The evolution of pharmaceutical expenditures is mainly driven by the entrance of new branded products and products going off-patent. The large number of key small molecules brands that will be reaching generic status, will mainly impact the European pharmaceutical expenditures in the years to come. In addition to this, ageing populations, the growing prevalence of chronic disease, the greater use of expensive treatments and also the increasingly tough regulatory environment and cost-containment strategies introduced by healthcare payers in response to the global economic downturn, will impact pharmaceutical expenditures.
With constant incentives for healthcare payers to contain their pharmaceutical budgets it is crucial for the Member States of the European Union and for the European regulatory bodies to anticipate the expected baseline evolution of Member States’ pharmaceutical budgets. Moreover, such impact will be important to understand for policy decision makers.
Objective and scope
The objective of the project was to build a model to assess the overall net effect of the entrance of new patented medicinal products versus medicinal products going off-patent, with a forecast horizon until 2016, on seven selected European Union Member States’ pharmaceutical budgets: France, the United Kingdom, Germany, Poland, Portugal, Greece and Hungary. This model should take into account the ageing population, as well as current and future country-specific pricing, reimbursement and market access policies.
The first step of the project was to gather the country-specific variables for each country from different databases, in order to identify the main inputs that would feed the model. Then, several databases were cross checked to identify, according to defined criteria, the range of products that would go off-patent and those that would enter the market between 2012 and 2016. Products that went off-patent and those that entered the market in 2010 and 2011 were also considered, regarding their potential impact on the budget of the forecasted period.The budget impact of generic entries and the impact of new approved innovative pharmaceutical products were separately analyzed and presented according to three perspectives (healthcare public payer, society and manufacturer), several types of distribution chain (retail, hospital, combined retail and hospital) and several outcomes (savings due to products going off-patent, additional costs due to new entrants products and net budget impact). The healthcare public payer perspective was selected as the base case.
This project was conducted under the supervision and validation at each stage, by a board of 6 independent experts. A model was developed for generics and biosimilars for each country. This model estimated a separate and combined effect of the direct and indirect impact on savings from the genericization of the market for each year in the forecasted period. A model was also developed for new entrants, which estimated the value of sales and the progression of market share in a competitive environment and taking into account the risk of failure regarding the development of the drug. For this project, new entrants were looked at individually to assess their clinical potential and translate into commercial potential. Probabilistic and deterministic sensitivity analyses were carried out regarding intrinsic uncertainty surrounding the estimations.
Moreover, several scenarios were built to analyze what the impact of various changes in the national pharmaceutical policies on the pharmaceutical budget would be.
The overall model was also supplied as a stand alone deliverable to allow to compute and assess various scenarios as per needed to support policy decision makers.
In light of the pharmaceutical policies analysis for each country, far-reaching changes were seen in the drug market access environment in most of the Members States under the study. Pricing and reimbursement regulations have shown substantial strengthening trends. Moreover, it was found that there is a wide variability between countries concerning generics entry policy such as time to market entry (from 0 day for the United Kingdom and Germany, to 270 days for Greece), penetration rate (from 25% for Greece and Portugal, to 100% for Hungary) and price reduction versus the branded product (from 45% for Poland, to 75% for the United Kingdom). Even if Europe appears as a leader for the biosimilar market, accounting for 80% of global spending on these molecules, little information was available about biosimilar pricing and reimbursement policies.
During the period 2012-2016, we identified 202 generics, 10 major biosimilars and 254 new entrants. During the period 2010 and 2011, we identified 71 products that went off-patent and 66 new entrants.
There was a large disparity observed in the total pharmaceutical sales in 2011 between countries as shown in Table 1.
Budget impact analysis has shown that, during the period of interest, all countries will experience drug budget reduction with the exception of Poland, which will experience increases as reported in theTable 2. Savings appear to be among the highest for the United Kingdom, followed by France and far behind, at the same level, by Greece and Germany.
Savings will mainly impact the cardiovascular and central nervous system areas, followed by the respiratory area and biosimilar entry. The leading source for additional costs will be the oncology area, followed far behind by the immunology and inflammation area.
Deterministic sensitivity analysis, as well as analysis of the scenarios related to pharmaceutical policies’ changes, exemplify the importance of the time to market of new branded products as a critical factor for budget impact, as well as the high sensitivity of the savings to the generic price, and to the generic penetration rate. Moreover, it appears that the impact of biosimilar savings is critically affected by the proportion of hospital distribution.
Except in Poland where the market is in development, the drug market is likely to decrease. This decrease is driven by several factors such as, on the one hand, the genericization, which, if it tends to slow down around the end of 2016, will be progressively replaced by the arrival of the biosimilars and, on the other hand, the increase in pressure on pharmaceuticals to evidence additional clinical or economical benefit to achieve market access.
The Polish and Hungarian markets are still far from mature and will certainly, in the future, increase their investment to secure patient access to innovative products. In the five other countries, the market is quite mature, and with a thinner margin of progression. Moreover, Portugal and Greece are today widely impacted by the economic crisis, and that will be a brake to a potential progression of the market.
During the study period, unsurprisingly, the therapeutic areas that will be the drivers of the health expenditures are oncology, and immunology and inflammation. These disease areas are the ones where new biologic entities are expected to enter the market with substantial clinical benefits and high unmet needs. Other important areas substantially impacting the budget are cardiovascular, central nervous system and respiratory areas, with a negative overall net budget impact, as more savings will occur in relation to generic entry than additional cost related to new brands.
The model developed in this study has been used to generate impact of changes in pharmaceutical policies. The most important leverages that were identified are driven by generic and biosmilar prices and distribution. Reducing, even slightly, the prices of generics will have a major impact. The reduction of generic prices, the distribution of biosimilars through hospital chain and increased share of generics are among the best options to boost savings across Member States of the European Union.