Presentation to The JP communications Conference on Market access and
Pricing of Healthcare held at the Protea Conference ...
As is apparent, expenditure on medicine according to the 2013 annual report of the Council for
Medical Schemes, at R16,3 b...
If we were to breakdown the market into prescription and Over The Counter medicines, according to
IMS Healthcare the R19,9...
To put this in simple terms, if averages are relevant it means that the average innovator product is
R218,86 vs R213,55 an...
 The registration process is the same as an originator product, although the level of evidence
is not as high. One must c...
Before we can expect doctors to prescribe generic medicines we need them to have belief in the
medicines. Millions of pati...
committee from one of the leading Medical Aid Administrators stood up and said this was
true as she experienced these type...
The publication of a draft Intellectual Property Policy by the Department of Trade and Industry
has hardly disturbed other...
We have the problem with the concept known as ever greening whereby a company modifies
the method of manufacture and makes...
One of the aspects which is of concern to the whole pharmaceutical industry in the country is the
shortage of skills for s...
This has an impact in a multitude of ways.
 It allows the originator an extra four years of marketing exclusivity
 It pr...
The problem with this is that the average consumer price over the previous year ended in October
does not take into effect...
If we turn to the output aspect there are many facets to the pricing aspects of generics in the market
price. As per the M...
levels are set at a price in line with the second lowest generic price. Co-pay is a deterrent for
patients to accept a par...
they make for treating sometimes serious diseases. Yet the general public are prepared to spend a
vast amount of money on ...
Proven medical benefits proven after at least 20 years of use
Generic medicines should be a stimulant for innovator compan...
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Market access conference NAPM

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NAPM is a Section 21 Trade Association which was established in 1977. It is a voluntary, non-profit organisation consisting of South African and Generics based Pharmaceutical manufacturers and distributors. NAPM has a diverse membership comprising of 24 companies. Some of the NAPM’s function is to ensure that the sector plays a constructive role in our country’s economic growth, development and transformation and thereby create an environment in which the sector can thrive, expand, be competitive and enhance access of medicines to all of our country’s citizens.

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Market access conference NAPM

  1. 1. Presentation to The JP communications Conference on Market access and Pricing of Healthcare held at the Protea Conference Centre, OR Tambo, Kempton Park on 24th May by CEO of NAPM Each one of you in this audience have a perception about generic medicines. I wonder what shapes this perception whether good or bad. Let’s start by putting healthcare costs into perspective by category.
  2. 2. As is apparent, expenditure on medicine according to the 2013 annual report of the Council for Medical Schemes, at R16,3 billion which accounts for 15,4% of the total after the 35,6% and 22,7% of Hospitals and Medical Specialists respectively. This figure does not relate to out of pocket expenses paid by the patient.
  3. 3. If we were to breakdown the market into prescription and Over The Counter medicines, according to IMS Healthcare the R19,981 billion of the prescription market accounts for 70% of the total market. The prescription market comprises the originator or innovator medicines and generic medicines worth 61,3% and 35,7% respectively in Rand value. The 3% missing is classed as non-categorised products.However if we look at the volume of products we find that the market share of innovator products is 35,8% versus the generic volume of 63%. In summary then, despite providing 63% of medicine products generic medicines gain only one third of the money.
  4. 4. To put this in simple terms, if averages are relevant it means that the average innovator product is R218,86 vs R213,55 and generic product R72,52 which compares with an average price in the previous year of R68,25. What is a generic medicine? The Food and Drug Administration describes a generic medicine as comparable to a brand product in dosage form, strength, route of administration, quality, performance characteristics and intended use. While the World Health Organization states that a generic medicine is a pharmaceutical product marketed after the expiry of the patent and manufactured without a license from an innovator company. It is intended to be interchangeable with an innovator product. How can a patient be assured that he or she is receiving an equivalent therapy?
  5. 5.  The registration process is the same as an originator product, although the level of evidence is not as high. One must consider that the active ingredient has been on the market for at least 20 years, so to prove the efficacy of the active ingredient in a clinical trial would be a waste of resources.  Bioequivalence studies are comparison studies conducted to ensure the same amount of active ingredient is present in the bloodstream as that of the originator product.  Generic manufacturers are subject to the same standards of Good Manufacturing Products as the originator company. Challenges The credibility gap
  6. 6. Before we can expect doctors to prescribe generic medicines we need them to have belief in the medicines. Millions of patients have used generic medicines over the years with favourable results. If they did not work there would be a decline in the use which is patently not the case. Why are there doctors who do not like the idea of prescribing generic medicines? There are many reasons. 1. The hardest marketing challenge in pharmaceuticals is to get a clinician to prescribe a brand with which they are not familiar. This is human nature. The medicine a doctor prescribes is a reflection of his ability as a medical person. The patients judge him or her on the ability to cure. The point I am making is that the same forces are at play in changing a clinician’s perception of one brand over another as changing from an originator to a generic medicine. What conditions would cause you to change from Kellogg’s Cornflakes to a house brand- and that’s an innocuous food. 2. There are clinicians who wish to keep their ties with originator companies, so enabling them to take part in innovator trials as investigators. This benefits them from being associated with scientific research, enhances reputations and provides financial rewards. SLIDE 13 3. Marketing of drugs in the private market is a very competitive endeavour and one of the strategies adopted by the innovator companies is the fear factor. To illustrate this I will use the example of an injectable antibiotic used in hospital for treating meningitis. The medical representative would merely say to the doctor “if your child was suffering from a life threatening disease like meningitis, would you gamble on the generic drug to treat him. I related this story in a previous presentation and the responsible pharmacist from one of the big pharma companies jumped up and objected. A member of a drug evaluation
  7. 7. committee from one of the leading Medical Aid Administrators stood up and said this was true as she experienced these types of comments virtually daily. 4. I am generalising now, but doctors consider themselves as independent thinkers and don’t want to be straitjacketed n their treating regimens. In some focus groups that we ran, doctors are not pleased with the way in which they are held to generic formularies by medical aid ad pharmaceutical benefit managers. The natural tendency is to rebel against this as they feel that they have no input in these formularies. The challenge for the generic pharmaceutical industry therefore is to get wider acceptance among doctors for the use of generic medicines. Patients in this country accept what the doctors prescribe. I could also be cynical and say as long as this corresponds with what they read on the internet. One must ask the question to what extent pharmacists implement section 22F of the Medicines and related Substances Act. 22F. (1) Subject to subsections (2), (3) and (4), a pharmacist shall— (a) inform all members of the public who visit his or her pharmacy with a prescription for dispensing, of the benefits of the substitution for a branded medicine of an interchangeable multi-source medicine; and (b) dispense an interchangeable multi-source medicine instead of the medicine prescribed by a medical practitioner, dentist, practitioner, nurse or other person registered under the Health Professions Act, 1974, unless expressly forbidden by the patient to do so. Intellectual Property
  8. 8. The publication of a draft Intellectual Property Policy by the Department of Trade and Industry has hardly disturbed other industries, but in the health industry has led our Minister of Health to accuse pharma companies who are members of the Innovator Pharmaceutical Association of SA as potentially committing genocide Certainly, the policy has advantages for the generic medicines industry, which are currently barriers to marketing of older drugs. Under the current laws, a company merely fills in the correct application form without spelling mistakes and gets granted a patent. There is no objective examination procedure to determine whether the invention is novel and thus deserved of a patent registration. The only way this can be challenged is through application to the High Court. Either an originator alleges that a generic marketer has transgressed a patent and sues them or a generic company applies for a patent to be set aside. The problem is that cost of litigation is high in this country and we do not have specialist judges who have technical expertise in pharmaceutical research, development and manufacturing. One of our members has been challenged by an originator company on an oral contraceptive drug. In most European countries the patent has been set aside, but the criminal court judge has taken the conservative route and sided with the originator. With costs already at R10million for the generic company the case is waiting among the backlog of appeals at the court in Bloemfontein. The generic industry is not against the granting of patents. Our Association agrees that a company should be granted a 20 year patent period for developing an innovative therapy.
  9. 9. We have the problem with the concept known as ever greening whereby a company modifies the method of manufacture and makes application for a new patent. As far as the patient is concerned the product has no extra benefit or performance, but the routine granting of another patent will block a generic alternative for a further number of years. It is a logical conclusion then that a prerequisite for a patent registration system should be an examination office. Our Patent Act 57 of 1978 does make provision for examination, but regulations have never been implemented to exercise this provision. MSF claimed in a recent media release that in SA, 2 442 pharmaceutical patents were granted in 2008, while in Brazil only 273 were granted from 2003 to 2008. As a note our current medicine law allows parallel importation, but the regulatory authority requires a complete dossier to be completed which information only the originator would have. Regulatory Concerns
  10. 10. One of the aspects which is of concern to the whole pharmaceutical industry in the country is the shortage of skills for specialist evaluators. A pharmacy qualification is the most acceptable background for the evaluation of the pharmaceutical and analytical aspects of a dossier. These skills are needed both in the pharmaceutical companies and in the Medicine Regulatory Authority. The skills are developed through on the job experience. The DOH is examining the establishment of a Regulatory Scientific Institute which will provide tailored qualifications for regulators and registration personnel. Hopefully this would lead to both an improvement of dossiers submitted and the speed of evaluations. The ability of retail chains to establish in house pharmacies has led to a greater demand for pharmacists at reasonable salary levels. This has added to the shortage of qualified personnel. Clinical evaluations are done by part-time clinicians working in tertiary institutions and again due to a shortage of specialist skills, the processing of dossiers is not the primary responsibility. The Committees and Council who ultimately approve the medicine meet at predetermined times of the year and often have insufficient time to complete the planned agenda at each meeting. As a consequence of this a backlog of registrations has built up. Sources say it is around 3000 dossiers. Among our members, as at December there were more than one thousand dossiers which had been submitted. The members claim that the average registration times are round four years. In addition to the backlog problem, once the drug obtains registration after four years, critical aspects have in the interim changed, such as Active Ingredient Source or method of manufacture. The dossier must then be resubmitted for updating , meaning another one to two years post registration regulatory delay.
  11. 11. This has an impact in a multitude of ways.  It allows the originator an extra four years of marketing exclusivity  It prevents competition which inevitably is responsible for causing price reductions  It discourages investment in the pharmaceutical industry.  It deprives the consumer of quicker access to medicine The proposed South African Health Products Regulatory Agency has the potential to speed up the regulatory process as it will be governed by a CEO, board of directors and full-time technical committees. The Authority will be funded in part by higher registration fees. Our members have indicated that they are more than willing to pay the higher fees if these were tied to performance contracts. Input Costs and the Single Exit Price. In terms of the Medicines and Related substances Act as amended in 2002 a single exit price for medicines was introduced. The Minister of Health on advice from the Pricing Committee makes a decision as to the percentage by which the prices may be adjusted each year. There is a guideline formula which is supposedly used to determine this and includes the Producer Price Index, and the Consumer Price Index, Rand Dollar and Euro exchange rate, but at least over the past two years the Consumer Price Index seems to have been the only consideration.
  12. 12. The problem with this is that the average consumer price over the previous year ended in October does not take into effect the approximate 18% devaluation of the Rand against the Dollar in the past three months. All medicines marketed in this country have a high importation content which ranges from 100% for a finished imported pack to 70% which is the active ingredient imported for local manufacturers. The exchange rate at a particular time determines the price at which the pharmaceutical company pays for the imported component and because the profit margins for generic medicines are much lower than those of originator products it is harder to absorb these additional costs. This is certainly a contributory factor to stock outs. Other price factors
  13. 13. If we turn to the output aspect there are many facets to the pricing aspects of generics in the market price. As per the Medicines Act, any increases can only be done with the blessing of the Minister of Health, but a company can apply for a reduction at any point during the year. If we look at anecdotal evidence, it appears that once there are five or six copies of a medicine on the market competitive market forces cause the price to reduce dramatically. Only the lowest cost producers will survive, which could in turn reduce competition. Here is an example of atorvastatin, the originator of which was Lipitor one of the blockbuster cardiac drugs. Notwithstanding the competition there are other elements which determine ultimate pricing in the private sector. A major component of this is the reimbursement level determined by the Medical Aid Administrators. In general depending on what level of cover a member chooses, reimbursement
  14. 14. levels are set at a price in line with the second lowest generic price. Co-pay is a deterrent for patients to accept a particular generic medicine and the expectation is not to pay co-pay for a generic medicine. As a consequence of the proliferation of generic medicines of the same molecule, retailers, particularly the medicine chain stores have introduced formularies, because it would be unwieldy to stock the whole range of available generic medicines. Each group have different measures for defining their formularies, but given that registration, quality and manufacturing requirements are at a common level, price is usually the determinant. Victor Mendoca an economist in the European Generic Association said during a presentation at the International Pharmaceutical Generic Alliance in December, that the targeting of generic medicines for short –term cost containment as part of the austerity measures by European governments was having a detrimental effect on the industry and the industry experienced negative growth if -1,7% in 2013. Some of the reasons for this were that generic medicines faced price freezes, claw-back policies and retail tendering, while legislation on falsified medicines, pharmaco vigilance, clinical trials and environmental issues were adding to complexity. Our authorities are tending to follow the lead of the EU and with the concentration of power swinging to the retail chains, retail tendering is virtually in operation. Complementary medicines A final anomaly is that IMS measures the OTC/ Complementary medicines market at R8,3 billion which is R2 billion mere than the generic medicine industry. As this learned audience knows that many of the so called complementary medicines are unregistered and unable to prove the claims
  15. 15. they make for treating sometimes serious diseases. Yet the general public are prepared to spend a vast amount of money on them. It is not uncommon for a consumer to spend R250 on a pack of vitamin tablets that merely increase the value of his or her urine, and baulks at the thought of spending R50 on a generic anti-inflammatory medicine which will bring proven pain relief. It is a welcome sign that the MCC has decreed in regulations to classify complementary medicines as schedule A medicines, which means they have to go through a registration process and provide some level of proof for their claims. So what benefits do generics bring to the country?
  16. 16. Proven medical benefits proven after at least 20 years of use Generic medicines should be a stimulant for innovator companies to develop new medicines after the patent period. Competition does cause prices to decline which makes medicines more accessible. Over the past year, the growth of the generic market in volume has been 4,2% as opposed to the branded market at half that amount the market share of generic medicines has remained static at just over 60%. We have computed that at current price levels for every 5% market share gain of generic medicines, the private sector will save R400million per annum. If one considered this on a compounded annual basis it is not inconsiderable.

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