PRESCRIPTION DRUGS: BACKGROUND AND BASICS

Transcription

1 PRESCRIPTION DRUGS: BACKGROUND AND BASICS Medicare & Medicaid Briefings National Health Policy Forum January 30, 2009 Jim Hahn Congressional Research Service

2 PRESCRIPTION DRUGS FAQS What is the price of drug Z? Are drug prices higher in the U.S.? Why? Are drug industry profits too low, appropriate, or excessive? How to keep prices down while preserving safety and innovation? It depends. Maybe it s complicated. Yes. No one knows for certain.

3 MARKET FOR PRESCRIPTION DRUGS, Global ($ billions) U.S. ($billions)

4 U.S. PRESCRIPTION DRUG EXPENDITURES, $ % Prescription Drug Expenditures per Capita $ $ $ $ $ $ $ $ $ Drugs per capita Drugs as % of NHE % 8.0% 6.0% 4.0% 2.0% 0.0% Prescription Drug Expenditures as % of National Health Expenditures

5 PUBLIC AND PRIVATE PER CAPITA DRUG EXPENDITURES $ $ $ $ $ $ $ $ $ $50.00 $ Year Public

6 LIFE CYCLE OF DRUGS Research & Development Filing/Granting of Patent Clinical testing and FDA approval Market introduction Competition End of product life/steady state

7 LIFE CYCLE OF DRUGS $ R&D/Lab Testing Time

8 RESEARCH AND DEVELOPMENT Drug development process typically takes 10+ years ~ 5-10,000 compounds to produce one approved drug Expensive to bring a drug to market (~ $500 - $800 million?)

9 INNOVATION AND PATENTS Economic rationale: Innovation might be reduced if new ideas/ products are easily copied. Patents provide incentive to innovators to assume risk. Patents provide the inventor with the sole right to exploit the invention (monopoly) for a given number of years.

10 LIFE CYCLE OF DRUGS $ Clinical Trials Time

11 FDA NEW DRUG TESTING PROCESS OVERVIEW Phase Lab testing CT: Phase I CT: Phase II CT: Phase III Synopsis Pharmacology & mechanism of action; animal tests for safety Small group (20-80) healthy volunteers to establish a drug's safety and dose range Larger groups ( ) of patient volunteers to establish safety & assess effectiveness parameters Large controlled trials ( ); establish effectiveness, safety for all proposed indications & adverse reactions Time (approx) ~3 4 years ~ 1 year ~2 years ~ 3 years

12 LIFE CYCLE OF DRUGS $ Clinical Trials Time

13 LIFE CYCLE OF DRUGS $ Introduction of product Monopoly position Time

14 TOP BRAND DRUGS BY RETAIL SALES, ,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 Lipitor Nexium Advair Diskus Prevacid Plavix Singulair Seroquel Effexor XR Lexapro Actos Protonix Vytorin Topamax Risperdal Abilify Cymbalta Lamictal Zyprexa Levaquin Celebrex $3,390,766 $3,315,740 $3,082,712 $2,863,326 $2,518,409 $2,464,396 $2,304,364 $2,229,333 $2,136,899 $1,938,882 $1,837,388 $1,790,436 $1,781,562 $1,732,827 $1,717,429 $1,579,252 $1,433,000 $1,416,084 $4,355,901 $6,165,531

15 TOP BRAND DRUGS, PRESCRIPTIONS ,000 30,000 45,000 60,000 Lipitor Nexium Advair Diskus Prevacid Plavix Singulair Seroquel Effexor XR Lexapro Actos Protonix Vytorin Topamax Risperdal Abilify Cymbalta Lamictal Zyprexa Levaquin Celebrex

16 LIFE CYCLE OF DRUGS $ Competition / Expiration of Patent Time

17 TOP GENERIC DRUGS BY RETAIL SALES, 2007 $0 $250,000 $500,000 $750,000 $1,000,000 $1,250,000 $1,500,000 $1,750,000 $2,000,000 Hydrocodone/APAP Azithromycin Simvastatin Oxycodone ER Sertraline Fentanyl Transdermal Amlodipine Besylate Fexofenadine Amoxicillin/Pot Clav Omeprazole Gabapentin Fluticasone Nasal Lisinopril Oxycodone w/apap Metoprolol Succinate Metformin NovoLog Amlodipine Besylate/ Levothyroxine Zolpidem Tartrate $687,256 $603,436 $570,726 $554,672 $538,282 $524,247 $501,413 $476,739 $1,000,754 $938,642 $927,435 $894,163 $864,380 $835,112 $832,601 $728,916 $1,302,635 $1,295,036 $1,253,324 $1,736,101

18 TOP GENERIC DRUGS, PRESCRIPTIONS Hydrocodone/APAP Azithromycin Simvastatin Oxycodone ER Sertraline Fentanyl Transdermal Amlodipine Besylate Fexofenadine Amoxicillin/Pot Clav Omeprazole Gabapentin Fluticasone Nasal Lisinopril Oxycodone w/apap Metoprolol Succinate Metformin NovoLog Amlodipine Besylate Levothyroxine Zolpidem Tartrate

19 LIFE CYCLE OF DRUGS $ End of Product Life / Steady State Time

20 TOP PHARMACEUTICAL FIRMS BY GLOBAL SALES, 2006 Sales Based/ Rank Company $ (m) Headquartered in 1 Pfizer 45,083 US 2 GlaxoSmithKline 36,947 UK 3 sanofi-aventis 35,605 France 4 Novartis 28,868 Switzerland 5 Hoffman-La Roche 26,560 Switzerland 6 AstraZeneca 25,741 UK/Sweden 7 Johnson & Johnson 23,267 US 8 Merck & Co 22,636 US 9 Wyeth 15,683 US 10 Eli Lilly 14,816 US Source: Wood Mackenzie's Productview March 2007

21 DRUGS VS. BIOLOGICS Small molecule with defined structure, physical and chemical characteristics Synthetic organic compounds Stable FDC Act Large, less well-defined molecule with complex tertiary structure Protein/carbohydrate based product from living entity Heat and shear sensitive PHS Act

22 LIPITOR & ERYTHROPOIETIN

23 MEDICARE AND MEDICAID BENEFICIARY MARKET SHARE 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Medicare & Medicaid Other Recipients Prescriptions Rx Spending Source: NACDS Economics Department August 2003

24 CURRENT AND EMERGING POLICY ISSUES Medicare Part D lessons Non-interference Reimportation Follow-on biologics Drug safety and adverse event reporting Direct-to-consumer (DTC) advertising Industry: New Product Pipeline / Consolidation

25 LESSONS FROM MEDICARE PART D Incentives Tiered Formularies Generics Spending Variance in Prices Choices and changes

26 MMA IMPOSED RESTRICTION SSA section 1860D (i): NONINTERFERENCE. -- In order to promote competition under this part and in carrying out this part, the Secretary -- (1) may not interfere with the negotiations between drug manufacturers and pharmacies and PDP sponsors; and (2) may not require a particular formulary or institute a price structure for the reimbursement of covered Part D drugs.

27 DRUGS BY THERAPEUTIC CATEGORY ACROSS COUNTRIES, 2006 US$ (millions) 0 20,000 40,000 60,000 80, , , , , , ,000 US Country Japan Germany France UK Italy Canada Spain Brazil Mexico Aus/NZ CARDIOVASCULAR CENTRAL NERVOUS SYS ALIMENTARY/ MET. RESPIRATORY ANTI- INFECTIVES MUSCULO-SKELETAL GENITO- URINARY CYTOSTATICS BLOOD AGENTS DERMATOLOGICALS SENSORY ORGANS DIAGNOSTIC AGENTS SYSTEMIC HORMONES MISCELLANEOUS HOSPITAL SOLUTIONS PARASITOLOGY Argentina Source: IMS Health - Retail Drug Monitor

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