Specialty Pharmacy Channel Distribution Panel

1. Specialty Pharmacy Channel Distribution Panel Moderated by Mark ZitterApril 3, 2013

2. Most Payers Limit the Number of Specialty Pharmacies They Use… For specialty agents not subject to manufacturer-imposed limited distribution, my organization… Payers n = 103 Percentage of Payers

3. …But Only a Minority Require Use of Specialty Pharmacy Vendors Third party vendor use (specialty pharmacy, wholesaler/distributor) is ______ for your network physicians. 30% Fall 2012 Payers n = 103 No significant differences from Spring 2012 report

4. Payers See Plenty of Excess Cost In the System… How much excess cost you could eliminate from cancer treatment without negatively impacting health outcomes? Percentage of Payers

5. …And Think Most Excess Cost Relates to Drugs and Care Sites How significantly does each of the following drive excess cost in oncology care? Significant driver of excess cost (5) Above average driver of excess cost (4) Mid-range driver of excess cost (3) Minimal driver of excess cost (2) Does not drive excess cost at all (1)

6. Payers Want More Oral Therapy to Go Through Specialty Pharmacy… What percentage of your organization’s oral oncology therapy volume goes through each of the following distribution channels? What is your organization’s preferred method of oral oncology therapy distribution?  Share of Total Oral Therapy Distribution No significant changes from Summer 2011 edition

7. …and So Do Oncology Office Practice Managers What percentage of your organization’s oral oncology therapy volume goes through each of the following distribution channels? What is your organization’s preferred method of oral oncology therapy distribution?  Share of Total Oral Therapy Distribution No significant changes from Summer 2011 edition

8. For Infusible Therapies, Payers Want to Reduce Buy-and-Bill… What percentage of your office-administered/infusible oncology therapy volume goes through each of the following distribution channels? What is your preferredmethod of office-administered/infusible oncology therapy distribution?  Share of Total Office-Administered / Infusible Therapy Distribution No significant changes from Summer 2011 edition

9. …While Practice Managers Like the Status Quo for Distribution Channels What percentage of your office-administered/infusible oncology therapy volume goes through each of the following distribution channels? What is your preferredmethod of office-administered/infusible oncology therapy distribution?  Share of Total Office-Administered / Infusible Therapy Distribution No significant changes from Summer 2011 edition

10. Site-of-Care Preferences Vary by Disease, But Payers Dislike the Hospital What is your organization’s preferred site-of-care for professionally administered therapies in the following categories?  Payers n = 101 Percentage of Payers

11. ASP Payment Has Sent Patients to Hospitals, But Reduced Total Costs Since adopting ASP-based reimbursements in your commercial population, which of the following has your organization experienced? Payers n = 76 Percentage of Payers

12. The Distribution Channel Challenge • Payers know there is waste in the system and want to use distribution channels that will minimize excess expenditures • With costs continuing to grow and care delivery becoming increasingly integrated with financial risk, which specialty distribution channel(s) will win? • Do we need all these channels? Does each add real and differentiated value? • How can and should the various channels integrate? • How can each channel prove its value to payers?

13. Specialty Pharmacy Channel Distribution Panel Moderated by Mark ZitterApril 3, 2013 http://go.zitter.com/nasp

14. Specialty Pharmacy Channel DiscussionHospital/Integrated Delivery Network Channel Thomas Blissenbach Director, Business Development Fairview Pharmacy Services, Minneapolis

15. Fairview Pharmacy Services, LLC • Specialty Pharmacy 17+ years • URAC Standards • Payer – Pharma agreements • Integrated Care Model

16. Hospital/IDN Channel • Relatively small today • Hasn’t been focus • Size matters • Specialists = Specialty Drugs • Need to do it right • Variety of options

17. Hospital/IDN Channel Strengths • Ambulatory care • Point of care • Improve adherence • Integrated Care Model • Access to medical record • Therapy Management • Compliments new payment models: ACO, At Risk Payer Agreements • Capture

18. Hospital/IDN Weaknesses • Hasn’t been focus • Expertise • Capital/space • Payer – Pharma agreements • Data capability

19. Hospital/IDN Opportunities • Revenue/margin • Retain patients • Improve outcomes

20. Hospital/IDN Threats • Loss of control • Missed opportunity

21. Independent Pharmacy Channel Mike Ellis Corporate Vice President, Specialty Pharmacy & Infusion, Walgreens

22. Independent Pharmacy Channel Kurt A. Proctor, Ph.D., RPh Senior Vice President, Strategic Initiatives National Community Pharmacists Association

23. National Community Pharmacists Association • Founded in 1898 as the National Association of Retail Druggists (NARD) • Represents pharmacist owners, managers, and employees • 23,000 non-publicly owned pharmacies • Single store, multiple locations, regional chains

24. Independent Pharmacies 1,800 rural independent pharmacies serve as the only pharmacy provider in their community

25. Independent Pharmacists • Patients trust us, choose us • Compete on service now • RPh available 24/7/365 • Able to document • Able to bill • Want to care for their patients completely, including most “specialty” drugs

26. Buford Road Pharmacy, Richmond, VA Health Living Center – Clinical Services • Hemoglobin A1c Test • Blood Sugar Test • Blood Pressure • Bone Density Screening • Cholesterol Screening • Coumadin Clinic • Medication Therapy Management • Medicare Part D Consultation • Diabetes Management • Routine & Travel ImmunizationsInfluenza, Pneumonia, Shingles, Meningitis, Hepatitis A & B, Polio, Yellow Fever, Rabies, Tetanus/Diphtheria/Pertussis, Typhoid, Japanese Encephalitis, Human Papillomavirus

27. Independent Advantages • Niche service experience • Understand the need to deliver support services and do so at competitive prices • Are the pharmacy home for this high-touch group of patients • Independent pharmacies provide face-to-face service that others can’t

28. Core Message from NCPA Independent pharmacies in your network will yield documented patient adherence and monitoring Independent pharmacists know… • Their patients • Their patients’ family • Their patients’ caregivers • Their patients’ doctors • Their patients’ environment

29. Specialty Pharmacy and Dramatic Change In the Oncology Channel Discussion Burt Zweigenhaft CEO Onco360

30. Ralph StayerFlight of the Buffalo (1994) "Change is hard because people overestimate the value of what they have—and underestimate the value of what they may gain by giving that up.”

31. Oncology Drug Market Hitting Critical Inflection Point • Oncology Rx spend projected to grow to $130B by 2020 • 50% of drugs in development are oncology medications • 36 new cancer drugs next 3 years • 907 cancer drug clinical trials or FDA review, 2x number in pipeline 6 years ago • 90% of oncology drugs approved in the last five years cost $20,000/3-month cycle Sources: The Specialty Pharmacy Times, the National Institutes of Health, and Industry Reports.

32. Purchaser's Demand Call to Action Trend is Unsustainable! • Commercial Payer Cancer Cost 2010: * NE Commercial Payer • $457.6MM per/1MM lives • (Includes: In-Patient, Out-Patient, E&M, Rx Administration, Drugs, Surgery, Radiation, Imaging and Labs) • $187.2MM per/1MM lives • (Includes: E&M, Rx Administration and Drugs) • Cost trend growth faster than CPI & Medical Cost Inflation at 12% - 23% • Medicare cancer incidence 48 per 1,000 members • Commercial cancer incidence 9 per 1,000 members • 35% undergoing treatment Average Payer Costs Per Cancer Patient Sources: Specialty Pharmacy Times, NIH, HealthSource, ASCO, and Industry Reports.

33. 75% Increase In Cancer Incidence Projected By 2030 1.7 MM New Cancer Cases Projected for 2012….was 1.4 MM in 2010 10,000 New Beneficiaries in Medicare or 3.6 MM a year

34. The Average Oncologist’s Drug Spend • Annually Prescribes $3MM Payer Patient Mix By Drug Admin Route

35. Drugs Used to Drive-Dominate Practice Margins Decline In Rx Margin for Oncologists

36. Care Shifts to Hospitals at Higher Costs • Un-sustainable shift in cost with no improvement in care • Leveraging 340b drug costs and Part A versus Part B Medical Billing • Medicare and Payers will burn down reimbursement over time 54% Of Practices Closed, Sent Patients Elsewhere, Or Were Acquired By Hospitals Source: Community Oncology Alliance, 2011 Study

37. Moving Away From Traditional Drug “Buy and Bill”

38. Oncologist Shortage Crisis = Need Physician Extenders Board Certified Oncology Pharmacists Fill GAP

39. Concordance with Evidence and Outcomes is the Issue

40. Oncology Drug Dispensing is Complex Typical Daily Chemotherapy Regimen: Across Multiple Benefits Typical Chemo Administration Kit:

41. Cancer Protocols = Drugs are Inter-dependent

42. Pharma HUB Workflow Patient Support Services Key Product Data BCOP Patient Payment Claims Provider (MD/Hospital) Manufacturer Oncology Pharmacy Payer 3PL

43. Universal Problem In Cancer - Oncology “Payers own ALL Medical Patients but not always the Specialty or Oral Drug Risks due to PBM carve out nature of Industry” Benefit Fragmentation Results In Dispensing Fragmentation Clinical Fragmentation Poor Outcomes Analytical and Registry Gaps Less Patient/Provider Satisfaction Less Utilization Control Less Cost Contracting Control More Adverse Events Hospitalization Adverse Site of Care Transfers Drug Waste • PBM • Orals and sometimes Injectable • Specialty • Orals, Injectable and sometimes Infused newer agents • Medical • Infused or Physician-Outpatient Drug Administration

44. Oncology Requires Integrated Benefit Solution • Drugs will be as ASP+ Whatever • Value of Clinical Services most important to patient, oncologist, Pharma and payers • Leverage combined experience to optimize benefit integration and control • ACO’s strive to achieve responsible initiatives and activities to deliver on quality and value Care Mgmt.

45. Value Based Continuum of Care Services

46. Oncology Clinical Service Values… Case Studies

47. Oncology Pharmacy Channel Requires Unique Competencies • Board Certified Oncology Pharmacy Experts • Comprehensive Benefit Access Oral-Injected-Infused • Compressed Operational Timelines • Treatment Day & Dose Dispensing • Pathway Concordance with Evidence and Clinical Flexibility • Medication Treatment Management (MTM) • Patient Financial Assistance and Insurance Exchanges • Access to Limited Distribution and Pedigree drugs • Highest Standard Accreditation and Facilities • USP 795 & 797 Compliant Clean Rooms aka NECC • NIOSH Compliant Product Storage & Handling aka NECC

48. More Change Ahead CMS Driving Bus • Near term is tiered ASP….. meaning that the larger the ASAP the smaller the percentage of add-on payment • Seems less likely given that sequestration occurred and docs are now effective getting roughly ASP plus 4.3% or loss of 33% margin • Longer term payment options:  • Bringing back CAP • Moving some or all buy and bill drugs intro Part D (Yesterday)  • Coverage options are the ones we always talk about—greater payment for outcomes, following clinical protocols, risk sharing arrangements (think ACOs) and value based purchasing! • General issue—when does the exception (340B) swallow the rule (ASP)?  Tremendous growth of 340B could become the majority of cancer drugs purchased

49. Part B to Part D Late Breaking News • CMS quote, MA = Medicare Advantage plans, which are Medicare plans offered by a health plan such as Aetna, United, etc.  Patients are able to CHOOSE to brown bag a Med B drug, and have it covered under Part D so long as the following stipulations are met: • Patient is enrolled in a Medicare Advantage plan that offers Part D coverage • The drug being prescribed is a Part B drug that CAN ALSO be covered under Part D • The patient ELECTS/STATES PREFERENCE to receive the drug from a pharmacy instead of getting it from their physician

50. Machiavelli Circa 1469-1527 "Whosoever desires constant success must change his conduct with the times.”