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Regionalization. versus. Harmonization. Fernando Royo 3rd Pharma Pricing Strategies Conference Rome, 16/01/08. The newly enlarged EU. The newly enlarged EU. Approx. 500 Mio. Inhabitants. Combined GDP > € 12 Trillion (€ 12,172,536,000,000).

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versus

Regionalization

versus

Harmonization

Fernando Royo

3rd Pharma Pricing Strategies Conference

Rome, 16/01/08

the newly enlarged eu3
The newly enlarged EU

Approx. 500 Mio. Inhabitants

Combined GDP > € 12 Trillion (€12,172,536,000,000)

Healthcare Spending = approx 8.7 % of GDP (€1,059 Billion)

A harmonized economic & regulatory framework

but…

with much larger differences between ms5
with much larger differences between MS

Is this new environment really “harmonic”/sustainable?

it further complicates an already complex p r scenario

Sellers (offer)

Buyers

(demand)

It further complicates an already complex P&R scenario

While in

consumer goods

true “Free Market”

rules apply

in pharmaceuticals we ve always had

the patients (users)

the prescribers

the suppliers (industry + distribution)

THE PAYORS

the regulatory authorities

In pharmaceuticals, we’ve always had…

…and last,

but not LEAST

now with a new twist regionalization
Now, with a new “twist”: Regionalization

e.g., Spain’s 17 Regions (“Autonomous Communities”)

hold increasingly broad political

and administrative powers.

Among them, the management of Healthcare

what are the consequences for p r
What are the consequences for P&R?

Pricing has remained centralized (led by MoH) but:

The new Spanish Drug Law (29/07/2006) establishes that, before setting the price, a network of external experts, designated by the Autonomous Comunities will counsel the Spanish Drug Agency in order to evaluate the “therapeutic usefulness” of each new drug.

Regions can (and often do) apply additional reimbursement restrictions, in the form of:

  • Positive/negative lists (linked to cost/discounts)
  • Inclusion/exclusion in computarized prescription systems
  • Administrative validation (“visa”) of prescriptions

The final result is a highly heterogeneous environment, with economic inneficiencies, and substantial differences in terms of patient’s access to innovative/expensive therapies.

Trans-regional “prescription filling” is already happening

slide11

=

R&D

Production

SG&A Costs

Pricing of Orphan Drugs

General Pharma Pricing Outline:Irrespective of chemistry, indication, etc., all therapies share a common economic ratio...

Unit Price

TOTAL INVESTMENT

# OF DOSES SOLD

Avrg. Doses/Year/Patient

x # of Treated Patients

x Years of Sales

Why is this so dramatic in the case of orphan drugs?

Because, as the # of patients goes down,

so does the # of doses sold

hence the unit price must increase

slide12

=

R&D

Production

SG&A Costs

…and, what about the future?

Unit Price

Advanced therapies (“Magic Bullets” = single-dose cures,conceivable with gen or celular ones)could make this ratio even worse:

TOTAL INVESTMENT

# OF DOSES SOLD

Avrg. Doses/Year/Patient

x # of Treated Patients

x Years of Sales

If a single dose would cure

# of doses sold = # of treated patients

bringing the unit price to unacceptable levels

what are the possible strategies for a sustainable p r of ultraorphan advanced drugs
What are the possible strategies for a sustainable P&R of “ultraorphan”/advanced drugs?

Better assesment of TOTAL disease-related costs: disability, family & social impact on integration, productivity, quality of life…

Convergence on “budgetary parameters”:

If healthcare managers receive & administer funds on a per capita, per annum basis, why should P&R of therapies remain based on traditional pharmaceutical “units”?

Reducing the “uncertainty risk” financial costs through public/private partnership initiatives

slide14

Thank you

for your

attention

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