Developing the Value Proposition for Your Product

Beyond Efficacy and Safety

June 4, 2008

Objective

Objective

To learn to define, measure and communicate value for your potential products early in development

Market Access and Product Value

The Fourth Hurdle

Safety

Budget Impact

Cost Effectiveness

Effectiveness(real-world)Efficacy

Regulatory Approval

“Market Access”

Economic Value

Therapeutic Value

Example: Exubera

Press

Friday, October 19, 2007

“Insulin Flop Costs Pfizer $2.8 Billion”The Wall Street Journal today characterized the failure of Exubera as "one of the drug industry's costliest failures ever." Mike Krensavage, an analyst at Raymond James & Associates, was quoted in the same article as saying "This is one of the most stunning failures in the history of the pharmaceutical industry." "They may have made it hard for themselves in the area of diabetes," says Jim Reddoch, a biotech analyst with Friedman, Billings, Ramsey Inc

What went wrong?

Exubera marketers felt they had an "unsinkable" product that would quickly reach blockbuster status and make the company a bundleCardinal flaws:

licensing decision without considering potential reimbursement hurdlesstudy design directed to registration onlydevice deficiencies neglecteddrug price out of range

NICE Decision

Key Stakeholders

SpecialistSpecialist

PhysicianPhysician

GP as gatekeeper

GP as gatekeeper

In- or Out- Patient

In- or Out- Patient

Care Givers

Care Givers

PATIENTSPATIENTS

Patient Groups

Patient Groups

Market AccessHospital

formulary

Hospitalformulary

HOSPITALHOSPITAL

EmployersEmployers

PublicInsurance

PublicInsurance

Private Insurance

Private Insurance

PAYERSPAYERS

Hospitalpharmacy

Hospitalpharmacy

PharmacyPharmacy

Retailpharmacy

Retailpharmacy

Expert statements

Expert statements

PublicationsPublications

Key Opinion Leader

Key OpinionLeader

Beyond Registration

Registration

Reimbursementformulary listing

Safety & Efficacy RegulatoryAuthorities

payers

price

cost effectivenessbudget impact

valueeffectiveness

providers

patientsMARKET ACCESSMARKET ACCESS

Comprehensive reimbursement strategy is critical in obtaining market access

Demonstrating Product Value

safetyefficacyeffectiveness

ClinicalOutcomes

work productivityease of administration

Indirect Costs& Benefits

hospitalizationsphysician visitsdrug costsprocedures

HealthcareCosts

tolerabilitypatient satisfactionquality of lifetime for “usual”activities (patient & caregiver)

Patient-reportedOutcomes

P R I C E

Product Value

Differential Value of the Product

Value ofComparatorProduct

Improvementin clinicaloutcomes

Healthcare costsavoided

Productivity gains

Patientoutcomesbenefits

Value ofNew Product

DifferentialValue

Val

ue

Beginning with the end in mind

Launch

PRO Instrument Evaluation / Development

Burden of Disease / Epidemiology / Treatment Practices Studies

Observational Economic & Clinical Outcomes Studies

Phase IIIPhase II Post-Launch

Budget Impact Models

Cost Effectiveness Models

G l o b a l V a l u e D o s s i e r s

P u b l i c a t i o n s

Database Analyses

Economics / QoL in Clinical TrialsEconomics / QoL in Clinical Trials

Burden of Disease / Epidemiology / Treatment Practices Studies

Therapeutic Value Assessment

The Value Dossier

Disease overview & evidence for unmet

medical need

Clinical evidence

Cost-effectiveness evidence

Budget impact evidence

Epidemiology

Burden of disease (economic and humanistic)

Current treatment practices for this condition

Emerging treatment practices

The need for alternatives (unmet clinical needs)

The place of product X in the treatment of condition Y

•

Proposed indication

•

Differences between product X & usual care

•

Mode of action

•

Physicochemical & pharmacokinetic

•

Tolerability and use

•

Clinical practice

•

Place of Product in Therapy

Clinical evidence supporting the use of product X

•

Overview of the clinical evidence for product X

•

Efficacy of product X

•

QoL/Patient reported outcomes for product X

•

Safety and tolerability of product X

•

Contraindications for product X

Economic evaluation evidence supporting the use of product X in the proposed indication

•

Cost effectiveness evidence for existing treatments

•

Cost effectiveness of product X

Economic impact/financial implications of product X

•

Number of patients suitable for product X

•

Estimated extent of use of product X

•

Estimated extent of substitution of other treatments

•

Estimated financial implications of product X

•

Estimated financial implications for health budgets

Tactics

Beginning with the end in mind

Launch

PRO Instrument Evaluation / Development

Burden of Disease / Epidemiology / Treatment Practices Studies

Observational Economic & Clinical Outcomes Studies

Phase IIIPhase II Post-Launch

Budget Impact Models

Cost Effectiveness Models

G l o b a l V a l u e D o s s i e r s

P u b l i c a t i o n s

Database Analyses

Economics / QoL in Clinical TrialsEconomics / QoL in Clinical Trials

Burden of Disease / Epidemiology / Treatment Practices Studies

Therapeutic Value Assessment

Assess the current and future clinical landscape for the productindication in the US market

Treatment algorithmsPlace of product in therapyEstablishment of product profile

Identify areas of opportunities and threats within the indication and among the competitor products

Unmet medical needs Comparative analysis of your product from clinical and economic standpointProduct Performance

Develop a strategy for the clinical and commercial planning to maximize product value and return on investment (ROI)

Therapeutic Value Assessment

Therapeutic Value Assessment

Perc

eive

d Va

lue

Product Evaluation

Reference Products

Willingness-to-Pay

Product Performance

Product Value

Needs A

ssessment

Maximizing market access requires that all possible components of a product’s intrinsic market value are accurately identified and measured

• Identify the key drivers required for optimal value proposition (clinical, economic and humanistic)

• Focus on the current and future willingness-to-pay vis-à-vis the reference of the available measures

• Identify the gaps and opportunities to communicate the product value

• Present target product profile scenarios to arrive at the value perception

Disease Area Overview

Background Research

•Literature Review

•Internet Search

Treatment Population

•Epidemiology

•Inc./Exc. Criteria

Treatment Population

•Epidemiology

•Inc./Exc. Criteria

Treatment Options

• Collect Treatment Data

• Consult Physicians

Disease Area Overview

Decision Analysis

•Success Rates

•Resources

Understand Clinical PositioningEvaluate Unmet Needs

Marketing RationaleHow established is the “standard of care”? Can it be “re-defined and over what period of time?What are the challenges in market segments?

Strategic Insight

Algorithm Construction

Algorithm Construction Evaluate the treatment algorithm to identify where the new product “fits” among the treatment options. An example for epilepsy is shown below:

Classify seizure type

Assign First Line anti-epileptic

drug

Follow up for ~ 2 years and

begin withdrawal

Seizure Free With

Withdrawal

Relapse with Withdrawal

Titrate to Maximum

Dosage

Switch Drug, remain

Monotherapy

Combine two medications

SurgeryIf uncontrolled

Maintain on drug therapy as tolerated

Vagus Nerve Stimulation

If controlled If uncontrolled

If un controlled

If uncontrolled

Decision Tree Analysis Convert the algorithm into a decision tree for quantitative analysis

Success

2nd Rx Success

FailureFailure

1st Line Treatment

Target population for Drug X: first- line treatment

failures

Target population for Drug X: first- line treatment

failures

80%

60%

40%20%

Decision Tree Analysis

The benefits of your product in terms of outcomes and economics can be estimated and may provide a strong message for the product based on the attributes that can be supported for it:

Success

80%Drug “X” Success

80%Failure – to surg.

20%

Failure

20%

1st Line Treatment

$40080%

$42516%

Drug X has a higher success rate thereby preventing the need for surgery

Drug X has a higher success rate thereby preventing the need for surgery

$5,5004%

Target Product Profile

Minimum Thresholds

Administration

Form

Launch

Efficacy

Safety

Indications

Onset of action

Age (main population)

Gold Standard AEs

USA, EU, Jp valuation

Validate clinical and payer landscape for each indication via in-depth qualitative interviews to further understand nuances in treatment approach, unmet needs, willingness to pay, and pricing and reimbursement Test product profile scenarios by indication to identify value drivers and understand value perception for key stakeholdersUncover the products’ market uptake potentialDevelop strategic approach to overcome probable hurdles and ensure optimal development and market access

Qualitative Primary Research Purpose of the research:

Various options for collecting data

Payer Discussion Guide

Section I. Interviewee information

Section II. Current Environment Assessment

Section III: Product Evaluation

Section IV: Market Access

Qualitative Primary Research

N = 15 – 30 depending upon number of

respondent types and indications

Focus group with target audience

On-line survey

Current and Future Environment

Value Drivers/ Unmet Needs

Impact of Multiple Indications

Projected Utilization

Expected Reimbursement

Pathway

• What is your role in influencing market access and reimbursement decisions?

• What is the current treatment pathway? What are the current unmet needs?

• How has the presence of multiple generic products influenced prescribing?

• Are there opportunities for new products with new MoAs?

• What is your reaction to the product profiles? Which attributes resonate with you?

• What are the key value drivers and data requirements that would influence prescribing?

• In which patient populations would you use this product?

• What percentage of patients would receive this product?

• What are reactions to alternative strategies and Phase III trial designs?

Scenario Testing

Reimbursement Issues to Consider

• Government Affairs• PhRMA• Government Affairs• PhRMA

• Prescription benefit regulations

• Legislated coverage for diseases

• Prescription benefit regulations

• Legislated coverage for diseases

• Market health policy trends

• Market health policy trends

• National Ambulatory Medical Care Survey National Hospital Ambulatory Medical Care Survey

• Tandem Research

• National Ambulatory Medical Care Survey National Hospital Ambulatory Medical Care Survey

• Tandem Research

• Government (Medicare, Medicaid)

• Commercial (HMO; PPO)

• Government (Medicare, Medicaid)

• Commercial (HMO; PPO)

• Payer mix for the condition

• Payer mix for the condition

• NDTI• NDTI• Hospital• Out-patient clinic• Skilled nursing facility

• Hospital• Out-patient clinic• Skilled nursing facility

• Settings of treatment for the condition

• Settings of treatment for the condition

Sources of Information Sources of InformationExamplesExamples

Reimbursement Issues

Reimbursement Issues

• DRG Handbook• Carrier web sites• Redbook• First Data Bank

• DRG Handbook• Carrier web sites• Redbook• First Data Bank

• Average DRG payment• Medicare payment level

(95% of AWP, to be revised)

• Average DRG payment• Medicare payment level

(95% of AWP, to be revised)

• Current payment levels for analogues

• Current payment levels for analogues

• Analysis of payer mix and settings

• Analysis of payer mix and settings

• Hospital (DRG)• Medicare (Out patient iv

chemotherapy) • Patient/MCO (tier three

drug)

• Hospital (DRG)• Medicare (Out patient iv

chemotherapy)• Patient/MCO (tier three

drug)

• Risk holders for reimbursement

• Risk holders for reimbursement

• Product Profile

Method of Use

Desired indications

• Clinical treatment algorithm

• Target patient population

• Competing products, including product analogues for reimbursement analyses

• Competing products under development

• Types of physicians or other providers who will administer or use the product

Inputs

Preliminary Pricing Strategy

• Product Profile

• Clinical treatment algorithm

• Target patient population

• Competition

• Providers

Inputs

• Market health policy trends

• Payer mix for the condition

• Settings of treatment

• Risk holders

• Current payment levels

Reimbursement Issues

Price (price range) and Rate(s) of Adoption Applied to the

Forecast of the New Product

SWOT Analysis: Benign Prostatic Hyperplasia (BPH)SWOT Analysis:

Benign Prostatic Hyperplasia (BPH)SWOT Analysis: Benign Prostatic Hyperplasia (BPH)SWOT Analysis:

Scenario 2

Conduct a SWOT analysis of the scenarios within the context of the disease area and the potential benefits of the new product

SWOT Analysis: Scenario 1: Launch Sequence Initiates with COPD

Strengths Convenient treatment schedule (1x 6 months)

WeaknessesIssues with inhalation formulation

Opportunities Broad market potential within chronic COPD

Threats Uncertain clinical benefit

ILLUSTRATIVE

Strategy Development

Develop development scenarios focusing on disease area, launch sequencing, market conditions, etc.

Product A: Endocrine Tumors

Product A: COPD

Product C: Gastric Hyperacidity

Scenario 1:Product A: Obesity

Product B: Endocrine Tumors

Product A: BPH

Scenario 2:

Product A: COPD

Product A: BPH

Scenario 3:

ILLUSTRATIVE

Strategy Development

What will you have accomplished

Understanding of ‘what matters’ to payersPicture of the reimbursement challengesOpportunity to revise clinical programTime to initiate other tactics to support product valueOptimal TPPPreliminary price range

Summary

Summary

Remember the ‘fourth hurdle’Develop the value proposition early

Clinical and Economic

Begin therapeutic value assessments in phase I and II in development to build the Dossier