Model validation across geographic areas requires factoring in local variations to ensure forecast accuracy. While central forecasting may be time efficient, it risks missing local variations and amplifying forecaster errors. Forecasting locally allows markets to capture key variations and engage local stakeholders, but can be time consuming. Managing diversity across Europe requires understanding differences in populations, products, healthcare systems, pricing and regulations to provide a comprehensive regional perspective for global forecasts.

1. Model Validation across geographic
areas
Factoring in local variations to ensure accuracy of
assumptions
Nic Talbot-Jenkins

2. Typical Company Organisation
Global
Overview/Strategy
InternationalUS Europe
Local Markets/Affiliates/Operating Companies
To many ‘international’ companies, ‘Global’ can be
synonymous with ‘US’
Clear voice needs to be heard from the regions at
a global level

3. Central vs Local Forecasting
 Why not forecast centrally?
 Pros:
– one version of forecast & model, one keeper
– time-efficient (?)
 Cons:
– miss local variation
– highly sensitive to the skill of the forecaster (errors are
amplified throughout the reach of the model)
– remote perspective
– may not reflect what is achievable in the market-place

4. Local vs Centralised Forecasting
 Why forecast locally or at a regional level?
 Pros:
– closer to the market
– capture key market variations
– engage & encourage the local markets
– more robust forecast
– commercially viable/endorsed figures
 Cons:
– can require extensive organisation
– time-consuming, takes time to achieve final result

5. The main issue - Creating a European
Voice to be heard Globally………..
 ‘Aligned’ position needs to be fed to Global
 Constant struggle for funds, resource, data etc
 Understanding of EU diversity to provide robust
regional voice which represents the best business
interests for Europe

6. Managing Diversity Across
Europe

7. European Diversity
 Regions & countries vary immensely
 Difficult concept for Global to understand
sometimes as US is a main comparator
 Diversity needs to be understood & captured in
order to provide a comprehensive view for Europe
 Diabetes & the Oral Antidiabetic market as a
working example

8. Forecasting…………...
 Forecasting is difficult enough, let alone with over
20 different markets to consider!
 Patient based vs script driven
 Either method needs local consideration
 What needs to be considered and how can that be
managed?

9. Considerations - 1. Population /
Patients
 Epidemiology
– varies from country to country
 Variances can be caused by a number of factors
– cultural variations
– demographic differences
– genetic predisposition
 Different numbers of eligible patients in different
countries

10. Population Variance Example:
Data from UN population database (units - 000s)
0
1000
2000
3000
4000
5000
6000
7000
0-4
10-14
20-24
30-34
40-44
50-54
60-64
70-74
80-84
France
Germany
Italy
Spain
UK
Poland

11. Demographic Impact
 Impact on disease - age-related conditions,
increase in availability of patients for treatment
 Accounts for some variation in disease prevalence
 Important to take into account when forecasting
across Europe
 Eg. Diabetes type 2

12. Type 2 Diabetes:
 If we took a flat rate of disease & applied to an EU
population indiscriminately…………
 However, if we take a more robust process & apply
local data by age-cohort…………….

13. What’s Happening Demographically...
0
1000
2000
3000
4000
5000
6000
7000
8000
0-4
10-14
20-24
30-34
40-44
50-54
60-64
70-74
80-84
2001
2005
2010
2013
Data from UN population database (units - 000s). Data shown is for
Germany

14. Population Variance through (miss)
Calculation
3500
3600
3700
3800
3900
4000
4100
4200
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Point Value
Age Mapped
Cumulative Difference ~ 2.8M
Overall
prevalence
rate of 5%
applied in
both
scenarios!!

15. Prevalence Calculations
 Through this example we can see the benefit of
proper demographic modelling of populations.
 This method should ideally be used in all countries.
 Same age-cohort prevalence rates can be used in
this way, overall calculated prevalence is then tied
into the demographic map of the market.
 You may find that this resolves issues with
divergent epidemiological data!

16. Considerations - 2. Market Variations -
Products & Usage
 As well as population & cultural differences there
are vast differences across Europe in terms of
products & competitors
 Germany - wide use of herbal remedies
 Italy - OAD market consists of combination
products (not widely seen elsewhere in Europe)
 Consideration of local competitors is key to
unlocking market potential
 Has knock-on effects on product positioning &
marketing

17. Product Usage Variations - OAD
Market
 Difference in packs available in some markets
 Tablet strengths
 Key competitors vary
– Germany - mainstay of treatment are the SUs
– UK - Metformin becoming drug of choice first line
 Strategy clearly needs to be very different to sell
against the SUs vs metformin (different modes of
action etc)

18. Impact on Patient Turnover
 1st line therapy will affect the rate of turnover of the
patient pool
 SUs - not sustainable long term for 1st line use,
patients will fail to be maintained quicker & progress to
2nd line
 Metformin - patients maintained for far longer, slower to
reach 2nd line therapy
 Important for the TZD class as they are indicated as
2nd line combination therapy
 Country market potential will vary hugely depending on
the treatment paradigm

19. Patient Dynamics (1):
Source: Medical Radar, Medical Dynamics database 2002
UK Diabetologist Market Dynamics (Hospital):

20. Patient Dynamics (2):
German Diabetologist Market Dynamics (Hospital):

21. Considerations - 3. Healthcare Access
 Very different access methods for healthcare
across Europe
 France - free access to specialists & medications
 UK - GP ‘gatekeepers’, patients need referral to
specialist
 Reimbursement of medications - partial
reimbursement of some medications in various
markets (e.g. Sweden - % of price, Germany - 3 co-
payment bands depending on pack size)

22. Considerations - 4. Reimbursement
 Reimbursement issues vary by market
– political (Germany - positive list - TZDs are absent,
only access to private patients)
– legal (EU legislation advises member states to take
measures to control their own healthcare spend,
Finland - no reimbursement available to products <1
on market)
– environmental (GDP in country & ability to pay for
healthcare/medications)

23. Considerations - 5. Pricing
 Price levels - no uniform price across Europe
(although a price corridor exists)
 Lower prices in Europe than in US (price often
overestimated by Global colleagues)
 Reference pricing - markets reference internally,
externally or both to set prices for new products
– Internal - review of similar products in similar
classes to set price
– External - review of neighbouring markets to set
prices

24. Internal & External Reference Pricing
Austria Notification of the price of the product in other EU
Countries
Belgium Notification of the price of the product in other EU
countries
Denmark Average of prices of all European Economic Area (EEA)
countries except Greece, Luxembourg, Portugal and
Spain
Finland Notification of the price of the product in other EU
countries
France No external referencing
Germany No external referencing
Greece Lowest price in all EU countries
Ireland Denmark, France, Germany, Netherlands, UK
Italy Average European price
Netherlands Belgium, France, Germany, UK
Norway Average of the three lowest prices of 9 EEA countries
(Austria, Belgium, Denmark, Finland, Germany, Ireland,
Netherlands, Sweden and U.K.)
Portugal France, Italy, Spain
Spain Notification of the price of the product in other EU
countries
Sweden Notification of the price of the product in other EU
countries
Switzerland Denmark, Germany, The Netherlands, U.K.
U.K. No external referencing

25. Cost-Containment Measures by
Markets
France
Germany
Greece
Hungry
Italy
The
Netherland
sNorway
Spain
Sweden
Switzerland
UK
Control ex-man. Price X X  X X X   X X X
Ctrl reimburs. Entry  X         X
Cross-country comp.  X         X
Reference pricing X  X  X   X  X X
Payback/contracts  X X X  X X   X 
Profit control X X X X X X X  X X 
Promotional spent ctrl  X X X X X X  X X 
Prescribing budgets X  X X X X X  X X 
Pharmacoecon. Evid. X X X X    X  X 
Fixed wholesale margin      X X  X  
Fixed pharmacy margin           
Generic substitution  X X  X    X  X
Patient co-payment      X     
Control of OTC price X X   X X X X X X X
Control of hospital price X X  X  X X  X X X

26. Product Launch Sequence
 Vital in Europe to get the launch sequence right
 Highest price markets should obtain a price first
 Reference markets to high price markets can then
achieve the price they want (within the EU pricing
corridor)
 If low price markets launch first, will mean a lower
average price for the product across Europe

27. Examples:
 Greece - have to take the lowest average EU price
available to them at time of launch.
 France - aggressive negotiations to lower new
product prices. E.g. if France launch with a low
price it will be very difficult for Germany to achieve
a higher price.
 Germany & UK (so-called free price markets)
should ideally be the first countries to launch a new
product in Europe

28. Market Access & Impact on Launch
Time
 Due to market access restrictions, there is no
uniform launch date across Europe
 Germany & UK tend to launch first, followed by
Spain, Italy and finally France (~12 months)
 Again, this needs to be included at a country level
before forecasts can be rolled together

29. Considerations - 6. Patent
Life/Protection
 Issues are coming to the fore regarding patent & data
exclusivity (Fosamax weekly in UK)
 Spain - limited data exclusivity period
 Large chunk of revenue may disappear due to the knock-on
effects of price erosion (through reference pricing)
 E.g. Fosamax weekly goes generic in UK, lowers the price
of the M5B oral class
– Downward pressure in other EU markets which use
external referencing, especially for Fosamax
– Any new entrants will be forced to price in a market
where genericisation has occurred
– Lower prices will be awarded to new bisphosphonates in
UK, as internal referencing to the M5B class

30. How to Practically Manage &
Forecast the Diversity

31. One Successful Approach……
 Central template disseminated to markets - which
includes all necessary tools to assist the markets in
providing a solid, robust forecast
 European initiatives
– educate markets in forecasting
– prepare & engage their focus on the product,
therapy area
– provide a European ‘owner’ to work with markets
– challenge markets on assumptions & rationale
– password-protect the Excel workbook template!!!

32. Or Alternatively………..
 Forecast at a European level
 Provide markets with a list of assumptions & a
forecast
 Ask for them to validate the figures & sign off at a
local level (GM or equivalent)
 Either process should end up with a robust,
validated local & regional forecast to be integrated
into the global business plans