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Preparing for What’s on the Prescription Drug Benefit Horizon

Preparing for What’s on the Prescription Drug Benefit Horizon. Brenda Motheral, PhD Senior Vice President Research & Product Management. Topics. Three Eras of Pharmacy Benefit Management Learnings From The Market’s 2006 Natural Experiments What’s Ahead in 2008. The Market Response.

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Preparing for What’s on the Prescription Drug Benefit Horizon

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  1. Preparing for What’s on thePrescription Drug Benefit Horizon Brenda Motheral, PhD Senior Vice President Research & Product Management

  2. Topics • Three Eras of Pharmacy Benefit Management • Learnings From The Market’s 2006 Natural Experiments • What’s Ahead in 2008

  3. The Market Response • PBMs aggregate purchasing power of plan sponsors • Mail forces discipline into retail Supply Chain 1990 1995 2005

  4. Low Cost Carrier Market Share 2002 City B St. Louis 0% 25% *Nonstops in May 2002

  5. Change in Ticket Price: 1998-2006 +25% City B St. Louis 2% *Bureau of Transportation Statistics

  6. Retail brand discountgrows for 15 years Baseline ‘92 ‘96 ‘98 ‘00 ‘95 ‘90 ‘02 ‘04

  7. The Market Response • Plan sponsors begin to adopt plan designs that incent or require cost-effective choices Plan Sponsor Directed Supply Chain 1990 1995 2005

  8. Employers Using Proven Tools (%) 1998 2002 2006

  9. Lowest Drug Trend In a Decade Generic Fill Rate Drug Trend Note: Specialty tracked separately as of 2003 Express Scripts Internal Data, 2006

  10. The Market Response • Public and private plan sponsors pass responsibility for spend mgt to consumers Consumer Directed Partnership Plan Sponsor Directed Supply Chain 1990 1995 2005

  11. Topics • Three Eras of Pharmacy Benefit Management • Learnings From The Market’s 2006 Natural Experiments • What’s Ahead in 2008

  12. Wal-Mart Market Share:Before and After $4 Generics Hypothesis: Low prices on selected generics will result in more volume of other generics and brands as well as increased non- pharmacy store sales Finding: Pricing strategy had minimal market impact on rx drug use. Impact on uninsured & non-pharmacy sales is unknown.

  13. Medicare Part D Hypothesis: Part D beneficiaries will take advantage of lower cost generics to avoid hitting the donut hole

  14. Medicare Part D Experience 56% 49% 45% 40% 34% 19% Plan A Plan C Plan B * Potential GFR is calculated under the assumption that all target brands switched to the generic alternatives In reality, some target brands could be switched to brand preferred alternatives.

  15. 65% 35% Plan C Opportunity Medicare Part D Experience 45% 40% Savings Potential Of $13.8 Million $2.1 Lipids $2.6 Ulcer $9.1 Other Plan C * Potential GFR is calculated under the assumption that all target brands switched to the generic alternatives In reality, some target brands could be switched to brand preferred alternatives.

  16. Medicare Part D Hypothesis: Part D beneficiaries will take advantage of lower cost generics to avoid hitting the donut hole Finding: Many beneficiaries are hitting the donut hole unnecessarily and could take advantage of lower cost generics

  17. 2006 Market Experiments • Wal-Mart • Medicare Part D • Consumer-Driven Health Plans

  18. Consumer-Directed Health Plans Hypothesis: Employees enrolled in a high deductible plan will use more generics and OTCs and discontinue unnecessary meds

  19. Compared to Traditional Insurance:CDHP Members Reduce Brand Use CDHP Implemented Jan ‘05 Jul ‘05 Jan ‘06 Jul ‘06 Dec ‘06 CDS-matched dataset, N = 3,374 each group

  20. But Generic Use is Lower Too … CDHP Implemented Jan ‘05 Jul ‘05 Jan ‘06 Jul ‘06 Dec ‘06 CDS-matched dataset, N = 3,374 each group

  21. Chronic Medication Persistency:CDHP Members May Switch to OTC But …. * p < .05 ** p < .01

  22. CDHP Members: Lower Persistency in Some Classes w/o OTC Options * p < .05 ** p < .01

  23. Consumer-Directed Health Plans Hypothesis: Employees enrolled in a high deductible plan will use more generics and OTCs and discontinue only unnecessary meds Finding: Without additional educational programs, enrollees did not use more generics. Compliance decreased in many therapy classes

  24. Topics • Three Eras of Pharmacy Benefit Management • Learnings From The Market’s 2006 Natural Experiments • What’s Ahead in 2008

  25. Other Market Experiments • Wellness Incentives • Value-Based Insurance Design • Care Coordination

  26. Conclusions • Three Eras of Pharmacy Benefit Management • Learnings From The Market’s 2006 Natural Experiments • What’s Ahead in 2008

  27. Conclusions • Three Eras of Pharmacy Benefit Management • Learnings From The Market’s 2006 Natural Experiments • What’s Ahead in 2008 Supply chain and plan sponsor-directed models will continue to drive value for pharmacy benefit mgt. New hybrid models pose familiar challenges for rx. High liability and web tools alone will not be sufficient. While consumerism will evolve over many years, pharmacy represents a great near-term opportunity.

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