MedImpact 2018 Meeting

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1 MedImpact 2018 Meeting Doug Long Vice President, Industry Relations March 2018 Copyright 2017 IQVIA. All rights reserved.

2 Key happenings in 2017! Snapshot of key happenings in the industry Market Performance Mergers / Alliances Reimbursement ü Dollar growth is low single digits ü Adjusted 90-Day TRX growth is 2.6% and Unadjusted TRx growth YTD is -0.1% in Retail ü 90 day scripts are 15.7% of scripts ü Below avg. Flu and Allergy Seasons (until now) ü Generic $ sales decreases ü New Walgreens and Rite Aid deal now approved ü Walmart and McKesson Alliance ü Econdisc joins WBAD Alliance ü Walgreens and PharMerica ü Amazon and Whole Foods ü CVS and Aetna ü Pharmacists can prescribe in more places ü Good Rx, Blink RX, etc. ü Patient s behavior during their deductible period ü DIR fees Generic Launches Regulation Price / Politics ü Record number of ANDA approvals and faster approvals ü Copaxone 40 mg ü Pristiq ü Strattera ü Viagra ü Opioids recognized as a national crisis ü FDA Priority list of no or limited generic entries ü Much more public/ media scrutiny on drug prices ü Generic Deflation ü Less Brand price inflation ü Repeal and Replace? 2

3 Key happenings in 2018 so far! Snapshot of key happenings in the industry Market Performance ü Dollar growth is low single digits ü Unadjusted TRx growth YTD is flat while Adjusted 90-Day TRX growth is ~2% ü 90 day scripts continue to grow ü Major Flu Season ü Generic $ sales decreases Generic Launches Mergers / Alliances ü New Walgreens and Rite Aid deal now being implemented ü Amazon and Whole Foods ü CVS and Aetna ü Amazon, Berkshire Hathaway, JP Morgan ü Albertsons and Rite Aid ü Walgreens and ABC ü Cigna & Express Scripts Regulation Reimbursement ü Patient s behavior during their deductible period ü DIR fees ü Audits Price / Politics ü Record number of ANDA approvals and faster approvals ü Cialis ü Glatopa 40mg ü Advair Diskus? ü Opioids recognized as a national crisis ü FDA Priority list of no or limited generic entries ü Much more public/ media scrutiny on drug prices ü Generic Deflation ü Less Brand price inflation ü Repeal and Replace? 3

4 US dollar sales growth is decelerating Total Market Growth (%) of Sales Retail and Mail Growth (%) 16.0% 11.0% 6.0% 1.0% 4.4% 14.1% 12.3% 5.4% 1.7% Growth (%) 16.0% 11.0% 6.0% 1.0% 4.6% 14.7% 12.2% 4.9% 0.0% -4.0% % Source: IQVIA, National Sales Perspectives, February

5 Non-Discounted Spending Growth Slowed to 1.7% in 2017 Reaching $454Bn Spending growth was 1.3% YTD in % % Sales ($Bn) % 5% 0% -5% Growth Source: IQVIA, National Sales Perspectives, Sep 2017 U.S. Market Overview - Q

6 Specialty growth is outpacing traditional growth but contributes to less share of the total non-discounted spend In 2017, specialty spend is growing at 9.3% while traditional is declining at 4.0% Non-Discounted Spend (BNs) $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 $444.6 $450.7 $425.0 $265.6 $255.0 $378.6 $263.0 $331.7 $245.9 $226.9 $104.8 $132.7 $162.0 $179.0 $ % 25% 20% 15% 10% 5% 0% -5% -10% Growth SPECIALTY TRADITIONAL SPECIALTY GROWTH TRADITIONAL GROWTH TOTAL MARKET GROWTH Source: IQVIA, National Sales Perspectives, March

7 Spending on traditional medicines is declining while specialty medicine spend is continually growing US Real Net Per Capita Spending and Growth Traditional Specialty Traditional % Growth 1000 Specialty % Growth Total % Growth 25% Real Net Per Capita Spending US$ % 15% 10% 5% 0% -5% -10% -15% Growth Source: QuintilesIMS, National Sales Perspectives; QuintilesIMS Institute; US Census Bureau; US Bureau of Economic Analysis (BEA), Dec

8 U.S. real net per capita drug spending and growth Real Net Per Capita Spending Real Net Per Capita Spending Growth % Real Net Per Capita Spending US$ % 6% 4% 2% 0% -2% -4% -6% % Growth % Chart note: Real medicine spending reflected in 2009 US$ Source: IQVIA, Market Prognosis Sep 2017; IQVIA Institute; US Census Bureau; US Bureau of Economic Analysis (BEA), Dec 2017 Forecast 8

9 Specialty classes Autoimmune, Oncology, and New Brand HIV Antivirals Drive Non-Discounted Spending Growth Harvoni & Sovaldi loss of volume growth drive decrease in Hep C Leading Therapy Classes Non-Discounted Spending Growth by Segment ($BN) in MAT Sep 2017 Protected Brands Volume Protected Brands Price New Brands Generics Volume Generics Price LOE Antidiabetics Oncologics Autoimmune Diseases Respiratory Agents Hiv Antivirals Multiple Sclerosis Pain Mental Health Anticoagulants Nervous System Disorders Viral Hepatitis ADHD Source: IQVIA, National Sales Perspectives, Sep 2017

10 Fastest and Slowest Growing Mail and Retail Therapy Areas by Absolute Dollar Change (12 month comparison) Fastest Growing Therapy Area 2017 Δ Change (BNs) Slowest Growing Therapy Area 2017 Δ Change (BNs) AUTOIMMUNE $6.7 LIPID REGULATORS -$5.4 DIABETES $4.1 VIRAL HEPATITIS -$3.6 ANTICOAGULANTS $1.8 PAIN -$2.1 ONCOLOGY $1.5 ANTIHYPERTENSIVES -$1.7 HIV ANTIVIRALS $1.4 ANTI-ULCERANTS -$1.6 RESPIRATORY $1.2 MENTAL HEALTH -$1.2 NERVOUS SYSTEM DISORDERS $0.7 ADHD -$1.0 GI PRODUCTS $0.3 DERMATOLOGICS -$1.0 OPHTHALMOLOGY $0.3 ANTIBACTERIALS -$0.9 COUGH COLD & FLU $0.3 OTHER CARDIOVASCULARS -$0.5 Source: IQVIA, National Sales Perspectives, February 2018, Mail and Retail 10

11 Oncology and autoimmune also outpace total specialty market growth HIV (+7.9%) and Multiple Sclerosis (+4.5%) also exhibit positive growth in the most recent quarter Specialty Growth (Current Q vs. Same QLY) 50% 40% 30% 20% 10% 0% -10% -20% -30% 1600% 1400% 1200% 1000% 800% 600% 400% 200% 0% -200% Hep C Growth (Current Q vs. Same QLY) Source: IQVIA, National Sales Perspectives, March 2018 AUTOIMMUNE ERYTHROPOIETINS HIV MULTIPLE SCLEROSIS ONCOLOGY ALL OTHERS TOTAL SPECIALTY HEP C 11

12 Sales-weighted gross branded inflation remained in the high single digits throughout 2017; January inflation totals 7.9% Nephron s Branded Pricing Monitor Source: Nephron Research, IQVIA, Glass Box Analytics 12

13 Sales-weighted gross generic deflation appear to be rebounding since Q4 2017; January deflation totals -9.3% Nephron s Generic Pricing Monitor Source: Nephron Research, IQVIA, Glass Box Analytics 13

14 U.S. price growth comparing protected brands invoice price, net price and existing products net price growth % 10% 9.3% 10.0% 11.4% 13.7% 12.0% 9.2% 7-10% 5% 8.7% 9.1% 4.9% 5.1% 2.5% 3.5% 2-5% 0% -5% 0.6% -4.1% 0.0% -2.5% -2.6% -1 to -4% -6.1% -10% Invoice Price Growth % (Patent Protected Brands only) Forecast Estimated Net Price Growth % (Patent Protected Brands Only) Estimated Net Price Growth % (Existing Products incl Brands, Generics and LOE) Source: IQVIA National Sales Perspectives, IQVIA Institute, Sep

15 Spending on Brands Launched in the Last 24 Months Grew by $17.2Bn for Total Sales of $28Bn in MAT Sep 2017 Genvoya, Descovy, Odefsey, and Triumeq drive growth in HIV therapy in 2017 New Brand Spending Growth ($BN) 30 Diabetes Other Traditional Multiple Sclerosis Oncology Autoimmune HIV Antivirals Viral Hepatitis Other Specialty MAT Sep 2017 Source: IQVIA, National Sales Perspectives, Sep

16 Fierce Pharma s Top 10 Potential Launches in 2017 Rank Product Company Approval Date Disease 2022 Sales (US$ BNs) Specialty/ Traditional Biologic/ Small mol 1 Ocrevus Roche Mar Multiple Sclerosis $4.1 Specialty Biologic 2 Dupixent Sanofi & Regeneron Mar Atopic Dermatitis $4.1 Traditional Biologic 3 Ozempic (semaglutide) Novo Nordisk Dec Diabetes $2.2 Traditional Biologic 4 Imfinzi AstraZeneca May Cancer Immunotherapy $1.9 Specialty Biologic 5 Zejula Tesaro Mar Ovarian Cancer $1.9 Specialty Small mol 6 Baricitinib Lilly & Incyte Rejected; expected to refile 2018 Rheumatoid Arthritis $1.8 Specialty Biologic 7 Kisqali Novartis Mar Breast Cancer $1.6 Specialty Small mol 8 Yescarta Kite (Gilead) Oct Non Hodgkins Lymphoma (CAR-T) $1.4 Specialty Biologic 9 Ingrezza Neurocrine BS Apr Tardiva dyskinesia $1.3 Traditional Small mol 10 Spinraza Biogen Dec Spinal Muscular Atrophy $1.3 Traditional Biologic Noteworthy Launch: Novartis Kymriah (CAR-T therapy) approved on August 30 th, 2017 for treatment of patients up to 25 years of age with B-cell precursor acute lymphoblastic leukemia (ALL) that is refractory or in second or later relapse. Kymriah is a novel immunocellular therapy and the first therapy based on gene transfer approved by the FDA. 16

17 The profile of successful launches significantly changed within a very short period leading to unanticipated cost pressures for payers Through 2006, launches generated between $3B and $5B per year; now launches can generate $20B per year Billions Total Spend on Brands by Launch Year First 12-months of sales The Age of Oncology and Specialty Traditional Brands Dominate the Landscape The Dark Ages Source: IQVIA National Sales Perspectives (NSP) *First 12-month sales for 2016 launches projected based on data through Jan

18 Complicating things for payers is the fact that ~50% of launch brands are serving markets with high need, but few bring increased value To get cost under control, do payers focus on market need or innovation? 60% Launch Brands by Level of Differentiation and Unmet Market Need 50% 50% 40% 30% 20% 27% 24% 10% 15% 0% Highly Differentiated High Unmet Need Source: IQVIA Launch Archetype Database 18

19 While the markets brands are launching into tend to have high need, the patient populations in these markets are decreasing This poses an increasing dilemma to payers; more spend focused on few patients with high need 200,000 Average Number of Patients Per Launch Brand in First Year 180, , , , ,000 80,000 60,000 40,000 20, Source: IQVIA SMART New-to-Brand (NBRx) 19

20 Spending on rare diseases in the U.S. has risen to 9.2% in 2016 U.S. Drug Spending US$Bn and Share of Spending % = $450Bn US market total drug spending Orphan Drug Spending Non-orphan uses of drugs with orphan approvals Rest of the U.S. Market 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Orphan Drug Spending Orphan Approved Uses % of Sales Source: IQVIA National Sales Perspectives, Dec 2016; FDA Orphan Drugs Database Feb 2017; IQVIA Institute 20

21 Six key issues that Market Access teams are currently facing Tighter, More Consolidated Payer Management Higher Patient Out-Of-Pocket Payments Amplified Public Pressure and Demand for Price Transparency More Stringent Medical Benefit Management Increase in Value Based Models Evolving Provider Landscape 21

22 1. The payer grip continues to tighten, as management across brands increases Tighter, More Consolidated Payer Management Number of CVS / ESI Drug Exclusions # of Excluded Drugs Managed Care Organizations (MCOs) and Pharmacy Benefit Managers (PBMs) are increasingly utilizing strict approaches to manage drugs, including formulary exclusions Access is now discussed in terms of winning and losing based on negotiations with the major PBMs and Payers CVS ESI Source: Formulary Exclusion Lists published by CVS and ESI 22

23 2. Patients are also facing increasing financial pressure, as payers are transferring a higher percentage of costs to patients Higher Patient Out-Of-Pocket Payments $750 $500 $338 $350 +4% CAGR $366 US Out-of-Pocket Health Spending (in $USD Billions) $383 $469 $424 $446 $401 $492 $517 +5% CAGR $542 Average Commercial Co-pay Increase ( )* $250 14% $ Source: CMS National Health Expenditure Accounts Data; IQVIA Formulary Impact Analyzer (FIA); *Excludes buy-and-bill and hospital products 23

24 Patients in the deductible period paid for almost forty percent of out-of-pocket costs for branded prescriptions Distribution of Prescriptions by Cost-sharing Type (Commercial, Brands) Copay Coinsurance Deductible All Brands Specialty Brands 14% 2% 5% 39% 32% 32% 13% 81% 66% 58% 48% 9% Brand Commercial Prescriptions Brand Commercial Patient Out-of-Pocket Spending Brand Specialty Commercial Prescriptions Brand Specialty Out-of- Pocket Spending Source: Amundsen Consulting (a division of IQVIA) analysis for PhRMA; IMS FIA; Rx Benefit Design, Mar

25 The growing role of deductibles and patient cost sharing for Rx How deductibles will reshape the pharmacy industry Prescription dispensing is becoming more seasonal because deductibles typically reset on January 1 st - Patients have an incentive to fill more prescriptions at the end of the year - Higher abandonment rates and lower adherence levels at the beginning of the year Patients are increasingly exposed to the list price of their prescriptions - Controversy for brand-name drugs with formulary rebates: PBM and health plan collect rebate that is not reflected in retail list price Consumers are starting to shop for prescriptions - Growing use of prescription deductibles directly encourages shopping behavior: online discount card vendors (GoodRx / Blink Health) are benefiting from this trend Consider generic drugs: 87% of prescription dispensing activity yet wide variations in cash prices may be the most logical opportunity for Amazon (low-cost generics) for Amazon to enter the market Source: Drug Channels, Shopping For Prescriptions: How Deductibles Will Reshape the Pharmacy Industry, November

26 Almost 1 in 4 prescriptions are abandoned by patients during their deductible phase Abandonment Rates for Branded Medicines 23% 27% 9% No Deductible Brands with Deductible Specialty Brands with Deductible Source: Amundsen Consulting (a division of QuintilesIMS) analysis for PhRMA; IMS FIA; Rx Benefit Design,

27 3. Pharma will also have to find ways to adapt to the new environment of stricter pricing scrutiny and demand for transparency Amplified Public Pressure and Demand for Price Transparency Increased Public Scrutiny on Drug Pricing Number of bills Number of State Bills Introduced on Price Transparency 25 ( ) 22*** 20 18** * Maximum Allowable Price List Price Increases Net Price Disclosure There will be an increasing push for companies to communicate a clear rationale for pricing decisions *AR, CA, MA, ME, NC, NY, OR **CA, CO, LA, MD, MN, NJ, RI, TN, VA, VT, WA ***CA, CT, IL, IN, LA, MA, MD, MT, NV, NY, OR, RI, TN, WA 27

28 4. Medical benefit drugs will no longer be protected, as payers are developing new capabilities to manage the medical benefit More Stringent Medical Benefit Management Increased Medical Benefit Management Techniques Developing medical formularies Increased utilization management Shifting medical benefit drugs to the pharmacy benefit Development of Vertically Integrated Payer Models + + Site-of-care management As specialty drugs have become increasingly costly, payers have implemented more utilization management techniques for medical benefit drugs Increased vertical integration between PBMs and MCOs leads to increased ability to manage both pharmacy and medical cost 28

29 5. Value frameworks are expanding influence, and use of valuebased payment models and innovative agreements has increased Increase in Value Based Models Development of Value Frameworks Launch date Recent Examples of Value-Based Payment Models Mag. of Clinical Benefit Scale May 2015 Drug Abacus Value Framework Value Framework Evidence Blocks TM Value framework June 2015 June 2015 Sept Oct Nov 2016 Novartis negotiated pay-forperformance agreements with Aetna and Cigna Cigna: Payments depend on patient hospitalization rates Aetna: Payments linked to delivering real-world results similar to those seen in clinical trials Amgen negotiated outcomesbased agreements with Harvard Pilgrim Amgen will pay a refund for all eligible patients who had a heart attack or stroke while on Repatha Overall, in the coming years, the concept of value will become part of the fabric of US healthcare 29

30 Number of U.S. publicly announced outcomes-based contracts and expected increase to 2022 All others Oncology Neuromuscular disorder Metabolic disorder Cardiovascular Autoimmune Forecast Chart Notes: Publicly disclosed outcomes-based contracts between manufacturers and payers Source: IQVIA Consulting Group, Dec

31 6. Finally, the provider landscape is constantly evolving, with continued growth in the number of IDNs and ACOs Evolving Provider Landscape To streamline care and costs, providers are merging to form integrated delivery networks (IDNs) Lines are also blurring between providers and payers through the formation of vertically integrated accountable care organizations (ACOs) IDNs / ACOs have become more influential in prescribing decisions and have demonstrated willingness to manage drug utilization at the class level 31

32 U.S. telehealth visits % 81 8% 7% % % % % 46 5% 4% 3% 2% 1% Telehealth Visits High Telehealth Visits Low Telehealth Share of Visits Low Telehealth Share of Visits High 0% Source: IQVIA National Disease and Therapeutic Index, Jan 2018; IQVIA Institute, Feb

33 Key patent expirations by 2020 will create competition from biosimilars & generics (not exhaustive) Biologics with expiring patents Marketed Biosimilars Approved (Not Marketed) Biosimilars 2015 Small Molecules with expiring patents Source: IQVIA Expertise, IQVIA Lifecycle. Top 15 products by forecasted annual sales for year prior between to LOE ( ) shown

34 Biosimilar Approvals to Date Biosimilar Innovator Molecule Manufacturer Date Approved Date Marketed Zarxio Neupogen filgrastim Sandoz 3/6/2015 9/3/2015 Inflectra Remicade infliximab Celltrion/Pfizer 4/5/ /2016 Erelzi Enbrel etanercept Sandoz 8/30/2016 TBD Amjevita Humira adalimumab Amgen 9/23/2016 1/31/2023 (proposed) Renflexis Remicade infliximab Samsung/Merck 4/21/2017 7/24/2017 Cyltezo Humira adalimumab Boehringer Ingelheim 8/5/2017 TBD Mvasi Avastin bevacizumab Amgen/Allergan 9/14/2017 TBD Ogivri Herceptin trastuzumab Mylan 12/1/2017 TBD Ixifi Remicade infliximab Pfizer 12/13/2017 TBD what about Basaglar? Considered a hybrid generic accessed 1/17/2018; accessed 1/17/2018

35 Known biosimilar pipeline for 2018 INN Innovator Molecule Manufacturer Rituximab (CT-P10) Trastuzumab (CT-P6) Rituxan Herceptin rituximab trastuzumab Teva and Celltrion Teva and Celltrion Application Submitted Estimated FDA Approval Date 4/2017 2/2018 5/2017 3/2018 Rituximab Rituxan rituximab Sandoz 7/2017 5/2018 Trastuzumab (PF ) Herceptin trastuzumab Pfizer 7/2017 5/2018 Filgrastim Neupogen filgrastim Trastuzumab (SB3) Herceptin trastuzumab Adello Biologics Samsung Bioepsis and Merck 7/2017 5/ / /2018 Adalimumab Humira adalimumab Sandoz 11/ /2018 The Pink Sheet, FDA Performance Tracker, Biosimilars, accessed 1/18/2018

36 Basaglar continues to grow share for both non-discounted spend and extended units in the Insulin Glargine (Lantus) molecule Share of Non-Discounted Spend 100% 80% 60% 40% 20% 0% INSULIN GLARGINE Share of Extended Units 100% 80% 60% 40% 20% 0% ORIGINATOR (Lantus) HYBRID GENERIC (Basaglar) Non Discounted Spend Share Molecule Class Insulin Glargine Originator (Lantus) Hybrid Generic (Basaglar) 100.0% 99.7% 80.0% 0.0% 0.3% 20.0% Extended Share Molecule Class Insulin Glargine Originator (Lantus) Hybrid Generic (Basaglar) 100.0% 99.7% 78.6% 0.0% 0.3% 21.4% Source: IQVIA, National Sales Perspectives, February

37 What are Stakeholders Thinking About? Pharmacies Reimbursement Controlled Substances abuse Access to Specialty Drugs Purchasing Alliances Track and Trace Amazon and the cash customers Wholesalers Purchasing Alliances Controlled Substances abuse Access to Specialty Drugs Generic Price Deflation Track and Trace Payers Exploding costs of Specialty Drugs Rising Oncology costs Formularies blocks and exclusive launches Generic Manufacturers Purchasing Alliances Price increase backlash Portfolio Optimization Brand /niche drugs Proposed labeling changes Brand/Specialty Manufacturers Price backlash Becoming more specialized Oral Specialty Orphan Drugs Consumers Rising costs Specialty Tiers and High deductables Losing Insurance

38 10 key turnings points in 2018 Harbingers of change for the outlook to 2022 Innovation trends Real-world data use in clinical practice guided by FDA Next-generation biotherapeutics move toward mainstream Apps make their way into treatment guidelines Telehealth usage surges Medicine spending growth drivers Branded medicine spending in developed markets falls Specialty medicines drive all spending growth in developed markets Slower growth in China and other pharmerging markets New approaches to value U.S. real net per capita spending on medicines steadies Outcomes-based contracts find limited role New wave of biosimilar market opportunities emerges 38

39 Thank you Disclaimer: The analyses, their interpretation, and related information contained herein are made and provided subject to the assumptions, methodologies, caveats, and variables described in this report and are based on third party sources and data reasonably believed to be reliable. No warranty is made as to the completeness or accuracy of such third party sources or data. As with any attempt to estimate future events, the forecasts, projections, conclusions, and other information included herein are subject to certain risks and uncertainties, and are not to be considered guarantees of any particular outcome. All reproduction rights, quotations, broadcasting, publications reserved. No part of this presentation may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any information storage and retrieval system, without express written consent of IQVIA IQVIA Incorporated and its affiliates. All rights reserved. Trademarks are registered in the United States and in various other countries. 39

40 Doug Long, Vice President, Industry Relations Doug Long is Vice President of Industry Relations at IQVIA (formerly QuintilesIMS), the world s largest pharmaceutical information company. IQVIA offers services to the pharmaceutical industry in over 100 countries around the globe. Doug has been with IQVIA since IQVIA (NYSE:IQV) is a leading global provider of information, innovative technology solutions and contract research services focused on using data and science to help healthcare clients find better solutions for their patients. Formed through the merger of IMS Health and Quintiles, IQVIA offers a broad range of solutions that harness advances in healthcare information, technology, analytics and human ingenuity to drive healthcare forward. IQVIA enables companies to rethink approaches to clinical development and commercialization, innovate with confidence as well as accelerate meaningful healthcare outcomes. IQVIA has approximately 55,000 employees in more than 100 countries, all committed to making the potential of human data science a reality. IQVIA s approach to human data science is powered by the IQVIA CORE, driving unique actionable insights at the intersection of big data, transformative technology and analytics with extensive domain expertise.. Doug is a frequent industry speaker and the recipient of many awards from trade groups. Before joining IQVIA, Doug held positions at Nielsen Market Research for 16 years in various sales and marketing capacities. A native of Illinois, Doug received a BA from DePauw University and holds an MBA in management from Fairleigh Dickinson University. 40

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