©2011 Novation Confidential. 1 1 NPPA Conference, Las Vegas, NV August, 2011 Drug Shortages: We’re in This Together

©2011 Novation Confidential. 2 ©2010 Novation Confidential. 2 On Pace for Unprecedented Number of Drug Shortages in 2011 National Drug Shortages (January 2001 to July 31, 2011) Note: Each column represents the # of new shortages identified during that year by University of Utah Drug Information Service

©2011 Novation Confidential. 3 ©2010 Novation Confidential. 3 Contracting Strategy to Minimize Drug Shortage Impact Stronger contract template language in 2011 requires prompt notification of supply problems to Novation Select most reliable suppliers possible for contract awards. Past performance on supply is one factor considered in evaluating contract awards For products with history of supply problems make multi-awards where possible Insulate customers from having to pay more for a non-contract product by securing strong “failure to supply” reimbursement terms in contract. Over $10 million returned to members in 2010 through the Failure to Supply Reimbursement Service. –FTS reimbursement is not intended as a substitute for obtaining contract coverage on available products

©2011 Novation Confidential. 4 ©2010 Novation Confidential. 4 Contracting Response if Shortage Occurs Investigate market for alternatives and review current agreement for options If generically equivalent product available, seek to add it to contract on a temporary basis. Prevents member from paying WAC price. If multiple suppliers are in the market, conduct a competitive procurement to obtain best price on available supply. Efficient process allows quick decisions.

©2011 Novation Confidential. 5 ©2010 Novation Confidential. 5 Helping with Information Financial support for ASHP’s drug shortage information postings on Weekly electonic member newsletter and other communication vehicles Marketplace web site contains many resources –Drug Shortage Information Alerts –Key supplier inventory updates provided on regular basis –Archived web conferences for playback Sponsor/participate in venues for stakeholders to exchange information –Regional and national meetings –Ongoing participation in work groups formed at 2010 Drug Shortage Summit –Represent members in ongoing discussions with FDA and participation in upcoming CDER Drug Shortage Workshop

©2011 Novation Confidential. 6 ©2010 Novation Confidential. 6 Drug Shortage Summit Co-convened by –ASHP –American Society of Anesthesiologists –American Society of Clinical Oncology –Institute for Safe Medication Practices Participants –FDA –CDC –Pharmaceutical suppliers –Pharmaceutical distributors –Novation and other GPOs –Other healthcare organizations November 5, 2010

©2011 Novation Confidential. 7 ©2010 Novation Confidential. 7 Drug Shortage Summit Discuss the scope and causes of drug shortages Shed light on the harm to patients due to drug shortages Discuss need for changes in public policy and stakeholder practices to prevent shortages Develop plan to stop harm and patient care disruptions caused by drug shortages Participants continue to work on above goals through conference calls Goals

©2011 Novation Confidential. 8 ©2010 Novation Confidential. 8 Our Continued Focus on Drug Shortage Issues Web conference series related to drug shortages during Q3 –Will offer pharmacy and nursing continuing education –Incorporating noted external subject matter experts in addition to Novation staff Contract templates changed to require better manufacturer communication on shortages Revised non-financial weighting for future bids Reviewing opportunities to improve/streamline communications on shortages with new Marketplace/Procure Web platform

©2011 Novation Confidential. 9 9 Government Gets Involved

©2011 Novation Confidential. 10 ©2010 Novation Confidential. 10 Government’s Efforts to Ease Drug Shortages “Preserving Access to Life-Saving Medications Act” (S.296) introduced late 2010 Sponsors –Klobuchar (D-Minnesota) –Casey (D-Pennsylvania) Key components –Manufacturer reporting of discontinuance (at least 6 months notice), interruption or action that may result in a shortage –Public notification by FDA through its web site –Identification of drugs vulnerable to shortage Continuity of operations planning for vulnerable and medically necessary products Requiures FDA to revise definition of medically necessary to include the prevalence of use of the drug – Proposed Senate Legislation

©2011 Novation Confidential. 11 ©2010 Novation Confidential. 11 Government’s Efforts to Ease Drug Shortages “Preserving Access to Life-Saving Medications Act of 2011” (H.R. 2245) –Introduced June 21, 2011 Sponsors –Rep. Diana L. DeGette (D-Colo.) –Rep. Thomas J. Rooney (R-Fla.) Key components –Requires drug manufacturers to provide advance notice to FDA regarding manufacturing problems or when a drug product will be discontinued –Institutes civil monetary penalties for manufacturers who fail to report –Requires FDA to: Maintain an online list of drugs in shortage situations Implement evidence-based criteria for identifying drugs vulnerable to a shortage Provide annual report to Congress followed by a report every five years on the actions taken to address and prevent drug shortages Text of Bill – Proposed House Legislation

©2011 Novation Confidential. 12 ©2010 Novation Confidential. 12 Other Government Efforts: Drug Shortages Senator Richard Blumenthal (D-Conn.), early March 2011 GAO office requested to open an investigation to examine –Hospital shortages of pharmaceutical products and prevalence in recent years –Impact of shortages on patient care –Possible explanations –Potential legislative or administrative approaches to address the problem Investigation is currently underway GAO Investigation Requested

©2011 Novation Confidential. 13 ©2011 Novation Confidential. 13 What Can You Do?

©2011 Novation Confidential. 14 ©2010 Novation Confidential. 14 Drug Shortages: Actions You Can Take Report them to ASHP FDA or your GPO Have a plan in place for handling shortages –ASHP Guidelines on Managing Drug Product Shortages in Hospitals and Health Systems Keep informed Keep all communication channels open Explore all purchasing avenues –Cultivate good relationships with company and distributor representatives –Jump through all the hoops –Backorders, direct orders (timing) Consider supporting legislation –ASHP’s Grassroots Action Center on Report concerns about trade practices to FTC: Use customer complaint link.

©2011 Novation Confidential. 15 ©2010 Novation Confidential. 15 Questions??