1. Rx carve Out Proposal Board Meeting April4, 2016

2. Background Solanco School District manages a Self-Insured Health Care program for about 780 covered lives through 368 employees Health Assurance (HA) / Health America is the carrier for net work and claims administration (ASO) HA medial network part of Coventry’s National networks Pharmaceutical and medical are combined under the HA contract (for Admin services including networks...PBM contract with HA) Aetna Bought HA/ Coventry in 2012...formal network cut-over is January 2017

3. Pharmaceutical Benefit Manager (PBM) Current PBM and Formulary is through and part of the HA contract utilizing Express Scripts (ESI) [i.e. HA holds the PBM contract] Aetna is/uses its own PBM with assistance from Caremark – January 1, 2017 Aetna conversion fully expected to be very smooth, especially on the medical side – PBM conversion would also occur to Aetna/Caremark—Unknown disruption; little expected, and again no reason to expect anything less than a smooth transition....

4. So why change?-----Several Reasons Senate Resolution 2013-250 – Study of School district health care PRM Consulting Group Study Report out November 2015 Found that 85% of SD’s were Self-Insured Found that 86% of SD’s still had Rx under the medical contract [cost avoidance is the SD’s] Estimated a $100 to $160 cost avoidance per covered life --- or about $72 million statewide

5. Facing a Change & Rx spend growing at double digit trend From ESI to Aetna/Caremark January 1 if do nothing Opportunity to examine cost avoidance of carve out or carve in Strategic opportunity to exert/implement a new business model with greater control utilizing carve out to manage going forward Complex environment getting more complex and Rx changes moving forward will require greater monitoring Requires skilled and experienced broker(s) and partner to work for staff and district interests

6. Proposals & Players Market-wise, Cost-wise; complexity and growth-wise: Doing nothing with RX as Self-insured...not an option Aetna and Caremark---Carve “in”...very competitive proposal Carve out---PSBA Insurance Services has Partnered with Keenan Associates / Keenan Pharmacy Services (formed 2007; currently over 400,000 lives nationwide) – Brings deeper Retail and Mail order discounts – Reduced dispensing fees – Guaranteed Rebates – performance guarantees – Internal audits by a third party/ Solid Benefit Guidance, LLC; all claims. – included as part of the net cost structure; includes contract compliance and oversight on emerging specialty Rx markets

7. AWP discounts shown are a guaranteed minimum across 100% of all prescriptions. Guaranteed minimum for ESI’s Specialty Pharmacy is 18.00%. Traditional Rebate Program: Rebates are guaranteed for all Brand scripts dispensed at a participating Retail, Mail, or Specialty pharmacy, and are paid to Solanco SD on a quarterly basis (150 days after the close of the quarter). Solanco SD currently has a rebate credit of $11.00 PEPM ($44,088). Under Coalition Solanco would have earned $106,696. Clients receive 100% of rebates earned from actual claims or the minimum guarantee, which ever is greater. Solanco SD - Cost Comparison Discounts, Fees and Rebates Keenan/PSBA

9. Cost Avoidance Results of Claims File Re-pricing PCMP is an optional Management Program Program without PCMP: Program with PCMP:

10. Overview and Recommendation Retrospective actual claims---The Claims File Cost Comparison based on current utilization shows $219,062 in cost could have been avoided, if the coalition program were in place. Coalition has negotiated significant (leveraged by scale) pharmacy benefit programs: – Deeper discounts, rebate at a level to cover increased fixed costs, and very low dispensing fees – Program flexibility with no mandatory plan design changes ( to Solanco’s Plan) – Prior Authorization, Drug Quantity Management, Retrospective Drug Utilization Review, and Specialty Step Management are offered to KPS members at no cost – Performance, Implementation and Generic Utilization guarantees – Ongoing Third -party audit – no charge – Annual market checks will keep coalition pricing competitive – Two year Contract --- to be fully reviewed and vetted

11. Appendix See glossary of Terms - link Clinical RFP link Board Members Only – Disruption reports link – Non-Disclosure Agreement (NDA) ( solicitor) link

12. General Rx overview 80/20 ‘rule’ for Medical is 80/10 for RX... 5.5% of Claimants is over 75% of claim dollars 2% of Claimants is over 60% of claims dollars -- Claimants at the “high cost” end generally are Not the long-term treatment claimants....so disruption factors generally can be avoided with initial formulary guidance $11 to $12 Admins fee add vs...significant Rx pricing differentials (22.80 now) Estimated an additional $50K in fixed costs....the $219K avoidance estimate is NET of fixed cost adds