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chart-pack-biopharmaceuticals-in-perspective

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TABLE OF CONTENTS

Introduction......................................1

Chapter1

Chapter2

AdvancesinTreatment..................3

ResearchandDevelopment.............21

Chapter 3 Market Dynamics ........... ..........45

Chapter4 CostSharingTrends......... ..........67

Chapter5

Chapter6

DrugSpendingTrends..................81

OutcomesandSavings.................95

Chapter 7 Economic Impact .....................109

Cover photo: Jennifer O’Neil and Yingzi Yue, Merck cancer researchers


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INTRODUCTION

This chart pack provides facts and figures about prescription

medicines and their role in the health care system. Topics

include medicines’ impact on health and quality of life, the

drug discovery and development process, health care

spending and costs, the challenges of addressing treatment

gaps and improving use of prescribed therapies, and the

contributions of the biopharmaceutical sector.

Data and information in this publication were drawn from a

wide range of sources, including government agency reports,

peer‐reviewed journals, and the Pharmaceutical Research

and Manufacturers of America’s (PhRMA’s) own research and

analysis. PhRMA hopes this publication provides useful

context for discussions about the role of medicines and the

US economy.

1


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1

ADVANCES

IN

TREATMENT

Medicines’ Impact on Health and Quality of Life

Prescription medicines continue to yield important advances,

helping patients live longer and healthier lives. Over the past 25

years, prescription medicines have transformed the trajectory of

many debilitating diseases and conditions, including HIV/AIDS,

cancer, and heart disease, resulting in decreased death rates,

improved health outcomes, and better quality of life for

patients. Recent advances continue to improve outcomes for

patients and are slowing disease progression, preventing

complications and the need for medical care across a broad

range of chronic conditions—including, for example, asthma,

diabetes, and hepatitis C. Today’s medicines are at the forefront

of science, with many new drugs taking a targeted approach to

attacking the underlying causes of disease. Advances such as

these are opening up doors to the development of first‐time

treatments for many rare diseases and other unmet medical

needs. Continued advances in biopharmaceutical innovation

will be critical in addressing future health care challenges and

improving health outcomes for patients.

1 • Advances in Treatment

3


Increases in US Life Expectancy

While nutrition, sanitation, other public health measures, and expanded

access to care have been major sources of increasing human health,

innovative medicines have also played a profound role in this progress.

85

At Birth (in Years)

80

75

70

65

71.1

65.6

73.1

74.7

66.6 67.1

77.4

70

—President’s Council of Advisors on Science and Technology 1 2013

US Life Expectancy, 1950‐2013 *

78.8 79.3

71.8

74.1

81.0 81.2

76.2 76.4

Women

Men

60

1950 1960 1970 1980 1990 2000 2010

*Life expectancies before 1997 were calculated using a slightly different

methodology from those after 1997.

1 • Advances in Treatment

Sources: President’s Council of Advisors on Science and Technology 1 ;

Centers for Disease Control and Prevention (CDC) 2

4


A Decade of Advances

Source: US Food and Drug Administration (FDA) 3

1 • Advances in Treatment 5


Medicines Are Transforming the Treatment of Many

Diseases

HIV/AIDS

During the past 2

decades, advances in

treatment have

contributed to a nearly

87% decline in death

rates and transformed

the disease from an

acute, fatal illness to a

Cystic Fibrosis (CF)

Advances in understanding

the genetic mutations that

cause CF have led to the

development of highly

targeted treatments—

including for patients with a

mutation known to be the

most common cause of the

disease. 4

chronic condition. 8 6

Cancer

New therapies have

contributed to a nearly

23% decline in cancer

deaths since the 1990s.

Today, 2 out of 3 people

diagnosed with cancer

survive at least 5 years. 6,7

Rheumatoid Arthritis (RA)

Therapeutic advances have

transformed the RA

treatment paradigm over

the past 20 years, shifting

from a focus on managing

symptoms to aiming for

slowed disease progression

and even disease

remission. 5

Sources: FDA 4 ; Boston Healthcare Associates 5 ; National Cancer Institute (NCI) 6 ; American Cancer Society 7 ; CDC 8

1 • Advances in Treatment


Rheumatoid Arthritis: Medicines Are Transforming

the Lives of Patients

HAND WITH RA

THEN:

Treatments for rheumatoid arthritis

were generally effective at reducing

joint inflammation but were limited to

treating the symptoms of the disease,

allowing for a steady, rapid progression

from disease onset to disability.

HEALTHY JOINT

NOW:

Biologic disease‐modifying antirheumatic

drugs target the underlying sources

of inflammation, which improves physical

functioning and prevents irreversible joint

damage, making disease remission

possible.

Source: Boston Healthcare Associates 9

1 • Advances in Treatment 7


HIV/AIDS: Decline in Death Rates

The number of US AIDS deaths decreased dramatically following the introduction of highly active antiretroviral

treatment (HAART). 10 As a result of HAART and all the important medical innovations that followed, it is

estimated that more than 862,000 premature deaths have been avoided in the United States alone. 11

Sources: CDC 10 ; Truven Health Analytics 11

1 • Advances in Treatment

8


HIV/AIDS: Treatment Advances Build Over Time

Dramatic declines in death rates did not occur with one single breakthrough but rather through a series of

advances providing important treatment options for patients over time.

Sources: Boston Healthcare Associates 12 ; CDC 13

1 • Advances in Treatment

9


Cancers: Decline in Death Rates

Since peaking in the 1990s, cancer death rates have declined 23%. 14 Approximately 83% of survival gains in

cancer are attributable to new treatments, including medicines. 15

I think some of the treatments that we have developed over the last half century or so are really

starting to pay off and, honestly, [it] seems limitless as to what may pay off in the future.

— William Nelson, MD, PhD, Director of Sidney Kimmel Comprehensive Cancer Center, Johns Hopkins University 16

Sources: NCI 14 ; Sun E, et al. 15 ; Dunellari A 16

Percent Change by Decade in US Death Rates From Cancer 14

1 • Advances in Treatment

10


Chronic Leukemia: Increased Survival Rates

When the first‐in‐class drug imatinib was approved in 2001 to treat chronic myeloid leukemia (CML), the

transformative impact of this new class of medicines had not been completely realized. 17

5‐Year Survival Rates for CML Patients 20,21

• After initial approval, continued research

revealed that imatinib had a greater

impact when initiated earlier in the

89%

progression of the disease.

• Further research also revealed that

imatinib was effective in combating

other types of cancer.

• Additional drugs in this class have since

been approved that target mutated

forms of CML in patients who have

become resistant or intolerant to

31%

imatinib. 18

• Today, survival rates have improved

dramatically, and CML patients are

living close to normal life spans. 19

Before Introduction

of Imatinib

After Introduction

of Imatinib

Sources: Boston Healthcare Associates 17 ; PhRMA 18 ; Gambacorti‐Passerini C, et al. 19 ; American Cancer Society 20 ; Druker BJ, et al. 21

1 • Advances in Treatment

11


Rare Diseases: Drug Approvals for Rare Diseases

Have Increased

Rare diseases are those that affect 200,000 or fewer people in the United States. 22 The FDA has approved

more than 500 orphan drugs since the passage of the Orphan Drug Act in 1983. 23

600

Number of Drug Approvals for Rare Diseases*

500

400

Cumulative Prior Orphan Drug Approvals

New Orphan Drug Approvals

300

200

100

0

*Drug approvals for rare diseases include initial approvals of new medicines and

subsequent approvals of existing medicines.

Source: FDA 22,23

1 • Advances in Treatment 12


Cardiovascular Disease: Declining Rates of Death

Tremendous strides have been made in reducing cardiovascular disease morbidity and mortality, thanks in part to

new medicines. The death rate from heart disease has declined about 38% over the past decade alone. 24

US Death Rates Due to Diseases of the Heart*

Age‐Adjusted Death Rates per 100,000

450

400

350

300

250

200

150

100

50

412

389

379

365

353

322

306 300

288

272

258

245

222

206

192

179

171

0

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

*Age‐adjusted death rates based on year 2000 US standard population. 1980‐1998 causes of death are classified by the International Classification of Diseases,

Ninth Revision (ICD‐9). Beginning in 1999, causes of death have been classified by the International Classification of Diseases, Tenth Revision (ICD‐10).

Source: CDC 24,25

1 • Advances in Treatment

13


Hepatitis C (HCV): Cure Rates Are Rising

Sources: Armstrong GL, et al. 26 ; PhRMA 27

1 • Advances in Treatment 14


Projected Reductions in Hepatitis C–Related Complications

Increased screening and the availability of new treatments for hepatitis C are projected to dramatically reduce

complications associated with the disease. Projections suggest that the number of liver‐related deaths avoided

will total 126,500 by 2050. 28 Source: Kabiri M, et al. 28

140,000

Avoided Cases of Hepatitis C–Related Complications by 2050

120,000

126,500 124,200

100,000

80,000

60,000

78,800

40,000

20,000

0

9,900

Liver‐Related Deaths Advanced Cirrhosis Liver Cancer Liver Transplants

1 • Advances in Treatment

15


Future Impact: Need for New Treatments

for Alzheimer’s Disease

The development of a new treatment that delays the onset of Alzheimer’s could reduce Medicare and Medicaid

spending on patients with Alzheimer’s by $218 billion annually by 2050.*

Projected Annual Medicare and Medicaid Spending With and Without New Treatment Advances (in Billions)**

$900

Projected Medicare and Medicaid Spending

$800

$700

$600

$500

$400

$300

$200

$100

Current Trajectory

Projection with Delayed Onset Due to Treatment Advance

$529

$310

$262

$182 $182

$377

$765

$547

$0

2020 2030 2040 2050

*Assumes research advances that delay the average age of onset of Alzheimer’s disease by 5 years beginning in 2025

**Projected savings to Medicare and Medicaid assume research breakthroughs that slow the progression of Alzheimer’s disease.

This would dramatically reduce spending for comorbid conditions and expensive nursing home care.

Source: Alzheimer’s Association 29

1 • Advances in Treatment

16


Notes and Sources

1. Executive Office of the President, President’s Council of Advisors on Science and Technology. Report to the president on propelling

innovation in drug discovery, development, and evaluation. https://www.whitehouse.gov/sites/default/files/microsites/ostp/pcast‐fda

‐final.pdf. Published September 2012. Accessed April 2016.

2. Xu J, Murphy SL, Kochanek KD, Bastian BA; US Department of Health and Human Services, Centers for Disease Control and Prevention,

National Center for Health Statistics, National Vital Statistics System. Deaths: final data for 2013. Natl Vital Statistics Rep. 2016;64(2).

http://origin.glb.cdc.gov/nchs/data/nvsr/nvsr64/nvsr64_02.pdf. Accessed April 2016.

3. US Food and Drug Administration (FDA). Drugs@FDA: FDA approved drug products. FDA Web site. http://www.accessdata.fda.gov/scripts

/cder/drugsatfda. Accessed April 2016.

4. US Food and Drug Administration (FDA). FDA approves new treatment for cystic fibrosis. FDA Web site.

http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm453565.htm. Published July 2, 2015. Accessed April 2016.

5. Augustyn C, Walker B, Goss TF; Boston Healthcare Associates. Recognizing the value of innovation in the treatment of rheumatoid arthritis.

http://www.phrma.org/sites/default/files/pdf/BHARAWhitepaperMarch2013.pdf. Published March 2013. Accessed April 2016.

6. National Institutes of Health (NIH), National Cancer Institute (NCI). Cancer statistics. NIH NCI Surveillance, Epidemiology, and End Results

Program Web site. http://seer.cancer.gov/faststats/selections.php?#Output. Accessed April 2016.

7. American Cancer Society. Cancer treatment & survivorship facts & figures 2014‐2015. http://www.cancer.org/acs/groups/content

/@research/documents/document/acspc‐042801.pdf. Published 2014. Accessed April 2016.

8. US Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Health Statistics. Health,

United States, 2014: with special feature on adults aged 55‐64. http://www.cdc.gov/nchs/data/hus/hus14.pdf. Published May 2015.

Accessed April 2016.

9. Augustyn C, Walker B, Goss TF; Boston Healthcare Associates. Recognizing the value of innovation in the treatment of rheumatoid arthritis.

http://www.phrma.org/sites/default/files/pdf/BHARAWhitepaperMarch2013.pdf. Published March 2013. Accessed April 2016.

10. US Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Health Statistics. Health,

United States, 2014: with special feature on adults aged 55‐64. http://www.cdc.gov/nchs/data/hus/hus14.pdf. Published May 2015.

Accessed April 2016.

11. Lacey MJ, Hanna GJ, Miller JD, Foster TS, Russell MW; Truven Health Analytics. Impact of pharmaceutical innovation in HIV/AIDS treatment

during the highly active antiretroviral therapy (HAART) era in the US, 1987‐2010: an epidemiologic and cost‐impact modeling case study.

http://truvenhealth.com/Portals/0/Assets/Life‐Sciences/White‐Papers/pharma‐innovation‐hiv‐aids‐treatment.pdf. Published December

2014. Accessed April 2016.

1 • Advances in Treatment

17


Notes and Sources

12. Augustyn C, Walker B, Goss TF; Boston Healthcare Associates. Recognizing the value of innovation in the treatment of rheumatoid arthritis.

http://www.phrma.org/sites/default/files/pdf/BHARAWhitepaperMarch2013.pdf. Published March 2013. Accessed April 2016.

13. US Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Health Statistics. Health,

United States, 2014: with special feature on adults aged 55‐64. http://www.cdc.gov/nchs/data/hus/hus14.pdf. Published May 2015.

Accessed April 2016.

14. National Cancer Institute, Surveillance, Epidemiology, and End Results Program. Number of new cases and deaths per 100,000 people (all

races, males and females), age‐adjusted. http://seer.cancer.gov/statfacts/html/ld/all.html. Accessed April 2016.

15. Sun E, Lakdawalla D, Reyes C, Goldman D, Philipson T, Jena A. The determinants of recent gains in cancer survival: an analysis of the

Surveillance, Epidemiology, and End Results (SEER) database. J Clin Oncol. 2008;26(15S)(May 20 suppl):6616.

16. Dunellari A. Researchers optimistic about future of cancer treatment. Voice of America. http://www.voanews.com/content/researchers

‐optimistic‐about‐future‐cancer‐treatment/3144653.html. Published January 13, 2016. Accessed March 2016.

17. Goss TF, Picard EH, Tarab A; Boston Healthcare Associates. Recognizing value in oncology innovation. http://www.phrma.org/sites/default

/files/flash/phrma_innovation_oncology.pdf. Published June 2012. Accessed April 2016.

18. Pharmaceutical Research and Manufacturers of America (PhRMA). A decade of innovation in rare diseases: 2005‐2015.

http://www.phrma.org/sites/default/files/pdf/PhRMA‐Decade‐of‐Innovation‐Rare‐Diseases.pdf. Published 2015. Accessed April 2016.

19. Gambacorti‐Passerini C, Antolini L, Mahon F‐X, et al. Multicenter independent assessment of outcomes in chronic myeloid leukemia patients

treated with imatinib. J Natl Cancer Inst. 2011;103(7):553‐561. doi:10.1093/jnci/djr060.

20. Thirty‐one percent 5‐year survival rate reported for cases diagnosed during 1991‐1992. American Cancer Society (ACS). Cancer facts &

figures 2012. ACS Web site. http://www.cancer.org/research/cancerfactsfigures/cancerfactsfigures/cancer‐facts‐figures‐2012. Accessed

April 2016.

21. Druker BJ, Guilhot F, O’Brien SG, et al. Five‐year follow‐up of patients receiving imatinib for chronic myeloid leukemia. N Engl J Med.

2006;355(23):2408‐2417.

22. US Food and Drug Administration (FDA). Helping rare disease patients find their voice. FDA Web site. http://www.fda.gov/ForConsumers

/ConsumerUpdates/ucm293213.htm. Updated February 22, 2016. Accessed April 2016.

23. US Food and Drug Administration (FDA). Search orphan drug designations and approvals. FDA Web site. http://www.accessdata.fda.gov

/scripts/opdlisting/oopd/index.cfm. Accessed March 2016.

1 • Advances in Treatment

18


Notes and Sources

24. US Department of Health and Human Services (HHS), Centers for Disease Control and Prevention (CDC). Vital signs: avoidable deaths from

heart disease, stroke, and hypertensive disease—United States, 2001‐2010. Morbidity & Mortality Weekly Rep. 2013;62(35):721‐727.

25. Centers for Disease Control and Prevention (CDC), National Center for Health Statistics (NCHS), National Vital Statistics System. Age‐adjusted

death rates for 72 selected causes by race and sex using year 2000 standard population: United States, 1979‐98. http://www.cdc.gov/nchs

/data/mortab/aadr7998s.pdf. Accessed April 2016. Xu J, Murphy SL, Kochanek KD, Bastian BA; US Department of Health and Human

Services, Centers for Disease Control and Prevention, National Center for Health Statistics, National Vital Statistics System. Deaths: final data

for 2013. Natl Vital Statistics Rep. 2016;64(2). http://origin.glb.cdc.gov/nchs/data/nvsr/nvsr64/nvsr64_02.pdf. Accessed April 2016.

26. Armstrong GL, Wasley A, Simard EP, McQuillan GM, Kuhnert WL, Alter MJ. The prevalence of hepatitis C virus infection in the United States,

1999 through 2002. Ann Int Med. 2006;144(10):705‐714.

27. Pharmaceutical Research and Manufacturers of America (PhRMA). A decade of innovation in chronic diseases: 2006‐2016.

http://phrma.org/sites/default/files/pdf/decade‐of‐innovation‐chronic‐disease.pdf. Published February 2016. Accessed April 2016.

28. Kabiri M, Jazwinski AB, Roberts MS, Schaefer AJ, Chhatwal J. The changing burden of hepatitis C virus infection in the United States: modelbased

predictions. Ann Intern Med. 2014;161(3):170‐180.

29. Alzheimer’s Association. Changing the trajectory of Alzheimer’s disease: how a treatment by 2025 saves lives and dollars.

http://www.alz.org/documents_custom/trajectory.pdf. Published 2015. Accessed April 2016.

1 • Advances in Treatment

19


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2

RESEARCH

AND

DEVELOPMENT

The Process of Drug Discovery and Development

The rapid pace of scientific advances is bringing tremendous

hope to patients. The pipeline for new medicines has never

been more promising, with more than 7,000 medicines

in development around the world. In 2015, PhRMA

member companies invested an estimated $58.8 billion

in biopharmaceutical research and development (R&D),

accounting for the majority of private biopharmaceutical

R&D spending. Development of new medicines is a long and

rigorous process, and it has become more costly and complex

over the past decade. Scientific complexities are creating new

challenges in R&D, and biopharmaceutical companies are

working to create efficiencies and are collaborating with

others across the research ecosystem to navigate through

the complexities.

2 • Research and Development

21


More Than 7,000 Medicines in Development Globally

Biopharmaceutical researchers are working on new medicines* for many diseases, including:

*Defined as single products that are counted exactly once regardless of the number of indications pursued

Source: Adis R&D Insight Database 1

2 • Research and Development

22


Potential First‐in‐Class Medicines in the Pipeline

An average of 70% of drugs across the pipeline are potential first‐in‐class medicines.

Percentage of Projects in Development That Are Potentially

First‐in‐Class Medicines in Selected Therapeutic Areas, 2011

Neurology

Cardiovascular

Cancer

Psychiatry

84%

81%

80%

79%

Immunology

Diabetes

HIV/AIDS

71%

69%

72%

Infections

57%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Source: Analysis Group 2

2 • Research and Development

23


Cutting‐Edge Research Drives Development of Medicines

Biopharmaceutical researchers are pursuing many novel scientific approaches that are driving therapeutic

advances.

MULTIPLE

SCLEROSIS

Anti‐LINGO‐1 Antibodies

can protect the nerves

damaged by multiple

sclerosis by spurring

myelin growth.

CANCER

Chimeric Antigen Receptor

(CAR) T‐Cell Immunotherapy

involves the personalized

modification of immuneboosting

T‐cells to target and

kill blood cancer cells.

Cancer Metabolism‐Targeting

Drugs disrupt cancer cell

metabolism and can impede

cancer cell growth.

RARE DISEASES

Viral‐Based Gene Therapies

involve using a virus to

insert a therapeutic gene

into removed stem cells,

then returning the cells to

the patient.

Source: PhRMA 3

2 • Research and Development

24


Harnessing Innovation in Rare Diseases

Since the passage of the Orphan Drug Act in 1983, we have seen tremendous advances in treatments for rare

diseases. The rapid pace of the science holds significant promise for the future.

Source: PhRMA 4

2 • Research and Development

25


Biopharmaceutical Companies Are Committed

to Advancing Personalized Medicine

In recent years we have seen remarkable advances in targeted therapy, and the R&D pipeline has never been

more promising.

Sources: Personalized Medicine Coalition 5 ; Tufts Center for the Study of Drug Development (CSDD) 6

2 • Research and Development

26


Biopharmaceutical Firms Conduct the Largest Share

of Biomedical Research in the United States

The biopharmaceutical industry was the source of nearly half of all US biomedical research funding in 2012,

accounting for the largest share of funding, public or private.

Share of US Biomedical Research Funding, 2012*

State and Local

Government Entities, 5%

Foundations, Charities,

Other Private Sector, 4%

Other Federal

Government Entities, 6%

National Institutes of

Health (NIH), 27%

Biopharmaceutical

Industry, 49%

Medical Device Industry,

10%

*Total US biomedical research funding in 2012 estimated to be $116.5 billion. The biopharmaceutical industry’s

total share of funding comprised funding from pharmaceutical firms (32%) and biotechnology firms (17%).

Source: Moses H III, et al. 7

2 • Research and Development

27


The Lengthy, Costly, and Uncertain Biopharmaceutical

Research and Development Process

From drug discovery through FDA approval, developing a new medicine on average takes 10 to 15 years and costs

$2.6 billion.* Less than 12% of the candidate medicines that make it into phase I clinical trials are approved by

the FDA.

Source: PhRMA adaptation based on DiMasi JA, et al.; Tufts CSDD; FDA 8

2 • Research and Development

28


Biopharmaceutical Research Companies Play a Pivotal

Role in Drug Discovery and Development

The private sector makes the largest R&D contributions in translating basic research findings into therapeutic

advances for patients.

Share of Contributions to Key R&D Milestones for the

Most Transformative Drugs of the Past 25 Years 9

58%

42%

73%

27%

81%

19%

Discovery Development Manufacturing

Today, most important developments in medical

science typically begin in laboratories, such as the

discovery of specific new biological molecules,

processes, or pathways, or innovative applications

of existing knowledge. In most cases, these

discoveries in and of themselves have limited

effect beyond meeting a fairly narrow research

goal. Their real impact for public health

generally comes after several more significant

steps—including further R&D, testing, approval

by appropriate regulatory bodies (such as the

FDA), manufacturing, and distribution.

—NIH, Office of Intramural Research (OIR),

Office of Technology Transfer (OTT) 10

Public

Private

Sources: Tufts CSDD 9 ; NIH OIR OTT 10

2 • Research and Development

29


Biopharmaceutical Companies Do the Vast Majority of

Research to Translate Basic Science Into New Medicines

While basic science is often initiated in government and academia, it is biopharmaceutical firms that provide

2015 PhRMA Member Companies

Biopharmaceutical R&D Investment: $58.8 Billion (est.) 11,13

the necessary critical mass, expertise, and experience needed to develop new medicines. 12

Applied Research

Management &

Administration

30

Applied

Research

Basic

Research

Basic Research

2015 TOTAL NIH Budget: $30.3 Billion 11,14

In addition to biopharmaceutical R&D, the NIH budget

includes funding in support of medical devices,

diagnostics, prevention, training, and other activities.

Sources: Tufts CSDD 12 ; PhRMA 13 ; NIH 14

2 • Research and Development


Innovative Biopharmaceutical Companies Sit at the

Heart of a Dynamic R&D Ecosystem in the United States

While research‐based biopharmaceutical

companies are responsible for bringing

new medicines to patients, they are part

of an ecosystem marked increasingly

by collaborations with academic

institutions, government agencies,

venture capital firms, nonprofit

foundations, patients, and

others.

Source: PhRMA 15

2 • Research and Development

31


Collaboration Is Key in Researching and Developing

New Medicines

The rapid pace of science and technological advances is propelling a new era in biopharmaceutical innovation

in the United States. Along with these advances come complexities in translating complex learnings into medical

advances. Partnerships are crucial to address these challenges. Select examples of key collaborative efforts across

the R&D spectrum include:

Sources: NIH 16 ; Foundation for NIH 17 ; Lung‐MAP 18

2 • Research and Development

32


PhRMA Member Company R&D Investment

The pharmaceutical industry is one of the most research‐intensive industries in the United States.

Pharmaceutical firms invest as much as five times more in research and development, relative to

their sales, than the average U.S. manufacturing firm.

— Congressional Budget Office (CBO) 19

PhRMA Member Company R&D Expenditures, 1995‐2015

$60

$58.8*

$50.7

Expenditures (in Billions of Dollars)

$50

$40

$30

$20

$10

$15.2

$26.0

$39.9

$0

*Estimated fiscal year 2015

Sources: CBO 19 ; PhRMA 20

2 • Research and Development 33


The Costs of Drug Development Have More Than Doubled

Over the Past Decade

Less than 12% of the candidate medicines that make it into phase I clinical trials are approved by the FDA,

less than half the rate a decade ago.

Average Cost to Develop One New Approved Drug—Including the Cost of Failures

(in Constant 2013 Dollars)

KEY DRIVERS of increasing R&D costs:

• increased clinical trial complexity

• larger clinical trial sizes

• greater focus on targeting chronic

and degenerative diseases

• higher failure rates for drugs tested

in earlier‐phase clinical studies

$1.0B

$2.6B

$179M

$413M

1970s 1980s 1990s‐Early 2000s 2000s‐Early 2010s

*Previous research by the same author estimated the average R&D costs in the early 2000s at $1.2 billion in constant 2000 dollars (see DiMasi JA,

Grabowski HG. The cost of biopharmaceutical R&D: is biotech different? Managerial Decis Economics. 2007;28:469‐479). That estimate is based

on the same underlying survey as the author’s estimates for the 1990s to early 2000s reported here ($800 million in constant 2000 dollars) but is

updated for changes in the cost of capital.

Source: DiMasi JA, et al. 21

2 • Research and Development

34


Setbacks in Alzheimer’s Disease Research Provide

Stepping Stones for Future Innovation

Since 1998, 123 medicines in development for the treatment of Alzheimer’s disease have not made it through

clinical trials, with only 4 gaining FDA approval. These setbacks highlight the complexity of the R&D process.

Though disappointing, they provide important knowledge to fuel future research.

Unsuccessful Alzheimer’s Drugs in Development, 1998‐2014

Number of Alzheimer’s Drugs No Longer

Under Development

14

13

12

10

10

9

9

8

7

7

5

5

5

3

2

2

2

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: PhRMA 22

2 • Research and Development

35


Cancer Researchers Build on Knowledge Gained From

Setbacks to Inform Future Advances

Developing a new cancer medicine is a complex process, fraught with setbacks, but these so‐called “failures”

are not wasted efforts. Researchers learn from them to inform future study and direct research efforts.

The scientific process is thoughtful, deliberate, and sometimes slow, but each advance, while

helping patients, now also points toward new research questions and unexplored opportunities.

— Clifford A. Hudis, MD, FACP 23

Chief, Breast Medicine Service, Memorial Sloan Kettering Cancer Center;

Professor, Weill Cornell Medical College

*Setbacks and advances from 1998 to 2014

Sources: Patel JD, et al. 23 ; PhRMA 24

2 • Research and Development

36


The Complexity of Clinical Trials Has Increased

During the past decade, clinical trial designs and procedures have become much more complex, demanding more

staff time and effort and discouraging patient enrollment and retention.

Trends in Clinical Trial Protocol Complexity

2000‐2003 2008‐2011

Increase in

Complexity

Total Procedures per Trial Protocol (median)

(eg, bloodwork, routine exams, x‐rays)

Total Investigative Site Work Burden

(median units)

105.9 166.6 57%

28.9 47.5 64%

Total Eligibility Criteria 31 46 48%

Clinical Trial Treatment Period

(median days) * 140 175 25%

Number of Case Report Form Pages

per Protocol (median)

55 171 211%

*These numbers reflect the “treatment duration” of the protocol only.

Source: Getz KA, et al.; Tufts CSDD 25

2 • Research and Development

37


Innovative Biopharmaceutical Companies Seek

to Improve R&D Efficiency

Biopharmaceutical companies are using new approaches to increase R&D efficiency and effectiveness.

Select examples include:

• Improving target validation methods to allow

for greater accuracy in identifying and

selecting the most promising drug candidates

• Enhancing IT infrastructure to improve

efficiencies in translating drug discovery and

preclinical data into clinical research activity

• Using adaptive trial designs to improve latestage

success rates and optimize clinical trial

performance and data quality

Biopharmaceutical companies…are using a

wide variety of innovative approaches to

adapt the R&D and manufacturing process

to the changing scientific landscape. These

innovative approaches to drug discovery,

development, and manufacturing shed light

on a resilient enterprise making progress in

improving the quality, performance, and

efficiency of R&D and manufacturing.

—Tufts Center for the Study of Drug Development 26

Source: Tufts CSDD 26

2 • Research and Development

38


Modernizing the Drug Discovery and Development

Process

The use of novel drug development tools will enable researchers to follow the trajectory of the science, which is

creating new avenues of research, exploration, and discovery.

2 • Research and Development

39


1 • Advances in Treatment

EXTRA PHOTO


Notes and Sources

1. Adis R&D Insight Database. Accessed March 2016.

2. Long G, Works J; Analysis Group. Innovation in the biopharmaceutical pipeline: a multidimensional view. http://www.analysisgroup.com

/uploadedFiles/Publishing/Articles/2012_Innovation_in_the_Biopharmaceutical_Pipeline.pdf. Published January 2013. Accessed March

2016.

3. Pharmaceutical Research and Manufacturers of America (PhRMA). 2016 PhRMA profile. http://www.phrma.org/profiles‐reports. Published

April 2016.

4. Pharmaceutical Research and Manufacturers of America (PhRMA). Great strides against rare diseases. http://phrma.org/sites/default/files

/pdf/great‐strides‐against‐rare‐diseases.pdf. Published February 2016. Accessed March 2016.

5. Personalized Medicine Coalition. 2015 progress report: personalized medicine at FDA. http://www.personalizedmedicinecoalition.org

/Userfiles/PMC‐Corporate/file/2015_Progress_Report_PM_at_FDA1.pdf. Accessed March 2016.

6. Tufts Center for the Study of Drug Development (CSDD). Personalized medicine gains traction but still faces multiple challenges. Tufts CSDD

Impact Rep. 2015;17(3).

7. Moses H III, Matheson DHM, Cairns‐Smith S, George BP, Palisch C, Dorsey ER. The anatomy of medical research: US and international

comparisons. JAMA. 2015;313(2):174‐189.

8. PhRMA adaptation based on DiMasi JA, Grabowski HG, Hansen RW. Innovation in the pharmaceutical industry: new estimates of R&D costs.

J Health Economics. 2016;47:20‐33; DiMasi JA, Grabowski HG, Hansen RW; Tufts Center for the Study of Drug Development. Innovation in

the pharmaceutical industry: new estimates of R&D costs. In: Briefing: Cost of Developing a New Drug. http://csdd.tufts.edu/files/uploads

/Tufts_CSDD_briefing_on_RD_cost_study_‐_Nov_18,_2014..pdf. Published November 18, 2014. Accessed April 2016; US Food and Drug

Administration. US Food and Drug Administration drug approval process. http://www.fda.gov/downloads/Drugs/ResourcesForYou

/Consumers/UCM284393.pdf. Accessed April 2016.

9. Chakravarthy R, Cotter K, DiMasi J, Milne C‐P, Wendel N; Tufts Center for the Study of Drug Development. Public and private sector

contributions to the research & development of the most transformational drugs of the last 25 years. http://csdd.tufts.edu/files/uploads

/PubPrivPaper2015.pdf. Published January 2015. Accessed March 2016.

10. National Institutes of Health (NIH), Office of Intramural Research (OIR), Office of Technology Transfer (OTT). About NIH OTT. NIH OIR OTT

Web site. https://www.ott.nih.gov/about‐nih‐ott. Accessed March 2016.

2 • Research and Development

41


Notes and Sources

11. Total National Institutes of Health (NIH) spending is for fiscal year 2015. In addition to funding for basic and applied research, the total NIH

budget includes funding in support of prevention (eg, suicide prevention), diagnostics and medical devices, Superfund Research Program

activities, training and education (eg, dental), program evaluation, management and support, buildings and facilities, and other activities.

PhRMA member companies’ R&D spending is estimated for calendar year 2015. PhRMA member companies account for the majority of

private biopharmaceutical R&D spending. Nonmember company data are not included.

12. Chakravarthy R, Cotter K, DiMasi J, Milne C‐P, Wendel N; Tufts Center for the Study of Drug Development. Public and private sector

contributions to the research & development of the most transformational drugs of the last 25 years. http://csdd.tufts.edu/files/uploads

/PubPrivPaper2015.pdf. Published January 2015. Accessed April 2016.

13. Pharmaceutical Research and Manufacturers of America (PhRMA). PhRMA Annual Membership Survey. Washington, DC: PhRMA; 2015.

US Department of Health and Human Services (HHS). FY 2016 budget & performance. HHS Web site. http://www.hhs.gov/about/budget

/fy2016/index.html#. Accessed April 2016.

14. National Institutes of Health (NIH), Office of Budget. FY 2016 president’s budget request. NIH Office of Budget Web site.

https://officeofbudget.od.nih.gov/br2016.html. Accessed April 2016.

15. Pharmaceutical Research and Manufacturers of America (PhRMA). 2016 PhRMA profile. http://www.phrma.org/profiles‐reports. Published

April 2016.

16. National Institutes of Health (NIH). Accelerating medicines partnership (AMP). NIH Web site. http://nih.gov/science/amp/index.htm.

Accessed April 2016.

17. Foundation for the National Institutes of Health. The Biomarkers Consortium Web site. http://www.biomarkersconsortium.org/index.php.

Accessed April 2016.

18. Lung‐MAP. About Lung‐MAP. Lung‐MAP Web site. http://www.lung‐map.org/about‐lung‐map. Accessed April 2016.

19. Congressional Budget Office (CBO). A CBO study: research and development in the pharmaceutical industry. www.cbo.gov/sites/default

/files/cbofiles/ftpdocs/76xx/doc7615/10‐02‐drugr‐d.pdf. Published October 2006. Accessed April 2016.

20. Pharmaceutical Research and Manufacturers of America (PhRMA). PhRMA Annual Membership Survey, 1995‐2015. Washington, DC:

PhRMA; 2016.

21. DiMasi JA, Grabowski HG, Hansen RW. Innovation in the pharmaceutical industry: new estimates of R&D costs. J Health Economics.

2016;47:20‐33.

2 • Research and Development

42


Notes and Sources

22. Pharmaceutical Research and Manufacturers of America (PhRMA). Researching Alzheimer’s medicines: setbacks and stepping stones.

http://phrma.org/sites/default/files/pdf/alzheimers‐setbacks‐and‐stepping‐stones.pdf. Published 2015. Accessed April 2016.

23. Patel JD, Krilov L, Adams S, et al. Clinical cancer advances 2013: annual report on progress against cancer from the American Society of

Clinical Oncology. J Clin Oncol. 2013;31. http://jco.ascopubs.org/content/early/2013/12/09/JCO.2013.53.7076.full.pdf+html. Accessed

April 2016.

24. Pharmaceutical Research and Manufacturers of America (PhRMA). Researching cancer medicines: setbacks and stepping stones.

http://www.phrma.org/sites/default/files/pdf/2014‐cancer‐setbacks‐report.pdf. Published 2014. Accessed April 2016.

25. Getz KA, Campo RA, Kaitin KI. Variability in protocol design complexity by phase and therapeutic area. Drug Inf J. 2011;45(4):413‐420;

updated data provided through correspondence with Tufts Center for the Study of Drug Development.

26. Lamberti MJ, Getz K; Tufts Center for the Study of Drug Development. Profiles of new approaches to improving the efficiency and

performance of pharmaceutical drug development. http://csdd.tufts.edu/files/uploads/CSSD_PhRMAWhitePaper_FINAL.pdf. Published

May 2015. Accessed April 2016.

2 • Research and Development

43


PHOTO TO BE INSERTED


MARKET DYNAMICS

The Economics of Drug Development and the Market

Forces That Shape Spending on Medicines

Biopharmaceutical competition begins in the research and

development (R&D) process, well before a medicine ever reaches

a patient. Companies “race” to bring the first medicine in a

therapeutic class to market, and once a medicine is approved, it

typically faces swift competition from other brands in its class.

The US prescription drug lifecycle promotes innovation while

providing built‐in cost containment because brands eventually

lead to lower‐cost generics—and soon many biosimilars—that

bring long‐term value to patients.

Ongoing investment in R&D depends on the commercial success

of a few products that must make up for all the rest, including

those that never reach the market. Recent research has found

that average lifetime revenues from new drug launches have

declined. Health plans have powerful tools, such as tiered

formularies and step therapy, to manage the use of medicines,

and negotiating power is increasingly concentrated among

fewer pharmacy benefit managers, driving large rebates that

reduce overall drug spending. Meanwhile, the market is rapidly

evolving, increasingly linking payment to quality and value.

3 • Market Dynamics

45


Illustrative Pharmaceutical Lifecycle

New pharmaceutical medicines face competition after a relatively short period on the market.

FDA Approval

Most brand drugs

face competition

from other brands

Generics Enter

Market

DRUG DEVELOPMENT

BRAND DRUG LIFESPAN

GENERICS

Average time to develop

a new medicine

= at least 10 yrs

Average time on market

before generic entry

= 12.5* yrs

*For brand medicines with more than $250 million in annual sales in 2008 dollars,

which account for 92% of sales of the brand medicines analyzed

Sources: PhRMA 1 ; Grabowski H, et al. 2 ; Tufts CSDD 3

3 • Market Dynamics

46


Increasing Competition Within Therapeutic Categories

The time a medicine is the only drug available in its pharmacologic class declined from a median of more than 10

years in the 1970s to close to 2 years in the 2000s.

Time Between Approval of First and Second Medicines in a Pharmacologic Class

12

Median Number of Years

10

8

6

4

2

10.2

Half of second medicines in

a class were approved

within 2.3 years of the first

medicine’s approval.

One‐quarter were approved

within just 4 months.

2.3

0

1970s 2005‐2011

Year of Approval of First‐in‐Class Medicine

Source: Tufts CSDD 4

3 • Market Dynamics

47


Earlier and More Frequent Patent Challenges

by Generic Companies

As early as 4 years after brand launch, a generic company may file with the FDA a Paragraph IV certification to

challenge patents associated with the brand medicine, often allowing generic market entry before the patent

expiration date.

Patent challenges are occurring earlier…

…and are more common

25

Average Time From Brand Launch to

Paragraph IV Patent Challenge

Share of Brand Products Experiencing at Least One

Paragraph IV Patent Challenge Prior to Generic Entry

94%

Number of Years

20

15

10

5

14.3

8.5

5.2

25%

60%

0

1995 2005 2014

Brands by Year of First Generic Entry

1995 2005 2014

Brands by Year of First Generic Entry

Note: All numbers are 3‐year moving averages for brand medicines with more than $250 million

in annual sales in 2008 dollars, which account for 92% of sales of the brand medicines analyzed.

Source: Grabowski H, et al. 5

3 • Market Dynamics

48


Newly Introduced Generics Are Adopted Rapidly

When a generic version of a medicine becomes available for the first time, it captures an average of threequarters

of the market within 3 months, 6 and some generics capture as much as 90% by that time. 7

100%

Average Generic Share of Total Use Following Launch

of a Brand Medicine’s First Generic, 2013‐2014*

80%

Generic Use Rate

60%

40%

20%

0%

Mo.

Before

Generic

Entry

Mo. of

Generic

Entry

First Full

Month

2 3 4 5 6 7 8 9 10 11 12

Number of Months After First Generic Entry

*Average monthly generic share of total standardized units of a unique molecule/form combination

Sources: Grabowski H, et al. 6 ; Express Scripts 7

3 • Market Dynamics

49


Few Approved Medicines Are Commercially Successful

Ongoing investment in R&D depends on the commercial success of a few products that must make up for all the

rest, including those that never reach the market.

2005 Dollars, in Billions

$55

$50

$45

$40

$35

$30

$25

$20

$15

$10

$5

Present Value of Lifetime Sales of Medicines Introduced 1991‐2009 7

Just 2 in 10 Approved Medicines

Produce Revenues That Exceed

Average R&D Costs 9

$0

100% 90% 80% 70% 60% 50% 40% 30% 20% 10%

Medicines by Lifetime Sales Percentile

A “medicine” is defined as a novel active substance (ie, a molecular or biologic entity or combination product in

which at least one element had not been previously approved by the FDA). Sales are global sales net of rebates and

discounts.

Sources: Berndt ER, et al. 8 ; Vernon JA, et al. 9

3 • Market Dynamics

50


Average Lifetime Returns From Newly Introduced

Medicines Have Declined in Recent Years

The R&D investments required to bring medicines to patients in the future rely on revenues from existing

approved innovative medicines. Continued declines in average lifetime revenues from new medicines could

reduce the ability of companies to maintain their historically high levels of innovation.

Average Present Value of Lifetime Sales of Medicines by When They Were Introduced

$5.1

2005 Dollars, in Billions

$3.4

$4.6

$2.9

1991‐1994 1995‐1999 2000‐2004 2005‐2009

Year of Launch

A “medicine” is defined as a novel active substance (ie, a molecular or biologic entity or combination product in

which at least one element had not been previously approved by the FDA). Sales are global sales net of rebates and

discounts.

Source: Berndt ER, et al. 10

3 • Market Dynamics

51


The Economics of Biopharmaceuticals Has Changed

Markedly in Recent Years

Source: PhRMA 11

3 • Market Dynamics

52


Accounting Treatment of R&D Overstates

Biopharmaceutical Profits

Correctly accounting for R&D as a long‐lived investment tends to reduce substantially, if

not to eliminate altogether, the inference that pharmaceutical companies are on average

achieving supranormal profit returns.

— Frederic Scherer, AEI‐Brookings Joint Center for Regulatory Studies 12

[T]he standard accounting measure of profits overstates true returns to R&D‐intensive

industries, such as pharmaceuticals, and makes it difficult to meaningfully compare profit

levels among industries. Accounting measures treat most R&D spending (except for capital

equipment) as a deductible business expense rather than as a capitalized investment. But the

intangible assets that research and development generate—such as accumulated knowledge,

new research capabilities, and patents—increase the value of a company’s asset base. Not

accounting for that value overstates a firm’s true return on its assets.

— Congressional Budget Office 13

Usual profit figures greatly overstate the industry’s economic profit rate.

— Joseph Newhouse, Harvard University 14

Sources: Scherer FM 12 ; CBO 13 ; Newhouse JP 14

3 • Market Dynamics

53


The US Prescription Drug Lifecycle Promotes Innovation

and Affordability

Figures represent the average annual price for 30 pills of the most commonly dispensed form and strength.

“Then” price represents the average price in the year prior to generic entry. “Now” price represents the average price in CY 2014.

Source: IMS Health 15

3 • Market Dynamics

54


Savings From the Prescription Drug Lifecycle Reduce

Treatment Costs for the Most Common Conditions

Incredible advances by innovative pharmaceutical companies, resulting from pioneering scientific work and

large‐scale investments, eventually lead to lower‐cost generics that bring long‐term value to consumers.

Daily Cost of Top 10 Therapeutic Classes* Most Commonly Used by Medicare Part D Enrollees

*Ten therapeutic classes most commonly used by Part D enrollees in 2006 were lipid regulators, angiotensin‐converting‐enzyme

inhibitors, calcium channel blockers, beta blockers, proton pump inhibitors, thyroid hormone, angiotensin II, codeine and

combination products, antidepressants, and seizure disorder medications.

Source: Kleinrock M 16

3 • Market Dynamics

55


Medicines Offer Built‐in Cost Containment, Which Is

Unique in Health Care

The price of a common medicine used to prevent cardiovascular disease dropped 92% between 2005 and 2013,

while the average charge for a surgical procedure used to treat it increased 66% over the same period.

Source: PhRMA analysis of Healthcare Cost and Utilization Project Hospital Charge Database; IMS 17

3 • Market Dynamics

56


Powerful Purchasers Negotiate on Behalf of Payers

Negotiating power is increasingly concentrated among fewer pharmacy benefit managers (PBMs), with the top

3 PBMs accounting for three‐quarters of the market.

PBM Market Share by Total Equivalent Prescriptions, 2014

Top 3

Market Share

75%

24%

22%

25%

Express Scripts

CVS Health (Caremark)

OptumRx/Catamaran*

All Other

29%

*OptumRx and Catamaran merged in 2015. Their 2014 shares are shown combined.

Source: Drug Channels Institute 18

3 • Market Dynamics

57


In the US System, Health Plans Have Powerful Tools

to Reduce Spending on Medicines

TIERED COPAYS

Higher cost to patients for

brands than for generics and

preferred brands

FORMULARIES

List of covered drugs

PRIOR AUTHORIZATION

Requirement to justify

medicine’s use before

it is covered

Plans drive nearly all use of

medicines to generics and

“preferred” brands.

CONCENTRATED

PURCHASING POWER

Individual Pharmacy Benefit Managers

buy medicines for more people than those

who live in entire European countries

STEP THERAPY

Patients must try and fail on

alternatives before certain

medicines are covered

FINANCIAL INCENTIVES

Payments to physicians and/or

pharmacies for generic prescribing or

switching patients to preferred drugs

Source: IMS Health 19

3 • Market Dynamics

58


Case Study in Manufacturer‐Payer Negotiations:

Hepatitis C Medicines

Leveraging increased competition in the hepatitis C market, payers negotiated deep discounts off list prices

for new medicines with manufacturers, reducing prices below those in many western European countries. 20 59

What Payers Claimed Would Happen

What Actually Happened

What they have done with this

particular drug will break the

country…. It will make pharmacy

benefits no longer sustainable.

Companies just aren’t going to be

able to handle paying for this drug.

—Express Scripts, April 2014 21

This pricing, which Gilead attempts

to justify as the cost of medical

advancement, will have a tsunami

effect across our entire health care

system.

—America’s Health Insurance Plans,

July 2014 22

The price is sufficiently low that we can

go to our clients and say that they can

treat every patient with hepatitis C.

—Express Scripts, January 2015 23

We are receiving market‐leading rates

from both companies. Neither company

wanted to be left off the formulary.

—Prime Therapeutics, January 2015 24

Competitive market forces and hard‐nosed

bargaining make “tremendously effective”

new hepatitis C medicines not just more

accessible to ailing patients—but also offer

good value to the U.S. health care system.

—The New York Times Editorial Board,

September 2015 25

Sources: LaMattina J 20 ; Cortez MF 21 ; Ignagni K 22 ; Silverman E 23 ; Langreth R 24 ; New York Times Editorial Board 25

3 • Market Dynamics


Many Factors Affect Physicians’ Prescribing Decisions

Factors Influencing Prescribing Decisions in the United States in 2013

Clinical knowledge and experience

Patient’s particular situation, including drug interactions,

side effects, and contraindications

91%

89%

8%

9%

Articles in peer‐reviewed medical journals

Clinical practice guidelines

50%

48%

42%

44%

Patient’s insurance coverage and formulary

Information from colleagues and peers

39%

38%

44%

54%

Pharmaceutical company–sponsored educational programs

featuring physician speakers, not Continuing Medical Education

Information from pharmaceutical company representatives

Information from insurance and prescription benefits

manager representatives

11%

10%

10%

35%

47%

53%

A great deal

Some

Source: KRC Research 26

3 • Market Dynamics

60


Direct‐to‐Consumer Advertising Encourages Patient

Engagement and Appropriate Use of Medicines

Advertising has promoted the appropriate use of oral breast cancer therapies consistent with medical practice

guidelines.*

*Study measured the effect of DTCA on patients and doctors regarding the use of aromatase inhibitors (AIs) consistent with medical practice guidelines. The study found that

DTCA spending on AIs was associated with an overall new AI prescription increase of 0.18% after 3 months (approximately 118 new AI prescriptions per million dollars spent).

There was “no significant change associated with DTCA spending for AIs for those aged 40 years or less at any time from 0 to 6 months.”

Source: Abel GA, et al. 27

3 • Market Dynamics

61


EXTRA PHOTO


Notes and Sources

1. Pharmaceutical Research and Manufacturers of America (PhRMA). Drug Discovery and Development: Understanding the R&D Process.

Washington, DC: PhRMA; 2014.

2. Grabowksi H, Long G, Mortimer R, Boyo A. Updated trends in US brand‐name and generic drug competition. J Med Economics. In press.

3. Tufts Center for the Study of Drug Development. Cost of developing a new drug [briefing]. http://csdd.tufts.edu/files/uploads

/Tufts_CSDD_briefing_on_RD_cost_study_‐_Nov_18,_2014..pdf. Published November 18, 2014. Accessed April 2016.

4. 1970s data: Tufts Center for the Study of Drug Development, unpublished data, March 2010; 2005‐2011 data: Tufts Center for the Study

of Drug Development. First‐in‐class drugs in competitive development races with later entrants. Tufts CSDD Impact Rep. 2015;17(6).

5. Grabowksi H, Long G, Mortimer R, Boyo A. Updated trends in US brand‐name and generic drug competition. J Med Economics. In press.

6. Grabowksi H, Long G, Mortimer R, Boyo A. Updated trends in US brand‐name and generic drug competition. J Med Economics. In press.

7. For example, a new generic version of an osteoporosis treatment launched in 2009 captured more than 90% of the mail order market in the

first week and more than 90% of all prescriptions in the first 3 months. Express Scripts. 2009 drug trend report. https://www.express

‐scripts.com/research/research/dtr/archive/2009/dtrFinal.pdf. Published April 2010. Accessed April 2016.

8. Berndt ER, Nass D, Kleinrock M, Aitken M. Decline in economic returns from new drugs raises questions about sustaining innovations.

Health Aff. 2015;34(2):245‐252.

9. Vernon JA, Golec JH, DiMasi JA. Drug development costs when financial risk is measured using the Fama‐French three‐factor model. Health

Economics. 2010;19(8):1002‐1005.

10. Berndt ER, Nass D, Kleinrock M, Aitken M. Decline in economic returns from new drugs raises questions about sustaining innovations.

Health Aff. 2015;34(2):245‐252.

11. Pharmaceutical Research and Manufacturers of America (PhRMA). 2016 PhRMA profile. http://www.phrma.org/profiles‐reports. Published

April 2016.

12. Scherer FM. Pharmaceutical innovation. AEI‐Brookings Joint Center for Regulatory Studies Working Paper 07‐13. July 2007.

13. Congressional Budget Office. Research and development in the pharmaceutical industry. http://www.cbo.gov/sites/default/files/cbofiles

/ftpdocs/76xx/doc7615/10‐02‐drugr‐d.pdf. Published October 2006. Accessed April 2016.

3 • Market Dynamics

63


Notes and Sources

14. Newhouse JP. How much should Medicare pay for drugs? Health Aff. 2004;23(1):89‐102.

15. IMS Health analysis for PhRMA. May 2015.

16. Kleinrock M. Daily Cost of Medicare Part D: December 2013 Update. Danbury, CT: IMS Institute for Healthcare Informatics; December 2013.

17. PhRMA analysis of average hospital charge data from Healthcare Cost and Utilization Project Hospital Charge Database 2005 and 2013;

invoice price data for atorvastatin 10mg from IMS National Sales Perspective for 2005 (branded Lipitor), 2013 (generic), and 2014 (generic).

18. Fein AJ; Pembroke Consulting, Inc., and Drug Channels Institute. 2014‐15 economic report on retail, mail, and specialty pharmacies.

http://drugchannelsinstitute.com/files/2014‐15‐PharmacyIndustry‐Overview.pdf. Published January 2015. Accessed April 2016. Total

adjusted prescriptions include claims at a PBM’s network pharmacies plus equivalent prescriptions and specialty claims filled by a PBM’s

mail pharmacy.

19. IMS Health Inc. IMS National Prescription Audit: December 2012. Danbury, CT: IMS Health.

20. LaMattina J. For hepatitis C drugs, U.S. prices are cheaper than in Europe. Forbes. December 4, 2015. http://www.forbes.com/sites

/johnlamattina/2015/12/04/for‐hepatitis‐c‐drugs‐u‐s‐prices‐are‐cheaper‐than‐in‐europe/#7ced43f564bb. Accessed April 2016. Citing

comments made at Forbes Healthcare Summit 2015. Video available at http://www.forbes.com/healthcare‐summit/#5550ec6e7ffc.

Accessed April 2016.

21. Cortez MF. Express Scripts raises pressure on Gilead for drug price. Bloomberg. April 8, 2014. http://www.bloomberg.com/news/articles

/2014‐04‐08/express‐scripts‐raises‐pressure‐on‐gilead‐for‐drug‐price. Accessed April 2016.

22. Ignagni K. We all pay for $1,000 a pill drug. CNN. July 24, 2014. http://edition.cnn.com/2014/07/07/opinion/ignagni‐hepatitis‐c‐drug.

Accessed April 2016.

23. Silverman E. “The big issue has not been choice, but access:” Express Scripts’ Miller explains. Wall Street Journal. January 6, 2015.

http://blogs.wsj.com/pharmalot/2015/01/06/the‐big‐issue‐has‐not‐been‐choice‐but‐access‐express‐scripts‐miller‐explains. Accessed

April 2016.

24. Langreth R. Hepatitis drug prices fall so low, no exclusives needed. Bloomberg. January 12, 2015. http://www.bloomberg.com/news

/articles/2015‐01‐12/prime‐covers‐both‐gilead‐and‐abbvie‐liver‐drugs‐as‐prices‐plunge. Accessed April 2016.

25. New York Times Editorial Board. Costly hepatitis C drugs for everyone? New York Times. September 2, 2015.

3 • Market Dynamics

64


Notes and Sources

26. KRC Research; for PhRMA. Survey of Physicians About Pharmaceutical and Biotech Research Company Activities and Information: Nationally

Representative Survey of 502 Physicians. Washington, DC: KRC Research; February 2014.

27. Abel GA, Chen K, Taback N, Hassett MJ, Schrag D, Weeks JC. Impact of oncology‐related direct‐to‐consumer advertising: association with

appropriate and inappropriate prescriptions. Cancer. 2013;119(5):1065‐1072.

3 • Market Dynamics

65


PHOTO TO BE INSERTED


4

COST

SHARING TRENDS

Evaluating the Impact of Insurance Benefit Design on Patients

Insurers are increasingly using high deductibles, coinsurance,

and multiple cost sharing tiers, which results in high cost

sharing for some patients. High cost sharing for medications

may limit patients’ access to needed treatments, reduce

adherence, and lead to poor health outcomes. Out‐of‐pocket

spending for prescription medications can represent a

disproportionate share of total health care costs borne

directly by patients, especially those who are low income

or chronically ill.

4 • Cost Sharing Trends

67


Insurance Covers a Lower Share of Prescription

Drug Costs Than the Costs of Other Medical Services

On average, patients pay out of pocket 17% of their total prescription drug costs compared with 4% of costs

for hospital care. 1 4%

Average Share of Health Care Costs Patients Pay Out of Pocket, All Ages

17%

Average, All Health Care (14%)

Hospital Care

Prescription Drugs

Note: Prescription drug spending includes brand and generic ingredients, pharmacy, and

distribution costs for retail prescriptions. Hospital care includes inpatient and outpatient.

Source: PhRMA analysis based on Medical Expenditure Panel Survey, 2013 1

4 • Cost Sharing Trends

68


More Plans Are Including Drugs in Combined Deductibles

The share of plans offered on the Health Insurance Exchanges including drugs in combined deductibles (a single

deductible for medical services and drugs) has steadily increased over the 3 years the exchanges have been in

operation. Plans that apply a large deductible to prescriptions can leave patients with high out‐of‐pocket costs

from accessing needed medicines, like those that treat chronic conditions. About half of plans without a combined

deductible have a separate drug deductible, and the remaining plans exempt drugs from the deductible.

Percentage of Plans With Combined Deductibles

63%

68%

73%

Average Combined

Deductible for Silver Plans

2015: $2,658

2016: $3,075

2014 2015 2016

In the Federally Facilitated Marketplace Individual Landscape File, plans note either a combined deductible, which

reflects a single deductible for medical services and drugs, or separate deductibles that apply only to medical services

or drugs.

Source: Avalere Health PlanScape® 2

4 • Cost Sharing Trends

69


Subjecting Prescription Drugs to a Combined Deductible

Results in Disproportionately High Cost Sharing

An analysis of the most common type of exchange plans under the Affordable Care Act found that drug coverage

was generally less generous than coverage for other services—primarily because plans subjected drug spending

to a large deductible.

Average Share of Costs Paid by the Plan

Among Silver Plans in 2014 With a Combined Medical/Drug Deductible*

72% 71%

54%

Pharmacy Hospital Professional/Other

*Silver Plans accounted for a majority of Health Insurance Exchange enrollment, and combined deductibles were the most common type

of deductible arrangement among these plans. A deductible is the amount patients must pay annually with their own money (out of pocket)

before a health plan will pay for any expenses. Figure shows the actuarial value for each service category listed (ie, the percentage of

covered costs paid by the plan).

Source: Milliman, Inc. 3

4 • Cost Sharing Trends

70


Plans Often Charge Patients a Percentage of a Medicine’s

Total Cost Rather Than Fixed‐Dollar Copays

In the most frequently purchased type of Health Insurance Exchange plan, coinsurance for certain medicines is

common: 74% of these plans require enrollees to pay a percentage of a specialty tier medicine’s total cost, with

36% of these plans requiring patients to pay coinsurance of more than 30% of the cost.

Cost Sharing in Specialty Tiers of 2016 Silver Plans*

Fixed‐

Dollar

Copays

26%

Coinsurance

74%

COINSURANCE

is a percentage of costs a patient is

responsible for paying with his or

her own money (out of pocket).

Coinsurance can make a patient’s

out‐of‐pocket costs difficult to

predict—and potentially much

higher—than fixed‐dollar copays.

*Silver Plans are shown here because they account for a majority of Health Insurance Exchange enrollment. Plans

subject different medicines to different levels of cost sharing, or “tiers.” Medicines assigned to a “specialty tier”

typically require the highest level of cost sharing.

Source: Avalere Health PlanScape® 4

4 • Cost Sharing Trends

71


Plans Increasingly Subject Certain Medicines to Higher

Cost Sharing

Patients taking medicines placed on higher cost sharing “tiers” commonly face serious and chronic health

conditions. Increased use of 4 or more tiers by plans means that more patients are subject to what is commonly

higher cost sharing in the specialty tier. Medicines on the specialty tier are also more likely to be subject to

coinsurance than products placed on lower cost sharing tiers. 5

*Silver Plans account for a majority of Health Insurance Exchange enrollment. “Tiers” refer to the

different levels of cost sharing that plans require patients to pay for different groupings of medicines.

Sources: Kaiser Family Foundation (KFF) 5 ; Avalere Health

PlanScape® 6 ; KFF/Health Research & Educational Trust 7

4 • Cost Sharing Trends

72


Insurers May Be Discouraging Enrollment Through

Drug Benefit Design

By placing all drugs to treat certain high‐cost conditions on the highest drug formulary cost sharing tier, a practice

known as adverse tiering, some insurers may be trying to discourage patients with certain conditions from

enrolling in their plans.

Percentage of Silver Plans Placing All Drugs in the Class on the Specialty Tier

67%

2014

2015

60%

47%

42%

51%

29% 30%

34%

16%

20%

Protease Inhibitors HIV‐Other* Antiangiogenics* Molecular Target

Inhibitors*

HIV/AIDS

ONCOLOGY

Multiple Sclerosis

Agents

*There are no generic drugs available in this class. All products are single‐source.

Source: Avalere Health PlanScape® 8

4 • Cost Sharing Trends

73


High Cost Sharing Reduces Adherence

RAND researchers found that doubling copays reduced patients’ adherence to prescribed medicines by 25%

to 45% and increased emergency room visits and hospitalizations.

Percent Change in Adherence From Doubling Medicine Copays

0%

Percent Change in Days Supplied of Medicine

‐5%

‐10%

‐15%

‐20%

‐25%

‐30%

‐35%

‐40%

‐45%

‐45%

‐44%

‐34%

‐33%

‐32%

‐26% ‐26%

‐25%

‐50%

Source: Goldman DP, et al. 9

4 • Cost Sharing Trends

74


Patients Facing High Cost Sharing Commonly Do Not

Initiate Treatment

Chronic myeloid leukemia patients facing high out‐of‐pocket costs for medicines on a specialty tier are less likely

to initiate drug therapy than patients receiving a cost sharing subsidy and take twice as long to initiate treatment.

Percentage of Chronic Myeloid Leukemia Patients Initiating Treatment

Patients facing high cost sharing

Patients facing minimal cost sharing

65% 67%

53%

36%

45%

21%

1 month 3 months 6 months

Time Following Diagnosis

Source: Doshi JA, et al. 10

4 • Cost Sharing Trends

75


Formulary Restrictions Can Lead to Greater Medical

Spending

Non‐elderly Medicaid patients facing formulary restrictions* for antipsychotic medications were 7% to 13% more

likely to be hospitalized and had higher medical costs than patients in states without formulary restrictions.

$16,000

Medicaid Total Annual Medical Expenditures per Patient, 2008

$14,000

$12,000

$13,299

$12,344

$13,735

$10,000

$10,952

$8,000

$6,000

$4,000

$2,000

$0

Schizophrenia

States Without Formulary Restrictions

Bipolar Disorder

States With Formulary Restrictions

*Restrictions examined: prior authorization, step therapy, and quantity limits

Source: Seabury SA, et al. 11

4 • Cost Sharing Trends

76


Patient Assistance Programs Help Patients Access

Needed Medicines

Despite more Americans having insurance, many are facing high cost sharing that puts their ability to stay on a

needed therapy at risk. Patient assistance programs sponsored by US biopharmaceutical companies are one

option to help patients maintain access to needed medicines.

Source: Partnership for Prescription Assistance 12

4 • Cost Sharing Trends

77


Notes and Sources

1. PhRMA analysis based on US Department of Health and Human Services, Agency for Healthcare Research and Quality, Medical Expenditure

Panel Survey, 2013. http://www.meps.ahrq.gov/mepsweb. Accessed April 2016. Prescription drug spending includes brand and generic

ingredients, pharmacy, and distribution costs. Hospital includes inpatient and outpatient. Analysis includes individuals with any source of

health care coverage, public or private; this includes individuals who had health coverage without coverage for prescription drugs, which

can be expected to account for less than 2% of those with health coverage.

2. Avalere Health PlanScape®, a proprietary analysis of exchange plan features, December 2015. This analysis is based on data collected by

Managed Markets Insight & Technology, LLC. Avalere Health PlanScape®, a proprietary analysis of exchange plan features, December 2014.

Avalere Health analyzed data from the Federally Facilitated Marketplace Individual Landscape File released November 2014 and the

California and New York state exchange Web sites.

3. Milliman, Inc.; for PhRMA. Impact of health insurance marketplace on participant cost sharing for pharmacy benefits. http://www.phrma

.org/sites/default/files/pdf/milliman‐impact‐of‐hix‐on‐pharmacy‐benefits‐report.pdf. Published May 13, 2014. Accessed March 2016.

4. Avalere Health PlanScape®, a proprietary analysis of exchange plan features, December 2015. This analysis is based on data collected by

Managed Markets Insight & Technology LLC.

5. Kaiser Family Foundation. Cost‐Sharing for Plans Offered in Federally Facilitated or Partnership Marketplaces for 2016. Washington, DC:

Kaiser Family Foundation; November 2015.

6. Avalere Health PlanScape®, a proprietary analysis of exchange plan features, December 2015. This analysis is based on data collected by

Managed Markets Insight & Technology LLC.

7. Kaiser Family Foundation/Health Research & Educational Trust. Employer Health Benefits: 2015 Annual Survey. Washington, DC: Kaiser

Family Foundation; September 2015, 162.

8. Avalere Health PlanScape®, a proprietary analysis of exchange plan features, updated February 2015. This analysis is based on data collected

by Managed Markets Insight & Technology, LLC. The sample includes Silver Plans in 6 states (Florida, Georgia, Illinois, North Carolina,

Pennsylvania, and Texas), relying on HealthCare.gov and California and New York. Coverage is weighted according to unique plan‐state

combinations.

9. Goldman DP, Joyce GF, Escarce JJ, et al. Pharmacy benefits and the use of drugs by the chronically ill. JAMA. 2004;291(19):2344‐2350.

4 • Cost Sharing Trends

78


Notes and Sources

10. Doshi JA, Li P, Ladage VP, Pettit AR, Taylor EA. Impact of cost sharing on specialty drug utilization and outcomes: a review of the evidence

and future directions. Am J Managed Care. 2016;22(3):188‐197. http://www.ajmc.com/journals/issue/2016/2016‐vol22‐n3/Impact‐of‐Cost‐

Sharing‐on‐Specialty‐Drug‐Utilization‐and‐Outcomes‐A‐Review‐of‐the‐Evidence‐and‐Future‐Directions. Accessed March 2016.

11. Seabury SA, Goldman DP, Kalsekar I, Sheehan JJ, Laubmeier K, Lakdawalla DN. Formulary restrictions on atypical antipsychotics: impact on

costs for patients with schizophrenia and bipolar disorder in Medicaid. Am J Managed Care. 2014;20(2):e52‐e60. http://www.ajmc.com

/journals/issue/2014/2014‐vol20‐n2/formulary‐restrictions‐on‐atypical‐antipsychotics‐impact‐on‐costs‐for‐patients‐with‐schizophrenia‐andbipolar‐disorder‐in‐medicaid.

Accessed March 2016.

12. Partnership for Prescription Assistance Web site. https://www.pparx.org. Accessed March 2016.

4 • Cost Sharing Trends

79


PHOTO TO BE INSERTED


5

DRUG

SPENDING

TRENDS

Understanding Reported Spending on Medicines

Prescription medicines represent a small share of national

health spending, and government estimates project medicines

to remain a stable share of health spending through the next

decade. Overall drug price growth has been in line with overall

medical price growth, in large part due to the cost containment

built into the drug cost lifecycle; 9 of every 10 US prescriptions

are filled with generics. Despite reported increases in list prices

for brand medicines, average net brand price growth has

declined in recent years, a result of increased rebates

negotiated by payers.

5 • Drug Spending Trends

81


After spiking at 12.2% in 2014, government actuaries project prescription drug spending growth to moderate

over the next few years to 5% to 7% through 2024, back in line with overall health care spending growth. 1

Percent Annual Growth Rate

14%

12%

10%

8%

6%

4%

2%

Prescription Medicine Spending Growth: 2008‐2024 *

2014 saw a record 41 medicines approved by

the FDA—including a number of transformative

medicines for many debilitating diseases—as well

as nearly 15.7 million Americans gaining coverage

through the Affordable Care Act. 2,3

82

0%

Total Health Care Spending Growth Rate

Prescription Drug Spending Growth Rate

*Total retail sales including brand medicines and generics

Sources: PhRMA analysis of Centers for Medicare & Medicaid Services (CMS) data 1 ; RAND Corporation 2 ; FDA 3

5 • Drug Spending Trends


Medicines Are Expected to Account for a Stable Share of

Total Health Care Expenditures Through the Next Decade

Health Care Expenditures Attributable to Retail and Nonretail Prescription Medicines, 2008‐2024

Percentage of National Health Expenditures

16%

14%

12%

10%

8%

6%

4%

2%

Actual

Projected

0%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Retail Nonretail

Retail prescription medicines are those filled at retail pharmacies or through mail service. Nonretail prescription medicines are those

purchased through physicians’ offices, clinics, and hospitals and are typically administered to the patient by the provider.

Source: Altarum Institute 4

5 • Drug Spending Trends 83


Retail Spending on Prescription Medicines Is a Small

Share of Total US Health Care Spending

Prescription medicines today account for about 10% of the $3 trillion of annual health care spending in the

United States, the same percentage as in 1960.

*Figures may not sum due to rounding.

**Other includes dental, home health, and other professional services as well as durable medical equipment costs.

Source: PhRMA analysis based on CMS data 5

5 • Drug Spending Trends

84


Growth in Prescription Medicine Prices Has Been in Line

With Other Health Care Prices

195

Consumer Price Index (2005 = 100)

175

Hospital and Related Services

155

135

115

All Medical Costs

Prescription Medicines

Consumer Price Index—

Urban, All Items

95

Source: PhRMA analysis based on Bureau of Labor Statistics data 6

5 • Drug Spending Trends

85


Nine Out of Every 10 US Prescriptions Are Filled

With Generics

Generic Share* of Prescriptions Filled, 1984‐2015

88%

91%

72%

33%

43%

52%

19%

1984 1990 1996 2002 2008 2014

2015

*Generic share includes generics and branded generics. “Other” category

from IMS National Prescription Audit not included in calculation.

Source: PhRMA analysis based on IMS Health data 7

5 • Drug Spending Trends 86


Medicines Account for a Small Share of Health Spending

Differences Between the United States and Other Countries

Per Capita Health Care Spending in the United States, Canada, and Germany, 2013

$9,000

$8,713

$8,000

$7,000

$6,000

For example, medicines account for 6% of the difference in

total health care spending between the United States and

Canada and 9% between the United States and Germany.

$5,000

$4,000

All Other

Health Care

$4,351

$4,819

$3,000

$2,000

All Other

Health Care

All Other

Health Care

$1,000

$0

Rx Medicines Rx Medicines Rx Medicines

United States Canada Germany

Source: PhRMA analysis based on Organisation for Economic Co‐operation and Development data 8

5 • Drug Spending Trends

87


Spending on Cancer Medicines Represents About 1%

of Overall Health Care Spending

Cancer Medicines as a Portion of Total US Health Care Spending, 2014

Column1

Cancer Medicines

$32.6 Billion

Total Health Care Spending

$3.03 Trillion

Sources: IMS Institute for Healthcare Informatics 9 ; CMS 10

5 • Drug Spending Trends

88


Forecasts of Specialty Drug Spending Have Been

Routinely Overstated

A recent analysis of annual drug trend reports found that inconsistent and arbitrary definitions of “specialty

medicines” can bias spending projections.

Forecasted vs. Actual Annual Growth in Specialty Drug Spending

From a Major Pharmacy Benefits Management Company*

Forecasted 2 Years Prior

As Reported for Year

24% 17% 27% 18% 19% 14%

2011 2012 2013

*As reported in annual Drug Trend Reports from Express Scripts.

Source: Milliman, Inc. 11

5 • Drug Spending Trends

89


Average Net Brand Price Growth Declined as a Result

of Increased Rebates

Commonly reported “list” or “invoice” prices are higher than what payers ultimately pay for medicines.

Average Price Growth for Brand Medicines

16%

14.3%

14%

12%

10%

9.3%

10.0%

11.5%

12.4%

8%

6%

4%

2%

0%

8.7% 9.1%

4.9% 5.1%

2.8%

2011 2012 2013 2014 2015

Invoice Price Growth

Estimated Net Price Growth

Includes protected brand medicines only (ie, brand medicines without generic versions available in the year

indicated). Net price growth reflects impact of off‐invoice rebates and discounts provided by manufacturers.

Source: IMS Institute for Healthcare Informatics 12

5 • Drug Spending Trends

90


$93 Billion of US Brand Sales Are Projected to Face

Generic Competition From 2016 to 2020

The savings from patent expiries in the coming years are expected to match the large‐scale savings observed

in recent years.

Pre‐expiry Value of Small Molecule Products at Risk (in Billions), 2011‐2020

2011‐2015: $101 Billion 2016‐2020: $93 Billion

Projections exclude

biologics, which will

face competition from

biosimilars entering

the market.

$19 $33 $12 $11 $27 $23 $21 $27 $13 $11

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Projected

Pre‐expiry sales of products are calculated for products facing loss of exclusivity (LOE) in each year; the sales in

the prior year for each product are aggregated to represent the collective industry exposure to LOE. LOE does

not indicate generic market entry. Only small molecule LOEs are included.

Source: IMS Institute for Healthcare Informatics 13

5 • Drug Spending Trends

91


EXTRA PHOTO


Notes and Sources

1. PhRMA analysis of Centers for Medicare & Medicaid Services data. National Health Expenditure (NHE) amounts by type of expenditure and

source of funds: calendar years 1960‐2024 in PROJECTIONS format. https://www.cms.gov/Research‐Statistics‐Data‐and‐Systems/Statistics‐

Trends‐and‐Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html; click on NHE Historical and Projections 1960‐2024 [ZIP

80KB] under Downloads. Accessed April 2016.

2. RAND Corporation. Health coverage grows under Affordable Care Act. http://www.rand.org/news/press/2015/05/06.html. Published

May 6, 2015. Accessed April 2016.

3. Food and Drug Administration. New drugs at FDA: CDER’s new molecular entities and new therapeutic biological products.

http://www.fda.gov/Drugs/DevelopmentApprovalProcess/DrugInnovation/ucm20025676.htm. Accessed April 2016.

4. Altarum Institute. Center for Sustainable Health Spending data brief: a ten year projection of the prescription drug share of national health

expenditures including non‐retail. http://altarum.org/sites/default/files/uploaded‐publication‐files/Non‐Retail%20Rx%20Forecast

%20Data%20Brief_with%20Addendum.pdf. Published October 2014; addendum update August 2015. Accessed April 2016.

5. PhRMA analysis based on Centers for Medicare & Medicaid Services data. The nation’s health dollar ($3.0 trillion), calendar year 2014, where

it went. https://www.cms.gov/Research‐Statistics‐Data‐and‐Systems/Statistics‐Trends‐and‐Reports/NationalHealthExpendData/Downloads

/PieChartSourcesExpenditures2014.pdf. Accessed April 2016.

6. PhRMA analysis based on Bureau of Labor Statistics data. Consumer price index—all urban consumers, history table. http://www.bls.gov/cpi

/#tables. Accessed March 2015.

7. PhRMA analysis based on IMS Health data. IMS National Prescription Audit. Danbury, CT: IMS Health; 2016.

8. PhRMA analysis based on Organisation for Economic Co‐operation and Development (OECD) data. Health at a glance 2015: OECD indicators.

http://www.oecd.org/health/health‐at‐a‐glance‐19991312.htm. Published November 4, 2015. Accessed April 2016.

9. IMS Institute for Healthcare Informatics. Medicines Use and Spending Shifts. Danbury, CT: IMS Institute for Healthcare Informatics; April 2015.

10. Centers for Medicare & Medicaid Services (CMS). National Health Expenditures Report. Baltimore, MD: CMS; December 2015.

11. Dieguez G, Pyenson B, Carioto J; Milliman, Inc.; for PhRMA. Understanding specialty drug forecasts. http://www.phrma.org/sites/default/files

/pdf/milliman‐specialty‐drug‐forecasts.pdf. Published February 2015. Accessed April 2016.

12. IMS Institute for Healthcare Informatics. Medicines use and spending in the U.S.—a review of 2015 and outlook to 2020. http://www.imshealth

.com/en/thought‐leadership/ims‐institute/reports/medicines‐use‐and‐spending‐in‐the‐us‐a‐review‐of‐2015‐and‐outlook‐to‐2020. Published

April 2016. Accessed April 2016.

13. IMS Institute for Healthcare Informatics. Global medicines use in 2020: outlook and implications. http://www.imshealth.com/en

/thought‐leadership/ims‐institute/reports/global‐medicines‐use‐in‐2020. Published November 2015. Accessed March 2016.

5 • Drug Spending Trends

93


PHOTO TO BE INSERTED


6

OUTCOMES

AND

SAVINGS

Overcoming Gaps in Treatment, Improving Outcomes,

and Reducing Costs Through Better Use of Medicines

Undertreatment of complex and chronic conditions as well

as suboptimal use of prescribed medicines are significant

public health problems, costing the US economy hundreds

of billions of dollars each year. Medicines help patients live

healthier lives and reduce the need for costly health care

services such as emergency department visits, hospital

stays, surgeries, and long‐term care. An ever‐growing body

of evidence demonstrates that improved use of prescribed

medicines can result in better health outcomes, lower costs

for other health care services, and increased worker

productivity.

6 • Outcomes and Savings

95


The Human and Economic Costs of Chronic Disease

More than 1 million lives could be saved annually through better treatment and prevention of chronic disease.

Sources: Agency for Healthcare Research and Quality 1 ; IHS Life Sciences 2

6 • Outcomes and Savings

96


Diabetes: An Example of Underdiagnosis and Undertreatment

Uncontrolled diabetes can lead to kidney failure, amputation, blindness, and stroke.

Source: IHS Life Sciences analysis based on CDC data 3

6 • Outcomes and Savings

97


Potential Savings From Better Use of Medicines

Better use of medicines could eliminate up to $213 billion in US health care costs annually, which represents

8% of the nation’s health care spending.

Avoidable Annual US Health Care Costs (in Billions, 2012)

Nonadherence

$105

Medication Errors*

$21

Suboptimal Prescribing**

$87

Total Avoidable Costs

$213

$0 $50 $100 $150 $200 $250

*Category includes medication errors ($20 billion) and mismanaged polypharmacy ($1 billion)

**Category includes untimely medicine use ($40 billion), inappropriate antibiotic use ($35 billion),

and suboptimal generic use ($12 billion)

Source: IMS Institute for Healthcare Informatics 4

6 • Outcomes and Savings

98


Failure to Prescribe the Indicated Treatment Is the

Most Common Prescribing Quality Problem

RAND researchers report that failure to prescribe an indicated treatment is a far more common quality problem

than inappropriate medicine use.

Quality Problems Among Vulnerable Older Patients

Failure to prescribe when

called for by guidelines

50%

Inadequate monitoring

36%

Inadequate education/

continuity/documentation

19%

Inappropriate medication

3%

0% 10% 20% 30% 40% 50% 60%

Percentage of Quality Indicators Failed*

*Quality indicators were developed and implemented based on systematic literature reviews and multiple layers of expert judgment.

Source: RAND Health 5

6 • Outcomes and Savings

99


Better Use of Medicines Yields Significant Health Gains

by Avoiding the Need for Other Medical Services

Due to a growing body of evidence, in 2012 the Congressional Budget Office (CBO) began recognizing reductions

in other medical expenditures associated with an increased use of prescription medicines in Medicare.

Since the CBO announcement, the evidence has continued to develop, broadening the potential for cost offsets in the health care system.

CHRONIC DISEASES

Medicare savings due to better use of medicines

may be 3 to 6 times greater than estimated by the CBO

for seniors with common chronic conditions, including

heart failure, diabetes, and hypertension. 7

$

MEDICAID

Increased use of medicines is associated with

reductions in Medicaid expenditures from avoided

use of inpatient and outpatient services. 8

Sources: CBO 6 ; Roebuck MC 7 ; Roebuck MC, et al. 8

6 • Outcomes and Savings

100


Mounting Evidence Demonstrates the Potential

for Savings and Improved Outcomes

Sources: Cutler DM, et al. 9 ; Dall TM, et al. 10 ; Jha AK, et al. 11 ; Jiang Y, Ni W 12 ; Modi A, et al. 13 ; Stuart BC, et al. 14 ; van Boven JF, et al. 15 ;

Roebuck MC, et al. 16 ; Stuart B, et al. 17 ; Stuart BC, et al. 18 ; IMS Institute for Healthcare Informatics 19

6 • Outcomes and Savings 101


Recent Studies Show Significant Value From Better Use

of Medicines

Patients with less common diseases are able to offset health care spending by exercising better adherence.

PARKINSON’S DISEASE

Health care savings of up to $6,300

can be achieved among patients with

Parkinson’s who continually stay on

therapy. 20

MULTIPLE SCLEROSIS

Improved persistence to

medications reduces the

likelihood of a patient’s hospital

admission by up to 50%. 21

CYSTIC FIBROSIS

Among children with cystic fibrosis, poor

medication adherence is associated with

more hospitalizations and emergency

department visits and more than

$14,000 in higher same‐year medical

costs compared with children who are

highly adherent. 22

LUPUS

Nonadherence among children in

Medicaid who are diagnosed with

lupus is associated with a 55%

increased rate of emergency

department use and a nearly 40%

increased rate of hospitalizations. 23

Sources: Wei YJ, et al. 20 ; Thomas NP, et al. 21 ; Quittner AL, et al. 22 ; Feldman CH, et al. 23

6 • Outcomes and Savings

102


Improving Adherence Increases Worker Productivity

For workers with asthma/chronic obstructive pulmonary disease (COPD), better medication adherence results

in more than $3,100 in savings on average per worker annually.

Absenteeism and Short‐Term Disability for Adherent Patients

Compared With Nonadherent Patients

0

Diabetes Hypertension High Cholesterol Asthma/COPD

‐1

Missed Days Per Year

‐2

‐3

‐4

‐5

‐6

‐7

‐6.0

‐3.6

‐3.6

‐3.1

‐6.3

‐2.7

‐3.6

‐8

‐9

‐10

Absenteeism

Short‐Term Disability

‐9.8

Source: Carls GS, et al. 24

6 • Outcomes and Savings

103


Gaining Drug Coverage Reduced Other Medical Spending

The Medicare drug benefit increased access to medicines for those previously without drug coverage, resulting

in reduced medical spending 25 and an overall savings of $13.4 billion in 2007, the first full year of the benefit. 26

Average Reduction in Medical Spending in 2006 and 2007 for

Beneficiaries Who Gained Drug Coverage Through Medicare Part D

PART D

Since the implementation

of Part D in 2006, nearly

200,000 Medicare

beneficiaries have lived

at least 1 year longer, with

an average increase in

longevity of 3.3 years. 27

Sources: McWilliams JM, et al. 25 ; Afendulis CC, Chernew ME 26 ; Semilla AP, et al. 27

6 • Outcomes and Savings

104


Notes and Sources

1. Cohen SB; Agency for Healthcare Research and Quality. The concentration and persistence in the level of health expenditures over time:

estimates for the U.S. population, 2012‐2013. Statistical Brief #481. http://meps.ahrq.gov/mepsweb/data_files/publications/st481

/stat481.pdf. Published September 2015. Accessed April 2016.

2. IHS Life Sciences. Burden of Chronic Illnesses in the US: Technical Overview and Fact Sheets. Englewood, CO: IHS Life Sciences; 2016.

3. IHS Life Sciences analysis based on Centers for Disease Control and Prevention data. National Health and Nutrition Examination Survey,

2013‐2014. http://wwwn.cdc.gov/nchs/nhanes/search/nhanes13_14.aspx. Accessed April 2016.

4. IMS Institute for Healthcare Informatics. Avoidable costs in US healthcare: the $200 billion opportunity from using medicines more

responsibly. http://www.imshealth.com/files/web/IMSH%20Institute/Reports/Avoidable_Costs_in%20_US_Healthcare

/IHII_AvoidableCosts_2013.pdf. Published June 2013. Accessed March 2016.

5. Goldman DP, McGlynn EA; RAND Health. US Health Care: Facts About Cost, Access, and Quality. Santa Monica, CA: RAND Corporation; 2005.

Cited by: Higashi T, Shekelle PG, Solomon DH, et al. The quality of pharmacologic care for vulnerable older patients. Ann Intern Med.

2004;14(9):714‐720.

6. Congressional Budget Office (CBO). Offsetting Effects of Prescription Drug Use on Medicare’s Spending for Medical Services. Washington, DC:

CBO; 2012.

7. Roebuck MC. Medical cost offsets from prescription drug utilization among Medicare beneficiaries [commentary]. J Managed Care Pharm.

2014;20(10):994‐995.

8. Roebuck MC, Dougherty JS, Kaestner R, Miller LM. Increased use of prescription drugs reduces medical costs in Medicaid populations.

Health Aff. 2015;34(9):1586‐1593.

9. Cutler DM, Long G, Berndt ER, et al. The value of antihypertensive drugs: a perspective on medical innovation. Health Aff.

2007;26(1):97‐110.

10. Dall TM, Blanchard TD, Gallo PD, Semilla AP. The economic impact of Medicare Part D on congestive heart failure. Am J Managed Care.

2013;19:S97‐S100.

11. Jha AK, Aubert RE, Yao J, Teagarden JR, Epstein RS. Greater adherence to diabetes drugs is linked to less hospital use and could save nearly

$5 billion annually. Health Aff. 2012;31(8):1836‐1846.

12. Jiang Y, Ni W. Estimating the impact of adherence to and persistence with atypical antipsychotic therapy on health care costs and risk

of hospitalization. Pharmacother. 2015;35(9):813‐822.

6 • Outcomes and Savings

105


Notes and Sources

13. Modi A, Siris ES, Tang J, Sen S. Cost and consequences of noncompliance with osteoporosis treatment among women initiating therapy.

Curr Med Res Opinion. 2015;31(4):757‐765.

14. Stuart BC, Simoni‐Wastila L, Zuckerman IH, et al. Impact of maintenance therapy on hospitalization and expenditures for Medicare

beneficiaries with chronic obstructive pulmonary disease. Am J Geriatr Pharmacother. 2010;8(5):441‐453.

15. van Boven JF, Chavannes NH, van der Molen T, Rutten‐van Mölken MP, Postma MJ, Vegter S. Clinical and economic impact of nonadherence

in COPD: a systematic review. Respir Med. 2014;108(1):103‐113.

16. Roebuck MC, Liberman JN, Gemmill‐Toyama M, Brennan TA. Medication adherence leads to lower health care use and costs despite

increased drug spending. Health Aff. 2011;30(1):91‐99.

17. Stuart B, Loh FE, Roberto P, Miller LM. Increasing Medicare Part D enrollment in medication therapy management could improve health

and lower costs. Health Aff. 2013;32(7):1212‐1220.

18. Stuart BC, Dai M, Xu J, E. Loh F‐H, S Dougherty J. Does good medication adherence really save payers money? Med Care. 2015;53(6):517‐

523.

19. IMS Institute for Healthcare Informatics. Avoidable costs in U.S. healthcare: the $200 billion opportunity from using medicines more

responsibly. http://www.imshealth.com/files/web/IMSH%20Institute/Reports/Avoidable_Costs_in%20_US_Healthcare

/IHII_AvoidableCosts_2013.pdf. Published June 2013. Accessed March 2016.

20. Wei YJ, Palumbo FB, Simoni‐Wastila L, et al. Antiparkinson drug adherence and its association with health care utilization and economic

outcomes in a Medicare Part D population. Value Health. 2014;17(2):196‐204.

21. Thomas NP, Curkendall S, Farr AM, Yu E, Hurley D. The impact of persistence with therapy on inpatient admissions and emergency room

visits in the US among patients with multiple sclerosis. J Med Econ. 2016;Jan 18:1‐9. [Epub ahead of print]

22. Quittner AL, Zhang J, Marynchenko M, et al. Pulmonary medication adherence and health‐care use in cystic fibrosis. Chest. 2014;146(1):142‐

151.

23. Feldman CH, Yazdany J, Guan H, Solomon DH, Costenbader KH. Medication nonadherence is associated with increased subsequent acute

care utilization among Medicaid beneficiaries with systemic lupus erythematosus. Arthritis Care Res. 2015;67(12):1712‐1721.

24. Carls GS, Roebuck MC, Brennan TA, Slezak JA, Matlin OS, Gibson TB. Impact of medication adherence on absenteeism and short‐term

disability for five chronic diseases. J Occup Environ Med. 2012;54(7):792‐805.

6 • Outcomes and Savings

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Notes and Sources

25. McWilliams JM, Zaslavsky AM, Huskamp HA. Implementation of Medicare Part D and nondrug medical spending for elderly adults with

limited prior drug coverage. JAMA. 2011;306(4):402‐409.

26. Afendulis CC, Chernew ME. State‐level impacts of Medicare Part D. Am J Managed Care. 2011;17 Suppl 12:S.

27. Semilla AP, Chen F, Dall TM. Reductions in mortality among Medicare beneficiaries following the implementation of Medicare Part D.

Am J Managed Care. 2015;21:S165‐S172.

6 • Outcomes and Savings

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IMPACT

109

7

ECONOMIC

Sustaining and Growing State and Local Economies

America’s biopharmaceutical industry is the foundation for

one of the country’s most dynamic innovation and business

ecosystems. The industry is among the most research and

development (R&D) intensive in the United States,

accounting for 1 out of every 6 dollars spent on domestic

R&D by US businesses. The industry’s large‐scale research

and manufacturing supply chain supports high‐quality jobs

in communities across the United States.

7 • Economic Impact


The Biopharmaceutical Sector Is the Single Largest

Funder of Business R&D in the United States

The biopharmaceutical industry accounts for the single largest share of all US business R&D, representing 1 out of

every 6 dollars (17%) spent on domestic R&D by US businesses.

Share of Total US Business R&D by Industry, 2013*

17%

13%

5%

4%

3% 1%

Pharmaceuticals

& Medicines

Software Automobiles Aerospace Computer Systems

Design

Scientific R&D

Services

*The remaining 57% share of business R&D spending is conducted by other industries, including

subsectors of the machinery sector, the electrical equipment sector, and the professional, scientific,

and technical services sector.

Source: PhRMA analysis of National Science Foundation data 1

7 • Economic Impact

110


The Biopharmaceutical Sector Invests More in R&D

Relative to Sales Than Other Manufacturing Industries

The biopharmaceutical sector invests more in R&D relative to sales than any other manufacturing industry,

investing more than 6 times the average for all manufacturing industries.

R&D as a Percentage of Sales by Industry, 2000‐2012

Pharmaceuticals & Medicines

18.3%

Semiconductor

14.6%

Computer & Electronic

11.9%

Medical Equipment & Supplies

Chemical

Aerospace

6.5%

6.2%

7.3%

Transportation

All Manufacturing

3.0%

3.9%

Petroleum & Coal

0.4%

Source: NDP Analytics 2

7 • Economic Impact

111


The Biopharmaceutical Industry Invests More R&D

Dollars per Employee Than Any Other Industry

Biopharmaceutical companies invest more than 12 times the amount of R&D dollars per employee than

manufacturing industries overall.

R&D Expenditures per Employee by Manufacturing Industry, 2000‐2010

Pharmaceuticals & Medicines

$130,086

Chemical

Semiconductor

Computer & Electronic

$46,438

$40,848

$49,489

Aerospace

Medical Equipment

Transportation Equipment

Petroleum & Coal

All Manufacturing Industries

Machinery

Electrical Equipment

Misc. Nonmedical Equipment

$23,372

$16,981

$16,404

$14,268

$10,529

$7,212

$6,516

$2,791

Source: NDP Analytics 3

7 • Economic Impact

112


The Biopharmaceutical Industry Employs the Largest

Share of R&D Workers Across All Manufacturing

Industries

One out of every 8 R&D workers in the nation’s manufacturing industries is employed by the biopharmaceutical

industry.

Selected Manufacturing Industries’ Share of Total R&D Workers, 2012*

13%

11%

9%

8%

7%

6%

5%

Pharmaceuticals

& Medicines

Semiconductors

Navigational

Equipment

Aerospace Automobiles Communications

Equipment

Medical

Equipment

*The manufacturing industries that employ the remaining 41% of the

R&D workforce each account for less than 5% of the total R&D workforce.

Source: PhRMA analysis of National Science Foundation data 4

7 • Economic Impact

113


The Economic Reach of the US Biopharmaceutical Industry

Every biopharmaceutical sector job supports more than 4 additional jobs outside the industry.

Source: TEConomy Partners 5

7 • Economic Impact

114


The Biopharmaceutical Sector Produces Jobs in a Wide

Array of Fields

One‐third of the jobs in the biopharmaceutical sector are in key STEM (Science, Technology, Engineering, and

Math) occupations.

US Biopharmaceutical Industry Employment by Occupational Category, 2014

Computer &

Mathematical,* 7.1%

Office & Admin

Support, 13.4%

Production, 13.0%

Architecture &

Engineering,* 9.2%

Management, 11.4%

Life, Physical & Social

Science,* 16.6%

Business & Financial

Operations, 8.9%

Other,** 9.2%

*Indicates a STEM occupation

**Occupations include health practitioners and persons in installation, maintenance,

and repair; arts, design, and media; and building and grounds maintenance.

Sales & Related (eg, wholesalers), 7.3%

Transportation & Material Moving, 3.8%

Source: TEConomy Partners 6

7 • Economic Impact

115


US Biopharmaceutical Exports Have Grown

Biopharmaceutical exports have nearly tripled over the 13‐year period from 2003 through 2015, accounting

for 3.1% of all US exports by 2015.

$60

US Biopharmaceutical Goods Exports

$50

$40

$47

Billions

$30

$29

$38

$20

$10

$16

$0

2003 2007 2011 2015

Source: PhRMA analysis of data from US Department of Commerce, International Trade Administration 7

7 • Economic Impact

116


Industry‐Sponsored Clinical Trials Contribute Significant

Value to the Communities in Which They Are Located

In 2013, the biopharmaceutical industry sponsored 6,199 clinical trials of medicines in the United States, involving

a total of 1.1 million volunteer participants and supporting a total of $25 billion in economic activity across all 50

states and the District of Columbia.*

Estimated Economic Impact From Industry‐Sponsored Clinical Trial Sites Across the United States, 2013

*Estimates reflect only those activities occurring at clinical trial sites and exclude more centralized, cross‐site functions

such as coordination and data analysis. Also excluded are nonclinical R&D such as basic and preclinical research and the

significant economic contribution from non‐R&D activities of the industry such as manufacturing and distribution.

Source: Battelle Technology Partnership Practice 8

7 • Economic Impact

117


States Are Increasingly Targeting the Biopharmaceutical

Industry in Their Economic Development Plans

Recognizing the broad economic impact of the biopharmaceutical industry, states across the country are adopting

a range of policies and programs to attract and grow the industry within their borders.

Common policies and programs that states are pursuing include:

Adopting comprehensive,

targeted strategies for life

science industry development

Accelerating innovation

through entrepreneurial

development programs

Building research capacity

and infrastructure

Building advanced

manufacturing capabilities

Increasing the availability

of financial capital for life

science development

Establishing economic

incentives for life science

innovation

Advancing the STEM talent

pipeline

Source: TEConomy Partners 9

7 • Economic Impact

118


The United States Leads in Biopharmaceutical

Intellectual Property

The intellectual property related to more than half of new medicines was invented in the United States.

US Patents Granted in Pharmaceutical Technology

by Region/Country of Inventor, 2014

United States,

55.2%

European Union,

21.6%

China, 1.8%

Asia,* 5.4%

Japan, 6.4%

All Others, 9.5%

*Asia includes India, Malaysia, Singapore, South Korea, Taiwan, and others.

Source: PhRMA analysis of National Science Foundation data 10

7 • Economic Impact

119


The United States Leads in Biopharmaceutical Venture

Capital Investment

Nearly three‐quarters of worldwide venture capital investments in high‐growth potential biopharmaceutical

startups are made in the United States.

Biopharmaceutical Venture Capital Investment by Country, 2015

European

Union, 23%

United States,

73%

All Others, 4%

Source: Evaluate Pharma 11

7 • Economic Impact

120


The Biopharmaceutical Industry Supports a Broader

Ecosystem Through Corporate Venture Capital

The corporate venture arms of established biopharmaceutical companies have helped fuel the next generation

of medical innovations by investing more than $6 billion in startups over the past decade. Much of this

investment has been directed toward early‐stage innovation and support for the formation of new startups.

Biopharmaceutical Corporate Venture Capital Investment, 2006‐2015

$1,400

$1,200

$1,239

$1,000

$925

Millions

$800

$600

$400

$533

$577

$464 $465 $437

$357

$567

$465

$200

$0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: PricewaterhouseCoopers/National Venture Capital Association 12

7 • Economic Impact

121


Biopharmaceutical Companies Lead Corporate Giving

Biopharmaceutical companies led worldwide corporate giving* in 2013. Ninety percent of these contributions

were in the form of in‐kind product donations.

Average Corporate Giving by Sector Total Giving as %of Pretax Profit Total Giving per Employee

All Companies 1.0% $644

Biopharmaceuticals 19.4% $24,453

Energy 0.8% $2,912

Utilities 1.2% $1,092

Information Technology 1.1% $666

Consumer Staples 1.1% $608

Industrials 0.8% $244

*Domestic giving makes up the largest portion of total corporate giving across all sectors surveyed.

Domestic giving made up 78% of total giving in 2013.

Source: CECP 13

7 • Economic Impact

122


The Biopharmaceutical Industry Is Advancing STEM

Education in the United States

The STEM workforce accounts for more than 50% of the nation’s sustained economic growth. From 2008 to 2012,

PhRMA member companies and their foundations supported more than 90 STEM education programs across the

United States, impacting more than 1.6 million students and 17,500 teachers.

PhRMA member company and foundation contributions to STEM education in the United States include:

Source: Battelle Technology Partnership Practice 14

7 • Economic Impact

123


The Biopharmaceutical Industry is Increasingly Focused

on Sustainability

Biopharmaceutical companies are pioneers in green chemistry and are committed to finding creative and

innovative ways, including the following, to reduce waste, conserve energy, and adopt other more

environmentally friendly processes.

Source: Deloitte 15

7 • Economic Impact

124


Fostering Growth of the US Biopharmaceutical Industry

Depends on Policies That Support R&D Investment

Industry analysts have consistently identified 3 policy areas as critical for the US biopharmaceutical industry

to remain an engine of economic growth and innovation:

Strong

INTELLECTUAL

PROPERTY

protections, including

patent and data protection

A well‐functioning,

science‐based

REGULATORY

SYSTEM

COVERAGE

AND PAYMENT

policies that support and

encourage medical

innovation

The capability to innovate is fast becoming the most important

determinant of economic growth and a nation’s ability to compete

and prosper in the 21st century global knowledge‐based economy.

— Battelle Technology Partnership Practice 16

Sources: Battelle Technology Partnership Practice 16 ; Deloitte 17

7 • Economic Impact

125


Notes and Sources

1. PhRMA analysis of National Science Foundation, National Center for Science and Engineering Statistics, data. Funds spent for business R&D

performed in the United States, by source of funds and selected industry: 2013. http://www.nsf.gov/statistics/2016/nsb20161/uploads/1

/7/tt04‐08.pdf. Accessed March 2016.

2. Pham ND; NDP Analytics. IP‐intensive manufacturing industries: driving US economic growth. http://www.ndpanalytics.com/ip‐intensive

‐manufacturing‐industries‐driving‐us‐economic‐growth‐2015. Published March 2015. Accessed March 2016.

3. Pham ND; NDP Analytics. IP‐intensive manufacturing industries: driving US economic growth. http://www.ndpanalytics.com/ip‐intensive

‐manufacturing‐industries‐driving‐us‐economic‐growth‐2015. Published March 2015. Accessed March 2016.

4. PhRMA analysis of National Science Foundation, National Center for Science and Engineering Statistics, data. Worldwide, domestic, and

foreign R&D paid for by the company and others and performed by the company, R&D employment, and R&D cost per R&D employee, by

industry and company size: 2012. http://www.nsf.gov/statistics/2016/nsf16301/pdf/tab45.pdf. Accessed April 2016.

5. TEConomy Partners; for PhRMA. The Economic Impact of the US Biopharmaceutical Industry. Columbus, OH: TEConomy Partners;

April 2016.

6. TEConomy Partners; for PhRMA. The Economic Impact of the US Biopharmaceutical Industry. Columbus, OH: TEConomy Partners;

April 2016.

7. PhRMA analysis of data from US Department of Commerce, International Trade Administration, Web site. http://tse.export.gov/TSE

/TSEhome.aspx. Accessed March 2016.

8. Battelle Technology Partnership Practice; for PhRMA. Biopharmaceutical Industry‐Sponsored Clinical Trials: Impact on State Economies.

Columbus, OH: Battelle Technology Partnership Practice; 2015.

9. TEConomy Partners; for PhRMA. Driving Innovation and Economic Growth for the 21st Century: State Efforts to Attract and Grow the

Biopharmaceutical Industry. Columbus, OH: TEConomy Partners; May 2016.

10. PhRMA analysis of National Science Foundation, National Center for Science and Engineering Statistics, data. USPTO patents granted in

pharmaceuticals, by region/country/economy: selected years, 1998–2014. http://www.nsf.gov/statistics/2016/nsb20161/uploads/1/9

/at06‐50.pdf. Accessed April 2016.

11. Urquhart L, Gardner J; Evaluate Ltd. Pharma & biotech 2015 in review. http://info.evaluategroup.com/rs/607‐YGS‐364/images/epv

‐pbr15.pdf. Published March 2016. Accessed April 2016.

7 • Economic Impact

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Notes and Sources

12. PricewaterhouseCoopers/National Venture Capital Association. MoneyTree Report: Biotechnology Investing by Corporate Venture Capital

Groups 1995‐2015. March 2016.

13. CECP. Giving in numbers: 2014 edition. http://cecp.co/pdfs/giving_in_numbers/GIN2014_Web_Final.pdf. Published 2014. Accessed

April 2016.

14. Battelle Technology Partnership Practice. STEM: building a 21st century workforce to develop tomorrow’s new medicines. www.phrma.org

/sites/default/files/pdf/stem‐education‐report‐2014.pdf. Published January 2014. Accessed March 2016.

15. Jacoby R, Pernenkil L, Harutunian S, Heim M, Sabadal A; Deloitte. Advanced biopharmaceutical manufacturing: an evolution underway.

https://www2.deloitte.com/content/dam/Deloitte/us/Documents/life‐sciences‐health‐care/us‐lshc‐advanced‐biopharmaceutical

‐manufacturing‐white‐paper‐051515.pdf. Published 2015. Accessed March 2016.

16. Battelle Technology Partnership Practice; for PhRMA. The US biopharmaceutical industry: perspectives on future growth and the factors

that will drive it. http://www.phrma.org/sites/default/files/pdf/2014‐economic‐futures‐report.pdf. Published April 2014. Accessed March

2016.

17. Lesser N, Terry C, Wu J, Mulder J, Dondarsk K; Deloitte. In the face of uncertainty: a challenging future for biopharmaceutical innovation.

http://www2.deloitte.com/content/dam/Deloitte/lu/Documents/life‐sciences‐health‐care/us_consulting_Inthefaceofuncertainty

_040614.pdf. Published 2014. Accessed March 2016.

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