pharmaceuticals: “keeping the industry competitive”

1 / 25Mannheimer Institut für Public Health – www.miph.uni-hd.de

UNIVERSITÄTHEIDELBERG

Institute for Innovation & Valuation in Health Care – www.innoval-hc.com

Pharmaceuticals: Keeping the Industry Competitive

A Perspective from Germany

1 © Michael Schlander, May 2011

Pharmaceuticals:“Keeping the Industry Competitive”A Perspective from Germany

IW – Institut der deutschen WirtschaftIbl – Istituto Bruno Leoni

Berlin / GermanyTuesday, May 03, 2011

Michael Schlander

Medizinische Fakultät Mannheim & Hochschule für Wirtschaft Ludwigshafen







“The spectacle of a drugcompany wringing its handsas a victim of governmentwhilst proudly reporting‘our 15th successive year ofrecord profits’ is as zoo-logically bizarre as a catsitting pretty in a mousetrap, quietly eating the

cheese.”2

Pharmaceutical Industry Profitability1

1Picture: “off the mark”, courtesy of Mark Parisi2Heinz Redwood; “The Dynamics of Drug Pricing and Reimbursement in the European Community.” Richmond (1992)







An Inconvenient Truth,Frequently Forgotten:

“Drugsare part of health care …

–… the pharmaceutical

industry is not.”

Heinz Redwood (1992)







Public Perceptions:Responsibility for “Financial Crisis”1

1Janssen-Cilag Population Study 1998; referring to the perceived financing crisis of German health care (so called “Kostenexplosion”)

54%

47%

43%

34%

73%

79%

0% 20% 40% 60% 80%

Politicians

Industry

Sick Funds

Physicians

Pharmacies

Patients







Public Perceptions:Trust in Patients’ Agents1

1Janssen-Cilag Population Study 2002; according the same survey, 78% of respondents wish institutionalized public participation such as a “Citizen Council”

26%19%

13%10%

7%1%

22%

0% 10% 20% 30%

Physicians

Sick Funds

Scientists

Government

Unions

Employers

Pharm. Ind.

None of those

0%







Example: New Anticancer Drugs1

1PB. Bach (2009)

[US-$, 2007]

Median Monthly Costs of New Anticancer Drugs (by Year of Launch):







“Jäger der Patent-Milliarden”1

1Der Spiegel 14/2003 (31.03.2003): “… a bizarre business model…”







¬ 1977: Krankenversicherungs-Kostendämpfungsgesetz¬ 1982: Kostendämpfungs-Ergänzungsgesetz¬ 1983: Haushaltsbegleitgesetz¬ 1989: Gesundheitsreformgesetz (GRG)2

¬ 1993: Gesundheitsstrukturgesetz (GSG)¬ 1996: Fünftes SGB-V-Änderungsgesetz¬ 1996: Siebtes SGB-V-Änderungsgesetz¬ 1997: Beitragsentlastungsgesetz (BeitrEntlG)¬ 1997: Erstes GKV-Neuordnungsgesetz (1. NOG)¬ 1997: Zweites GKV-Neuordnungsgesetz (2. NOG)¬ 1999: GKV-Solidaritätsstärkungsgesetz (GKV-SolG)¬ 2000: GKV-Gesundheitsreformgesetz

German Polypharmacy:Health Care Reform Acts including new Pharmaceutical Market Regulation, 1977-20001

1M. Schlander (2005) Medizinische Klinik2first introduction of reference pricing







¬ 2000: GKV-Gesundheitsreformgesetz¬ 2001: Festbetrags-Anpassungsgesetz (FBAG)¬ 2002: Arzneimittelbudget-Ablösungsgesetz (ABAG)¬ 2003: Beitragssatzsicherungsgesetz¬ 2003: 12. SGB-V-Änderungsgesetz¬ 2004: GKV-Modernisierungsgesetz (GMG)3

¬ 2006: Arzneimittelversorgungs-Wirtschaftlichkeitsgesetz (AVWG)¬ 2007: GKV-Wettbewerbsstärkungsgesetz (GKV-WSG)4

¬ 2009: 15. AMG-Novelle¬ 2010: GKV-Änderungsgesetz¬ 2010: Arzneimittelmarkt-Neuordnungsgesetz (AMNOG)

… and what next?

German Polypharmacy:Health Care Reform Acts including new Pharmaceutical Market Regulation, since 20001,2

1M. Schlander (2005) Medizinische Klinik2M. Schlander (2009) “The German Disease” – Kassenarzt3introducing IQWiG and [isolated] “benefit evaluation”4introducing “cost benefit evaluation” at IQWiG







¬ Modified cost-sharing policies¬ Including change of social hardship clauses and exempts

¬ Extended reference pricing policies (levels 2 and 3) ¬ Temporary increase of mandated manufacturers‘ discount

¬ 16% in 2004 (6% before and after 2004), beneficiary = statutory health insurance

¬ Formal evaluation of incremental (clinical) “benefits” (only)¬ Primarily of prescription drugs by new institute (IQWiG) “A/B” vs. “C/D”

¬ Modifications of the (highly regulated) distribution system¬ Entirely new system of pharmacy mark-ups

¬ As of 2004: €8.10 + 3% of wholesale (= pharmacy acquisition) price

¬ Exclusion from reimbursement of OTC products¬ Numerous exceptions (e.g., children < 18 years)

¬ Deregulation of ex-pharmacy pricing for OTC products

German Polypharmacy:Example: New Regulations of GMG, effective 2004







1BMGS: „Komprimierte Fassung … eines Gesetzes zur Modernisierung des Gesundheitssystems…“, 8. Mai 2003; 2Glaeske G., Hermann, C., Lauterbach, K.W., Schwoerer, P., Wasem, J.: „GKV-Reform 2003 – Reformen für die Zukunft“. Fr.-Ebert-Stiftung, August 2002;

3Der Spiegel 14/2003 (31.03.2003)

An Old Debate: Politicians and Their Consultants

¬ „Patentgeschützte Arzneimittel mit pharmakologisch-therapeutisch vergleichbaren Wirkstoffen ... werden künftig in die Festbetragsregelung einbezogen.“1

¬ „Zur Steuerung des Verordnungsverhaltens werden werden künftig Honorare und veranlaßte Leistungen(Arzneimittel, Heilmittel) miteinander verknüpft.“1

¬ „Für die Erstattung von neuen Arzneimitteln sollte deren ... Kosten-Nutzen-Verhältnis bestimmt werden.“2

¬ „Wir müssen an die hohen Pharmakosten ran – ohne das wird die Gesundheitsreform auf Dauer nicht gelingen.”3

¬ „Die massive Steigerung der Arzneimittelausgaben ist ‚nicht allein medizinisch gerechtfertigt.‘“3

¬ „Die Industrie ‚ist mit ihrem Freiraum bei der Preis-gestaltung nicht immer verantwortlich umgegangen.‘“3







“containing costs”

What are Health Technology Assessments for?

“issuing guidance to potential users”

“prioritizing for further evaluation”

A broad range of expectations (and fears) …

“alerting users to future possibilities”







1VFA: „Positionspapier: Staatliches Institut als Arzneimittel-Innovationshürde“, 2. Februar 2003; 2Quelle: Ärzte-Zeitung vom 23.05.2003; 3BPI-Kampagne gegen die Positivliste (2001); 4P. Rothermund (Vorstandsmitglied des BPI) am 17.06.2002 in Leverkusen: ebenda auch bezogen auf Cimetidin (sic!): „Wäre es nicht gute Pharmakoökonomie gewesen, hier einmal den gesamten volkswirtschaftlichen Nutzen eines solchen Arzneimittels zu untersuchen.“

An Inappropriate Response by Industry

¬ „Ein staatliches Zentralinstitut führt zwangsläufig zur Einheitsversorgung.“1

¬ „Die Attraktivität ausländischer Pharmastandorte würde durch ein solches Gesetzesvorhaben [gemeint ist die „vierte Hürde“] weiter erhöht.“1

¬ „Viele VFA-Mitgliedsunternehmen ... werden sich gezwungen sehen, Investitionen am Standort Deutschland einzufrieren und zukunftsfähige Arbeitsplätze abzubauen.“1

¬ „Es ist eine absolute Illusion, daß zu irgendeinem Zeitpunkt ein Arzneimittel ... eindeutig ... bewertet werden kann.“2

¬ „Leben ist Vielfalt – stoppt die Einfalt.“3

¬ „Unter dem Deckmäntelchen der Pharmakoökonomie geht es weiterhin ... immer nur darum, an genau den falschen Stellen, Gelder einzusparen.”4







Recommendations

Decision Making

Assignment of Tasks

Federal Ministry of Health

IQWiG

Joint Federal Committee

IQWiG Assignments¬ by Federal Joint Committee (G-BA)1

¬ by Federal Ministry for Health (BMG)¬ IQWiG may be independently active in pertinent

topics related to medical care (“Generalauftrag”)

IQWiG in Germany (2004/2008)

1Application through the Joint federal Committee possible for (a) patient organizations,(b) organizations of the German health care self-administration system; not possible for(a) companies, (b) private persons, and (c) interest or lobby groups







Cost

“Benefit” (Effectiveness)

A

B

C

D

‘Efficiency Frontier’ Approach¬ Are There Alternative

Treatmentsfor the Condition in Question?

¬ Which Alternatives Have Been Reimbursed in the Past?

¬ Dominanceof New Treatment “Nd”?=> Reimbursement

¬ Extended Dominanceof New Treatment “Ne”?=> Reimbursement

¬ Issue: Were Pricing and Reimbursement Decisions Made in the Past Justified?

IQWiG 2008/2009:Focus on “Technical Efficiency”

E

F

G

Ne

Nd







¬ Choice of comparator

¬ Reliance on strong clinical effectiveness data (“evidence based medicine”)

¬ Discounting future costs and benefits

¬ Incremental comparisons

¬ Allowing for uncertainty

¬ Perspective of analysis

¬ Relevance of phase III trials and the role of modeling

¬ Measurement and valuation of health outcomes(LYG, QALYs, WTP, …)

¬ Accounting for uncertainty

¬ Budget impact analysis

Consensus Ongoing Debate

Overview of Existing Guidelines:

Another Inappropriate Response by Industry“International Standards” (?)







Another Inappropriate Response by Industry“International Standards” (?)

¬ Pearson and Rawlins (2005):“The conditions seem ripe for a NICE in the United States …”

¬ Smith (2004):“The triumph of NICE”:“NICE is conquering the world … and may prove to be one ofBritain’s greatest cultural exports along with Shakespeare,Newtonian physics, The Beatles, Harry Potter, and theTeletubbies …”

¬ WHO (2003):“Published technology appraisals are already being used asinternational benchmarks …”

– or: “What Could Be Nicer Than NICE?”1

1A. Williams (2004)







THE QALY SURPRISETHE NEW YORKER 1925

“International Standards” (?)







“International Standards” ?The House of Commons Health Committee Inquiry into theNational Institute for Health and Clinical Excellence (NICE)¬ American Pharmaceutical Group (APG):

„[The] growing arbitrary dependence on a cost per QALY thresholdapproach appears to be a back-door means of NHS containment. [...] the APG does not believe it should be pivotal to whether or not a product is recommended for use. [...] Affordability, innovation, burden on carers, value to society and contribution to economic productivity are all important factors that should be taken into account.“ (Ev32)1

¬ Association of the British Pharmaceutical Industry (ABPI):„NICE decisions have become overly reliant on one parameter: the cost/QALY. [...] The current methodology requires re-evaluation, with distinct decision rules focusing more on unmet need, innovation, clinical effectiveness and budget impact, and less on cost/QALY.“ (Ev45)1

¬ Bioindustry Association (BIA):„A broader definition of value is needed in the NICE evaluation process. NICE currently relies heavily on a methodology that is based on a one-size-fits-all measure of cost-effectiveness...“ (Ev57)1

1House of Commons, London: The Stationery Office,

May 17, 2007







UK Cancer Experts Deplore NICE Decision..on Kidney Cancer Drugs..

August 26, 2008 – Cancer experts in the United Kingdom have banded together to voice their dismay overthe recent draft guidance from the National Institute for Health and Clinical Excellence (NICE) stating that4 new cancer drugs should not be used in the treatment of advanced and/or metastatic renal cellcancer. This draft recommendation, issued on August 7, is now open for consultation; a further review isplanned for September 10.The 4 products involved are bevacizumab (Avastin, Roche/Genentech), sorafenib (Nexavar, Bayer), sunitinib(Sutent, Pfizer), and temsirolimus (Torisel, Wyeth). Although the drugs have been shown to extendpatients' lives by some months, NICE ruled that they were not cost effective and hence should not beavailable on the National Health Service (NHS).…"It just can't be that everyone else around the world is wrong about access to innovative cancer careand the NHS right in rationing it so severely," they comment. The signatories include some of the mostprominent cancer specialists in the United Kingdom, and the group of 26 is headed by Karol Sikora,MBBCh, PhD, medical director of CancerPartnersUK, professor of cancer medicine at HammersmithHospital, in London, and former chief of the World Health Organization Cancer Programme.







„Seit einigen Jahren weisen die Arzneimittelausgaben in der Gesetzlichen Krankenversicherung überdurchschnittliche

Zuwächse auf, die sich zu einem Dauerproblem für die GKV entwickelt haben.“

[…]Einem Anteil von mittlerweile 18 Prozent (Anstieg

5,3%) der Gesamtausgaben im Jahr 2009 musste die Politik wirksam und nachhaltig begegnen.

Das haben wir mit dem AMNOG getan.“

Rolf Koschorrek (2011)1

1Monitor Versorgungsforschung 02/2011, p. 14







AMNOG Rationale:







http://www.bmg.bund.de/fileadmin/redaktion/bilder_infografiken/10-03-19-infografik-faire-preise-gross.jpg; accessed April 06, 2011

AMNOG: “Cost Benefit Evaluation” Moved Back







2833

47 48 51

6372 75

90

111

99

81

17

0

20

40

60

80

100

120

D I CH DK NL GR F IRE FIN CAN USA AUS S

[%]

Total Pharmaceutical Spending (real per-capita growth 1990-2001)1

1Source: OECD Health Data 2003; Australia and Switzerland: 1990-2000; Germany: 1992-2001; Schlander (2004)







International Pharmaceutical Spending Trends







30.7 29.726.3 24.7 24

21.918 16.7

1411.5 10.1 8.7 7.3

4.3 3.9 3.4 3.2 2.9 2.70

10

20

30

40

5019

91

1993

1995

1997

1999

2001

2003

2005

2007

2009

PrescriptionsRevenues

1Data source: U. Schwabe, D. Paffrath: Arzneiverordnungsreport 1992-2010

“Controversial Drugs” 1991-2009 (AVR)1

What Happened in Germany?







0102030405060708090

100

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

RevenuesPrescriptions

1Data source: U. Schwabe, D. Paffrath: Arzneiverordnungsreport 1996, 2006; generic revenues (2004), 7.4 bn €(market segment with generic competition: 10.6 bn €); calculated remaining (theoretical) savings potential: 1.06 bn €

Share of market segment with generic competition

Generics: Market Evolution 1981-2005 (AVR)1

What Happened in Germany?







in an increasingly polarized pharmaceutical market

Knowlegde as the Primary Source of Valueenabling appropriate clinical use of pharmaceuticals

Molecule (extremely) fierce price low variable cost competition

“Hardware” post-patent expiry

Clinical Data (extremely) public goodInformation high fixed cost (transparency)“Software” intellectual property

patent protection

In Search of “Value for Money”







Many Thanks Indeed for Your Attention!

“It may well bring about immortality

–but it will take forever to test

it.”

Contact: Professor Michael Schlander, M.D., Ph.D., M.B.A.Mail 1: [email protected]

Mail 2: [email protected]

pharmaceuticals: “keeping the industry competitive”

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