pharmaceuticals australia report 2013

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AustraliaPharma reportFebruary 2013

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Focus Reports would like to thank the Hon. Mark Butler, Prof. Warwick Anderson,

Dr. Suzanne Hill, Dr. Brendan Shaw, Dr. Anna Lavelle, and Dr. Martin Cross for

their contributions, and to all the companies supporting the production of

this report.

5

This report was prepared by Focus ReportsProject Director: Mariuca Georgescu Project Coordinator: Martijn JimminkJournalist: Herbert Mosmuller Report Publisher: Diana Viola and Crystelle Coury

CopyrightAll rights reserved. No part of this publication maybe reproduced in any form or by any means, whether electronic, mechanical or otherwise including photocopying, recording or any information storage or retrieval system without prior written consent of Focus Reports.While every attempt is made to ensure the accuracy of the information contained in this report, neither Focus Reports nor the authors accept any liabilities for errors and omissions. Opinions expressed in this report are not necessarily those of the authors.

CONTENTS

INTERVIEWS

4 AKNOWLEDGEMENTS

8 A DOUBLE-EDGED SWORD NAMED PBS

11 PREVENTING BEATS CURING

12 AND THE KEY TO SUCCESS IS…

13 MULTI-ETHNICAL; CROSS-SECTORAL; GEORGE CLINICAL

13 PILOTING AUSTRALIA INTO THE ASIAN CENTURY

14 IT’S ALL ABOUT PHARMACY BABY!

15 THE DISAPPEARING DISCONNECT

18 DON’T FORGET ABOUT ALZHEIMER’S

22 INTERVIEW WITH: Brendan Shaw, Chief Executive - Medicines Australia

24 INTERVIEW WITH: Anna Lavelle, Chief Executive Officer, AusBiotech

26 INTERVIEW WITH: Dr. Suzanne Hill Chair,Pharmaceutical Benefits Advisory Committee

28 INTERVIEW WITH: Chris Hourigan Managing Director Janssen Australia and New Zealand

30 INTERVIEW WITH: Mark Fladrich, Managing Director, AstraZeneca Australia and New Zealand

32 INTERVIEW WITH: Prof. Vlado Perkovic Executive Director The George Institute Australia

RESEARCH AND DEVELOPMENT:The motor driving innovation and progress at Servier• Servier is a Foundation, with the sole aim of reinvesting all profi t from worldwide operations into R&D, in

particular with a focus on new fi rst-in-class chemical entities at the high-end of pharmaceutical innovation

• The company was founded by Dr Jacques Servier in 1954 has since grown to become the second largest

French based pharmaceutical company in the world with 20,000 employees and a presence in over

140 countries

• Servier employs over 200 staff in Australia including 30 in R&D. It is one of the top 10 Servier affi liates

in the world. Two and a half percent of Servier’s global turnover comes from Australia

Improving health outcomes in Australia through discovery and alliances• Research collaboration between Servier and Australian partners including Monash Institute of Pharmaceutical

Sciences (MIPS) and the Florey Institute aims to fi nd new innovative treatments to improve the health of

patients in the national health priority areas of Australia

• We have a commitment to improving Aboriginal health outcomes through support for projects that aim to

improve the management of diabetes and renal disease among indigenous groups in rural and remote Australia

• Servier has partnered with Lifeline to fund a 3 year research project which will, for the fi rst time, investigate

the profi le of continuing callers to Lifeline crisis services and consider the connection points between crisis

and professional health services

Servier Laboratories (Aust) Pty Ltd 8 Cato Street, Hawthorn Victoria 3122

www.servier.com.au

TA

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083

Research in partnership with

medical practice

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7Special SponSored Section

FeBrUarY 2013 FOCUS REPORTS S2

australia report

This sponsored supplement was produced by Focus Reports.

Project Director: Mariuca GeorgescuJournalist: Herbert MosmullerCoordinator: Martijn JimminkReport Publisher: Diana Viola and Crystelle Coury

For exclusive interviews and more info, please log onto or write to [email protected]

In some ways the Australian medicines industry is going through the same restructuring and challenges as the in-dustry is globally: the country is dealing with patent cliffs, companies are cutting back staff, an ageing popu-

lation forces the government to rethink healthcare expendi-tures, and big originator companies are reforming. And just like internationally, that is forcing the industry to rethink traditional ways of doing things. Only, the Australian phar-maceutical industry has been rethinking its role in such an innovative way that it is slowly floating from down under to the center of attention of the global industry.

A young female client of the Adult Mental Health Rehabilitation Unit at Sunshine Hospital, Victoria, Australia, Courtesy of Janssen-CilagAUSTRALIA:AUSTRALIA:

Where Value Beats Cost

8 Australia pharma report January 2013

australia reportSpecial SponSored Section

S3 FOCUS REPORTS FeBrUarY 2013

During a visit to Australia in Febru-ary 2012 Sir Andrew Witty, then still in his tenure as CEO of GlaxoSmithKline, quoted the Australian industry as an ex-ample of how the global industry should modernize itself and win back society’s belief in its readiness to change, “wheth-er that is through employment, contri-bution to savings, or delivery of remark-able medicines.”

And indeed the Australian pharma-ceutical industry is undergoing several remarkable developments. Its pharma-ceutical manufacturing industry, not too long ago having been seemingly doomed to disappear as rationalization reigned, is reinventing itself as a high value added manufacturing hub. With USD4.19 billion it is now Australia’s biggest exporting industry, before the car and wine industry, the country’s traditional export strongholds.

AstraZeneca, for instance, recently decided to invest USD80 million in its existing Australian production capa-bilities to provide the Chinese market with its asthma treatment medicine.

“For many lower value added manu-facturing processes decisions are made every day to move manufacturing to India as an alternative to producing in Europe or Australia,” AstraZeneca’s managing director Mark Fladrich said. “The opportunity for AstraZeneca here is that technology that is used to support our medicines is complicated,” he continued.

Furthermore, the notion of a discon-nect between the country’s research capabilities and big pharma’s research investments, oft-heard when Focus Re-ports first visited Australia in 2008, is quickly turning obsolete. While big pharma mainly tended to focus on le-veraging Australia’s clinical research ca-pabilities in the past, today the world’s innovative companies are roaming Australia’s research institutes and its Melbourne-based biotech industry to

find ammunition for their pipelines. In 2012, the combined worth of Austra-lia’s publicly listed biomedical compa-nies was actually higher on a per capita basis than is the case for such companies in the US, according to Mark Mether-ell, health correspondent of the Sydney Morning Herald.

“The pharmaceutical industry is high-skilled, high-wage, high-tech, ex-port- and innovation- oriented, low car-bon footprint industry,” said Dr. Bren-dan Shaw, Chief Executive of Medicines Australia, the association representing the discovery-driven pharmaceutical industry in Australia. “On top of that Australia has a fantastic base of medical research, public infrastructure, hospi-tals, universities that national and inter-national companies can plug into.”

These promising developments led Medicines Australia to unfold a high-ly ambitious agenda. The vision is to double the manufacturing output from AUD7 billion (USD7.34 billion) in 2012

to AUD14 billion (USD14.68 billion) over the next decade and to establish a number of highly specialised bio-man-ufacturing plants, to double exports from AUD4 billion (USD4.19 billion) to AUD8 billion (USD8.39 billion); and to double R&D investment from AUD1 billion (USD1.05 billion) to AUD2 bil-lion (USD2.1 billion), to create many more high-skilled jobs and increase the number of Australians accessing clinical trials to 30,000.

Some doubt, however, whether the nation is sufficiently aware of the value of this highly innovative industry to gen-erate the support needed to realize these plans. Making the importance of the in-dustry clear can be especially challeng-ing against the backdrop of a massive natural resource-driven economic boom that made Australian per capita GNP overtake the US’ in 2011 (USD49.130 for Australia and USD48.620 for the US) according to World Bank data. This led the International Monetary Fund in April 2012 to predict that Australia would be the best performing major ad-vanced economy in the world over the next two years.

“We need to keep our policy makers understanding that booms in minerals and coals come and go; we need to bal-ance that with industries built on brains, and the Australian medicines industry has shown that it can fulfill a balancing role,” said professor Warwick Ander-son, CEO of the National Health and Medical Research Council (NHMRC), Australia’s medical research-funding or-gan that is responsible for handing out AUD0.8 billion in subsidies in 2012.

Paradoxically, today’s biggest chal-lenge to Australia’s pharmaceutical industry indirectly comes from the na-tion’s rapidly ageing population. The Australian government is looking to contain soaring health expenditures through reform of its pharmaceutical reimbursement system.

AstraZeneca manufacturing plant in North Ryde, Australia

From left: Mark Fladrich, Managing Director, AstraZeneca; Dr. Brendan Shaw, Chief Executive, Medicines Australia

9

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A DOUBLE-EDGED SWORD NAMED PBSIn the case of Australia, the reforms of this reimbursement system, the Phar-maceutical Benefits Scheme (PBS), have been about control of the supply chain to combine a rise in generics share with a drop in its prices in order to create headspace for reimbursement of new innovative medicines. Whether the PBS reforms are reaching their goals is up for serious debate. Many industry players are asking whether the government can afford to use the efficiencies that it has gained from generics to increase spend-ing on new products.

One of the industry representatives that questions the reforms is Robert Hendriks, managing director of Gen-zyme. “Statistics of PBS approvals of innovative medicines show that a de-

creasing percentage of submissions are approved. The central question today is: should the focus be on cost containment to the extent we see today, or should the focus shift more towards assessing real health outcomes?”

Genzyme encounters a specific reim-bursement challenge with its rare disease portfolio, for which it has to apply to obtain reimbursement on the life-saving drug program. The life-saving drug pro-gram gives a set of criteria, one of which is showing substantial life-saving ben-efit. This is extremely difficult for prod-ucts that treat rare diseases: “we treat few patients, which makes it difficult to set up clinical trials, certainly when

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From left: Professor Warwick Anderson, CEO, NHMRC; Robert Hendriks, Managing Director, Genzyme



australia report

they are life-saving,” said Hendriks. “Is it ethical to have a double blind ran-domized placebo-controlled trial? You might consider that at the beginning of the development of your drug, but if you are further down the path and clinicians are convinced that your drug works, how are you going to set up a trial that would allow patients to shorten their life-span?”

Such hard-to-meet standards across Australia’s reimbursement programs could even put future investments of research-driven pharmaceutical compa-nies at risk, thinks Hendriks. “I sincere-ly hope that government understands the harm it does to Australia’s image as an attractive investment destination in the eyes of the global pharmaceutical industry,” Hendriks said.

Already, job losses of Medicines Aus-

tralia-members in 2012 number around 300 on a total of 14.000 employees, with five major companies affected: Sanofi, Pfizer, MSD Australia, Eli Lilly and GlaxoSmithKline. The redundan-cies are considered to be related in part to medicines coming off patent and in part to price cuts that resulted from the latest PBS reform.

“Whilst the stated aims of PBS re-forms related to efficient generics pricing and transparency to ensure cost-effec-tive pricing are well on the way to being realised, the structural reforms related to serving the future needs of patients with the introduction of new innovative medicines still leave much room for im-provement,” said Albert Spanos, general manager of Celgene Australia, “both from a pricing and timing perspective, which is definitely having a material im-pact on industry investment in Austra-lia, illustrated by the loss of 300 indus-try jobs in 2012.”

In a response to industry criticism, Dr. Suzanne Hill, chair of the Pharma-ceutical Benefits Advisory Committee (PBAC), the statutory committee that advises the Ministry of Health and Ageing as to what drugs will be listed

From left: Albert Spanos, General Manager, Celgene Australia; Dr. Suzanne Hill, Chair, Pharmaceutical Benefits Advisory Committee

The ageing of Australia’s population and the increasing burden of chronic disease jeopardize the sustainability of the country’s healthcare system at the current levels of expenditure. Government is thus looking at new ways to cut cost. “We see our govern-ment encouraging people to look after themselves, advising them to eat more healthy, reduce smoking and frequently exercise thus implement-ing preventative programs,” said Mal Eutick, CEO of Phebra, an Australian company involved in the development, manufacturing, marketing and distribu-tion of highly specialized and innovative medicines for the hospital market. “Ultimately, the government could penal-ize people who do not look after themselves.”

Furthermore, we see people becoming more interested in complementary medicines including vitamin and mineral products and the NHMRC providing a significant amount for rigorous scientific research in complementary medi-cines,” Eutick continued.

But taking a greater role in maintaining health is a big challenge for many. “Who has time for a balanced diet,

complete with organic fruits and vegetables?” asked Radek Sali, CEO of vitamin company and Australian suc-cess story Swisse.

Multivitamins help with the prevention of everything from cognitive decline through to PMS and heart disease according to Sali, and he therefore pleads for stronger commitments of both the vitamin industry and govern-ment to clinical research in order to bolster awareness of the crucial role of vitamins in preventing disease. “It is a responsibility for the natural health sector in general to increase the evidence base.”

Swisse has over twenty trials published, unique for a natural health company. Sali plans to spend one percent of total revenue on clinical trials, which comes down to a minimum of $20 million over the next five years according to the company’s revenue projections.

One of the hurdles that the vitamin industry faces is a modest commitment of government. Of the $800 million the government spent on medical research and clinical trials in 2011, $600,000 went to natural health, while the industry represents 14 percent of the total health market, according to Swisse’s data.

“I do feel that we need more government support in clinical trials,” said Sali. “We have only started this jour-ney and are still creating a structure with the right people to drive outcomes in this area, but there are positive signs coming from the government.”

Preventing Beats Curing

Radek Sali, CEO of Swisse




on the PBS, explained how the reforms are changing the demands to the indus-try. “It is going to be demanding of the industry, because they will have to put a lot of effort into clinical trials that actually show that their products are really better, and that difference in ef-ficacy or effectiveness can be translated

into a difference in price,” Dr. Hill said, adding that “The usual drug de-velopment by industry is incremental in its gains and development, and that is going to be a real challenge.”

Looking at the growth of expendi-ture through the PBS, about one percent in an economy growing 3.2 percent in

2011, the reforms already seem to have the intended effect. Nonetheless, the end is not in sight. “I suspect that the gov-ernment is going to look for a lot more savings before it allows more expendi-ture,” said Dr. Hill.

AND thE KEy tO SUccESS iS…In this environment—“one of the most demanding in the world when it comes to data, cost-effectiveness proof, etc.”, according Veronique Toully, managing director of UCB Australia and former vice-president in charge of pricing & reimbursement—a player’s competitive-ness is determined by several factors.

“The companies that have had loss of exclusivity issues, a concentrated port-folio, and do not have a strong pipeline are really struggling,” said Andy Jack-son, general manager IMS Australia and New Zealand. “Those three dynamics together all hitting in one go plus a rela-tively unfavorable economic environ-ment provide serious challenges.”

“Still, there are companies that are growing very well in this market, main-ly companies with a specialist portfolio or from generics,” according to Jackson. One example of a company that is doing well in the changing environment is No-vartis. Recently appointed country head and managing director Jason Smith is confident that he will be able to lead the company to the top of the commercial rankings on the back of Novartis’ re-search success and its pipeline.

Except for Toyota, no other company worldwide invests more money in R&D than Novartis. “This commitment to re-search allows us to focus more and more on unmet medical needs in the therapeu-tic areas in which we have experience and ensures the longevity of our robust pipeline,“ said Smith. “That means that as we bring newer products to market, they should be more likely to meet the bar for approval and reimbursement in a country like Australia.”

On top of that, Novartis is develop-

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From left: Veronique Toully, Managing Director, UCB Australia; Andy Jackson, Managing Director, IMS Australia; Jason Smith, Country Head & Managing Director, Novartis; George Varkanis, Vice President Asia Pacific, Celgene



australia report

ing products with companion diagnostics which are used in the clinical development process. According to Smith, this helps to personalise treatment, to identify those who respond well and those who do not respond well to treatment, which then means discovering better patient outcomes at the start.

PiLOtiNG AUStRALiA iNtO thE ASiAN cENtURyWhile one could argue that PBS reforms are limiting access to the newest innovations to the Australian pensioner after a hardworking, taxpaying life, PBS reforms are also forcing the industry to do something totally new rather than tweak existing products.

“Registration and reimbursement processes in Australia should be approached as a trigger for creativity, to come up with ways to successfully commercialize your drug,” said George Varkanis, vice-president Asia Pacifi c for Celgene. Aus-tralia was purposely meant to be a pioneer market for Celgene in Asia Pacifi c, a role that it has fulfi lled with verve. Australia was among the fi rst in Celgene’s global portfolio to success-fully launch key brands Revlimid and Vidaza.

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One of the frontrunners in connecting public and private is George Clinical (part of the George Institute for Global Health), which is successfully working with multiple stakeholders. “We run a number of trials that address pub-lic health priorities while provid-ing commercial opportunities for companies funded by industry and at the same time by the NHMRC,” said Marisa Petersen, George Clinical’s managing director. “Be-cause of the mutual benefi t and goals, it is possible to do hugely important research in a very ef-fective way.”

“A key priority for George Clinical is redesigning the clinical trials process and infl uencing regulatory process in this area,” added Prof. Vlado Perkovic, execu-tive director of the Institute. “The current process is creaking under its own weight. We need more modern, cheaper, and effective clinical trials that can identify treatments that work.”

With half the world’s popula-tion living in Asia and a growing expertise in clinical trials as well as an expanding middle class to market new medicines, that is where George Clinical focuses its activity. Recently George Clinical opened its offi ce in Beijing, its third in Asia after Hong Kong and India. “The growth of chronic disease and ‘western’ diseas-es is greatest in Asia, so this population needs to be part of trial plans,” explained Petersen.

Multi-Ethnical; Cross-Sectoral; George Clinical

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From top: Marisa Petersen, Managing Director George Clinical; Vlado Perkovic, Executive Director, The George Institute




Due to the dynamics of the government reforms, the Australian pharmacy has taken on a pivotal role as a platform for growth. As margins start to deplete the supply chain, both generics and innovator companies are looking at smarter ways of getting to the pharmacies. This has led Pfizer to breach the traditional Community Service Obligation-model of bypassing the wholesaler and going directly to pharmacy in collaboration with DHL in a landmark move.

Three visions on how to deal with the stake-holder that have been taking center stage in the shifting dynamics of Australia’s pharma industry.

Kos Sclavos, National President, Pharmacy GuildWe have seen a big change over the past three or four years in the interaction between pharmacy and manufac-turers. Big pharma have engaged heavily with the Guild. Four years ago, 99 percent of our relationships were with generics manufacturers, as in most countries, but every-one is realizing that pharmacies can play an important role and pharmaceutical companies have to maximize usage of

medicine while it is on patent. When I became president we dreamed that we would be working with AstraZeneca, Pfizer, Eli Lilly, etc.; now it is reality in Australia.

What would you earmark as the biggest chal-lenge in establishing stronger relations with the big pharma companies?It is hard for the Guild to deal with an industry sector where CEOs change frequently. Also, in many Asian countries pharmacists play a mar-ginal role, and we sometimes see players com-ing in who at first are not aware of the different role of pharmacies here in Australia.

Of course the Guild explains that this is not the case and the pharmacies have an indispensable place in the supply chain of medicines. In Australia, patients with chronic diseases often see the pharmacist five times over a six month period while seeing their doctor only once. The link with the individual family doctor is disappearing, which makes the pharmacists’ role more crucial.

It’s All About Pharmacy Baby!

Kos Sclavos, National President, Pharmacy Guild

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In a success story similar to that of Celgene, the Australia-affiliate of Bel-gian chemical company-gone-biotech UCB was the first in the Asia-Pacific re-gion to launch the company’s three new brands—Cimzia, Neupro, and Vimpat. “Australia is thus a pilot country in the region,” said Toully.

“Australia is much closer to Europe-an markets than to Asia-Pacific markets in terms of launching timelines and the overall way in which the industry oper-ates,” she continues. “At the same time, because we have this strong geographic link and also because the doctors here have very strong connections with Chi-nese, Japanese, and Korean doctors we are a close partner of UCB affiliates in Asia-Pacific and we can actually share a lot with them and support their launch-es,” she said.

thE DiSAPPEARiNG DiScONNEctWith South East Asia’s seemingly nev-er-ending boom expected to drive the numbers of the Asian middle class from around 500 million to 3.2 billion by 2030, figuring out how to optimally

continues…

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THE WHOlESAlER/BANNER GROUPStephen Roche, CEO and Managing Director, Australian Pharmaceutical Industries (API)

last April we saw the biggest round of price cuts, how has this impacted the API business?“There is no doubt that pharmacy in this country has un-dergone more change in the last 2.5 years than probably in its recorded history before that, and with the current reform process this is likely to continue for the foreseeable future. We, along with the rest of the constituents in the supply chain, are working to maintain both our presence and our profitability for our shareholders, as well as providing the best in market service & experience for our customers.”

looking at the distribution sector in the region, we see a very competitive situation, with a balancing act between a big three (API, Sigma, Symbion) aggressively targeting each other’s clients. How do you position API in the com-petitive landscape in the region to be the partner of choice

for the world’s leading pharma companies in Australia?“Among wholesalers, margins are so thin that everyone has effectively the same product and the same pricing. The gov-ernment’s Community Service Obligation (CSO) demands a level of efficiency and fundamental investment. I am of the view that there is absolutely no point of differentiation in

the supply chain. The CSO prescribes maximum price and minimum delivery, so in essence you are actually provid-ing a similar service that cannot be dif-ferentiated. This makes it fundamen-tally a relationship business, both with our customers and the leading pharma companies.”

Pfizer’s decision to engage in a clos-er integrative relationship with phar-macists was the signal that everyone needed to re-evaluate their model. The scenario for API is to continue to adapt and change over the next three to five

Stephen Roche, CEO, Australian Pharmaceutical Industries (API)

It’s All About Pharmacy Baby! continued

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australia report

capture the massive opportunities that come with it is one of the hot-test topics on Australia’s national agenda.

While bringing ample oppor-tunities, the explosion of Asia’s markets & middle classes also causes less favorable develop-ments, such as an inevitable de-scent of Australia down the global ladder of most sizable pharma-ceutical markets. “Australia still stands up very well against other

mature markets across the dynamics that IMS looks at, but the issue is that it does not stand up as well as it used to in terms of growth potential and market issues,” said Andy Jackson, general manager of IMS Australia. “The investment divide is already there: the pharmaceutical industry opts for China, India—the Pharmerging markets. The Australian market has grown 6-7 percent on a com-pound annual growth basis in re-cent years, while the forecast has dropped to 2-3 percent for the next five years.”

But, “Australia has a very strong R&D capability and is an amazing country for start-ups,” according to Dr. Martin Cross, chairman of

Dr. Martin Cross, Chairman, Generic Medicines industry Association (GMiA)

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years as big pharma– depending on their own molecular portfolio and their generic relationship—will change and adapt to whatever their new markets are. There is no doubt that, once the key molecules go post-patent, branded phar-ma companies face a very different go-to market strategy.”

API believes that it offers a very economic & viable ser-vice to pharmacy. Our view is that pharmacies actually want a single source of supply for their product, which provides real efficiencies to them which they need in this economic environment. API will continue to add value and the go-to-market strategy for brand pharma or generic suppliers as required.”

THE GENERICS PlAyERAzhar Mohammed, Managing Director, Dr. Reddy’s

How does a relatively new entry differentiate itself in a highly competitive Australian generics industry?It is about engaging pharmacy on a sustainable basis by providing value in these challenging times. In the older days the pharmacy would go with a manufacturer’s full portfolio without rigorous review of the individual product prices.

With the current price pressure the pharmacist is willing to take a detailed look at individual price offerings and switch to where he can maximize his value. To Dr. Reddy’s that means con-sistent engagement with the pharma-cists across a range of products and services to improve their profitability in these rather challenging times.

How do you see the relationship be-tween manufacturer and pharmacy change?

There is no denying that there has been an aggressive cut on generics pricing, and this has put pressure on the profit-ability of the pharmacies. It is in the interest of all—phar-maceutical companies, consumers and the governments that pharmacies operate in a sustainable environment. In order to meet this objective I am very clear that only com-panies that are vertically integrated and able to execute global economics of scale can sustainably partner with pharmacies; all others need to review their cost structures.

Azhar Mohammed, Managing Director, Dr. Reddy’s



australia report

capture the massive opportunities that come with it is one of the hot-test topics on Australia’s national agenda.

While bringing ample oppor-tunities, the explosion of Asia’s markets & middle classes also causes less favorable develop-ments, such as an inevitable de-scent of Australia down the global ladder of most sizable pharma-ceutical markets. “Australia still stands up very well against other

mature markets across the dynamics that IMS looks at, but the issue is that it does not stand up as well as it used to in terms of growth potential and market issues,” said Andy Jackson, general manager of IMS Australia. “The investment divide is already there: the pharmaceutical industry opts for China, India—the Pharmerging markets. The Australian market has grown 6-7 percent on a com-pound annual growth basis in re-cent years, while the forecast has dropped to 2-3 percent for the next five years.”

But, “Australia has a very strong R&D capability and is an amazing country for start-ups,” according to Dr. Martin Cross, chairman of

Dr. Martin Cross, Chairman, Generic Medicines industry Association (GMiA)

Chris Hourigan, Managing Director, Janssen-Cilag

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years as big pharma– depending on their own molecular portfolio and their generic relationship—will change and adapt to whatever their new markets are. There is no doubt that, once the key molecules go post-patent, branded phar-ma companies face a very different go-to market strategy.”

API believes that it offers a very economic & viable ser-vice to pharmacy. Our view is that pharmacies actually want a single source of supply for their product, which provides real efficiencies to them which they need in this economic environment. API will continue to add value and the go-to-market strategy for brand pharma or generic suppliers as required.”

THE GENERICS PlAyERAzhar Mohammed, Managing Director, Dr. Reddy’s

How does a relatively new entry differentiate itself in a highly competitive Australian generics industry?It is about engaging pharmacy on a sustainable basis by providing value in these challenging times. In the older days the pharmacy would go with a manufacturer’s full portfolio without rigorous review of the individual product prices.

With the current price pressure the pharmacist is willing to take a detailed look at individual price offerings and switch to where he can maximize his value. To Dr. Reddy’s that means con-sistent engagement with the pharma-cists across a range of products and services to improve their profitability in these rather challenging times.

How do you see the relationship be-tween manufacturer and pharmacy change?

There is no denying that there has been an aggressive cut on generics pricing, and this has put pressure on the profit-ability of the pharmacies. It is in the interest of all—phar-maceutical companies, consumers and the governments that pharmacies operate in a sustainable environment. In order to meet this objective I am very clear that only com-panies that are vertically integrated and able to execute global economics of scale can sustainably partner with pharmacies; all others need to review their cost structures.

Azhar Mohammed, Managing Director, Dr. Reddy’s




the Generic Medicines industry Associa-tion (GMiA). “It is a knowledge-based country, and under-recognized as a mat-ter of fact, and that is to the detriment of many companies that could come here and get really good leads.”

However, this notion of a disconnect seems to be disappearing. Pharmaceu-tical companies have been concluding many agreements with biotech industry and research institutes for their R&D, demonstrating a set of new relationships

that requires sophisticated partnering. “Indeed Australia is considered a high-potential R&D opportunity particularly in the biotech sector, and the secret is out. Many of the world’s top pharma-ceutical companies have caught on to

One of the world’s leading laborato-ries to optimally leverage Australia’s research capabilities is Servier, France’s second-largest pharmaceuti-cal company, for whom Australia is its seventh-biggest affiliate.

In 2012, Servier announced two significant collaborative partnerships for drug discovery and research. The company commenced collaboration with the Monash Institute of Pharma-ceutical Sciences (MIPS) on G Protein-Coupled Receptors (GPCRs), while also starting collaboration with the Florey Institute of Neuroscience and Mental Health on the Insulin-Regulat-ing Amino Peptidase program (IRAP).

“The Florey Institute is among the world’s top six brain research centres and the largest and most success-ful neuroscience and mental health institute in Australia,” said Servier Australia CEO Patrick Tete, who has been leading the Australia-operations for over eight years. “IRAP is a novel target which has been under preclini-cal validation as a target in Alzheim-er’s Disease. In addition to being a

cognitive enhancer, it is believed that IRAP inhibitors may also provide a mechanism for disease modification in Alzheimer’s Disease.”

Servier’s investments in Al-zheimer’s are all the more remark-able against a backdrop of a steady stream of headlines announcing drug companies abandoning research into treatments for dementia. With poor economic conditions in the US and Europe, many drug companies are cutting back on their research arm, and disproportionately so on research related to the central nervous system given the high-risk character of such investments.

According to Tete, Servier’s foun-dation structure allows it to pursue strategies that listed companies cannot. “We do not have to meet shareholders expectations; therefore we can focus on long-term strategies. Servier can focus on the longer term, and also on domains such as cardio-vascular and mental health at a time when the Pharma industry is basically turning its back on research for new anti-hypertensives, heart failure drugs or antidepressants.”

Servier’s investments in Alzheim-er’s come at a time when Australia’s first minister of mental health & ageing, the hon Mark Butler, warns that dementia is set to become Australia’s largest source of disability by 2016. “We need to get everyone in the health sector rowing in the same direction: we need the entire pharma-ceutical industry behind it, we need traditional biomedical researchers be-

hind it, we need the age care sector, GPs and so on collaborating on the matter,” Butler told Focus Reports. ”To do that we need to recognise that the healthcare sector currently oper-ates in silos—the hospital system, GP system, pharmaceutical indus-try—and breaking down those silos is a key challenge.”

An example of such broader stake-holder cooperation to alleviate the burden of mental health is Lifeline, a leading provider of crisis support, mental health and suicide prevention services. The organization recently found its first corporate contributor in Servier for its Foundation for Suicide Prevention. Through the Foundation Servier funds a three-year research project that investigates improved pathways for people with complex needs, many of whom have mental illnesses or are suicidal, and who are in contact with Lifeline crisis sup-port services. Through this research, Lifeline will find better ways to assist these individuals with accessing continuing professional care—and will create better partnerships between crisis services and clinical services.

Don’t Forget About Alzheimer’s

From left: The Hon Mark Butler MP, Australia’s first Minister of Mental Health & Ageing; Patrick Tete, CEO, Servier

G Protein-coupled receptors (GPCR; as depicted) are the focus of the MIPS-Servier drug discovery partnership

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Craig Rogers, CEO, Nucleus Network



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“The quality and the abil-ity to do work that other countries cannot do are key,” explained Jason Smith the choice of his company Novar-tis to invest close to USD40 million in R&D in Australia annually. While part of the money is in-vested in over 100 clinical trials, Novar-tis’ research commitment to Australia is no longer limited to the clinical side.

The Swiss drug maker recently an-nounced collaboration with the Brain & Mind Research Institute, one of Aus-

tralia’s leading neuroscience centres. Through this cooper-ation, Novartis is supporting the first multi-country analy-sis of MRI work in its kind in the Southern Hemisphere within the company. Australia is the third country within the group after the US and Swit-zerland to have this capability.

While discovery-focused re-search is becoming increasingly popular, the last few years have been tough for the clinical research sector. “The last three or four years have been tough, the financial crisis has had an impact on the work com-ing through both from small biotechs into Australia and the overall availability of

money to overseas biotechs,” said Craig Rogers, CEO of Nucleus Network, one of Australia’s leading early-phase clinical research businesses. “Also from the big pharma perspective the high Australian dollar has made us less competitive.”

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22 Brendan Shaw, Chief Executive - Medicines Australia

INTERVIEW WITH:

Brendan Shaw, Chief Executive - Medicines Australia

Focus Reports: When we met you in 2008 your vision for the future of the pharmaceutical industry in Australia was ‘for existing manu-facturers to reinvest in new plants and bring more work here, to utilize the strong Austra-lian skill base and competitive advantages, and to grow more indigenous Australian com-panies.’ Do the achievements of the industry over the past five years match your vision of 2008?BRENDAN SHAW: In the past 12 to 18 months we have seen several positive developments. AstraZeneca had decided to close its plant in Sydney, but reversed this decision and decided not only to keep it open, but to actually expand it. GSK decided to invest in its Melbourne plant rather than invest in a new plant in India. The global CEO of GSK, Andrew Witty, said during his visit to Aus-tralia earlier this year that the reason for GSK to invest in Australia was the belief that factors such as quality, research, and “Just In Time” manufacturing are more important today than cheap labor.

On top of the investments of AstraZeneca and GSK we see CSL, an Australian success story is investing A$ 235 million in its biotech manufacturing facility in Melbourne.

Furthermore a number of Australian start-up biotech companies are reaching the commercial stage. One of them is Pharmaxis, which recently had its first drug recom-mended for the Pharmaceutical Benefits Scheme. Others are Mesoblast and Star-pharma.

FR: To what extent do you still see the narrow manufacturing base and manufacturing ratio-nalization as a threat for the future of Austra-lia’s pharma manufacturers? BRENDAN SHAW: They still pose challenges. Another challenge is the high exchange rate of the Australian dollar, although the good news is that to date the pharmaceutical manufacturing plants have managed to stay competitive in spite of the high exchange rate. This most probably has to do with the high-value, high-technology nature of the pharmaceutical products that Australia exports, as for these products the factor cost of production is less impactful.

The high exchange rate is causing some restructuring in the Australian manufactur-ing industry and leads some industries to decline, and the government is looking at other industries that can take on a leading role. The pharmaceutical industry is high-skilled, high-wage, high-tech, export- and innovation- oriented, low carbon footprint industry. On top of that Australia has a fan-tastic base of medical research, public infra-structure, hospitals, universities that national and international companies can plug into.

Another interesting opportunity stems from one of the things that we have not done well in Australia historically, which is to link universities with industry. There are comple-mentary interests here: the pharmaceutical industry globally is looking for more oppor-tunities to find pipeline products at biotech companies and universities, while the Aus-tralian government wants to integrate the

Brendan Shaw, CHIEF EXECUTIVE, MEDICINES AUSTRALIA

23

Australian research sector with business. We need to get on each other’s radar screens though.

FR: How successful have you been in reaching this over the past years?BRENDAN SHAW: AstraZeneca, GSK, CSL, and Leo Pharma have ventured into biotech. Some of the indigenous companies such as Pharmaxis are on the verge of becoming commercial pharmaceutical companies. The challenge for Australia is to continue the momentum and capitalize on it.

So Medicines Australia is keen to see the government take the next step in building a strategy around this. We have seen several good initiatives over the years, such as the R&D Tax Credit, which makes R&D about ten percent cheaper and significantly boosts the attractiveness of Australia as an R&D desti-nation.

FR: To what extent can your member compa-nies accept further price reductions in order to keep the PBS sustainable? BRENDAN SHAW: In 2010 Medicines Australia signed a Memorandum of Understanding (MoU) with the government on how the PBS should be run in terms of pricing policy, the first agreement of its kind between the industry and the government. The MoU runs until 2014 and contains a range of ini-tiatives such as price cuts in the F2 multiple brand market, process improvements in listing new medicines, and guarantees of government on which policy changes they will not implement before the MoU ends. The MoU provides the industry with a level of policy predictability. It is not perfect, but the agreement has given the industry a four-year window in which it can more or less know what will happen.

April 2012 indeed saw a major round of

PBS price cuts. Dozens of medicines were cut in price by up to 75 percent, and more such price cuts will follow as agreed in the MoU. The reason that Medicines Australia could negotiate this agreement is that our members account for a significant percentage of the off-patent market; originator companies histor-ically have significant business in the off-pat-ent market in Australia. So the price cuts have affected our members quite badly, but it is part of the philosophy of the industry: while a medicine is on-patent a rigorous health technology assessment system regulates the price, but once the medicine goes off-patent, the price is set through market competition. Our philosophy has been to indeed let free competition reign and have the tax-payer benefit.

FR: What is your vision for the Australian pharmaceutical industry in the next five years?BRENDAN SHAW: When talking about the future of medicines and pharmaceuticals, Australia is the undiscovered country. Over the past years the industry has produced a range of remarkable successes, and I would urge pharmaceutical executives around the world to have a good, hard look at Australia. Often Australia would be towards the bot-tom of the pile of a range of Asia-Pacific investment proposals in a company. Com-panies would focus all their attention on China or India. But when looking for oppor-tunities in hi-tech, high-value manufactur-ing, Australia is positioning itself more and more as a viable choice in the region. GSK is a good example with their choice for Aus-tralia over India as the location for their manufacturing facilities. The more the com-panies are awake to the opportunities, the better the companies and Australia will be served.

24 Interview with: Anna Lavelle, Chief Executive Officer, AusBiotech

INTERVIEW WITH:

Anna Lavelle, Chief Executive Officer – AusBiotech

Focus Reports: What have been the focus areas for the association in improving the wellbeing of the life science biotech industry and what have been the key milestones/achievements since 2008?ANNA LAVELLE: In addition to the financial cri-sis the government decided to decrease its 2008 budget in which they axed programmes designed for innovative companies-in par-ticular life science companies in the biotech area. These two events coinciding has been a double jeopardy for the life science biotech industry. Inevitably the industry received a big hit with the result that numerous com-panies have not survived.

Due to successful C-level decision making by the leading pharmaceutical companies the industry has managed to march on despite money scarcity and the sober environment. Notable has been that they have not lost their desire to continue their search to access cap-ital subsequently refocusing and restructur-ing their companies extremely well.

Looking back from 2008 until now, the small cap biotech life science companies have outperformed all the ordinaries in the Nas-daq Composite index and the ISEX 300. In other words, the small cap biotech life science companies have proven to be highly invest-able-many sophisticated investors have made money. This can’t be said about many other industries.

FR: What has been the key success factor for the biotech industry being able to consistently outperform the size of the economy?ANNA LAVELLE: Australian biotechnology and

life science companies are capital efficient. Australians are used to doing a lot with very little. Moreover, companies tend to be flat with little hierarchy and are reasonably priced-good value for money.

Due to high level of technology, manage-ment and driven scientists, Australia is well positioned on a global level.

Incentives that attract investors to Aus-tralia are our regulatory framework, a good health system and skilled clinicians who have created an attractive environment to conduct clinical trials. In addition to this, Australia punches above its weight if we set off popula-tion versus number of top researchers. This country seems to be fertile ground for medi-cal research having a highly reputable medical research community.

FR: Could you shed a light on what AusBiotech has been doing recently to pave the way for the Australian biotech industry to further build its success?ANNA LAVELLE: In 2007 listed companies have raised almost a billion Australian Dol-lars in secondary capital.

During the financial crisis we realized that our best contribution would be helping our member companies to access capital. Having said this, at a 2009 conference we organized the first in a series of of investment plat-forms. We showcased 40 private companies - 20 late stage and 20 early stage - to invited international investors. Around 100 inves-tors, including bankers, stock brokers and other investors participated to that particular conference. We have built on this and today

Anna Lavelle, CHIEF EXECUTIVE OFFICER, AUSBIOTECH

25

we have an international series of investment meetings taking Australian companies over-sees and putting them in front of potential investors who may not be aware of Australian technology. This has proven to be extremely successful, generating significant new invest-ments and interest in our technology.

From a public policy perspective, we have been involved in negotiations regarding changes in the federal tax laws, which were implemented 12 months ago. Since these changes started to apply companies announced that they are getting significant money reimbursed due to R&D tax incentives. Companies with less than $20 million turno-ver get 45 cents cash back for every dollar they invest in R&D and companies with turn-over above $20 million get a 40% offset. This is a 45% discount on their expenditure that companies get back as a cheque in cash from the tax office or a 40% tax credit. This guar-antees that investors receive a 40 - 45 % uplift straight away and it encourages R&D.

FR: How confident are you today about the gov-ernment’s commitment to foster the right environment for the biotechnology sector? ANNA LAVELLE: I believe that the federal as well as the state government wants to see innovation. Speaking to the public the gov-ernment often mentions its desire for a smart country and their support for inno-vation.

AusBiotech conducts a survey among CEOs every year in order to track what their ideas are about the environment. Last year we found the CEOs optimistic, speaking about hiring additional staff, capital raisings, growth and other positive aspects. They were less positive about the business environment meaning: tax, the regulatory framework, red tape and processes.

What is your vision for the Australian biotech-nology industry?ANNA LAVELLE: We need more success stories such as Pharmaxis, a company that is involved in the research, development and commercialisation of new therapies for undertreated respiratory diseases and has grown to become among Australia’s largest life sciences companies.

The environment will always be heteroge-neous because it depends on what the product is. Does it have a domestic or international focus and are there partnerships involved? It is a bespoke area where it is hard to make standard rules or expectations. We have seen that companies search creative ways in order to finance their operation, looking for inno-vative financing and partner arrangements or start-up a commercial operation that finances the program rather than having to go out raising money through investors.

I strongly believe that to enable innova-tion, pressure is required. If there is no pres-sure there is no drive nor trigger to innovate. Over the last few years, scarce capital has pushed people to find creative solutions to finance their companies.

Pharmaxis has been a great example as a first indigenous company that has made its way from discovery right through commer-cialization process. I’d like to see more com-panies PBS-listed and getting their products out to the community.

While five years ago people merely focused on phase III developments, today we see increasing interest from pharmaceutical com-panies in phase I and pre-clinical studies. Moreover, pharmaceutical companies have been concluding agreements with the biotech industry to their R&D, not taking up the responsibility of developing themselves. This demonstrates a set of new relationships that requires sophisticated partnering.

26 Interview with: Dr. Suzanne Hill ChairPharmaceutical Benefits Advisory Committee

IntervIew wIth:

Dr. Suzanne Hill, Chair – Pharmaceutical Benefits Advisory Committee

Focus Reports: What is your response to PBS reform criticisms at the apparent conflict between the government’s desire to reward innovation, while sharply reducing the rev-enues that would otherwise be used to fund such innovation?DR. SuzAnne Hill: The question is: what are you paying for, and how much control do you have over the pharmaceutical sec-tor? When I left in 2005, Australia was paying lower prices for innovative prod-ucts than its OECD comparators, but rel-atively high prices for generics. If you want to encourage new products, then generics prices may have to drop to allow head room for investment.

The PBS reforms introduced in 2007 have been about control of the supply chain to encourage a drop in generics prices, and that created financial space. The challenge then is whether the government will be able to afford to use the efficiencies that it has gained from generics to actually spend it on new products. The PBAC is required under the National Health Act to assess comparative effectiveness, safety and cost. We are also required not to recommend a product that is more expensive than some-thing we already have, unless we are con-vinced that it is better. It is going to be demanding of the industry, because they will have to put a lot of effort into clinical trials that actually show that their prod-ucts are really better, and that difference

in efficacy or effectiveness can be trans-lated into a difference in price. The usual drug development by industry is incremen-tal in its gains and development, and that is going to be a real challenge. I suspect that the government is going to look for a lot more savings before it allows more expenditure.

Any system needs to be clear about what its overall gains are, and what the aims for healthcare are. If we know that we have three or four different generic molecules and that by allowing competition in the market we can actually allow improved health outcomes at a lower price, then it is irresponsible not to go that way. We need to ask ourselves whether our system is allowing competition appropriately, or whether we have perverse incentives in the system that distort competition and may mean that we do not get best value for money.

At the moment, because Australia has been unpacking its control on generics pricing over the last three years, a lot of things are still in transition, and I believe that there are probably some perverse incentives in the system that are inflating prices inappropriately or are holding up newer versus older generics in the market. Those will gradually be resolved and things will even out. In the end, from the health perspective, we are about health outcomes.

Dr. Suzanne Hill Chair PharmaCeutiCal Benefits advisory Committee

27

FR: Some of our interviewees have mentioned that, although there are mechanisms in place to speed up the approval of new products, the approval time is still quite long and the pre-dictability of getting products listed on the PBS is decreasing. Would you agree and how is the PBAC working to improve this? DR. SUZANNE HILL: There are three parts to the process. First of all the PBAC has to approve. If the PBAC does not approve, the product wil l not be listed; if PBAC approves, the product might be listed. That is what companies are complaining about: that it has gone from a definite approval if the PBAC said yes, which meant they only had one hurdle, to a ‘maybe’ after the PBAC approved. Nothing has actually changed other than that the government is exercising its prerogative under the National Health Act, which has always been there and has been exercised in the past, so it is about remembering his-tory a little bit.

There are three parts to it though - there is the PBAC recommendation, there is the pricing negotiation, and then there is approval on the political level. These three parts have always been there. If a company is feeling that things have come less predictable, it could be because the pricing discussions that they are having are much tougher, which in the environment after the global financial crisis is to be expected as well as , in an environment in which the pricing system with the supply chain control is chang-ing. That would be the first hurdle.

Then if the government is fiscally responsi-ble and is worried about its budget, it naturally sets higher demands. Companies are seeing the downstream effects of that as uncertainty, and are seeing basically what other countries are seeing as well in the global financial crisis. It is just the reality of the changing environment that we are working in.

You have been in charge of the organization now for 1 year. What is your vision for the PBS and the PBAC for the remainder of your ten-ure?DR. SUZANNE HILL: The appointment is for four years. The PBAC has to make sure that its advice is relevant and as accurate as pos-sible. The committee is doing that pretty well and we have to continue to do that. We have to be responsive to both community expectations for access because that is our role in the national medicines policy, as well as to industry expectations for access for business purposes. We have to sit on the fence at times and make sure that both views actually get transferred into that advice.

We have to remain independent because the strength is having an independent advi-sory committee that people can turn to for a balanced view, without being prejudiced by either side of the spectrum.

Remaining independent is key, as well as being clear and transparent. We need to maintain what my predecessor Lloyd Sansom has managed to do so well over the last dec-ade and develop it to suit the needs of the various stakeholders.

“We need to ask ourselves whether our system is allowing competition appropriately, or whether we have perverse incentives in the system that distort competition and may mean that we do not get best value for money.”

28 Interview with: Chris Hourigan Managing DirectorJanssen Australia and New Zealand

INTERVIEW WITH:

Chris Hourigan, Managing Director –Janssen Australia and New Zealand

Focus Reports: To what extent has Janssen Aus-tralia been able to meet increased demands for more acceptable and additional evidence that supports reimbursement as criteria for listing on the Pharmaceutical Benefits Scheme grow increasingly stringent?CHRIS HOURIGAN: The fact that we are the fast-est growing pharmaceutical MNC in Austra-lia is a great testimony of our success. We have also been relatively successful over time with achieving PBS reimbursement.

Nonetheless, we would like to see more attention for real world data. Clinical trials are of course crucial but they do not always give the right picture; actually there have been examples where a clinical trial will give one effect, while in the real world we see a different effect.

Janssen has a long-acting injectable for treating schizophrenia, a product that offers one single injection per month, after which the patients can get on with their lives. The other options available to the patients are either fortnightly injections or an oral tablet that must be taken at least once per day, 365 days per year.

The oral treatment option may be associ-ated with a greater adherence risk compared to the injection. In a clinical study chances are that the person will take his tablets every day, while in the real world the oral medication does not hold on.

The bottom line is that we need to do more about data generation, but we would like to see a change in the guidelines to facilitate real world data collection.

FR: With Minister of Mental Health & Ageing Mark Butler we discussed how pressing mental health issues are in Australia. Janssen tradi-tionally has a strong mental health portfolio - how important is the presence of Janssen in for the Australian population?CHRIS HOURIGAN: Globally a lot of companies are pulling out of mental health. Nonethe-less, mental illnesses are still top of the table of the global burden of diseases. Neurosci-ence is one of the last areas where research-ers worldwide are working hard to reach the same levels of understanding as in cardio-vascular or oncology when it comes to under-standing the science behind the disease.

Although we realize that there are big chal-lenges in identifying innovative discoveries in neuroscience, we have a long-term commit-ment that is also based on the fact that our founder Paul Janssen is one of history’s great-est CNS researchers. That legacy gets carried on in the company.

FR: How would you explain the disconnect between Australia’s research capabilities and the attention it gets in executive rooms of the global pharmaceutical industry?CHRIS HOURIGAN: Janssen does not see the dis-connect as much as others in the industry. We actually see Australia and New Zealand as a real opportunity from a business per-spective but also from an innovation and R&D perspective.

We fly in the key therapeutic areas leads from the US and Europe to Australia on an annual basis and review the research that is happening in this country. Australia and New

Chris Hourigan, MANAGING DIRECTOR JANSSEN AUSTRALIA AND NEW ZEALAND

29

Zealand are high-potential R&D opportuni-ties, particularly in the biotech sector, and the secret is out: many of the world’s top pharma-ceutical companies have caught on to the fact that Australia offers a lot of pipeline potential.

In the last two years we have signed seven local R&D deals. One of them is with Uni-Quest, the University of Queensland’s main research commercialisation company. This is a strategic research collaboration agreement to develop a promising treatment for a devas-tating immunological disease that affects mil-lions of people around the world. Dr. Paul Stof-fels, our worldwide Chairman with responsibility for research and development actually came to Australia to visit the program.

Gone are the days where everything was done in silos. We have several programs and agreements for open innovation with external stakeholders under which we share IP and try and find solutions. Everyone acknowledges that the burden of disease cannot be lessened by one company or individual but it has to be about people working together. Johnson & Johnson is committed to that.

The model is no longer just about pharma-ceutical interventions; governments are after finding a total, life-improving solution for a therapeutic area that cannot be offered by the individual components. Johnson & Johnson’s three key divisions are able to offer something to wrap around all of that and give that kind of outcome.

FR: You recently started your tenure. If we come back four years from now for the next edition of our report, where will you have taken Jans-sen in Australia?CHRIS HOURIGAN: I wish to continue to develop our people like Janssen Australia has done before. Historically, Janssen Australia is a key driver of talent development for the group in Asia-Pacific. We are very proud of

our record in exporting talent. This does not only involve talent that we have identified here but also bringing people in from other parts of the Asia-Pacific region and give them a chance to experience our way of working. Being a good employer is of great impor-tance, and Janssen has already won the Hewitt 2012 Employer of the Year Award. I truly believe that people are the key differ-entiating factor in our industry, perhaps of even greater importance than the products we deliver.

Secondly a lot needs to be done in the Aus-tralian context about how we work as an indus-try group and partner with the government on continuing to evolve the system, improve access and the timeliness of access. I am hope-ful that in four years’ time we will have worked through some of the challenges and that the Australian system has continued to evolve. We should aim to be a global benchmark for indus-try-government cooperation. Hopefully the government has a similar view; it is what we need to do if we want to create a viable indus-try in this country.

Thirdly we strive to be the world leader in every single therapeutic area for Janssen. We are number two or three in many different markets in terms of our market share, and we aim to be number one in four years’ time!

“ Although we realize that there are big challenges in identifying innovative discoveries in neuroscience, we have a long-term commitment that is also based on the fact that our founder Paul Janssen is one of history’s greatest CNS researchers. That legacy gets carried on in the company.”

30 Interview with: Mark Fladrich, Managing Director, AstraZeneca Australia and New Zealand

INTERVIEW WITH:

Mark Fladrich, Managing Director – AstraZeneca Australia and New Zealand

Focus Reports: You returned to Australia a year ago after spending eight years in Europe. What have been the key changes in the Aus-tralian market between the moment you left and your return?MARK FLADRICH: Looking at the overall mar-ket, the biggest changes have been the var-ious reforms to the Pharmaceutical Bene-fits Scheme (PBS). PBS reform started back in 2004 and culminated with the signing of the Memorandum of Understanding (MoU) between Medicines Australia repre-senting the Industry and the government.

Through these reforms, significant sav-ings have been delivered by the industry to government who have clearly stated that PBS spending must grow only at a controllable rate. The MoU has actually delivered A$2.5 billion in savings, which is significantly above the government’s own estimates, which in return was supposed to deliver a stable and predictable reimbursement pro-cess with room for new medicines to enter the Australian Market.PBS reform intro-duced the process of price disclosure which was designed to deliver savings resulting from generic entry of off-patent medicines because the country’s generics prices were relatively high. Price disclosure was designed to bring prices down and reduce the cost bur-den on the PBS.

The government has chosen various mechanisms beyond PBS reform designed to slow PBS growth further such as deferrals and cost-effectiveness reviews. The bar for achieving reimbursement of medicines is

arguably at an all time high, resulting in a reduction of new medicines of the PBS for all medicines.

Industry’s greatest disappointment is that the predictability and stability that we require has not been delivered and the PBS itself has become increasingly politicised in the quest for savings and a balanced federal budget, which in my view does not achieve the best health outcomes for the Australian public.

FR: Is the regulatory environment a threat to the industry? MARK FLADRICH: The PBS price cuts are hav-ing an impact on the innovative industry, and AstraZeneca is no exception. Not only do we deliver savings to government, but we’re a leading export Industry to Asia. Yet the government’s lack of a plan for the sec-tor threatens our collective success, jobs and our reputation as an outstanding coun-try for access to medicines.

The unpredictability of the reinbursement process is a real hinderance. However, Astra-Zeneca has been one of the few companies in the past 12 months to have successfully achieved a PBS listing, for our drug Brilinta, probably the most important asset that AstraZeneca has globally. Brilinta is a good example of providing the kind of evidence that is needed to secure good pricing and market access. We have a very good clinical study which showed a CV mortality benefit, which was key to achieving reimbursement.

But, let’s face it, not all medicines deliver

Mark Fladrich, MANAGING DIRECTOR, ASTRAZENECA AUSTRALIA AND NEW ZEALAND

31

that kind of innovation. That is the dilemma that the industry is facing: the benchmark for innovation continues to increase and obviously the cost of research and develop-ment is not decreasing. This balance between bringing incremental innovation versus breakthrough innovation is our biggest chal-lenge as an industry and at AstraZeneca.

The challenge is generating acceptable evi-dence that will support reimbursement, at least in markets where governments effec-tively pay for medicine.. AstraZeneca recog-nized several years ago that we need to pro-vide extra evidence for payers, beyond what we need to provide to get a product regis-tered. AstraZeneca is building this into our phase III program. Of course, given that it takes quite a long time to flow through, we will only see this deliver over time - , although Brilinta is an early example of this being put into action. We recognize that payers need additional evidence, and if we ignore their needs we will not get good pricing and access.

FR: And looking at the organisation that you now lead, what have been the key changes?MARK FLADRICH: AstraZeneca has effectively doubled its size since 2003 in terms of sales on the back of our outstanding portfolio of medicines. . With a market share of ten per-cent, we are one of the highest performing subsidiaries for AstraZeneca globally. This ten percent ranks Australia in the top half of the top ten countries within the com-pany, ahead of Germany, the UK, and Spain in terms of contribution to global revenue, which helps us to punch above our weight globally.

How would you outline the present and future role of Australia within AstraZeneca?

We believe in the next five years we will stay in the top five global markets for Astra-Zeneca globally, we also we have a privileged

position owing to our center of excellence for manufacturing based on blow fill seal tech-nology. This technology is about injecting sterile solutions blown into plastic type vials that are then presented as sterile products either for injection or inhalation.

It is high-end manufacturing which needs to be done in a sterile environment and for which highly trained operators are needed. For twenty years AstraZeneca has built the capability and productivity of the facility, and today we are the sole supplier to the Chi-nese market for our asthma treatment med-icine. The Chinese market for this medicine is projected to grow from 50 million units to 250 million units in the next decade, thus presenting tremendous opportunities for AstraZeneca Australia.

FR: Why has the choice been made to continue production from Australia rather than to invest in facilities in cheaper competitors such as India?MARK FLADRICH: For lower value-added man-ufacturing processes decisions are made every day to move manufacturing to India as an alternative to producing in Europe or Australia. The opportunity for AstraZeneca here is that technology that is used to sup-port our medicines is complicated. To start up as a green field operation with all the required validation and then get all the machinery functioning and produce prod-ucts that need to be sterile was not a viable alternative to the great manufacturing environment that Australia offered. Astra-Zeneca chose to build on the capability and the very high level of productivity of the Australian site.

32 Interview with: Prof. Vlado Perkovic Executive Director The George Institute Australia

INTERVIEW WITH:

Prof. Vlado Perkovic, Executive Director – The George Institute Australia

Focus Reports: You have recently been appointed at the head of the Institute. What are the changes that you are looking to imple-ment in an already highly successful organi-zation?PROF. VLADO PERKOVIC: The Institute has been incredibly successful since its foundation in 1999, and there are a range of world lead-ing experts doing great research.

Looking ahead, a key priority is redesign-ing the clinical trials process and influencing regulatory process in this area. The current process is creaking under its own weight. We need more modern, cheaper, and effective clinical trials that can identify treatments that work.

In the delivery of healthcare we need to concentrate on understanding how to increase global access to products and treat-ments that work. Most people around the world do not have access to the simple proven effective treatments that we take for granted like Aspirin and agents that lower cholesterol or blood pressure. The Institute’s priority is to find solutions to this.

We are also focusing our work on the broader determinants of health. Healthcare is a much broader issue than treating an ill-ness in hospital, and improving health is more than the pills a person is taking; it is also about their diet and the kind of exercise that they do.

An example is the Institute’s work around salt reduction as a way to prevent chronic dis-ease like heart disease and stroke, and reduce the global burden of disease.

FR: What are the biggest flaws in the way clin-ical trials are conducted today?PROF. VLADO PERKOVIC: We have a long his-tory of delivering high-quality, rigorously conducted and high impact trials at much lower cost than those conducted through pharmaceutical companies or other CROs.

It is about intelligent design, intelligent consideration of the factors that are crucial in clinical trials (in terms of determining their reliability and ensuring that partici-pants are protected). It is also about getting rid of a lot of the additional activities that are routine in clinical trials, but that do not actually provide additional value.

We do this by bringing science to the operations side of clinical trials. We evaluate what the impact of site monitoring and other expensive activities are, and generally we find that they add little value and that there are more modern, technology-based methods of doing the same sort of thing, yielding sim-ilar or better results at lower cost.

FR: How do you see cooperation between gov-ernment-funded clinical research vs. privately funded clinical research in Australia?PROF. VLADO PERKOVIC: There is a tension between the public sector and private com-panies, but I am not sure it is an unhealthy tension. Sometimes this sort of tension allows change to occur and allows both sides to evolve.

One of the reasons the Institute has been so successful is that we have been able to work with multiple stakeholders. We run tri-als that are funded by industry and at the

Prof. Vlado Perkovic, EXECUTIVE DIRECTOR THE GEORGE INSTITUTE AUSTRALIA

33

same time funded by the NHMRC. These trials have addressed the needs of both

sides of the spectrum: they address public health priorities of the NHMRC while providing a com-mercial opportunity for a company that seeks the benefits of the trial. Because of the mutual benefit and goals, it is possible to do hugely important research in a very effective way.

FR: Would you outline in more detail what coop-eration looks like for the George Institute? PROF. VLADO PERKOVIC: The CHEST trial was a collaboration between the manufacturer of the fluid and the George Institute, as well as the NHMRC and a range of other funding bod-ies. The company had a requirement to clearly understand what the effects of their product, which was also a addressing a public health issue and they also wanted to do it in a rigor-ous way that maximized the reliability of the study and allowed them to be hands-off in the way the trial was conducted.

The company entered in an agreement with the Institute under which they provided fund-ing for the study but the study was run, designed, reported on by an independent aca-demic group.

The results were published in the New Eng-land Journal of Medicine and have had a huge impact, providing important data for the scien-tific community, for the health community, and for the company.

The results of a trial are not always what was hoped, but no commercial organization wants to do something that is harmful.

FR: What role do you believe Australia can play in clinical research in the Asian Century? PROF. VLADO PERKOVIC: Although Australia is perceived as a place where it is difficult to recruit large numbers of patients because our population is not so big, there are key exam-ples where people have arranged themselves

in a way as to outperform other parts of the world.

One of those is in intensive care trials, where we have a very strong and well established net-work of intensive care researchers who in the past decade have recruited over 20.000 people in Australia and New Zealand alone, far more than anywhere else in the world.

It is possible to set up modern or effective systems that are not based on the traditional hospital recruitment system and that allow vol-umes that are comparable to for example China or other countries.

On top of this there are other groups, for instance the Monash Group in Melbourne, who have set up innovative primary care based net-works. They are currently recruiting 10-15.000 people to a trial using a novel, highly effective and innovative model of recruitment. These intelligent re-designs of the clinical process are a real opportunity not only for Australia, but for the broader clinical trials community glob-ally.

Furthermore I see the opportunity for Aus-tralia not as a bulk producer of clinical trials or a heavy recruiter to clinical trials, although it still is possible, but more as a value-added part-ner for the broader region. We are in the same time zone which makes communication and partnership much stronger. We understand the culture of the countries around us, and can work very well as a facilitator of clinical research in the region.

“We have a long history of delivering high-quality, rigorously conducted and high impact trials at much lower cost than those conducted through pharmaceutical companies or other CROs.”

34

Company index

AstraZeneca ............ 8, 14, 22 ,23, 30, 31

Ausbiotech ....................................24, 25

Australian Pharmaceutical Industries. ............................................16

Celgene .............................. 11, 12, 13, 14

Dr. Reddy’s .....................................17, 19

Genzyme ....................................... 10, 16

Generic Medicines Industry Association .....................................17, 18

George Clinical ....................................13

George Institute.....................................13, 32, 33

IMS ........................................... 10, 12, 17

Janssen ...............................17, 19, 28, 29

Medicines Australia ............ 8, 22, 23, 30

Ministry of Health & Ageing .............. 11

National Health and Medical Research Council ...................................................8

Novartis ..................................... 9, 12, 19

Nucleus Network ..........................17, 19

Pharmaceutical Benefits Advisory Committee............................... 11, 26, 27

Pharmacy Guild ..................................14

Phebra .................................................. 11

Servier. .............................................6, 18

Swisse ................................................. 11

UCB ................................................12, 14

35

PAST REPORTS

http://issuu.com/focusreports/docs/mexico_pharmaceuticals_august_2012

http://issuu.com/focusreports/docs/mexico_pharmaceuticals_august_2012

http://issuu.com/focusreports/docs/thailand_pharma_report_june_2012

http://issuu.com/focusreports/docs/pharmaceuticals_south_africa_report_2012

http://issuu.com/focusreports/docs/ukraine_pharma_march_2012

http://issuu.com/focusreports/docs/phex_brazil_2012

http://issuu.com/focusreports/docs/hungary_pharm_2012

http://issuu.com/focusreports/docs/pe1211_country_uk_-_december_2011

http://issuu.com/focusreports/docs/phex_russia_2011

pharmaceuticals australia report 2013

Documents

servier servier

remote australia servier

director janssen australia

astrazeneca australia

countries servier

new zealand32 interview

new zealand30 interview

ausbiotech26 interview