US Pmp Overview 2008
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How US pharmaceutical Market behaved during 2008.Why it has behaved like this what it depicts about the future. What the future hold?????????...

How US pharmaceutical Market behaved during 2008.Why it has behaved like this what it depicts about the future. What the future hold?????????

I have started compiling data since 2006
Going forward i will be uploading three presentation series US PMP 2008, US PMP 2009, US PMP 2010 which will briefly summaries present, past and future of US pharmaceutical market.

Your valuable comments and criticism will be greatly appreciated and will help me in refining my work further.

Please don't hesitate to contact me. My 24 hr Hand phone no. is + 91 963290278

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US Pmp Overview 2008 Presentation Transcript

  • 1. US PMP Overview October 2008 Accenture Research Jaydeep Adhikari, Dawn M. Melberg, Mikael Stenstrand 1 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 2. Accenture Research Accenture Research Agenda Agenda • US Overview – Summary Conclusions – Geography & Political Structure – Key Economic Indicators – Demographics • US PMP Overview • Key PMP Players • US PMP Outlook • Appendix 2 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 3. Accenture Research Accenture Research The US Pharmaceutical and Medical Products industries are facing many challenges due in part to domestic scrutiny and reforms and global issues impacting all the major geographic markets US Overview: Summary Conclusions Summary US PMP overview • US national healthcare spending will increase • The US prescription drug market is currently by 7.3% in 2008, reaching a total of US $2.1 experiencing a slowdown, in large part due to trillion increased utilization of generic drugs and weak • Currently at 16 percent of gross domestic performances from newly launched products product (GDP), U.S. health spending is double the median of industrialized countries and is • The generics segment is growing rapidly as a expected to consistently outpace GDP over the result of the cost-containment measures coming decade, accounting for 20 percent of implemented by health insurers GDP by 2015 • The elderly population (65+) is projected to • The market for OTC drugs is showing stronger exceed 20% of the total US population by growth than in many years, mainly as a result of 2050, placing a tremendous strain on public increased Rx-to-OTC switching and the decision services and programs by a number of health insurers to reimburse • Public and private healthcare payers have certain OTC products begun to implement cost-saving mechanisms – eg. Increased premiums and co-payments, • In 2005 Medicare represented 2% of the tiered health plans and generic drug preference prescription drug market, that share is expected to • In 2008, the federal health insurance Medicare jump to 28% in 2008 expanded its scope to include outpatient care, including prescription drug subsidies. This represents a large shift in the way prescription drugs are paid for in the United States 3 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 4. Accenture Research Accenture Research Agenda Agenda • US Overview – Summary Conclusions – Geography & Political Structure – Key Economic Indicators – Demographics • US PMP Overview • Key PMP Players • US PMP Outlook • Appendix 4 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 5. Accenture Research Accenture Research US – Geographic Summary US Overview: Geography & Political Structure Geography Capital City: Washington, DC Main Language (s): English Continent/Region: North America Population: 300 million Monetary Unit: US Dollar $ Main Export (s): Capital goods including transistors, aircraft, motor vehicle parts, computers and telecommunication devices; Consumer goods including automobiles and medicines; Industrial supplies including organic chemicals Source: Lonelyplanet; US Census Bureau; CIA Factbook 5 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 6. Accenture Research Accenture Research The United States is a constitution-based federal republic consisting of 50 states with significant legislative authority US Overview: Geography & Political Structure The United States • The United States’ is a federalist system with a national government and fifty sovereign states. • Any power not delegated to the federal government in the U.S. Constitution, nor prohibited by it to the states, are reserved to the states • Both the national government and each state government are divided into executive, legislative, and judicial branches • In the United States, federal and state government funding of health care needs of its citizens is limited to Medicare and Medicaid insurance programs for the eligible senior, very poor or disabled persons • Individual states have significant leeway in regard to healthcare legislation including access and funding • State budgets have been heavily impacted by escalating healthcare costs as federal funding declines and costs for healthcare services and medications increase Source: Plano ISD Instructional Center; CIA Factbook; Legislationline; 6 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 7. Accenture Research Accenture Research Agenda Agenda • US Overview – Summary Conclusions – Geography & Political Structure – Key Economic Indicators – Demographics • US PMP Overview • Key PMP Players • US PMP Outlook • Appendix 7 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 8. Accenture Research Accenture Research The United States is the largest economy in the world Key facts of the United States economy and consumers GDP , GDP growth Private consumption, population 6% 5% Germany 2008est. USA 2008 5% Private consumption USA World average GDP real growth* 3% GDP* $12.36 bn Population 300m 4% growth *** UK GDP real 3.5% Private $16,260 Spain 1% France UK growth** consumption USA 3% France Spain per capita GDP p.c. $41,800 2% -1% $0 $5,000 $10,000 $15,000 $20,000 Germany Germany 1% -3% Bubble size = GDP 0% per capita Bubble size = 2008 Population 0 5000 10000 15000 -5% *official exchange rate Private consumption p.c. (2008) GDP ($bn) **2004/2005 Consumer price index (2000=100) GDP per capita index (2000=100) CAGR 120 CAGR Country 2000/08 125 Country 2000/08 115 Spain Spain 120 3.2% 3.2% UK UK 2.5% 115 110 2.3% France France 1.9% 110 1.9% 105 Germany Germany 1.6% 1.6% 105 United States United States 3.8% 100 2.5% 100 95 95 2002 2004 2006 2008 2010 2012 2002 2004 2006 2008 2010 2012 Sources: OECD Factbook, 2006; Pharmaceutical Markets Fact Book 2005, OECD Main Economic Indicators; U.S. Department of Labor, Bureau of Labor Statistics, World Economic Outlook Database 2006 and The Economist Intelligence Unit Ltd, 2005 8 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 9. Accenture Research Accenture Research Agenda Agenda • US Overview – Summary Conclusions – Geography & Political Structure – Key Economic Indicators – Demographics • US PMP Overview • Key PMP Players • US PMP Outlook • Appendix 9 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 10. Accenture Research Accenture Research The United States has one of the largest birth rates of OECD countries with the population projected to almost double between 2005 and 2050 Germany Overview: Demographics Birth rate*, 2008 Expected US population (million), 2005-2050 United States 2.04 France 450 1.89 420 Netherlands 1.75 392 United Kingdom 1.71 400 Sweden 1.71 364 Belgium 1.61 350 336 OECD average (1.56) Switzerland 1.41 309 296 Austria 1.39 300 Japan 1.38 Germany 1.34 250 Italy 1.29 Spain 1.29 200 2005 2010 2020 2030 2040 2050 0 1 2 3 Note: Birth rate equivalent to number of children born to women aged 15 to 49 Source: US Census Bureau, 2004 Source: OECD Factbook 2008: Economic, Environmental and Social Statistics 10 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 11. Accenture Research Accenture Research US citizens have historically lived longer than the OECD average however in 2003 the US life expectancy dipped just below the OECD average. Life expectancy at birth continues to increase for both men and women Germany Overview: Demographics Life expectancy at birth (years) US life expectancy at birth by sex (years) 80 85 77.8 77.5 78 80.1 78.8 80 75.4 76 74.9 74.8 74.6 75 74 72 72 70 70.8 70.3 67 70 65 68 60 66 1970 1990 2010 1970 1990 2010 Females Males United States OECD Average Source: US CDC, 2008 11 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 12. Accenture Research Accenture Research The population in the US is ageing, which is illustrated by the fact that people aged 65 and above are projected to represent 16% of the US population by 2020, compared to 12% in 2000 US Overview: Demographics The expected development of the age structure in the US, 2000-2020 Age structure (2000) Age structure (2020) Population aged 65 and over: 12% Population aged 65 and over: 16% People ‘000 People ‘000 60,000 60,000 50,000 50,000 40,000 40,000 30,000 30,000 20,000 20,000 10,000 10,000 0 0 0-4 19-May 20-44 45-64 65-84 85+ 0-4 19-May 20-44 45-64 65-84 85+ Male Female Male Female Source: US Census Bureau, Population Projections Source: US Census Bureau, Population Projections 12 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 13. Accenture Research Accenture Research Agenda Agenda • US Overview • US PMP Overview – PMP Expenditures – Regulatory System – Pharmaceuticals Overview – Medical Products Overview – Distributor Overview • Key PMP Players • US PMP Outlook • Appendix 13 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 14. Accenture Research Accenture Research The United States spends more on healthcare than any other OECD country both in terms of GDP and per capita – the US has not managed to contain costs US PMP Overview: PMP Expenditures Healthcare spend as a % of GDP, 2008 Healthcare spend per capita (USD*) CAGR 1999-2008 CAGR 1999-2008 USA 5,711 7.1% 3.8% USA 15.2% Switzerland 3,776 5.8% 2.3% Switzerland 11.5% Germany 3,001 4.0% 1.2% Germany 11.1% Netherlands 2,987 8.9% 2.1% France 10.1% France 2,902 5.9% 3.9% Netherlands 9.8% Belgium 2,828 7.6% 2.9% Sweden 9.4% Sweden 2,704 6.3% 2.5% Belgium 9.4% Ireland 2,496 11.3% Italy 2.2% 8.4% United Kingdom 2,389 8.9% United Kingdom 8.0% 2.7% Austria 2,306 3.0% Spain 7.7% 0.7% Italy 5.1% 2,266 Austria 7.5% -0.3% 6.2% Spain 1,853 Ireland 7.3% 4.2% 6,000 USD 0 2,000 4,000 0.0% 5.0% 10.0% 15.0% 20.0% Note: Healthcare spend per capita expressed at international dollar rate Source: WHO Statistical Information System (WHOSIS), May 2008 14 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 15. Accenture Research Accenture Research Pharmaceutical spending in the US is lower than the OECD average however per capita spending is significantly higher than OECD peers US PMP Overview: PMP Expenditures Pharmaceuticals expenditure per capita, 2008 (USD) Pharmaceutical spend as a % of total healthcare spend, 2008 Italy 22.1% USA 728 Spain 21.8% France 606 France 20.9% Italy 498 Japan 18.4% Germany 436 OECD average (17.5%) Germany 14.6% Spain 401 USA 12.9% Switzerland 398 Sweden 12.6% Japan 393 OECD average (380) Netherlands 11.4% Sweden 340 Switzerland 10.5% Netherlands 340 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 0 200 400 600 800 Source: Health at a Glance, OECD 2005 15 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 16. Accenture Research Accenture Research The US spends less on medical technology as a percent of total healthcare spend than the OECD, but maintains the highest rate of spend on a per capita basis US PMP Overview: PMP Expenditures Medical Technology spend as a % of Medical Technology expenditure per capita, 2008 total healthcare spend, 2008 (EUR) Germany 8.6% USA 278 Netherlands 6.5% Germany 230 France 6.5% Switzerland 188 European average (6.4%) Netherland Spain 6.1% 154 s Italy 5.8% France 150 European average (124) USA 5.1% Sweden 120 Sweden 5.1% Italy 107 UK 4.8% UK 97 Switzerland 4.5% Spain 73 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 0 50 100 150 200 250 300 Source: Medical Technology Brief, Eucomed 2008 16 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 17. Accenture Research Accenture Research Hospital and physician services represent the largest share of total US healthcare expenditures US PMP Overview: PMP Expenditures Distribution of US Healthcare Expenditures, 2008 • National healthcare expenditures are expected to reach a total of $2.1 trillion in 2008, growing 100% at a much faster rate than the overall economy 10% Other • While the largest portion of US health 90% 22% expenditures is paid for by private funds, the US 14% Administrative 80% government is projected to spend approximately 2% 7% Nursing home care $740 billion on healthcare in 2006, representing 70% 7% 14% Pharmaceuticals 34% of total national spending 60% 11% • Hospital care and physician services account for more than 50% of total healthcare expenditures 50% Hospital care 29% • Total hospital spending growth is projected to be 40% 7.9 percent in 2005, more than 1.5 percentage 31% points higher than GDP growth 30% • Advances in medical technology, growth and 20% aging in the population and the propensity of Physician/Clinical 31% services baby boomers to frequently use healthcare 22% 10% services are all factors contributing to the increased use of hospital and physician 0% services Private healthcare spend Total healthcare spend Note: Other spend includes dental services, home healthcare, durable medical products, etc. Source: 2008 Medical Cost Reference Guide, Blue Cross Blue Shield Association 17 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 18. Accenture Research Accenture Research Pharmaceutical spend as a percent of total healthcare expenditures has slowed to single digit growth over the past several years US PMP Overview: PMP Expenditures Total Pharmaceutical Spend and % of Total Healthcare* • Prescription drug expenditures reached $224 billion in 2005, representing 11.5% of total national healthcare expenditures $600 16% • Prescription drug spending has slowed over the past 14% few years, growing at a rate of 8.2% in 2005 as $500 opposed to the double digit growth of the mid nineties 12% through 2003 (in billions) $400 • Slower growth rates are in part attributed to a 10% slowdown in drug usage prompted by increased consumer out-of-pocket expenditures and recent $300 8% concerns over drug safety • The industry outlook is characterized by conflicting 6% $200 factors which will both accelerate and slow growth – The former include practice patterns that involve 4% prescribing existing drugs to a larger segment of the $100 2% population and high-cost specialty drugs designed to treat rare conditions; growth constraints include $0 0% projected growth in the use of generics and increased cost sharing in the form of rising co-payments and additional deductibles or both Note: 2005-2014 projected Source: 2008 Medical Cost Reference Guide, Blue Cross Blue Shield Association 18 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 19. Accenture Research Accenture Research Pharmaceuticals are primarily financed by private insurance in the US, however with the introduction of Medicare Part D legislation in 2006 there is expected to be a significant increase in federal funding US PMP Overview: PMP Expenditures Prescription drug spend, by source, $bn, 2000-2010 • Currently, the private sector represents the largest share of prescription drug purchasing with a projected share of over 80% in 2006 • A shift is underway in prescription drug funding with 400 private insurers attempting to reduce drug 350 expenditures through higher co-pays and increased use of generic substitutes 300 • The federal government’s share of prescription 250 drug spending is expected to increase significantly with the passage of Medicare Part D legislation 200 which provides previously unavailable outpatient 150 drug coverage to Medicare members 100 • Under Medicare Part D, Medicare beneficiaries will be able to join a private health plan for out-patient 50 coverage, or sign up to a stand-alone Medicare 0 prescription drug scheme 2000 2005 2006 2008 2009 2010 • The Medicare share of prescription drug spending is expected to increase from 2% in 2005 to 27% in Total Out-of-Pocket Total Private 2006 Total Public Medicare Medicaid Source: US Centers for Medicare and Medicaid Services, 2008 19 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 20. Accenture Research Accenture Research US managed care companies are increasingly demanding higher co- payments for prescription drugs US PMP Overview: PMP Expenditures Prescription drug co-payments demanded by HMOs (% of all prescriptions covered) Prescription Co-Payments 2004 2008 2012 [Projected] Generic $5 46 24 23 $10 40 52 51 $15 - 6 9 Brand Formulary $10 28 10 7 $15 30 15 14 $20 26 35 31 $30 - 7 13 Brand Non-Formulary $10 9 4 2 $25 21 5 6 $30 22 11 10 >$30 24 38 40 Source: Global Insights Report: United States (Healthcare and Pharma). October, 2008. 20 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 21. Accenture Research Accenture Research In the United States, the manufacturer receives 76.5% of the reimbursed drug price (excluding taxes), which is among the highest of European peers. In Germany PMP Overview: contrast, US pharmacies get a lower margin than their European counterparts PMP Expenditures Share of final drug price (excluding taxes) in selected countries, per type of player, percentage 2008 Taxes Sweden 82 2 16 0 United States 76.5 3.4 20.1 0 Norway 75.3 4.9 19.8 Denmark 74.7 20.3 26.6 Switzerland 73.5 0 26.5 2 Portugal 71.6 8.4 20 5.3 France 70.5 3.2 26.3 5.3 Finland 68.6 3.5 27.9 16.3 Netherlands 68.1 10.6 21.3 6.4 Italy 67 6.6 26.4 9.9 Spain 65.6 7.3 27.1 4.2 Ireland 64 11 25 0 Germany 64 4.7 31.4 16.3 Belgium 59.6 9.6 30.9 6.4 UK 87.5 4 8.5 0 0 20 40 60 80 100 120 140 Manufacturers Wholesalers Pharmacies Taxes Source: Statistics 2008 VFA (The German Association of Research-Based Pharmaceutical Companies) 21 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 22. Accenture Research Accenture Research Agenda Agenda • US Overview • US PMP Overview – PMP Expenditures – Regulatory System – Pharmaceuticals Overview – Medical Products Overview – Distributor Overview • Key PMP Players • US PMP Outlook • Appendix 22 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 23. Accenture Research Accenture Research The US Food & Drug Administration (FDA) is the primary regulator of the pharmaceutical and medical products industries in the US US PMP Overview: Regulatory System •All drugs must be accepted by the FDA prior to being marketed and sold in the US •The FDA requires that pharmaceutical manufacturers perform extensive testing to US FDA prove that their products are safe and effective before it will sanction commercial sale •New drugs must pass through a three Enforces US food stage process of Clinical Trials before & drug laws receiving final approval from the FDA •The FDA estimates that, of 20 drugs Regulates the Introduction entering clinical trial testing, an average of of New Drugs Monitors the manufacture, 13 to 14 will successfully complete phase I Transport & storage of – of those only 9 will finish phase II and food, drugs and cosmetics only 1 or 2 will pass phase III •Due to recent concerns over drug safety, Clinical Trials The FDA is working on improving ways to track the safety of drugs already Phase I Phase II Phase III on the market; Tightening label requirements and planning to expand the duties of advisory committees are two New Drug Application measures currently underway to achieve (NDA) more effective post-market surveillance Source: Pharmaceutical Industry Survey. Standard & Poor’s. May 25, 2006. 23 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 24. Accenture Research Accenture Research Unlike its European counterparts, the US pharmaceutical industry is characterized by no direct pricing controls US PMP Overview: Regulatory System • Currently, US drug pricing is primarily affected by: • Free market dynamics: Includes the relative efficacy and safety profile of a drug versus its rivals, the size of its market, the competition it faces, and its development costs • Discount and rebate programs resulting from leverage exacted by large buying groups: Large-scale buyers (such as hospital chains and other institutional customers) usually pay well below list price, because their huge volume purchases enable them to negotiate heavy discounts. Government organizations, such as the Department of Defense, the Department of Veterans Affairs, and Medicaid, for example, typically negotiate some of the steepest discounts for drugs. • Patient assistance programs: Programs run by pharmaceutical companies to provide free medications to people who cannot afford to buy their medicine • Generic competition: When some easy-to-manufacture blockbuster drugs go off-patent, half a dozen or more generic competitors may enter the market simultaneously at prices that are 50% to 80% or more below brand • Because US drug prices tend to be an average of 16-18% higher than in European countries, there have been an increasing number of calls for the US to adopt more direct pricing controls Source: Pricing & Reimbursement in the US. Datamonitor. June, 2008; Pharmaceutical Industry Survey. Standard & Poor’s. May 25, 2008. 24 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 25. Accenture Research Accenture Research Agenda Agenda • US Overview • US PMP Overview – PMP Expenditures – Regulatory System – Pharmaceuticals Overview – Medical Products Overview – Distributor Overview • Key PMP Players • US PMP Outlook • Appendix 25 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 26. Accenture Research Accenture Research For a long time, the market-based nature of the US Pharmaceuticals market has enabled it to grow faster than the Pharmaceuticals market in any other major developed country US PMP Overview: Pharmaceuticals Overview Growth of the largest Pharmaceutical markets, 2004-2010 [projected] • The Pharmaceutical market in the US has been growing faster than in any other major developed Index 1998=100 220 country over the last decade • While tight price controls from central governments USA has limited growth in many other OECD-countries, 200 the US market is still characterized by free market pricing and a large number of independent buyers, leading to higher prices in general 180 Spain • In addition, the strong development of the US economy, the introduction of new UK 160 products/treatments and an aging population have driven growth in volume consumption. For instance, Italy in 2010 an estimated 51% of the population took 140 France prescription drugs on a daily basis and 27% took three or more drugs daily Germany Japan 120 100 2004 2005 2006 2007 2008 2009 2010 Sources: Statistics 2008, VFA (The German Association of Research-Based Pharmaceutical Companies); Health Care Costs Survey, USA Today/Kaiser Family Foundation/Harvard School of Public Health, 2008 26 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 27. Accenture Research Accenture Research Over the last few years value growth has stagnated, mainly as a result of increasing competition from generic drugs, but also due to falling productivity among manufacturers US PMP Overview: Pharmaceuticals Overview Prescription Pharmaceutical sales (at wholesale prices) and annual growth rates, 2005-2008($bn) • Between 2005 and 2008 the US prescription drugs market grew from $194 bn to $252bn, recording a Compound Annual Growth Rate (CAGR) of 9.1% $ bn • Yet, the annual growth rate fell every year during the same 300 14.0% period to reach a low 5.4% in 2008 13.0% • This decelerating growth in terms of value is underpinned by 12.0% several factors, of which a few stand out: 11.3% – Lower number of approvals for New Chemical Entities 10.4% (NCEs) 252 10.0% – Fewer and lower-performing product launches 250 239 – The increasing use of generic drugs, which in turn is driven 8.0% mainly by two different facts: • The implementation of greater cost-sharing measures by 216 most health insurers 6.0% 5.4% • The fact that many major drugs lost their patent 194 200 protection over the last few years 4.0% – The withdrawal (for safety reasons) of a number of major products 2.0% – A large number of switches by prescription drugs to OTC status • At the same time it should be noted that in terms of volume the 150 0.0% market continues to expand 2005 2006 2007 2008 Size Growth Sources: IMS Health press release 22 Feb 2008; PharmaHandbook 2008, VOI Consulting 2008, United States Healthcare and Pharma, Global Insight, Oct 2008 27 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 28. Accenture Research Accenture Research Pharma sales by therapeutic category US PMP Overview: Pharmaceuticals Overview Pharmaceutical Retail Sales by Therapeutic Category, 2008 (USD m) 577 25,098 Contracting < -ve growth 2005-2008 389 522 661 2% 100% 2% 694 Underperforming market <6%2003-2008 2% 1,102 3% N/A 0.5% 3% 3% 1,321 3% 4% 2% Out performing Market >6% growth 2003-2008* 1,387 -9% 5% 12% 1,858 6% -7% 7% 1,902 8% -3% 8% 1,995 3% 8% 3,836 16% 15% -2% 3,839 15% 8% Sales ($m) 5,015 Share of total 20% Growth (03-04) -9% Erythropoietins Bisphosphonates Antipsychotics, other Other Monoclonal Anti-platelets, Oral Total Statins Seizure Disorders Calcium Blockers Ace Inhibitors SSRI Proton Pump Insulin Sensitizer Angiotensin II Antibodies Antagonists Inhibitors Source: PharmaHandbook 2008, VOI Consulting * IMS reported 6% growth in retail sales 12m to May-08 $26.8B 28 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 29. Accenture Research Accenture Research Pfizer’s cholesterol reducer Lipitor is by far the best-selling drug on the US market. At the same time, a number of biotech products, such as Amgen’s Aranesp and Enbrel, are rapidly becoming major growth engines US PMP Overview: Pharmaceuticals Overview Leading prescription drugs, 2008, at wholesaler prices Company Class Sales (USD bn) Change (2005-2008) Lipitor Pfizer Statin 8.4 +8% Zocor Merck & Co Statin 4.4 -5% Nexium AstraZeneca Proton pump inhibitor 4.4 +15% Prevacid TAP (Takeda/Abbott) Proton pump inhibitor 3.8 -2% Advair Diskus GlaxoSmithKline Beta 2 agonist 3.6 +22% Plavix Bristol-Myers Squibb Platelet ADP antagonist 3.5 +15% Zoloft Pfizer SSRI 3.1 -2% Epogen Amgen Erythropoietin 3.0 -1% Procrit Johnson & Johnson Erythropoietin 3.0 -9% Aranesp Amgen Erythropoietin 2.8 +46% Enbrel Amgen TNFa inhibitor 2.7 +36% Note: Biotech products shaded Source: IMS National Sales Perspectives, 1/2008 IMS Health 29 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 30. Accenture Research Accenture Research The US prescription drug market is still dominated by US-headquartered companies. However, weak performances by companies like Pfizer and Merck & Co has recently paved the way for some of the larger European companies US PMP Overview: to increase their market share Pharmaceuticals Overview Leading Pharma companies, by US prescription drug sales, 2008 • Pfizer has dominated the US prescription drugs market for many years and has maintained its market share mainly by acquisitions. Examples Sales Change Market Ranking include the acquisition of Warner-Lambert in (USD bn) (2004-2008) share in 2000 2000 and of Pharmacia in 2003 Pfizer 27.2 -12% 10.8% 1 • In the last few years, however, Pfizer’s market share has dropped, mainly due to falling GlaxoSmithKline 19.9 +6% 7.9% 2 productivity, patent expiries and the withdrawal of some marketed products, such as the COX-2 Johnson & Johnson 16.0 -4% 6.3% 6 inhibitor Bextra in 2005 Merck & Co 15.2 0 6.0% 3 • Two other major US companies, Merck and Bristol-Myers Squibb have also lost market AstraZeneca 12.3 +10% 5.1% 5 share recently. In Merck’s case the withdrawal of one of its best-selling products, the COX-2 Novartis 12.3 +11% 4.9% - inhibitor Vioxx in September 2004 marked the Amgen 11.9 +23% 4.7% - beginning of a tough time for the company • This has paved the way both for European Sanofi-Aventis 11.0 +9% 4.4% - companies like Novartis and Sanofi-Aventis, and for biotech companies like Amgen, who Eli Lilly 8.7 +6% 3.4% 8 have all increased their market share over the Bristol-Myers Squibb 8.4 -10% 3.3% 4 last few years. In the case of Novartis, sales of generic drugs within its Sandoz division has contributed to sales growth Source: IMS National Sales Perspectives, 1/2008, IMS Health; IMS 2000 30 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 31. Accenture Research Accenture Research The total number of people employed within the pharmaceutical industry in the US increased rapidly over the last decade. In the last few years, staff reductions, mainly within sales functions has halted this growth US PMP Overview: Pharmaceuticals Overview Employees in the US pharmaceutical industry, in thousands, 1996-2008 • The US drug-producing industry includes some 1,300 companies employing around 290,000 people • During the end of the 1990s, employment in the US 300 291 292 290 pharmaceutical industry increased rapidly following the 289 290 283 strong growth of the US pharmaceuticals market. In 277 279 fact, between 1996 and 2002 industry employment 280 274 274 grew by more than 25% 270 261 • In the last few years, this development has been 260 halted as companies have reduced their staff in some 247 250 functional areas. This is particularly the case within 236 240 sales departments, where the number of sales 229 representatives has been cut in initiatives to enhance 230 sales force efficiency 220 • At the same time, the number of R&D staff has 210 continued to increase as a larger share of the global 200 R&D activity has moved to the US 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: US Bureau of Labour Statistics; Ethical Pharmaceuticals, Fredonia, 2008 31 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 32. Accenture Research Accenture Research R&D activity in US research-based pharmaceutical companies has increased strongly over the last decades. Still, R&D productivity is falling, causing US PMP Overview: companies to look for alternative ways of developing drugs Pharmaceuticals Overview R&D expenditure in the US research-based Pharma • R&D activity in US research-based industry, 1980-2008, $ bn, and as a % of total sales pharmaceutical companies has increased strongly over the last decades, recording a compound annual growth rate (CAGR) of 12.7% 45.0 20% between 1980 and 2005 40.0 39.4 18% 38.9 18% 17% 40.0 16% 17% 17% • In addition, R&D as a share of revenue has 35.7 16% 35.0 14% increased sharply over the same period, 16% although decreasing slightly over the last 14% 13% 30.0 decade 26.0 12% 25.0 • Following this growth, the US has become the 10% engine of global pharmaceutical R&D, as 20.0 evidenced by its improved position compared to 9% 8% 15.2 European R&D 15.0 6% • At the same time, R&D productivity is falling, as 8.4 10.0 4% measured by R&D investment divided by the 4.1 5.0 number of new molecules approved 2% 2.0 • In order to address this development the major 0.0 0% pharmaceutical companies have increased their 1980 1985 1990 1995 2000 2005 2006 2007 2008 collaboration with the biotech industry in addition to reorganising their own research Total R&D R&D as a % of sales departments to increase productivity in-house Note: Data refer to R&D expenditures by PhRMA-members Source: Pharmaceutical Industry Profile 2008, PhRMA 2006; PharmaHandbook 2008, VOI Consulting, 2008 32 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 33. Accenture Research Accenture Research Marketing of pharmaceuticals in the US differ from the practice in most other developed countries mainly by the fact that marketing of prescription drugs directly to the patient is allowed Pharmaceutical marketing spend by category, 2005-2008, USD m • Office promotion (i.e. sales representatives from pharma CAGR companies visiting physicians to promote their products) Category 2005-2008 USD m still accounts for the largest share of pharma companies’ 15,000 14,491 Total 12.5% drug marketing expenditures • However, Direct-to-consumer (DTC) advertising is also 2,408 Samples 15.6% 12,796 an important part of brand-name drug manufacturers' sales strategies in the US Journal 1,956 544 11,061 8.6% advertising • Recently, this practice has been criticized by regulators 917 10,165 480 Hospital and the wider public, partly because of a backlash 1,786 10,000 849 promotion 9.3% against the rising costs of prescription drugs, and also 1,570 437 because of drug-safety concerns following the withdrawal 873 425 of the heavily-promoted COX-2 inhibitor, Vioxx in 2004 702 Office 6,602 • Still, it has not just been DTC advertising that has 11.3% promotion recently come in for increasing scrutiny. Other areas 6,281 which could potentially attract regulatory attention in the 5,327 4,789 5,000 near future include: – the ghost-writing of articles – the sponsorship of medical events – trips for doctors and other opinion-leaders 4,019 DTC 3,230 – pharma lobbying practices 2,679 2,638 advertising 14.5% – the behaviour of pharma companies’ drug-detailing 0 forces 2005 2006 2007 2008 Note: Sample value calculated at ex-manufacturer cost Source: PharmaHandbook 2005, VOI Consulting, 2005; United States Healthcare and Pharma, Global Insight, Oct 2006 33 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 34. Accenture Research Accenture Research Marketing investments differ widely between categories, with the SSRI/SNRI category being the most heavily promoted category in 2004, followed by the Statins category US PMP Overview: Pharmaceuticals Overview Marketing spend by category, 2005-2008, USD m • The SSRI/SNRI (Selective Serotonin Reuptake Inhibitors/Selective Noradrenalin Reuptake Inhibitors) Growth drug category is the largest category in terms of 2003-2004 marketing investment SSRI/SNRI 509 +16% • In 2004-05, the most heavily promoted drugs (by Statins 402 +14% marketing investment) within the SSRI/SNRI category were Lexapro (Forest Laboratories) and Zoloft COX-2 Inhibitors 348 -10% (Pfizer). Lexapro was in fact the most heavily promoted drug on the US market in 2004, with a Proton Pump Inhibitors 346 -11% marketing spend of $168m Angiotensin II 302 0% • The second largest category was Statins, Antagonists Sexual Function underpinned by marketing investments supporting the +76% 239 Disorder launch of Crestor. This drug recorded the third largest +5% marketing spend of all drugs in 2004 Antipsychotics 237 • The marketing expenditures of COX-2 inhibitors -9% Quinolones, systemic 207 decreased as a result of the withdrawal of Vioxx in September 2004. This drug had been the second -3% Steroid, Inhaled nasal 192 most promoted drug in 2003 +22% Macrolides and related 186 • Sexual function disorders was the fastest growing segment, as Viagra faced competition. This started in 0 200 400 600 late 2003 and picked up substantially in 2004 Source: PharmaHandbook 2008, VOI Consulting, 2008 34 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 35. Accenture Research Accenture Research Over the last decades, the market for generic drugs has experienced strong growth and generics now account for more than half of all prescriptions dispensed in the US US PMP Overview: Pharmaceuticals Overview Generic drugs’ share of total number of prescriptions dispensed in the US, 1984-2005 Source: Generic Pharmaceutical Association, 2006 35 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 36. Accenture Research Accenture Research Generic drugs account for around 17% of the total prescription drugs market in value terms, but hold more than half of the market in terms of volume. Measures to increase the use of generics are widely used by health insurers US PMP Overview: Pharmaceuticals Overview Generics’ share of total pharmaceutical sales, by value and volume, 2008 • The US has one of the most developed market for generic drugs in the world. In 2008, generics accounted for around 17% of the total prescription Branded Brands drugs market in value terms, but hold more than half of Generics (82.6%) (9.6%) the market in terms of volume Total Generics • The foundation for the industry was laid by the 1984 (17.4%) Hatch-Waxman act Generics (7.8%) – Under this legislation generic manufacturers are able start developing bioequivalent drugs while the Value original drug is still under patent – Also, as an incentive to generic producers, the first company that successfully files a patent challenge Branded Generics gets a six-month generic exclusivity period. Once Total (10.6%) Brands Generics this period expires, any generic company is free to (45.8%) (54.2%) sell the product and prices fall rapidly Generics (43.6%) Volume Sources: PharmaHandbook 2008, VOI Consulting, 2008; Global Generics Guide: Part 2, Datamonitor, 2008 36 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 37. Accenture Research Accenture Research In 2008, the US generics market was worth around $22bn, equivalent to 9% of the total prescription market. Between 2005 and 2008 the generics market US PMP Overview: recorded a CAGR of 17.5% Pharmaceuticals Overview Generics market value and growth, 2005 – 2008 ($bn) • Between 2005 and 2008 the generics market grew from $13.8bn to $22.3bn, representing a CAGR of 17.5%. During the same period $ bn the total US prescriptions market recorded a CAGR of 9.1% 25.0 0.25 • Sales growth varies significantly from year to year, depending mainly on the degree of patent expiries of branded drugs, but also on the 22% 22.3 implementation of cost containment policies by health insurers 21% 0.2 • Measures to increase the use of generics vary between the different private and public health insurers on the market, but include: 20.0 – Generic substitution is encouraged in the majority of the states 18.5 0.15 to a varying degree. In some states pharmacists are required to dispense generics unless specifically directed otherwise by the 16.8 physician. In other states it is the physician’s responsibility to take the initiative 0.1 10% – Pharmacist incentives are used by many health insurers. Within 15.0 13.8 this arrangement, the level of reimbursement received by the pharmacist is in many cases higher if generics are dispensed 0.05 – Tiered patient co-payments, whereby the amount paid by the patient is lower for generics than for branded products – Supply of free generic drugs for a limited period to encourage 10.0 0 patients to switch from branded drugs. For instance, WellPoint, a 2005 2006 2007 2008 leading US health benefits company, now gives members free generic medication for four to six months Size Growth Sources: PharmaHandbook 2005, VOI Consulting, 2005; IMS Health press releases 21 Feb 2003, 17 Feb 2008 14 Feb 2005, 22 Feb 2006; Global Generics Guide: Part 2, Datamonitor, 2008; Accenture Research analysis 37 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 38. Accenture Research Accenture Research Both patent-holders and generic manufacturers are leveraging the existing legislation at a maximum, while lobbying for amendments to this legislation US PMP Overview: Pharmaceuticals Overview Examples of legislation affecting the US Generics industry • Ever since the implementation of the Hatch-Waxman act in 1984, generic manufacturers and patent-holders have found ways to use the existing legislation to their advantage. In addition both sides have lobbied strongly for amendments to the act • For instance, patent-holders have developed a strategy called authorised generics. Under this strategy, the patent-holder supplies the product to a generic company for distribution, allowing the patent-holder to compete during the 180-day exclusivity period. As the majority of generic company profits Pro-patent legislation are made during the exclusivity period, the ultimate result is a reduction in incentive for challenging patents early. • Authorised generics • Generic manufacturers have complained that by launching allowed authorized generics patent-holders are using a loop-hole in the • 30-month patent Pro-generic legislation Hatch-Waxman act, but the FDA ruled against one such extension retained petition in 2004 • The Hatch-Waxman act • At the same time, the Bush administration has made concessions to the generic drug industry: • Limitation of patent – Firstly, the FDA has received increasing funding for its extension to one 30- generic drugs programme over the past several years month period – President Bush also issued a regulation change stating that • Increased FDA funding brand-name manufacturers have the right to just one 30- for approval of generic month extension to their patent when challenging the drugs legality of a generic equivalent Sources: PharmaHandbook 2005, VOI Consulting, 2005; Global Generics Guide: Part 2, Datamonitor, 2006 38 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 39. Accenture Research Accenture Research US PMP Overview: Generics market, cont. Pharmaceuticals Overview Generics companies, by number of US prescriptions, 2008 • The market for generic drugs is dominated by a few Prescriptions Change Market large companies and is more concentrated than the (million) (2004-2008) share market for branded drugs Teva 213 +6% 13% • The largest company on the market is the Israeli generics group Teva. In 2006, Teva acquired, Ivax, Mylan 203 +5% 13% one of the largest US companies Watson 148 +5% 9% • One of the other major players, Sandoz, is owned by the Swiss pharmaceuticals company Novartis. In the Sandoz 133 +3% 8% last few years, other major pharmaceutical companies have followed this strategy and Ivax* 84 +21% 5% increased their investments in the generics industry: Mallinckrodt 73 +15% 5% – Example…. – XXX… Alpharma 69 -3% 4% Qualitest 69 +18% 4% Par 68 +21% 4% Barr 56 -1% 4% Other 497 +16% 31% Total 1,613 +10% 100% Note: Ivax was acquired by Teva in 2008 Source: PharmaHandbook 2005, VOI Consulting, 2008 39 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 40. Accenture Research Accenture Research The US biotech market is a large and fast-growing industry, dominated by a small number of very large biotech companies US PMP Overview: Pharmaceuticals Overview Biotech sales (at wholesale prices) and annual growth rates, 2005-2008 ($bn) • The US market for biotechnology products was worth $32.8 bn in 2008, up from $19.6 bn in 2005. This is $ bn equivalent to a compound annual growth rate (CAGR) 35.0 0.25 of 18.7% 32.8 • The lion’s share of these sales were recorded by 22.0% products sold by the major biotech companies. Some of 30.0 0.2 28.0 the main contributors were: Aranesp, Enbrel and 17.2% Neulasta from Amgen, and Rituxan from Genentech 17.0% • There are a number of driving forces behind the strong 25.0 0.15 23.9 growth recorded by biotech drugs over the last few years: 19.6 20.0 0.1 – While the large pharma companies struggle with their productivity, the biotech industry has remained productive 15.0 0.05 – Biologic products have a large share of high-growth therapeutic areas focused on elderly people, such as AIID (Arthritis, Immune and Inflammatory Disorders) 10.0 0 and oncology 2005 2006 2007 2008 – The lack of competition from generic drugs Size Growth Sources: IMS Health press releases 21 Feb 2008, 17 Feb 2008, 14 Feb 2008, 22 Feb 2008; United States Healthcare and Pharma, Global Insight, Oct 2008; PharmaHandbook 2008, VOI Consulting 2008; Pricing and Reimbursement in the US, Datamonitor, 2008 40 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 41. Accenture Research Accenture Research The US is the engine of the global biotech industry, with the large majority of biotech R&D being carried out there. The main biotech clusters are located around strong universities in coastal states US PMP Overview: Pharmaceuticals Overview Main US Biotech clusters • The United States is the driving force behind the global biotechnology industry, with some 63% of biotech R&D being carried out there • The main clusters of biotech activity are San Massachusetts Francisco, Maryland, San Diego, Boston, Washington New York Seattle and North Carolina, all of which are Connecticut based around strong research bases such as Pennsylvania California University and the Massachusetts Institute of Technology (MIT) Maryland New • Government funding for biotech research is Jersey substantial: the National Institutes of Health North Carolina (NIH) received $15.6 billion in federal funding California in 1999, rising to $27 billion in 2003. The NIH Georgia consists of 27 institutes, employing 15,000 people Texas • In addition, many states offer tax incentives for Florida biotech R&D. Those states with the most attractive tax breaks tend to be the ones with Size of bubble indicates the number of the largest biotech sectors. California, for Biotech companies in the state: example, has introduced a number of incentives such as exemption from a 6% sales 350-400 250-300 50-100 25-50 companies companies companies companies tax Sources: Strength and Stability – The Americas Perspective, Ernst & Young, 2006; United States Healthcare and Pharma, Global Insight, Oct 2006 41 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 42. Accenture Research Accenture Research The US market for OTC medicines only accounts for around 6% of the total US drugs market, but is accelerating growth mainly as a result of cost- containment measures taken by health insurers US PMP Overview: Pharmaceuticals Overview Sales of OTC medicines (at retail selling prices) and annual growth 2004-2008 ($bn) • The US market for Over-the-counter (OTC) medicines was worth around $19bn at retail selling prices in 2008. This is equivalent to around 4% of the total US pharmaceuticals market 20 0.05 • At the same time, approximately 60% of all drugs sold in the US are 4.7% non-prescription drugs. A total of 100,000 drugs are marketed OTC 0.045 • For a long time, growth of the OTC market has been essentially in 19 18.8 0.04 line with general inflation. However, in the last few years the annual 3.8% growth rate has increased for a number of reasons: 0.035 – As patient co-payments of prescription drugs are increasing 3.3% 18 many patients seek cheaper forms of treatment with greater 18 0.03 frequency. Using OTC drugs has the advantage of cutting out 17.3 0.025 physicians’ charges and OTC prices are generally lower 2.1% – Some of the major health insurers have recently agreed to cover 17 0.02 16.7 OTC drugs in their plans: 16.4 0.015 • In 2004 the pharmacy benefit manager Medco Health Solutions announced that it would add a number of OTC 16 0.01 drugs to its cost-saving scheme 0.005 • In September 2004, the health maintenance organisation Health Alliance Medical Plans agreed to cover Wyeth’s 15 0 antihistamine Alavert and OTC Prilosec 2004 2005 2006 2007 2008 – The FDA has announced that it is looking to increase the Size Growth number of blockbusters switched to OTC status (through enforcement) as it has already done with Prilosec and Claritin Sources: OTC Pharmaceuticals in the United States, Datamonitor, Oct 2005; United States Healthcare and Pharma, Global Insight, Oct 2006 42 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 43. Accenture Research Accenture Research The US authorities have begun to relax the rules for Rx-to-OTC switching. This change is mainly driven by the desire by governments and health insurers to curb expenditures on medicines US PMP Overview: Pharmaceuticals Overview Recent Rx-to-OTC switches in the US • Historically, tough safety and efficacy regulations on Rx-to-OTC switching have limited the types of new drugs eligible for this often lucrative lifecycle-extension option. OTC • But times are changing, and authorities are beginning to relax the rules manufacturer Notes for a number of reasons: Claritin Schering- Approved in Nov – Pressure from manufacturers, pushing to squeeze as much return Plough; Andrx 2002 on investment as possible after patent expiry – Cost-containment policies on the part of governments and insurers Prilosec Procter & Brand owned by have long aimed for more responsible self-medication in an effort to Gamble AstraZeneca; alleviate costly and unnecessary physician visits and to shift the approved in June burden of drug costs further on to the consumer 2003 – Consumers also gain in this scenario in terms of wider access to Plan B Barr OTC switch denied medicines, greater price competition, and time savings (and often Laboratories by FDA in 2004 and cost savings) associated with pharmacist—rather than medical— again in August 2005 consultations • Examples of recent switches include drugs which have set precedents in Allegra Sanofi-Aventis Under consideration the industry for different reasons: for OTC switch by – The switch of Claritin was special since it was initiated through a FDA petition to switch non-sedating antihistamines filed by a managed- care group Zyrtec UCB Under consideration Pharmaceuticals for OTC switch by – Prilosec was the first proton pump inhibitor to be switched. This was FDA Safety concerns are high with this type of drug, particularly due to the risk of misdiagnosis in the case of more serious conditions Sources: Should I Stay or Should I Go?, Global Insight, 31 Jul 2006; United States Healthcare and Pharma, Global Insight, Oct 2008 43 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 44. Accenture Research Accenture Research The OTC market is dominated by the Cough and cold preparations segment. Growth in this segment is driven mainly by Rx-to-OTX switches of allergy remedies, such as Schering-Plough’s Claritin in 2001 US PMP Overview: Pharmaceuticals Overview Segment shares of OTC market, by value, 2008 • Cough and cold preparations is the largest segment of the US OTC market, representing around 23% of total sales in Other Cough and cold 2004 (13.0%) preparations • The Cough and old segment includes allergy and hay (22.9%) Traditional fever remedies, such as Schering-Plough’s Claritin, which medicines was switched to OTC in 2002 following a decision by the (12.8%) FDA. Currently, the FDA is considering to switch Sanofi- Aventis’ Allegra and Pfizer’s Zyrtec to OTC status Analgesics • Vitamins and Minerals is another major segment, (12.8%) accounting for almost 20% of sales. This segment is gaining from current trends of promoting preventive medicine. On the other hand, growth is restrained by the ongoing debate over actual benefits and proper dosage Vitamins and minerals levels Medicated skin (19.6%) products • Indigestion preparations received a boost when (12.9%) Indigestion AstraZeneca’s blockbuster drug Prilosec was switched to preparations OTC status in 2003 (13.2%) Market value (at Retail Selling Price): $18.8bn Sources: OTC Pharmaceuticals in the United States, Datamonitor, Oct 2005; United States Healthcare and Pharma, Global Insight, Oct 2006; Over-the-Counter Pharmaceutical Chemicals, Freedonia, 2006 44 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 45. Accenture Research Accenture Research Until recently, parallel importation of pharmaceuticals has been illegal in the US. Still, some trade has occurred as the authorities have tacitly allowed importation of drugs for personal use… US PMP Overview: Pharmaceuticals Overview Parallel imports’ share of total pharmaceutical sales, 2008 • The practice of re-importing drugs from countries where prices are lower (parallel imports) is an established way of lowering health payers’ drug bills in many countries (particularly in Europe) and UK 17% these products are generally sold in regular pharmacies • In the US, however, parallel importation of medicines has been illegal for many years as US authorities have claimed that they Denmark 15% cannot guarantee the safety of imported drugs. The decision may also have been influenced by pharmaceutical companies, who would see their profits drop if re-importation would be allowed Netherlands 13% • Nonetheless, for years Americans living close to the Canadian border have crossed the border to purchase cheaper Canadian drugs. More recently they have also been buying these drugs over Sweden 12% the Internet, mainly from Canada and Australia. A few states have even encouraged parallel importation and have set up websites that link patients with pharmacies abroad Norway 7% • Although technically illegal, US residents have been allowed to continue with the activity because of the FDA’s discretionary policy Germany 5% over personal drug imports (due to a lack of resources, the FDA tolerates a maximum of three months supply for personal use), and no patient has been prosecuted for personal use US 1% • However, commercial parallel importation into the US is not currently taking place due to its illegality. This is the main factor that is keeping the overall level of parallel importation in the US low 0% 5% 10% 15% 20% Source: The Pharmacy Industry in Figures – 2008 Edition, European Federation of Pharmaceutical Industries and Associations (EFPIA), June 2006 45 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 46. Accenture Research Accenture Research Congress recently passed a bill allowing re-importation of drugs from Canada for personal use. It remains to be seen what will be the impact of this US PMP Overview: new legislation Pharmaceuticals Overview Types of parallel importation from Canada • For a long time, one of the largest and most visible sources of parallel allowed in the new US legislation importation in the US has been from pharmacies in Canada, where drug prices are considerably lower. Indeed, branded drug prices were estimated at 81% higher in the US compared to Canada and seven Canadian online Re-importation by other Western countries in 2003 pharmacies US citizens for • Pharmaceutical companies have been targeting parallel importation from Canada. Supply management strategies have been the single personal use most successful strategy in limiting drug importation in the US so far, Cross-border sales with drug exports from Canadian Internet pharmacies declining as a in 2008 estimated at (90-day drug supply result $460m allowed) • Despite opposition from drugs companies, numerous bills proposing the legalization of parallel importation from Canada have been introduced into Congress in the last few years • However, parallel importation has remained illegal as authorities have cited safety concerns as the main reason to keep the legislation unchanged. This case was strengthened by the withdrawal of Vioxx in 2004 (although this was not related to drug imports) • In September 2006, Congress finally passed a bill allowing Americans visiting Canada to bring back a 90-day supply of prescription drugs for personal use. In addition, the bill stops customs officials from seizing packages containing prescription drugs posted from Canadian pharmacies • Now, it remains to be seen what impact this will have on drug imports. Re-importation from Canada had already dropped prior to the decision for mainly two reasons: – The introduction of Medicare Part D reduced the demand for cheap drugs as many people who previously imported drugs back from Canada now receive subsidised drugs at home – The Canadian dollar has become stronger compared to the US dollar, which has made Canadian drugs more expensive Sources: Pricing and Reimbursement in the US, Datamonitor, 2006; Popping pills, The Economist, 7 Oct 2006 46 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 47. Accenture Research Accenture Research Agenda Agenda • US Overview • US PMP Overview – PMP Expenditures – Regulatory System – Pharmaceuticals Overview – Medical Products Overview – Distributor Overview • Key PMP Players • US PMP Outlook • Appendix 47 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 48. Accenture Research Accenture Research The US market for Medical Products is the largest in the world representing almost 50% of global sales US PMP Overview: Medical Products Overview The global Medical Products market, 2008$ bn • The global healthcare equipment and supplies RoW$3.5 bn market grew by 4.7% in 2008 to reach a value of (1.9%) $186.4 billion Japan $33.1 bn (17.7%) USA $86.3 bn • The market is projected to reach $230.5 billion by (46.3%) 2010, an increase of 23.7% between 2005 and 2010 • Disposable equipment forms the largest segment of the market, generating 40.5% of global sales • Global market share is concentrated among four major players: Medtronic, Johnson and Johnson, Europe $63.5 bn Baxter and GE Healthcare which together hold more (34.1%) than 21% of total global revenues Global market, 2008: $186.4 bn Sources: Healthcare Equipment & Supplies in the United States. Datamonitor. May, 2008. 48 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 49. Accenture Research Accenture Research The US Medical Equipment and Supplies market is projected to grow at a steady rate of 4.1% (CAGR) between 2005 through 2010 US PMP Overview: Medical Products Overview US Medical Equipment & Supplies forecast, 2005-2010 $ bn • The US healthcare supplies and equipment industry generated total revenues of $86.3 billion in CAGR 2005-2010: 4.1% 120 2005, this represents a compound annual growth rate (CAGR) of 4.6% for the five-year period 105 101 spanning 2005-2010 97 100 93 90 • Unhealthy lifestyles and an aging demographic are 86 leading to higher incidences of chronic diseases, 80 whose diagnosis and treatment is a key driver of demand for medical equipment and supplies • Healthcare spending is also increasing, and the 60 introduction of the Medicare Part D scheme makes medical treatment accessible to a broader socio- 40 economic spectrum of patients which analysts believe will boost industry revenues going forward • A switch in consumer spending patterns towards 20 low-margin, private label over-the-counter (OTC) products and supplies is anticipated to negatively impact revenue growth in the future 0 2005 2006 2007 2008 2009 2010 Source: Healthcare Equipment & Supplies in the United States. Datamonitor. May, 2006. 49 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 50. Accenture Research Accenture Research Almost half of US Medical Device sales are concentrated between two categories: Orthopaedics and Cardiovascular US PMP Overview: Medical Products Overview US Medical Products Sales, 2008 • Sales of disposable equipment generate the largest revenues for the United States health care equipment Other and supplies market, accounting for 40.1% of the Disposable 30.6% market's revenues equipment 40.1% • Industry analysts believe that as US consumers continue to embrace self-treatment and preventive medicines, disposable medical supplies will remain a key driver of growth moving forward • Spinal care products and intra-cardiac defibrillators (ICDs) form under-developed sectors of the market - Technical aids Technological innovation, and new Centers for 7.0% Medicare and Medicaid Services (CMS) regulations, have allowed for greater penetration of these Opthalmic IV diagnostics equipment 6.7% products, increasing revenues for manufacturers 11.3% through higher sales volumes US market, 2008: $86.3 bn Sources: Healthcare Equipment & Supplies in the United States. Datamonitor. May, 2006. 50 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 51. Accenture Research Accenture Research US Medical products market, cont. US PMP Overview: Medical Products Overview US Medical Technology Industry Trade Statistics Total US Exports of Medical Device & Diagnostics Industry 1989 – 2003-calculate by moving average 2004-2008-Calculate by moving average method method Source: Medical Technology Industry at a Glance. AdvaMed, 2008. Source: Medical Technology Industry at a Glance. AdvaMed, 2004. 51 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 52. Accenture Research Accenture Research Almost 38% of Medical Products establishments are concentrated within five states; California, Texas, Florida, Pennsylvania and New York. Employment in the US Medical Equipment and Supplies industry experienced a decline US PMP Overview: between 2001 – 2004, but is now on the rebound Medical Products Overview US Medical Equipment & Supplies US Medical Equipment & Supplies Establishments, 2008 Employment 2000 – 2008, 000’s Total number of establishments = 12,160 315 310 756 515 305 1,883 300 644 811 295 2003 2004 2005 2006 2007 2008 Sources: US Census Bureau; US Bureau of Labor Statistics 52 © 2008 Accenture. All rights reserved. Adhikari,Dawn Source: EUCOMED & member associations 2004 & Melberg - accenture H&LS consultant
  • 53. Accenture Research Accenture Research Agenda Agenda • US Overview • US PMP Overview – PMP Expenditures – Regulatory System – Pharmaceuticals Overview – Medical Products Overview – Distributor Overview • Key PMP Players • US PMP Outlook • Appendix 53 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 54. Accenture Research Accenture Research Pharmacy chain stores is the main distribution channel for prescription drugs in the US, accounting for 35% of the market in 2008. Clinics and Mail order (including online sales) are the fastest growing channels US PMP Overview: Pharmaceuticals Overview Prescription Drug Market Share by Distribution Channel, 2008(and CAGR 2001-2008) • Prescription pharmaceuticals in the US are distributed to end consumers through a number of channels Other • The largest distribution channel is pharmacy chain stores, (CAGR: 14%) which accounted for 35% of the market in 2008. Sales Pharmacy chain through this channel recorded a compound annual growth Food stores 8% stores rate (CAGR) of 10% between 2001 and 2008 (CAGR: 10%) (CAGR: 10%) • Combined retail sales (i.e. chain and independent 9% pharmacies plus food stores) accounted for nearly 60% of Clinics 35% the distribution of pharmaceuticals to end consumers (CAGR: 18%) 10% • One of the fastest growing channels of prescription drug distribution is the mail service segment, including online sales. This segment reached $36.9 billion in sales in 2008, representing a CAGR of 18% between 2001 and 2008 Non-federal 10% • Prescription drug sales in clinics also recorded a CAGR of hospitals 18% between 2001 and 2008. This can be explained by (CAGR: 11%) the fact that sales in clinics and other institutions are driven 15% 14% in large part by professionally administered biologics, sales Online/Mail order Independent of which have been increasing by 25% per year in recent (CAGR: 18%) pharmacies years (CAGR: 6%) Total value, 2008 (at wholesaler prices): $251.8 bn Sources: IMS National Sales Perspectives, 1/2006, IMS Health 54 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 55. Accenture Research Accenture Research Pharmacies are growing in the US, and may be found in stand-alone locations as well as supermarkets and general retail stores US PMP Overview: Pharmaceuticals Overview Number of pharmacies per 100,000 inhabitants, 2004 • There are more than 55,000 pharmacies in the US which provide employment to more than 130,000 United States 60 pharmacists France 37 • Most Americans live within five miles of a community pharmacy Italy 29 • Even with mail-order sales gaining market share, Germany 26 analysts expect chain drug stores to continue to Switzerland 23 capture market share over the next three to five years UK 21 • CVS is currently the number one drugstore chain in Finland 15 the US, by store count and holds over 10% of the market according to volume of prescriptions sold Austria 13 • As mail-order sales increase, retail chains are going Norway 12 online and expanding their in-store outlets to Netherlands 10 supermarkets and general retail stores Sweden 10 Denmark 6 0 20 40 60 80 Sources: Global Insights Report: United States (Healthcare and Pharma). October, 2008. CVS Corporation. Deutsche Bank. November, 2008; Drugstore Chain Market Overview. Knoweledge Source. October, 2008. 55 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 56. Accenture Research Accenture Research The US Pharmaceutical Distribution market experienced a prolonged period of consolidation between 1995 to 2008, resulting in a highly concentrated competitive landscape US PMP Overview: Pharmaceuticals Overview The US market for pharmaceutical wholesales, 2008 • Three major companies account for over 90% of the national pharmaceutical wholesale marketplace and approximately 71% of all pharmaceutical market distribution Other • Direct manufacturing and regional wholesalers compete 9% McKesson in a highly fragmented market for the remaining market share 29% • Operating margins have eroded over the last several Direct 20% years due to intense competition among channel participants, an addiction to spec buying to drive higher gross margins which fueled a lack of discipline in pricing to customers, and consolidation among manufacturers. • In recent years the industry has migrated to a fee-for- service (FFS) payment model, which according to 20% 22% industry analysts drives lower margins but increases AmerisourceBergen earnings visibility and cash flow Cardinal Health Source: Deutsche Bank, 2008 56 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 57. Accenture Research Accenture Research Agenda Agenda • US Overview • US PMP Overview • Key PMP Players – Key Pharmaceutical Players – Key Medical Products Players – Key Distribution Players • US PMP Outlook • Appendix 57 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 58. Accenture Research Accenture Research Major US PMP players US PMP Overview: Key PMP Players Top 15 US Pharmaceuticals and Medical Products players, by H&LS sales 2008 Company H&LS sales ($m) EBIT margin No. of employees Market value ($m) Main market segment (Group) McKesson 88,050 1.3% 26,400 15,376 Pharma wholeselling Cardinal Health 81,364 2.3% 55,000 26,635 Pharma wholeselling AmerisourceBergen 54,577 1.0% 12,300 9,411 Pharma wholeselling Pfizer 51,298 22.5% 106,000 201,827 Pharmaceuticals Johnson & Johnson 50,514 26.2% 116,200 200,715 Pharma, Med. Products Walgreen 47,409 5.7% 179,000 43,929 Retail pharmacies CVS 37,006 5.5% 148,000 25,209 Retail pharmacies Abbott Laboratories 22,338 19.5% 59,735 74,526 Pharma, (Med. Prod) Merck & Co 22,012 25.7% 61,500 99,318 Pharmaceuticals Bristol-Myers Squibb 19,207 21.8% 43,000 48,161 Pharmaceuticals Wyeth 18,756 25.9% 49,732 70,634 Pharmaceuticals Riteaid 17,271 1.9% 38,448 2,320 Retail pharmacies Eli Lilly 14,645 19.3% 41,600 64,704 Pharmaceuticals Amgen 12,430 40.0% 16,500 86,564 Pharmaceuticals Medtronic 11,292 27.2% 35,733 55,674 Medical Products Note: GE Healthcare with annual sales of $15,153 is headquartered in the UK Sources: OneSource; Evaluate Pharma 58 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 59. Accenture Research Accenture Research Agenda Agenda • US Overview • US PMP Overview • Key PMP Players – Key Pharmaceutical Players – Key Medical Products Players – Key Distribution Players • US PMP Outlook • Appendix 59 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 60. Accenture Research Accenture Research Pfizer Key PMP Players: Pls check the latest BI from Accenture neural network Key Pharmaceutical Players Financial highlights 2005 Pharma sales by therapeutic area (actual and expected) CAGR Group sales: $51,298m (-2.3% from 2004) 2005- 2005(a) 2010(e) 2010 Therapeutic area Pharma sales: $46,682m (-3.7% from 2004) Estimated US pharma (Rx) sales: $23,443m 41.2% 36.5% -2.2% Cardiovascular Group EBIT margin: 22.5% 15.2% 15.8% 1.0% Central Nervous System Number of employees: 106,000 10.7% 11.1% 1.0% Systemic Anti-infectives Market Value: $201,827m (as of 20 Oct 2006) 6.7% 7.1% 1.1% Genito-Urinary R&D spend (% of Pharma sales): 14.9% 5.3% 6.7% 4.8% Musculoskeletal 4.5% 6.1% 6.6% Best-selling drugs (actual and expected) Oncology & Immunomodulators 4.0% 1.0% -24.1% Respiratory Sales Sales 2005 2010 3.6% 6.2% 11.5% Endocrine Product ($m) Product ($m) 3.3% 4.3% 5.9% Sensory Organs Lipitor 12,187 Lipitor 10,673 0.9% 0.7% -5.5% Blood Norvasc 4,706 Lyrica 2,842 0.5% 0.4% -6.2% Dermatology Zoloft 3,256 Lipitor-torcetrapib 2,504 0.5% 0.5% 1.2% Gastro-Intestinal Zithromax 2,025 Celebrex 2,335 3.6% 3.6% 0% Other Celebrex 1,730 Xalatan 1,586 100% 100% 0.1% Total WW Rx & OTC Sales Sources: Evaluate Pharma, Oct 2006; OneSource 60 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 61. Accenture Research Accenture Research Johnson & Johnson Key PMP Players: Key Pharmaceutical Players Pls check the latest BI from Accenture neural network Financial highlights 2005 Pharma sales by therapeutic area (actual and expected) CAGR Group sales: $50,514m (+6.7% from 2004) 2005- 2005(a) 2010(e) 2010 Therapeutic area Pharma sales: $24,696m (+0.7% from 2004) Estimated US pharma (Rx) sales: $14,478m 41.6% 36.2% 1.2% Central Nervous System Group EBIT margin: 26.2% 13.8% 11.2% -0.1% Blood Number of employees: 116,200 9.1% 12.5% 10.8% Musculoskeletal Market Value: $200,715m (as of 20 Oct 2006) 8.5% 13.6% 14.4% Systemic Anti-infectives R&D spend (% of Pharma sales): 17.9% 6.5% 6.1% 2.7% Gastro-Intestinal 6.2% 5.3% 0.7% Best-selling drugs (actual and expected) Genito-Urinary 2.1% 5.9% 27.9% Oncology & Immunomodulators Sales Sales 2005 2010 1.8% 1.3% -2.0% Dermatology Product ($m) Product ($m) 1.0% 0.3% -19.7% Cardiovascular Risperdal 3,552 Remicade 3,345 9.4% 7.7% 0% Other Procrit/Eprex 3,324 Procrit/Eprex 2,616 100% 100% 4.1% Total WW Rx & OTC Sales Remicade 2,065 Risperdal 2,434 Tylenol 1,727 Paliperidone ER 2,105 Topamax 1,680 Levaquin 1,796 Sources: Evaluate Pharma, Oct 2006; OneSource 61 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 62. Accenture Research Accenture Research Abbott Laboratories Key PMP Players: Key Pharmaceutical Players Pls check the latest BI from Accenture neural network Financial highlights 2005 Pharma sales by therapeutic area (actual and expected) CAGR Group sales: $22,338m (+13.4% from 2004) 2005- 2005(a) 2010(e) 2010 Therapeutic area Pharma sales: $15,321m (+12.7% from 2004) Estimated US pharma (Rx) sales: $9,768m 19.6% 16.9% 0.1% Systemic Anti-infectives Group EBIT margin: 19.5% 17.2% 20.5% 6.9% Musculoskeletal Number of employees: 59,735 12.9% 11.3% 0.6% Central Nervous System Market Value: $74,526 m (as of 20 Oct 2006) 9.9% 13.9% 10.4% Cardiovascular R&D spend (% of Pharma sales): 7.7% 6.6% 0.3% -45.2% Genito-Urinary 6.3% 6.1% 2.6% Best-selling drugs (actual and expected) Endocrine 3.0% 3.4% 5.7% Gastro-Intestinal Sales Sales 2005 2010 1.7% 9.3% 45.7% Oncology & Immunomodulators Product ($m) Product ($m) 0.3% 0.1% -11.9% Respiratory Humira 1,400 Humira 3,681 0.1% 0% - Blood Mobic 1,232 TriCor 1,605 22.5% 18.1% -1.2% Other Depakote 1,096 Kaletra 1,372 100% 100% 3.2% Total WW Rx & OTC Sales Biaxin/Klacid 1,065 Depakote 1,066 Kaletra 1,005 ABT-874 750 Sources: Evaluate Pharma, Oct 2006; OneSource 62 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 63. Accenture Research Accenture Research Merck & Co Key PMP Players: Key Pharmaceutical Players Financial highlights 2005 Pharma sales by therapeutic area (actual and expected) Pls check the latest BI from Accenture neural network CAGR Group sales: $22,012m (-4.1% from 2004) 2005- 2005(a) 2010(e) 2010 Therapeutic area Pharma sales: $22,012m (-4.1% from 2004) Estimated US pharma sales: $12,767m 36.9% 12.7% -15.9% Cardiovascular Group EBIT margin: 25.7% 15.7% 2.8% -26.3% Musculoskeletal Number of employees: 61,500 15.2% 28.5% 18.1% Systemic Anti-infectives Market Value: $99,318m (as of 20 Oct 2006) 13.5% 18.2% 10.5% Respiratory R&D spend (% of Pharma sales): 16.8% 3.5% 2.0% -7.1% Sensory Organs 3.4% 1.4% -12.4% Best-selling drugs (actual and expected) Genito-Urinary 1.6% 3.2% 20.2% Central Nervous System Sales Sales 2005 2010 1.3% 1.0% -2.0% Dermatology Product ($m) Product ($m) 0.4% 0.3% -3.4% Blood Zocor 4,382 Singulair 4,901 0.4% 1.0% 26.3% Gastro-Intestinal Fosamax 3,191 Cozaar 2,031 0% 6.0% NA Endocrine Cozaar 3,037 Gardasil 1,408 0% 6.0% NA Oncology & Immunomodulators Singulair 2,976 Varivax 1,329 8.3% 16.9% 20.0% Other Proscar 741 Januvia 1,226 100% 100% 4.1% Total WW Rx & OTC Sales Sources: Evaluate Pharma, Oct 2006; OneSource 63 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 64. Accenture Research Accenture Research Bristol-Myers Squibb Key PMP Players: Key Pharmaceutical Players Pls check the latest BI from Accenture neural network Financial highlights 2005 Pharma sales by therapeutic area (actual and expected) CAGR Group sales: $19,207m (-1.0% from 2004) 2005- 2005(a) 2010(e) 2010 Therapeutic area Pharma sales: $16,010m (-2.5% from 2004) Estimated US pharma (Rx) sales: $8,140m 26.7% 30.9% 6.2% Blood Group EBIT margin: 21.8% 24.7% 11.1% -12.1% Cardiovascular Number of employees: 43,000 19.2% 18.9% 2.8% Systemic Anti-infectives Market Value: $48,161m (as of 20 Oct 2006) 10.2% 23.3% 21.8% Oncology & Immunomodulators R&D spend (% of Pharma sales): 16.7% 2.4% 1.4% -7.0% Central Nervous System 0.8% 0% NA Best-selling drugs (actual and expected) Dermatology 0.7% 2.4% 31.2% Endocrine Sales Sales 2005 2010 0.5% 0% NA Musculoskeletal Product ($m) Product ($m) 14.8% 12.0% -1.0% Other Plavix 3,823 Plavix 5,255 100% 100% 3.2% Total WW Rx & OTC Sales Pravachol 2,256 Avapro 1,341 Avapro 982 Reyataz 1,258 Taxol 747 Orencia 1,017 Reyataz 696 Erbitux 960 Sources: Evaluate Pharma, Oct 2006; OneSource 64 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 65. Accenture Research Accenture Research Agenda Agenda • US Overview • US PMP Overview • Key PMP Players – Key Pharmaceutical Players – Key Medical Products Players – Key Distribution Players • US PMP Outlook • Appendix 65 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 66. Accenture Research Accenture Research Johnson & Johnson Key PMP Players Key Medical Products Players Group sales: $50,514m (+6.7% from 2004) Medical Products sales: $19,096m (+13.1% from 2004) Pls check the latest BI from Accenture neural network US sales: $28,377m (56.2% of total sales) EBIT margin: 26.2% Number of employees: 116,200 Market Value: $201,827m (as of 20 Oct 2006) R&D spend: 12.5% Johnson & Johnson is engaged in the manufacture and sale of a range of products in the healthcare field and has more than 230 operating companies. The Company operates in three segments: Consumer (18% of group sales); Pharmaceutical (44.2%); and Medical Devices and Diagnostics (37.8%). In May 2006, Ethicon, a Johnson & Johnson company, acquired Vascular Control Systems, Inc., which is focused on developing medical devices to treat fibroids and to control bleeding in obstetric and gynaecologic applications. For the nine months ended 1 October 2006, Johnson & Johnson's revenues rose 5% to $39.64bn. Net income rose 12% to $8.89bn. Revenues reflect an increase in sales from Consumer segment, higher sales from Pharmaceuticals segment and increased revenue from Med Devices & Diagnostics segment. Net income also reflects a decrease in in-process research & development expenses and higher net interest income. Source: 66 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 67. Accenture Research Accenture Research Medtronic Key PMP Players Key Medical Products Players Group sales: $11,292m (+17.3% from 2004) Medical Products sales: $11,292m (+17.3% from 2004) Pls check the latest BI from Accenture neural network US sales: $7,626m (67.5% of total sales) EBIT margin: 27.2% Number of employees: 35,733 Market Value: $55,674m (as of 20 Oct 2006) R&D spend: 9.9% Medtronic, Inc. is engaged in medical technology. The Company functions in seven operating segments that manufacture and sell device-based medical therapies: Cardiac Rhythm Disease Management (46.1% of group sales), Spinal and Navigation (19.9%), Neurological (9.0%), Vascular (8.3%), Diabetes (6.4%), Cardiac Surgery (5.9%) and Ear, Nose and Throat (4.4%). For the three months ended 28 July 2006, Medtronic, Inc.'s revenues rose 8% to $2.9B. Net income rose 87% to $599M. Revenues reflect higher sales from Spinal & Navigation due to the acceptance of INFUSE Bone Graft and increased turnover from Neurological & Ear due to growth in the Activa Therapy. Net income also reflects the absence of purchased in-process research & development costs and increased interest income. Source: 67 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 68. Accenture Research Accenture Research Baxter Key PMP Players Key Medical Products Players Group sales: $9,849m (+3.6% from 2004) Medical Products sales: $9,849m (+3.6% from 2004) Pls check the latest BI from Accenture neural network US sales: $4,383m (44.5% of total sales) EBIT margin: 15.9% Number of employees:47,000 Market Value: $30.010m (as of 20 Oct 2006) R&D spend: 5.4% Baxter International Inc. assists healthcare professionals and their patients with the treatment of complex medical conditions, including haemophilia, immune disorders, infectious diseases, cancer, kidney disease, trauma and other conditions. Baxter's products are used by hospitals, clinical and medical research laboratories, blood and plasma collection centres, kidney dialysis centres, rehabilitation centres, nursing homes, doctors' offices and by patients at home under physician supervision. Baxter's operations are divided in three business segments: Medication Delivery (40.5% of group sales), BioScience (39.1%), and Renal (20.4%). The Company manufactures products in 28 countries and sells them in over 100 countries. For the nine months ended 30 September 2006, Baxter’s revenues rose 3% to $7.62B. Net income rose 45% to $965M. Revenues reflect an increase in sales from international market in Bioscience business and favourable impact of foreign exchange on sales. Net income also reflects decreased cost of goods sold, lower interest payable, the absence of restructuring adjustments and decreased other expenses. Source: 68 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 69. Accenture Research Accenture Research Tyco Key PMP Players Key Medical Products Players Group sales: $39,727m (+3.4% from 2004) Medical Products sales: $9,543m (+4.8% from 2004) Pls check the latest BI from Accenture neural network US sales: $19,635m (49.4% of total sales) EBIT margin: 12.3% Number of employees: 247,900 Market Value: $59,152m (as of 20 Oct 2006) R&D spend: Not available Tyco International Ltd. is a diversified manufacturing and service company. It operates in four business segments: Electronics (30.7% of group sales}, Fire and Security (29.0%}, Healthcare (24.0%}, and Engineered Products and Services (16.3%}. The Healthcare division designs, manufactures and distributes medical devices and supplies, imaging agents, pharmaceuticals, and adult incontinence and infant care products. During the fiscal year ended September 30, 2005 (fiscal 2005), Tyco divested 18 businesses, including the sale of the Tyco Global Network. During fiscal 2005, Tyco discontinued its Plastics and Adhesives segment, and acquired Vivant Medical Inc. For the nine months ended 30 June 2006, Tyco's revenues increased 3% to $30.2bn. Net income from continuing operations before accounting change increased 27% to $2.79bn. Revenues reflect an increase in sales of electronics due to higher volume growth and continuing improvement in the Worldwide Fire Services businesses. Net income also reflects an increase in interest income and decreased interest expenses. Source: 69 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 70. Accenture Research Accenture Research Boston Scientific Key PMP Players Key Medical Products Players Group sales: $6,283m (+11.7% from 2004) Medical Products sales: $6,283m (+11.7% from 2004) Pls check the latest BI from Accenture neural network US sales: $3,852m (61.9% of total sales) EBIT margin: 15.6% Number of employees:19,800 Market Value: $23,912m (as of 20 Oct 2006) R&D spend: 10.8% Boston Scientific Corporation is a worldwide developer, manufacturer and marketer of medical devices that are used in a range of interventional medical specialties, including interventional cardiology, vascular surgery, electrophysiology, neurovascular intervention, oncology, endoscopy, urology, gynaecology and neuromodulation. The Company's products are principally offered for sale by three business groups: The Cardiovascular organization offers products and technologies for use in interventional cardiology, peripheral interventions, vascular surgery, electrophysiology and neurovascular procedures. The Endosurgery organization offers products and technologies for use in oncology, endoscopy, urology and gynaecology procedures. The Neuromodulation organization focuses on the treatment of auditory disorders and chronic pain. During the year ended December 31, 2005, it acquired Advanced Stent Technologies, Inc., CryoVascular, Inc., Trivascular, Inc. and Rubicon Medical Corporation. Source: 70 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 71. Accenture Research Accenture Research Agenda Agenda • US Overview • US PMP Overview • Key PMP Players – Key Pharmaceutical Players – Key Medical Products Players – Key Distribution Players • US PMP Outlook • Appendix 71 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 72. Accenture Research Accenture Research McKesson Key PMP Players Key Medical Products Players Group sales: $88,050 m (+9.9% from 2008) H&LS sales: Same as group sales Pls check the latest BI from Accenture neural network US sales: $81,935m (93.1% of total sales) EBIT margin: 1.3% Number of employees: 26,400 Market Value: $15,376m (as of 20 Oct 2008) McKesson Corporation provides supply, information and care management products and services. Through the Pharmaceutical Solutions segment (94.7% of group sales), it is a distributor of drugs, and health and beauty care products. It also manufactures and sells automated pharmaceutical dispensing systems for retail pharmacies, and provides medical management, and specialty pharmaceutical solutions. Its Medical-Surgical Solutions segment (3.5%) distributes medical-surgical supplies, first-aid products and equipment, and provides logistics and other services. Its Provider Technologies segment (1.8%) delivers enterprise-wide patient care, clinical, financial, supply chain, managed care and management software solutions, automated pharmaceutical dispensing systems for hospitals, as well as outsourcing and other services, to healthcare organizations. In May 2006, McKesson acquired HealthCom Partners LLC. In June 2006, the Company acquired RelayHealth Corporation. Source: OneSource 72 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 73. Accenture Research Accenture Research Cardinal Health Key PMP Players Key Medical Products Players Group sales: $81,364m (+9.5% from FY05) H&LS sales: Same as group sales US sales: $80,100m (98.4% of total sales) EBIT margin: 2.3% Number of employees: 55,000 Market Value: $26,635m (as of 20 Oct 2008) Cardinal Health is a provider of products and services supporting the healthcare industry. As of and for the fiscal year ended June 30, 2008 (fiscal year 2008), the Company's four segments were: Pharmaceutical Distribution and Provider Services (81.5% of group sales), Medical Products and Services(12.2%), Pharmaceutical Technologies and Services (3.4%), and Clinical Technologies and Services (3.0%). The aggregate of the Company's five largest customers accounted for approximately 46% of its revenue for fiscal 2008. During fiscal 2008, Cardinal Health acquired ParMed Pharmaceutical, Inc., a generic telemarketing business, Denver Biomedical, Inc., which develops and manufactures medical devices for acute care cancer hospitals and oncology offices, and the wholesale pharmaceutical, health and beauty and related drugstore products distribution business of The F. Dohmen Co. and certain of its subsidiaries. Source: OneSource 73 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 74. Accenture Research Accenture Research AmerisourceBergen Key PMP Players Key Medical Products Players Group sales: $54,577m (+2.7% from 2008) H&LS sales: Same as group sales US sales: $54,577m (100% of total sales) EBIT margin: 1.0% Number of employees: 12,300 Market Value: $9,411m (as of 20 Oct 2008) AmerisourceBergen Corporation is a pharmaceutical services company, providing drug distribution and related services to pharmaceutical manufacturers and healthcare providers. It distributes brand name and generic pharmaceuticals, over-the-counter healthcare products, and home healthcare supplies and equipment to healthcare providers located throughout the United States. It also provides pharmaceuticals and pharmacy services to long-term care, workers' compensation and specialty drug patients. In addition, AmerisourceBergen furnishes healthcare providers and pharmaceutical manufacturers with an assortment of related services, including pharmacy automation, supply management software, pharmaceutical packaging, inventory management, reimbursement and pharmaceutical consulting services, logistics services and physician education. It has two segments: Pharmaceutical Distribution (96.9% of group sales) and PharMerica (3.9%). In October 2005, the Company acquired Trent Drugs (Wholesale) Ltd. Source: OneSource 74 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 75. Accenture Research Accenture Research Walgreen Key PMP Players Key Medical Products Players Group sales: $47,409m (+12.3% from FY08) H&LS sales: Same as group sales (although the company also sells non-H&LS products in its pharmacies) US sales: Not available (but close to 100%) EBIT margin: 5.7% Number of employees: 179,000 Market Value: $43,929m (as of 20 Oct 2006) Walgreen Company is a retail drugstore chain that sells prescription and non-prescription drugs and general merchandise. General merchandise includes, among other things, cosmetics, toiletries, food, beverages, household items and photofinishing. Customers can have prescriptions filled at the drugstore counter, as well as through the mail, by telephone and on the Internet. As of August 31, 2005, the Company operated 4,950 drugstores (including stores closed, as of August 31, 2008, due to Hurricane Katrina in the United States) located in 45 states and Puerto Rico. In addition, Walgreen operates three mail service facilities. In July 2006, the Company merged with Happy Harry's Inc and on August 2007, it acquired Medmark Specialty Pharmacy Solutions. Source: 75 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 76. Accenture Research Accenture Research CVS Key PMP Players Key Medical Products Players Group sales: $37,006m (+21.0% from 2008) H&LS sales: Same as group sales (although the company also sells non-H&LS products in its pharmacies) US sales: $37,006m (100% of total sales) EBIT margin: 5.5% Number of employees: 148,000 Market Value: $25,209m (as of 20 Oct 2006) CVS Corporation operates in the retail drugstore industry in the United States with 5,471 retail and specialty pharmacy stores in 37 states and the District of Columbia. The Company sells prescription drugs and an assortment of general merchandise, including over-the-counter drugs, beauty products and cosmetics, film and photofinishing services, seasonal merchandise, greeting cards and convenience foods, through its CVS/pharmacy retail stores and online through CVS.com. It also provides pharmacy benefit management, mail order services and specialty pharmacy services through PharmaCare Management Services and PharmaCare Pharmacy stores. CVS operates in two segments: Retail Pharmacy (92.0% of group sales) and Pharmacy Benefit Management (8.0%). In June 2006, the Company acquired approximately 700 standalone Sav-On and Osco drugstores, and a distribution center in La Habra, California from Albertson's, Inc. In September 2008, the Company acquired the Minneapolis-based MinuteClinic. Source: OneSource 76 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 77. Accenture Research Accenture Research Agenda Agenda • US Overview • US PMP Overview • Key PMP Players • US PMP Outlook • Appendix 77 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 78. Accenture Research Accenture Research Should the cost of Medicare Part D rise considerably from initial forecasts, the federal government is likely to introduce a number of policies to curb drug spending. Key PMP Players US PMP Outlook Should the cost of Medicare Part D rise considerably from initial forecasts over the next 10 years, it is questionable whether federal government will remain committed to carrying this cost beyond the first two years of the benefit's implementation. This renders some form of price control likely in the medium-to-long term. Global Insight, a Health & Life Sciences market analysis firm, foresees the following policies in the medium-to- long term from the federal government: Further Cost-Containment Measures Probable Congressional opposition has already been voiced to the projected levels of Medicare spending after the launch of the drugs benefit in January 2006. Elements in Congress are already calling for the same pricing measures to be introduced to Medicare as are used by the Department of Veterans Affairs (prices are intended to equal or better the price manufacturers offer their most-favoured non-federal customers, or they must be 24% less than the non-federal average manufacturer price). The decision to introduce price controls to Medicare will be a political one, and will only come at a point when the cost of the programme is deemed to be politically unacceptable. Global Insight contends that the projected cost of providing out-patient drug subsidies has been under-estimated; the higher costs rise, the more likely it is that Congress will crack and legislate for pricing measures. More Aggressive Discounts More stringent use of formularies, requiring increasingly generous discounts from manufacturers in return for inclusion on preferred drug lists (as is the case under most state Medicaid programmes) is highly possible - particularly if Medicare spending on prescription drugs rises rapidly. Source: United States Healthcare and Pharma, Global Insight, Oct 2006 78 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 79. Accenture Research Accenture Research Policies, cont… Key PMP Players US PMP Outlook Introduction of a NICE-Style Advisory Body? One way of obtaining greater efficiency in the Medicare spend would be to introduce a body akin to the UK's National Institute for Health and Clinical Evidence (NICE), which provides guidance on the cost-effectiveness of new and existing clinical interventions. Although Part D requires private health plans set up a Pharmacy and Therapeutics (P&T) Committee to consider pharmacoeconomic factors in selecting drugs for inclusion on a reimbursement list, this will be carried out on a plan-by-plan basis. The CMS could eventually move to introduce a federal agency that rules across Medicare as a whole on the cost-effectiveness of interventions. Therapy Area Reference Pricing Future reforms may take the form of therapeutic area or drug class reference pricing, covering both inpatient and out-patient drugs. There are currently no federal provisions for reference pricing, but it is growing in currency as a cost-containment measure in the country as a whole (by states and private insurers). Under such a system, the CMS would choose the lowest-cost drug in a therapeutic class in which drugs are considered to be equivalents of each other. The patient could choose a more expensive product, but would have to pay the difference. The CMS is most likely to introduce a system that promotes the use of 'preferred' brands over 'non-preferred' equivalents, rather than promoting generic use above all else. The most-targeted drugs will be so-called 'me-too' products, which the CMS has shown a predilection to reimburse unfavourably in the past (eg Amgen's Aranesp vis-à-vis J&J's Procrit). Manufacturers of highly priced 'me-too‘ drugs will either have to reduce their prices or expect volumes to fall if they fail to argue that their product provides a clinical advantage over others in its class. Source: United States Healthcare and Pharma, Global Insight, Oct 2006 79 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 80. Accenture Research Accenture Research Policies, cont… Key PMP Players US PMP Outlook Wholesale Margin Targeted Instead of Prescription Drugs? The wholesale margin is high by the standards of most developed markets. An ideal scenario for drug manufacturers would be to highlight this trend as a driver of cost growth, leading regulators to seek savings through attacks on wholesaler margins rather than drug prices. To achieve this, the drug industry needs to reverse growing public mistrust of its operations, and the only way in which that can be accomplished is for the industry to argue its case more effectively in public. However, no-one in the industry has thus far shown a willingness to take this step. More Tools for States to Modernise Medicaid The Deficit Reduction Act (DRA) of 2005 was signed into law by President Bush in February 2006. It enables individual states to implement cost-sharing measures in their Medicaid programmes similar to those used in the wider healthcare system in the United States. According to Congressional Budget Office (CBO) estimates, the provisions within the DRA will reduce federal spending on Medicaid by US$11.5 billion over the next five years. According to CBO estimates, the changes to Medicaid rules for cost sharing of prescription drugs will affect around 13 million people by 2010. This figure will rise to about 20 million by 2015, and almost half of these will be individuals below the poverty line. The CBO estimates that around 80% of the savings made will be due to patients switching to lower cost medicines, while the remainder will come from lower payments to providers. Source: United States Healthcare and Pharma, Global Insight, Oct 2006 80 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 81. Accenture Research Accenture Research Local vs. foreign sales US PMP Overview: Pharmaceuticals Overview Domestic and Foreign Pharmaceutical Sales by US research-based companies, 1998-2008 100% 90% 27% 30% 32% 34% 35% 37% 80% 70% 60% 50% 40% 73% 70% 68% 66% 65% 63% 30% 20% 10% 0% 1998 2000 2002 2004 2006 2008 Domestic sales Sales abroad Source: 81 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 82. Accenture Research Accenture Research Agenda Agenda • US Overview • US PMP Overview • Key PMP Players • US PMP Outlook • Appendix 82 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 83. Accenture Research Accenture Research Glossary of Terms Appendix: Glossary of terms The following presentation uses terminology that is specific to the Pharmaceuticals and Medical Products industry and/or the US political or healthcare system. In other publications on this subject other terminology may be used to describe the same concepts. Therefore, we have chosen to describe the most central terminology. For details on the US Healthcare system, please see the Accenture Research presentation US Healthcare Overview, August 2006. Generics – Pharmaceuticals for which the active ingredient has lost its patent protection and which are now legally copied by companies that are not those who patented the product in the first place RX drugs – Pharmaceuticals that can only be purchased with a prescription from a physician (opposite of OTC) OTC drugs – Over-The-Counter pharmaceuticals are drugs that can be purchased without a prescription from a physician. These drugs are usually not reimbursed by the healthcare system Federal level – National level (all of the US) State level – Regional level (states, e.g. California) 83 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 84. Accenture Research Accenture Research Bibliography Appendix: Bibliography Selected helpful sources Data coverage Homepage Access Source www.datamonitor.com Datamonitor • PMP market data (market size, • Via OneSource growth, etc) PhRMA – The Pharmaceutical • Detailed information on the www.phrma.org • Open Internet Research and Manufacturers of US pharmaceutical market access America (from a vendor perspective) www.imshealth.com IMS Health • Quantitative data on the • Open Internet US prescription and (to access (Data available under Media/Top-Line Industry some extent) OTC markets Data) GPhA – Generic Pharmaceutical • Information on the US • Open Internet www.gphaonline.org Association Generics industry and access market 84 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant
  • 85. Accenture Research Accenture Research Accenture Research - Contact Details Appendix: Contacts Jaydeep Adhikari (Global H&LS expert) jaydeep.adhikari@accenture.com Dawn M. Melberg dawn.m.melberg@accenture.com Mikael Stenstrand mikael.stenstrand@accenture.com 85 © 2008 Accenture. All rights reserved. Adhikari,Dawn & Melberg - accenture H&LS consultant