Svetainei health & growth evidence compendium_sent(1)

HEALTH & GROWTH -
Evidence Compendium
October 30th, 2013

Foreword
I am delighted to welcome you to EFPIA’s first “Evidence Compendium”. As our industry is facing a period of
unprecedented change and challenges, it is all the more important that we demonstrate the value of our medicines
to people’s lives, and the value of the industry to Europe’s economy. This Review is part of that commitment to
patients, to Europe and to transparency.
This document provides fact, figures and evidence about innovative medicines and the research-based
pharmaceutical industry in Europe. The focus is on the impact of medicines on health and the healthcare system,
lifecycle of medicines, the future challenges of the current healthcare system in Europe and the current and future
state of the innovative-based pharmaceutical industry in Europe.
From EFPIA’s perspective, it is the intention that this evidence compendium can provide a joint platform for the
industry towards which more evidence-based discussions around the future of the innovation-based
pharmaceutical industry in Europe can take place. Discussions that are becoming increasingly imminent in the
current environment of high unemployment, shrinking healthcare budgets and financial austerity.
I hope that you will find this evidence-based compendium useful in providing a required evidence-based platform
in which we, in cooperation with all our stakeholders can support and co-create solutions to secure a thriving
innovation-based pharmaceutical industry in Europe.
Richard Torbett
Chief Economist
HEALTH & GROWTH 2

Purpose of the document
The purpose of this evidence compendium is largely two-fold. Firstly, it is intended to serve as a comprehensive
and robust collection of evidence made available to the member companies and associations of EFPIA in order to
build compelling and inter-linked arguments when interacting with our stakeholders, for example payers,
policymakers and regulators. Secondly, it is intended as a frame within which EFPIA and its member companies
and associations can better align their ‘policy asks and gives’ and strive towards talking and acting with ‘one
industry voice’
The structure of the document highlights an overarching narrative around three main areas in which regional and
national policymakers and the pharmaceutical industry have critical current and future interfaces:
HEALTH & GROWTH 3
1) Health & Wealth
2) Sustainable Financing
3) Growth & Competitiveness
Embedded in the above three sections is a sequential flow that could be used as a platform for building a
compelling industry story and alignment, however the ambition has been to ensure that each slide can ‘present
facts on its own’ and ‘speaks for itself’. This provides enhanced flexibility to EFPIA and its member companies and
associations in order to create tailor-made storylines.

Index
Foreword …………………………………………………………………………………………………………….....………….
Purpose of the Document …………………………………………………………………………………………...………….
Index ………………………………………………………………………………………………………...………...……………
Glossary ……………………………………………………………………………………………………………....……………
Part I: Health & Wealth ………………………………………………………………………………......................................
Introduction ………………………………………………………………………………………...……………….
Europe has made great strides in improving health outcomes and medicines played an
3
11
HEALTH & GROWTH 4
important part, but inequalities exist …………………………………………………………......………………
Addressing demographic challenges and improving health outcomes will increase
economic productivity and wealth creation…………………………………………………....…………………
Innovative medicines have been key to address unmet needs in the past and will be in
the future ………………………………………………………………………………………...………………….
Sources ……………………………………………………………………………….........………………………
2
4
7
9
10
22
38
51

Index
Part II: Sustainable Financing ….….….….….….…………………………………………………......................................
Introduction ………………………………………………………………………………………...……………….
Medicines promote efficiency of healthcare by reducing cost of care for
patients and society ..….….….….….….….….….….….….….….….….….….….….…….......………………
Appropriate use of medicines can be a self sustaining model .….….….….……………....
59
HEALTH & GROWTH 5
…………………
Medicines innovation contributes to the financial sustainability of health system
through its investments and partnership working .….….…………………………………...
………………….
More flexible pricing models could improve access and financial
sustainability ……………………………………………………………………………………………………….
Sources ……………………………………………………………………………….........………………………
58
61
78
99
105
118

Index
Part III: Growth & Competitiveness ..……….….…………………………………………………......................................
Introduction ………………………………………………………………………………………...……………….
Healthcare provides a triple play (social, economic, innovation) .….…………...….…….......………………
Healthcare eco-system is amongst the best growth opportunities
for Europe .……………………….….….….……......….….….….….….………..............................................
Pharma plays a key role in European healthcare eco-system …..….……....….….….….….….…...........…
Europe has many of the right foundations but needs to lift its game to be
competitive ..….….………………………………………………………………………………………………….
Sources ……………………………………………………………………………….........………………………
Back Up ..……….….…………………………………………………...................................................................................
Methodology based on OHE Research .….….….….….……….…….………………………...……………….
Methodology to calculate multiplier effect ….….….….….……....……….……............….….….….….…......
123
124
126
144
155
169
185
195
196
197
HEALTH & GROWTH 6

Glossary
Portugal PT
Romania
Slovakia
Slovenia
Spain
Sweden
United Kingdom
RO
SK
SI
ES
SE
UK
HEALTH & GROWTH 7
European Countries
Switzerland CH
Other
Global
China CN
Latvia
Lithuania
Luxembourg
Malta
Netherlands
Poland
LV
LT
LU
MT
NL
PL
Canada CA
Finland
France
Germany
Greece
Hungary
Ireland
Italy
FI
FR
DE
EL
HU
IE
IT
United States US
Austria
Belgium
Bulgaria
Cyprus
Czech Republic
Denmark
AT Estonia
BE
BG
CY
CZ
DK
EE
Europe EU
Australia AU Russia RU Japan JP

HEALTH & GROWTH 8
Evidence Review – Overview
Appropriate use of
innovative medicines is
essential to ensuring a
sustainable health
budget
Pharma could have a vital
role in Europe’s growth
and future
competitiveness
Sustainable
Financing
Growth &
Competitiveness
Why Europe needs a
thriving
pharmaceutical
industry
2 3
HHeeaalltthh && WWeeaalltthh
1
By ensuring uptake of
innovation Europe has
the potential to further
improve health outcomes
and wealth creation

HEALTH & GROWTH 9
Evidence Review – Health & Wealth
Appropriate use of
sustainable health
budget
and future
competitiveness
Sustainable
Financing
Growth &
Competitiveness
Why Europe needs a
thriving
pharmaceutical
industry
2 3
1
and wealth creation

Health & Wealth – Introduction
 Over the last 60 years Europe has made huge strides in improving health outcomes and life
expectancy by over 9 years. Medicines have played a key role in achieving extension of life expectancy
in general and healthy life years by helping to address the challenges of infectious diseases, chronic
conditions and, more recently, cancer.
 However, major inequalities to medicines access persist across Europe. In addition to an ageing
demographic, degenerative diseases are becoming the next major challenge for most healthcare
systems across Europe. The number of Europeans over the age of 65 will increase by 75% over the
next 50 years, and incidence of dementia will more than double.
 Continuing to improve the wellbeing and productivity of Europeans will be even more important in light
of the demographic change. Without new effective solutions, health and social expenditure will become
unsustainable.
 Through its R&D activities and partnership initiatives, the pharmaceutical industry is committed to
addressing these challenges.
 By ensuring access and uptake of innovation, Europe can continue to improve wealth creation in a
changing demographic environment.
HEALTH & GROWTH 10

By uptake of the potential to further improve health outcomes By ensuring uptake of innovation Europe has the potential to further improve health outcomes aanndd wweeaalltthh ccrreeaattiioonn
Innovative medicines have been key
to address unmet needs in the past
and will be in the future
HEALTH & GROWTH 11
Europe has made great strides in
improving health outcomes and
medicines played an important part,
but inequalities exist
Addressing demographic
challenges and improving health
outcomes will increase economic
productivity and wealth creation
1.1 1.2 1.3
 Medicines has played a important
part in the increases in life
expectancy
 Uptake of innovation differs within
the European Union; both between
countries and within countries
 Health inequalities exits within the
European Union; both between
 Increase in disabilities resulting in
productivity loss are a future
economic burden for society
 Diseases of old age are the next
major health challenge and
medicines represent a cost-effective
health intervention
 Medicines reduce the economic
burden of illness through allowing
patients to return to productive
activities
1
 New medicines have made
significant contribution to reduction
in deaths of critical disease areas
 Industry innovation agenda reflects
diverse medical and economic
requirements
 Industry provides solutions to
improving patient compliance and
adherence
 This section reviews the achievements that have been made in improving health outcomes in Europe
and the challenges that still face us, and the role that innovative medicines and industry can play in
continuing to support improvements in the Health & Wealth of Europe.

Europe has made great strides in improving health outcomes and
medicines played an important part, but inequalities exist
 Over the last 60 years Europe has made great strides in improving health outcomes resulting in a 14-
17 % increase in life expectancy
 Europe has shown substantial improvements in life expectancy during the last 60 years
 Life expectancy continues to improve today – and medicines usage has made major contribution to
recent advances
 However wide variations in health attainments remain across Europe, amounting to almost a decade of
life expectancy
 Drug spending is highly correlated with life expectancy at birth and adult mortality
 Across Europe there are wide variations in usage of innovation which cannot be solely explained by
differences in GDP per capita
 Innovative medicines are showing superior results in health outcomes and cost-effectiveness
compared to existing treatments
 Even within countries access to innovation is highly variable for chronic diseases
 For cardiovascular diseases, access to innovation varies significantly within countries
HEALTH & GROWTH 12
Key Headlines

Over the last 60 years Europe has made great strides in improving
health outcomes resulting in a 14-17 % increase in life expectancy
HEALTH & GROWTH 13
Life expectancy at birth for EU27 countries (1950-2010)
 During the last 60
years, both male
and female life
expectancies have
improved
substantially across
Europe.
Life Expectancy
(years)
Source: United Nations: World Population Prospects – The 2010 Revision (2011)
+17%
+14%
Time Period
0

Europe has shown substantial improvements in life expectancy
during the last 60 years
Japan
EU 15
US
EU Average
EU 27 countries
HEALTH & GROWTH 14
Life expectancy at birth for EU27 countries (1950-2010)
Life Expectancy
(years)
Source: United Nations: World Population Prospects – The 2010 Revision (2011)
Time Period

Life expectancy continues to improve today – and medicines usage
has made major contribution to recent advances
HEALTH & GROWTH 15
Contribution of innovative medicines to increase in life expectancy (2004-2009)
 From 2000 – 2009, an
improvement in population
weighted mean life expectancy
at birth of 1.74 years was seen
across 30 OECD countries.
 Innovative medicines are
estimated to have contributed
to 73% of this improvement
once other factors are taken
into account (e.g. income,
education, immunization,
reduction in risk factors, health
system access).
Life Expectancy
(years)
0
+1.74 years
Source: Lichtenberg, F: Pharmaceutical innovation and longevity growth in 30 developing OECD and high-income countries, 2000 - 2009 (2012)

However wide variations in health attainments remain across Europe,
amounting to almost a decade of life expectancy
HEALTH & GROWTH 16
Life expectancy at birth – 2011
Life Expectancy at birth in 2011 (years))
 While health outcomes have
improved throughout Europe
over the last 50 years, a 12%
variation (equal to 9 years) in
life expectancy exists between
country with highest and lowest
life expectancy.
 Cumulative differences in life
expectancy between each
country and highest life
expectancy amounts to over
1.22 billion life years.
 While variations are most
observable with recent
accession markets, wide
variations also exist in markets
with highest life expectancy.
+12%
Source: World Health Organization (WHO): Database on life expectancy; The World Bank: Database on life expectancy at birth (both accessed 2013)

Drug spending is highly correlated with life expectancy at birth and
adult mortality
Pharmaceutical spend per capita and life
expectancy at birth, 2010
Pharmaceutical spend per capita and adult
mortality, 2010
Finland
Belgium
HEALTH & GROWTH 17
Netherlands
) sr aey( htri b t a ycnat cepxe efi L
Spain
Sweden
Italy
Austria
Portugal
Denmark
France
Belgium
Ireland
Greece
Germany
Finland
United Kingdom
Czech
Slovakia
Hungary
Drug spend per capita (US$)
Poland Estonia
Bulgaria
Romania
Lithuania
Latvia
Note: Adult mortality rate (probability of dying between 15 and 60 years per 1 000 population)
Lithuania
Romania
Bulgaria
Estonia
Poland
Source: World Health Organization (WHO): Database on adult mortality (2013); ESPICOM: Pharmaceutical Markets Fact Book (2011)
Latvia
Hungary
Portugal
United Kingdom
Czech
France
Germany
Austria
Denmark
Sweden
Spain
Greece
Ireland
Slovakia
Italy
ht aed f o #( ytil atr o m tl udA
Netherlands
Drug spend per capita (US$)

Across Europe there are wide variations in usage of innovation which
cannot be solely explained by differences in GDP per capita
Volume consumption of innovative therapies / 100 000 people indexed to European Average (2012)
Innovative Anti-diabetics Innovative Anti-Coagulants Innovative “wet” AMD therapies
HEALTH & GROWTH 18
Ranked according to income (GDP / capita)
Source: Eurostat: Population figures (2012); IMS Health: MIDAS MAT Q2 (2012)

Innovative medicines are showing superior results in health outcomes
and cost-effectiveness compared to existing treatments
Medicines efficacy Quality-adjusted life expectancy Cost-effectiveness
1 Improved efficacy vs. existing treatment
Incremental cost-effectiveness
ratios vs. existing treatment
(sulfonylurea) in patients with Type 2
diabetes (added to metformin
monotherapy)† 8,2% 8,2% 8,2%
HEALTH & GROWTH 19
EExxaammppllee:: DDiiaabbeetteess
Innovative Medicines vs. existing treatments: Liraglutide (GLP-1 class) [approved 2009 by EMA]
(sulfonylurea) in a randomized, Phase III
clinical trial*
liraglutide
(1.2mg)
liraglutide
(1.8mg)
sulfonylurea
Baseline
HbA1c
2 Improved body weight vs. existing
treatment (sulfonylurea) in a
randomized, Phase III clinical trial*
Mean increases in quality-adjusted life
expectancy vs. existing treatment
(sulfonylurea) in patients with Type 2
diabetes (added to metformin
monotherapy)†
liraglutide sulfonylurea
(1.8mg)
liraglutide
(1.2mg)
HbA1c
change
from
baseline
Body
weight
change
from
baseline
Mean increase
in QALY Cost-effectiveness
ratio per QALY (in £)
body weight (kg)
Change in
Source: EMA; * Garber, A et al: Liraglutide versus glimepiride monotherapy (2009); † Davis, MJ et al: Cost–utility analysis of liraglutide (2012)

Even within countries access to innovation is highly variable for
chronic diseases
HEALTH & GROWTH 20
Regional uptake of innovative Anti-diabetes medicines (DDD/100 000) - 2012
Sweden Italy UK
+580%
DDD/100 000
DDD/100 000 DDD/100 000 +100%
+37 569%
Source: IMS Health MIDAS MAT Q3 (2012); SCB population statistics; Population statistics Istat; Statistics from NHS IC GP registered populations

For cardiovascular diseases, access to innovation varies significantly
within countries
HEALTH & GROWTH 21
EExxaammppllee:: CCaarrddiioovvaassccuullaarr
Regional uptake of innovative Anti-coagulants (DDD/100 000), 2012
Sweden UK
DDD/100 000 DDD/100 000
+ 1 700%
+341%
Source: IMS Health MIDAS MAT Q3 (2012); SCB population statistics; Population statistics Istat; Statistics from NHS IC GP registered populations

HEALTH & GROWTH 22
1.1 1.2 1.3
expectancy
health intervention
activities
1
requirements
adherence
 This section reviews the current and future challenges due to demographic change and impact on
productivity and wealth creation, and the role that innovative medicines and industry can play in
continuing to support populations staying healthy and productive.

Addressing demographic challenges and improving health outcomes
will increase economic productivity and wealth creation
 Chronic diseases are already a major part of the healthcare bill and, unmanaged, risk factors indicate it
will keep rising
 Forecasts show an acceleration in lost output due to illness; high income economies like Europe are
the most exposed
 Looking to the future, Europe needs to find solutions to pressing demographic challenges that will
impact health and social spending
 Health-related disability increases sharply with age and across Europe there is an increase in reported
disabilities
 With an ageing population living with disabilities focus needs to shift from preventing mortality to
improving quality of life and function
 Without new approaches the EU itself acknowledges that demo-graphic challenge will render
healthcare systems unsustainable
 Workforce reduction and increasing dependency ratio put increased pressure of society’s healthcare
financing
HEALTH & GROWTH 23
Key Headlines – 1

Addressing demographic challenges and improving health outcomes
will increase economic productivity and wealth creation
 Keeping the population healthy and productive is a critical priority and medicines have and can
continue to play a part
 Reducing disability and sickness transfers, by improving outcomes, can further contribute to Europe’s
ability to fund future investments
 Health is a major cause of productivity loss and early labour market exit, with many causes being
addressable
 For many diseases the real cost to the system is lost productivity and new medicines are making a
difference
 Medicines offer an opportunity to reduce the cost of productivity loss and disability by improving
workforce health
 Relative to the economic cost of lost productivity, medicine and healthcare are very cost effective
HEALTH & GROWTH 24
Key Headlines – 2

Chronic diseases are already a major part of the healthcare bill and,
unmanaged, risk factors indicate it will keep rising
Impact of chronic diseases on distribution
of healthcare bill
HEALTH & GROWTH 25
Development of risk factors
(obesity, urbanisation, aging)
 ~75% of Europe’s healthcare bill is spent
on chronic diseases amounting to €700 bn*.
 Chronic diseases like heart disease,
diabetes, lung disease, and Alzheimer's
Disease are overwhelming healthcare with
soaring annual costs.
Increased
Adult Obesity†
Increased
Urbanisation
RatesΔ
Aging♯
(65+ years)
Forecast Ranges
Source: * The Economist Intelligence Unit (2012); † NSCN (2006); Δ PRB (2007); ♯ European Commission (2012)
Urbanisation
rate (%) +8%
Population (mn)
+28%
% of population

Forecasts show an acceleration in lost output due to illness; high
income economies like Europe are the most exposed
Projected Output Losses, 2011 – 2030*
(Breakdown of NCD cost by disease)
HEALTH & GROWTH 26
Share of Disability Life Years and
Healthy Life Years in Europe†
Lost output,
trillions (2010 US$)
Note: NCD = Non-communicable Diseases; Analysis based on EPIC model
Total EU disability
life years (bn)
77.5
83.2
Years
Source: * World Economic Forum /Harvard School of Public Health (2011); † Eurostat: various databases (accessed 2013); A.T. Kearney analysis

Looking to the future, Europe needs to find solutions to pressing
demographic challenges that will impact health and social spending
Demographic Development*
HEALTH & GROWTH 27
System Impact: Severity, length and
increased incidence
87mn
152mn
65+ Years
+75%
Increase in
severity of
Degenerative
Diseases†
Extended
impact of
Chronic
DiseasesΔ
Increased
incidence of
Cancer♯
Mn people +136%
Source: * European Commission (2012); † Brookmeyer R et al. (2007); Δ UK Dept. of Health (2010), European Commission; ♯ WHO (2013)
+16%
+16%
years
Mn cases

Health-related disability increases sharply with age and across
Europe there is an increase in reported disabilities
Prevalence of disability among working age
people (2009), EU27 Average*
HEALTH & GROWTH 28
Increase in reported disability, EU27†
Population
(in %)
year
by gender) +6%
% reporting long-term restrictions in daily activities
Disability
(% of population
Source: * European Commission: Situation of working-age people with disabilities across the EU (2011); † OECD: Sickness, Disability and Work (2010)

With an ageing population living with disabilities focus needs to shift
from preventing mortality to improving quality of life and function
HEALTH & GROWTH 29
Male Disability Life Years as a % of total life expectancy in 1990 and 2010
12.4%
12.3%
13.8%
13.7%
13.5%
13.5%
13.5%
13.4%
13.4%
13.4%
13.3%
13.2%
13.1%
12.9%
12.9%
12.8%
12.8%
12.8%
14.2%
Source: Lancet: Healthy life expectancy for 187 countries, 1990–2010 (2010); A.T. Kearney analysis
 In all 27 EU countries,
disability life years as %
of life expectancy has
increased in the period
1990 – 2010.
 Going forward the old-age
dependency ratio
and the impact of
chronic diseases on
disability could result in
additional increases
going forward with
productivity losses and
increases in incapacity
benefits as outcomes.
Disability life years in % of total life expectancy
12.2%
12.6%
13.0%
13.4%
13.8%
13.5%
14.1%
15.4%

Without new approaches the EU itself acknowledges that demo-graphic
challenge will render healthcare systems unsustainable
HEALTH & GROWTH 30
Healthcare Expenditure (% of GDP, EU27 average) under different scenarios
 Pure Demographic scenario:
Gains in life expectancy are assumed to be spent in
disabled health while the number of years spent in
good health remains constant. In this, the assumption
is that health care cost per capita for each year of age
remains constant in GDP per capita-adjusted terms
over the whole projection period.
 Constant Health scenario:
For each year and for each age/gender, the age-related
expenditure profile is shifted outwards – i.e. providing
modified values of cost per capita, which are then
applied in the same manner as the pure demographic
scenario. For the constant health scenario, the scale
of the outward shift in the age-related expenditure
profile is directly proportional to the increase in life
expectancy for each cohort.
 Improved Health scenario:
Similar to the constant health scenario, only the same
outward shift is assumed to be multiplied by a factor
of 2.
-23%
Healthcare
expenditure
in % of GDP
(EU27 average)
year
Source: European Commission: Projecting future healthcare expenditure at European level (2010)

Workforce reduction and increasing dependency ratio put increased
pressure of society’s healthcare financing
Social Impact: Decline in workforce due to
demographic changes*
Social Impact: If no alternative financing is
identified, taxes will rise to unseen levels†
0 year
HEALTH & GROWTH 31
Decline in
workforce
(mn people)
-11%
year
 Absolute size of the workforce will decline
over the next decades, leading to a smaller
tax base.
Tax in %
 Tax burden in Europe is rising (per cent on
wages).
Source: * European Commission: The 2012 Aging Report (2012); † Government Office for Science: The Burden of Ageing (2011)

Keeping the population healthy and productive is a critical priority
and medicines have and can continue to play a part
% of GDP lost due to chronic diseases*
HEALTH & GROWTH 32
Disability prevalence at working age
(EU countries) †
% of GDP
6.77%
 Cost-of-illness studies illustrate that cost of
chronic diseases and their risk factors had
a sizeable impact on high-income country’s
GDP, ranging from 0.02% to 6.77%.
Disability prevalence
Note: Disability prevalence defined as: “chronic health problem for at least six months limiting daily activities”
(in %)
Source: * Suhrcke M, Urban D: Are cardiovascular diseases bad for economic growth (2006) in WHO (2010); † OECD (2010)

Reducing disability and sickness transfers, by improving outcomes,
can further contribute to Europe’s ability to fund future investments
Social protection expenditure*
Disability and sickness transfers as a factor
of unemployment transfers†
Disability and Sickness transfers as
a factor of unemployment transfers
1,1
HEALTH & GROWTH 33
Structure of social protection expenditure,
EU-27, 2010
Old age
38%
Other benefits
9%
Family/children
Sickness/Healthcare
28%
Disability
8%
Unemployment
6%
8% Administration costs
3%
Other expenditure
1%
4,6
10,9
15
12
9
6
3
Source: * Eurostat: Structure of social protection expenditure, EU-27 (2010); †OECD: Sickness, Disability and Work (2010)
1,00,8
1,71,6
1,1
3,2 3,2 2,8
2,7 2,72,5
3,7 3,5
5,5
9,9
11,3
0
dnal erI
yl atI
cil bupeR hcez C
kr a mneD
yr agnuH
Factor
eceer G
gr uob mexuL
dnal ni F
l agutr oP
ecnar F
dnal oP
nedewS
ai kavol S
sdnalr eht eN
modgni K deti nU
1.0
yna mr e G
ni apS
mui gl eB
airt suA

Health is a major cause of productivity loss and early labour market
exit, with many causes being addressable
Health as a cause of leaving job
Determinants for health-related early labour
market exits in Austria (% of exists)
HEALTH & GROWTH 34
Left last job for
reasons of health
Health related causes for loss of output
Age Group
 2/3 of lost output are due to mental
health and cardiovascular diseases.
% of market exists
Note: Percentage of people that were previously employed and answered the main reason for leaving their job was ‘Own illness or disability”
Source: European Commission: Health of People of Working Age( 2011); European Commission: Health Systems and Health care in the EU (2012)

For many diseases the real cost to the system is lost productivity and
new medicines are making a difference
Distribution of Multiple Sclerosis cost
(EU27 + Norway, Iceland and Switzerland)*
Arthritis: Improvement in functioning and
productivity due to new medicines†
HEALTH & GROWTH 35
 More than 1/3 of Multiple Sclerosis cost in
Europe are due to productivity loss
% of patients
Source: * Kobelt, G, Kasteng F: Access to Innovative Treatments in Multiple. Sclerosis (2009); †Strand, V: Function & Health-Related Quality of Life (1999)

Medicines offer an opportunity to reduce the cost of productivity loss
and disability by improving workforce health
Avoidable Productivity Losses, U.S., 2023*
Disease Area % of GDP
 Across Europe, a significant amount of
people with chronic diseases had either
gone into early retirement or were
contributing less than productive peers.
HEALTH & GROWTH 36
COPD in selected European countries:
% of GDP lost due to chronic disease†
US$ bn
Source: * Milken Institute: The Economic Burden of Chronic Disease (2007); † Respiratory Medicines Journal (2003)

Relative to the economic cost of lost productivity, medicine and
healthcare are very cost effective
HEALTH & GROWTH 37
Cost of Medical and Medicines cost vs. Productivity Loss
Source: Loeppke, R: Health and Productivity as a Business Strategy (2009)
 Study objective:
To assess business implications of a full-cost
approach to managing health.
 Methodology:
Questionnaire study with more than 50.000
employees participating combined with
medical claims data. Regression analysis
were used to estimate impact of health-related
absenteeism and presenteeism.
 Results:
Health-related productivity cost are significantly
greater than medical and medicines cost
combined (on average 2.3 times across 25
therapy areas).
Parameter (cost vs. productivity loss)

HEALTH & GROWTH 38
1.1 1.2 1.3
expectancy
health intervention
activities
1
requirements
adherence
 This section reviews the current and future trends in epidemiology and R&D , and the role that
innovative medicines and industry can play in continuing to support patients staying healthy and
improving adherence and compliance.

Innovative medicines have been key to address unmet needs in the
past and will be in the future
 Medicines innovation has made major contribution to reducing mortality rates in many priority
conditions
 In areas like cancer, medicines innovation continues to play a key role in increasing life expectancy
 The pharmaceutical industry remains firmly committed to investing in finding solutions to key unmet
needs
 With over 16 000 compounds currently in development, over 80% of projects are focused on
degenerative diseases, NCDs and cancer
 For degenerative diseases, NCDs and Cancer balanced mix can be found across all phases of
compound development
 Industry pipelines have historically been targeting the major unmet needs of the European society
 Beyond medical conditions, medicines adherence continues to present major challenges for many
healthcare systems
 Lack of compliance is estimated to cost the European governments €125 bn / year
 The development of insulin injection devices has increased compliance rates in diabetes
 The industry continues to invest in innovating new oral forms in line with patient preference
 The advent of social media and more connected patients are opening up new opportunities to support
patients and physicians
HEALTH & GROWTH 39
Key Headlines

Medicines innovation has made major contribution to reducing
mortality rates in many priority conditions
HEALTH & GROWTH 40
Death rate decreases for diseases treated with pharmaceuticals 1965 - 1995
Death rate decreases by disease
Source: US National Center for Health Statistics (1998); PhRMA (2012)
-31%
-41%
-61%
-67%
-68%
-75%
-80%

In areas like cancer, medicines innovation continues to play a key
role in increasing life expectancy
Increases in life expectancy 1980 - 2008
Contribution to increased life expectancy
from new treatments incl. new medicines
HEALTH & GROWTH 41
Increase in
life expectancy
+ 3 years
Life expectancy
of cancer patients
(0 = base value)
(in years)
Source: Smith, B: The Future of Pharma (2011)
Contribution to increased
life expectancy in %

The pharmaceutical industry remains firmly committed to investing in
finding solutions to key unmet needs
Share of EMA Marketing Approvals
1995-2000
HEALTH & GROWTH 42
Share of EMA Marketing Approvals
2007-2012
 Infectious Diseases dominating the overall
picture. NCDs emerging.
 Cancer, NCDs and mental health on a rise
Source: EMA (European Medicines Agency): Database (accessed 2013); A.T. Kearney analysis

With over 16 000 compounds currently in development, over 80% of
projects are focused on degenerative diseases, NCDs and cancer
Registered Pipeline Compounds
 Finding solutions for unmet needs in
HEALTH & GROWTH 43
Registered Pipeline Compounds end of year 2011
346
329
581
507
490
769
716
1178
1012
1887
2125
Source: Business Insight Database end Year 2011 via Lifescience Analytics (2012); A.T. Kearney analysis
cancer has been a major recent focus for
the industry.
 Growth in early stage investment in CNS
reflects appreciation for the need to
identify breakthroughs in major challenge
of degenerative mental health diseases.
 Decreasing activity in areas like
cardiovascular care reflect the adequate
nature of existing standards of treatment
in some areas (e.g. hypertension) and
some residual unmet needs (e.g. stroke
227 prevention).
6317

For degenerative diseases, NCDs and Cancer balanced mix can be
found across all phases of compound development
HEALTH & GROWTH 44
Registered Pipeline Compounds per phase end of year 2011
Source: Business Insight Database end Year 2011 via Lifescience Analytics (2012); A.T. Kearney analysis

Industry pipelines have historically been targeting the major unmet
needs of the European society
 The pharmaceutical industry have to
a large extent focused their
innovation on the unmet needs of
EU-25 countries.
 A minor ‘innovation gap’ can be
identified within neuropsychiatric
conditions where the share of DALYs
lost still exceed the share of new
product approvals.
 Especially for infectious and parasitic
diseases and diabetes mellitus, the
identified ‘innovation overload’ could
be explained by the fact that these
diseases largely occur in developing
countries where the DALYs (and thus
the need for innovation) is
substantially greater than in EU-25.
HEALTH & GROWTH 45
Share of EMA approvals 1995 – 2009 and share of DALYs per 100,000 in EU-25
Optimal
Value for
society
Size of bubble illustrates share of DALYs per 100 000 in EU-25
Source: Catala-Lopez, F. et al: Development of new medicinal products in the European Union (2010); A.T. Kearney analysis

Beyond medical conditions, medicines adherence continues to
present major challenges for many healthcare systems
Adherence rates for selected treatment
areas*
1 in 3 patients don’t fill the
prescriptions they are given
1 in 2 forget to take prescribed
3 in 10 stop taking a medication before
their supply run out
1 in 4 take less than the recommended
HEALTH & GROWTH 46
Global Dimensions of non-adherence†
medicines
dose
Adherence rate
in %
Time period
Source: * National Council on Patient Information and Education (2007); †
EFPIA: Annual Review of 2011 and Outlook for 2012 (2012); A.T. Kearney Analysis

Lack of compliance is estimated to cost the European governments
€125 bn / year
 14% of total healthcare
expenditure are cost arising
due to the complications of
poor adherence.
 Higher focus on adherence
would lead to significant
cost long-term savings
especially in terms of
decreased hospital
admissions.
HEALTH & GROWTH 47
Avoidable cost for the National Healthcare System
Avoidable cost
for NHS (in %)
Note: €125 bn /year is an A.T. Kearney estimate based on US avoidable cost data
Source: New England Healthcare Institute: A System-wide Approach to Improving Patient Medication Adherence for Chronic Disease (2009)

The development of insulin injection devices has increased
compliance rates in diabetes
Situation Industry’s Response Impact Conclusion
HEALTH & GROWTH 48
CCaassee SSttuuddyy
Development and Impact of Insulin Injection Devices
Improved
compliance
 In 1985, the first insulin
delivery device was
invented by the
pharmaceutical industry
(NovoPen)
 Since then, numerous
additional devices and
device-related
innovation have been
brought to the market to
the benefits of patients
and society. New
features have included:
 Lowered injection force
 Ergonomic grip
 Memory function
 Children specific devices
 Diabetes
management
requires intensive
glycemic control to
prevent macro- and
microvascular
complications
 Glycemic control
complicated by
cumbersome and
inaccurate vial and
syringe
administration
 Low compliance
rates with vial and
syringes was
regarded a large
barrier to improve
glycemic control
Clear patient
preference
Health
economic
impact
 Continuous
innovation during
more than 25 years
in the area of
insulin devices
exemplifies
continued
commitments by
the pharmaceutical
industry to support
efforts to reduce
healthcare cost and
improve health
outcomes
Source: Selam, J. (2010); Lee, W et al (2006); Pawaskar MD, et al (2007); IMS Health (2012)
+ 11%
Medication compliance
-53%
Total Healthcare Cost

The industry continues to invest in innovating new oral forms in line
with patient preference
HEALTH & GROWTH 49
CCaassee SSttuuddyy
Preference of Treatment Schemes (cancer, diabetes)
Examples
 In terms of adherence,
oral drugs have a
potential advantage over
injected therapies,
generally, they are
perceived to be better
tolerated, physically and
psychologically.
 Studies involving patients
with diabetes or cancer
have shown that patients
prefer receiving
medication in the form of
inhaled or tablet
preparations, rather than
an injectable.
Treatment preference in patients with advanced colorectal cancer
Treatment preference in patients with Type 2 diabetes
Source: Twelves, C et al (2006); daCosta DiBonaventura, M et al ( 2010)
Treatment
preference

The advent of social media and more connected patients are opening
up new opportunities to support patients and physicians
HEALTH & GROWTH 50
CCaassee SSttuuddyy
Development of mobile disease management tools
Situation Situation
 Diabetes relies heavily on self-management†,
but the majority of
patients are not adhering to their
recommended SMBG therapyΔ.
 Diabetes patients across
Europe are not in good
glycemic control resulting in
elevated risks for severe
macro- and microvascular
complications*.
 Regular SMBG increases the
proportion of individuals achieving
their glycemic targets♯
Industry’s Response
 The pharmaceutical industry has
responded to the need for a more
integrated way of blood glucose
monitoring by establishing new
paradigms around mobile and
seamless disease management.
 Example: ‘iBGStar system’ – an
integrated system of blood
glucose monitoring, data capture,
-storage, and –transmitting and
management tool as integrated
into an iPhone
Source: * Changingdiabetesbarometer.com; † Peyrot, M. (2005); Δ Vincze, G et al (2004); ♯ Blonde, L. et al (2002)

Health & Wealth – Sources
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HEALTH & GROWTH 51
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Frequency of blood glucose monitoring in relation to glycemic control in patients with type 2 diabetes
Diabetes Care 2002; 25: 245-246
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Forecasting the Global burden of Alzheimer’s disease
Johns Hopkins University, Dept. of Biostatistics Working Papers. Paper 130. 2007
Catalá-López, F. et al. (2010)
Does the development of new medicinal products in the European Union address global and regional health concerns?
Population Health Metrics 2010, 8:34 al
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Multinational Internet-based survey of patient preference for newer oral or injectable Type 2 diabetes medication
Patient Preference and Adherence 2 November 2010
Davis, M.J. et al. (2012)
Cost–utility analysis of liraglutide compared with sulphonylurea or sitagliptin, all as add-on to metformin monotherapy in Type 2
diabetes mellitus
DiabeticMedicine: DOI: 10.1111/j.1464-5491.2011.03429.x
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HEALTH & GROWTH 52
EFPIA (2010)
Patients W.A.I.T. Indicator - Report (2010)
ESPICOM (2011)
Pharmaceutical Markets Fact Book (2011)
European Commission (2011)
Health of people of working age - Full Report. (2011)
European Commission Directorate General for Health and Consumers. Luxembourg. ISBN 978-92-79-18526-7
European Commission
Health Systems and Healthcare in the European Union
Presentation by Paola Testori Coggi, Director General for Health and Consumers
Projecting future healthcare expenditure at European level
Economic Papers 417 / July 2010
The 2012 Aging Report: Underlying Assumptions and Methodologies
European Economy 4/2011
The situation of working-age people with disabilities across the EU
Research Note 5/11

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HEALTH & GROWTH 53
European Medicines Agency
Database on EMA Medicines Approvals
Eurostat
Database on population figures
http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tps00001&plugin=1
(accessed April 2013)
Eurostat
Database on structure of social protection expenditure
http://epp.eurostat.ec.europa.eu/statistics_explained/index.php?title=File:Structure_of_social_protection_expenditure,_EU-
27,_2009_(1)_(%25).png&filetimestamp=20130102113739 (accessed April 2013)
Garber, A. et. al. (2009)
Liraglutide versus glimepiride monotherapy for type 2 diabetes (LEAD-3 Mono): a randomised, 52-week, phase III, double-blind,
parallel-treatment trial
Lancet 2009; 373; 473 – 481
Government Office for Science (2011)
The Burden of Ageing (2011)
http://www.sigmascan.org/Live/Issue/ViewIssue/121/4/the-burden-of-ageing-economic-impacts-of-changing-demographics/
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MIDAS database

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HEALTH & GROWTH 54
Kobelt, G. Kasteng, F. (2009)
Access to innovative treatments in multiple sclerosis in Europe
EFPIA 2009
Lee, W, et al (2006)
Medication adherence and the associated health-economic impact among patients with type 2 diabetes mellitus converting to insulin
pen therapy: an analysis of third-party managed care
Clinical Therapy 2006;28(10):1712–25; discussion 1710–11
Lichtenberg, F. (2012)
Pharmaceutical Innovation and Longevity Growth in 30 Developing and High-income Countries, 2000-2009
NBER Working Papers 18235, National Bureau of Economic Research, Inc. (2012)
Loepke, R. et al. (2009)
Health and Productivity as a Business Strategy: A Multiemployer Study
DOI: 10.1097/JOM.0b013e3181a39180. JOEM • Volume 51, Number 4, April 2009
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An Unhealthy America: The Economic Burden of Chronic Disease
2007
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HEALTH & GROWTH 55
OECD (2010)
Sickness, Disability and Work. Breaking the Barriers
OECD 2010
Pawaskar, M, et al (2007)
Health care costs and medication adherence associated with initiation of insulin pen therapy in Medicaid enrolled patients with type 2
diabetes: a retrospective database analysis
Clinical Therapy 2007;29 Spec No:1294–305
Peyrot, M, et al (2005)
Psychosocial problems and barriers to improved diabetes management: results of the Cross-National Diabetes Attitudes, Wishes and
Needs (DAWN) Study
Diabetes Medicines, 22 (2005), pp. 1379 – 1385
Selam, J, (2010)
Evolution of Diabetes Delivery Devices
Journal of Diabetes Science and Technology. Volume 4, Issue 3, May 2010
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HEALTH & GROWTH 56
Suhrcke M., Urban, D. (2006)
Are Cardiovascular diseases bad for economic growth?
CESifo Working Paper No. 1845
The Economist Intelligence Unit (2012)
Never too early: Tackling chronic disease to extend healthy life years (2012)
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http://data.worldbank.org/indicator/SP.DYN.LE00.IN (accessed April 2013)
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A randomized cross-over trial comparing patient preference for oral capecitabine and 5-fluorouracil/leucovorin regimens in patients
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Annals of Oncology 17: 239–245, 2006
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HEALTH & GROWTH 57
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Factors associated with adherence to self-monitoring of blood glucose among persons with diabetes
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2013
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September 2011

Growth &
Competitiveness
HEALTH & GROWTH 58
Evidence Review – Overview
and future
competitiveness
Why Europe needs a
thriving
pharmaceutical
industry
3
1
and wealth creation
Sustainable
Financing
Appropriate use of
sustainable health
budget
2

Sustainable Financing – Introduction
 Appropriate medicines usage has been a major contributor to the improved productivity of health
systems across Europe. Overall medicines usage represents less than 15% of total costs, and yet
medicines are at the heart of many of the most effective pathways of any health system, such as
respiratory complications, diabetes and cardiovascular disease.
 Early and appropriate use of medicines reduces the need for much more expensive healthcare
interventions, which, for example in the case of cardiovascular disease, may result in a three-fold
return on investment, releasing capacity in the acute and informal care sector and headroom to support
patients at the end of life.
 Over the last decade, medicines expenditure in Europe has grown at a third of the rate of overall
healthcare expenditure. The combination of cost controls and more competitive off-patent markets has
led to an average decrease – albeit in absolute terms – in the unit costs of medicines, relative to a rise
in the consumer price index in many markets of up to 20-30%.
 Medicines expenditure tends to follow a sustainable life cycle model and represents one of the best
investments a health system can make and will continue to be so in the future.
HEALTH & GROWTH 59
SSuussttaaiinnaabbllee FFiinnaanncciinngg

Sustainable Financing – Introduction
 Through its clinical trial and partnership activities, the industry contributes to the revenues of the
system and co-funds many initiatives – in the case of oncology it may subsidise up to 15% of the costs
of treatment in areas of high unmet need.
 Europe’s rigid approach to medicines pricing is driving inequalities as those least able to pay are
bearing the major burden of an inflexible pricing system.
HEALTH & GROWTH 60

Evidence Review – Sustainable Financing
 This section reviews the role of medicines in different treatment pathways and in particular highlights
the benefits that can achieved through the appropriate use of medicine, both within the healthcare
system and more broadly across society.
2.1 2.2 2.3 2.4
More flexible pricing models
could improve access and
financial sustainability
 Price rigidity driven by reference
pricing and free movement of
goods is creating inequalities to
access in Europe
HEALTH & GROWTH 61
AApppprroopprriiaattee uussee ooff iinnnnoovvaattiivvee mmeeddiicciinneess iiss eesssseennttiiaall ttoo eennssuurriinngg aa ssuussttaaiinnaabbllee hheeaalltthh bbuuddggeett
Medicines promote efficiency
of healthcare by reducing cost
of care for patients and society
 Good early use of medicines
reduces the need for
alternative high cost
interventions later
 Medicines are only reimbursed
if value can be proven
2
Appropriate use of medicines
can be a self sustaining
model
model
Medicines innovation
contributes to the financial
sustainability of health system
through its investments and
partnership working
partnership working
 The problem of sustainable
health funding is not medicines
 System of patent protection and
–expiries create headroom for
innovation
 Price control creates a built in
deflationary effect and have only
increased in line with CPI
 Industry has played a part in
creating innovative commercial
models to smoothen impact of
introduction of new technologies
 Pharmaceutical companies
contribute to ‘system’ revenues
 Pharmaceutical companies are
engaging in novel types of
partnerships with a variety of
stakeholders to enhance
 Differences in affordability of
healthcare exist across Europe
 More flexible approaches to
pricing by indication could
improve access to innovation
 Pharmaceutical companies have
shown a willingness to adjust
prices to reflect differences in
affordability

Medicines promote efficiency of healthcare by reducing cost of care
for patients and society
 Health systems across Europe have improved productivity with treatment volumes increasing faster
than costs
 Overall medicines across Europe represent less than 15 % of total expenditure although variances
exist between therapy areas
 Throughout Europe medicines are only reimbursed if value can be comprehensively proven across
multiple dimensions
 Pharmaceuticals have been and will continue to be a major contributor to efficiency gains leading to
better outcomes and lower pathway costs
 Investment in prevention has been long recognized as good value
 Early and appropriate use of medicines reduces costs even in therapy areas with treatments readily
available
 Analysis of compliance data clearly shows substantial returns that can be achieved through appropriate
medicines usage
 Relative to costs of hospitalisation, cost of innovative new medicines are a good investment
HEALTH & GROWTH 62
Key Headlines – 1

Medicines promote efficiency of healthcare by reducing cost of care
for patients and society
 At a time of pressure on healthcare spending, appropriate medicines usage can create additional
capacity throughout the health system
 In light of demographic change and burden of mental health, innovative medicines have the potential to
reduce expenditure
 For many conditions that will become more important with an ageing population, informal care is the
major cost driver
 Even in a high-treatment cost area like oncology, around 60% of total cost arrive from productivity
losses and informal care across the EU
 Appropriate and early use of medicines in mental health can delay the need for nursing home
placements and reduce total costs
 Even modest future improvements in disease progression could lead to significant returns to society
 Effective usage of medicines throughout the pathway ensures that systems can also afford to invest in
improving end of life treatment
HEALTH & GROWTH 63
Key Headlines – 2

Health systems across Europe have improved productivity with
treatment volumes increasing faster than costs
Total patients treated and total healthcare
expenditure (2004 = Index 100)*
Total patients treated and total healthcare
expenditure (2004 = Index 100)†
HEALTH & GROWTH 64
Note: Total patients treated includes in-patients and out-patients
Source: *NHS (2012); † Department of Health, Ireland (2011), OECD Health Statistics Database (accessed 2013)

Overall medicines across Europe represent less than 15 % of total
expenditure although variances exist between therapy areas
Total healthcare expenditure by function
(2010, pop.-weighted, current prices, PPP, $)*
HEALTH & GROWTH 65
Medicines contribution to disease cost
(2011, various diseases)
Cost
factor COPD† Diabetes† CHF† Alzhei-mersΔ
Prostate
Cancer♯
Care 21% 8% 6% 9% 34%
Hospitali-sation
30% 22% 64% 11% 31%
Indirect
Cost 22% 35% 18% 76% N/A
Other Cost 14% 20% 6% 1% 2%
Medication
14% 15% 5% 3% 34%
Source: * OECD Health Statistics Database (accessed 2013); † A.T. Kearney analysis (2012); Δ Schwarzkop et al. (2010); ♯ Damm el al. (2012)

Throughout Europe medicines are only reimbursed if value can be
comprehensively proven across multiple dimensions
Countries with formal HTA systems in place*
Reimbursement criteria across countries†
HEALTH & GROWTH 66
Countries with formal HTA process for reimbursement in place
Countries with no formal HTA process for reimbursement
AT BE GE FI FR NL SE UK
Therapeutic
benefits
Patient
benefits
Cost-effectiveness
Budget Impact
Innovative
Characteristics
Availability of therapeutic
alternatives
Equity
considerations
Public health
impact
R&D
Included in HTA process
Source: * EFPIA: Role and impact of Health Technology Assessment (2011); † Sorensen et al.: Ensuring value for money in health care (2009)

Pharmaceuticals have been and will continue to be a major contributor
to efficiency gains leading to better outcomes and lower pathway costs
Contribution of medicines to efficiency gains
UK Programme Budgeting Costs (2008)Δ
HEALTH & GROWTH 67
Patient Pathway Cost per
QALY
(2008, £)
Rank
Respiratory 1 998 1
Endocrine 3 124 2
Neurological 5 480 3
Circulatory 7 039 4
Gastro-intestinal 7 293 5
… ...
Cancer 16 997 6
Musculo skeletal 20 254 8
Infectious
diseases 20 829 9
… …
Mental health 49 835 12
Poisoning & AE 163 766 20
Relative role of
pharmacological
treatment in
pathway
Low birthweight infants (1950 to 1990)*
Value benefits gained from delaying onset
of Alzheimer’s Disease†
Delay AD Onset by 1 Year
Delay AD Onset by 3 Years
Delay AD Onset by 5 Years
Note: 1. Dollar values by year of AD onset delay for all new cases from 2010 to 2050; calculated with $50’000 per QALY; 2. NHS England Programme Budget Category
Source: * Cutler, D et al: Technology of birth (2000); † Vernon, J et al: Alzheimer’s Disease and Cost-effectiveness Analyses (2010);
Δ Claxton K. et al: “Methods for the estimation of the NICE cost effectiveness threshold (2012); A.T. Kearney analysis

Investment in prevention has been long recognized as good value
Polio: Now largely eradicated in Europe
due to investments in vaccines*
Hepatitis B: Cost of Vaccinations vs. Clinical
Savings†
HEALTH & GROWTH 68
Reported
cases
Source: * WHO: Vaccine-preventable diseases: monitoring system: (2009); † Boccalini et al.: Economic analysis of the first 20 y of universal hepatitis B vaccination program in Italy (2013)

Early and appropriate use of medicines reduces costs even in
therapy areas with treatments readily available
Estimated avoidable macrovascular events,
absolute numbers 20101
HEALTH & GROWTH 69
Estimated avoidable
healthcare cost, € 000s, 20102
% of total diabetes
spending
13%
8%
4%
Note: 1. Extrapolated from the likelihood of patients on insulin with delayed insulinazation from IMS Disease Analyzer; 2. Average cost for treating stroke and myocardial infarction
Source: IMS Institute for Healthcare Informatics: Advancing the responsible use of medicines (2012)

Analysis of compliance data clearly shows substantial returns that
can be achieved through appropriate medicines usage
Return on
Investment
HEALTH & GROWTH 70
Total Healthcare Spending: Adherent vs. non-adherent patients, 2005 - 2008
9x
7x
6x
2x
Note: Calculations are marginal effects from linear fixed-effects models of services cost. Main drivers for cost savings were inpatient hospital days and emergency department visits
Source: Roebuck et al: Increased Drug Spending Medication Adherence Leads To Lower Health Care Use And Costs Despite increased drug spending (2011)

Relative to costs of hospitalisation, cost of innovative new medicines
are a good investment
Cost of newer cardiovascular medicines compared to savings in hospitalizations in 20 OECD countries
1995 - 2003
HEALTH & GROWTH 71
EExxaammppllee:: CCaarrddiioovvaassccuullaarr
Assess the effects of introductions of innovative
cardiovascular medicines on total healthcare spending
 Methodology:
 Data used for 1100 cardiovascular medicines in 20
OECD countries during the period 1995 – 2003 and
based on drug vintage (i.e. the first year the
medicines was available in any market)
 Controlling for demographic variables, quality of
cardiovascular medicines consumption,
consumptions of other medical innovations (e.g. CT
scanners and MRI units), cardiovascular risk factors
and prevalence
 Conclusion:
Per capita expenditure on hospitalization would have been
$89 higher in 2003 had new cardiovascular medicines
not been introduced in the period 1995 – 2003. This
increase was almost four times as high as the per capita
increase on expenditure on cardiovascular medicines
($24)
Source: Lichtenberg, F: Have Newer Cardiovascular Drugs Reduced Hospitalization? Evidence from Longitudinal Country-level Data on 20 OECD Countries, 1995–2003 (2008)

At a time of pressure on healthcare spending, appropriate medicines
usage can create additional capacity throughout the health system
Full Time equivalent hospital staff savings by use of innovative medicines for avoidance of hospitalizations
for chronic diseases
3,4% of total
personel in
hospitals
HEALTH & GROWTH 72
Total patients Total hospital
admissions
Introduction of
innovative medicines
(# of innovative
medicines in analysis)
Total FTE Hospital staff savings by
hospital admission avoidance
Disease Area
COPD 316 400 19 422 (6%)
Coronary
Heart Disease 675 000 95 277 (14%)
Mental
Disorders 902 658 87 690 (10%)
 Effective management of early-stage disease in the community could release between 4% and 7%
of hospital resources in specific areas.
Source: Tsichristas, A et al.: Medical innovations and labor savings in health care (2009)
1
3
3
2 591 FTEs
2 077 FTEs
2 292 FTEs
7,4% of total
personel in
mental hospitals

In light of demographic change and burden of mental health,
innovative medicines have the potential to reduce expenditure
HEALTH & GROWTH 73
EExxaammppllee:: AAllzzhheeiimmeerr
Projected Spending on Alzheimer’s Disease in Europe (€ bn)
Note: Assumes research breakthroughs that delay the average age of onset of Alzheimer’s disease by five years beginning in 2010
Source: A.T.Kearney analysis based Alzheimer’s Association: Changing the trajectory of Alzheimer’s Disease (2010)
 Delaying the onset of
Alzheimer’s disease could
reduce the cost of the disease
by almost 50%
 Potential cost savings are
based on the introduction of
innovative and effective
medicines at Year x leading to
a delay of AD onset by 5 years

For many conditions that will become more important with an ageing
population, informal care is the major cost driver
HEALTH & GROWTH 74
EExxaammppllee:: AAllzzhheeiimmeerr
Mean cost of Alzheimer’s Disease (Average € per month)
Source: Rapp, T: Exploring the relationship between Alzheimer’s disease severity and longitudinal cost (2012)
 Sample of patients consisted of
1 131 diagnosed with mild to
moderate Alzheimer’s disease
followed during a 2-year period
in 50 French memory clinics. To
assess business implications of
a full-cost approach to
managing health.
 Data were collected at three
time points: baseline visit, 1.
year visit and 2. year visit
 15% of patients were
institutionalized during the
study period

Even in a high-treatment cost area like oncology, around 60% of total
cost arrive from productivity losses and informal care across the EU
10,1
31,5
33,4
25,0
18,4
23,7
23,7
34,2
HEALTH & GROWTH 75
EExxaammppllee:: OOnnccoollooggyy
Costs of cancer in the European Union in 2009, by country (%)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
5,6
5,8
5,8
9,1 7,3
10,8
20,7
17,2
20,2
12,8
13,8
53,2
11,6
10,3
53,9
8,8
34,0
11,2
46,0
7,3
31,1
15,1
46,5
22,6
17,6
12,5
47,4
14,7
26,7
10,3
48,3
29,0
16,2
47,6
7,7
34,7
18,3
39,3
10,8
29,6
18,4
41,2
17,9
30,9
8,5
42,7
17,9
23,8
15,1
43,2
30,3
9,2
45,9
16,3
17,2
8,9
57,6
12,1
15,5
13,1
59,4
3,9
21,9
61,4
16,5
12,4
62,0
8,4
26,7
14,3
50,6
28,1
15,5
50,8
29,5
9,8
54,9
25,7
12,0
56,5
Source: Luengo-Fernandez, R. et al: Economic burden of cancer across the European Union: a population-based cost analysis (2013)
13,0
32,6
20,8
33,6
10,4
42,8
11,0
35,8
FI
16,8
28,8
36,8
ES
51,4
CY
SI
14,6
IE
PL
HU
BG
UK
13,5
DE
EU
SK
FR
CZ
RO
PT
LT
AT
17,5
17,5
30,5
13,4
38,7
EL
33,9
13,5
39,1
LU
60%
IT
MT
12,7
DK
SE
NL
BE
24,1
EE
LV
%
Medicines Cost Other Healthcare Cost Informal Care Productivity Losses

Appropriate and early use of medicines in mental health can delay
the need for nursing home placements and reduce total costs
% of patients placed in nursing homes*
HEALTH & GROWTH 76
Cost-effectiveness of early treatment
(£ per patient) †
 Patients taking cholinesterase inhibitors were 5
times less likely to be admitted to a nursing home
after 3 years of treatment after controlling for
multiple factors that can alter the course of the
disease
 Treatment initiated for early-stage (mild-to-moderate)
Alzheimer’s disease followed by 7-year
treatment proves more cost-effective than current
standards of care
 In addition to cost savings, the QALY per patient
were 9% higher with early treatment of Alzheimer’s
Disease
Source: * Lopez, O et al: Clinically meaningful outcome in Alzheimer’s disease (2005); † Getsios D et al.: Economic evaluation of early assessment for Alzheimer’s disease in the UK (2012)

Even modest future improvements in disease progression could lead
to significant returns to society
HEALTH & GROWTH 77
EExxaammppllee:: PPaarrkkiinnssoonn
Economic Value to Society of slowing Parkinson’s Disease Progression
Model PD progression over the complete course of disease
and to assess economic consequences of slowing down
PD progression
 Methodology:
 Model length spanned 25 years
 Cost and benefits were discounted at 3%
 Patient progression based on Hoehn and Yahr
(H&Y) stages of disease development
 Direct and Indirect medical costs were taken from
published German studies
 Conclusion:
Net benefits of €54,000 achievable by slowing PD
progression per patient by 20%m rising to €327,000 per
patient by fully arresting disease progression
If this potential is to be realized more innovation within the
area of Parkinson’s disease should be encouraged.
Source: Johnson, SJ et al.: Economic value of slowing Parkinson’s Disease in Germany, (2012)

Effective usage of medicines throughout the pathway ensures that
systems can also afford to invest in improving end of life treatment
HEALTH & GROWTH 78
QALYs across health life cycle
Creating
Life
Preventing ill
health
Treating ill health Prolonging
life
Source: * QQUIP (2007); † NICE (2006); Δ Dept. of Health, UK (2002); ♯ Ruger et al (2008); Ω Gillick (2004); Σ RIVM (2007); + Buddingh (2007);§ NICE (2006)
Preventing
Death
£
Smoking
cessation
advice in
pregnant
mother ♯
£424/QALY
Reduced infant
mortality with
rotavirus
vaccinationΣ
Cost Saving
Suicide
prevention*,Δ
Cost Saving
Effective usage
of statins*,†
~£2 300/QALY
Intense glycose
control in Type 1
diabetes*
Cost Saving
Breast Cancer
screening§
£2 050/QALY
PET for
Alzheimer’s
diseaseΩ
£250 000/QALY
Herceptin for early
stage HER2+
breast cancer§
£18-33 000/QALY
GM-CSF in
elderly with
Leukemia+
£118 000/QALY

 This section reviews the historical and projected expenditure development within the healthcare system
and highlights how the expenditure of medicines has been and can continue to be a self-sustaining
system, providing the right measures for creating headroom for innovation are in place.
2.1 2.2 2.3 2.4
access in Europe
HEALTH & GROWTH 79
interventions later
2
model
model
partnership working
partnership working
innovation
affordability

Appropriate use of medicines can be a self sustaining model
 Across Europe growth in medicines expenditure is lagging behind growth in total healthcare
expenditure
 Medicines have only contributed to 15% of increased health costs in Europe – with hospitalizations and
elderly care being the key drivers
 In all but a few markets across Europe, medicines expenditure is growing 30% slower than overall
health investment
 In many European countries medicines is the slowest growing category of any other areas of
healthcare expenditure
 Savings from generic expiries have ensured that the global medicines bill is sustainable and will
continue to be so
 For many therapy areas the average cost of medicine has decreased over time, while more patients
are being treated
 Based on recent history the impact of generics on volume and pricing will result in substantial and
rising budget savings
 Combination of generic price erosion & price regulation resulted in a 16% decline in nominal medicines
prices vs. a 25% rise in consumer prices
 Within cardiovascular, industry’s innovation model ensures clinical cost effectiveness in the short-, and
major social surplus in the longer term
HEALTH & GROWTH 80
Key Headlines – 1

Appropriate use of medicines can be a self sustaining model
 Even for more complex hospital products, patent expiries expands capacity for treatment while
decreasing treatment cost
 Within oncology, generics also create headroom for innovation as a sustainable model can be
established
 While the share of generic usage has increased by 50%, there is still scope to improve the
effectiveness of medicines usage in many markets
 Even over a short 12 month period average costs of genericized treatments have declined, with
‘efficient’ markets making dramatic gains
 The industry’s lifecycle model will ensure that medicines expenditure will continue to be sustainable in
the future
 Patent expiries will continue to create headroom for innovation in Europe, while ensuring the medicines
bill stays in control
 Like small molecules, biosimilars have also created headroom for innovation as treatment cost
decreases after patent expiries
 In the mid-term, biosimilars will contribute to the continued sustainability of medicines spending
HEALTH & GROWTH 81
Key Headlines – 2

Across Europe growth in medicines expenditure is lagging behind
growth in total healthcare expenditure
HEALTH & GROWTH 82
Total healthcare expenditure per capita and total medicines expenditure per capita
(2004 – 2010, 21 EU OECD Countries, population-weighted, current prices, PPP, $)
Note: Countries included: Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain,
Sweden, UK
Source: OECD Health Statistics Database (accessed 2013); Eurostat Database (accessed 2013)

Medicines have only contributed to 15% of increased health costs in
Europe – with hospitalizations and elderly care being the key drivers
54% 16% 14% 5% 4% 4% 3% 0% 100%
HEALTH & GROWTH 83
Share of Growth per healthcare category
(2004 – 2010, 15 EU OECD Countries, population-weighted, current prices, PPP, $)
Note: Countries included: Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Hungary, Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden
Source: OECD Health Statistics Database (accessed 2013); Eurostat Database (accessed 2013)

In all but a few markets across Europe, medicines expenditure is
growing 30% slower than overall health investment
HEALTH & GROWTH 84
Growth in total medicines expenditure per capita
vs. growth in total healthcare expenditure per capita
 In 17 of the EU21, medicines
expenditure is growing at
least 30% slower than health
expenditure
 Medicines can support
efficiency gains in the
healthcare sector by reducing
expensive hospitalization and
rehabilitation cost
Source: OECD Health Statistics Database (accessed 2013)
30% slower
medicines
growth

In many European countries medicines is the slowest growing
category of any other areas of healthcare expenditure
Healthcare segments Growth 2004 - 2010
Source: OECD Health Statistics Database (accessed 2013)
HEALTH & GROWTH 85
CAGR 2004 - 2010

Savings from generic expiries have ensured that the global
medicines bill is sustainable and will continue to be so
Patent exposure over time and ratio of new
product sales vs. generic expiries*
Components of change in total medicines
spending†
HEALTH & GROWTH 86
$bn %
Total Spend
($ bn) CAGR: +1%
Source: * EvaluatePharma Database (accessed 2013); † IMS Market Prognosis, April 2011 (2011)

For many therapy areas the average cost of medicine has decreased
over time, while more patients are being treated
Index Index Index Index Index Index
+3%
% Change in number of treatment days (Q4 2010 = Index 100) % Change in price per treatment day (Q4 2010 = Index 100)
HEALTH & GROWTH 87
% Change in price per treatment day vs. % Change in number of treatment days
Anti-depressants Angiotensin II Antagonists Anti-ulcerants
Source: IMS MIDAS, MAT 09 2012 (2012)
+6% +7%

Based on recent history the impact of generics on volume and
pricing will result in substantial and rising budget savings
Volume retained by originator brand vs.
pre LoE volume
HEALTH & GROWTH 88
Generic price as a percentage
of the brand pre LoE price
% of volume % of price
Note: ‘Easy’ products refer to easy formulation (e.g. tablets, Capsules, Pastilles, Retard Tabs, Dispersible Tabs, Soluble tabs, solutions, bottles); ‘Difficult’ products refer to difficult formulation (e.g. syringes, vials, pens,
patches, ampoules, suspensions, inhalers)
Source: ABPI (2012)

Combination of generic price erosion & price regulation resulted in a 16%
decline in nominal medicines prices vs. a 25% rise in consumer prices
Consumer Price Index (CPI) vs. Medicines Price Index, population weighted, year 2000 = Index 100
Index Index Index Index
Index Index Index Index Index
HEALTH & GROWTH 89
Population-weighted - Europe Countries reporting Medicines Price Index Data
125
84
Note Euro-denominated countries producing medicines price index only. Countries included: Austria, Belgium, Finland, France, Germany, Greece, Italy, Spain, Sweden
For Austria, only data available until 2010
Source: Austria: IFP; Belgium: Pharma.be; Finland: Statistic Finland; France: INSEE; Germany: GKV; Greece: Eurostat; Italy: ISTAT; Spain: INE; Sweden: Apotekens Service

Within cardiovascular, industry’s innovation model ensures clinical cost
effectiveness in the short- and major social surplus in the longer term
Simvastatin patients treated and total
associated cost of treatment
Patient- and manufacturer surplus in on-and
HEALTH & GROWTH 90
off-patent period
On-patent
period
Off-patent
Zocor® patent period
Patients (‘000) expiry
€mn.
€ mn per mn inhabitants
Source: Lindgren et al.: Cost–effectiveness of statins revisited: lessons learned about the value of innovation, (2011)

Even for more complex hospital products, patent expiries expands
capacity for treatment while decreasing treatment cost
HEALTH & GROWTH 91
Ondansetron Oral change in total usage after patent expiry, EU-5
Source: IMS Health, MIDAS Dec. 2012
 Patent expiry of
originator brand
Zofran allowed for
an expansion in the
number of patients
treated while
average treatment
cost decreased after
patent expiry
Volume, DDD, mn Cost / DDD (LC€)
-44%

Within oncology, generics also create headroom for innovation as a
sustainable model can be established
HEALTH & GROWTH 92
EExxaammppllee:: BBrreeaasstt CCaanncceerr
Simulated of total cost distribution over time (2008 vs. 2013)
 In a complex oncology disease
area, patent expiries can
optimize the patient pathway
and the relative usage of
pharmacological agents
 Reduced costs for 50% of
patients leads to modest overall
increase in average cost /
patient (c. 2-3% p.a.) keeping
cost under control while
allowing both patients and
manufactures to benefit
% of patients
in range
Source: A.T.Kearney analysis
Early generics
come off patent
Existing biologics treatment
increases in line with disease
progression and
-epidemiology
Increased use of
combination therapy
Total Treatment Cost (£000’)

While the share of generic usage has increased by 50%, there is still
scope to improve the effectiveness of medicines usage in many markets
Generic market share of volume sales
2001 - 2012
HEALTH & GROWTH 93
Generic market share of volume sales
(selected countries)
% %
CAGR: +5%
Source: IMS MIDAS Market Segmentation Data 12 Months to 2012 (2012)
~3x

Even over a short 12 month period average costs of genericized treat-ments
have declined, with ‘efficient’ markets making dramatic gains
HEALTH & GROWTH 94
Change in cost per treatment day, based on DDD, Q3 12 vs. Q3 11
Note: Based on seven common frequent prescribed therapy areas:
Angiotensin II antagonists, anti-depressants, anti-epileptics, anti-psychotics, anti-ulcerants, cholestrol regulators and oral anti-diabetics
Source: IMS MIDAS Q3 2012 and Q3 2011
Higher share
of generics

The industry’s lifecycle model will ensure that medicines expenditure
will continue to be sustainable in the future
HEALTH & GROWTH 95
IIlllluussttrraattiivvee
Therapy area life cycle over time
‘Delivering
Innovation’
Society
Surplus
Direct Thrombin
Inhibitors
Autoimmune
Note: Size of bubbles = 2012 European Medicines spend
Source: A.T.Kearney analysis, IMS ATC analysis (2013)
‘Addressing
Unmet Needs’
Pain
‘Establishing
Pathway Efficiency’
‘Realizing
Society Surplus’
Rewarding
Innovation
Hormonal
Contraception
Respiratory
Hypertension
Oncology
Bacterials
Antifungals
Gene Therapy
Lipid Regulators
Nervous
System
Diabetes
Time
Stem Cells

Patent expiries will continue to create headroom for innovation in
Europe, while ensuring the medicines bill stays in control
Net effect of new launches, core sales and
patent expiries 2010 – 2016*
HEALTH & GROWTH 96
Forecast medicines spending
(2010-2016)†
 The current generation of generic expiries in
community care is funding headroom for new
technologies
$bn.
CAGR: -1%
 If governments continued to fund medicines at the
same rate as health expenditure, $30bn extra
funding for medicines would be available for
medicines investment
Sources of
funding
CAGR:
+2%
Source: * A.T.Kearney analysis based on Datamonitor: Pharma and Biotech Outlook to 2016 (2012); † IMS Health: The Global Use of Medicines, July 2012 (2012)

Like small molecules, biosimilars have also created headroom for
innovation as treatment cost decreases after patent expiries
HEALTH & GROWTH 97
Positive Volume effect after biosimilar introduction
Note: T-1 = 100%, T = year of biosimilar introduction
Source: IMS MIDAS MAT Q4 2010
Filgrastim (G-CSF)
 Physicians moved G-CSF back
in 1st line cancer treatment due
to lower biosimilars cost
 G-CSF prevents hospital
readmission due to infections
Volume Effect
% of SU vs. T-1 (year before
biosimilar introduction

In the mid-term, biosimilars will contribute to the continued
sustainability of medicines spending
Spending in 2016 ($bn.)
by Therapeutic Area*
Disease Indications for biosimilar mAbs
currently in clinical trials†
HEALTH & GROWTH 98
Top 20 Global TAs (42% of total)
Note: mAbs: Monoclonal antibodies
48-53
44-48
33-36
31-34
83-88
Spending in 2016 (US$ bn)
22-25
22-25
22-25
19-22
16-18
15-17
14-16
14-16
14-16
14-16
13-15
13-15
13-15
12-14
12-14
Source: * IMS Health: The Global Use of Medicines, July 2012 (2012) † Parexel Statistical Yearbook 12/13

 This section highlights how the pharmaceutical industry contributes, above and beyond its medicines,
to the economic viability of health systems through its investment in clinical trials activities and training
of physicians and novel partnerships.
2.1 2.2 2.3 2.4
access in Europe
HEALTH & GROWTH 99
interventions later
2
model
model
partnership working
partnership working
innovation
affordability

Medicines innovation contributes to the financial sustainability of
health system through its investments and partnership working
 The industry’s clinical trial investment in Europe creates value at multiple levels for healthcare systems
 In areas like oncology, sponsor-provided medicines in clinical trials can result in significant subsidies of
medicines costs
 Through donations and other CSR initiatives, the pharmaceutical industry supports global healthcare
infrastructure development
 Initiatives like IMI demonstrate industry’s role as co-investor in major partnership initiatives
HEALTH & GROWTH 100
Key Headlines

The industry’s clinical trial investment in Europe creates value at
multiple levels for healthcare systems
HEALTH & GROWTH 101
IIlllluussttrraattiivvee
Clinical Trials Revenue Streams
Trial Execution Regulatory
Labour Sites
Patients
State Budget
Support Services
Medical
Laboratory Testing
Diagnostics
Medical Equipment
Other
Courier and Printing
IT / Data Services
Translation Services
Transport and Lodging
Sponsor /
Pharma Industry
CRO
Medicines
Ethical Committee
Purcha-sing
Funding
Investigator
Fee
Site
Grants
Tax Tax
Tax
Tax
Purcha-sing
Participation
Fees
Fees Tax
Source: PWC: Clinical Trials in Poland (2010)

In areas like oncology, sponsor-provided medicines in clinical trials
can result in significant subsidies of medicines costs
Average NHS Cost savings per patient due to
clinical trials supplies, cancer sites*
Range of NHS cost savings due to clinical trials
supplies, selected therapy areas†
HEALTH & GROWTH 102
Source: * Bredin, C et al.: Drug cost avoidance from cancer clinical trials (2010); † PWC: Clinical Trials in Poland (2010)
4-15%
1-3%
1-3%

Through donations and other CSR initiatives, the pharmaceutical
industry supports global healthcare infrastructure development
Treatments donated and sold at cost
Total value estimate of the pharmaceutical
industry’s donations and capacity building
HEALTH & GROWTH 103
Note: Developing Countries; CSR = Corporate Social Responsibility
Source: The Pharmaceutical Industry and Global Health: Facts and Figures 2011 (2011)

Initiatives like IMI demonstrate industry’s role as co-investor in major
partnership initiatives
HEALTH & GROWTH 104
CCaassee SSttuuddyy
Innovative Medicines Initiative
Situation Industry’s Response
 In 2008, the European
federation of pharmaceutical
industry and associations
(EFPIA) together with the
European Commission
formed IMI – Innovative
Medicines Initiative – as a
joint technology framework
program to support
collaborative non-competitive
pharmaceutical research
projects and build networks of
industrial and academic
expertise in Europe
 IMI is the largest biomedical
public-private partnership in
the world
 Cost of developing
medicines has
increased
significantly during
the last decade
 Large scale internal
R&D organizations
may not be the
appropriate model for
the future
 Truly innovative R&D
partnerships working
seen in other
industries were
lacking within the
development of
medicines
Impact: IMI Publication in high-impact journals
Source: Thomson Reuters: Bibliometric analysis of ongoing projects (2013).
Publications

 This section highlights the fact that free movement of goods and international reference pricing across
the European Union are impeding medicines access, and may be a blocker to greater pricing flexibility.
2.1 2.2 2.3 2.4
access in Europe
HEALTH & GROWTH 105
interventions later
2
model
model
partnership working
partnership working
innovation
affordability

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