Source: IMS MIDAS, MAT 09 2012 (2012)

Anti-depressants Angiotensin II Antagonists Anti-ulcerants

Index Index Index Index Index Index

% Change in number of treatment days (Q4 2010 = Index 100) % Change in price per treatment day (Q4 2010 = Index 100)

+3%+6% +7%

Volume retained by originator brand vs. pre LoE volume

Based on recent history the impact of generics on volume and pricing will result in substantial and rising budget savings

HEALTH & GROWTH 88

Generic price as a percentage of the brand pre LoE price


Note: ‘Easy’ products refer to easy formulation (e.g. tablets, Capsules, Pastilles, Retard Tabs, Dispersible Tabs, Soluble tabs, solutions, bottles); ‘Difficult’ products refer to difficult formulation (e.g. syringes, vials, pens, patches, ampoules, suspensions, inhalers)

Source: ABPI (2012)

% of volume % of price

Combination of generic price erosion & price regulation resulted in a 16% decline in nominal medicines prices vs. a 25% rise in consumer prices

HEALTH & GROWTH 89

Consumer Price Index (CPI) vs. Medicines Price Index, population weighted, year 2000 = Index 100


Note Euro-denominated countries producing medicines price index only. Countries included: Austria, Belgium, Finland, France, Germany, Greece, Italy, Spain, SwedenFor Austria, only data available until 2010

Source: Austria: IFP; Belgium: Pharma.be; Finland: Statistic Finland; France: INSEE; Germany: GKV; Greece: Eurostat; Italy: ISTAT; Spain: INE; Sweden: Apotekens Service

Population-weighted - Europe Countries reporting Medicines Price Index Data

125

84

Index Index Index Index Index

Index Index Index Index

Simvastatin patients treated and total associated cost of treatment

Within cardiovascular, industry’s innovation model ensures clinical cost effectiveness in the short- and major social surplus in the longer term

HEALTH & GROWTH 90

Patient- and manufacturer surplus in on- and off-patent period


On-patent period

Off-patent periodZocor® patent

expiry

Source: Lindgren et al.: Cost–effectiveness of statins revisited: lessons learned about the value of innovation, (2011)

Patients (‘000) €mn.

€ m

n p

er m

n

inh

abit

ants

Even for more complex hospital products, patent expiries expands capacity for treatment while decreasing treatment cost

HEALTH & GROWTH 91

Ondansetron Oral change in total usage after patent expiry, EU-5

Source: IMS Health, MIDAS Dec. 2012

Patent expiry of originator brand Zofran allowed for an expansion in the number of patients treated while average treatment cost decreased after patent expiry


Volume, DDD, mn Cost / DDD (LC€)

-44%

Within oncology, generics also create headroom for innovation as a sustainable model can be established

HEALTH & GROWTH 92

Simulated of total cost distribution over time (2008 vs. 2013)


Example: Breast CancerExample: Breast Cancer

In a complex oncology disease area, patent expiries can optimize the patient pathway and the relative usage of pharmacological agents

Reduced costs for 50% of patients leads to modest overall increase in average cost / patient (c. 2-3% p.a.) keeping cost under control while allowing both patients and manufactures to benefit

Source: A.T.Kearney analysis

% of patients in range

Early generics come off patent

Existing biologics treatment increases in line with disease

progression and -epidemiology

Increased use of combination therapy

Total Treatment Cost (£000’)

Generic market share of volume sales 2001 - 2012

While the share of generic usage has increased by 50%, there is still scope to improve the effectiveness of medicines usage in many markets

HEALTH & GROWTH 93

Generic market share of volume sales (selected countries)


Source: IMS MIDAS Market Segmentation Data 12 Months to 2012 (2012)

CAGR: +5%

% %

~3x

Even over a short 12 month period average costs of genericized treat-ments have declined, with ‘efficient’ markets making dramatic gains

HEALTH & GROWTH 94

Change in cost per treatment day, based on DDD, Q3 12 vs. Q3 11


Note: Based on seven common frequent prescribed therapy areas: Angiotensin II antagonists, anti-depressants, anti-epileptics, anti-psychotics, anti-ulcerants, cholestrol regulators and oral anti-diabetics

Source: IMS MIDAS Q3 2012 and Q3 2011

Higher share of generics

The industry’s lifecycle model will ensure that medicines expenditure will continue to be sustainable in the future

HEALTH & GROWTH 95

Therapy area life cycle over time


Note: Size of bubbles = 2012 European Medicines spend

Source: A.T.Kearney analysis, IMS ATC analysis (2013)

‘Delivering Innovation’

‘Addressing Unmet Needs’

‘Establishing Pathway Efficiency’

‘Realizing Society Surplus’

Re

wa

rdin

g

Inn

ova

tio

nS

oc

iety

Su

rplu

s

IllustrativeIllustrative

Hormonal

Contraception

Respiratory

Pain

Hypertension

Oncology

Autoimmune

Direct Thrombin

Inhibitors

Bacterials

Antifungals

Gene Therapy

Lipid Regulators

Nervous

SystemDiabetes

Time

Stem Cells

Net effect of new launches, core sales and patent expiries 2010 – 2016*

Patent expiries will continue to create headroom for innovation in Europe, while ensuring the medicines bill stays in control

HEALTH & GROWTH 96

Forecast medicines spending(2010-2016)†


The current generation of generic expiries in community care is funding headroom for new technologies

If governments continued to fund medicines at the same rate as health expenditure, $30bn extra funding for medicines would be available for medicines investment

Sources of funding

CAGR: +2%

Source: * A.T.Kearney analysis based on Datamonitor: Pharma and Biotech Outlook to 2016 (2012); † IMS Health: The Global Use of Medicines, July 2012 (2012)

$bn.

CAGR: -1%

Like small molecules, biosimilars have also created headroom for innovation as treatment cost decreases after patent expiries

HEALTH & GROWTH 97

Positive Volume effect after biosimilar introduction


Note: T-1 = 100%, T = year of biosimilar introduction

Source: IMS MIDAS MAT Q4 2010

Filgrastim (G-CSF) Physicians moved G-CSF back

in 1st line cancer treatment due to lower biosimilars cost

G-CSF prevents hospital readmission due to infections

Volume Effect

% of SU vs. T-1 (year before biosimilar introduction

Spending in 2016 ($bn.) by Therapeutic Area*

In the mid-term, biosimilars will contribute to the continued sustainability of medicines spending

HEALTH & GROWTH 98

Disease Indications for biosimilar mAbs currently in clinical trials†


Note: mAbs: Monoclonal antibodies

Source: * IMS Health: The Global Use of Medicines, July 2012 (2012) † Parexel Statistical Yearbook 12/13

Spending in 2016 (US$ bn)

Top 20 Global TAs (42% of total)

12-1412-1413-1513-1513-1514-1614-1614-1614-1615-1716-18

19-2222-2522-2522-25

31-3433-36

44-4848-53

83-88


HEALTH & GROWTH 99

This section highlights how the pharmaceutical industry contributes, above and beyond its medicines,

to the economic viability of health systems through its investment in clinical trials activities and training

of physicians and novel partnerships.









model


model



partnership working



partnership working





2.1 2.2 2.3 2.4











The industry’s clinical trial investment in Europe creates value at multiple levels for healthcare systems In areas like oncology, sponsor-provided medicines in clinical trials can result in significant subsidies of

medicines costs Through donations and other CSR initiatives, the pharmaceutical industry supports global healthcare

infrastructure development Initiatives like IMI demonstrate industry’s role as co-investor in major partnership initiatives

Medicines innovation contributes to the financial sustainability of health system through its investments and partnership working

HEALTH & GROWTH 100


Key Headlines

The industry’s clinical trial investment in Europe creates value at multiple levels for healthcare systems

HEALTH & GROWTH 101

Clinical Trials Revenue Streams



State Budget

Transport and Lodging

Translation Services

IT / Data Services

Laboratory Testing

Diagnostics

Medical Equipment

Courier and Printing

Support Services

Medical

Other

Sponsor /Pharma Industry

CRO

Medicines

Patients

Labour Sites

Ethical Committee

Trial Execution Regulatory

Purcha- sing

Funding

Investigator Fee

Site Grants

Tax Tax

Tax

Tax

Purcha- sing

Participation Fees

TaxFees

Source: PWC: Clinical Trials in Poland (2010)

Average NHS Cost savings per patient due to clinical trials supplies, cancer sites*

In areas like oncology, sponsor-provided medicines in clinical trials can result in significant subsidies of medicines costs

HEALTH & GROWTH 102

Range of NHS cost savings due to clinical trials supplies, selected therapy areas†


Source: * Bredin, C et al.: Drug cost avoidance from cancer clinical trials (2010); † PWC: Clinical Trials in Poland (2010)

4-15%

1-3%

1-3%

Treatments donated and sold at cost

Through donations and other CSR initiatives, the pharmaceutical industry supports global healthcare infrastructure development

HEALTH & GROWTH 103

Total value estimate of the pharmaceutical industry’s donations and capacity building


Note: Developing Countries; CSR = Corporate Social Responsibility

Source: The Pharmaceutical Industry and Global Health: Facts and Figures 2011 (2011)

Initiatives like IMI demonstrate industry’s role as co-investor in major partnership initiatives

HEALTH & GROWTH 104

Innovative Medicines Initiative



Situation Industry’s Response

In 2008, the European federation of pharmaceutical industry and associations (EFPIA) together with the European Commission formed IMI – Innovative Medicines Initiative – as a joint technology framework program to support collaborative non-competitive pharmaceutical research projects and build networks of industrial and academic expertise in Europe

IMI is the largest biomedical public-private partnership in the world

Cost of developing medicines has increased significantly during the last decade

Large scale internal R&D organizations may not be the appropriate model for the future

Truly innovative R&D partnerships working seen in other industries were lacking within the development of medicines

Impact: IMI Publication in high-impact journals

Source: Thomson Reuters: Bibliometric analysis of ongoing projects (2013).

Publications


HEALTH & GROWTH 105

This section highlights the fact that free movement of goods and international reference pricing across

the European Union are impeding medicines access, and may be a blocker to greater pricing flexibility.









model


model



partnership working



partnership working





2.1 2.2 2.3 2.4











Health affordability is a function of wealth and varies by a factor of 10 across Europe External reference pricing is widely used to establish and regulate medicines prices in Europe Countries mostly construct their pricing baskets referencing equal to economies, however this leads

over time to an ‘averaging down’ Inclusion of new accession markets, together with lowest-price referencing, is driving a race to the

bottom Current mechanisms are leading to wide variation in both absolute and relative price levels in Europe,

creating social inequalities In a single trading zone, price disparities across borders can create significant supply chain disruptions

and patient shortages Those least able to pay are bearing the cost of a rigid and inflexible approach to pricing in Europe

More flexible pricing models could improve access and financial sustainability

HEALTH & GROWTH 106


Key Headlines – 1

In other regions, the industry has proven able to adopt creative solutions to the consequence of affordability

The current and future wave of multi-indication products will require a more flexible approach to value definition and price evaluation

Industry has shown willingness to develop flexible approaches resulting in faster access and improved returns

More flexible pricing models could improve access and financial sustainability

HEALTH & GROWTH 107


Key Headlines – 2

Health affordability is a function of wealth and varies by a factor of 10 across Europe

HEALTH & GROWTH 108

GDP per capita and Healthcare Spend per capita (€ 2010)


Positive and very strong correlation between expenditures on healthcare and overall wealth across Europe

10-fold difference in healthcare expenditure per capita between the highest and lowest

Note: Romania, Latvia 2009 data. Cyprus 2008 data. Bulgaria 2006 data. Ireland, UK, Greece, Malta and Luxembourg healthcare spend per capita not reported in Eurostat

Source: Eurostat database (accessed 2013)

Sweden

Italy

Germany

Denmark

Spain

SloveniaSlovak Republic

Romania

Portugal

Poland

Netherlands

Lithuania

Latvia Hungary

FranceFinland

EstoniaCzech Republic

Cyprus

Bulgaria

Belgium

Austria

R2: 0.9515

Usage of External Reference Pricing (23 out of 27 EU Member States)

External reference pricing is widely used to establish and regulate medicines prices in Europe

HEALTH & GROWTH 109

Variations in constructions ofpricing baskets


Countries using external price referencing

Countries not using external price referencing

Average Basket Pricing

Lowest basket Pricing

Average Basket pricing minus 5%91% of the average of the basket

Average of 3 lowest

Source: Leopold, C et al.: Differences in external price referencing in Europe (2012).

Countries mostly construct their pricing baskets referencing equal to economies, however this leads over time to an ‘averaging down’

HEALTH & GROWTH 110

GDP per Capita and Average GDP per capita of “pricing basket countries”


Source: WorldBank database (accessed 2013); Leopold, C et al.: Differences in external price referencing in Europe (2012).

Out of 23 EU-27 countries using external price referencing, 15 (65%) have constructed their pricing basket to reference countries with lower affordability (measured as GPD / Capita)

Ongoing re-referencing drives prices down on an ongoing basis (‘a gift that keeps on giving’).

Italy

Spain

Slovenia

Slovak RepublicRomania

Portugal

Poland

Netherlands

Malta

Lithuania

Latvia

Ireland

Greece

France

Finland

Estonia

Hungary

Cyprus

Bulgaria

BelgiumAustriaCzech Republic

Inclusion of new accession markets, together with lowest-price referencing, is driving a race to the bottom

HEALTH & GROWTH 111

Pricing & Reimbursement Reforms


In two years time, Spain has altered its pricing & reimbursement practices from an EU-15 average prices reference basket to an expanded EU-27 basket now referring to the lowest price within this basket

Source: Business Monitor International (various quarterly editions)

Pricing

Mechanism

Reference

Basket

2011

20102009

EU-15 EuroZone EU-27

Lowest

Average

Highest

2011

Current mechanisms are leading to wide variation in both absolute and relative price levels in Europe, creating social inequalities

HEALTH & GROWTH 112

Medicines Price Level Index and Relative Price Level


Note: Analysis covers Top200 patented products for the period Q3 2012 representing 93,1% of total value. Index calculated as country prices for each product / form / strength (total value / total SU) vs. average European price for each product / form / strength (total value / total SU)

Source: IMS Pricing Insight; Q3 2012, RX only, Patent protected only

In a single trading zone, price disparities across borders can create significant supply chain disruptions and product shortages

HEALTH & GROWTH 113

Current overview of supply chain imbalances - 2013


Source: IMS Health (2013)

Primarily imports

Net importer

Net exporter

Primarily exports

Norway with PE/PI, but mainly exports and top destinations are SWE and DNK

UK is a mixed market. High level of retail trading commonly to other import markets

Ireland has relatively high prices and mainly an importer typically from UK, exports on some brands may grow

Portugal and Spain are mainly exporters of primary care products classically but not exclusively to UK.

Sweden the main importer in Nordic, significant growth in latest year, driven by currency and likely to grow further up to 2014, and then some price cuts are expected

Baltic, new and growing export source

Poland with significant exports, also some imports, pharmacy export is illegal

Czech, Romania and Hungary are major exports due to their low prices,

Italy trade mainly on primary care typically into UK and Germany

Those least able to pay are bearing the cost of a rigid and inflexible approach to pricing in Europe

HEALTH & GROWTH 114

Out of pocket expenditure as a % of total health expenditure


In general, a correlation between the level of wealth and the state’s willingness to fund medicines can be observed

Out-of-pocket expenditure is highest in markets with comparatively low GDP

Evidence suggests a high sensitivity of patient participation and adherence to therapy based on co-payment levels

Source: OECD Health Data 2012 (2012); WHO Global Health Expenditure Database (accessed 2013).

GSK: Developing Countries and Market Access Unit (DCMU)

In other regions, the industry has proven able to adopt creative solutions to the consequence of affordability

HEALTH & GROWTH 115

Novartis: Differential Pricing


Source: The Access to Medicine Index 2012 (2012).

What Pricing Approach

Flexible Pricing: Prices of GSK’s patented

medicines and vaccines are capped at no more than 25% of the UK price

Partnership with Medicines Transparency Alliance to ensure that retail prices are controlled along the supply chain

All GSK’s business in LDC countries

Focus: Establish a lower

price/higher volume unit

Innovative partnerships, -investments and –philanthropy

20% of profits directly invested into LDC healthcare infrastructure

What Pricing Approach

Differential Pricing: Practices a differential

pricing approach for its antimalarial medicine Coartem/Riamet (artemether 20 mg/lumefantrine 120 mg) at not-for-profit prices for public sector use in developing countries, and at market prices in developed markets

Partnership with ACTwatch to measure accessibility, affordability and to track retail prices in selected countries

Improving patients access to medicines through differential pricing

Differential pricing expressed both in terms of inter-country price differences, but also increasingly intra-country price differences to support intra-country affordability differences

Practices in less developed countries

The current and future wave of multi-indication products will require a more flexible approach to value definition and price evaluation

HEALTH & GROWTH 116

Clinical Value over Time



Note: Representation of the change in clinical value over time as additional data and evidence became available such as new clinical benefits, new possible use or combination use

Source: Goss et al.: Recognizing value in oncology innovation (2012)

Examples of added clinical value over Time2001: Initial Indication: Patients with chronic myeloid leukemia 2002: Patients with KIT positive inoperable or GISTs2003: Pediatric patients with Ph+ CML-CP after stem cell transplant 2006: Adults with relapsed Ph+ ALL and with myelodysplastic diseases2008: Treatment of adult patients following resected Kit positive GIST2012: 36 months post-surgery in patient with resected KIT positive GIST

Examples of added clinical value over Time2004: Initial Indication: Combination treatment of EGRF metastatic cancer2006: Combination with radiation therapy for treatment of squamous cell carcinoma2007: Single treatment of EGRF metastatic colorectal carcinoma2011: 1st line treatment of recurrent locoregional disease or metastatic squamous cell carcinoma

Imatinib (Glivec®) Cetuximab (Erbitux®)Clinical valueover time

Ealier treatment pathway or disease stage usage New combination New disease indication Initial FDA indication

Clinical valueover time

Industry has shown willingness to develop flexible approaches resulting in faster access and improved returns

HEALTH & GROWTH 117

Oncology Risk Sharing Schemes in Italy



Source: AIFA; A.T. Kearney analysis

Improved economic terms for payers through risk-sharing

More rapid market access for innovation

Benefits for the Payers Benefits for the Manufacturers

Average “savings” to payer of risk sharing per patient / average oncology therapy costs

Drugs uptake time (in days) of oncology medicines enrolled in risk sharing vs. others

9008007006005004003002001000

Authorized with a risk-sharing agreement

Authorized without a risk-sharing agreement

Time to access (days)

Sustainable Financing – Sources (1/5)

HEALTH & GROWTH 118

Alzheimer’s Association (2010)Changing the trajectory of Alzheimer’s Disease

Boccalini, S. et al. (2013)Economic analysis of the first 20 y of universal hepatitis B vaccination program in ItalyHuman Vaccines & Immunotherapeutics 9:5, 1–10; May 2013; Landes Bioscience

Bredin, C. et al. (2010)Drug cost avoidance from cancer clinical trials (2010)

Damm, O. el al. (2012)Cost-of-Illness of Common Cancer Types: Results of a Health Insurance Claims Data AnalysisPresented at the ISPOR 15th Annual European Congress, 3-7 November 2012, Berlin, Germany

Department of Health Ireland (2011)Health in Ireland: Key Trends 2011

EFPIA (2011)Role and impact of Health Technology Assessment

EurostatDatabase on GDP per capita in Europe



HEALTH & GROWTH 119

EurostatDatabase on healthcare spending per capita in Europe

EvaluatePharmaDatabase of sales and patent expiries (accessed 2013)

Getsios, D. et al. (2012)Economic evaluation of early assessment for Alzheimer’s disease in the UKAlzheimer’s & Dementia 8 (2012)

Goss et al. (2012)Recognizing value in oncology innovation White Paper June 2012

IMSMarket Prognosis, April 2011

IMS Health (2012)The Global Use of Medicines, July 2012 (2012)

IMS Institute for healthcare informatics (2012)Advancing the responsible use of medicines

Leopold, C. et al. (2012)Differences in external price referencing in Europe (2012)



HEALTH & GROWTH 120

Lichtenberg, F. (2008)Have Newer Cardiovascular Drugs Reduced Hospitalization? Evidence from Longitudinal Country-level Data on 20 OECD Countries, 1995–2003 NBER Working Papers 14008, National Bureau of Economic Research, Inc. (2008)

Lindgren, P., Jonsson, B. (2011)Cost–effectiveness of statins revisited: lessons learned about the value of innovationSpringer-Verlag 2011

Lopez, O. et al. (2005)Clinically meaningful outcome in Alzheimer’s disease

Luengo-Fernandez, R. et al. (2013)Economic burden of cancer across the European Union: a population-based cost analysisThe Lancet: http://dx.doi.org/10.1016/; S1470-2045(13)70442-X

Johnson, SJ et al. (2012)Economic value of slowing Parkinson’s Disease in Germany

NHSHospital Episode Statistics: Admitted Patient Care 2011-12

OECDHealth Statistics Database



HEALTH & GROWTH 121

Parexel (2013)Statistical Yearbook 12/13

PWC (2010)Clinical Trials in Poland

Rapp, T. et al. (2012)Exploring the relationship between Alzheimer’s disease severity and longitudinal cost Value in Health 15 (2012) 412 - 419

Roebuck, C. et al. (2011)Medication Adherence Leads To Lower Health Care Use And Costs Despite Increased Drug Spending Health Affairs, 30, no.1 (2011):91-99 doi: 10.1377/hlthaff.2009.1087

Schwarzkopf, L. et al. (2010)Results of the German IDA Study – Assessing the financial impact of informal care amongst community-living dementia patientsPresented at ISPOR 13th Annual European Congress Prague, Czech Republic November, 2010

Sorensen et al (2009)Ensuring value for money in health care Observatory Studies Series No 11

The Access to Medicine Index 2012http://www.accesstomedicineindex.org/


http://www.accesstomedicineindex.org/

http://www.accesstomedicineindex.org/


HEALTH & GROWTH 122

The Pharmaceutical Industry and Global Health (2011)

Facts and Figures 2011

The World Bank

Database on GDP per capita

http://data.worldbank.org/indicator/NY.GDP.PCAP.CD (accessed April 2013)

Thomson Reuters (2013)

Bibliometric analysis of ongoing projects

Tsichristas, A. et al (2009)

Medical innovations and labor savings in health care

Aarts De Jong Wilms Goudriaan Public Economics by (APE) and Maastricht University

WHO (2009)

Vaccine-preventable diseases: monitoring system 2009 global summary


123HEALTH & GROWTH


Appropriate use of



sustainable health

budget

Appropriate use of



sustainable health

budget

Sustainable

Financing

Sustainable

Financing





2





and wealth creation





and wealth creation


1

Pharma has a vital role to

play in Europe’s growth

and future

competitiveness

Pharma has a vital role to

play in Europe’s growth

and future

competitiveness

Growth &

Competitiveness

Growth &

Competitiveness

3

Healthcare industry is well known to provide a three pronged benefit – social, economic and innovation.

Societies world over are increasingly concerned with general well-being of their citizens. While the

economic factor is an obvious one, social equality is critical to achieving the levels of well-being that

individuals and societies desire.

Poor health is a key driver of economic and social inequality. It has impact not only on the individuals

but also on governments with a significant proportion of government spending on sickness and

disability. Research based healthcare companies continually invest resources in developing new

medicines and increasing the effectiveness of existing treatments to prevent and treat diseases and

improve lives of patients.

Additionally, not only does pharmaceutical and biotechnology have the highest R&D intensity amongst

comparable industrial sectors, it also drives one of the highest value added for every unit of currency

spent on R&D. Employment provided by the sector is high quality, given the high proportion of jobs in

R&D. In both turnover and value added per employee, pharmaceutical companies generate the highest

returns. Even during the crisis, the industry showed resilience and succeeded in arresting the decline in

employment.

Growth and Competiveness – Introduction

HEALTH & GROWTH 124

Growth & CompetitivenessGrowth & Competitiveness

It is also interesting and pertinent to note that the benefits that accrue from pharmaceutical investments

are far greater than just the direct economic and social benefits. There is a significant ripple effect by

way of indirect creation of jobs and spending that result due to this. Equally important are the various

externalities such as academic contribution, growth in SMEs, professional development of healthcare

personnel etc.

In light of demographic changes, healthcare industry is only set to become larger the world over. Given

Europe’s strong export position, it is likely to benefit from the growth in the healthcare market. Within

Europe too, there exists a wealth poor of over 65s that are wealthier than any of their peers in other

countries across the world.

Europe’s pharmaceutical industry has historically held a leading position worldwide. It is however no

secret that recently other countries have picked up pace in innovation while Europe has declined or

plateaued on various metrics. It is therefore crucial that Europe takes a hard look at its capabilities in

view of the wider macro changes and invests in being a leader again.

Growth and Competiveness – Introduction

HEALTH & GROWTH 125


Evidence Review – Growth & Competitiveness

HEALTH & GROWTH 126

This section reviews how the pharmaceutical industry, in comparison with other industries, aligns with

the European Union’s objectives for sustainable growth, innovation and social inclusion in a unique

triple play.


Pharma could have a vital role in Europe’s growth and future competitivenessPharma could have a vital role in Europe’s growth and future competitiveness

Healthcare provides a triple play (social, economic,

innovation)


innovation)

The industry directly helps to address social needs

The industry contributes to a positive balance sheet for Europe

Growth & CompetitivenessGrowth & Competitiveness3

Healthcare eco-system is amongst the best growth opportunities for Europe


Pharma plays a key role in European healthcare eco-

system


system

Europe has many of the right foundations but needs to lift its game to be competitive


3.1 3.2 3.3 3.4

Healthcare is the mega industry of the future

Historically pharmaceuticals has contributed to the positive trade balance

Healthcare benefits from a large captive market

Pharmaceutical industry has a bigger footprint than what is obvious

Industry is adapting its R&D models leveraging the eco-system

Europe has the opportunity to be a leader again

In the global race for R&D leadership, Europe is coming under increasing competitive pressure and lags far behind the US

The pharmaceutical industry creates more high quality jobs than other industries

Industry delivers incremental and breakthrough innovation across the eco-system

Industry investments in R&D has other positive externalities in the eco-system

The pharmaceutical sector directly and indirectly addresses many of the priorities of the EU Horizon 2020

Poor health has long been recognised as a key driver of social and economic inequality Chronic conditions such as mental illness are both costly to treat and result in considerable productivity

losses The complex relationship between socioeconomic conditions and illness represents a major equity

challenge Spending on sickness and disability makes up a large portion of GDP and government social spending Medicines have improved quality of life in Europe by providing multiple treatment options for previously

untreatable conditions The industry helps Europe to support its pledge to improve quality of life in developing countries

through programmes like WHO’s G-FINDER The industry employs over 700 000 people in Europe, accounting for 17% of total business enterprise

R&D employment Industry continues to invest significantly in R&D, driving one of the highest value added relative to other

industries

Healthcare provides a triple play (social, economic, innovation)

HEALTH & GROWTH 127

Key Headlines – 1


Economic value added per employee in the pharmaceutical sector is higher than comparable industries Employment quality is reflected in above average salary levels and resulting higher social contributions Employment within the pharmaceutical sector generates the highest returns among comparable

industries Even during the financial crisis, employment in the pharmaceutical sector has proven more resilient

than in other industries The impact of the industry can be seen even outside of the EU5 and the multipliers observed are in line

with those seen in the US Pharmaceutical industry is a major source of comparative advantage and growth, and outstrips other

innovation-based industries

Healthcare provides a triple play (social, economic, innovation)

HEALTH & GROWTH 128

Key Headlines – 2


The pharmaceutical sector directly and indirectly addresses many of the priorities of the EU Horizon 2020

HEALTH & GROWTH 129

Objectives of the Europe 2020 and Horizon 2020 initiatives


Source: European Commission: Europe 2020 (2012); European Commission: Research & Innovation – Horizon 2020 (2012)

Smart growth Sustainable growth Inclusive growth

Education Research and innovation

Sustainable low-carbon economy

Job creation Poverty reduction

Strengthen the EU’s position in science

Strengthen industrial leadership in innovation

Address concerns including affordability, sustainability, security and ageing

High-quality research jobs, academic partnerships

Europe’s most research intensive manufacturing industry

Sustainable financing mechanisms

Positive and growing surplus in trade balance

Creating jobs in manufacturing, with spill overs to other sectors

Reduces causes of social exclusion and inequality

Poor health has long been recognised as a key driver of social and economic inequality

HEALTH & GROWTH 130

Employment and at-risk-of-poverty rates for disabled and non-disabled EU citizens


Note: ‘Disability’ defined as responding either ‘Yes, strongly limited’ or ‘Yes, limited’ to the question: ‘Does the respondent have limitations because of health problems in activities people usually do, for at least the last 6 months?’

Source: Zaidi , A: The situation of working-age people with disabilities across the EU (2011); EU SILC (2012).

Employment prospects of people reporting disability

Risk of poverty facing people reporting disability

EU citizens reporting a disability are between 1.8 and 3.2 times less likely to be employed

The same individuals are also between 1.3 and 2.7 times more likely to be at risk of poverty

1

3.2

1.8

1

2.7

1.3

Employment rate

At-risk-of-poverty rate

Chronic conditions such as mental illness are both costly to treat and result in considerable productivity losses

HEALTH & GROWTH 131

Mental health in the United Kingdom


Source: McCrone, P et al: Paying the Price – The cost of mental healthcare in England to 2026 (2008)

The number of people affected by mental health conditions is projected to rise by approximately 1.2 million.

This shift will bring about an increase in treatment costs (£10.1bn) an lost productivity (£2bn).

The total cost of mental health to the UK economy is thus forecast to increase by £12.1bn, or 25% by 2026

Persons affected (£mn) Treatment cost (£bn)

Persons affected (£mn) Total cost (£bn)

+14%

+8% +25%

Disability-free life expectancy in highest- and lowest-income neighbourhoods*

The complex relationship between socioeconomic conditions and illness represents a major equity challenge

HEALTH & GROWTH 132

Potential extra healthy years of life among people born in 2010 in different scenarios †


Source: * UCL Institute of Health Equity: Working for health equity (2011); † Marmot Review: Strategic review of health inequalities in England post-2010 (2011)

Note: ‘Disability free life years’ is the number of years a person lives without a disability

Modest improvement scenario:

Life expectancy is improved for all neighbourhoods to the level of the top 50 percent of neighbourhoods.

Major improvement scenario:

Life expectancy is improved for all neighbourhoods to the level of the top 10 percent of neighbourhoods.

Healthy life years (mn)

Scenario

Sickness and disability spending as a % of GDP and % of total social public spending

Spending on sickness and disability makes up a large portion of GDP and government social spending

HEALTH & GROWTH 133

Social expenditure on sickness and disability relative to spending on unemployment


Source: OECD: Sickness, disability, and work – breaking the barriers (2011)

%

Relative spending onunemployment benefits

vs. sickness and disability(2007 data for OECD)

Medicines have improved quality of life in Europe by providing multiple treatment options for previously untreatable conditions

HEALTH & GROWTH 134

Standardised life years lost to previously untreatable conditions per 100 000 of population


Source: OECD: Health Data (2010)

Treatment and reduction of contributing factors to heart attack has substantially reduced mortality rates from myocardial infarction

Colon cancer, which in past would be fatal for the sufferer, can now be treated and cured

Since the development of Streptomycin, tuberculosis has been almost eradicated

-62%

-15% -22%

-52%

The industry helps Europe to support its pledge to improve quality of life in developing countries through programmes like WHO’s G-FINDER

HEALTH & GROWTH 135

Multi-national pharmaceutical company funding under WHO’s G-FINDER by disease (2007-2011)


Note: USD prices are adjusted for inflation and exchange rates using purchasing power-parities.:

Source: World Health Organisation G-FINDER: Findings – Neglected Disease Funders (2011).

In 2011, the pharmaceutical industry had 93 ongoing R&D projects for neglected diseases, with 48 medicines in the pipeline for malaria and 81 for HIV/AIDS

Aggregated pharmaceutical funding for 2010 exceeded EUR 400 million

The pharmaceutical industry contributes 85% of the R&D funding for tuberculosis, malaria and dengue, and was the biggest funder for bacterial pneumonia, meningitis, and rheumatic fever

USD mn

185.6

279.0

337.9

442.4469.2

Employment in the pharmaceutical industry in EU (1990-2012)*

The industry employs over 700 000 people in Europe, accounting for 17% of total business enterprise R&D employment

HEALTH & GROWTH 136

R&D jobs in pharmaceutical as a % of total R&D jobs across all business enterprises†


Source: * EFPIA: Pharmaceutical industry in figures (2013); † Eurostat - Science and Technology database (accessed March 2013)

+40%

+52%

Ranking of industrial sectors by overall R&D intensity*

Industry continues to invest significantly in R&D, driving one of the highest value added relative to other industries

HEALTH & GROWTH 137

Value added vs. changes in R&D intensity†


Source: * EFPIA: Pharmaceutical industry in figures (2013); † EU KLEMS Database; Eurostat; OECD STAN Indicators; European Commission: Innovation Union Competitiveness (2011)

0,3%2,2%

1,6%

1,7%

2,7%

3,1%3,1%

3,2%

4,1%

4,2%5,1%

5,9%

6,7%

7,9%

9,5%

0% 5% 10% 15% 20%

R&D as percentage of net sales (2012)

Oil & gas producers

Banks

Food producers

Fixed line telecomunnications

General industrials

Industrial engineering

Chemicals

All sectors

Aerospace & defence

Automobiles & parts

Electronic & electrical equipment

Health care equipment & services

Leisure goods

Technology hardware & equipment

Software & computer services

Pharmaceuticals & Biotechnology 15.1%

-2,0%

-1,5%

-1,0%

-0,5%

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

-5% -4% -3% -2% -1% 0% 1% 2% 3% 4%

% G

row

th in

valu

e-ad

ded

(2001-200

7)

R&D intensity gain/loss (1995-2006)

Aerospace

Other transport equipment

Chemicals excluding pharmaceuticals

Pharmaceuticals

Motor vehicles

Radio, TV and communication equipment

Gross output at market prices, 2007

Note: R&D intensity gain/loss calculated as difference between average R&D intensity in 1995-2000 and 2001-2006

Economic value added per employee in the pharmaceutical sector is higher than comparable industries

HEALTH & GROWTH 138

Gross value added per employee


Note: Gross Value Added is defined as the difference between Production and Intermediate inputs. Value added comprises Labour costs (compensation of employees), Consumption of fixed capital, taxes less subsidies (the nature of which depends on the valuation used ) and Net operating surplus and mixed income

Source: OECD: Structural Analysis Database (Denmark, France, Italy, Poland, Slovak Republic, United Kingdom) (accessed 2013)

EUR

TimePeriod

Employment quality is reflected in above average salary levels and higher resulting social contributions

HEALTH & GROWTH 139

Average Personnel costs in selected industries (EUR 1 000 per head; 2010)


Note: Personnel costs include wages, salaries and employers' social security costs. They include taxes and employees' social security contributions retained by the employer, as well as the employer's compulsory and voluntary social contributions

Source: Eurostat (online data code: sbs_na_ind_r2): 2010 figures (accessed 2013)

32

40403842444446

52

59

0

10

20

30

40

50

60

Ch

emicals and chem

ical products

Com

puter, electron

ic

and optical products

Pharm

aceuticals

Electrical equipm

ent

Motor veh

icles,

trailers and sem

i-trailers

Beve

rages

Paper a

nd paper

products

Repair a

nd installation

of machinery

and equipment

Machinery a

nd

equipment

Printing and

reproduction of recorded m

edia

Personnel Costs (EUR1 000 per head)

Value added per employee euro spent

Employment within the pharmaceutical sector generates the highest returns among comparable industries

HEALTH & GROWTH 140

Turnover generated per employee


Source: Eurostat (online data code: sbs_na_ind_r2): 2008 figures (accessed 2013)

Value added/employee EUR Turnover generated per employee (1 000 EUR)

Even during the financial crisis, employment in the pharmaceutical sector has proven more resilient than in other industries

HEALTH & GROWTH 141

Percentage change in employment in select industries


Source: Eurostat: various databases (accessed 2013); A.T. Kearney analysis *% change 2003-2009

Annual changes in employment

Multi-year changes in employment

The impact of the industry can be seen even outside of the EU5 and the multipliers observed are in line with those seen in the US

HEALTH & GROWTH 142

Spillover effects of pharmaceutical industry in 2009


Source: AIFP: Impact of the innovative pharmaceutical industry on the Czech economy and employment (2010); Eurostat: various databases (accessed 2013)

Example: Czech RepublicExample: Czech Republic

Creating jobs in other industries

Spillovers in revenue generation

Lowering the cost of access to medicine

For every job created in the pharmaceutical sector, 5.8 jobs are created elsewhere in the economy

Payment of wages, taxes and suppliers results in an economic multiplier effect of c.2.4 times

Through discounts, Czech pharmaceutical patients’ medicines bill was reduced by EUR 72m in 2009

Jobs

EUR mn

EUR mn

Revealed comparative advantage for high- and medium-high-tech industries*

Pharmaceutical industry is a major source of comparative advantage and growth, and outstrips other innovation-based industries

HEALTH & GROWTH 143

Relative trade balance of European pharma & other high- and medium-high-tech industries†


Source: * European Commission: European Competitiveness Report 2012 (2012); † * European Commission: European Competitiveness Report 2012 (2012)

Relative trade (net exports/total trade volume)

+9%

+83%

+33%

+43%0%

Index value

1.22

0.98

1.13

0.60

1.47

Motor vehicles, trailers and semi-trailers

Electrical equipment

Chemicals and chemical products

Computer, electronic and optical equipment

Basic pharmaceuticals and pharmaceutical preparations

+12%

Index value

1.28

0.97

1.16

0.57

1.65

20102007

Evidence Review – Growth & Competitiveness

HEALTH & GROWTH 144

This section outlines the importance of healthcare, and pharmaceuticals within it, as a key opportunity

for future growth in which Europe has the opportunity to take a leading role.




innovation)


innovation)







system


system



3.1 3.2 3.3 3.4











Over the next few decades, healthcare will be amongst the key growth sectors Health industries are responsible for the amelioration of pressing unmet global needs Within healthcare, medicines are among the most exciting growth opportunities, primarily driven by

demand from emerging markets Positioned properly, pharmaceuticals should be able to continue to drive a positive trade balance for

Europe EU is also one of the foremost suppliers of pharmaceutical products worldwide and to the fastest

growing markets With a high wealth pool, Europe’s ageing population represents the fastest growing consumer segment

in Europe Growth in out of pocket expenditure, albeit modest, demonstrates an increasing willingness to fund

healthcare consumption In Europe, growth in demand for healthcare is forecast to outstrip that of other major industries Underlying demand will preserve and strengthen healthcare industry’s status as Europe’s foremost

employer


HEALTH & GROWTH 145

Key Headlines


Over the next few decades, healthcare will be amongst the key growth sectors

HEALTH & GROWTH 146

Projected global demand for healthcare and other comparable industries


Source: Economist Intelligence Unit (2012)

Growth rate (2011-2017)

Note: ICT = Information and Communication Technology

Health industries are responsible for the amelioration of pressing unmet global needs

HEALTH & GROWTH 147

Health industries are responsible for the amelioration of pressing unmet global needs


Source: World Health Organisation.

+325%

A further decline of 41% is required to meet the MDG

Although HIV spread has stabilised in recent years, considerable work still has to be done to start reversing its spread.

Universal access to HIV/AIDS treatment is an unaccomplished goal that requires much further work.

Number of people living with HIV globallyNumber of deaths in children under five worldwide

-41%

Within healthcare, medicines are among the most exciting growth opportunities, currently driven by demand from emerging markets

HEALTH & GROWTH 148

Annual projected global consumption growth for medicines through 2016


Note: Spending in US $ with varying exchange rates. All estimates allow for exchange rate variability.

Source: IMS: The global use of medicines (2012)

Medicine spending expected to reach $1trn globally by 2013

Building on high growth since 2006, spending is still projected to increase by 26%

Growth in developed markets was only $3bn in 2012, but will rebound to $18-20bn, driven by the U.S., EU5 and Japan

+24%

+45%1 190214

48

20249

49

ROW DevelopedEmerging

Trade Balance for Europe

Positioned properly, pharmaceuticals should be able to continue to drive a positive trade balance for Europe

HEALTH & GROWTH 149

EU-27 Trade balance for high technology sectors (2012)


Source: Eurostat, COMEXT database, May 2012, EFPIA Pharmaceutical industry in figures 2013 (2013)

300 000

250 000

200 000

150 000

100 000

50 000

0

-50 000

-100 000

-150 000

-200 000

-250 000

350 000

EUR mn

2012E

-225 000

305 000

2010

-214 824

276 357

2000

-68 841

90 935

1990

-16 113

23 180

Trade balance

Imports

Exports

Production

-40 000-50 000

60 00050 00040 00030 00020 00010 000

0-10 000-20 000-30 000

Trade balance

16 545

1 281

-40 409-48 454

33 530

54 401

EUR mn

Professional, scientific, controlling material

Electrical machinery

Telecommunication, sound, TV, video

Office machines and computers

Power generating machinery and equipment

Pharmaceutical products

EU is also one of the foremost suppliers of pharmaceutical products worldwide and to the fastest growing markets

HEALTH & GROWTH 150

EU share of imports in the world’s fastest growing markets


Note: China, Brazil, Venezuela, Turkey, India, S.Korea, and Russia are projected to be in Top 20 countries worldwide by size of pharmaceutical market in 2013e

Source: ECORYS (2009), ‘Competitiveness of the EU Market and Industry for Pharmaceuticals – Volume II: Markets, Innovation & Regulation’ (2009).

EU share of imports

Europe’s pharmaceutical sector accounted for almost half of the pharmaceutical imports of the world’s fastest growing markets, with a total absolute value of $15.8bn.

EU share of imports48%

R.O.W. share52%

Age demographic projections in the EU*

With a high wealth pool, Europe’s ageing population represents the fastest growing consumer segment in Europe

HEALTH & GROWTH 151

Global wealth pool of over 60s†


Source: * Eurostat; † ERS International Macroeconomic Data Set (2012); United Nations: Department of Economic and Social Affairs (2011)

Bubble size pool represents wealth among over 60s ($trn)

Time period

Proportion of total population by age (%)

Other emerging countries

BRIC

Western Europe

United States

Japan

Po

pu

latio

n g

row

th o

ver 6

0s (CA

GR

2011-20 %

)

GDP per capita in 2020 (USD)

2.32

4.16

4.631.72

0.49

Average total health expenditure as a percentage of GDP in the EU

Growth in out-of-pocket expenditure, albeit modest, demonstrates an increasing willingness to fund healthcare consumption

HEALTH & GROWTH 152

Average out-of-pocket expenditure per capita across the EU


Source: WHO (World Health Organisation): National Health Accounts Database (accessed 2013); A.T. Kearney analysis

+29%

9.01%

7.00%

% GDP

USD+135%

In EU 16*, growth in demand for healthcare is forecast to outstrip that of other major industries

HEALTH & GROWTH 153

Actual and projected growth in real demand for pharmaceutical and similar products


Source: Economic Intelligence Unit (2012)

Pharmaceuticals and HC experienced amongst the strongest growth in real market demand over the five years to 2011

The industry in Europe is predicted to exceed that growth rate between 2012 and 2017

Two-thirds of this growth will come from markets outside the UK, France and Germany

Note: * EU16 consists of EU15 plus Switzerland

Fo

recast av

erage an

nu

al gro

wth

(2012-2017)

Average annual growth (2007-2011)

Healthcare and Pharmaceuticals

Food, beverages and tobacco

Electronics and domestic appliances

Motor vehicles and parts

Bubble size proportional to current market value

Underlying demand will preserve and strengthen healthcare industry’s status as Europe’s foremost employer

HEALTH & GROWTH 154

Employment projections for health and comparable industries


Source: Cambridge Econometrics: MDM Revision 7146 (2012)

Health and social work strongest employers in absolute terms and have the strongest employment growth rate

Healthcare industry will continue to be a major employer as other industries’ labour forces contract

As seen before, increases in employment also increase government revenue, resulting in a multiplier effect on economic activity

+79%

-26%

-62%

-4%

+56%+32%

+52%

Evidence Review – Growth and Competitiveness

HEALTH & GROWTH 155

This section postulates that pharmaceutical industry has continually added value through introduction

of new medicines/vaccines and has dynamically responded to the changing R&D scenarios. It also

highlights some of the major positive externalities of the industry.




innovation)


innovation)







system


system



3.1 3.2 3.3 3.4











The pharmaceutical industry is one of the leading R&D investors in Europe, driving innovation across the healthcare ecosystem

The pharmaceutical industry’s total wage premium for R&D personnel across Europe can amount to as much as €0.5bn

By creating demand in major supplier sectors, industry creates as many as 3 million jobs Jobs created as a result of pharmaceutical industry activity further contribute as much as €66bn to

European economic output Over a single year, growth in the number of Pharmaceutical SMEs has injected as an extra €0.2bn in

wages into the European economy Dividends from major pharmaceutical companies have increased wealth in Europe by up to €25bn A large portion of healthcare research studies are driven by the biopharmaceutical industry and

medicines research

Pharma plays a key role in European healthcare eco-system

HEALTH & GROWTH 156

Key Headlines – 1


In addition, through joint funding of initiatives like IMI, further training and education are made available across Europe

Time between approval of first and second drug in a TA is decreasing over time, commercial success is more elusive than before

The pharmaceutical industry is exploring more open and collaborative R&D approaches with wider ecosystem impacts

Sustained investment in R&D drives wealth across the economy and stimulates the next wave of innovation and entrepreneurship


HEALTH & GROWTH 157

Key Headlines – 2


The pharmaceutical industry is one of the leading R&D investors in Europe, driving innovation across the healthcare ecosystem

HEALTH & GROWTH 158

Estimated value of pharmaceutical research and development contributions to the EU economy



Note: This is a conceptual design of the value of the pharmaceutical industry to Europe.

Post-doctoral funding

Seminars Clinical trials Wage premium

Value of industry joint

ventures

Companies’ market value

Inter-industry impact

Learning externality

Doctoral funding

In-work training

Treatments sold at cost

Indirect employment

SME births

Jointly-funded

programs

Industrial placements

Direct and health GDP

effects

The pharmaceutical industry’s total wage premium for R&D personnel across Europe can amount to as much as €0.5bn

HEALTH & GROWTH 159

Estimate of wage surplus accruing to pharmaceutical workers


Note: Rest of Europe’ includes Czech Republic, Denmark, Germany, Estonia, Ireland, Spain, France, Italy, Cyprus, Lithuania, Hungary, Netherlands, Austria, Portugal, Romania, Slovakia, Finland, United Kingdom.

Source: OHE, Eurostat A.T. Kearney analysis.

No

. of

em

plo

yees

72 876

60 067

12 809

45 876

37 813

8 063

Wag

e p

rem

ium

Per

wo

rker

£

Employment Wage surplus per worker

Wage surplus of all workers

EU wage surplus of all workers

Ag

gre

gat

e R

&D

Wa

ge

pre

miu

m (

£ m

n)

Ag

gre

gat

e R

&D

wag

e p

rem

ium

(£

mn

)

Direct and indirect employment from pharmaceutical industry R&D (2010)

By creating demand in major supplier sectors, industry creates as many as 3 million jobs

HEALTH & GROWTH 160

Direct and indirect employment from whole pharmaceutical industry (2010)


Source: Eurostat, Pfizer, PwC, Ernst and Young. A.T. Kearney analysis.

Employment activities

Office administrative, office support and other business

Renting and leasing of other machinery, equipment and tan

Renting and operating of own or leased real estate

Telecommunications

Wholesale trade, except of motor vehicles and motorcycles

Construction

Energy, Heating, Electricity

Pharma



Pharma


Construction




Telecommunications

No. employeesNo. employees

Jobs created as a result of pharmaceutical industry activity further contribute as much as €66bn to European economic output

HEALTH & GROWTH 161

Estimated aggregate value of wage surplus from Europe’s pharmaceutical industry


Source: Eurostat, Pfizer, PwC, Ernst and Young. A.T. Kearney analysis.

Total





Telecommunications


Construction


Over a single year, growth in the number of Pharmaceutical SMEs has injected as an extra €0.2bn in wages into the European economy

HEALTH & GROWTH 162

Approximate value of SME personnel cost across the EU (2008 vs. 2009)


Source: Eurostat

Increase in overall personnel cost has been driven by an increase in number of SMEs with 50-249 employees Average salary assumed to be 39.2k (across all four categories)

Note: SME = Small and Medium Enterprises

EUR bn

Personnel Cost (2008)

EUR bn

Personnel Cost (2009)

Dividends from major pharmaceutical companies have increased wealth in Europe by up to €25bn

HEALTH & GROWTH 163

Estimated earnings distribution from major European pharma companies to EU shareholders


Source: Eurostat, annual reports for Novartis, GSK, Roche, GSK, Astra Zeneca, bayer, Novo Nordisk, Merck KGaA ; A.T. Kearney analysis.

Europe’s top eight pharmaceutical companies, which make up 36% of revenue of the world’s largest fifty, distribute approximately €25bn to shareholders in Europe

Note: 2011 revenues; average EPS multiplied with European ownership (excluding the entity itself)

A large portion of healthcare research studies are driven by the biopharmaceutical industry and medicines research

HEALTH & GROWTH 164

Breakdown of grant types from industry sponsors to U.S. academic medical centers (2011)


Source: Milne and Malins: Academic-Industry Partnerships for Biopharmaceutical Research & Development: Advancing Medical Science in the U.S. (2012).

Health research and education projects

Public health priority studies

Joint clinical trials

OverallTotal Grants: 3278

Industrial sponsors: 443

Breakthrough

Vulnerable populatin

Oversight

Comparative

Other

Dietary supplement

Genetic

Behavioural

Radiation

Procedure/Surgery

Biologic/Vaccine

Device

Drug

Joint clinical trials

Public health priority studies

In addition, through joint funding of initiatives like IMI, further training and education are made available across Europe

HEALTH & GROWTH 165

Total training and education funding included in IMI (2008)


Source: EFPIA: ‘Partnering with academia in pharmaceutical industry – Recent trends / The Innovative Medicines Initiative IMI as a model?’ (2011).

0

5

10

15

20

25

30

35

EUR mn

30.2

TotalPharmaceutical Medicine Training Program

8.0

European Modular Education and Training Program in Safety

7.2

European Modular Education and Training Program in Safety

7.0

European Medicines Research Training Network

8.0

Total funding

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

Time between approval of first and second drug in a TA is decreasing over time, commercial success is more elusive than before

HEALTH & GROWTH 166

Present value of lifetime sales of new medicines introduced during 1990-1994


Source: PhRMA: Chart Pack: Biopharmaceuticals in Practice

Also, on average, new brand drugs face generic competition after 11.8* years, but generic companies can challenge patents as soon as four years after a brand enters the market

With most of the ‘low-hanging fruits’ already commercialized, it is getting harder and harder for pharmaceutical industry to justify investments into R&D

Med

ian

Nu

mb

er o

f Y

ear

s

Aft

er-T

ax

Pre

sen

t V

alu

e o

f S

ales

(Mill

ion

s o

f 20

00 D

oll

ars)

New medicines introduced during 1990-1994;

grouped by tenths; by lifetime sales

After-tax Average R&D Cost

The pharmaceutical industry is exploring more open and collaborative R&D approaches with wider ecosystem impacts

HEALTH & GROWTH 167

Multiple approaches to revitalising research and development


Source: : Deloitte: Change and disruption in the pharmaceutical industry (2007).

Level 3

Level 2

Level 1Increased R&D

Spend

Industry Consolidation

Biotech In-licensing

R&D Reorganisation

Outsourcing

Cooperative Tech development

Open Source

Timeline

Ease of Implementation Simplifying R&D

Decoupling R&D

Managing the R&D interface

Accessing global knowledge to solve in house R&D problems

Virtual R&D processes

Roche’s restructured management process for managing its’ new Disease Biology Area R&D organization

Pfizer decoupled its R&D - Tasking R with creating knowledge and understanding and D on efficient execution of focused development programs through targeted business units

GSK’s use of Centres of Excellence to efficiently manage the R& D interface for clarity and speed

Eli Lily’s creation of its Innocentive subsidiary which is essentially a global exchange for problems and solutions

TAP and King Pharmaceuticals outsourcing of Research, inlicensing development candidates and concentrating on drug development, with the help of external suppliers e.g. CROs

Sustained investment in R&D drives wealth across the economy and stimulates the next wave of innovation and entrepreneurship

HEALTH & GROWTH 168

Number of active companies by size, in the European pharmaceutical industry (1999-2006)


Source: ECORYS (2009), ‘Competitiveness of the EU Market and Industry for Pharmaceuticals – Volume II: Markets, Innovation & Regulation’ (2009).

In recent years, the number of SMEs in the industry has risen

SMEs are well-equipped for well-defined innovation in narrow fields

Out-licensing or selling ideas by SMEs is playing an increasingly important role within the ecosystem

% o

f a

ll c

om

pan

ies

in p

har

mac

eu

tica

l in

du

stry

Year

Evidence Review – Growth and Competitiveness

HEALTH & GROWTH 169

This section postulates that Europe has historically enjoyed an enviable position in pharmaceutical

innovation. And although it has been on a decline recently, Europe possesses the right capabilities to

be a winner once again. It also highlights the steps that will be necessary if Europe were to ride this

wave of opportunity-.




innovation)


innovation)







system


system



3.1 3.2 3.3 3.4











Europe has been a major contributor to pharmaceutical innovation and still accounts for over 28% of all patents filed

While Europe headquartered companies still account for about over one-third of all NCEs, their share has fallen over many decades

Europe has lost its position as the place where innovators want test and launch their products first – US is now the market of choice

Health research and development in Europe makes up a relatively small share of government R&D spending

Although gap is closing, Europe lags behind many other knowledge intensive economies on key indicators

EU R&D intensity is close to stagnation, while markets like China are rapidly catching up Europe’s high-technology economy is still among the world’s most innovative, and pharma is supported

by a thriving biotech sector


HEALTH & GROWTH 170

Key Headlines – 1


Europe plays host to a considerable share of the world’s top academic institutions and centres of clinical academic excellence

Europe employs more researchers than its major competitors, almost half of which work in the business enterprise sector

Europe has one of the largest healthcare workforces in the world and greater market demand for healthcare than the US

Recent trends in investigator site involvement suggest that a wider Europe can hold its share of innovation and return to leadership

While Europe has indeed maintained its share of clinical trials, this is largely down to positive developments in Eastern Europe

On a global basis, Europe still has many of the preconditions for leadership


HEALTH & GROWTH 171

Key Headlines – 2


Europe has been a major contributor to pharmaceutical innovation and still accounts for over 28% of all patents filed

HEALTH & GROWTH 172

Country shares of pharmaceutical patents filed (2007-2009)


Note: Data relate to patent applications filed under the Patent Co-operation Treaty (PCT), at international phase, published by the WIPO. Patent counts are based on the priority date, the inventor's country of residence. BRIICS refers to Brazil, Russian Federation, India, Indonesia, China, and South Africa.

Source: WIPO, http://www.wipo.int/ipstats/en/statistics/patents/

% of patents filed

% of patents filed

While Europe headquartered companies still account for about over one-third of all NCEs, their share has fallen over many decades

HEALTH & GROWTH 173

Europe – Historic ‘Pharmacy of the World’ (1960-2010)


Source: Arthur Daemmrich: Where is the Pharmacy to the World? International Regulatory Variation and Pharmaceutical Industry Location (2009). Milken Institute

Between 1961 and 2000, companies headquartered in European countries were responsible for 52% of the New Chemical Entities (NCEs) discovered

% change (1961-1970 to 20001-2010)

New

Ch

emic

al E

nti

ties

d

isc

ov

ered

(1

00%

)

Europe is consistently lagging behind the US as the place where innovators want to launch their products first

HEALTH & GROWTH 174

Launches of new active substance by region, 2001 - 2011


Source: Parexel R&D Statistical Sourcebook 2012/2013

Note: Only includes entirely novel products that were first introduced in any worldwide market during 2010 – as such it includes new chemical entities and biologics but excludes novel formulations or combination products. To be included in this analysis, the products also need to be actively launched on the market, not just approved for sale.

Lau

nch

es o

f n

ew a

ctiv

e su

bst

an

ce

Health research and development in Europe makes up a relatively small share of government R&D spending

HEALTH & GROWTH 175

Breakdown of total government budgetary appropriations for research and development by socio-economic objective (2010)


Note: Europe aggregate includes Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, United Kingdom. ‘Remainder’ objectives includes exploration, environment, space exploration, agriculture, education, culture, political and social systems, general advancement of knowledge funded by general university funding. For Mexico and Israel, defence spending is included in ‘Remainder’ as no disaggregated data available.

Source: OECD

0.78 0.75

0.50

0.63

1.021.03

General advancement of knowledge

Energy

Transport, telecommunications and other infrastructuresIndustrial production and technology

Defence

Remainder Health

Although gap is closing, Europe lags behind many other knowledge intensive economies on key indicators

HEALTH & GROWTH 176


Source: European Commission: Innovation Union Scoreboard 2013 (2013).

Knowledge-intensive services expenditure

Trade balance

% difference in performance

License and patent revenues

PCT patents for societal change

PCT patents

Public-private co-publications

Business sector R&D expenditure

Public sector R&D expenditure

Most cited publications

International co-publications

Tertiary education

Doctoral graduates

JapanUnited States

PCT patents

% change in performance

License and patent revenues

Knowledge-intensive services expenditure

Trade balance

PCT patents for societal change

Public-private co-publications

Business sector R&D expenditure

Public sector R&D expenditure

Most cited publications

International co-publications

Tertiary education

Doctoral graduates

JapanUnited States

Note: A country has a performance lead over the EU27 if the relative score for the indicator is below 0 and a performance gap with the EU27 if the relative score is above 0 (or the EU27 has a performance lead if the relative score for the indicator is above 0 and a performance gap if the relative score is below 0). Relative annual growth as compared to that of the EU27 over a 5-year period.

Europe’s relative performance on key innovation competitiveness indicators

Changes in scores on relative competitiveness indicators

Pharmaceutical R&D Expenditure – Annual growth rate (%)*

EU R&D intensity is close to stagnation, while markets like China are rapidly catching up

HEALTH & GROWTH 177

R&D intensity (GERD as a% of GDP), 2003 vs. 2010†


Source: : *EFPIA: Pharmaceutical industry in figures - key data (2013); †Data from Eurostat, OECD.

+7%

+3%

+8%+79%

China’s overall R&D intensity has grown 85% in the last 7 years and is nearly the same as EU’s now

Country shares of high-tech patent applications (2008-2010)

Europe’s high-technology economy is still among the world’s most innovative, and pharma is supported by a thriving biotech sector

HEALTH & GROWTH 178

Country shares of biotechnology patent applications (2008-2010)


Source: Various Eurostat databases (accessed October 2013)

Rest of World10%

China1%

Australia1%

South Korea1%

Canada2%

Japan10%

United States34%

EU2739%

Rest of World6%

Taiwan2%

Canada3%

China5%

South Korea7%

Japan19%

United States25%

EU2733%

Regional shares of the world’s top higher education institutions (2012)

Europe plays host to a considerable share of the world’s top academic institutions and centres of clinical academic excellence

HEALTH & GROWTH 179

Shares of the world’s top hundred clinical and pharmaceutical academic institutions


Source: Shanghai Ranking – Academic Ranking of World’s Universities (2012)

Note: 2005 is the most recent year with sufficient data to make a sensible comparison of healthcare workforce levels in the United States and Europe.

Research personnel (2009)

Europe employs more researchers than its major competitors, almost half of which work in the business enterprise sector

HEALTH & GROWTH 180

Research personnel by sector of employment (2009)


Source: Eurostat.

Researchers (FTE)

Research personnel(mn)

Healthcare workforce (2005)*

Europe has one of the largest healthcare workforces in the world and greater market demand for healthcare than the US

HEALTH & GROWTH 181

Market demand for healthcare (2012)†


Source: *World Health Organisation Global Health Statistics; †Economist Intelligence Unit.

Note: 2005 is the most recent year with sufficient data to make a sensible comparison of healthcare workforce levels in the United States and Europe.

Healthcare employees

No. employees

Market demand for healthcare (USD)

USD bn

Recent trends in investigator site involvement suggest that a wider Europe can hold its share of innovation and return to leadership

HEALTH & GROWTH 182

Investigator sites for clinical trials (2005-2011)


Source: Clinical trials submitted in marketing-authorisation applications to EMA. Overview of patient recruitment and the geographical location of investigator sites

The number of investigator sites involved in pivotal clinical trials submitted in MAAs to the Agency per region and year

Nu

mb

er

of

sit

es

While Europe has indeed maintained its share of clinical trials, this is largely down to positive developments in Eastern Europe

HEALTH & GROWTH 183

Investigator sites for clinical trials (2005-2011)


Note: EU-15 includes the member states of the European Union prior to the accession of the ten new countries on 1 May 2004, plus EEA countries. EU-10 includes the 2004 accession countries

Source: EMA 2013

Number of investigator sites involved in pivotal clinical trials submitted in MAAs to the Agency per region and year

Number of investigator sites

Number of investigator sites

On a global basis, Europe still has many of the preconditions for leadership

HEALTH & GROWTH 184

Country comparison on patent applications and higher education institutions


Source: Eurostat: Various databases (accessed 2013); Shanghai Ranking: Academic Ranking of World’s Universities (2012); WHO-Global Health Statistics; Economist Intelligence Unit

19%

25%

33%

10%

34%

39%

Country shares of high-tech patent applications (2008-2010)

Country shares of biotechnology patent applications (2008-2010)

37.5 41.0 39.5 40.4

53.0 42.5 36.3 34.3 30.0

11.0 11.7 15.0 17.6

31.0

5.03.74.0

40.0

20.0

0.0

100.0

80.0

60.0

Europe

United States

Rest ofNorth America

Asia

Oceania

Top 500

4964.8

Top 400

398

6.3

4.5

Top 300

299

7.0

Top 200

200

Top 100

100

4.07.0

5.0

6.4

Rest of World6%

Taiwan2%

Canada3%

China5%

South Korea7%

Japan19%

United States25%

EU2733%

China1%

Australia1%

South Korea1%

Canada2%

Japan10%

United States34%

EU2739%

Rest of World10%

Regional shares of the world’s top higher education institutions (2012)

Shares of the world’s top hundred clinical and pharmaceutical academic institutions

12%

32% 56% Rest of World12%

Europe32%

United States56%

Growth & Competitiveness – Sources (1/10)

HEALTH & GROWTH 185

Allen, Matilda, Alllen, Jessica, Hogarth, Sue , Marmot, Michael

Working for Health Equity: The Role of Health Professionals (Released March 2013)

http://www.instituteofhealthequity.org/projects/working-for-health-equity-the-role-of-health-professionals (accessed April 2013)

Astra Zeneca Annual report 2012

http://www.astrazeneca-annualreports.com/2012/documents/eng_download_centre/annual_report.pdf (accessed April 2013)

Bayer Annual Report 2012

http://www.annualreport2012.bayer.com/en/bayer-annual-report-2012.pdfx (accessed April 2013)

Business Monitor International

Clinical Trials Registry

http://article.businessmonitor.com/article/247890/ (accessed April 2013)

Committee Encouraging Corporate Philanthropy

Giving in Numbers: 2012 Edition - Trends in Corporate Giving

http://cecp.co/download/pdfs/giving_in_numbers/GIN2012_finalweb.pdf (accessed April 2013)

Cooper, Terri (National Leader Life Sciences R&D Practice Deloitte Consulting LLP)

Change and Disruption in the Pharmaceutical Industry

http://www.corkcoco.ie/co/pdf/484086187.pdf (accessed April 2013)



HEALTH & GROWTH 186

Daemmrich, Arthur

Where is the Pharmacy to the Word? International Regulatory Variation and Pharmaceutical Industry Location

http://www.hbs.edu/faculty/Publication%20Files/09-118.pdf (accessed April 2013)

Dr Moran, Mary, Dr Guzman, Javier, Dr Henderson, Klara

NEGLECTED DISEASE RESEARCH AND DEVELOPMENT: A FIVE YEAR REVIEW 2012 By Policy Cures (December 2012)

http://www.policycures.org/downloads/GF2012_Report.pdf (accessed March 2013)

Economic Research Service (United States department of Agriculture)

International Macroeconomic Data Set (Updated December 2012)

http://www.ers.usda.gov/data-products/international-macroeconomic-data-

set.aspx#.UZS8c7XvvqUropa.eu/enterprise/sectors/healthcare/files/docs/vol_2_markets_innovation_regulation_en.pdf (accessed April 2013)

ECORYS Research and Consulting

Competitiveness of the EU Market and Industry for Pharmaceuticals Volume II: Markets, Innovation & Regulation (Released December 2009)

http://ec.europa.eu/enterprise/sectors/healthcare/files/docs/vol_2_markets_innovation_regulation_en.pdf (accessed April 2013)

EFPIA

Partnering with academia in pharmaceutical industry – Recent trends / The Innovative Medicines Initiative IMI as a model? (March 2011)

http://ec.europa.eu/education/higher-education/doc/business/forum2011/presentations/gottwald.pdf (accessed April 2013)



HEALTH & GROWTH 187

EFPIA

The Pharmaceutical Industry in Figures – Key data 2013

http://www.efpia.eu/uploads/Figures_Key_Data_2013.pdf (accessed February 2013)

Ernst & Young AIFP

Impact of the innovative pharmaceutical industry on the Czech economy and employment (Released 2010

Received from Richard Torbett at EFPIA

EU KLEMS Growth and Productivity Accounts

NACE 1.1 March 2011 Updates – Data upto 2007 ( released March 2011)

http://www.euklems.net/euk09ii.shtml#top (accessed April 2013)

European Commission

Europe 2012 http://ec.europa.eu/europe2020/europe-2020-in-a-nutshell/index_en.htm (accessed May 2013)

Research and Innovation – Horizon 2012 http://ec.europa.eu/research/horizon2020/index_en.cfm?pg=h2020

(accessed May 2013)

European Commission - Enterprise and Industry Publications

EUROPEAN COMPETITIVENESS REPORT 2012/ Reaping the benefits of globalization

http://ec.europa.eu/enterprise/newsroom/cf/_getdocument.cfm?doc_id=7657 (accessed April 2013)



HEALTH & GROWTH 188

European Commission

European Commission: Innovation Union Scoreboard 2013 (2013).

http://ec.europa.eu/enterprise/policies/innovation/files/ius-2013_en.pdf (accessed April 2013)

European Medicines Agency

Clinical trials submitted in marketing-authorisation applications to the European Medicines Agency - Overview of patient recruitment and the geographical location of investigator sites

http://www.ema.europa.eu/docs/en_GB/document_library/Other/2009/12/WC500016819.pdf (accessed April 2013)

http://csdd.tufts.edu/files/uploads/tuftscsdd_academic-industry.pdf (accessed April 2013)

Eurostat

Annual detailed enterprise statistics for industry (NACE Rev. 2, B-E) [sbs_na_ind_r2], last updated April 2013

http://appsso.eurostat.ec.europa.eu/nui/setupModifyTableLayout.do (accessed April 2013)

EUROSTAT

EPO Worldwide Patent Statistical Database

Excel file accessed at http://www.epo.org/about-us/annual-reports-statistics/statistics/filings.html (accessed April 2013)

Eurostat

ESA 95 Supply, Use and Input-Output tables Database (Updated October 2012, data up to 2008) http://epp.eurostat.ec.europa.eu/portal/page/portal/esa95_supply_use_input_tables/data/database (accessed April 2013)



HEALTH & GROWTH 189

Eurostat

EU-SILC database

http://epp.eurostat.ec.europa.eu/portal/page/portal/income_social_inclusion_living_conditions/data/database (accessed April 2013)

Eurostat

Labour Cost database

http://epp.eurostat.ec.europa.eu/portal/page/portal/labour_market/labour_costs/main_tables (accessed April 2013)

Eurostat

Science and Technology Database – R&D expenditure

http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/R_%26_D_expenditure (accessed March 2013)

Eurostat

Small and Medium Enterprise Database

http://epp.eurostat.ec.europa.eu/portal/page/portal/european_business/special_sbs_topics/small_medium_sized_enterprises_SMEs (accessed April 2013)

IMS Institute for Healthcare Informatics

The Global Use of Medicines: Outlook Through 2016 (Released July 2012) http://www.imshealth.com/deployedfiles/ims/Global/Content/Insights/IMS%20Institute%20for%20Healthcare%20Informatics/Global%20Use%20of%20Meds%202011/Medicines_Outlook_Through_2016_Report.pdf (accessed April 2013)



HEALTH & GROWTH 190

Innovative Medicines Initiative - IMI (EFPIA Research Directors Group & IFPMA)

Joint research for better medicines

http://www.phusewiki.org/docs/2010/2010%20PRESENTATIONS/MA06.pdf (accessed April 2013)

Marmot Review

Fair Society, Healthy Lives: A Strategic Review of Health Inequalities in England Post-2010 (Released February 2010)

http://www.instituteofhealthequity.org/projects/fair-society-healthy-lives-the-marmot-review (accessed April 2013)

McCrone, Paul, Dhanasiri, Sujith, Patel, Anita, Knapp, Martin, Lawton-Smith, Simon

PAYING THE PRICE - The cost of mental health care in England to 2026 (Released 2008)

http://www.kingsfund.org.uk/sites/files/kf/Paying-the-Price-the-cost-of-mental-health-care-England-2026-McCrone-Dhanasiri-Patel-Knapp-Lawton-Smith-Kings-Fund-May-2008_0.pdf (accessed April 2013)

Merck Annual Report 2012

http://www.merckgroup.com/company.merck.de/en/images/Q4_2012_Annual_Report2_EN_tcm1612_105641.pdf?Version= (accessed April 2013)

Milne , Christopher-Paul and Malins, Ashley

Academic-Industry Partnerships for Biopharmaceutical Research & Development: Advancing Medical Science in the U.S.

Tufts Center for the Study of Drug Development, Tufts University School of Medicine, Boston, MA



HEALTH & GROWTH 191

Novartis Annual Reporthttp://www.novartis.com/downloads/investors/reports/novartis-annual-report-2012-en.pdf (accessed April 2013)

Novo Nordisk Annual report 2012http://www.novonordisk.com.au/Images/AnnualReport2012/Novo-Nordisk-AR-2012-en.pdf (accessed April 2013)

Office for National StatisticsIndex of Labour Costs for chemical manufacture (released March 2013)http://www.ons.gov.uk/ons/datasetsandtables/index.html?pageSize=50&sortBy=none&sortDirection=none&newquery=labour+cost&contenttype=Reference+table&content-type=Dataset (accessed April 2013)

OECDHealth Status Data sethttp://stats.oecd.org/Index.aspx?DataSetCode=HEALTH_STAT (accessed April 2013)

OECDGovernment budget appropriations or outlays for RD - Science, technology and Patents databasehttp://stats.oecd.org/Index.aspx?QueryId=16264 (accessed April 2013)

OECDMain Science and Technology Indicators, Volume 2012 Issue 1http://www.oecd-ilibrary.org/science-and-technology/main-science-and-technology-indicators-volume-2012-issue-1/gross-domestic-expenditure-on-r-amp-d-gerd-as-a-percentage-of-gdp_msti-v2012-1-table2-en (accessed April 2013)



HEALTH & GROWTH 192

OECD

Sickness, Disability and Work - breaking the barriers A synthesis across all OECD countries (published November 2010)

http://www.oecd-ilibrary.org/social-issues-migration-health/sickness-disability-and-work-breaking-the-barriers_9789264088856-en (accessed February 2013)

OECD

STAN ( Structural Analysis database) – last updated August 2012

http://stats.oecd.org/Index.aspx?DataSetCode=NAAG (accessed April 2013)

PAREXEL Biopharmaceutical R&D Statistical Sourcebook 2012/2013 (eStats)

Hard copy accessed Mar, April, May 2013

Pharmaceutical Research and Manufacturers of America (PhRMA)

The US Biopharmaceutical Sector: Economic Contribution to the Nation prepared by Battelle Partnership (Released July 2011)

http://www.phrma.org/sites/default/files/pdf/2011_battelle_report_on_economic_impact.pdf (accessed April 2013)

Resolution Foundation

Who Gains from Growth? Living standards in 2020 - Institute for Employment Research and Institute for Fiscal Studies (Release September 2012)

http://www.resolutionfoundation.org/media/media/downloads/Who_Gains_from_Growth.pdf (accessed April 2013)



HEALTH & GROWTH 193

Roche Annual Report 2012

http://www.roche.com/investors/annual_reports.htm (accessed April 2013)

Shanghai Rankings

Academic Ranking of World Universities 2012

http://www.shanghairanking.com/ARWU2012.html (accessed April 2013)

The Economic Intelligence Unit (EIU)

Forecast Market Indicators (updated March 2013)

http://www.eiu.com/default.aspx (accessed April 2013)

United Nations – Department of Economic and Social Affairs

Population Division Database

http://esa.un.org/unpd/wpp/unpp/panel_population.htm (accessed April 2013)

World Health Organisation (WHO)

Global Health expenditure - NHA Indicators Database

http://apps.who.int/nha/database/PreDataExplorer.aspx?d=1 (accessed April 2013)



HEALTH & GROWTH 194

World Health Organisation (WHO)

World health statistics report 2013

http://www.who.int/gho/publications/world_health_statistics/EN_WHS2013_Full.pdf (accessed April 2013)

Word Intellectual Property Organization (WIPO)

WIPO Economics & Statistics Series - WIPO IP Facts and Figures 2012

http://www.wipo.int/export/sites/www/freepublications/en/statistics/943/wipo_pub_943_2012.pdf (accessed April 2013)

Zaidi, Asghar

Research Note 5 /2011 The situation of working-age people with disabilities across the EU

Social Situation Observatory – Income distribution and living conditions (November 2011)


195HEALTH & GROWTH


Back UpBack Up

Estimating Pharmaceutical Companies’ value to the national economy – Methodology based on OHE Research

HEALTH & GROWTH 196


Source: OHE research paper 2007, Estimating pharmaceutical companies’ value to the national economy

Producer Rents Labour Rents R&D spill overs Economic Rent

Estimated net additional income and wealth brought to a country by activities of pharmaceutical companies in excess of the income they would be expected to generate in the next best alternatives use(s) to which labour and capital would be diverted if these companies cease to exist

Economic rents earned Spillover benefits from research and development (R&D) activity that may be captured within the national economy by bodies other than the company making the original R&D investment. The flows of knowledge generated by R&D by one company in one sector can benefit other companies in the same or other sectors

Labour rents, i.e. economic rent earned by employees in the country. This arises if companies pay their employees more than they could earn in their next most remunerative employment

Economic rents earned from country exports, and country tax revenues , realised when possible to sell country goods or services at price sin excess of the cost of production, where those costs include a normal rate of profit.

Economic rents earned from the overseas activities of country-owned businesses captured by country shareholders or the country Exchequer, for example by visa dividend payments and capital gains from increased share prices, and from taxation of those

+ + =

Methodology to calculate multiplier effect

HEALTH & GROWTH 197


Direct Impact Indirect Impact Induced Impact Total Impact+ + = The specific impact if

pharmaceutical sector expenditure in the first round of spending - initial change in spending or demand

The impact of expenditures by suppliers to the pharma sector - increase in business demand up the supply chain as a result of the Direct Impact

The additional economic impact of the spending of the pharma sector employees and suppliers’ employees in the overall economy that can be attributed to the direct pharma industry expenditures - the increase in consumer spending as a result of the higher earnings from the Direct & Indirect Impact

£10

Local material = £10Local labour = £10Total = £20

£10

£5

£5

£2.5

£2.5

£2.5

£2.5

………

Multiplier

Output Multiplier =

Direct + Indirect + Induced Impact £20+£10+£5+£2.5+£1.25+..

Direct Impact £20= 2=

Consumption / Income

Leakage: Savings & Imports


http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=n8MM_m_K_1oCrM&tbnid=rqmiYeefu8RRkM:&ved=0CAUQjRw&url=http://annabrixthomsen.com/2012/08/23/how-to-stop-being-a-people-pleaser-day-93/&ei=WB-NUb2BO5De8ASZiYD4Dg&bvm=bv.46340616,d.dmg&psig=AFQjCNEiZYCkFx1a57aTzOSyJMVs8yE71A&ust=1368289494172276





EFPIA Brussels Office

Leopold Plaza BuildingRue du Trône 108B-1050 Brussels - Belgium Tel: +32 (0)2 626 25 55

www.efpia.eu

EFPIA Brussels Office

Leopold Plaza BuildingRue du Trône 108B-1050 Brussels - Belgium Tel: +32 (0)2 626 25 55

www.efpia.eu

Health & Medicine

Svetainei health & growth evidence compendium_sent(1)