1

Need

Want

UNLIMITED

Buying Power Demand PRICE

Supply

Operation

Resource RARE

Production

HEALTH

ECONOMICS

HEALTH ECONOMICS

PHARMACOECONOMICS

Pharmaceuticals are the most

cost-effective, value-added, least-invasive

part of the health-care system.
Alan Holmer, President of the Pharmaceutical Research and Manufacturers of America (PhRMA), 1998

Pharmacoeconomics is a branch of health economics primarily concerned with

assessing the cost-effectiveness of drug therapies.

Growing importance of PHARMACOECONOMICS Pressure on healthcare

budget Interest in economic data from government, insurers, formulary committees

Formal requirement for

economic data in some jurisdictions (eg. Australia, Canada etc.)

MAJOR TRENDS IN THE PHARMACEUTICAL INDUSTRY

Rising expenditures on drugs
(though drugs still a relatively small % of overall health spending) Aging population High and rising costs of drug development Innovative products (though slowing?) Competition -- from generics and other brand-names Pressures from payers (managed care, government) Drug industry response Rising spending on R&D Rising spending on marketing: OTC, etc. Drugs promoted as a cost-effective strategy

Country
USA Switzerland Germany Luxemburg Canada Indonesia

Healthcare Spending Per Person Per Year

$2,689 $2,412 $2,222 $2,206 $2,002

< $ 10 (?)

Year 1960 1970 1980 1990 1998

US Healthcare Spending Per Person $141 $341 $1,052 $2,689 $4,094

DRUG EXPENDITURE PER CAPITA (USD)

COUNTRY

PER CAPITA YEAR

PER
40%

USA
JAPAN

$756.20
$463.30

GERMANY
TAIWAN KOREA SINGAPORE HONG KONG THAILAND MALAYSIA PHILIPPINES

$319.70
$119.50 $104.50 $58.50 $53.40 $16.20 $15.80 $14.10

INDONESIA
CHINA VIETNAM

$7.70
$5.80 $5.40

15%

What will be covered?

Rx drug industry and the
FDA Regulation of drugs and promotional claims Reimbursement and pricing issues Case studies in pharmacoeconomics Alzheimers disease Thrombolytic therapy Lifestyle drugs Others The real world

Why Pharmacoeconomics ?
Pharmacoeconomic information is being widely disseminated; The information can help payers, managers, consumers, physicians, regulators, analysts make better decisions; There is (legitimate) concern about the quality of analyses; There is great demand for skilled practitioners. Decision theory

Decision analysis for health and medical

practice

Decision analysis in clinical research Methods for decision analysis in health care
technology assessment

Cost-effectiveness and cost-benefit analysis

for health program evaluation

Economics

OCCUPATIONAL RANKING IN TERM OF HONESTY AND ETHICAL STANDARD

GALLUP POLL 1985 GALLUP POLL 1993

OCCUPATION PROFESSION
CLERGYMAN PHARMACIST MEDICAL DOCTOR DENTIST COLLEGE TEACHER

1985 1985 1993 1993 SCORE RANK SCORE RANK

67 65 58 56 54 1 2 3 4 5 53 65 51 50 52 2 1 4 6 3

ENGINEER
POLICEMAN BANKER TV REPORTER / COMMENTATOR

53
47 37 33

6
7 8 9

49
50 28 28

7
5 10 9

JOURNALIST
NEWSPAPER REPORTER LAWYER BUSINESS EXECUTIVE

31
29 27 23

10
11 12 13

26
22 16 20

11
12 17 13

FUNERAL DIRECTOR
BUILDING CONTRACTOR

34
20

8
14

OCCUPATIONAL RANKING IN TERM OF HONESTY AND ETHICAL STANDARD

GALLUP POLL 1985 GALLUP POLL 1993

1985 SCORE
LOCAL OFFICE HOLDERS US SENATORS TV TALK SHOW HOSTS REAL ESTATE AGENTS -

1985 RANK
-

1993 SCORE
19 18 16 15

1993 RANK
15 16 18 19

LABOR UNION LEADERS

CONGRESSMEN STATE OFFICE HOLDERS

14
14 14

20
21 22

STOCKBROKERS
INSURANCE SALESMEN ADVERTISING PRACTITIONERS

13
10 8

23
24 25

CAR SALESMEN

26

Generic Sales Development 2000 2004

2400 2200 2000 1800 1600 1400 1200 1000 800 600 400 200 0
NPanel IHPA IDA IPA

1999

2000

2001

2002

2003

2004

Generic Sales Development by sector 2000 2004

2000 2001 2002 2003

Total Market Panel Market
IPA IDA IHPA

2004
2,187 756
335 182 239

1,140 1,574 439

176 128 135

1,732 1,860 577

247 149 181

537
226 154 157

640
273 162 205

Non-Panel Mkt 701

1,037

1,155

1,220

1,431

Total Pharma Market 2004/2003

25,000 20,000
Rp bn

15,000 10,000 5,000 0

2003 2004

IPA

IDA

IHPA NP Eth
Market Sector

NP TOTAL OTC

Total Pharma Market 2004/2003

Value Rp bn
PANEL MARKET
IPA IDA IHPA

2004
9,509
4,662 2,517 2,330

2003
17,458
8,650
4,233 2,379 2,038

+%
19.6
9.9
10.1 5.8 14.3

TOTAL MARKET ( IT A) 20,873 M

NON-PANEL MARKET
Ethical (clinic, doctor etc) OTC (S.Market, Warung etc)

11,363
5,693 5,670

8,808
4,541 4,267

29.0
25.4 32.9

Generic Market Share by sector 2000 2004 (%)

2000 2001 2002 2003 2004

Total Market Panel Market IPA IDA IHPA Non-Panel Market

11.5 12.4 11.1 10.7 10.5

7.3 7.9 5.9 7.0 11.4 17.6 6.8 7.8 10.5 17.7 7.6 7.4 6.5 7.5 10.3 14.3 6.4 6.8 10.0 13.9 7.9 7.2 7.2 10.3 12.6

OCCUPATIONAL RANKING
IN TERM OF HONESTY AND ETHICAL STANDARD US GALLUP POLL 1985 / 1993

Occupation / 1993 Profession RANK

REAL ESTATE AGENTS LABOR UNION LEADERS CONGRESSMEN STATE OFFICE HOLDERS STOCKBROKERS INSURANCE SALESMEN ADVERTISING PRACTITIONERS CAR SALESMEN

1985 1985 1993 SCORE RANK SCORE

15 14 14 14 13 10 8 6 19 20 21 22 23 24 25 26

Generic Market Share by sector 2000 2004 (%)

2000 2001 2002 2003 2004

Total Market Panel Market IPA

11.5 12.4 11.1 10.7 10.5

7.3 7.9 7.6 7.4 7.9 6.5 6.4 7.5 6.8 10.3 10.0 14.3 13.9 7.2 7.2 10.3 12.6

5.9 6.8 IDA 7.0 7.8 IHPA 11.4 10.5 Non-Panel 17.6 17.7
Market

Year 1960 1970 1980 1990 1998

US Healthcare Spending Per Person $141 $341 $1,052 $2,689 $4,094

DRUG EXPENDITURE ( USD ) 2003 - 2004

COUNTRY YEAR USA JAPAN
GENERIK

PER CAPITA PER $ 756.20 $ 463.30 40%

GERMANY TAIWAN KOREA SINGAPORE HONG KONG THAILAND MALAYSIA PHILIPPINES INDONESIA CHINA
GENERIK

$ $ $ $ $ $ $ $ $ $
$

319.70 119.50 104.50 58.50 53.40 16.20 15.80 14.10 7.70 5.80
5.40

15%

VIETNAM

Unlimited

Need

Want Buying Demand

Power

PRICE

Supply
Operation
Rare

Resource Production

Country
USA Switzerland Germany Luxemburg Canada Indonesia

Healthcare Spending Per Person Per Year

$2,689 $2,412 $2,222 $2,206 $2,002 < $ 10 (?)

OCCUPATIONAL RANKING
IN TERM OF HONESTY AND ETHICAL STANDARD US GALLUP POLL 1985 / 1993
Occupation / Profession
CLERGYMAN PHARMACIST MEDICAL DOCTOR DENTIST COLLEGE TEACHER ENGINEER POLICEMAN BANKER TV REPORTER / COMMENTATOR

1985 1985 SCORE RANK

67 65 58 56 54 53 47 37 33 1 2 3 4 5 6 7 8 9

1993 1993 SCORE RANK

53 65 51 50 52 49 50 28 28 2 1 4 6 3 7 5 10 9

Total Pharma Market 2004/2003

Value Rp bn 2004 2003 + %

TOTAL MARKET ( ITMA) 20,873 17,458 19.6
PANEL MARKET
IPA IDA IHPA

9,509
4,662 2,517 2,330

8,650
4,233 2,379 2,038

9.9

10.1 5.8 14.3

NON-PANEL MARKET

11,363

8,808
4,541 4,267

29.0
25.4 32.9

Ethical (clinic, doctor etc) 5,693 OTC (S.Market, Warung etc) 5,670

Total Pharma Market 2004/2003

25,000 20,000
bn

15,000 10,000 5,000 0

Rp

2003 2004

IPA IDA IHPA NP Eth NP TOTAL OTC

Market Sector

Generic Sales Development by sector 2000 2004

2000 2001 2002 2003

Total Market Panel Market
IPA IDA IHPA

2004
2,187 756
335 182 239

1,140 1,574 439

176 128 135

1,732 1,860 577

247 149 181

537
226 154 157

640
273 162 205

Non-Panel Mkt 701

1,037

1,155

1,220

1,431

Generic Sales Development 2000 2004

2400 2200 2000 1800 1600 1400 1200 1000 800 600 400 200 0
NPanel IHPA IDA IPA

1999

2000

2001

2002

2003

2004

Unlimited

Need

Want Buying Demand

Power

PRICE

Supply
Operation
Rare

Resource Production

Healthcare Country Spending Per Person Per Year

USA $2,689 Switzerland $2,412 Germany $2,222 Luxemburg $2,206 Canada $2,002 Indonesia < $ 10 (?)

US Healthcare Year Spending Per Person 1960 1970 1980 1990 1998 $141 $341 $1,052 $2,689 $4,094

COUNTRY CAPITA PER YEAR USA 756.20 40% JAPAN

GENERIK

PER $ $ 463.30 $ 319.70 $ 119.50

GERMANY TAIWAN

KOREA
SINGAPORE

$ 104.50
$ 58.50

HONG KONG
THAILAND MALAYSIA PHILIPPINES INDONESIA

$ 53.40
$ 16.20 $ 15.80 $ 14.10 $ 7.70

Generic Market Share by sector 2000 2004 (%)

2000 2001 2002 2003 2004

Total Market Panel Market IPA

11.5 12.4 11.1 10.7 10.5

7.3 7.9 7.6 7.4 7.9

5.9 6.8 6.5 6.4 7.2 IDA 7.0 7.8 7.5 6.8 7.2 IHPA 11.4 10.5 10.3 10.0 10.3 Non-Panel 17.6 17.7 14.3 13.9 12.6
Market

OCCUPATIONAL RANKING
IN TERM OF HONESTY AND ETHICAL STANDARD US GALLUP POLL 1985 / 1993
Occupation / 1985 1985 1993 1993 Profession SCORE RANK SCORE RANK
CLERGYMAN 53 2 PHARMACIST 65 1 MEDICAL DOCTOR 51 4 DENTIST 50 6 COLLEGE TEACHER 52 3 ENGINEER 49 7 POLICEMAN 50 5 BANKER 28 10 67 1

65
58 56 54 53

2
3 4 5 6

47
37

7
8

OCCUPATIONAL RANKING
IN TERM OF HONESTY AND ETHICAL STANDARD US GALLUP POLL 1985 / 1993 Occupation / 1985 1985 1993 1993 Profession SCORE RANK SCORE RANK
JOURNALIST 26 11 NEWSPAPER REPORTER 22 12 LAWYER 16 17 BUSINESS EXECUTIVE 20 13 FUNERAL DIRECTOR 34 8 BUILDING CONTRACTOR 20 14 LOCAL OFFICE HOLDERS 19 15 US SENATORS 18 16 TV TALK SHOW HOSTS 31 29 10 11

27
23 -

12
13 -

OCCUPATIONAL RANKING
IN TERM OF HONESTY AND ETHICAL STANDARD US GALLUP POLL 1985 / 1993 Occupation / 1985 1985 1993 1993 Profession SCORE RANK SCORE RANK
REAL ESTATE AGENTS 15 19 LABOR UNION LEADERS 14 20 CONGRESSMEN 14 21 STATE OFFICE HOLDERS 14 22 STOCKBROKERS 13 23 INSURANCE SALESMEN 10 24 ADVERTISING PRACTITIONERS 8 25 CAR SALESMEN -

2000 2001 2002 2003 2004 11.5 12.4 11.1 10.7 10.5

OCCUPATIONAL RANKING
IN TERM OF HONESTY AND ETHICAL STANDARD US GALLUP POLL 1985 / 1993 Occupation / 1993 Profession RANK
JOURNALIST NEWSPAPER REPORTER LAWYER BUSINESS EXECUTIVE FUNERAL DIRECTOR BUILDING CONTRACTOR LOCAL OFFICE HOLDERS US SENATORS TV TALK SHOW HOSTS

1985 1985 1993 SCORE RANK SCORE

31 29 27 23 10 11 12 13 26 22 16 20 34 20 19 18 16 11 12 17 13 8 14 15 16 18