session 60 panel discussion predictive modeling … 60 pd, predictive modeling for pharmaceutical...
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Session 60 PD, Predictive Modeling for Pharmaceutical Cost Growth
Presenter: Joseph Farago
SOA Antitrust Disclaimer SOA Presentation Disclaimer
Private Drug Plan Forecast2016-2018
Summary of Key Findings and Messages
Joe Farago Executive Director Healthcare Innovation and Reimbursement
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Prescription Drug Coverage in Canada2015
Drug Insurance Population Coverage
Drug Spending byInsurance Type
Coverage with both public and private = ?
Private lives = 24 million (67%)
Public lives = 12.6 million (35%)
Source: CLHIA Facts and Figures, 2016 (People with coverage for Extended health care). Innovative Medicines Canada Public Plans Database (interim) - sourced from provincial health ministry reports, 2015.
Source: CIHI NHEX 2015 & 2016, CLHIA (data year 2015)
Source: QuintilesIMS, Canadian Drugstore and Hospital Audit, MAT December 2016Chart taken from PRA February 2017 Industry Luncheon
1991
0%
-5%
5%
10%
15%
20%
25%
-0.9 4.9
1991
11.1 10.0
1989
11.0 9.1 8.0 2.2 4.6 4.1 9.9 12.7 11.5 13.6 16.7 12.8 8.9 9.5 7.1 8.3 6.1 6.9 6.5 1.7 0.0 3.26.30.6
1990
1994
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1997
1985
1996
2000
1988
1999
2003
2001
2002
2006
2004
2005
2009
2007
2008
2012
2010
2011
2015
2013
2014
2016
Continued patent cliff, combined withgeneric pricereforms
Peak of patient cliffand generics’ sales, pre-pricing reforms
Drug cost growth is cyclicalGrowth in 2014+ signals a new but modest growth era
Hep C
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Total Prescribed Drug Spending and Patented Drug Spendingas a Share of Total Health Care Spending, Trend
5%
7%
9%
11%
13%
15%
17%
0
50
100
150
200
250
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 f
$ Bi
llion
s
Prescribed Drugs Total Health Care Prescribed Drugs Share Patented share
Source: CIHI NHEX 1975-2015 and 2016; IMS Brogan Pharmafocus (Canadian Drug Stores and Hospital); PMPRB Annual Report 2015. Prescribed Drugs here include sales of prescription drugs made to hospitals (added to CIHI NHEX prescribed drugs figures).Prescribed Drugs excludes OTC and personal health supplies, includes mark-ups, dispensing fees, and plan administration costs. (as per CIHI NHEX definitions)
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Total Sales of Curative Hep C Medications, Growth Curve2014-2016
Source: QuintilesIMS, Canadian Drugstore and Hospital Audit, Months ending December 2016
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Hepatitis C Market Drug Costs: Public vs. Private Claims Split2013-2016
Private Plans paid for ¼ of total Hep C costs and in 2016 were back to 2014 levels
$ 28$ 86
$ 185
$ 91$ 90
$ 85
$ 521
$ 555
-
100
200
300
400
500
600
700
800
2013 Annual 2014 Annual 2015 Annual 2016 Annual
Mill
ions
Private
Public
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The Future of Biosimilars: TNF Illustration
8Private Drug Benefits Importance
Sanofi Survey 2016
Chiropractic care
Massage therapy
Psychotherapy/mental health counselling
Critical illness insurance
Services from healthcare professionals other than doctors
Life Insurance
Short-term disability insurance
Physiotherapy
Long-term disability insurance
Dental plan - major and orthodontic coverage
Vision care coverage
Dental plan - basic and preventative coverage
Prescription drug plan
0% 20% 40% 60% 80% 100%
IMPORTANCE OF PLAN COMPONENTS Very/somewhat important
BASE: All plan members (n-1,500)
Employee Assistance Program (EAP) or Employeeand Family Assistance Program (EFAP)
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Access to Future Innovation
Source: http://www.phrma.org/innovation/meds-in-development
The Prescription
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The Total cost components of a Prescription
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WHAT IS “FORECASTING"
….the use of historic data to determine the direction of future trends
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Agenda
• Background
• Definitions• Methodology• Assumptions
• Detailed Forecast
• Summary of Total Forecase Scenarios
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Definitions and LegendQI = QuintilesIMS
PDP = Private Drug Plan market, i.e., health insurance carriers insuring or administering prescription drug claims in Canada
PDP drug cost = drug claims costs adjudicated through private insurers nationally across Canada
Trend factor = Cost growth (positive or negative)
CAGR = Compound annual growth rate; a measure of “average” year to year compounded cost growth over a certain period; does not take into account fluctuations in growth over the period.
LOE = Loss of exclusivity, i.e., brands that will lose patent and face competition from generics
NDEs = New Drug Entries, i.e., new innovative drugs entering the market (not new versions of existing drugs)
Biosimilars = drugs that are considered “similar” to and therapeutically equivalent to biologic drugs by Health Canada, but they are not chemically interchangeable (not like generics to brands) and they may not have all the same approved indications
PLA=Product listing agreement
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Data Definitions and Disclaimers
• IMS private plan claims database captures approximately 70% of all private drug plan claims (85% of pay-direct market), and is highly representative across all Canada.
• Therefore absolute values are a portion of the total, while trends and growth rates are accurately represented
• Total PDP cost is not projected for the ~30% of private spending not captured by IMSB databases
• Drug cost includes mark-ups but does not include dispensing fees, except in Quebec
• Non-transparent PLA and rebates are not captured in the forecast
Baseline growth developed by QI; assumptions and market events applied in collaboration with IMC
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1 New Drug Entries – i) impact of recent NDE launches, and ii) impact of future NDE launches
Future market events: individual effects on the forecast
2 Cost per claim increases – effect of brand list price increases and other factors increasing cost per claim
3 Generic entry – effect of genericisation and generic pricing policies on total drug cost
4 Biosimilars – impact of biosimilar launches on total drug cost (separate from generic event)
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1) New Drug Entry impact estimated by considering growing influence of products in the years following launch
• Two components based on historical data from 2011-2015:
• Recent NDE impact: impact in 2016-2018 of increasing utilization of drugs which launched in 2011-2015.
• Future NDE impact: impact of drugs which will be launched in 2016-2018. Impact estimated based on observed impact of 2011-2015 launches
Forecast Year Recent NDE Impact Years
2016 2015 2014 2013 2012 2011
2017 2016 2015 2014 2013 2012
2018 2017 2016 2015 2014 2013
Actual Recent NDE impact
Forecast Recent NDE impact
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2) Cost per claim increases seen in historical data used to calculate average increases for 2016-2020
• 2011-2015 historical data used to calculate annual cost per standard unit increases for brand products, weighted for DIN value
• Sensitivity analysis performed to show cost per unit impact on drug cost and inform creation of high/low increase scenarios
Drug Cost per Std Unit growth, weighted by DIN yearly Drug CostAverage
2011-20152011 2012 2013 2014 2015
Brand DINs - 1.32% 1.36% 1.50% 1.18% 1.34%
Baseline growth developed by QI; assumptions and market events applied in collaboration with IMC
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3) Generic Entry erosion curve based on observed experience of 98 products with generic competition from 2011-2015
• Historical data used to measure loss of exclusivity (LOE) impact: 98 products in PDP 2011-2015 data experienced entry of generic competitors
• Speed of generic entry, number of generic competitors, generic pricing as % of brand, and erosion of market share quantified
• Resulting generic erosion curve applied to brands expected to undergo LOE in 2016-2018
• Small molecule (chemical) only
Baseline growth developed by QI; assumptions and market events applied in collaboration with IMC
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3) 80 brands* expected to undergo LOE in forecast period; generic pricing assumptions based on pCPA rules
Baseline growth developed by QI; assumptions and market events applied in collaboration with IMC
# of generic manufacturers Generic price as % of brand
Oral solid Non- oral solid
1 75% 75%
2 50% 50%
3+ 25% 35%
*Does not include biologics, covered in Market Event #4: Biosimilars
Source: http://formulary.drugplan.health.gov.sk.ca/PanCanadian.aspx
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4) Revised Biosimilar market event informed by domestic and int’l data; Canadian uptake curve expected to be distinct
Baseline growth developed by QI; assumptions and market events applied in collaboration with IMC
• IMS RxDynamics was used to study patient uptake and turnover for Inflectra vs. Remicade by inferred indication, starting May 2016
• IMS MIDAS data set was used to compare uptake/turnover for biosimilars that have launched in US, UK, Germany, Italy, and others; although biosimilar experience in Canada is expected to differ greatly
• Derived biosimilar uptake curve applied to biologics expected to face biosimilar competition in 2016-2018 based on IMS and IMC expert opinion and considering the above evidence sources
Market Event definable variables
Biosimilar cost/claim as % of bran biologic – current estimate ~60%
Share of new patients starting biosimilar vs. brand - 50% in 1st year of biosimilar, 75% in 2nd, 90% thereafter. No switching considered.
Brand biologic price drop after biosimilar entry – 20% brand price decrease 1 year after biosimilar launches due to PLA
Historical Trends2011-2015
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Historical PDP drug cost Compound Annual Growth Rate (CAGR) 2011-2015
Baseline growth developed by QI; assumptions and market events applied in collaboration with IMC
Drug Cost (Billions)CAGR 2011-2015
2011 2012 2013 2014 2015
Brand $4.80 $4.94 $5.10 $5.43 $5.77 4.7%
Generic $1.49 $1.52 $1.51 $1.56 $1.68 3.1%
Total $6.28 $6.46 $6.61 $6.99 $7.45 4.4%
Total Year-over-year
- 2.8% 2.2% 5.9% 6.6% -
4.80 4.94 5.10 5.43 5.77
1.49 1.52 1.511.56
1.68
$0
$1
$2
$3
$4
$5
$6
$7
$8
2011 2012 2013 2014 2015
Dru
g Co
st (B
illio
ns)
Total Brand and Generic PDP Drug Cost, 2011-2015Generic Brand
Baseline Growth Model
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The Baseline Growth Model
• The Baseline is an extension of the historical trends• Used actual PDP data from 2011-15 to develop the QI
quantified historic trends in:• Recent NDEs (does not include new NDE’s)• Cost per unit increases held to 2015 levels• Growth by class, therapeutic type is factored into model
• The Baseline is the foundation of the “Forecast”, the base case with no major changes. This is not realistic as we know things will change, hence the need for the Forecast assumptions
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Baseline total drug cost CAGR
Baseline growth developed by QI; assumptions and market events applied in collaboration with IMC
Year-over-Year Growth CAGR 2011-2015
CAGR 2016-20182011 2012 2013 2014 2015 2016 2017 2018
Brand - 2.9% 3.2% 6.6% 6.3% 3.2% 5.9% 5.5% 4.7% 5.7%
Generic - 2.6% -0.9% 3.6% 7.4% 7.9% 6.9% 6.6% 3.1% 6.7%
Total Baseline Drug Cost
Growth
-2.8% 2.2% 5.9% 6.6% 4.3% 6.1% 5.7% 4.4% 5.9%
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Baseline high-cost drugs cost growth is forecast at CAGR of 7.1% for 2016-2017
Baseline growth developed by QI; assumptions and market events applied in collaboration with IMC
High-Cost Drugs definition: average $10,000 annual cost per claimant in any calendar year 2005-2014 from the Private Pay Direct Drug Plans or Ontario Public Drug Plan.
7.0%7.3%
8.1%
$BnImpact on Baseline Total PDP Drug Cost
2016-20182016 2017 2018
Baseline drug cost $7.77 $8.25 $8.72 5.9%(CAGR)Baseline drug cost growth 4.3% 6.1% 5.7%
High Cost Drug cost impact on baseline
$1.52 $1.63 $1.74 $4.89 (sum)$1.63 (avg)
High Cost Drug total drug cost growth
3.7% 7.1% 7.0%7.1%
(CAGR)
Non-High Cost drug cost growth
4.8% 5.8% 5.3%5.5%
(CAGR)
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Baseline growth developed by QI; assumptions and market events applied in collaboration with IMC
0.64 0.77 0.89 1.03 1.14 1.27 1.39 1.510.150.17
0.200.21
0.240.25
0.260.270.11
0.120.13
0.08 0.19 0.08
0.821.00
1.17
1.40 1.66 1.71 1.831.95
$0.0
$0.5
$1.0
$1.5
$2.0
2011 2012 2013 2014 2015 2016 2017 2018
Dru
g C
ost
(bill
ions
)
Historical 2011-2015 and Baseline 2016-2018 PDP drug cost by High-cost category
Symptomatic Use
Curative Care
Rare Disease
Oncology
Chronic
2016-2018 High-Cost Drugs Baseline Forecast, by Category
High-cost drug Total PDP drug cost % by category
2011 2012 2013 2014 2015 2016 2017 2018
Chronic 77.6% 77.1% 76.5% 73.4% 68.8% 74.5% 76.1% 77.3%
Oncology 17.7% 17.1% 16.9% 15.3% 14.2% 14.3% 14.2% 13.9%
Rare Diseases 3.9% 4.0% 5.2% 5.6% 5.6% 6.1% 6.3% 6.4%
Curative Care 0.6% 1.5% 1.3% 5.6% 11.3% 4.9% 3.3% 2.3%
Symptomatic Use 0.2% 0.2% 0.2% 0.2% 0.1% 0.1% 0.1% 0.1%
Baseline forecast
• High-Cost Drugs definition: average $10,000 annual cost per claimant in any calendar year 2005-2014 from the Private Pay Direct Drug Plans or Ontario Public Drug Plan. • Rare Disease list from US FDA Orphan Drug List Registry: https://www.accessdata.fda.gov/scripts/opdlisting/oopd
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Therapeutic class cost growth in the 2016-2018 Baseline Growth
Therapeutic Class Drug Cost CAGR2011-2015
Drug Cost CAGR 2016-2018
All 4.4% 5.9%
Biologic disease modifiers for RA/PsO/IBD 13.6% 7.6%
Anti-depressants and anti-psychotics 4.2% 6.8%
Cardiovascular -10.0% 2.1%
Antidiabetic 11.6% 13.5%
Anti-infective agents 12.9% -0.4%
Gastrointestinal drugs -0.7% 5.6%
Bronchopulmonary therapy 5.7% 6.6%
Other immunomodulating/ immunosupressive agents
13.4% 11.1%
Hormones and synthetic substitutes 6.0% 2.8%
Oncology 10.3% 8.1%
Analgesics -1.8% 0.8%
Blood formation and coagulation 2.5% 2.7%
Skin and mucous membrane preparation 4.1% 2.6%
Other CNS 3.0% 6.2%
Anticonvulsants -5.3% 8.4%
Autonomic agents 5.8% 7.9%
Nutritional Products 2.5% 1.4%
Other therapy areas 7.8% 6.0%
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In the baseline growth, PDP drug cost is expected to increase faster than utilization over 2016-2018
5.9%
4.3%
Baseline Total PDP Drug Cost and Claims Growth %CAGR 2016-2018
2016 2017 2018
Baseline drug cost ($Bn)
$7.77 $8.25 $8.72
5.9%Baseline drug cost
growth4.3% 6.1% 5.7%
Baseline claims (millions)
143.4 149.8 156.1
4.3%Year-over-year claims
growth4.5% 4.4% 4.2%
The “Forecast”Trend Factors
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1 New Drug Entries – i) impact of recent NDE launches, and ii) impact of future NDE launches
2 Cost per claim increases – effect of brand list price increases and other factors increasing cost per claim
3 Generic entry – effect of genericisation and generic pricing policies on total drug cost
4 Biosimilars – impact of biosimilar launches on total drug cost (separate from generic event)
Future market events: individual effects on the forecast
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We started with a realistic set of assumptions to drive the “events” in our forecast
Market Event The “Forecast”
1) New Drug Entries 2011-2015 historical average yearly NDE impact
2) Cost per claim increases 1.34% cost/claim increase (average 2011-2015)
3) Generic Entry Number of generic entries based on 2011-2015 LOEs. No further price reductions
4) Biosimilars
Share of new patients starting biosimilar vs. brand - 50% in 1st year of biosimilar, 75% in 2nd, 90% thereafter
Brand PLA at 80% begins 1yr after biosimilar entry in Q3, biosimilar priced at 60% of brand
Baseline growth developed by QI; assumptions and market events applied in collaboration with IMC
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Forecast trend factor assumptions are the most realistic, and increase the Baseline drug cost CAGR by +1.0% over 2016-2018
Baseline growth developed by QI; assumptions and market events applied in collaboration with IMC
Forecast
Baseline Growth
6.9% CAGR
5.9% CAGR
5.9%
-0.9% -0.8%
1.2%1.4%
5.9%
Baseline forecast developed by IMSB, assumptionsand market events applied in collaboration with IMC
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8%
7%
6%
5%
4%
3%
2%
1%
0%
-
1%
-
2%
Baseline GenericEntrants
Biosimilars New Drugs
Cost/Claim Increases
Net Impact
In Summary: The Forecast scenario produces a drug cost CAGR of 6.9% for 2016-2018
1.0%
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How did the “Forecast” do for 2016?
Baseline growth developed by QI; assumptions and market events applied in collaboration with IMC
5.1%
6.8%7.0%
4.3%
6.1% 5.7%
0.0%
2.0%
4.0%
6.0%
8.0%
2016 2017 2018
PDP
Dru
g Co
st G
row
th
Forecast Drug Cost Year-Over-Year Growth %, 2016-2018
Actual Drug Cost Growth 20164.1%
Forecast
Baseline Growth
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Actual PDP drug cost growth was 4.1% in 2016; 1.0% less than the 5.1% in the Forecast
ScenariosLow – High
Trend Factors
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Sensitivity Analyses were performed using Low and High drug cost trend factor assumptions
Baseline growth developed by QI; assumptions and market events applied in collaboration with IMC
Market Event Low Trend Factor Forecast High Trend Factor
1) New Drug Entries
50% of 2011-2015 historical avgNDE impact
2011-2015 historical avg yearly NDE impact
150% of 2011-2015 historical avgNDE impact
2) Cost per claimincreases
1.18% cost/claim increase (lowest seen in 2011-2015)
1.34% cost/claim increase (historical average 2011-2015)
1.50% cost/claim increase (highest seen in 2011-2015)
3) Generic EntryFaster generic entry: 3+ generics
enter immediately at LOEDefault number of generic entries
based on 2011-2015 LOEs
Slower generic entry: 1 add’lgeneric entrant after each year of
LOE
4) BiosimilarsBrand PLA at 60% begins 1yr after biosimilar entry in Q1, biosimilar at 60% of brand
Brand PLA at 80% begins 1yr afterbiosimilar entry in Q3, biosimilar at
60% of brand
No brand PLA, biosimilar at 60% of brand
Additional Sensitivity Variables
Blockbusterlaunch
No blockbuster launch No blockbuster launch No blockbuster launch
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Full range of trend factor scenarios results in forecast drug cost CAGR from 5.1% to 8.4% over 2016-2018
Baseline growth developed by QI; assumptions and market events applied in collaboration with IMC
%Year-over-Year Total PDP Drug Cost Growth %
Total PDP Drug Cost CAGR, 2016-20182016 2017 2018
High Trend 5.9% 8.2% 8.5% 8.4%
Forecast 5.1% 6.8% 7.0% 6.9%
Low Trend 2.9% 7.0%* 3.3% 5.1%
Baseline Growth 4.3% 6.1% 5.7% 5.9%
* Low scenario has smallest drug cost increases in $ terms, but relatively stagnant biosimilars impact in 2017 results in high-year-over-year growth.
41Forecast Conclusions
Thank you