1. 1 Medicare Part D Prescription Drug Benefit: Understanding Implications for Practices and Patients

2. 2 Educational Objectives Provide an overview of the new Part D Medicare prescription drug benefit Review Part D eligibility guidelines and enrollment timelines Introduce Part D and Medicare Advantage regions Discuss the standard Part D benefit and alternative benefit structures Analyze assistance available for limited income beneficiaries Understand coverage for Part D drugs and formulary guidelines Discuss how Part D will impact practices and Medicare beneficiaries Review the Part D resources available to your practice and patients 2

3. 3 Overview of Medicare Programs Part A benefits provide coverage for inpatient services, such as hospitalizations, hospice care, skilled nursing facility stays, and home health services. Part A Part B Part B benefits provide reimbursement for outpatient services, durable medical equipment, home health services, and drugs that are “not usually self-administered.” Part C Medicare via managed care with all benefits of standard Medicare plus additional benefits (formerly known as Medicare+Choice), now known as Medicare Advantage. Part D Beginning in 2006, the newly established Part D will provide an outpatient prescription drug benefit for those drugs not currently covered by Medicare Part A or B.

4. 4 Medicare Prescription Drug Coverage Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) Signed by President Bush on December 8, 2003 Prescription Drug Discount Card Available to all Medicare beneficiaries June 1, 2004 – December 31, 2005  Estimated savings between 15% and 25% per prescription Program ends December 31, 2005  Beneficiaries will need to enroll in Part D for drug coverage Medicare Part D Prescription Drug Benefit Effective January 1, 2006 Benefits include a standard plan and three levels of subsidy for limited income enrollees 4

5. 5 Part D Covered Drugs For a drug to be covered under Medicare Part D, it must meet the following characteristics: Available only by prescription Approved by FDA Used for medically accepted indication Used and sold in the US Covered Part D drugs include prescription drugs, biological products, insulin and vaccines Part A and B covered drugs may be included on some Part D plan formularies Currently covered Part B drugs will remain covered under Part B  Oral anti-cancer prodrugs  Oral anti-emetic drugs Wrap-around coverage provided by Part D when not covered by A or B Part D will not cover co-insurance from Part A or B covered drugs 5

6. 6 Administration of Part D Benefit The Part D benefit will be administered by risk-bearing private plans: Prescription Drug Plans (PDPs) Traditional, fee-for-service Medicare, with access to private drug-only plans Medicare Advantage Prescription Drug Plans (MA-PDs) Integrated plans that cover Medicare benefits and drugs Parts A, B, and D in one product Plans began communicating to beneficiaries October 1, 2005 6

7. 7 Part D Eligibility and Enrollment Beneficiaries currently eligible for Part A and/or Part B will be eligible for enrollment into Part D Enrollment into Part D is voluntary Beneficiaries must elect to enroll in Part D Dual eligibles and some limited income beneficiaries will be auto-enrolled Late enrollment penalties may apply Beneficiaries will have a variety of plans to choose from Interested beneficiaries may enroll in a PDP or a MA-PD National and regional PDP and MA-PD options exist Plan enrollment is good for one year 7

8. 8 Scenario 1: Beneficiary Enrolls Prior to January 1, 2006 If beneficiary enrolls in Part D before December 31, 2005, benefits are effective January 1, 2006, no late enrollment penalty

9. 9 Scenario 2: Beneficiary Enrolls after January 1, 2006 If beneficiary enrolls in Part D after December 31, 2005, but before May 15, 2006, benefits are effective the first day of the following month, no late enrollment penalty

10. 10 Scenario 3: Beneficiary Enrolls after May 15, 2006 If beneficiary enrolls in Part D after May 15, 2006, benefits are effective the January 1, 2007, and beneficiary will be subject to a late enrollment penalty

11. 11 Late Enrollment Penalty Part D is “insurance” and can be bought to either help with drug costs or to protect oneself from future drug costs Premiums are lower if beneficiaries enroll when first eligible Beneficiaries subject to a 1% premium increase per month past the enrollment deadline if beneficiary does not have creditable coverage Example calculation for beneficiary who enrolls in a plan eight months late, January 1, 2007 Late Enrollment Penalty Estimated Calculation Beneficiary enrolls January 1, 2007 May 15, 2006 - January 1, 2007 8 months late Premium penalty of 1% of base beneficiary premium per month 1% x 8 months($32.20 x 08%) = $2.58 Late enrollment premium $32.20 + $2.58$34.78 11

12. 12 Creditable Coverage Definition: Coverage through a source other than Medicare (eg., retiree plan) that is at least as good as the standard Part D benefit Medicare beneficiaries with creditable coverage can remain in their plan without a late enrollment penalty Some retiree plans are considered creditable Medicare beneficiaries who have coverage that is not “creditable” or as good as the standard benefit will be subject to a late enrollment penalty Medigap prescription coverage currently does not offer coverage as good as the standard Part D benefit and, therefore, would not be creditable coverage Plan sponsors are required to mail letters to all Medicare patients indicating if their coverage is creditable or not 12

13. 13 Prescription Drug Plan (PDP) Regions Number of plans per region varies from 27 - 52 ME VT NH MA RI CT NY PA NJ DE MD DC VA NC SC GA FL AL MS LATX NMAZ OK AR TN KY OH WV MI IN IL WI MN IA MOKS NE SD NDMT WY CO UT NV CA ID WA OR AK HI 43 47 39 38 41 43 47 44 43 4041 43 40 41 44 47 52 41 38 41 42 45 42 45 44 27 29 40 46 44 41 DE DC 47 MD 44 13

14. 14 WA OR ID MT WY CA NV AZ UT ND SD CO NE KS OK NM TX MN IA MO AR LA WI IL IN KY TN MSAL MI OH AK HI FL GA SC NC VA WV PA NY ME NH VT NJ DE DC MD CT RI MA 21 0 44 12 113 32 16 4 17 257 34 14 12 53 17 20 14 24 4 22 49 39 22 12 30 6 11 16 1 35 21 164 15 7 54 13 28 25 8 10 41 58 10 0 23 25 11 23 7 Medicare Advantage (MA-PD) Regions Number of MA-PD plans varies from 0 to 257 14

15. 15 Coverage under the Standard Benefit The total True Out of Pocket (TrOOP) costs incurred by a standard benefit enrollee prior to reaching catastrophic coverage is $3,600 Monthly premiums do NOT count towards TrOOP The Kaiser Family Foundation estimates that the average beneficiary incurs annual prescription costs of $3,160 15 $32 premium $250 deductible 25% Co-insurance up to $2,250 5% Co-insurance for $5,100 and beyond Donut Hole Patient pays 100% cost of drug from $2,251 to $5,100 TrOOP = $250 TrOOP = $500 TrOOP = depends on drug costs TrOOP = $2,850 * TrOOP = True Out of Pocket costs for the patient

16. 16 Sample Medicare Benefit Designs (PDPs) * Total drug costs *** Members may obtain up to a 90 days supply at retail for incremental copays (1-30 = 1 copay; 31-60 = 2 copays; 61-90 = 3 copays Plan NameRx Type Rx Costs $0-$250$250-$2250Over $2250 Over $3600 TrOOP Humana PDP Standard Generic 100%25%100%5% Preferred Non-preferred Specialty Humana PDP Enhanced Generic$0$7 100%5% Preferred$30 Non-preferred$60 Specialty25% Humana PDP Complete Generic$0$7 5% Preferred$30 Non-preferred$60 Specialty25% Source: Humana benefit designs from https://www.humana-medicare.com

17. 17 Patient spending for a course of therapy of $25,100 *Assumes that a course of therapy costs $25,100, that therapy is administered within one year, and that patient uses no other drugs $1233 $1046 $429 $209 Humana PDP Complete 25% coinsurance in donut hole Total spend: $4135 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Coinsurance benefit reduces the initial spending but total spend is only reduced by about 10% because catastrophic coverage is delayed $2683 $1080 $209 Part D Standard Benefit Total spend: $4600 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Patient Spending with Coverage through Donut Hole 17

18. 18 Part D Benefit Based on Patient Income Level Income< 100% FPL<135% FPL<150% FPLStandard Asset Test None $6,000 single $9,000 couple $10,000 single $20,000 couple None Premium Fully subsidized Sliding scale$32.20 Deductible Fully subsidized $50$250 Patient co- payment/ coinsurance $1 generic $3 brand $2 generic $5 brand 15% up to catastrophic limit 25% up to $2,250 in drug expense Gap in coverage None Between $2,250 and $5,100 in drug expense Catastrophic coverage (>$3,601) No cost sharing $3 generic $5 brand copay above limit 95% after $3,600 in OOP 18

19. 19 Estimated OOPs for Beneficiaries of Different Income Levels, Assuming Drug Costs of $1,000 to $5,000 Depending on the beneficiary’s ability to qualify for the low-income subsidy, the out-of-pocket expenses will vary greatly Assuming monthly drug costs between $1,000/mo to $5,000/mo the annual out-of-pocket expenses are displayed in the following table* For the beneficiary who qualifies for the full or partial subsidy, drug cost sharing under Part B may be greater than Part D Group Standard Benefit <100% FPL<135% FPL<150 % FPL $1,000 per month drug cost $4,331$36$60$2,229 $2,000 per month drug cost $4,931$36$60$3,991 $4,000 per month drug cost $6,131$36$60$4,021 $5,000 per month drug cost $6,731$36$60$4,026 *The calculations do not take into account any other drugs which a patient make be taking at the time. Includes premium.

20. 20 Formulary Design Formularies must include at least two drugs for each category and class Most formularies exceed minimum requirements Six drug classes of special concern in which all or “substantially all” drugs will be on formulary Anti-cancer, anti-HIV/AIDS, immunosuppressant, anti-psychotics, anti-depressants, and anti-convulsants All drugs will be on formulary, but plans can still impose coverage restrictions on these products  Prior Authorization  Step Therapy Non-formulary drugs may be provided through an appeals and exceptions process 20

21. 21 Tiering and Formulary Exceptions Tiering Exception Content of Physician’s Supporting Statement should indicate: Drug in preferred tier would not be as effective as requested drug Preferred drug would have adverse effects Formulary Exception Content of Physician’s Statement Should State: All of the formulary drugs for treatment for the same condition would not be as effective as the requested non- formulary drug Formulary drugs would have adverse effects 21

22. 22 Issues and Challenges for Practices Medicare beneficiaries will have new coverage options Patients may seek counseling from your office on:  Enrollment decisions  Cost-sharing concerns  Drug Coverage Dual eligibles Complete change of benefits for this population Education and counseling efforts will be needed Part D will follow Medicaid guidelines governing off-label use of drugs, not Medicare guidelines Medicaid only recognizes compendia, not published literature Important for drugs with prior authorization or diagnosis restrictions 22

23. 23 Issues and Challenges for Practices (cont.) Tightly controlled drug formularies Appeals and exception process for non-covered drugs is time and resource-consuming  7 days for re-determinations and up to 72 hours for expedited requests  72 hours for exceptions and 24 hours for expedited requests Changes to formulary mid-year Plans can add/delete drug throughout the year with 60 days notice Access to new drugs impeded Patients who do not enroll in Part D Will they still be eligible for Patient Assistance Programs? How will your practice respond to these changes? 23

24. 24 Practice Administrative Considerations Assess office ability to support Medicare beneficiaries in educating them about Part D options Practices need to be proactive in communicating beneficiary copay responsibilities upfront as part of the beneficiaries pre- treatment planning Practices do not have to be “experts” on Medicare and Part D options, but know your resources Advocacy groups and pharmaceutical companies can assist patients Understand the coverage guidelines for the PDPs and MA-PD plans in your market. If in doubt, verify coverage. 24

25. 25 Issues and Challenges for Beneficiaries Education and communication Deciding whether to enroll in Part D in 2006 Financial penalties for delayed enrollment Enrolling in limited income subsidy program Will beneficiaries, not auto-enrolled, know they are eligible? Will they sign up? Comparing plans and deciding which to join Will face wide variations in premiums, benefit design, formularies and preferred drug lists each year Facing potential consequences of a bad decision Annual lock-in Tracking and affording their total and out-of-pocket Rx costs Important due to benefit gap Who will manage? 25

26. 26 What do Beneficiaries Need to Consider? Assess current health insurance coverage Are prescription drugs covered? What is current cost? Are current benefits equal to or richer than Part D benefits? Determine if they qualify for low income subsidy assistance If selecting the PDP or MA-PD plan, are current medications on formulary? Enroll by May 15, 2006 to avoid possible late enrollment penalty 26

27. 27 Medicare Part D Plan Finder Tool-Supporting Part D Enrollment Prescription Drug Plan Finder Tool on www.medicare.gov launched October 17, 2005 The Prescription Drug Plan Finder tool will: Only be accessible through www.medicare.gov Provide plan cost, drug pricing and pharmacy network information for all PDPs and MA-PDs Provide ranking of plan’s net cost based on beneficiary’s location, income level, drugs, and pharmacy selection Update pricing information weekly The Prescription Drug Plan Finder Tool will not: Make specific plan recommendations 27

28. 28 Nexavar REACH Program Resources for Expert Assistance and Care Helpline Reimbursement Services Toll-Free Number 1-866-NEXAVAR A REACH Program Counselor will help to: Answer questions about insurance coverage, including questions about the new Medicare Part D drug benefit Assist with insurance verifications for Nexavar Identify and assist with applying for alternate sources of coverage and payment for Nexavar Review eligibility, if necessary, for Nexavar patient assistance for uninsured patients Identify a specialty pharmacy that will fill prescriptions and ship directly to the patient’s home

29. 29 Conclusion Medicare Part D benefit will provide greater access to medications for Medicare beneficiaries Medicare beneficiaries will look to providers for assistance in selecting the appropriate plan and navigating the appeals process Education and communication will be key in ensuring successful implementation of the Part D benefit Beneficiaries should be directed to utilize the resources and support services being provided through Medicare and other organizations Bayer/Onyx REACH Program can assist providers and patients with reimbursement services related to Medicare and all other payers