Identifying Critical Factors Pre-launch

Identifying Critical Factors Pre-launch Incorporate pricing and market access into product planning Eric M. Bachman, Director Boston office One Canal Park Cambridge, MA 02141, USA Tel. +1 617 231 4592 Eric.Bachman@simon-kucher.com www.simon-kucher.com

Simon-Kucher is a leading management consultancy >2,000 projects in the last 3 years Global presence Strategy > 400 Sales > 500 Marketing > 500 Pricing > 1,000 Growth and competitive strategies Product portfolio (re-)design Pricing excellence Customer relationship and customer value management Sales strategies and sales channel optimization Toronto Boston New York San Francisco Atlanta Amsterdam Madrid Barcelona Milan Dubai Bonn Munich Brussels Paris Cologne Warsaw São Paulo Copenhagen Vienna Frankfurt Zurich Santiago de Chile Istanbul London Luxembourg 29 offices worldwide, 800 employees Beijing Singapore Tokyo Sydney Simon-Kucher s revenue split Simon-Kucher s growth Other Revenue in $m No. of Employees Chemicals/ Construction Automotive 7% 10% 13% 35% Healthcare Pharma MedTech Biotech Providers 223 190 205 161.3 140 446 550 625 700 800 Technology/ Engineering 11% Financial Services 12% 12% Telco/IT/Media 63 30.4 '00 '05 '10 '11 '12 '13 14 248 130 46 '95 '00 '05 '10 '11 '12 '13 '14 Source: Simon-Kucher 2

We are recognized as the world s leading pricing advisor Unrivalled experience World leader in pricing 2,000+ Pricing projects completed in the last 3 years alone World leader in giving advice to companies on how to price their products BusinessWeek The world s leading pricing consultancy The Economist 800 Strategy professionals in 29 offices worldwide Pricing strategy specialists The Wall Street Journal In pricing you offer something nobody else does Professor Peter Drucker Best consultancies in marketing and sales* 1 to 5 % Percentage points on margin improvement 1 Simon-Kucher & Partners manager magazin 40 Books written on pricing and business management 2 3 Boston Consulting Group McKinsey & Company Source: manager magazine, August 2011/IMB, survey among German top managers 3

Agenda Why worry about P&MA during development? What factors should be considered and when? Evaluating the risk vs reward trade-off 4

Case study 1: Product s positioning in the therapeutic pathway can drastically change its price potential Product Example High risk Potentially infected Severely symptomatic Patients that are not showing signs of infection The infection is not confirmed, but some symptoms are shown Patients are confirmed to be infected and become much more difficult to treat Patient population Unmet need and willingness to pay Situation: Phase 1 product Treats a rare type of hospital infection Client has questions about price, value, and access Problem: The transition to severely symptomatic only takes 1-2 days and makes the infection much more difficult to treat Willingness to pay is low until the infection worsens significantly Solution: Position the product where willingness to pay is high but at a point before the infection became difficult to treat 5

Case study 2: Product s clinical design may not be accepted by payers for reimbursement For a product that was starting phase 3 trials, the market needs had changed substantially. Product Example BMD Comparator data Fracture data Regulatory requirements Reimbursement requirements Payers were likely to require multiple lines of therapy before using the new agent with the planned data package Differences between US and EU needs made the situation more complex There were questions about the validity of the BMD endpoint with KOLs After a thorough evaluation, the manufacturer decided to not continue developing the therapy. 6

Pricing & market access input in development stage leads to big payoffs (slide o summarize the importance and need for early P&MA) Typical product cash flow: Product cash flow Product Revenues R&D Costs Cash flow with P&MA planning across development stages: 1 Reduces costs by: Prioritizing R&D candidates based on future potential Making quicker and better go / no go decisions 2 3 Increases incremental peak revenue: gains compound year-on-year Accelerates revenue: payerrationalized clinical trials lead to faster reimbursement Clinical development stage Source: Simon-Kucher & Partners 7

Agenda Why worry about P&MA during development? What factors should be considered and when? Evaluating the risk vs reward trade-off 8

Simon-Kucher recommends the payer perspective be built into all junctures in a product s lifecycle Typical focus areas during a product s lifecycle Start of... Phase I trials Start of... Phase II trials Start of... Phase III Trials Launch Strategic R&D Landscape and initial pricing assessment Market access launch pricing strategy & contracting options Value strategy framework Development of value proposition framework Value story development and positioning Landscape assessment Mock payer negotiations Payer-rationalized clinical trial design Market access playbooks LOE planning Focus: Price-positioning Focus: P&MA strategy Source: Simon-Kucher & Partners. 9

Price-positioning: questions to consider How will the market change before the product launches? What product benefits are needed to achieve commercial success? How can we design a development program that will meet the needs of regulators, physicians, and payers? How does the strategy for this product fit into the broader organizational mission/goals/objectives/strategy? Source: Simon-Kucher & Partners. 11

The design and outcomes of clinical trials will have a major influence on a product s perceived value Stakeholder assessment of the clinical trial design and the expected outcomes helps to shape the product s future market access and pricing strategy. What information is meaningful to stakeholders? How do different development scenarios influence perceived value and P&R opportunities? What are lessons learned from comparable products? How do payers and physicians value the clinical trial design and comparators? Which primary and secondary endpoints provide strongest evidence? Clinical trials for a new drug Is data necessary for specific patient subpopulations? What is the value of patient- and physician- reported outcomes? What influence do the duration & size of the trial have? Perceived therapeutic improvement Use & market uptake Reimbursement & market access Pricing opportunities Source: Simon-Kucher & Partners. 12

From an access perspective, how do we prioritize indications? The market access potential can vary substantially across markets. Project Example Overall attractiveness US Overall attractiveness EU-4 (DE, FR, IT, SP) High Maybe Strong negotiation position Go Maybe Strong negotiation position Go Bubble size (relative mkt size) should be compared within each graph, not across graphs. Indication 1 Indication 2 Indication 1 KOL demand Indication 2 Indication 3 Indication 3 Low No go Weak negotiation position Weak competitive position No go Weak negotiation position Weak competitive position Not covered Covered with restrictions Covered Not reimbursed Reimbursed with restrictions Reimbursed Coverage at current price Reimbursement at current price Bubble size factors in eligible patient population and treatment duration. Source: Simon-Kucher & Partners. Data has been disguised 13

Even early in development, a concept for the value story can be developed Value story Target value proposition A short, concise statement to communicate the value of the product to key stakeholders Early in development, there may be a single product statement Key value messages Summary of key points of value story Detailed evidence and supporting data Detailed presentation of supporting evidence An effective value story needs to: Support the overall product and portfolio strategies Target payers as well as other stakeholders access drivers & incentives Address the questions for which payers & other stakeholders want answers Source: Simon-Kucher & Partners 14

P&MA strategy: questions to consider $ What price at launch would optimize access and revenue? How can we effectively and efficiently communicate the value of our product to key stakeholders (e.g. payers)?? What concerns about the product will payers have at launch? What options do we have to address these concerns? Source: Simon-Kucher & Partners. 16

Output example: Value message matrix Simon-Kucher uses the value message matrix to present the different rating criteria for each message in order to draw conclusions and view the overall success of the payer value story. Value message matrix Importance of value message High Low Evidence needed (Important for coverage/reimbursem ent but not believable improvement in evidence needed!) Lower Priority (Not as believable, and has little impact on coverage / reimbursement) Competitive advantage (Well-supported, believable, and has a positive impact on coverage / reimbursement) Nice-to-have (Respondents find value message credible, but little coverage / reimbursement impact) Uniqueness Each value message is graphed in the matrix as a dot. The size of the dot indicates the uniqueness of the value message. Other options deliver the same Value message matrices can be created for specific payer segments No competitor can deliver this Low Credibility of value message High Source: Simon-Kucher & Partners 17

Comprehensive approaches to evaluating the pricing opportunities In the US, multiple methodologies across stakeholder groups will ensure results are validated by both payers and robust quantitative research. Value story impact on pricing Pricing strategy development Comprehensive revenue analysis Aggregation of data Pricing opportunities Identify key opportunities and challenges for coverage across price points, including e.g. differences in cost-sharing implications of Commercial, Medicare Part D, and Medicaid Assess physician price sensitivity and willingness to prescribe under various access scenarios and price points Media scrutiny Identify potential risks of negative media attention at various price levels to minimize risk to the overall P&MA strategy Source: Simon-Kucher & Partners; Forbes Online; New York Magazine 18

Data from payers and physicians are combined to generate aggregate sensitivity curves A revenue function for will influence decision-making among pricing strategy options. Conceptual % of lives 50% 25% 0% 1. Payer / hospital access Payer management by pricing scenario 100% 75% 50% 25% 0% 81% 87% 19% 13% 13% 12% 2. Physician prescribing 33% 27% 10% 77% 20% 68% Price 1 Price 2 Price 3 Price 4 18% Peer-to-peer review PA to label Minimal management Physician prescribing by price / copay scenario % of patients 7% Price 1 Price 2 Price 3 Price 4 60% 40% 20% 3. Product utilization Aggregate utilization (including management and price sensitivity) 0% Price 1 Price 2 Price 3 Price 4 4. Revenue functions Revenue maximization 100 80 60 40 20 0 Price 1 Price 2 Price 3 Price 4 Revenue = price * volume Index 100 = maximum revenue Simon-Kucher uses robust decision simulation exercises to generate the input data for these exercises (with both physicians and payers). Source: Simon-Kucher & Partners 19

Outcome example from EU payer research: Where will restrictions/loss of reimbursement occur? Expected price-restriction relationships European countries Conceptual France Germany Italy Spain Reimbursement exclusion P2 Severe restriction A P4 Therapy Advice U P3 Reimbursement exclusion P7 Reimbursement exclusion P9 Note: Restrictions would be described in detail, (i.e. restricted to use only in specific patient populations, ) Price Restriction T P1 Restriction W Restriction V P6 P5 Restriction X P8 Innovative access schemes and back of the envelope cost/ QALY calculations will be explored as relevant per market Restriction threshold by payers Reimbursement or severe restrictions/coverage threshold by payers Thresholds derived from both primary research and implications of national P&R systems (i.e. expected ASMR score in France and related implications for P&R opportunities) Source: Simon-Kucher & Partners 20

Agenda Why worry about P&MA during development? What factors should be considered and when? Evaluating the risk vs reward trade-off 21

When evaluating investment options, changes in the perceived value of a product can be quantified Additional perceived value provided by additional evidence Value What is the cost? What would be the impact of non-successful study? Product value Sub-population data Outcome study Health economic model Source: Simon-Kucher & Partners 22

Measuring the impact of investment in additional data Does the additional data. Investment cost Investment impact Increase the achievable price? Reduce access barriers? Increase product uptake? Source: Simon-Kucher & Partners 23

Can the impact of the additional data be measured within the global sales forecast? 1,000,000 Global sales forecast Annual sales (m ) 750,000 500,000 250,000 - Year Source: Simon-Kucher & Partners 24

Thank you Boston office One Canal Park Cambridge, MA 02141, USA Tel. +1 617 231 4500 www.simon-kucher.com