1. PBMs, PDPs & MA-PDs: Which Way Is Up? Bob Atlas THE SECOND NATIONAL MEDICARE PRESCRIPTION DRUG CONGRESS November 1, 2005

2. 1 Medicare Plays for PBMs PBM’s Own Stand- alone PD Plan PharmacyManager Medicare Advantage PD Plan Fallback Plan Contractor Insurer’s Stand- alone PD Plan PharmacyManager CMS PBM at risk PBM not at risk for underwriting losses A BCE E off limits if bid for A or B PharmacyManager QualifiedEmployer PD Plan D

3. 2 Largest PBMs, Pre-MMA ( Total PBMs ~ 70) *Includes WellPoint-Anthem merged PBMs. † Figures cannot be summed – probable double counting. PBMOwnership Lives † (Millions) Caremark RxPublicly traded 80 Medco Health SolutionsPublicly traded 60 Express ScriptsPublicly traded 50 WellPoint Pharmacy Mgmt.*Insurer – WellPoint 43 PharmaCarePharmacy – CVS30 MedImpactPrivately held 27 Argus HealthPrivately held 24 Prime TherapeuticsInsurer – 8 Blues 9 CIGNA HealthcareInsurer – CIGNA 9 Aetna Pharmacy Mgmt.Insurer – Aetna 8 Prescription SolutionsInsurer – PacifiCare 6

4. 3 Largest PBMs - Participation in Part D PBM National PDP Regional PDPs MA-PDs Own (Brand)Partner Caremark Rx SilverScriptCoventrySub Medco Health Solutions YOURx-Sub Express Scripts --Sub WellPoint Pharmacy Mgmt. Unicare M’care Rx PharmaCare (CVS) -Universal Amer.Sub MedImpact --Sub Argus Health --HumanaSub Prime Therapeutics --Parent Blues CIGNA Healthcare CIGNATURE Rx-- Aetna Pharmacy Mgmt. Aetna M’care Rx-- Prescription Solutions PacifiCare-- Walgreens Health Initiatives - United (AARP) & WellCare Sub

5. 4 PDP Advantages vs. MA-PD EASIER ENROLLMENT Keep same medical providers Default enrollment of 6.5M duals Obvious choice for 1.2M nursing home residents Simple take-up for 4.7M current Medigap enrollees Encouragement from retail pharmacists – invested in PDPs

6. 5 Medicare Managed Care Got Boost in MMA MA plan capitations raised  10.6% in 2004  6.6% in 2005  4.8% in 2006 $10B “stabilization fund” for regional PPOs 2007+ Addition of Part D Mar ‘99Mar ‘03Aug ‘05 Contractors Enrollees (Millions) 412 6.6 426 5.9 235 5.1

7. 6 MA Plan Advantages vs. Stand-Alone PDPs COST SAVINGS POTENTIAL Buy down PD price bid/cost-sharing using medical care savings Spread administrative costs over broader revenue (per head) base Manage Rx usage via leverage with physician prescribers Better odds of normal or favorable population selection

8. 7 Premiums for MA-PDs vs. PDPs Distribution of Prescription Drug Benefit Premiums* MA-PD PDP MA-PD Median Premium ~ $21.70 PDP Median Premium ~ $36.66 *Unweighted, based on listings of MA-PDs (N=22,741 plan options including Rx, by counties) and PDPs (N=2,184 plan options, by PDP regions) as shown on CMS website as of October 27, 2005

9. 8 Significance of Biased Selection Average Annual Net Rx Benefit by Age Cohort and Health Status Source: “Lifetime financial benefit of the new prescription drug law,” Muse and Associates, August 2004