L O C K T O N C O M P A N I E S

Lessons Learned from Sovaldi -

The Future is NOW in Specialty PharmacyAugust, 2014Presented by Bob Kordella, Chief Clinical Officer of Excelsior Solutions

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Chief Clinical Officer

Robert Kordella, Chief Clinical Officer, has more than 27 years of diverse experience in the pharmacy industry. Bob has practiced in retail pharmacy, in a large academic medical center setting, and, for the last sixteen-plus years, has been an effective, widely known, and well-respected leader in the PBM industry. Over the course of his tenure with LDI Integrated Pharmacy Services, National Medical Health Card Systems, CVS PharmaCare, Eckerd Health Services, and TDI Managed Care Services, Bob has led clinical and PBM operations teams that successfully managed over $4 billion in annual drug spend while limiting per member per year spending growth to levels that have simultaneously drawn industry acclaim and consistently high levels of member and payer satisfaction.

Bob received his Bachelor of Science in Pharmacy from the University of Pittsburgh School of Pharmacy. He went on to receive his Masters in Business Administration from The University of Pittsburgh, Katz Graduate School of Business.

Meet Bob Kordella, RPh

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Past Performance is no Guarantee of Future Results

Never a good idea to drive down an interstate highway with your gaze fixed in the rear-view mirror

Sovaldi isn’t an exception, it represents the new rule

That “coming tsunami” in Specialty Pharmacy has arrived

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What Was Different About Sovaldi?

Seeming Surprise

Higher Unit Costs

Higher Utilization

Higher Visibility

Clear Link to Medical Management

Ethical Concerns – Is It For Everyone?

Government Role, Clinical

Government Role, Economic

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Will All New Specialty Pharmacy Drug Launches Have Impact Like Sovaldi’s?

That depends…

MAJOR: Treats what was previously untreatable, OR Treats what was previously treatable in such a superior way that old ways will no longer suffice

High incidence disease categories Rationale for high cost

MODERATE: Lower incidence disease categories, OR Lower cost premium, OR Less potential to unlock “pent-up demand”

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Did Sovaldi’s Launch Surprise You?

Clinically

Financially

“Ergonomically”

Lesson Learned: Pay attention to the wealth of information at your disposal

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Why Will Specialty Rx Unit Costs Be Higher?

Higher true costs to develop What is a true cost? Acthar HP example

Convenience premium

Lesson Learned: The market has shifted from costs being driven down by “small molecule” patent expirations to costs being driven up by “large molecule” innovation

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Why Will Specialty Pharmacy Utilization Be Higher?

Unleashed pent up demand as “watchful waiting” transforms to action driven by new oral dosage forms

Lesson Learned: Oral dosage forms will drive utilization and product adoption of new Specialty Rx products higher, faster than has historically been the case – old actuarial and underwriting models are obsolete if these changes aren’t reflected I’m going to prescribe something that

works like aspirin but costs a whole lot more.

-A. Bacall

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Why Will Visibility Be Greater?

Initiatives to support enhanced screenings will quietly support new Specialty Rx product launches

The early lessons of Pharma direct-to-consumer advertising will be migrated to Specialty Rx

It is in Pharma’s interests to make the pool of potential customers larger

Lesson Learned: Don’t lose control of screening initiatives

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Why Are Pharmacy & Medical Management Linked More Closely?

The questions surrounding new Specialty Rx drugs are not as simple as, “Formulary or Non-Formulary” or “Which tier to place it on?”

It’s evaluating 84 days of Rx at $1,000 per day vs. probability and cost of a subsequent liver transplant based on current clinical condition of patient

Lesson Learned: Your predictive analytics capabilities will be as important to your future success as your clinical capabilities, and they must work more closely together than ever

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Will Everyone Be Eligible to Receive the New Meds?...Who’s to Say?

This isn’t about rationing, per se, it’s about establishing reasonable and defensible unbiased patient characteristics that point to success from a $1,000 per day (or more), 84-day long (or longer) treatment

Lesson Learned: Ethical issues will also become more prominent as Specialty Rx costs rise

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What Role Will Government Play Clinically?

Many State Medicaid agencies have stepped in to work with plans to develop and implement regional or state-wide utilization management criteria

Lesson Learned: Avail yourselves of this opportunity if available in your state, or seek to lead such an initiative if one doesn’t exist

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What Role Will Government Play Financially?

Some State Medicaid agencies have stepped in to work with plans to develop and implement reinsurance initiatives to mitigate the financial ramifications of high-cost Specialty Rx products

Lesson Learned: Sustainability is a concern as more products launch

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What’s a Plan to do…

Watch out for combination therapies in Hepatitis C 2 separate pills/copays replaced with 1 pill/1 copay Therapies will be significantly more expensive

$84K for Sovaldi versus $100K - $150K for combination product Plans should not be covering all of these products for all

patients. Suggestions: Evaluate formulary status, add appropriate utilization management controls and screenings

Be alert for first-in-class products that now offer drug therapy in addition to or replacing medical treatments Anticipate increased costs due to drug regimen add-on.

Not all new specialty therapies replace prior options.

Consider appropriate Utilization Management criteria Not every drug has to be (or should be) available for all

patients. Qualify patients prior to approving

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Conclusion

Sovaldi has fundamentally transformed how payers must think about and deal with Specialty Pharmacy

Clinical, Economic, Ethical, Financial, and Regulatory minefields abound

The Specialty Rx pipeline is rich and more transformative products that share many of the characteristics of Sovaldi are queuing up to launch

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Appendix

The Specialty Drug Pipeline (as of August 2014)

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Specialty Pipeline – Hepatitis C

Drug Name

Disease Treated

Approx. Approval Date

Route of Admin

Projected Costs

Current Disease Treatments

Recommended Potential Action

ledipasvir / sofosbuvir*

Hepatitis C genotype 1

Oct. 2014

Oral$100 - $150K per tx course

Sovaldi, Olysio, Incivek, Victrelis

Evaluate formulary statusPA/UM and qualify appropriately (genotype 1)

ABT-450 / ritonavir/ ombitasvir / dasabuvir*

Hepatitis C, genotype 1

Dec. 2014 Oral$75 - $90K per tx course

Sovaldi, Olysio, Incivek, Victrelis

Evaluate formulary statusPA/UM and qualify appropriately (genotype 1)

MK-5172 / MK 8742*

Hepatitis C, genotype 1

2015 Oral$80 - $100K per tx course

Sovaldi, Olysio, Incivek, Victrelis

Evaluate formulary statusPA/UM and qualify appropriately (genotype 1)

daclatasvir / asunaprevir

Hepatitis C, genotype 1b

Dec. 2014 Oral$80 - $100K per tx course

Sovaldi, Olysio, Incivek, Victrelis

Evaluate formulary statusPA/UM and qualify appropriately (genotype 1b only)

The three genotype 1 products and the combination therapy of Sovaldi + Olysio are transforming the Hepatitis C class dramatically. The combination of two drugs in one tablet represents the next evolution of oral treatment in Hepatitis C.

*Combination therapies (such as the above three) will compete with Sovaldi/Olysio and continue to increase costs

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Specialty Pipeline – Cystic Fibrosis, Multiple Sclerosis & High Cholesterol

Drug Name

Disease Treated

Approx. Approval Date

Route of Admin

Projected Costs

Current Disease Treatments

Recommended Potential Action

LumacaftorCystic Fibrosis

June 2015 Oral$300K per year

First in classPA/UM for gene mutation; qualify appropriately

Lumacaftor is considered to be an orphan drug because it treats a very specific gene mutation in cystic fibrosis. Its use will be rare, but its costs will be material when required. *Screening test under development.

LemtradaRelapsing Multiple Sclerosis

Nov. 2014

IV$40K per year

Copaxone, Avonex

Not initial therapy; consider step or PA for trial of initial therapy drugs

Lemtrada will be a mixed bag of benefits and costs. In the short-term it will likely displace less expensive Rebif therapy, but in the long-run it will be more effective at preventing relapses leading to better outcomes and lower costs.

EvolocumabHypercholeste-rolemia

2015 Sub Q$10 - $18K per year

StatinsClose monitoring of FDA approval status

Currently slated for narrow (and rare disease state) approval. However, if approved for broader treatment, could replace or be adjunct therapy with statins for cholesterol treatment. If granted broad approval, expect significant treatment protocol and cost increases for cholesterol therapy.Evolocumab has potential to redefine clinical

management of high cholesterol with significant cost impacts against a mature (generic-heavy) statin

category

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Specialty Pipeline - Miscellaneous

Drug Name

Disease Treated

Approx. Approval Date

Route of Admin

Projected Costs

Current Disease Treatments

Recommended Potential Action

AlexionHypophosphatasia

2015 Sub-Q$200 - $300K per year

First in class

Examine medical claims for evidence of these patients; pharmacy data will not indicate

With the incidence of hypophosphatasia most recently estimated to be one in three hundred thousand, the need for this orphan drug will be rare, but the costs will be material when it is required. Alexion is considered to be a “breakthrough therapy” meaning that its mechanism of action is superior to any previous treatments.

RuconestHereditary Angioedema

July 2014 IV$200K per year

Berinert, Kalbitor,Firazyr

Consider allowing as first line therapy as HAE is life-threatening

Ruconest has the potential to displace Berinert, Kalbitor, and Firazyr in the treatment of acute attacks of Hereditary Angioedema with a single IV dose. Received final orphan drug designation in July. There are 6,000 to 10,000 patients in the US who seek treatment for acute HAE attacks annually.

CerdelgaGaucher Disease

Aug. 2014

Oral$240K per year

Cerezyme, Vpriv, Elelyso, Zavesca

Consider allowing as first line therapy for convenience and efficacy

Cerdelga, an oral therapy, has the potential to displace traditional infused treatments for Gaucher disease. Costs will offset somewhat as this therapy replaces other available treatments.

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Specialty Pipeline - Miscellaneous

Drug Name

Disease Treated

Approx. Approval Date

Route of Admin

Projected Costs

Current Disease Treatments

Recommended Potential Action

Amigal Fabry Disease June 2015 Oral$100 - $300K per year

FabrazymeKeep watching – could be approved as combo therapy ($$$)

Amigal, an oral therapy, has the potential to displace traditional Fabrazyme therapy in the treatment of rare Fabry disease, however it may also be approved to be used in combination with Fabrazyme, in which case cost impact will be more material, although the incidence of Fabry disease is low. **Screening test under development

EsbrietIdiopathic Pulmonary Fibrosis

Nov. 2014 Oral$100K per year

Oxygen, pulmonary rehab, lung transplant

Expect to cover; may help defer/prevent lung transplants

Esbriet would be the first drug treatment in this disease that currently affects between 100,000 and 200,000 patients in the US, and so has the potential to reduce lung transplant rates in advanced disease.

SynagevaLysosomal Acid Lipase (LAL) Deficiency

Jan. 2015 IV$250K per year

First in ClassRare occurrence disease; qualify appropriately

Synageva is considered an orphan drug drug due to low incidence of LAL deficiency, with only 8 cases of the early onset form per year, and approximately 4,000 patients with the late onset form in the US currently.

secukinumabModerate to Severe Plaque Psoriasis

Oct. 2014 Sub-Q$5K per month ($60K per year)

Methotrexate, Enbrel, Humira, Stelara, Remicade

“Me too” drug – no clear therapy advantage; consider costs for formulary placement

Secukinumab will compete primarily with well-known high cost therapies in the treatment of moderate to sever plaque psoriasis at similar costs

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Specialty Pipeline – Cancer Therapies

Drug Name Disease Treated

Approx. Approval Date

Route of Admin

Projected Costs

Current Disease Treatments

Recommended Potential Action

idelalisibIndolent non-Hodgkin’s Lymphoma

Aug. 2014 Oral $10 - $12K per month

Rituxan, Treanda, Arzerra

“Me too” – evaluate cost/appropriateness for formulary

pembrolizumab

Refractory melanoma & non-small cell lung cancer

Oct. 2014 IV$120K per year Yervoy

“Me too” – evaluate cost/appropriateness for formulary

palbociclibHormone sensitive advanced breast cancer

Jan. 2015 Oral$5 - $10K per month First in Class

Potential to be blockbuster. Hung up with FDA for data issues

nivolumabSquamous non-small cell lung cancer

June 2015 IV $150K per tx course

Yervoy“Me too” – evaluate cost/appropriateness for formulary

daratumumab Multiple Myeloma 2015 IV UnknownVelcade, Kyprolis, Pomalyst, Revlimid

Game changer for therapy options; expect to cover

panobinostat Multiple Myeloma Nov. 2014 Oral $54K per tx course

Velcade, Kyprolis, Pomalyst, Revlimid

To be given in combination with Velcade

olaparibBRCA mutation-positive ovarian cancer

Summer 2016

Oral $12 - $15K per month

First in Class Likely delays with FDA approval

Daratumumab has the potential to improve patient outcomes in multiple myeloma patients, but cost is yet unknown. Other oncology therapies are expected to have moderate impact at similar costs to existing therapies.

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Contact

Martha Allen, VP Business DevelopmentExcelsior Solutions7401 Metro Blvd, Suite 210Edina MN 55439

mallen@excelsiorsolutions.com

(o) (952) 562-5542 (m) (612) 325-7594

Please check out our team and client testimonials at: www.excelsiorsolutions.com

For questions or more information:

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