Presented by: Keenan & Associates Debra L. Yorba, Sr. Vice President February 22, 2014 License Plan Design Sub-Committee Recommendations KPPC/ESI Prescription Plan Plan Year

2 ESI Rx Program Key Statistics The following statistics are based on an experience period of October 1, 2013 thru September 30, 2014: 1.Average covered employees per month - 8,082 employees 2.Average covered members per month – 19,536 3.Total Rx plan costs - $22,450,384 (+7.2%) 4.Total Rxs filled – 253,336 (-3.6%) 5.Plan Cost Per Member Per Month (PMPM) - $95.76 (+19.6%)

3 Non-Specialty Rx /Specialty Rx Statistics  Non-Specialty Drug Plan Cost PMPM = $73.64 (+14.0%)  Specialty Drug Plan Cost PMPM = $22.12 (+42.9%)  Total Plan Cost Non-Specialty Drugs = $17,264,66 (+2.2%)  Total Plan Cost Specialty Drugs = $5,185,723 (+28.1%)

4 Top 10 Drugs by Plan Cost Brand NameIndication# of RxPlan Cost Enbrel - SpecialtyInflammatory Conditions164$589,523 AbilifyMental/Neuro675$548,754 CompoundMisc Conditions1,494$530,650 Copaxone - SpecialtyMultiple Sclerosis57$369,360 Humira – SpecialtyInflammatory Conditions89$327,840 Lantus SolostarDiabetes756$315,714 Duloxetine HCLDepression1,157$304,582 HumalogDiabetes726$301,733 NexiumUlcer Disease1,037$299,803 Solvaldi - SpecialtyHepatitis10$285,227

5 Plan Design Sub-Committee Recommendations Plan Design Sub-Committee reviewed REEP claims experience and detailed claims analysis REEP has historically had minimal Utilization Management Rising Rx costs, Rx waste and extreme Specialty Drug costs require diligent management Recommendations do not effect the formulary; REEP remains on the broadest formulary ESI offers Members currently receiving medications will be grandfathered on those medications Estimated cost savings to REEP - $2.5 million in Rx claims costs

6 Recommendation #1 Hepatitis C Drug Management Average treatment over $100,000/patient Estimated 3.2 million Americans living with Hep C virus 16,000 cases are diagnosed each year Drug spend per insured person is expected to increase 1800% between 2013 and 2016 Members currently in treatment will be grandfathered on the medication they are currently receiving

7 Recommendation #1 Cont’d Preferred Specialty Management + Hepatitis Cure Value Program (HCV) Viekira Pak dispensed as preferred 1 st Line Use drug for Hepatitis C to REEP members Exclusively dispensed through Accredo Accredo provides 2x greater adherence to medication thru Clinical Specialist and patient monitoring throughout therapy Refund to REEP for early treatment discontinuation up to 2 fills ($56,000) Extended therapy cap at $100,000

8 Recommendation #2 Implement Advanced Utilization Management which includes: 1.Prior Authorization 2.Step Therapy 3.Drug Quantity Management Patients currently receiving medications will be grandfathered on current medications Will effect members receiving new prescriptions 7/1/15 or after

9 Recommendation #2 Cont’d Prior Authorization - Ensures clinically appropriate use of medications How does Prior Authorization Work? 1.Prescription is provided to pharmacy 2.If prior auth is on file at pharmacy, Rx is dispensed 3.If no active prior auth on file, Pharmacy calls Physician 4.Physician calls Prior Auth Dept at ESI, submits clinical criteria, claim is approved and medication dispensed

10 Recommendation #2 Cont’d Step Therapy - Reduces prescription waste by promoting use of generics with therapeutic equivalence How Does Step Therapy Work? 1.Prescription is provided to pharmacy 2.System checks history for Step 1 or Step 2 drugs 3.If history is present, medication is dispensed 4.If not history present, prior authorization is required and Pharmacist calls Physician to obtain Rx for Step 1 drug 5. Patients currently receiving medications will be grandfathered on current medications

11 Recommendation #2 Cont’d Drug Quantity Management - Aligns dispensing quantity with FDA-approved dosage guidelines How does DQM Work? 1.Prescription is provided to pharmacy 2.System checks for appropriate quantity and medication is dispensed if quantity is less than or equal to limit 3.If quantity exceeds limit, pharmacist receives message with maximum quantity allowed. 4.Pharmacist can dispense within guidelines or ask prescribing physician to request an exception

12 Recommendation #3 Implement Express Advantage Network What is it? - A Preferred network of pharmacies offering deeper discounts to REEP with substantial savings on Rx costs Express Advantage Network 32,000 pharmacies – Tier 1 All other pharmacies – Tier 2 Members choose either Tier 1 or Tier 2 pharmacy Rx filled at Tier 1 pharmacy are filled at the regular copays Members who use Tier 2 pharmacies will pay an additional $15 copayment per Rx

13 Recommendation #3 Cont’d Implement Express Advantage Network Who are the major Tier 1 Pharmacies? Target, Ralphs, Kmart, Vons, Walmart, Rite Aid, Albertsons, Stater Bros., COSTCO Who are the major Tier 2 Pharmacies? CVS, Walgreens, The Medicine Shoppe Members can use the pharmacy of their choice. Members pay an additional $15 per Rx at Tier 2 pharmacies.

14 Recommendation #3 Cont’d Implement Express Advantage Network Current Utilization –47% of members use Tier 1 pharmacies –53% of members use Tier 2 pharmacies Proximity of Tier 1 pharmacies to members –With 3 miles – 99.3% of membership –Within 5 miles – 99.8% of membership –Within 15 miles – 100% of membership

15 Recommendation #4 Implement Select Home Delivery 72.3% of REEP’s maintenance drugs are filled at the retail pharmacy Home Delivery saves the member money and costs REEP less Member chooses whether to fill at retail pharmacy or home delivery – the member chooses – it is not mandatory Member has up to two Rx fills at retail pharmacy to make their decision – first two fills are covered at copay Third fill and after will cost member 100% until member elects to continue at retail or home delivery Once member chooses, Rx is filled at regular copay

16 In Summary The Plan Design Sub-Committee is recommending adoption of all programs outlined: Hepatitis C Management Program Advanced Utilization Management Prior Authorization Step Therapy Drug Quantity Management Express Advantage Network Select Home Delivery Est. Rx claims savings $2.56 million