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1 © 2015 Express Scripts Holding Company. All Rights Reserved.


Bend the Trend

May 21, 2015


What We’ll Discuss

• Welcome and introductions

• Key highlights of the current Drug Trend Report

• Compounds

• Specialty market dynamics

• Questions and answers


Key Takeaways

2014 drug trend highest since 2003 Unsustainable Trend

Compounded drugs and hepatitis C

Key Trend Drivers

Creative solutions that meet plan sponsor needs without sacrificing patient health

Required

Smart formulary management, channel optimization, clinical specialization, fair drug pricing

Express Scripts Expertise


Drug Trend Over Time

Source: Express Scripts 2014 Drug Trend Report


Components of Overall Trend – Commercially Insured



Commercially Insured Therapy Class Review: Traditional Medications



Commercially Insured Class Review: Specialty Medications



The Express Scripts Prescription Price Index



More than 15% of Express Scripts Clients Spent Less on Rxs per Capita in 2014 Versus 2013

Spend (PMPM) Trend $

70

65

60

55

50

45

40

35

Unmanaged Managed Tightly Managed

%

5

4

3

1

0

2

Unmanaged Managed Tightly Managed Source: Express Scripts 2014 Drug Trend Report


Key Brand Drugs Losing Patent Protection More Than $73.1 Billion Within the Next Five Years

2015 2016 2017 2018 2019

(Annual Sales)

$26.7 Billion $23.9 Billion $6.6 Billion $6.5 Billion $9.3 Billion

• Abilify

• Aggrenox

• Aloxi

• Androgel

• Copaxone

• Namenda

• Nexium

• Ortho Tri-Cyclen Lo

• Welchol

• Zyvox

• Azilect

• Azor

• Benicar

• Crestor

• Cubicin

• Epzicom

• Nuvigil

• ProAir HFA

• Seroquel XR

• Tamifu

• Zetia

• Butrans

• Fanapt

• Ivanz

• Relpax

• Reyataz

• Strattera

• Sustiva 600mg

• Treximet

• Viagra

• Viread 300mg

• Vytorin

• Adcirca

• Cialis

• Elidel

• Levitra

• Lexiva

• Rapaflo

• Sensipar

• Solodyn (addl. Strengths)

• Viread

• Emend

• Exelon Patch

• Exjade

• Fentora

• Gilenya

• Lyrica

• Ranexa

• Solodyn (addl.

Strengths)

• Symlin

• Vesicare


Orphan Drugs

• New drugs provide treatment for the

disease not just symptoms

• Kalydeco® (ivacaftor) approved Jan. 2012;

first therapy to treat disease

• Currently approved for selected genetic

mutations (~5% of the CF population)

• Lifesaving treatment — at a cost

• Cost of treating a patient with Kalydeco often

exceeds $300,000 per year

ORPHAN DRUGS

are medications

indicated to treat rare

conditions —diseases

and disorders which

affect fewer than

200,000 individuals in

the U.S. and for which

adequate or curative

treatments have not

been developed.

Cystic Fibrosis: Rare genetic condition affecting

30,000 people in the U.S.


ADVANCED USERS ONLY:

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Industry Changes

COMPOUND DRUGS

PMPY: $18.92

Total Trend = 128.4%

Utilization Unit Cost

128.2% 0.2%

© 2015 Express Scripts Holding Company. All Rights Reserved.

12

Before our compound management solution was

implemented, total trend was 276.9%


Regulation Changes Impacting Pricing

NCPDP 5.1

• Only most expensive ingredient

submitted

• Coverage based on only most

expensive ingredient

• ‘Blind’ summation of all

ingredients submitted and paid

COMPOUND CLA IMS P R O C E S S

Greater visibility identifying concerning trends

NCPDP D.0

• All ingredients submitted

• Coverage based on all

ingredients

• Each ingredient cost must be

submitted for reimbursement

• Expanded reject oversight

2011 (through 12/31/11)

2012 (1/1/12 and beyond)


Compound Management Solution



Hepatitis C pricing and trends were on an unsustainable path: we are helping clients get costs under control

Total average treatment over

$100,000 per patient when not

covered by our cost controls

3.2 M

Americans are

living with the

hepatitis C virus

16,000

New cases

diagnosed each year

Hepatitis C drug forecast

U.S

. sp

en

d p

er

insu

red

pe

rso

n


Patient Access to Hepatitis C Cures

Expand access to a cure at

a more affordable price

Provide high quality care

Achieve better health

outcomes

More Affordable Access, Adding Value to Payers and Patients

Unprecedented problem. Unprecedented solution.

1

2

3


Newly Approved Agents

• All oral DAA regimen;

polymerase inhibitor,

NS5a, protease inhibitor

• Approved for use in

genotype 1

• Twice daily all oral,

interferon free regimen

• Favorable/adverse

effect profile

Viekira PakTM

Combination Therapy

• Once daily oral

polymerase inhibitor;

new class of direct-acting

HCV antiviral

• For genotype 1 and 4:

triple therapy regimen

with peginterferon and

ribavirin x 12 weeks

• All oral interferon free

regimen for genotypes

2 and 3; taken with

ribavirin x 12 to 24 weeks

• Favorable/adverse effect,

tolerability and drug

interaction profile;

approved for use in HIV+

Sovaldi®

Polymerase Inhibitor

Harvoni®

Combination Therapy

• Combination of an NS5a

inhibitor and nucleotide

polymerase inhibitor

• Approved for use in

genotype 1

• Once daily all oral,

interferon free regimen

• Favorable/adverse

effect profile


Report: Sovaldi ROI Not Justified

$100M-200M

1-year cost per 1,000 patients

“Even at a 20-YEAR HORIZON,

if all patients infected with Hepatitis C

are treated with new regimens,

the cost offset will only cover

approximately TWO-THIRDS

of initial drug cost.”


Comprehensive Solutions to Manage Hepatitis C

FORMULARY

MANAGEMENT

$4.32 PMPY

savings

UTILIZATION

MANAGEMENT

Up to 16%

savings

EXCLUSIVE

PRICING 2% savings

PATIENT-

FOCUSED CARE

89% more likely to stay on therapy*

8x fewer wasteful fills*

FAIR PRICING

ADVOCACY

Without change, drug costs will

skyrocket 1,800% by 2016

HEPATITIS CURE

VALUE PROGRAM

HCV program available to save clients

20+ percent total client costs

1

2

3

4

5

*Compared to retail, JMCP Vol. 20 #12 Dec. 2014

6

Offering first-in-class strategies to

manage your benefit and drive

down costs


High Cholesterol Population and treatment guidelines

17% of US ADULTS WITH HIGH LDL ARE UNTREATED

POPULATION

• 33.5% of US adults have high LDL,

less than half are treated

• Familial hypercholesterolemia —

unique challenges

• Aging population = more patients

MEDICATIONS

• #2 in spend for Express Scripts clients

• Cholesterol management PMPY = $51.87

• Generics dominate

TREATMENT GUIDELINES

• Controversial new treatment guidelines

• Statins demonstrated

improvements in morbidity

and mortality

20

© 2015 Express Scripts Holding Company. All Rights Reserved.


PCSK9 Inhibitors Transforming cholesterol management

• Est. $12K/patient annually

• Self injected antibody

• Effective in lowering cholesterol

• No identified drug interactions

and fewer side effects

• Mid-2015 approval

• Broad indication likely

• No cardiovascular event

reduction outcomes data

STATINS PCSK9

No known interactions

60-65% LDL ↓

Injection site reactions

$$$, branded biologics

Interactions and contraindications

High dose ~50% LDL ↓

Myalgia, LFT elevations

$, generics

THE FACTS:


Cholesterol Management’s Unmet Needs

LONG-TERM IMPLICATIONS

Familial hypercholesterolemia Morbidity and mortality data

2016-2017

Statin intolerance Dramatic implications for cost

and treatment

Statin drug interactions

Not to goal with statin

PCSK9 study results could change

COST AND TREATMENT approaches dramatically

SHORT-TERM TREATMENT GAPS


PCSK9 Management Strategies

• Preferred product strategy under evaluation Formulary Management

• Prior Authorization solution

• Further drug approval criteria

Utilization Management

• Client-specific, proactive modeling of costs based on specific-use scenarios

Impact Modeling

• Personalized counseling and injection training from specialty clinicians

• Adherence and therapy optimization

Clinical Management



Looking Forward


Trend Forecast: Traditional Medications



Trend Forecast: Specialty Medications



More Than 5,400 Drugs in Development

2,164

2,329

833

82

Phase I

Phase II

Phase III

Reg Review in US


Pipeline Drugs Target Conditions That Affect Millions

5.4M Alzheimer’s

26M Diabetes

67M Hypertension

71M High Cholesterol

91M Obesity

Sources: U.S. Centers for Disease Control and Prevention, Alzheimer’s Association



Specialty Market Dynamics


Market Projection: Specialty Spend Growth in Pharmacy

Sources: Express Scripts Book of Business; Express Scripts analysis of Thomson Reuters MarketScan® Commercial Database.

2018 Projected 2014 Actual

Specialty Pharmacy Benefit Traditional and Specialty Medical Benefit

31.8%

68.2%

50% 50%


What’s Trending in Specialty

31% Specialty

versus

6% Traditional

in 2014

SOARING SPECIALTY TREND

8% increase since 2012

MIGRATION TO SPECIALTY TIERS

900 biologics

targeting

100 diseases

BIOLOGICS IN DEVELOPMENT

Hepatitis C price wars

Biosimilar market entrants

Expanded therapy categories

MARKET ACTIVITY


New Specialty Drug Pipeline

33.3%

27.8%

11.1%

11.1%

11.1%

5.6%

Proportion of Near-Term Specialty Pipeline

Drugs by Indication

Cancer

Orphan Conditions

Hepatitis C

Inflammatory Conditions

Hemophilia

Multiple Sclerosis


Biosimilars

Source: Hillary Clinton and Amy Poehler on Saturday Night Live: https://screen.yahoo.com/editorial-response-sen-clinton-000000311.html


54 Biotech Products With Patent Expirations Through 2020

2015* 2016 2017 2018 2019 2020

Neulasta®

Rituxan®

Epogen®

Procrit®

Neupogen®

Synagis®

Pulmozyme®

Humira®

Elitek®

ReoPro®

Berinert®

Lemtrada® Remicade®

Xolair®

Erbitux®

Avastin®

Herceptin®

Orencia®

Actemra®

Advate®

Lucentis®

Tysabri®

Pegasys®

Vectibix®

Peg-Inton®

Kineret®

Overall U.S. Market Opportunity

(in $ Billions)

$14.1

$7.4

$0.3

$6.2 $7.1

$4

Billio

ns

*Includes all drugs with patent expirations through 2015

Source: U.S. Drug spend estimates are based on IMS Health data for 2014. The availability of biosimilars is

highly variable due to litigation, patent challenges, FDA’s establishment of 351(k) pathway, or other factors.

$38.8B BIOSIMILAR OPPORTUNITY


Near-Term Biosimilar Pipeline

* Approval or launch may be delayed due to litigation

BIOSIMILAR ANTICIPATED

APPROVAL DATE*

BRAND

MANUFACTURER

PATENT

EXPIRATION INTENDED USE

Zarzio

(filgrastim -

Sandoz)

Pending Amgen

(Neupogen)

Nov. 10,

2013 Neutropenia

Remsima

(infliximab –

Celltrion/Hospira)

August 8, 2015 Janssen

(Remicade)

Sept. 4,

2018

Rheumatoid Arthritis

and other Inflammatory

Conditions

Pegfilgrastim

(Apotex) August 17, 2015

Amgen

(Neulasta)

Oct. 20,

2015 Neutropenia

Retacrit

(epoetin alfa –

Hospira)

October 16,

2015

Amgen (Epogen),

Janssen (Procrit)

June 6,

2015 Anemia

(adalimumab) Winter 2016 Humira (Abbvie) 2016

Rheumatoid Arthritis

and other Inflammatory

Conditions

Continue to support use of the most CLINICALLY

APPROPRIATE and COST-EFFECTIVE medications

Zarzio may

be one of

the first

biologics

approved

using the

FDA’s

biosimilars

pathway


Specialty Pharmacy Benefit Management Spectrum of Solutions

Full spectrum of specialty drug management

programs to reduce waste for plan sponsors

NETWORK

MANAGEMENT

UTILIZATION

MANAGEMENT

MEDICAL

BENEFIT

MANAGEMENT

Savings on unit cost discounts through

Exclusive Specialty program

Significant savings through programs like

Prior Authorization, Drug Quantity Management,

and Preferred Specialty Management

Savings through management of

medical-billed specialty drug spend

BENEFIT PLAN

DESIGN

Reduce waste and encourage adherence through

formulary strategy, days’ supply design, and

member cost share recommendations


Specialty Plan Design Recommendations

Source: Express Scripts Research Study February 2015: Effect on Specialty Copay on PMPM Utilization

Add separate specialty tiers and pivot to coinsurance with stepped percentages 1

SPECIALTY MEDICATION TIERS

Tier Category Accredo and Retail Copayment

1 Generic 10% to 15% (up to $100 Max)

2 Preferred Brand 20% (up to $250 Max)

3 Non-Preferred Brand 20% or Not Covered

TRADITIONAL MEDICATION TIERS

Tier Category Retail Copayment Home Delivery Copayment

1 Generic $7 $7 to $14

2 Preferred Brand $27 to $44 $67 to $110

3 Non-Preferred Brand $47 to $78 $117 to $150; Max. $150


Increase member cost share, while being mindful of impact to utilization


0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

$0-$100 $101-$250 $251-$500 $501+

Average PMPY

Specialty Utilization

Average Member Specialty Copay

Source: Express Scripts Research Study February 2015: Effect on Specialty Copay on PMPM Utilization

2


Provide access to various marketplace means to help patients with the high cost

of specialty medications


Copay Assistance Programs

Cover a portion

of the member’s responsibility

HCR Out-of-Pocket Maximum

PPACA requires all non-grandfathered health

plans to limit a member’s out-of-pocket expenses for in-network Essential

Health Benefits

Consumer-Directed Health Plans

First dollar coverage is often incorporated

through HSA and HRA spending

accounts

3


Managing Copay Assistance

Variable Copay

Plan Design

True Out-of-Pocket

and Deductible

Protection

A

B

• Sets copay to max of copay card or out-

of-pocket

• 6.4% savings on hepatitis C costs for a

plan with 69K lives

• Prevents copay assistance from being

applied to members’ accumulated

amounts

Accredo helped find $240 million in assistance in 2014


Gleevec Transformed Leukemia

0%

20%

40%

60%

80%

100%

Proportion

of Leukemia

Patients

Alive

Years from Referral to MD Anderson Cancer Center

0 3 6 9 12 15 18 21 24 27

1965-1974

1975-1984

1985-1994

1995-2004

93% (leukemia-only causes)

84% (all causes of death)

Gleevec Era


Adherence in Leukemia Drives Healthcare Savings Accredo® Improves Adherence

53%

63%

50% 52% 54% 56% 58% 60% 62% 64%

Retail

Accredo

Journal of Clinical Oncology, 2006 (June 20 suppl; abstr 6083) presented at ASCO 2006; Express Scripts book of business scripts- 2010

Percent of Gleevec Patients With MPR >90%

$49,537 PER PATIENT saved per year: fewer and

shorter hospital stays


Adherence Is Survival for Transplant Patients Specialty pharmacy management of transplant patients leads to higher adherence and lower costs

NONADHERENCE IS A FACTOR IN 36% OF TRANSPLANT LOSSES, with 20% to 50% of transplant patients nonadherent.2

Accredo® transplant patients have higher adherence than retail.

76%

85%

Retail Pharmacies CuraScript Specialty

Pharmacy

MPR in Transplant Patients1

Drive adherence. Save organs. Save lives.

$5,076

$3,345

$2,066 $1,566

7.5%

6.2% 5.5%

2.7%

<80% 81-90% 91-95% >95%

Medication Possession Ratio (MPR)

Impact of Adherence in Transplants on

Hospitalization Rate and Cost1

Avg Cost Hospitalization

% Patients Hospitalized

1. Express Scripts research, Aug 2011. Source: Thomson Reuters MarketScan® Commercial Claims and Encounters database. Bivariate correlation. Patients selected if had at least two

pharmacy claims for immune suppression medications between 1/1/2007 and 12/31/2009.

2. Laederach-Hofmann K, Bunzel B. Noncompliance in organ transplant recipients: a literature review. General Hospital Psychiatry. 2000;6:412-24.


Advanced Utilization Management Reduce waste and improve health outcomes

PRIOR AUTHORIZATION PREFERRED SPECIALTY

STEP MANAGEMENT DRUG QUANTITY MANAGEMENT

Right Patient

Right Drug

Right Amount

Ensures clinically appropriate

use of traditional and specialty drugs

Trying clinically effective, front-line specialty

drugs before second-line drugs

Aligns dispensing quantity with FDA-approved dosage

guidelines and other supportive evidence

1 2 3

Significant savings across all categories


Medical Channel Management

MEDICALLY BILLED SPECIALTY-DRUG CHALLENGES

• Lack of program control

• Limited reporting and utilization

management

• Inconsistent clinical protocols

between pharmacy and medical

• J-code billing format

• Delays in billing

MEDICAL CHANNEL MANAGEMENT SOLUTION

• Better visibility and control of

specialty spending

• Increased savings from coverage

and therapy management

• Real-time adjudication

• Tracks spending at NDC level

• Improved reporting

47% OF ALL SPECIALTY DRUG SPEND is billed through the medical benefit


20.2% 16.9%

13.8%

Unmanaged Managed Tightly

Managed

Taking Action Aligning patient care and benefit affordability

HGH MS Pulmonary

+10% +2% +5%

% Increase in Adherence Rates

Source: Express Scripts Research Study – Impact of Effective Management on Specialty Trend

Clients moving from

UNMANAGED to

TIGHTLY MANAGED

status can LOWER TREND

up to 32% while

IMPROVING CARE for

their members

Specialty Trend

GUARANTEE AVAILABLE


Key Takeaways

Growth in Specialty Drug Spend

is Not Sustainable

Effective Pharmacy Trend

Programs Deliver Savings

Specialty Pharmacy is Key to

Optimal Adherence

Biosimilars Provide Opportunity

to Manage Trend

1

2

3

4


• Overall trend: +13.1%

• Traditional drug trend: +6.4%

• Specialty drug trend: +30.9%

• Overall trend was driven by higher drug costs for specialty

medications, which now exceeds 31% of total PMPY spend

2014

Trend

• For the 4th year in a row, diabetes medications had the highest

traditional PMPY spend

• If compounds were excluded from the analysis total traditional

trend would have been just 2.3% instead of 6.4%

• Three hepatitis C medications made up 96.4% of total

Hepatitis C spend and 11.8% of total specialty spend.

Therapy

Class

Review

• Specialty trend will slow to more sustainable levels, averaging

22.1% over the next three years.

• Medications used to treat less-common specialty conditions, many

of them orphan diseases, are forecast to increase significantly in

the next few years, driven by both brand inflation and increased

utilization.

Looking

Forward

Drug Trend Report: Key Facts

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