Jonas D. Policarpio MD, MBA UERM Graduate School & Research Institute for Health Sciences Ateneo Graduate School of Business United Laboratories Medical Affairs Lecture for Sienna College, March 5, 2008 Components of the Cheap Medicine Bill Senate Shortening of Patents Drug Parallel Importation Strengthening the regulatory agencies (BFAD) capability of monitoring quality of drugs Congress Establishment of a price regulatory board Strictly generics prescribing 0 7-8 17-20 years Research & Development Patent awarded Market launch invest harvest Marketing Phase Patent expires high prices high prices high costs low costs pressure to ? decrease prices COMPETITION Drugs: Life Cycle Philippine Total Health Expenditures 1991 -2003 47.4 54.6 65.2 76.2 87.1 93.5 103.4 113.5 116.6 115.4 136 35.9 39.6 0 20 40 60 80 100 120 140 160 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 B i l l i o n
P e s o s National Statistical Coordination Board : 2003
Total Pharma Market 49 97 89 82 73 66 56 9.7% 13.1% 9.0% 8.4% 8.5% 0 20 40 60 80 100 120 2002 2003 2004 2005 2006 2007 B i l l i o n
P h p 0% 2% 4% 6% 8% 10% 12% 14% %
G w t 105 YTD June +9.3% LEGEND ACTUAL SALES FORECAST SALES FORECAST GROWTH ACTUAL GROWTH YTD June 06 7.7% Total Pharma Market Drugstore + Hospital 73 79 87 44 8 9 10 11 64 5 10.7 2.4 8.3 9.6 9.9 12.9 6.5 2.8 14.4 9.2 0 20 40 60 80 100 120 2003 2004 2005 2006 YTD JUNE 2007 B i l l i o n
P h p 0 2 4 6 8 10 12 14 16 %
G w t Drugstore Hospital DS Gwt Hosp Gwt June 2007 MAT Sales (in B) % Shr %Gwt TOTAL MARKET 101.3 100.0% 9.8% DRUGSTORE 90.5 89.3% 10.3% HOSPITAL 10.8 10.7% 5.9% Total Pharma Market Branded and Unbranded Sales 79 86 94 48 3 3 3 4 70 2 16.6 13.5 5.7 10.3 8.3 9.2 9.2 12.9 0 20 40 60 80 100 120 2003 2004 2005 2006 YTD June 2007 B i l l i o n
P h p 0 2 4 6 8 10 12 14 16 18 %
G w t Branded Unbranded Branded Gwt Unbranded Gwt June 2007 MAT Sales (in B) % Shr %Gwt TOTAL MARKET 101.3 100.0% 9.8% BRANDED 97.6 96.3% 9.9% UNBRANDED 3.7 3.7% 5.9% Top 10 Corporations YTD June 2007 21.8 6.6 5.0 4.6 4.0 2.9 3.7 3.2 3.3 8.7 3.6 4.5 3.3 3.1 3.4 3.7 5.6 6.9 8.7 20.9 0 5 10 15 20 25 UL GSK WYE PFZ SAN-AVE ABT AZN ROC NVR J.J %
S h a r e YTD Jun 2006 YTD Jun 2007 Total Market YTD 6/2007 49.4 B + 9.3% Up/Down arrows for companies with at least+/ 0.2 percent difference vs last year -0.9% -0.4% -0.4% +0.6% +0.4% +0.5% Top 11-21 Corporations YTD June 2007 2.1 2.3 1.7 1.7 1.3 1.0 1.2 1.0 1.6 3.1 1.6 3.1 1.1 0.9 1.1 1.5 1.7 2.3 1.4 2.2 2.7 2.9 0 2 4 6 8 10 B.I BMS PASCUAL BAYER MSD SRVIER S.PLOUGH NATRA GX INT'L E MERCK INTERMED %
S h a r e YTD Jun 2006 YTD May 2007 Total Market YTD 6/2007 49.4 B +9.3% -0.4% +0.2% Up/Down arrows for companies with at least+/ 0.2 percent difference vs last year -0.2% -0.2% Shares of Major Segments Source: IMS YTD June 2007 18.3% 12.8% 11.5% 9.0% 8.7% 5.7% 5.0% 3.9% 3.8% 3.1% 2.5% 15.6% CARDIO ANTI-INFECTIVES VITAMINS ENDOMETABOLICS PAIN GIT COUGH-COLD ANTI-ASTHMA DERMA CNS ONCOLOGY OTHERS Segments Breakdown By Branded/Unbranded YTD Jun 2007 97.9 99.4 99.3 98.3 96.9 97.6 97.0 89.3 97.9 96.2 2.2 0.6 0.7 1.7 3.1 2.4 3.0 10.8 2.1 3.8 0.0 20.0 40.0 60.0 80.0 100.0 Branded Unbranded TOTAL BRND UNBR TOTAL MARKET 9.3 9.2 10.3 CARDIO 13.6 13.3 33.1 ANTI-INFECT 7.1 6.6 12.3 VITAMINS 7.3 7.8 -8.0 ENDO 12.7 12.6 16.7 PAIN 7.8 7.7 10.6 GIT 9.4 9.8 -7.1 COUGH-COLD -7.2 -7.2 -7.9 ANTI-ASTHMA 14.3 14.3 6.6 DERMA 6.0 6.4 -9.4 % GROWTH 96.7 93.2 98.5 87.6 88.6 95.4 72.0 92.8 89.7 3.3 6.8 1.5 12.4 11.4 4.6 28.0 7.2 98.1 1.9 10.3 0 20 40 60 80 100 Drugstore Hospital Segments Breakdown By Drugstore/Hospital YTD June 2007 TOT DS HS TOTAL MKT 9.3 9.6 6.5 CARDIO 13.6 15.2 -3.6 ANTI-INFECT 7.1 8.4 4.0 VITAMINS 7.3 7.6 -7.4 ENDO 12.7 13.0 6.6 PAIN 7.8 8.1 5.2 GIT 9.4 9.8 7.1 COUGH-COLD -7.2 -7.4 0.5 ANTI-ASTHMA 14.3 14.5 11.8 DERMA 6.0 5.8 12.4 % GROWTH Prescription Share by Company - National Project Harmony Projected Rx Data - 5.00 10.00 15.00 20.00 25.00 30.00 Q 1
2 0 0 4 Q 2
2 0 0 4 Q 3
2 0 0 4 Q 4
2 0 0 4 Q 1
2 0 0 5 Q 2
2 0 0 5 J U L
2 0 0 5 A U G
2 0 0 5 S E P T
2 0 0 5 O C T
2 0 0 5 N O V
2 0 0 5 D E C
2 0 0 5 J A N
2 0 0 6 F E B
2 0 0 6 M A R
2 0 0 6 A P R
2 0 0 6 M A Y
2 0 0 6 J U N E
2 0 0 6 J U L Y
2 0 0 6 A U G
2 0 0 6 S E P T
2 0 0 6 O C T
2 0 0 6 N O V
2 0 0 6 D E C
2 0 0 6 J A N
2 0 0 7 F E B
2 0 0 7 M A R
2 0 0 7 A P R
2 0 0 7 M A Y
2 0 0 7 J U N E
2 0 0 7 R x
S h a r e
( % ) GENERIC UNITED LAB GLAXO SMITHKLINE PFIZER INC NOVARTIS BOE. INGELHEIM PASCUAL LABS SANOFI-AVENTIS WYETH PHILIPPINES NATRAPHARM Q1 2004 - Q2 2005; Jul. 2005-Jun. 2007 Sample: 360 Drugstore per Data Point (monthly data point is equivalent to 3 months rolling data) Drug Quality & Affordability Stakeholders Pharmaceutical companies : manufacturing & marketing practices Prescribers: prescribing patterns Drug retailers and distributors BFAD: Drug quality & safety Congress: Good implementable laws Phihealth: Drug quality, safety & access ? 0 7-8 17-20 years Research & Development Patent awarded Market launch invest harvest Marketing Phase Patent expires high prices high prices high costs low costs pressure to ? decrease prices COMPETITION Drugs: Life Cycle Drugs: Development to Selling Raw Materials Production Packaging
Storage Distribution Sales / Promotions Retailing Marketing/ Advertising COSTS/ PRICES
Research & Development US $ 400-800 M/drug
Transfer price Product Cost (Transfer Price) Sales Marketing Distribution Retailing Dynamics: Branded Patented Drugs
prescriptions FUNDS & EFFORTS
Objective: Acceptance of new molecule or therapeutic approach/ Brand preference
COSTS P Product Sales Marketing Distribution Retailing Dynamics: Branded Off- Patent Drugs
prescriptions FUNDS & EFFORTS
Objective: Brand preference
COSTS P Product Sales Marketing Distribution Retailing Dynamics: Pure Generics
FUNDS & EFFORTS
Objective: Brand preference
COSTS Preferred product at drugstore among SUBSTITUTES P Product Brand Management Distribution Advertising Dynamics: OTC
FUNDS & EFFORTS
Objective: Brand preference
COSTS Top of mind of P CONSUMERS Cost Components: across categories 0 20 40 60 80 100 120 140 160 180 200 Patented OffPtnt Brand Pure Gnrxs OTC Prod Costs Sales Mktg/Adv Distrib Retail Others Use Restrictions Rigid formularies Prescribing guidelines Generic prescribing Reimbursement restrictions Disease management Rise of Healthcare Expenditures Cost containment measures Price Restrictions Purchaser / provider power Price reduction / freezing Reference pricing Reimbursement restrictions US/UK/Canada Model
Why are medicines expensive in the Philippines?
1. No fine chemical industry 2. Limited definition of market; low volume 3. No countervailing institutions to reduce drug prices (e.g., universal health insurance, HMOs, price referencing) 4. Marketing and promotion practices 5. Transfer pricing 6. Monopolies in distribution and retail 7. Failure to provide for TRIPS-compliant public health flexibilities in the IP Code 8. Strategic litigation by originators
In short, a non-competitive market. Components of the Cheap Medicine Bill Senate Shortening of Patents Drug Parallel Importation Strengthening the regulatory agencies (BFAD) capability of monitoring quality of drugs Congress Establishment of a price regulatory board Strictly generics prescribing Expiring/Breaking of Patents Molecule Patent : wait till it expires : local patent Frivolous Patents Patents on Salts : change the salts Patents on Process : find another process Patent on delivery system : find another delivery process Parallel Drug Importation: Philippines Validate the claim that drugs sold in the Philippines are higher relative to our neighboring countries Gain leverage for government in negotiating with drug companies to hopefully reform their market practices and subsequently lower their product prices
1999 Initial talks with multinational drug companies for possible price reduction of products
mid 2000 Government recognized that drug prices in the Philippines are high Creation of DOH-DTI Task Force on Pharmaceutical Concerns PITC designated as the importing agency
PDI - the Philippine Way LIMITED to OFF-PATENT drugs trademark rather than patent issues 45 different kind of products The distribution network is generally limited to government retail and hospital drug outlets SOURCING PDI products are sourced from wholesalers / consolidators and not DIRECTLY from manufacturers; wholesalers and consolidators are legitimate businesses; identities known only to PITC Documents cannot be authenticated with manufacturer/trademark/patent holder Products obtained from various sources and channels STORAGE AND DISTRIBUTION
Biggest drug retailers in Philippines # of Branches Mercury Drug Corporation 568 Rose Pharmacy 123 South Star Drug 118 Watson 105 Manson 52 Effects of a credible competitor Simvastatin patent expired in the Phils. Nov 2000 Generic simvastatin launched at 50% lower price Aug 2002 Atorvastatin (Lipitor) price by reduced by 20% Jan 2003 Originators Simvastatin (Zocor) price reduced by 52-57 % Sept 2003 Atorvastatin (Lipitor) price dropped further by another 20 % Oct 2003 Generic simvastatins price further reduced by 20% Dec 2003 Therapharma Vidastat RiteMed Simvastatin Pharex Credible Competitor Reputable company (quality products) Priced at least 30% lower than the leading brand Effective marketing strategy and organization Adequate marketing firepower Hospital Fluids: PRICE COMPARISON BEFORE THE PULLOUT OF LVP (2005 to early 2006) Source: MDC & Hospital Bidding forms LVP ERMD NSS 1 Liter P 87.00 P 21.00 P 85.00 P 18.00 D5LR 1 Liter P 92.00 P 22.00 P 89.00 P 19.50 PRICE COMPARISON AFTER THE PULLOUT OF LVP (2006) Source: MDC & Hospital Bidding Forms LVP ERMD NSS 1 Liter - P 95.00105.00 D5LR 1 Liter - P 95.00-105.00 PRICE COMPARISON: AFTER RE- LAUNCH OF LVP (Nov-Dec 2006) LVP ERMD NSS 1 Liter P 67.50 P 95.00 D5LR 1 Liter P 74.72 P 95.00 Source: MDC & Hospital Bidding Forms
PRICE COMPARISON: PRESENT LVP ERMD NSS 1 Liter P 55.50 P 65.00 D5LR 1 Liter P 55.75 P 65.00 Source: MDC & Hospital Bidding Forms
Consumers: Tri-Media Campaign > High quality drugs need not be expensive. MD Prescribers: Pharmacoeconomics / Cost-effective prescribing Drugstore Chains: forego huge but short term profits in favor of long term continuity of business
SUPPLY Gawa ng Unilab RiteMed Model: Launch to Php 1 B in 5 years; priced 50% less + UNDP citation Health Financing Countervailing Still mainly out-of-pocket (fee-for-service) >>>>>> covered by HMOs >>>>>> covered by insurance Both have no influence on physician prescriptions Philhealth has covered majority but marginal Approaches to control drug prices: Philippines DEMAND SIDE Prescription and treatment guidelines = cost-effective prescriptions How? Pharmacoeconomics a new discipline! Data? Rigid hospital formularies = cost-effective hospital services How? Pharmacoeconomics a new discipline! Data?
MARKETING CHANNELS Dispensing physicians. Will they get substantial volume discounts? Will they shave off retailers discounts? Retailing How do we maintain profitable operations while helping the cause of cheaper medicines? Government hospital pharmacies (funding, budget, etc) Botika ng Bayan / Botika ng Barrangay
Approaches to control drug prices: Philippines SUPPLY SIDE Substitutes: Generics & Parallel imports How do we maintain patient and prescriber confidence and assure product quality? Bioequivalence / ASEAN Harmonization Experiences from Generics Act & DOHPITC Parallel Drug Importation Exploitation of expiring patents How do we achieve a swifter patent expiration to marketing turnaround? Enhancing competition among suppliers? credible competitor Do we support smaller competitors? How?
FINANCING Philhealths emerging role not only as a payor of drugs but also as a leverage to quality, safety, and accessibility of drugs. (emerging) (countervailing)
Filipino Household Ranking Eleven Basic Needs
1. Food 2. Economic Base/Livelihood 3. Water 4. Medical Services 5. Education 6. Clothing 7. Power/Energy 8. Shelter 9. Ecological Balance 10. Mobility 11. Sports National Health Survey 1991 1988/97/00 Distribution of Expenditures of Families by Major Expenditure Item I n Percent (%) 1988 1997 2000 1. Food 50.8 43.9 43.6 2. Housing 12.7 15.4 14.2 3. Fuel/Light/Water 5.5 5.3 6.3 4. Transpo./Communication 4.7 5.2 6.8 5. Clothing 4.2 3.3 2.7 6. Personal care 3.3 3.2 3.6 7. Education 2.9 3.7 4.2 8. Other Expenditures 2.9 3.1 9. Household Operations 2.5 2.3 2.3 10. Special Occasions 2.3 2.4 11. Furnishings 2.2 3.3 2.5 12. Tobacco 2.1 1.3 0.7 13. Medical Care 1.7 2.2 1.9 14. Alcohol Beverages 1.2 0.8 1.1 15. Taxes 1.1 2.7 2.1 16. Gifts 0.9 1.0 0.2 17. Recreation 0.5 0.4 0.5
1988/97/00 Family Incomes & Expenditures Survey Household Level Health Spending Estimates In 2003
Per capita spending for health: P1,665 per Filipino per year
Per capita spending for drugs: Php 770 per year or Php 4,230 per household per year
Threshold income : Php 352,500/yr or Php 29,375/month
Total Number of Families by Income, Class, Urban-Rural 1991 1994 1997 2000 Philippines 11975400 12754944 14192462 15269655 Income Class ... ... ... ... Under P 10,000 306400 149537 66917 35556 10,000 - 19,999 1647500 933267 482827 329012 20,000 - 29,999 2145600 1644422 1132664 836651 30,000 - 39,999 1731700 1652896 1473041 1170541 40,000 - 49,999 1250900 1391055 1438575 1388507 50,000 - 59,999 978700 1133426 1163897 1196126 60,000 - 79,999 1234400 1698025 1828642 1983219 80,000 - 99,999 772400 1074314 1285026 1496280 100,000 - 149,999 1017000 1501550 2072417 2431060 150,000 - 249,999 593400 1054063 1853665 2382193 250,000- 499,999 237300 419355 1063498 1528433 500,000 and over 60000 103035 331293 492077 NEDA 2004 Report Consumer Values HIERARCHY OF NEEDS Misc Utilities/House/ Car Health Food Areas of Non- Negotiability Savings Childrens Needs Food/Utilities Personal Needs Savings Health Misc Becomes non-negotiable only when at risk
MARRIED SINGLE Childrens Needs: Tuition fee, baon, clothing, school project, personal care, medication/vitamins Utilities/House/Car: electricity, water, cable, telephone, maids, amortization, mortgage, car maintenance Health: Vitamins, medication, check-up Savings: cash, placements, insurance, investments Miscellaneous: party, gifts, expenses for guests Personal Needs (Single): clothing, dating, personal care A case of a 45 y/o diabetic hypertensive father of 5 earning P20,000 a month Plendil 5 mg OD (P33@) P 33.00 Capoten 25 mg BD (P22.75@) 45.50 TD 68.25 Treatment/day 78.50 101.25 Hypertension treatment/mo P2355.00 P3037.80 (11.8%) (15%) Euglucon 5 mg BD (P9.25) P 18.50 Glucophage 500 mg TD (P7.60@) 22.80 Imdur 60 mg OD ( P24.00@) 24.00 Lipitor 20 mgOD ( P80.00 @) 80.00 Non-HPN treatments/mo P 4359.00 TOTAL TREATMENT COST/Mo P6,714.00 P7,369.80 (34%) (37%)
Method: interview on UHA 249 male/female patients, 21-60 yrs old Belonging to ABC1 and C2D households Clinical diagnosis: HPN, DM, HD Taking maintenance drugs on therapy for 6 months or more Have taken medications in the past 3 months Base: Total respondents who have taken medications for (ILLNESS) in the past three months as prescribed Whether Have Instances that the Prescribed Frequency of Intake was Not Followed Q21b / Q58b / Q94b. Sir / Maam, you mentioned that you take (mention Brand/s) (mention frequency prescribed) a day as prescribed by the doctor. Was there a time when you did not follow the prescribed frequency of intake for (mentions Brand/s)? 4 8 43 44 46 57 56 54 0 10 20 30 40 50 60 70 80 90 100 Hypertension (124) Diabetes (86) Heart disease (90) Yes No However, more than 2/5 of those who claimed that they take their medications as prescribed admitted that there are times when they miss to take their medications as scheduled. Reasons for Not Being Able to Follow the Prescribed Frequency of Intake Base: Total respondents who have taken medications for (ILLNESS) in the past three months and with prescribed frequency of intake the same with the actual but skipped Q21c / Q58c / Q94c. Why were you not able to follow the prescribed frequency of intake for (mention Brand/s)? 4 9 Forgot to take / negligence HPN 36% Diab 39% HD 32% Financial constraints HPN 25% Diab 34% HD 24% Have seen improvement in the condition HPN 15% HD 16% Busy / no time Diab (13%) Hypertension (53) Diabetes (38) Heart disease (41) Across the 3 conditions, reasons for non-compliance with the prescribed regimen are primarily negligence and financial constraints. Additionally, improved condition (hypertension and heart disease) and lack of time (diabetes).
Duration of Not Being Able to Follow the Prescribed Frequency of Intake Base: Total respondents who have taken medications for (ILLNESS) in the past three months and with prescribed frequency of intake the same with the actual but skipped Q21d / Q58d / Q94b. How long have you not followed the prescribed frequency of intake for (mention Brand/s)? 5 0 % 21 13 13 9 9 13 32 8 8 18 21 11 18 8 8 13 8 0 10 20 30 40 50 60 70 80 90 100 1 day 2 days 3 days 4 days 5 days 7 days 9 days refused Hypertension (53) Diabetes (38) Heart disease (41) MEAN: HPN 4.83 days DIAB 5.03 days HD 5.42 days Respondents would miss out taking their medications up to about 5 days. Important Attributes or Factors in Choosing a Brand for a Medication Base: Total respondents who have taken medications for diabetes in the past three months (n=90) Q63. What attributes or factors do you consider important in choosing a brand of medication for diabetes? What else? 5 1 EFFICACY 70% PRICE 30% SAFETY PROFILE 26% OTHERS 21% Lowers blood sugar, lowers blood sugar to 135mg/dl, easily relieves symptoms, relieves symptoms like weakness, polyuria, dizziness, numbness, helps feel relaxed, gumagaan ang pakiramdam , effective (unspec) Mentioned specific price : P3.00, P5.00, P8.00, P10.00, P12.00, P20.00, P30.00, cheap, affordable, cost-effective No/less side effects like headache, dizziness, allergy, difficulty of breathing, palpitations, no side effects (unspec) Kung ano ang reseta ng doktor, hiyang, once a day, packaging, brand is known, for maintenance Prescribed Quantity vs. Actual Quantity Bought (One Drug) Base: Total respondents who have taken medications for (ILLNESS) in the past three months and have bought only one drug the last time Q31 / Q68 / Q104. How many (mention Brand/s) did your doctor prescribed you to buy? Q32 / Q69 / Q105. How many (mention Brand/s) did you actually buy the last time? 5 2 Among those who bought only one drug the last time, compliance in terms of buying the prescribed quantity of drug is high, especially for diabetes. 64 91 67 34 29 2 2 4 7 0 10 20 30 40 50 60 70 80 90 100 Hypertension (96) Diabetes (46) Heart disease (56) No prescribed quantity but bought Prescribed quantity different from actual Prescribed quantity same as the actual Prescribed Quantity vs. Actual Quantity Bought (Multi-purchase) Base: Total respondents who have taken medications for (ILLNESS) in the past three months and have bought more than one drug the last time Q31. How many (mention Brand/s) did your doctor prescribed you to buy? Q32. How many (mention Brand/s) did you actually buy the last time? 5 3 On the other hand, when buying multiple drugs, respondents are more likely NOT to buy the prescribed quantity of medications. 32 5 15 48 19 82 89 7 3 0 10 20 30 40 50 60 70 80 90 100 Hypertension (32) Diabetes (44) Heart disease (36) Mixed practice Prescribed quantity different from actual Prescribed quantity same as the actual Reasons for Not Buying the Prescribed Quantity of Brand Base: Total respondents who bought medications the last time and with prescribed quantity different from the actual quantity bought Q33. / Q70 / Q106. Why did you not buy the prescribed quantity of (mention Brand/s)? Why else? 5 4 HPN (55) Diab (45) Heart disease (39) % % % Limited budget 62 71 62 (lack of money / lack of budget / don't have money, di kaya ng budget, konti lang ang nabibili ng budget) Cost of medicines 13 16 10 (expensive, expensive P60.00, P50.00) For maintenance 13 9 13 (maintence - for life, it's up to me how many to buy for it's lifetime) Non-compliance in buying the prescribed quantity of drugs is mainly due to a persons financial capability. Options if Cannot Afford the Prescribed Medications Base: Total respondents who find the price of medicines for(ILLNESS) as quite expensive / very expensive Q38 / Q75 / Q111. The doctor prescribed you medicine/s for hypertension which you consider (quite/very) expensive? What would you do if you can afford the medicine/s prescribed to you? 5 5 Ask doctors advice HPN 15% Stop medications HPN 13% HD 18% Diet / exercise Diab 21% Others (e.g., will just take medicine OD) HD 21% Budget the money HPN 23% Diab 14% Switch to herbal medicines HPN 15% Diab 48% HD 9% Look for other means (e.g., hihingi sa anak, mangungutang sa kamag-anak) HPN 18% Diab 17% HD 35% Among the hypertensives, budgeting the money is their more common option while patients with heart disease would look for other means like borrowing money from relatives. On the other hand, most diabetics would switch to herbal medicines. Poor Economics, Poor affordability of therapy Poor compliance Poor control More complications More expensive therapy, poorer Quality of life, earlier death More economic burden Thank You Very Much