ProCare Rx - History ProCare Rx founded as a Healthcare Information Technology Company

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1 ProCare Rx - History 1988 ProCare Rx founded as a Healthcare Information Technology Company 1996 Pharmacy Internet Switching Released 2003 ProCare Pharmacy Care Mail Order & Specialty Pharmacy Established 2014 Western HQ Las Vegas Opened 2016 HST Pharmacy Established 1994 Claims Processor Released 2000 PBM Established 2006 ProCare HospiceCare PBM Division Established 2015 ProMod Rx Established

2 Traditional Model vs. Pass-Through Model Traditional Model: PBM makes money through spread pricing (difference between what PBM pays pharmacy and what PBM bills client) PBM pays pharmacy $ and bills client $ NO administration fee charged to client Client pays $ PBM profit is $13.00 Pass-Through Model: PBM makes money through administration fee PBM pays pharmacy $ and bills client $ $4.00 administration fee charged to client Client pays $ plus a transparent $4.00 administration fee = $ PBM profit = $4.00

3 AWP Discounts Average Wholesale Price (AWP) AWP discounts have become meaningless in traditional spread models Game of definitions: brands, high-priced generics, single source generics, etc. PBM guarantees a brand discount rate of AWP -18.5% PBM guarantees a generic discount rate of AWP -84% Pass-Through PBMs guarantee to pass through their true discounts!

4 What Happens Brands Single Source Generics High Priced Generics Low Priced Generics AWP -16.5% AWP -30% AWP -60% AWP -84% AWP -18.5% Middle 2 pushed left Spread models push left AWP -84% AWP -16.5% Middle 2 pushed right Pass-through follow RFP directions even though 4 distinct columns AWP -78% The Spreadsheet Game

5 Payers Problem Traditional PBMs look better on paper (i.e. the spreadsheet) What happens if you put your worst priced generics into the brand bucket? Including single source generics and certain high priced generics in brand bucket will artificially improve brand discount rate Moving these same drugs to the brand discount bucket also artificially inflates the generic discount rate After hundreds of repricings, it is very clear Payers consistently pay more by using the spread model

6 The Spreadsheet Traditional (Spread) Model Brands: AWP -18.5% Generics: AWP -84% Dispensing Fee: $0.50 Admin Fee: $0.00 Broker Fee: $0.00 Pass-Through Model Brands: AWP -16.5% Generics: AWP -78% Dispensing Fee: $1.40 Admin Fee: $2.75 Broker Fee: $0.75

7 Actual Repricing Data: Same Drug, Same Pharmacy, Same Day Traditional (Spread) Model Net Rx Claims: 24,368 Ingredient Cost: $2,992,448 Spread: $324,716 $324,716/24,368 = $13.32 ProCare Rx (Pass-Through) Model Net Rx Claims: 24,368 Ingredient Cost: $2,667,732 Pass-Through: $2,667,732 Administration Fee: $4.00 PBM Makes: $13.32 per claim Total Cost: $2,992,448 24,368 x $4.00 = $97,472 Total Cost: $2,765,204 Savings of $9.32/claim or $227,244

8 Actual Repricing Data: Same Drug, Same Pharmacy, Same Day Spread Model ProCare Rx (Pass-Through) Model Net Rx Claims: 1.141M Ingredient Cost: $133.37M Spread: $14.5M $14.5M/1.141M= $12.70 PBM Makes: $12.70 per claim Total Cost: $133.37M Net Rx Claims: 1.141M Ingredient Cost: $118.82M Pass-Through: $118.82M Administration Fee: $ M x $2.00 = $2.282M Total Cost: $ M Savings of $10.70/claim or $12.268M

9 My Challenge to Consultants You are losing badly to traditional PBMs Your clients are grossly overpaying for PBM services Figure it out and stop putting your clients in a bad situation Place your clients with a pass-through PBM and take the shell game out of the equation Negotiate a fair administration fee

10 Rebates - Conceptual High priced brands with higher rebates Lower priced brands with lower rebates Are you driven by highest rebate? Are you driven by lowest net cost? 2 similar brands in terms of efficacy & safety Brand A: $250 with a $75 rebate (net $175) Brand B: $150 with a $10 rebate (net $140)

11 Formularies - Conceptual Need P&T clinical team to review therapeutic classes for best in class and whether 2 or more drugs within each class are similar in terms of efficacy and safety Let the bidding begin Old examples everyone has heard of: Crestor vs. Lipitor Nexium vs. Prilosec vs. Prevacid vs. Protonix vs. Aciphex

12 Formularies Continued Have manufacturers compete for a preferred position on formulary to lower net cost for the plan sponsor Set up a benefit plan design to take advantage of appropriate generics Utilize Quantity Limits, Step Therapy Edits, and Prior Authorizations on targeted medications like specialty drugs

13 PBM-Owned Mail Order & Specialty Pharmacies Pros Control customer service Ability to lower cost Cons Direct from wholesaler vs. a vendor also making profits Incentive to approve medications that should be denied (making money at pharmacy)

14 What Should Benefit Managers Do? Work with a pass-through PBM Assure the contract states the PBM will pass-through the price they pay for the medications and only earn an administration fee know exactly what you are paying Never sign with a traditional spread model You will overpay for your current mix of medications Insist all fees from brokers/consultants/tpas are disclosed in the contract, or pay those separately don t allow PBM contract to include others fees

15 What Should Benefit Managers Do? Take advantage of appropriate benefit plan designs Low net cost Appropriate generics (dependent upon evidencebased data) Appropriate denials (dependent upon evidencebased data)

16 Thank You! John Addelman Chief Sales Officer, ProCare Rx Cell Phone: (813)