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1

Economic Issues in Health Care and

the Pharmaceutical Industry

MAHU Sales Congress

February 3, 2005

Richard Manning, Pfizer Inc

2

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,800,000

1960 1965 1970 1975 1980 1985 1990 1995 2000

Total Health Care Spending

Total US Healthcare Spending 1960–2003M

illio

ns

of

Do

llars

Source: Centers for Medicare and Medicaid Services; available at www.cms.gov.

2003

3

300

250

200

150

100

50

0

1900 1920 1940 1960 1980 2000

2000 = 262

1900 = 46

Medical Progress Contributes to a More Healthy Population and an Aging Population Means More Spending on Health

Number of People Older Than 100, per Million Population

Source: Caplow, Theodore, et al. The First Measured Century, Washington DC: AEI, 2001:9

4

Outline

Pharmaceutical Prices, Spending and the Value of Medicines

Information, Marketing and Advertising

R&D, Profits and Incentives in the Pharmaceutical Industry

Should We Fill our Prescriptions in Canada?

The Road Ahead

5

Public Overestimates the Amount of Healthcare Spending that Goes to Pharmaceuticals

40%

21%21%

20%20%

19%19%

50% or more of healthcare spending is spent on Rx drugs

50% or more of healthcare spending is spent on Rx drugs

Less than 30%Less than 30%

UnsureUnsure

30 – 40%30 – 40%

Source: Gallup, “Pharmaceutical Image Survey”, 2003; N=1,011Source: Gallup, “Pharmaceutical Image Survey”, 2003; N=1,011

““What percent of the total healthcare spending do What percent of the total healthcare spending do you feel is spent on prescription drugs?”you feel is spent on prescription drugs?”

““What percent of the total healthcare spending do What percent of the total healthcare spending do you feel is spent on prescription drugs?”you feel is spent on prescription drugs?”

Average estimate: Average estimate: 44% 44%

6

Consumers Pay a Greater Share for Medicines Than for Other Components of Health Care

Note: Totals do not add up to 100% due to shares allotted to all other payors.Source: PhRMA. Coverage of prescription medicines in Private Health Insurance: lower level of coverage for medicines than for other items. Winter 2004.

20.6%

70.5%

10.1%

80.2%

7.6%

85.4%

2.5%

90.5%

37.2%

60.2%

0%

20%

40%

60%

80%

100%

Prescription Drugs

Hospital Inpatient

Hospital Outpatient

Emergency Room

Physician

Per

cen

tag

e S

har

e

Percent Covered by Private Insurance vs. Out-of-Pocket Among Insured Under Age 65

Out-of-PocketPrivate Health Insurance

7

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,800,000

1960 1965 1970 1975 1980 1985 1990 1995 2000

Total Health Care Spending Total Health Care Spending Less Rx Medicine

Total US Healthcare Spending Excluding Prescription Medicines, 1960–2003

Mill

ion

s o

f D

olla

rs

Source: Centers for Medicare and Medicaid Services; available at www.cms.gov.

2003

8

Share of National Health Care Spent on Each Category 1960-2003

Prescription Prescription MedicinesMedicines

Physician &Physician &Clinical ServicesClinical Services

HospitalHospitalCareCare

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1960 1970 1980 1990 2000 2003

Pharmaceuticals Account for Just Over 10% of Total US Healthcare Spending

Source: Centers for Medicare and Medicaid Services (CMS); available at www.cms.gov.

9

Copayments for Prescription Medicines Are Increasing Faster Than Rx Prices Copayments for Prescription Medicines Are Increasing Faster Than Rx Prices

Note:The Consumer Price Index, or CPI, measures price changes in consumer goods and services. Calculations based on Kaiser Family Foundation data and Health Research and Education Trust, Employer Health Benefits: 2003 Annual Survey (Menlo Park, CA: KFF and HRET, 2003).Source: PhRMA. Focus on Health Policy. Spring 2004.

Percentage Increase

Average Annual Change In Copayments by Medicine Classification, vs. Price Increase, 2000-2003

14.3%

9.9%

6.6%

3.6%

0% 5% 10% 15% 20%

Non-Preferred Brands

Preferred Brands

Generics

Rx Drug Consumer Price Index

10

Consumer Price Index Annual Rate of Change, December 2002 - December 2004

3.3%

1.9%

2.4%

4.2%

3.7%

5.0%

3.5%

2.5%

4.5%

0%

1%

2%

3%

4%

5%

6%

Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04

All Items Medical Care Rx Drugs & Medical Supplies

Source: BLS data, not seasonally adjusted

11

Producer Price Index Annual Rate of Change, December 2002 – December 2004

1.2%

4.0%

4.1%

1.9%3.7%

3.5%

0%

1%

2%

3%

4%

5%

6%

Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04

All Finished Goods Drugs and Pharmaceuticals

Source: BLS data, not seasonally adjustedNote: PPI sampling for all drugs and pharmaceuticals, not only prescription drugs

12

Innovative Medicines Have Turned the Tide Against HIV/AIDS

First New Drugs Introduced, 1995 Highly Active

Antiretroviral Therapy (HAART) Introduced, 1996–97

HIV Mortality Declined Dramatically

After Introduction of First “Expensive” Antiretrovirals...

AIDS Deaths per 100,000 Population

$618

$1,193

$821

$700

Jan 96 Mid-1997

Total: $1,811 Total:

$1,521

Drug Costs

Increase by 34%

Other Costs

Decrease by 41%

…While Monthly Costs for AIDS

Patients Decreased by 16% After HAART IntroducedSource: Costs – Bozette S, et al. Expenditures for the care of HIV-infected patients in the era of highly

active antiretroviral therapy. New England J of Medicine Vol. 344, No. 11, March 15, 2001; Mortality – Centers for Disease Control and Prevention; data on drug development from PhRMA and the NIH Office of Technology transfer

Monthly Health Spending for AIDS Patients

18

1512

9

6

3

0

Year

90 94 988682$0

$400

$800

$1,200

$1,600

$2,000

Rx drugs All other costs

13

Drug Cost Increase

Inpatient Savings

Office Visit Savings

Home Health Savings

Outpatient Savings

ER Savings

Net Impact: $18 Investment Returns $129 in Savings – Ratio of $7 Saved for Every $1 Invested

Source: Lichtenberg, F. “Benefits and Costs of Newer Drugs: An Update.” NBER Working Paper 8996, June 2002

-$18

$80

$24

$12

$10

$3

Evidence Suggests that New Drugs Are Not Just as Good as Old Drugs

Estimated “Savings” From Use of Older Medications (Instead of Newer Ones), On Average for All Patients and All Conditions

(Assumes Average “Age” of Drug Increases by 10 Years)

14

Holding Other Things Constant, Mortality Rate Declined When Newer Medicines Were Used

Three-Year Mortality Rate for Patients vs. Vintage of Drugs Used for Treatment, Holding Other Factors Constant

4.4%

3.6%3.0%

2.5%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

pre 1970 1970s 1980s 1990s

Date of Drug Approval

Source: Lichtenberg, F. “The effect of drug vintage on survival rates:evidence from Puerto Rico’s ASES program.” NBER Working Paper, November 2004

15

It is Possible to Lower Medical Costs by Encouraging Appropriate Medication Use

Avg Sick Days 12.6 6.0 8.5 7.3 7.7 6.4

Baseline Year 1 Year 2 Year 3 Year 4 Year 5

$5,394

$4,651

$5,882$5,843$5,210

$7,082

Source: Cranor C, Bunting B, Christenson D. The Asheville Project: long term clinical and economic outcomes of a community pharmacy diabetes care program. J of the Am Pharm Assoc, March/April 2003.

$1,153 $1,614$2,335 $2,599 $2,579 $3,095

$3,596

$3,508 $3,283 $2,815 $1,556$5,929

All Other Medical

Rx Expenses

City of Asheville, NC, Created a Program Granting Diabetics Free Access toPrescription Drugs and Other Services if They Enrolled in a Care-Management

Program. After Five Years, Program Is Paying Significant Dividends…

City of Asheville, NC, Created a Program Granting Diabetics Free Access toPrescription Drugs and Other Services if They Enrolled in a Care-Management

Program. After Five Years, Program Is Paying Significant Dividends…

16

429

63

0

100

200

300

400

500

Primary Prevention Secondary Prevention

NN

T t

o p

reve

nt

CV

eve

nt

Number Needed to Treat to Prevent a Cardiac Event with Statins, by Prevention Category

Source: Ellis, J.J. Journal of General Internal Medicine, June 2004; 19: 639-646.

17

Tendency to Remain on Statin Therapy Depends on Co-pay Level

Source: Ellis, J.J. Journal of General Internal Medicine, June 2004; 19: 639-646.

*Adjusted for all available covariates. The median time to discontinuation was 3.9+ years for $0 to <$10; 2.2 Years for $10<$20; and 1.0 years for $20+.

18

Higher Co-payments Reduce Medication Use

May 2004 study published in JAMA showed that when copayments were doubled, there were substantial reductions in use of medicines for important conditions

Change in Drug Days Supplied

-25%

-34%

-26%

-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%Diabetes High Cholesterol Hypertension

Source: Goldman D, Joyce GF, Escarce JJ, et al. Pharmacy benefits and the use of drugs by the chronically ill. JAMA. May 2004.

For patients with diabetes, asthma, and gastric disorder, reductions in medication use were associated with a 17% increase in annual ED visits and 10% increase in hospital days

19

Outline





The Road Ahead

20

Information Is a Good Much Like Any Other

Price

Quantity

Demand for Information

21

Physicians reported largely positive impact of advertising on their interaction with patients

Ref: Page C6, C8

No: 44 % No: 85%

Yes Saw Positive

Impact

Yes Saw Negative

Impact

56%

15%

Ref: Page MA6, MA8

No: 34 % No: 91%

Yes Saw Positive

Impact

Yes Saw Negative

Impact

66%

9%

Did the fact that the patient saw an advertisement

…have a positive impact on the interaction?…have a negative impact on the interaction?

High Cholesterol Mood/Anxiety Disorder

Did the fact that this patient saw an advertisement...

41%

18%

Yes, Had Benefits Yes, Caused Problems

Have beneficialeffects?

Cause an problems?

FDAFDA Survey of PhysiciansSurvey of Physicians11

Did the fact that this patient saw an advertisement...

41%

18%

Yes, Had Benefits Yes, Caused Problems

Have beneficialeffects?

Cause an problems?

FDAFDA Survey of PhysiciansSurvey of Physicians11

1FDA Talk Paper, FDA Releases Preliminary Results of Physician Survey on Direct-to-Consumer Rx Drug Advertisements, January 12, 2003.

22

Physicians reported that patients asked about products that were appropriate for them and their condition

85%1 of physicians reported that patients inquired about a medicine that was appropriate for them

72% 1 of physicians found the discussion to be a valuable part of the office visit.

85%1 of physicians reported that patients inquired about a medicine that was appropriate for them


83% 1 of physicians reported that patients inquired about a medicine that was appropriate for them


83% 1 of physicians reported that patients inquired about a medicine that was appropriate for them


High Cholesterol Mood/Anxiety Disorders

When a patient asked about a drug, 88% of the time they had the condition that the drug treated

80% of physicians believed patients understood what condition the drug treats The vast majority (91%) of physicians said patients did not attempt to influence their

treatment in a way that would be harmful

2FDA Talk Paper, FDA Releases Preliminary Results of Physician Survey on Direct-to-Consumer Rx Drug Advertisements, January 12, 2003.

FDA Survey of Physicians2

1Rated 5,6,7 on a 7-point scale (Ref Page: C13,C&; MA13,MA7)

23

High Cholester

ol

High Blood Pressure

Nonacceptance 10% 15% 11%

Nonpersistence

At 12 months 34% 38% 37%

At 18 months 47% 49% 51%

Noncompliance 47% 46% 46%

Most Patients Are Not Taking Medicines Properly

Diabetes

Source: Integrated Healthcare Information Services, Inc. (IHCIS)(30 health plans, 11 million members; HL analysis: Age 25–64, N=8839; HTN analysis: Age 25–64, N=11,422; Diabetes analysis: Age 18–64, N=6090).

Note: acceptance means patient filled original prescription; persistence means patient remains on therapy by a given date; and compliance means the patient is taking the medicine appropriately.

24

Patient-Reported Reasons for Non-Adherence

I just forget (54.9%)Other (3.6%)

Don’t like being dependent on drugs (7.3%)

Don’t like being told what to do (0.6%)

Too expensive (1.8%)

If I don’t take them, supply will last longer (1.3%)

Side effects (6.4%)

Don’t think drugs are working (3.4%)

Hate taking drugs (7.1%)

Don’t think it’s always necessary (13.7%)

Cheng JW, et al. Pharmacotherapy. 2001;21:828-841.Source: Cheng JW, Kalis M, Feifer S. Patient-reported adherence to guidelines of the Sixth Joint National Committee on prevention, detection, evaluation, and treatment of high blood pressure. Pharmacotherapy. 2001. Accessed at: http://www.medscape.com/viewarticle/409745 on July 12, 2004.

25

US Government Finds Pharmaceutical Industry Spends 50% More on R&D than Marketing

*Total promotion includes DTC, retail value of samples, office & hospital promotion, and professional journal advertising.

Source: U.S. General Accounting Office (GAO). FDA Oversight of Prescription Drug Advertising Has Limitations. October 2002.

R&D vs. Promotional Spending, 1997-2001

19.021.1

22.726.0

11.012.5 13.9

15.719.1

$0

$10

$20

$30

1997 1998 1999 2000 2001

To

tal E

xp

en

dit

ure

( B

illio

ns

)

R&D Total Promotion*

30.4

26Sources: GAO Report. October 2002.

$30.30

R&D Retail Value of Samples

Office Promotion

Direct-to-Customer

Advertising

Hospital Promotion

Journal Advertising

$10.50

$4.80$2.70

$0.70 $0.40Exp

end

itu

res

in B

illio

ns

($)

Product Samples Are a Significant Share of Total Promotional Spending

Pharmaceutical Industry’s Annual R&D Investment Far Exceeds the Total Value of Marketing Spending, as Reported by GAO

Marketing

27

TreatedTreated

50%

60%

65%

70%

50%50%

40%40%

35%35%

30%30%

Depression

HIV

Cholesterol

Anxiety

UntreatedUntreated

Undiagnosed and Untreated DiseasesRemain Significant

Source: NHANES; Internal Analysis

28

Outline





The Road Ahead

29

90%

27%

Public Does Not Believe That Private Industry Invents New Medicines

Public PerceptionPercent of credit assigned to pharma by public for discovery of new medicines*

RealityPercent of new medicines discovered and developed by private industry

* Survey participants allocate 100% across seven stakeholdersSource: Consensus Research, “Stakeholder Value Research”, General Publics, Phase II, July 2003; N=1,000; PhRMA estimate, 2003

30

Private Companies and the NIH Invest Billions of Dollars in Research Every Year

Annual R&D Spending in Billions of Dollars

0

5

10

15

20

25

30

35

$ B

illi

on

PhRMA Members NIH

31

Research-Based Pharmaceutical Cos1

Industrial Sector Comparison2

1 “Research-Based Pharmaceutical Companies” based on ethical pharmaceuticals sales and ethical pharmaceutical R&D only, tabulated by PhRMA.2 “Standard and Poor’s Compustat” – 4-digit SIC codes.Source: PhRMA Pharmaceutical Industry Profile 2000: Research for the Millennium.

17.0%

10.5%

8.4%

7.8%

4.7%

3.9%

1.2%

3.9%

0% 2% 4% 6% 8% 10%

Domestic Research & Development

Computer and Software Services

Electrical and Electronics

Office Equipment and Services

Leisure Time Products

Automotive

Metals and Mining

All Industries

12% 14% 16% 18%

5.3%Telecommunications

3.8%Aerospace and Defense

0.7%Paper and Forest Products

Pharmaceutical Companies Spend More as a Share of Sales on R&D Than Any Other Industry

32

Net Cost: $802 Million Invested Over 15 Years

Compound Success Rates by Stage

16

14

12

10

8

6

4

2

0

Phase II100–300 Patient Volunteers Used to Look for Efficacy and Side EffectsPhase III

1,000–5,000 Patient VolunteersUsed to Monitor Adverse

Reactions to Long-Term Use

FDA Review ApprovalAdditional Post-

Marketing Testing

Phase I 20–80 Healthy Volunteers Used to

Determine Safety and Dosage

Preclinical TestingLaboratory and Animal Testing

Discovery(2–10 Years)

Years

New Product Development – A Risky and Expensive Proposition

Source: PhRMA Pharmaceutical Industry Profile 2003, Chapter 1: Increased Length and Complexity of the Research and Development Process. And DiMasi, JA, Hansen, RW, Grabowski, HG. “The Price of Innovation: new estimates of drug development costs.” J of Health Economics. 2003:22:151-185.

5,000–10,000Screened

250Enter Preclinical

Testing

5Enter Clinical

Testing

250Enter Preclinical Testing

Compound Success Rates by Stage

5,000–10,000Screened

11Approved by the FDAApproved by the FDA

00

22

44

66

88

1010

1212

1414

1616

33

Ongoing Research Investment Depends on Healthy Returns For a Handful of Successful Products

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th

New Products Grouped in Tenths According to Financial Success

Average R&D Cost*

Value of After-Tax Net Lifetime Sales of New Drugs ($ Millions)

* After taxH. Grabowski, J. Vernon, and J. DiMasi, “Returns on Research and Development for 1990s New Drug Introductions”, Pharmacoeconomics 20 (2002)

34

Wall Street Journal Finds That Pharmaceutical Stocks Have Lagged for Five Years, Ranking 65th of 76 Major Industries

Source: Leaders and Laggards: The Best and Worst of the Rankings. The Wall Street Journal. March 8, 2004 (R4).

8.8%6.3% 5.0% 3.3%

0.5%

-3.2% -4.8% -5.4%

-17.9%

10.7%12.6%

-30%

-20%

-10%

0%

10%

20%

30%

40%

Cas

ino

s

Min

ing

&M

etal

s

Bio

tech

no

log

y

Dis

tille

rs &

Bre

wer

s

Hea

lth

-Car

eP

rovi

der

s

To

bac

co

Maj

or

Oil

Co

mp

anie

s

Med

ical

Su

pp

lies

Co

smet

ics

29.3%

28.8%

Off

ice

Eq

uip

men

t

Ph

arm

aceu

tica

ls

Air

lin

es

Dru

g

Ret

aile

rs

Five-Year Average Compound Annual Total Returns for Selected Industry Groups, Through

Year-End 2003

35

Operating Environment Has Led toSignificant Industry Evolution

Pharmaceutical Industry Consolidation, 1980–20032625242322212019181716151413121110987654321

7654321

Am

eric

an

Cya

nam

id

Am

eri

can

Ho

me

P

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s

Hof

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arke

D

avis

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ner-

Lam

bert

Mon

sant

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Pha

rmac

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Wye

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36

Effect of Generic Entry on Prices

Share of New Prescriptions for Zantac & Generic Rantidine

Source: IMS

Sh

are

of

Sal

es (

%)

Generics

Zantac

100

0

20

40

60

80

Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun

1997 1998 1999

37

Outline





The Road Ahead

38Source: Fraser Institute (Canada), Public Policy Sources: Prescription Drug Prices in Canada and the US – Part 2, 2002.

Prices Differ for Most Products Between Canada and the US, Not Just Medicines

US vs Canada – Income and Prices

0%

50%

75%

100%

Average Income

Market Basket

Average

AOL Quicken Software

Brand Name Drugs

US Canada

25%

39

Many Automobiles Are Much Less Expensive In Canada

Make Model US Price Canadian Price (in US$)

Price Difference: US - CAN

Chevrolet Avalanche 4x4 $37,035 $30,430 $6,605

Chevrolet Astro Minivan LT $30,080 $24,649 $5,431

Saturn L300 Wagon $24,135 $19,037 $5,098

Suzuki XL-7 $27,249 $22,676 $4,573

Saturn L300 Sedan $23,885 $19,396 $4,489

Ford F150 XLT $25,275 $21,309 $3,966

Buick Regal $28,640 $24,933 $3,707

Buick Century $22,475 $18,876 $3,599

Chevrolet Malibu $21,395 $17,874 $3,521

Chevrolet Cavalier $15,000 $11,573 $3,427

Source: MSRPs from Manufacturer websites Exchange rate as of 13 May 2004: $1=CAN$0.7177 accessed at quote.yahoo.com

Buying one of these cars in Canada would save $4,442 on averageBuying one of these cars in Canada would save $4,442 on average

40Source: IMS Health.

As a Practical Matter, Canadian Drug Supply Too Small to Serve US Need

Total Prescriptions Filled in US vs Canada, in Millions - 2002

0

500

1,000

1,500

2,000

2,500

3,000

3,500

US Canada

>3.4 Billion

331 Million

After exhausting all Canadian supplies, still would need to supply medicines for

3.1 billion prescriptions

41

Canadian Association of Retired Persons (CARP) and Other Groups Have Concerns About Canadian Supply Integrity

“…There is no way that a pharmaceutical supply chain built to meet the needs of 32 million Canadians can meet the needs of more than 300 million Americans. Canadians will pay the price if this practice continues," said Dr. Jeff Poston, Executive Director of the Canadian Pharmacists Association. "As a pharmacist, I also have serious concerns about safety. Medications are potent and patients need proper care to ensure they are used correctly. Drugs are a therapy, they should not be treated as a commodity to be bought from anywhere in the world at the cheapest price."

From the October 22, 2004 statement from CARP, “Canada must stop cross-border exports”:

Available at www.50plus.com; accessed Dec 20, 2004.

42

Counterfeit vs. Authentic: Can You Tell the Difference?

AuthenticCounterfeit

43

Cross-Boarder Sales from Canada Have Increased but Quality Is Questionable

Drug Ambien Lipitor Viagra

Drug Present PASS PASS PASS

Potency FAIL FAIL FAIL

Dissolution PASS FAIL FAIL

Purity Test PASS FAIL FAIL

Source: FDA News July 13, 2004 FDA test results of prescription drugs from bogus Canadian website showing products were substandard (http://www.fda.gov/bbs/topics/news/2004//NEW01087.html)

“Canadian Pseudo-Generics”

Three Imported Drugs Tested by

the FDA for Quality

44

In Other Countries, Majority of Potential Savings From Importation Captured by Middlemen

38%

16%

11%

26%

42%

33%

62%

84%

89%

74%

58%

67%

Netherlands

Germany

UK

Norway

Sweden

Denmark

Home Country Payers and Pharmacies Importers

Source: Kanavos P. The Economic Impact of Pharmaceutical Parallel Trade: A Stakeholder Analysis. London School of Economics, 2004.

Share of Economic Gains Captured by Importers vs Payers in Other Countries Where “Reimportation” is Allowed

45

Those Under Price Controls Have to Wait for New Therapies

86%

78%

73%

58%

53%

52%

36%

31%

Percentage of Global New Medicines Reaching

Country*

Average Delay for Products That Are Launched

(number of months between initial global launch and launch in country)

USA

Germany

Sweden

Spain

France

Italy

Poland

Portugal

4.2

8.8

7.8

15.7

14.9

17.2

20.5

22.1* Percent of 85 global launches 1994–1998 that were launched in each country by end of 1999.Source: Danzon P, et al. The impact of price regulation on the launch delay of new drugs. NBER Working Paper 9874, July 2003.

Canada 12.266%

US Consumer

s Get More

Medicines, and Get

Them More

Quickly

46

Outline





The Road Ahead

47

Keeping Focused on the Opportunity Ahead

600

400

200

0

Major Cardiovascular Diseases (Heart Disease, Stroke, High Blood Pressure)

Number of Deaths per 100,000 Population per Year

1900 = 345

1997 = 352

1997 = 201

1900 = 64

Cancer

1900 20001920 1940 1960 1980


48

300

250

200

150

100

50

0

1900 1920 1940 1960 1980 2000

2000 = 262

1900 = 46

An Aging Population Will Demand More Cures

Number of People Older Than 100, per Million Population


49

Patients Under Care Mgmt

Medicaid Eventwith Gov. Bush

June ’01 June ’02 Sept ’02 Dec ’02 March ’03 June ’03 Sept ’03

ReleaseClinical

Outcomes

AnnounceExtension

Agreement

AnnounceYearly Savings

$15.9M

17,700

4,800

ClinicalChangesClinical

ChangesReduced Need for Services

Reduced Need for Services

CostSavings

BehaviorChangesBehaviorChanges

39% of patients improved medication compliance

54% of patients improved mental health scores

Heart Failure: 43%–47%

reduction in number of patients with most severe HF

Hypertension: 48% of patients

lowered blood pressure

Utilization: Inpatient

Days: 12.6%

Year 1 Savings and Investment: $15.9M

Florida – A Healthy State Program Milestones and Performance Metrics

50

Closing Points

Health Care Spending Is Rising and Probably Will Continue to Do So Prescription Drugs Are not the Primary Reason

Health Care Is a Highly Valuable Dynamic Good Patients and Society Have Reaped Exceptional Returns

from Medical Innovation and have an Enormous Stake in Continued Progress

Challenge of the Future is More than Controlling Costs Continue Progress Against Illness

Use Health Care Resources Appropriately

Establish Financing Mechanisms that Encourage Appropriate Utilization of Medical Resources and Make the Fruits of Medical Progress Widely Available

51

BACK UP SLIDES

52

Inspection Activities Are Not Without Cost

Illustration of Two Districts Seattle District Office

Southwest Import District Office

Days of Blitz* 11/4-7/2003 11/4-6/2003

FDA Staff (Full or Part-Time at Mail Facility) 6 3

Hours (Working at Facility on Blitz) 88.75 44

FDA Staff (Full or Part-time Outside of Mail Facility) 9 3

Hours (Spent in Support/Follow-Up Including Processing Detentions) 757.5 790

Total Hours (Mail Facility and Support/Follow-Up) 846.25 834

Average Hours Spent Per Package (Including Support Activity) (300 Packages Examined)

2.82 2.78

Average Cost of Examining and Processing Each Package $267.90 $264.10

* The blitz operations were FDA and Canadian Boarder Patrol conducted short-term intensive evaluations of drug products that were entering the U.S. through specific international mail facilities. November 2003

53

*Adjusted for all available covariates. The median time to discontinuation was 3.7 years for secondary prevention and 3.4 years for primary prevention. Source: Ellis, J.J. Journal of General Internal Medicine, June 2004; 19: 639-646.

Survival Curves for Discontinuation of Statin Therapy, by Prevention Category*

54

Role of Medicines in Employers’ Annual Premium Increases is Modest

2005 Forecasted Premium Increasesfor Plans With and Without Rx Coverage

13.3% 12.9%

0%

5%

10%

15%

20%

With Rx Without Rx

Av

era

ge

Ac

ros

s P

lan

Ty

pe

s

Source: Segal Health Plan Cost Trend Survey, 2005 edition, October 2004.

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