Troy Wieck, ASA, MAAA Sr. Director, Actuarial Services March 20, 2018 The PBM Chain: How the PBM, Pharmacy, Wholesaler, Doctor and Plan Interconnect Troy Wieck, ASA, MAAA Sr. Director, Actuarial Services March 20, 2018 ©2018 CVS Health and/or one of its affiliates

The Stakeholders PBM Member Plan Pharmacy Doctor Manufacturer Wholesaler Government

PBM and Member Coordinate Benefits Relay Drug Price Relay Benefit Insurance Cards Letters and Communications Clinical Outreach Provide information regarding lower prices

PBM and Plan Negotiate drug costs Clinical Programs Drug Adjudication Pharmacies and Manufacturers Client Traditional and Transparent Clinical Programs Drug Adjudication Compliance Consultation on: Formulary Plan Design Bids

PBM and Pharmacy Negotiate Drug Costs Relay Plan Benefit Networks: Broad Narrow Performance Relay Plan Benefit Measure Performance

PBM and Doctor Education Utilization Management Formulary Benefits Drug Costs Utilization Management

PBM and Manufacturer Negotiate Rebates Base Rebate Admin Fees Price Protection Competition between competitors to obtain favorable formulary status

PBM and Wholesaler Obtain current wholesale price Used to negotiate drug costs Purchase Drugs for Mail Order 90% of drugs distributed by AmerisourceBergen, Cardinal Health, McKesson

PBM and Government Medicare Medicaid Exchanges Compliance Education Pricing/Filing/Bids Formulary Data Regulations Education Note: PBM’s interact with govenrnents on client’s behalf.

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