2015 in Review Cooperative Performance Financial Highlights

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1 2016 Annual Report 2015 in Review Cooperative Performance Financial Highlights

2 A Note From Your CEO Dear Members, Thank you for welcoming me into your organization. Josh Bindl CEO National CooperativeRx has several accomplishments from 2015 to highlight, but none larger than the contract extension with CVS/caremark. Our pharmacy benefits contract is our greatest asset and we take great pride in consistently coming out on top when compared to other contracts. The extension provides you with additional savings and more guaranteed rebates, while retaining the important contract language that makes our contract best in class. Membership acknowledged this value with 134 members signing up for the additional two years. Price is only one aspect of the total cost of your pharmacy benefit. Thanks to members use of independent clinical consultation and plan design recommendations, we once again beat industry trend. I cannot stress enough the importance of continued engagement in your pharmacy benefits plan design with the high-priced specialty drugs that will continue to drive costs. Soon the Cooperative staff and the Board of Directors will undergo the second step of a two-part strategic planning process. Step one was completed last fall culminating in a planning document for the organization to measure the organization s success into the future. Step two will be a visioning session to brainstorm ways the organization can add additional value for members. The dynamics of the industry we operate in is changing at exponential rates. This change often presents challenges for employers. Our role at National CooperativeRx is to turn challenges into opportunities. The Cooperative has done this time and time again over the years and I look forward to being a part of it for years to come.

3 Revenue and Expenses $2.5M $2M $1.5M $1M $500K Revenue Expenses unaudited $600K $500K $400K $300K $200K $100K Dividends Cooperative Benefits In 2015, we distributed quarterly rebates, true-up, patronage, equity, and audit results totaling: $14,675, Audit Results Independent audits were conducted on cooperative business and on our PBM. Performed by two third parties, they reviewed 100% of claims assuring that all mail, retail, specialty, rebate and other financial guarantees were met.

4 Financial Highlights Cooperative ownership brings financial and non-financial benefits. Our agreement with our PBM partner stipulates that members see every part of the financial arrangement. Another benefit is dividends, paid to members when income exceeds expenses. Because we re member-owned, this money is your money. Clinical Highlights We do not believe in a one-size fits all approach to clinical programs or plan design. Some of our members want turnkey clinical solutions based on best practices, while others want a fully-customizable program. We bring consultative expertise to help members with these important decisions, and offer a comprehensive suite of effective clinical programs at little to no cost to plans. The results speak for themselves. 80% 75% 70% 65% 60% 55% 50% National CooperativeRx Generic Dispensing Rate Our GDR reached 83.1% in NatRx Best In Class (88%)

5 2015 Financials (unaudited): Revenue $2,394,597 Expenses $1,936,307 Net Earnings $458,289 (member dividends) 12 new members, representing 14,900 participants, joined our cooperative. With every participant, National CooperativeRx gains strength to better represent our members in the pharmacy benefits industry. The process to elect new Board Representatives began at the end of Voting will close and the results will be announced at the 2016 Annual Meeting. Money Distributed to Members in 2015: Rebates: $10,581,007 Rebate True-up: $ 3,840,109 Patronage: $ 254,593 National CooperativeRx received $386,148 back from the 2014 audit results. This money will be combined with the audit results from 2015 and distributed in Tackled complex specialty drug issues by promoting Advanced Control Specialty Formulary. 99% of members signed on for better control of their costs.

6 Managing Specialty with Wayne Salverda, R.Ph. Senior Director of Clinical Services Wayne Salverda With specialty pharmacy rapidly evolving, what current trends should employers keep an eye on? Year 2015 saw a record number of drug approvals; the FDA approved 45 new drugs. Today, one in 13 drugs in early stage development make it to market. This is an improvement from a few years ago when only one in 19 drugs reached the market. Orphan drugs (used to treat rare diseases affecting fewer than 200,000 people) are becoming more common. Treatment costs for these drugs often exceed $200K annually. In late 2015, we saw the approval of the first of the PCSK9 Inhibitors, a new class of drugs to treat high cholesterol, with annual costs of about $14K. While these drugs have gotten off to a slow start, they will gain momentum as more competition joins the market and as clinical studies are completed to support their use in broader populations. What are employer best practices when setting up a specialty pharmacy plan? Plans need to take a strategic and methodical approach that acknowledges dispensing limitations, exclusive provider arrangements, cost share strategies, and formulary and utilization management. It s important not to lose sight of the management of non-specialty drugs as these savings opportunities can be used to offset costs of specialty drugs especially when annual Out-Of-Pocket limits come into play. Speak with your National CooperativeRx Account Manager today to ensure your plan is ready for 2016.