Top 10 pharma industry drivers for 2014 by IHS Healthcare & Pharma

1. IHS Healthcare and Pharma Key Industry Drivers for 2014 Gustav Ando Director Healthcare and Pharma

2. 1. The foundations for economic recovery continue to be in place • The global economy is expected to see a recovery in 2014 and 2015. However, there is a marked shift in dynamics over where the growth is expected. Average growth in emerging markets has fallen 1. The foundations for economic steadily to 4.7% in 2013, while the recovery continue to be in place outlook for advanced markets is stronger than it has been for many years. • Add to this the scarring experience several pharmaceutical companies had in China–amid a clampdown on marketing practices–and we see several significant players deciding to reset their agenda in emerging markets. • While much attention is focused on the detrimental impact of healthcare reform in general, the impact will be felt hardest in key European markets –especially Germany, France, UK, Southern Europe and the Nordics. Interestingly, the global pharmaceutical industry continues to be heavy dependant and focused on these regions. IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright © 2014 IHS

3. 2. The United States’ first full year of ACA The focus has been on the stuttering implementation of Medicaid expansion – amid continued political resistance. Midterm elections will be critical in deciding how fast – or slow – implementation will happen. 1. The cliff is over, meaning that • The bulk of the patentfoundations for economic the market will return to recovery continue to be in place being driven significant increases in pharmaceutical prices • Health spend will grew 5% in 2013 and is expecting to rise above 6% in 2014 – our assumptions are based on a more gradualistic impact of Medicaid expansion than for example CMS (which subsequently revised its estimations). • Pharmaceutical prices declined dramatically in September 2013 and there is more pushback from payers on pricing. • IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright © 2014 IHS

4. 3. Europe/Eurozone instability will continue to suppress public health expenditure Greece and Italy will experience negative and lower growth (respectively), with Italy implementing its spending review. Spain is also declining significantly due to co-payments and procurement. • Health spend will grow significantly ineconomic 1. The foundations for France with newly implemented recovery continue to a in place price cuts, prescription controls, andbe focus on home care. The transition to ITR is having a significant impact. • Germany has abandoned the retroactive benefit assessments, but looks to prolong price freezes, and there may be other non-AMNOG-related reforms. • UK’s VBP pushed towards the end of the year • IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright © 2014 IHS

5. 4. Secondary emerging markets are expanding healthcare insurance The Philippines continues to be a fast-growing market, and a law introducing universal health was enacted by President Aquino in June 2013. • Indonesia's universal healthcare coverage was launched on 1 January 1. The foundations for economic recovery coverage be in years 2014 with a goal of 100%continue toin five place for the world's fourth most populous country. The universal healthcare system, Jaminan Kesehatan Nasional (JKN), will transform Indonesia from a primarily selfpaid market to an insurance-driven healthcare market. • Markets such as Nigeria, UAE and Qatar are also expanding their insurance coverage. • IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright © 2014 IHS

7. 6. Patent expirations continue to be a significant driver, but it is a comparatively quiet year 2014 will be a comparatively quiet year among patent expirations following the turbulent 2011-2013 period. • The patents to expire include drugs such as Temodar, Evista, Avelox, Nasonex, and Nexium.foundations for economic 1. The recovery continue • In the biosimilars space, there areto be in place negative drivers with more potential challenges to Herceptin, Lantus and Rituxan in Europe. • IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright © 2014 IHS

8. 7. IRP baskets continue to evolve Portugal has already changed its basket and there could be changes in Turkey. • Increasing fears that prices in New Zealand and South Korea could trickle into much more1. The foundations for economic important markets. recovery continue to be in place • Price harmonisation efforts in GCC (collective procurement starting 2014) and Baltics. • Colombia is launching its new reference pricing system which will target patented and generic drugs, whilst Mexico is looking at international reference pricing in 2014 during next round of negotiations. • IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright © 2014 IHS

9. 8. Drug shortages will continue, but clampdowns on parallel exports are seen in many countries Drug shortages will increase due to parallel export—with several countries (Greece, Czech Republic, Slovakia and Romania, among others) banning exports of certain drugs. • Italy and Bulgaria are also looking to curb parallel exports. Poland has 1. The foundations for economic recovery continue growing concern. highlighted the issue as an area ofto be in place • Whilst parallel trade continues to be a significant negative driver, governments are beginning to realize the negative consequences on a stable supply of essential pharmaceuticals • IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright © 2014 IHS

10. 9. Price cuts in Japan – but some incentives for innovation The government has concluded that the average price cut rate in April 2014 will be 5.7%—excluding the impact of a sales tax hike. • However, Japan remains one of the few major markets where there are constructive discussions around increasing the reward for innovation. 1. The foundations for economic recovery • The country is continuingcontinue to be in place exempting innovative its pilot programme of products which fulfil certain criteria from the price cuts – although it backed down from its December 2013 proposal to turn the pilot programme into a permanent fixture on the market. • IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright © 2014 IHS

11. 10. New technology developments At the tail-end of 2013, the FDA approved Gilead’s Sovaldi (sofosbuvir), the first approval of an all-oral, interferon-free combination therapy in hepatitis C. Whilst J&J’s NS3/4A protease inhibitor Olysio was approved the month before,The foundations for very much sets the tone for the 1. Sovaldi’s approval economic new drug catalysts in 2014, and it to thein place new drug launch that the recovery continue is be biggest industry has seen for some time. • 2014 is generally felt to be a transformational year for immunotherapies and drugs targeting PD-1. Two therapies are in the final stages of development here: Bristol-Myers Squibb’s (BMS, US) nivolumab and Merck & Co’s MK-3475. • IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright © 2014 IHS

12. Recent Multi-Client Studies • Flexible Pricing Strategies: Maximizing Value across the Pharmaceutical Product Lifecycle • Tiered Pricing Strategies in the Global Pharmaceutical Industry: Matching Prices with Local Market Conditions • Pharmaco-economic Evaluation and ITR Reforms in France: Optimising Market Access Strategies • Drug Price Erosion: SafeguardingfoundationsAssets Against Value Attrition 1. The Pharmaceutical for economic • recovery continue to be the New Global Pharmaceutical Pricing Paradigm International Reference Pricing: A Strategic Guidebook toin place • Biosimilars and Non-Innovator Biologics in Emerging Markets: Payer, Regulator, and Pharma Strategies • European Pharmacovigilance Reform: Implications for Market Access Strategies • Payer-Industry Partnerships in the Emerging Markets: Best Practices for Successful Market Access of New Pharmaceuticals • The New REAlity of Relative Effectiveness: An International Comparison of Evolving Requirements • Optimising Medical Device & Diagnostic Launches: A Country-Specific Analysis • Payer-Industry Partnerships: Best Practices for Successful Market Access of New Pharmaceuticals IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright © 2014 IHS

13. Learn more Get weekly insights on global healthcare policy, market access, pricing and reimbursement and R&D 1. The foundations for economic www.ihs.com/healthcareblog recovery continue to be in place IHS Healthcare and Pharma Key Industry Drivers for 2014 I Copyright © 2014 IHS

14. IHS Healthcare and Pharma Contact us Gustav Ando Director Healthcare and Pharma Gustav.Ando@IHS.com