Michael Kuchenreuther, PhD, is a research analyst, at Numerof & Associates, Inc.

Michael J. Kuchenreuther, PhD

*Editor's Note: This article appeared in 

	Manufacturers exploring opportunities in global markets face dynamic demographic and disease trends, changing market demands, and evolving regulatory requirements-all of which differ from one country to another. While emerging markets continue to represent a new channel of demand for pharmaceutical products, manufacturers have quickly realized that significant attention must still be given to more established markets, such as Germany. It’s no longer sufficient to expect that regulatory data from prospective randomized clinical studies alone will be enough to convince payers to provide a price premium for new products. In this article, the authors take a look at some of the recent developments in the German pharmaceutical market, identify pricing and reimbursement challenges, and discuss strategies manufacturers should consider for sustainable success.


	Germany is the third largest pharmaceutical market worldwide and accounts for approximately 23% of the European pharmaceutical market (1). Of equal importance to manufacturers, drug prices in Germany are often used as reference prices in 19 other countries. Taken together, gaining access to this market at an acceptable price has major implications for long-term success. In a cost-constrained economy, the German government has taken steps to reduce healthcare spending, and unfortunately for manufacturers, one way they have sought to do this is through The Act on the Reform of the Market for Medical Products (Arzneimittelmarkt-Neuordnungsgesetz-AMNOG). This piece of legislation was enacted in 2011 and mandates a more rigorous benefit evaluation procedure for new pharmaceuticals (and their subsequent label expansions), thereby adding significant challenges to the market access process.

	In AMNOG’s new system, manufacturers continue to set the initial price for new prescription drugs after regulatory approval. This price is valid for one year. During this time, the manufacturer’s value dossier is reviewed by the Federal Joint Committee (G-BA), which represents the self-governance structure of the German healthcare system. With the help of the Institute for Quality and Efficiency in Health Care (IQWiG), an expert Health Technology Assessment (HTA) body, the G-BA determines the level of added benefit of the new drug relative to the appropriate comparative therapy (ACT) chosen by the G-BA as well as the certainty of evidence presented by the manufacturer. A brief description of these two inputs that go into the G-BA’s final decision is included in 

. Patient-relevant criteria for additional medical benefit include improving health, extending survival, shortening the burden of illness and reducing side effects, or improving quality of life, and are outlined in the IQWiG methodology paper (2). Originally, the law was written to include the possibility that patented products already on the market would have to undergo retrospective benefit assessments; however, manufacturers were recently spared from this potential headache (3).

Decision criteria for G-BA’s/IQWiG’s benefit assessment.

Factors shown to impact categorization decision

					Number of appropriate clinical studies available; Use of valid measurement instruments; Risk of bias (e.g., non-blinding); Endpoint type (e.g., hard, surrogate)

					Major, considerable, minor, non-quantifiable, no added benefit, or reduced benefit

					Effect size at outcome level, confidence interval associated with effect

	Once the G-BA reaches a final conclusion, pricing negotiations begin with the statutory health insurance (SHI) umbrella organization, GKV
	SV (Gesetzliche Krankenversicherung-Spitzenverband), which negotiates on behalf of all SHIs and also private sickness funds in Germany. It is important to highlight that the ACT is not only used by the G-BA in its assessment, it is also the price anchor for these negotiations. For drugs found to have no added benefit, their price is capped in reference to the price of the comparator. Reference pricing to the comparator can be either advantageous if the ACT is already a high-priced therapy or devastating if the ACT is a generic drug. Thus, manufacturers looking to enter breakthrough therapeutic areas where the current standard treatment is a generic will be particularly challenged. Therapeutic products that demonstrate added benefit are priced above the ACT but may still face a minimum price reduction of 7% (formerly 16%) by law, unless it has been replaced as part of the price negotiations. Unfortunately for manufacturers, while the number of products that have gone through the entire assessment and pricing process remains small since the law was enacted three years ago, early evidence suggests only limited correlation exists between benefit ratings and price reductions. Rather, G-BA’s benefit rating has primarily served as a door opener for price negotiations (4).

Snapshot of Benefit Assessments and Pricing Negotiations under AMNOG


	As of May 2014, 79 products have been assessed by the G-BA within 169 patient subpopulations. More than 50% of these early benefit assessments have led to ‘no added benefit’ rulings by the G-BA (see

) (5). Not surprisingly, there has been considerable variance observed in the levels of additional benefit reported by pharmaceutical manufacturers and the G-BA. In contrast, the G-BA’s decisions have more closely resembled IQWiG’s recommendations with a few notable exceptions (e.g., belimumab, cabazitaxel, eribulin) (6). Reasons the G-BA has offered for ‘no proven added benefit’ include inadequate comparator, lack of a relevant study to back claims of benefit, lack of data on potential harms, and omission of data for relevant patient subpopulations. A more detailed breakdown of the G-BA’s negative rulings as of October 2013 is presented in 

 G-BA decision breakdown on “Degree of Added Benefit” for new pharmaceuticals within a specific patient subpopulation (N=169).

 illustrates, even though the outcome of benefit assessment is a key driver of price negotiations, manufacturers have not always prepared dossiers adequately. This, in turn, compromises the outcome of the assessment and subsequent price that is agreed upon. Such problems with incomplete or inadequate evidence may be overcome as drug makers gain better understanding of the requirements. To this end, the Federal Joint Committee offers consultation opportunities for manufacturers to give advice on trial design (e.g., patient segmentation, comparator selections, and endpoints). Not all manufacturers, however, have communicated with the G-BA to discuss the technical issues and challenges around preparation of the benefit dossier, or earlier to discuss the clinical trial (6).

Despite the market access challenges that manufacturers have experienced so far, only a few products have been pulled despite negative G-BA rulings and demands for substantial rebates. Novartis became the most recent manufacturer to do this, withdrawing its oral anti-diabetic Galvus from the German market after failing to secure a mutually beneficial price with payers (8). Given the size and revenue potential associated with this marketplace, the fact that few products have been pulled is not surprising. However, Hagen Pfundner, the chairman of Germany’s pharma lobby VFA and head of Swiss drugmaker Roche’s German unit, believes that a recent update to the AMNOG legislation could lead to “an increasing number of opt-out decisions” (9). In the past, a product’s original launch price in Germany served as the published list price for other markets. This approach is no longer the case. Since April 2014, the newly negotiated reimbursement amounts are published as visible ex-factory prices, effectively replacing the original list prices as source for referencing. Drug makers fear the information could challenge the entire pricing framework within Europe (and globally) either causing a downward spiral in reimbursement across the region or heavy parallel exports from Germany to other countries. If this new law is not overturned, it poses a significant risk to profits in the industry, especially considering that price discounts have been as high as 70% following G-BA’s benefit assessment and range on average between 1630% (10).  More broadly, the new rule reinforces the importance of manufacturers understanding the nuances of this market and having strategies in-place to achieve successful market access.


	While Germany is certainly not the only market that is enforcing more stringent pricing and reimbursement policies for new therapeutic products, it is perhaps scrutinizing the quality and appropriateness of clinical data more so than any other country. Taken together with the fact that other markets look to Germany to determine pricing, manufacturers should place a greater emphasis on G-BA’s recommendations when structuring clinical studies. To date, the majority of AMNOG submissions did not have much guiding input from the G-BA prior to clinical study design and were based on evidence generated on a pre-AMNOG world. Moving forward, proactively consulting with the G-BA to define the comparator(s), clinical endpoints and patient cohorts will be essential. Manufacturers need to do this early in product development, especially prior to starting Phase III trials. Internally, manufacturers should also enhance communication between regulatory and market access teams to strategically plan for both market authorization requirements and G-BA’s requirements.

	Even before G-BA consultations, manufacturers need to give greater consideration to the product’s indication. While the indication does not determine how the benefit assessment is conducted, completed assessments indicate that it can influence the G-BA’s comparator choice and a pivotal trial’s relevance. For products with broad indications, IQWiG and the G-BA are demanding clinical data for multiple patient subpopulations and against multiple ACTs. For example, these commissioning bodies recently distinguished between four subpopulations and ACTs for Roche’s Kadcyla (see 

) (11). Manufacturers that have failed to anticipate and include such data are seeing a significant reduction in the overall level of added benefit granted to their products (e.g., Pixuvri and Inlyta) (12). Moving forward, manufacturers will need to ensure that all relevant subpopulations have robust and statistically significant clinical endpoints to support reimbursement, with increasing demand for quality of life data. If the resources required to study multiple populations using multiple comparators are too great, pursuing a narrower indication for a clearly defined patient population and against a single comparator serves as a viable alternative.

Manufacturers will also have to keep in mind that every new indication for a product will trigger another round of benefit assessment and a new price negotiation. Here, attempts to negotiate a higher price with subsequent indications may be met with resistance by the GKV-SV and prove to be a significant challenge for manufacturers. Thus, drug makers should give greater consideration to the trade-off between a fast product launch and the highest value launch.

	Aside from data collection and defining a product’s indication, manufacturers must also develop a solid pricing strategy earlier on in the product development process and have capabilities to better predict a products negotiated price. There is currently no formula regarding the rebate amount the pharmaceutical company has to grant on its retail price.  Furthermore, while evidence demonstrating added benefit is required to avoid reference pricing, it is by no means the sole determinant of pricing decisions. Rather, the extent to which a product’s price will be marked down following a positive benefit assessment is largely dependent on its original launch price as well as the market size and price of the appropriate clinical comparator. As more products go through the product review and pricing process and as more data become available, manufacturers should consider developing algorithms to forecast the benefit assessment outcomes and the product’s final net price.

	The first three years of the AMNOG reform have proven that demonstrating added benefit is no small feat for manufacturers, and while complaints continue to be heard from pharmaceutical stakeholders, the law shows no signs of slowing down. AMNOG has not only set new rules for reimbursement and pricing of pharmaceuticals in Germany, it also forces the industry to adapt at a global level, rethinking how it brings new products to market. Manufacturers that prepare thoroughly for benefit assessment and the negotiation processes within it will be best positioned for success.


	The authors would like to thank Stefan Seliger, PhD, for his review and insights.

		German Pharmaceutical Industry Association/BPI, based on IMS World Review 2012.	

		IQWiG, General Methods Version 4.1.  (Nov. 28, 2013).	

A tweak or an outrage? Germany passes new pricing law

		LEO Pharma Germany, It´s difficult to meet HTA criteria according AMNOG - reason why?  (June 10, 2014).	

 PRMA Insights Focus: Pricing and Reimbursement Success in Germany

		F. Kermani, “Novartis Pulls Galvus From Germany After Failed Price Negotiations,”  

Germany’s stance on pricing threatens drug firm profits

,” Reuters, Feb. 18, 2014, accessed Aug. 14, 2014.	

Comparing the Effectiveness of Prescription Drugs: The German Experience

” (May 21, 2014), accessed Aug. 14, 2014.

		Institute for Quality and Efficiency in Health Care, Trastuzumab emtansine 

 Benefit assessment according to §35a Social Code Book V	

		C. Henry, “Oncology drugs under AMNOG,” 


	Jill E. Sackman, DVM, PhD, senior consultant, and Michael Kuchenreuther, PhD, research analyst, at Numerof & Associates, Inc., St. Louis, MO, 

Articles

The authors take a look at some of the recent developments in the German pharmaceutical market.

Drug Benefit Assessment Challenges Market Access in Germany

Manufacturers exploring opportunities in global markets face dynamic demographic and disease trends, changing market demands, and evolving regulatory requirements—all of which differ from one country to another. While emerging markets continue to represent a new channel of demand for pharmaceutical products, manufacturers have quickly realized that significant attention must still be given to more established markets, such as Germany. It’s no longer sufficient to expect that regulatory data from prospective randomized clinical studies alone will be enough to convince payers to provide a price premium for new products. In this article, the authors take a look at some of the recent developments in the German pharmaceutical market, identify pricing and reimbursement challenges, and discuss strategies manufacturers should consider for sustainable success.


Germany is the third largest pharmaceutical market worldwide and accounts for approximately 23% of the European pharmaceutical market (1). Of equal importance to manufacturers, drug prices in Germany are often used as reference prices in 19 other countries. Taken together, gaining access to this market at an acceptable price has major implications for long-term success. In a cost-constrained economy, the German government has taken steps to reduce healthcare spending, and unfortunately for manufacturers, one way they have sought to do this is through The Act on the Reform of the Market for Medical Products (Arzneimittelmarkt-Neuordnungsgesetz—AMNOG). This piece of legislation was enacted in 2011 and mandates a more rigorous benefit evaluation procedure for new pharmaceuticals (and their subsequent label expansions), thereby adding significant challenges to the market access process.

In AMNOG’s new system, manufacturers continue to set the initial price for new prescription drugs after regulatory approval. This price is valid for one year. During this time, the manufacturer’s value dossier is reviewed by the Federal Joint Committee (G-BA), which represents the self-governance structure of the German healthcare system. With the help of the Institute for Quality and Efficiency in Health Care (IQWiG), an expert Health Technology Assessment (HTA) body, the G-BA determines the level of added benefit of the new drug relative to the appropriate comparative therapy (ACT) chosen by the G-BA as well as the certainty of evidence presented by the manufacturer. A brief description of these two inputs that go into the G-BA’s final decision is included in 

Factors shown to impact categorization   decision

Number   of appropriate clinical studies available; Use of valid measurement   instruments; Risk of bias (e.g., non-blinding); Endpoint type (e.g., hard,   surrogate)

Major,   considerable, minor, non-quantifiable, no added benefit, or reduced benefit

Effect   size at outcome level, confidence interval associated with effect

Once the G-BA reaches a final conclusion, pricing negotiations begin with the statutory health insurance (SHI) umbrella organization, GKV
  SV (Gesetzliche Krankenversicherung-Spitzenverband), which negotiates on behalf of all SHIs and also private sickness funds in Germany. It is important to highlight that the ACT is not only used by the G-BA in its assessment, it is also the price anchor for these negotiations. For drugs found to have no added benefit, their price is capped in reference to the price of the comparator. Reference pricing to the comparator can be either advantageous if the ACT is already a high-priced therapy or devastating if the ACT is a generic drug. Thus, manufacturers looking to enter breakthrough therapeutic areas where the current standard treatment is a generic will be particularly challenged. Therapeutic products that demonstrate added benefit are priced above the ACT but may still face a minimum price reduction of 7% (formerly 16%) by law, unless it has been replaced as part of the price negotiations. Unfortunately for manufacturers, while the number of products that have gone through the entire assessment and pricing process remains small since the law was enacted three years ago, early evidence suggests only limited correlation exists between benefit ratings and price reductions. Rather, G-BA’s benefit rating has primarily served as a door opener for price negotiations (4).


As of May 2014, 79 products have been assessed by the G-BA within 169 patient subpopulations. More than 50% of these early benefit assessments have led to ‘no added benefit’ rulings by the G-BA (see

) (5). Not surprisingly, there has been considerable variance observed in the levels of additional benefit reported by pharmaceutical manufacturers and the G-BA. In contrast, the G-BA’s decisions have more closely resembled IQWiG’s recommendations with a few notable exceptions (e.g., belimumab, cabazitaxel, eribulin) (6). Reasons the G-BA has offered for ‘no proven added benefit’ include inadequate comparator, lack of a relevant study to back claims of benefit, lack of data on potential harms, and omission of data for relevant patient subpopulations. A more detailed breakdown of the G-BA’s negative rulings as of October 2013 is presented in   


  While Germany is certainly not the only market that is enforcing more stringent pricing and reimbursement policies for new therapeutic products, it is perhaps scrutinizing the quality and appropriateness of clinical data more so than any other country. Taken together with the fact that other markets look to Germany to determine pricing, manufacturers should place a greater emphasis on G-BA’s recommendations when structuring clinical studies. To date, the majority of AMNOG submissions did not have much guiding input from the G-BA prior to clinical study design and were based on evidence generated on a pre-AMNOG world. Moving forward, proactively consulting with the G-BA to define the comparator(s), clinical endpoints and patient cohorts will be essential. Manufacturers need to do this early in product development, especially prior to starting Phase III trials. Internally, manufacturers should also enhance communication between regulatory and market access teams to strategically plan for both market authorization requirements and G-BA’s requirements.

Even before G-BA consultations, manufacturers need to give greater consideration to the product’s indication. While the indication does not determine how the benefit assessment is conducted, completed assessments indicate that it can influence the G-BA’s comparator choice and a pivotal trial’s relevance. For products with broad indications, IQWiG and the G-BA are demanding clinical data for multiple patient subpopulations and against multiple ACTs. For example, these commissioning bodies recently distinguished between four subpopulations and ACTs for Roche’s Kadcyla (see 

Aside from data collection and defining a product’s indication, manufacturers must also develop a solid pricing strategy earlier on in the product development process and have capabilities to better predict a products negotiated price. There is currently no formula regarding the rebate amount the pharmaceutical company has to grant on its retail price.  Furthermore, while evidence demonstrating added benefit is required to avoid reference pricing, it is by no means the sole determinant of pricing decisions. Rather, the extent to which a product’s price will be marked down following a positive benefit assessment is largely dependent on its original launch price as well as the market size and price of the appropriate clinical comparator. As more products go through the product review and pricing process and as more data become available, manufacturers should consider developing algorithms to forecast the benefit assessment outcomes and the product’s final net price.

The first three years of the AMNOG reform have proven that demonstrating added benefit is no small feat for manufacturers, and while complaints continue to be heard from pharmaceutical stakeholders, the law shows no signs of slowing down. AMNOG has not only set new rules for reimbursement and pricing of pharmaceuticals in Germany, it also forces the industry to adapt at a global level, rethinking how it brings new products to market. Manufacturers that prepare thoroughly for benefit assessment and the negotiation processes within it will be best positioned for success.


  The authors would like to thank Stefan Seliger, PhD, for his review and insights.

German Pharmaceutical Industry Association/BPI, based on IMS World Review 2012.

IQWiG, General Methods Version 4.1.  (Nov. 28, 2013).

LEO Pharma Germany, It´s difficult to meet HTA criteria according AMNOG — reason why?  (June 10, 2014).

F. Kermani, “Novartis Pulls Galvus From Germany After Failed Price Negotiations,”  

,” Reuters, Feb. 18, 2014, accessed Aug. 14, 2014.

” (May 21, 2014),  accessed Aug. 14, 2014.

Institute for Quality and Efficiency in Health Care, Trastuzumab emtansine 

 Benefit assessment according to §35a Social Code Book V

C. Henry, “Oncology drugs under AMNOG,” 


Jill E. Sackman, DVM, PhD,  senior consultant, and Michael Kuchenreuther, PhD,  research analyst,  at Numerof & Associates, Inc., St. Louis, MO, 

Germany Post AMNOG: Insights for BioPharma

Global healthcare systems are currently undergoing major transformations spurred by increasing regulation, record public debt, and shrinking budgets. The United States has the dubious distinction of leading the way in this regard. The mandates of the Affordable Care Act, along with shrinking reimbursement to providers, are fundamentally changing the operation of the US healthcare system. At the same time, patients are being challenged to assume greater accountability for their own health, and the industry is moving to a model that better aligns stakeholder incentives to deliver on cost and quality.  Healthcare providers and payers that have historically been siloed and fragmented are now exploring ways to collaborate and coordinate efforts to reduce costs while improving patient safety and healthcare quality.

Amidst lower reimbursement from payers and declining productivity in R&D, manufacturers are looking to develop high-value, cost effective and targeted drugs. It has long been maintained that personalized medicine offers the prospect of improved health, better outcomes, and less harm. It should not be surprising that the concept of personalized medicine has become a buzzword throughout the industry as manufacturers increasingly see it as the solution to many of their business needs. In fact, the number of personalized medicine products has more than quadrupled in recent years, from only 13 on the market in 2006 to more than 70 in 2012, and a recent report projects that the US market for predictive personalized drugs will double, increasing from $9.2 billion in 2013 to $18.2 billion in 2019 (1). 

FDA defines personalized medicine as “the tailoring of medical treatment to the individual characteristics, needs, and preferences of a patient during all stages of care, including prevention, diagnosis, treatment, and follow-up” (2). Other definitions include specific language around using biological information and biomarkers on the level of molecular disease pathways, genetics, proteomics as well as metabolomics to stratify patients. Some examples of personalized therapies, devices, or technologies that illustrate the broad nature of the term include an implanted 3D-printed tracheal splint, an artificial pancreas device system, drugs aimed at molecular targets specific to a patient’s disease state (e.g., Kadydeco for cystic fibrosis and Zykadia for melanoma), immunotherapies that combat tumors using the body’s own immune system, and disease risk assessment through genetic testing.  

Regardless of how the term is defined, one thing is clear--data and analytics have emerged at the center of this patient-centered and personalized ideal.  Technologies that can extract large amounts of data from samples or biopsies are allowing for previously unknown factors involved in disease to be identified and used as drug targets or disease biomarkers. “Big data can help us personalize medicine, and also glean new insights from big numbers of patients in the real world like never before,” according to Geno Germano, head of Pfizer’s Global Innovative Pharma division (3). Many stakeholders including manufacturers, however, are still struggling with how to effectively leverage massive data sets to improve efficiencies, reduce costs, and advance patient-centric treatments. This article explores data analytic strategies that pharmaceutical companies are considering to capitalize on the opportunities of personalized medicine.


Pharma has always been a data-driven sector; however, the volume of data available today is unprecedented. According to Eric Schmidt, chairman of Google, we generate as much information in a couple of days as all of mankind has since the dawn of recorded history up to 2003 (4). This notion certainly applies to the life-sciences industry, which has seen an explosion of documented patient data over the past decade.  This has been spurred by dramatic changes that include advancements in genome sequencing technologies; the adoption of electronic health records (EHRs) across health systems; the sharing of clinical-trial data; and the rise in patient registries, social media networks, and medical and nonmedical device data systems (e.g., smartphones and fitness monitors). These changes have created a virtual explosion of genomic, clinical trials, claims, EHR, and research study data. When paired with the adoption of advanced analytic tools to generate insights from these data, manufacturers are positioned to create more targeted therapies and to transform the way that biopharmaceutical drugs are discovered, developed, and marketed.  

Personalized medicine is rooted in the hypothesis that diseases are heterogeneous in their causes, rates of progression, and their response to drugs. Simply put, each person’s disease is potentially unique, and therefore, that person needs to be treated as an individual. Thus, the shift toward personalized medicine has required that manufacturers develop rigorous strategies to understand the cause or origin of a disease as opposed to simply treating patients’ symptoms. Ted Driscoll, digital health director at Claremont Creek Ventures, believes that mining data on genomics, proteomics, and metabolomics alongside clinical-trial data and real-world clinical data will enable manufacturers to more thoroughly understand the particular structure of a disease. This understanding will lead to faster and more accurate identification and validation of targets and biomarkers for designing personalized therapies (5). Some forward-thinking manufacturers are already participating in public-private research initiatives to harness the power of “big data” and genome sequencing to improve the success rate for discovering new personalized medicines (

). Such strategies will enable manufacturers to implement patient-centered approaches across all stages of translational and clinical research in therapeutic areas where targeted therapies are lacking.  

Traditional clinical trials enroll a tightly selected group of patients to show, under highly controlled circumstances, that a drug’s effects are statistically significant. As manufacturers invest greater resources in drug discovery focused on the etiology and mechanism of specific diseases, diagnostic biomarkers will help target a patient population that will optimally respond to therapy. Clinical trials designed to test these personalized medicines will likely become more structured as well. Using personal medical and population genomics data, manufacturers now have tools to design more targeted clinical trials by matching cell types and individual metabolic response to the drug candidate, recruiting subjects who will be more likely to respond and excluding those likely to have treatment-limiting side effects.  

Some global manufacturers have already launched personalized medicine clinical trial strategies that could change how drugs are studied and potentially cut the time and cost of bringing them to market (see 

). Multi-drug, multi-arm, biomarker-driven clinical trials are one strategy manufacturers are putting into practice. According to Maria Freire, PhD, president and executive director of the Foundation for the National Institutes of Health, this clinical trial design establishes a model of clinical testing that more efficiently meets the needs of both patients and drug developers. “This strategy will validate biomarkers and facilitate drug development in one infrastructure, to more rapidly provide safer and more effective treatments to patients” (6).   

Table II: Examples of more personalized clinical trial strategies. 

Finally, as greater volumes of patient reporting information are captured and tracked, manufacturers should be reviewing that data and correlating the real-world reactions of patients with their clinical data to ensure that the intended outcome of the drug or device is actually happening. This especially holds true for manufacturers of companion diagnostic tests as it is often more difficult for these developers to achieve broad coverage and value-based reimbursement for their product. To this point, some manufacturers have already created proprietary data networks through partnerships to gather, analyze, share, and respond to real-world outcomes and claims data. One example involves Genomic Health’s Oncotype DX for breast cancer recurrence, where the manufacturer analyzed the real-world outcomes and costs of 925 Humana patients managed with diagnostic and demonstrated significant cost savings (7).   


The volume of health-related data is exploding at an unprecedented rate. While having access to these data is important, access alone does not advance the science. The real challenge that manufacturers must address is asking the right questions and effectively discerning which data are of value in answering these questions. Given the sheer volume of information available, framing appropriate questions along with data and analytic capabilities will be key differentiators in personalized medicine. Some organizations may be able to do these analytics in-house, while others may need to consider investing in data through innovative partnerships with healthcare-focused and even non-healthcare focused entities. Regardless, manufacturers at the leading edge of personalized medicine will be those that invest resources to determine where true medical unmet needs exist and what data and analytics can answer key questions around improving patient outcomes.  

From a drug discovery and development standpoint, the ability to manage, integrate, and link data across functions (e.g., safety, clinical studies, regulatory, patient reported outcomes, etc.) will enable manufacturers to conduct comprehensive data mining that can facilitate lead generation as well as identify related applications or potential safety issues.  In order for this to be possible, however, silos that have historically separated internal functions will need to be removed to allow for end-to-end data integration. R&D heads can also use genomic data, clinical-trial data, and real-world data to prioritize investments in specific disease areas. Criteria such as potential clinical relevance of biomarkers and feasibility of discovering biomarkers should also be considered given the increasing importance of biomarkers and companion diagnostics in personalized medicine.  

As manufacturers continue to develop more targeted therapies, clinical trials must be more targeted as well. Essentially, clinical trials must be designed so that they can show, early on, if a drug is efficacious for the first cohort of patients. Manufacturers must identify appropriate patients using more data sources (e.g., patient registries and social media) and additional criteria (e.g., genetic composition). Targeting specific populations will allow for trials that are smaller, shorter, less expensive, and more powerful. When appropriate, manufacturers that develop or invest in companion diagnostic tests early on in their R&D processes will be better-positioned to conduct such studies.
With payers increasingly driving value-based reimbursement strategies for services, therapeutics, and devices, the availability of data around individual patients’ medical history, clinical interventions including prescription history, outcomes, and cost will help drug manufacturers develop better target therapies and stratify populations thereby optimizing value and patient outcomes.  

What You Need to Know to Create or Sustain a Personalized Medicine Strategy for Your Company

Paving the Way for Personalized Medicine: FDA’s Role in the New Era of Medical Product Developmen

t (October 2013).
  3.	A. McConaghie, “Can big data really transform healthcare?” 2014 

,  accessed June 15, 2014. 
  4.	M. Kirkpatrick, Google CEO Schmidt: “People Aren’t Ready for the Technology Revolution” 

 (Aug. 4 2010), accessed June 15, 2014
  5.	J. Rowe, Top 5 Pathways to Personalized Medicine, 

 (2013),   accessed June 16, 2014.
  6.	National Cancer Institute, 

Lung-MAP Launches: First Precision Medicine Trial From National Clinical Trials Network

 (2014),  accessed June 18, 2014.
7.	K. Pothier and G. Gustavsen, 


Jill E. Sackman, DVM, PhD, is a senior consultant, and Michael Kuchenreuther, PhD, is a research analyst, both at Numerof     & Associates, Inc., St. Louis, MO, 

Data analytic strategies can help companies capitalize on personalized medicine.

Marrying Big Data with Personalized Medicine

Recognizing that emerging markets continue to play a significant role in terms of future growth, most major pharmaceutical companies have accelerated efforts to strengthen their presence within these markets through R&D investment, licensing deals, acquisitions, or other partnerships. However, with global markets facing dynamic demographic and disease trends, changing market demands, and evolving regulatory requirements, it has been hard for manufacturers to devise the strategies needed for success in each of these areas. 

India, a member of the BRIC nations (Brazil, Russia, India, and China), is much more comparable to the United States in terms of market size and must be included in this list of promising potential markets for global pharmaceutical manufacturers. Recent changes in India’s population and economy have contributed to a shift in the country’s epidemiological profile towards ‘lifestyle’ diseases that are more prevalent in Western markets. Such changes have increased the demand for better healthcare and for medications that address chronic diseases. Furthermore, India’s own pharmaceutical industry, a recognized world leader in the production of generic drugs, offers manufacturing expertise to organizations looking to outsource or create networks of collaboration and discovery. However, a more granular assessment of India’s pharmaceutical market reveals growing concerns over patent protection, price capping, quality, and safety. Understanding this country’s complex market dynamics will be crucial for manufacturers exploring new opportunities for growth in India.  

India health and pharmaceutical market overview


India is the second most populous country in the world with about 1.27 billion people, and is projected to surpass China by 2028 (1). As the Indian population has continued to grow in recent years, so too has the country’s economy. Over the past decade, India’s economy grew above the Organization for Economic Co-operation and Development (OECD) average, which can be attributed to rising average income levels, an expanding middle class, and a drive toward urbanization (2). These socio-economic changes are contributing to a significant shift in India’s epidemiological profile. With working-age adults accounting for the majority of the overall population and more people becoming affluent and living longer, Indian health service users are facing increasing challenges associated with the prevention and treatment of chronic diseases such as obesity, heart disease, stroke, cancer, and diabetes (3).   

At the same time, India continues to be challenged by a range of infectious disorders. Despite economic advancements, significant income inequality still exists throughout the country. In fact, per capita gross national income in India was only $3,391 in 2012 when adjusted by purchasing power parity (compared to $50,000 in US) (4).  In rural areas, where two-thirds of the nation’s citizens are located, hundreds of millions of people are still living in severe poverty, and vaccination coverage for children remains poor.  

Taken together, this high incidence of infectious and chronic disease and the large number of disadvantaged communities have created an even greater need for patient access to quality healthcare delivery as well as new and innovative therapeutic products. Historically, India has had one of the world’s lowest levels of health spending as a proportion of gross domestic product (GDP). In 2011, India’s total health expenditure was 3.9% of GDP (public expenditure was only 1.2% of GDP) compared to 10.1% of GDP, an average across all G-5 countries (4). The lack of government funding in healthcare has led to significant gaps in the quality and availability of public facilities and has pushed an increasing proportion of Indian patients to use private healthcare facilities that are associated with high costs. Where other countries have a well-established insurance sector that seeks to reduce this economic burden, health insurance in India is still in its infancy.   

Approximately 243 million people are covered by different forms of government-sponsored insurance schemes while approximately 55 million rely on commercial insurers (5). With the vast majority of people in India uninsured, out-of-pocket payments are among the highest in the world. According to the World Health Organization (WHO), 70% of Indians are spending their entire out-of-pocket income on medicines and healthcare services (6). On top of this, most insurance plans only provide coverage for inpatient healthcare services and do not include coverage for outpatient treatments, including prescription medicines. Thus, it is no surprise that approximately 90% of India’s pharmaceutical market is currently made up of branded generic drugs (7).  

Against this backdrop, India’s Ministry of Health has been focused on improving access to healthcare facilities, increasing population coverage by way of healthcare insurance, and creating initiatives for the prevention and early stage management of chronic diseases. In 2012, as part of the country’s 12th Five-Year Plan, the government proposed to double its public expenditure on healthcare to 2-3% of GDP in an effort to boost local access and affordability to quality healthcare. In light of these efforts, the Indian healthcare industry as a whole is expected to reach $158 billion by 2017 (8).   

India’s pharmaceutical market accounts for about 10% of the global pharmaceutical industry in terms of volume and represents a major component of growth for the country’s healthcare industry (9). The Indian pharmaceutical market was estimated at $18.4 billion in 2012 and is expected to almost double by 2016. Although India’s market is currently dominated by generic drugs, rising incomes, enhanced medical infrastructure, and insurance coverage could provide a valuable opportunity for manufacturers’ higher-priced branded healthcare products moving forward.     

 Similar to many other countries, India’s medical regulatory structure is divided between national and state authorities. The Drug Controller General of India (DCGI) is the national authority responsible for the regulation of pharmaceuticals. The DCGI registers all imported drugs, new drugs, and biologicals in selected categories and has responsibility for approving clinical trials and quality standards in the country. Recently, these standards have come under question by FDA, citing quality-control problems ranging from data manipulation to sanitation. While FDA and regulatory bodies in other countries step up inspections of Indian plants in response to these developments, global manufacturers have had to reassess their contracted relations with these plants and give careful consideration to developing new strategic partnerships in this country moving forward (10).    

Concerns over quality and data integrity have also impacted manufacturers’ perception of India’s clinical trials system. India’s large and diverse patient pool and low drug trial costs have made the country an attractive destination for multinational pharmaceutical clinical trials. However, India has recently seen the number of clinical trials fall dramatically among allegations that protocols were not being conducted properly and that companies were taking advantage of disadvantaged patients (11). In response to these developments, manufacturers have been forced to either shift their trials to another country or encounter significant delays in clinical trial approval--both of which are holding their organizations back.

 The high prevalence of self-pay generic drugs throughout the country has created little incentive for the development of certain market access disciplines such as health economics and outcome research (HEOR) and reimbursement. Government affairs and pricing functions, on the other hand, play an important role and have been broadly cited as the most crucial challenges global manufacturers face in the Indian marketplace.

India’s National Pharmaceutical Pricing Authority (NPPA) controls product pricing throughout the country. In 2013, the NPPA expanded the National List of Essential Medicines (NLEM) to include 652 drugs, a substantial increase over the 74 drugs previously listed. These products will now be subject to price controls that are projected to reduce prices by more than 20% for half the drugs (12). As if this did not challenge manufacturers enough, the Indian government recently decided to revise the NLEM later this year in response to complaints that the list should include all dosages, strengths, delivery mechanisms, and combinations of these previously identified drugs (13). The NPPA is also allowed to control prices of patented drugs that lie outside this list, and last month the government began exploring the possibility of using a reference pricing system for these products (14).  With intense generic competition already driving down drug prices in India, these additional controls pose a significant threat to international manufacturers’ ability to generate revenue.

 Aside from pricing, patent protection has also come under the microscope as of late. In an effort to ensure greater accessibility to higher-cost, branded drugs, India, as well as other BRIC countries, has begun to allow generic-drug manufacturers to market these drugs at dramatically reduced costs without consequence through compulsory licenses.  While only one compulsory license has been approved by India’s government to date (Bayer’s Nexavar), other manufacturers have recently had their patents weakened, revoked, or rejected. While appeals to some of these rulings are still in process, precedents have been set, leading manufacturers to question their future investment in India. 

Implications for successful market entry 


Despite the aforementioned challenges, major pharmaceutical companies recognize the long-term prospects of this market and continue launching new patented drugs and pursuing unique business opportunities in India. To encourage future investment, the government has made tax breaks available to the pharmaceutical sector, including a weighted tax deduction of 150% for any R&D expenditure incurred. In addition, the government recently declared that all drugs that offer some form of innovation would be exempt from price regulation for the first five years following approval. Here, innovation refers to drugs or drug delivery systems that arise from native R&D efforts or existing drugs that are improved upon by an Indian company. This measure is aimed to spur growth in the domestic pharmaceutical market and to ensure that pricing regulations do not turn global manufacturers away from India. Thus, companies that develop strategic partnerships with local businesses and outsource some of their R&D and manufacturing activities will be well-positioned to maximize revenue by avoiding steep price cuts. This opportunity for manufacturers will only apply, however, for those products that offer true innovation by providing economic and/or clinical value.  

Uncertainty over patent security and obstacles to clinical trials are discouraging Western companies from conducting drug research in India. With that said, the government has already initiated clinical research reform efforts through new amendments and regulations that could quickly restore the growth of clinical trials throughout the country.  At the same time, there is speculation that a transfer of power in India’s upcoming election could dampen fears of additional compulsory licenses (15). Manufacturers should closely monitor these internal developments and react accordingly.  


A growing middle class that is projected to see a significant rise in noncommunicable diseases provides an excellent opportunity for global companies to launch their premium products and expand their market share. India’s underdeveloped insurance industry and high poverty rates, however, require that manufacturers first develop a careful pricing strategy. Pricing products appropriately can go a long way towards ensuring future growth as well as avoiding disputes over patent protection and licensing agreements.  In a country that holds about one-fifth of the world’s population, India’s market is too big for pharmaceutical companies to shy away from, despite all of the hurdles placed in front of them.  

UN: India to be world’s most populous country by 2028

” (June 2013),  accessed Apr. 8, 2014.
  2.	OECD, “Crisis squeezes income and puts pressure on inequality and poverty (2013).
  3.	Patel V et al. 

 2011; 377:413-28.
  4.	The World Bank, Research and Development Expenditure (% of GDP) (2013).
  5.	Report of the Steering Committee on Health for the 12th Five Year Plan, Health Division, Planning Commission (February 2012) p. 23.
  6.	Indians’ growing healthcare expenses concern WHO. 

 (Nov. 2, 2011).
  7.	PricewaterhouseCoopers, 

India Pharma Inc.: Capitalising on India’s Growth Potential 

(2010). 
  8.	India Brand Equity Foundation, Indian Healthcare Industry Analysis (August 2013).
  9.	India Brand Equity Foundation,  Pharmaceuticals (August 2013).
  10.	Palmer E., “AstraZeneca says Nexium pills with Ranbaxy ingredient are safe to use,” 

(March 2014). 
  11.	Garde D., Report: Indian clinical trials fell 93% last year,  

 (January 27, 2014).
  12.	Economic Times Bureau, “Government to regulate rates of 652 medicines; prices set to fall,” 

 (May 2013). 
  13.	A. Jain A., “Analysts in India call for urgent expansion of essential medicines list,” 

  (March 2014) 348.
  14.	Sidhartha, TNN.  Patented drugs face price caps, 

, Jan. 27, 2014   
  15.	Hirschler B and Siddiqui Z, 

Big Pharma still betting on “messed up” Indian drugs market 

(Reuters, March 2014), accessed Apr. 9, 2014. 
  
  


  Jill E. Sackman, DVM, PhD, is a senior consultant at Numerof & Associates, Inc. (NAI), St. Louis, MO, 

. Michael Kuchenreuther, PhD, is a research analyst at Numerof & Associates, Inc.  

An established drug-manufacturing base with quality and safety issues, and patent protection and price capping concerns complicate efforts to do business in India.

India Offers Biopharma Opportunities and Challenges

Biopharma companies should not overlook India's growing market.

India's Developing Market Offers Opportunities

Israel is a developed, industrialized nation that, despite ongoing conflict with neighboring Arab countries, remains committed to making technological and medical advances through education and high R&D expenditures. Over recent decades, much of Israel’s economic growth and export performance has been reliant on research-intensive industries. Its dense population and focus on innovation positions Israel well to drive a significant amount of growth for pharmaceutical and medical-device manufacturers.  
  
The infrastructure of Israel’s healthcare system has come under scrutiny in recent years as the Israeli government continues to rein in its healthcare expenditures. Even though Israel’s economy has recovered from the global financial crisis of 2008-09 better than most advanced, comparably sized economies, constraints are still being placed on the Ministry of Health’s annual budget. In recent years, the Ministry of Health has developed strong capabilities in the areas of health technology assessment (HTA), new technology prioritization, and quality monitoring for community-based care to focus more on value and minimize inefficient spending. Despite these changes, however, the Israeli pharmaceutical market is still expected to grow.

In 1995, Israel enacted a National Health Insurance Act, granting basic health insurance to all Israeli residents, covering a “Health Basket” that includes both medical services and specific medical products. The treatments and products included on this list are set by the state on an annual basis. Residents must pay a certain percentage of income (approximately 5%) to belong to one of the four non-government providers called “sick funds” (“kupat cholim”); in certain cases they are required to make a co-payment for treatment. 

While strained political relationships and terrorism remain real threats to Israel’s economy, including its healthcare market, the Israeli health system continues to provide a high standard of care to the population as a whole.  According to global data compiled by Bloomberg, Israel ranked fourth in healthcare efficiency (1). This ranking is particularly impressive considering the relatively moderate level of resources allocated to healthcare. Even though Israel, which joined the Organization for Economic Co-operation and Development (OECD) in 2010, has seen accelerated health spending since 2009, national expenditures on health remain lower than for other OECD member nations.  Health spending accounted for 7.7% of gross domestic product (GDP) in Israel in 2011, below the average of 9.3% in OECD countries (2).   

With approximately 7.4 million people at the last census in 2008 and 311 people per km², Israel’s population density is among the highest in the Western world.  More than 60% of the population is concentrated in the narrow strip along the Mediterranean Sea. Israel’s high total fertility rate has given rise to a relatively young society with 28% of the population younger than 15 years and only 10% older than 64 years of age (3).  For pharmaceutical companies looking to expand in the region, this young society provides a skilled workforce, ranking it amongst the world’s leading countries in terms of high-tech start-ups per capita as well as R&D spending per capita (4.40% of GDP) (4).   

The environment of innovation and entrepreneurship in Israel has resulted in substantial growth in the number of life-science companies from 186 in 1996 to more than 1100 in 2012 (5). Medical-device companies make up approximately 50% of that pool. The production revenue (export and local sales) of the Israeli medical devices industry in 2011 was US$1.8 billion (6). Israel is also ranked second to the United States in biopharmaceutical patents per capita, and its pharmaceutical market was estimated at US$1.78 billion in 2010 and is expected to reach US$2.3 billion by 2020 (7).
  


  New drugs registered in Israel, including biologics, must meet European Union (EU) standard GMPs in terms of quality and efficacy to ensure public safety. In addition, medical products that have been manufactured, registered, or marketed in other major pharmaceutical markets are eligible to be registered in Israel. This eligibility encourages growth in the market by allowing drugs to be shared relatively easily between Israel and other countries.  
  
Israel has become an increasingly significant location for international companies conducting multinational pharmaceutical clinical trials.  One important factor has been the fact that the entire Israeli population belongs to one of four health funds, which maintain a full history of each member’s health.  The system facilitates locating patients and allows for good follow-up over time. Israel also has the type of population frequently required for multinational studies, offering more ethnic diversity than many other countries.  In addition, Israel was one of the first countries to accept the International Conference on Harmonization (ICH) guidelines for good clinical practice (GCP), allowing for unified standards between the European Union, Japan, and the US, facilitating mutual acceptance of clinical trial data by regulatory authorities.

Other healthcare access considerations include pharmacovigilance (PV) and inclusion in the “health basket.”  The need for improved PV in Israel has been underscored in recent years by several high-profile cases in which pharmaceutical products have reached Israeli consumers with adverse side effects caused by formulation changes. In response to these developments, a branch of the International Society of Pharmacovigilance (ISoP) is being founded in Israel with the goal of increasing awareness about PV throughout the region. Furthermore, the Israeli Ministry of Health recently mandated that all prescription products must have multilingual labels in Hebrew, English, Arabic, and Russian.  

Historically, the high price of drugs has not been part of the public debate in Israel, and the government has rarely used price controls as is the case in other countries. However, recent economic stress in the form of rising military and defense costs coupled with a slowdown in the global economy has led the government to search for budgets to cut and taxes to raise. As such, the Israeli Ministry of Health is now placing new and existing products under greater scrutiny to limit spending.  For instance, only 77 new medications and medical devices were added to the basket of reimbursed products in 2012. This number was significantly lower than the approximate 200 new drugs and technologies that were included in each of the previous two years (8).  Inclusion of drugs and technologies in the National Health Basket is crucial for organizations seeking marketing success in Israel. Here, manufacturers will require data on clinical, epidemiological, and economic characteristics, including its predicted impact on the available budget.
  
  

Successful market entry and in-region partnering


  Israel is home to one of the world’s largest generic-drug makers, Teva Pharmaceuticals, yet despite its presence, the Israeli pharmaceutical market remains in favor of patented medicines. In 2010, it was reported that patented drugs accounted for more than 50% of all pharmaceutical sales in the country and approximately 70% of the prescription drug market (9).  Moreover, according to Benny Zeevi, co-chairman of the Israel Advanced Technology Industries (IATI), Israel’s flourishing biotechnology industry is transitioning from a period of incubation to one of maturity. The number of biotech companies has nearly tripled since 2003, and the number of registered clinical trials is continuing to rise (10).   
  
The government recently established a new biotech incubator that joins more than 20 other incubators or accelerators to help attract large, international pharmaceutical companies to Israel. Although some large pharmaceutical companies may be turned off by Israel’s moderate population size or by the perception of a volatile political environment, other large global organizations recognize the market opportunities that exist in this country. In 2009, Pfizer partnered with Protalix Biotherapeutics and together developed the first approved plant-based biologic for treating type 1 Gaucher’s disease (11). In 2011, Merck KGaA’s subsidiary Merck Serono invested US$13 million in a new drug development incubator with the goal of having at least six startups working on new medications or technologies by 2018.

Israel’s dynamic venture capital market has delivered a stream of substantial investments in R&D.  With increasing awareness of chronic diseases and a highly skilled workforce, Israel’s pharmaceutical and diagnostic markets are expected to grow even stronger. Taken together, Israel seems like a great place to turn to for future investment opportunities.
  
  


  Israel has a long history of biotechnology innovation and growth and with an educated and diverse population, high-quality healthcare system, and resilience to global financial stress it remains a strong partner for R&D, clinical research and market growth. Additionally, Israel is a popular destination for medical tourism. As of 2010, up to 30,000 foreigners come to Israel every year for treatment, mostly from Russia (12). Israel, like the US, is also a frequent “first adopter” of new technology and medical innovation. Manufacturers, however, need to be aware that the Israeli government’s fiscal austerity and sick funds traditionally have kept the most expensive branded drugs and treatments unavailable. Cheaper generics and low physician and healthcare provider salaries have been used to control overall costs.
  
  


  1.	“Israel ranks 4th globally in health care efficiency,” 

  (August 2013).
  2.	OECD Health Data (2013).
  3.	OECD Reviews of Health Care Quality: Israel (2012).
  4.	The World Bank, Research and development expenditure (% of GDP) (2013).
  5.	M. Scudellari, 

(July 2013).
  6.	Meidata, Israel Medical Devices Industry-Market Overview 2012.
  7.	Global Data, Research and Markets: Healthcare, Regulatory and Reimbursement Landscape--Israel (2012).
  8.	Scripp Business Insights, The Pharmaceutical Market in Israel  (2012).
  9.	Industry Trend Analysis, Investment In Innovation Necessary (2010).
  10.	N. Elis, 

(April 25, 2013).
  11.	J. Fox, Nature Biotechnology (June 2012).
  12.		“Health Ministry to probe Israel medical tourism industry following Haaretz exposé,” haaretz.com (November 2010). 
  
  --Jill E. Sackman, D.V.M., PhD, is a senior consultant and Michael Kuchenreuther, PhD, is a research analyst, both at Numerof & Associates, Inc.

Israel's diverse population, high-quality healthcare system, and resilience to global financial stress make it a strong partner for R&D, clinical research, and market growth.