A copy of a presentation I delivered on February 8, 2011 for Barclays Capital on mail order pharmacy.

1. GEORGE VAN ANTWERP
PBM Expert Call
GM, Pharmacy Solutions
Silverlink Communications Pass Through Pricing At Retail:
More Focus On Mail?
February 8, 2011

2. Quick Biography
1996 - 2000 2000 - 2001 2001 - 2006 Current
Business Web configuration Member
intelligence and Electronic communication
tools for health plans prescribing, generic
technology strategy
t h l t t and other industries strategy, design, and
t t d i d
for health plans and sampling, plan implementation for
other industries design, utilization over 15 PBMs and
management, pharmacies
therapeutic
interchange, retail-
i t h t il Focus on adherence
to-mail, mandatory and retail-to-mail
mail
www.georgevanantwerp.com
Disclaimer: Silverlink does work and intends to work with many of the PBMs and has confidentiality agreements with them.
Additionally, George Van Antwerp may own individual stocks.
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3. Agenda
Why mail order is important
How to increase mail order utilization
Challenges
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4. Why Mail Is Important: Profits
percentage of PBM profits
from generics at mail order
Source: Adam Fein 2010-11 Economic Report on Retail and Specialty Pharmacy (http://www.pembrokeconsulting.com/pharmacy.html) 4
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5. Why Mail Is Important: Control
Source: Medco’s 2008 Drug Trend Report 5
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6. Why Mail Is Important: Adherence
84.7% of patients who received their medications
by mail at least two-thirds of the time stuck to
their physician-prescribed regimen, versus 76.9%
who picked up their medications at “brick and mortar”
Source: Kaiser Permanente pharmacies
(http://xnet.kp.org/newscenter/pressreleases/nat/2010/011310mailorderpharmacy.html)
"We also know that an approximately 15 percent increase
in adherence to medications occurs for consumers
receiving a 90-day prescription versus those receiving
a 30-day supply. So our Go 90 program can improve
health outcomes and reduce overall costs to the health
care system through better adherence "
- Kermit Crawford, President, Walgreens
in press release on 1/12/11
p
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7. Why Mail Is Important: Price Compression
Retail business (for a PBM) can be a claims
processing business
 Too easy to be commoditized
Retail pass-through p
p g pricing will always be a “simple”
g y p
model to pursue
 Takes away incentive for PBM to aggressively manage
retailers
Pass-through pricing (like focusing just on discount
percentage) is short-sighted in that it doesn’t look at
net cost (i.e., total cost of ownership)
 Medicare shift to bonus payments based on quality (Star
measures))
PBM has to focus on innovation and outcomes
 Cigna / Merck agreement
Opportunity for engagement of the consumer is
better
 How do you impact medication possession ratio?
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8. Increasing Mail Utilization: Alignment
Does the
Consumer
save?? These questions
are drug specific
based on plan
design and
pricing.
Does the Does the
payer PBM make
save?? money? ?
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9. An Example: How Mail Doesn’t Save The Payer Money
Assume $80 cost for a If the payer saves 10% If the patient’s copay is
30-day brand Rx going to mail order, you $25 and you give the
create $8 in savings patient a 90-day supply
(per 30-day supply) or
( 30 d l ) for t
f two 30-day copays,
30 d
$24 in savings they save $25
(per 90-day claim)
Moving to mail generates $24 in savings, but the
payer gives all that plus $1 to the consumer. They
either need more savings (pricing) or to reduce the
copay incentive (plan design)
design).
Note: Numbers are only examples. They do not represent any national averages. 9
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10. Increasing Mail Utilization: Awareness and Trust
What is mail
order (or home
delivery)?
Who is PBM?
How do you
know my How can the
medications? same
medication be
less expensive?
Is it safe to ship
it to me using
USPS?
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11. Increasing Mail Utilization: Plan Design
Source: CVS C
S Caremark T d R R
k TrendsRx Report 2009
t Source: http://www.consumerology.com/science-solutions/select-home-delivery/
S htt // l / i l ti / l th d li /
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12. Increasing Mail Utilization: Interventions
Target and score individuals based on number of Rxs and likelihood
to convert
Develop p
p personalized messaging based on g
g g gender, g g p y, and
, geography,
other attributes
Coordinated outreach using direct mail and automated calling
Provide members with opportunity to talk with live agent to learn
more
Manage ongoing test grid to evaluate champion / challenger for
optimization
Use final disposition of member to evaluate for recycling frequency
and new outreach plan
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13. Increasing Mail Utilization: Consumer Knowledge
New Caring Sporadic Forgetful Steady
Nancy Carin Sam Frank Suzy
 Newly diagnosed  Caregiver for either  Someone who gets  Chronic medication  Chronic medication
 Not very familiar with dependents or parents some acute user user
her condition, the  Picking up medications  Likely to have or  One or more
medication, the
di ti th prescriptions f them
i ti for th occasionally (
i ll (e.g., develop multiple
d l lti l conditions
diti
pharmacy process, or and responsible for antibiotic) conditions  Understands the value
the PBM translating (sharing)  Understands the  Not great with of medication
 Needs lots of hand- information with them healthcare system adherence to therapy  Feels better when
holding and education  Important to educate, somewhat but not  Understands their taking her medications
 Need to address gaps but not the patient overly interested or condition, but not  Actively managing her
in the physician-  Likely to be the “e- engaged in the worried about it (even health
patient encounter patient
patient” but also semantics if they should be)  Generally adherent
 Need to help her build stressed out (aka  Engaged with MD and
a routine sandwich generation) pharmacist
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14. Challenges: “Wal-Mart Models”
Medicare Pharmacy Access Standards
M di Ph A St d d
Urban: On average, at least 90% of Medicare beneficiaries who live in an urban area
have access to a network pharmacy within 2 miles of their residence.
Suburban: On average at least 90% of Medicare beneficiaries who live in a suburban
average,
area have access to a network pharmacy within 5 miles of their residence.
Rural: At least 70% of Medicare beneficiaries have access to a network pharmacy within
15 miles of their residence.
Source: Access Standards from Wal-Mart whitepaper - http://www.walmartstores.com/lowpricenetwork 14
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15. Challenge: Retention
5-25%
5 25% Percentage of people that leave
mail order after the first fill
In one study, people continued to churn from mail order BUT the
majority of them (that stayed continuously eligible) returned in
approximately 45 days indicating the issue was refilling before it was
too late NOT service and satisfaction.
Source: Data points provided here are anecdotal and not from published studies. 15
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16. Challenges: Generic Utilization
BRAND GENERIC
$25 copay for 30-day $8 copay for 30-day
$50 copay for 90-day $16 copay for 90-day
$100 savings per year
$32
savings per year
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17. Challenges: 90-day Retail
The findings showed that of the members who previously got their
prescriptions through mail, 76.3 percent chose to stay with mail
service,
service while 23 7 percent moved their prescriptions to retail For
23.7 retail.
the group that was just initiating therapy for a recently diagnosed
long-term chronic illness, 44.3 percent selected retail as their
pharmacy of choice, while 55 7 percent selected mail service For
choice 55.7 service.
members who had no previous experience using a mail pharmacy,
nearly 68 percent selected retail pharmacy for their maintenance
medication prescriptions. (CVS Caremark press release on 1/19/11)
p p ( p )
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18. My Predictions
Generics at mail will continue to be the profit driver for PBMs
Specialty (by mail) will be the bigger focus
90-day programs will take off
More retail and PBM collaboration to leverage the POS relationship (for
adherence); evaluate central fill (mail at retail); and implement limited networks
The messaging around mail order will shift from savings to adherence and
health outcomes (which may address some of the skeptics at the plans)
Increased automation will continue to lower costs
Eventually retail will manage the first fill and mail order and/or kiosks will be the
strategy for long-term patients that are stabilized on their medications
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