Trends in Medication Management 2015 Vincent Ng TELUS Health Drug Conference March 25, 2015

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Summary

Trends in Medication Management 2015

After a period of historically slower drug spending growth in Canada, a higher growth rate for private drug plans is expected over the next several years

At the same time, new technology trends, consumer attitudes towards self-management, and shifting business model trends of pharmacies may impact the safety, cost and health outcomes of medications

What are some of these initiatives, and how might they affect private payors and plan sponsors?

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182 193 200 206 211

2009 2010 2011 2012 2013

29.5 32.4 33.0 33.7 34.5

2009 2010 2011 2012 2013

Total Health Expenditure $Billions

16% Drug Expenditures

22.0 22.4 22.2 22.1 22.2

2009 2010 2011 2012 2013

64% Rx Drug Spending in Retail Pharmacies

Prescribed drug spending growth slowed from 2009 to 2013

Sources: Canadian Institute of Health Information; Morgan et al. 2013

2009-13 CAGR = 4%

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22.0 22.4 22.2 22.1 22.2

2009 2010 2011 2012 2013

Rx Drug Spending in Retail Pharmacies $Billions

494 516 541 560 574

2009 2010 2011 2012 2013

47 46 44 43 42

2009 2010 2011 2012 2013

x Average Price per Rx ($)

No. of Retail Rx (Millions)

66% No. of Retail Rx – Generic

223 219 215 206 195

2009 2010 2011 2012 2013

34% No. of Retail Rx – Brand

+

…driven by lower prescription prices

271 297 326 354 379

2009 2010 2011 2012 2013

Sources: IMS Health; Morgan et al. 2013

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…but signs point to increasing cost growth

-0.7%

-1.1%

0.5%

-0.5%

1.5%

0.8%

1.3%

1.6%

Claimants

Total Eligible Amount

Cardholders

2012-13

0.8%

1.9%

4.5%

-1.7%

2.4%

2.9%

5.6%

0.07% OntarioCanada

2013-14

Year-Over-Year Growth Rate TELUS Health, Ages 0 to 64

Claims

Sources: J. Anacleto presentation at Drug Conference 2015

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Cancer & Immune system disorder drugs dominate pipeline

21 14

25 20

27 24

39 45

26 218

6

7

7

8

9

10

11

12

12

58

Anti-infectivePsoriasis

GastrointestinalVaccines

Respiratory AilmentsBlood Disorders

Central Nervous SystemCardiovascular Drugs

HepatitisCancer and Immune System…

Phase III or Above

Drugs in the Pipeline Counts

Sources: IMS LifeCycle R&D Focus, August 2014

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PCSK9 inhibitors may be a game-changing specialty drug

PCSK9 inhibitors are specialty drugs that target the gene that regulates the body's LDL receptors, resulting in up to 64% reduction in LDL (bad) cholesterol

Injected every 2-4 weeks as ongoing maintenance therapy for patients with familial hypercholesterolemia

Persons with this genetic are prone to develop heart disease at an earlier age than the general population (i.e. in their 40s or even 30s)

Current standard of treatment is statins with lifestyle changes Early estimates of $7,000 to $12,000 for annual treatment costs Amgen sumitted Avolocumab to the FDA in August 2014; Sanofi/Regeneron submitted

Alirocumab in December 2014

Sources: Health Affairs Blog 2015 http://healthaffairs.org/blog/2015/02/17/in-the-debate-about-cost-and-efficacy-pcsk9-inhibitors-may-be-the-biggest-challenge-yet/

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…with a potential $2.6 billion annual impact

Indication Prevalence Annual Cost Therapeutic Alternatives

Familial Hypercholesterolemia 70,000 Canadians $0.5 billion Statins

LDL Apheresis LDL > 190 100,000 Canadians $0.7 billion Statins Intolerant/Unresponsive to Statins 200,000 Canadians $1.4 billion Fibrates

Niacin Potential Market Size (Public & Private Payor) $2.6 billion

At $7,000 annual treatment cost:

Sources: Health Affairs Blog 2015 http://healthaffairs.org/blog/2015/02/17/in-the-debate-about-cost-and-efficacy-pcsk9-inhibitors-may-be-the-biggest-challenge-yet/

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New oral drugs for Hepatitis C are highly effective

Chronic Hepatitis C Harvoni and Holkira are latest drugs to treat Hepatitis C Genotype 1

(similar to Sovaldi)

Single, oral 12 to 24 week treatment $56 to $100k

One course of treatment lowers viral load by more than 90%, reducing the necessity for liver transplants and avoiding the incidence and duration of periods of disability

About 242,500 Canadians have Hepatitis C; of those, ~160,000 have Genotype 1 and 1 in 5 are undiagnosed

Expect higher costs in the short term as a surge of untreated patients get treated; long-term impact to plan sponsors is limited to those with Hepatitis C who have not progressed to liver disease

Sources: Public Health Agency of Canada

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New specialty drugs for asthma and obesity indicated for ongoing, maintenance therapy

Asthma Mepolizumab for severe in patients aged 12 years and older with a history

of exacerbations (~10% of those with asthma) Subcutaneous injections every 4 weeks as maintenance treatment Estimate $10k to $15k per year Current options for refractory asthma are oral and inhaled corticosteroids as

maintenance along with “rescue” inhalers

Obesity Liraglutide (Saxenda™) approved in Canada in February for patients with

obesity and at least one other co-morbidity Slows gastric emptying, increases satiety and reduces hunger pangs, with 5

to 10% weight loss YoY in trials Self-administered injection once daily as maintenance therapy Estimated cost of $15/day ($5,475 per year)

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Payors have ramped up strategies to mitigate cost growth

Governments Cap reimbursement prices of generic drugs, through the

Pan-Canadian Pharmaceutical Alliance and provincial polices

Expand pharmacists’ scope of practice (prescribing and ordering lab tests for minor ailments, medication reviews, antibiotic adherence program)

Introduce Subsequent Entry Biologics; RAMQ is first to limit reimbursement of Remicade at lowest available price for certain indications

Begin to address drug shortages, through legislation and toolkits to support manufacturer disclosure

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…with emphasis on cost controls

Plan Sponsors Continue more aggressive interpretations of coordination rules

Advocate for government reforms to benefit all consumers equally regardless of who pays

Insurers Promote more managed drug plans, through enhanced generic substitution,

Prior Authorization and tiered formularies

Establish Preferred Provider Networks and pharmacy agreements;

Implement cost controls at point of service (max drug pricing, limitations in mark-up, frequency of dispensing)

Sources: CLHIA Presentation at National Drug Conference 2014

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Consumer-driven, technology-enabled medication management trend is emerging

1. Consumer appetite for health self-management is growing

2. Pharmacies are pivoting to become “Health & Wellness” destinations

3. Large technology companies and venture capital are focusing on “disrupting” healthcare

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Mobile health app use is exploding

1. Over 43,000 apps categorized as “Health & Fitness” or “Medical” in Apple App Store alone

2. 500 million people worldwide will use mobile health apps by 2015

3. Mobile health app industry will be worth $26 billion in 2017

Sources: www.research2guidance.com

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Health monitoring device market is expanding

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…from connected versions of traditional monitoring devices

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…to new wearable health and fitness trackers

Sources: http://mobihealthnews.com/36795/23-notable-fda-clearances-for-digital-health-apps-devices-so-far-this-year/

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Venture capital is pouring into healthcare

1. $4.1 billion invested in 295 deals in the US in 2014, representing 125% growth over 2013 and more than the three previous years combined

2. Qualcomm Ventures has been investing in digital health companies since 2011 with 18 healthcare startups in its portfolio

3. Apple HealthKit, Google Fit and Samsung SAMI all “platforms” and “frameworks” for sharing health data within ecosystem

4. TELUS has invested over $1 billion in the last decade in health IT

Sources: Rock Health 2015 http://rockhealth.com/2015/01/digital-health-funding-tops-4-1b-2014-year-review/

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…looking to “disrupt” the “broken” system

Theranos can perform up to 70 different blood tests using just 25 to 50 μL of blood

Scanaflo is a urine test kit in development for use at home that provides immediate results that can be sent to the physician

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…including common medication management issues

Adherence Improve the ease of refill management

Deploy dedicated staff to follow up and monitor adherence

Enhance the ability of patients to self-manage through digital tools

Cost Increase medication cost and drug plan coverage transparency

“upstream” to physicians at the point of prescribing

Enable employees to make more informed choices in choosing drug plans, and when filling prescriptions

Provide pharmacy prices to enable price comparisons

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…including common medication management issues

Quality and Safety Enable secure messaging between physicians, pharmacists and

patients

Improve secure and private exchanging of medical and health information between health system stakeholders

Enhance ability of patients to report and view adverse reaction information

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Digital health’s full potential not yet realized

1. 50% of users stop using their device after 12 months

2. Only 40% of mHealth app users share information with care team

3. On Google Play, 50% of health apps are downloaded fewer than 500 times

Sources: http://goo.gl/JXBAZ5; www.endeavorpartners.net; Modicity 2014

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Pharmacies pivoting to be health & wellness destinations

1. Pharmacies investing in medical clinics (physical and virtual) to connect patients to NPs or MDs (e.g. Loblaw/Primacy, Target/Kaiser, Walmart)

2. Over 1,300 pharmacies across Canada have, or are planning to, roll out TELUS’ Pharma Space technology to enable patients to order refills online or on mobile devices

3. Loblaw launched a new patient contact centre in January, staffed by 50 pharmacists and 75 assistants, who call newly diagnosed patients starting treatments and those who are late in refilling medication

Sources: http://www.thestar.com/business/2015/02/26/shoppers-drug-deal-helps-loblaw-more-than-double-profit.html

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…as a strategic imperative

1. “Patient engagement is the blockbuster drug of the century”

2. Digital health is a path for pharmacies to deepen and extend customer engagement disproportionately to staffing and costs

3. Pharmacists are ideally positioned to be the “most accessible” and the most “digitally savvy” health professional

Sources: Walgreens 2013

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Example: Walgreens’ goal is to be a digital health company

1. Partnered with PatientsLikeMe.com to enable patients to see how their prescribed medication has impacted other patients on the therapy, including medication side effects

2. Launched Walgreens Balance Rewards app, which awards participants points for logging weight, tracking blood pressure and glucose levels and other "healthy" activities and partnered with Qualcomm to automatically upload data from personal health devices

3. Partnered with MDLive to enable Walgreens mobile app users to consult a board-certified physician from their computer, tablet or phone

4. Signed deal to place Theranos™ Wellness Centers in Walgreens locations to provide access to fast, affordable, high-quality lab testing

5. Partnered with WebMD to create Your Digital Health Advisor, a virtual wellness-coaching program “to create customized goals and action plans that support lasting lifestyle changes”

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Implications for plan sponsors and payors

1. Plan members are increasingly involved in managing own healthcare, as well as demanding more transparency and data to make informed decisions

2. Pharmacies are looking to “omnichannel” strategies to engage customers, drive prescription volume and retain the refill chain

3. Pharmacies will continue to experiment with ways to monetize professional services – such as partnering with payors and plan sponsors to provide digital-enabled, pharmacist-led chronic disease management programs

4. Can a digital strategy help payors reduce administrative costs, manage drug costs, and improve plan member satisfaction?

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Key Takeaways

1. Specialty drugs as ongoing therapies for high-prevalence, chronic conditions will be entering the market soon, with significant cost implications for payors

2. Public and private payors are continuing strategies to manage medications and contain costs; meanwhile,

3. A “perfect storm” of consumer demand, investment focus, and business imperative will drive the digital health push to “disrupt” healthcare and medication management