Contents:

Executive Summary 10 Balancing supply and demand: an introduction to pharmacoeconomics 10 Regulatory trends in pharmacoeconomics 11 Applications of pharmacoeconomics across the value chain 12 Case studies: proving value for money to decision-makers 13 Chapter 1 Balancing supply and demand: an introduction to pharmacoeconomics 16 Summary 16 Background to health technology assessment 17 Report scope 18 Pharmacoeconomics 19 Definition of pharmacoeconomics 19 A fourth hurdle to new product launch 20 Affordability: a ‘fifth barrier’ to entry? 22 Pharmacoeconomic analysis methods 23 Cost-benefit analysis 24 Cost-effectiveness analysis 25 Cost-utility analysis 26 Cost-minimization analysis 27 Study perspective and type of cost 27 Drivers and resistors of pharmacoeconomics 30 Drivers 31 Resistors 34 Chapter 2 Regulatory trends in pharmacoeconomics 38 Summary 38 Introduction 39 Influential regulatory environments 40 International regulatory framework 40 Australia 43 Overview of the Australian healthcare system 43 Mandatory pharmacoeconomic requirements 43 A multi-committee affair 44 A fourth hurdle to commercialization 46 Impact on the pharmaceutical industry 46 Canada 49 Overview of the Canadian healthcare system 49 Pharmacoeconomic requirements 50 Impact on the pharmaceutical industry 53 UK 55 Overview of the UK healthcare system 55 National Institute for Clinical Excellence 56 NICE guidelines 57 Impact on the pharmaceutical industry 62 US 65 Overview of the US healthcare system 65 Economic considerations 67 The wider pharmacoeconomic environment – major international trends 73 Conceptual and methodological bases 73 Objectives of economic appraisal 73 Pharmacoeconomic study type and timeline 74 Outcome variable 74 Type of costs 75 Organization of pharmacoeconomic assessment 76 Government body 76 Preparation of initial assessment 77 Selection of products 78 Outcomes 78 Chapter 3 Applications of pharmacoeconomics across the value chain 82 Summary 82 Introduction 83 Pharmacoeconomics in R&D 83 Typical use of pharmacoeconomics in R&D 84 Investment 84 Timing 84 Role in portfolio management and stop-go decisions 85 Incorporating pharmacoeconomics into clinical trial design 87 Phase III pharmacoeconomic studies – design considerations 88 Phase IV studies – demonstrating value in the real world 90 Advantages of early pharmacoeconomic assessments 91 Early assessment of market potential and risk 93 Identification of unmet economic needs 94 Better study preparation 94 Informed stop-go decisions 96 Barriers to early pharmacoeconomic assessments 96 Benefits of pharmacoeconomic studies in late stage R&D 97 Pharmacoeconomics in pricing and reimbursement 98 The reimbursement process 98 Inadequate commitment of time and resources 99 Benefits of early pharmacoeconomic assessments 100 Barriers to improvement 105 Inadequate level, integration and distribution of expertise 105 Lack of acceptance by internal decision-makers 106 Overcoming barriers: the value of external expertise 107 Pharmacoeconomics in marketing 108 Promoting to different audiences 108 Physicians 110 Payors 111 Patients 111 Presenting pharmacoeconomic data – new marketing strategies 112 Chapter 4 Case studies: proving value for money to decision-makers 116 Summary 116 Introduction 117 Impact of pharmacoeconomic appraisals – NICE’s assessments of CNS disorders 118 COX-II inhibitors in osteoarthritis and rheumatoid arthritis 119 NICE’s recommendations 119 Impact on the COX-II market 120 Implications for development-stage COX-II inhibitors 121 Beta interferon and glatiramer acetate for multiple sclerosis 122 NICE’s recommendations 122 Industry response 122 Wider implications of the ‘payments by result’ scheme 123 Atypical neuroleptic antipsychotics in schizophrenia 124 NICE’s recommendations 124 Impact on the antipsychotic market 125 Implications for development stage antipsychotics 126 Herceptin tests reactions to a new era of innovative therapies 127 Efficacy 127 Side effects 128 Impact on payors 129 Pricing and reimbursement hurdles 130 The North American experience 130 The Australian experience 131 The UK experience 132 Patient advocacy: fueling high prices? 132 Strategic responses to unfavorable reimbursement decisions 134 Option 1: working with decision-makers to improve reimbursement status 134 Lilly secures Medicare reimbursement for Xigris 134 Option 2: applying pressure by lobbying to improve reimbursement 135 Amgen lobbies for Aranesp to be reimbursed 136 Option 3: brokering deals with decision-makers and payors 138 Chapter 5 Appendix 141 References 141 Index 142 List of Figures Figure 1.1: Decision patterns in cost-effectiveness analyses 26 Figure 1.2: Parameters influencing pharmacoeconomic studies 27 Figure 1.3: Major drivers of and resistors to the wider use of pharmacoeconomics 31 Figure 1.4: Growth in pharmaceutical expenditure per capita in real terms, 1990-2001 (1990=100) 32 Figure 1.5: Pharmaceutical R&D investment in Europe, the US and Japan, 1990-2002 36 Figure 2.6: The aim of international health technology assessment organizations – consensus 42 Figure 2.7: The four hurdles to successful new product commercialization in Australia 46 Figure 2.8: Total and pharmaceutical related NICE appraisals per year, 2000-03 59 Figure 2.9: Recommendations arising from NICE’s first 50 technology appraisals 60 Figure 2.10: The roles of NICE and CHI/CHAI 61 Figure 2.11: Economic content in US pharmaceutical product advertisements 71 Figure 3.12: Benefits of early integration of pharmacoeconomics into R&D 93 Figure 3.13: The reimbursement decision process 99 Figure 3.14: Industry attitudes: commitment of time and resources to reimbursement issues 100 Figure 3.15: Industry attitudes: optimal time to address reimbursement issues 101 Figure 3.16: Early stage economic value considerations 104 Figure 3.17: Internal organization of pharmacoeconomic expertise: centralized versus distributed approaches 106 Figure 3.18: Use of external expertise in health economic assessments 108 Figure 3.19: Relative importance of different stakeholders as targets for pharmacoeconomic marketing data 110 List of Tables Table 1.1: Relative pros and cons of major methods of pharmacoeconomic analysis 24 Table 2.2: Adoption of economic evaluation in healthcare decision-making in selected major, economies 40 Table 2.3: International variability in costs included in pharmacoeconomic analyses 76 Table 2.4: Achievement of pharmacoeconomic objectives 79