CHAPTER 2 CURRENT MARKET SITUATION AND ITS IMPLICATIONS FOR P&R 10
Pharma companies under increasing pressure in a global cost conscious healthcare market 11
Pharma R&D productivity in decline 11
Generic usage forecast to rise 12
The future - more pressure on profit margins 13

CHAPTER 3 GLOBAL OVERVIEW OF P&R TOOLS 15
Global pricing and reimbursement approaches 16
Price-optimization launch strategies - both a global and regional perspective critical 16
Key global pricing controls 17
Profit controls are an effective way of guaranteeing prices for both Pharma and payers 18
Reference pricing is used widely in Europe and Japan to control drug expenditure 18
Price cuts, freezes and ceilings play a fundamental role in containing costs in several EU countries and Japan 20
Discounts and rebates are mandatory in the US and Germany 21
EU single price is still being debated 21
Key global reimbursement controls 21
Patient co-pays more prevalent in the US healthcare system than in Europe 22
Formulary positive/negative lists used more in the US than in Europe 22
Volume limitations used in Europe but not very effective 22
Pharmacoeconomics playing a pivotal role in P&R 23
Risk sharing is becoming a viable option for both payers and industry 23
OTC switching an alternative in markets with stiff generic competition 24
Pharmacist substitution used widely to increase generic use 24
Step therapy and fail first used predominantly in the US 24
Parallel imports are still impacting on Pharma profits 24
Generic intrusion eroding branded pharmaceutical profits 26

CHAPTER 4 US SPECIFIC P&R MEASURES 27
US - the world's largest pharma market gets cost-conscious 28
Escalating healthcare costs prompt introduction of cost-effective initiatives 30
Reasons behind escalating healthcare costs 31
Medicare - overview 32
Medicare prescription drug benefit - Part D successful but expensive 33
Medicare needs to cut cost as current expenditure is unsustainable in the future 35
Medicaid - recent changes impacting the industry 39
Recent changes to Medicaid aimed at creating savings by increasing pricing transparency 39
Elections - implications for Pharma and P&R? 42
Potential impact of the US Presidential and Congress elections on Pharma 43
Democratic candidates mandates - focus on universal health coverage 43
Implications for the pharma industry of a Democratic presidency 45
Republican candidate mandate - focuses on cost containment 46
Implications for the pharma industry of a Republican presidency 47
Electoral outcomes for Pharma - pending legislation will depend on the level of representation in both Congress and the Senate 47

CHAPTER 5 JAPANESE SPECIFIC P&R MEASURES 49
Japan's healthcare system in need of overhaul 50
Japan's P&R system in need of reform 51
Cost containment in Japan revolves mainly around biennial price cuts 52
Pricing of new drugs - outline of Japan's 2008 drug pricing system reform 52
Revision of NHI prices of existing drugs 53
Japan is slow to adopt generics 54
Industry frustrated by what it perceives as Japan's lack of encouragement for innovative drugs 55

CHAPTER 6 SPECIFIC P&R MEASURES IN THE FIVE MAJOR EU PHARMACEUTICAL MARKETS 56
France pushes for cost containment initiatives, although is held back by lack of physician compliance 57
Overview of the French healthcare system 57
Overview of P&R system - retail market 57
Drug reimbursement in France is based on the seriousness of the disease being treated 59
Hospital market is relatively small but drug P&R has considerable influence on the retail market 60
Cost containment - centers around promotion of generics and price cuts 60
Promotion of generics - France's uptake of generics is slow 61
Price cuts implemented to reduce overspending on healthcare budgets 61
Poor growth for the French pharma market set to continue 62
French Pharma expected to implement job cuts due to slow growth 62
Germany continues healthcare reform and cost cutting through the controversial jumbo reference pricing 64
Overview of the German healthcare system 64
Ambulatory care in Germany is by far the largest purchaser of pharmaceuticals 65
Hospital care subject to a lower level of regulation compared to ambulatory care 65
Reforms to the German healthcare system prompted by growing healthcare costs 65
Germany implements price freezes on branded drugs until 2008 66
Amendments to the German reference price system 66
Rebate for generic drugs 67
Bonus-Malus system to be abandoned 67
The Statutory Health Insurance Competition Enhancement Law (GKV-WSG) 68
Impact of Germany's healthcare reform on the pharmaceutical industry 69
Germany continues to implement and review cost-cutting policies 70
Generics - hit hard by latest reforms 70
Italy attempts to balance price cuts with sustaining pharmaceutical innovation 73
Overview of the Italian national health service 73
Overview of P&R system - becoming more decentralized 74
Italian cost containment measures center around price cuts 76
Price cuts continue to be Italy's preferred method of cost containment 77
Patient co-pays and limited prescriptions are re-emerging in some regions in Italy in an effort to cut costs 77
Pharmacist substitution - still more lucrative to dispense branded products over generics 78
Generics - slow uptake due to lack of awareness and distrust 79
Recent developments in P&R in Italy include rewarding therapeutic innovation 80
Italy creates a ranking system rewarding therapeutic innovation 80
Spain's cost containment initiatives are keeping healthcare costs stable 83
Overview of the Spanish healthcare system 83
Overview of Spain's P&R environment - considered open and transparent 84
Spain's pricing procedures examines both a drug's benefit profile and cost-plus profile 85
Spain's reimbursement procedures 86
Spanish cost containment strategies center around reference pricing 87
Legislative changes to Spain's reference pricing environment - further decentralization 87
Cost containment - generic market in Spain still has room to grow 88
Intellectual property laws and its effects on Spain's generic market 89
Regionalized cost containment measures vary and are adapted to the needs of individual regions 89
Parallel trade body files complaint against Spain for dual pricing 90
Pharma warns Spain to balance cost containment with encouraging innovation 90
UK - NICE continues to play a major role in pharmaceutical cost containment 92
UK - cost containment strategies 92
NICE or NASTY (Not available so treat yourself)? 93
How NICE reaches its recommendations 94
NICE and risk-sharing - a compromise 96
Criticisms of NICE 97
Future role of NICE - taking on roles in pricing 97
Impact of generics on the UK market - a positive influence in the long term? 98
Parallel trade in the UK not producing beneficial savings 100
Pharmaceutical Pricing and Regulation Scheme to undergo new reforms, moving towards value based pricing 101
Pharma reaction to OFT proposed reforms to the PPRS 102

CHAPTER 7 BIBLIOGRAPHY 105
Conference literature 110
Datamonitor resources 110

APPENDIX 111

List of Tables 
Table 1: Top 10 Medicare Part D Plans, by enrollment, 2007 34
Table 2: Potential outcomes for Pharma following the 2008 US election 48
Table 3: AOK discount contracts, 2008-09 72
Table 4: Datamonitor exchange rates ($) 116

List of Figures 
Figure 1: Big Pharma sales growth rates from launches and expiries (%), 2006-2012 13
Figure 2: Preferred drug launch sequence in the US, selected European countries and Japan 17
Figure 3: Reference pricing pathways in the EU, 2007 19
Figure 4: Key stakeholders in the US healthcare system, 2008 29
Figure 5: Healthcare coverage in the US, 2005-06 30
Figure 6: Prescription drug coverage among Medicare beneficiaries, 2008 31
Figure 7: Key healthcare reforms from the US presidential candidates, 2008 43
Figure 8: Japanese cost containment measures, 2008 52
Figure 9: Drug market assessment process in France, 2008 59
Figure 10: Germany's healthcare system, 2008 64
Figure 11: Italy's healthcare system, 2008 74
Figure 12: Italian pricing and reimbursement process, 2008 75
Figure 13: Differences in drug expenditure among regions, 2007 78
Figure 14: AIFA drug innovation evaluation criteria in Italy 81
Figure 15: Spanish healthcare system, 2008 84
Figure 16: P&R controls implemented in Spain 85
Figure 17: UK pricing and reimbursement controls, 2008 93
Figure 18: Breakdown of NICE decisions to 2008 94
Figure 19: NICE's decision making process 95
Figure 20: UK generic sales as % of total sales, 2001-05 99