An Outlook of Drug Cost in the Private Market

An Outlook of Drug Cost in the Private Market:
2013-2017 Forecast and Methodology
Presentation to Face-to-Face Drug Plan Management Forum
May 2014
Michael Brogan
President, IMS Brogan
Overall Canadian pharma market growth at
historic low
Total Canadian Drug Store and Hospital Purchases
24%
21.6%
21.2%
19.1%
20%
18.7%
16.7%
16.6%
16.2%
16.3%
13.6%
% Growth
16%
12.6%
12%
11.0%
11.1%
10.0%
12.8%
12.7%
11.5%
9.9%
8.0%
9.1%
9.5%
8.9%
8.3%
7.1%
8%
4.6%
6.9%
6.1% 6.3%
4.1%
4%
2.2%
1.5%
+0.2%
0%
-0.1%
-0.9%
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
9
19 7
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
-4%
Source: IMS Brogan. Canadian Drug Stores and Hospital Purchases. MAT December 2013
Background
• Rx&D commissioned IMS Brogan to develop an independent, objective, evidence‐based forecast
• Purpose: to inform public discussion about future drug costs using transparent analysis
• Result: • Forecast future costs by incorporating a variety of costs drivers and high/low scenarios
• High confidence in data quality, methodological rigour, reasonable assumptions, transparent model
• Forecast period 2013‐2017
3
What was Included and Excluded?
 Overall Canadian private drug plan (PDP) market: IMS Brogan PDP Database captures 70% of market through pay direct claims  The forecast predicts drug costs and not the cost of drug plans:
 Drug cost = ingredient cost + markup
 Eligible drug cost: Claim amount after adjustments for allowable drug price and markup, but before applying plan design and copayments
 Dispensing fees* and other private plan costs such as drug administration fees
 Reimbursement (pay and submit) claims
 Cash paying customers
4
*Except for Quebec where dispensing fee and drug cost are not split
IMS Brogan Private Drug Plan Drug Cost
Forecast: Key Findings
Scenario
2012‐2017 Compounded Annual Growth Rate (CAGR)
High Scenario
2.8%
Low Scenario
1.6%
Drug cost = ingredient cost + markup
5
Methodology
Forecast Events
2
1. Baseline Forecast of Drug Costs (2013‐2017)
a. Analysis of Historical Volume Change (2008‐2012)*
A
1
Baseline is status quo, based on current volume trend holding everything else constant
Generic Impact Event
2. Forecast Events (2013‐2017)
a. Generic Impact Event
New Drug Entry
B
b. New Drug Entry Event
c. Aging Event Event
* When year‐over‐year growth was measured, 2007 was referenced to measure the growth in 2008
C
Aging event
6
Generic Impact Event: National Generic
Pricing Ratio in High-Low Growth Scenarios
The forecasted impact of Generic Event (incremental savings from baseline)
Impact of Generic Event on Baseline, Annual (%)
Scenario
Description
2013f
2014f
High Scenario
Latest known generic pricing policy of provinces (2014) extends to 2015, 2016 and 2017
‐4.41%
‐6.92%
Low Scenario
Provinces continue to reduce generic pricing and private plan follows
‐4.41%
‐6.92%
2015f
2016f
2017f
‐9.66%
‐11.61%
‐13.85%
‐9.66%
‐15.96%
‐18.33%
7
The Generic Impact Event: Savings in High-Low
Growth Scenarios
Impact of Generic Event on Baseline Forecast, $millions and %
2013F
2014F
2015F
2016F
2017F
‐2%
‐4%
(400)
‐6%
(600)
‐8%
(800)
‐10%
(1,000)
Pricing
(1,200)
LOE
(1,400)
% Impact ‐ High (Right axis)
‐16%
(1,600)
% Impact ‐ Low (Right axis)
‐18%
‐12%
(1,800)
‐14%
% (Impct on Baseline Forecast)
Low
High
Low
High
Low
High
Low
High
Low
(200)
0%
High
$ Millions (Impact on Baseline Forecast)
0
‐20%
% of generic savings attributed to LOE vs generic pricing reform
LOE = Loss of exclusivity = genericization
8
The Value of Top Brands Expected to Lose
Exclusivity during 2013-2017
PDP Costs of Branded Products Expected to Lose Exclusivity During Forecast Period
$300
PDP Costs ($Millions)
$250
$200
$150
$100
$50
$‐
2013F
15 LOE Drugs
2014F
8 LOE Drugs
2015F
16 LOE Drugs
2016F
9 LOE Drugs
2017F
9 LOE Drugs
Year of LOE
Private drug plan costs in 12 month period prior to losing exclusivity
LOE = Loss of exclusivity = genericization
Sample of branded products expected to Lose exclusivity during forecast period
9
New Drug Entry: Share of PDP Drug Cost of NMEs
Launched in 2008-2012 and Net Impact on Drug
Cost
9.0%
% (NMEs’ Share of PDP Drug Cost & Net Impact)
8.0%
Each bar represents the combined cost of NMEs launched that year and in preceding year(s). For example, 2010 bar is the value of NMEs launched in 2010 7.0%
6.0%
5.0%
Specialty
Small Molecule
Cancer
Impact of NMEs
4.0%
3.0%
1.84%
2.0%
1.0%
0.96%
1.11%
2009
2010
2.25%
0.32%
0.0%
2008
19 NMEs
22 NMEs
19 NMEs
2011
17 NMEs
Total 98 NMEs launched in 2008‐2012 period10
2012
21 NMEs
10
New Drug Entry: Mix of New Drugs in
Low-High Growth Scenarios
Mix of New Drugs in
Low Scenario
Mix of New Drugs in High Scenario
Small molecule
62%
Small molecule
48%
Cancer
20%
Cancer
31%
Specialty medicines
18%
Specialty medicines
21%
11
The Impact of New Drug Entry Event: an
Incremental Cost to the Baseline Forecast
Impact of New Drug Entry on Baseline Forecast, $ Millions and %
3.0%
Baseline
$ Impact‐High (Left axis)
$ Impact‐Low (Left axis)
% Impact ‐ High (Right axis)
% Impact ‐ Low (Right axis)
9,000
8,500
8,000
2.5%
2.5%
2.3%
2.1%
7,500
1.8%
1.5%
7,000
6,500
1.1%
6,000
1.2%
1.0%
1.0%
1.1%
0.5%
5,500
5,000
0.4%
High
0.3%
Low
2013f
2.0%
0.0%
High
Low
2014f
High
Low
2015f
High
Low
2016f
High
Low
2017f
Total incremental impact of new medicines for entire forecast period: $530 million (7.9%) in Low Scenario $592 million (8.8%) in High Scenario
12
% (Impact on Baseline) $ Millions (Baseline & Impact on Baseline) 9,500
The Impact of Aging: an Incremental Cost to the
Baseline Forecast
Impact of Aging Event on Baseline Forecast , $ Millions and %
$ Millions (Impact on Baseline Forecast)
$ Impact ‐ High
% Impact ‐ High (Right Axis)
0.14%
$14.0
$12.0
0.12%
0.12%
0.12%
0.12%
0.12%
0.12%
0.10%
$10.0
0.08%
$8.0
0.06%
$6.0
0.04%
$4.0
0.02%
$2.0
0.00%
$-
‐0.02%
2013f
2014f
2015f
2016f
% (Impact on Baseline Forecast)
0.16%
$16.0
2017f
The incremental impact due to aging for the entire forecast period: High Scenario ‐ annual impact is 0.12% on the baseline forecast
Low Scenario ‐ 0% impact
13
Commentary
• PDP drug cost growth in the low single digits
• Continued savings from genericization of branded products and potential further generic pricing regulation
• The incremental cost of new products on the overall market is mitigated due to displacement of current therapies
• Discussion is broadening around disease management and total cost to plans and employers
• Concerns around high‐cost claims remain, particularly for small plans
• Very high cost drugs tend to serve a small patient population
• Risk pooling is important 14
Thank you!
Michael Brogan
President, IMS Brogan

Download Report