Deloitte Ireland Life Sciences Conference 2014 Slides

Life Sciences International Summit
David Hearn
Head of Deloitte Consulting Ireland
15 October 2014
Deloittes Life Sciences Practice
Deloitte Capabilities
Strategy & Operations
Working With Industry Leaders
Regulation and Corporate Governance
85% of Fortune 1000 LS&HC

companies
Technology Solutions and

Implementation
10 of the 10 largest pharmaceutical

manufacturers
Corporate Finance
10 of the 10 largest medical equipment

manufacturers
Human Resources
Audit and Assurance
10 of the 10 largest biotechnology

companies
Security and Controls

Tax
Recognition
The #1 Life Sciences & Health Care Consulting
Organization
The Largest Health Care Management Consulting

Organization
2014 Global Life Sciences Sector Outlook
2014 Deloitte & Touche
Global life sciences industry issues in 2014

Aging and Demographics
Aging population
The aging population is a shared, long-term trend in markets including Western Europe,
Japan, and surprisingly China.
Overall life expectancy is expected to increase from an estimated 72.6 years in 2012 to
73.7 years by 2017
Demographic trend
The biggest shared demographic trend is the spread of chronic diseases, which is due to:
Aging population
Sedentary lifestyles
Diet changes
Rising obesity levels
BRICMT adds its agenda
BRICMT makes its mark
Growth of Total Healthcare

Expenditures by Regions
Growth of GDP by Regions

(1996- 2008)
75%
(1996-2008)
1996-2000
1996-2000
2000-2005
63%
50%
75%
2006-2008
50%
47%
2000-2005
63%
2006-2008
46%
35%
30%
30%
27%
25%
19%
21%
26%
23%
25%
22%
18%
11%
8%
11%
8%
0%
0%
BRICMT
(in USD)
EU5
(in EUR)
US
(in USD)
BRICMT
(in USD)
EU5
(in EUR)
US
(in USD)
Note: BRICMT = Brazil, Russia, India, China, Mexico, Turkey
Source: 3
WHO Health
Care
Database
2008, Monitor
2014
Global
Life Sciences
Sector Analysis
Outlook
BRICMT adds its agenda
but have very different healthcare structures

Sources of Funding for Healthcare
Expenditures by Country
Share of Out-of-Pocket Expenditures by Total

Healthcare Expenditures in % of GDP per Country
(2008, % of total health care expenditures)
(2008)
28%
47%
75%
47%
44%
8%
47%
66%
69%
78%
4%
50%
4%
24%
64%
25%
41%
6%
49%
9%
49%
32% 28%
8%
22%
14%
12%
0%
India
Mexico
Russia
EU5 US
China
Brazil
Turkey
Government
Out-of-Pocket
Share of Out-of-Pocket Expenditures

(in % of total health care expenditures)
High
100%
Low
Low
Health Care Expenditures

(in % of GDP)
High
Private Insurances
Note: BRICMT = Brazil, Russia, India, China, Mexico, Turkey

Delivering innovation and value
Patent cliff
The patent cliff is now at its steepest point. In 2012, $38 billion of worldwide prescription
drug sales were lost as a result of expired patent protection.
The risk continues as governments and other payers intensify efforts to maximize
savings from patent expirations by promoting the use of generics.
Many countries across the world have introduced programs to encourage generic use,
including India and most European countries.
Biosimilars
Engineering copies of high-priced biotech drugs offers another growth opportunity for
generics producers.
The global market for biosimilars grew by 44 percent in 2011, to $2.5 billion, and is
expected to rise to $3.6 billion by 2016, with the fastest growth in Asia-Pacific.
The U.S., the European Union, Japan, and other countries have created regulatory
pathways for biosimilar products, although U.S. health care reform also extended the
patent protection on biotech drugs to 12 years, potentially slowing U.S. biosimilars
growth.
Investments in specialised medicines / indications
Patent expirations are only marginally replenished by upcoming launches...
$384
$382
$380
$380
$379
2015F
2016F
2017F
2018F
$329
$383
2014F
250
$318
$379
2013F
$281
300
$303
$385
2012F
350
$378
2011
400
2010
Sales of top drugs (c. 80% of revenues) by lifecycle stage (top 12 companies), 2002-18F, $bn
$347
$251
$222
$191
200
150
100
50
Generic
Core
Launch
Expiry
2009
2008
2007
2006
2005
2004
2003
2002
Selected top brand-name drugs with patent expirations from 2013-2018

2013
2014
2015
2016
2017
2018
Cymbalta (Eli Lilly)
Gleevec (Novartis)
Strattera (Eli Lilly)
Reyataz (BMS)
Humalog (Eli Lilly)
Nexium
(AstraZeneca)
Avodart (GSK)
Zetia (Merck)
Rebif (Merck)
Vytorin (Merck)
Lovaza (GSK)
Aciphex (J&J)
Evista (Eli Lilly)
Abilify (BMS)
Crestor
(AstraZeneca)
Seroquel XR
(AstraZeneca)
Erbitux (BMS / Eli

Lilly / Merck)
Xeloda (Roche)
Renagel/Renvela
(Sanofi)
Zyvox (Pfizer)
Advair (GSK)
Emend (Merck)
Humira (Abbvie)
Neupogen (Amgen)
Kaletra (Abbott)
Orlistat (Roche /
GSK)
Source: Datamonitor; Monitor Deloitte Analysis

Note: Analysis encompasses the top 12 publicly-listed research-based pharmaceutical and biotechnology companies measured by 2008-09 R&D spend: Amgen, AstraZeneca, BMS,
Eli Lilly, GSK, J&J, Merck, Novartis, Pfizer, Roche, Sanofi and Takeda; 2012-18 data are forecasts based on analyst consensus; This analysis only includes sales from top-selling
drugs within the cohort so only reflect c. 80% of total revenues; Generics drugs released or to be released as copies of drugs without patent protection; Core - patented drugs that
neither launch nor expire between 2011-18; Launch - patented drugs launching between 2011-18;
Expiry patent expired drugs or patented drugs expiring between 2011-18
Investments in specialised medicines / indications
Multiple, smaller launches

Example: Pharma Launches
2012
GSK
30 3
Novartis
1 1 2
Merck
0 0 0
Takeda
303
Sanofi
21 3
Roche
20 2
Eli Lilly
0 0
20 2
J&J
20 2
BMS
Astra
Zeneca
Amgen
1 0
20 2
0 0
0 10
1 4
8
4
1
1 5
4
1 9
0 4
0 4
1 0 1
1 4
EU+Global
Source: Companies pipelines

10
150
21
1 1 2
21 3
1 0
2 4
5
0 0
10
0
15 0
2 23
16
30 3
14
1 15
15
0 15
21
3 19
0 0 0
11 0 11
0 0 0
11 1 12
0 0
7 1 8
0 0
13
3 25
0 0 0
0 0
1 0 1
1 5
2
30 3
2 0 2
4 0 4
5 0 5
0 8
20 2
0 0
22
1 28
27
1 0 1
0 1 1
20 2
0 5
2 0 2
30 3
0 5
Total 2012-2018
4 0 4
1 4
20 2
5
2 9
2016-18
30 3
1 5
0 7
2015
1 10
9
1 13
12
0
0
0
5
10 15 0
Number of Launches
7
2014
10
Pfizer
2013
3 11
33 6
1 2
1
10
15 0
10
150 5 10 15 20 25 30
Rest

Delivering innovation and value
Sales revenue
Life sciences companies have adopted a multipronged approach to cope with the current
and anticipated drop in sales revenue:
Cutting costs and staff.
Engaging in joint ventures and mergers and acquisitions (M&A) to share R&D risk and
improve their product portfolio.
Expanding in emerging markets.
Recalibrating business models and research priorities; and using real-world evidence
and emphasizing a products clinical, safety, and economic impact (e.g., comparative
effectiveness) to articulate their value proposition by identifying new ways to
demonstrate product value.
R&D
Life sciences R&D portfolio management is transitioning from its traditional vertically
integrated scientific R&D model to one that focuses more on asset management.
R&D model differs greatly from that of a decade ago. It is multi-disciplinary and requires
an ability to collaborate and partner.
Another characteristic of the emerging models is that there is explicit consideration
about investment, risk, and knowledge.

Complying with regulatory changes
Government policies and mandates
The U.S. FDA, Europes EMA, the Brazilian National Medicines Agency
(ANVISA), and Mexicos Federal Commission for Protection against Health
Risks (COFEPRIS) are among the scores of government agencies that
regulate life sciences product approvals.
The agencies investigate and litigate alleged fraud violations, product quality
issues, corruption, and improper sales activities such as off-label promotion of
drugs or improper contact with physicians.
Each country develops and enforces its own regulations, such as the U.K.
Bribery Act, and the U.S. Physician Payments Sunshine Act and the Foreign
Corrupt Practices Act (FCPA), increasing numbers of countries are enhancing
cross-border agency collaboration to strength regulatory decision making and
enforcement actions.

Navigating global health care reform
Cost containment
It is a common reform objective in both developed and developing markets.
Most national health care systems have been encouraging greater use of generic drugs.
Germany and several other countries have turned to value-based pricing for new drugs.
Some countries are increasingly mandating prices.
Medical and life sciences product innovation
China has identified biotechnology as one of seven strategic industries in its latest fiveyear reform plan.
Brazilian government is in the midst of a ten-year biotechnology development program.
U.K. has reduced taxes on exploiting British-owned intellectual property.
Improving health care access
Expanding insurance coverage to millions of consumers around the globe.
Increasing governments direct purchase of life sciences products.
10

Drug safety
Drug safety standards particularly those associated with quality systems

implementation, data integrity, and validation of processes in manufacturing or
testing continue to tighten in countries around the world.
Some pharmaceutical companies are also taking voluntary steps to advance
drug safety measures.
Others are investing in robust, long-term cleansing and archiving of data for
compliance purposes and promote ongoing oversight through regular review
of KPIs.
Certain countries struggle with drug safety issues more than others.
Pharmaceutical companies have experienced regulatory actions, including
drug recalls, warning letters, and penalties from the FDA for violating U.S.
rules such as lapses in good manufacturing practices.
11

Counterfeiting
World Health Organization (WHO) estimates range from around one percent
of sales in developed countries to over 10 percent in developing countries,
depending on the geographical area.
Weak or incomplete supply chain security particularly when many supply
chains are expanding across the globe is exacerbating the spread of
counterfeit drugs, particularly in emerging markets.
Legislation such as the EUs Falsified Medicines Directive (FMD) has been
enacted with the goals of reducing counterfeit products and bringing some
transparency to the parallel trade.
12

M&A and joint ventures
Increasingly, life sciences companies are conducting M&A and JV

transactions or have key third-party contractual relationships in emerging
markets.
Among potential concerns are the quality and veracity of financial information;
lack of infrastructure and substantive controls; inadequate reporting of
liabilities; unclear legal title of assets; and questionable local governance and
operational practices.
However, all local representatives should be thoroughly vetted to avoid FCPA
issues. Important watch words: Know the relationship; know the partners.
13
Supply chain is one of the big areas of focus
Sustainability on the agenda
Supply security
Supply Chain Risk
Reputational risk
Compliance risk
14
Building Resilience into the Supply Chain
15
New Business Models: Health Data is transforming what is possible

Supply Drivers
Demand Drivers
Increasing possibilities through health data
Intensifying need to address cost & quality
Medical & patient data

EHRs, HIEs, health
sensors, social media,
and genomics are
creating rich new data
sources ready for analysis
Big data analytics
Cheap computing power
and sophisticated analytics
are driving ways to create
insights into patient
behavior, treatment costs
and in R&D
16
Aging patients, in-home

treatment, mobile reduce
medical errors and
improve quality
HIT enabled
opportunities
Discover and deliver

targeted and
personalized therapies
with real world evidence
of impact
Mobile / mHealth
Pervasive mobile and
smart phone adoption
creates new engagement
models within daily
routines
Influence patients
behaviors beyond the
pill and sustain
engagement outside the
traditional care setting
HCP Digital workflow

Increasing integration of
EHRs and telehealth driving
new digitally-enabled
coordinated care models
Drive population
management, protocol
driven care, and data
driven patient risk pool
management
Social Media Use Continues to Expand

Pharma companies are increasingly building their presence in Social Media channels
US Users of Social Media (1)
Pharma Presence in Social Media (2)

Pharmaceutical
Followe
rs
Tweets
Videos
Views
Johnson &
Johnson
Yes CE
9,516
1,904
599
4,959,881
Pfizer
Yes CE
20,068
561
30
10,644
Roche
No
13,576
1,502
Yes CE
9,940
468
45
61,001
Yes
17,054
932
238,615
Sanofi-Aventis US
Yes CE
1,691
1,149
51
110,514
AstraZeneca
Yes CE
9,169
534
26
12,147
Yes
875
Merck
Yes CE
1,698
64
859
Bayer US
Yes CE
2,357
536
66
59,054
Eli Lilly
Yes
5,444
1,378
22
4,114
Bristol-Myers
Yes
5,863
269
Abbot Labs
(1) Source: The Growth of Social Media: An Infographic;

http://www.searchenginejournal.com/the-growth-of-social-media-an-infographic/32788/
(2) Source: Pharmas Social Media Experiments Tap Enthusiasm, Await Regulatory Guidance;
http://www.searchenginejournal.com/the-growth-of-social-media-an-infographic/32788/
17
YouTube
Page
Novartis
Companies Using Social
Twitter
Company
GlaxoSmithKline
Media (1)
Facebook
Comments Enabled (CE); Page not Found (?)
Life Sciences decision makers are confronted with data

and analytics issues
High Costs
Incomplete
Insights
Business Models
Significant costs to reliably

access necessary data sets
Available data often does not

reflect the full span of clinical
observations
Ethically gain access to data

from multiple stakeholders and
ability to collaborate efficiently
Inability to Recognize
Patterns/Associations
Resource Constraints
Technology and privacy

challenges related developing
associations across disparate
datasets
Lack of expertise, resources

and time needed to
effectively interrogate data
Successful use of data requires: 1) widespread and easy accessibility to existing data and
evidence assets, 2) clinical nuances and background to derive insights from data,
3) near real-time connectivity to health systems to further build on that evidence, and
4) appropriately skilled resources to do the same
18

Technology
Technology advancements
Technology advances are connecting developed and emerging markets

and participants along the health care and life sciences value chain.
Adoption of new digital health information technologies (HIT) such as
electronic medical records (EMRs), telemedicine, and mobile health
(mHealth) applications, and electronic medical prescriptions is driving change
in the way physicians, patients and other sector stakeholders interact.
Increasing use of M&A, JVs and other collaborative business models means
that companies with disparate systems will need to synergize their local
operations with global requirements.
Top pharma manufacturers are focusing on optimizing their IT investments,
concentrating their efforts on facilitating real-time communication and visibility
between the R&D and marketing sectors.
19

Information security and privacy
Life sciences companies in the sector are increasingly challenged to protect

their intellectual property (IP) and other valuable intangible assets.
Networked medical devices and other mobile health (mHealth) technologies
may expose patients and health care provider organizations to safety and
security risks.
Increased government focus on information security and privacy is most
evident in the United States. FDA regulations on Unique Device Identifier
Complex and outsourced Supply Chains need to be secure. Regulations are
changing around packaging, serialization, track and trace.
Potential patient safety, economic and reputational damage may arise if
organizations lack appropriate security and privacy controls, lost productivity
and other costs, brand and reputational loss, and loss of consumer goodwill,
among others.
On the other hand there are opportunities for companies that are excellent
in these areas and can prove themselves to be best in class.
20
Requirement for Strong IT Governance

ISO 27000
Project and
Risk
Management
2013 COSO
Framework
IT Governance
Robust
SDLC for
Life
Sciences
ITIL
COBIT 5.0
Regulatory
Compliance
21
A changing, tougher game: compliance access, PV, sales
Healthcare authorities are becoming more risk-averse and

demanding higher requirements for safety and efficacy
% of FDA approved drugs requiring post
marketing monitoring (1970 - 2003)
Post-Marketing
Monitoring
FDA is emphasising
pharmacovigilance, and require
companies to monitor the
safety of their products in the
market
90%
73.0%
60%
30%
25.0%
0%
1970 - 1984
Expanded
Clinical Trials
Regulatory demands are increasing

Expanded clinical trials and
larger databases
More diverse sub-populations
to prove therapeutic
improvements over existing
substances
Increased in the cost of clinical
trials
Cost Breakdown for Launching a New Drug

(1995 - 2002)
2.0
1.7
Launch
1.5
Phase III
1.1
US$ BN
1998 - 2003
Phase II
1.0
2x
Phase I
Pre-Clinical
0.5
Discovery
0.0
Source: EFPIA Position Paper (Nov2004); In Vivo Business & Medical Report (Nov 2003)
22
1995 - 2000
2000 - 2002
More than $6bn of penalties for off label selling in 2009/10 focused
pharma on compliance
0
500
Eli Lilly (Zyprexa, 15 Jan 09)
1,000
1,500
2,000
2,500
1,400
Pfizer (Cox 2, 26 Jan 09)
2,300
GSK (off label for 9 drugs, 29 Jan 09)
400
Sanofi (Nasal spray, 28 May 09)

Merck (Vytorin, 15 Jul 09)
96
5
Eli Lilly (Zyprexa, 21 Aug 09)
23
Eli Lilly (Zyprexa, 29 Sep 09)
25
Abbott (Tricor, 7 Jan 10)
23
AZ (Seroquel, 27 Apr 10)

J&J (Topamax, 29 Apr 10)
520
81
Elan (Zonegran, 15 Jul 10)
204
Allergan (Botox, 1 Sep 10)
225
Novartis (Trileptal, 15 Sep 10))

Forest Labs (Levothroid, Celexa, 15 Sep 10)
J&J (Risperdal, 15 Oct 10
Off label
promotion
423
313
Misleading
marketing
Pricing / other
258
Source: Fierce Pharma

23
A tougher game: Example of New EU Pharmacovigilance Legislation
New Good Vigilance Guidelines - GVP

Submission of Medical Product data
Improved data formats/interoperability for
data transmission and exchange
Industry Perspective - Departments Impacted
New PV Legislation Regulators require:
Impact on Pharma:
Significant increase and transparency

into medicinal product data
Better quality medicinal product data to

be submitted
Impacts all companies whom market products

and/or who sponsor clinical trials within the
European Union
Increased scrutiny on the benefit risk of

medical products
New data requirements of the agencies will

create a new era of increased collaborations
Changes are cross functional in nature and will

impact multiple departments not just R&D
Additional head count required to comprehend

and implement the changes
Consolidation of data is necessary from

disparate systems and processes
Additional Solutions/tools required 2014 Deloitte
Increased monitoring of products
Increased global interoperability and

collaboration, new submissions
formats/data
Faster decision making

24
& Touche
Beyond the pill, outcomes and real world data (RWD)
Lack of transparency has contributed to increased use of RWD
and product
efficacy
Lack of transparency over

drug safety
Example Controversies1
GSK: $3bn settlement over
undisclosed safety data relating to
Avandia, Wellbutrin & Paxil
Merck: Vioxx estimated to have

caused 80-140k heart attacks. 190
class actions filed against the
adequacy of safety warnings (>$5bn
set aside for settlement)
Wyeth: Pondimin withdrawn after it
was shown to cause potentially fatal
pulmonary hypertension and heart
valve problems leading to $13bn in
legal damages
has led to increased

scrutiny and use of RWD
Estimate of how much drug

impression was inflated by not
publishing unfavorable studies2
EU measures to increase scrutiny3
Estimated change in drug efficacy (%)
BMS
Serzone
Pfizer
Zoloft
SP
69
64
Remeron
GSK
Wellbutrin SR
GSK
Paxil
Lilly
Cymbalta
61
55
40
33
Wyeth
Effexor
28
Wyeth
Effexor XR
27
Forrest
Celexa
Forrest
Lexapro
Lilly
Prozac
GSK
Paxil CR
Under VBP, post launch

outcomes could support
revisions of price
25
16
14
11
Under AMNOG, product prices

will be reassessed post launch
using RWD
Use of RWD will become a

requirement to ensure continued
market access and ANSM now
has the right to demand
comparative data
Note: 1) Press; 2) New England Journal of Medicine; 3) IMS Health 2011
25
EU Regulatory landscape
New medical device regulations in Europe will be finalized

soon
EU Medical Devices Directives (MDD) and in vitro

Diagnostics Directive (IVDD)
European Medicines Agency and FDA announce launch of

generic medicines application inspections initiative
26
Regulation Vs Innovation - A Challenging Balancing Act

Some regulatory agencies are now grappling with how to strike the right
balance between promoting innovation and ensuring safety
Some indications that the FDA are now attempting to adopt a more flexible
approach
In order to function optimally the regulatory system has to find the right balance
in three key areas:
1. Cautiousness
2. Incentive structure
3. Comprehensiveness
27

Final considerations
Regulatory compliance
Executives at many life sciences companies are deciding that it is worth

pursuing stronger compliance risk management capabilities for their own
sake, rather than to merely satisfy emerging legal requirements.
They are re-evaluating their organizations entire approach to managing
compliance risks, applying many of the methodologies used for financial
reporting to compliance issues.
Taking a risk-based approach to compliance planning, execution, and
monitoring makes good business sense in a heightened regulatory
environment.
28
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a private company limited by guarantee, and its network of member firms, each of
which is a legally separate and independent entity. Please see www.deloitte.com/ie/about for a detailed description of the legal structure of Deloitte
Touche Tohmatsu Limited and its member firms.
Deloittes nearly 2,000 people in Ireland provide audit, tax, consulting, and corporate finance to public and private clients spanning multiple industries.
With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients,
delivering the insights they need to address their most complex business challenges.
Deloitte has in the region of 200,000 professionals, all committed to becoming the standard of excellence. This publication is for internal distribution and use
only among personnel of Deloitte Touche Tohmatsu Limited, its member firms, and their related entities (collectively, the Deloitte Network). None of the
Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this publication.
2014. For information, contact Deloitte Touche Tohmatsu Limited.

Deloitte Ireland Life Sciences Conference 2014 Slides

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Deloitte Ireland Life Sciences Conference 2014 Slides

Uploaded by

Copyright:

Available Formats

Life Sciences International Summit

Deloittes Life Sciences Practice

Strategy & Operations

Working With Industry Leaders

Regulation and Corporate Governance

85% of Fortune 1000 LS&HC

Technology Solutions and

10 of the 10 largest pharmaceutical

10 of the 10 largest medical equipment

10 of the 10 largest biotechnology

Security and Controls

The Largest Health Care Management Consulting

2014 Global Life Sciences Sector Outlook

2014 Deloitte & Touche

Global life sciences industry issues in 2014

2014 Global Life Sciences Sector Outlook

2014 Deloitte & Touche

BRICMT adds its agenda

BRICMT makes its mark

Growth of Total Healthcare

Growth of GDP by Regions

Note: BRICMT = Brazil, Russia, India, China, Mexico, Turkey

2014 Deloitte & Touche

BRICMT adds its agenda

but have very different healthcare structures

Share of Out-of-Pocket Expenditures by Total

(2008, % of total health care expenditures)

Share of Out-of-Pocket Expenditures

Health Care Expenditures

2014 Global Life Sciences Sector Outlook

2014 Deloitte & Touche

Global life sciences industry issues in 2014

2014 Global Life Sciences Sector Outlook

2014 Deloitte & Touche

Investments in specialised medicines / indications

Patent expirations are only marginally replenished by upcoming launches...

Selected top brand-name drugs with patent expirations from 2013-2018

Cymbalta (Eli Lilly)

Strattera (Eli Lilly)

Humalog (Eli Lilly)

Evista (Eli Lilly)

Erbitux (BMS / Eli

Source: Datamonitor; Monitor Deloitte Analysis

Investments in specialised medicines / indications

Multiple, smaller launches

Source: Companies pipelines

Global life sciences industry issues in 2014

2014 Global Life Sciences Sector Outlook

2014 Deloitte & Touche

Global life sciences industry issues in 2014

Government policies and mandates

2014 Global Life Sciences Sector Outlook

2014 Deloitte & Touche

Global life sciences industry issues in 2014

2014 Global Life Sciences Sector Outlook

2014 Deloitte & Touche

Global life sciences industry issues in 2014

Drug safety standards particularly those associated with quality systems

2014 Global Life Sciences Sector Outlook

2014 Deloitte & Touche

Global life sciences industry issues in 2014

2014 Global Life Sciences Sector Outlook

2014 Deloitte & Touche

Global life sciences industry issues in 2014