P1252428712HMlQe

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Biotechnology drugs addressing the
opportunities and challenges
Ulf Staginnus, MA Economics Managing Director,
European Health Economics Spain Keynote
Address Durban, July 2006
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Introductory primer
If morality represents an ideal world, than
economics represents the actual world
Steven D. Levitt, Economist, University of Chicago
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What are biologics?

• Are typical large molecules proteins, peptides,
  nucleaic acids or inactivated virus or bacteria
• They include hormones and enzymes, cytokines,
  vaccines, monoclonal antibodies, antisense drugs
  and cell therapies
• Insulins, erythropoietins, and interferons are
  the three largest categories of biotech products
  innovative cytostatics, immunosupressive agents
  and special antirheumatic agents are the fastest
  growing

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and how do they differ from conventional drugs

• More complicated patenting relative to genes,
  proteins, delivery and function
• Complex manufacturing process e.g. issue of
  capacity
• Broader range of activity and potential to
  generate immune responses
• Greater complexity in getting biotech agents to
  the target site
• Appropriate patient selection for
  biopharmaceuticals more challenging

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Groupings of biotechnology products
Category Biotechnology group Examples of
products/molecules Hormones Fertility
hormones Follitropin Alpha Beta Enzymes
Enzymes Imiglucerase, Alglucerase Human
Growth Hormones Somatrem, Somatropin Human
Insulins Insulin isophane, Insulin
aspart Tissue Plasminogen Activators
Alteplase, Nateplase, Reteplase,
Tenecteplase, Thyroid Stimulating Hormone
Thyrotrophin Dnase Dornase Alpha Blood
Clotting Factors Factor VII, VIII, IX,
X Cytokines Colony Stimulating Factors
Filgrastim, Lenograstim, Nartograstim,
Sargramostim Interleukins Aldesleukin,
Celmoleukin, Oprelvekin, Teceleukin,
Denileuking Interferons Interferon Alpha,
Beta Gamma Vaccines Vaccines/antigens
Hepatitis B antigen, Haemophilus B
conjugate, Antigens Diphtheria Tetanus
Pertussis vaccine, Cholera vaccine Monoclonal
Monoclonal antibodies Abciximab, Alemtuzumab,
Basiliximab, Daclizumab, Antibodies Endrecol
omab, Gemtuzumab, Imciromab, Infliximab,
Muromonab CD3, Palivizumab, Rituximab,
Satumomab, Sulesomab, Trastuzumab Antisense
Antisense Fomiviren Cell Therapy
Cell/tissue therapy Carticel, Epicel, Apligraf
Business Insights Ltd. The Biotechnology market
outlook. 2006
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Value of Biologics

• Medicines that are developed for unmet clinical
  needs such as Monoclonal antibodies for Cancer,
  biotherapies against TNF alpha, recombinant
  erythropoietin etc.)
• More targeted and specific drugs
• Fewer side effects
• Optimization of known therapies
• Paradigm shift towards personalized medicine
  (e.g. Herceptin)

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What has happened in the last two decades?

• Biologics when first developed in the 80s and
  90s were often used for small and targeted
  subpopulations (such as Gauchers disease), hence
  high costs didn't matter at this time
• By 2005, biologics have expanded in the medical
  therapeutic market and are now approved for
  widespread diseases such as rheumatoid arthritis
• Biologics are now treating a much wider patient
  population than anticipated due to the increasing
  number of approvals and the use of these
  medicines to treat many chronic conditions (e.g.
  asthma)

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Pharma revenues by drug type
US billion
Biologics will represent ca 10 of the drug sales
in 2010
Big Pharma peer set
Datamonitor. Big Pharma turns to Biologics for
growth. 05/2006
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CAGR by product type
Big Pharma peer set
Datamonitor. Big Pharma turns to Biologics for
growth. 05/2006
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Biotechnology drug development
2004 Survey. Medicines in development
Biotechnology.
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...oncology is expected to remain a leader in
biologics up to 2015
Primary research undertaken among industry
executives about expected therapeutic area
launches of biologics
Business Insights Ltd. The Biotechnology market
outlook. 2006
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Spending on speciality drugs in the US
Specialty drugs are typically biotech medications
that treat complex, chronic conditions and often
need to be injected
90 billion
40 billion
19 biologics
28 biologics
72 traditional medicines
81 traditional medicines
2005
2009
Express Script Inc.Pharmacy benefit manager
Agovino T. Spending on specialty drugs soar. AP
Business Writer, June 7, 2006.
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Tackling the thorny cost issue...

• Biotech costs are perceived as expensive and are
  becoming more and more unsettling to payer
• Expensive? Yes, if we look at cost per
  dose/patient only
• Payers still focus on cost per dose. That's one
  of the hardest things to change, because it's
  the easiest thing to measure vial versus vial
• However Cost Net cost to society of overall
  treatment Value of product Cost-effectiveness

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Rheumatoid arthritis as an example

• 2.300 to 13.5000 average direct medical cost
  per patient per year in 20041
• 10.000 to 16.000 indirect cost (lost
  productivity and employee absenteeism) per year2
• 16.000 to 20.000 biologic drug cost per year3

Problem many cost components that are important
to the society are not considered in the cost
discussion around biologics or measured in
economic analysis
(1) Kvien TK. Epidemiology and burden of illness
of rheumatoid arthritis. Pharmacoeconomics.
200422(suppl 2)1-12.(2) Yelin E. The costs of
rheumatoid arthritis absolute, incremental, and
marginal estimates. J Rheumatol Suppl.
19964447-51(3) Nurmohamed MT, Dijkmans BA.
Efficacy, tolerability and cost-effectiveness of
disease-modifying antirheumatic drugs and
biologic agents in rheumatoid arthritis. Drugs
200565(5)661-94
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..therefore, a compelling and data driven value
proposition of biologics is needed

• However, scarcity of cost-effectiveness studies
  and prospective economic evaluations on
  biologicals
• Challenge for manufacturers to generate
  appropriate data that will enable healthcare
  providers to understand the value attached to a
  company's product e.g. in rheumatoid
  arthritis, as much as 70 of the total cost of
  this illness is
  due to work loss
• Products need to be on the market first in order
  to provide the (long term) data requested from
  reimbursement authoritiescatch 22

Sheridan C. Katsnelson A. Cost-effectiveness data
on biologics needed. Nature Biotechnology
2006.Pugner Km et al. The costs of rheumatoid
arthritis an international long-term view. Semin
Arthritis Rheum 200029305-20.
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Cost effectiveness

• A review from Clemente Bautista and co-workers
• Medline search on different biotechnology
  products and published cost-effectiveness studies
  with a definition of cost effectiveness (lt0LYG)
  cost saving (0-20.000/LYG) highly
  cost-effective (20.001-40.000/LYG)
  cost-effective (40.001-60.000/LYG) doubtfully
  cost-effective (gt60.001/LYG) not
  cost-effective
• Results
• Only 31 published data of the total of the
  searched biotech drugs
• In 2 clinic condition cost saving 11
  cost-effective 33 highly cost effective4
  doubtfully cost effective 14 not cost effective
• Conclusions
• In the majority (73) of the clinical situation
  evaluated, a good cost-effectiveness relation
  was observed

Clemente Bautista S et al. Current framework of
biotechnology products according to the available
pharmacoeconomic studies. Med Clin (Barc.)2003
Apr 12120(13)498-504.
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The burden and cost of cancer drugs
EU 25 EU 25 EU 25
Total DALYs DALY /1000
All disease groups 58,807,846 129.7 100
Mental disease 14,857,720 32.8 25.3
Cardiovascular disease 10,088,093 22.2 17.1
Cancer 9,839,035 21.7 16.7
Injuries 5,099,011 11.2 8.7
Respiratory disease 3,523,243 7.8 5.9

• The proportion of drug cost on the total cost of
  cancer is estimated at 9 (costs are dominated
  by inpatient care) and only 3,5 of the cost of
  all drugs in EU member countries
• In the EU, the share of healthcare expenditure
  allocated to cancer (5 to 7) is still lower
  than the share of the burden of disease (17 of
  all DALYs)

Wilking N, Jönsson B. A pan-European comparison
regarding patient access to cancer drugs.
Karolinska Institutet 2005.
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Market access of biologics examples from the
oncology market

• The major challenge for healthcare providers
  across the globe is the funding of innovative
  biologics
• In the oncology field, there are different
  experiences from various countries
• In some countries separate lists of innovative
  drugs exist with separate funds available
  (Germany and France)1
• In other countries (e.g. Denmark) there are
  special initiatives to make budget available1
• In other regions (UK, France, Spain) national
  cancer plans that emphasize the need for access
  to new cancer drugs have been put in place1
• In the USA new strategies are out in place from
  health place to contract specialty pharmacy, form
  buyer groups, introduce co-payments and build
  outcomes data bases in order to allow for prompt
  access to biotech therapies 2,3

(1) Wilking N, Jönsson B. A pan-European
comparison regarding patient access to cancer
drugs. Karolinska Institutet 2005.(2) Appleby C.
Making the case to managed care. Biotechnology
Healthcare, December 200416-25.(3) Carlson B.
How four health plans manage biotech drugs.
Biotechnology Healthcare, May 200430-34.
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Market access of biologics examples from the
oncology market (2)

• However, in order to facilitate faster patient
  access to new cancer medicines broader strategies
  seem to be indicated such as
• Policy of separate funding on wider scale?
• Combination of separate funding mechanism with
  relevant data collection to further identify
  subpopulations?
• Can separate funding mechanisms be established to
  cover the cost for new cancer drugs during, for
  example, the first 3 years on the market while
  data on real life use is being collected?

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Summary

• Biologics are a different class of medicines with
  additional complexity and increased unit costs
  but offer additional value to patients
• Cost issues seem to become a major barrier for
  their introduction
• The expenditure discussion is often shortsighted
  (budget silo mentality) and rarely focusses on
  the overall treatment value of these new drugs
• Manufacturers are challenged due to trial design,
  development cost and time to market with the
  provision of comprehensive pharmacoeconomic data
  (at launch!) that reimbursement agencies require

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Summary (contd)

• Innovative and/or separate funding
  reimbursement mechanisms are necessary for market
  access and to generate longer term data on new
  biologic medicines
• Early integration of outcomes research into
  clinical trial programs and parallel development
  of drugs with a focus on those with survival gain
  and biomarker are important points to consider
  from an industry perspective
• Standardizations of methodology and education to
  take a broader view on value is required when
  assessing the cost-effectiveness of new biologics
  we have to move away from unit cost comparisons
  based on dose price
• Collaboration amongst all stakeholders critical
  to guarantee patient access to innovative
  biologic medicines

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Thank you for your kind attention. Ulf
Staginnus ulf.staginnus_at_healtheconomics.es 34
638 029 982