Assessment, pricing, and reimbursement of new health technologies: Innovative reimbursement models: Examples from health insurance systems in Asia Abdulkadir Keskinaslan, MD, MBA, MPH International Conference for Improving Use of Medicines – ICIUM 2011 Antalya,Turkey, November 17, 2011

Striking a Challenging Balance Continued innovation Appropriate use Access to new medicines Household & system affordability 2 | Innovative Reimbursement Models | Keskinaslan | 17 Nov 2011

Risk-Sharing Agreement: The underlying concept of innovative pricing and patient access schemes is value-based pricing In an increasingly cost-sensitive environment, it is becoming more difficult for highly-priced innovative drugs to gain reimbursement Pharma is now moving towards a value-based pricing system, opting for risk-sharing in an effort to improve equitable access to effective care Innovative pricing and patient access schemes are arrangements which may be used on an exceptional basis for the acquisition of medicines The schemes are intended to improve the cost-effectiveness of a medicine and therefore allow HTA bodies to recommend treatments which they would otherwise have deemed not cost-effective Risk-Sharing Agreement: “A contract between two parties who agree to engage in a transaction in which there are uncertainties regardless concerning its final value. Nevertheless, one party, the company, has sufficient confidence in its claims of either effectiveness or efficiency that it is ready to accept a reward or a penalty depending on the observed performance.” Source: Akehurst,Taiwan HTA Workshop 2010; de Pouvourville, EJHE, 2006 3 | Innovative Reimbursement Models | Keskinaslan | 17 Nov 2011

From “Price Volume” and “Money Back” to Value Based Reimbursement: Non-linear pricing high Price-Volume Agreement assumes that “reimbursement buckets” are filled from left to right Money-back Guarantee assumes binary outcome: full response or failure Is it possible to devise a scheme, where all “buckets”! Are filled simultaneously, depending on patient characteristics (e.g. unmet need, risk, benefit)? P3 Weighted Average Price Average Price P2 P1 low S1 S2 S3 Size of Patient segment or indication 4 | Innovative Reimbursement Models | Keskinaslan | 17 Nov 2011

Pricing models to improve access and affordability Financial Utilization Models Outcomes Based Pricing Models Risk Based Pricing Models Initial 10% of patients Full response High Risk Next 20% of patients Partial response Moderate risk All others No response Low risk Patient segments Patient segments Patient segments Price volume agreement: e.g. full reimbursement for first 10% of patients, reduced reimbursement for next 20% of patients, no reimburse-ment for all others Money back guarantee, e.g. full reimbursement for responders, reduced reimbursement for partial responders, no reimburse-ment for non-responders Reimbursement linked to value and level of risk factors (e.g. based on diagnostic test) 5 | Innovative Reimbursement Models | Keskinaslan | 17 Nov 2011

Financial Utilization Models Lucentis (ranibizumab) for AMD – UK Per patient, response-assumed, if longer treatment required, drug free of charge Financial Utilization Models In 2008 NICE found Lucentis to be cost-effective for wet Age-Related Macular Degeneration (AMD) if a course of treatment did not exceed 14 injections To ensure full patient access, Novartis agreed to pay for any injections of Lucentis that exceeded the 14 recommended by NICE Company covers the costs of additional injections Results Patients received effective innovative treatment Improved cost effectiveness for the NHS Lucentis became established as effective treatment in the market Source: National Institute for Health and Clinical Excellence. Final Guidance: Ranibizumab and pegaptanib for age-related macular degeneration. http://guidance.nice.org.uk/TA155 6 | Innovative Reimbursement Models | Keskinaslan | 17 Nov 2011

Outcomes Based Pricing Models Velcade (bortezomib) for multiple myeloma - UK Per patient, response dependent, cash refund Outcomes Based Pricing Models In 2006, Velcade treatment was considered ‘not cost-effective’ costs approx. £3,000 per treatment cycle (£38,000 per QALY). Johnson & Johnson scheme proposed that treatment would be reimbursed only when effective Full or partial response - remain on therapy and funded by NHS minimal or no response - cease treatment and costs refunded to NHS by the company ICER with rebate, stopping rule after 4 cycles with partial and full responders continuing therapy: £20,700/QALY Response assessed after max of 4 treatment cycles and response was measured by tumor shrinkage - reduction in serum M-protein levels of 50% or more 60 day claim period Source: A Keskinaslan, ISPOR Asia, Thailand September 5-7th, 2010 7 | Innovative Reimbursement Models | Keskinaslan | 17 Nov 2011

Outcomes Based Pricing Models Actonel (risedronate) for osteoporosis – US Per patient, response dependent, pay for consequence Outcomes Based Pricing Models In 2009 Procter & Gamble and Sanofi-Aventis agreed the scheme with Health Alliance Medical Plans A risk-sharing agreement where preventative treatment is assessed against unwanted disease outcomes To pay for bone fractures occurring while the patient is taking Actonel. For these patients, any health costs associated with a non-spinal fracture to be covered by the manufacturing companies (estimated to cost between $6,000 and $30,000 per fracture, depending on the fracture location). Patients qualify if they have no-comorbidity, no prior fractures etc; and have taken Actonel for six out of the nine most recent months Intention of the scheme: To reduce potential treatment costs for fracture treatment for patients on Actonel To provide an incentive to keep qualified patients on Actonel instead of switching to less-expensive generic alternatives To keep Actonel on a lower formulary tier than competition 8 | Innovative Reimbursement Models | Keskinaslan | 17 Nov 2011 Source: A Keskinaslan, ISPOR Asia, Thailand September 5-7th, 2010

Telbuvidine for chronic hepatitis B treatment - Australia acceptable ICER across patient segments Risk Based Pricing Models Telbuvidine is indicated for the treatment of HBeAg-positive and HBeAg-negative chronic hepatitis B patients who have compensated liver disease, evidence of viral replication and active liver inflammation and who are nucleoside analogue naïve. Telbuvidine priced at weighted average price across patient subgroups priced at a high but acceptable incremental cost effectiveness ratio compared to lamivudine for HBeAg-positive (e-pos) patients priced higher than lamivudine for HBeAg-negative patients based on cost-offsets due to reduced resistance rates and thus lower use of more expensive 2nd-line adefovir Source: http://www.health.gov.au/internet/main/publishing.nsf/Content/pbac-psd-telbivudine-mar08; www.novartis.com.au/DownloadFile.aspx?t=p&f=seb.pdf&dateid 9 | Innovative Reimbursement Models | Keskinaslan | 17 Nov 2011

The underlying concept of patient access schemes is no different from innovative pricing schemes: value-based pricing Willingness to Pay Based Pricing Models Affordability Based Pricing Models Discount for members Full price Price or free goods reward for compliance Partial price Value added services for compliant patients No price Patient segments Patient segments Loyalty Card: e.g. progressive discounted price for members, additional reward for compliant patients (4+1), value added services (free routine tests) for long term compliant patients Patient Assistance Program, e.g. Patients pay what they can afford, governments or private insurance companies may contribute 10 | Innovative Reimbursement Models | Keskinaslan | 17 Nov 2011

NOA providing Glivec (imatinib) for CML - Indonesia Affordability based model, shared contribution Novartis Oncology Access (NOA) designed to bridge the affordability gap in Indonesia NOA offers patients to pay what they can afford, based on a financial evaluation – to bridge the affordability gap. Co Pay Model Based on the “Cost of Living Wages” (CoL) Patient’s financial resources do not fall under 2 X CoL after purchasing Glivec 7 tier scheme determined through assessment made by financial agency; in December, 2010: 305 patients Multiple Stakeholders involved in setting up the program Ministry of Health Indonesia Indonesian Society of Hematology and Blood Transfusion Indonesian Hematology and Internal Medicine Medical Oncology National Working Group Indonesian Cancer Foundation, Jakarta Branch Financial assessment by PT Survindo Putra Pratama Novartis Indonesia Affordability Based Pricing Models Full price Partial price No price Patient segments 11 | Innovative Reimbursement Models | Keskinaslan | 17 Nov 2011

Lucentis (ranibizumab) for AMD – UAE Affordability based model with shared contribution Novartis introducing MUSANDA Program, a patient access & affordability program which enables ophthalmologist to treat a segment of patients that was left with no treatment Program helps patients with funding gap and creates a financing option for self-pay patients It helps restoring sight and prevent blinds & visual impairment for AMD/DME patients Program also offers discounted fees for patients at affiliated clinics and hospitals 3rd party conducts financial assessment to identify eligibility for different level of support Affordability Based Pricing Models Partial price for all segments Patient Purchase Patient segments 12 | Innovative Reimbursement Models | Keskinaslan | 17 Nov 2011

Musanada program designed to help patients with no access Affordability barrier No Access Patients wAMD & DME for MUSANADA program : 13 | Innovative Reimbursement Models | Keskinaslan | 17 Nov 2011

Q&A abdulkadir.keskinaslan@novartis.com

Examples of Estimated ICER Thresholds Unit Lower boundary Upper boundary USA QALY US$50,000 US$100,000 Canada US$17,600 US$87,800 Australia LYG US$28,200 US$51,000 UK US$32,000 US$48,000 Thailand ~US$2,000 ~US$8,000 WHO GDP/capita/DALY averted <3 Australia PBAC GDP/capita/life-year gained 1.26 2.29 UK NICE GDP/capita/QALY 1.4 2.1 If the ICER is within a defined acceptable range (threshold) by the payer/ provider of healthcare, then there is a high likelihood that the treatment could be accepted ICER = incremental cost-effectiveness ratio; QALY = quality-adjusted life-year; LYG = life-years gained; GDP = gross domestic product; WHO = World Health Organization; DALY = disability adjusted life-years; NICE = National Institute for Clinical Excellence (UK); PBAC = Pharmaceutical Benefits Advisory Committee Value in Health 2004;7:518 15 | Innovative Reimbursement Models | Keskinaslan | 17 Nov 2011