1. Medical Directors Meeting Exploring the Pharmacy Opportunity March 3, 2011

2. Purpose Set context Share two examples of actions ACHP plans are taking –Fallon Community Health Plan –Capital District Physicians Health Plan Discuss potential for ACHP collaborative effort 2

3. Health Care Costs: An Unsustainable Path While overall health care costs trended down (slightly) in 2009 for the first time in over 50 years, total health expenditures of $2.5 trillion = 17.6 percent of the nation’s GDP, an increase of 1% from 2008. The growth in health spending continues to outpace the growth of the rest of the US economy.

4. Health Expenditures Continue to Rise Across All Categories

5. Medical Director Focus: Clinical Leadership Lever Transitions of care & Primary Care Innovation Cost Opportunities ACHP Triple Aim Initiatives Hospital Costs (Readmissions, LOS, ED) End of Life Costs (primarily hospital related) Pharmaceutical costs Advanced Imaging Costs Preference sensitive interventions Chronic Care costs Palliative Care Shared Decision Making Primary Care Innovation Opportunity area

6. Agenda About Fallon Community Health Plan Network options Plan designs Value-added features Taking care of your employees Your FCHP team Pharmacy 2011 Leslie Fish, PharmD Elizabeth Malko, MD Fallon Community Health Plan

7. Agenda About Fallon Community Health Plan Network options Plan designs Value-added features Taking care of your employees Your FCHP team Agenda Trends in Retail and Specialty Trends at Fallon Community Health Plan Reasons for price increases Health Care Reform influences Management - future

8. Agenda About Fallon Community Health Plan Network options Plan designs Value-added features Taking care of your employees Your FCHP team Average cost = $103.75/Rx (first time over $100) Trends in Retail Volume grew 2.7% Spending grew 9.3% Average costs:  Cash $68.58/Rx  Medicaid $93.20/Rx  3rd party $109.46/Rx 2009

9. Agenda About Fallon Community Health Plan Network options Plan designs Value-added features Taking care of your employees Your FCHP team Average % shares of health benefit premiums allocated to the pharmacy benefit 20092010 MA-PD private plans 18.3%18.9% Commercial Plans 15.6%16.3%

10. Agenda About Fallon Community Health Plan Network options Plan designs Value-added features Taking care of your employees Your FCHP team Highest states in utilization State# Rxs West Virginia20.1 Kentucky18.5 Tennessee18.2 Alabama17.9 Louisiana16.9 Arkansas16.3 Rhode Island16.3 Mississippi16 Iowa15.1 Pennsylvania15

11. Agenda About Fallon Community Health Plan Network options Plan designs Value-added features Taking care of your employees Your FCHP team Lowest states by utilization State# Rxs Washington11.3 Maryland11.2 Nevada11.1 Arizona10.7 Hawaii10.7 Utah10.6 New Mexico10.3 California9.4 Colorado9.4 Alaska8.1

12. Agenda About Fallon Community Health Plan Network options Plan designs Value-added features Taking care of your employees Your FCHP team National retail prescription market 2009 Cost Third party $354B Medicaid (non-third party) $28B Cash $30B Utilization Third party 3.2B Medicaid 0.3B Cash 0.4B

13. Agenda About Fallon Community Health Plan Network options Plan designs Value-added features Taking care of your employees Your FCHP team Prescription decision making 20082009 Dispensed to Patients 86.3%85.6% % Denied by Health Plans 8.6%8.1% % Abandoned by Patients 5.1%6.3%

14. Agenda About Fallon Community Health Plan Network options Plan designs Value-added features Taking care of your employees Your FCHP team Trend by specialty Oncology accounts for over 50% of medical specialty drug costs. 25% of costs of medical specialty drug costs are for RA, Crohn’s, psoriatic arthritis and other autoimmune diseases. Oral oncology medications account for about 10% of all cancer medications.

15. Agenda About Fallon Community Health Plan Network options Plan designs Value-added features Taking care of your employees Your FCHP team Trend drivers: Top 24 medical injectables Remicade Aloxi Tysabri Avastin Zometa Abraxane Neulasta Orencia Sandostatin Rituxan Alimta Gammagard Herceptin Gemzar Eligard Eloxatin Procrit Carboplatin Taxotere Erbitux Taxol Aranesp Velcade Gammargard S

16. Agenda About Fallon Community Health Plan Network options Plan designs Value-added features Taking care of your employees Your FCHP team Specialty drug spend by provider specialty 39% Hematology 24% Oncology 12% Rheumatology 2% Urology 23% Other

17. Agenda About Fallon Community Health Plan Network options Plan designs Value-added features Taking care of your employees Your FCHP team Specialty drug trends AWP has been largely replaced with ASP reimbursement with larger payers. Two thirds of commercial health plans require a co-share for medical injectables for which the average co-share is 17% of the drug cost. Two thirds of payers require genetic testing prior to receiving medications such as Herceptin or Erbitux.

18. Agenda About Fallon Community Health Plan Network options Plan designs Value-added features Taking care of your employees Your FCHP team Future specialty medications SLE - drugs are here Hep C - new orals used in addition MS - new orals HIV - new oral in treatment naïve New oral and injectable oncology medications

19. Agenda About Fallon Community Health Plan Network options Plan designs Value-added features Taking care of your employees Your FCHP team Significant influences on pharmacy at FCHP in 2011 MS category Colchicine Decrease in rebates from pharma New oral anticoagulants

20. Agenda About Fallon Community Health Plan Network options Plan designs Value-added features Taking care of your employees Your FCHP team Reason for increases Health Care Reform Dried up Pipelines Stricter Management - including Medicaid Recession Lower bars with respect to outcomes Lower price concessions to Europe Resurrection strategy

21. Agenda About Fallon Community Health Plan Network options Plan designs Value-added features Taking care of your employees Your FCHP team Health Care Reform Cannot wait until 2014 (share holders) Comparative effectiveness Rebates to Medicaid Medicare - fill in doughnut hole Biosimilar exclusivity

22. Agenda About Fallon Community Health Plan Network options Plan designs Value-added features Taking care of your employees Your FCHP team The Good Comparative effectiveness (Patient Centered outcome research) Transparency Member education Physician education Medical Home model

23. Agenda About Fallon Community Health Plan Network options Plan designs Value-added features Taking care of your employees Your FCHP team Benefit Changes Copays/ Co-insurance Buy & Bill MD High Deductibles Site of Care Specialty Mandatory- Member Goal: Reduce cost and improve Pharmacy management Tiered Physician Networks

24. Agenda About Fallon Community Health Plan Network options Plan designs Value-added features Taking care of your employees Your FCHP team Management Changes Stricter Management -Guidelines -Criteria set for oncology -HIV Preferred Drug Lists Elimination of certain categories from the formulary Quantity Limits Step Therapies Goal: Reduce cost and improve Pharmacy management

25. Agenda About Fallon Community Health Plan Network options Plan designs Value-added features Taking care of your employees Your FCHP team FCHP PPI program Exclusion of certain PPI products PPI formulary consist of Dexilant #30 for Tier 3 copayment, $5.00 for #42 OTC Prilosec and #42 Prevacid 24 Nexium with PA and Step Savings of $2M for 2010 in Commercial membership Decrease of 29% in utilization 72% of use in OTC products

26. Agenda About Fallon Community Health Plan Network options Plan designs Value-added features Taking care of your employees Your FCHP team FCHP Specialty Mandate for Retail Rx Mandate specialty retail medications via specialty vendor Limit to one month supply Decreased waste (lost meds, unused meds, wrong med ordered) First year savings in decrease amount of medication sent out

27. PPI Step Therapy 1.Omeprazole 2.Lansoprazole 3.Pantoprazole All brands are non-formulary Statin Step Therapy 1.Generics through simvastatin 80 mg 2.Lipitor 80 mg 3.Crestor 40 mg All Crestor utilizers “grandfathered ” New-starts affected July 1 st ; Current utilizers have 90-day transition period Physician telephone consultations allowed and reimbursed with no copay required – July through October CDPHP Summary of Targeted Formulary Action $10 Million savings from Step Therapy for Statin and PPI Classes -- Beginning July 2010

28. CDPHP: Therapeutic Class Costs Dropping Cost of Therapeutic Class- Per Member-Per Month Formulary Decision date - June 16, 2010 Over $8 million saved per 100k Commercial lives $6.42 $4.84 $4.53 $2.45 $7.72 $7.60 $7.29 $6.93 $6.47 $6.35 $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 4Q091Q102Q103Q104Q10 PMPM Cost HMGPPI

29. CDPHP: Generic Utilization Increasing

30. Next Steps 30