1. Population Health, Value Based Benefits and Biologic Technologies F. Randy Vogenberg, RPh, PhD Executive Director, BFAC

2. Setting the Stage—from the Employer View

3. 3 Who Controls the Product? DistributorMcKesson Cardinal Bergen The Market View Payer Medicaid Medicare Third Part Admin MCO PBM w/Specialty Pharm (SPC): APCS(Fed)/Caremark, Express Scripts/Curascript Medco/Accredo Retail w/SPC & PBM (Walgreens, CVS)‏ “Independent” SPC: Accredo, Chronimed, etc. MCO with internal PBM/SPC Dispenser Patient Administered by MD Office / Infusion Center HHC Patient Manufacturer

4. Copyright 2007, F R Vogenberg. Sample Snapshot from “BY 2004” U.S. Pharmaceutical Market TraditionalSpecialty Total Market = $215 B ($ in Billions)‏ Specialty Pharmaceutical Market Multiple Sclerosis2.5 Hemophilia1.6 Hepatitis C1.6 Rheumatoid Arthritis1.5 Pulmonary Hypertension1.2 RSV prophylaxis0.8 Growth Hormone0.4 Infertility0.7 Oncology12.6 HIV/AIDS3.4 Renal3.2 Transplant1.5 Other1.3 Total32.3 Sources: Extrapolated from IMS Health, JP Morgan Industry Update, “Specialty Pharmacy: Conduit of Growth for Biotechnology,” March 14, 2003, Bear Stearns Health Care Distribution, “Specialty Pharmacy Services: Among the Fastest-Growing Areas of Health Care,” November 2003, Caremark Estimates.

5. Copyright 2007, F R Vogenberg. A Sample Snapshot from 2006 U.S. Pharmaceutical Market TraditionalSpecialty (+20%)‏ Total Market = $275 B ($ in Billions; +8%)‏ Specialty Pharmaceutical Market Multiple Sclerosis Hemophilia Hepatitis C Rheumatoid Arthritis Pulmonary Hypertension RSV prophylaxis Growth Hormone Infertility Oncology HIV/AIDS Renal Transplant Other Total40.0 Sources: Extrapolated from IMS Health, JP Morgan Industry Update, “Specialty Pharmacy: Conduit of Growth for Biotechnology,” March 14, 2003, Bear Stearns Health Care Distribution, “Specialty Pharmacy Services: Pharma Voice, 2007.

6. Copyright 2007, F R Vogenberg. Trend Impacts in 2006  Acute or Life Saving 0.6 %  Life Style or Cosmetic 0.1%  Chronic preventative, maintenance or symptomatic 3.4 %  “Over Utilization” 1.1 % Generics: Top 5 = 0.8% savings of gross Generics: Top 14 overall = ~4 % savings of gross Top Brands spend result in ~even cost overall. Source: adapted from Caremark 2006, 2-07 Industry Analytics.

7. Copyright 2007, F R Vogenberg. Generics  +13 % in prescription volume  +22 % in pharmacy sales

8. Copyright 2007, F R Vogenberg. Health Care Hyper Disruption— Just Like “IT”  Information explosion 100 fold increase in bytes of data by 2010 Consumerism and genome project applications  Device explosion Mobile devices double by 2010 Biotechnology utilization grows 4 fold  Transaction explosion Platform stability for connection to interaction Claims adjudication to value based behavioral management  Mayhem explosion Security breaches HIPAA compliance

9. Copyright 2007, F R Vogenberg. Source: Banc of America Securities LLC New “Specialty” Drugs Are Escalating Rapidly & Impacting Medication Spend U.S. biotech companies had sales of $32.3 billion in 2003. U.S. biotech companies are predicted to have sales of $91 billion in 2008. Sources: Ernst & Young LLC, Resurgence: The Americas Perspective Global Biotechnology Report 2004, cited in T. Agres, "US Biotech May Leap into the Black," Drug Discovery and Development, July 1, 2004, p. 16. $17B $46B Number of Specialty Drugs Product Revenues ($ Billions)‏

10. Copyright 2007, F R Vogenberg. Follow the Dollar: Cross Impacts of Rising Cost Share on the Severely Ill

11. Copyright 2007, F R Vogenberg. Tidal Wave Effect—Use & Cost Sources: Managed Care Magazine, August 2004; Specialty Pharmacy News, 2006.

12. Benefits: Trends are about market challenges and change  Short Term 1-3 years

13. Today we have Co-pay set on price, not value Generic drugs – lowest co-pay Preferred brand – middle Nonpreferred brand – highest Benefit-Design Trends: Increased Cost Sharing at Point of Service

14. Value-based Health Benefit Plan  Why is it a good concept? More appropriate strategy to engage “consumers” in their own health management Creates an alignment between quality improvement initiatives and health plan designs

15. Misinterpretation of VbBD Value-based Benefit Design Value Based Insurance Design & Hybrids Pay For Performance (P4P) & HPN Value Based Formularies Medical Home & Gatekeeper Others

16. VbBD: A Corporate Strategy Value-based Health Plan Benefit Coverage VbBDs Value Based Insurance Design & Hybrids Pay For Performance (P4P) & HPN Value Based Formularies Medical Home & Gatekeeper Others Goals, Objectives/Outcomes & Desired Behaviors resulting from Health Care Plan(s). Implementation of Health Plan. Following ERISA, HIPAA, etc. Business Goals and Objectives.ER Corporate Business Model

17. Employers Primary Focus of Health Care Risk Reduction Prevent the Preventable Change Incidence Rates CONFIDENTIAL INFORMATION © 2007 Copyright EPS LLC, All Rights Reserved

18. Employer’s Health Care Objective CONFIDENTIAL INFORMATION © 2007 Copyright EPS LLC, All Rights Reserved Health & Wellness (Prevention curtails costs) No Risk EEs Disease Management (After the fact Management) EEs suffered CVD Event Economic Benefit of Healthy Employees… Find Patients @ Risk Prevent the Preventable (Heart Attack) Risk Reduction Prevent the Preventable Change Incidence Rates Continuum of Service

19. VbBD How can “Pharmacy” help enhance each stakeholders own “Value Proposition”? IMPROVED OUTCOME Patient: QoL Care Perception Lower Co-pays Payor: Market Share Member Turnover Utilization & Costs Employer: Productivity Employee Stability Premium Rates Physician: Reputation Office Efficiency Improved Care

20. Biologic Finance and Access Council (BFAC) About the Program at Thomas Jefferson University

21. Background A multi-disciplinary not-for-profit organization addressing: –Patient cost burden –Appropriate access and reimbursement –Role and value of biologics –Future means of financing and managing –Unmet educational and informational needs of stakeholders Information analysis and idea exchange Need for innovative benefit designs and insurance solutions Biologic Finance and Access Council

22. Membership: An Opportunity to “LEARN” Leadership –Members steer the direction by identifying key issues, such as: Patient cost burden; role and value of biologics; access to, reimbursement for, and ways to finance and manage biologic products and technologies; and other relevant issues Education –Provides, through existing or new collaborations : Courses, webinars, and conferences offering in-depth professional development opportunities, designed by and for BFAC members and related professionals CME opportunities for licensed professionals Action –Develops and disseminates practical solutions: Collaborate with stakeholders on the creation of innovative benefit designs Publish definitive viewpoints and interpretations of market trends, addressing the unmet educational and informational needs of stakeholders

23. Membership: An Opportunity to “LEARN” Research, Representation, and Resources –Creates opportunities for: Original or shared research on innovative benefit designs Data and information analysis Exchange of ideas on future financing of biologic technologies Provision of member mailing lists, conferences, and educational courses Networking –Offers a dynamic forum for the exchange of new ideas, bringing together members to share their experiences, expertise, and friendship Through BFAC, there are numerous opportunities for leadership, education, discussion of national or local issues, personal and professional networking, professional development, referrals, and accredited education offerings

24. Foundation In Place for the Future

25. Biotechnology Healthcare - Official Journal Reports on: –Management and use of biopharmaceuticals and molecular diagnostics –Value to third-party payers and employer purchasers –Scientific advances affecting healthcare –Financing, utilization, and public policy Bimonthly, peer-reviewed journal, introduced 2004, link with BFAC 2006 Reaches 35,000 healthcare decision makers Website – www.biotechnologyhealthcare.com –Weekly e-newsletter (13,000 requestors)

26. Foundational Initiatives by BFAC The Need for Value-based Health Benefits Aligning the Value Equation Distributed to 45,000 stakeholders Held on April 7, 2008 with more than 100 attendees

27. Future Focus for BFAC Benefit design innovation Employer issue exchange on health care coverage Biologic technologies, biomarkers, and molecular medicine Spotlight on disease states Health data analysis and research Multidisciplinary opportunities for collaboration Market focused and action oriented

28. Summary Unique biologic/new technology focus with emphasis on member driven solutions led by an experienced leadership team Action oriented around innovation in benefit design for real world biotechnology access and finance solutions Established work product and direction, now with the Jefferson School of Population Health and its resources or affinity groups