IMS Perspective on Specialty care Sarah Rickwood VP, European Thought Leadership

Agenda

•  Shift to specialty medicine

− A changing landscape − Pipeline and approvals − Regulators and Payers − Bundling of products and services: adding value to patients

•  Innovation in speciality − Oncology: The largest therapy area for specialty medicine − Paying for innovation in specialty

2

The specialty segment of the market will be the dominant story to 2020

• By 2020 it’s likely that 75% of the world’s top 20 pharma will be partially or wholly specialty dominated

• New specialty drugs in previously primary care areas

Big pharma is specialty dominated

• New biologics for asthma, COPD, dyslipidaemia, Alzheimer’s, Parkinson’s, Heart Disease

Specialty products enter genericised and primary care areas

• Increasing orphan drugs approvals means that the total orphan drug market becomes significant as a budget item

Orphan drugs major share of non generic

spend

• Oncology continue to be the single most valuable therapy area, and new immunotherapies among the largest selling

Oncology passes $100bn in value by

2018

Specialty products defined as medicines that treat specific, complex chronic diseases with four or more of the following attributes: Initiated only by a specialist, require special handling and administration; unique distribution; High cost; warrants intensive patient care; might require reimbursement assistance

3

Specialty becomes 25% of market value – and is especially important for big pharma

Global: specialty (*) sales (billion US$), list price, excludes rebates and discounts

(*) IMS definition: Specialty products defined as medicines that treat specific, complex chronic diseases with four or more of the following attributes: Initiated only by a specialist, require special handling and administration; unique distribution; High cost; warrants intensive patient care; might require reimbursement assistance

900

800

700

600

500

400

300

200

100

0

1,000

Sal

es,

US $

bn

2014

901

25%

2004

492 16%

84%

75%

Specialty Traditional (Primary)

Source: IMS Health, MIDAS, MAT June 2014, Non Rx Bound

Top 15: specialty (*) sales (billion US$), list price, excludes rebates and discounts

2014

441

36%

2004

304 19%

81% 64%

4

9%

17%

0%

2%

4%

6%

8%

10%

12%

0

50

100

150

200

250

2008 2009 2010 2011 2012 2013 2014 G

row

th,

LCU

S$

Sal

es,

US

$ b

illio

ns

Biologics Sales Biologics Growth Total Pharma growth

Biologics, which are primarily specialist, outperform the market and focus on developed

5

Biologics growth outpacing that of total pharma

Source: IMS Health, MIDAS, MAT Q2 2014, Rx; Brazil and Mexico Non Retail Sales are included; Share of growth in LC$

6,6% 9,8%

12,6%

21,2%

49,8%

Japan Pharmerging ROW EU5 US

2,7% 10,2%

8,9%

15,3%

62,9%

Biologics – Share of sales

Biologics – Share of growth

Global market trends Sales and Growth

Biosimilars/NOBs currently a very small element of developed markets- key impact is in pharmerging

6

Mature 8 markets biologics split

MAT 2012:

Pharmerging* markets biologics split

MAT 2012:

Source: IMS Health MIDAS Dec 2012. (*) It includes 16 Pharmerging markets. Mature 8 is EU5, Canada, US and Japan.

$137 Bn

0.4%

99,6%

Biosimilars

All other biologics

10.7%

89,3%

NOBs

All other biologics

$15 Bn

3-5%

95-97%

NOBs/biosimilars All other biologics

Global market by 2017:

$205-235 Bn

*NOBs: Non Original Biologics. Biologics defined as according to IMS MIDAS definition as macormolecules of natural original or based on natural origin macromolcules. Non Original Biologics defined as biologics which are neither original nor have followed a dedicated biosimilar approval pathway

Expect variations at the therapy area, country and molecule level

7

Filgrastim almost resembles small molecule generic performance in some countries

0%

10%

20%

30%

40%

50%

60%

70%

80%

ITA GER FRA SPA UK NE

% U

pta

ke,

DD

D

Biosimilar uptake across TA/Countries MAT 12/2013 (Volumes, DDD)

ALL Filgrastim Somatropin EPO

130 104 102 86 56 Values, M$

Source: IMS MIDAS, MAT 12/2013. To calculate uptake, reference and non reference products have been included. (*) size: MAT 09/2014; Netherlands: only retail panel available (Somatropin uptake not captured)

2.6

Infliximab, the first European anti-TNF biosimilar, has launched at up to a 39% list price discount

Expected biosimilar discount

Likely Access of Biosimilars (given value proposition and data is sufficient)

Payers KOLs

~30% 20-30% •  Local: Hospital purchasing of anti-TNFs will select the cheapest molecule (brand or biosimilar)

20-30% 10-25% •  National/regional: Reference group likely to be formed; G-BA may push

for biosimilar use by applying % target quota for new patients; additional rebate agreements are possible

~30% 5-30% •  National/regional/local: With a significant discount quick AIFA process

and regional tendering to push biosimilars as preferred drugs; potential for step therapy through biosimilar

20-40% ~25-50% •  Regional/local: There is expected to be pressure to recommend biosimilars and step therapy is likely

10-30% 25-30% •  Regional/local: There is expected to be no differentiation between the brand and the biosimilar so the cheapest product will be used

Celltrion is offering Infliximab at a 39% discount vs. remicade in Norway. This is above and beyond the average reductions we have seen in Europe so far and shows

biosimilars manufacturers’ willingness to take the European market by storm and boost uptake at the expense of margins

8

Recent most successful launches are mostly specialist and for focused patient populations

Achieving >$1.0bn with a launch in the 5 year period 2008 - FY2013

ü All launched into areas of high need: •  Diabetes •  Multiple Sclerosis •  Osteoporosis •  Venous Thrombosis •  Macular Degeneration •  Psoriasis/Crohn’s •  Prostate cancer •  Schizophrenia •  Hepatitis C

ü Specialty Products

dominate

Gilenya (Novartis) Launch Sept 2010

($1.934bn, FY2013)

Source: Company reported information. IMS Health Dec 2013, first word and IMS analysis. * Sovaldi included (launched in 2014)

Victoza (Novo Nordisk) Launch June 2009

($2.071bn, FY 2013)

Stelara (J&J) Launch Jan 2009

($1.504bn, FY 2013)

Eylea (Bayer/Regeneron) Launch Dec 2011

($1.851bn, FY 2013)

Prolia/Xgeva (Amgen/GSK) Launch May 2010

($1.763bn, FY 2013)

Xarelto (Bayer/J&J) Launch Sept 2008

($2.124 bn, FY 2013)

Zytiga (J&J) Launch May 2011

($1.698bn, FY 2013)

Invega Sustenna (J&J) Launch August 2009 ($1.248bn, FY 2013

Five are biologics

Incivek/Incivo (Vertex/J&J) Launch May 2011

($0.983bn, FY2013)

Sovaldi(Gilead) Launch Dec 2013

($2.27bn, Q1 2014*)

9

© 2014, IMS HEALTH INCORPORATED OR ITS AFFILIATES. ALL RIGHTS RESERVED

And specialty areas dominate the late stage pipeline, with Oncology leading

10

Source: IMS R&D Focus, Nov 2014

29

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150

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Vacc

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Pain

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Most Active Therapy Areas in the Pipeline (Phase III to Registered)

* Some programs in pipeline are multi-indicational and are assigned to multiple ATC classes

© 2014, IMS HEALTH INCORPORATED OR ITS AFFILIATES. ALL RIGHTS RESERVED

The FDA continues to be first to approve specialty medicines in common between the FDA and EMA

11

61 of these are specialty medicines

45 of these are primary care oriented medicines

54 have first approval by FDA

7 have first approval by EMA

25 have first approval by FDA

20 have first approval by EMA

There have been 106 new drug approvals in common between the FDA and EMA in the 2007-2013 period

That the FDA is first to approve does not mean the EMA is necessarily slower as this does not consider the filing date with the respective agencies and many pharmacos file at different time points with the FDA and EMA. But what it clearly means is that patients in the US are getting faster access to specialty medicines

Source: EMA Website, EU Commission website, FDA website. It includes molecules only visible on IMS Health MIDAS.

The shift to specialty medicines also changes drivers of profitability for other healthcare players

12

Specialty medicines

Traditional medicines

Past Evolution

Retail market Hospital market

Increasing Specialty investment

Payor action

Pharma Shift

Channel shift

Value Chain IMPACT

Product Polarization Retail Specialty distribution - Most volume is low cost GX packs -  Most of value is high cost packs

- Fewer dispensing points -  Fewer distributors

More stringent regulation of supply chain margins and discounts à Pressures could result in drug shortages

Moving dispensing to hospital enable Payors to leverage price negotiations à Hospitals are bearing higher costs

Market development is forcing manufacturers to look to new areas for growth/profitability. They are looking for a more efficient supply chain and ways to add

value via services

Pharma

- Pharmacies focusing on discounts while wholesalers consolidating, expanding, exiting certain countries, vertically integrating, investing in specialty distribution etc.

Pharmacy/Wholesalers

Companies seek to add value with bundles of products and services Wide range of approaches and players

Beyond the product

Product bundled to service

Patient co-pay support

Education and training

Delivery of medication/other

patient care

Product bundled to other products

Package of products for

single disease

Package of products for

multiple diseases

Rx only or mixed Rx/OTC

packages

Product bundled to service and

product

Combinations of product/service

packages

•  Product bundles occur as a function of therapeutic protocol in areas such as cancer

•  In other diseases such as diabetes, patients will use a variety of products and services to manage their disease

•  Bundles are often offered by distributors/healthcare providers/insurers

•  Product bundling has proven controversial in the past

13

But focused around a single product Examples of Value-Add Product plus service programs

Stelara

Remicade

Humira

14

Agenda

•  Shift to specialty medicine

− A changing landscape − Pipeline and approvals − Regulators and Payers − Bundling of products and services: adding value to patients

•  Innovation in speciality − Oncology: The largest therapy area for specialty medicine − Paying for innovation in specialty

15

Oncology spending growth in the total market reaches $100 billion by 2018

16

0

20

40

60

80

100

2008 2013 2018

US EU5 Japan Pharmerging ROW

$710 -730Bn

$220Bn

$48Bn

$65Bn

$85-115Bn

CAGR 2014-2018 7-10% CAGR 2009-2013 6%

Source: IMS Health Market Prognosis, September 2014; IMS Institute for Healthcare Informatics, October 2014

GLO

BAL

SPE

ND

ING

US$B

N

7% 14% 6%

5%

6%

7-10%

11-14%

7-10%

7-10%

7-10%

Oncology is the largest therapy area in developed, fourth largest in pharmerging

New transformational Oncology launches are seeing sales uptake match that of early blockbusters

17

0 1 2 3 4 5 6 7 8 9 10 11 120

50

100

150

200

250

300

Quarters Post-Launch

Glo

bal S

ales

(LC

US$

Mill

ion)

ZYTIGA

Source: IMS Health, MIDAS, MAT Jun 2014. Oncology (L1&L2&V3C&Revlimid&Xgeva&Proleukin&Pomalyst). Europe doesn’t include Russia and Turkey

Uptake of Selected Targeted Oncology Launches (launch year 2010 onward)

Zytiga had strongest uptake of any onco drug launched in last 4yrs

JEVTANA

PERJETA XGEVA

VOTRIENT

JAKAVI KADCYLA XTANDI

ZELBORAF

YERVOY

Zytiga is one of the strongest oncology

launches of all time: and has already turned over >

$1bn in Europe alone since launch

But what succeeds in oncology varies significantly between countries

18

US JP DE FR IT ES UK CA

1 AVASTIN AVASTIN ZYTIGA ZYTIGA SUTENT AVASTIN ZYTIGA ELOXATINE

2 ELOXATINE ELPLAT SUTENT AVASTIN AVASTIN TARCEVA YERVOY ZYTIGA

3 XGEVA ERBITUX YERVOY ERBITUX ERBITUX ERBITUX ZELBORAF YERVOY

4 ZYTIGA VECTIBIX NEXAVAR TARCEVA VIDAZA VIDAZA SUTENT SUTENT

5 YERVOY IRESSA AVASTIN SUTENT TARCEVA ZYTIGA VOTRIENT ELIGARD

6 PERJETA XGEVA TARCEVA ALIMTA ALIMTA SUTENT SPRYCEL AVASTIN

7 ERBITUX NEXAVAR XGEVA XGEVA NEXAVAR NEXAVAR JEVTANA XGEVA

8 TARCEVA VIDAZA ZELBORAF YERVOY VELCADE VELCADE TASIGNA TARCEVA

9 TREANDA TEMODAL M-CO ERBITUX NEXAVAR IRESSA ALIMTA VELCADE

10 ALIMTA AFINITOR VIDAZA SPRYCEL DEPO-ELIGARD

11 SUTENT VOTRIENT

12 ABRAXANE VIDAZA

Excellent oncology launches since Jun 2002 (Top 25 percentile value at Q8)

Source: IMS Health, MIDAS, MAT Mar 2014. Excellent launches based on top 25 percentile of any onco drug launched since June 2002.in that country. Note Xgeva is a supportive therapy (denosumab for hypercalcaemia of maliganancy). Osteoporosis sales have been excluded.

If market reward is a valid measure of consensus on value, Zytiga, Avastin, Yervoy and Sutent are valued across countries, but otherwise picture is highly variable – why?

Avastin rejected by NICE – why it does not appear in UK

Recent examples indicate payers are penalizing new products for lack of H2H data in Europe

19

France Germany

•  Insufficient SMR – not granted reimbursement

•  Re-assessment once active comparator data is available

•  No proven additional benefit given lack of data vs. ‘appropriate’ comparator in 80% patient sub-population

•  Entered negotiations for pricing reimbursement with sick funds

Not reimbursed Negotiations necessary

Companion diagnostics are expected to play a large role in future drug selection

20

Prognosis and chemo –therapy evaluation

Companion diagnostics

Early detection/ Screening

• Assays must have very low price to gain widespread use; unattractive for IVD developers so low investment area

• Controversies over PSA mean new tests will be treated with apprehension

• Precise dynamics unclear, however tests are too early in disease pathway to have significant immediate effects on drug treatment

• Launches in new tumour types (CRC & prostate) as well as increased competition for existing tests

• Though pipeline is busy, many developers lack size and financial requirements for effective product launch

• Lack of clarity surrounding regulatory environment of diagnostics may hinder any upcoming product launches

• Area of significant focus for major players in oncology with more new products having companion Dx

• Can increase physician willingness to use product

• Expensive targeted therapies will increasingly require companion Dx to demonstrate value

• Recent examples: ― Zelboraf - $9,400 per mo.

― Xalkori - $9,600 per mo.

1 2 3

Rationale Rationale Rationale

Low impact on drug spend

Small decrease in drug spend for specific tumour types

Will facilitate launch of expensive drugs

Sources: PWC Diagnostics report 2011, IMS Consulting Group

Agenda

•  Shift to specialty medicine

− A changing landscape − Pipeline and approvals − Regulators and Payers − Bundling of products and services: adding value to patients

•  Innovation in speciality − Oncology: The largest therapy area for specialty medicine − Paying for innovation in specialty

21

Market access challenges (and increasingly specialised launched)

22

75 85

5

6

7

60 70 80 35 90 0

1

2

3

4

8

5 15 25 45 55 65 40 50 0 10 20 30

Luxembourg Austria Belgium

Bulgaria

Croatia

Czech R.

Estonia

Finland Greece

Hungary

Ireland

Latvia Lithuania

Netherlands

Norway

Poland

Portugal Romania

Russia

Slovakia

Slovenia

Sweden

Switzerland

Turkey

France

Germany

Italy

Spain

UK EU Average 3.9%

EU Average n49

EU Average 2.9%

EU Average n46

NCEs

(20

09-1

3) M

arke

t Sha

re o

f To

tal R

x M

arke

t N

CEs

(20

04-0

8) M

arke

t Sha

re o

f To

tal R

x M

arke

t

Number of NCEs (2009-13)Launched Number of NCEs (2004-08)Launched

Countries with high # NCEs and low

penetration

Countries with low # NCEs and low penetration

Countries with low # NCEs and strong penetration

Countries with high # NCEs and strong penetration

Country Innovation profile (NCEs launched vs. Market Share achieved)

Other European EU5

Source: IMS Health, MIDAS, Year 2013, Rx only.

Europe

On average 2.4 fewer NCE’s approved in each European country

23

Very few countries have seen any growth in share/NCE – Netherlands is one of them

-0.09

-0.08

-0.07

-0.06

-0.05

-0.04

-0.03

-0.02

-0.01

0.00

0.01

0.02

0.03

0.04

10 8 6 -14 0 -2 -4 -6 -8 -10 2 -12 -26 12 4

Estonia

Czech R. Croatia

Belgium Austria

Bulgaria

Cha

nge

in S

hare

/NCE

Change in number of NCEs Launched

UK

Turkey Switzerland

Sweden

Spain

Slovenia Ireland Russia

Romania

Portugal

Poland

Norway Netherlands

Luxembourg

Slovakia

Latvia

Italy

Hungary Greece

Germany

France

Finland

Lithuania

EU5 Other European

EU Average n-2.4

EU Average -0.02%

Source: IMS Health, MIDAS, Year 2013, Rx only.

Payer willingness to fund often relies on proving value in treating remaining unaddressed symptoms

Payer perceived unmet need

Behavioural adjustment required?

Surgical/ other interventions

required?

Drug treatment required?

Cure disease?

Address progression/ mortality?

Relieve remaining

symptoms?

Severe remaining

symptoms?

Moderate remaining

symptoms? Mild remaining

symptoms?

> >

> >

Common field of play - success

most challenging for Pharma

Symptom level of unmet need

Type of unmet need

Pharma ability to revolutionize

treatment paradigm = high

probability of funding

24

Even in oncology Payers are demanding more

25

Source – Published payer assessments (CT reports, G-BA assessments, NICE guidance). From Unravelling payer perception in oncology• P&8 MA Forum June 2013

As specialty becomes a dominant cost driver, addressing payer concerns will be key

26

•  Comparative data strongly preferred: almost mandatory in Germany, France and the UK to support P&MA

•  HTA becoming one of the biggest influence of P&MA in Europe •  In USA priority reviews ease go to market challenges

Clinical Evidence

Pricing flexibility

Level of cooperation

Health Information Technology

•  Increase of “innovative” reimbursement systems e.g. Pay for performance. Risk sharing etc.

•  RWE to become more important than clinical trial data in determining sustained market access

•  More open data access policies spearheaded by Europe

•  Increasing cost controls throughout Europe •  In Pharmerging Markets, payers increasingly demand significant discounts for

therapies in areas of high unmet need, and threatening IP if negotiations unsuccessful

•  Price premiums are more and more based on added value vs. current price paid •  Free pricing and price increases to remain a feature of the US market, but

discounts/rebates increasing to ensure access

•  Increased number and type of stakeholders involved in the US with shift of budget risk to providers

•  Higher international cooperation and information gathering between payers •  Increase of international reference price systems

Source: IMS Consulting Group

As specialty dominates the future it also changes the healthcare paradigm

• Wide range of primary care products for a single healthcare stakeholder: the family doctor/general practitioner

•  Focus on the drug: genericisation seen as the primary route to cost savings

• Broad labels, open patient populations: products maximise value by being “good enough” for largest possible population

•  Specialty focuses on a narrower therapeutic set but a much broader group of stakeholders: multiple specialists, payers, providers, and patients

•  Focus on patient value add: more sophisticated cost benefit arguments, comparative trials, RWE and broader impact

• Narrow labels, highly defined patient populations: products maximise value by being best treatment for highly specific populations

27

Primary Past Specialty future

Thank you Sarah Rickwood Srickwood@uk.imshealth.com