2015 CareFirst Formulary Options 200+ ASO Accounts

1. 2015 CareFirst Formulary Options200+ ASO Accounts August 5, 2014

2. Agenda • Purpose • Pharmacy Landscape • Guiding Principles • 2015 Options • Implementation

3. Purpose of Today’s Training • Why we are here • Understanding CareFirst’s strategic decision • How CareFirst and downstream accounts benefit

4. Double Digit Increase in Pharmacy Trend Projected • Influencers • Inflation • Source of drug • Lack of product competition • Site of service • Influencers • Generics • Formulary • Pharmaceutical marketing • New agents Utilization *By 2016. CVS Caremark drug trend forecast. Trend calculations based on a trend cohort group. Trend cohort group includes funded Accounts with retail claims for the calendar year and includes Accounts in the commercial segments (health plan and employer), Medicare and Medicaid. Drug Mix Overall cost of drug, including what Account and member pay Price Proportion of brand-name and generic drugs being dispensed Intensity of drug use; approval of new drugs or indications • Influencers • Changes in treatment guidelines • Demographic/economic changes 30454

5. Multiple Market Factors Increase Pressure on Accounts to Control Pharmacy Spend Generic launches have peaked; will no longer offset drug trend manufacturer response: Price increases; share retention strategies Specialty continues to drive up costs *CVS/caremark Internal Analysis, 2013. 1. As reported by PCMA: Cleveland Research, “How Co-pay Discount Cards Are Affecting Drug Spend,” Presented at Pharmacy Benefits Academy, August 2011 Past plan performance is no guarantee of future results – accounts must employ a defined strategy to offset ongoing marketplace tactics • Generic dispensing rate topped 80% in 2013; 2012 was peak of patent cliff at $35B* • 2014 generic launches make up half the market value of 2012 launches* • 14.4% increase in non-specialty brand AWP in 2013* • Manufacturers invested $4 billion annually1between 2010 and 2011 to preserve market share and margin by going outside the standard supply chain • Specialty drugs accounted for 22.5% of our Accounts’ pharmacy spend* • Relative increase of more than 10% in a single year* 31392e 5

6. Our Proactive Approach Positions Accounts at the Forefront of Market Changes the 2014 CVS/caremark formulary STRATEGY RESULTED IN: *Indicates an average savings based on cohort results. Actual savings may vary per plan. Contact your CVS/caremark Account team for a personalized savings analysis. A strategic approach to formulary management proactively positions Accounts to help mitigate the effects of future trend increases • Industry-leading formulary strategy: Built from our experience in anticipating marketplace changes • Encourage continued savings: Help Accounts stay ahead of market shifts with innovative formulary and pipeline management • Building on our success: Continue to help maximize savings for Accounts while minimizing plan member disruption $41.13Average plan savings per transitioned prescription* $28.69Average member savings per transitioned prescription* 2.5%Overall effective increase in GDR in targeted drug classes* 31392e 6

7. Guiding Principles of Formulary Management R x *Specialty classes with similarity between chemical entities Maintain clinical integrity Target classes with sufficient generic availability, clinically interchangeable brands; evaluate appropriate specialty classes* Secure competitive pricing for our Accounts Continually assess marketplace to identify lower-cost options and opportunities to maximize manufacturer rebate values Educate and engage members and physicians Help ensure access to the drugs members need to stay healthy; provide resources for physicians to support member transition 20 years experience providing unique formulary strategies to meet Accountgoals 31392e 7

8. CareFirst Formulary Options in 2015 CAREFIRST FORMULARY 3 • Covers most generics and brands and specialty • ~200 excluded products • Exclusions updated quarterly • Up to 3-4% savings of drug spend compared to CareFirst Formulary 2* • Covers generics and most brands • ~70 excluded products • Exclusions updated yearly • Up to 3-4% savings of drug spend compared to CareFirst Formulary 1* CareFirst FORMULARY 2 • OpenFormulary • Currently in place for CareFirst (all business) • Tieringchanges on some drugs to drive member behavior • Quarterly tier changes CareFirst FORMULARY 1 SAVINGS 1. Source: CVS Caremark Enterprise Analytics, 2012. Projections based on CVS Caremark data. Individual results will vary based on plan design, formulary status, demographic characteristics and other factors. Based on Account specific modeling of CareFirst BCBS *Based on ingredient cost Drug Spend. Drug Spend pharmacy savings include rebate impact. Account savings may vary by plan design, pricing arrangement, drug mix and at-risk market launches. Member savings will vary based on several factors, some of which include plan design, plan performance, etc. 30454 8

9. CareFirst Formulary 1: Open Formulary • Enhanced the current CareFirst open formulary to increase the overall rebate value • Broad access to over 5,000 drugs with no brand drug exclusions • Formulary tiering to drive member behavior • 10.5% of the members were positively impacted by drugs moved to a lower cost sharing tier (July 15, 2014) • Less than 2% of the members will have drugs moved to a higher cost sharing tier (January 1, 2015) • Quarterly tier changes • Targeted member communications will be sent to affected members 30 - 45 days prior to the effective date Default option for CareFirst accounts Note: CareFirst Formulary 1 is a Custom Opt-out Formulary

10. CareFirst Formulary 2: Generic and Rebate Improvement Formulary Effective 1/1/15 • For 200+ ASO accounts looking to be more aggressive in their pursuit of rebates • ~70 drugs excluded – alternative medications available • 2-3% of members affected by drug exclusions and negative tier changes • Exclusions updated annually • Increased rebate guarantees over CareFirst Formulary 1 • Reduces overall spend by nearly 3-4% compared to CareFirst Formulary 1 • Quarterly tier changes • Targeted member and physician communications 30-90 days prior to the effective date Note: CareFirst Formulary 2 is Standard Formulary

11. CareFirst Formulary 3: Higher Control Formulary (Lowest Net Spend) Effective 1/1/15 • For 200+ ASO accounts seeking the lowest possible costs while retaining coverage within each therapeutic class • Focuses on driving to generic drugs & driving higher rebate value • ~ 200 drugs excluded – preferred alternative medications available • 4-5% of members affected by drug exclusions and negative tier changes • Exclusions and tier changes updated quarterly • Creates savings by driving members to the lowest cost drugs • Up to 3-4% savings of drug spend compared to CareFirst Formulary 2* Note: CareFirst Formulary 3 is Advanced Control Formulary

12. CareFirst Formulary 3: Integrates Preferred Product Strategy and Generics • Extend savings by leveraging preferred product strategy along with shift to generics • Quarterly updates • Advanced specialty controls included • Helps ensure trend management against costly new products that do not deliver clinical advantages • Day one control of new product launches and line extensions, until reviewed Note: CareFirst Formulary 2 is Standard Formulary 30454

13. CareFirst Formulary 3 Specialty Drives Additional Plan Savings • Help manage specialty drug spend: • Included in the new formulary option • Addresses both appropriate utilization and preferred drug selection • Currently focused on seven** therapy classes: MS, Biologic Disease-Modifying Agents (Rheumatoid Arthritis), fertility, hepatitis C interferons, growth hormone, PAH, osteoarthritis • Quarterly updates • Day one control of new product launches and line extensions, until reviewed; unless given pivotal drug status **Number of classes may change. Accounts must accept all classes 1. The Growing Cost of Specialty Pharmacy—Is it Sustainable? February 18, 2013) Note: CareFirst Formulary 3 is Advanced Control Formulary Specialty growth expected to quadruple by 20181 – new specialty control strategies needed to address rapid growth 30454 13

14. Internal/For Training Purposes Only Comparing CareFirst Formularies *Savings based on drug ingredient cost. Savings include rebate impact. Account savings may vary by plan design, pricing arrangement, drug mix and at-risk market launches. Member savings will vary based on several factors, some of which include plan design, plan performance, etc. Note: CareFirst Formulary 1 is a Custom Opt-out Formulary, CareFirst Formulary 2 is Standard Formulary, CareFirst Formulary 3 is Advanced Control Formulary 30454 14

15. Internal/For Training Purposes Only Account Formulary Strategy – Key Considerations 15

16. Support a Smooth Transition with Effective Member and Physician Engagement • Member communication focuses on new savings options; encourages outreach to prescriber • Current drug and recommended drug are clearly listed • Provides support in contacting physician, if requested by member MID-OCTOBER MID-NOVEMBER We leverage best practices for the most comprehensive engagement strategies. 31392e 16

17. Communication Strategy CareFirst Formulary 1: • Member Communications Only • Targeted Negative Tier Change Notifications • Mailed 30-45 days prior to Implementation date (Mid-November) and quarterly thereafter • Final drug list targeted for 10/1/2014 – updated impact report expected by 10/5/14 CareFirst Formularies 2 & 3: • Member Communications • Targeted Negative Tier Change Notifications • Mailed 30-45 days prior to Implementation date (Mid-November) and quarterly thereafter • Targeted Excluded Drug Notifications • Phase 1 Mailed Beginning October (and quarterly thereafter for CareFirst Formulary 3) • Phase 2 Mailed Mid-November (and quarterly thereafter for CareFirst Formulary 3) (CareFirst Formulary 2 doesn’t have quarterly exclusions – yearly only) • Physician Communications • Targeted Member Specific Excluded Drug Notifications • Mailed Approximately 3 weeks after Member Letters (End – Early November) and quarterly thereafter Medical Necessity Exception Process: In place for physicians to submit on behalf of their members for medical necessity review

18. Questions?

19. ID Cards • CareFirst Marketing Materials • Installation

20. ID Cards Mock-Up – 200+ ASO (Facets) ID cards will now include an indicator of which formulary: RX = CareFirst Formulary 1 RX2 = CareFirst Formulary 2 RX3 = CareFirst Formulary 3

21. ID Cards Mock-Up – Large Group (NASCO) Before Legend on card strip After

22. CareFirst Formulary 2 & 3 Quote and Installation Process • Account Manager • Request a quote business as usual from Underwriting • Notify your Underwriter if sold • Service Rep • Facets • No additional paperwork • Service Rep indicates “Formulary 2 or Formulary 3” in SOCS form comments • NASCO • Pharmacy NAEGS & FirstForm updates • Service Rep indicates “Formulary 2 or Formulary 3” in SOCS form comments

23. CareFirst Formulary Communication Resources

24. CareFirst Formulary 1 Member Communications

25. Formulary 2 Drug Removal List (MOCK-UP): Updated Annually

26. Drug Search Tool – Pre-Log In Search Function may change for 2015

27. Secure Log In--My Account My Account “Drug and Pharmacy Resources” include: My Drug Home Drug coverage and cost (Drug Pricing) View Drug claims Find a Pharmacy Order and refill prescriptions (Mail Order) 1 2 4 3 5 • NOTE: The Drug Pricing Tool provides pricing information for the plan the member currently has. A member cannot access pricing information for a plan that is effective in the future. • Example, Marta changes benefits effective January 2015. She will not be able to get drug pricing information on her new plan until January 2015.