1. Midwest Business Group on Health National Employer Survey on Biologics/Specialty Pharmacy August 2011

2. MBGH Biologics/Specialty Pharmacy Initiative Establishing an Employer View MBGH sees significant growth in specialty pharmacy products and related cost impacts to employers MBGH Board cites Biologic/Specialty Pharmacy #1 priority for 2010 and 2011 MBGH partners with Dr. Randy Vogenberg in developing a research project to help employers: – Understand what Biologics/Specialty Pharmacy is and the challenges they must prepare for – More effectively manage benefit through plan design innovation and partnering with specialty vendors in contracting and patient management – Understand the importance of managing their at-risk population and communicating specialty benefits to employees Copyright 2011 © MBGH & IIH 2

3. MBGH Biologics/Specialty Pharmacy Initiative Addressing Employer Needs Phase I - 2011 – Employer Advisory Councils – Chicago & Baltimore – National Employer Baseline Survey – National Vendor Survey – Employer Toolkit and Educational Outreach with employer group testing in two markets Phase II - 2012 – Review pilot efforts and expand outreach and dissemination of findings – Expand survey research, updates to toolkit and national educational outreach – Re-evaluate work and external reporting on results Copyright 2011 © MBGH & IIH 3

4. Survey Demographics – July 2011 MBGH partners with 15 NBCH sister coalitions 120 national employers participate in survey – Representing more than 1 million employee lives Average Age: – 47% of employees are 41 to 45 years of age 36% of survey respondents are manufacturers Average employer size: – 22% - Less than 500 ees – 17% split - Over 25000 and 1000 to 3000 ees Employer funding of health benefits – 69% - Self-insured – 19% - Fully-insured – 13% - Combo of benefits Employers who offer combination of benefits – 60% - don’t combine – 12% - FF 10%; SF 90% 4 Copyright 2011 © MBGH & IIH

5. Size of active employee population in U.S. 5 Copyright 2011 © MBGH & IIH

6. Funding of health benefits/employer size 6 6 Copyright 2011 © MBGH & IIH

7. Level of understanding of specialty pharmacy 7 Copyright 2011 © MBGH & IIH

8. Level of understanding/employer size 8 Copyright 2011 © MBGH & IIH

9. Total medical and pharmacy spend 2010 Per employee spend 2010 9 Copyright 2011 © MBGH & IIH

10. Special meds paid through medical plan Specialty meds paid through pharmacy benefits 10 Copyright 2011 © MBGH & IIH

11. Increase of specialty total claims over past 3-5 years 11 Copyright 2011 © MBGH & IIH

12. Highest cost specialty medications Highest cost drugs 1.Vaccine (not childhood) 2.Arthritis 3.Cancer 4.Multiple Sclerosis Patient Mgmt Services 72% - Case Management 69% - Disease Management 68% - Drug Utilization Management Employee out of pocket or co-insurance per Rx – Average Minimum - $10 to $20 – Average Maximum - over $200 54% of employers require that employees use the Specialty Pharmacy to receive coverage 12 Copyright 2011 © MBGH & IIH

13. Of the 54% of employers who require use of the specialty pharmacy……. Copyright 2011 © MBGH & IIH 13

14. Specialty pharmacy plan design 14 Copyright 2011 © MBGH & IIH

15. Incentives offered for use of specialty pharmacy 15 Copyright 2011 © MBGH & IIH

16. Benefits and service providers utilized for specialty pharmacy 16 Copyright 2011 © MBGH & IIH

17. Entities who support employer in management, contracting and benefit design 17 ManagementContractingBenefit Design Do on own or In-house 36%51%79% Benefits Consultant 21%60%77% Outside Pharmacy Consultant 28%44%74% PBM 61%41%70% Specialty Pharmacy 56%29%54% Health Plan 46%42%76% Copyright 2011 © MBGH & IIH

18. Level of importance for key areas when contracting with specialty pharmacy Copyright 2011 © MBGH & IIH 18

19. Use of other options for specialty pharmacy Copyright 2011 © MBGH & IIH 19

20. Importance of medication-related cost transparency in vendor contracts Copyright 2011 © MBGH & IIH 20

21. Entities who support employer in case and disease management 21 Case Management Disease Management Don’t Know NA Do on own or In-house 20%23%5% 70% Health Plan 78%64%4% 12% PBM47%39%11% 35% Specialty Pharmacy 48%34%10% 37% Outside Vendor 18%26%8% 64% Copyright 2011 © MBGH & IIH

22. Effectiveness of case and disease mgmt support with covered population Copyright 2011 © MBGH & IIH 22

23. Effectiveness of initiatives to increase employee awareness Copyright 2011 © MBGH & IIH 23

24. Communication tactics for covered population Copyright 2011 © MBGH & IIH 24

25. 25 Very Effective EffectiveSomewhat Effective Not Effective Don’t Know Generic Options22%32%12%4%31% Protocols used for prior approval 20%24%22%34% Cost share incentive11%20%22%10%38% Days supply-limited messaging10%27%25%4%34% Communication from pharmacist10%17%22%3%48% Integrated pharmacy network10%21%18%3%49% Inclusion/exclusion criteria9%17%22%4%47% Communication from physician8%14%21%3%55% HRA5%16%26%16%36% Formulary explanation5%24%32%7%31% Cost comparison5%15%29%9%41% Audience benefit management communications for employees 3%22% 4%49% Utilization management mailing and phone messages 3%18%28%9%42% Effectiveness of strategies and employee communication efforts over the past 3-5 years 25 Copyright 2011 © MBGH & IIH

26. 26 Importance of tactics used in managing specialty medication costs Very Important ImportantSomewhat Important Not Important Don’t Know Improved contracting terms, coverage for claim reimbursement 29%25%11%1%33% Incorporation of wellness/catastrophic care coordination strategies 28%22%9%5%36% Improved coordinated info on therapies27% 12%1%32% Contractual opportunities – i.e. rebates25%26%16%4%29% Innovative plan designs for coverage22%41%9%3%27% Vendor provides analysis or cost modeling20%28%11%8%34% Alternative drug delivery channels for access/distribution 17%30%14%2%37% Risk sharing contracts for Rx use12%15%17%4%52% Direct manufacturer contracting12%23%16%10%38% Exclusive networks by setting of care9%23%15%4%49% Alternative risk financing-actuarial designed coverage 9%29%19%3%40% 26

27. 27 Cheryl Larson, Vice PresidentCary Conway Midwest Business Group on HealthMBGH Public Relations clarson@mbgh.orgcary@conwaycommunication.com MBGH is one of the nation's leading not-for-profit business coalitions of private and public employers. Members are represented by human resources/health benefits professions for approximately 110 large self-insured public and private employers, who represent over 3 million lives and spend more than $3 billion on health care benefits annually. F. Randy Vogenberg, PhD, Principal Institute for Integrated Healthcare, Sharon, MA Strategic Pharmacy Advisor, Business Group Pharmacy Collaborative & Senior Fellow, Jefferson School Population Health frandy627@comcast.net The Institute for Integrated Healthcare, an organization that provides integrated pharmaceutical benefits consulting and education to self-insured employers and business coalitions. Contacts Copyright 2011 © MBGH & IIH