Hoffman Slides

Projecting Future Drug Expenditures and an

Approach to Financial Planning for Pharmaceuticals 11th Annual Pharmacy Purchasing Networking Conference August 14, 2007

James M. Hoffman, PharmD, MS, BCPS Medication Outcomes Coordinator St. Jude Children’s Research Hospital Assistant Professor University of Tennessee College of Pharmacy Memphis, TN

Objectives











Discuss recent trends in overall, hospital, and clinic prescription drug expenditures and understand factors that will influence pharmaceutical expenditure patterns. Describe the drug pipeline for and evaluate the influence of these new agents on prescription drug expenditures for health systems. Discuss the diffusion patterns of recently approved drugs that influence health system drug expenditures and trends in the availability and pricing of generic drugs. Devise an approach to financial planning for pharmaceuticals.

2005 U.S. Pharmaceutical Market Exceeded $250 Billion Dollars $300

$273.5 $252.0 $239.0 $216.4 $192.2

$200 $150 $100

$73.4 $82.0 $66.6 $61.2

$92.9

$128.0 $107.3

$172.2 $146.8

$50 $0

'9 3 '9 4 '9 5 '9 6 '9 7 '9 8 '9 9 '0 0 '0 1 '0 2 '0 3 '0 4 '0 5 '0 6E

Billions

$250

Source: IMS HEALTH

2005 US Health Care Expenditures by Category 7.4% Total HC Growth

8% Rx Growth

Other Medical Svcs 10.1%

Public Health Activity Program 3.1% Admin 7.1%

Research 2.1%

Structures & Equipment 4.6% Medical Equipment 2.8% Hospital Care 30.1%

Pharmaceuticals 10.1%

Nursing Home/ Home Health 8.5% Source: CMS, Office of the Actuary from Borger et al, Health Affairs, 2006; W61– W73; Numbers Projected

Physician Services 21.3%

2004 US Health Care Expenditures by Category 7.5% Total HC Growth

11.9% Rx Growth

Other Medical Svcs 10.2%

Program Admin 7.1%

Public Health Activity 3.2%

Research & Construction Medical 3.8% Equipment 3.0%

Pharmaceuticals 11.1% Hospital Care 30.6% Nursing Home/ Home Health 8.9% Source: CMS, Office of the Actuary from Heffler et al, Health Affairs, 2005; W5-74 – W5-85

Physician Services 22.0%

Growth in Health Care Expenditures by Type, 1995-2004 % G ro w th

20 15 10 5 0 1970

1980

1993

National Health Expenditures Physician and Clinical Services

1997

2000

2003

2004

Hospital Care Prescription Drugs

Caitlin et al, Health Affairs 26, no. 1 (2007): 142–153 (CMS data)

2005

Trends in Overall Drug Expenditures: 2000 to 2006 Since 2001, the growth in overall drug expenditures has moderated 20%

18% 15%

15%

12.3%

11.4%

10%

8.3%

7.5% 5.5%

5%

0% 2000

2001

2002

2003

Sources: Hoffman JM, Shah ND, Vermeulen LC, et al. Hoffman JM, Shah ND, Vermeulen LC, et al. Hoffman JM, Shah ND, Vermeulen LC, et al. Hoffman JM, Shah ND, Vermeulen LC, et al.

Forecasting future drug expenditures 2004. Forecasting future drug expenditures 2005. Forecasting future drug expenditures 2006. Forecasting future drug expenditures 2007.

Am J Health-Syst Pharm. Am J Health-Syst Pharm. Am J Health-Syst Pharm. Am J Health-Syst Pharm.

2004; 61:145-58. (IMSHealth data) 2005; 62:149-67. (IMSHealth data) 2006; 63:123-38 (IMSHealth data) IN PRESS (IMSHealth data)

2004

2005

2006 (9mos)

Trends in Drug Expenditures for Non-Federal Hospitals: 2000-2006* 30%

26.8%

25% 20% 15% 10%

9.7% 4.9%

6.2%

6.4%

5.7% 2.5%

5% 0%

1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006* * 2006 Data based on 9 months of 2006 Hoffman JM, Shah ND, Vermeulen LC, et al. Forecasting future drug expenditures 2005. Am J Health-Syst Pharm. 2005; 62:149-67. (IMSHealth data) Hoffman JM, Shah ND, Vermeulen LC, et al. Forecasting future drug expenditures 2006. Am J Health-Syst Pharm. 2006; 63:123-38 (IMSHealth data) Hoffman JM, Shah ND, Vermeulen LC, et al. Forecasting future drug expenditures 2007. Am J Health-Syst Pharm. IN PRESS (IMSHealth data)

Trends in Drug Expenditures for Clinics: 2000-2006* 30%

24.6% 25%

23.0%

21.4% 22.5% 18.2%

20%

13.5% 12.4%

15% 10% 5% 0%

1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006* * 2006 Data based on 9 months of 2006 Hoffman JM, Shah ND, Vermeulen LC, et al. Forecasting future drug expenditures 2005. Am J Health-Syst Pharm. 2005; 62:149-67. (IMSHealth data) Hoffman JM, Shah ND, Vermeulen LC, et al. Forecasting future drug expenditures 2006. Am J Health-Syst Pharm. 2006; 63:123-38 (IMSHealth data) Hoffman JM, Shah ND, Vermeulen LC, et al. Forecasting future drug expenditures 2007. Am J Health-Syst Pharm. IN PRESS (IMSHealth data)

Trends in Overall Drug Expenditures: 2000 to 2006* 20%

18.1% 15.3%

15%

12.4% 12.6% 9.2%

10%

7.5% 5.5%

5%

0% 1999-2000

2000-2001

2001-2002

* 2006 Data based on 9 months of 2006

2002-2003

2003-2004

2004-2005 2005-2006*

Reasons for Moderation in Growth of Drug Expenditures


Increased cost sharing for consumers •

Average co pay: • •




2000: $7 generics, $13 preferred, $17 nonpreferred 2005: $10 generics, $22 preferred, $35 nonpreferred

Decrease in number of new agents, especially new “blockbusters” •

For example, 21 NMEs in 2003 and 17 NMEs in 2002 vs. a high of 53 NMEs in 1996

Sources: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2000-2005. http://www.fda.gov/cder/rdmt/default.htm

Reasons for Moderation in Growth of Drug Expenditures


Safety concerns • • •




Rx to OTC conversions • •




Hormone replacement therapy COX 2 Inhibitors SSRIs in children and adolescents Nonsedating antihistamines Proton pump inhibitors

Generic Drugs

Examples of Recent Significant New Generics








Fluoxetine Lisinopril Milrinone Loratadine Metformin Omeprazole Paroxetine










Ciprofloxacin Gabapentin Fluconazole Carboplatin Amoxicillin-clavulanate Glimepride Azithromycin

Fluoxetine: Rapid Switch to Generic

Source: Benjamin G. Druss, Steven C. Marcus, Mark Olfson, and Harold Alan Pincus, Listening To Generic Prozac: Winners, Losers, And Sideliners, Health Affairs, Vol 23, Issue 5,2004: 210-216

Monitoring and Evaluating Drugs in Development



Gather information on drugs in development Determine which drugs are relevant to your institution •




Talk to key prescribers!!!

If relevant to your setting, discern if the drug is a: •

Therapeutic breakthrough •

•

“Me too” drug •

•

Marginal advantages over existing drugs in class

Lifestyle drug •

•

Will change practice and/or improve outcomes

Improve quality of life but do not increase life expectancy

Orphan/Military Use •

Not used in most hospitals (but important influence if used)

Evaluating the Cost of Drugs in Development





Based on knowledge of new drug and existing drugs, preliminary cost analysis can be conducted Global assessment of cost impact • • •




Will the new drug replace an existing drug? (+, -, or =) Will the new agent be added to existing therapy? (+) Will the new agent shift costs between settings of care? (e.g. from inpatient to clinic)

Remember not to overlook “me too” drugs •

Aggressive pricing can sometimes lead to therapeutic interchange opportunities and cost savings

Broad Pipeline Indicators






FDA Approvals New Drug Applications (NDAs) and Investigational New Drug Applications (INDs) FDA Approval Time

Broad Indicators of the Pipeline Size: FDA Approvals


20 novel drugs approved by FDA in 2005 •




36 novel drugs approved by FDA in 2004 •




31 NMEs and 5 Biologics

Compared to: • •




18 New Molecular Entities (NMEs) and 2 Biologics

21 NMEs approved in 2003 17 NMEs approved in 2002

Recent approvals not expected to result in widespread increase in drug costs •

•

2005: approvals not truly new (e.g. 2 Hyaluronidase products) or for small populations Many orphan drugs approved (7 in 2005; 9 in 2004)

Sources: http://www.fda.gov/cder/rdmt/default.htm

Number of Novel Drugs Approved by FDA: 2000 to 2006 40

36 32

35 30

27 23

25

21

20

17

20 15 10 5 0 2000

2001

Sources: http://www.fda.gov/cder/rdmt/default.htm

2002

2003

2004

2005

2006

Broad Indicators of the Pipeline Size: NDAs and INDs


Late Stage Pipeline •




Number of NDA filings consistent • • •

2005* = 116 2004* = 115 2003 = 109

Early Stage Pipeline •

Commercial INDs received by FDA • • •

•

Number of Active Commercial INDs at FDA by end of CY • • •

* Numbers include therapeutic biologics http://www.fda.gov/cder/rdmt/

2005* = 637 2004* = 621 2003 = 391

2005* 2004* 2003*

= 5,023 = 4,827 = 4,544

Broad Indicators of the Pipeline Size: Approval Time


Approval time expected to increase • •




Mean approval time for all application types actually decreased • • •




Lack of permanent FDA leadership Greater caution due to safety concerns (from both FDA and manufacturers)

2005 = 14.4 months 2004 = 18.7 months 2003 = 17.1 months

However, decrease due to mix of priority vs. standard applications •

75% of 2005 approvals were priority applications

Broad Indicators of the Pipeline Size: Approval Time


Approval times have remained consistent •

Priority NMEs/Biologics: Median approval • • •

•

6.0 months in 2005 6.0 months in 2004 6.7 months in 2003

Standard NMEs/Biologics: Median approval • • •

23.0 months in 2005 24.7 months in 2004 23.1 months in 2003

Drugs in Development: Alvimopan (Entereg)



Opioid antagonist with specificity for the GI tract Indication: treatment of postoperative illeus •




Also being studied for opioid-induced bowel dysfunction in patients with chronic pain not due to cancer

In a randomized placebo controlled study of patients undergoing abdominal surgery: •

•

Median time to first bowel movement was faster in the alvimopan group (70 hrs vs. 111 hrs, p=0.01) 23 hour difference in median time until hospital discharge (68 hrs vs. 91 hrs (p=0.03)

Taguchi A, et al.. N Engl J Med. 2001; 345:935-940.

Drugs in Development: Alvimopan (Entereg)






FDA deemed alvimopan “approvable” in 2005- but requested additional data from an ongoing trial Approval was expected in 2006 FDA issued another approvable letter issued Nov 2006; FDA requested: •

•




12 month safety data from ongoing study, including analysis of cardiovascular events Risk management plan

Data expected to be available 2nd Quarter 2007

See: http://phx.corporate-ir.net/phoenix.zhtml?c=120919&p=irol-newsArticle&t=Regular&id=926785

Anti-infectives in Development: Dalbavancin (Zeven)





Second generation lipoglycopeptide that acts by inhibiting cell wall synthesis Intravenous antibiotic with activity against a variety of Gram positive bacteria •




Including methicillin-resistant Staphylococcus aureus (MRSA)

Being evaluated for complicated skin and soft tissue infections and catheter related blood stream infections

Bosso JA. Pharmacotherapy. 2005; 25(10 Pt 2):55S-62S Seltzer E, Dorr MB, Goldstein BP et al. Clin Infec Dis. 2003; 37:1298-1303.

Anti-infectives in Development: Dalbavancin (Zeven)


Drug has long ~7.5 day half life, which leads to unique once weekly dosing regimen •







Expected to be key marketing point, but may also present challenges

Adverse events similar to various comparator regimens FDA issued approvable letter June 2006; approval and launch expected in 2007

Bosso JA. Pharmacotherapy. 2005; 25(10 Pt 2):55S-62S Seltzer E, Dorr MB, Goldstein BP et al. Clin Infec Dis. 2003; 37:1298-1303. Pfizer Form 10-Q on 3-Nov-2006 available at http://biz.yahoo.com/e/061103/pfe10-q.html

Anti-infectives in Development: Doripenem











New carbapenem with activity similar to currently available antipseudomonal carbapenems Initial development focused on ventilator associated pneumonia Also, being evaluated for complicated urinary tract infections, pyelonephritis, complicated intraabdominal infections Approval possible in late 2007

Bosso JA. Pharmacotherapy. 2005; 25(10 Pt 2):55S-62S

Quarterly Expenditures for Erythropoietin Products (Darbepoetin = Yellow Squares, Epoetin alfa = green diamonds; Total = Orange circles) 2,750 2,536

2,500

2,331

2,250 2,004

2,000

$ in Millions

1,750

1,852 1,712

1,723 1,616

1,565

1,925

1,622

1,669

1,558

1,968

1,603

2,031

1,577

2,054

1,532

2,126

1,565

2,097

1,499

2,168

1,484

2,233

2,243

1,511

1,475

1,545 1,466

1,500 1,250 991

1,000

866 684

750 454

500 250

147

165

237

303

335

522

560

722

768

598

366

Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06

Quarter

Continuous Erythropoietin Receptor Activator (CERA)










Pegylated epoetin product Initial development focused on Chronic Kidney Disease (CKD) population Application for CERA filed in 2006 Patent challenges but approval possible in 2007 Other anemia therapies in development – dynamic class over next 3 – 5 years

Summary of Emerging Therapies (1) Indication

Estimated Approval Date

Anti-epileptic

2007

Garenoxacin

Broad Spectrum Quinolone

2007

Sitaxsentan (Thelin)

Pulmonary Artery Hypertension

2007

Drug Rufinamide (Xilep)

Summary of Emerging Therapies (2) Drug CERA

Indication

Estimated Approval Date

Anemia

Late 2007 or early 2008

Breast Cancer

APPROVED

Diabetes

?

Rheumatoid Arthritis; Crohn’s Disease

3rd Quarter 2007

(Continuous Erythropoietin Receptor Activator)

Lapatinib (Tykerb) Vildagliptin (Galvus) Certolizumab (Cimzia)

Summary of Emerging Therapies (3) Indication

Expected Approval Date

Satraplatin

Prostate Cancer

3rd Quarter 2007

Temsirolimus

Various Cancers

APPROVED

Anticonvulsant

4th Quarter 2007

Drug

Vigabatrin (Sabril)

Emerging Therapies: Looking Beyond 2007


Torcetrapib •

•




Denosumab •




New class of antihyperlipidemic therapies that dramatically increases HDL Safety concerns – development ended New injectable osteoporosis therapy; administered only 2 times per year

Maraviroc and other CCR5 Inhibitors •

New class of HIV therapies

Brousseau ME, et al. Effects of an Inhibitor of Cholesteryl EsterTransfer Protein on HDL CholesterolN Engl J Med 2004;350:1505-15.

Summary of Drugs in Development


Approvals • •










Numbers are modest and flat Specialized

Early stage pipeline appears to be growing at slow rate Relatively small number of drugs in pipeline important to health systems Trends in drugs in development have helped moderate drug expenditures

Diffusion of Innovation New behaviors or technologies are adopted in stages depicted by an “S” shaped curve.

Rogers EM. Diffusion of innovations. 4th ed. New York: Free Press; 1995.

“Typical” Drug Diffusion Pattern









Initial use may slow But as familiarity with drug increases, use increases rapidly until drug is widely in use and use stabilizes Therefore, economic impact may not become important until several years after approval However, typical pattern has been less common recently

New Drug Diffusion Pattern





Slower drug diffusion due to safety concerns, which moderates drug expenditures Examples • • •

COX 2 Inhibitors Natalizumab Nesiritide

Safety Concerns and Diffusion: 2006




Safety concerns going away in 2006? No just lower profile Examples •




Gatifloxacin and dysglycemias Telithromycin and hepatatoxicity

Safety concerns still moderate expenditures

Data on Nesiritide





Meta analysis of 3 studies showed that the risk of death within 30 days after nesiritide therapy was higher compared to controls Meta analysis of 5 studies showed that nesiritide treated patients had an increased risk of worsening renal function compared to control patients

Sackner-Bernstein JD, Kowalski M, Fox M, Aaronson K. Short-term risk of death after treatment with nesiritide for decompensated heart failure: a pooled analysis of randomized controlled trials. JAMA. 2005; 293:1900-1905. Sackner-Bernstein JD, Skopicik HA, Aaronson KD. Risk of worsening renal function with nesiritide in patients with acutely decompensated heart failure. Circulation. 2005; 111:1487-1491.

Quarterly Expenditures for Nesiritde (4th Quarter 2002 to 2nd Quarter 2006) 140 $124 $113

120 $98 $99

$ in Millions

100

$89

$87

$75

80 $58 $56

60

$49

$44

$39

$36

40

$32 $25

20 Q4 02

Q1 03

Q2 03

Q3 03

Q4 03

Q1 04

Q2 04

Q3 04 Quarter

Q4 04

Q1 05

Q2 05

Q3 05

Q4 05

Q1 06

Q2 06

Typical Drug Diffusion Pattern Still Exists


Antifungals (azoles, echinocandins) • • •

Dynamic and important class Prophylaxis increasing Caspofungin 15th highest expenditure for Non-Federal Hospitals in 2005

Quarterly Expenditures for Caspofungin (Green Squares) and Voriconazole (Yellow Triangles) (4th Quarter 2002 to 2nd Quarter 2006) 90 $78 $78

80 $58

$ Millions

60

$81 $76

$61

$54 $46

50 $38

40

$31 $22

20 10

$87

$66

70

30

$81 $83

$18

$20 $22

$25

$28

$34 $34 $30 $31 $32

$36 $38

$41

$43 $45

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 02 03 03 03 03 04 04 04 04 05 05 05 05 06 06 Quarter

Typical Drug Diffusion Pattern Still Exists


Recombinant Factor VIIa (NovoSeven) •

Use continues to increase •

•

1st quarter 2005 expenditures for hospitals and clinics were more than double that of 1st quarter 2002

New indications – for example recent data on use for intracerebral hemorrhage

Mayer SA, Brun NC, Berftrup K, et al. for the Recombinant Factor VII Intracerebral Hemorrhage Trial Investigators. Recombinant Activated Factor VII for acute intracerebral hemorrhage. N Engl J Med. 2005; 352:777-785.

Quarterly Non Federal Hospital and Clinic Sales of Recombinant Factor VIIa from 1st Quarter 2002 to 2nd Quarter 2005 (NovoSeven, Novo Nordisk) $50

$45.4 $42.2

$41.8 $41.9 $40 $34.1

$36.9

$36.0

$ Millions

$31.8 $31.7 $28.2

$30

$28.1

$24.4

$20

$18.8 $18.0

$10

$0 1st Quarter 2002

2nd Quarter 2002

3rd Quarter 2002

4th Quarter 2002

1st Quarter 2003

2nd Quarter 2003

3rd Quarter 2003

4th Quarter 2003

Quarter

1st Quarter 2004

2nd Quarter 2004

3rd Quarter 2004

4th Quarter 2004

1st Quarter 2005

2nd Quarter 2005

Typical Drug Diffusion Pattern Still Exists


Colony Stimulating Factors (CSFs) (pegfilgrastim, filgrastim, sargramostim) •

•

•

Pegfilgrastim drives overall increase in CSF expenditures Particularly growth in CSF expenditures for clinic setting Further increase in use expected from: • •

Updated NCCN guidelines recommend broader use FDA indication for pegfilgrastim expanded to include use in less myelosuppressive chemotherapy regimens

Quarterly Hospital and Clinic Sales of CSFs from 1st Quarter 2002 to 2nd Quarter 2005 (Total CSFs include pegfilgrastim, filgrastim, and sargramostim) Total Hospital and Clinics CSFs Total CSFs for Clinics

Total Hospital and Clinics Pegfilgrastim Total Hospital and Clinics Filgrastim $680.2

$700 $579.4

$600

$599.9

$624.2

$546.0 $516.7

$500 $ Millions

$429.8

$447.7

$326.8

$313.1

$289.0

$264.1

$406.7

$332.6

$286.5

$447.0 $381.5

$378.9

$354.2 $298.2

$306.5

$150.3

$146.0 $144.3

$137.2

$143.0

$142.8

$140.4 $139.3

$151.5

2nd Quarter 2003

3rd Quarter 2003

1st Quarter 2004

2nd Quarter 2004

3rd Quarter 2004

4th Quarter 2004

2nd Quarter 2005

$230.6

$100

$445.7

$383.9

$359.1

$300

$472.8 $425.0

$392.5

$400

$200

$472.2 $487.9

$261.3

$278.3

$206.3

$106.1 $0.6

$0 1st Quarter 2002

2nd Quarter 2002

3rd Quarter 2002

4th Quarter 2002

1st Quarter 2003

4th Quarter 2003

Quarter

1st Quarter 2005

Estimated Value of Expected Patent Expirations $35

$27

$30 $25

$29

$22

$20 $15 $10 $5 $0

2006

2007 $ Billions

Source: Bain and Company/GPhA

2008

Key Potential Patent Expirations in 2007









Amlodipine (Norvasc) Carvedilol (Coreg) Fentanyl transmucosal (Actiq) Fosphenytoin (Cerebryx) Metoprolol Extended Release (Toprol XL) Sumatriptan (Imitrex) Zolpidem (Ambien) Ziprasidone (Geodon)

Key Potential Patent Expirations in 2008








Alendronate (Fosamax) Divalproex (Depakote) Granisetron (Kytril) Levetiracetam (Keppra) Irinotecan (Camptosar) Risperidone (Risperdal) Salmeterol (Serevent)

Pricing/Availability Trends:




More “at risk” launches (e.g. clopidogrel) Legislation to address citizen petitions Patent Reform • Patent Act of 2005 • Medicare Modernization Act • •

More likely to immediately influence generic access Only one 30 month stay during legal challenges

Pricing/Availability Trends: Industry Consolidation


Recent examples • • •




Theory: Fewer generic firms =

•

•




Sandoz (Novartis) acquired Eon Teva acquired IVAX (completed Jan 26) Various Indian generic firms acquiring firms in US, Canada, and Europe less competition = higher generic prices No data to suggest this has occurred across generics market But remains trend to monitor

Generic drug industry ability to broadly raise prices may be limited, but monitor niche products

Pricing/Availability Trends: FDA Approval Generic Drug Approvals Median times, approvals 36

400 321

380

273

Months

212

244

225

263 234

186

18

200

27.0 23.0

19.3

18.0

18.6

18.2

18.1

18.3

17.0

15.7

0

0 1995

1996

1997

1998

1999

2000

2001

2002

2003

Calendar year Median approval times Source: 2004 FDA CDER Report to the Nation

Number of generic approvals

2004

Approvals

207

Pricing/Availability Trends: FDA Approval Generic Drugs Submissions*

Number

700

350

635 479 283

307

330

345

1995

1996

1997

1998

296

365

320

392

0 1999

2000

2001

2002

2003

2004

Calendar year *Submissions = workload in subsequent years

Applications received (workload in future years) Source: 2004 FDA CDER Report to the Nation

Pricing/Availability Trends: FDA Approval Median ANDA approval time increasing, projected to be:




• •

16.9 months in FY06 17.5 months in FY07

Substantial backlog of generic applications




• •

800 to 850 pending applications at FDA FDA received record number of generic applications in Dec 05 (129)

FDA Office of Generic Drugs funding has remained level over last 3 years




Sources: Kaufman M New generics delayed: FDA sees backlog of 800 applicants, an all time high. The Boston Globe Feb 5 06 Generic drug reviews take a hit in FDA 2007 budget request. FDC Reports The Pink Sheet. Feb 13 06

“Generic” Biologics - Biosimilars








Biologics are among top expenditures for hospitals and clinics Some patents expired or nearing expiration, but “generic” biologics not yet marketed Presents unique challenges and questions • • • •

Legal/regulatory Production Safety Savings

Top 15 Drug Expenditures for Hospitals Percent of 2004 Hospital Drug Expenditures

Drug

2004 Expenditures ($000’s)

Epoetin Alfa

1,178,462

4.8%

-13.2%

Enoxaparin

806,156

3.3%

15.1%

Darbepoetin

379,864

1.5%

68.5%

Pegfilgrastim

426,804

1.7%

44.0%

Infliximab

521,449

2.1%

2.6%

Ondansetron

497,174

2%

7.6%

Rituximab

451,023

1.8%

7.5%

Pipercillin/Tazobactam

396,940

1.6%

24.3%

Propofol

470,571

1.9

3.5%

Ceftriaxone

444,471

1.8%

-0.8%

Filgrastim

335,413

1.4%

-2.6%

Iohexol

344,644

1.4%

20.8%

Sevoflurane

267,090

1.1%

15%

Nesiritide

372,662

1.5%

63.9%

Eptifibitide

312,588

1.3%

5.1%

Hoffman et al. Projecting Future Drug Expenditures-2006 Am J Health-Syst Pharm 2006; 63:123-38

Percent Increase over 2003

Top 15 Drug Expenditures for Clinics Drug

2004 Expenditures ($000’s)

Percent of Total 2004 Clinic Expenditures

Percent Increase over 2003

Epoetin Alfa

3,901,126

17.7%

-.05%

Darbepoetin

1,214,297

5.5%

83.8%

Pegfilgrastim

1,160,429

5.3%

45.8%

Infliximab

1,269,004

5.8%

25.1%

Rituximab

950,981

4.3%

12.1%

Oxaliplatin

541,014

2.5%

71.8%

Docetataxol

635,990

2.9%

-0.4%

Zolendronic Acid

466,887

2.1%

10.6%

Traztuzumab

364,762

1.7%

33.9%

Gemcitabine

420,510

1.9%

16.6%

Paricalcitol

349,728

1.6%

23.7%

Pneumococcal Vaccine

349,836

1.6%

-16%

Irinotecan

327,023

1.5%

-14.9%

Filgrastim

227,999

1%

-7.1%

Carboplatin

317,603

1.4%

-30.5%

Hoffman et al. Projecting Future Drug Expenditures-2006 Am J Health-Syst Pharm 2006; 63:123-38

“Generic” Biologics


No clear regulatory framework exists •

After 3 years, application for generic growth hormone approved by FDA •

•




But FDA explicit that product is not generic biologic, not equivalent to innovator, not a pathway for future approvals

FDA guidance delayed on multiple occasions, and will likely not be completed until confirmed FDA commissioner

Appears legislation will be required to clarify approval process •

HR 6257 introduced in Sept 2006

“Generic” Biologics


Production process for biologics is more complex compared to small molecules • •




Significant capital investment Innovator may hold patents for process

Would differences in production process lead to differences in safety profile? •

Pure Red Cell Aplasia (PRCA) from epoetin associated with differences in production process

“Generic” Biologics


Savings would not be as significant as current generics •

•

GPhA estimates these products will cost 2030% less than innovator product European Generics Association suggests 2540% less than innovator product

“Generic” Biologics


Despite challenges, many companies have “generic” biologics in development •

• •







Area of growth for major generic manufacturers European regulatory framework evolving 7 companies developing generic epoetin for European market

No “generic” biologics expected to be available in the US in 2007 or early 2008 Could pose some challenging questions for hospitals

The Medication Technology Management Model Medication Cost Driver “Gestalt” Higher Order Phenomenon (Uncontrollable)

External Phenomenon (Largely Uncontrollable) Internal Phenomenon (Somewhat Controllable) N. Shah, L. Vermeulen, University of Wisconsin

Medication Technology Management

Planning -Financial (Budget) - Strategic (Programmatic) - Tactical (Policy)

V I G I L A N C E

Financial Planning (Budgeting)


Pareto Principal (80/20 rule) •

•

In nearly all cases, a few vital factors (20%) are important and many (80%) are trivial Applies to preparing a drug budget • •




60 to 70 drugs will make up 80% of a drug budget Focus for budgeting and cost containment should be on these top drugs

Extraordinary situations can occur which can be nearly impossible to anticipate •

Example: Million dollar patients

% of Inpt Rx Expenditures

Distribution of Inpatient Drug Expenditures 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 0%

10%

21%

31%

42%

52%

% of Patients

63%

73%

83%

94%

An Approach Pharmaceutical Financial Management











Step-wise, systematic approach to financial plan (budget) development Detailed description appeared in January 15, 2005 AJHP “Projecting Future Drug Expenditures – 2005” Acknowledgement to Lee Vermeulen and Nilay Shah Nine-step process

Better Financial Planning (1)










Step 1: Obtain data Step 2: Assess past performance Step 3: Build high-priority budget Step 4: Build new product budget Step 5: Build non-formulary budget Step 6: Build low priority budget Step 7: Establish cost-containment plan Step 8: Budget “reality check” Step 9: Vigilance

Step 1: Obtain Data (1)












Review and understand financial statements and all other relevant data Review previous full fiscal year, current year to date and annualized current fiscal year Purchasing data vs. utilization data Distinguish between issues related to price issues related to volume of use Contract price forecast from various sources

Step 1: Obtain Data (2)


Utilization forecasts • • •






Interviews with clinical leadership Discussions with other key department heads Administration forecasts

New programs Strategic expansion of existing programs Data on external factors, e.g. • • •

Patent expirations New elements Overall forecast picture

Step 2: Review Past Performance












Last full fiscal year vs budget Annualized current fiscal year vs current budget Current fiscal year vs actual last fiscal year Performance on current costcontainment initiatives Identify causes of variance

Key Aspects of Steps 1 and 2 – Data Acquisition








Key to success – acquisition of purchasing data AND utilization data Distinguish between issues related to price issues related to volume of use Utilization forecasts • • • • •

Discussions with clinical leadership Discussions with other key department heads Use administrative forecasts with caution! New programs Strategic expansion of existing programs

Step 3: Build High-Priority Budget






Identify products with highest total cost Top 60 to 70 PRODUCTS (not line-items) often represent 80-90% of total budget Focus detailed planning efforts on that list • • • •






Plot historical spending patterns Identify utilization by prescriber or service Cost trend by class and agent from AJHP paper Identify impact of price, expected utilization changes, potential brand to generic conversion

Develop product specific budget Watch for diffusion of new agents Consider adding uncertainty factor, but document carefully

Step 4: Build New Product Budget


Pipeline information from various sources • • •








AJHP forecast GPO Other sources

Identify those that will affect your facility Identify price cautiously Volume estimate Estimate of release date Pipeline list as discussed previously

Step 5: Build Non-Formulary Budget










Separate out non-formulary drug use and budget separately Key agents as line items; remainder as fixed cost Critical for financial performance monitoring Report on performance vs budget to P&T Track by prescriber for intervention

Step 6: Build Low-Priority Budget









Remainder of products not included in highpriority budget “Residual” budget Appropriate to apply standard inflationary figure BUT apply on a volume-specific basis (cost per discharge) Use estimates of contract price available from various sources, particularly GPO (often only 2-3%)

Step 7: Establish Cost Containment Plan










Calculate a preliminary total budget and compare vs. expected target Identify variance Identify cost containment opportunities (generally in highpriority budget) to make up variance Use benchmarks with caution (compass vs. thermometer) Document well • • •




Target amount Expected tactics to be used to achieve target Time frame for project

Cost reduction vs. inflation trend moderation

Step 8: Finalize Budget


Total budget sum of: • • • •






High-priority product New elements Non-formulary budget Low-priority budget

Less value of cost containment initiatives “Reality check” Respond to requests for additional cuts after submission

Step 9: Vigilance







Tracking of performance Variance identification and resolution Focus attention on high-priority budget at line-item level Overall picture of financial performance • •




Cost per day vs cost per discharge Watch volume of cost-driving service elements

Continuous process makes subsequent budgeting efforts easier!

2007 Drug Expenditures Forecast by Setting



Use with caution… not a “multiplier” Clinics include prescriber offices and hospital outpatient clinics where meds are administered

Setting Outpatient Clinics Non-federal hospitals

Inflation Rate Forecast 5 to 7% 14 to 16% 4 to 6%

Hoffman et al. Projecting Future Drug Expenditures – 2007. Am J Health-Syst Pharm. 2007; 64:298-314

Conclusions











Growth in drug expenditures is moderating across all settings (overall, hospital, and clinic) Pipeline growth limited and recent approvals are specialized Drugs in development highlighted included alvimopan and CERA Mixed diffusion trend for 2007 •

Moderation due to safety concerns (e.g. nesiritide) but also “typical” diffusion pattern

Conclusions











Diffusion of recent approvals will be important to manage (e.g. panitumumab, inhaled insulin) Generic biologics will not be available in 2007, but their availability remains important to monitor (coming challenge?) Mixed picture for generic pricing and availability, but negatives do not overshadow dominant pattern which is unprecedented generic drug availability Financial planning for drugs requires data and constant vigilance

Acknowledgments





Lee Vermeulen (U of Wisconsin - Madison) Nilay Shay (Mayo Clinic) Glen Schumock (U of Illinois –Chicago) Collaborators at IMS HEALTH, especially Bob Hunkler

THANK YOU! Questions and Discussion