Maximizing prices and securing reimbursement status for a product is increasing in importance, as pharmaceutical companies seek to ensure that they achieve a high return on investment from current and future drugs in light of a sustained R&D productivity shortfall and a wave of impending blockbuster patent expiries. Pharmaceutical Pricing Strategies: Price optimization, reimbursement and regulation in Europe, US and Japan, is a report which will help you create an effective pricing policy, in the midst of continued regulatory uncertainty, stagnant R&D and the continued cost-containment efforts of healthcare payors. This report will provide detailed analysis of the key issues and market environments making up the pricing landscape, and enable you to conduct pricing and reimbursement evaluations for products throughout the development lifecycle. Gain a detailed understanding a drug's potential price profile and optimize future returns by including these assessments in portfolio evaluations and lifecycle planning, with the help of this report.
 

Table of Contents
 
Pharmaceutical pricing strategies
 
Executive Summary 12
 
The importance of price optimization 12
 
Pricing and reimbursement in North America 13
 
Pricing and reimbursement in Europe 14
 
Pricing and reimbursement in Japan and the rest of the world 15
 
Pricing strategies for new drugs 16
 
Pricing strategies for established drugs 17
 
Chapter 1 The importance of price
 
optimization 20
 
Summary 20
 
Introduction 21
 
Maximizing return on investment 21
 
R&D productivity shortfall 21
 
Key patent expiries 25
 
Healthcare cost containment 28
 
Cost-containment initiatives 30
 
Cost containment in pharmaceutical expenditure 30
 
Key issues 32
 
Price optimization 32
 
Reimbursement regulations 33
 
Reference pricing 37
 
Pharmacoeconomic evaluations 39
 
Parallel imports 42
 
Generic substitution 44
 
Hot topics 46
 
US reimportation 46
 
Medicare Drug Benefit 47
 
EU enlargement 48
 
Price harmonization 48
 
Pricing and reimbursement hurdles 49
 
iv
 
Chapter 2 Pricing and reimbursement in
 
North America 51
 
Summary 51
 
Introduction 52
 
US pricing regulations 52
 
Medicare 53
 
Medicaid 55
 
Private healthcare 56
 
Recent developments in the US 57
 
The 2003 Medicare Prescription Drug Act 58
 
Expanded access… 60
 
Improved drug compliance… 60
 
Higher utilization… 61
 
Price comparison tool… 62
 
Medicare drug benefit formularies… 62
 
Medicaid budget crisis 63
 
Price controls in Maine? 65
 
Florida’s Medicaid drug rebates 68
 
Pharmacoeconomics in the US 69
 
Pharmacoeconomics in public healthcare provision 69
 
Pharmacoeconomics in private healthcare provision 69
 
Managed care pharmacoeconomic submissions 70
 
Future use of pharmacoeconomics in the US 71
 
Parallel imports in the US 73
 
Developments in cross-border trade 76
 
Reimportation task force report… 76
 
State-level action… 78
 
Generic substitution in the US 79
 
The Waxman-Hatch Act 79
 
Pediatric exclusivity provisions 80
 
Anti-competition agreements 82
 
Delaying tactics and 180-day exclusivity 84
 
Biogenerics 85
 
Trends in generic usage 87
 
‘March-in’ law… 87
 
Future pricing scenarios in the US 87
 
Best case pricing scenario 88
 
Worst case pricing scenario 89
 
Most likely pricing scenario 89
 
Canadian pricing regulations 90
 
Federal measures 91
 
Provincial measures 92
 
Driving down prices 93
 
Reimportation 94
 
v
 
Chapter 3 Pricing and reimbursement in
 
Europe 97
 
Summary 97
 
Introduction 98
 
European pricing regulations 98
 
France 100
 
Recent developments… 102
 
Germany 104
 
Recent developments… 105
 
Italy 108
 
Recent developments… 110
 
Spain 113
 
Recent developments… 115
 
The UK 120
 
Recent developments… 120
 
Pharmacoeconomics in Europe 122
 
France 123
 
Germany 124
 
Italy 125
 
Spain 126
 
UK 127
 
Parallel importing in Europe 131
 
Penetration of parallel imports 132
 
Price differentials… 132
 
Initiatives to encourage use of parallel imports… 133
 
Ability to obtain a license to import products… 133
 
Regulations and key legal decisions 133
 
Merck versus Stephar… 134
 
Bayer (Adalat)… 134
 
Bristol-Myers Squibb versus Paranova… 134
 
The Silhouette case… 135
 
The Maglite case… 135
 
The Davidoff case… 136
 
Recent developments 136
 
GSK’s supply restriction in Greece… 136
 
Lack of regulatory framework in France… 137
 
Novo Nordisk’s supply of Actrapid Novolet in Spain… 138
 
Pfizer’s direct distribution to pharmacies in Spain… 138
 
Generic substitution in Europe 139
 
The mutual recognition procedure 141
 
Future changes in European generics legislation 142
 
Government initiatives encouraging generic uptake 144
 
EU accession 144
 
Drug pricing policies and reimbursement post-accession 146
 
Parallel trade post-accession 147
 
Generics post-accession 149
 
vi
 
Future pricing scenarios in Europe 151
 
Best case pricing scenario 151
 
Worst case pricing scenario 152
 
Most likely pricing scenario 153
 
Chapter 4 Pricing and reimbursement in
 
Japan and the rest of the world 156
 
Summary 156
 
Introduction 157
 
Japanese pricing regulations 157
 
Recent developments 159
 
Pharmacoeconomics in Japan 162
 
Parallel importing in Japan 163
 
Generic substitution in Japan 164
 
Future pricing scenarios in Japan 165
 
Best case pricing scenario 166
 
Worst case pricing scenario 166
 
Most likely pricing scenario 167
 
Australian pricing regulations 168
 
Benchmark pricing 170
 
Cost plus method 170
 
Average monthly treatment cost 171
 
Prices for new items 171
 
Chinese pricing regulations 171
 
Chapter 5 Pricing strategies for new drugs 174
 
Summary 174
 
Introduction 175
 
Pricing strategies in early-stage development 175
 
Therapy area analysis 177
 
Epidemiology analysis 177
 
Treatment delivery analysis 177
 
Market needs analysis 178
 
Pricing analysis 178
 
Cost analysis 178
 
Economic analysis 179
 
Decision-maker analysis 182
 
Market research 183
 
Initial assessment of drug candidates 184
 
Pricing strategies in mid stage development 186
 
vii
 
Evaluating opportunities 187
 
Case study: Aventis appeal against NICE… 190
 
Improving product value 191
 
Case study: Johnson & Johnson’s Concerta… 191
 
Pricing strategies in late stage development 192
 
Sub-population analysis 193
 
Choosing outcomes 194
 
Case study: Merck’s Zocor (simvastatin)… 195
 
Patient reported outcomes 196
 
Case study: Pfizer’s Viagra… 197
 
Head-to-head trials 198
 
Phase III pharmacoeconomic studies 200
 
Phase IV studies 202
 
Pricing strategies for new product approvals 204
 
Submission dossiers 204
 
Identifying key decision makers 206
 
Failure to secure reimbursement 207
 
Working with decision makers… 207
 
Case study – Eli Lilly’s Xigris… 208
 
Applying pressure through lobbying… 209
 
Case study – Amgen’s Aranesp… 209
 
Brokering deals… 211
 
Case study – Celebrex in France… 212
 
External support 213
 
EU launch order 213
 
First choice countries… 215
 
Second choice countries… 215
 
Third choice countries… 216
 
Fourth choice countries… 217
 
Global price optimization 217
 
Chapter 6 Pricing strategies for established
 
drugs 221
 
Summary 221
 
Introduction 222
 
Strategic pricing of reformulations 222
 
Benchmarking relative pricing 222
 
Patient expansion strategies 224
 
Patient switching and generic defence strategies 226
 
Generic defence reformulations 231
 
Strategic pricing at patent expiry 232
 
US patent expiry 233
 
European patent expiry 233
 
viii
 
Chapter 7 Appendix 236
 
Glossary 236
 
Sources 238
 
ix
 
List of Figures
 
Figure 1.1: Declining trend in number of NDAs and NMEs approved, 1995-2004 23
 
Figure 1.2: Rise in the cost of drug development, 1975-2000 25
 
Figure 1.3: US patent expiries for top ten selling drugs, 2004 27
 
Figure 1.4: Trends in healthcare spending as a proportion of GDP between 1998 and 2002 29
 
Figure 1.5: Pharmaceutical expenditure as a share of total healthcare expenditure in 2002 30
 
Figure 1.6: Key drivers and resistors of pharmacoeconomics 41
 
Figure 2.7: Average branded drug prices in selected countries compared with the US 58
 
Figure 2.8: Distribution of 2003 Medicare drug expenditure 59
 
Figure 2.9: Average annual growth rates of total Medicaid spending, 1995-2002 64
 
Figure 2.10: Drivers and resistors of parallel imports into the US 75
 
Figure 3.11: External reference pricing in Europe, 2004 99
 
Figure 3.12: The NICE appraisal cycle 129
 
Figure 5.13: Stop-go decision portfolio review phase IIa 189
 
Figure 5.14: Use of economic evaluation 193
 
Figure 5.15: Optimal country-by-country sequence launch for entry into the EU-15 countries 214
 
Figure 5.16: Global pricing and the interaction between countries 218
 
Figure 6.17: Comparative analysis by strategic type – relative average US pricing four quarters
 
following launch for 25 reformulations 224
 
Figure 6.18: Relative average US pricing – patient switching versus generic defense 228
 
Figure 6.19: Relative average US pricing 12 quarters following launch in patient switching
 
reformulations 229
 
List of Tables
 
Table 1.1: Number of NDAs and NMEs approved by the FDA, 1990-2004 22
 
Table 1.2: R&D expenditure within the US and abroad by PhRMA members, 1980-2004 24
 
Table 1.3: Trends in healthcare spending as a proportion of GDP between 1970 and 2002 28
 
Table 2.4: Future pricing scenarios in the US 88
 
Table 3.5: Use of economic evaluations in different European countries 123
 
Table 3.6: Generic substitution in across European countries 144
 
Table 3.7: Future pricing scenarios in Europe 151
 
Table 4.8: Co-payments for drugs/services in Japan 158
 
Table 4.9: Classification for price premium (Japanese healthcare system) 159
 
Table 4.10: Future pricing scenarios in Japan 165
 
Table 6.11: Calculating relative pricing – Prozac 20mg versus Prozac Weekly 223