Russia: Market Access Challenges and Opportunities IMSCG PMA Conference London 2014 Copyright 2014, IMS Health and its affiliates. All rights reserved. Agenda • Overview of the Russian pharmaceutical market • OOP vs. reimbursement • How to play? PMA conference Russia Market Access 2 IMSCG PMA Conference London 2014 Russia is a growing pharmaceutical market, expected to be ranked 8th Globally by 2017 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1 1 2 1 1 1 1 11 8 1 3 3 2 4 2007 Index US 100 Japan 27 France 13 Germany 13 China 11 Italy 8 UK 7 Spain 7 Canada 7 Brazil 5 Mexico 4 Australia 4 South Korea 3 Russia 3 Turkey 2 India 2 Netherlands 2 Greece 2 Poland 2 Belgium 2 Change in ranking over prior 5 years Source: IMS Market Prognosis, September 2013s PMA conference Russia Market Access 3 IMSCG PMA Conference London 2014 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 2 2 4 1 1 2 3 3 3 2 8 2 1 9 2012 US Japan China Germany France Brazil Italy UK Canada Spain Russia Australia India Mexico South Korea Venezuela Turkey Poland Argentina Belgium Index 100 27 25 13 11 8 8 7 7 6 5 4 4 4 3 3 3 2 2 2 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1 1 2 1 1 3 1 1 2 2 1 1 3 1 1 1 2 8 2017 Index US 100 China 45 Japan 29 Brazil 13 Germany 13 France 10 Italy 8 Russia 7 UK 7 7 Canada India 6 Spain 5 Mexico 4 South Korea 4 Australia 4 Turkey 3 Venezuela 2 Argentina 2 Indonesia 2 Poland 2 Across 2008-2012 30 NCEs were launched in Russia, but their share by end of this period was just about 0,5% Country Innovation profile (NCEs launched vs. Market Share achieved) US (2008-12) Market Share of Total Rx market NCEs (2003-07) 6.5% Countries with low # NCEs and strong penetration 6.0% 5.5% EU EUaverage averagen46 n48 Countries with high # NCEs and strong penetration Germany 5.0% Ireland Luxembourg 4.5% France Slovakia 4.0% Belgium EU average 3.3% 2.3% 3.5% 3.0% Netherlands Slovenia Countries with low # NCEs and low penetration 2.5% Spain Switzerland Greece Austria Finland Sweden Mexico Norway Italy UK Czech Hungary Estonia Latvia Brazil South Africa Russia Japan Turkey Romania 2.0% 1.5% 1.0% Lithuania India China Bulgaria Croatia 0.5% Countries with high # NCEs and low penetration Poland 0.0% 0 10 20 30 40 50 60 70 80 Number of NCEs (2003-07) (2008-12) launched NCEs (New Chemical Entities) Source: IMS Health, MIDAS, MAT Jun 2013, Rx only. Denmark and Portugal not included PMA conference Russia Market Access 4 IMSCG PMA Conference London 2014 90 However, on average all drug prices are relatively low vs. rest of Europe and a higher generic penetration exists Average price per pill (LC EUR) MAT3 2014 Share of non-generics (SU) MAT3 2014 0.50 35% 30% 0.40 25% 0.30 20% 0.20 15% 10% 0.10 5% 0.00 0% Russia EU5 Russia Non-Generics Generics 0.25 Share of non-generics (EUR) MAT3 2014 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 0.20 0.15 0.10 0.05 0.00 Russia EU5 EU5 70% 60% 50% 40% 30% 20% 10% 0% Russia Source: IMS MIDAS PMA conference Russia Market Access 5 IMSCG PMA Conference London 2014 EU5 Russia EU5 Future growth will be driven by healthcare priorities, which includes boosting locally manufactured products • Priorities declared by the Russian healthcare are as follows − Improving health indicators (preventive intervention) − Screening and better disease monitoring/management − Widening access to high-quality healthcare products and services − Modernizing the System − Boosting the share of locally manufactured drugs to 50% of the overall pharmaceutical market by 2020, and to 90% of products on the EssentialDrugsList (EDL) by 2018 • Whilst notable space for improvements in terms exist in − Healthcare access − Diagnosis − Unmet treatment needs • It − − − is not unusual for the course of action to deviate from the plan The agenda of the federal institutions is subject to political situation Presidential elections in 2018 may trigger some actions… …but some decisions may as well be delayed Source: Russia Market Prognosis 2014; internal expertise PMA conference Russia Market Access 6 IMSCG PMA Conference London 2014 Agenda • Overview of the Russian pharmaceutical market • OOP vs. reimbursement • How to play? PMA conference Russia Market Access 7 IMSCG PMA Conference London 2014 Russia is a complex and fragmented market with numerous funding challenges Niche Clinics & Hospitals National health Programmes 11% Federal clinics Dispensing Channels Institutions District hosp. Other* 3% Municipal hosp. Ph. chains 7VZN 7% ONLS 6% DLO Regional Reimb 11% RETAIL 63% Reimbursed Federal Reimbursed Regional Out-Of-Pocket Pharmacies Kiosks Financing Fed tender Reg/Hosp tender Source: IMS pharmacy panel and tender database PMA conference Russia Market Access 8 IMSCG PMA Conference London 2014 Private – OOP Other (gazprom, goscomsport, prisons etc.) There is a large (63%) component of retail out-of-pocket payments which patients will pay for Share by value in TRD prices Pharmacy purchasing prices, 2013 100% 80% 6% • Patients are used to paying for drugs; If properly diagnosed, treated and have the ability to pay 3% • Playing in the out-of-pocket field is relatively rewarding – Russia has a notable volume of high income patients, conveniently concentrated in most wealthy regions 7% 21% 60% 40% • Expensive specialty therapies seek federal or regional funding to expand patient base 63% 20% 0% Funding source Fed. institutions* Reg. Hospital Fed. Tender (7VZN) Retail OOP Reg. Tender (ONLS) *E.g. Gazprom, Goscomsport, Prisons Source: IMS pharmacy panel and tender database PMA conference Russia Market Access 9 IMSCG PMA Conference London 2014 There is space for playing in out-of pocket even if price is on the higher end (main examples include $30-45 drugs) An OOP product should provide unique sales preposition to consumers and be supported by strong promotional activities directed to specialists and final consumers Exforge sales Exforge (45 US$ per pack) is an RX product for hypertension treatment that was actively supported by Novartis SF team Yaz sales Yaz (30 US$ per pack) is a successful example of the contraceptive product uptake in the local market that was strongly supported by promotional activities to specialists 43 Sales (USD, M) 50 Yaz Plus that was launched in 2012 contributed 6 mln US$ in 2013 40 30 20 10 0 0 1 2 5 8 10 34 24 12 12 0 0 2 2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013 Retail Source: IMS Russia database, trade price (in 2013 Yaz sales together with sales of sub-brand Yaz Plus) PMA conference Russia Market Access 10 IMSCG PMA Conference London 2014 However, OOP drugs are scarce among top15 launches – scale, as anywhere comes from reimbursement Top 15 innovative launches across 2008-2012 (mln USD, full year) Trade Name Corporation Financial sources (State/OOP) PREZISTA J&J State 59 YAZ BAYER OOP 34 ISENTRESS MSD State 31 CERAXON TAKEDA S&OPP 25 KIVEXA GSK State 24 INTELENCE J&J State 21 ELAPRASE SHIRE State 18 INVIRASE ROCHE State 18 LUCENTIS NOVARTIS State 15 TELZIR GSK State 13 VECTIBIX AMGEN State 13 NEXAVAR BAYER State 12 EXFORGE NOVARTIS OOP 11 GALVUS MET NOVARTIS S&OPP 11 SPRYCEL BMS State 10 Source: IMS Russia database, trade price (in 2013 Yaz sales together with sales of sub-brand Yaz Plus) PMA conference Russia Market Access 11 IMSCG PMA Conference London 2014 Sales by value in 2012, mln $ The main channels to achieve reimbursement is EDL, alternatives include regional programs (retail or hospital) Listing principles 2-3 years ONLS Hospital Regional Main steps Fully based on EDL Mainly municipal Federal& Regional ~50% Fully based on EDL EDL listing 2 years EDL listing ONLS listing 0.5-1 year Hospital listing 1-2 years Own listing Fully based on EDL 2 years EDL listing Own listing Source: IMS Health experts PMA conference Russia Market Access 12 IMSCG PMA Conference London 2014 Regional listing • 5-7 years • No known short-cuts • 2-4 years • Some activities can be done in parallel • Pre-launch activities • 1-2 years • Pre-launch activities Hospital listing 1-2 years ~50% no cases since introduction First Sales/Shortcuts 0.5-1 year Regional listing • 2-4 years • Some activities can be done in parallel • Pre-launch activities • 1-2 years • Pre-launch activities Reimbursed funding is challenging – ONLS drug list not updated since 2007 and 7N program limited to 14 INNs Top reimbursed INN’s on Federal level Molecule RITUXIMAB BORTEZOMIB FACTOR VIII GLATIRAMER ACETATE IMATINIB INTERFERON BETA-1A INSULIN GLARGINE TRASTUZUMAB INFLIXIMAB EPTACOG ALFA (ACTIVATED) INSULIN HUMAN ISOPHANE OCTOCOG ALFA 2013 sales value (trade price) – USD 250 191 158 156 147 92 79 72 60 394 447 285 073 432 149 107 047 002 466 502 746 411 096 841 743 460 590 57 634 794 49 984 228 43 900 226 Source: IMS panel and tender data, IMS Health experts PMA conference Russia Market Access 13 IMSCG PMA Conference London 2014 2013 sales volume (units) 170 110 849 140 89 268 732 32 47 Market Share TRD Price in USD(%) 907 460 910 323 543 042 258 926 126 9,36 7,16 5,92 5,84 5,51 3,45 2,96 2,69 2,24 47 667 2,16 1 936 769 162 170 1,87 1,64 ~50% • Half of federal reimbursement is concentrated among top 12 INNs (in total about 900 INNs were reimbursed federally last year) • The list includes drugs from the 7N program (hemophilia, cystic fibrosis, growth hormone deficiency, Gaucher’s disease, Leukemia, MS, and post-transplant immune system suppression Reimbursed funding is challenging- ONLS drug list not updated since 2007 and 7N program limited to 14 INNs Seven Nosologies programe (7N) Disease condition Reimbursed molecules Example brands Hemophilia Octocog alpha, Epatoc alpha (activated), Factor VIII, Factor IX Advate, Epatoc alpha (activated), Alphanate, Alphanine SD Cystic fibrosis Dornase alpha Pulmozyme Growth hormone deficiency Human growth hormone Somatropin Gaucher’s disease Imiglucerase Cerezyme Leukemia Bortezomib, Imatinib, Rituximab, Fludarabine Velcade, Gleevec, Rituxan, Fludara Multiple sclerosis Glatiramer acetate, Interferon beta-1a, Interferon beta 1-b Copaxone, Avonex, Betaferon Post-transplant immune system suppression Mycophenolare mofetil, Mycophenolic acid, Tacrolimus, Ciclosporin CellCept, Myfortic, Prograf, Neoral Source: IMS panel and tender data, IMS Health experts PMA conference Russia Market Access 14 IMSCG PMA Conference London 2014 If not listed within Federal schemes, regional funding is diverse and may provide opportunities Federal opportunity is largest, but regional is still important Regional reimbursement is often obtained prior to federal listing and is an important component of a product’s overall strategy for Russia (Regional/Local) Hospital segment (Regional) Regional reimbursement Funding Federal/Regional through Obligatory Medical Insurance Fund (OMI) Regional budget Administration Hospital tenders Regional Healthcare Authorities (Regional MOHs) Listing EDL and Standards of Treatment Regional formularies based on EDL and Standards of Treatment; Orphan diseases Not only is regional reimbursement a significant contributor to total revenue, the regional MoH and stakeholders can have significant influence on federal decisions Source: IMS Health experts PMA conference Russia Market Access 15 IMSCG PMA Conference London 2014 Regional funding is less concentrated than federal (top 12 INN only make 25% of drug spend) Top reimbursed INN’s on Regional level (national total) Molecule 2013 2013 sales sales value (trade volume price) – USD (units) Market Share TRD Price in USD(%) INSULIN GLARGINE 39 026 433 332 182 3,72 IDURSULFASE 31 130 114 4 670 2,96 INSULIN HUMAN ISOPHANE 26 416 620 982 046 2,52 BUDESONIDE*FORMOTEROL 24 842 684 515 701 2,37 ECULIZUMAB 21 508 148 2 209 2,05 METFORMIN 21 189 391 3 759 854 2,02 FLUTICASONE*SALMETEROL 20 562 094 450 645 1,96 ADALIMUMAB 17 621 388 7 881 1,68 INSULIN HUMAN BASE 17 108 767 618 416 1,63 BOSENTAN 15 707 371 2 419 1,50 ~25% Source: IMS panel and tender data, IMS Health experts PMA conference Russia Market Access 16 IMSCG PMA Conference London 2014 • Regional reimbursement is less concentrated and spans across more INNs (1500 in total) • There is a stronger diabetes component and less presence of rare diseases While Federal reimbursement has no preference towards types of treatments, patterns at regional level are seen Share of ATC1 in regions’ drug spend, 2013 • The region of Khabarovsk (quite near to Japan) it is the top spender in Respiratory 24% 20% • At the same time, it spends only 7% on Cardio 16% 12% 8% 4% Max Average Source: IMS regional data PMA conference Russia Market Access 17 IMSCG PMA Conference London 2014 Min Respiratory Neuro Muscle Oncology Anti-Inf. Derma Cardio Blood Alimentary 0% • A subregion of Volga District (not far from Ukraine) is a strong spender on primary care classes (A, C) • At the same time, they spend only 3% of their budget on Oncology (national low) Erbitux has found some success in hospitals though not comparable to its competitor Avastin, which is on the EDL Erbitux sales Even without federal listing, Erbitux has been able to grown its hospital channel and capture regional budget Avastin sales Avastin, which is EDL listed, achieves significant DLO sales but also has grown its hospital channel sales 54 Sales (USD, M) 60 44 50 34 40 30 20 20 10 0 36 0 0 2 3 6 7 13 12 2006 2007 2008 2009 2010 2011 2012 DLO Hospital 15 2006 2007 2008 2009 2010 2011 2012 Retail Note: MIDAS sales audits do not cover some regional sales which would be in addition to the data shown Source: IMS MIDAS, IMS Health experts PMA conference Russia Market Access 18 IMSCG PMA Conference London 2014 Similiarly, Humira has also found some success vs. Remicade: Russia’s top selling TNFi – at the regional level Humira sales While not being EDL or DLO listed, Humira has been able to achieve some success despite strong competition from Remicade Remicade sales Remicade has been very successful due to its DLO channel and use as an inpatient infusible 66 70 53 Sales (USD, M) 60 50 39 40 30 17 20 10 0 0 0 0 0 5 8 19 8 2006 2007 2008 2009 2010 2011 2012 DLO 17 44 Hospital 2006 2007 2008 2009 2010 2011 2012 Retail Note: MIDAS sales audits do not cover some regional sales which would be in addition to the data shown Source: IMS MIDAS, IMS Health experts PMA conference Russia Market Access 19 IMSCG PMA Conference London 2014 Over the coming years both federal and regional funding will still provide growth and opportunity by… Area Prospects Federal – Funding Expansion of the federal program to cover new diseases and the use of orphan drugs is expected to take place from 2015 Federal – 7Nosologies 7N program expected to expand add a number of second line drugs (moderate impact on sales, but a different mix) Fed/Reg – EDL pricing Price growth in DLO expected to remain restricted in (EDL pricing methodology restricts increases for most products) Regional – New programs Additional investments expected through special regional programs aimed to provide more patients with reimbursed products and free medical services Source: IMS Health PMA conference Russia Market Access 20 IMSCG PMA Conference London 2014 Agenda • Overview of the Russian pharmaceutical market • OOP vs. reimbursement • How to play? PMA conference Russia Market Access 21 IMSCG PMA Conference London 2014 How can you, the multinational manufacture play on the Russian market in short and long term? Out –of-pocket as entry point Reimbursement as expansion leverage • • • • Should be able to pay for itself, in case reimbursement does not come through Should target regions based on key treatment centers + local wealth For less expensive products it may end up to be the end-game • With successful doctors promotion, awareness campaigns and stimulation of diagnostics sales may grow notably even without reimbursement • • Source: IMS Health PMA conference Russia Market Access 22 IMSCG PMA Conference London 2014 Federal – work with federal institutions on getting into EDL (may turn out to be a long term initiative and no guarantee of success, but the direction is simply to big to ignore). Regional – identify regions with high prevalence/ diagnosis/spend on therapy… …and develop customized tactics on how to make reimbursement case there • (i.e. may begin by driving case studies through special committee funding decisions, and than based on that drive inclusion into formulary) Be aware… • • • • Registration takes time and is expensive • Local clinical trials are necessary favoring local players and fueling local CRO investments Price pressure is strong • Variety of reference countries Russia looks at (EU, Switzerland, Turkey and a range of CIS countries) • Price cannot be higher than minimum in reference, nor then import price from previous year Given recent sanctions against Russia, it is speculated that preference towards local producers may increase • 15% price advantage already • Entry procedure for local generics may be fast-tracked The program for increasing share of local generics (2020) is not moving as fast as expected – how will the government adjust?
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