Lecture 1 – Introduction to the course and the business cases
Learning goals of this course
- Have insight in pharmaceutical cost and pricing trends and the drivers of these trends;
- Be able to reason how the life cycle of a drug is affected by different aspects of life cycle
management;
- Know how pricing and reimbursement systems of key international markets (UK, Spain, France,
Germany) work;
- Understand key concepts of pharmaceutical innovation, pricing and market access (e.g. patent
systems, value based pricing, price referencing (internal and external), market access
arrangements);
- Be able to develop a pricing and market access strategy for drugs (business cases);
- Understand how the market for medical devices differs from the drug-market.
Tutorial group 1
Problem definition: How can pharmaceutical companies make their product profitable as long as
possible? So how can those companies extend the life cycle of the product as long as possible with
management strategies and stay ahead of the generics? Why does it take so long for generic versions
of COPD drugs to join the market?
Learning goals
1. What is the life cycle of a drug?
a. What are the different phases in the life cycle of a drug?
b. What are bottlenecks and advantages of the life cycle?
c. What are the timelines of the different phases in the life cycle of a drug?
2. What is life cycle management of a drug?
a. What are different mechanisms used in life cycle management?
b. What mechanisms of life cycle management belong to what phase in the life cycle of a
drug?
3. What is the patent system with regard to drugs?
a. What are the requirements of patents?
b. What are the advantages and disadvantages of patents
c. When can generics enter the market?
Tutorial group 2
Problem definition: How to launch a new drug? What will be the market access strategy for this drug?
Learning goals
1. What are the different pricing models
a. When is which model used?
b. What are the advantages and disadvantages of those models
2. What are the perspectives for the pricing models?
a. How can payers regulate on the prices?
3. What is value based pricing?
4. What is differential pricing?
5. What are factors influencing the sequence of launching?
Tutorial group 3
Problem definition: What type of risk sharing agreements are present that can be used in practice and
which one is most appropriate?
Learning goals
1. What are the different types of market entry agreements (outcome based and non-outcome
based)
a. What are the advantages and disadvantages of each of the agreements?
b. What about transparency in these different types of agreements?
c. What is the empirical evidence of the agreements?
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,Tutorial group 4
Problem definition: orphan drugs will never be considered cost effective when relating it to the ICER,
should there be another cost-effectiveness threshold for orphan drugs, or should there be even another
way of assessing orphan drugs (MCDA?)
Learning goals
1. What is an orphan drug?
a. When is a drug labelled as an orphan drug?
b. What are the advantages of having an orphan drug designation?
2. What is multi criteria decision analysis?
a. What different MCDA’s are possible?
b. What are the advantages of the analyses?
c. What are the disadvantages of the analyses?
3. What are different regulations for orphan drugs?
a. What are consequences of orphan drugs regulations?
4. How can pharmaceutical companies decide on the price of the drug
a. How can payers control or regulate the price and budget of orphan drugs?
Tutorial group 5
Problem definition: what strategies can manufacturers set in to lengthen their lifecycle of the drug and
reduce the generics entering?
Learning goals
1. What are generics?
a. What are the differences between generics, biosimilars and biologics?
b. How does the registration of generics work?
2. How are prices of generics set?
a. Are the strategies comparable with branded drugs?
b. How is the competition between generic manufacturers?
c. How is the competition between generic and branded manufacturers?
3. What kind of strategies exist for innovative companies to protect their market share for branded
drugs?
a. What are the advantages of the different types of strategies?
b. What are the disadvantages of the different types of strategies?
4. What strategies do generic manufacturers use?
a. What are the implications?
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,Lecture 2 – Pharmaceutical innovation and the life cycle of a drug
History of drug discovery; in 1900 drug discovery happened incidentally in nature based on herbs and
natural sources or synthetic versions of natural active ingredients, through the years there was a
development towards targeted treatments with chemicals and molecular biology in 2010 based on
proteins subtracted from genetically engineered cells (biotech drugs). Nowadays, there is a focus on
precision medicine, including chemo and gene therapy. Furthermore, over the same time period the
doses have been reduced dramatically > medicines are more concentrated.
Life cycle of a drug; drugs have a specific life cycle with the following phases;
development, introduction, growth, maturity and decline phase with a
difference in the number of sales being made.
1 Development phase – actual development of a drug leading to registration of the drug by EMA or FDA
and marketing.
First there is basic research in the discovery phase (3 years); a lot of molecules (3,000-10,000) are
screened to detect candidate molecules and then early quality and safety studies in animals are
performed on 5-10 potential candidate molecules (3 years). It is a very iterative phase; going back and
forward. After quality and safety in animal testing has been performed, clinical trials in humans are
conducted on 2-5 candidate drugs (4 years).
- Phase 1 clinical trials – in a small population (20-100) of healthy volunteers to investigate the
safety and quality of the drug
- Phase 2 clinical trials – in a larger population (100-500) of patients to investigate the efficacy of
the drug
- Phase 3 clinical trials – large multi-level randomised controlled trials (1000-5000) to confirm the
efficacy results (compared to placebo for registration (EMA) and golden standard of care to have
comparative effectiveness data (HTA bodies)).
Information on safety, quality and efficacy is reported and submitted to the EMA – Market
Authorization Application (EU) or FDA – New Drug Application (USA) to apply for registration of the
drug (10 years after patent application). When approved, the drugs are launched to the market.
After approval there are phase 4 clinical trials.
- Phase 4 clinical trials – post marketing surveillance to asses safety and long term (adverse)
effects in real life patients.
At the start of the development phase there is a large number of potential drug substances (3,000-
10,000) that over the different phase studies is reduced to 1 substance that is registered to enter the
market > only 10% of all substances in phase 1 clinical trials reach the market (the farther in the
phases, the more substances make it to the next phase). A patent lasts for 20 years (+ 5 years optional
supplementary patent protection to compensate for the long period and administrative hurdles in
reimbursement and pricing procedure) to expire after application; a large number of these years is
spend on research (which is expensive; more expensive when study population grows) and negotiations
on pricing and reimbursement before it can be brought to the market (13 years after patent
application) > there is only 7 years left to generate sales before patent expiry, which is relatively short
> effective patent period.
The development phase starts with filing a patent when a new molecule is discovered, but it still takes
a lot of time to develop the drug > to stimulate innovation as it creates temporary monopolies (high
drug prices) during which the manufacturer can make profit to recoup the costs of research and
development, manufacturing, distribution, invest in future innovation, and high return on investment
rates to attract new private investors in the risky business. It is easy to file a patent as you only need to
prove that it is different enough from patents that already exist in the market > therefore, a lot of
patents are filed by pharmaceutical companies for each of the different possible substances.
Disadvantage is the patent puzzle, an increasing number of patents is given and their legal position
becomes stronger, however, innovation lacks behind and therefore may harm society.
The costs of developing a new drug increased from $179 million in the 1980’s to $2,2 billion in 2018
due to increased safety regulations, larger clinical trials in more different countries (50% of costs occur
during clinical trials > 28% in phase III) and tougher regulatory processes that take longer. However,
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, costs of developing new drugs vary due to the different approval times (some drugs are approved
rather quickly due to high unmet needs and therefore have lower costs, some are slow, novel and next
in class drugs).
2 Introduction phase – sales start to grow during the first few months of introduction to the market
When a drug is registered and has obtained market authorization (approval) from EMA or FDA to
protect public health and ensure the availability of high quality, safe and effective medicines, it can be
introduced to the market. There are different routes to get market authorization once the clinical study
phase is completed.
- National – approval of a drug is given by the regulatory authority of a single member state, the
approval is only valid in this member state. A lot of drugs were approved nationally as EMA did
not exist yet.
- Decentralised – approval of a drug is simultaneously filed by more than one member state in
case there is no existing national market approval (no approval by a single country yet).
- Mutual recognition – approval of a drug is obtained by several member states based on the
assessment of a reference member state > file for approval in 1 member state, the other
member states follow based on the recommendations of the member state where the file was
submitted, so there is already one country that has approved the drug.
- Centralised – submit one central application by EMA, the approval of a drug is valid in all member
states and therefore all EU citizens have the same drugs available > mostly used for new drugs
nowadays. Centralised procedure ensures the safety monitoring after market approval and
product information is available in all EU languages at the same time.
Which procedure to follow depends on the type of product (compulsory for certain types of drugs
(HIV/AIDS, cancer, diabetes, auto-immune diseases, gene therapies, orphan drugs) to follow
centralised procedure, whereas for other drugs different procedures may be followed), authorization
history and regulatory and marketing strategies of the manufacturer
Vast majority of sales for new drugs is in the US (65%), followed by Europe (17.5% in Germany, France,
Italy, Spain and UK) > most interesting markets for manufacturers to launch new medicines. In the US
there is a free market as they assume there will be competition in the pharmaceutical industry
resulting in lower prices > this is not the case resulting in high drug prices in the US.
In the introduction phase, pricing and reimbursement decisions are made. Once regulatory approval is
obtained, the drug can be marketed, but sales will be low as long as the reimbursement is not
arranged. Market approval is centralised, but pricing and reimbursement is decentralised; this belongs
to national reimbursement authorities that differ between different EU member states. Health
Technology Assessment bodies provide recommendations on drugs that can be financed or reimbursed
by the healthcare systems in a member state in accordance with regional and national legislation >
assessment criteria used by HTA bodies differ from EMA and between countries; have been working
closely together to harmonise the process of assessing drug application (what outcomes are needed) >
European Network for Health Technology Assessment which is positive for the manufacturers as they
need to provide evidence to both the EMA and HTA bodies.
During the introductory phase prices have to be set before the actual introduction of the drug to the
market > countries use external reference pricing (price in a country is set by referencing prices in
other countries) to determine their prices. The Netherlands references their prices to Belgium, France,
UK and Norway > affects the order in which a drug is launched in different countries.
3 Growth phase – period of increasing sales and profit performance as the drug enters the growth stage
When drugs enter the growth phase, their volumes increase. However, there are factors that limit the
growth rate of the drugs and result in lower growth rates than other industrial products;
- Switching patients to new drugs may be risky for physicians – physicians are reluctant until
proven it is worth to switch. Growth curve will be steeper in case of a new therapy for
untreatable or uncontrollable diseases.
- There are well established drug classes and many me-too drugs (different drugs with the same
active ingredient and working mechanism) that are doing well > the medical break-throughs
become rarer
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