Technology is the Strategy : Innovation in Pharmacy Care

1. Technology is the Strategy :Innovation in Pharmacy Care Stuart M. McGuigan SVP and Chief Information Officer

2. Who is CVS Caremark? CVS Caremark is the largest pharmacy health care provider in the U.S. • $87+ Billion in overall revenue = Fortune 19 (2009) • Over 200,000 employees • 7,100+ Stores throughout the U.S. including Longs in Hawaii • Over 45 million participants served by our Pharmacy Benefits Management business • 4+ million customers per day 2 21679

3. CVS Caremark…A Leader in Health Care PBM Retail Greater convenience and choice Improved health outcomes Lower overall health costs Mail Specialty

4. #1 Same-store Sales Growth #1 Sales per Square Feet #1 Retail Loyalty Program #1 Profitability CVS/pharmacy is the Premier Retail Drugstore Chain in the Country • Currently fill ~19% of the U.S. retail drug market • #1 or #2 in 20 of the top 25 markets across the country Sources: Drug Store Distribution Guide, NACDS, CVS estimates

5. CVS Caremark: World-Class Pharmacy Benefits Manager Fill or manage ~20% of all U.S. scripts Over 2,200 clients…62 million lives Network of over 64,000 pharmacies #2 mail order pharmacy #1 in specialty pharmacy #1 in generic dispensing rate 98% client satisfaction rating 6

6. …Leader in Retail Clinics Over 500 clinics in 26 states ~ 8 million patient visits since inception New products and services focus on chronic condition management Diabetes, hypertension, hyperlipidemia and asthma

7. Technology Vision Providing innovative, efficient and effective technology solutionssupporting pharmacists, nurses and service professionals in the delivery of expert care.

8. IT at CVS Caremark: Some Random Facts • 2,600 IT professionals • Significant systems development scalability from off-shore and on-shore partnerships • 3,200 servers generating compute power to process a gazillion simultaneous transactions • 4,750 terabytes of on-line storage • Network bandwidth for 100 petabits of data and voice traffic • Dot com sites average 3.2 million hits per day

9. Guiding Principles for Managing IT All IT projects are business projects Innovation is in the eye of the customer Performance is defined (and paid for) by the user Data belongs to the enterprise not the application We manage through transparency not escalation Every iteration is faster – better – cheaper Never make the same mistake twice

10. Case Study: CVS Retail Pharmacy System

11. Retail Pharmacy Systems: what do they do? • Prescription fulfillment / management • e.g., all store functionality, workflow and reports • Third Party Reimbursement • e.g., online billing and exception management • Product Management • e.g., pricing • Financial Reporting • e.g., sales reporting and A/R • Communications • e.g., patient and doctor contacts

12. Situation Assessment • Legacy System: Rx2000 • Highly distributed • Highly reliable • Reasonably efficient • If it isn’t broken do we need to fix it? • Technology Strategy Question: Can centralized processing and Java technology scale to 7,000+ stores? • Can we use new technology to create a better operational model?

13. The Project: RxConnect • Technology Enabled Goals: • System flow follows pharmacy workflow driving new efficiencies • All work is in the system, paper queues eliminated • New workflows can be developed and deployed rapidly • Performance can be monitored real time and at the transaction level • Roll out success defined: • No learning curve • No service or quality degradation: None! • 99.5% of stores open on time (except 24 hour stores) • Oh and by the way, roll out to newly acquired Long’s store first

14. Design Development Conversion Technology Deployment RxConnect: The Plan Conduct full blown usability studies in a realistic pharmacy lab: design until done Develop and test a 25k function point code base to deliver the required capabilities Convert 1.1B prescription and 100M patients into RxConnect to ensure a smooth transition on day 1 Ensure the application and infrastructure is able to scale and support 7000+ stores Train and support 70k store employees and manage logistics of over 7000 overnight conversions

15. Design Development Conversion Technology Deployment RxConnect: The Result Next day return to productivity High degree of reliability, even as new releases are being deployed during conversion Achieved goal of 99.5% on time openings With targeted upgrades, application and infrastructure is able to scale and support 7000+ stores All stores converted, no processing left on legacy system

16. Requisite Complex Technology Diagram No 1.

17. On average stores outperformed pre-conversion service trends within 5 weeks of conversion Index vs. pre-conversion baseline Comparison Of Pharmacy Customer Service Scores (Triple S) pre- and post-conversion Conversion Week Weeks post conversion RxConnect Post Conversion date is the “Week of System Conversion” dateWeeks with base of 30 or more are shown. Base Sizes and # of Stores reflects data for the Rx Connect 2010 group

18. Prescriptions requiring correction during verifications Enhanced process and tools drove measurable improvements in quality and productivity per 100 scripts 50% reduction in rework 20% reduction in reported quality incidents

19.  I must say, that my first two stores now on Rx Connect, absolutely love it!! … I am extremely impressed with the ease of roll-out.  It was essentially seamless … …We have a grocery store competitor that recently rolled out a new computer system (Kroger).  It is amazing how miserable those pharmacists are… It is definitely refreshing to have the complete opposite experience with our rollout… Pharmacy Supervisor Stores and Field Management Teams quickly embrased the benefits of RxConnect

20. RxConnect enables new thinking Now that we have centralized, what else can we do?

21. RxConnect architecture enables key strategic initiatives Pharmacy Call Center Patient Hub True Central System Component-based design Retail Delivery Framework CVS.com Consumer Engagement Engine

22. Pharmacy Call Centers Will Remove Approximately 85% of Incoming Calls Pharmacists Focus On Proactive Care Healthcare Providers Realize Improved Outcomes Centers Staffed by Pharmacists and Pharmacy Technicians

23. Call Center substantially reduces time on phone calls… 4.6 hours of talk time in average store per day... ...Call Center will reduce this to 1.2 hours per store per day Minutes Minutes Time of Day Time of Day

24. Resulting in better store experience % of customers extremely satisfied +5.5 +7.2 +2.9 +2.6 +3.8 +10.7 +4.6 Speed of service Ready when promised Overall environment Answering questions Attentive staff Noise level How well communicated with you Pre-pilot During pilot

25. The Consumer Engagement Engine (CEE) is an enterprise technology ecosystem to identify, manage and deliver opportunities Deliver Opportunities • Customer Service • RxConnect • Caremark.com (PBM Member Portal) • Letters / mailings • Outbound IVR • Caremark Messaging Platform (e-Mail) • ACE (Outbound Phone Advisors) Identify Opportunities Manage Opportunities • Longitudinal Prescription Data • New Therapy Starts • Disease Management Programs • Enterprise Opportunity Management System (Expert System) • Enterprise Data Warehouse and Analytics Consumer Engagement Engine

26. Requisite Complex Technology Diagram No 2.

27. Pharmacy Advisor – Diabetes Care Closing Gaps In Diabetic Therapy • CEE technology enables pilot results at scale • Identifies/delivers opportunities in timely manner • Delivers messages through most effective channel for each member • Coordinates messages across channels to ensure consistent member experience • Optimizes process for message delivery within channels and ensures execution • Tracks status and initiates follow-up where necessary Percent of gaps-in-care closed 91% 59% Control Pilot Control Pilot FACE-TO-FACE ADVISORS PHONE ADVISORS Through the CEE technology we are able to achieve world class health outcomes with multi-channel coordination * Monthly registration rate based on independent sign-ups on single client sample (6-month average)

28. ReadyFill at Mail™ ReadyFill at Mail Enrollment Rates • Increasing ReadyFill at Mail enrollment rates through improved influence • Leveraging impact of Care representatives by engaging members when they call • Re-engaging members more effectively using previous contact history and response data Percent of Engagement Email Mail Enhanced Outbound Inboundvia Care HISTORICAL ENGAGEMENTS CEE-POWERED ENGAGEMENTS Through CEE technology we have been able to influence behavior and drive higher rate of enrollment

29. What does the future look like1? ePrescribing Increased healthcare coverage creates new demand Primary Care supply will not meet the demand Patients and Payors will expect increased productivity, quality and service Government incentives will be successful in driving technology into the Doctor’s office 1. One CIO’s opinion

30. ePrescribing • A number of factors support continued growth in 2011 and beyond • ePrescribing of controlled substances • Federal government HITECH rebates to prescribers for EMR adoption • Medicare penalties for not ePrescribing • Platform has grown beyond just electronic communication of prescriptions • Patient medication history • Patient prescription benefit information • RxConnect automates e-prescribing workflow and tracking • CEE enables the right intervention at the right time in the right channel

31. E-prescription growth growing at a rapid pace e-script volume (000) 280M e-Rxs 113% CAGR E-enabled prescribers 36,000 74,000 156,000 200,000 Expected Source: SureScripts, NACDS, CVS Caremark analysis *Annualized 2010 projections using SureScripts Jan’10-Jun’10 transactions

32. In Conclusion CVS Caremark continues to look to technology to achieve and maintain a competitive business advantage There is no shortage of opportunities in healthcare (or likely anywhere else) for new applications of technology IT needs to help drive AND implement business strategy