1. The pharmaceutical market in Europe
Per Troein
VP Strategic Partners, IMS Health
April 5, 2016

2. There is not one Europe 32 separate countries One Medical Agency –EMA
Common regulation for GMP, GDP, etc
HC “local competency”
Funding
Pricing
What is available
All countries has some form of “solidaric” health care system
IMS Health Confidential

3. Health Care system are organized differently
Funding can vary
Taxation
National
Local or
Mandatory insurance
Provision also varies
Public hospitals and employed Drs or
Private hospitals or Drs
IMS Health Confidential

4. Drug spend varies between countries
TOTAL MARKET SALES AT EX-MNF PRICE BEFORE REBATES AND DISCOUNTS ( VS. GDP/CAPITA
The amount spent on pharmaceuticals is linked to the GDP per capita
Very low GDP countries spend also a very low share
As GDP growth, pharmaceutical spend growth faster
At a certain level, the increase needs declines
IMS Health Confidential

5. Generic Penetration vary by country
Protected market includes patent protected branded products.
IMS Health Confidential

6. The way Generics are managed varies
Who selects the manufacturer?
Patient
Prescriber
Pharmacy
/WHS
Payer
How are prices set?
Tender
Free
pricing
Regulated 1 2 3 4 5
Tender markets
Regulated price & dispensing choice
Market driven pricing & dispensing choice
Regulated price & prescribing choice
Out of Pocket markets
The issues we need to understand better;
Addressable markets; we assume that sales based on tenders, that branded generic sales is not accessible. We also need to understand what AB and Celesio definitely control. But we also need to understand what part is products that we do sell in US – products without purchasing synergies.
We also need to have a better insight on who we potentially can play with. Only a limited number of companies actually have registered products in all relevant markets as we saw – and are they even the right partners from a price point of view
IMS Health Confidential

7. Europe has large variation on treatment cost
Europe weighted
2014
2015
Cost per treatment day, based on DDD, 2014 vs. 2015
Source: IMS MIDAS 2015; Selected therapy areas: Angiotensin II antagonists, anti-depressants, anti-epileptics, anti-psychotics, anti-ulcerants, cholestrol regulators and oral anti-diabetics.
IMS Health Confidential

8. Price reductions being off-set by volume increases
Evolution of therapy volume, price of treatment and overall treatment cost in 7 therapy areas, Rx retail market from Q Q4 2015,
Normalized to population growth
Selected therapy areas: Angiotensin II antagonists, anti-depressants, anti-epileptics, anti-psychotics, anti-ulcerants, cholesterol regulators and oral anti-diabetics. Source: IMS MIDAS, MAT Population statistics: OECD
IMS Health Confidential

9. Cholesterol regulators are investments in prevention
TD per capita in cholesterol regulators, Q4 2015
SOURCE: IMS HEALTH MIDAS YEAR MAT , POPULATION STATISTICS: OECD
IMS Health Confidential

10. What is the right use of antidepressants?
TD per capita in antidepressants, Q4 2015
SOURCE: IMS HEALTH MIDAS YEAR MAT , POPULATION STATISTICS: OECD
IMS Health Confidential

11. High specialty growth is a long term trend
Specialty versus traditional medicine market value dynamics
(2015 value market share vs. 10 year value growth (MAT )
10 yr value CAGR %
Traditional
Specialty 3%
11% 1%
12%
-1% 7% 1%
10% 2%
14% 0% 8% 1%
10% 1% 8% 0% 8% 0% 9% 2% 8%
-4% 1% 0%
10%
SOURCE: IMS HEALTH MIDAS MAT ; *NL Growth is calculated for 2015/11, DK Growth is calculated for 2015/09
IMS Health Confidential

12. 2014 and 2015 was exceptional years for Europe
Several countries had an exceptional growth due to innovation – HepC
Low level of new generics
Updated by Gowri Ramachandran, Oct 2015
Source: IMS Market Prognosis Sept 2015; at ex-manufacturer price levels, not including rebates and discounts. Contains Audited + Unaudited data; $US used for Argentina & Venezuela due to hyperinflation

13. Oncology is likely to be a future driver
Oncology drugs under development according compilation IMS Health Institute
IMS Health Confidential

14. Pricing mechanism of innovative medicine varies
Value Based Pricing
Internal Reference Pricing
International Reference pricing
IMS Health Confidential

15. Correlation between Price Index and GDP
Protected non-generic Price Index (Jan 2016)
VS. GDP/CAPITA (2014)
SOURCE: IMS HEALTH Pricing Insights 2016; GDP/CAPITA FROM EUROSTAT;
Protected non-generic includes High Tech + Non High Tech
IMS Health Confidential

16. European PT developed significantly in past years
European parallel trade sales value in past 13 years
€5.6
€5.6
€5.7
€5.6
€5.5
€5.3
GBP rise
€4.8
€4.9
€4.7
Apoteket dereg and SKr gains
€4.1
-3,9% PPRS UK
€3.8
€3.7
€3.7
€ PI Sales (bn) / MNF
-7% PPRS UK
-1.9% PPRS UK
GBP falls
Germany 16% rebate
Germany 6% rebate
Germany introduces PT incentives
Year
IMS Health Confidential
Source: IMS Health MIDAS and local databases

17. Loss of exclusivity drives biosimilar interest
Key products losing protection by 2020
Europe Top molecules sales (MAT 12/2015), €
EU expiry date
2018
2028
Expired
2019
2020
IMS Health Confidential

18. Competition drives down the price
The increased competition affects not just the price for the directly comparable product but also the price of the whole product class
It can have an almost as large or even a larger impact on the total market price as it has on the biosimilar/reference product price
The countries with the highest reduction show reduction of 50-70%
In order to achieve long-term savings, there should be a competition with multiple players; however, too high short term savings might preclude this
Competition drives down prices;
On a macro level, you see similar levels of reductions on;
On the biosimilar together with the reference product as
On all the accessible market which in addition includes other for example short acting but not reference products
. As on the total market
- competition drives down the prices also on the patented products
If we look on just some of the markets with the highest reduction we see reductions of %. The reality is that if we had been allowed and able to show the rebates, we would have found this levels in many markets
IMS Health Confidential

19. Lower prices has the most impact on usage in countries with low initial usage
For Epoetins, we can see
significant increases in consumption for countries with low starting volumes
volume reductions in countries with a high use based on safety warnings
Lowered prices impact usage but we also need to be aware of other factors:
New indications or restriction of indications (as the EPO safety warnings)
General economic conditions
Changes in diagnosing and prevalence of diseases
You would have liked and also expected to see that lower price increase the volume. This haas actually very much been the case for small molecules.
The picture is however more complicated;
For EPO we see the increase trend for countries that at time of LOE had a low usage. But we also can see that countries with a high usage actually went down. This has to be seen in the background of the safety warnings for certain use published by the EMA
G-CSF shows a much more consistent picture with significant growth in all countries and not the least UK
Human Growth Hormones shows growth everywhere – despite sometimes moderate price reductions – but most in countries with low starting usage and high price reduction
In countries which used to have low usage/availability in the classes the price reductions seem to have a significant impact on the increased access.
IMS Health Confidential

20. Other observations from Europe
A shift from retail to hospital dispensing – this makes pricing to be more business agreements versus regulated
Retail is still mostly independent pharmacies – but both chains and virtual chains are growing
Falsified Medicine Act being put into action with authentication of all dispensed drugs
IMS Health Confidential

21. The pharmaceutical market in Europe
Per Troein
VP Strategic Partners, IMS Health
April 5, 2016