Presentation by Stefan Kapferer, Deputy Secretary-General of the OECD. A look at potential remedies for a broken health system.

1. A LOOK AT POTENTIAL
REMEDIES FOR A
BROKEN SYSTEM
Stefan Kapferer
Deputy Secretary General of the OECD
Economist Pharma Summit
London, 26th February 2015

2. • The health innovation
• 3 problems with innovation in health
– Wrong innovation
– Wrong diseases
– Wrong price
• How to fix them
– Better process regulating innovation
– Improve R&D environment to reduce risks and
costs
– Pay for result when RoI is low
Roadmap

3. Q: Why is health the only sector of the
economy where new technologies end up
costing more than the old ones?
A: Our innovation system is broken

4. Smith et al. 2000 Peden and
Freeland 1995
Cutler 1995 Newhouse 1992
US (1940-90) US (1960-93) US (1940-90) US (1940-90)
Life
expectancy/aging
2% 6%-7% 2% 2%
Administrative costs 3%-10% * 13% *
Changes in
financing
10% 4%-5% 10% 10%
Personal income
growth
11%-18% 14%-18% 5% <23%
Health care prices 11%-22% * 19% *
Technology 38%-62% 70%-75% 49% >65%
Notes: *Not estimated
…and broken systems cost us all heavily
Sorenson et al, 2013. Medical technology as a key driver of rising health
expenditure: disentangling the relationship

5. Problem 1: we get the wrong
innovations…
1 0
8 10
148
20 2 4
8
19
1
Major Important Moderate Minor None No rating
Added therapeutic value of medicines launched in 2013, as assessed by the French
Transparency Commission
New drug New indication, existing drug
Source: Haute Autorité de santé, Rapport d’activité 2014

6. Problem 2: … in the ‘wrong’
diseases…
Unipolar depressive
disorders
Ischaemic heart
disease
Other malignant
neoplasms
Breast
cancer
Prostate
cancer
Other
cardiovascular
diseases
Alzheimer &
other dementias
Alcohol use
disorders
Numberoftechnologies
Burden of disease
R2 Linear=0.225
New and Emerging Health Technologies identified by horizon scanning
from 2000 to 2009.
Source: Euroscan network

7. Problem 3: …at the ‘wrong’ prices (for payers)

8. Problem 3: High prices threaten access and
health systems sustainability

9. WHAT CAN WE DO?

10. • Late trails that
failed
• Little transfer
of biomedical
innovation to
point of care
• Risks and
rewards for
innovators not
aligned
Research on Alzheimer’s disease
illustrates the problem

11. Solving the problem of price: It is true that costs
of innovation are inflating
Costs of bringing a
successful drug to
market estimated
between
USD 1.3 – 1.7B
2013

12. Solving the problem of price: policymakers
can help reduce costs by…
Stronger Public Private
Partnerships
Modernising regulatory
pathways
Open Science for greater
International Collaboration Big Data

13. Big data in particular has great potential
New discovery
programs
Crowd-sourcingMultidisciplinary
collaborations
New models
of care
Kaiser Permanente
Electronic health records
stores 9 million patients -
30 petabytes(*) with 2
petabytes added each year
European Bioinformatics
Institute is storing 20
petabytes of data
* [1 petabyte = 1 million
gigabytes]

14. Solving the problem of price: pay for ‘value’
Many countries grant a price premium to innovative
products. However,
 They do not agree on « innovativeness » of new products
 They do not agree on what « value » should encompass.
 The price accepted for a QALY gained differs widely across
therapeutic area. Does it reflect society values?
 They do not set cost/QALY threshold or find difficult to stick to
them
What can we do?
 Use performance-based agreements to guarantee quick access and
reduce uncertainty (evidence-development) and/or share financial
risks (e.g. when health benefits lower than claimed)
 Do not stick to “price x volume” where inappropriate

15. Sometimes valuable innovations will not be
used, but governments should still pay
For example, there is much discussion of how to encourage
the development of antibiotics
“Push mechanisms”
• Easing approval (FDA and EC) – not enough to reduce significantly
the costs of clinical trials and risky for patients
• Public-provider partnerships to support clinical trials: BARDA in
the USA and ND4BB in Europe.
• Longer market exclusivity: FDA 2012 GAIN – but we doubt this will
work.
“Pull mechanisms”:
• Advanced commitments or prize award in exchange to commitment
to sell at low price or not sell at all (financed by a tax on animal
consumption of antibiotics?)

16. Governments are ready to work with
private sector to tackle emerging problems

17. For further information
Online:
www.oecd.org/health
www.oecd.org/sti/biotechnology
OECD work on dementia:
http://www.oecd.org/sti/addressing-dementia-the-oecd-response.pdf
Contacts:
Stefan.kapferer@oecd.org
health.contact@oecd.org – Mark.pearson@oecd.org
sti.contact@oecd.org – Dirk.pilat@oecd.org