10228PH001MG.PPT/008-17-49183 5/2005 Confidential 1 Pharmaceutical Coalition Transparency in Pharmaceutical Purchasing Solutions (TIPPS) Transparency in.

Confidential 110228PH001MG.PPT/008-17-49183 5/2005

Pharmaceutical Coalition

Transparency in PharmaceuticalPurchasing Solutions (TIPPS)Transparency in PharmaceuticalPurchasing Solutions (TIPPS)

October 10, 2007


Today’s Discussion

– TIPPS Standards & Objectives

– Review of 2008 Bidding Requirements

– Presentation by Robert I. Garis, Ph. D.

– Future of AWP

– Lunch

– Recap of 2008 TIPPS Process

– Refining TIPPS Standards and Coalition Objectives for 2009

– Update of Compliance Project


Coalition Leadership & Staff

Sidney BanwartVice President, Human Services Division, Caterpillar, Inc.Chairman, Pharmaceutical Purchasing Coalition

Todd BispingCaterpillar, Inc.

Marisa MiltonHR Policy Association

Steve WetzellHealth Care Policy Roundtable


Hewitt’s Project Support

Joshua Golden National TIPPS Project Leader

Kristin Begley, Pharm. D.Senior Pharmacy Consultant


ACS General Dynamics Northwestern MutualALCOA Inc. General Mills PepsiCo, IncorporatedApple Computer HCA Inc. PPG Industries, IncArmstrong World Industries Hewitt Associates Prudential FinancialAT&T, Inc. Hilton Hotels Corporation Quest Diagnostics BAE Systems The Home Depot, USA Inc. Rolls-Royce North AmericaCaterpillar Inc. Honeywell International Inc. Shell Oil CompanyCinergy Corporation IBM Corporation Sodexho, Inc.Cox Enterprises, Inc. International Paper Starbucks CorporationDTE Energy Company Johnson Controls, Inc. Sunoco, Inc.Eaton Corporation KeyCorp Swift Transportation Co.EMC Corporation Liberty Mutual Insurance TAP Pharmaceutical ProductsEmerson Electric Company Lowe’s Companies, Inc. Temple-InlandExelon Corporation Lucent Technologies Texas InstrumentsFederal-Mogul Corporation Maersk TXU Business ServicesFirst Data Corporation Marathon Petroleum University of Missouri SystemFMC Corporation Marathon Oil Corporation United TechnologiesFMC Technologies McDonald’s Corporation Verizon CommunicationsFord Motor Corporation Motorola, Inc. Verizon WirelessFPL Group Inc. Northrup Grumman The Walt Disney Company

TIPPS Coalition Member Companies


Aetna Pharmacy Management

Blue Cross and Blue Shield of Alabama

CVS Caremark

Catalyst Rx, A HealthExtras Company

CIGNA Pharmacy Management

Express Scripts, Inc.

Humana

Medco Health Solutions, Inc.

Prime Therapeutics, LLC

RESTAT PBM LLC

SXC Health Solutions, Inc.

Walgreens Health Initiatives, Inc.

WellPoint NextRx

Pharmaceutical Coalition/TIPPS 2008 Certified PBMs


Washington Post Ad

10228PH001MG.PPT/008-17-49183 5/2005

Review of TIPPS Standards and Coalition Objectives


The Pharmaceutical Coalition

Primary Objective:

Leverage the combined purchasing volume of Coalition to change the way pharmaceutical products are purchased

– create price transparent environment to encourage competition and consumerism

– align incentives of PBMs with employers and patients

– establish a platform for value-based purchasing

– drive business to certified PBMs that agree with principles


Overview of Bidding Requirements

Bidding Requirements Have Been Streamlined

– Six principle bidding requirements fundamental in the selection criteria

• Format has been streamlined from nine requirements in 2006

• Still designed to capture the ultimate in financial disclosure and service capability, and allow for a true partnership between a PBM and client


Bidding Requirement 1

Acquisition Cost for All Retail Claim Payments

– Charge the Participating Group no more than the amount that you pay the pharmacies in your retail network for each claim dispensed

– Includes all brand and generic drugs.



Acquisition Cost Basis for All Mail Service Claim Payments

– Charge no more than the acquisition cost of drugs at the mail order pharmacy, plus a dispensing fee.

– Acquisition cost is defined as either:

• actual inventoried per unit cost (AAC), or

• published Wholesale Acquisition Cost (WAC)

– Agree to utilize a MAC list to determine the Participating Group’s cost for any drugs that do not have an associated WAC price



Pass-Through of 100% of All Pharmaceutical Manufacturer Revenue

– Pass through 100% of any and all formulary rebates, market-share rebates, and other rebate revenue that the Participating Group’s utilization enables you to earn.

– Includes Rebate Administrative Fees, Data Sale Revenue, and Compliance/Adherence program revenue



Specialty Pharmacy Transparency

– Charge no more than the acquisition cost of drugs at the specialty mail order pharmacy, plus a dispensing fee.

– Pass through any and all pharmaceutical manufacturer revenue.

– Provide dose optimization and consolidation programs, where appropriate.

– Provide case management for critical disease states (and not build cost of programs into ingredient cost)

– Offer a tool to enable cross-walk billing (i.e., J-Code to NDC conversion)



Plan Management/Consumer Engagement – Apply rebate on a per-unit basis specific to NDC-11 at the point of sale

(at client’s discretion).

– provide members with decision support tools:

• web-based formulary lookup tool

• web-based drug price comparison tool, with retail pharmacy pricing comparison

• web-based or letter-based utilization summary tool that identifies member cost-share savings opportunities

– Offer financial performance guarantees to support effective utilization management, by therapeutic class.

• Penalties to be assessed on a dollar-for-dollar basis



Comprehensive Audit & Disclosure Rights – Offer full audit rights

• Audits of Claims/Utilization Data

• Audits of Retail Network Contracts

• Audits of Rebate Arrangements

• Audits of Clinical Savings Criteria

– No limitation to specific list of audit firms (“mutually agreeable”)

– Allow self-audit by client

– Provide claims data with all financial fields

– Outsourcing vendors must also allow audits


Exclusion Criteria

The following criteria are grounds for exclusion from TIPPS certification:

– PBM does not agree to all 2008 bidding requirements

– PBM does not complete an RFP response, or submits an incomplete RFP response

– PBM’s fee exhibit contradicts their RFP response


If a vendor outsources ANY core functionality that is relevant to the bidding requirements, that vendor must provide documentation that the outsourced provider ALSO meets the certification criteria.

– Includes outsourced mail service, rebate administration, specialty drug management, etc.

– This documentation MUST include the Audit Rights bidding requirement – audit rights must extend to the third-party outsourced provider

– Letter templates provided with the RFP for each outsourced functionality

Outsourced Services

10228PH001MG.PPT/008-17-49183 5/2005

Robert I. Garis, Ph.D. “The HR Executive: Optimal Pricing in

Pharmacy Benefit Programs”

10228PH001MG.PPT/008-17-49183 5/2005

Future of AWP

10228PH001MG.PPT/008-17-49183 5/2005

Lunch

10228PH001MG.PPT/008-17-49183 5/2005

Recap of 2008 Certification Process


Request for Proposals (RFPs)

RFP process went as planned:

– RFP distributed broadly to all interested PBMs (based on PBM request)

– Core TIPPS Bidding Requirements

– Additional Questions on Topics of Interest

– Outsourcing Documentation Requirements

– Certification proposals received from 16 PBMs

– Preliminary certification granted to 14 PBMs

– Fee Exhibits released, evaluated

– Final Certification granted to 13 PBMs


Review of RFP Responses

Initial Proposal Review - Process

– Initial proposal review conducted with Coalition on July 12th (telephonic meeting)

– “Preliminary Certification” status determined for each PBM vendor

– Review included a line-item confirmation of all bidding requirement details

– Material deviations from bidding requirements identified

– Follow-up conducted to resolve deviations where possible/appropriate

– Vendors receiving Preliminary Certification were issued a fee exhibit for final approval/certification



Initial Proposal Review - Methodology

“Green Light”Vendor meets all certification criteria, or criteria deviations are likely to be satisfactorily resolved. All necessary outsourcing documentation has been provided.

“Yellow Light”Vendor has significant deviations which may or may not be resolved. Outsourcing documentation may be outstanding.

“Red Light”Vendor’s current response includes serious deviations that are not likely to be satisfactorily resolved.



Initial Proposal Review - Outcome

“Green Light” “Yellow Light” “Red Light”

Aetna

Caremark

Catalyst Rx

CIGNA

Express-Scripts

Humana

Medco

Walgreens Health Initiatives

Wellpoint NextRx

BCBS Alabama

Prime Therapeutics

HealthTrans

RESTAT

SXC Rx

MedImpact

Rx America



Red Light Bidders – Issues

– MedImpact

• Refused to provide documentation for outsourced mail service and specialty vendors

– Rx America

• Documentation not provided for outsourced specialty functionality

• Could not provide acquisition cost basis for specialty drugs

• Some contracts with network pharmacies and pharmaceutical companies preclude vendor from allowing full audit rights



Yellow Light Bidders – Most Common Issue

– Missing documentation for outsourced arrangements (with vendor working to provide documentation)

• Outsourced specialty vendor

• Outsourced mail service vendor

• Outsourced rebate contracting

– Final certification was contingent on receipt of documentation

– All Yellow & Green Light vendors provided documentation by final certification deadline



All Bidders – Other Observations

– Seven (7) vendors did not currently offer POS rebate administration (agreed to develop within 6 months upon request)

– Three (3) vendors would not pass-through revenue from Data Aggregation (but agreed to allow client to opt-out of these programs)

– Two (2) vendors did not currently offer acquisition cost basis for mail service (agreed to develop within 6 months upon request)



HealthTrans – Withdrawal of Submission

“Thank you for allowing HealthTrans to participate in the HRPA/TIPPS 2008 certification process. Please accept this letter as notification that HealthTrans, after careful consideration, has decided not to proceed with certification this year.

As a pioneer and a continuing leader in the area of not only transparency, but also a differentiating business model that reflects our philosophy of visibility, value and validation we could not agree more with the principles espoused by HRPA.

We appreciate the opportunities that have emerged from our relationship with both Hewitt and HRPA over the recent past, and HealthTrans looks forward to working with you in the future to further the interests of both clients and consumers.” (HealthTrans)



Final Outcome

– Thirteen (13) PBM vendors were granted certification:

• Aetna Pharmacy Management

• BlueCross and Blue Shield of Alabama

• CVS Caremark

• Catalyst Rx, A HealthExtras Company

• Cigna Pharmacy Management

• Express Scripts

• Humana Pharmacy

• Medco Health Solutions, Inc.

• Prime Therapeutics LLC

• RESTAT

• SXC Health Solutions, Inc.

• Walgreens Health Initiatives

• WellPoint NextRx


AWP AlternativesWith the possible withdrawal of AWP from the marketplace as an available reference price, please describe your organization’s current “plan of action” as it pertains to pursuing alternative pricing metrics.

– “Although none of the options meet all the requirements [of a replacement metric], the WAC has the least amount of challenges surrounding it...”

– “Medi-Span maintains their position that their process for deriving AWP will remain unchanged...”

– “No change is without its challenges; however [we believe] that WAC is the right alternative…”

– “[Our] current choice is WAC, but AMP is also being evaluated…”

RFP - Additional Topics of Interest


Follow-On (Generic) BiologicsWhat specific actions is your organization taking to promote the present or future availability of follow-on (generic) biologics?

– “CIGNA Pharmacy Management is involved with the coordinated efforts of PCMA and AHIP in lobbying and promoting FDA action to approve the availability of generic biologics.“

– “Express Scripts is among the leaders of the legislative initiative to develop an FDA pathway for follow-on biologics... and published a financial model of the potential savings of such a pathway.”

– “Aetna is FOR a regulatory pathway to allow FDA to approve generic biopharmaceuticals… Aetna is OPPOSED to legislation that messes with patents or directs the FDA as to what to review, how to review it and what to decide (we don't want to pre-judge the science).”



Fiduciary ResponsibilityParticipating Groups in the TIPPS Coalition may wish to have their PBM serve in various fiduciary roles for their plan. Please state your willingness to act as fiduciary in the following capacities: First Level Appeals, Second/Third Level Appeals, Final Appeal Decision, Clinical (Formulary) Management, Named Co-Fiduciary for Overall Plan Administration, Named Sole Fiduciary for Overall Plan Administration.

– Several vendors (Aetna, BCBSAL, MedImpact) agreed to serve as fiduciary in all capacities listed

– Several vendors agreed to accept most or all responsibilities after a case-by-case consideration

– Many vendors limited their fiduciary roles

– Limited to first-level appeals and clinical/formulary management

– Would not accept responsibility for medical necessity determinations or overall plan administration

– Many vendors offer third-party services to support the appeals process


10228PH001MG.PPT/008-17-49183 5/2005

Evaluating TIPPS Compliance and Savings

10228PH001MG.PPT/008-17-49183 5/2005

Refining TIPPS Standards and Coalition Objectives for 2009

10228PH001MG.PPT/008-17-49183 5/2005

Compliance Project Update

10228PH001MG.PPT/008-17-49183 5/2005 Confidential 1 Pharmaceutical Coalition Transparency in Pharmaceutical Purchasing Solutions (TIPPS) Transparency in.

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