Managing Healthcare Costs By Adopting The New Business Model for Managing Pharmacy Benefits

1. Managing Healthcare Costs By Adopting The New Business Model for Managing Pharmacy Benefits

2. Today’s Headlines… “National health expenditures are projected to reach $3.4 trillion by 2013.”- Centers for Medicare & Medicaid Services “Americans consume about 3 billion prescriptions on average….” – National Coalition on Health Care “Drug spending in the United States rose 11 percent in 2003 to $180 billion.” – National Coalition on Health Care “PBMs have been accused of failing to act in the best interests of their clients.” – Consumersunion.org

3. Need for CHANGE • High Operating Costs Paperwork in America’s health care system is one of the largest costs. In 2003, a study done by The New England Journal of Medicine, “estimated that administrative costs took 31 cents out of every dollar the United States spent on health care….” – NY Times • Hidden $$ Incentives “In a traditional PBM, the plan sponsor may lose $1 to $4 per claim from retained rebates or undisclosed MAIC (maximum allowable ingredient cost) prices.” – Drug Topics

4. Closed doors between Parties “A few have sued their PBMs for alleged abuses of fiduciary duty, including efforts to conceal rebate revenue.”– Businessinsurance.com • “Drug Switching” Some companies “have been accused of steering clients towards more expensive drugs in order to increase their own compensation….” – Consumerunion.org

5. Time for CHANGE Infrastructure inertia results from existing business models and delivery systems that mandate that revenues are derived from businesses behaving in a certain way. These behaviors have driven fragmentation, inefficiencies and administrative burden while doing little to improve the quality of care… Ventegra was formed to create new channels in the delivery of healthcare that would be more efficient and less fragmented. - Robert Taketomo, Pharm.D, MBA, President and CEO, Ventegra

6. is NOT a PBM… NOT a GPO… *PBM: Pharmacy Benefit Management company **GPO: Group Purchasing Organization

7. is THE NEW BUSINESS MODEL … The First Contracting Services Organization (CSO)!

8. Ventegra is the first managed care Contracting Services Organization (CSO) representing our clients as their fully transparent contracting arm to control rising drug benefit costs by providing a choice of Pharmacy Benefit Administration (PBA) services.

9. Ventegra’s CSO offers a new channel in the delivery of pharmacy benefit management services • Business Culture is based on “truth and integrity” • Payors regain control with Ventegra’s CSO • Alignment of incentives across the board

10. What’s the Difference?

11. Payors’ ChoiceChoose only what you really need Ventegra offers a wide variety of Pharmacy Benefit Administration Services and Programs Payors CHOOSE what they want.

12. Key Ventegra Services and Programs • Contracting for pharmaceutical drug discounts • Transparent pharmacy claims administration • Mail service prescriptions at true acquisition cost (Cost-based Model) • Ventegra Injectable Program (“VIP”) • Robo-Rebatesm System: lets you see the discounts! • Formulary management and controls • Pharmacy benefit design strategy

13. Ventegra is not “going” to be transparent. Ventegraistransparent.

14. The Difference… • True Transparency via • Full disclosure on ALL discounts/rebates • Any/All administrative services fees disclosed • Full access by payors to the terms of their agreements • Discounts/rebates may be administered by payor • Full pass through on retail pharmacy rates • Acquisition cost for mail order and injectable prescriptions • Transparency in claims processing • All discounts/rebates received by payor

15. Room for Improvement… Mail Service Injectables Rebate Processing Ventegra makes a historic difference!

16. Issues with Current Mail Order Delivery Systems • Hidden margins on drug costs and claims • Switching programs to more costly drugs • Dispensed quantity discrepancies • Charges for errors may not be reversed • Extra charges for retail prescriptions • $$ Differences between true cost and MAC Many Hidden Costs & Charges! Ventegra offers solutions!

17. Ventegra’s Cost-Based Mail Service Model Potential Financial Return* (all costs are per tablet/capsule) *Actual analysis for Health Plan “X” conducted on 2004 data **Before significant generic drug bid contracting process ***Rounded to the nearest whole number

18. The “Injectable” Dilemma • Unclear definition of “Specialty Injectable” • High $$ Cost (average >$1,000/prescription) • Is it Pharmacy Cost?? Or Medical Cost?? • What is the true cost? • Any hidden charges? • Need for new benefit designs and utilization management systems Ventegra offers solutions!

19. Ventegra Injectable Program (“VIP”)The TURNKEY Solution • Acquisition Cost based business model • Discounted injectable pricing direct from manufacturers • Integrated medical and pharmacy claims processing • A well-designed distribution system • Utilization management and authorization systems • Excellent customer service • Strategic consulting

20. Rebate Processing Woes • Contract terms not fully disclosed • Hidden discounts, fees and rebates • Total rebate $$ unknown – costly audits • Payors do not have control • True drug costs unknown • Rebates treated as “revenue” instead of “cost offset” Ventegra offers solutions!

21. Robo-Rebate System: The Benefits are Clear • Web-based = NO costly IT/IS expense • Rebates received is what you get = 100% pass through • Accurate invoices = NO costly audits • Complete report portfolio = TRUE drug cost revealed • Forecast reports = MAXIMIZE rebate opportunities • Access to contract terms 24/7 via internet = TOTAL accessibility

22. Formulary Services • Three Formularies • Preferred • Premium • Premium Plus • Consumer Oriented • Customized for Payors • Formulary management and control • Pharmacy Benefit Design Strategy

23. Alignment of Incentives • Payors - Realize the TRUE value of discounts/rebates - Can do business planning with confidence - Afforded more formulary choices • Providers - Engaged in the formulary process - Administrative simplification • Patients - Patients realize the benefits of reduced drug costs - Greater access to important pharmaceutical products • Pharmaceutical Industry - ALL discounts/rebates reach the intended parties - Improved image with transparent discounts/rebates

24. The difference is not in “what we do”… …but HOW we do it!

25. GET IN TOUCH WITH VENTEGRASM

26. Sources: “National Health Care Expenditures Projections: 2003-2013”, Centers for Medicare & Medicaid Services, September 17, 2004 “Health Insurance Cost”, National Coalition on Health Care, 2005 “Fact Sheet: Disclosing Relationships Between Pharmacy Benefit Managers and Drug Companies”, Consumersunion.org, 2005 “The Medical Money Pit”, Paul Krugman, New York Times, April 15, 2005 “Under Mounting Pressure, New Breed of PBM is Born”, Fred Gebhart, Drug Topics, September 12, 2005 “Employers Pushing Their PBMs for Revenue Information, Rebate Funds”, Karen Pallarito, Business Insurance, September 19, 2005