The document discusses strategies for pharmaceutical pricing in the current healthcare environment. It outlines several market trends impacting price and positioning, including industry consolidation, risk-sharing contracts, biosimilars, and healthcare reform. The presentation also examines how to determine the perceived value of a product and considers factors like clinical benefits, unmet need, and cost-effectiveness studies. Finally, it discusses the complex pharmaceutical supply chain and how consolidation has impacted pricing negotiations.

1. Pharmaceutical Pricing
Strategies & Tactics:
What’s the Plan?
Kent Rogers
Vice President, Managed Markets
Acorda Therapeutics

2. Agenda
• Overview of Current Market Trends
• Analysis of Value Proposition
• PPACA Legislation Overview
• Wrap-Up/Questions

3. The Public/Payer Perception of
Pharmaceuticals

4. Managed Markets Increasing
Influence Over Corporate Revenue
Source: Health Strategies Group

5. Pharma Org Structure 1990’s – 200(7)
CEO
General
CFO CMO COO
Counsel
Marketing Sales
Managed
Markets

6. Pharma Org Structure
2009 & Beyond
CEO
General
CFO CMO COO
Counsel
Managed
Marketing Sales
Markets

7. Structure of Managed Care
Departments Before 2000
Managed
Markets
GPOs/
National MCOs/PBM
Hospitals
Regional MCOs/PBMs Payer Contracting
Government Affairs Product Pricing

8. Structure of Managed
Markets Today
Managed Public
Markets Policy
GPOs/
National MCOs/PBM
Hospitals
Regional Payer
MCOs/PBMs Marketing
Trade &
Payer Contracting
Distribution
Product Pricing HEOR
Business Development

9. Pharma’s Previous Approach
to Payer Challenges

10. Questions to address…
• What Current Market Factors Are
Impacting Price/Positioning?
• What Constitutes A “Value Proposition”?
• How Will The PPACA Legislation Affect
Payer Strategy?

11. 10 Mega Trends
1. M & A Continues
– Merck/Schering Plough
– Pfizer/Wyeth
– Roche/Genentech
– Astellas/OSI
– Celgene/Abraxis
– Sanofi/Genzyme
– Pfizer/King Pharma
– Teva/Cephalon
– Johnson & Johnson/Synthes
– Takeda/Nycomed

12. 10 Mega Trends
2. Rise in Risk Evaluation & Mitigation Strategy
 75 in 2010 vs. 21 YTD in 2011 (April)
3. The Impending “Patent Cliff”
 100 Billion by 2016
4. Estimated Specialty Drug Pipeline
 600 Molecules
5. “Designer Therapies”
 Biomarkers
 Specific Patient Populations
6. Biosimilars
 More questions than answers
 Exclusivity, pricing structure, etc.

13. 10 Mega Trends
7. Co-Pay Mitigation Programs
 On the Rise & Under Fire
8. Outcomes-based or Risk Share Contracting
 Cigna & EMD Serono MS Contract
9. Patient Protection & Affordable Care Act
(PPACA)
 New Costs to Industry started in 2011
10. Accountable Care Organizations
 Scope & Relevance?

14. What’s the “value proposition”?:

15. How do manufacturers price
products?
Offensive!
Too
High
Too
Low
$$
Lost

16. Gov’t Intervention – Precedent?
UPDATE 2-KV Pharma cuts price of
Pressure mounts on KV
premature birth drug
Pharmaceutical to lower drug cost
Is KV Pharmaceutical A
Fri Apr 1, 2011 2:13pm EDT
* Cuts injection prices 55 pct BY JIM DOYLE • jdoyle@post-dispatch.com > 314-340-8372 STLtoday.com | Posted:
* Will offer supplemental rebates along with list price
Flat-Out Evil Company?
Wednesday, March 30, 2011 12:10 am |
However, industry groups expressed disappointment with the of criticism, KV Pharmaceutical Co. officials
Trying to fend off an onslaught
price cut, saying it was not enough to bridge the gap between
met Tuesday with national medical advocates bent on persuading the
the branded drug and similar versions compounded by specialty to reduce its $1,500 price tag for a prenatal
Bridgeton-based drug marketer
pharmacies. drug.
Check out the lead of this story inhas faced The medical director of the March of Dimes and top officials of the
The company, which the Pittsburgh Post-Gazette drug
strong opposition since the
about a drug that is March Of Dimes Ends Relationship With KV
pricegoing from costing $10price of Makena by nearly 55
was announced, cut the list a dose to $1,500:
American Academy of Pediatrics and the American College of
percent to $690 per injection.
Pharma
The revelation this weekfor each pregnancy remains about $7,000Gynecologists were among those who conferred
"The cost that the cost of aObstetricians andto
popular drug compared
help prevent preterm labor thegoing to godrug," Silverman // April 1st, representatives to
with $300 for is compounded up 100 times its
By Ed said Washington
privately inGeorge Saade,with KV2011 // 11:06 am discuss the pricing of
current price has stunned pregnant for Maternal-Fetaldoctors and that doctors have prescribed in recent years to
president of the Society women, their Medicine, a drug
Makena, an injectable nonprofit
group of obstetricians and gynecologists.
prevent pre-term births.
pharmacists in Western Pennsylvania. ”I’m ready to which extended late into the afternoon, occurred days after
have a
"Makena has not been shown Despite effective or safer than
to The meeting, decision today by KV Pharma to lower the
be more the
heart attack,” Janice Watkins, a Pittsburgh resident who is
the available compounded drug."
price of its Makena drug forHowse threatened in a March55 letter
March of Dimes President Jennifer premature births by 23
pregnant and has been group America's Healthto severknown as 17P, with the drug company unless KV's marketing
Industry taking the generic Insurance Plans, which had
drug its partnership ties
U.S. Food and Drugpercent - tofrom significantly reduces the list price of Makena, among
Administration to $690 (see this), the March of Dimes has
urged the learned of the price increase Corp., her
said Thursday after she arm, Ther-Rx provide clearer
guidance on the availability of the cheaper compounded drugs, donated $1 million to the March of Dimes in
endedthings. The company corporate relationship in which the
other a decade-long has
doctor’s office. “I’m nervous price cut "a modesthave to go home
called Friday's now because I step."
drugmaker contributed some $1 million to help support
the past decade.
and call my insurance company to see if they’ll cover me.” but
The drug had been available for $10-$20 per injection,
The Food and Drug Administration on Feb. 4 awarded KV Pharmaceutical
reportedly rose to $1,500 after the Missouri-based company's as a neo-natal family intensive
various activities, such to sell the drug, which up to this time has
version was granted orphan status. exclusive marketing rights
the [ID:nL3E7EI28M]
care program. health, March
The nonprofit organization for pregnancy and by chemical compounding pharmacies for about $15 per
been offered baby
of Dimes, ended its current contract withKV wants to mark up its FDA-approved version about 100 times
injection. K-V and called K-V's
handling of the Makena launch and the list which "highly mean a full course of treatment would run between
that price, price would
unsatisfactory and unacceptable."$25,000 and $30,000.

17. Gov’t Intervention – Precedent?
May 25, 2011, 5:16 PM ET
Lawmakers Aren’t Laughing
About Avanir’s Price for
By Katherine Hobson
Avanir: Congress Gripes About Drug Price
Lawmakers are inquiring aboutAdam price tag of
By
the Feuerstein 05/25/11 - 09:43 AM EDT
Nuedexta from Avanir Pharmaceuticals. D.C. (TheStreet) --Avanir
WASHINGTON.
Pharmaceuticals(AVNR) has been asked to justify the
That drug is for a condition called pseudobulbar
pricing of its newly launched drug Nuedexta by four
affect — severe involuntary, members of Congress.
inappropriate
emotional outbursts, i.e. uncontrollable weeping
or hysterical laughing. The problem is associated Committee on Aging, chaired
The U.S. Senate Special
by Wisconsin Democratic Sen. Herb Kohl, sent a letter
with neurological diseases including Lou Gehrig’s
to Avanir Wednesday in which it expresses concern
disease, MS, Alzheimer’s disease and traumaticof Nuedexta, a drug used to treat
about the high price
brain injury… pseudobulbar affect, a neurological condition that
causes involuntary emotional outbursts.
Avanir shares fell 6% to $4.35 in early Wednesday
trading.

18. Andrew Witty (CEO of GlaxoSmithKline PLC) comment in a
press conference - Annual Meeting of the European
Federation of Pharmaceutical Industries and Association.
The GSK chief - claimed that new, innovative approaches to drug pricing, such as
the value-based-pricing model being designed in the U.K, are appearing as a
result of industry's having convinced E.U member states that slashing the
pharmaceutical budget is no longer a reasonable way to control health care
expenditures
Source: NICE Will Have Key Role in Value-Based Pricing Under U.K Healthcare
Reforms,''The Pink Sheet” DAILY, May 11, 2011.
"I think that the fact that you are seeing more drugs being approved
by cost-effectiveness agencies such as England's National Institute of
Health and Clinical Excellence[NICE] demonstrates to us that
pharmaceutical companies are much more flexible then they have
ever been in the past to create win-win pricing solutions. Companies
are prepared to take more risks in putting the price for their reward
at stake against the performance of the medicine.”

19. Inelasticity of Price Points
Thresholds may be evident when the price goes above
$400 and $700 WAC per month.
2%
4th tier 9%
21%
32% 32% 32%
86%
3rd tier 79%
79% 56% 56% 56%
2nd tier
12% 12% 12% 12% 12%
$200 $400 $600 $700 $900 $1,083

20. Step 1: Determine the perceived
value of the product
• Clinical advance (dosing, delivery, etc.)
• Improved Safety
• Improved Efficacy
• Unmet Medical Need

21. Vested interests motivating
perceptions
Brand Value Economic Value
• Product Attributes
(efficacy, safety, MOD) • Cost Effectiveness
– RxEcon Studies
• Unmet Need • Cost Savings
– Untreated Disease – Medical Cost Offset
– High Volume Market
• Perceived Benefits • Budget Impact
– PMPM Increase
– Clinical advance
PHYSICIANS PAYERS

22. Two Approaches to
Pharmaceconomic Modeling
• Establish Predictability of Cost Outlay
– Budget Impact Analysis
• Market Share Changes
• Drug Volume/Market Penetration
• Provide Evidence for Potential Cost
Offsets
– Pharmacoeconomic Analysis
• Cost Minimization
• Cost Effectiveness
• Cost Utility
• Cost Benefit

23. Step 2: Consider Market Factors
• Traditional Customers Changing
Structure
• Impact of Market Access
– Tier Placement = Market Share?
• Distribution Models
– Wholesaler PPD and FFS rates on rise
– SPPs becoming more aggressive

24. 3. They Expand Into New Lines of
Business
Traditional Classes of Trade Becoming Blurred…
Wholesaler MCO
PBM Wholesaler
Retail
Retail PBM
Specialty
Pharmacy
PBM
MCO
PBM Specialty
Pharmacy

25. Is Tier Placement a Function of
Market Share Success?
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Product A Product B Product C
2nd Tier Access Mkt Share

26. Focus on Net Revenue vs.
Access At All Costs
20%
21%
15%
15%
10%
5%
5%
0%
Tier 2 Tier 3 Tier 4
Gross $210.00 $150.00 $50.00
Rebates $52.50 $0.00 $0.00
Net $157.50 $150.00 $50.00

27. Focus on Net Revenue vs.
Access At All Costs
20%
20%
15% 16%
10%
5%
5%
0%
Tier 2 Tier 3 Tier 4
Gross $200.00 $160.00 $50.00
Rebates $50.00 $0.00 $0.00
Net $150.00 $160.00 $50.00

28. The Supply Chain Has Become
Multi-Layered
Prisons
Chain Drug Store
Warehousing
Retail Mail Order
Pharmacy
Chain
Manufacturer Distribution Centers
Food/Mass Merch
Drug Store
Independent
Drug Store
HHC
Full Line
Health Care Professional
Patient
Wholesalers Long Term Care
Acute Care
Hospital Pharmacy
HMO
Specialty Government
Distributors
Physician
Clinic
SPP
Mail
Medical Groups
VA & DoD

29. Consolidation Brings Pricing
Disadvantages
McKesson Drug Company
D&K Healthcare Resources
Medis Health & Pharmaceutical Service
V.F. Grace, Inc. McKesson Drug Company
FoxMeyer Corporation
Harris Wholesale
Cardinal Cardinal
F. Dohmen & Co.
Par Med
Bindley Western Drug Company AmeriSource Bergen
Tennessee Wholesale Drug
Alabama Wholesale Drug
Superior Wholesale Drug Morris + Dickson Co. Ltd.
Kendall Drug
J.E. Gould & Co.
Behrens, Inc.
Humiston-Kneeling Kinray Inc.
Whitmire Distribution Corp.
Solomons Company Inc.
Chapman Drug Co. D&K Wholesale Drug Inc.
AmeriSource Bergen
Bergen Brunswig Drug Co. H.D. Smith Wholesale Drug Co.
Trent Drugs Ltd.
Alco Health Services Corp.
C.D. Smith Healthcare Inc.
General Drug Company Smith Drug Co.
James Brudnick Company Inc.
Walker Drug Company
Albers, Inc. Walsh Dohmen
Coleman, Meadows, Pate Drug Co.
Skyland Medical Supply, Inc.
Gulf Distribution
Newbro Drug Company F. Dohmen
Eagle Drugs Inc.
J.M. Blanco
Dr. T.C. Smith Company
Durr Drug Company, Inc. 0 200 400 600 800 1,000 1,200
Owens and Minor Inc.
South Bend Drug Co. Sales $ Millions

30. The Retail Channel Shortfall

31. Use of Specialty Pharmacies by
Insurance Plans Nears 100%
Source: EMD Serono Injectibles DigestTM 5th Edition

32. What’s the right price?

33. Designer Therapies/Biomarkers
Medicare, SelectHealth Create
Coverage
Policy for Test to Identify Tumor
Origin
With health plan spend in oncology care
accelerating, more payers are taking
steps in managing this therapeutic category to
make sure that the right patient gets the
right drug at the right time. But getting the right
drug can be a problem when it’s not
clear exactly what kind of cancer is causing
tumors. Recognizing this, Medicare and
SelectHealth, the health insurance unit of
Intermountain Healthcare, recently created
coverage policies for Pathwork Diagnostics,
Inc.’s Pathwork Tissue of Origin Test.

34. Healthcare Reform
Impacts?

36. Key Organizations Driving
Quality
Quality
NCQA CMS
(& HEDIS)
PQA QIOs
NQF &
AQA Supplier
Council
AHRQ AHIP

37. Healthcare Reform Highlights
• Increase in Federally Mandated Rebates
15.1% to 23.1%
– Medicaid Eligibility expanded
• Medicare Part D Donut Hole 50% share
• PHS Program participation will expand
Federal Ceiling Price legislation
• Accountable Care Organizations

38. Medical Loss Ratio (MLR)
• Under the Affordable Care Act (ACA), insurers are required
to disclose the amount of premium dollars on care and
coverage
• Small health plans required to have an 80% MLR
• Large health plans required to have an 85% MLR
• Definition of plan based on number enrolled
consumers
• In 2012, Insurers that do not meet requirements will
provide rebates to consumers (based on 2011 data)
– 2012 rebates paid to consumers in 2013
MEETING NAME HERE

39. Summary

40. Questions to address…
• What Current Market Factors Are
Impacting Price/Positioning?
– Rise in Specialty Products
– Pharma Embracing Reimbursement Strategy
• What Constitutes A “Value Proposition”?
– Predictability for 1st in class products
– Cost Offset for all products
• How Will The PPACA Legislation Affect
Payer Strategy?
– Government is THE PAYER
– Outcomes vs. Rebates

41. Questions (cont.)
• How will payers determine what is considered a
specialty product?
• Why do some payers put specialty products in the
2nd tier while others do not?
• How will government intervention (PPACA) affect
formulary contracting?
• How will pharma manufacturers produce
innovative products if the investment is above
the market potential?
• How will a manufacturer make Business
Development decisions in light of the evolving
payer landscape?