Potentials for drug savings in the generic sector - experience accross Europe" Per Troein Vice President Strategic Alliances IMS Health

2 Innovation brings value to healthcare – but drives drug cost! Drug cost increases for several reasons; New, innovative, but more expensive products Treating previously untreated conditions Increases life expecancy  volume

3 NHS Deficit, € billion Cumulative deficit € 42,6 billion *: last estimate Affordability of health care – a Pan-European dilemma Example France

4 Potential for savings using generics One option for savings are utilizing generics – or more specific - to save after patent experations. The temting reasoning is; A long list of quite efficient drugs has gone/ is going of patent They are known entities; both efficacy and side effects Potential for very compeling price

5 World market growth rate continues to slide Source: IMS Health MIDAS ending MAT Q4

Others Generics No Longer Protected Protected Brands Original Brands Total Market Source: IMS Health MIDAS; MAT Dec 2005 (preview New Midas Generic Database), top 5 EU % Growth Constant $ 73% 24% 49% 18% % share Value 9% Even if generics are growing fast, original brand no longer protected is larger in top 5 Europe Unprotected market

7 USA – Generics dominate the unprotected market volume Source: IMS Health MIDAS MAT1205, Generic DB (GENDB3) Ethical Market only -28% 21% 5% -34% -8% 11%

8 In dispensed Rx, generic erosion is usually % after 12 weeks Source: IMS National Prescription Audit

9 UK – a true generics market with high penetration and low prices Source: IMS Health MIDAS MAT1205, Generic DB (GENDB3) Ethical Market only -20% 9% -6% -1% -4% -7% 1% 7%

10 Source: IMS Health MIDAS MAT1205, Generic DB (GENDB3) Ethical Market only Germany- a strong generic market driven by the payer -6% 18% 7% 10% -4% 15% 0% 6%

11 Class cannibalisation has provided increased opportunities for generics in Europe Source: IMS Disease Analyzer Germany Germany Generic Impact in Selected Dynamic Therapeutic Classes Statin MarketCalcium Antagonist Market

12 Source: IMS Health MIDAS MAT1205, Generic DB (GENDB3) Ethical Market only France – a growing generic market in its very early stages with prices still currently high -8% 26% 3% 4% -5% 18% 3% 4%

13 Switching to generics varies between countries and molecules Germany UK Italy Spain Portugal Netherlands Belgium Austria Sweden Norway Finland Denmark Ireland Greece Poland Share of brand in total molecule Value, Q Mainly Generic Mainly Brand CITALOPRAM Cipramil 28% 10% 30% 39% 6% 50% 37% 34% 84% 17% 87% 100% 37% SIMVASTATIN Zocor 9% 15% 50% 26% 16% 13% 56% 23% 27% 40% 32% 19% 84% 34% 24% AMLODIPINE Norvasc 51% 53% 89% 59% 62% 11% 87% 53% 100% 46% 97% 66% 99% 100% 6% PRAVASTATIN Pravachol 46% 35% 33% 23% 54% 34% 82% 85% 100% 76% 68% 56% 96% 55% RAMIPRIL Triatec 17% 5% 45% 89% 56% 23% 95% 28% 60% 80% 66% 46% 97% 35% 77% OMEPRAZOLE Losec 5% 18% 48% 1% 5% 39% 13% 53% 33% 58% 51% 50% 82% 44% 3%

14 Issues to achieve generic penetration Prescriber attitude Pharmacist attitude Patient attitude Drs loyal to innovator “Franchise” relationships “old habit” Substitution right Margin system penalise pharmacist for using cheaper drug Available discounts Perceptions of generics Differentiated co-payments

15 Generics also show very different price levels … Official pharmacy purchase price per tablet in Euros, December 2004 Enalapril (10mg)Omeprazole (20mg)Simvastatin (20mg) Dec-04 AUSTRIA CZECH REPUBLIC FINLAND FRANCE0.73 GERMANY GREECE0.63 HUNGARY NETHERLANDS NORWAY POLAND0.32 PORTUGAL SLOVAKIA SPAIN UK

16 DoH Intervenes £ Simvastatin Tabs 20mg/28 price development in UK Drugtariff.com April 2005; Pat exp - simvastatin 0503; £2.26 £0.63 Increased awareness where the money ends – market price is far below Drug Tariff in UK

17 The power of discounts Discounts are as important as dispensing fees  Dispensing fee € 657k  Discounts € 794k  brands 8%  parallel import 21%  generics 75% Source; A Dutch pharmacy, actual 2004 result

18 The relative savings to the healthcare system varies greatly Note: excludes government ‘clawbacks’ (important in the UK)

19 Countries are using different generics strategies due to differences in circumstances Company branded with limited substitution - Germany Generic companies selling to doctors Some discounting to pharmacists – to be outlawed from 1 April INN branded with full substitution – UK Doctors prescribes substance – not manufacturer One reimbursement price Pharmacist encourage to buy cheapest Payer benefit on “discounts” by claw-backs INN branded with full substitution – Sw, N version Pharmacy obliged to dispense cheapest available

20 The patient makes no savings from generic prescribing Pharmacists Patients PhysiciansSuppliers The UK achieved these savings via specific policy infrastructure PPRS profit controls Maximum price scheme Drug tariff Claw back system Medical training PCT Prescribing Budgets

21 The outlook – significant new molecules will go off patent in the next 5 years. Top 7 markets Source: IMS New Generic MIDAS -Preview- Rx bound ethical market Preview

22 Summary Generics can free up money to spend on new innovative drugs Clear strategy for how to drive penetration essential Penetration has to be balanced with gaining price savings Low cost manufacturing in eastern-Europe, India, and China likely future supply

Potentials for drug savings in the generic sector - experience accross Europe" Per Troein, IMS Health,