The methodology for this research varies from earlier approaches in using a product-level, or “bottom-up”, approach, rather than a top-down, macro perspective. This makes it possible to base forecasts on what is most likely to change in the medicines market, e.g. the appearance of new products and the debut of new generics and biosimilars. OHE’s model for projecting NHS medicines expenditure was an important tool used by the Association of the British Pharmaceutical Industry to produce its forecast for discussion with the Department of Health about revisions to the PPRS.

1. Jorge Mestre-Ferrandiz
EuroDURG 2014
Groningen • 28-29 August 2014
Projecting Expenditure on
Medicines in the UK NHS

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• The model
• Results
• Policy relevance
Agenda

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• Bottom-up projection: built up from pack level up to total market
• Detailed company input on more dynamic therapy areas (covering
approx. 80%+ of the market)
• Public data and industry intelligence used to:
o Generate current position
o Erosion curves post LoE
o Future new products and their uptake
• Keep model at list prices (based on IMS data)
• Account for degree of ‘cannibalisation’ of sales from new launches,
i.e. substitution effect
• Scenarios – important to focus on ranges, rather than point estimates
The Model

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Four ‘types’ of products
1. LoE products between 2012 and 2015
• Distinguishing between generics and biosimilars
2. Future launches (launched between 2012 and
2015)
3. Recent launches (launched 2007–2011)
4. Non-recent (launched before 2007), non-LoE
products
Building Blocks of the Model: Structure

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• Key issue for the forecast: how will generic competition
evolve for those medicines losing patent protection between
2012 and 2015?
• Four (price and volume) erosion curves, depending on
manufacturing complexity (‘easy’ or ‘difficult’) and primary /
secondary care
o Primary care: Based on historical analysis for LoE products in
primary care (2003–2011) [IMS data good enough]
o Secondary care: case study approach
• Use erosion curves to predict impact of generic competition
LoE: Methodology

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LoE: Methodology Primary Care
Based on historical
analysis for LoE
products between
2003 and 2011
(weighted by
sales)
RETAINED VOLUME by the originator
RETAINED PRICE: Generic prices as a % of
originator
Formulation Year 1 Year 2 Year 3 Year 4 Year 5 Formulation Year 1 Year 2 Year 3 Year 4 Year 5
Easy 51% 25% 15% 13% 10% Easy 90% 54% 35% 26% 14%
Difficult 59% 45% 35% 33% 30% Difficult 98% 96% 89% 81% 74%
Number of observations
Easy 71 53 44 35 26
Difficult 19 17 13 6 4
Note on sample size: There were only 6 and 4 observations for year 4 and year 5 respectively for ‘difficult’ formulations, and
results derived for the volume erosion curve presented some anomalies. For this reason we decided to trend for years 4
and 5, assuming a 33% and 30% erosion rate respectively. For the price erosion curve, we used the result obtained from
the historical analysis for year 4 and year 5 (81% and 74% respectively).
6

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• The model
• Results
• Policy relevance
Agenda

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Summary – Top-line Projections
CAGR 2011 - 15
Baseline 3.5%
High 4.1%
Low 3.1%
Total UK NHS Medicines Bill: Actual and Forecast (£m) [at list prices]
Total UK NHS Medicines Bill: CAGRs [At list
prices]
Total UK NHS Medicines Bill: CAGR 2007-11
CAGR 2007 - 11
IMS 3.9%

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Elements Driving Total Expenditure:
Baseline

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• The model
• Results
• Policy relevance
Agenda

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2014 PPRS
• For the first time, PPRS sets limits to the growth of sales of
branded medicines to the NHS
• Our projections were a key element during the negotiations

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Further Information

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About OHE
To enquire about additional information and analyses, please contact Dr. Jorge Mestre-
Ferrandiz at jmestre-ferrandiz@ohe.org.
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