ESTIMATING PHARMACEUTICAL EXPENDITURE AT NET PRICES: … · TOTAL PHARMACEUTICAL EXPENDITURE IS FORECAST TO GROW AT A RATE OF 1.5 TO 2% CAGR OVER THE NEXT 5 YEARS The forecast figure

ESTIMATING PHARMACEUTICAL EXPENDITURE AT

NET PRICES: IS THE PERCEIVED PROBLEM AS

LARGE AS EXPECTED?

DR JORGE MESTRE-FERRANDIZ

A LITTLE ABOUT ME…

• Economist by training

• Currently working as a freelance

• Used to work for the Office of Health Economics, London

• Areas of interest: pharmaceutical policy

• Research/academia and consulting experience

2

AGENDA

1. Introduction & Context

2. Objective of study

3. Methods

4. Results

5. Conclusions

3

1. INTRODUCTION & CONTEXT

• There is an assumption that biopharmaceutical expenditure is unsustainable and driven by high prices

4

What will

pharmaceutical

expenditure look

like in the future in

Europe?

What level

of pharma

expenditure can be

considered sustainable

(and optimal)?

But there are

still questions

to be

answered…

1. INTRO & CONTEXT: HEALTHCARE EXPENDITURE IS EXPECTED TO GROW AT AROUND 3%

BY 2030 (2.1% FOR HIGH INCOME COUNTRIES)

• Health spending is associated with economic development but remains variable across world regions

Source: Global Burden of Disease Health Financing Collaborator Network. Future and potential spending on health 2015–40: development assistance for health, and government, prepaid private, and out-of-pocket health spending in 184 countries. The Lancet 2017;389(10083):2005–30

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1. INTRO & CONTEXT: OECD DATA SUGGEST THE PROPORTION OF HEALTHCARE

EXPENDITURE SPENT ON MEDICINES IS FALLING

• Growth in overall healthcare expenditure is a challenge for publicly funded healthcare systems; however,

this trend might not not fuelled by disproportionate increases in the cost of medicines

Source: OECD. Pharmaceutical spending (indicator). 2018: Available at: https://data.oecd.org/healthres/pharmaceutical-spending.htm; accessed 25/03/196

1. INTRO & CONTEXT: …BUT DIFFERENT PICTURE FOR GREECE?

7Source: OECD. Pharmaceutical spending (indicator). 2018: Available at: https://data.oecd.org/healthres/pharmaceutical-spending.htm; accessed 25/03/19

1. INTRO & CONTEXT: IMPORTANCE OF OFF-PATENT SEGMENT TO GENERATE SAVINGS

• Within the EU, the availability of generic medicines and patent expiries has helped offset spending on

branded medicines

Note: Europe includes Germany, France, Italy, UK, Spain, Poland, Belgium, Switzerland, Austria, Netherland, Greece, Finland, Hungary, Portugal, Ireland, Czech Republic, Norway and Slovakia

1. IMS Health: The Role of Generic Medicines in Sustaining Healthcare Systems: A European Perspective. June 2015; accessed June 2018

8

1. INTRO & CONTEXT: BUT UPTAKE OF GENERICS UNEVEN…MANY REASONS

Source: OECD: https://stats.oecd.org/Index.aspx?DataSetCode=HEALTH_PHMC 9

1. INTRO & CONTEXT: FORECASTS ARE USED TO ESTIMATE THE GROWTH AND IMPACT OF MEDICINE EXPENDITURE BUT ARE TYPICALLY BASED ON LIST PRICES

This forecast is based on real sales data but does not adjust for confidential discounts and rebates

1. IQVIA forecast

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1. INTRO & CONTEXT: IN THE LAST DECADE, THERE HAS BEEN AN INCREASED USE OF NET

PRICE DISCOUNTS, REBATES AND MANAGED ENTRY AGREEMENTS ACROSS EUROPE

Managed entry agreements and rebates are mechanisms increasingly used for reimbursing high cost medicines

1. VFA. The German pharmaceutical market. 2018. Available from: www.vfa.de/en/statistics/statistics-2012-am-deutschland1; accessed May 2018

2. Tettamanti A. Managed entry agreement in the Italian market between June 2005 and June 2015. ISPOR PHP220 poster

3. Pharmaphorum. Patient access schemes: a look behind the scenes. 2015. Available from: www.pharmaphorum.com/views-and-analysis/patient-access-

schemes-a-look-behind-the-scenes/; accessed May 2018

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1. INTRO & CONTEXT: AND USE OF ERP EXPANDING…

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Source: WHO, 2018

Source: Panteli et al., 2017 Source: WHO/WTO report of the workshop on differential pricing and financing of essential drugs, available at www.wto.org.

AGENDA

1. Introduction & Context

2. Objective of study

3. Methods

4. Results

5. Conclusions

13

2. OBJECTIVE OF STUDY

• Estimate future pharmaceutical expenditure growth rates in France, Germany, Italy, Spain and the UK (EU5) at

net prices by adjusting the established IQVIA analysis (‘list forecast’) for discounts that are not currently

incorporated (‘net forecast’).

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AGENDA

1. Introduction & Context

2. Objective of study

3. Methods

4. Results

5. Conclusions

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3. METHODS: A FOUR-STEP APPROACH WAS USED TO ADJUST THE IQVIA FORECAST

METHODOLOGICAL APPROACH OF THE ADJUSTED FORECAST1

Rx= expenditure on medicines that require a prescription

Historical list estimate (2010–2016)

Identify IQVIA historical list

estimates of pharmaceutical

expenditure (2010–2016).

Expenditure on branded medicines

and generics are not reported

separately.

1

1. Espin J et al (2018). Projecting Pharmaceutical Expenditure in EU5 to 2021. Applied Health Economics and Health Policy Journal

List forecast (2017–2021)

Analyse and plot historical volume

and list price data; develop baseline

projections using exponential

smoothing techniques; assess and

quantify events, and apply to baseline

projections.

2

Historical net estimate (2010–2016)

Estimate historical discounts

observed in each country (not

included in historical list estimates)

to create historical net estimates

(2010–2016).

3Net forecast (2017–2021)

Adjust list forecast for each

country to reflect historical net

estimates; estimation of net forecast.

4

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3. METHODS – MOVING FROM LIST TO NET HISTORIC EXPENDITURE

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3. METHODS – SPAIN: OVERVIEW OF DISCOUNTS AND REBATES FOR MANUFACTURERS

100

-2%

98

-7.5%*

92.5

-~20%

72.5%

List price Compulsory

paybacks

National level

- 27.5%

Price after

payback

Product

discounts

via

invoicing

Retail setting drugs

Industry rebates – Not

applicable to date

Hospital drugs

Reimburse

ment

price

(net price)

* For orphan dugs

it is 4%

Ambulatory

off-patent

products

Hospital level

Additional hospital

discounts over and

above the national

discounts

Tenders/discountsTenders

Regional level

- 40%**

** Only in Andalucia

Negotiated

discounts

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AGENDA

1. Introduction & Context

2. Objective of study

3. Methods

4. Results

5. Conclusions

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4. RESULTS: TOTAL PHARMACEUTICAL EXPENDITURE IS FORECAST TO GROW AT A RATE OF 1.5

TO 2% CAGR OVER THE NEXT 5 YEARS

The forecast figure could be as low as 0.5 to 1% if there is greater biosimilar use than current conservative

estimates

1. Espin J et al (2018). Projecting Pharmaceutical Expenditure in EU5 to 2021. Applied Health Economics and Health Policy Journal 20

4. RESULTS: EU5

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AGENDA

1. Introduction & Context

2. Objective of study

3. Methods

4. Results

5. Conclusions

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5.CONCLUSIONS

• Increasing frequency and magnitude of confidential discounts, including MEAs, rebates and discounts =>

growing divergence between list and net prices for medicines in Europe.

• Many drivers, including increasing financial pressures within health systems, and policies such as external

reference pricing, and a shift in pharmaceutical innovation from retail to hospital settings in many countries

with most new medicines for immunological and cancer conditions.

• We should analyse jointly with outcomes achieved from their use – complex task!!

• After adjusting for discounts and rebates, net expenditure growth in EU5 is predicted to be

approximately 1.5% CAGR over the next five years. This is below predicted healthcare expenditure

growth in Europe and in line with long-term economic growth rates

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5. CONCLUSIONS

• Latest OECD data seem to confirm the conclusions: drug spending has grown the least among functions of

health spending between 2004 and 2016

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Thanks for your attention!

Dr Jorge Mestre-Ferrandiz

Independent Economics Consultant

Visiting Fellow, Office of Health Economics

Profesor Asociado, Universidad Carlos III, Madrid

Profesor de Health Economics de FT/Instituto de Empresa (IE) Business School

Director, Oxford Martin Programme on Affordable Medicines, Oxford Martin School, University of Oxford

Honorary Visiting Lecturer, Department of Economics, City University London

Views expressed are my own

Email: jormesfer13@gmail.com

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Back-up slides

HEALTH SPENDING

Source: OECD. Pharmaceutical spending (indicator). 2018: Available at: https://data.oecd.org/healthres/pharmaceutical-spending.htm; accessed 25/03/19

PHARMACEUTICAL SPENDING (1/3)

Pharmaceutical spending covers expenditure on prescription medicines and self-medication, often referred to as over-the-counter products. In some countries, other medical non-durable goods are also included. Pharmaceuticals consumed in hospitals and other health care settings are excluded. Final expenditure on pharmaceuticals includes wholesale and retail margins and value-added tax. Total pharmaceutical spending refers in most countries to “net” spending, i.e. adjusted for possible rebates payable by manufacturers, wholesalers or pharmacies. This indicator is measured as a share of total health spending, in USD per capita (using economy-wide PPPs) and as a share of GDP

Source: OECD. Pharmaceutical spending (indicator). 2018: Available at: https://data.oecd.org/healthres/pharmaceutical-spending.htm; accessed 25/03/19

PHARMACEUTICAL SPENDING (2/3)

Source: OECD. Pharmaceutical spending (indicator). 2018: Available at: https://data.oecd.org/healthres/pharmaceutical-spending.htm; accessed 25/03/19

PHARMACEUTICAL SPENDING (3/3)

Source: OECD. Pharmaceutical spending (indicator). 2018: Available at: https://data.oecd.org/healthres/pharmaceutical-spending.htm; accessed 25/03/19

PHARMACEUTICAL SPENDING: GREECE

Source: OECD. Pharmaceutical spending (indicator). 2018: Available at: https://data.oecd.org/healthres/pharmaceutical-spending.htm; accessed 25/03/19