1. © Henley Business School 2008 Dr. Giampiero Favato Henley Business School University of Reading SEFAP University of Milan Long term sustainability of SSN pharmaceutical coverage in Italy A twenty year outlook (2005-2025)

2. 2 Long term sustainability of current SSN level of pharmaceutical coverage Source: OSMED data 2007 ?

3. 3 Key determinants of demand for pharma in public healthcare systems* Ageing –Increase Rx volume Price –Generic substitution –Shift to more expensive alternatives –Shift in demand Morbidity Mortality Chronic illness rate Physicians’ prescribing behaviour Disposable income Education Access to healthcare * Majeed A, Malcom I (1999) Source: OSMED data 2007

4. 4 Study objective To determine the long term impact of age and generic substitution on the Italian public pharmaceutical spending. Key assumptions: –Base year: 2005 –Fundamental level of SSN pharmaceutical coverage unchanged –No drastic shifts in pharmaceutical demand –All other determinants unchanged –Generics price = 40% of branded off-patent

5. 5 Quantifying the impact of ageing: the ASSET study (2007)

6. 6 ASSET outcomes Patient and cost data were obtained directly from computerised prescription records for a two year period, from January 2004 to December 2005. The ASSET sample totalled 3,175,691 residents. The ASSET mean costs were applied to the Istat projections of the Italian population (intermediate scenario) * Favato G, Mariani P, Mills RW, Capone A, Pelagatti M, et al (2007) ASSET

7. 7 Impact of ageing on demand: +24% over twenty years (2005-2025) 124 100

8. 8 Goodness of fit Polynomial regression model: y = -0.0055x2 + 1.2906x + 98.759 R 2 = 0.9999

9. 9 Quantifying the impact of generics Population: ISTAT projections 2005-2025 (intermediate scenario) at year end. Impact of generic substitution: 40% price reduction, calculated at year end for each molecule going off patent on its average cost by age group (source: ASSET) The calculated reduction is then carried forward to the following year.

10. 10 Time distribution of patent expiration 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

11. 11 Expected impact of patent expiration by ATC class 2006-2017* * Patent expiration dates provided by AIFA

12. 12 Top ten molecules off patent by 2017

13. 13 Generic substitution to offset the impact of ageing population 100 124 101

14. 14 Goodness of fit Polynomial regression model: y = 0.0846 x 2 – 1.6324x + 100.19 R 2 = 0.8854

15. 15 Sensitivity to generics’ price 112 101 83 124 No generics

16. 16 The actual trend 2005-2008E* seems to confirm the ageing generic model * 2008 estimates based on Jan-Jun (-1.4% vs. 2007). Source: Il Sole 24 Ore

17. 17 Net effect of generic substitution: 2001-2004 equilibrium ATC4 class growing: –32.6% of drugs off-patent UPleaders –18.6% of drugs off-patentDOWNshift ATC4 class declining –13.9% of drugs off-patentUPlow impact –34.5% of drugs off-patentDOWNshift sustainable cost reduction potential cost increase (therapy shift)

18. 18 Conclusions Ageing and price are key determinants of pharmaceutical demand in a state funded, open access social healthcare system like the Italian SSN. All else equal, by 2025 the expected ageing of the Italian population would increase the cost of the current public pharmaceutical coverage by 24%. Generic substitution could offset the upward trend driven by ageing. Cholesterol inhibitors and anti hypertensive agents could reduce the total cost of cardiovascular treatments by 25%. Due to time to patent expiration, the next couple of years would provide critical indications about the sustainability of the current pharmaceutical coverage provided by the SSN in Fascia A.

19. 19 All else equal… a major limitation of the age/generic substitution model CHANGE Shift in pharmaceutical demand Accelerated shift to more expensive treatment options Physicians behaviour Patients behaviour POLICY IMPLICATIONS Redefine levels of SSN coverage Outcome based prescribing guidelines Rationale prescribing Reduce moral hazard: –Link reimbursement to compliance –Education: health as capital