Copyright © 2017 IQVIA. All rights reserved.

Sarah Rickwood, Vice President, IQVIA

Prescription medicines

trends: an overview

and perspective on two

therapy areas

1

Global prescription medicine volume growth is decelerating

Global prescription medicine value spend has also decelerated

Antibiotics are a therapy class challenged by unmet need but innovation deficit

Orphan drugs for rare diseases see high levels of innovation but budget challenge

We will discuss four issues

2

Where IQVIA data is expressed at value level in this presentation, this is at ex-Manufacturer level, list price

List price

• List price is a price level for a medicine either publically available or estimated from public sources, from which non-

publically available discounts or rebates may be made, meaning the actual price the manufacturer realises is in fact

lower.

• These non publically available rebates/discounts can be substantial- it is now estimated that the average discount in

the US to private insurers is now 41%, up from 28% in 2012*.

• These rebates and discounts are also almost entirely non transparent, with confidentiality agreements between buyer

and supplier frequent.

Ex-manufacturer level

• This means that margins added by wholesalers, retail pharmacies and any other elements of the distribution chain to

the patient are not captured, nor are any other tariffs of taxes. In many countries these are regulated margins. In some

countries they are not.

• A certain level of mark-up added by distributors is the necessary cost of delivering medicines to patients safely,

securely, and reliably by commercial enterprise. However, in some countries where distribution margins are

unregulated and/or distribution is inefficient and involves many actors, mark-ups can substantially increase the cost

of medicines to the patient.

* Wells Fargo report, January 2018

A word on value measurements

0

1,000

2,000

3,000

4,000

5,000

2007 2012 2017 2022

Pharmerging Others

Global prescription medicines volume growth slows; Pharmerging markets have seen the strongest slowdown

1%

3%

2%

0%

4%

2%

2%

8%

5%

CAGR 2007-2012 CAGR 2012-2017 CAGR 2017-2022

Source: IQVIA Institute, Oct 2017. Pharmerging is a group of IQVIA defined pharmerging markets characterized by less than $30k GDP/capita and greater than $1bn absolute prescription medicines market growth potential between 2014 and 2019. The markets are: China Brazil India Russia Mexico

Turkey Poland Saudi Arabia Indonesia Egypt Philippines Pakistan Vietnam Bangladesh Argentina Algeria Colombia South Africa Chile Nigeria Kazakhstan

Trn

Sta

nd

ard

Units,

To

tal w

orld

, a

ud

ited

an

d u

na

ud

ited

-20 0 20 40 60 80 100 120 140

NIGERIAINDONESIA

PHILIPPINESMEXICO

BANGLADESHINDIA

CHINAPAKISTANTHAILANDVIETNAMALGERIA

ARGENTINASAUDI ARABIA

SOUTH AFRICACOLOMBIA

EGYPTTURKEY

CHILEBRAZIL

KAZAKHSTANPOLAND

RUSSIAN FEDERATION

Index of SU Per Capita to Developed Markets Average in 2017 SU Per Capita Incremental to 2022

Pharmaceutical volume per capita varies widely in pharmerging countries, as does the potential for growth

high income markets’

Volume in SU per capita =

100

2017 = 1,457

2022 = 1,487

Source: IQVIA Institute, Oct 2017. Pharmerging is a group of IQVIA defined pharmerging markets characterized by less than $30k GDP/capita and greater than $1bn absolute prescription medicines market growth potential between 2014 and 2019. The markets are: China Brazil India Russia Mexico Turkey Poland

Saudi Arabia Indonesia Egypt Philippines Pakistan Vietnam Bangladesh Argentina Algeria Colombia South Africa Chile Nigeria Kazakhstan Note: High Income markets are known for wider adoption of newer therapies whose clinical importance is often understated

in Standard Units. Pharmerging markets are known for historically less well resourced health systems and often use oral and older medicines to a greater extent. The index may overstate the gains being made by Pharmerging markets relative to more clinical or

health outcomes based measures. Although the South African market has been strongly affected by weak economic growth, changes in data coverage may also affect this market’s recent history.

Pharma SU volume per capita index for

Pharmerging countries for 2017 and 2022

Original branded

products (protected or

unprotected) represent 7-

15% of pharmerging

medicine volumes and

19-34% of list price ex

manufacturer value; most

volume/value is non-

original

5

Global Market Spending, based on list price, to grow 3-6% in value in the next five years

Source: IQVIA Market Prognosis, Sept 2017; IQVIA Institute, Oct 2017- Outlook for Global Medicines through 2021

Global pharma spending and growth

2007 -2022

0%

2%

4%

6%

8%

10%

12%

0

200

400

600

800

1,000

1,200

1,400

1,600

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Gro

wth

Co

ns

tan

t U

S$

Sp

en

din

g U

S$

Bn

Spending Growth

Heavy small molecule

genericisation

Economic austerity in

US/Europe/Japan

Resurgence of spend on

innovative medicines in

high income markets,

list price growth in US,

peak Hepatitis C spend

Moderating

growth of

pharmerging

medicine spend

2016 IQVIA estimate of

difference between list

price and net sales for

the US=33%, or $148bn

2016 IQVIA estimate of

difference between list

and net for rest of world=

18% or $96bn

An estimate of the

difference between list

price and net value is

therefore 25% globally,

but with substantial

caveats.

6

Below this list price picture, rebates and discounts have grown strongly, although recently moderating in US

Notes: US calculation from IQVIA Institute; RoW calculation using a universe of 297 products representing 21% of MIDAS sales in 2016; Anomalous products excluded

Source: IQVIA Thought Leadership Analysis, IQVIA Analytics Link, IQVIA Institute; IQVIA MIDAS MAT Q2 2017

0%

5%

10%

15%

20%

25%

30%

35%

2009 2010 2011 2012 2013 2014 2015 2016

Rest of World US

Global and US difference between gross (MIDAS list price) and estimated net

pharmaceutical market value (2009-16)

Rest of World Data

• Calculation based on the ratio of MIDAS

sales and company reported Net sales on a

product by product basis

• Starting universe of 297 products

representing 11% of MIDAS sales (2016)

and 9% of RoW sales

• 2016 RoW value (18% discount)

constructed from 112 data points

Caveats

• Crude calculation – no distinction possible

between high and low income economies

outside US, but this is likely skewed to

high income countries

• Starting universe of products are company

reported – so typically new products or

those with significant sales for a publically

quoted company. No Generics

contribution.

7

Inefficient use of existing medicines generates avoidable costs: non compliance is the biggest cost, antibiotics misuse third

• The inefficient use of existing medications, whether on or off

patent, incurs substantial, avoidable costs for healthcare

systems

• Non-adherence to prescribed medicines regimens is the single

greatest avoidable cost- although a perennially challenging

issue, even small improvements would result in substantial

savings

• Antibiotic misuse (antibiotic use for non bacterial infections)

was the third largest source of waste, and, although it has

seen recent substantial effort to address, cost 2012

healthcare systems $54bn in avoidable spend

Estimated avoidable costs (2012) bn USD

475 100%

Mismanaged polypharmacy

in the elderly 18

269 57%

42 9%

Antibiotic misuse 54 11%

Delayed evidence-based

treatment practise 62 13%

Non-adherence

Total avoidable costs

4%

Suboptimal generic use 30 6%

Medication errors

Source: IQVIA European Thought Leadership; IQVIA Institute 2012 “Responsible use of Medicine”

8

Antibiotics and orphan drugs: opposite ends of the innovation spectrum

Antibiotics Orphan drugs

• High prevalence conditions, acute

• Established treatment paradigm

• High share of generic standard of care

• Extremely low individual prevalence conditions

(although there are many of them) chronic

• Emerging/radically changing treatment paradigm

• No or low share of generics

• Focus on generics for the broadest population

• Focus on reducing unit cost (where payers are institutions or

governments)

• Action to reduce mis-use (but still a major problem and source of

unnecessary medicine spend)

• New products may see restricted use as “antibiotic of last resort”- sales

are low

• Cost per patient is high and a growing concern in high income

markets

• Individual products can have low sales, but collectively treatments for

rare diseases are a growing element of high income market medicine

spend

• Orphan drugs increasingly the subject of strict price negotiation and

health technology assessment

• Commercial launch of new antibiotics was

historically frequent but is now rare

• Commercial launch of new orphan drug treatments was historically

rare but is now frequent and increasing

• However, only an estimated 5% of rare diseases currently have a

pharmacotherapy

Market features

Payer/provider

actions

Commercial

impacts

Regulation/policy • Significant global legislation and action to manage antibiotic use and

contain resistance

• GAIN provision as part of 2012 FDA safety and innovation act (US) aims

to improve commercial attractiveness with additional 5 years exclusivity

• EU Innovative Medicines Initiative ND4BB program and setting up of

JPIAMR since 1999

• 1983 Orphan drug act (US) , 2000 Regulation (EC) 141/2000 (EU)

both have given substantial encouragement to companies

developing drugs for rare diseases

• Japan, Singapore and Australia have also enacted legislation which

encourages development of orphan drugs

How do medicines challenge healthcare systems? What is the impact of regulation and commercial activity?

9

Usage of systemic antibiotics declines in high income markets; from 2016 we see the same trend for pharmerging markets

Source: IQVIA European Thought Leadership; IMS MIDAS Q3/2017; *only systemic antibiotics (ATC J1)

2012 2013 2014 2015 2016 2017

70

40

50

60

100

90

10

0

30

80

20 -2.3% -1.0%

Global

+1.7%

+1.9% -3.4%

Top7

-2.7%

Pharmerging

Systemic antibiotics* Sales in Volume (Bn SU) Standard Unit volume for Systemic

antibiotics falls in both pharmerging

markets (low/middle income) and

high income markets

Volume decreases 2015-17 in

China, Brazil, Turkey, South Africa,

Thailand, Philippines, Saudi Arabia,

Poland, Vietnam and Chile (10/20

pharmerging markets)

Volume rises 2015-17 in

Kazhakstan, Algeria, Egypt,

Pakistan, Russia, India,

Bangladesh, Argentina, Colombia,

Mexico

10

Global New Active Substance launch has seen very little activity from systemic antibiotics

Note: 2017 NAS data is provisional and is subject toc change ; NAS=New Active Substance; Antibiotics include the following ATC3s J1A,B,C,D,E,F,G,H,K,L,M,P,X,J3A,J8

Source: IQVIA MIDAS NAS analysis Q3 2017

0

10

20

30

40

50

60

2010 2011 2012 2013 2014 2015 2016 2017

NAS launches 2010 - 2017

1 1

3 3

0

0 2

0

# Antibiotic NASs

11

In contrast, orphan drug approvals in Europe have risen substantially since 2000 legislation

10

18

20

14

7

11

54

10

6

0

5

10

15

20

2017* 2016 2015 2014 2013 2008 2012 2011 2010 2009

Orphan drugs in Europe with European Market

Authorisation by approval year (2008-16) – 135 in total

were approved between 2001 and 2016

Source: European Medicines Agency October 2017; *to Oct 2017 only

• 146 medicines were reviewed by

the EMA for orphan designation

since 2001-2016.

• As of 2016:

• 90 are approved Orphans

• 45 have been withdrawn

• 11 were refused designation

• 91% (82) of approved Orphan

drugs in 2016 (90) have sales in

Europe in MIDAS

12

Orphan drug share of total sales of pharmaceutical use in Europe has increased from 1.5% in 2007 to 3.5% In

2016

Source: IQVIA MIDAS MAT Dec 2016

Growth of orphan drug sales value decelerates in Europe, share of total pharmaceutical list price spend is 3.5%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

PP

G%

Growth of drug sales (LC €)

Orphans growth rate Non Orphans growth rate

Note: Products are classified as “Orphan” in any given year,

but after this year may have been withdrawn, and before this

year may have been “non-orphan”

Share of Drug

Sales (€) 1.5% 1.9% 2.2% 2.7% 2.2% 2.3% 2.6% 3.0% 3.3% 3.5%

13

• There is currently both volume and value deceleration in spend on Rx medicines globally

• Many pharmerging markets (where majority of volume and value is off patent) are substantially

behind the high income markets in terms of use per head of modern medicines, and current

growth rates will not close that gap

• Avoidable costs to healthcare systems of mis-use of prescription medicines equated to 49% of

total list price Rx market value in 2012, with compliance the leading cost and antiobiotic mis-use

third

• Orphan drugs see growth of innovation with enabling legislation but costs challenge high income

markets

• Antibiotics see innovation dearth and yet to see impact of policy on new drug approvals

Concluding points

IQVIA’s definition of Pharmerging Markets: middle-low income countries that have significant potential for list price, ex-manufacturer market growth

Source: IQVIA Market Prognosis

China Brazil Mexico Bangladesh

India Turkey Argentina

Russia Poland Algeria

Saudi Arabia Colombia

Indonesia South Africa

Egypt Chile

Philippines Nigeria

Pakistan Kazakhstan

Vietnam

21

co

un

trie

s

Pharmerging Definition

GDP per capita less than $30,000

>$1Bn US$ or LCUS$ in absolute

5yr growth (2014-2019)

Tier 1 Tier 2 Tier 3

Tier

definition

> 100Bn US$

sales in 2014

>15Bn US$ sales

in 2014

>1Bn US$ or LCUS$ in absolute 5yr

growth

(2014-2019)