Specialty Pharmacy: “The Inside Story”

1. Specialty Pharmacy:“The Inside Story” John Aforismo, B.Sc. Pharm., R.Ph Chairman & Founder RJ Health Systems International, LLC

2. AGENDA • Current Reimbursement Trends • Payor Models • Managed Care Expectations

3. Payor Issues

4. Reimbursement: Trends AMP AverageManufacture Price SWP Suggested Wholesale Price AAC Average Acquisition Cost AWP? Average Wholesale Price MAC? Maximum Allowable Cost ASP? Average Sales Price PAYORS Reimbursement Methodologies? HCPCS Drug CodevsNDC WAC? Wholesale Acquisition Cost

5. Reimbursement: Trends • Payors (commercial & federal government) are using variations of the following: • ASP (average sales price) • AWP (average wholesale price) • WAC (wholesale acquisition cost) • SWP (suggested wholesale price) • AMP (average manufacturer’s price) • AAC (average acquisition cost) • MAC (maximum allowable cost) • Pharmacy benefit • Medical benefit

6. New Reimbursement Methodologies MAC (Maximum Allowable Cost) • “A list of prescription medications established by a health plan (PBM or Third Party) which will be covered at a generic product level price.” • Pharmacy Benefit: • Medical Benefit: • HCPCS Drug Code Level • NDC Level Acquisition costs used as reference

7. New Reimbursement Methodologies Average Acquisition Cost (AAC) • Used for Medicaid • Surveys of Pharmacy Purchases • Reflects the final drug price paid by the pharmacy after subtracting discounts • Each state reimbursement would be different • NA DAC- National Average Drug Acquisition Cost Potential New Benchmark from CMS

8. NADAC National Average Drug Acquisition Cost • Developed in response to FDB ceasing publication of AWP in September 2011 • More precise than AWP/MAC • For Medicaid Drug Reimbursement

9. Is A New National Benchmark Needed?

10. Reimbursement: Observations

11. Reimbursement Observations Present Payor Contracts Retail Pharmacy • Brand name drugs: • Usually AWP discounts range from AWP−14% to AWP−16% (plus dispensing fee) ($1.40 – $1.50) • Generic drugs: • MAC plus dispensing fee (AWP-76 or MAC) ($1.40 – $1.50) Mail Order Pharmacy • Brand name drugs: • AWP discounts range from AWP−23% (plus a small or no dispensing fee) • Generic drugs: • AWP− (plus a small or no dispensing fee)

12. Reimbursement Observations Specialty Pharmacy • AWP discount can vary by drug with maximum discounts seen of AWP–35% • Payors requiring NDC on claim when HCPCS Drug Codes is supplied.

13. Specialty Pharmacy Managed Care Expectations

14. Specialty Patient Workflow Benefits Verification Proactive Clinical Assessment Initial Prescription Received Prior Authorization & Step Therapy Clinical Reassessment Care Coordination Compliance & Persistence Clinical Intervention Member Outreach Personalized Education Billing Dispensing & Shipping

15. Payor/Management: CMS 1500/UB04 Claim Form 857 Electronic Transfer

16. CONTACT INFORMATION RJ Health Systems International, LLC30 Cold Spring RoadRocky Hill, CT 06067 Phone: 860-563-1223 Fax: 860-563-1650E-Mail: info@rjhealthsystems.com

17. Specialty Pharmacy: “The Inside Story” Stephen Lagano, Founding Principal, Altometrixs, LLC

18. Today’s Objectives • Overview Specialty Pharmacy And Market • Identify Significant Impactful Trends • Identify Key Stakeholders And Their Expectations • Review The Specialty Pharmacy Business/Financial Model • Business/Patient Impact – Reimbursement & Care Perspective • Discussion Into The “Future”

19. Discussion Guide Specialty Pharmacy Market Trends Stakeholders SP Business/Financial Model Reimbursement Trends Into the “Future” Discussion

20. What is Specialty? Specialty Products Specialty Channels* • Injectable and infusion therapies (can be an oral drug) • High-cost ($5,000 and up per patient per year) therapies • Therapies that require complex care (“high touch” services) • Special handling • Specialty Distributors • Servicing physicians • Clinics, etc. • Specialty Pharmacies • * - Specialty products can go through the retail channel

21. Specialty Pharmacy • Specialty Pharmacy: • Specialty pharmacy is a “closed door”pharmacy that is delivering high cost drugs for complex therapies that require patient case management and “high touch” services • Specialty pharmacies provide day-to-day patient management services to optimize the patient’s clinical outcomes, including: • Coordination of care across all providers • Patient counseling and support to assist with injection technique • medication side effects and disease complications • Recognizing and responding to suboptimal responses to therapy • Identifying insurance coverage and reimbursement support services to assist the patient with out-of-pocket expenses that may limit the patient’s access to the drug

22. Specialty Markets • Specialty Markets: • The specialty markets is an aggregate of specialty of specialty products under therapeutic categories • Common specialty markets therapeutic areas*: • Rheumatoid Arthritis • Multiple Sclerosis • Oncology • HIV/AIDS • Human Growth Hormone • Hepatitis C • Infertility • Auto-Immune * - Sample list not meant to be exhaustive

23. $270B The Specialty Markets Are About Growth Drug Spend - Prescriptions Drug Spend: 2006 - $270B, 2011 - $320B, 2016 - $404B Sources:HIRC & IMS Estimates

24. Multiple Influences Affecting Specialty Complex “Picture” Health Care Reform New & Improved Specialty Biologics Patient Pool Increases “Actual Care Act” Affordable Care Act Innovation ????? Quality of Care Provider Pool Decreases Costs/drug Spend Increase Rising Health Care Costs Increasing Challenges = Increasing Opportunities

25. Trends Impacting Specialty Affordable Care Act Patient Protection Act Health Care Reform Multiple Moving Parts – “Not All in the Same Direction” Comparative Effectiveness Research ACO/Health Exchanges Technology “Push” More Patients

26. Trends Impacting Specialty Patient Provider Plan Employers Health Care Costs/Drug Spend Increasing costs/spend Cost Containment Demonstrated Value Utilization Management Outcomes Decision/Payment Criteria Pharmacy/Medical Benefit Management

27. Trends Impacting Specialty Increasingly Orphan Drugs REMs Requirements Reimbursement Needs Drug Pipeline Simple /Traditional Complex/Specialty Retail/ Specialty Channels Critical Patient Needs Limited/ Restricted Channels Therapeutic Expertise

28. Trends Impacting Specialty Employment Situation Generics Other Important “Stuff” Simple /Traditional Complex/Specialty Copay Programs Biosimiliars TBD TBD

29. Multiple Stakeholders & Multiple Interests Payer Patient Physician Data, SP/Plan Performance Patient Info, care planning & mgt Patient, Program Support Services Reimbursement Data, SP/ patient performance Data, Data, Referrals Specialty Pharmacy Mfg HUB/ Patient Center Data, Referrals Funds Data

30. Stakeholder – SP Value Propositions

31. Specialty Pharmacy business Model and Reimbursement trends