Presentation given by Milena Izmirlieva , Senior Manager, Research Life Sciences, IHS at the 2015 CBI Reimbursement and Contracting conference in Philadelphia

1. © 2015 IHS
IHS ECONOMICS & COUNTRY RISK
RISK SHARING AGREEMENTS:
LESSONS FROM THE GLOBAL
EXPERIENCE
25 FEBRUARY 2015
Milena Izmirlieva
Senior Manager, Life Sciences Research
Sarika Pundit
Strategic Account Director

2. © 2015 IHS
Agenda • What is risk sharing?
• Types of risk sharing deals
• Evolution of risk sharing
• Country preference for payer
partnerships by type
• Game-changers for risk sharing
• The future of risk sharing
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RISK SHARING / FEBRUARY 2015

3. © 2015 IHS
What is risk-
sharing?
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• IHS definition (2009):
“an umbrella term for a host of creative pricing or costing initiatives with the goal of
securing reimbursement or greater access to the drug. Agreements are put in place
between manufacturer and payer to potentially spread the cost of a particular medicine,
or treatment regime, by placing conditions that explicitly dictate how much the payer will
spend and not spend. Risk-share conditions can significantly vary in nature depending
on the drug, its mechanism of action, and the type of disease it is treating, and their
implementation can often be indirect.”
• University of Washington's PORPP definition (2008):
"agreements between a payer and a pharmaceutical, device, or diagnostic manufacturer
where the price level and/or nature of reimbursement is related to the actual future
performance of the product in either the research or 'real world‘ environment rather than
the expected future performance"

4. © 2015 IHS
What is risk-
sharing?
• In theory, risk sharing is simply an
agreement to share the risks associated
with the introduction of a new product to
the market.
• In reality, risk sharing means different
things to payers and to pharmaceutical
companies.
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RISK SHARING / FEBRUARY 2015
???

5. © 2015 IHS
What is risk-
sharing?
• For payers: A way to share the costs.
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I need to share the
cost!
I have finite resources.

6. © 2015 IHS
What is risk-
sharing?
• For pharmaceutical companies: A way to
secure market access in difficult
circumstances.
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I’m running out of
options.
I want to avoid a
worse outcome.

7. © 2015 IHS
Brief history of
risk sharing
• The first RS agreement, recorded by
IHS, was in 2002 and was for Bayer’s
MS drug Betaferon (interferon beta) in
the UK.
• The 2007 agreement for myeloma drug
Velcade (bortezomib) in the UK was a
turning point for RS as it set clear
performance-based criteria for funding.
• The manufacturer rebates the cost of
bortezomib for patients who, after a maximum
of 4 cycles of bortezomib, have less than a
partial response (measured using serum M
protein); treatment is continued only in people
who have a complete or partial response (that
is, reduction in serum M protein of 50% or
more or, where serum M protein is not
measurable, an appropriate alternative
biochemical measure of response).
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RISK SHARING / FEBRUARY 2015

8. © 2015 IHS
Growth in number of proposed risk sharing agreements
8
Source: IHS Life Sciences Risk Sharing Database
(excluding 2007-08 New Zealand agreements)
Proposed Risk Shares per Year
0
5
10
15
20
25
30
35
40
45
50
2005 2006 2007 2008 2009 2010 2011 2012 2013
RISK SHARING / FEBRUARY 2015

9. © 2015 IHS
Types of risk
sharing deals
• RS deals are known under different
names: Patient Access Schemes (PAS)
in the UK; cost sharing agreements in
some markets.
• There are several types of risk sharing
deals, with discount-based schemes
becoming increasingly dominant.
• The most popular types are finance-
based schemes and finance-based
discounts schemes.
• More than 15 different types of risk-
sharing schemes are tracked regularly in
the IHS Risk Sharing database.
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10. © 2015 IHS
Risk sharing
subclasses
defined
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• Finance-Based: These agreements are conditioned by a set of pre-
specified budget caps, discounts or restrictions that can either be based
on a particular patient or on the disease population. These can include
price-volume agreements (France), expenditure caps (Australia; United
States), price cuts that are attached to forecasted spend (Japan) and
conditional discounts (Italy; United Kingdom).
• Outcomes-Based: These agreements are conditioned by a pre-specified
endpoint or definition of response that dictate whether the payer will cover
the treatment on an ex post facto basis. These can include outcomes
guarantees (United Kingdom; United States) and form the traditional
model of risk-sharing agreements, as payment is weighted entirely against
the performance of the drug.

11. © 2015 IHS
Risk Sharing Deals by Type
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Source: IHS Life Sciences
Europe has led the way in prevalence of outcomes-based RS
RISK SHARING / FEBRUARY 2015
Countries Name of the medicine (active ingredient) Therapeutic area
Italy
Tarceva (Erlotinib) Sutent (Sunitinib)
Nexavar (Sorafenib) Sprycel (Dasatinib) Tasigna
(Nilotinib)
Avastin (Bevacizumab) Tyverb (Lapatinib)
Lucentis (Ranibizumab) Macugen (pegaptanib
sodium)
Lung cancer Renal cell carcinoma (RCC)
Leukaemia Colorectal cancer, Kidney cancer
Breast cancer Ophtalmology
UK
Avonex (Interferon beta 1a) Betaferon (Interferon
beta 1b) Copaxone (Glatiramer acetate) Rebif
(Interferon beta 1a) Velcade (bortezomib)
Multiple Sclerosis
Multiple Myeloma
Germany
Aclasta (zoledronic acide) Certican (everolimus)
Sandimmun Optoral (cyclosporin A ) Myfortic
(mycophenolate sodium)
Osteoporosis Prophylaxis of organ rejection
Rheumatoid Arthritis
Prevention of rejecting kidney transplant
Australia
Enbrel (etanercept) Tykerb (lapatinib)
Tracleer (based on mortality rate)
Rheumatoid Arthritis
Breast cancer

12. © 2015 IHS
Risk Sharing Deals by Type
12
Source: IHS Life Sciences
Notable early outcomes-based RS agreements in the US
RISK SHARING / FEBRUARY 2015
US
Proscar (finasteride), Cialis (vardenafil)
Actonel (risedronate), Januvia (sitagliptin) /
Janumet (sitagliptin, merformin), Zocor
(simvastatin), Diovan (valsartan) / Diovan
HTC (valsartan hydrochlorothyazide)
Benign Prostatic Hyperplasia Erectile
Dysfunction Postmenopausal osteoporosis
Diabetes Cholesterol Blood pressure

13. © 2015 IHS
Risk Sharing Deals by Class
13
Source: IHS Life Sciences Risk Sharing Database
Proposed Risk Sharing Deals by Broad Class (2002-2014)
Finance-based: discounted
scheme
Other finance-based
Dose cap
Off-label
Performance-based
Undefined/Unknown
Finance and performance
based
RISK SHARING / FEBRUARY 2015

14. © 2015 IHS
Risk Sharing Deals by Class
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Source: IHS Life Sciences Risk Sharing Database
Implemented Risk Sharing Deals by Broad Class (2002-2014)
Finance-based: discounted
scheme
Other finance-based
Dose cap
Off-label
Performance-based
Undefined/Unknown
Finance and performance
based
RISK SHARING / FEBRUARY 2015

15. © 2015 IHS
Risk Sharing Deals by Class
15
13% of proposed risk sharing deals were not implemented (mainly due to NICE
funding rejections in the UK)
Source: IHS Life Sciences Risk Sharing Database
Proposed versus Implemented Risk Sharing Deals by Broad Class (2002-2014)
Finance-based: discounted
scheme
Other finance-based
Dose cap
Off-label
Performance-based
Undefined/Unknown
Finance and performance
based
RISK SHARING / FEBRUARY 2015

16. © 2015 IHS
Risk Sharing Deals: Impact on Reimbursement Outcome
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Source: IHS Life Sciences Risk Sharing Database
NICE Reimbursement Outcome Following PAS Proposal
0 5 10 15 20
2009
2010
2011
NICE Reimbursement Outcome
Following PAS
Recommended
Rejected
RISK SHARING / FEBRUARY 2015

17. © 2015 IHS
Therapeutic Areas at Highest Risk of Risk Sharing Deals
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Source: IHS Life Sciences Risk Sharing Database
Implemented Risk Sharing Deals by Therapeutic Area
0 50 100 150 200 250 300
Total
Oncology
Ophthalmology
Viral (inc Hepatits B & C, HIV), vaccines
Cardiovascular
Anfi-inflammatory and Pain
Orphan Diseases
Respiratory
Other
RISK SHARING / FEBRUARY 2015

18. © 2015 IHS
Finance-based
schemes are
gaining popularity
• Finance-based schemes have increased
– with various permutations, including
discount-based finance schemes
• Performance-based schemes have
become somewhat less common –
mainly as a result of:
• difficulties in implementation
• new payers engaging in risk sharing deals
that are exclusively interested in discounts
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19. © 2015 IHS
Preference for discounted schemes grows
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Source: IHS Life Sciences Risk Sharing Database
Implemented Risk Sharing Deals by Type 2009 vs 2013
RISK SHARING / FEBRUARY 2015
Performance-based Finance-based Performance-based Finance-based
Undefined Finance and performance based
86% of those
were discount-
based
50% were
discount-based

20. © 2015 IHS
New Players
engaged in Risk
Sharing
• A significant number of new countries
are beginning to see risk sharing
agreements, including:
• Belgium
• Hungary
• Poland
• Portugal
• South Korea
• Spain
• Interest is widening in emerging markets
• Countries interested in adopting the
NICE cost-effectiveness methodology
may want to introduced PAS.
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21. © 2015 IHS
Game-changers
for risk sharing
deals
• E-prescribing and the move to electronic
healthcare records.
• Market entry of expensive new drugs.
• Growing sophistication of payers
• The risk of International Reference
Pricing
• Adaptive licensing legislation in the
European Union
• Approval under Breakthrough
Designation in the US
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22. © 2015 IHS
Latest
developments in
risk sharing
• The overuse of conditional
reimbursement with expected risk
sharing or price cut has been questioned
in Poland
• Increased trend for RS deals to be
signed at the regional level (e.g.,
Catalonia) in addition to national
agreements in Spain
• Romania and Serbia both intend to use
RS as part of cost-containment strategy
• Calls for more productive sharing of risk
between companies and the NHS in the
UK: “to progressively reflect the value of
new treatments as our knowledge of
what they can offer to patients increases”
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23. © 2015 IHS
The Future of
Risk Sharing
• Risk sharing agreements are here to
stay, but they are a moving target.
• New expensive drugs and the new drug
approval initiatives may well reshape the
environment and the type of risk sharing
payers are willing to engage in going
forward.
• Watch this space!
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