This document summarizes a presentation given by David Lin from Novartis Oncology on drug purchasing and pricing from the pharmaceutical industry perspective. The presentation covers: - The growing demand for healthcare and new treatments putting pressure on pricing and access - Malaysia's national medicine policy and efforts to improve access to medicines through affordability - Factors considered in pharmaceutical pricing like production costs, reference pricing to other countries, and balancing access and sustainability - Efforts by industry like access programs to help patients gain early access to innovative treatments - The changing treatment landscape with new cellular and personalized therapies requiring new frameworks for evaluation and pricing assessment.

1. Drug Purchasing & Pricing
The Pharmaceutical Industry Perspective
David Lin
Head of Market Access
Novartis Oncology
National Cancer Institute, Putrajaya
24 Nov 2014

2. Disclaimer
 Full-time employee of Novartis Corporation.
 Information shared in this presentation does not
necessarily represents the sole position of
Novartis Corporation.
 Previous employment includes Pfizer,
AstraZeneca, Bayer Healthcare, Genzyme and
Sanofi.

3. Contents
Introduction
Pricing Context in Malaysia
National Medicine Policy (DuNAS)
Pharmaceutical Pricing
External Reference Pricing
Drugs availability – patients access
Access of the Future & Conclusion

4. Introduction

5. Introduction
 Demand for more and better healthcare grows faster
than resources available to meet the demand
 Facing growing ageing population
 More chronic diseases developed and diagnosed
 More new innovative treatments
 Healthcare is a great political topic
 More countries recognize good health is an economic
asset and are finding ways to improve the healthcare
system (e.g., designing and implementing Universal
Coverage)

6. Introduction
 Payers face increasingly complex decision-making
challenges in the oncology treatment due to the pace
of groundbreaking scientific advances e.g. targeted
therapy, cell therapy.
 Such challenges requires:
 Systematic understanding of value of clinical endpoints
 Incorporating valuable endpoints in reimbursement
 Evidence to demonstrate valuable endpoints
The pace of new treatment discoveries and increasing number of
therapeutic options requires new frameworks for payers to evaluate
for reimbursement

7. Pricing Context in Malaysia

8. Medicine Pricing
Malaysia has a free
pricing system:
manufacturers,
distributors and retailers
are allowed to set their
own prices.
Public’s perception of high
medicine prices and
subsequent perceptions of
inequitable access and
reduced affordability of
medicines
In the public sector,
medicine prices are
indirectly controlled
through tenders and
price negotiations.
Private sector free market
competition governs prices of
medicines, although the
Pharmaceutical Services
Division has been monitoring
private sector prices through
the Medicines Price Monitoring
System (MedPrice).
Private sector prices have
come under scrutiny more
recently due to growing concern
regarding affordability of
medicines for middle to low
income patients.

9. How much are we spending on
pharmaceuticals? Pharmaceutical expenditure as a share of total
health expenditure, 2009
• In Asian countries,
pharmaceutical expenditure
share of total health
expenditure range between
8% -50%.
• For Malaysia, pharmaceutical
expenditure is 8.8% of total
health expenditure.
Are we effective in
spending our $$$
or we are not
spending enough?

10. National Medicine Policy (DuNAS)

11. Industry collaborating with MOH to achieve
goals of National Medicine Policy

12. Policy 2: Access to medicines

13. Policy 2: Access to medicines
Strategy 2 – Affordability of medicines

14. Pharmaceutical Pricing

15. From the lab to the patients

16. The balancing act

17. Understanding payer’s perspectives in order for the industry
to position the acceptable price to encourage access
Payer benefits
Public health
benefits
Economic benefits
Clinical and
humanistic benefits
Functional
consequences
Product attributes
Payer goals
• Unmet need for the targeted population
• Existing treatment options: not optimal results and risky
• Rare disease that has no other approved drug therapy
• Significant cost offsets: lower monitoring and AE costs,
savings in medical visits, co morbidity management and
productivity
• Limited budget impact: 2nd-line / last-line option, very
small patient population
• QoL, DFS, PFS, OS
• Tumor size shrinkage, slow down disease
progression, improve survival
• Key product attribute that differentiate its value

18. PRICE APPROACH AT TIME OF LAUNCH –
INDUSTRY’S APPROACH
Margin
Distribution
cost
Functional
Costs /
Overheads
Import Tax
Freight &
Insurance
Functional
Costs /
Overheads
Production Cost
Country costs
HQ costs
Selling Price
• Discounts
• Rebates
• Bonus
• Free goods
• Access models
• MEA
Net Selling Price
International Selling Price
Lowest net selling price
Includes the cost of the drug development
(lab, clinical trials etc.)

19. THE «MAGIC PRICING TRIANGLE»:
OBJECTIVES IN PRICING IS NOT ABOUT PRICE ONLY!
 Find the right
balance that
maximizes patient
access and a
sustainable business
19
INDUSTRY

20. WHO Guideline on Country
Pharmaceutical Pricing Policies
1. Use health technology assessment (HTA) as a tool
to support reimbursement decision-making as well
as price setting/negotiation.
2. Combine HTA with other policies.
3. Using HTA: review of reports from other countries;
review of reports submitted by industry; conduct
assessments based on local information and local
data.
Source: WHO, 2014

21. WHO Guideline on Country
Pharmaceutical Pricing Policies
4. Take a stepwise approach to develop legislative
and technical capacity to take full advantage of the
potential utility of HTA in pharmaceutical price
setting.
5. Clearly define the roles and responsibilities of the
decision-makers and other stakeholders, and the
process of decision-making.
6. Ensure that HTA processes are transparent and
that the assessment reports and decisions should
be made publicly available and effectively
disseminated to stakeholders.
7. Collaborate to promote exchange of information
and develop common requirements for HTA.
Source: WHO, 2014

22. External Reference Pricing

23. External reference pricing
 According to the Organisation for Economic Co-operation and
Development (OECD), External Price Referencing, also referred to
as External Price Benchmarking or International Reference Pricing,
is defined as “the practice of comparing pharmaceutical prices
across countries” and it is further indicated that, “There are various
methods applied and different country baskets used”1.
 4 main components to consider:
 Country basket
 Product basket
 Reference price calculation
 Infrastructure and implementation processes
Friend or foe? Is Malaysia paying more than
others? Will this hamper access?
1. Pharmaceutical Pricing Policies in a Global Market. OECD Health Policy Studies, OECD, 2008.

24. Example of Countries Referencing Germany
Formally, Informally and Indirectly

25. Comparative Pricing analysis of top 5 therapy
areas across Asia Pacific countries

26. Drug availability – patients access

27. Drug Availability
 There is evidence that availability of medicines may be
a challenge, with patients not receiving treatments
despite reimbursement on the MoH formulary 1.
 The public sector uptake showed limited growth, despite
listing on the MoH Formulary in 2009.
 In the case of the oncology product, the growth in public
sector uptake over the 4 years since 2009 had been
about 7.5%.
 This analysis tends to suggest that despite MoH
Formulary listing status, access to certain medicines
through public channels remains unchanged or low.
1. Babar ZU, Ibrahim MI, Singh H, Bukahri NI, Creese A. Evaluating drug prices, availability, affordability, and price
components: implications for access to drugs in Malaysia. PLoS medicine. 2007;4(3):e82.

28. Volume uptake of branded original drugs
after inclusion in the MoH formulary in 2009
Source: IMS PADDS data, Full year 2008-2014,

29. Volume uptake of branded original drugs
after inclusion in the MoH formulary in 2009
Source: IMS PADDS data, Full year 2008-2014,

30. Volume uptake of branded original drugs
after inclusion in the MoH formulary in 2009
Source: IMS PADDS data, Full year 2008-2014,

31. Drugs availability – patients
access

32. Access of innovative drugs to critically ill patients
should not be delayed though no perfect solutions

33. Access Models
 Broadly speaking there are three types of drug
reimbursement listing models depending on how
clinical and cost factors are used in decision
making.
 Clinical effectiveness evaluation alone
 Clinical effectiveness evaluation and budget impact
analysis
 Cost effectiveness and budget impact analyses

34. Solving access through innovative
access program
 Industry introduced Patients Assistant Program
(PAP) and other form of access program to help
patients gain early access to innovative medicines,
ultimately increase affordability.
 Example:
 Imatinib for CML was introduced in Malaysia in 2002
through GIPAP (Glivec International Patients Assistant
Program) and later transition to MYPAP (Malaysia
Patients Assistant Program) since 2008.
 MYPAP is an example of Budget Impact Access Model
where it is based on cost capitation model.
 Since then, many other pharmaceutical
companies had introduce access program,
some successful, some not.

35. Access strategies
 Various pricing policies and strategies exist, however,
it’s challenging to determine which to implement.
 All have strengths and weaknesses, just as all
countries have unique medicine needs and
challenges.
 Each country must assess its own medicines situation
and implement different combinations of policies and
interventions.
 Industry is open to collaborate.

36. Access of the Future

37. The Paradigm of Cancer Treatment is Changing
Dramatic and exciting advances keep coming!
General Cytotoxic Targeted Therapy
Personalized
Cellular Therapy
37

38. The future of cancer treatment – how are
we preparing for it?
What
would be
the right
price?

39. PFS INCREASINGLY ACCEPTED AS A BASIS FOR
1995 2000 2005 2010
Proprietary and Confidential
Sunitinib
(RCC)
Bevacizumab
(RCC)
REGULATORY APPROVAL
Lapatinib
(BC)
Trastuzumab
(BC)
Ixabepilone
(BC)
Bevacizumab
(BC)
Everolimus
(RCC)
Panitumumab
(CRC)
Sorafenib
(RCC)
Bortezomib
(MCL)
Gemcitabine
(ovarian)
Pemetrexed
(NSCLC)
Bevacizumab
(NSCLC)
Docetaxel
(NSCLC)
Bevacizumab
(CRC)
Bortezomib
(MM)
Erlotinib
(pancreatic)
Sorafenib
(HCC)
Irinotecan
(CRC)
Gemcitabine
(pancreatic)
Erlotinib
(NSCLC)
Oxaliplatin
(CRC)
39
Approval based on OS
Approval based on PFS/TTP
Source: www.cancer.gov/cancertopics/druginfo

40. What are the views of the regulatory agencies
on clinical trial endpoints?
“Acceptable primary endpoints
include OS and PFS/disease free
survival […] While it is generally
acknowledged that the aim of
treatment is to improve quality of life
and survival, restraints on the
conduct of clinical trials may make
these goals unattainable.”
EMA Guideline on the Evaluation of
Anticancer Medicinal Products in Man
“The analysis of OS may be
confounded by crossover and/or
subsequent therapies.
PFS, measured prior to the
introduction of other therapies,
may more accurately depict a
treatment’s therapeutic effect.”
FDA Oncology Head
Richard Pazdur
“PFS can reflect tumour growth and be assessed before the
determination of a survival benefit. Its determination is not
confounded by subsequent therapy.”
FDA Guidance for Industry: Clinical Trial Endpoints for the
Approval of Cancer Drugs and Biologics
EMA Guideline 2009; FDA Guidance For Industry 2009

41. Conclusion

42. Conclusion
There are future challenges to address as public financing and quality of care
needs to be in pace with population growth, disease and lifestyle trends.
Hence, availability or access to medicines in the public sector has become
increasingly difficult leading to an affordability challenge for low and middle
income patients who do not have access to medicines through the public
sector and cannot afford private sector prices.
This undermines the fundamental principle upon which Malaysia’s health care
system has been based – that access to quality health care should not depend
upon ability to pay.
Low prices can reduce the attractiveness of certain countries to manufacturers
and importers which might result in important products not being produced and
marketed in a particular country or at least, being marketed with substantial
delays.