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GENERIC INDUSTRY: 2011

National Pharmaceutical CongressMarch 30, 2011Toronto, Ontario

Morris Goodman

Pharmascience

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Implementation of new pricing regimes

Canada European Trade Negotiations

PRIORITIES FOR GENERIC INDUSTRY: 2011

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PRICING AND REIMBURSEMENT

ITS NOT BUSINESS AS USUAL

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EVOLUTION OF GENERIC PRICING

[85% OF CANADIAN MARKET]

2 PRICING MODELS EMERGING

LOWER RETAIL/REIMBUSED PRICES

WITH CONTROLS

ON PHARMACY ALLOWANCES

LOWER RETAIL/REIMBUSED PRICES

WITH NO CONTROLS

ON PHARMACY ALLOWANCES

ONTARIO AND QUEBEC61% OF CANADIAN MARKET

BRITISH COLUMBIA AND ALBERTA24% OF CANADIAN MARKET

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61% OF CANADIAN MARKET

LOWER PRICES AND CONTROLS

ONTARIO

(38% Market)

QUEBEC

(23% Market)

REIMBURSEMENT PRICES

PRICE EXCEPTIONS

REBATES

PROFESSIONAL ALLOWANCES

25% of brand price for government

phased reduction to 25% for privatesector market

Phased reduction to 25% of

brand price for entire market

YES (incentive period, single source,non-solids, other)

YES Follows Ontario

ILLEGAL ILLEGAL

NOT permitted in public market phased out over time in private market.

Ordinary Commercial Terms cappedat 10%

Defined for patient services onlyand capped at 20%; phased reductionto 15%

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24%OF CANADIAN MARKET

LOWER PRICES AND NO CONTROLS

BRITISH COLUMBIA

(13% Market)

ALBERTA

(11% Market)

REIMBURSEMENT PRICES Phased reduction to 35% of thebrand-name price

New generics 45% of brand-nameprice. Existing (October 2009) 56%of brand-name

REBATES NO RULES/CONTROLS NO RULES/CONTROLS

PROFESSIONAL ALLOWANCES NO RULES/CONTROLS NO RULES/CONTROLS

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DRUG REFORM IMPACT (3 YEAR PHASE-IN)

GRx reimbursement prices reduced by ~40%

Annual payer savings approximately $3B

Trade losses approximately $3B in allowances/indirect funding

Intense pressure on GRx net prices and margins

All supply chain stakeholders must re-invent themselves

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MARKET DYNAMICS UNCERTAINTY CONTINUES

REGULATOR

COST COMPETITIVENESS

PRICE EROSION ORIGINATOR RESPONSE

RETAIL CONSOLIDATION

BUSINESS MODEL

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CANADA EU TRADE TALKS (CETA)

EU Proposals include demands on Canada for:

Patent Term Extension

Longer Data Protection

Automatic stay of Linkage Regulations to be lengthened throughRight of Appeal

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Canadas IP regime includes Patented Medicine Notice ofCompliance (PMNOC) linkage regulations that do not exist inthe EU

The EU proposals would make Canadas pharmaceutical IP

regime more restrictive to generic product entries than eitherthe EU or US regimes

CANADA-EU TRADE TALKS (CETA)

The new proposed measures WILL delay the entry

of low cost generics and add significant cost tothe Canadian health care system

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LOOKING AHEAD

Changes could impact domestic operations,investment andtiming of new launches

PRESSING QUESTIONS:

1. How will future IP policies and price levels effectgeneric market entry?

2. Will the future business model support a sustainablegeneric industry?

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THANK YOU!