Ibis Sánchez-Serrano, founder and CEO of The Core Model Corp., a corporate strategy and policy think tank, talks about the role of pharma in the World’s Health Care Crisis at the New York Public Library on Aug. 29, 2013. He says the major problem is lack of access to better, safer and more affordable medicines. This issue is present not only in the United States and the developing world but also in countries with socialized health care systems. This illustrated talk will provide a comparative analysis of healthcare systems throughout the world and address major issues within biotechnology and pharmaceutical industries.

4. Today’s patient is far from yesterday’s
stereotype, who was docile, uninformed, and
in a relatively weak position compared to
that of the doctor. The characteristics of the
new consumer are dramatically different.
Today’s patients are well-informed and
demanding. They think critically, and they
are building powerful networks.
—Johan Hjertqvist, 2001

5.  Global Health Care Crisis
 Causes of a Global Health Care Crisis
 The Pharmaceutical Industry
 Solutions
 Conclusions

6.  It is a financial crisis that affects two
interrelated sectors:
A. Health Care Services
B. Pharmaceuticals
 This compentes with the pensions system and
the political will to solve these problems
 It is worsened by population increase and
aging

7.  Economic
 Clinical
 Pharmaceutical
 Political
 Sociological

8. What Parts of the World are Affected by this
Crisis and How?

10. North America

11. If this is the best of all possible worlds, what
must the other worlds be like?
—Voltaire, Candide, ou l’Optimisme (1759)

12.  The most privatized system in the world
 The most inefficient health care system in the the industrialized world based on
statistical measures and quality
 Spends more than 17% of its GDP in health care (in 1960, it was only 5.2%)
 In spite of being the most privatized in the world, subsidizes half of the health
care spending through Medicare and Medicaid
 Among industrialized countries, the U.S. has highest infant mortality rates ,
lowest life expectancy, and lowest quality of life at age 65, due to chronic
ailments
 Before ObamaCare, more than 46 millon people without health insurance and
many people going bankrupt because of health care expenses (62% of
bankruptcies in the US are health-care related)
 Unhealthy life-style in the US (fast-food, obesity, lack of physical exercise, stress,
etc. ) complicate the situation

14.  United States is undergoing a health-care reform (Patient Protection
and Affordable Care Act (ACA) of 2010 or Obamacare) to extend
health insurance coverage to more than 30 million Americans
without insurance
 Trying to contain costs
 With Obamacare pharmaceutical consumption and market will
considerably increase in the U.S.
 United States has no price control for innovative medicines. The costs
of medicine and medical education are the highest in the world
 Deductibles and out-of-pocket costs have more than tripled for
insured patients over the last five years, while costs of consumer-
driven health plans have increased seven-fold. Average annual out-
of-pocket cost per insured patient rose to$1,146 in 2012, from $877 in
2011 (IMS).

15.  A universal health care system with a single
payer since1984 (no private health insurance )
 The Government has a monopoly of the
health care system
 High inefficiency
 Long waiting lists
 Limited access to innovative medicines
 People die or their health problems
complicate while waiting to be attended
 Lack of enough doctors, nurses, hospital beds,
etc.

16. Europe

17. The grass is always greener…

18.  For many decades the European health care systems have been
characterized for creating ―safety nets‖ for all citizens and for being
socialized
 Objetive: To create a universal health -care system. However, this
ideal has been economically unsustainable, due to many factors,
including the pharmaceutical component
 Therefore, European countries have had to implement a series of
cost-containing strategies, such as :
- Co-pay
- Referential pricing
- Differential pricing
- Rationing
- Zero coverage for certain items (lab tests, innovative medications
for cancer and other diseases)
- Economic euthanasia

19.  In some countries like UK, France, Spain, Greece, the situation is on
the verge of collapse
 The UK is suffering from excessive rationing
 France is financing its health-care system with debt
 Countries like the Netherlands and Germany have a semi-public
system which allows patients to get out of the public system and
switch to private. However, in Germany due to the global economic
downturn this system has had problems if the person who is in the
private sector wants to return to the public one. In the Netherlands,
there is an increase of the costs, which is preoccupying the
government and the population
 Sweden has made a move towards privatization, and Switzerland is
private, with government subsidy. But today Switzerland, which was
considered the envy of health systems has problems

20.  Other industrialized countries, such as Australia and
Japan have serious health problems, in particular due
to the high cost of medicines
 In Japan the health care is universal, but highly
inefficient for non-emergencies, long waiting lists (as in
Canada), lack of coverage for some innovative drugs,
lack of medical personnel, etc. Half of the Japanese
suicides are attribute to medical reasons
 These private and public health care systems, suffer
form waste, lack of fiscal discipline, corruption, and
overall inefficiency. Ageing population is another great
problem. In Japan and Europe.

21. Poor, Developing, and Emergent-Economy
Countries

23.  These countries present, at best, the same
problems of Europe and Canada; and in the worst
of the cases lack of infrastructure, regulatory
bodies, personnel, raw materials, food, drinkable
water, electricity, infectious diseases endemic to
the tropical and sub-tropical areas, where most of
the world’s poverty concentrates, lack of R & D,
corruption, fake and fraudulent medicines, lack of
good and efficient methods for disease monitoring
and early diagnostics, lack of equipment, etc.
 Panama: All of the above and more…!!!

29. What Are the Causes of this Global Health-
Care Crisis?

30.  Structural Causes: The health systems that are in force today, and which were created
after the Second World War (1939-1945), began badly and with large deficits and
people never imagined the effects that, in the future, would have a demographic
explosion and an increase in longevity. Cases such as USA, England, France, and other
countries. Reforms have been undertaken in many countries in the world, but these
reforms have been aimed at containing costs
 Socio-Economic Causes: By the end of Second World War most of the diseases known
today had been characterized and more or less understood. The development of
antibiotics, advances on drug discovery and development, in surgery, and in the
diagnosis of diseases, and in science/technology, in general, coupled to the
economic welfare that occurred after World War II increased living standards and
longevity. But with the passage of time (from the 1980’s onwards) this gave way to a
more sedentary, less physically active, less responsible-for-their-health, more
consumerist, and less disciplined population. We need to add the facility to global
transportation and easy transmission of infectious diseases such as HIV/AIDS,
tuberculosis, etc., and the ones that come as a result of contamination/environment.
Poverty
 Scientific-Financial Causes: Disease and the creation of medicines to cure them are
an extremely profitable business, from a pharmaceutical point of view as well as from
a private health insurance one. Today the pharmaceutical factor in the health-care
equation has an enormous weight. Drug costs have skyrocketed and are creating
enormous stress on global health systems

32.  Any visit to the doctor, most likely requires the
prescription of medicines
 As we live in consumerist and pharmaco-dependent
societies people expect and demand better medicines
and better, more sophisticated medical interventions.
This requires a great deal of innovation, investment, and
the development of technologies, which eventually
also increase prices and overall costs
 Even preventive programs require medications (i.e.
immunization programs—polio, hepatitis, etc.)

33. 6.0% 6.1%
7.0%
7.9%
8.3%
3.4% 3.2%
2.9%
3.8%
-0.3%
2005 2006 2007 2008 2009
AverageAnnual%Change
RetailPrice General Inflation (CPI-U)
Prepared by the AARP Public Policy Institute and the PRIME Institute,
University of Minnesota, based on data from Thomson Reuters MarketScan®
Research Databases.

35. The Pharmaceutical Industry

36.  Industry of approximately U.S. $ 956 billion a
year (2012). Will be U.S. $ 1.2 trillion in 2016
 Represents 75% of the market value in the
global health sector
 In the United States it has ~23% return on
equity (other industries, 3-5%) and ~20% of
profit on revenues (a third of medicines
consumed by the elderly)
 Industry in Transition (or Crisis…?)

37. Company Sales (in US$ billions)
1. Pfizer 67.4
2. Johnson & Johnson 65.5
3. Novartis 58.6
4. Bayer 50.6
5. Hoffman-La Roche 48.1
6. Merck 48.0
7. Sanofi 46.5
8. GlaxoSmithKline 43.9
9. Abbott 38.8
10. AstraZeneca 33.6
Source: World Pharma Frontier (2012)

38. Regional Sales (in US$ b.) Market %
US & Canada 323.8 38.7
Europe 263.9 31.5
Asia, Africa,
Australia 106.6 12.7
Japan 95.0 11.3
Latin America 47.9 5.7
Total 837.3 100.0
Source: Standard & Poor’s

39. Regional Sales Market %
U.S. 34
Europe 17
Japan 12
Emerging Economies 20
Other 17
Source: Standard & Poor’s

40.  Productivity Crisis
 Patents Expirations Crisis

41. 0
13
26
39
52
0
15
30
45
60
1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011
R&DExpenditures
(Billionsof2011$)
NMEApprovals
R & D Expenditures
New NMEs Approval
New Molecular Entities (NMEs) Approval Lags Behind
Investment in R & D
* Trend line is 3-year moving average; R&D expenditure adjusted for inflation
Fuente: Tufts CSDD, 2012

42.  The pharmaceutical industry depends on
its patents and its sales in order to grow

43. 1. Lipitor (for high cholesterol): $9.6 – $3.98 billion (Pfizer) (2012
, Enbrel, $ 8.37 billion, Amgen/Pfizer (Wyeth))
2. Nexium (for heartburn, gastroesophageal reflux, and ulcers):
$6.3 billion (AstraZeneca)
3. Plavix (blood thinner for heart attack and stroke prevention):
$6.1 billion (Sanofi Bristol-Myers Squibb)
4. Advair Diskus (for asthma): $4.7 billion (GlaxoSmithKline)
5. Abilify (for bipolar disorder, schizophrenia, and severe
depression): $4.6 billion (Otsuka)
6. Seroquel (for schizophrenia, bipolar disorder, and severe
depression): $4.4 billion (AstraZeneca)
7. Singulair (for allergies and asthma): $4.1 billion (Merck)
8. Crestor (for high cholesterol): $3.8 billion (AstraZeneca)
9. Actos (for type 2 diabetes): $3.5 billion (Takeda)
10. Epogen (for people on dialysis with anemia): $3.3 billion
(Amgen)

45.  US$ 127 billion (2012-2016)

48. LEADING THERAPY CLASSES IN US SALES
(Ranked by 2012 US sales)
- - - - - - - - - - - SALES (BIL. $) - - - - - - - - - - -
CLASS 2008 2009 2010 2011 2012
1. Oncologics 19.7 21.5 22.6 24.0 25.9
2. Mental health 26.0 26.1 28.2 29.7 23.5
3. Respiratory agents 16.0 18.1 19.8 21.7 22.1
4. Antidiabetes 13.6 15.8 18.4 20.5 22.0
5. Pain 16.8 17.3 17.6 17.9 18.2
6. Lipid regulators 18.1 18.6 19.8 21.3 16.9
7. Autoimm. diseases 8.6 9.7 11.0 12.5 14.8
8. Antihypertensives 14.7 15.4 15.6 14.0 13.6
9. HIV antivirals 7.1 8.2 9.4 10.4 11.7
10. ADHD 5.5 6.7 7.9 9.2 10.4
Total, Top 10 146.1 157.4 170.3 181.2 179.1
Total US Market 285.7 300.7 316.5 329.2 325.8
Source: IMS Health, Inc.

49. Company Country Sales 2012 ($ Billion)
1. Teva Israel 10.4
2. Sandoz Germany 8.7
3. Actavis (Former Watson) Switzerland 5.91
4. Mylan United States 5.8
5. Hospira United States 4.1
6. Sanofi France 2.45
7. Ranbaxy India 2.3
8. Aspen South Africa 1.70
9. STADA Arzneimittel Germany 1.61
Source: GlobalData

50.  Discovery
 Development
 Regulatory requirements
 12 a 15 years
 US$ 1 billion on average
 Patents and generics
 Marketing and pricing

52.  INDA: Investigational New Drug Application
 Phase 0: Amount less than or equal to 100 mg, with no pharmacological activity, for
imaging studies (diagnosis) and pharmacokinetic studies
 Phase I: 20-100 healthy volunteers. Safety and efficacy (Phase Ib
patients, biomarkers, etc.). 1.5 years. $ 15,000 per patient: cost: $ 1.5 million
 Phase II: 100-500 patients. Efficiency. 2 years. $ 19.300 per patient, cost: $ 2-10 million
 Phase III: 1,000-5,000 patients. Patients are monitored closely, observing adverse side
effects closely. 3.5 years. Exceeds $ 26,000 per patient, $ 26 million a130 million or
more depending on the agent.
 Then, if all goes well, fill application for a New Drug Application (NDA) / Biologic
License Application (BLA) (new drug or biological). Launch / Marketing. Cost of
application with the FDA / EMA are approximately U.S. $ 350,000 per agent. The
marketing and promotion expenses are HUGE!!
 Phase IV: Post-Marketing Surveillance

53.  Price increase
 Reformulation
 Patent Extension
 Indication Extension
 Finding new and niche markets / "orphan" disease
drugs
 Cuts in operating expenses
 Cuts in R & D
 Buy / license agents
 Mergers and Acquisitions/ Formation of clusters
(Cartels?)
 Re-structuring/Diversification

57. As a Result…

59.  Large imbalances in terms of money
 Large imbalances in the regulatory aspects
 Lack of drugs in many parts. Even generics
 Double suffering: ―common" diseases and
"endemic― diseases
 Fake and Counterfeit Drugs
 Neglected Diseases
 According to WHO, 90-95% of the world's
health problems are solved with generics

62.  Cause and consequence of poverty
 Lack of medicines
 Lack of infrastructure
 Lack of medical staff
 Lack of regulatory agencies
 Lack of drinking water
 Lack of food
 Homelessness
 Lack of electricity
 LACK OF EDUCATION

63.  Increased incidence of
chronic, infectious, and neglected diseases
 Drug resistance, in general, and especially to
antibiotics
 Problems related to poverty and
underdevelopment
(water, food, housing, education, electricity, e
tc..)
 Total abandonment of peasant and
indigenous populations
 Social and economic inequality is abysmal
 Little education about disease

64.  The problems that affect the developing
world, especially in terms of infectious
diseases, also affect the developed world
(HIV/AIDS, TB, Pandemic influenza, etc.)
 Health Care/Access to medicines is
becoming un-affordable

65. Summary

67. Solutions

68.  The problem of global health crisis will not be solved with just a structural reform
(i.e. health insurance coverage extension) or with changes from a public
health insurance system to private or vice versa (or both) IF the price of drugs
continue to increase, if new and more effective drugs to fight many diseases
are not developed. In the short- and medium-runs we will be back to the
starting point (U.S., Europe, and the rest of the world)
 We need to change the way in which we produce drugs, lower production
costs, and increase competition. We need to understand diseases
better, develop better diagnostic methods
 We need to work on prevention, whenever possible, through EDUCATION
 We need to create a campaign about global economic development. As the
world population continues to grow we need to get better prepared for the
problem of longevity and the struggle for limited financial and natural
resources and the spread of disease. This implies fighting poverty and injustice
 We need to work on the ―Humanizing‖ of Medicine, which has become one of
the most lucrative businesses in the world

69. Industrialized world:
 More collaboration in science and technology and knowledge integration
(between the public and private sectors)
 More investment in research and development to lower production costs and
for more accessible medicines
 Pharmaceutical industry re-organization
 More coordination among global drug regulators
 Emphasis on education and prevention
 Changes in the global patent system
 Global discussion forums nations on the world's health crisis
Developing world:
 International Economic Development (food, water, sanitation, education, R
&D, etc.).
 Investment in infrastructure, services, personnel, prevention
 Fighting Corruption. International Criminal Treaty for fake drugs. Fight medical
malpractice. Application of the law.
Overall:
 More humanity

70. Health care reform, therefore, should be not only
about health insurance reform but also about
prevention reform, biopharmaceutical industry
reform, intellectual property law
reform, regulatory system reform, university–
industry collaboration reform, basic science and
innovation reform, pharmaceutical marketing
and pricing reform, tort reform, medical
education reform, and other types of reform—all
of which contribute directly and indirectly to the
cost of the health care system. And we should
work on all of them simultaneously!

72. This is, precisely, the gravest thing … There are
too many intelligent people all over the world
who only talk about our problems, but who do
not act. If our goal is to save the world, then we
need to start a crusade. So, it is not only about
publishing a summary of all our ills, but about
finding remedies for them. It is about providing
the layperson access to a more noble and
dignified concept of humankind.
—Georges Mathieu (French painter), interviewed by novelist Vintila Horia
(―Viaje a los centros de la tierra‖, 1971)

73. Special Thanks to Mr. Daniel Morand of
Switzerland for financing this project!