1. Pharmaceutical Trends, Issues, & Forecasts
Doug Long
Vice President, Industry Relations IQVIA

2. Disclosure
Doug Long is the Vice President of IQVIA. The conflict of interest was resolved by peer review of the slide content.

3. Learning Objectives
Discuss pharmaceutical pipelines and what they project for spending in the next 3-5 years.
Discuss patient population and prescribing trends.

4. Key happenings in 2017! Market Performance Mergers / Alliances
Dollar growth was 1.7%
Adjusted 90-Day TRX growth was 2.3% and Unadjusted TRx growth was falt
90 day scripts are 15.7% of scripts
Below avg. Flu and Allergy Seasons (until now)
Generic $ sales decreases
Mergers / Alliances
New Walgreens and Rite Aid deal now approved
Walmart and McKesson Alliance
Econdisc joins WBAD Alliance
Walgreens and PharMerica
Amazon and Whole Foods
CVS and Aetna
Reimbursement
Pharmacists can prescribe in more places
Good Rx, Blink RX, etc.
Patient’s behavior during their deductible period
Generic Launches
Record number of ANDA approvals and faster approvals
Copaxone 40 mg
Pristiq
Strattera
Regulation
Opioids recognized as a national crisis
FDA Priority list of no or limited generic entries
Price / Politics
Much more public/ media scrutiny on drug prices
Generic Deflation
Less Brand price inflation
Repeal and Replace?

5. Key happenings in 2018 so far!
Market Performance
Dollar growth is low single digits
Unadjusted TRx growth YTD is flat while Adjusted 90-Day TRX growth is ~2%
90 day scripts continue to grow
Major Flu Season
Generic $ sales decreases
Mergers / Alliances
New Walgreens and Rite Aid deal now being implemented
Amazon and Whole Foods
CVS and Aetna
Amazon, Berkshire Hathaway, JP Morgan
Walgreens and AmerisourceBergen
Albertsons and Rite Aid
Reimbursement
Patient’s behavior during their deductible period
DIR
Generic Launches
Record number of ANDA approvals and faster approvals
Cialis
Glatopa
Advair Diskus?
Regulation
Opioids recognized as a national crisis
FDA Priority list of no or limited generic entries
Price / Politics
Much more public/ media scrutiny on drug prices
Generic Deflation
Less Brand price inflation
Repeal and Replace?

6. A Year in Review Market Performance01
Market Performance
Market Access, Deductibles, & Reimbursement
Hot Topic 1: “Cash Business”
Hot Topic 2: Adherence
Hot Topic 3: Opioids
A Look Forward to 2018 & Recap 02 03 04 05 06

7. US market dollar sales growth is decelerating
9/19/2018
US market dollar sales growth is decelerating
Growth (%) of Sales
Total Market
Retail and Mail
Growth (%)
Growth (%)
Source: IQVIA, National Sales Perspectives, February 2018

8. Absolute Growth by Segment ($BN)
Increased Spending on New Brands and Protected Brand Price Helped Grow U.S. Market by $9.4Bn to $454Bn in MAT Sep 2017
$4.1Bn in traditional new brand growth, $13.1Bn in specialty new brand growth
Absolute Growth by Segment ($BN)
NSP Sep 2017, updated by pduke Dec 2017
Source: Buckets Workbook
BD_5_4_Total_Growth_Waterfall
Source: IQVIA, National Sales Perspectives, Sep 2017

9. Non-Discounted Spend by Channel - 2017
Sales by Channel
US $ BNs
% Market Share
% Growth
RETAIL
$321.1
70.5%
0.0%
CHAIN / MASS
$134.9
29.6%
-2.4%
MAIL
$110.1
24.1%
4.5%
INDEPENDENTS
$50.0
11.0%
0.1%
FOOD STORES
$26.2
5.8%
-5.9%
INSTITUTIONAL
$134.6
29.5%
6.1%
CLINICS
$70.3
15.4%
11.2%
HOSPITALS
$33.9
7.4%
-0.3%
LONG-TERM CARE
$16.8
3.7%
0.8%
HMO
$5.8
1.3%
10.1%
HOME HEALTH
$4.0
0.9%
7.3%
OTHERS
$3.9
-4.5%
TOTAL
$455.7
100.0%
1.7%
Source: IQVIA, National Sales Perspectives, February 2018

10. Sales-weighted gross branded inflation remained in the high single digits throughout 2017; January inflation totals 7.9%
Nephron’s Brand Pricing Monitor
Source: Nephron Research, IQVIA, Glass Box Analytics

11. Sales-weighted gross generic deflation appear to be rebounding since Q4 2017; January deflation totals -9.3%
Nephron’s Generic Pricing Monitor
Source: Nephron Research, IQVIA, Glass Box Analytics

12. 2017 was a record year for ANDA Approvals
FDA Fiscal Year Basis
Source: GDUFA Approvals Dec 2017

13. US is facing price deflation, decreased dollar growth, and concentrated buying power in generics market
Generic dollar sales have declined for 19 consecutive months thru Dec. 17)
17 of top 20 generic companies had negative dollar growth over the last 12 months
Fresenius Kabi, Zydus and Alvogen all exhibited positive dollar growth in the last 12 months
50% of top 20 generic companies have had TRX losses over the last 12 months
Decreased sales and TRx
Three generic purchasers have 90% share of generic purchases
The top 4 generic companies have 38% dollar share and 34% of TRX share
It would only take 20+ generic companies to comprise 75% dollar share and 19+ generic companies to comprise 75% Rx share
Consolidated buying power
Source: IQVIA, National Sales Perspectives and National Prescription Audit, DEC 2017

14. A record 86% of prescriptions were dispensed as unbranded generics in 2017
Unbranded Generics just account for 13% of spending
NSP, NPA Sep 2017, updated by pduke Dec 2017
Source: Buckets db
BD_3_Brnd_vs_Gen_Dol_TRx_%
Source: IQVIA, National Sales Perspectives, National Prescription Audit, February 2018

15. Small Molecule brands facing LOE in the next 5 years are valued at $72
Small Molecule brands facing LOE in the next 5 years are valued at $72.4Bn
Biggest 2017 expiries: Advair Diskus, Zetia, Cialis, Invega Sustenna
U.S. Small Molecule Patent Expiry Exposure
$72.4Bn at Risk in Next 5 Years
$Bn
Buckets Jun 2017 with LOE overwrites from exdatefix, updated by pduke Jun 2017
BD_13_1_Brnds_LOE_5_Years_Past_Years
BD_13_2_Brnds_LOE_5_Years_Future_Years
Small molecule, prescription-bound brands only.
Excludes biologics (Lovenox in 2010, Neupogen in 2013, Copaxone in 2015 and other biologics on the horizon noted below)
Biologics tend not to a large amount of generic erosion and are unpredictable so excluded from this view
*Sales in year prior to expiry used for years ; sales in MAT Jun 2017 used for years
Source: IQVIA, National Sales Perspectives, Jun 2017

16. 9/19/2018
US dispensed TRx growth, particularly unadjusted script volume, is also decelerating
Growth (%) of Rx Volume
Unadjusted
Adjusted for 90-Day
Growth (%)
Growth (%)
*Aligned to forecast
Source: IQVIA, National Prescription Audit, February 2018, Retail, Mail, LTC

17. Dispensed TRx by Channel – MAT JAN 2018
Dispensed by Channel
Unadjusted TRx MNs
% Market Share
% Growth
RETAIL
4,072.9
100.0%
-0.1%
CHAIN
2,070.5
50.8%
0.7%
MASS
627.5
15.4%
-2.0%
FOOD STORES
581.4
14.3%
0.1%
INDEPENDENTS
793.5
19.5%
-1.1%
Source: IQVIA, RxInsights, February 2018

18. Dispensed TRx by Channel – MAT JAN 2018
Dispensed by Channel
Adjusted TRx MNs
% Market Share
% Growth
RETAIL
5,240.5
100.0%
2.6%
CHAIN
2,697.3
51.5%
3.9%
MASS
842.2
16.1%
0.7%
FOOD STORES
748.9
14.3%
2.7%
INDEPENDENTS
952.1
18.2%
Source: IQVIA, RxInsights, February 2018

19. Pharma Sales Growth has Been Trending Downwards in Recent Quarters for Brands & Generics
Total market prescription growth is -0.3% in Q4 2017; Generics are up slightly up +0.6%
NSP, NPA Sep 2017, updated by pduke Dec 2017
Source: Buckets db
BD_32_Sales_&_TRx_Growth_Adhoc
Source: IQVIA, National Sales Perspectives, National Prescription Audit, February 2018

20. Overall retail pharmacy counts are decreasing
9,837 Pharmacies
 169 Pharmacies
Southeastern Grocers closures
8,063 Pharmacies
 252 Pharmacies
Sears/Kmart store closures
21,896 Pharmacies
 138 Pharmacies
18,709 Pharmacies
 67 Pharmacies
Retail = 58,505 Pharmacies
626 Pharmacies
Independents
Chain
Food
Mass
Source: IQVIA, RxInsights, Retail Class of Trade Only (Note: does not include “Other”), MAT Oct 2017; store closures are based on publically available information

21. Unadjusted script volume has declined for Mass and Independents
Source: IQVIA Xponent, Fiscal Q3 2017

22. All classes of trade are experiencing year over year increases on an adjusted Rx basis
Independents: exhibiting growth but trailing the rest of the retail players with only a +1.0% increase
Food: in line with Retail
Chain: showing the strongest growth at 4.9%
Mass: exhibiting growth but trailing the rest of the retail players with only a +0.7% increase
Source: IQVIA Xponent, Fiscal Q3 2017

23. 30 day Rx growth is in decline across the industry yet 90 day Rx’s are experiencing double digit growth
Source: IQVIA Xponent, Fiscal Q3 2017

24. Med D is the biggest contributor to growth for method of payment
Cash month by month payment (dive into copay forgiveness cards)
Source: IQVIA Xponent, Fiscal Q3 2017

25. Med D has the largest share of 90 Day Rx’s
Source: IQVIA Xponent, Calender QE 10/2017

26. Fastest and Slowest Growing Mail and Retail Therapy Areas by Absolute Dollar Change (12 month comparison)
Fastest Growing
Therapy Area
2017
Δ Change (BNs)
Slowest Growing
AUTOIMMUNE
$6.7
LIPID REGULATORS
-$5.4
DIABETES
$4.1
VIRAL HEPATITIS
-$3.6
ANTICOAGULANTS
$1.8
PAIN
-$2.1
ONCOLOGY
$1.5
ANTIHYPERTENSIVES
-$1.7
HIV ANTIVIRALS
$1.4
ANTI-ULCERANTS
-$1.6
RESPIRATORY
$1.2
MENTAL HEALTH
-$1.2
NERVOUS SYSTEM DISORDERS
$0.7
ADHD
-$1.0
GI PRODUCTS
$0.3
DERMATOLOGICS
OPHTHALMOLOGY
ANTIBACTERIALS
-$0.9
COUGH COLD & FLU
OTHER CARDIOVASCULARS
-$0.5
Source: IQVIA, National Sales Perspectives, February 2018, Mail and Retail

27. Fastest and Slowest Growing Mail and Retail Therapy Areas by Absolute Rx Change (12 month comparison)
Fastest Growing
Therapy Area
2017
Δ Change (MNs)
Slowest Growing
20178
MENTAL HEALTH
6.6
PAIN
-18.3
COUGH COLD & FLU
4.8
ANTIHYPERTENSIVES
-14.3
RESPIRATORY
3.9
OTHER CNS
-4.1
NERVOUS SYSTEM DISORDERS
2.8
LIPID REGULATORS
CORTICOSTEROIDS
2.4
ANTI-ULCERANTS
-3.8
ADHD
2.1
ANTIBACTERIALS
-3.7
DIABETES
2.0
HORMONAL CONTRACEPTION
-3.6
CANCER DETOX AG
1.7
ERECTILE DYSFUNCTION
-2.1
AUTOIMMUNE
1.4
VITAMINS & MINERALS
-1.6
MIOTICS+ANTIGLAUCOMA PREPS
0.9
THYROID
-1.4
Source: IQVIA, National Prescription Audit, February 2018, Mail and Retail

28. Fastest and Slowest Growing Mail and Retail Therapy Areas by Absolute Rx Change (12 month comparison)
Adjusted for 90-Day Rx
Fastest Growing
Therapy Area
2017
Δ Change (MNs)
Slowest Growing
ANTIHYPERTENSIVES
27.1
PAIN
-15.0
MENTAL HEALTH
23.2
ANTIBACTERIALS
-3.5
LIPID REGULATORS
17.6
OTHER CNS
-2.9
DIABETES
16.9
ERECTILE DYSFUNCTION
-2.1
RESPIRATORY
8.3
ANTI-PARASITICS
-1.0
NERVOUS SYSTEM DISORDERS
8.2
NASAL PREPS
-0.3
ANTICOAGULANTS
6.2
ALL OTHER UROLOGICAL
-0.1
THYROID
5.5
DIETETICS
-0.03
COUGH COLD
5.3
LABOUR INDUCERS
-0.02
VACCINES
4.6
MULTIPLE SCLEROSIS
-0.01
Source: IQVIA, RxInsights, February 2018, Mail & Retail

29. Adjusting for 90 Day Rx volume will be critical in the years ahead
2016
2017
Growth
THERAPY AREA
Unadjusted
(MNs)
Adjusted
Days
Supply
Abs. %
Change
ANTIHYPERTENSIVES
637.1
1,020.6
48.1
628.0
1,047.7
50.1
-9.2
-1.4%
27.1
2.7%
MENTAL HEALTH
335.3
426.9
37.8
343.6
450.1
38.9
8.3
2.5%
23.2
5.4%
PAIN
439.5
462.0
21.4
422.1
447.0
21.8
-17.5
-4.0%
-15.0
-3.2%
LIPID REGULATORS
235.7
394.6
50.3
233.8
412.2
53.0
-1.9
-0.8%
17.6
4.5%
DIABETES
232.5
336.5
44.0
236.6
353.4
45.5
4.1
1.8%
16.9
5.0%
ANTIBACTERIALS
257.0
259.3
9.8
253.4
255.9
9.7
-3.6
-3.5
-1.3%
ANTI-ULCERANTS
154.7
216.6
41.5
151.9
220.1
42.9
-2.8
-1.8%
3.5
1.6%
NERVOUS SYSTEM DISORDERS
167.0
199.7
35.0
170.2
207.9
35.8
3.1
1.9%
8.2
4.1%
THYROID
122.6
197.0
48.3
121.7
202.4
50.0
-0.9
-0.7%
5.5
2.8%
RESPIRATORY
164.9
189.0
30.9
169.9
197.3
31.4
5.0
3.0%
4.4%
ALL THERAPY AREAS
4,194.3
5,428.5
34.2
4,197.2
5,568.5
35.2
2.9
0.1%
140.0
2.6%
Source: IQVIA, RxInsights, January 2018

30. Adjusting for 90 Day Rx volume will be critical in the years ahead
2016
2017
Growth
THERAPY AREA
Unadjusted
(MNs)
Adjusted
Days
Supply
Abs. %
Change
OTHER CNS
173.1
184.8
27.4
169.5
181.9
-3.6
-2.1%
-2.9
-1.6%
HORMONAL CONTRACEPTION
95.7
133.5
39.2
92.5
135.7
41.3
-3.2
-3.4%
2.2
1.6%
VITAMINS & MINERALS
85.6
116.9
40.5
86.0
120.3
41.6
0.3
0.4%
3.4
2.9%
ANTICOAGULANTS
75.0
107.8
42.8
77.2
114.0
44.0
2.1
6.2
5.7%
DERMATOLOGICS
108.3
110.7
21.5
108.8
111.4
21.7
0.6
0.5%
0.8
0.7%
ADHD
86.6
92.9
31.7
88.9
95.5
2.6%
2.7
GI PRODUCTS
76.3
83.4
24.1
77.3
85.2
24.3
1.0
1.4%
1.9
2.3%
CORTICOSTEROIDS
67.0
70.8
13.4
69.4
73.5
13.2
2.4
3.6%
3.8%
ALLERGY
63.5
69.6
27.6
64.9
71.9
28.4
1.3
2.1%
2.3
3.3%
BENIGN PROSTATIC HYPERTROPHY
37.1
61.1
49.0
37.8
65.0
51.1
0.7
2.0%
3.9
6.3%
TOP 20
3,614.7
4,733.6
34.2
3,603.2
4,848.4
35.2
-11.4
-0.3%
114.8
2.4%
Source: IQVIA, RxInsights, February 2018, Mail & Retail

31. Adjusting for 90 Day Rx volume will be critical in the years ahead
2016
2017
Growth
MOLECULE
Unadjusted
(MNs)
Adjusted
Days
Supply
Abs. %
Change
LISINOPRIL
125.5
203.1
48.6
120.9
204.5
50.8
-4.6
-3.6%
1.3
0.7%
HYDROCHLOROTHIAZIDE
118.5
194.4
49.0
113.8
194.3
51.3
-4.7
-4.0%
-0.1
0.0%
LEVOTHYROXINE
109.9
179.6
84.8
108.4
183.6
50.9
-1.5
-1.4%
4.0
2.2%
ATORVASTATIN
94.1
154.9
78.4
100.9
175.9
52.4
6.9
7.3%
21.0
13.5%
AMLODIPINE
87.4
139.1
72.7
88.1
147.2
50.2
0.7
0.8%
8.1
5.8%
METFORMIN
88.5
135.5
59.5
88.9
142.6
48.3
0.3
0.4%
7.0
5.2%
ACETAMINOPHEN
145.6
146.2
61.8
131.5
132.1
15.7
-14.1
-9.7%
METOPROLOL
75.7
122.6
45.8
77.1
130.1
50.7
1.4
1.9%
7.5
6.1%
ETHINYLESTRADIOL
120.3
44.5
84.9
122.0
40.4
-3.2
-3.7%
1.7
1.4%
LOSARTAN
60.6
99.1
38.6
63.3
108.7
51.6
2.7
4.5%
9.6
9.7%
TOP 10
993.9
1,494.9
1,578.5
977.8
1,541.1
46.2
-16.1
-1.6%
3.1%
Source: IQVIA, RxInsights, February 2018, Mail & Retail

32. Fastest and Slowest Growing Mail and Retail Products by Absolute Dollar Change (12 month comparison)
Fastest Growing
Product
2017
Δ Change (BNs)
Slowest Growing
HUMIRA
$2.6
CRESTOR
-$3.3
GENVOYA
$1.6
HARVONI
-$3.2
EPCLUSA
$1.5
SOVALDI
-$1.7
TRULICITY
$1.4
ZETIA
-$1.6
ELIQUIS
EPIPEN 2-PAK
-$0.9
STELARA
$1.0
NEXIUM
-$0.7
TRESIBA FLEXTOUCH
$0.9
BENICAR
JARDIANCE
$0.7
SEROQUEL XR
XARELTO
LANTUS SOLOSTAR
-$0.6
ENBREL
DAKLINZA
Source: IQVIA, National Sales Perspectives, February 2018, Mail and Retail

33. Fastest and Slowest Growing Mail and Retail Products by Absolute Rx Change (12 month comparison)
Fastest Growing
Product
2017
Δ Change (MNs)
Slowest Growing
ROSUVASTATIN CAL
12.4
CRESTOR
-9.9
VIT D2
8.0
HYCD/APAP
-8.9
ATORVASTATIN CA
6.3
SIMVASTATIN
-6.5
OSELTAMIVIR PHOS
5.8
VIT D
-5.4
EZETIMIBE
4.3
ZETIA
-4.3
GABAPENTIN
3.5
ATENOLOL
-3.9
DICLOFENAC SOD
2.7
LISINOPRIL
-3.6
VENTOLIN HFA
2.6
OMEPRAZOLE (RX)
-3.4
NITROGLYCERIN
2.4
OXYCODONE/APAP
-3.1
ELIQUIS
ALPRAZOLAM
-2.6
Source: IQVIA, National Prescription Audit, February 2018, Mail and Retail

34. Fastest and Slowest Growing Mail and Retail Molecules by Absolute Rx Change (12 month comparison)
Adjusted for 90-Day Rx
Fastest Growing
Molecule
2017
Δ Change (MNs)
Slowest Growing
ATORVASTATIN
21.0
ACETAMINOPHEN
-14.1
LOSARTAN
9.6
HYDROCODONE
-9.6
AMLODIPINE
8.1
SIMVASTATIN
-6.7
METOPROLOL
7.5
ATENOLOL
-5.6
METFORMIN
7.0
OXYCODONE
-4.5
ROSUVASTATIN
6.8
CIPROFLOXACIN
-2.8
GABAPENTIN
6.1
CODEINE
-2.7
MONTELUKAST
4.6
ALPRAZOLAM
-2.6
ESCITALOPRAM
TRAMADOL
INACTIVATED INFLUENZA VIRUS
4.4
WARFARIN
-2.3
Source: IQVIA, RxInsights, February 2018, Mail & Retail

35. TOTAL ILI-2017/18 STD vs. Prior 6 Ssns & Most Recent 3 Ssns Avg - ILI over several weeks has fallen off!!
Even with the fall off the current affected population is setting a record weekly high over the last six seasons

36. FAN Regional 2017/18 Season %Change Vs. 2016/17 Season
WE: 1/13/2018 37

37. FAN Market 2017/18 Season %Change vs. 2016/17 Season
WE: 1/13/2018 38

38. Summary on the current 2017-2018 flu season
The season is predominantly influenza A(H3N2) meaning vaccine effectiveness could be lower and antiviral treatments (oseltamivir or Tamiflu®, zanamivir or Relenza®, and peramivir or Rapivab®) should be utilized
ILI appears to have peaked in December 2017 (40.9 MM) but is still expected to observe an uptick in February
Three regions, the West North Central (-6.7%), Mid-Atlantic (-4.8%), and East South Central (-2.2%), are trending lower than last season
Compared to last season, Philadelphia is down 6.1% and Los Angeles is up 14.8% in afflicted patients

39. A Year in Review Market Performance01
Market Performance
Market Access, Deductibles, & Reimbursement
Hot Topic 1: “Cash Business”
Hot Topic 2: Adherence
Hot Topic 3: Opioids
A Look Forward to 2018 & Recap 02 03 04 05 06

40. 9/19/2018
Deductible plans are increasingly common and deductible levels are rising
Cumulative Increases in Deductibles, Premiums, Wages and Inflation
While healthcare spending has been growing above inflation, specific aspects of healthcare have been growing more rapidly, especially cost-sharing with patients via deductibles, and premiums.
Deductible plans have increased by 28% from 21 to 49% of employer sponsored plans, where in some cases employers only offer high deductible plans instead of more traditional plans in order to limit their share of costs, or to avoid being deemed a “Cadillac” plan and be subject to ACA penalties.
In many cases employers offer choices and patients choose deductible plans with lower premiums than in in more traditional insurance plans.
Deductibles paid have increased by 63% since 2011 driven by higher drug list prices, more patients with deductibles plans and higher deductible limits.
Net spend on medicines has been growing at the same rate as premium increases but patient exposure to cost sharing is increasing at a substantially higher rate than net spend (or net revenues).
In the case of retail prescriptions, over 1.3 million people carry patient payments in excess of $200, and over 9.5 million had out of pocket costs over $50 (see appendix).
While it’s estimated that relatively few patients experience significant out of pocket costs (given that 90% of medicines are generic and specialty medicines are estimated at 2%), this is likely to change over the coming years as the growth in specialty medicines
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), ; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, (April to April).

41. Payers are shifting more cost onto patients through benefit designs with higher co-pays and pharmacy deductibles
Commercial Payer 1 Benefit Design
Percent of Claims
Generic
Preferred
Brand
Non-Preferred Brand
2015 Average Pharmacy Deductible
2Q13
2Q15
Growth
$10
$40
$50 $
25%
28%
+12%
$20
30% $ 0%
10% $5
$25 $ 9% 8%
-11%
12% 7%
-42%
$15 2% 5%
+150%
Commercial Payer 2 Benefit Design
$ 1,000
16%
+78%
$35
$60 $
15%
+7%
11%
+9%
$30
+13% $
-20%
The second largest benefit design was not even available in 2013
The largest, and fastest growing, benefit design has co-insurance and a high pharmacy deductible
Source: IQVIA Formulary Impact Analyzer (FIA); IQVIA Rx Benefit Design (RxBD)

42. Patients in the deductible period paid for almost forty percent of out-of-pocket costs for branded prescriptions
Distribution of Prescriptions by Cost-sharing Type (Commercial, Brands)
All Brands
Specialty Brands
Source: Amundsen Consulting (a division of IQVIA) analysis for PhRMA; IMS FIA; Rx Benefit Design, Mar 2017

43. The growing role of deductibles and patient cost sharing for Rx
How deductibles will reshape the pharmacy industry
Prescription dispensing is becoming more seasonal because deductibles typically reset on January 1st
Patients have an incentive to fill more prescriptions at the end of the year
Higher abandonment rates and lower adherence levels at the beginning of the year
Patients are increasingly exposed to the list price of their prescriptions
Controversy for brand-name drugs with formulary rebates: PBM and health plan collect rebate that is not reflected in retail list price
Consumers are starting to shop for prescriptions
Growing use of prescription deductibles directly encourages shopping behavior: online discount card vendors (GoodRx / Blink Health) are benefiting from this trend
Consider generic drugs: 87% of prescription dispensing activity yet wide variations in cash prices – may be the most logical opportunity for Amazon (low-cost generics) to enter the market
Source: Drug Channels, Shopping For Prescriptions: How Deductibles Will Reshape the Pharmacy Industry, November 2017

44. The growing role of deductibles and patient cost sharing for Rx
How deductibles will reshape the pharmacy industry
81% of covered workers must meet an annual deductible before healthcare plan covers services (typically excludes Rx)
Average deductible is $1,505 for single coverage and $4,527 for family coverage
However, 1/3rd of workers in HIGH-deductible plans face separate prescription deductible: plans shift 100% of prescription cost to the patient until the deductible is met
1 in 7 workers (15%) have a separate drug deductible
Source: Drug Channels, Shopping For Prescriptions: How Deductibles Will Reshape the Pharmacy Industry, November 2017

45. Almost 1 in 4 prescriptions are abandoned by patients during their deductible phase
Abandonment Rates for Branded Medicines
Source: Amundsen Consulting (a division of QuintilesIMS) analysis for PhRMA; IMS FIA; Rx Benefit Design, 2015

46. A Year in Review Market Performance01
Market Performance
Market Access, Deductibles, & Reimbursement
Hot Topic 1: “Cash Business”
Hot Topic 2: Adherence
Hot Topic 3: Opioids
A Look Forward to 2018 & Recap 02 03 04 05 06

47. Rapid growth of drug discount programs for uninsured or patients considered “underinsured” (high cash deductible)

48. Many drug discount programs have shown rapid growth since launch
Adjusted TRx
Good Rx: Between Q to Q1 2017, Good Rx has an average Q over Q growth of 22.6%. The last 2 Qs have averaged over 5MN dispensed scripts.
Blink Health: In 1 year, Blink Health has gone from dispensing ~30K scripts per Q to ~300K scripts in the most recent Q.
Source: IQVIA, RxInsights, April 2017

49. Inside Rx is an example of a drug discount program and was recently launched by Express Scripts / GoodRx
New York Times “Express Scripts to Offer Cheaper Drugs for Uninsured Customers”
Inside Rx offers discounts of 40+ common products (from cholesterol to diabetes prescriptions) to:
Patients without insurance
Patients with high-deductibles that could not otherwise afford medications
Addresses gross-to-net challenges of underinsured
Consumers sign-up for Inside Rx & either present a discount card or the mobile app to receive discounts
Average discount is one-third off the list price
Inside Rx is a subsidiary of Express Scripts and started in partnership with GoodRx
GoodRx is similarly structured to offer discounts on generic prescriptions
Inside Rx retail network includes 40,000 pharmacy locations
Exclusively national and regional drug chains

50. Overview of newly emerging accumulator programs
Accumulator Programs: benefit design option targeted for specialty drugs where a manufacturer provides copayment assistance
Unlike conventional benefit designs, manufacturer’s payments no longer count toward a patient’s deductible or out-of-pocket maximum
Shifts a majority of drug costs to patients and manufacturers = cost savings to employers and health plans
Could lower a plan’s drug spending by discouraging the appropriate utilization of specialty therapies and reducing adherence
Evolution of benefit plan design has caused patients to pay a significant share of prescription costs for more-expensive specialty drugs because of high coinsurance amounts
Many patients also face a deductible for prescriptions: combined medical-pharmacy benefit deductible or an annual prescription drug deductible separate from general annual deductible
Previously copay cards or coupons offered by the manufacturer typically offset out-of-pocket costs for brand-name specialty drugs and count toward a patient’s deductible or annual out- of-pocket maximum
Source: Drug Channels, Copay Accumulators: Costly Consequences of a New Cost-Shifting Pharmacy Benefit. January 2018

51. A patient with RxBD containing coinsurance (30%), an annual deductible of $3K, and an OOP maximum of $6K would pay $6K MORE in the accumulator scenario
Note: For this scenario, the cost per Rx is $3K, manufacturer rebate to sponsor is 20%, amount covered by copay program is 100% and max value of copay program is 100%
Conventional Scenario
Payer Costs
Jan 18
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2018
Patient OOP
(actual) $0
Manufacturer
CoPay Program
$3,000
$900
$300
$6,000
Plan Sponsor
$2,100
$2,700
$30,000
Total
$36,000
Accumulator Scenario
Payer Costs
Jan 18
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2018
Patient OOP
(actual) $0
$3,000
$900
$300
$6,000
Manufacturer
CoPay Program
$15,000
Plan Sponsor
$2,100
$2,700
Total
$36,000
Source: Drug Channels, Copay Accumulators: Costly Consequences of a New Cost-Shifting Pharmacy Benefit. January 2018

52. Potential implications of the accumulator programs
Patient backlash and confusion
Study published by United HealthCare found 1/3rd of consumers don’t understand the meaning of “health plan deductible” and almost 2/3rds don’t understand “out-of-pocket” maximum
Lower adherence
The median US household is $58K = high mid-year co-pays may result in abandonment of specialty scripts (i.e. patient can not afford to fill a $6K prescription)
Most specialty scripts are single-source therapies with no equivalent generic or therapeutic alternative
Drug spending will drop
Utilization is a significant driver of specialty drug spending
A major component of spending growth can be attributed to growth in the number of people being treated AND the number of prescriptions being dispensed
Higher utilization of specialty drugs is usually considered a positive trend because high pharma spend = lower medical spend and improved patient health
Massive cost-shifting to patients via copay accumulators could reduce spending by decreasing the utilization of specialty drugs
Source: Drug Channels, Copay Accumulators: Costly Consequences of a New Cost-Shifting Pharmacy Benefit. January 2018

53. Is Amazon a potential retail contender?

54. Speculation on Amazon entering pharma retail sector
To change this title, go to Notes Master
9/19/2018
Speculation on Amazon entering pharma retail sector
Amazon has wholesale distribution licenses in 12 states: Nevada, Arizona, North Dakota, Louisiana, Alabama, New Jersey, Michigan, Connecticut, Idaho, New Hampshire, Oregon and Tennessee; pending application in Maine (just withdrew application in Maine)
Not clear if intended use for distributing pharmaceuticals or B2B medical products
Express Scripts currently profits in multiple ways from partnership with Inside Rx:
Earns a fee from pharmacies to administer the program
GoodRx gets a portion of the fee
Inside Rx is a partially owned subsidiary of Express Scripts (PBM); Inside Rx retains a portion of the rebates negotiated with manufacturers
No large plan sponsor behind the scenes forcing Inside Rx to pass through rebates and admin fees
Potential for Amazon to target the “cash-pay” market by partnering with Express Scripts to drive Inside Rx
Amazon as a channel for high growth without build / buy the infrastructure to adjudicate third-party prescriptions
Source: Drug Channels, The Latest on Amazon’s Pharmacy Ambitions—And a Possible Express Scripts Collaboration, November 2017

55. 6 ways Amazon could reshape the current US pharma business
Distribution: Amazon could use logistics operation to start its own mail-based drug-delivery business, cutting out drugstores and distributors in the process.
Generics: Amazon could offer customers cut-rate generics for cash, appealing to uninsured patients and those on high-deductible plans. Amazon could cut deals with insurers that are not already heavily focused on mail drug delivery (Humana, Anthem, Cigna).
Turn Whole Foods into Whole Drugs: Now that Amazon owns a brick and mortar location, Whole Foods could offer a “pickup point” in addition to mail or same-day-delivery operation. Amazon could also potentially partner with local independent pharmacies.
PBMs: Amazon could buy a drug distributor or PBM but this would potentially be restrictive on the number of people filling prescriptions through Amazon.
Supply Chain: Amazon could launch a startup of its own. Amazon owns wholesale distribution licenses in at least 13 states and could build its own pharmacy business from scratch, completely restructuring the drug supply chain process.
Consumer: “Alexa, refill my Lipitor”. Amazon has the potential to dramatically impact the consumer experience: voice-activated refills being just one example. Amazon could also partner with programs, such as Rx Saving Solutions, to offer consumers buying options on finding the lowest costs alternatives for refills.
Source: The Denver Post, Six Ways Amazon Could Reshape America’s Pharmacy Business, November 2017

56. More on the Amazon, Berkshire, and JP Morgan joint venture
”It's ‘long past time’ for employers like these three to force innovation into the health-care system. For better or worse, there are warped incentives baked into every aspect of the U.S. healthcare system, from medical innovation to care delivery to insurance and benefit management. Rather than merely bashing the current system, I hope this new organization can help patients and their physicians make more informed and more cost-effective decisions. Technology will be necessary but not sufficient to make positive changes.“
Adam Fein, President of Pembroke Consulting

57. A Year in Review Market Performance01
Market Performance
Market Access, Deductibles, & Reimbursement
Hot Topic 1: “Cash Business”
Hot Topic 2: Adherence
Hot Topic 3: Opioids
A Look Forward to 2018 & Recap 02 03 04 05 06

58. Medication adherence is the core of the healthcare value chain
Stakeholders benefit from improved medication therapy adherence.
The Star Rating therapies have the largest ability to impact the value chain.
Stakeholder Value Chain
STAR RATING
THERAPY ADHERENCE
PHARMACY
PHYSICIAN
CMS
INSURER
HOSPITAL
PATIENT
Better Health defined by:
Lower Total Medical Costs
Less ER visits
Fewer Hospitalizations and Readmissions
Increased CMS reimbursements due to better patient outcomes:
Less ER Visits
Reduced admissions, particularly preventable patient readmissions
Significant reduction in Total Allowable Costs and increased CMS reimbursements, particularly for the most vulnerable populations.
Improved Patient Health
Improved relationship with patients.
Improved community engagement defined by:
Rx growth
Improved patient outcomes
Increased patient store traffic
Increased CMS reimbursements and improved patients ratings:
Increase in patient engagements .
Reduced Total Healthcare Costs
Improved Patient outcomes
The Adherence Value Proposition
Source: IQVIA, Advanced Analytics, Information Partner Services

59. Significant range of variability between states
Adherence is not uniform regionally and varies by different factors, such as method of payment: Med D is most adherent
Cash
Medicare D
Medicaid
Third Party
State Level Market Adherence Rates by Method of Payment – Diabetes
Significant range of variability between states
45% - 49%
Diabetes Adherence Rates
50% - 54%
55% - 59%
60% - 64%
65% - 69%
70% - 74%
75% - 79%
80% - 84%
85% - 89%
90% - 95%
Source: IQVIA, State Level Market Adherence Rates by Method of Payment, MAT July 2017

60. The Case for Risk Adjustment in Medication Adherence
National Quality Forum, 2014
“When used in accountability applications, performance measures that are influenced by factors other than the care received, particularly outcomes, need to be adjusted for relevant differences in patient case mix to avoid incorrect inferences about performance.“ 1
Clinically Complex Patient1
Multiple Chronic Conditions
Severe Primary Condition (e.g., Severe heart failure, metastatic cancer, end-stage renal disease)
Concurrent mental and physical health problems
Disease affects multiple organ systems
Disease causes significant functional deficit or disability
Condition requires treatment by multiple providers and/or specialized sites of care
Sociodemographically Complex Patient1
Poverty – Low income and/or no liquid assets
Low levels of formal education, literacy or health literacy
Limited English proficiency
Minimal or no social support – not married, living alone, no help available for essential health related tasks
Poor living conditions – homeless, no heat or air conditioning in home or apartment, unsanitary home environment, High risk of crime
No community resources – social support programs, public transportation, retail outlets
1“Risk Adjustment for Socioeconomic Status or Other Sociodemographic Factors TECHNICAL REPORT August 15, 2014 “, National Quality Forum

61. Sociodemographic Risk Factors Identified through IQVIA Research
Star Therapy Medication Adherence is influenced by patient risk characteristics
Sociodemographic Risk Factors Identified through IQVIA Research
Low Income
Ethnicity
Race
< High School Degree
Average Size of Household
Lower Home Value
Average number of store level community risk factors
Med D Majority Adherence variation can be explained by the average number of store sociodemographic risk factors for the state
Source: IQVIA, Advanced Analytics, Information Partner Services, May 2017

62. Understanding medication synchronization programs
Med Sync programs are designed by pharmacies to simplify the refill process by enabling patients to pick up all medications on a single visit
Critical in improving adherence for patients with complex chronic diseases
Med Sync programs are growing rapidly year over year
2014: 355,000 Enrollees
2017: ~3.5M Enrollees
Source: Health Affairs: Pharmaceuticals & Medical Technology, Medication Synchronization Programs Improve Adherence To Cardiovascular Medications And Health Care Use, January 2018

63. Medication synchronization programs improve adherence to cardiovascular medications and health care use
Study Background:
Retrospective analysis of medication synchronization programs
Evaluated the impact of two synchronization programs on adherence, cardiovascular events, and resource use among Medicare beneficiaries treated between 2011 and 2014 for two or more chronic conditions—at least one of which was hypertension, hyperlipidemia, or diabetes
Using Thrifty White Pharmacy and Publix Super Markets
Both synchronization programs used an appointment-based model of medication synchronization, in which appointment reminders and access to pharmacists are core components
Source: Health Affairs: Pharmaceuticals & Medical Technology, Medication Synchronization Programs Improve Adherence To Cardiovascular Medications And Health Care Use, January 2018

64. Medication synchronization programs improve adherence to cardiovascular medications and health care use
Adherence improvement in synchronized versus control patients was three times greater in patients with low baseline adherence compared to those with higher baseline adherence
Synchronization programs were associated with improved adherence for patients with cardiovascular disease, especially those with low baseline adherence
Rates of hospitalization and emergency department visits and rates of outpatient visits were 9 percent and 3 percent lower in the synchronized group compared to the control group
Cardiovascular event rates were similar
Source: Health Affairs: Pharmaceuticals & Medical Technology, Medication Synchronization Programs Improve Adherence To Cardiovascular Medications And Health Care Use, January 2018

65. Taking diabetes medications as prescribed, exercising frequently and managing weight linked to better blood sugar control
Kaiser Permanente, June 2017
The National Health and Nutrition Examination Survey estimates 21% of adults with diabetes have poorly controlled blood sugar
African Americans and other racial / ethnic minorities are more likely than non-Hispanic whites to have poorly controlled blood sugar
According to study published by the American Journal of Pharmacy Benefits, people with diabetes who…
Are 80% adherent with their medication
Patients who took oral diabetes at least 80% of the time were 46% less likely to have poorly controlled blood sugar
“If patients are refilling medications when they’re supposed to, they’re also likely taking them when they’re supposed to,” David Mosen, PhD & Investigator at the Kaiser Permanente Center for Health Research
Exercised ≥4 times per week were
…at lower risk for poorly controlled blood sugar. The study also found clinically obese patients are at higher risk for poorly controlled blood sugar

66. YoY Adherence Rates are up for all Star Markets
Chains continue to over-index in Adherence, but all Classes of Trade are improving;
Mass shows the greatest overall improvement
Sep-2017 National Mkt Average
Cholesterol improved 3.0% pts, with Mass increasing the most at 3.1%.
Diabetes improved 1.9% pts, with Mass increasing the most at 2.1%.
RAS Antagonists improved 2.2% pts, with Mass increasing most at 2.6%
Adherence Rate
Diabetes is up by 1.9% Nationally
Cholesterol is up by 3% and RAS Antagonists are up by 2.2%
Class of Trade for 12 Mos Ending Sep-2016 and Sep-2017

67. YoY Adherence Rates are up for all Star Markets
The Northeast continues to dominate Adherence; the South has the highest YoY improvement
Sep-2017
National Mkt Average
Cholesterol improved 3.0% pts, with the South increasing the most at 3.3% growth.
Diabetes improved 1.9%, with the South increasing the most at 2.1% growth.
RAS Antagonists improved 2.2%, with the South increasing most at 2.7% growth.
Adherence Rate
Census Region for 12 Mos Ending Sep-2016 and Sep-2017

68. In addition to a growth in Adherence, all Regions have also had a growth in Med D patients meeting Stars criteria
The largest number of patients are in the South, where there has also been the highest patient growth
Cholesterol and RAS Antagonists have ~3X as many patients as Diabetes.
Cholesterol had the largest growth in Med D patients meeting Stars criteria, with RAS Antagonists running a close second. Diabetes had the slowest % and # increase.
Total Number of Patients meeting Med D Stars criteria
Census Region for 12 Mos Ending Sep-2016 and Sep-2017

69. A Year in Review Market Performance01
Market Performance
Market Access, Deductibles, & Reimbursement
Hot Topic 1: “Cash Business”
Hot Topic 2: Adherence
Hot Topic 3: Opioids
A Look Forward to 2018 & Recap 02 03 04 05 06

70. Regulatory restrictions by the FDA and other government entities are resulting in less dispensed narcotics over time
For example, Hydrocodone from Schedule III to Schedule II has resulted in a 41% decline
New York state
Reschedules to C-II
US Reschedules
to C-II
Source: IQVIA, National Prescription Audit, September Note: “Hydrocodone” is Rx only and includes Hydrocodone and combinations of Hydrocodone/Ibuprofen and Hydrocodone/Acetaminophen.

71. Pain as a class is declining in the most recent 12 months
Duexis and Pennsaid PMP are driving positive 12-month growth of +$0.5BN; Oxycontin and HYCD/APAP growth declined in the most recent 12 months for a combined loss of $0.6BN
Rank
Top 10 Products
MAT Sept US$ (BNs)
Market
Share
Diabetes
Market Share
Δ MAT
US$ (BNs)
MAT
Growth 1
OXYCONTIN
$1.8
0.4%
9.9%
-$0.4
-16.8% 2
DUEXIS
$1.1
0.3%
6.3%
$0.3
30.2% 3
PENNSAID PMP
$0.9
0.2%
5.2%
$0.2
26.8% 4
HYCD/APAP
$0.7
3.8%
-$0.2
-24.4% 5
VIMOVO
$0.6
0.1%
3.5%
$0.0
7.6% 6
OXYCODONE/APAP
$0.4
2.5%
-36.1% 7
FENTANYL
2.4%
-$0.1
-18.7% 8
LIDOCAINE
1.9%
-19.5% 9
OXYCODONE HCL
-12.7% 10
RELPAX
-2.4%
Source: IQVIA, National Sales Perspectives, October 2017

72. Yet the annual prescribing rate for ≥30 days’ supply opioid script is increasing
The annual prescribing rate per 100 persons increased (+55.1%) from 17.6 to 27.3 for prescriptions with ≥ 30 days of supply, while prescriptions with < 30 days’ supply decreased
(-28.3%) from 54.7 to 39.2 prescriptions
Source: Centers for Disease Control and Prevention. Annual Surveillance Report of Drug-Related Risks and Outcomes — United States, Surveillance Special Report 1. Centers for Disease Control and Prevention, U.S. Department of Health and Human Services. Published August 31, Accessed [date] from drugoverdose/pdf/pubs/2017­ cdc-drug-surveillance-report.pdf

73. Higher Rx per capita is observed in the south
Opioid Utilization per Capita by State, 2016
Source: IQVIA Xponent, 2017

74. Growth in Overdose Deaths Year over Year
Overdose deaths from heroin and synthetic opioids has grown rapidly since 2013
Growth in Overdose Deaths Year over Year
GROWTH
2011
2012
2013
2014
2015
2011 to 2015
Opioids
5.4%
-5.1%
-1.3%
3.0%
3.5%
-0.1%
Heroin
44.8%
34.8%
39.4%
28.1%
22.8%
195.4%
Synthetics
-11.3%
-1.4%
18.2%
78.6%
72.8%
259.3%
Source: National Center for Health Statistics, CDC Wonder; ICD-10 T40.1, T40.2, T40.3 T40.4 & T40.6

75. Post surgical, middle aged women (40-59) are also particularly vulnerable to potential opioid misuse
Middle age women consume the most opioids
Women ages are prescribed more opioids than any other age group and receive 2x as many opioids prescriptions as their male counterparts
Among women, ages has the highest death rates from opioids
Surgery is a gateway to persistent opioid use and potential misuse
Colectomy (17.6%) and knee replacement (16.7%) surgeries put patients most at risk to becoming persistent opioid users
Gen X women and knee replacement surgeries are a dangerous combination
Women ages undergoing knee replacement surgery had the highest rate of persistent opioid use at 22.8%
The highest rate of opioid prescribing is concentrated in more rural states, primarily in the South
Source: Pacira Pharmaceuticals Inc., United States for Non-Dependence, September 2017

76. Patients with mental disorders represent a vulnerable population receiving more than 50% of opioid scripts
Kaiser Health News, June 2017
According to a study (Prescription Opioid Use among Adults with Mental Health Disorders in the United States) published by JABFM (Journal of the American Board of Family Medicine), adults with mental illness receive more than 50% of 115 million opioid prescriptions in the US annually
People with mental health disorders represent 16% of the US population
Findings are worrisome as researchers / medical professionals believed it was best practice for physicians to prescribe opioids more conservatively for those with mental illness
Represents a vulnerable population more likely to develop addiction and abuse
The study found in total, 19% of Americans with a mental health illness use prescription opioids
According to the CDC, opioid sales have quadrupled from 1999 to 2015
Source: Journal of the American Board of Family Medicine, Prescription Opioid Use among Adults with Mental Health Disorders in the United States

77. A Year in Review Market Performance01
Market Performance
Market Access, Deductibles, & Reimbursement
Hot Topic 1: “Cash Business”
Hot Topic 2: Adherence
Hot Topic 3: Opioids
A Look Forward to 2018 & Recap 02 03 04 05 06

78. Innovation: late phase R&D pipeline remains robust and will see an ongoing high number of new brand launches by 2021
Late Phase R&D Pipeline by Top Therapy Areas
40-45 NAS/year
Expected by 2021
631
355
121 85
1154
Source: QuintilesIMS, LifeCycle R&D Focus, Dec 2016; QuintilesIMS Institute, Mar 2017

79. Prescription Forecast through 2020
Total TRx demand (unadjusted) in 2017 was 4.7B prescriptions, up 0.1% from 2016, yet when adjusted for 90 day Rxs, the adjusted TRx growth rate actually rebounded, growing by 2.3% in 2017, to 6.1B TRxs
Note: Total Rx includes Retail, Mail and LTC channels

80. A large increase in 90 day prescriptions is driving market growth
Adjusted 90 day prescriptions grew 10.2% in 2017
Findings:
The growth of 90’s continues to eclipse the growth of 30s and will continue through 2020
Prescriptions of 90 day duration are now 35% of adjusted TRxs, up from 32% in 2013 and are expected to increase to 45% by 2020.
Growth rate for 90 day scripts is expected to continue at 10% annually in

81. Chain Store Volume Dominates the Market
Chain store adjusted TRx growth of roughly 5% per year is the highest among retail channels
Findings:
Chain stores dominate the market and are forecast to grow faster than the market rate and continue to increase share
Independents are expected to growth 1.9% annually and lose share throughout the forecast period
Mass will also lose share and have negative growth through 2020
The Mail channel is expected to return to positive growth rates in 2018 through 2020 but will continue losing share, more than any other channel
The explosive growth rates in LTC, due to rapid expansion of Assisted Living facilities, have stabilized. LTC growth rates are expected to remain under 0.3%

82. 90 Day Rxs by Class of Trade
Findings:
90 Day TRx share is growing rapidly in all retail classes, most especially in chains
The share increase of 90 day adjusted Rxs is expected to be greatest in Chains and Mass. Food stores and Independents are also seeing a share shift toward 90 day but more slowly than in Chains
LTC logically has very low 90-day scripts due in part to laws mandating short duration prescriptions
Retail will continue to capture more of the 90 day prescription market at the expense of mail, driven by traditional drug patent expiries which reduce incentives for patients/payers to require mail dispensing.
92% of mail adjusted Rxs were 90 day in 2017, but that is forecast to continue on a downward trend

83. While Third Party Continues to Capture the Majority of all TRxs…
The growth of Med-D will continue to outpace other payment categories as the population ages
Findings:
Med D continues to capture larger shares of the market at the expense of cash and third party driven by the aging population
Medicaid’s share is also expanding and is expected to reach 12% by Medicaid grew substantially in 2014 and 2015, in line with ACA expansion and then moderated in 2016 and 2017.
While 3rd party dominates TRx volume, its share is declining. Third party is expected to grow around 1% a year through 2020, much less than Med D and Medicaid
Cash is expected to have negative growth rates through 2020

84. The share shift from brands to generics will continue
Generic growth rates are expected to remain at approximately 3% a year through 2020
Findings:
Brands are a shrinking share of the market resulting from both the substantial volume of patent expiries (which peaked in 2012), as well as continued market incentives to generic dispensing
Generics (including Branded Generics) captured over 90.9% of the market in 2017 and will continue to increase through 2020
Brand rates of decline are expected to return from negative growth to low positive growth by 2020, but grow more slowly than generics

85. Chronic therapy scripts are growing faster than the market
Acute therapy TRxs dipped to negative growth in 2017 and will continue with negative growth
Findings: %
Chronic Rxs continue to dominate the market and are growing in market share, while acute therapies will have negative growth through 2020 (on adjusted basis)
Anticipated growth in chronic therapy Rxs of 4% per year through is consistent with expected census growth in the 65+ population
90 day prescriptions continue to gain share among chronic therapy prescriptions and will be over half of chronic Rxs by 2019 (on adjusted basis) as payers and patients seek to realize cost savings

86. Specialty growth rates will exceed traditional market growth rates
From 2013 to 2020 Specialty prescriptions are expected have a growth of 37% vs Traditional at 21%
Findings:
Specialty growth rates returned to 6.3% in 2017 and are expected to be about 4.5% annually the next two years, as compared with traditional therapies growing at roughly 3.0%
Specialty Rxs (adjusted) are still a modest 2.2% of the market in 2017, but represent a much higher percentage of sales due to substantially higher prices

87. The aging population continues to drive increased demand
Findings:
Expected Rx growth of 3.5% annually among the 50+ age group is more than double younger segments
The increasing growth rates for the 50+ age group reflect the aging population and the higher Rx demand of this age group
The overall proportion of the market for the 50+ age group is expected to continue growing over the forecasted period while demand from patients under 50 will decline slightly
The spike in 2015 for younger age groups stems primarily from growth in ADHD, Mental Health, and vaccines but is not expected to be sustained

88. Thoughts for 2018 and Beyond
The shift in retail to 90 day Rxs, especially among chains, is a key driver in retail growth; Mail is becoming more focused on lower-volume specialty limiting growth
Demand remains robust in general but is shifting: from brands to generics, acute to chronic and from traditional to specialty products
Patients’ rising exposure to costs puts them at risk for worse adherence and could weaken demand if copay offsets are not in place
Steady growth trends in TRxs likely to exceed spending trends in 2017 and 2018
The aging population will be a key underlying driver in continued growth and is reflected in expected steady increases in Med D

89. Recap WHAT’S OUT Double digit growth WHAT’S IN Specialty medicines
Price increases
HEP C
Opioid scripts
WHAT’S AHEAD
Biologics entering traditional spaces
Healthcare reform?
More political pressure
WHAT’S IN
Specialty medicines
Less branded price inflation
Generic price deflation
More and faster ANDA approvals
Opioid scrutiny
High out of pocket costs
Vaccines
Orphan drugs
New oncology drugs
Biosimilars?

90. What are Stakeholders Thinking About?
Pharmacies
Reimbursement
Controlled Substances abuse
Access to Specialty Drugs
Purchasing Alliances
Track and Trace
Amazon and the cash customers
Generic Manufacturers
Purchasing Alliances
Price increase backlash
Portfolio Optimization
Brand /niche drugs
Proposed labeling changes
Wholesalers
Purchasing Alliances
Controlled Substances abuse
Access to Specialty Drugs
Generic Price Deflation
Track and Trace
Brand/Specialty Manufacturers
Price backlash
Becoming more specialized
Oral Specialty
Orphan Drugs
Payers
Exploding costs of Specialty Drugs
Rising Oncology costs
Formularies blocks and exclusive launches
Consumers
Rising costs
Specialty Tiers and High deductibles
Losing Insurance

91. Thank you
Disclaimer:
The analyses, their interpretation, and related information contained herein are made and provided subject to the assumptions, methodologies, caveats, and variables described in this report and are based on third party sources and data reasonably believed to be reliable. No warranty is made as to the completeness or accuracy of such third party sources or data.
As with any attempt to estimate future events, the forecasts, projections, conclusions, and other information included herein are subject to certain risks and uncertainties, and are not to be considered guarantees of any particular outcome.
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©2017 IQVIA Incorporated and its affiliates. All rights reserved. Trademarks are registered in the United States and in various other countries.

92. Doug Long, Vice President, Industry Relations
9/19/2018
Doug Long, Vice President, Industry Relations
Doug Long is Vice President of Industry Relations at IQVIA (formerly QuintilesIMS), the world’s largest pharmaceutical information company. IQVIA offers services to the pharmaceutical industry in over 100 countries around the globe. Doug has been with IQVIA since 1989.
His fundamental task is to help secure data for all existing and new databases supported by IQVIA, manage supplier, manufacturer & association relationships, and develop information for data partners. As direct consequence of his involvement in these areas, Doug has considerable experience with, and a unique perspective on, the changing U.S. and global healthcare marketplace and pharmaceutical distribution.
Doug is a frequent industry speaker and the recipient of many awards from trade groups. Before joining IQVIA Doug held positions at Nielsen Market Research for 16 years in various sales and marketing capacities. A native of Illinois, Doug received a BA from DePauw University and holds an MBA in management from Fairleigh Dickinson University.

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