NYBGH Pharmacy Management Conference

Bill Resnick Dr. Aran Ron July 22, 2010

Agenda

• • • • • Introductions Current and future state of specialty medications Financial impact of specialty medications Strategies plan sponsors can adopt to control cost and adherence of specialty medications Wrap Up/Q&A

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Who is SBG

• • • A boutique consulting firm with a specialty practice in pharmacy benefits management 50+ years of experience with a team of seasoned professionals with complementary skill sets in all aspects of pharmacy and health care management Areas of expertise include:       insider knowledge of the PBM business model and pricing tactics procurement/contract negotiations clinical expertise (Medical Advisor on staff) plan design modeling ongoing management financial performance audits

SBG currently provides PBM consulting services for over 850,000 commercial members and over 30M additional members through our work with a combination of regional and national health plans across the country 3

Current State of Specialty- Why it’s so Unique?

• • Evolving definition-usually a large molecule injectable – but increasingly a small molecule oral drug (more than just a biologic) Drug that targets a disease with unmet medical need for relatively small populations and include one of the following:   Premium price (very high cost medicines) Coverage under the medical benefit but increasingly under the pharmacy benefit     Generally prescribed by a relatively small number of physicians Specialized pharmacists/care coordinators Often requires special handling and storage Very few generic alternatives available expectations of development of “bio-similars” or follow-on protein products

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Trends in Specialty That Impact Growth

• • • • • Expanded indications for currently approved therapies Expansion of adjunctive therapies for multiple disease states Growing number of oral therapies, particularly Cancer Biotech’s being prescribed earlier in disease progression New FDA drug safety program “REMS” ( Risk Evaluation & Mitigation Strategies)-to ensure benefits of drug outweigh the risks

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Latest Trends

• • In 2009 specialty drug spending increased 19.5%, and is expected to grow at rates of 20% and higher in each of the next three years.

Here’s a look at how traditional medications compared to specialty medications Overall Prevalence Cost/Unit Units Per Rx Patent Expirations New Drugs Intensity Mix

Traditional

4.8% 3.5% 5.3% 0.4% -2.4% 0.3

0.6% -2.9%

Specialty

19.5% 5.7% 11.6% -1.1% 0.0% 1.5% -1.0% 2.7%

Total

6.4% 3.7% 6.0% 0.2% -2.1% 0.5

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-2.3% Prevalence-changes in the % of patients taking meds, Cost Per Unit -changes in ingredient cost+taxes+admin fees-rebates, Units/Rx-changes in the # of units prescribed per fill, Patent Expirations -the impact of branded medications expiring, New Drug Entrants -the impact of new branded drugs in 2009 on spend, Intensity changes in utilization among those using drugs, Mix-changes to lower cost or higher cost products

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Source: ESI 2009 Drug Trend Report

Common Specialty Drugs and Avg. Cost

Drug Enbrel Copaxone Avonex Humira Cellcept Xolair Betaseron Gleevec Rheumatoid Arthritis Multiple Sclerosis Multiple Sclerosis Rheumatoid Arthritis Transplant Asthma Multiple Sclerosis Cancer Average Cost Per Month $1,800 $2,800 $2,400 $1,800 $1,300 $1,900 $2,900 $4,900

Amounts above are averages based on SBG client sampling

• On average 1% of population will utilize these Meds—and can skew the average PEPY cost of $1500 to easily $2500+ in the next few years • Average cost of a traditional medication is $67 vs. $1867 for specialty

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Top Specialty Products

Label Name

Top 10 Specialty Drugs dispensed during the first quarter of 2010 for SBG Sample Client

Disease Claims Ingredient Member ICST Per Member State Cost Copay Rx Copay Member Cost %

ENBREL HUMIRA COPAXONE GLEEVEC RA/Ps RA MS 417 269 134 46 $750,089 $483,275 $373,219 $224,662 $20,711 $14,015 $3,853 $1,115 $1,798.78

$1,796.56

$2,785.22

$4,883.96

Per Rx

$49.67

$52.10

$28.75

$24.24

2.76% 2.90% 1.03% 0.50% AVONEX LOVENOX REBIF 83 174 60 $199,352 $160,714 $155,127 $2,518 $4,454 $1,755 $2,401.83

$923.64

$2,585.45

$30.34

$25.60

$29.25

1.26% 2.77% 1.13% BETASERON TRACLEER 39 21 $114,515 $112,137 $4,623 $2,515 $2,936.28

$5,339.84

$118.55

$119.76

4.04% 2.24% Average Member Cost share is 24% for Generic and 16% for Brand

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Specialty Drugs Unique Clinical Characteristics

• • • • Can be highly effective treatment – move from control of symptoms to slowing disease and potentially achieving remission Mechanism of action includes immune modulation, targeted protein synthesis and other unique focused functions Disease states include • Rheumatoid arthritis, oral oncology, multiple sclerosis, hepatitis C, infused oncology, transplants, growth deficiency, blood cell deficiency, respiratory conditions, infertility, pulmonary hypertension Oncology accounts for half of the specialty drug expenditure – cancer treatment as a chronic disease with declines in cases and deaths

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Growing Pipeline

• • Over 250 specialty medications have been approved by FDA Pipeline is robust with specialty drugs likely to outnumber small molecule drugs – – 633 specialty drugs in development for more than 100 diseases (254 for cancer, 162 infectious disease, 59 auto immune) Approvals will outnumber other new drugs

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Examples of specialty pipeline drugs

    Replagal – treatment of Fabry disease with enzyme alpha-galactosidase A manufactured by human cell line, $250 million projected sales approval 2010 Motavizumab – second generation respiratory syncytial virus antibody, $950 million projected sales, approval 2010 Telaprevir – Protease inhibitor for treatment of hepatitis C, $1.9 billion projected sales, approval 2011 Benlysta – inhibitor of B lymphocyte stimulator for treatment of lupus and RA, projected sales $1.1 billion, approval 2011

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Challenges in Clinical and Fin. Mgmt of Specialty Drugs

• • • • • • Often the only option for treatment of a complex serious illness Production by small number of biotech manufactures allows for high pricing and limited leverage Multiple routes of administration and benefit coverage presents utilization control and reporting issues Traditional methods of pharmacy management not applicable Use of drugs for off label indications Complexity of data capture and coverage – medical, pharmacy and specialty rider

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Coverage of Specialty Pharmaceuticals –Med vs. Rx

• • • • Historical coverage driven by location of administered - self administered drugs under pharmacy and infusions under medical Medical vs. Pharmacy • • Two thirds of plans cover self injectables under pharmacy 70% cover drugs requiring administration by a health professional under medical • 5% have a separate rider Differences in reimbursement rates, billing systems, cost share and utilization management approaches Example – Humira (injectable) vs remicade (infusion)

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Coverage of Specialty Pharmaceuticals –Med vs. Rx

• • • • • Integration under pharmacy specialty medications benefit allows for alignment of incentives, data collection and standardization of benefits Allows for management of me-too drugs or appropriate substitutes Can implement co-pay differentials if substitutes exist Co-insurance and out of pocket maximums – requires integrated processing Allows for data tracking and management

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Limitations of Traditional Pharmacy Management

• • Many traditional management methods not effective • Generic substitutes • • Creation of formularies Maximization of manufacturer’s rebates • • Therapeutic substitutions Quantity restrictions • Patient cost share through tiered copays Requires more complex and sophisticated tools

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Adherence and Affordability

• • • • • Limitations of cost shifting Adherence to treatment is multi-factorial (costs, complex regiments, side effects etc) Can have a significant impact on outcomes and medical costs Increasing cost share may reduce employer/plan drug costs - but will likely impact hospital/ER costs and clinical outcomes Studies have found decrease in fill rate 4.6 more likely if out of pocket costs greater than $250 vs. less than $100

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Categories of approaches to manage specialties

• • • • More clinical and utilization management Provider reimbursement New specialty provider strategies Benefit design

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Most common recent changes specialty pharmacy

• • • • • • • • • Created new copay - 90% New benefit – 75% Mandatory specialty pharmacy program – 70% Decreased reimbursement for drugs - 67% Selected preferred products – 40% Utilized lab values 36% Step edits – 33% More prior auths – 31% Genetic testing – 22% Source EMD Serono Injectable 5 th edition

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Clinical Strategies to Manage Specialty Drugs

• • Vary by therapeutic class • • • Optimize clinical outcomes (MS, Hepatitis C, oral oncology) Limit off label use (Oncology) Prevent inappropriate use based on national guidelines (respiratory syncytical virus, growth hormone) • Require trial and failure of other agents first (rheumatoid arthritis, psoriasis and asthma) Future strategies focus on targeting based on laboratory values and genetic testing

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Clinical Utilization Management

• • Goals include: – – – Appropriate use based on disease severity and diagnosis, Limit non-FDA approved use (up to 33% in oncology) Ensure tried and failed first line therapy Strategies include – Step Therapy – – • Preferred drugs for select classes (impose prior authorization, tiered copays, on line edits, payment lockout) Preferred drugs when available in therapeutic class (growth hormone, multiple sclerosis, hepatitis) Coverage criteria and review for select drugs assure appropriate use according to national guidelines

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Clinical Utilization

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Case and disease management

• Coordination with current programs • • Rare disease management programs Management of individuals with multiple conditions/co-morbities •

Role of education and patient care management

• • • • Compliance Administration Expectation management Avoidance of unnecessary hospital and emergency utilization

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Clinical Utilization

• Pipeline management • • • New drugs being approved and utilized at a rapid pace Need information and analysis of new approvals Understanding of clinical and financial impact of the drug • • Assuring placement in correct therapeutic category and implications for current drugs Development of clinical strategies

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Financial Utilization Management

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Distribution management

• Use of specialty pharmacies vs open network or buy and bill

Reimbursement methodology

• Discounts off average wholesale price (AWP) vs average sales price (ASP)

Site of care management

  Modification in provider reimbursement and large margins on administering drugs Better capture of claims submission data (move from non-specific J codes)

Claims management

 Retrospective and concurrent DUR

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Survey of most effective strategies

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Implement prior authorization Implement step edits Mandate use of specialty pharmacy programs Select preferred products Create guidelines

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Summary

• • • • • Increase in the number of specialty products Continued cost pressure and irrational price increases Highly effective treatments-which often lead to lower medical expenses Heightened emphasis around clinical programs and ongoing oversight Different strategies required to manage specialty vs. traditional medications

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Q&A

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Copies of the presentation will be made available Contact information:

– – [email protected]

[email protected]

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