1. Impact of Restricting Access to Antipsychotic Medications Review of the Current Literature

2. Schizophrenia 1-year prevalence in adults (18-54 years old) is 1.3% 1 Onset is generally during young adulthood; the course varies over time 1 Most patients experience at least 1 relapse after the first psychotic episode 1 Early treatment with antipsychotic medications has led to better long-term outcomes 1 Many patients need antipsychotics for life 2 The chronic nature of the illness has major health and economic importance 3 Patients may have underlying (or treatment-specific) issues that need to be considered when developing a treatment plan 2 1. US Department of Health and Human Services. Mental Health: A Report of the Surgeon General—Executive Summary. Chapter 4. Adults and Mental Health. Rockville, MD: US Department of Health and Human Services; 1999. Available at http://surgeongeneral.gov/library/mentalhealth/home.html. Accessed September 25, 2008. 2. American Psychiatric Association. APA Practice Guidelines for the Treatment of Psychiatric Disorders: Compendium 2004. Arlington, VA: American Psychiatric Association; 2004. Available at http://www.psychiatryonline.com/pracGuide/loadGuidelinePdf.aspx?file=Schizophrenia2ePG_05-15-06. 3. World Health Organization. The World Health Report 2001. Geneva, Switzerland; 2001. Available at http://www.who.int/whr/2001/en/index.html. Accessed September 25, 2008. A Unique Population Requiring Varied Treatment Options © Ortho-McNeil-Janssen Pharmaceuticals, Inc. 2008

3. High Rates of Switching Require Many Therapeutic Options Nearly two-thirds of patients switch antipsychotics each year 2 Reasons for switching include 2 : —Lack of efficacy —Adverse side effects —Noncompliance/Subject choice This market dynamic is expected to continue 1. Marketing Excellence Schizophrenia Market Map Study (2005). 2. Masand PS. Prim Care Companion J Clin Psychiatry. 2005;7:121-129. 40% No change of Medication 60% Change APS Medication Annual medication switching of atypical antipsychotics (APS) patients 1 © Ortho-McNeil-Janssen Pharmaceuticals, Inc. 2008

4. Experts Universally Recognize That a Variety of Antipsychotic Agents Are Needed 1. Kane J, et al. Schizophr Res. 2007;90:147-161. 2. National Institutes of Health, National Institute of Mental Health. Ethnicity predicts how gene variations affect response to schizophrenia medications. Science Update, January 2, 2008. Available at http://www.nimh.nih.gov/science-news/2008/ethnicity-predicts- how-gene-variations-affect-response-to-schizophrenia-medications.shtml. 3. American Psychiatric Association. Atypical antipsychotics position statement. Available at http://www.psych.org/Departments/EDU/Library/APAOfficialDocumentsandRelated/PositionStatements/200007.aspx?css=print. Accessed July 24, 2008. 4. Parks J, et al. Principles of antipsychotic prescribing for policy makers, circa 2008. Translating knowledge to promote individualized treatment. Available at http://www.nasmhpd.org/publicationsmeddir.cfm. Accessed July 24, 2008. 4 “… the pharmacotherapy of individual patients requires the availability of many treatment options…” 1 KANE J, ET AL. SCHIZOPHRENIA RESEARCH. 2007. “A medication that works well for one person with schizophrenia often doesn’t work well for another.” 2 NATIONAL INSTITUTE OF MENTAL HEALTH 2008 FACT SHEET “… it is our opinion that the new generation of antipsychotic medications (except clozapine) need to be made available as first-line treatment…” 3 AMERICAN PSYCHIATRIC ASSOCIATION (APA) “Given significant individual variability in response, ultimately all marketed antipsychotic medications should be available to patients who require treatment with them.” 4 NATIONAL ASSOCIATION OF STATE MENTAL HEALTH PROGRAM DIRECTORS (NASMHPD) © Ortho-McNeil-Janssen Pharmaceuticals, Inc. 2008

5. Direct costs of treatment for schizophrenia in the US (2002): $23 billion 1 25% of total US mental health expenditures is for inpatient mental health treatment 2 — Hospitalizations comprise 14% of Medicaid direct medical costs 3 — Hospitalizations comprise 38% of private health insurance direct medical costs 3 Hospitalization is more costly than outpatient services provided by psychiatrists, psychologists, and social workers combined 2 Hospitalization is more costly (3-fold) than outpatient medications 1 1. Wu EQ, et al. J Clin Psychiatry. 2005;66(9):1122-1129. 2. Marcus SC, Olfson M. Schizophr Bull. 2008;34(1):173-180. 3. Janicak PG, et al. Curr Med Res Opin. 2008;24(6):1807-1815. 4. NAMI Spring 2008 summary of the NASMHPD medical directors council statement for antipsychotic prescribing. Arlington, VA: National Alliance on Mental Illness; 2008. Available at http://www.nami.org. Accessed September 25, 2008. Prescription Drugs Are Only a Part of the Total Cost of Care 5 Finding the right medication is critical. Failure may lead to costly and devastating relapses 4 © Ortho-McNeil-Janssen Pharmaceuticals, Inc. 2008

6. Treatment Considerations Antipsychotics should be individualized to optimally promote remission 1 A wide selection of medications increases the opportunity for individualized treatment 2 Antipsychotics should explore providing value in terms of quality of life 3 Cost Considerations Medicaid drug spending has increased >18% annually since 1997 4 Due to this increase, there is a trend toward more restrictive access to medication via the following formulary control methods 4 : –Prior authorization –PDL (Preferred Drug Lists) –Co-pay policies –Defined limits on coverage Successful Outcomes Require Balancing Treatment Options With Drug Costs 6 1. Andreasen NC, et al. Remission in schizophrenia: proposed criteria and rationale for consensus. Am J Psych. 2005;162:441-449. 2. NAMI Fact Sheet. The need to preserve Risperdal ® and atypical antipsychotic medications. Arlington, VA: National Alliance on Mental Illness. Available at http://www.nami.org. Accessed September 25, 2008. 3. NAMI Spring 2008 summary of the NASMHPD medical directors council statement for antipsychotic prescribing. Arlington, VA: National Alliance on Mental Illness. Available at http://www.nami.org. Accessed September 25, 2008. 4. Soumerai SB. Health Affairs. 2004;(Jan/Feb):135-146. © Ortho-McNeil-Janssen Pharmaceuticals, Inc. 2008

7. Impact of Increasing Controls and Restrictions on Atypical Antipsychotics © Ortho-McNeil-Janssen Pharmaceuticals, Inc. 2008

8. 1. Soumerai SB, et al. Health Affairs. 2008;(Apr):W185-W195. Potential beneficial outcomes of policy change Implementation of policy may lead to a decrease in atypical antipsychotic spending 1 Formulary controls may be able to restrict use to the best supported therapeutic areas Restriction of non-supported areas could potentially reduce drug-induced adverse events Impact of Increasing Controls and Restrictions on Atypical Antipsychotics © Ortho-McNeil-Janssen Pharmaceuticals, Inc. 2008

9. Medicaid Policy Change July 2003 1 Maine Medicaid instituted a prior authorization and step-therapy policy for atypical antipsychotics March 2004 1 Policy suspended citing numerous adverse effects in this patient population Replaced with provider education programs Potential unintended effects on a vulnerable population 2 Outright treatment discontinuation Acute psychotic episodes Increased hospital admissions Impact of Increasing Controls and Restrictions on Atypical Antipsychotics “Observed increases in treatment discontinuities without cost savings suggest that Atypical Antipsychotics should be exempt from PA for patients with severe mental illness.” 1 1. Soumerai SB, et al. Health Affairs. 2008;(April):W185-W195. 2. Polinski JM, et al. Health Affairs. 2007;(May/June):750-760. © Ortho-McNeil-Janssen Pharmaceuticals, Inc. 2008

10. 1. Huskamp HA. Health Affairs. 2003;(Sep/Oct):84-96. 2. Soumerai SB. Health Affairs. 2004;(Jan/Feb):135-146. 10 Impact of Increasing Controls and Restrictions on Atypical Antipsychotics Preferred Drug Lists Goal of plan Decrease overall pharmacy budget by encouraging patients and healthcare providers to choose lower-cost drugs Encourage competitive pricing of medication Anticipated negative outcomes in mental health Patients and physicians will not want to switch medications once an effective drug has been found PDLs shift costs from plan to patient, increasing out-of-pocket burden for population with chronic mental illness Run the risk of reversing the gain mental health treatments have made over past decades 1,2 Data demonstrate that formularies are not cost-effective control measures when considering mental disorders as compared to other therapeutic areas © Ortho-McNeil-Janssen Pharmaceuticals, Inc. 2008

11. Hartung DM, et al. Medical Care. 2008;46(6):565-572. Reduction of prescription drug use observed in every therapeutic category, including schizophrenia – Antipsychotics decreased by 15.2% 11 Implementation of Copay Policy Impact of Increasing Controls and Restrictions on Atypical Antipsychotics Medicaid Co-payment Policy Deficit Reduction Act permits medication co-pays of up to 10%-20% of the direct costs Implementation of co-pays led to an immediate 17% decrease in utilization of drugs © Ortho-McNeil-Janssen Pharmaceuticals, Inc. 2008

12. West JC, et al. Am J Psychiatry. 2007;164(5):789-796. Dual Eligible Psychiatric Patients Forced to Medicare Part D within the first 4 months: More than half (53.4%) of the patients studied had at least 1 problem associated with medication access or continuity 31% could not access needed medication refills 22% had medically necessary medications stopped or interrupted 18% had stable medication regiments changed Disruption of Access to Medication Adverse events in patients with medication access or continuity problems: 22% suffered an increase in suicidal behaviours 20% required an emergency room visit 11% required hospitalization 3.1% became homeless 12 Impact of Increasing Controls and Restrictions on Atypical Antipsychotics © Ortho-McNeil-Janssen Pharmaceuticals, Inc. 2008

13. Economic Impact of Controls © Ortho-McNeil-Janssen Pharmaceuticals, Inc. 2008

14. Lower medication costs but significantly higher hospitalization costs –Re-hospitalization of patients with schizophrenia is 13%-38% of direct medical costs 1 –A medication that works well for one person with schizophrenia often doesn't work well for another 2 –Lower acquisition costs for medication but potentially increased spending in emergency care 1 Poor adherence to APS 3,4 –Suggests a relationship between adherence and risk of hospitalization –The lower the level of adherence, the greater the risk of hospitalization Lost earnings 5 –Annual loss of earnings totaling $193 billion among patients with mental illness 1. Janicak PG, et al. Curr Med Research Opin. 2008;24(6):1807-1815. 2. National Institutes of Health, National Institute of Mental Health. Ethnicity predicts how gene variations affect response to schizophrenia medications. Science Update, January 2, 2008. Available at http://www.nimh.nih.gov/science-news/2008/ethnicity- predicts-how-gene-variations-affect-response-to-schizophrenia-medications.shtml 3. Weiden PJ, et al. Psychiatric Services. 2004;55(8):886-891. 4. Surles RC. Am J Managed Care. 2005;11(suppl 8):S248-S253. 5. Insel TR. Am J Psychiatry. 2008;165(6):663-666. Economic Impact of Restricted Access © Ortho-McNeil-Janssen Pharmaceuticals, Inc. 2008 Individualized Therapy Improved Tolerability Improved Adherence Decreased Hospitalization

15. Choice Is Beneficial for Both Patients and Healthcare Systems 1. NAMI Spring 2008 summary of the NASMHPD medical directors council statement for antipsychotic prescribing. Arlington, VA: National Alliance on Mental Illness. Available at http://www.nami.org. Accessed September 25, 2008. 2. Masand PS. Prim Care Companion J Clin Psychiatry. 2005;7:121-129. 3. Andreasen NC, et al. Remission in schizophrenia: proposed criteria and rationale for consensus. Am J Psych. 2005;162:441-449. 4. Elam L, Murawski MM. Psychiatric Services. 2005;56(8):1012-1016. 15 Options are needed for a vulnerable patient population — The variability of patient response necessitates the availability of a multitude of treatment options 1 — Antipsychotics should explore providing value in terms of quality of life 1 Antipsychotics are not interchangeable — Antipsychotic drug switching is common and frequently required for successful treatment 2 — Antipsychotic treatment should be individualized to optimally promote remission 3 — Treatment must consider personal preference, tolerability, and vulnerabilities 1 Increasing controls may result in increased 4 : — Use of healthcare resources — Healthcare rationing — Risk specificity to psychiatric patients © Ortho-McNeil-Janssen Pharmaceuticals, Inc. 2008

16. Limitations Include 16 Potential publication bias Few prospective or systematic studies Most studies performed prior to the introduction of generic risperidone © Ortho-McNeil-Janssen Pharmaceuticals, Inc. 2008