Unsustainable Trend Commercial Plan members averaging 232,964 per quarter. (Stats do not include our 73,000 Medicare retirees) Plan received critical Board approval in May 2015 to make proactive, timely changes to the formulary. Hired pharmacy consultants in October 2015 to focus on the traditional and specialty drugs spend reduction. Had first Clinical Summit with our PBM in December 2015 to enlighten them of our new policy to manage our Formulary aggressively with their cooperation. Alabama Public Education Employees’ Health Insurance Plan Page 1 of 4 Alabma Public Education Employees' Health Insurance Plan

Immediately Realized Savings Primary Initiatives Annual Savings Prior Authorization Program $3.5M Revised 159 Prior Authorization Criteria in alignment with Package Inserts and Full Prescribing Information • Created 83 new Specialty Drug Prior Authorizations Drug Exclusions $15.7M Excluded more than 200 drugs from our formulary with very little member disruption. Excluded a host of new drugs to market before getting on our formulary, avoiding utilization and member disruption. Adopted PBM’s Non-essential Table program automatically excluding kits and pain patches before getting on our Formulary. Specialty Drug Copay Assistance $10.7M Implemented Variable Copay Assistance Program for 33 Specialty Drugs saving $10.7 from Mar 2016 – Sep. 2017. Reports and Monitoring Tools Specialty Monitor Software tools to identify savings opportunities. Max Claim Dollar Report Drug Price Impact Report High Dollar Monthly Report TOTALS $29.9M Alabama Public Education Employees’ Health Insurance Plan Page 2 of 4

Single Digit Percent Increase in 2017 Spend Cost of Rheumatoid Arthritis Class of Drugs Continues to Rise. Diabetes Medications increasing rapidly in price. New very expensive oncology gene therapies are coming. 2017 Trend would be worse without the aggressive formulary management which began in 2015. Alabama Public Education Employees’ Health Insurance Plan Page 3 of 4 Alabma Public Education Employees' Health Insurance Plan

Next Steps to Manage the Spend  Challenged our Business Partners to get to $88 pmpm    Excluded an additional 57 dermatology drugs for a total of about 100 exclusions in this class. Tightened Utilization Management in the hemophilia class of drugs. Planning to add 40 new oncology drugs to the Variable Copay Assistance Program bringing the total number of drugs in the program to 77. Our pharmacy consultants conducted an audit of the PA review and appeals process to ensure criteria enforcement and PA criteria improvement. PBM did a Compliance Review of our Specialty Network which will lead to greater compliance and network narrowing. PEEHIP analysts continue to review new drug NDCs monthly and conduct regular reviews of claims data looking for drug cost, pharmacy, patient, and prescriber outliers using a variety of data analytic tools. Research results shared with our PBM and consultant's pharmacists for actionable recommendations. Alabama Public Education Employees’ Health Insurance Plan Page 4 of 4 Alabma Public Education Employees' Health Insurance Plan