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An IHS Life Sciences report

May 2016

COMPARATIVE HEALTHCARE FINANCING TRENDS IN EUROPE

A RETROSPECTIVE AND FORWARD-LOOKING VIEW

I. Executive summary ..................................................................................................... 3

II. Introduction ............................................................................................................... 5

III. Comparative retrospective analysis .............................................................................. 7

3.1 Public healthcare spending ................................................................................................................................ 7

3.2 Private healthcare spending ............................................................................................................................ 12

3.3 Pharmaceutical spending ................................................................................................................................ 17

3.4 Categories of care spending ............................................................................................................................. 26

3.5 Distribution of direct cancer care costs ............................................................................................................ 28

IV. Future trends analysis ............................................................................................... 31

7.1 Forecast public healthcare spending ................................................................................................................ 31

7.2 Forecast private healthcare spending ............................................................................................................... 36

7.3 Forecast pharmaceutical spending ................................................................................................................... 40

7.4 Forecast oncology pharmaceutical spending .................................................................................................... 45

7.5 Projected budget impact of emerging therapy classes ...................................................................................... 50

V. Conclusions .............................................................................................................. 55

VI. Appendix .................................................................................................................. 57

7.1 Additional country details ............................................................................................................................... 57

7.1.1 France ............................................................................................................................................................ 57

7.1.2 Germany ........................................................................................................................................................ 58

7.1.3 The Netherlands ............................................................................................................................................. 61

7.1.4 Poland ............................................................................................................................................................ 62

7.1.5 Spain .............................................................................................................................................................. 64

7.1.6 The UK ........................................................................................................................................................... 67

7.2 Macroeconomic data ...................................................................................................................................... 69

7.3 Data sources ................................................................................................................................................... 80

7.3.1 Total and private healthcare expenditures ....................................................................................................... 81

7.3.2 Categories of care spending ............................................................................................................................. 82

7.3.3 Public pharmaceutical reimbursement spending .............................................................................................. 83

7.4 Budget impact methodology ........................................................................................................................... 88

I. EXECUTIVE SUMMARY

Even before the onset of the 2008 financial crisis, European countries faced an imperative to contain costs.

Ageing populations and the growing challenge of meeting the associated healthcare demands saw countries

turn to emergency measures or embark upon substantive reforms to consolidate cost savings. In the

recessionary period that followed, cost-containment measures intensified, leading to negative or subdued

real-terms growth in public healthcare expenditures from the -3.6% compound annual growth rate over

2010-2014 observed in France to the 1.7% observed in Poland.

Despite representing a considerably smaller share of total public healthcare expenditure relative to

inpatient and ambulatory care costs, pharmaceuticals were a key target for cost containment over the

2010-14 period. Overall public-sector outlays for reimbursement spending on medicines saw significant

year-on-year (y/y) contractions in most countries, reaching 15% y/y in Poland.

Most European countries also saw higher rates of growth in private healthcare expenditure over this

period, on average three-to-seven percentage points above growth in public outlays in real terms. Rising

private contributions were associated with increases in the out-of-pocket (OOP) burden facing patients,

concentrated on pharmaceuticals in particular. Spain, one of the countries worst impacted by the financial

crisis, is estimated to have seen OOP spending increase from 78% of total

private healthcare expenditure in 2010 to 86% a year later.

This rising burden has led to serious debates surrounding the impact on access

and health outcomes. With growth in public healthcare expenditure expected

to remain negative or subdued in real terms through 2020, this raises important

questions over the potential impact on outcomes if pharmaceuticals remain a

key target for cost containment.

A reflection of gradual economic recovery, growth in overall public

pharmaceutical spending through 2020 is forecast to pick up pace relative to

the 2010-14 period in most countries. Reimbursement expenditure on oncology is expected to outpace the

pharmaceutical market as a whole, given the significant number of innovative treatments in this therapy

area anticipated to enter the market.

However, high growth scenarios envision compound annual growth of 6% to

8.4% in this expenditure, with oncology forecast to account for a broadly

comparable share of overall drug reimbursement spending relative to recent

trends. Under the high growth scenario, oncology’s share is forecast to

represent between 9% and 11% on average, with the exception of Poland at

31.2%. Budget impact analyses of some of the most significant breakthrough

treatments in breast cancer and non-small cell lung cancer suggest these

agents will absorb no more than 2.5% of projected oncology drug

The rising out-of-pocket

burden concentrated on

pharmaceuticals has led

to serious concerns

surrounding the impact

on access and ultimately

health outcomes.

Current anxieties

surrounding

sustainability of funding

for the next generation of

breakthroughs in

oncology may be

exaggerated.

reimbursement spending.

These findings, based on the potential budget impact of new treatments in some of the most common

cancers, suggest that current anxieties surrounding sustainability of funding may be exaggerated in certain

countries. Taking stock of current policy tools and the opportunities countries possess to achieve cost

savings in those areas of care which dominate spending – in particular, inpatient hospital care – forecast

expenditure appears broadly manageable.

Certain countries such as Poland and Spain are forecast to experience more acute financing challenges

given pre-existing inequities in access, other funding priorities and/or ongoing struggles to reign in deficit

spending. In these countries, a combination of already anticipated policy reforms and new policy

innovations involving broad-based stakeholder dialogue may be necessary to support comprehensive

access to emerging treatments.

This report was commissioned by AstraZeneca. All research and analysis were undertaken

independently by IHS Life Sciences.

II. INTRODUCTION

The past five years have been accompanied by a major shift in thinking in the world of healthcare. With

the genericization of atorvastatin in 2011, the era of on-patent, primary-care blockbuster drugs seemed to

have reached its high watermark. Healthcare systems around the world were prepared to benefit from the

so-called patent cliff, seeing new levels of cost containment achievable on the back of generic uptake. The

pharmaceutical industry faced serious question marks over declining R&D productivity and a dearth of

pipeline candidates.

Since that time, a new reality has emerged. The primary-care blockbuster model typified by atorvastatin

has given way to a new era of biologic and innovative small-molecule drugs broadly targeting specialist

care. A focus on targeted therapies in diseases like non-small cell lung cancer and melanoma, coupled with

progress in orphan and ultra-orphan diseases, has seen niche indications associated with premium pricing

come to play an unprecedented role in the treatment landscape.

High-cost therapies do not only reflect a move toward smaller patient

populations. The arrival of next-generation hepatitis C drugs such as sofosbuvir

has seen entry onto the market of agents associated with remarkable cure rates

that hold the potential to revolutionize treatment for relatively large numbers of

patients. Against this backdrop, question marks over the sustainability of industry

pipelines have been replaced by question marks over the sustainability of

healthcare systems.

Over the next five years, a wealth of new treatments are expected to reach the

market. Many of these innovations will be in the cancer field, where advances in immuno-oncology have

shown the potential of breakthrough treatments to significantly extend survival. Oncology will also see an

unprecedented move toward combination therapies, as emerging and existing products are found to

significantly enhance outcomes in concert in both existing and new indications.

What is without question an immense wave of progress for patients is also

posing increasingly challenging questions for policymakers, payers and

healthcare stakeholders more broadly. Accentuated by the global financial

crisis, and driven by long-term dynamics such as ageing populations and a

slowing pace of economic growth, many countries are in the midst of, or

embarking upon, major cost-saving drives. The need to address systemic

shortfalls in government financing of healthcare is pronounced in a number of

European countries. This reality means that the next wave of treatment

breakthroughs coincides with a period when cost containment is firmly on the

healthcare system agenda.

Question marks over

the sustainability of

industry pipelines have

been replaced by

question marks over

the sustainability of

healthcare systems.

The next wave of

treatment

breakthroughs

coincides with a period

when cost

containment is firmly

on the healthcare

system agenda.

Although much has been said regarding the sustainability of pharmaceutical spending, and debate has

centred in particular on list prices of emerging therapies, what has been absent so far is a critical analysis

which helps to frame the discussion in terms of broader healthcare financing trends, both recent and

forecast. The present report aims to evolve the current debate by providing such an analysis, looking at

healthcare financing trends over the retrospective period of 2010 to 2014, as well as looking forward

through 2020.

This analysis focuses on France, Germany, the Netherlands, Poland, Spain and the United Kingdom

(sometimes focused specifically on England for reasons of data availability). These countries were chosen to

represent a cross-section of Europe, reflecting a diverse set of healthcare systems, pharmaceutical pricing

and reimbursement policies, economic conditions and political circumstances. The analysis is intended to

be broadly applicable to other countries inasmuch as similarities across these factors permit extrapolation

of findings.

This report considers the structure of the healthcare market in each country with regards to public and

private contributions, how expenditure is distributed across different categories of care, and the evolution

of pharmaceutical spending both in general and with a particular focus on oncology. Exploration of these

broad trends in financing is joined by a consideration of policies pursued by these countries which have

enabled them to support access to innovations in treatment while managing costs. This retrospective

analysis lays the groundwork for a forecast of future trends through to 2020, looking to identify how market

structures and government policies are likely to position countries going forward.

In order to forecast future trends in expenditure, the analysis relies on a number of data sources and

methodologies. Top-line projections for overall healthcare and pharmaceutical spending and the

components of private market expenditure come from the IHS World Markets Healthcare Forecasts service,

which derives its forecasts based on projected economic growth and historical relationships between that

growth and various healthcare expenditure indicators. Economic growth forecasts derive from the

comprehensive macroeconomic data comprising the IHS World Economic Service.

Literature review and analysis of recent expenditure patterns and policy and cost-containment measures

were relied upon to derive a number of scenarios for future public reimbursement spending on oncology

pharmaceuticals specifically. A budget impact modelling approach was developed for a number of therapy

classes in order to interrogate these forecasts and validate their ability to absorb the financing

requirements of significant new treatments.

This report is accompanied by a detailed appendix in section VII, which outlines the data sources utilised,

offers a glossary of terms, provides various macroeconomic indicators for all countries, and explains the

above methodologies relied upon to generate the relevant forecasts and budget impact scenarios. It also

provides additional commentary on the market and policy landscapes for readers wishing to acquire further

details on a specific country.

III. COMPARATIVE RETROSPECTIVE ANALYSIS

3.1 PUBLIC HEALTHCARE SPENDING

European countries entered the crisis with both shared and unique healthcare challenges

Trends in healthcare spending between 2010 and 2014 must be placed in the context of the extraordinary

economic circumstances impacting European countries over that period. This window of time spans the

latter part of the recession sparked by the 2008 financial crisis, as well as the roots of economic recovery

since 2012.

Leading up to 2008, European countries were united in facing the secular trend of ageing populations and

the growing challenge of meeting the associated healthcare demands, creating a broad-based focus on

cost containment. Against this backdrop, however, countries exhibited different priorities and spending

commitments, some associated with reforms designed to consolidate cost savings in the long run:

France: The country faced a longstanding agenda to address the deficits plaguing its social security

system, with the national target for public healthcare spending overrun on average by EUR1.5 billion

each year since 1997.i

Germany: Despite its statutory healthcare system benefiting from relatively strong reserves, like France

the country was focused on cost containment due to its ageing population, including preparation of

major reforms to its system of free pricing for innovative pharmaceuticals.

The Netherlands: The country saw erratic growth in healthcare expenditure in the run up to the crisis,

with temporary surges in spending associated with implementation of a new statutory health insurance

system in 2006.

Poland: The country witnessed marked economic growth from the mid-1990s, helping drive an

approximately five-fold increase in total healthcare expenditure by 2009 as the government sought to

improve the relatively poor level of access and address the high out-of-pocket burden.

Spain: Like the Netherlands, the country experienced erratic growth in healthcare expenditure, seeing

periodic upticks in spending after its 17 autonomous communities took control of their healthcare

budgets in 2002.

England: Starting with the Labour government which came to power in 1997, England sought to

increase public healthcare spending as a share of GDP to bring it in line with the European average.

All countries experienced a slowdown in real-terms healthcare spending growth relative to pre-crisis

levels

As illustrated in Figure 1, in nominal terms, countries can be divided into those which saw declines in public

healthcare spending at the start of the 2010-14 period, and those which witnessed rising expenditures

throughout that time window.

FIGURE 1 TOTAL HEALTHCARE EXPENDITURE, 2010-14, BILLIONS OF LOCAL CURRENCY UNITS (LCU)

Source: IHS World Markets Healthcare Forecasts

France Germany

Netherlands Poland

Spain United Kingdom

As illustrated in Table 1, however, all countries experienced a decline in real-terms growth in public

healthcare expenditure over 2010-14 compared to the pre-crisis trend, which should be viewed in the

context of growth in, and as a percentage of, Gross Domestic Product (GDP) as displayed in Table 2 and

Table 3, respectively. If the compound annual growth rate (CAGR) in public healthcare expenditure is

compared between 2000-07 and 2010-14, it can be seen that with the exception of Germany, no country

saw less than a four percentage-point drop in the real-terms CAGR in public healthcare spending between

the two periods.

TABLE 1 REAL-TERM COMPOUND ANNUAL GROWTH RATES IN PUBLIC HEALTHCARE EXPENDITURE,

2000-07 & 2010-14

2000-07 2010-14

France 3.1% -3.6%

Germany -1.2% -3.0%

The Netherlands 5.7% 1.6%

Poland 6.2% 1.7%

Spain 8.6% -0.9%

The UK 4.2% -1.2%


TABLE 2 REAL AND NOMINAL YEAR-ON-YEAR GROWTH IN GROSS DOMESTIC PRODUCT, 2010-2014

2010 2011 2012 2013 2014

France Real 1.88% 2.09% 0.21% 0.75% 0.17%

Nominal 2.98% 3.05% 1.37% 1.51% 0.74%

Germany Real 3.94% 3.72% 0.62% 0.41% 1.58%

Nominal 4.87% 4.77% 1.91% 2.55% 3.35%

Netherlands Real 1.32% 1.66% -1.06% -0.41% 1.01%

Nominal 2.21% 1.81% 0.35% 0.93% 1.83%

Poland Real 3.71% 5.01% 1.55% 1.29% 3.35%

Nominal 6.11% 8.41% 3.99% 1.68% 3.79%

Spain Real 0.03% -1.00% -2.62% -1.67% 1.36%

Nominal 0.17% -0.97% -2.57% -1.11% 0.96%

The UK Real 1.54% 1.97% 1.18% 2.16% 2.85%

Nominal 4.70% 4.11% 2.82% 4.19% 4.74%

Source: IHS Global Economic Data

TABLE 3 GENERAL GOVERNMENT HEALTH EXPENDITURE AS A PERCENTAGE OF GROSS DOMESTIC

PRODUCT, 2010-2014

2010 2011 2012 2013 2014

France 8.68% 8.73% 8.83% 8.91% 9.02%

Germany 8.58% 8.31% 8.36% 8.57% 8.70%

The Netherlands 9.08% 9.09% 9.53% 9.62% 9.48%

Poland 4.90% 4.71% 4.58% 4.53% 4.51%

Spain 7.17% 7.00% 6.73% 6.50% 6.40%

The UK 7.94% 7.77% 7.80% 7.78% 7.58%

Source: World Health Organization Global Health Expenditure database

The downturn in the rate of healthcare spending growth does not necessarily reflect how severely each

country was impacted by the financial crisis. Poland, for example, avoided recession thanks to ongoing

public investments, but witnessed a decline in the CAGR in public healthcare spending of similar magnitude

to the Netherlands, where bursting of the country’s housing bubble led Dutch citizens to become some of

the most indebted in the Eurozone following the outbreak of the crisis.

Rather, these downturns reflect the extent to which different countries targeted healthcare – and in

many cases, pharmaceuticals in particular – in order to achieve cost savings in the public sector. That the

decline was relatively marginal in Germany indicates the extent to which some countries were already

undertaking significant cost-containment drives even before the onset of the crisis.

Growth in healthcare expenditure has remained subdued or faced significant cost-containment targets

since the roots of economic recovery

The roots of economic recovery saw public healthcare expenditure recover its losses by 2012 or 2013 in

France, Germany and Spain, leading to significant year-on-year (y/y) increases in some cases. However, by

period close, most countries were engaged in significant cost-savings drives or undertaking careful budget

management:

France: From 2010, the country’s annual target for health spending (l’Objectif National des Dépenses

d'Assurance Maladie: ONDAM) was limited to a maximum annual increase of 3%, subsequently revised

downwards in light of diminished economic growth prospects.

Germany: The country remained committed to cost containment, as evident even before the crisis,

with many of the associated policies focused on pharmaceutical expenditure (see discussion on trends

in pharmaceutical expenditure below).

The Netherlands: In the aftermath of the financial crisis, there was an increasing emphasis placed on

cost containment. Although the healthcare budget was allowed to grow despite a series of broader

austerity packages, growth was inevitably very subdued.

Poland: The public investments which helped Poland weather the financial crisis better than other

European countries subsequently led to concerns over the scale of public debt, weighing down on

growth in public spending relative to the pre-crisis period.

Spain: The worst impacted by the recession and Eurozone debt crisis amongst the countries considered

in this report, Spain’s economic recovery was delayed and still fragile, with persistently high levels of

unemployment and the consequent need to carefully manage outlays on healthcare as autonomous

communities struggled to balance their deficits.

The UK: The National Health Service (NHS) in England faced a target of GBP20 billion in efficiency

savings by 2015, with the scale of the deficits faced by provider organisations recognised to require

further cost savings in future.

KEY TAKE AWAY

The recent economic downturn led to significant declines in the rate of growth of public outlays on

healthcare in most European countries. However, even before the outbreak of the crisis, the secular trends

of ageing populations and reduced economic growth prospects in the developed world saw European

countries increasingly focused on cost containment. This reality meant that even countries such as Poland

and the UK, committed to aligning healthcare spending and outcomes with the European average, have had

to carefully manage new investments with cost savings.

The broad-based focus on cost containment, which has persisted beyond the recession, raises important

question marks over whether access to care and health outcomes have been negatively impacted. As the

discussion below on trends in private healthcare spending and pharmaceutical expenditure indicates, there

is reason to believe that the subdued rate of growth in healthcare spending has indeed restricted the

ability of European countries to maintain their commitment to universal access to comprehensive care.

3.2 PRIVATE HEALTHCARE SPENDING

Most European countries saw comparatively higher rates of growth in private healthcare expenditure

over 2010-14

Compared to the subdued rates of growth in public outlays on healthcare over the 2010-14 period, which in

real terms did not surpass approximately 2% y/y, European countries saw significantly higher growth in

real-terms private healthcare expenditure.

As shown in Table 4, with the exception of the Netherlands, which experienced a negative real-terms CAGR

in private healthcare spending over this time period, European countries saw private contributions toward

healthcare increase by approximately three-to-seven percentage points more y/y than public outlays in real

terms. This suggests that private sources of funding have plugged a gap left by the cost-containment

efforts characterising public-sector healthcare financing.

TABLE 4 REAL-TERM COMPOUND ANNUAL GROWTH RATES IN PRIVATE HEALTHCARE EXPENDITURE,

2010-14

2010-14 Difference relative to public outlays

France 1.5% 5.1%

Germany 1.6% 4.6%

The Netherlands -3.2% -4.8%

Poland 4.7% 3.1%

Spain 4.8% 5.7%

The UK 6.1% 7.4%


Most European countries saw significant changes in the composition of private healthcare expenditure

over 2010-14 indicating increased financial burden on patients

Figure 2 illustrates the trajectory of private healthcare spending over 2010-14 in nominal terms, including

its composition by different funding sources.

FIGURE 2 PRIVATE HEALTHCARE EXPENDITURE, 2010-14, BILLIONS OF LCU


France Germany

Netherlands Poland


N.B. The contribution of “private insurance” was removed from the graph for the Netherlands on the basis that the majority of spending in the voluntary health

insurance sector can be attributed to services such as plastic surgery or sports medicine, services which do not strictly qualify as healthcare-related for the

purposes of this report. Spending on such services may be captured in the “private insurance” contribution in other countries, thus challenging a completely like-

for-like comparison. However, due to the contribution of private insurance toward genuine healthcare-related items in these other countries, combined with

absence of data on the precise composition of this contribution, the private insurance indicator was otherwise retained, with the exception of the Netherlands.

Changes in the composition of private healthcare expenditure have been driven by trends unique to each

country:

France: The bulk of private spending is attributable to complementary insurance subscribed to by the

overwhelming majority of the population in order to offset the OOP costs otherwise required under the

public healthcare system. Due to austerity measures brought in to contain the spiraling healthcare

deficit (see the discussion on pharmaceutical expenditure below), the recessionary period saw a

dramatic increase in OOP payments, rising from 28% of overall private healthcare spending in 2010 to

34% in 2011. By period end, OOP payments accounted for 30% of the total, likely attributable to

government negotiations with the complementary insurance sector which subsequently saw the latter

expand patient coverage and contribute to the ongoing cost-savings drive.ii

Germany: In 2011, Germany’s Federal Cabinet agreed to raise the premiums paid for statutory health

insurance to the pre-crisis level of 15.5% of monthly salary – shouldered between employees and

employers – following a deficit reported by the country’s sick funds in 2010 for the first time in many

years.iii This saw OOP costs increase by a CAGR of 6.6% in nominal terms over 2010-14, rising to

account for 60% of overall private spending by period end, up from 56% in 2010.

The Netherlands: The country saw a significant increase in OOP spending, rising from 76.9% of total

private spending on healthcare to 83.8% in 2014; this trend can be explained by the steady increase in

the annual deductible required under the statutory health insurance package, more than doubling over

the period from 2009 to 2014.iv

Poland: The country made some progress with regards to its historically high levels of OOP spending

over the 2010-14 period, seeing this funding source decrease from 80% of total private expenditure on

health to 76% by period end. Over the same timeframe, growth in the country’s burgeoning market

for private insurance – dominated by employer-sponsored medical subscription packages – was

dramatic, rising to account for 9% of private healthcare expenditure in 2014, up from 4% in 2010.

Spain: Like France, the country saw a dramatic increase in OOP spending associated with

implementation of austerity measures, leading this contribution source to increase from 78% of total

private healthcare expenditure in 2010 to 86% a year later, before declining to 80% by 2014.

The UK: The country saw growth in the proportion of private healthcare spending attributable to the

private insurance market, dominated by employer-sponsored benefits.

What is noteworthy is that with the exception of France and Poland, no country exhibited a pattern of

increasing outlays from private insurance combined with reduced OOP spending, a pattern that would have

been indicative of insurers relieving the financial burden on patients imposed by the decline in public

expenditure. Even in Poland, the reduction in OOP spending had more to do with government reforms (see

discussion below) than growth in the voluntary insurance market. As such, the private insurance sector, as

it is currently structured in most European countries, would seem to have limited capacity to plug gaps in

public outlays on healthcare.

It is worth commenting on the composition of OOP spending in those countries where this funding source

accounts for an above-average share of overall private healthcare expenditure. For instance, while

prescription co-payments and spending on non-reimbursed over-the-counter medicines have historically

accounted for much of the OOP spend in Poland, Table 5 indicates that in Spain, pharmaceuticals have

actually accounted for a declining share of total OOP expenditure.

TABLE 5 PRIVATE SPENDING ON PHARMACEUTICALS IN ABSOLUTE VALUE AND AS A PERCENTAGE OF

TOTAL OUT-OF-POCKET EXPENDITURE IN SPAIN, 2010-2013

2010 2011 2012 2013

Private spending on

pharmaceutical products

(EUR mil)

3,475.40 3,520.11 3,594.27 3,738.84

Percentage of total OOP

spending 13.0% 10.7% 10.3% 10.2%

Source: EAE Business School report v

Changes in the composition of private healthcare expenditure have led to serious debates surrounding

the impact on access and health outcomes

Those countries which saw significant increases in OOP spending over the 2010-14 timeframe also

witnessed the emergence of political resistance or stakeholder concern surrounding the impact on patient

access. Whether due to introduction of new copayments as part of emergency austerity measures, or

increases in contributions to the statutory healthcare system, the rising burden on patients prompted

fears that patients would avoid seeking necessary care or face access restrictions:

In Spain, although in 2012 the Ministry of Health shifted 21 medicines, including many oral oncology

drugs, from the retail to the hospitals sector (accompanied by copayment elimination), there has been

increasing pressure to reduce reliance on this type of austerity measure. In fact, subsequent increases

to copayments for medicines, combined with proposals by the Ministry of Finance to increase user fees

in other parts of the healthcare system, led the Spanish Medical College Association to petition against

further reliance on these austerity measures in mid-2014, on the grounds it would defer patients from

seeking necessary treatment. In December of that year, the Socialist Party of Madrid proposed an

extraordinary budget item to eliminate copayments for vulnerable segments of the population,

including low-income pensioners and the disabled and unemployed without benefits, again over

concerns of the impact on access to care.vi,vii

In the Netherlands, in light of lower-than-anticipated healthcare spending, it has been suggested that

increases in cost-sharing dissuading patients from seeking care may have contributed to this

phenomenon.viii

In Germany, additional patient contributions under the statutory health insurance system have

provoked political debate, with the junior party in the governing coalition, the Social Democratic Party,

pushing for more of this additional payment to be covered by employers.

Even in those countries such as Poland where OOP spending has declined over the 2010-14 period, cost-

containment efforts targeting pharmaceuticals (see discussion below) have led manufacturers in some

cases to withdraw products from the market, with a significant potential impact on patient treatment and

outcomes. Thus, the absence of an increase in OOP burden as depicted in Figure 2 should not be equated

with lack of impact on patient access over this timeframe.

KEY TAKE AWAY

Subdued growth in public healthcare spending, driven by ongoing cost-containment efforts and worsened

by the recession, contributed to an uptick in private healthcare expenditure over the 2010-14 period. While

the composition of such spending differs across European countries, reflecting structural differences in

healthcare systems, many saw a significant increase in the OOP financial burden facing patients,

concentrated on pharmaceuticals in particular. This burden has prompted political debate and broader

stakeholder concern surrounding patient access.

3.3 PHARMACEUTICAL SPENDING

Pharmaceuticals were a key target for cost containment during most of the 2010-14 period, leading to

negative or muted growth in public-sector outlays on medicines as a whole

Figure 3 illustrates the trajectory of public-sector pharmaceutical expenditure as a whole over 2010-14. It

can be seen that with the exception of England, all countries witnessed a contraction in this spending over

the time period. This trend reflects the introduction or intensification of cost-containment measures

designed to target pharmaceutical expenditure, as elaborated upon below.

FIGURE 3 PUBLIC PHARMACEUTICAL EXPENDITURE, 2010-14, MILLIONS OF LCU


France Germany

Netherlands Poland

Spain England

France: Cost-containment policies targeting pharmaceuticals during the recession continued the trend

of bringing in emergency measures to rein in healthcare spending in line with the ONDAM, which

generally saw the government look to achieve savings on the scale of EUR2 billion annually. This

explains the 1-2% y/y contractions seen in the market in nominal terms as displayed in Figure 3. During

the height of the recessionary period between 2010 and 2012, the government delisted and decreased

the reimbursement rates of medicines with lower Service Medical Rendu (SMR) ratings, negotiated

increasingly higher price cuts with pharmaceutical manufacturers, and increased substitution targets

and prescription controls to drive generics penetration.ix

Germany: Cost-containment measures focused heavily on pharmaceuticals, with the 2010 passage into

law of the Pharmaceutical Market Restructuring Act (Arzneimittelmarkt-Neuordnungsgesetz: AMNOG),

which ended the country’s free-pricing regime and introduced central negotiation over

reimbursement rates for innovative drugs. Throughout the recessionary period, and following deficits

reported by the statutory insurance funds for the first time in many years, the mandatory rebate for

medicines not subject to the country’s internal reference pricing system was increased from 6% to 16%,

and a price freeze (initially intended to last for three years but since extended) was introduced for all

reimbursed medicines. Large savings were also made over the period through the use of generic

discount contracts.x These policies help to explain the significant contraction in the market observed

over 2010-11 in Figure 3. The market then went on to recover its losses, driven in part by a reduction in

the mandatory rebate and entry onto the market in 2014 of a record number of innovative new

medicines, including next-generation hepatitis C therapies.xi

The Netherlands: Subdued growth in pharmaceutical expenditure stemmed from a mixture of policy

levers and market dynamics. The slowdown in spending in the community pharmacy sector was

dramatic, a 16% decline in outlays over the period from 2008 to 2013.xii One policy initiative helping to

explain this trend involved the shifting of expensive therapies from the outpatient sector to hospital

budgets, thereby reliving the basic health insurance providers of this expenditure. On top of routine

use of international reference pricing, it has been suggested that a focus on generics – aided by

preferential prescribing policies implemented by insurers – also contributed to this phenomenon.xiii

Meanwhile, the health minister entered into a coalition agreement limiting public hospital spending to

2.5% y/y over 2012-15, putting pressure on hospital drug budgets. Between 2013 and 2014, the market

showed positive growth of 4% in nominal terms, most likely attributable, as in Germany, to market

entry of expensive new medicines.

Poland: Trends in pharmaceutical expenditure must be viewed through the lens of the country’s

Reimbursement Act of 2012, a watershed year for reform of the pricing and reimbursement system.

This far-reaching piece of legislation aimed to expand access to innovative medicines while also seeking

cost savings allowing the government to meet this objective, with pharmaceutical reimbursement

spending not to exceed 17% of total public healthcare expenditure. Savings over the period relied on a

reduction in and broadening of reference pricing groups, and ongoing rounds of price negotiations with

manufacturers, with the government reportedly calling for high double-digit cuts.xiv This explains the

22% y/y contraction in the community pharmacy market in 2012, which led to a 15% contraction in

the public pharmaceutical market overall.

Spain: As in France, austerity measures targeting pharmaceuticals were brought in to curb costs during

the recessionary period, leading to y/y contractions of 3-5% at the level of the overall public

pharmaceutical market. As part of the Heath Pact entered into between the central government and

the autonomous communities, starting in 2010, reforms to the internal reference-pricing system,

generic price cuts and reimbursement limits on on-patent medicines with no generic competitors were

implemented, designed to save EUR1.5 billion.xv Mandatory discounts were introduced for innovative

medicines, price cuts were negotiated, and prescribing by active ingredient encouraged. In 2012, the

government significantly increased pharmaceutical copayments and withdrew over 400 drugs from the

reimbursement list.xvi Subsequent emergency measures, involving copayments on hospital drugs for

outpatients and a EUR1 charge on all prescriptions, saw the government backtrack following legal

challenges and resistance from the autonomous communities.xvii

England: Set against the backdrop of subdued or negative growth in public pharmaceutical expenditure

in the other countries under analysis, England is noteworthy for the upward trajectory it has shown in

such spending over the 2010-14 period, growing initially at 2-3% y/y before rising to 6-8% y/y. In

theory the country possesses a free-pricing regime, which helps to explain this trend, although in

practice most manufacturers participate in the Pharmaceutical Price Regulation Scheme (PPRS) which

imposes pricing restrictions, and price concessions offered as part of patient access schemes are a

common occurrence. The stronger growth is also a reflection of the relative lack of cost-containment

policies targeting pharmaceuticals under the NHS’ GBP20 billion cost savings drive.

The subdued growth in public-sector reimbursement spending on pharmaceuticals over the retrospective

period gave rise to concerns over patient access to treatments and the potential impact on health

outcomes

France: Debate over the impact of austerity measures targeting pharmaceuticals centered on the

ability of the complementary insurance sector to absorb additional copayments without passing

costs onto patients. Non-profit mutual insurers announced a 5% jump in their contributions directly

linked to 2010 reforms involving reimbursement cuts and daily hospital fee increases.xviii Mutualité

Française, the umbrella organisation for France's complementary insurance sector, stated that many

insurers would refuse to cover the cost of drugs subject to the new lowest reimbursement rate.

Subsequent reimbursement cuts on drugs with intermediate SMR ratings prompted insurers to

consider re-evaluating “blind” reimbursement of medicines, with calls for more selective coverage.xix

The data in Figure 2 indicate that the private insurance sector has since absorbed a significant share of

costs, but OOP payments borne by patients remain higher than at the start of the 2010 period.

Germany: The amount that patients covered by statutory health insurance made in additional

payments to make up the difference between reference prices and the actual prices of medicines

reportedly increased by 22% y/y in 2014, amounting to EUR115 million.xx The increase in the

proportion of medicines requiring additional payments rose from 4.1% of reimbursed medicines in

2013 to 6.1% during 2014. It was reported that a significant number of manufacturers opted not to

lower their prices to the level of the government’s reference prices given the ongoing cost-containment

drive. The discount contracting system, responsible for significant savings, meanwhile gave rise to

increasing reports of supply shortages impacting patient access to generic medicines.xxi

The Netherlands: As highlighted above, in light of the lower-than-anticipated outlays on community

pharmacy, it has been suggested that increases in cost-sharing may have potentially dissuaded

patients from seeking care. Over the period from 2008 to 2013, pharmacy expenditure for the

population aged 65 and over decreased by 9%, significantly above other segments of the population,

despite the expectation that expenditure on medicines might be higher in this group.xxii

Poland: Although the Reimbursement Act lowered patient copayments for medicines, continued

rounds of price negotiations have reportedly led producers to withdraw medicines from the

reimbursement system, compelling patients to pay their full cost.xxiii Where manufacturers have

agreed to the price cuts, this has reportedly contributed to large-scale parallel export, leading to

problems with medicine supply shortages.xxiv As a result, there are serious concerns regarding the

impact of the reforms on patient access to medicines as well as the consequent risk posed to health

outcomes.

Spain: As described above, continued expansion of copayments for medicines ultimately led the

government to backtrack or propose supplementary aid for the most vulnerable segments of the

population due to concerns over the impact on access and outcomes. It was reported that almost one

quarter of the drugs removed from the reimbursement list during 2012 either experienced price

increases or were withdrawn entirely from the country.xxv The cumulative impact led innovative

medicines to account for a steadily smaller share of public spending on pharmaceuticals in the retail

sector.xxvi

England: Despite continued growth in public pharmaceutical expenditure, the country continues to lag

behind some of its peers with regards to access. A report issued by Cancer Research UK in August 2015

highlighted the shortfall in molecular diagnostic testing associated with targeted therapies for solid

tumours.xxvii Based on cancer incidence data and extrapolation of testing rates from a survey of labs,

the charity estimates that in 2014, 15,929 patients missed out on molecular diagnostic testing, due

either to lack of funding or awareness. Based on mutation rates, this translates into an estimated 3,552

patients who may have otherwise been eligible for targeted therapies. These access challenges can be

compared to the system in France, for example, where a national network has led to comprehensive

biomarker testing.

The composition of public pharmaceutical expenditure in the retail sector has remained broadly

consistent over the 2010-14 period

Figure 4 illustrates the share of the public retail pharmaceutical market attributed to select therapeutic

classes over time for the years for which data are available in each country. It can be seen that

cardiovascular, alimentary tract and metabolism, and nervous system drugs (Anatomical Therapeutic

Chemical (ATC) classes C, A and N, respectively) accounted for the largest shares of such spending across

most countries.

FIGURE 4 PUBLIC RETAIL PHARMACEUTICAL EXPENDITURE BY THERAPEUTIC AREA, 2010-14


France Germany

Netherlands Poland


The genericiation of a significant number of primary-care blockbuster medicines coincided with the

period under analysis – a phenomenon referred to as the “patent cliff” – helping governments to hold

down costs and contributing to the subdued growth seen in the public market for pharmaceuticals as a

whole.

ATC classes accounting for the largest shares of retail spending – namely, ATC classes A and C – benefited

more than most from the associated genericization and hence cost savings in the community pharmacy

budget.

A number of countries have reported increases in spending in the outpatient setting on categories of

medicines such as oncology which have traditionally functioned as key drivers of inpatient hospital costs.xxviii

However, it can be seen in Figure 4 that oncology accounted for only a small minority of the total public

retail market over 2010-14, staying stable over this period across countries.

Growth in public spending on hospital medicines has varied across countries, with the portion

attributable to oncology broadly comparable

Figure 5 illustrates the trajectory of public spending on hospital medicines over 2010-14. In contrast to the

negative or muted growth in public-sector outlays on medicines as a whole, it can be seen that spending in

this segment of the market varied markedly by country.

While Germany witnessed y/y contractions on the scale of 1-2%, the remaining countries saw positive

growth. That growth ranged from the 1-3% y/y observed in France and Spain to the 11-13% seen in the

Netherlands and the consistent 15% seen in England. These dramatically different trajectories in spending

can be attributed to very different policy landscapes and frameworks for cost containment as elaborated

upon above.

FIGURE 5 PUBLIC HOSPITAL PHARMACEUTICAL EXPENDITURE, 2010-14, MILLIONS OF LCU


France Germany

Netherlands Poland


Of the countries which saw public outlays on hospital pharmaceuticals increase significantly, there are

varied reasons for this phenomenon, which in general diverges from the trend of the overall market

identified in Figure 3:

In Poland, nominal growth in spending ranging from 6-9% y/y can be attributed to the Reimbursement

Act which, at the same time that it sought substantial cost savings, also sought to channel some of the

liberated funds into enhanced access to innovative medicines, in particular in secondary care

In England, nominal growth of 15% y/y can be attributed to the introduction of new medicines and

increased use of specialist therapies despite the commercial concessions made as part of patient

access schemes. Notably, oncology’s share of total hospital drug expenditure appears to have declined

even over a period where the Cancer Drugs Fund (CDF) overran its budget, suggesting there have been

cost offsets in baseline commissioning of cancer therapies

In the Netherlands, the nominal growth of 10-13% y/y has been corrected for the shifting of expensive

therapies from the outpatient sector to hospital budgets over this period, indicating this phenomenon

represents genuine spikes in expenditure in sharp contrast to the trend in community pharmacy

Figure 5 also illustrates the share of public spending on hospital medicines attributable to oncology in

particular where these data are available. It can be seen that this share is broadly comparable across

countries, ranging from 20-27%. The higher and steadily increasing share in the Netherlands reflects the

addition of outpatient oncology medicines to the hospital budget as described above.

In those countries where routine estimates of public hospital drug spending by therapeutic area are

available, oncology accounts for the largest single category of spending by a fair margin. Figure 6 illustrates

the distribution of public reimbursement spending on hospital medicines across therapeutic areas in France

and Germany.

FIGURE 6 PUBLIC HOSPITAL PHARMACEUTICAL EXPENDITURE BY THERAPY AREA, FRANCE &

GERMANY

Source: l’Agence nationale de securite du medicament et des produits de santé; Bundesverband der Pharmazeutischen Industriexxix

France (2013)

Germany (2014)

KEY TAKE AWAY

Public reimbursement spending on pharmaceuticals saw negative or muted growth over most of the 2010-

14 period, reflecting the targeting of this sector for cost-containment efforts as well as the impact of the

“patent cliff” which helped governments hold down costs in community pharmacy. Trends in

reimbursement spending on pharmaceuticals in the hospital sector varied more markedly, but the share

attributable to oncology was broadly comparable.

The targeting of pharmaceuticals for cost containment gave rise to concerns over patient access to

treatments and the potential impact on health outcomes, key learnings applicable to ongoing and future

cost-containment efforts.

3.4 CATEGORIES OF CARE SPENDING

Over 2010-14, the composition of public healthcare expenditure across categories of care has remained

broadly consistent

Figure 7 illustrates the distribution of total public healthcare expenditure across discrete categories of care

for the years for which data were available.

FIGURE 7 PUBLIC HEALTHCARE EXPENDITURE BY CATEORIES OF CARE, 2010-14


France Germany

Netherlands Poland

Spain England

The data should be interpreted with caution, as governments classify categories of care differently.

However, within each country, it can be seen that the composition of public healthcare spending has

remained essentially constant over the retrospective period. This consistency might be expected given the

short timeframe relative to the timescales necessary to see significant shifts in care delivery and

organisation.

Inpatient services continue to account for the largest portion of expenditure

The share of spending accounted for by inpatient services has remained largely stable, despite countries

pursuing reforms seeking operational efficiency savings in this sector. Rationalization of hospital costs

formed a key part of France’s austerity measures during the recession for example, with 50% of the EUR2.4

billion in savings in 2011 expected to come from this sector.

In England, hospital efficiencies played a key role in the GBP20 billion in savings required of the NHS by

2015. In an independent review by Lord Carter of Coles for the Department of Health (the “Carter review”),

unwarranted variation in resource utilization by NHS hospitals is estimated to cost the system an

additional GBP5 billion out of the GBP55.6 billion spent annually.xxx

The fact that inpatient hospital costs as a share of total public healthcare expenditure have remained flat,

or decreased only very marginally as in the Netherlands and Spain, suggests that the inpatient segment of

care – which continues to account for the bulk of healthcare spending by some margin – should be a key

target for cost containment.

Medicines account for a comparatively smaller share of overall public healthcare expenditure

In contrast, pharmaceuticals (either alone or in combination with other nondurable medical goods,

depending on how data are reported) account for a comparatively smaller share of overall public healthcare

spending. It can be seen in Figure 7 that this share has decreased over 2010-14 in nearly all of the

countries under analysis, generally falling by two-to-four percentage points.

KEY TAKE AWAY

Although most European countries have sought to shift care out of hospital and into the home or

community setting, the inpatient segment continues to dominate the bulk of care expenditure.

Pharmaceuticals were a key target for cost-containment efforts over the 2010-14 period, but represent a

comparatively smaller share of healthcare spending. Going forward, inpatient care presents a significant

opportunity to realise cost savings.

3.5 DISTRIBUTION OF DIRECT CANCER CARE COSTS

Inpatient services represent the bulk of direct cancer care costs across European countries

Data on overall cancer care costs and its distribution across discrete categories of care are not consistently

gathered across European countries, and the figures which do exist do not adhere to a standardised

framework. As such, it is difficult to make precise like-for-like comparisons among the national-level data

sets that do exist. With these caveats in mind, the data illustrated in Figure 8 and Figure 9 provide general

insights into the scale and structure of cancer care spending and whether, at a broad level, there are

similarities across countries.

FIGURE 8 DISTRIBUTION OF DIRECT CANCER CARE COSTS I

France Germany (2009)

Source: Institut National du Cancer

xxxi

Source: Luengo-Fernandez R et al. (2013)xxxii

Netherlands Poland (2011)

Source: Cost of illness tool, Volksgezondheidenzorg

xxxiii

Source: NFZ, 2014xxxiv

FIGURE 9 DISTRIBUTION OF DIRECT CANCER CARE COSTS II

Spain (2011) England (2009)

Source: Sociedad Española de Oncología Médica, 2013

xxxv

Source: London Cancer New Drugs Group, 2014xxxvi

Allowing for the inevitable differences in how items are assigned to care categories, it can be seen that

patterns of direct cancer care expenditure are broadly similar across countries. Inpatient hospital costs

have accounted for the largest share of direct cancer care costs.

In Germany, the Netherlands and Spain, figures for inpatient care, hospital and specialist care, and

hospital admissions are reported respectively. In Germany and Spain, this care accounted for 66% and

62% of direct cancer care costs in 2009 and 2011, respectively, while in the Netherlands, it increased

from 65.3% in 2003 to 72.6% in 2011. The higher share in the Netherlands may be attributable to the

inclusion of certain specialist care costs which are not captured in this category in the other countries.

A like-for-like comparison with the remaining countries is difficult as they split out costs on other items

such as surgery and radiotherapy, some of which will be attributable to the inpatient setting and some

of which pertain to procedures conducted on an outpatient basis. In terms of radiotherapy, France and

Poland reported a larger share of total costs attributable to this category, at 12% and 18.9%,

respectively, in comparison to Spain and England, both at 5%.

In comparison to the proportion of spending allocated to inpatient care, direct cancer care costs in the

ambulatory sector are limited. Primary care costs are split out in Germany and the Netherlands, where

they accounted for a similar 2% and 5% of expenditure respectively. Outpatient spending, presumed to

capture all ambulatory care distinct from that in the primary care sector, accounted for a similar 11% in

Germany and 8% in England. Spending on palliative care, reported in France and England, accounted for

approximately 5% of costs in both cases.

Pharmaceuticals make up a smaller share of direct cancer care costs

For those countries which split out chemotherapy costs from other spending categories, it can be seen that

this item accounted for a broadly similar share, ranging from 26% in Spain to 32% in France and 35.6% in

Poland. Drug costs as a whole were reported in Germany and England, both at 18%. Caution should be

taken when comparing chemotherapy and drug costs in particular, as it is not always apparent how

acquisition costs versus preparation and administration costs are allocated. Another caveat is that the

Spanish data do not include onco-haematological drugs.

KEY TAKE AWAY

Inpatient services account for the lion’s share of direct cancer care costs and largely overshadow the

expenditure incurred by oncology drugs. There is an argument for the continued cost-containment drive

to focus on improving efficiency savings in non-drug spending categories, particularly to accommodate the

future generation of pipeline medicines that are anticipated to require administration in the hospital

setting, even if on an outpatient basis.

IV. FUTURE TRENDS ANALYSIS

7.1 FORECAST PUBLIC HEALTHCARE SPENDING

Over 2015-20, growth in public healthcare expenditure is expected to remain negative or subdued in real

terms

Figure 10 illustrates the forecast for topline healthcare expenditures from 2015 to 2020.

FIGURE 10 FORECAST TOTAL HEALTHCARE EXPENDITURE, 2015-20, BILLIONS OF LCU


France Germany

Netherlands Poland


Table 6 indicates the projected CAGRs of public healthcare expenditure in real terms, which should be

viewed in combination with the forecast for y/y growth in GDP as displayed in Table 7. In most countries,

the projected growth rates in public healthcare expenditure translate into an improvement relative to the

2010-14 period.

The improvement is forecast to be greatest in France, the UK and Germany, a reflection of stronger

forecast economic growth predicted to lift public outlays on healthcare, although as elaborated upon

below, specific cost-containment targets place limits on spending.

In comparison, the Netherlands and Poland are expected to see marginal improvements, a reflection of

the above-average CAGRs in public healthcare expenditure seen over 2010-14, when most countries

saw negative real-term CAGRs.

In Spain, real-terms growth in public healthcare expenditure is forecast to be negative, reflecting

comparatively weaker economic growth prospects and the need to contain costs in line with deficit

targets. In nominal terms, public healthcare spending is expected to grow 2-3% y/y, with cost-

containment likely to be derived from pharmaceutical policy, which may be more accentuated if a left-

wing coalition forms the next Spanish government.

TABLE 6 FORECAST COMPOUND ANNUAL GROWTH RATES IN PUBLIC HEALTHCARE EXPENDITURE,

2015-20

Real-terms CAGR Difference relative to 2010-14

France 2.1% 5.7%

Germany -0.9% 2.1%

The Netherlands 1.9% 0.3%

Poland 2.8% 1.1%

Spain -1.3% -0.4%

The UK 2.1% 3.3%


TABLE 7 REAL AND NOMINAL FORECAST YEAR-ON-YEAR GROWTH IN GROSS DOMESTIC PRODUCT,

2015-2020

2015 2016 2017 2018 2019 2020 2014

France Real 1.16% 1.25% 1.39% 1.34% 1.30% 1.44%

Nominal 2.29% 2.39% 2.82% 3.24% 2.97% 3.22%

Germany Real 1.45% 1.85% 2.02% 1.72% 1.51% 1.67%

Nominal 3.53% 3.73% 3.78% 3.33% 3.04% 3.14%

Netherlands Real 1.99% 1.36% 1.97% 1.77% 1.79% 1.81%

Nominal 2.38% 3.27% 4.12% 3.58% 4.17% 3.91%

Poland Real 3.61% 3.75% 3.26% 3.24% 2.97% 2.96%

Nominal 4.13% 4.65% 5.40% 5.40% 5.22% 5.21%

Spain Real 3.21% 2.73% 2.37% 2.27% 2.12% 2.03%

Nominal 3.84% 3.60% 3.70% 3.89% 3.77% 3.68%

The UK Real 2.33% 1.92% 2.48% 2.37% 2.29% 2.30%

Nominal 2.61% 2.57% 4.22% 4.66% 4.48% 4.38%


Cost-containment targets and the need to carefully manage expenditure versus other priorities are

forecast to continue to weigh on healthcare outlays

In absolute terms, forecast growth rates remain subdued, and even in Germany, despite the improvement

relative to the 2010-14 period, growth is forecast to be negative in real terms. On a country by country

basis, the reasons for the continued plateau in public healthcare spending are varied:

France: Given the persisting challenge of tackling social security deficits, the country’s ONDAM has

been revised downwards, set to 1.75% for 2016. xxxvii This reduces spending growth to an historic low.

The country’s stability programme envisions an ambitious target of EUR50 billion in savings by 2017.

Marisol Touraine, the French health minister, announced a series of cost-containment measures in the

social security financing act for 2016, including promotion of generics, reductions in medicines prices

and efficiencies in hospital spending.

Germany: With a significant share of public hospitals in Germany recording deficits, in 2015 the country

passed a law intended to reduce overcapacity as well as unnecessary operations in secondary

care.xxxviii It has been predicted that the law will result in additional spending of up to EUR5.4 billion by

2020, although this includes setting up systems and collaborative networks that will enable a

streamlining of operations, so its ultimate goal will be one of cost containment. Combined with the

major focus on cost containment in pharmaceutical expenditure, this drive means Germany is one of

two countries alongside Spain predicted to see a negative CAGR in total public healthcare spending

over 2015-20.

The Netherlands: Government finances are improving given past fiscal consolidation efforts, and the

Rutte government has agreed an austerity package spanning 2014-17 in a bid to reach a structurally

balanced budget by 2017. Although there are specific cost-containment efforts centered on the

country’s expensive system for long-term care, the main approach for the broader healthcare system

relies on promoting market forces and efficiency improvements.xxxix A controversial proposal from the

government to allow insurers to restrict choice of providers to only the most efficient (free choice

would have been associated with a higher premium) has since been altered to offer patients who select

preferred providers discounts on their premiums after originally being rejected by the Senate.xl The

latest proposal is envisaged to generate savings of about EUR1 billion, in the absence of which it will be

difficult to make further progress controlling health spending prior to the government’s term ending in

2017.

Poland: While the dynamism of the economy in the early 2000s enabled the government to support

the country through the recession impacting the rest of Europe, concerns about the scale of debt have

since weighed on public spending. At the same time, with the recent election of the Law and Justice

(Prawo i Sprawiedliwość) party, the new government intends to increase the share of GDP spent on

public healthcare from just over 4% to 6%. However, set against a number of other expensive

campaign pledges, including bringing the retirement age back to its previous level and providing a

statutory monthly sum for families with two or more children, this ambition will only be realised with

significant cost savings achieved in other areas.

Spain: The future direction of healthcare will hinge on resolution of the continued political uncertainty

stemming from the indecisive December 2015 national election, as well as whether any of the tax cuts

(with the potential to increase the deficit) unveiled during the election year are reversed. The Socialists

pledged during the election campaign to petition the European Commission to relax deficit targets set

for Spain, which has been in the corrective arm of the Stability and Growth Pact since April 2009.

However, the next government is expected to make significant healthcare budget adjustments,

particularly pertaining to greater management of drug spending as recommended by the European

Commission, in order to meet deficit objectives.

England: The political agenda to improve the country’s standing relative to average European spending

on healthcare places limits on the degree of cost containment going forward. Nonetheless, the English

NHS faces serious budgetary challenges, with the anticipation that the funding gap will reach GBP30

billion in 2020, assuming funding rises in line with inflation and no efficacy savings are made.xli The

government therefore expects the NHS to make efficiency savings of some GBP22 billion by this time.

These savings are expected to be realised through measures such as better staff roster management,

procurement efficiencies, reduced unnecessary hospital admissions, and improved stock management

of medicines.xlii

KEY TAKE AWAY

The forecast trend for continued subdued or negative real-terms growth in public outlays on healthcare is a

reflection of diminished economic growth prospects across the developed world, combined with the

persistence of structural economic issues which were not resolved by austerity measures during the crisis.

A full decade of subdued growth – a phenomenon already apparent in some countries even before the

financial crisis – raises important questions over the potential impact on outcomes if pharmaceuticals

remain a key target for cost containment at a time when healthcare demands are increasing due to

ageing populations, and patients have already seen significant increases in OOP spending.

7.2 FORECAST PRIVATE HEALTHCARE SPENDING

Over 2015-20, rates of growth of private healthcare expenditures are once again predicted to exceed

those of public outlays

Figure 11 illustrates the forecast for private healthcare expenditures from 2015 to 2020.

FIGURE 11 FORECAST PRIVATE HEALTHCARE EXPENDITURE, 2015-20, BILLIONS OF LCU


France Germany

Netherlands Poland


The marginal improvements in the forecast rates of growth in public outlays on healthcare mean that as in

the retrospective period, private spending will be required to offset likely shortfalls in public-sector ability

to cater to rising healthcare demand.

However, as captured in Table 8, the difference between the projected rates of growth of the private

market and public outlays are forecast to be weaker compared to the retrospective period (reflecting in

part the marginal improvements in public spending itself), raising questions over the extent to which the

private market will be able to absorb healthcare demand if public resources prove inadequate.

TABLE 8 FORECAST COMPOUND ANNUAL GROWTH RATES IN PRIVATE HEALTHCARE EXPENDITURE,

2015-20

Real Difference relative to public outlays

France 2.4% 0.3%

Germany 1.6% 2.5%

The Netherlands 1.9% 0%

Poland 5.5% 2.7%

Spain 3.2% 4.5%

The UK 3.9% 1.8%


The period over 2015-20 is predicted to see changes in the composition of the private market in a number

of European countries, in particular leading to greater OOP burdens for patients

France: France’s system for national health expenditure targets is intended to achieve savings without

compromising quality of care or shifting significant additional cost burden onto patients. While reports

have been put forward considering reforms to the country’s system for reimbursement of chronic

diseases (known as Affection de Longue Dureé: ALD) as well as the general three-tier system of

reimbursement rates for medicines, in reality the political system is not perceived to be favourable to

such sweeping changes. xliii Furthermore, the complementary insurance sector has already absorbed

costs (as highlighted in Figure 2 above) and it is unclear what additional costs this sector can absorb

before they are passed on to patients in the form of increased cost-sharing. As such, unlike some of the

other countries under analysis, the composition of the private market is expected to remain broadly

stable in France.

Germany: Since the beginning of 2015, the “additional” contribution (Zusatzbeitrag) to the statutory

insurance system for which employees are liable (traditionally 0.9% of pre-tax salary) can be freely set

by funds within defined limits. Although the average additional contribution rate was expected to rise

to 1.1% by 2016, it was reported early that year that 25 funds were charging more than this rate.xliv This

increase in cost sharing, coupled with the trend for rising payments on pharmaceuticals priced above

the reference reimbursement rate (see discussion on trends in pharmaceutical expenditure above), is

forecast to see OOP spending account for a growing share of private market expenditure, and growth

of the latter at a higher rate relative to public outlays.

The Netherlands: OOP payments are projected to account for a rising share of the private

marketplace, increasing from 85.7% in 2015 to 92.1% in 2020. This trajectory reflects trends in cost

sharing under the Dutch statutory health insurance system which, as discussed above, saw the annual

deductible more than double over the period from 2008 to 2014 to reach EUR375 in 2015. In 2016, this

deductible increased by EUR10, and premiums were expected to increase by EUR7 to an average of

EUR103 per month owing to higher healthcare costs. Going forward, the government is anticipated to

be more wary of enabling insurers to continue to pass rising costs on to patients.

Poland: Private insurance is set to rise from representing 9% of total private healthcare spending in

2014 to accounting for 29.3% in 2020, representing a nominal-term CAGR of 30.1%. In tandem, OOP

payments are forecast to fall from representing 75.4% of the private market in 2014 to 69.7% in 2020,

indicating that the rising contribution from the private insurance sector is not associated with a

significant offset of the comparatively high OOP spending patterns. Rather, the category of total

“other” private spending (including spending, for example, by charities and other institutions not

otherwise captured) is set to see a dramatic decline at a CAGR of 38.1% through 2020. These trends

reflect a maturation of the market as more employers are projected to offer medical subscription

packages in the country’s bourgeoning voluntary insurance sector.

Spain: OOP payments are forecast to account for an increasing share of private healthcare spending,

rising from 38.2% in 2015 to 52.4% in 2020, and helping drive growth of the overall private market. This

trend reflects increasing cost shifting to patients under measures to combat the budget deficit, but

also the relatively stronger contribution of private sources toward overall healthcare spending in Spain.

With specialists' fees generally more affordable than in other European countries, a significant

proportion of citizens seek private healthcare. This is true not only of affluent classes in urban areas,

but is also relatively common in rural areas where private specialists are often seen as a priority for

children and the elderly.xlv There are signs of renewed uptake of private health insurance as

dissatisfaction with constrained public services increases amongst citizens who can afford to pay

premiums, and autonomous communities that reduced public healthcare spending in 2012 and 2013

saw a rise of market share in private health insurance, a trend that is likely to continue.xlvi However, this

will be set against fewer workers being covered by employer-sponsored policies and a still limited

culture of opting for individual private coverage.

The UK: The private market is expected to remain relatively stable in terms of composition. The

broad-based political consensus around universal access to care limits scope for greater user fees, and

individual purchases of private medical insurance have been shown to be unresponsive to tax relief

(leading the Labour government in England to abolish the subsidy in 1997), meaning that the market

for private healthcare remains largely reliant on trends in employer-sponsored insurance.xlvii

KEY TAKE AWAY

Subdued growth in public healthcare spending over 2010-14 contributed to an uptick in private healthcare

expenditure, a trend which is forecast to continue over the 2015-20 timeframe. However, a number of

European countries saw patients or private insurers absorb significant new costs over 2010-14, posing

potential challenges to their ability to accommodate additional future funding gaps in public healthcare

provision. In other countries, political resistance to increased user fees or private-sector involvement

represents a significant obstacle to the private market absorbing shortfalls in public outlays.

7.3 FORECAST PHARMACEUTICAL SPENDING

Over 2015-20, growth in overall public pharmaceutical spending is forecast to pick up pace relative to the

2010-14 period in most countries

Even before the close of the 2010-14 period, a number of European countries saw an uptick in

pharmaceutical expenditure, driven in part by entry onto the market of an above-average number of high-

cost innovative therapies, notably next-generation hepatitis C treatments. In 2014, 45 new active

substances became available in Germany for instance, the largest number of new innovative medicines for

any one year in history..xlviii

Looking forward to 2020, a large number of new therapies, many offering breakthroughs in treatment in

oncology in particular, are set to enter the market.xlix As in 2013-14, with many treatments with significant

potential budget impact entering the market over the same time period, there will almost certainly be an

uptick in drug reimbursement spending.

Figure 12 illustrates the 2015-20 forecast for public pharmaceutical reimbursement spending based on

projected economic growth and historical relationships between that growth and healthcare expenditure.

These forecasts assume continued economic recovery, leading to upticks in reimbursement spending which

will need to be stretched to accommodate emerging new treatments.

FIGURE 12 FORECAST PUBLIC PHARMACEUTICAL EXPENDITURE, 2015-20, BILLIONS OF LCU


France Germany

Netherlands Poland

Spain England

The change in the forecast rate of growth of public pharmaceutical spending and how it relates to the 2010-

14 trend varies by country:

France: After contracting y/y over most of the 2010-14 period, growth in public pharmaceutical

spending is expected to increase at a nominal rate of 4-5% y/y going forward, reflecting medium-term

improvements in broader economic growth.

Germany: Growth in public pharmaceutical spending is projected to persist in line with the 2010-14

trend, averaging 1-2% y/y in nominal terms.

The Netherlands: Public pharmaceutical spending is forecast to increase at 1.5% y/y in nominal terms,

following the series of contractions observed over 2010-14. While there are forecast improvements in

broader economic growth given ongoing fiscal consolidation, cost containment remains high on the

government agenda, in particular for spending on drugs in hospital.

Poland: Growth in public pharmaceutical expenditure is forecast to temper slightly, down to a

nominal 3% y/y in comparison to the 4-6% y/y growth observed over 2010-14 (with the exception of

the contraction over 2011-12 due to implementation of the Reimbursement Act). The need to close the

gap in access to treatments with regards to peer countries means that pharmaceutical are expected to

continue to be prioritized to some degree, even against the backdrop of constrained public resources.

Spain: As in France, the retrospective period defined by successive contractions in public

pharmaceutical spending is forecast to give rise to growth at 3% y/y in nominal terms. This projection

is driven by improving economic growth prospects, although ongoing deficit challenges will constrain

resources and require the autonomous communities to manage budgets very carefully.

England: The government’s commitment to closing the gap in healthcare spending in relation to peer

countries, combined with improving economic growth prospects, means that public pharmaceutical

spending is forecast to grow at a nominal 4-5% y/y, roughly in line with the 3-7% y/y observed over

the 2010-14 period.

The trajectory of public pharmaceutical spending as a share of overall public healthcare expenditure is

forecast to vary across countries

The year 2014, for the reasons outlined above, represents a time when a significant number of high-cost

new treatments were entering the market while countries were simultaneously engaged in cost-

containment efforts. That year’s pharmaceutical spending as a share of overall healthcare expenditure can

thus be viewed as a conservative measure of what countries might need to contribute to drug expenditure

in order to maintain sufficient levels of access to new treatments.

As displayed in Table 9, in Germany, the Netherlands and Spain, pharmaceutical reimbursement is forecast

to account for a growing share of overall public healthcare expenditure relative to 2014, although in most

cases rising only marginally. In France, Poland and England, pharmaceutical reimbursement is forecast to

account for a declining share.

TABLE 9 FORECAST PUBLIC PHARMACEUTICAL SPENDING AS A SHARE OF TOTAL PUBLIC HEALTHCARE

EXPENDITURE, 2015-20

2015 2016 2017 2018 2019 2020

France 15.8% 15.4% 15.4% 15.5% 15.6% 15.6%

Germany 18.4% 18.5% 18.6% 18.7% 18.8% 19.0%

The Netherlands 12.4% 12.5% 12.1% 11.6% 11.2% 10.8%

Poland 13.2% 12.2% 11.8% 11.4% 11.1% 10.8%

Spain 21.8% 22.2% 22.9% 23.4% 23.8% 24.0%

England 10.7% 10.6% 10.5% 10.5% 10.4% 10.3%


Taking the difference in spending between the two scenarios – i.e., the above forecasts and a scenario

where reimbursement spending is maintained at the 2014 level relative to projected overall public

healthcare expenditure – gives an idea of the scale of the potential spending shortfall facing France, the

Netherlands, Poland and England in terms of what would be required to enable access to emerging

treatments.

Figure 13 displays the resulting shortfalls by country from 2015 to 2020.

FIGURE 13 FORECAST SHORTFALL IN PUBLIC PHARMACEUTICAL EXPENDITURE RELATIVE TO 2014,

2015-20, MILLIONS OF LCU

Source: IHS Life Sciences analysis

France Netherlands

Poland England

It can be seen that the forecast shortfall reaches significant figures in each country, especially when viewed

in light of ongoing cost-containment efforts. This projection underscores the importance of countries

seeking opportunities for broad-scale cost savings in those areas of the healthcare system such as

inpatient hospital care (see discussion above) associated with the greatest outlays.

In those countries where pharmaceutical reimbursement as a share of total healthcare expenditure is

forecast to increase relative to 2014, it is unclear whether that additional funding will be sufficient to

provide comprehensive access to emerging treatments. Figure 14 displays the forecast funding above and

beyond the amount resulting from pharmaceutical expenditure remaining at the 2014 level relative to

overall healthcare spending.

FIGURE 14 FORECAST UPTICK IN PUBLIC PHARMACEUTICAL EXPENDITURE RELATIVE TO 2014 LEVELS,

2015-20, MILLIONS OF LCU


Germany Spain

N.B. In both countries, the projections for 2015 resulted in a minor shortfall instead of uptick in public pharmaceutical expenditure, which was recast as zero for

the purposes of graphical display.

In light of the reports described above identifying significant existing access challenges to innovative

medicines in Spain, it is unclear whether this additional forecast funding will be sufficient to enable access

to emerging treatments. In order to gain further insights into the scale of the potential funding shortfall

facing all countries, it is informative to look at forecast spending in oncology in particular (given the number

of new treatments in this field), discussed directly below.

KEY TAKE AWAY

Over the retrospective period, the patent cliff helped to hold down costs in the community pharmacy

sector. Going forward, increasing generic penetration rates will continue to represent a cost-savings

strategy in countries such as France, Poland and Spain, where generic uptake remains comparatively low.

The new wave of biosimilars will help to contain costs more broadly across countries.

Emerging new treatments and continued economic recovery will contribute to an uptick in public

reimbursement spending on pharmaceuticals. In some countries this spending is forecast to be less as a

share of overall public health expenditure compared to 2014, raising question marks over the ability to

finance new innovations in therapy. This underscores the importance of achieving cost savings in other

parts of the healthcare system in order to ensure equitable access new treatments.

7.4 FORECAST ONCOLOGY PHARMACEUTICAL SPENDING

Over 2015-20, growth in public oncology pharmaceutical spending is expected to outpace the broader

pharmaceutical market

As discussed above, over the 2015-20 period, a significant number of innovative new therapies in

oncology are anticipated to enter the market. Many are expected to represent breakthroughs in treatment

in areas such as breast cancer and non-small cell lung cancer capable of significantly extending survival.

These agents are being studied in multiple lines of therapy, as well as in combination with pre-existing and

other emerging treatments.

As a result, growth in public expenditure on oncology medicines through 2020 is forecast to outpace public

drug reimbursement spending as a whole. Figure 15 illustrates a variety of future growth scenarios for

each country, based on literature review as well as analysis of recent spending patterns and cost-

containment efforts.

FIGURE 15 FORECAST PUBLIC PHARMACEUTICAL EXPENDITURE ON ONCOLOGY, 2015-20, BILLIONS OF

LCU


France Germany

Netherlands Poland

Spain England

Individual countries are expected to manage topline pharmaceutical expenditure and facilitate access to

emerging new treatments in a variety of ways

In those countries forecast to see pharmaceutical reimbursement as a share of total public healthcare

expenditure increase relative to the 2014 ratio (Germany, the Netherlands and Spain), it is clear on the

basis of Figure 15 that projected spending in oncology will absorb more than this additional level of funding.

With cost savings in other parts of the healthcare system – notably in inpatient hospital care – this level

of funding seems broadly achievable however in order to ensure equitable access to emerging

innovations in treatment.

In trying to gauge the funding requirements of future oncology treatments, and the impact on capacity to

finance innovations in other therapy areas as well, it is useful to consider the potential each country has for

managing topline pharmaceutical expenditure:

France: Given the country’s still relatively fragile economic recovery, the government is expected to

rely on a variety of measures to control pharmaceutical expenditure, including a major increase in the

penetration of generics, and continued savings through negotiating price cuts and lowering the so-

called L rate ("taux L"), spending above which incurs a payback from pharmaceutical companies. Ability

to enable access to new treatments at the country’s historically generous level will depend on the

success of the stability programme aiming for EUR50 billion in savings by 2017. With hospital care a

centerpiece of this effort, France has a critical opportunity to realise significant efficiencies and direct

major savings toward sustaining access to new treatment innovations.

Germany: Trends in pharmaceutical expenditure going forward will be influenced by the political

developments following broad-based calls for reform of AMNOG. Options on the table include benefit

assessment of pre-AMNOG drugs in exceptional cases (such as when a pre-AMNOG medicine gains

approval in a significantly different indication), as well as introduction of a turnover threshold for new

innovative drugs during the year of free pricing which, if it is exceeded in the course of that year, will

result in the reimbursement price coming into effect before the end of the 12-month period. Another

option is to expand the use of drug class-wide tendering. While the country has long relied on rebate

contracts to hold down costs in the generics segment, tendering across an entire drug class is a new

direction that may be tapped for cost savings.l More broadly, the government will continue to rely on

the price freeze for all reimbursement medicines, and potentially increase the extent of the mandatory

rebate once again. Like France, Germany has the opportunity to channel significant cost savings

stemming from its drive to reduce overcapacity and unnecessary operations in secondary care into

ensuring access to new innovations in treatment.

The Netherlands: In the community pharmacy sector, so-called preference policies, first introduced by

insurers in 2005, link reimbursement for certain groups of off-patent drugs to the price level of the

cheapest available generic, with patients having to pay the difference if they want an alternative

product. Going forward, these policies are expected to be expanded to new drug classes. At the same

time as new spending controls in the hospital setting have incentivized insurers to place ceilings on

drug expenditure and avoid negotiating pass-through payments, from 2015, they bear full financial risk

for most add-on drug costs, including for orphan drugs, which hitherto benefited from government-

organized risk-equalization payments. From 2016, insurers may also assume full risk for add-on cancer

therapies. In addition, secondary care has seen its pharmaceutical spending increase with the transfer

of medicines previously financed in the outpatient sector as described above. In future, a list of

additional therapies may be transferred. Managing hospital drug spend while safeguarding access is

projected to be a critical pressure point for the Dutch healthcare system.

Poland: The new government pledged during its election campaign to introduce free prescription

medicines for patients over 75, representing a significant new addition to public expenditure. Since the

new government has assumed office, the Ministry of Health has proposed that this segment of the

population will only receive cheaper medicines used in the treatment of diseases associated with old

age for free. Over the 2015-20 period, Poland will be required to manage pharmaceutical expenditure

very carefully if the government prioritizes this campaign pledge and seeks to maximize state budget

contributions under the proposed annual limits, while also seeking to catch up to peer countries with

regards to access to innovative new therapies. The government is expected to continue to rely on price

negotiations to bring down the costs of innovative medicines.

Spain: Ongoing reforms of the internal reference pricing system are expected to form a cornerstone of

cost savings. In 2015, the Ministry of Health controversially incorporated two biosimilars into a

reference group for the first time.li The consumption of generic medicines, as in France, is also forecast

to form a key part of cost containment, with the government reporting that generics penetration

reached 48.8% in volume terms between January and August 2015, compared to 34.2% over the same

period in 2011.lii Going forward, the government is likely to continue to rely on these measures to hold

down expenditure, but the trend toward overspending at the autonomous community level is

expected to persist. Previous policy proposals included linking pharmaceutical expenditure to growth in

GDP, but in the absence of a resolution to Spain’s political situation, the likelihood of implementation

of such a broad-based reform remains unclear.

England: The trajectory of pharmaceutical spending will be influenced by trends in secondary care,

given the existing high level of generics penetration and success the country has already seen driving

down prescribing costs in primary care. Under a financial agreement between the pharmaceutical

industry and the government, the former is set to bring forward GBP200 million in payments for 2017

and 2018 in 2016 under the PPRS payback scheme.liii At the same time, the free-pricing regime and

relative lack of cost-containment efforts focused on pharmaceuticals mean that England is expected to

see one of the highest rates of nominal-terms growth in public pharmaceutical expenditure going

forward. Like France and Germany, England has the opportunity to achieve significant cost savings in

secondary care under its new efficiency drive which, with appropriate reform of current appraisal

methods, could support more equitable access to new treatment innovations.

Forecasts for oncology pharmaceutical spending as a share of total drug reimbursement are broadly in

line with what countries are already spending on this therapy area

The question of how large a share of total pharmaceutical spending can be absorbed by oncology is

complex and depends on the interplay of a range of different factors, including expenditure demands in

other therapy areas, trends in generics and biosimilar uptake, and success of new and ongoing cost-

containment measures, as much as it does country-level trends in disease burden, prevention and

outcomes.

In order to benchmark affordability of the forecasts presented in Figure 15, it is useful to place them in

relation to projections for the overall public pharmaceutical market in order to understand relative scale.

Table 10 displays projected 2020 spending on oncology medicines as a share of the overall market based on

the respective low, moderate and high-growth scenarios.

It can be seen that even under the high-growth rate scenario, public reimbursement spending on

oncology medicines as a share of overall expenditure is forecast to increase by only a marginal number of

percentage points in most countries, with the exception of Poland (6.2 points).

TABLE 10 PUBLIC PHARMACEUTICAL SPENDING IN ONCOLOGY AS A SHARE OF TOTAL PUBLIC

PHARMACEUTICAL EXPENDITURE, 2014 VS 2020

2014 share 2020 share

Low Growth

2020 share

Moderate Growth

2020 share

High Growth

France 9.9% 9.8% 9.9% 11.0%

Germany 7.6% 7.6% 9.8% 11.2%

The Netherlands 12.6% 12.3% 12.5% 13.3%

Poland 25.0% 25.0% 26.3% 31.2%

Spain 8.1% 8.1% 8.5% 9.6%

England 9.7% 8.4% 9.7% 10.0%


From this perspective, forecasts for oncology pharmaceutical spending can be seen as broadly in line with

what countries are already spending, assuming continued economic recovery and ongoing cost savings in

other parts of the healthcare system such as hospital efficiencies.

KEY TAKE AWAY

Despite escalating concerns surrounding the future budget impact of oncology therapies, forecast

spending under a number of different scenarios foresees expenditure as a share of total public

reimbursement broadly in line with current spending patterns. Although some countries are projected to

spend less on pharmaceutical reimbursement as a share of overall public healthcare expenditure relative to

2014 levels, and in those countries projected to spend more, the additional amounts are not predicted to

cover oncology spending needs, the overall amounts seem broadly achievable given current policy tools and

efficiency drives. The pressure is likely to be most acute in a country such as Poland, where a pre-existing

gap in access to treatments implies that a broadly similar level of spending on oncology will be

insufficient to support access to newly emerging therapies.

Spain

7.5 PROJECTED BUDGET IMPACT OF EMERGING THERAPY CLASSES

Emerging therapy classes associated with some of the most common cancers are predicted to absorb only

a fraction of forecast oncology spending

It is informative to complement the above forecasts for oncology pharmaceutical expenditure with a

“bottom up” approach modelling the budget impact of emerging therapy classes.

To this end, there are two classes of molecules already launched or soon to launch on the market, and

which have preliminary or final outcomes data as well as information on pricing. These are the programmed

death 1 (PD-1) and programmed death 1 ligand (PD-L1) monoclonal antibodies in second-line metastatic or

stage IIIb non-small cell lung cancer (NSCLC), and the cyclin-dependent kinase 4/6 (CDK4/6) inhibitors in

first-line treatment in combination with endocrine therapy in oestrogen receptor-positive, HER2-negative

advanced breast cancer.

Figure 16 displays the results from a projected budget impact analysis for these products over 2016-20,

relying on estimates for incidence rates, average treatment duration, market share, and relative pricing and

price concessions (a full explanation of the methodology is available in the appendix below). This scenario

assumes a peak market share of 60% by 2018 for each class of agent, reflecting relatively unrestricted

access.

FIGURE 16 PROJECTED BUDGET IMPACT OF PD-L1/PD-1 AND CDK4/6 INHIBITORS, HIGHER MARKET

SHARE SCENARIO, 2016-20, MILLIONS OF LCU


France Germany

Netherlands Poland


N.B. Although the PD-1 and PD-L1 monoclonal antibodies are in development for use as first-line therapies both alone and in combination with other molecules,

this analysis leverages existing clinical data from pivotal phase III trials in in second-line metastatic and stage IIIb NSCLC. The budget-impact estimate therefore

focuses specifically on this indication. It is however worth highlighting that reimbursement approval of first-line therapy would lead to an uptick in expenditure

towards the end of this forecast horizon.

Figure 17 displays the results from an alternative scenario where peak market shares are lowered to 30%,

assuming access conditions are imposed on both agent classes in order to contain expenditure.

FIGURE 17 PROJECTED BUDGET IMPACT OF PD-L1/PD-1 AND CDK4/6 INHIBITORS, LOWER MARKET

SHARE SCENARIO, 2016-20, MILLIONS OF LCU


France Germany

Netherlands Poland


It can be seen that even under the most cautious scenario – assuming peak market shares of 60% and the

low-growth scenario of oncology spending – by 2020, in no country would the CDK4/6 inhibitors in the

relevant indications account for more than 2.5% of total public reimbursement spending on oncology

therapies.

Individual countries are anticipated to respond to the increasing number of treatment innovations in

oncology and manage spending within forecast limits in a variety of ways

France: Price/volume agreements, a hallmark of the French system, are expected to continue to be

relied upon for high-cost new therapies. To this end, the government can also rely on the pharmaco-

economic assessments which, from October 2013, have become a mandatory part of the pricing

negotiation process for certain medicines. Thus far in its cost-containment efforts, the government has

tried to avoid curtailing access to the most innovative therapies by reducing reimbursement rates for

medicines with lower SMR ratings. Going forward, escalating treatment demands may require the

government to place increasing limitations on access to medicines with high SMR ratings. On that

note, in March 2016, France's Ministry of Health published a government decree specifying rules for

inclusion on the country's Tarification à l'Activité (T2A) exclusion list, that list designating high-cost

hospital medicines reimbursed outside the DRG system. The French pharmaceutical industry

association has warned that this will restrict admission to the list and could increase inequalities in

terms of access to healthcare, in particular for cancer patients. Decisions on delisting of a small number

of drugs from the list were expected to be taken.liv

Germany: Reforms to AMNOG will dictate the trajectory of oncology expenditure in the medium-to-

long term, while in the more immediate future, the country may come to rely increasingly on

price/volume agreements and imposition of greater reimbursement restrictions, on top of potentially

increasing mandatory rebates.

The Netherlands: Oncology drug spend will be a critical issue given its recent growth rates. The country

may seek to implement a formal cost-effectiveness threshold, as has been debated in the past, or begin

to renegotiate prices upon indication expansion as is common in peer countries. Expensive new

therapies in the hospital sector will increasingly be placed under “lock,” such that reimbursement will

no longer be automatic until after the country’s National Healthcare Institute (Zorginstituut Nederland)

has completed an assessment and negotiated a price.lv In April 2016, the government confirmed its

proposal for this “lock,” although the measure remains to be fully implemented and it remains to be

seen when exactly it will be used.

Poland: The risk is that other government priorities arising from campaign pledges will detract from

progress made under the Reimbursement Act for access to oncology medicines, even as that progress

is reported to be mixed. lvi With the Act having seen Poland transfer medicines into its mainstream

reimbursement programmes which were already accessible on a more comprehensive basis in other

countries, the reality is that Poland may fall behind with incorporation of treatment innovations that

launched in the interim and which will continue to do so in increasing numbers in the near term. With

ongoing rounds of price cuts having prompted concerns over increasing numbers of product

withdrawals, and the government otherwise limited in its policy measures, there may be the need to

consider scope for greater private-sector contributions. To this end, medical experts as well as

politicians have begun calling for the establishment of a Fund for the Fight against Cancer (Fundusz

Walki z Rakiem) to help plug gaps in the Polish public health insurance system.lvii The fund is the

brainchild of Krzysztof Łanda (founder of the non-profit organisation Watch Healthcare and current

Deputy Minister of Health), and would be based on a system of additional health insurance, paid on top

of the basic, mandatory amount deducted from salaries. According to the fund's proponents, if 20% of

the Polish population were to pay PLN50 per month, the fund would amass a total of PLN20 billion

within a period of five years.

Spain: A backdrop of significant inequities in access to treatments across the 17 autonomous

communities, as well as different hospital centers, is expected to continue impacting oncology

pharmaceutical spending. Many evaluation committees within the autonomous communities and/or

the hospital themselves are expected to restrict use or delay uptake of new treatments. It is also

expected that oncology drugs will continue to be at the center of risk-sharing agreements at regional

level; however, pioneering Cataluña is so far the only autonomous community with adequate

infrastructure for these types of schemes. It is expected that the new government, once the political

impasse is resolved, will pursue innovative funding arrangements similar to the first upper ceiling

expenditure agreement signed for the breast cancer drug pertuzumab.lviii

England: With the ongoing drug delistings from the CDF to ensure it remains within budget, and plans

to evolve the Fund into a managed-entry scheme with additional cost control mechanisms, rates of

growth in oncology spending in particular are expected to temper in the short term.

KEY TAKE AWAY

A “bottom up” approach modelling the budget impact of emerging therapy classes indicates that major

new agents in some of the most common cancers will absorb only a fraction of forecast public

reimbursement spending on oncology treatments. Countries currently possess a variety of policy tools

which seem conducive to supporting access to new treatments while managing budgets within the forecast

limits.

Spain

V. CONCLUSIONS

The preceding set of analyses and consideration of policy and healthcare financing trends underscore the

challenges facing European countries in their ability to simultaneously contain costs while facilitating access

to emerging treatment innovations. Economic conditions and the secular trend of ageing societies

associated with escalating healthcare demands continue to put significant pressure on governments.

Key takeaway 1: Pharmaceuticals have remained a key target of cost containment, but at the expense of

compromising access and leading to concerns over the impact on health outcomes

Over the recent retrospective period, European governments placed an emphasis on pharmaceutical cost

containment in the context of austerity measures or substantive policy reforms. Although these efforts

contributed to subdued or negative growth in overall public outlays on healthcare, they came at the price of

compromising patient access, whether as a result of medicine delistings, rising OOP burdens, or

manufacturer product withdrawals. This reality has given rise to debates surrounding the impact on health

outcomes and the sustainability of such cost shifting.

Key takeaway 2: Concerns over the funding demands of emerging treatments may have been overstated

to some extent, but nonetheless serious budgetary pressures exist for certain countries

Forecasts for overall pharmaceutical and oncology drug expenditure rely on a range of assumptions. While

the pharmaceutical and broader healthcare markets are complex and subject to many variables, meaning

that top-line forecasts based on the projection of past or estimated growth rates must be interpreted with

caution, the results of the present analyses suggest that current anxieties over the budget impact of

oncology therapies may be exaggerated in some countries.

Under a variety of different growth scenarios, forecast public reimbursement spending on oncology

medicines is set to account for a share of overall public drug spending broadly similar to current

expenditure patterns. A bottom up, budget impact modelling approach suggests that these growth

scenarios are able to accommodate significant new therapy classes in some of the most common cancers.

The reality remains that certain countries will nonetheless face pronounced budgetary pressures. This is

true in the case of a country such as Poland, where pre-existing gaps in access mean that maintaining or

only marginally increasing the budget for oncology medicines poses a risk to access to future innovations.

Competing government priorities stemming from campaign pledges limit resources, and there has

reportedly been a slowdown in the number of innovative new drugs securing reimbursement listing.lix Spain

is another country where, depending on the resolution of political uncertainty, ongoing deficit challenges

may result in constrained resources and thus more pronounced challenges in sustaining access to emerging

treatments.

Key takeaway 3: New funding demands should be broadly achievable through a combination of

appropriately targeted cost-containment drives and existing policy tools

While forecast public expenditure on oncology medicines envisions substantial outlays on reimbursement

spending, the amounts seem broadly achievable in a majority of countries assuming ongoing cost-

containment efforts. A number of countries have already committed to large-scale efficiency drives in

secondary care, positioning them to realise significant cost savings in inpatient hospital care, that sector

which continues to represent the bulk of public healthcare outlays. Efficiencies in areas such as

procurement, improved management of staff rosters and overcapacity, and consolidation, integration and

coordination of healthcare delivery all have the potential to generate major savings which can be

channelled to support equitable access to emerging therapy innovations. In addition, shifting care out of

hospital and into the community and home settings remains a significant opportunity.

In the pharmaceutical sector itself, countries such as France, Poland and Spain continue to see

opportunities for greater uptake of generics across the healthcare system. Even in countries such as

Germany, which have probably maximised generic penetration in primary care, opportunities persist to

increase penetration rates in hospital. More generally speaking, the new wave of biosimilars, although

representing comparatively smaller cost savings relative to generics, will liberate additional funding for

emerging treatment innovations.

Key takeaway 4: There is a need to enter into broad-based discussion surrounding innovations in

healthcare financing

In some countries, significant pre-existing disparities in access or weakening economic conditions may

challenge the ability to finance new treatments in line with the above forecasts. It should also be kept in

mind that while substantive reforms to secondary care are expected to release significant cost savings in

the long run, some efficiencies are only possible with upfront investments.

Solutions may involve greater participation of the private sector, along the lines of the proposal in Poland

discussed above for additional insurance contributions to feed into a dedicated oncology care fund. More

generally speaking, collaborations across EU Member State governments should be encouraged, specifically

looking at how data sharing, centres of expertise, collaborative networks and joint procurement can

procedure greater efficiencies and disseminate best practice.

A broad-based discussion around innovative policy arrangements is warranted to ensure that European

countries do not see a deterioration in health outcomes relative to the advances made possible by

emerging treatments. Going forward, this is an agenda which will require broad stakeholder support and

cooperation between policymakers and industry.

VI. APPENDIX

7.1 ADDITIONAL COUNTRY DETAILS

7.1.1 FRANCE

In France, as part of the country’s deficit-reduction programme, growth in public health insurance spending

was initially designed to be limited to 2% y/y over 2015, 2016, and 2017.lx However, in 2015, France's

Ministry of Finance proposed changes to these targets, trimming the ONDAM for 2016 down to 1.75%.lxi

This reduces spending growth to an historic low which is seen as necessary in order to limit the health

insurance system's deficits. France’s system for national health expenditure targets is intended to achieve

savings without compromising quality of care and without shifting additional cost burden onto patients.

Nonetheless, the country’s stability programme envisions an ambitious target of EUR50 billion in savings by

2017. Marisol Touraine, the French health minister, announced a series of cost-containment measures in

the social security financing act for 2016, including promotion of generics, reductions in medicines prices,

and efficiencies in hospital spending.

Looking at trends that may impact private market expenditure, it is noteworthy that the Treasury

Department published a paper in June 2015 on potential reforms to the country’s longstanding disease

reimbursement system.lxii The programme, covering patients with severe chronic disease (known as

Affection de Longue Dureé: ALD), provides eligible beneficiaries with full reimbursement for a select number

of medicines on a designated list. According to the Treasury Department, the co-payment exemption costs

the national health insurance system EUR12.5 billion annually, or an estimated 14% of total reimbursed

healthcare expenditure.

The list covers 30 recognised diseases and is forecast to experience significant cost increases by 2025. The

underlying factors behind the sharp cost increases are attributed to France's ageing population as well as

increases in the prevalence of chronic illness, detection, and survival rates. Eligible beneficiaries represent

about 15.4% of the population, but this could rise to 19.7% of the French population (13.2 million) by 2025.

The Treasury has put forward a scenario in which, based on current trends, the system will cost the French

state EUR17.1 billion in 2025, compared to EUR12.5 billion in 2011. This increase will feed into and

exacerbate an overall increase in healthcare reimbursement. Proposals to reform the ALD system include

reducing the number of designated diseases, measures to deter overconsumption of prescription drugs by

excluding full reimbursement status in some cases, and applying stricter criteria to access the ALD system,

including adopting new regulations to expedite patients' exit from the system once chronic disease

conditions have been medically resolved.

Meanwhile, in September 2015, a study commissioned by Minister of Health Marisol Touraine

recommended unifying France’s three-tier system of reimbursement rates for medicines.lxiii Currently, these

rates are set based on a medicine's clinical value rating (the lower the rating, the lower the reimbursement

rate), as well as taking into account factors such as disease severity and public health interests. A fourth

level of reimbursement (100%) is provided for essential medicines that treat serious diseases, including

cancer. The report proposed abolishing the 15% rate, and eventually merging the rates of 30% and 65%.

While these changes theoretically could result in rising private contributions and OOP payments accounting

for a growing share of that spending, in reality the political system in France is not perceived to be

favourable to such sweeping changes, and the proposed overhauls would represent a major policy

departure. Furthermore, the complementary insurance sector in France has already absorbed costs which

would otherwise have shifted to patients; it is unclear what additional costs this sector can absorb before

they are passed on to patients in the form of increased cost-sharing, an outcome which would be expected

to have a negative impact on access and equity in the healthcare system.

The seemingly limited scope for France to absorb future escalations in healthcare costs via greater

contributions from the private sector intensifies the need for the government to find public-sector savings

and means to contain costs. In contrast to Germany, the Netherlands and the UK, France is a country where

there is significant scope to increase the penetration of generics, a strategy which serves as a centerpiece of

the government’s plans to achieve its healthcare deficit-reduction targets. For drug spending specifically,

France's 2016 social security budget called for a 1% y/y reduction in expenditure on reimbursed medicines,

and anticipated savings of EUR550 million from reduced drug prices. This is the second year in a row of the

application of the so-called L rate ("taux L"), spending above which incurs a payback from pharmaceutical

companies, which in 2014 yielded a reported EUR76.5 million.lxiv Of the EUR50 billion in total savings

expected by 2017, the government plans to save EUR3.5 billion in drug spending.

In addition to a strong focus on generics, it is predicted the government will seek to manage expenditure on

new high-cost therapies through negotiation of price/volume agreements. To this end, the government can

also rely on the pharmaco-economic assessments which, from October 2013, have become a mandatory

part of the pricing negotiation process for certain medicines expected to have a significant impact on public

finances. Proposals from the Hospital Federation of France for greater precision in setting of hospital drug

spending targets by the government each year may also play a role in managing expenditure.lxv

Although price/volume agreements for individual medicines predicted to have a significant budget impact

make up the bulk of financing arrangements in the French market, more recently, the country has moved

toward implementation of ring-fenced budgets for high-cost medicines, specifically in the hepatitis C space.

Within its recent healthcare budgets, the French government set spending ceilings of EUR450 million in

2014 and EUR700 million in 2015 for next-generation hepatitis C medicines, an unusual measure that

involved the government in matters typically reserved for the pricing committee.lxvi Once these thresholds

are exceeded, the budget law foresees a payment by the manufacturers of a progressive contribution.

While in principle the mechanism works similarly to the well-established price/volume agreements, the

extension to a whole class of agents and indeed the involvement of the government represents a novelty.

7.1.2 GERMANY

In Germany, the statutory health insurance funds experienced a deficit in 2014 after several years of

surplus. Since the beginning of 2015, the “additional” contribution (Zusatzbeitrag) for which employees are

liable (traditionally 0.9% of pre-tax salary), on top of the 14.6% of salary paid by employees and employers

in equal proportion, can be freely set by the funds within defined limits. While the average additional

contribution rate was still estimated to stand at around 0.9% in 2015, it was expected to rise to 1.1% by

2016, according to estimates by Germany's Federal Ministry of Health.lxvii However, it was reported early in

2016 that 25 funds were charging more than this rate.lxviii

Germany is expected to continue to see political divisions over whether to make employers cover half of

the additional contribution. The Social Democratic Party of Germany, the junior partner in the governing

coalition, is strongly in favour of this proposition, with the employees' rights group of the Christian

Democratic Union (CDU) – one of the two parties in the leading coalition grouping, 'the Union parties'

(together with the Christian Social Union, CSU) – having also come out in favour of parity between

employees and employers in terms of this payment. The CSU, however, remains opposed, as do many

within the CDU, on the grounds that to do so would threaten insurance companies' competitiveness. The

divisions over how the statutory insurance system should be financed are expected to become more

pronounced, as the contribution rates for the funds are expected to continue to rise through to 2020. On

the other hand, according to Federal Ministry of Health figures, in the fourth quarter of 2015, the insurance

funds recorded a combined financial surplus. It remains to be seen whether this trend will persist and, if so,

if it will be reflected in a reduction in the additional contribution.

Although there remains a very strong consensus in favour of statutory health insurance in Germany, there is

a political commitment among some German politicians to open up the healthcare market more fully to

private health insurance. The significance of the increasing amount Germans have to pay out for statutory

health insurance is mainly that those who earn above the threshold below which payment into a statutory

fund is obligatory may decide that the difference in cost is not significant enough to opt for the statutory

fund, and may start to opt for the private sector more frequently.

Meanwhile, the amount that German patients covered by statutory health insurance had to pay in

additional payments to make up the difference between reference prices and the actual prices of medicines

reportedly increased by 22% y/y in 2014, amounting to EUR115 million.lxix The increase in the proportion of

medicines reimbursed by the funds that required such additional payments rose from 4.1% of reimbursed

medicines in 2013 to 6.1% during 2014. Of these additional payments, 55% were made for off-patent

originators, 18% were made for generics and 16% for patent-protected medicines. It has been reported that

many manufacturers have opted not to lower their prices to the level of the reference prices.

The level of additional payments and fixed co-payments that insured patients are required to pay for

medicines in Germany remains relatively low in European terms, with Germans paying comparatively higher

amounts in monthly premiums instead. However, in this context, it is also worth noting that, according to

data from the Federal Ministry of Health, there was an increase of EUR125 million in the first three quarters

of 2015 in the amount paid out by patients in co-payments, estimated to reach just under EUR200 million

by the end of the year.lxx The amount paid has risen at a more dynamic rate than overall pharmaceutical

expenditure, and the Ministry has suggested that an increase in the number of insured and a reduction in

the number of chronically ill people with co-payment exemptions may be drivers of this change.

In Germany, trends in pharmaceutical expenditure going forward will be strongly influenced by the

outcome of political developments following broad-based calls for reform of AMNOG. In the 2015

Innovation Report issued by the insurance fund Techniker Krankenkasse and prepared by the Research

Center on Inequality and Social Policy at the University of Bremen, it is estimated that AMNOG delivered

savings of around EUR320 million in 2014, versus the EUR2 billion in annual savings it was initially proposed

it would bring.lxxi As part of the fourth and final full session of the "Pharma Dialogue" – the discussions

initiated by Germany's coalition government at the beginning of its term of office, involving several

government ministries, the pharmaceutical industry, and the scientific and medical communities – the

government considered growing calls from insurance funds to retroactively apply negotiated prices to the

12-month free-pricing period under AMNOG, as well as undertake a “late” benefit assessment that could

see drug prices and reimbursement conditions reviewed more dynamically. An April 2016 report on the

final session of meetings indicates the federal Ministry of Health’s resulting proposals now focus on

introduction of a turnover threshold for the "free pricing" period, benefit assessment of pre-AMNOG drugs

in exceptional circumstances, and the negotiated reimbursement price becoming confidential. lxxii The

elements of the Pharma Dialogue proposals relating to AMNOG will be included in a separate act, with the

first draft of this likely to be revealed in the summer of 2016.

In January 2016, Germany's National Association of Statutory Health Insurance Funds called for reform of

the provisions of AMNOG pertaining specifically to orphan drugs.lxxiii Under the current system, orphan

drugs only undergo full benefit assessment when their annual cost is anticipated to exceed EUR50 million.

Otherwise, orphan drugs automatically receive a status of “additional benefit” on the basis of their

marketing authorisation. However, the Association has argued that the law should be changed so that in

certain justified cases it should be possible to undertake a full benefit assessment of orphan drugs whose

budget impacts fall below the current threshold.

While they have the potential to lead to significant cost containment, any modifications to AMNOG will

need to proceed via the appropriate legislative and regulatory channels, meaning that any impact on

pharmaceutical spending will only occur in the medium term. However, the German Federal Ministry of

Health’s decision in January 2016 to maintain the price freeze on reimbursed medicines that are not

included in reference-pricing groups, as well as to continue the existing mandatory discount of 7% on the

ex-factory price of these treatments and that of 6% on the price of drugs within the groups, will have a

more immediate impact.lxxiv Under the applicable legislation, the government assesses the appropriateness

of the price freeze and mandatory discounts each year. Going forward, the government is likely to continue

to rely on these measures to hold down spending.

Another more immediate option in Germany may be to expand the use of drug class-wide tendering. While

Germany has long relied on rebate contracts to hold down costs in the generics segment of the market, for

the first time, in September 2015, the Federal Association of the Allgemeine Ortskrankenkassen, the central

organisation bringing together one of Germany's largest groups of insurance funds, announced the

completion of the first tender for contracts for the supply of medicines applying across an entire class of

drugs. Applying in this case to tumour necrosis factor-alpha inhibitors, this model is likely to be applied to

other therapy areas if shown to be successful, providing the statutory insurance system with another tool

for cost savings.lxxv

7.1.3 THE NETHERLANDS

In the Netherlands, the Rutte government has agreed an austerity package over 2014-17 as described

above. This follows the 25.5% increase in real-terms public expenditure seen over 2005-06, when the

country’s health insurance system underwent fundamental reform. The Dutch economy slowed

dramatically at the beginning of the decade, with rising wage costs undermining the country’s competitive

position. In addition, surging house prices fueled by tax breaks on mortgage interest led Dutch households

to become the most indebted in the Eurozone following the outbreak of the crisis. These realities have put

cost containment at the top of the healthcare agenda, with the Rutte government having outlined plans to

reduce the healthcare budget by 1.5% in 2014 and 1% in 2015 in a bid to reach a structurally balanced

budget by 2017. However, government finances are improving given recent fiscal consolidation efforts.

In terms of sources of private financing, OOP payments are projected to account for a rising share of the

private marketplace. In this case, the gains made by OOP payments are predicted to come largely at the

expense of the private insurance sector. This trajectory reflects trends in cost-sharing under the Dutch

statutory health insurance system which, as discussed above, saw the annual deductible more than double

over the period from 2008 to 2014 to reach EUR375 in 2015. In 2016, this deductible increased by EUR10,

and premiums were expected to increase by EUR7 to an average of EUR103 per month owing to higher

healthcare costs. Going forward, insurers are expected to continue to pass rising costs on to patients.

Pharmaceutical costs are an important target under the government’s drive to reach a structurally balanced

budget by 2017, with savings of up to EUR1 billion in drug costs anticipated by that year. To this end, the

health minister has entered into a new coalition agreement which limits public hospital spending growth to

1% y/y over 2015-17, following a similar accord that placed a limit of 2.5% y/y over 2012-15. This

framework has put increasing pressure on hospital providers, 85% of which anticipate challenges in delivery

of expensive drugs to patients in 2016 and beyond.lxxvi Contractual arrangements between hospitals and

private insurers in the Netherlands, which must take account of the annual growth limits, may package drug

costs into the overall contract, or feature separate “add-on” payments for high-cost therapies.

At the same time as the new spending controls have incentivized insurers to place ceilings on drug

expenditure and avoid negotiating pass-through payments, from 2015, they bear full financial risk for most

add-on therapies, including orphan drugs, which hitherto benefited from government-organized risk-

equalization payments on the basis of expenditure on these items being difficult to predict. From 2016,

insurers may also assume full risk for add-on cancer therapies. In addition, secondary care has seen its

pharmaceutical spending increase with the transfer of medicines previously financed in the outpatient

sector as described above. In future, a list of additional therapies may be transferred, including

immunoglobulins, hematopoietic growth factors, interferons, and drugs used in HIV, organ transplantation,

multiple sclerosis and pulmonary arterial hypertension.

In a report published by the Amsterdam-based Academic Medical Centre in mid-2015, it was claimed that

nearly 50% of metastatic colorectal cancer patients in the Netherlands do not receive the appropriate

pharmaceutical treatment because hospitals are unable to afford the cost.lxxvii With the pressure on hospital

budgets only expected to increase for the reasons outlined above, pharmaceutical spending in secondary

care will be a key challenge for the Dutch healthcare system going forward. The change in the position of

the Dutch Medicines Evaluation Board in April 2015 that controlled switching between biologics and

biosimilars medicines is permissible should strengthen the uptake of the latter and lead to some reduction

in spending on the current generation of high-cost biologics.lxxviii

In the pharmacy sector, as described above, the Netherlands saw significant reductions in the rate of

spending due to a confluence of policy and market-based factors. Of the policy levers, the so-called

preference policies, first introduced in 2005, link reimbursement for certain groups of off-patent drugs to

the price level of the cheapest available generic, with patients having to pay the difference if they want an

alternative product. Going forward, these policies are expected to be expanded to new drug classes, and

continue to play a major role in holding down spending in the pharmacy sector. The Netherlands, with a

generic volume share of 70% of the market, faces limits in the extent to which it can rely on generic uptake

as a driver of further cost containment, but these preference policies hold the potential to manage

reimbursement rates.

On balance, the Netherlands would appear to face significant challenges over ensuring continued access to

treatment in secondary care versus some of the other countries under analysis. The spending targets set in

place for the hospital sector, combined with the transfer of a significant number of new medicines to that

domain and the rapid growth in spending on oncology in particular, appear to have already begun to

negatively impact access, with providers predicting this will get worse in the near-term future. At the same

time, in light of the lower-than-anticipated healthcare spending seen in the Netherlands in recent years as

discussed above, it has been posited that increases in cost-sharing dissuading patients from seeking care

may have contributed to this phenomenon.lxxix As such, it is unclear whether future sustainability challenges

will be able to be absorbed by additional cost-sharing on the part of patients. As a whole, these trends

would suggest that policy reforms are needed in the Netherlands to safeguard against deterioration in

health outcomes.

7.1.4 POLAND

In Poland, future trends in topline healthcare expenditure will be impacted by the escalating level of public-

sector debt as a percentage of GDP. While the dynamism of the economy in the early 2000s enabled the

government to support the country through the recession impacting the rest of Europe, concerns about the

scale of debt have since weighed on spending. At the same time, with the recent election of the Law and

Justice (Prawo i Sprawiedliwość) party, the country’s new leadership has pledged to increase healthcare

spending and embark on fundamental changes to the healthcare system.

Poland's new healthcare minister, Konstanty Radziwiłł, has presented plans which would transition the

current system of financing public healthcare through compulsory contributions to one funded by the state

budget through taxation, starting in 2018.lxxx The new government also intends to significantly increase

funding for healthcare from the state budget, increasing the share of GDP spent on public healthcare to 6%.

With public spending on healthcare in Poland as a percentage of GDP one of the lowest rates among EU

member states, there is a clear incentive for the government to increase this level of spending in real terms.

However, set against a number of other expensive campaign pledges, including bringing the retirement age

back to its previous level and providing a statutory monthly sum for families with two or more children, this

ambition will only be realised with significant cost savings achieved in other areas.

In terms of sources of private financing, Poland is forecast to see noteworthy changes in the composition of

the marketplace going forward. Private insurance in the form of prepaid health plans is set to rise from

representing 9% of total private healthcare spending in 2014 to accounting for 29.3% in 2020, representing

a real-term CAGR of 30.1%. In tandem, OOP payments are forecast to fall from representing 75.4% of the

private market in 2014 to 69.7% in 2020, indicating that the rising contribution from the private insurance

sector is not associated with a significant offset of the comparatively high OOP spending patterns in Poland.

Rather, the category of total “other” private spending (including spending, for example, by charities and

other institutions not otherwise captured) is set to see a dramatic decline at a CAGR of 38.1% through 2020.

These trends reflect a maturation of the market as more employers are projected to offer medical

subscription packages in the country’s bourgeoning voluntary insurance sector.

In Poland, the National Health Fund projected that pharmaceutical expenditure in the country’s drug

programmes and in the community pharmacy sector would increase marginally over 2014-15, at 3.2% and

2.6%, respectively, before falling by 4.4% and 1.7% respectively over 2015-16. While reimbursement of

prescription medicines via pharmacies increased in the range of 3-5% over 2010-14 in nominal terms,

spending on the drug programmes increased by a dramatic 20.8% over 2012-13 and 12.4% over 2013-14,

reflecting the phasing out of the “non-standard” chemotherapy scheme under the Reimbursement Act and

transition of the drugs into other channels as well as, to a lesser extent, growth in spending on medicines

through the standard chemotherapy list. Thus, the move toward negative growth represents a step change

for both segments of the market.

That Poland is forecast to see more modest growth in pharmaceutical expenditure going forward is a

reflection of the escalation in public debt attributable to the scale of government investment which helped

the country avoid recession. However, the new government pledged during its election campaign to

introduce free prescription medicines for patients over 75, representing a significant new addition to public

expenditure. Since the new government has assumed office, the Ministry of Health has proposed that this

segment of the population will only receive cheaper medicines used in the treatment of diseases associated

with old age for free. An initial draft amendment proposed financial limits for this spending set at PLN495

million in 2016 and predicted to reach PLN1.2 billion in 2025.lxxxi However, the government is since reported

to have allocated PLN125 million from the state budget for financial year 2016.lxxxii

Over the 2015-20 period, Poland will be required to manage pharmaceutical expenditure very carefully if

the government prioritizes this campaign pledge and seeks to maximize state budget contributions under

the proposed annual limits. A larger question surrounds the future role of the National Health Fund, with

some stakeholders reported as saying that it may represent another source for such spending. However,

the new government has also pledged to abolish the Fund, which replaced the country’s regional sickness

funds in 2003 in an attempt to solve the healthcare sector’s debts through centralised control. Were the

Fund to be disbanded and a shift back toward regional control implemented, pharmaceutical spending in

Poland would be dependent on the course of this major structural change.

In any case, it seems likely that the new priority of free medicines for the elderly segment of the population,

combined with other expensive campaign pledges, will constrain expansion of access to new, high-cost

treatments, an objective of the 2012 Reimbursement Act. The addition of new oncology drugs and

indications for such treatments was part of a major shift in the reimbursement system under that Act.

According to Krzysztof Łanda, current Deputy Minister of Health and founder of the Watch Healthcare

Foundation, a non-profit organisation that aims to provide information on limitations of accessing basic

healthcare benefits in Poland, the country has gone from being at just about the bottom of the list among

countries in the EU in terms of access to new innovative drugs to being about third or fourth from last. lxxxiii

While many of these drugs have been moved into drug programmes, concerns remain about those patients

who require drugs which are still in “limbo” after the phasing out of the non-standard chemotherapy

system. In January 2015, Poland's Supreme Audit Office (Najwyższa Izba Kontroli: NIK) published a wide-

ranging and detailed report into the functioning of the system of drug programmes, in which it was strongly

critical of the lack of clarity surrounding the system of non-standard chemotherapy.lxxxiv The NIK criticised

the functioning of the system in the lead up to its phase out, as well as confusion surrounding the future

treatment of patients requiring drugs that have until now been funded within this system. After the phasing

out of the non-standard chemotherapy system, patients starting treatment with drugs previously included

within the system after the beginning of 2015 will come under a new system of individual access to

medicines. However, judging from the significant concerns of the NIK, the lack of clarity and confusion

around access to these drugs is set to continue.

The risk is that the other government priorities for healthcare and in other areas as manifested in the

campaign pledges will detract from the progress made under the Reimbursement Act, even as that progress

is reported to be mixed. With the Act having seen Poland transfer medicines into its mainstream

reimbursement programmes which were already accessible on a more comprehensive basis in other

countries, the reality is that Poland may fall behind with incorporation of treatment innovations that

launched in the interim and which will continue to do so in increasing numbers in the near term. There is

therefore a significant risk that health outcomes are negatively impacted in comparison to other EU

countries going forward.

7.1.5 SPAIN

In Spain, resolution of political uncertainty stemming from the December 2015 national election will dictate

the future direction of healthcare, as the new Minister of Health is yet to be named following the end of

Alfonso Alonso’s mandate. The election has created Spain’s most fragmented parliament in recent history

and instigated a true political revolution by ending the two-party state (the Popular party and the Socialists)

since democracy was reinstated in 1978. Due to the inconclusive elections, a new government is yet to be

formed after Spain’s Popular party prime minister, Mariano Rajoy, turned down an offer from King Felipe VI

to do so in mid-January 2016. The Socialists came second in the December election, the reason why their

leader Pedro Sanchez was the latest to be called by the monarch in early February 2016 to form a coalition

government. The absence of a party leader winning support within two months of the first vote means that

new elections must be called.

The Socialists had pledged during the electoral campaign to ask the European Commission to relax deficit

targets set for Spain, which has been in the corrective arm of the Stability and Growth Pact since April 2009

and has been requested to correct its excessive deficit by 2016. The next Spanish government must ensure

that its budget deficit is reduced below the EU ceiling of 3% of GDP in 2016 in line with set objectives.

However, the Commission forecasted a deficit of 3.6% for 2016. The 2015 deficit projection of 4.8% also

appears to have missed the target set by the Commission of 4.2%. The main uncertainty over whether the

2015 target would be attained centered on the performance of the autonomous communities which have

overspent in recent years.lxxxv Although dependent on the outcome of political uncertainty, according to the

European Commission, the next government is expected to make healthcare budget adjustments in order

to meet public deficit objectives similarly to previous years.

Besides the general election outcome, future Spanish healthcare spending will also be shaped by the

recently elected autonomous community governments. As a result of the decentralization process, the

autonomous communities have been in charge of their own healthcare budgets since 2002. As of early

January 2016, the regional government budgets presented for 2016 foresee expenditure rises for

healthcare, with the exception of Cataluña, which had yet to present its budget. However, not all budgets

had been approved yet. The healthcare budgets of the 16 autonomous communities added up to more than

EUR50,000 million, with Andalucía leading the ranks of the highest spenders with a sum of EUR8,807

million.

Similarly to the Netherlands, in Spain, OOP payments are forecasted to account for an increasing share of

private healthcare spending. In line with the Dutch scenario, the gains in OOP payments are expected to

derive mainly from the private health insurance sector. This falls in line with recent historical trends with

private healthcare spending markedly higher during the economic crisis as a result of public spending

cutbacks. In the context of financial difficulties, the government effectively opted for a policy of transferring

healthcare costs directly onto users, which is likely to continue in the short term while the Spanish economy

is under scrutiny by the European Commission and on the slow road to recovery.

Despite the economic crisis, the private health insurance market has managed to maintain positive growth

rates and has become a need rather than a luxury amongst those who can afford the premiums. Provisional

data show that in 2014 there was a 3.3% increase in subscribers compared to the 9.3 million in 2013, and

about 18% of Spaniards hold private health insurance. It has been noted that in autonomous communities

that have dropped their public healthcare budget per capita, private health insurance has increased market

share.lxxxvi

In Spain, it remains to be seen whether the next government will be able to fulfil the European Commission

targets related to pharmaceutical expenditure, given that the Rajoy government failed to do so. The

Commission had also demanded the creation of a transparent system of information on hospital

expenditure that is yet to be implemented, although the Ministry of Finance assures it has received data

from the autonomous communities. The Rajoy government had notably committed to slash EUR1 billion

(half in 2015 and the other in 2016) from the hospital medicines bill based on a mechanism linking

pharmaceutical expenditure with growth in GDP. The Ministry of Finance modified legislation (Organic Law

6/2015 of 12 June) to create a mechanism to monitor the sustainability of pharmaceutical and healthcare

expenditure of the autonomous communities. As such, for those autonomous communities that have

signed up to the mechanism, there is a healthcare expenditure limit whereby the inter-annual variation of

pharmaceutical expenditure should not be superior to the reference GDP growth rate of Spain. If this limit is

surpassed, the adhering autonomous communities will not be allowed to approve the complementary

package of services, amongst other measures.

Additionally, the agreement signed between the Spanish industry association, Farmaindustria, and the

Ministries of Health and Finance in November 2015, seeking to link the public pharmaceutical expenditure

growth limit to the country’s GDP, has yet to be implemented. It was due to start on 1 December 2015 and

was valid for 12 months, with the possibility of an extension annually for a maximum of three years. This

protocol establishes a mechanism to determine a compatible limit if societal therapeutic needs are greater

than the development of the Spanish economy. The Socialists have already announced their intention of

scrapping this agreement if they are elected.lxxxvii The implementation of similar deals with the Spanish

generics and medical devices associations are also yet to be determined.

None of the autonomous communities have yet signed up to the Ministry of Finance’s aforementioned

mechanism in spite of renewed pharmaceutical expenditure growth, which occurred due to the newly

funded hepatitis C drugs. Furthermore, a report by the Ministry of Finance about the regional budgets for

2016 highlights that seven autonomous communities are likely to have healthcare financing issues, in

particular to fund pharmaceutical expenditure. These included Aragon, Baleares, Castilla y Leon, Galicia,

Murcia, La Rioja and Valencia.lxxxviii This is likely to mean that autonomous communities will struggle to

further reduce public hospital pharmaceutical debt in particular. The debt owed to the pharmaceutical

industry reduced by 13% in December 2015 to about EUR2,200 million with regards to the previous month.

It appears to indicate that 2015 ended with 13% less debt than 2014, which corresponds to the best value

since 2006 when debt amounted to EUR2,142 million.lxxxix

Cost-containment measures coupled with the promotion of the rational use of medicines helped Spain to

maintain a stable average expenditure per prescription of EUR10.81 in 2015 (equating to a y/y 0.31% rise).xc

One measure highlighted by the Ministry of Health was the reference-pricing system annual update

published in October 2015, controversially incorporating two biosimilars into a homogenous group for the

first time.xci The effects of this update will only truly be felt once the next government is in operation. The

consumption of generic medicines also reached 48.8% in volume terms over January-August 2015, which

the Ministry said was approaching the European average, compared to 34.2% in 2011. Going forward, the

government is likely to continue to rely on these measures to hold down expenditure, but the trend toward

overspending at the autonomous community level is expected to persist.

7.1.6 THE UK

In the UK, the political agenda to improve the country’s standing relative to average European healthcare

outcomes places limits on the degree of cost containment going forward. Nonetheless, the English NHS

faces serious budgetary challenges. By the end of September 2014, more than half of all types of NHS

providers were in deficit, with a total net shortfall of GBP630 million.xcii This challenge is greatest in acute

hospitals, of which 81% reported a deficit during the same period. For the first half of the financial year

2015/16, NHS trusts in England reported a deficit of GBP1.6 billion, GBP358 million above expectations at

the beginning of the year.xciii It is anticipated that the NHS will face a funding gap of GBP30 billion from 2020

if funding rises in line with inflation and there are no efficiency savings realised.xciv

UK Chancellor of the Exchequer George Osborne, as part of the annual government spending review,

announced in November 2015 that the NHS in England is to receive an additional GBP10 billion in real terms

over the next five years.xcv Much of this funding is to be used by the NHS to move towards a seven-day

system allowing access to primary care at weekends, one of the Government's flagship health policies.

Cancer care has been earmarked for additional spending increases, with some GBP300 million to be

invested in cancer diagnostic services alongside a government pledge that by 2020, all patients will be given

a diagnosis or all-clear for suspected cancers within 28 days of referral.xcvi

However, the Government expects the NHS to make efficiency savings of some GBP22 billion by 2020/21

given the scale of the predicted budget shortfall.xcvii These savings are expected to be realised through

measures such as better staff roster management, procurement efficiencies, reduced unnecessary hospital

admissions, and improved stock management of medicines.xcviii This means that in the UK, new investments

will have to come at the expense of cost containment in other areas of healthcare or in other governmental

budgets in order to ensure that the necessary cost savings or limitations on public debt escalation are

achieved.

The situation in the UK is in some ways reminiscent of past developments in the configuration of cancer

care in Poland. In March 2014, the latter country’s then health minister Bartosz Arłukowicz presented plans

for improving access to oncology treatment, and reducing queues in the system, which included the

scrapping of limits on care provision and implementing a maximum waiting time.xcix This reform was

expected to increase public spending on oncology by at least 50%.c However, the reform was touted as

budget neutral, as any increased spending on oncology was intended to translate into decreased spending

in other areas of healthcare provision.

Of the countries under analysis, the private market for healthcare is expected to remain stable in terms of

composition from different sources of funding in the UK. The broad-based political consensus around

universal access to care as embodied in the NHS, combined with past developments in individual and

employer-sponsored private insurance as discussed above, mean that the market is expected to remain

relatively small.

In the UK, the trajectory of pharmaceutical spending will be heavily influenced by trends in secondary care,

given the high level of generic penetration and success the country has seen driving down prescribing costs

in primary care. With secondary-care medicine costs being driven by spending on oncology, the designation

of chemotherapy and systemic oncology treatments as a specialized service in England, as a result of the

major reforms brought in by the 2012 Health and Social Care Act, has implications for how this trajectory

unfolds. With this designation, from April 2013, decisions regarding the commissioning of these therapies

have been made at national level by NHS England, a centralised, arm’s length body reporting to the

Secretary of State for Health which is also responsible for commissioning primary care. The NHS budget for

specialised services amounted to GBP14.6 billion for 2015/16. Since the restructuring of the NHS under the

2012 Act, specialised services have generally accounted for 10-14% of the overall NHS allocation. Reports

from 2014 indicated that, by April of that year, the specialised services budget was predicted to be

overspent by at least GBP336 million.ci A large share of this overspend can be attributed to the larger-than-

expected outlays for the CDF.

As a first step toward reining in CDF spending, in 2014 the government announced that NHS England would

begin evaluating cost as well as clinical effectiveness in order for drugs to be included in the Fund,

subsequently leading to a series of delistings. In November 2015, NHS England and the National Institute for

Health and Care Excellence (NICE) put forward consultation proposals envisioning a new role for the CDF as

a managed entry fund.cii This would allow promising cancer drugs, for which there is insufficient evidence to

be recommended for routine commissioning, to obtain a conditional approval to be funded through the

CDF for a certain period of time, enabling sufficient data to be collected in order to support a more

informed NICE decision. Prospective contingency provisions would be put in place to ensure the CDF

remains within budget.

With these policy developments indicating that England will bring the CDF budget under control in the short

term, pharmaceutical market growth through 2020 is projected to be more subdued in comparison to the

2010-14 period. However, aside from the proposals for the CDF, the UK lacks an overarching cost-

containment drive focused on pharmaceuticals outside of the now routine discounts it receives on new

medicines under its patient access schemes. The country’s discussions over a new system of value-based

pricing, which eventually gave way to considerations of value-based assessment by NICE, were put on hold

indefinitely after a series of consultations failed to lead to consensus.

What is more, a report issued by Cancer Research UK in August 2015 highlighted the shortfall in molecular

diagnostic testing associated with targeted therapies for solid tumours in England.ciii Based on cancer

incidence data and extrapolation of testing rates from a survey of labs, the charity estimates that in 2014,

15,929 patients missed out on molecular diagnostic testing, because of either a lack of funding or a lack of

awareness. Based on mutation rates, this translates into an estimated 3,552 patients who may have

otherwise been eligible for targeted therapies. In light of the country’s pledge to increase cancer diagnosis

rates as discussed above, there is likely to be an increase in the number of patients receiving high-cost

therapies in future. It is also worth mentioning that in July 2015, the Independent Cancer Taskforce

published a cancer strategy for England for 2015-20, which includes recommendations for improving access

to molecular diagnostics.civ

It is noteworthy that since the implementation of the 2012 reforms, NHS England has developed a

framework for so-called co-commissioning of primary care and collaborative commissioning of specialised

services, which will ultimately see the new local Clinical Commissioning Groups (CCGs) take on some

elements of commissioning as currently performed by NHS England itself. The stated rationale for this

transition is to enable NHS England and the CCGs to commission specialised care pathways that are better

suited to the needs of each local health economy, following patient feedback that the current configuration

has led to disjointed service delivery. Criticism of the proposals has focused on the potential for resulting

inequities in access to treatment (the so-called “postcode lottery”) due to inconsistent funding decisions, a

phenomenon which the centralisation of specialised services was supposed to protect against. Some

commentators see the decision to devolve greater responsibility to local-level commissioners as a question

of shifting the burden and forcing CCGs to absorb new risks on top of already strained budgets, a situation

reminiscent of the transfer of new classes of medicines to hospital budgets in the Netherlands.

NHS England’s specialised services commissioning intentions for 2016/17 in oncology include a focus on the

piloting of “population-based” commissioning, whereby entire cancer pathways will be commissioned in

one local health economy.cv The pilot will test devolving the full budget to CCGs, and potentially introduce a

population-based reimbursement model. Proposed supply-side innovations centre on introduction of one

lead provider of care to manage the budget for all local secondary and tertiary cancer services. If the model

is proven to be successful, this could lead to another means to hold down oncology drug costs in the longer-

term future. However, as alluded to above, a return to the “postcode lottery” might result, with access to

medicines dependent on decisions taken in the local health economy. Despite the government pledge to

improve spending on and outcomes in oncology, there is a risk that, given the frequent reorganisations of

commissioning responsibility, NHS patients face resulting challenges to access.

7.2 MACROECONOMIC DATA

Average Income (000s of 2005 US PPP USD)

2010 2011 2012 2013 2014 2015 2016* 2017* 2018* 2019* 2020*

France 51.6 51.3 50.4 50.0 50.1 50.8 51.1 51.6 52.0 52.4 52.7

Germany 47.0 48.6 48.6 48.6 49.0 49.9 50.5 51.0 51.4 51.9 52.4

Netherlands 44.9 45.2 44.4 43.8 43.8 43.2 43.5 43.8 44.5 45.0 45.5

Poland 35.4 36.3 36.3 36.2 36.6 37.4 38.5 39.6 41.0 42.3 43.7

Spain 48.2 47.1 44.2 43.3 43.7 44.8 45.4 45.7 46.0 46.6 47.2

United Kingdom 53.1 50.1 50.3 51.2 51.4 53.1 54.9 55.9 56.9 57.8 58.8

Note: * = forecast

Source: IHS Global Consumer Markets

Average Income (000s of USD)

2010 2011 2012 2013 2014 2015 2016* 2017* 2018* 2019* 2020*

France 62.6 66.4 61.2 63.4 63.4 53.2 54.8 60.3 67.1 71.4 74.1

Germany 53.6 59.4 55.7 58.2 59.2 50.1 52.3 57.4 63.6 67.2 69.5

Netherlands 53.8 58.0 53.4 55.7 56.4 46.3 47.7 52.5 58.8 62.7 65.2

Poland 22.8 25.0 23.5 24.3 24.5 20.9 23.0 27.6 33.6 37.4 39.8

Spain 52.1 54.9 48.7 49.8 50.1 42.2 43.7 47.9 53.2 56.7 59.0

51.6 50.8

52.7

47.0 49.9

52.4

44.9

43.2

45.5

35.4

37.4

43.7

48.2

44.8 47.2

53.1

53.1

58.8

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Average Income (000s of 2005 US PPP USD)

United Kingdom 64.0 64.8 65.6 67.2 72.2 69.8 74.2 79.9 85.8 89.2 93.1

Note: * = forecast


Life Expectancy at Birth (Years)

2010 2011 2012 2013 2014 2015 2016* 2017* 2018* 2019* 2020*

France 80.82 81.03 81.23 81.43 81.64 81.84 82.04 82.24 82.44 82.64 82.84

Germany 79.76 79.93 80.11 80.29 80.47 80.65 80.82 81.00 81.18 81.36 81.54

Netherlands 80.18 80.41 80.63 80.86 81.08 81.31 81.46 81.60 81.75 81.90 82.05

Poland 75.46 75.79 76.13 76.46 76.80 77.14 77.31 77.47 77.64 77.81 77.98

Spain 81.20 81.41 81.62 81.84 82.05 82.27 82.46 82.65 82.83 83.02 83.22

United Kingdom 79.65 79.80 79.96 80.12 80.29 80.45 80.61 80.77 80.93 81.09 81.25

Note: * = forecast


62.6

France, 53.2

74.1

Germany 53.6

50.1

69.5

Netherlands, 53.8

46.3

65.2

22.8

20.9

39.8

52.1

42.2

59.0

64.0

69.8

93.1

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Average Income in 000 USD

Unemployment Rate (%)

2010 2011 2012 2013 2014 2015 2016* 2017* 2018* 2019* 2020*

France 9.23 9.20 9.78 10.25 10.30 10.46 10.27 9.78 9.51 9.38 9.39

Germany 7.68 7.04 6.82 6.85 6.69 6.40 6.17 6.48 6.45 6.29 6.17

Netherlands 5.46 5.34 7.11 8.98 9.03 8.63 7.53 7.04 6.60 6.44 6.28

Poland 9.63 9.60 10.10 10.33 9.00 7.50 6.90 6.60 6.32 6.17 5.75

Spain 19.86 21.39 24.79 26.09 24.43 22.06 20.05 19.09 18.48 17.96 17.51

United Kingdom 7.90 8.10 7.98 7.60 6.20 5.34 4.82 4.71 4.64 5.02 5.31

Note: * = forecast


France, 80.8

81.8

82.8

Germany 79.8

80.6

81.5

80.2

81.3

82.1

75.5

77.1 78.0

81.2

82.3

83.2

79.6

80.4

81.2

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Life Expectancy at Birth (Years)

Real GDP in Billion USD (2010 USD)

2010 2011 2012 2013 2014 2015 2016* 2017* 2018* 2019* 2020*

France 2644.8 2700.2 2706.0 2726.2 2730.9 2762.5 2797.1 2835.9 2873.7 2911.2 2953.2

Germany 3416.8 3543.8 3565.6 3580.1 3636.8 3689.4 3757.7 3833.5 3899.4 3958.4 4024.5

Netherlands 836.1 850.0 841.0 837.5 846.0 862.8 874.5 891.8 907.5 923.8 940.5

Poland 479.2 503.3 511.1 517.7 535.0 554.3 575.1 593.9 613.1 631.3 650.0

Spain 1433.2 1418.9 1381.7 1358.6 1377.1 1421.4 1460.2 1494.8 1528.7 1561.2 1592.9

United Kingdom

2403.5 2450.9 2479.8 2533.4 2605.7 2662.4 2718.3 2787.0 2853.7 2917.2 2983.8

Note: * = forecast


9.2

France, 10.5

9.4

Germany 7.7 6.4

6.2

5.5

8.6

6.3

9.6

7.5

5.7

19.9

22.1

17.5

7.9

5.3 5.3

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Unemployment Rate (%)

Total Debt in USD

2010 2011 2012 2013 2014 2015 2016* 2017* 2018* 2019* 2020*

France 2,194.92 2,484.37 2,428.77 2,629.72 2,689.17 2,328.50 2,311.53 2,509.22 2,697.75 2,795.58 2,893.42

Germany 2,767.65 2,946.67 2,821.14 2,903.37 2,901.50 2,380.33 2,265.44 2,465.88 2,650.03 2,770.77 2,836.23

Netherlands 493.33 547.90 551.17 593.00 605.16 490.30 479.25 504.81 538.83 580.97 618.35

Poland 255.57 287.30 269.87 293.17 274.91 247.01 246.31 286.78 337.82 384.15 418.49

Spain 815.85 994.44 1,063.19 1,263.85 1,347.34 1,177.52 1,183.01 1,299.63 1,422.35 1,516.69 1,582.50

United Kingdom

1,672.92 1,893.98 2,041.50 2,171.67 2,452.03 2,357.84 2,282.23 2,626.81 2,757.14 2,802.82 2,858.30

Note: * = forecast


2,644.8

2,762.5

2,953.2

3,416.8

3,689.4 4,024.5

836.1

862.8 940.5

479.2 554.3

650.0

1,433.2

1,421.4 1,592.9

2,403.5 2,662.4

2,983.8

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Real GDP in Billion USD (2010 USD)

Government Total Expenditures in USD

2010 2011 2012 2013 2014 2015 2016* 2017* 2018* 2019* 2020*

France 1493.87 1601.14 1523.91 1602.7 1627.11 1376.55 1351.08 1488.47 1628.93 1747.54 1866.67

Germany 1614.65 1680.43 1573.35 1667.05 1712.41 1476.57 1480.21 1638.79 1791.82 1910.19 1996.25

Netherlands 395.39 416.46 386.74 399.05 402.04 343.22 345.62 386.2 431.66 460.82 489.47

Poland 218.62 230.43 212.94 222.16 229.69 210.65 211.06 237.6 279.63 319.13 349.62

Spain 654.17 679.14 639.97 618.8 614.27 521.07 502.91 551.36 602.24 646.53 683.01

United Kingdom

1031.15 1084.77 1092.77 1081.12 1132.08 1052.71 1000.04 1138.74 1204.17 1242.31 1288.9

Note: * = forecast


2,194.9 2,328.5

2,893.4

2,767.6

2,380.3

2,836.2

493.3

490.3 618.3

255.6

247.0

418.5

815.9

1,177.5

1,582.5 1,672.9

2,357.8

2,858.3

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Total Debt in USD

Fiscal Balance: % of GDP

2010 2011 2012 2013 2014 2015 2016* 2017* 2018* 2019* 2020*

France -6.80 -5.10 -4.81 -4.08 -3.97 -3.50 -3.20 -3.00 -2.82 -2.76 -2.75

Germany -4.22 -0.96 -0.09 -0.11 0.31 0.64 0.14 0.08 0.01 -0.06 -0.11

Netherlands -5.00 -4.30 -4.02 -2.36 -2.20 -2.01 -1.60 -1.16 -1.01 -0.68 -0.51

Poland -7.53 -4.85 -3.69 -4.02 -3.30 -2.96 -3.23 -2.85 -2.56 -2.31 -2.08

Spain -9.36 -9.37 -10.25 -7.00 -5.91 -4.79 -3.81 -3.61 -3.21 -2.96 -2.84

United Kingdom -9.12 -7.05 -7.57 -5.81 -5.40 -4.03 -3.18 -2.11 -1.25 -0.65 -0.35

Note: * = forecast


1,493.9

1,376.6

1,866.7

1,614.7 1,476.6

1,996.3

395.4 343.2

489.5

218.6

210.7

349.6

654.2 521.1 683.0

1,031.2

1,052.7

1,288.9

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Government Total Expenditures in USD

Real PPP Conversion Factor (2005 USD)

2010 2011 2012 2013 2014 2015 2016* 2017* 2018* 2019* 2020*

France 0.94 0.94 0.94 0.94 0.94 0.94 0.94 0.94 0.94 0.94 0.94

Germany 0.99 0.99 0.99 0.99 0.99 0.99 0.99 0.99 0.99 0.99 0.99

Netherlands 0.95 0.95 0.95 0.95 0.95 0.95 0.95 0.95 0.95 0.95 0.95

Poland 1.90 1.90 1.90 1.90 1.90 1.90 1.90 1.90 1.90 1.90 1.90

Spain 1.11 1.11 1.11 1.11 1.11 1.11 1.11 1.11 1.11 1.11 1.11

United Kingdom 0.82 0.82 0.82 0.82 0.82 0.82 0.82 0.82 0.82 0.82 0.82

Note: * = forecast


Demographic pyramid: percentage of the population by age brackets in years

France

-6.80

-3.50 -2.75

-4.22

0.64

-0.11

-5.00

-2.01 -0.51

-7.53

-2.96 -2.08

-9.36

-4.79

-2.84

-9.12

-4.03

-0.35

-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Fiscal Balance: % of GDP


Germany


The Netherlands

12.4% 12.4% 12.4% 12.4% 12.3% 12.3% 12.2% 12.1% 12.1% 12.0% 11.9%

12.1% 12.0% 12.0% 12.0% 12.0% 12.1% 12.2% 12.2% 12.2% 12.2% 12.2%

12.6% 12.5% 12.4% 12.2% 11.9% 11.7% 11.6% 11.6% 11.5% 11.5% 11.5%

12.8% 12.6% 12.5% 12.4% 12.3% 12.2% 12.2% 12.2% 12.2% 12.2% 12.1%

13.8% 13.7% 13.7% 13.6% 13.5% 13.4% 13.3% 13.1% 12.9% 12.7% 12.5%

13.1% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 12.9% 12.9% 12.9%

10.4% 10.8% 11.2% 11.6% 11.8% 12.0% 12.1% 12.0% 11.9% 11.8% 11.8%

12.9% 12.9% 12.9% 12.9% 13.0% 13.2% 13.5% 13.9% 14.3% 14.7% 15.1%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

70+

60 to69

50 to59

40 to49

30 to39

20 to29

10 to19

0 to 9

8.6% 8.5% 8.5% 8.4% 8.4% 8.4% 8.4% 8.5% 8.5% 8.6% 8.6%

10.1% 10.0% 9.9% 9.8% 9.6% 9.5% 9.3% 9.2% 9.1% 8.9% 8.8%

12.2% 12.3% 12.2% 12.1% 11.9% 11.8% 11.6% 11.4% 11.2% 11.0% 10.8%

11.7% 11.6% 11.6% 11.8% 12.1% 12.3% 12.5% 12.7% 12.8% 12.9% 13.0%

17.1% 16.7% 16.3% 15.7% 15.0% 14.4% 13.8% 13.2% 12.7% 12.3% 12.0%

14.3% 14.7% 15.1% 15.4% 15.8% 16.1% 16.4% 16.6% 16.8% 16.9% 16.8%

11.1% 11.0% 11.0% 11.1% 11.2% 11.5% 11.8% 12.1% 12.5% 13.0% 13.4%

14.9% 15.2% 15.5% 15.8% 16.0% 16.1% 16.3% 16.3% 16.4% 16.5% 16.6%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

70+

60 to69

50 to59

40 to49

30 to39

20 to29

10 to19

0 to 9


Poland


Spain

11.4% 11.2% 11.1% 10.9% 10.8% 10.7% 10.6% 10.5% 10.5% 10.4% 10.4%

12.0% 11.9% 11.9% 11.9% 11.8% 11.7% 11.7% 11.6% 11.5% 11.3% 11.2%

11.9% 12.0% 12.0% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1% 12.1% 12.0%

12.9% 12.5% 12.3% 12.1% 11.9% 11.8% 11.8% 11.8% 11.9% 12.0% 12.0%

15.8% 15.7% 15.5% 15.2% 14.9% 14.5% 14.1% 13.7% 13.2% 12.8% 12.4%

13.8% 13.9% 14.1% 14.2% 14.4% 14.6% 14.8% 14.9% 15.0% 15.0% 15.0%

11.5% 11.8% 12.0% 12.2% 12.4% 12.5% 12.5% 12.5% 12.5% 12.5% 12.6%

10.7% 10.9% 11.1% 11.4% 11.6% 12.0% 12.4% 12.9% 13.4% 13.9% 14.4%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

70+

60 to69

50 to59

40 to49

30 to39

20 to29

10 to19

0 to 9

9.8% 10.0% 10.1% 10.2% 10.3% 10.4% 10.3% 10.3% 10.2% 10.1% 9.9%

11.6% 11.2% 10.7% 10.3% 10.0% 9.7% 9.6% 9.5% 9.6% 9.7% 9.8%

16.2% 15.9% 15.5% 15.0% 14.5% 14.0% 13.5% 13.0% 12.5% 12.0% 11.6%

15.0% 15.4% 15.8% 16.1% 16.4% 16.6% 16.7% 16.7% 16.6% 16.4% 16.1%

12.4% 12.3% 12.2% 12.3% 12.5% 12.8% 13.1% 13.5% 13.9% 14.3% 14.8%

15.5% 15.4% 15.1% 14.8% 14.4% 13.9% 13.4% 12.9% 12.5% 12.1% 11.9%

9.4% 10.0% 10.6% 11.3% 11.9% 12.5% 13.0% 13.4% 13.7% 13.8% 13.9%

9.9% 10.0% 10.0% 10.0% 10.0% 10.2% 10.4% 10.8% 11.1% 11.6% 12.0%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

70+

60 to69

50 to59

40 to49

30 to39

20 to29

10 to19

0 to 9


The UK


7.3 DATA SOURCES

10.2% 10.2% 10.2% 10.1% 10.0% 9.9% 9.7% 9.5% 9.3% 9.2% 9.0%

9.2% 9.2% 9.2% 9.3% 9.4% 9.5% 9.6% 9.8% 10.0% 10.1% 10.3%

12.2% 11.6% 11.1% 10.7% 10.4% 10.2% 10.0% 9.8% 9.7% 9.6% 9.5%

17.5% 17.2% 16.8% 16.2% 15.7% 15.0% 14.4% 13.8% 13.2% 12.6% 12.0%

16.0% 16.1% 16.3% 16.4% 16.5% 16.6% 16.8% 16.9% 17.0% 17.0% 16.9%

12.6% 12.9% 13.3% 13.7% 14.1% 14.4% 14.7% 14.9% 15.1% 15.3% 15.5%

9.8% 10.0% 10.1% 10.3% 10.5% 10.7% 10.9% 11.1% 11.4% 11.6% 12.0%

12.6% 12.8% 13.0% 13.2% 13.4% 13.7% 13.9% 14.2% 14.4% 14.7% 14.9%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

70+

60 to69

50 to59

40 to49

30 to39

20 to29

10 to19

0 to 9

11.8% 12.0% 12.1% 12.2% 12.3% 12.4% 12.4% 12.4% 12.4% 12.3% 12.3%

12.4% 12.1% 11.9% 11.6% 11.4% 11.2% 11.2% 11.1% 11.2% 11.2% 11.3%

13.6% 13.6% 13.6% 13.6% 13.5% 13.4% 13.3% 13.1% 12.9% 12.7% 12.5%

13.0% 12.9% 12.8% 12.8% 12.9% 12.9% 13.0% 13.1% 13.3% 13.4% 13.4%

15.0% 14.9% 14.7% 14.4% 14.2% 13.9% 13.5% 13.2% 12.9% 12.6% 12.5%

11.9% 12.0% 12.3% 12.6% 12.9% 13.2% 13.4% 13.7% 13.8% 13.9% 13.9%

10.8% 10.9% 11.0% 11.0% 11.0% 10.9% 10.8% 10.7% 10.5% 10.5% 10.5%

11.5% 11.6% 11.7% 11.8% 11.9% 12.1% 12.4% 12.7% 13.0% 13.3% 13.6%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

70+

60 to69

50 to59

40 to49

30 to39

20 to29

10 to19

0 to 9

7.3.1 TOTAL AND PRIVATE HEALTHCARE EXPENDITURES

The IHS World Markets Healthcare Forecasts service provides projected and retrospective data on

healthcare expenditure and pharmaceutical sales across 36 countries. Data are based on the World Health

Organization (WHO) statistics, and forecasts continuously updated based on historical data sets. All

indicators were obtained from this service using data expressed in nominal terms unless otherwise noted.

The following glossary explains the terminology used in those figures derived from IHS World Markets

Healthcare Forecasts data:

Public healthcare expenditure: expenditure on healthcare incurred by public funds. Public funds are state, regional and local government bodies and social security schemes

Private healthcare expenditure: the sum total of the individual components of private expenditure as detailed below

Private insurance: expenditure on health incurred by private insurance funds (both private social insurance and all other private insurance funds)

Out-of-pocket expenditure: household out-of-pocket payments include cost sharing, self-medication and other expenditures paid directly by private households. These include co-payments, co-insurance, over-the-counter drug spending, etc.

Other private expenditure: includes non-public expenditures not paid by households or insurance. These include expenditures from non-profit institutions, foreign aid, etc.

Data from this service were used for retrospective and forecast total healthcare expenditure and private

healthcare expenditure.

7.3.2 CATEGORIES OF CARE SPENDING

Country-specific data sources were relied upon in order to obtain estimates for the proportion of total

public healthcare spending accounted for by discrete categories of care:

France The 2015 report Les dépenses de santé en 2014: Résultats des Comptes de la santé from

le Direction de la recherche, des études, de l’évaluation et des statistiques (DREES) cvi

Germany Data tables based on the Health Expenditure Accounts as maintained by the Online-

Datenbank der Gesundheitsberichterstattung (GBE) cvii

Netherlands Data on health and social care expenditure organised by functions and financing

maintained by the Statistics Netherlands cviii

Poland The archive of Zdrowie i ochrona zdrowia reports maintained by the Główny Urząd

Statystyczny cix

Spain The report Estadística de Gasto Sanitario Público published by the Subdirección General

de Cartera Básica de Servicios del SNS y Fondo de Cohesión cx

England The report Into the red? The state of the NHS’ finances by the Nuffield Trust cxi

7.3.3 PUBLIC PHARMACEUTICAL REIMBURSEMENT SPENDING

To obtain estimates of public reimbursement spending on pharmaceuticals overall and for oncology

specifically in the community pharmacy sector, country-specific data sources and methods were relied

upon:

France

The Medic'AM annual dataset provided by the Assurance Maladie public-sector insurance

body in France was utilised.cxii Total annual expenditure reported by this dataset was

computed as well as expenditure by ATC class, including codes L01 and LO2 for oncology. Due

to a change in the methodology for compiling the Medic'AM over the course of the

retrospective time period under analysis, the most recent data for the years 2012 and 2013

were taken. As 2012 was common to both datasets, new values for 2011 and 2010 were

calculated assuming the same percentage change in the market between 2011 and 2012 and

2010 and 2011 as reported in the old datasets but working backwards from the revised 2012

data. To project evolution of the retail market over 2015-20, the y/y percentage changes as

predicted by the IHS World Markets Healthcare Forecasts service were applied starting with

the 2014 data.

Germany

Data tables based on the Wissenschaftliches Institut der AOK (WIdO) as maintained by the GBE

were utilised to derive total annual expenditure by the SHI in the retail sector by ATC class,

including codes L01 and L02 for oncology.cxiii To project evolution of the retail market over

2015-20, the y/y percentage changes as predicted by the IHS World Markets Healthcare

Forecasts service were applied starting with the 2014 data.

Netherlands

Data tables based on the Genees- en hulpmiddelen Informatie Project (GIP) databank

maintained by the Zorginstituut Nederland were utilised to derive total annual expenditure in

the retail sector by ATC class, including codes L01 and L02 for oncology.cxiv To project evolution

of the retail market over 2015-20, the y/y percentage changes as predicted by the IHS World

Markets Healthcare Forecasts service were applied starting with the 2014 data.

Poland

A 2010 report from the Narodowego Funduszu Zdrowia (NFZ), Wydatki Narodowego Funduszu

Zdrowia z tytułu refundacji cen leków w 2010 roku - wersja rozszerzona, was used to derive a

breakdown of the retail market by ATC class.cxv Note that the share attributed to oncology is

an overestimate in Figure 3 as it encompasses all of the L codes. To obtain a more precise

estimate for oncology spending in the retail sector for the purposes of calculating total

oncology pharmaceutical spend as a basis for the forecasts, IMS Health data for the classes

Wspomaganie przy leczeniu onkologicznym and Onkologia as reported in an article from 2012

were utilised.cxvi It was assumed that spending on oncology drugs in the retail sector remained

at a constant ratio to overall community pharmacy spend in the absence of data on other

years. The figures for overall community pharmacy spend were derived from IHS Same Day

Analysis reports, on the basis of NFZ data. To forecast evolution of the retail market over

2015-20, projected spending by the NFZ was used for 2015 and 2016, and the y/y increase

between 2014-15 (2.56%) then used to project spending from 2017 onwards.

Spain

The annual memoranda published by the pharmaceutical industry association Farmaindustria

were utilised for estimates of the retail market, based on IMS data.cxvii These reports contain a

breakdown of the market by ATC class, including for class L as a whole. In order to derive a

more specific estimate for oncology, a study published in October 2013 by the Spanish

Medical Oncology Association reporting 2011 retail expenditure on oncology drugs, excluding

onco-haematological products, was relied upon.cxviii It was assumed that this spending as a

share of class L spending (as reported by Farmaindustria for the year 2011) held across the

other years in the retrospective period. To project evolution of the overall retail market over

2015-20, the y/y percentage changes as predicted by the IHS World Markets Healthcare

Forecasts service were applied starting with the 2014 data.

England

Prescription Cost Analysis data 2010-14 for England as maintained by the Health & Social Care

Information Centre (HSCIC) were utilised to obtain estimates for overall retail market

spending.cxix Spending totals by British National Formulary Sub Paragraphs were used in place

of ATC codes. For oncology, the following Sub Paragraphs were relied upon: Drugs for

Cytotoxic-Induced side-effects; Alkylating Drugs; Antimetabolites; Vinca Alkaloids And

Etoposide; Other Antineoplastic Drugs; Antiproliferative Immunosuppressants; Rituximab &

Alemtuzumab; Oestrogens; Progestogens; Breast Cancer; Prostate Cancer & Gonadorelin

Analogues. To project evolution of the overall retail market over 2015-20, the y/y percentage

changes as predicted by the IHS World Markets Healthcare Forecasts service were applied

starting with the 2014 data.

In order to arrive at estimates for public reimbursement spending on hospital drugs in general and oncology

medicines in hospital specifically, a variety of country-specific data sources were relied upon, as outlined

below. The estimates for public reimbursement spending on hospital oncology medicines and retail

oncology medicines were combined for the year 2014 to derive an estimate for total public-sector oncology

medicine spending for projection over 2015-20. The ratio of public-sector oncology medicine spending to

total public-sector drug reimbursement spending for 2014 was computed and used as the basis for the

“constant ratio” scenario for future oncology drug spending.

France

In France, l’Agence nationale de securite du medicament et des produits de sante (ANSM)

provides data on public pharmaceutical spending in the hospital sector in annual reports

stretching from 2010 to 2013.cxx The y/y 1.64% increase between 2012-13 was used to project

hospital spending forward over 2014-20 on the basis of assumed continued cost-containment

trends in this segment of the market. The same reports provide estimates of oncology drug

spending in the hospital sector. Again to derive the figure for 2014, the y/y increase between

2012-13 (1.04%) was applied. Because data on oncology drug spend in hospital was missing

for 2011 and instead aggregated with immunosuppressants, the ratio of immunosuppressant

spending to total hospital spending in other years (approx. 11%) was assumed to hold for this

year, and thus a figure for oncology specifically derived from the remaining portion.

Germany

In Germany, the Bundesverband der Pharmazeutischen Industrie (BPI), the pharmaceutical

industry association, provides figures for overall sales on drugs in the hospital sector based on

IMS Dataview.cxxi These figures, as reported in the Association’s “Pharma-Data 2015” report,

were relied upon for total public spending on hospital medicines over 2010-14. Separately, the

Bundesverband der Arzneimittel-Hersteller (BAH), an alternative industry association, provided

an estimate for SHI spending on oncology medicines as a whole for the year 2014 in its report

Der Arzneimittelmarkt in Deutschland - Zahlen und Fakten 2014.cxxii The figure calculated for

the overall value of the oncology retail market in 2014 as described above was subtracted to

derive an estimate for hospital spending on oncology medicines in this year.

Netherlands

In the Netherlands, the Nederlandse Zorgautoriteit (NZa), the Dutch Healthcare Authority,

provides estimates for spending on hospital drugs over 2010-13 in its 2015 research report,

Onderzoek naar de toegankelijkheid en betaalbaarheid van geneesmiddelen in de medisch

specialistische zorg.cxxiii It is important to note that the NZa separately reported the amounts

spent on medicines previously reimbursed in the pharmacy sector but since transferred into

hospital budgets; these figures were added retroactively in order to ensure a like-for-like

comparison across the retrospective timeframe. In its 2015 report Effectieve nieuwe middelen

tegen kanker, maar het financieringssysteem kraakt: Belemmeringen en oplossingen bij de

inzet van dure geneesmiddelen tegen kanker, the KWF Kankerbestrijding Werkgroep dure

geneesmiddelen, the Dutch Cancer Society, gives estimates for oncology spending in the

hospital sector for 2010-13.cxxiv To derive a figure for 2014, the CAGR over 2010-13 (8.1%) was

applied.

Poland In Poland, data published by the NFZ were relied upon as reported in the IHS Same Day

Analysis service for spending on drug programmes, standard chemotherapy and non-standard

chemotherapy as a proxy for overall hospital drug spending. NFZ budget estimates for

spending on drug programmes in 2015 and 2016 were relied upon, and the y/y change

between 2014-15 (3.2%) used to project this segment of the market forward over 2017-20.

The y/y change in standard chemotherapy spending over 2013-14 (11.6%) was deemed to be

atypically high, so a CAGR of 3% was used to project forward spending in this segment of the

market over 2015-20. To derive an estimate for hospital oncology drug spending specifically,

data on spending on oncology drug programmes in 2012 were taken from a report published

by experts from Lazarski University, Analiza dostępności do leczenia onkologicznego oraz

finansowania świadczeń z zakresu chemioterapii ze szczególnym uwzględnieniem nowych

terapii onkologicznych.cxxv It was assumed that hospital oncology drug spending would account

for the same share of overall hospital drug spending (26%) in 2014 to derive a figure for

overall oncology drug spend for projection forward over 2015-20.

Spain

In Spain, Farmaindustria, the pharmaceutical industry association, provides estimates for the

public hospital pharmaceutical market based on IMS data.cxxvi Data were available for 2010-14

as well as projections for the years 2015 and 2016. The forecast y/y change over 2015-16

(4.2%) was used to project hospital spending forward over 2017-20. The same 2011 figure

from the 2013 study referenced above from the Spanish Medical Oncology Association was

used to derive an estimate for total oncology spend in 2014, on the assumption that the

market would have recovered its losses from the prior period of austerity.cxxvii

England

For England, data from the HSCIC series of reports on Hospital Prescribing and Prescribing

Costs in Hospitals and the Community over 2010-14 were utilised for estimates of spending on

hospital medicines as a whole.cxxviii Data on overall NHS spending on oncology medicines was

derived from two presentations giving figures for 2012 and 2014.cxxix The implied CAGR

between 2012-14 was used to derive figures for the remaining years over the retrospective

time period. Hospital oncology drug spend specifically was derived by subtracting the retail

value of oncology drug spend (as obtained as described above) from these overall estimates.

After conducting literature review, the lower-range CAGR of oncology spending of 6% through 2018, as

forecast in the IMS Institute for Healthcare Informatics Global Oncology Trend Report 2015, was used as a

moderate or high growth rate scenario.cxxx In order to derive alternative forecast scenarios for total public

reimbursement spending on oncology, the following approaches were utilised:

France: The 4% y/y change in total oncology spending over 2013-14 as derived as described above

was used to project this spending forward over 2015-20 for the purposes of a medium growth rate

scenario; pervious years were not incorporated into a longer-term CAGR on the assumption that

more subdued growth during the austerity period would be uncharacteristic going forward

Germany: The 8.4% CAGR over 2012-14 of total oncology spending was used to project this

spending forward over 2015-20 for the purposes of a high growth rate scenario

The Netherlands: The 7.4% CAGR over 2012-14 of total oncology spending was used to project this

spending forward over 2015-20 for the purposes of a high growth rate scenario

Poland: For the reasons described above for the 3% y/y growth rate for standard chemotherapy

spending, the same rate was applied for total oncology spending to derive a medium growth rate

scenario

Spain: The 4% y/y change in total oncology spending applied in France was used as the basis for a

medium growth rate scenario on the basis of lack of comprehensive, public-domain data on recent

spending patterns in Spain

England: The 2.3% CAGR over 2012-15 of total oncology spending as implied by the data described

above was used as a medium growth rate scenario

7.4 BUDGET IMPACT METHODOLOGY

To determine the list of oncology therapies expected to have a significant budget impact over the 2016-

2020 period, the pipelines of major pharmaceutical companies known to be active in the oncology field

were reviewed. A large list of assets were identified, including immuno-oncology therapies, novel kinase

inhibitors, cell-cycle checkpoint inhibitors and other classes of agents, in addition to currently marketed

therapies undergoing evaluation for earlier lines of therapy. cxxxi Of this list, two classes of molecules were

identified to be sufficiently advanced in the pipeline as to have preliminary or final outcomes data as well as

information on pricing. These are the programmed death 1 (PD-1) and programmed death 1 ligand (PD-L1)

monoclonal antibodies in NSCLC, as well as the cyclin-dependent kinase 4/6 (CDK4/6) inhibitors in breast

cancer. These indications were determined to provide useful insights on the scale of expenditure on

treatment innovations in oncology in future given the relatively large patient populations impacted.

Nivolumab as second-line treatment in squamous and non-squamous advanced NSCLC was selected as

representative for the first class of agents based on availability of pricing data in a number of the European

countries and its presence on the market from 2016. Palbociclib as first-line treatment in combination with

endocrine therapy in post-menopausal, estrogen receptor-positive, HER2-negative metastatic breast

cancer, or second-line treatment following initial endocrine therapy, was chosen as representative of the

second class of agents, similarly due to availability of pricing data and expected presence on the market

from 2016. These agents were assumed to be broadly representative of their classes in terms of outcomes

and pricing so that the projections do not attempt to take account for market share between individual

agents, as this variable is dependent on many factors outside the scope of the present analysis.

In order to determine the size of the target patient population in each country, general lung cancer and

female-specific breast cancer incidence rates were taken from GLOBOCAN 2012, a project overseen by the

International Agency for Research on Cancer which provides estimates of the incidence, mortality and

prevalence rates of major types of cancer in a large number of countries.cxxxii In order to project annual

incidence rates through 2020, demographic data on projected population growth by age group for each

country from IHS World Markets Healthcare Forecasts were utilised, and combined with the 2012 age-

group-specific cancer incidence rates from the Surveillance Epidemiology and End Results (SEER)

programme in the US, in order to derive overall growth in incidence as the incidence-share-weighted sum of

age-group growth rates.cxxxiii This approach effectively assumes that the share of incident cases in the US by

age group is identical across markets and that this share will remain constant through 2020. This approach

was deemed preferable to tying incidence growth rates simply to overall population growth without

accounting for age.

The percentage of the incident population eligible for NSCLC therapy was determined using My Cancer

Genome (a website providing biomarker prevalence estimates in distinct cancer settings based on the

literature), as well as documents from National Institute for Health and Care Excellence (NICE) appraisals in

the UK and the Transparency Commission in France to obtain data on disease histology, staging at time of

diagnosis and percentage of patients receiving first- and second-line therapy.cxxxiv In the breast cancer

http://globocan.iarc.fr/Pages/glossary.aspx#INCIDENCE

http://globocan.iarc.fr/Pages/glossary.aspx#MORTALITY

http://globocan.iarc.fr/Pages/glossary.aspx#PREVALENCE

http://globocan.iarc.fr/Pages/cancer.aspx

setting, documents from past NICE appraisals were reviewed to identify relevant biomarker prevalence

estimates, probability of therapy selection, and probability of progression to second-line therapy.cxxxv

The following schematics illustrate the procedure used to isolate the number of patients predicted to be

eligible for treatment each year:

To estimate treatment cost, the IHS PharmOnline International (POLI) pricing database was used to obtain

manufacturer list prices. We assumed a 20% discount off of this list price for both classes of agents in each

of the countries.

For nivolumab, prices were found for Germany and the UK. At a dosing schedule of 3mg/kg every 2 weeks

in NCLC and the assumption of a 70-kg average European body weight, monthly treatment costs were

estimated for these two countries. To extrapolate these prices to the remaining markets, POLI data for

NSCLC treatment gefitinib were utilised in order to determine representative price ratios between

countries, aside from in the case of the Netherlands where POLI data was lacking and the cost in Germany

was chosen instead.

To account for changes in exchange rates, the launch price of gefitinib in Poland was converted into euro at

that year’s average exchange rate, using IHS macroeconomic data. The ratio between this price in euro and

Germany’s launch price in euro was then taken to derive an estimate for the Polish price of PD-1/PD-L1

monoclonal antibodies in NSCLC in euro, then subsequently converted back into local currency units based

on the IHS forecast for the 2016 average exchange rate. For the Eurozone countries, the ratios between the

German price and their respective launch prices were also considered.

This approach was deemed preferable to making the assumption of equivalent pricing across all markets,

due to the reality that pricing dynamics may vary by the priority certain countries allocate to cancer

treatments. In the case of palbociclib, pricing was only available for the US market. As in the case of NSCLC,

the same approach was used in terms of launch prices and local currency unit conversions as outlined for

Poland above across all of the European countries with reference to the US dollar. Due to variations in

breast cancer treatment guidelines across countries and question marks over a suitable comparator, it was

decided to use the ratios derived for gefitinib to determine relative pricing levels of palbociclib.

To estimate treatment duration, median progression free survival (PFS) figures for nivolumab in squamous

and non-squamous NSCLC were taken from results from the pivotal clinical trials, 3.5 months and 2.3

months, respectively.cxxxvi. For palbociclib in the first-line setting, a median PFS of 20.2 months based on the

results from the PALOMA-1 trial was utilised, on the assumption that upon disease progression, patients

would switch to a standard second-line treatment.cxxxvii In the second-line setting, a median PFS of 9.2

months based on the results from the PALOMA-3 trial was relied upon.cxxxviii The additional 0.2 months of

treatment in the first-line setting were carried over into the following year’s forecast, such that the cost of

this treatment was multiplied by the eligible population in the preceding year and added to the newly

incident number of cases to determine the overall predicted annual cost.

Finally, to estimate rates of market uptake, assumptions were modelled off of the submission made by the

manufacturer of nivolumab to NICE in the UK.cxxxix The submission assumes that in 2016, year one of the

timeframe, 4% of eligible patients would go onto nivolumab, rising to 36% in year two, and then remaining

at 40% through 2020. A review of the grey literature revealed that nivolumab captured over 70% of market

share in the US market within less than one year from launch.cxl Because the model reported in the NICE

submission might thus represent an underestimation, for both nivolumab and palbociclib, a market share of

4% was assumed in 2016 (with entry onto the Polish market in 2017 to allow for typical launch sequencing

patterns), rising to 35% in 2017, and then remaining at 60% for the remainder of the period through to

2020. This scenario was complemented by an alternative assuming equivalent penetration in year one, then

rising to 15% in year two and enduring at 40% in all years thereafter.

i IHS Same Day Analysis, France: France Adopts Austerity Bill for 2011, 26 November 2010

ii IHS Same Day Analysis, France: Reimbursement, Price Cuts Planned As Part of PLFSS 2011 in France, 29 September 2010

iii IHS Same Day Analysis, Germany: German Cabinet Approves Rise in Healthcare Premiums, 23 September 2010

iv IHS Same Day Analysis, Netherlands: Dutch statistics agency reports slowdown in increase of drugs dispensed in 2013, 29 July

2014

v Lago Moneo et al. “Línea Perspectivas: El gasto farmacéutico en España 2014 Evolución internacional y situación desde el punto

de vista nacional,” June 2014, http://mba.americaeconomia.com/sites/mba.americaeconomia.com/files/eae_business_school._el_gasto_farmaceutico_2014.pdf (last accessed on 26 April 2016)

vi IHS Same Day Analysis, Spain: Spanish Medical Association states it is against increasing co-payments, 25 July 2014

vii IHS Same Day Analysis, Spain: Spain's PSM proposes elimination of co-payments, 15 December 2014

viii SFK, “Facts and figures 2014 on pharmaceutical care in the Netherlands,”

https://www.sfk.nl/english/Dataenfeiten2014_A4_magazine_web.pdf (last accessed on 8 February 2016)

ix IHS Same Day Analysis, France: French Government Introduces New 10-20% Reimbursement Rate, over 100 Drugs of Low

Therapeutic Value Targeted, 7 January 2010

x IHS Same Day Analysis, Germany: Germany's 2013 drug prescription report reveals untapped savings potential from generics and

higher-priced originators, 13 September 2013

xi IHS Same Day Analysis, Germany: SHI fund and physician association agree on higher prescription growth limits for 2014-15, 27

October 2014

xii IHS Same Day Analysis, Netherlands: Dutch drug expenditure declines 16% during past five years, 16 December 2013

xiii IHS Same Day Analysis, Netherlands: Generic drug market share rises to 70% by volume during 2013 in Netherlands, 25 March

2014

xiv IHS Same Day Analysis, Poland: Polish MoH calls for sharp price cuts in negotiations on new drug reimbursement agreements, 3

October 2013

xv IHS Same Day Analysis, Spain: Government and CCAA Agree on Guidelines for "Health Pact" in Spain, Pharmaceutical Sector

Fears Consequences, 23 March 2010

xvi IHS Same Day Analysis, Spain: Spain's P&R Austerity Measures to Be Officially Enforced on 1 August, 16 July 2012

xvii IHS Same Day Analysis, Spain: Spain eliminates hospital co-payment, 16 January 2015; IHS Same Day Analysis, Spain: Spain's

Catalonia ends EUR1-per-prescription charge, 17 January 2013

xviii IHS Same Day Analysis, France: French Government Introduces New 10-20% Reimbursement Rate, over 100 Drugs of Low

Therapeutic Value Targeted, 7 January 2010

xix IHS Same Day Analysis, France: France's Private Insurers Plan Own Reimbursement System Based on SMR Rating, 18 August

2010

xx IHS Same Day Analysis, Germany: German patients pay 22% more y/y in 2014 for difference between reference and actual drug

prices, 3 June 2015

xxi IHS Same Day Analysis, Germany: New German government finalises healthcare plans featuring significant pharma-related

measures, 6 December 2013

xxii IHS Same Day Analysis, Netherlands: Dutch drug expenditure declines 16% during past five years, 16 December 2013

xxiii IHS Same Day Analysis, Poland: Many drugs face withdrawal from Polish market due to failed price negotiations as parallel

export problems persist, 30 September 2015

http://mba.americaeconomia.com/sites/mba.americaeconomia.com/files/eae_business_school._el_gasto_farmaceutico_2014.pdf

xxiv IHS Same Day Analysis, Poland: Polish MoH publishes new list of medicines facing supply threats due to parallel export , 8

January 2016

xxv IHS Same Day Analysis, Spain: Almost one-quarter of drugs withdrawn from Spain's co-payment list experience price increases

or are withdrawn, 3 September 2013

xxvi IHS Same Day Analysis, Spain: Innovative drugs in Spain experience drop in market share, 2 January 2014

xxvii Cancer Research UK, Molecular Diagnostic Provision in England, August 2015,

http://www.cancerresearchuk.org/sites/default/files/policy_august2015_mdx_final_1.pdf

xxviii ANSM, “Analyse des ventes de medicaments en France en 2013,” June 2014

xxix Bundesverband der Pharmazeutischen Industrie, Pharma-Data 2015,

http://www.bpi.de/fileadmin/media/bpi/Downloads/Internet/Publikationen/Pharma-Daten/Pharmadaten_2015_EN.pdf (last accessed 23 December 2015); ANSM, “Analyse des ventes de medicaments en France en 2013,” June 2014, http://ansm.sante.fr/var/ansm_site/storage/original/application/3df7b99f8f4c9ee634a6a9b094624341.pdf (last accessed on 4 March 2016). N.B. The Pharma-Data 2015 report lists two entries for the category L01X Other antineoplastic agents in the table on page 93 containing the data from which this graph was derived. It was assumed the second entry was mislabelled in error, and only the first value of EUR841.3 mil was taken in combination with the L01B Antimetabolites category to derive an estimate for oncology as a whole.

xxx Lord Carter of Coles, "Operational productivity and performance in English NHS acute hospitals: Unwarranted variations,"

February 2016, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/499229/Operational_productivity_A.pdf (last accessed on 18 April 2016)

xxxi Institut National du Cancer, Les cancers en France - Edition 2014, http://www.e-cancer.fr/Expertises-et-publications/Catalogue-

des-publications/Les-cancers-en-France-Edition-2014 (last accessed on 23 December 2015)

xxxii Luengo-Fernandez R et al. Economic burden of cancer across the European Union: a population-based cost analysis, The

Lancet Oncology, Vol. 14, November 2013

xxxiii Cost of illness tool, Volksgezondheidenzorg, https://kostenvanziektentool.volksgezondheidenzorg.info/tool/english/ (last

accessed 23 December 2015)

xxxiv Polskie Towarzystwo Onkologiczne, Obecny Stan Zwalczania Nowotworow w Polsce, 16 May 2014

xxxv Sociedad Española de Oncología Médica, Aproximación al cálculo del coste del abordaje del cáncer en España, October 2013

xxxvi Newland A, "Key Issues in Haematology Commissioning," September 2014,

http://www.google.com/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=23&ved=0ahUKEwjivPed_v7JAhUHfxoKHbxbB0A4FBAWCCgwAg&url=http%3A%2F%2Fwww.ncin.org.uk%2Fview%3Frid%3D2792&usg=AFQjCNG47T-5LG9b8Z8jWARfdUIDWOGUdA&sig2=Tye7JKhPBXVJMHVe8lM5iw&bvm=bv.110151844,d.d2s (last accessed 23 December 2015)

xxxvii IHS Same Day Analysis, France: France's government curtails pharmaceutical expenditure by additional USD857 mil. in 2015,

17 Apr 2015

xxxviii IHS Same Day Analysis, Germany: Germany's statutory health insurance funds and state hospitals dispute over costs of health

reforms, 21 July 2015

xxxix van Ginneken, E. "Perennial health care reform - the long Dutch quest for cost control and quality improvement," Perspective, 3

September 2015, New England Journal of Medicine, http://www.nejm.org/doi/pdf/10.1056/NEJMp1410422 (last accessed on 2 March 2016)

xl The Economist Intelligence Unit, "Government faces struggle to cut healthcare spending," 17 February 2015

xli NHS Five Year Forward View, October 2014, https://www.england.nhs.uk/wp-content/uploads/2014/10/5yfv-web.pdf (last

accessed on 18 April 2016)

xlii IHS Same Day Analysis, United Kingdom: UK Chancellor gives NHS above inflation cash injection but slashes budget for public

health, 27 November 2015

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/499229/Operational_productivity_A.pdf

http://myinsight.ihsglobalinsight.com/servlet/cats?filterID=1015&serviceID=9662&pageContent=report

xliii IHS Same Day Analysis, France: Treasury Department advocates changes to reimbursement for chronic diseases in France, 12

June 2015

xliv IHS Same Day Analysis , Germany: Political division deepens in Germany over growing burden of statutory health insurance

contributions on patients, 7 January 2016

xlv IHS World Markets Pricing and Reimbursement (WMPR) service, Country Profiles: Spain

xlvi Instituto para el Desarrollo e Integracion de la Sanidad, "Sandidad Privada, aportando valor: Analisis de situacion 2015,"

http://www.redaccionmedica.com/contenido/images/Informe_Analisis_Situac_IDIS%C2%A116-03-15%20final.pdf (last accessed on 11 February 2016)

xlvii Thomson S & Mossialos E. “Private health insurance in the European Union: Final report prepared for the European

Commission, Directorate General for Employment, Social Affairs and Equal Opportunities,” 2009

xlviii IHS Same Day Analysis, Germany: German research institute attributes increased 2014 public drug spending to regulatory

changes, surge in new innovative drugs , 10 June 2015

xlix Pharmaceutical Research and Manufacturers of America, “Medicines in Development: Cancer, 2014 Report”

l IHS Same Day Analysis, Germany: Germany's AOK funds announce TNF-alpha inhibitors discount contracts, first across entire

drug class, 22 September 2015

li Redaccion Medica, "El BOE publica los precios de referencia," 17 October 2015,

http://www.redaccionmedica.com/secciones/industria/precios-de-referencia-precios-de-referencia-88568 (last accessed on 11 February 2016)

lii Spanish Ministry of Health, Notas de Prensa, "El gasto farmacéutico se mantiene estable en el año 2015 y se consolida el ahorro

para el Sistema Nacional de Salud," 29 January 2016, http://www.msssi.gob.es/gabinete/notasPrensa.do?id=3888 (last accessed on 12 February 2016)

liii IHS Same Day Analysis, United Kingdom: Pharma industry brings forward GBP200-mil. payment to UK government, 23

December 2015

liv IHS Same Day Analysis, France: French MoH specifies rules for inclusion of high-cost medicines in T2A exclusion list, 28 March

2016

lv Axon, "The Netherlands: All eyes on pharmaceutical expenditures in the hospital sector," September 2015

lvi IHS Same Day Analysis, Poland: Supreme Audit Office gives mixed assessment of Poland's system for funding high-cost

medicines, 8 January 2015

lvii IHS Same Day Analysis, Poland: Proposed Polish cancer foundation could provide substantial funding for innovative oncology

drugs, 27 August 2015

lviii SEOM press release, “"SEOM detecta heterogeneidades en el accesso a farmacos y en el manejo asistencial de los pacientes

con cancer en las CCAA," 23 October 2015, http://www.seom.org/seomcms/images/stories/recursos/NP_28_10_15.pdf (last accessed on 8 February 2016)

lix IHS Same Day Analysis, Poland: Hodgkin lymphoma treatment Adcetris is single new innovative drug in Poland's draft May

reimbursement list update, 25 April 2016

lx IHS Same Day Analysis, France: France limits health insurance expenditure increase at 2% in 2015–17, 24 Apr 2014

lxi IHS Same Day Analysis, France: France's government curtails pharmaceutical expenditure by additional USD857 mil. in 2015, 17

Apr 2015

lxii IHS Same Day Analysis, France: Treasury Department advocates changes to reimbursement for chronic diseases in France, 12

June 2015

lxiii IHS Same Day Analysis, France: French government report proposes establishment of single reimbursement rate, 9 September

2015

http://myinsight.ihsglobalinsight.com/servlet/cats?pageContent=art&serviceID=9662&filterID=1012&documentID=2811792&typeID=0&documentTypeId=8&src=pc

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lxiv IHS Same Day Analysis, France: France's draft 2016 social security budget foresees more than USD617 mil. in savings from

reduced drug prices, 6 October 2015

lxv IHS Same Day Analysis, France: French hospital association calls for greater transparency and consistency in funding of hospital

drugs, 9 December 2015

lxvi IHS Same Day Analysis, France: France's draft 2016 social security budget foresees more than USD617 mil. in savings from

reduced drug prices, 16 October 2015

lxvii IHS Same Day Analysis, Germany: Germany's political left concerned about increasing burden of health insurance premiums on

employees, 22 December 2015

lxviii IHS Same Day Analysis , Germany: Political division deepens in Germany over growing burden of statutory health insurance

contributions on patients, 7 January 2016

lxix IHS Same Day Analysis, Germany: German patients pay 22% more y/y in 2014 for difference between reference and actual drug

prices, 3 June 2015

lxx IHS Same Day Analysis, Germany: Germans face increasing co-payments for medicines, combined with rising health insurance

contributions, 8 January 2016

lxxi IHS Same Day Analysis, Germany: TK's Innovation Report criticises limited savings achieved by Germany's AMNOG, 11

September 2015

lxxii IHS Same Day Analysis, Germany: German government reveals planned changes to P&R regulations, including positives and

negatives for pharma, 13 April 2016

lxxiii IHS Same Day Analysis, Germany: Germany's association of statutory HI funds calls for overhaul of assessments of orphan

drugs, 22 January 2016

lxxiv IHS Same Day Analysis, German MoH maintains price freeze and mandatory discounts as GKV reimbursement rises 5% y/y in

2015 , 3 February 2016

lxxv IHS Same Day Analysis, Germany: Germany's AOK funds announce TNF-alpha inhibitors discount contracts, first across entire

drug class, 22 September 2015

lxxvi NZa, "Onderzoek naar de toegankelijkheid en betaalbaarheid van geneesmiddelen in de medisch specialistische zorg," June

2015

lxxvii IHS Same Day Analysis, Netherlands: AMC study finds Dutch hospitals unable to fund Avastin treatment in 50% of cases, 19

June 2015

lxxviii IHS Same Day Analysis, Netherlands: Netherlands' MEB allows exchange between biologic and biosimilar drugs, 8 April 2015

lxxix SFK, “Facts and figures 2014 on pharmaceutical care in the Netherlands,”

https://www.sfk.nl/english/Dataenfeiten2014_A4_magazine_web.pdf (last accessed on 8 February 2016)

lxxx IHS Same Day Analysis, Poland: Poland's health minister sets course for transfer to tax-based healthcare system by 2018, 27

January 2016

lxxxi IHS Same Day Analysis, Poland: Polish government publishes draft amendment on free medicines for over-75s, upper spending

limit of USD127 mil. set for 2016, 23 December 2015

lxxxii IHS Same Day Analysis, Poland: Polish opposition accuses government of reneging on free drugs for over-75s, only USD31

mil. available for 2016, 7 January 2016

lxxxiii IHS Same Day Analysis, Poland: Polish MoH improves access to new oncology drugs, imposes restrictions on market access,

3 March 2014

lxxxiv IHS Same Day Analysis, Poland: Supreme Audit Office gives mixed assessment of Poland's system for funding high-cost

medicines, 8 January 2015

lxxxv Euronews, "Spain has to cut deficit in 2016, Moscovici says," 4 February 2016, http://www.euronews.com/business-

newswires/3142358-spain-has-to-cut-deficit-in-2016-moscovici-says/ (last accessed on 11 February 2016)


http://myinsight.ihsglobalinsight.com/servlet/cats?documentID=2880984&serviceID=9662&pageContent=art

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lxxxvi Instituto para el Desarrollo e Integracion de la Sanidad, "Sandidad Privada, aportando valor: Analisis de situacion 2015,"

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