The Complexity of Pharmacy Benefits Presented by: Kristin Fox-Smith, MPA Senior Vice President, Visante

Agenda Topic Specialty Pharmacy Trends Value of Specialty Pharmaceuticals Managing Specialty Pharmaceuticals - Health Plan Perspective Managing Specialty Pharmaceuticals - Payor Perspective Open Discussion/Q&A

State of the Industry

Specialty Market Dynamics • Fastest growing segment in pharmacy today and the foreseeable future with 28% of all dispensed prescriptions • $ 115 Billion in 2016 • 50% of top 100 drugs and 8 of the top 10 will be specialty pharmaceuticals by 2016 • Over 600 drugs in the specialty pharmaceutical pipeline (phase II and phase III) • Close to 50% of drugs in the pipeline are oral drugs • Majority of drugs are for treatment of cancer • Medical benefit to pharmacy benefit/specialty pharmacy transition • www.phrma.org • Bartholow M. Top 200 prescription drugs of 2009. Pharmacy Times website.: http://www.pharmacytimes.com/issue/pharmacy/2010/May2010/RxFocusTopDrugs-0510. May 2010.

Specialty Market Dynamics Drivers • Less than 1% of prescriptions filled in 2012 were for specialty medications, yet they accounted for 25% of total prescription drug expenditures. By 2019 or 2020, specia Ity drugs are expected to represent 50% of plan sponsors’ overall drug spend. The top three therapy classes - inflammatory conditions, multiple sclerosis and cancer - are expected to account for more than 50% of that overall spend. • At least 60% of the new drugs expected to gain approval from the Food and Drug Administration (FDA) in 2013 alone will be specialty drugs. • The primary driver of specialty drug spend will be a continuing increase in drug costs. Costs will rise as newer, more-sophisticated therapies with price tags worth tens and hundreds of thousands of dollars are brought to market. • The introduction of biosimilars in key therapy classes with high-cost, highly utilized drugs has the potential to alter the trajectory of specialty drug spend. Express Scripts Drug Trend Report 2013. http://www.drugtrendreport.com/commercial/specialtv-forecast-bv-therapy-class. Accessed May 31, 2013.

Characteristics of Specialty Pharmaceuticals High Cost • Prescription cost > $600/month Difficult Medication Delivery • Strict temperature control • Restricted distribution • Restricted location for administration • Personalized dosing or administration • Clinical management or close monitoring Complex Treatment Adapted from Blaser DA, et.al. How to Define Specialty Pharmaceuticals - A Systematic Review. Am J Pharm Benefits. 2010;2(6).371-380.

FDA Ten Year Average New Drug Approvals Per Year FDA Drug Approvals FDA Ten Year Average New Drug Approvals Per Year 20 of the 37 New Molecular Entities approved in 2012 were specialty drugs. Source: www.fda.gov

The Pipeline Number of Drugs in Development www.phrma.org

Drug Trend: Traditional vs. Specialty Percent Specialty bGLCGUf gbGC!3|(A ■ Percent Traditional ■ bGLCGIJf lL9qi(jOU9| DRUG TYPE 2013 2014 2015 2016 2017 2018 TRADITIONAL 2% 3% 4% 5% 6% SPECIALTY 20% 22% 21% 19% 18% 17% Specialty Drug Trend Across the Pharmacy and Medical Benefit" - Artemetrxa PSG Company January 2013

Understanding Specialty Pharmacy Management and Cost Control

• Why It is Important to focus on Specialty Pharmacy • Employer / Plan Sponsor Goals • Methods to Manage Specialty Pharmacy • Cost Containment • Utilization Management Strategies

Specialty Medication Pipeline

Route of Administration • Self-Administered Agents (SAA) - Patient can administer the medication • Enbrel; Humira; Copaxone; Tarceva - Typically billed as a pharmacy benefit • Office Administered Agents (OAA) - Injected or infused in the physician's office, outpatient clinic etc. • Remicade; Chemotherapy agents; Lupron - Billed as a medical benefit, however can be billed under pharmacy benefit • Home Infused Agents - Home Health Nurse administers the medication - Billed as a medical benefit

Employer / Plan Sponsor Goals • Optimize cost management — Receive the lowest cost from dispensing pharmacies • Ensure appropriate use with clinical guidelines — Prior authorization; formulary programs • Improve clinical management — Monitor adherence and persistency — Patient care services — Improved clinical outcomes

Employer / Plan Sponsor Priorities -2012 PBMI Specialty Drug Benefit Report-

Methods to Manage Specialty Pharmacy • Pharmacy Benefit vs Medical Benefit? — Currently 50/50 split with more shifting to pharmacy — Tighter control resides on the pharmacy side • Clinical criteria to control costs and reduce waste • Utilization management and reporting capabilities — Can be more costly on medical side with administration fees • Cost Sharing Designs - 49% of Employers use flat copays under pharmacy benefit

Optimize Cost Containment Maximize Distribution Channels - Retail vs. Specialty vs. Mail vs. Provider Office - Pricing lists should be updated quarterly Exclusive vs Preferred Specialty Pharmacy Network Requirements of Specialty Providers: - Competitive discounts - Mailing & tracking services; - 24 hour access to Pharmacists for members - Support for Patient Assistance Programs - Member education concerning injection technique, adverse effects etc - Solid clinical programs with evidence-based guidelines that report outcomes - High touch member services - refill calls; prescription transfer services

Cost Containment cont. • Specialty agents billed through medical benefit (OAA; Home Infused) should be reviewed to determine if most cost effective route. — Self funded Medical • Rebates are not available for most Specialty drugs — Plan Assistance Programs • Specialty Providers should not charge dispensing fees or shipping fees.

Utilization Management Programs • Prior Authorization and Step Therapy — Implement evidence-based clinical criteria — First line therapy requirements • Quantity Restrictions and Dose Consolidation — Certain medications can be dispensed in partial supplies (ie. Oncology meds = 2 week therapy) - Specialty medications should be limited to 30-day supplies - Duration of therapy edits Formularies should be managed purely on clinical efficacy and cost effectiveness

Improve Clinical Management • Adherence Reports - Patient level compliance and outcome data is necessary to determine the value of Specialty Pharmacy. • Education Program Guidelines - Side effect treatment options - Focus on co-morbid conditions • Depression commonly occurs in Multiple Sclerosis - Depression screening should be placed in the monthly call schedule - Quality of life evaluation to determine therapy effectiveness • Coordination with Disease Management - Data integration with DM vendors

• Employers must develop effective methods to ensure patients who need the therapies are able to access them at an affordable cost • Pharmaceutical manufacturers must maintain and guarantee the quality and accessibility of the product • Providers must develop a relationship with the patient - Patient education - Appropriate therapy plan • Specialty pharmacies must ensure appropriate patient education and knowledge in side effect management • Patients must be motivated to adhere to therapy and actively participate in their own care

The Member’s Reality - Fragmented Health Care “I don't have access to that information ...” “Have you filled your medication?” “Check your PBM for your preferred drug ...” “Let me transfer you ...”

©sync Clinical Synchronization: How Does it Work? “I can help you right now ...” Working better together to improve health, simplify the experience and lower total cost At the Pharmacy Online At the Doctor ©sync

Contact Information: kfoxsmith@visanteinc.com 801.201.3681