Comparing US and Canadian Drug Plan Design Trends: The Express Scripts Story Steve Goldberg, MD,MBA Chief of Medical Affairs Value of Generics Symposium October 26, 2011 Montreal, Canada 102411 1500 CST

Agenda Overview: US PBM, Express Scripts Generics are a key strategy to maximizing quality and mitigate cost trend Our experience with “free” generics and tiered co-pays There is significant opportunity in Canada with active management of the pharmacy benefit

US Pharmacy Benefit Managers (PBMs) Emerged in late 1970s to manage increasing prescription costs Adjudicate 90% of all prescriptions processed today (approximately four billion annually) Top three pharmacy benefit managers (PBMs) handle around 50% of outpatient prescription volume

Express Scripts Overview 60 million members Respected and recognized Our business model is in alignment with our clients Business model does not compete with our clients Scientific research to develop meaningful prescription-drug solutions Express Scripts Technology & Innovation Center Key corporate facts More than 13,000 employees 60,000+ participating pharmacies in US 54.1 million Home Delivery and specialty prescriptions 72.7% of all prescriptions dispensed are generic drugs At Express Scripts, we work to make the use of prescription drugs safer and more affordable

The Research and New Solutions Lab Data Insights Solutions

Key Companies Trust Express Scripts Confidential & Proprietary © 2011 Express Scripts, Inc. All Rights Reserved

Annual US Pharmacy-Related Waste More than $403 billion Three steps to drive out pharmacy-related waste Step  Optimize Channel Step  Optimize Drug Mix Step  Maximize Adherence  $88.3 $258.3  $56.7  Amounts are in billions of dollars Source: Express Scripts, Inc.

Pharmacy Benefit Managers Electronic claims processing Benefit design and administration Pharmacy networks Formulary development and management Generic substitution Pharma rebates and discounts Patient service Home Delivery Clinical management Trend management Reporting

National P&T Committee Committee composition 18 physicians and one pharmacist community- and academic-based practice settings No Express Scripts employees Term of three years Specialties Allergy and Asthma Geriatrics (MD and PharmD) Ophthalmology Cardiology Infectious Disease Pediatrics Dermatology Internal Medicine Psychiatry Endocrinology Neurology Pulmonology Family Practice Obstetrics and Gynecology Rheumatology Gastroenterology Oncology

Attacking the Waste Spending More and not Getting More Chemical Equivalence Therapeutic Equivalence Occurs “automatically” Requires interventions Prilosec Omeprazole Nexium Omeprazole Substitution occurs 97% of the time with little intervention Substitution occurs infrequently without intervention

Attacking the Waste Spending More and not Getting More In 2007, the average retail price of a generic prescription drug was $34.34. The average retail price of a brand name prescription drug was $119.51. (source: The National Association of Chain Drug Stores, 2007) 30 days of one brand-name drug: $119.51 30 days of the generic equivalent: $34.34 No difference in health benefit

Generic Fill Rate (GFR) The “trend management metric” Clinical Potential: 86% The higher the Generic Fill Rate, the lower the overall drug cost. Every 1% increase in GFR = 1.5% decrease in Rx spend Express Scripts Average: 72%

Generic Fill Rate (GFR) The “trend management metric” Clinical Potential: 86% WASTE: Spending money without improving health Express Scripts Average: 72%

Generics Avoid Unknown Risks 25 Years, 25 “Unsafe” Drugs 1982: Ticrynafen® 1998: Seldane® 1999: Hismanal® 2001: Baycol® 2005: Palladone® 1983: Zimeldine® 1998: Duract® 1999: Trovan® 2003: Orlaam® 2005: Cylert® 1984: Methaqualone® 1998: Posicor® 2000: Rezulin® 2004: Vioxx® 2006: Tequin® 1996: Trancopal® 1999: Raxar® 2000: Propulsid® 2005: Tysabri®* 2007: Permax® 1997: Fen-Phen® 1999: RotaShield® 2000: Lotronex®* 2005: Bextra® 2007: Zelnorm®* 1982: Ticrynafen® 1998: Seldane® 1999: Hismanal® 2001: Baycol® 2005: Palladone® 1983: Zimeldine® 1998: Duract® 1999: Trovan® 2003: Orlaam® 2005: Cylert® 1984: Methaqualone® 1998: Posicor® 2000: Rezulin® 2004: Vioxx® 2006: Tequin® 1996: Trancopal® 1999: Raxar® 2000: Propulsid® 2005: Tysabri®* 2007: Permax® 1997: Fen-Phen® 1999: RotaShield® 2000: Lotronex®* 2005: Bextra® 2007: Zelnorm®* * Reintroduced with new safety program 21 of the 25 were still brand-only

Optimize Plan Design, Optimize GFR

Optimize Your Copay Levels Two employers, two plans Plan A (7,000 lives) and Plan B (6,300 lives) Started at same copay levels Made the same Tier 2 and 3 copay increases Plan B also lowered Tier 1 copay by $3 No other benefit changes in 2005

Optimize Your Copay Levels Two employers, two plans Results Plan A GFR: 1.4% higher than expected; saved $0.91 pmpm Plan B GFR: 4% higher than expected; saved $2.60 pmpm Plan A (7,000 lives) and Plan B (6,300 lives) Started at same copay levels Made the same Tier 2 and 3 copay increases Plan B also lowered Tier 1 copay by $3 No other benefit changes in 2005 Plan A missed a win/win: $1.69 in additional savings by lowering Tier 1 copay by $3

Landscape in Canada Drug Trend GFR 2003 11.2% 32.1% 2004 9.6% 34.7% 2005 9.4% 37.5% 2006 8.4% 38.8% 2007 7.1% 41.4% 2008 5.0% 45.0% 2009 5.4% 47.0% 2010 2.8% 49.0%

Generic Fill Rate

Landscape in Canada The vast majority (approx 80%) of plans in Canada are using a single-tier plan that covers all items that require a prescription (vs multiple tiers or step therapy) Decline in drug trend due primarily to patent cliff and generic price reform Canada GFR rate of 49% vs US 72% The clinical potential GFR is much higher through active benefit management (e.g., exchanges of therapeutic equivalents)

Step Therapy and FormularyRapidResponse Medical Exception Criteria Back-up Drugs Higher-cost Brands Back-up Drugs Lower-cost Brands Front-Line Drugs Generics Step Therapy RapidResponse : Patient + Physician

Benefit Changes Have Limited Impact on Calls 10,000 Enrollee Plan, Changed from 2 to 3 Tier Benefit Extra Calls Per Week Express Scripts Call Center HR Department Source: Express Scripts Office of Research and Development based on a 2-tier to 3-tier benefit change

How Clinical 360® Works Reduce Enable Prescription Waste We have a comprehensive mix of programs that will deliver immediate, short term, and long term clinical goals to: Reduce Prescription Waste Manage Medication Therapy and Safety Enrich The Care Continuum Enable Better Overall Health and Value

Path to Greater Care and Zero Waste Turn2Generics® Zero $ Generic Copay Drug Quantity Mgmt Prior Authorization Select Step Therapy* Step Therapy Clinical 360® Trend Drug Utilization Review Medication Adherence Fraud, Waste, and Abuse ExpressAlliance® Integrated Data Services MTM Clinical 360®Health Solutions Specialty Pharmacy and Distribution Specialty Pharmacy Benefit Management Select Specialty* Medical Benefit Management Specialty Benefit Services Retiree Drug Subsidy Medicare Part B 2-Tier (open) 3-Tier Copayment Differential 2-Tier (closed) High Performance Prime National Preferred Prescription-Drug Plan Medicare Solutions Formulary Benefit Design * Retail Network Standard Network (50k) Select Network* Preferred Network Exclusive Network Exclusive HD Preferred HD Select HD* Home Delivery Education Home Delivery

Generics Reduce Prescription Waste Program Description How it Works Implementa-tion Time Clinical Edits Reporting PMPM Savings Value Turn2 Generics® Member fills brand at retail. Letter alert. Savings with generics. Program targets expensive brands. Proposes therapeutic shift. Practitioner engaged. Letter mails 10 days from date of data analysis. ACE ARB CCB Cox2 NSAID HMG Lyrica PPI Activities and Outcomes $0.09 PMPM Reduces waste both plan sponsors and members. ROI up to 8:1 Switch rate 7.4% Zero Dollar Generic Copay Plan sponsor waives copayments up to six months to motivate members to try generics. Members receive a materials to share with practitioner. Educates them about therapeutically equivalent generics . Notes they will have and $0 copayment if their physician provides a new prescription for a generic alternative. Standard=4 weeks, Custom=6 weeks. Brand ACE Inhibitors, ARB, ARB/HCTZ Combo, Beta Blockers, BisphosphonatesOthers $0.03 PMPM ROI up to 23:1 Express Scripts Proprietary & Confidential

Express Scripts National Formularies National Preferred Prime High Performance Generic Drugs* 99.3% Brand Drugs* 54.6% 45% 36% Features Manages drug trend with a three-tier or open formulary benefit design Features a broad brand selection and low-cost generic products Manages drug trend with a three-tier or closed formulary benefit design Limited number of brands Aggressively manages drug trend with a closed formulary benefit design Comprised of generics and the lowest cost brand drug in each therapeutic class Trend Focus Optional Trend programs Recommended for use with Enhanced Trend Package Mandatory Trend Package Ideal Plan Sponsor Type Marginally managed $20 Copayment differential and less Well-managed Greater than $20 Copayment differential Aggressive Closed benefit design

Summary Drug plans in the US that are actively managed by PBM's show significant savings compared to plans that are passively managed Much of the savings from actively managed US plans come from maximizing the use of generics Most plans in Canada are not actively managed (proven US PBM tools are not used) so generics are underutilized Savings opportunity for private plans in Canada with increased use of both interchangeable and therapeutically equivalent generics

Thank you Questions?