1

Pharmacy Trends and Management Opportunities

Kerry Bendel, R.Ph.Director of Pharmacy

Medica

September 14, 2007

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Agenda

Pharmacy Trend Experience

Trend Drivers and Management Opportunities

Call to Action

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Pharmacy Trend Experience

4

Rx Drugs

Source: “Medicare-approved Drug Discount Cards and Prescription Drug Prices,”Chisholm et al, Am J Health-Syst Pharm – Vol 62, July 15, 2005

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MCHA Pharmacy Utilization PMPM

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

$180.00

Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07

Amt P

aid

PM

PM

0

0.3

0.6

0.9

1.2

1.5

1.8

2.1

2.4

2.7

Rx's

PM

PM

Amount Paid PMPM# Rx's PMPM

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2007 YTD MCHA Top Drug ReportCost Rank

Medica BOB Cost Rank Brand Name Therapeutic Use # of Rx's Amount Paid by

Plan% of Total Amt Paid

Avg. Amt Paid/Rx

Utilizing Members

1 1 LIPITOR High Cholesterol 10,539 $675,123.20 3.46% $64.06 32542 4 ENBREL Rheumatoid Arthritis, Psoriasis 479 $593,061.33 3.04% $1,238.12 1113 5 EFFEXOR XR Depression 3,256 $381,718.31 1.95% $117.24 7924 18 COPAXONE Multiple Sclerosis 257 $327,205.17 1.68% $1,273.17 575 77 REYATAZ HIV/AIDS 496 $322,977.36 1.65% $651.16 1096 6 PROTONIX GERD 3,027 $320,196.26 1.64% $105.78 8867 64 ATRIPLA HIV/AIDS 292 $300,474.99 1.54% $1,029.02 608 73 TRUVADA HIV/AIDS 463 $300,408.24 1.54% $648.83 1119 2 PREVACID GERD 2,206 $281,618.13 1.44% $127.66 608

10 3 ADVAIR DISKUS COPD 2,036 $272,759.25 1.40% $133.97 74311 17 LANTUS Diabetes 3,013 $270,302.48 1.38% $89.71 88412 7 SEROQUEL Antipsychotic 1,483 $269,744.94 1.38% $181.89 37113 31 HUMALOG Diabetes 2,294 $262,787.69 1.35% $114.55 67514 14 LAMICTAL Anticonvulsant 1,254 $260,592.48 1.33% $207.81 29715 107 EPZICOM HIV/AIDS 425 $257,719.35 1.32% $606.40 9416 42 CELLCEPT Transplant Rejection 585 $248,121.54 1.27% $424.14 13717 10 ACTOS Diabetes 1,863 $242,254.56 1.24% $130.03 50218 16 CYMBALTA Depression 1,821 $221,158.59 1.13% $121.45 49019 20 TOPAMAX Anticonvulsant 997 $215,098.65 1.10% $215.75 26020 15 ONE TOUCH ULTRA TEST STRIPS Diabetes 2,493 $207,610.66 1.06% $83.28 100821 115 KALETRA HIV/AIDS 366 $206,183.56 1.06% $563.34 8522 12 LEXAPRO Depression 3,200 $197,938.99 1.01% $61.86 90123 35 REBIF Multiple Sclerosis 129 $178,083.69 0.91% $1,380.49 2524 40 AVANDIA Diabetes 1,467 $168,069.27 0.86% $114.57 40225 25 HUMIRA Rheumatoid Arthritis, Crohns 124 $165,586.87 0.85% $1,335.38 29

Top 25 Drug Total 44,565 $7,146,795.56Total Drug YTD 346,621 $19,529,654.11Top 25 as a % of Total 12.86% 36.59%

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Plan Paid Per Prescription

$0.00

$25.00

$50.00

$75.00

$100.00

$125.00

$150.00

Jan-06

Feb-06

Mar-06

Apr-06

May-06

Jun-06

Jul-06 Aug-06

Sep-06

Oct-06

Nov-06

Dec-06

Jan-07

Feb-07

Mar-07

Apr-07

May-07

Jun-07

BrandGeneric

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MCHA Generic Utilization

53.00%

54.00%

55.00%

56.00%

57.00%

58.00%

59.00%

60.00%

Jan-06

Feb-06

Mar-06

Apr-06

May-06

Jun-06

Jul-06

Aug-06

Sep-06

Oct-06

Nov-06

Dec-06

Jan-07

Feb-07

Mar-07

Apr-07

May-07

Jun-07

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7.90%

5.40% 4.87%

13.41%

7.20%

2.80%2.90%

-7.31%

9.00%-12.00%

1.00%

-5.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

2005 2006 2007

Drug Trend

ESI*Medco+MedicaMCHA

(Projected)

Source: *ESI 2005, 2006 Drug Trend Reports+ Medco 2005, 2006, 2007 Drug Trend Reports

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Trend Drivers and Management Opportunities

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Member Contribution

Price

Utilization

Mix

Benefit Coverage

Demographics

Introduction to Drug Trend Drivers

Pharmacy Trend Drivers

What factors arewithin our control?

Member Contribution

Price

Utilization

Mix

Benefit Coverage

Demographics

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Introduction to Drug Trend Drivers

Pharmacy Trend Drivers

Member Contribution

Price

Utilization

Mix

Benefit Coverage

Demographics

Strategies used to address controllable influences

Formulary management

Clinical and trend management

Plan design

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Cost and Quality – Asking tough questions

Can we have it all and expect someone else to pay for it?

Will medicine save us despite our unhealthy lifestyles?

Should we pay for care that’s not recommended by experts nor based on evidence?

What defines medically necessary?

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Cost and Quality – Making Tough DecisionsPreferred productsPrior authorization – medical necessityGeneric incentives

Formulary Management

Step therapy: Use of a generic or low cost brand prior to a higher cost brand when medically appropriate.Quantity level limits: Supports benefit design, member cost share and prevents wasteDisease and care management: Chronic condition coaching

Clinical / Trend Management

Cost ShareNetwork Restrictions Coverage exclusions or restrictions by category

Plan Design

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Intervention Targets

• Generic incentives

• Formulary notifications

• Online self-service

• Disease education and management

• Specialty pharmacy services

• Wellness and lifestyle programs

Members

• Formulary Interventions

• Pay for performance

• Generic samples

• Retrospective DUR

Physicians

• Brand & generic substitution

• Therapeutic substitution

• On-line point-of-service edits

Pharmacists

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MCHA Statin Utilization

0100200300400500600700800900

1000110012001300140015001600170018001900200021002200230024002500

Jan-06 Feb-06 Mar-06 Apr-06 May-06

Jun-06 Jul-06 Aug-06

Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07

Jun-07

LIPIT ORSIM V A ST A T INV Y T OR INC R EST ORLOV A ST A T INPR A V A ST A T IN SOD IU MPR A V A C HOLLESC OLLESC OL X LM EV A C ORZ OC OR

Impact of Managing the Formulary

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A Call to Action

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The Impact of Decision Making

The True Cost of a Prescription Decision

Nexium: $185Prilosec OTC: $20

$165 per month

The new math equation is:

Prilosec OTC + = Nexium

$17,172

NPV* = $17,172

* Net Present Value

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The Obesity Burden64%: Increase in diabetes patients, 1987-2002

1,000%: Increase in obesity-related costs, 1987-2002

$1,244: Annual health care spending difference, normal weight v. obese adults.

Source: Health Affairs, June 2005% of U.S. Health Spending

On Obesity-linked Conditions

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Specialty Pharmacy Cost

1 IMS Health, Company Reports and JP Morgan estimates2 Ernst & Young, “Competitive Growth, Growing Competition,” Beyond Borders 2005

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MEDICA