Health Care & Pharma challenges in Europe;

a view from the Netherlands

Einte Elsinga Ph D,

MSD the Netherlands, Manager External Affairs

Bucharest, Romania, September 24th

einte.elsinga@merck.com

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Agenda

►Health Care in Europe

►Health care in the Netherlands

►Challenges in pharmaceutical care

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Is it worth all that money ???

Euro’s vs Life expectancy and patient satisfaction

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The rising costs of care in Europe: a challenge everywhere !!

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2000 2005 20100

2

4

6

8

10

12

14

16

18

20

USAthe NetherlandsUKHungary

% G

DP

NL

Hun

USA is by far the World champion in HC costs!

year

USA

UK

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Money alone does not extend lives….

http://ucatlas.ucsc.edu/spend.php

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Consumer satisfaction on health care

Euro Health Consumer Index 2012 Report

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Healthcare Expenditure Per Capita Grew Stronger Than Pharmaceutical Expenditure

Expenditure on Health and Pharmaceuticals in US$/ capita (USPPP; 24 OECD Countries)

0

500

1000

1500

2000

2500

3000

3500

4000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

US

$

Total expenditure on health, /capita, US$ purchasing power parity

Total expenditure on pharmaceuticals and other medical non-durables, /capita, US$ purchasing power parity

Source: OECD Health Data 2011

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The Netherlands

• 16,7 mln inhabitants• Strong economy (15th of the

world, 6th of Europe))• Large export industry (transit)• Political: new cabinet in

formation, Social democrats + Liberals?

• € since 2002• Economic recession

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Health Insurance system: public regulation, private organization

Social insurance scheme• Curative care (hospitals, GP,

pharmacy, mental care• Obligatory• Premium: Income related and

flat rate (50/50)• Open enrollment• Risk equalization model

Additional insurance• Dental care (>18 y), • Optional• No obligation to accept

Exceptional Medical Expenses ActCare for the elderly & disabled

cure care

Since 2006 one basic insurance scheme for the whole population

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The Dutch health care system

Government

Health care insurance companies

Insured parties/patients

SuppliersCare

market: supply

Care market:

insurance

Care market:

procurement

A regulated market: competing HC insurers (private) and providers (private) within regulated setting.

• Accessibility• Affordability• quality

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Key issues of almost every HC system

• Level of coverage: social insurance/NHS

• Waiting times

• Cost level• Payments: % or

flat

• Lack of transparancy

• inefficiencies

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Issues today

► Do health care insurers succeed in playing a countervailing force to hc providers?

► Payment systems for hc providers contain production incentives. Need for outcome measurement and payment structure

► Free rider behavior of the patient

► Inefficiencies in organization of health care

Pharmaceutical care

22Bron: Nefarma, Pharma facts, 2012

23source: Nefarma, Pharma facts, 2012

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MC Kinsey: “the good days for pharmaceutical industry are gone forever”

challenges

1. Growth in generics vs branded

2. Price pressures (Govt, HC insurers, tenders)

3. More complicated procedures for Market Access

4. Biosimilars upcoming

answers

► More focus on added value, pharmaco-economic approach

► New business models: from product orientation to client/market orientation

► Providing services, expertise

Source: MC Kinsey Quarterly, december 2011

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1. Share of generics is rapidly increasing

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Volume: 60% generic in the Dutch market,Costs: >70% branded, innovative products

Volume 2010

Costs 2010

The Netherlands

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Loss of exclusivity causes major decrease in revenues

Bron: rapport IBM, Fade or Flourish? 2012

28Bron: Nefarma, Pharma facts, 2012

Long period before entry to the market leading to lower effective patent period

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From an Investment Perspective„Sunk costs“: In economics and business decision-making, sunk costs are retrospective (past) costs that have already been incurred and cannot be recovered.

Source: Wikipedia (2010), „Sunk costs“, www.wikipedia.org; OECD (2008), Pharmaceutical Pricing in a Global Market

$1.3bn, ~12 years

30Source: ENVI (2011), Differences in Costs of and Access to Medicines in Europe

2. Government interventions can be classified in three major groups:

– Supply-side interventions: methods to determine the prices of pharmaceuticals (in particular those in patent)

– Supply-side interventions through pharmaceutical reimbursement policies

– Demand-side actions, including policies affecting physicians, pharmacies and patients

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Estonia

Greece

France

UK

SloveniaHungary

Netherlands

Italy

Germany

Latvia

Lithuania

Portugal

Denmark

Sweden

Poland

Romania

Malta

Croatia

Bulgaria

Switzerland

Czech Republic

Ireland

Finland

Austria

Belgium

Serbia

Cyprus

Slovakia

Spain

External Reference PricingWeaker form of ERP

No External Reference Pricing

Luxembourg

Austria: EU 25

Norway

Bulgaria: Lowest of 8 countries

Croatia: Avg of wholesale price of 3 countries minus 10%

24 of 27 EU Member States Apply External Reference Pricing – Rules Differ

Finland: Median of 17 countries

Hungary: Lowest of 13 countries, incl. ES, SK, PL*

Spain: lowest of 9 countries

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Tendering In The Hospital Sector: Nearly In All Member States

Source: Vogler (2011), Pharmaceutical pricing and reimbursement in Europe, PPRI WHO Conference 2011, Vienna

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New customers are increasingly influencing the pharmaceutical buying process, while traditional core customers are losing relevance

Customer GroupsRelatively Low Importance

Relatively High Importance

Source: Accenture Research 2010; Global summary of results; *relative importance per country can differ

Importance of the stakeholder 2009

Importance of the stakeholders 2014

Change to stakeholder importance

Patient Associations

Individual Patients

Payers and Wholesalers

Specialist Prescribers (Hospital and Retail)

Pharmacies

Trad

itio

nal

Ph

arm

a C

ust

om

ers

General Practitioners

Pharmacy Chains

Health Technology Assessment Institutions

Purchasing Organizations/TendersN

ew P

har

ma

Cu

sto

mer

s

.

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Growing role of HC insurers in health care(the Netherlands)

:– Procurement (contracting health care providers)– Cost containment pressure– Quality of care, measurement outcomes, added value, cost effectiveness of

care– Pricing of care, pharmaceuticals– Reimbursement levels– Access and free choice of provider, of drugs– Guidelines, prescriptions rules towards medical doctors– Etc. etc...

Entry to the

marketEntry to the social

Insurance scheme

Entry to

delivery

registration entitlement Access for the patient

Registration authority Coverage authority Insurance company

37Bron: Nefarma, Pharma facts, 2012

Effective cost reduction measures in NL by Government and HC insurers

Preference policy HC insurers for generic products:Price reductions up to 80%!

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Upcoming: new models for managed entry schemes

Source: article Adrian Towse, in Pharmacoeconomics 2010; 28 (2): 93-102

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Pharma: from Product- to Market-orientation

From selling a product to contributing in health care solutions

Partnership with other HC providers and with patient organizations, HC insurers

Stimulating appropriate use instead of maximum use of the medicine

Providing evidence in real life (phase 4), patient registries, monitoring

Showing added value/value for money (business cases)

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New times also means: new opportunities!

May it sometimes feel like…

… the challenge for the Pharmaceutical industry is to contribute to:

• affordable health care

• added value in health care

• appropriate use of medicine

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