1. Alice Valder Curran, Partner Ali Tore, Co-founder & Sr. Director of Product Management Deficit Reduction Act: What You Can and Should Do Now IIR’s 11 th Annual Medicaid Drug Rebate Conference Monday, September 25, 2006

2.  Welcome and Introductions  DRA Summary and Implementation Timeline  Topics of Discussion  Monthly AMP/BP Reporting  Authorized Generics  AMP Formula Changes  Definition of Nominal Price for BP  State Rebate Claims for Physician-Administered Drugs  Industry Benchmark Survey :: Are We Ready?  Emerging Best Practices  Q&A Agenda

3. DRA Implementation Timeline Q2 CY06Q3 CY06Q4 CY06Q1 CY07Q2 CY07Q3 CY07 HHS OIG Recommendations Report 6/1 CMS Open Door Session 6/9 Most DRA Changes in Effect 1/1 First Monthly AMP/BP Submission 3/2 CMS to Issue Regulation 7/1 Voluntary AMP Submissions Due 9/6

4. Monthly AMP/BP Reporting  DRA Changes  AMP/BP to be reported monthly to CMS starting with report for January 2007  CMS to provide monthly AMP data to states and make AMP data public on a quarterly basis CMS began providing AMP data to states in July, but has instructed states to keep AMP data confidential prior to 2007 AMP data will become publicly available in 2007  Open Issues  Calculation methodology for monthly AMP and BP figures Subject to restatement or smoothed like ASP?  Relationship of quarterly and monthly AMP and BP figures Statutory reporting period is now monthly Statutory “rebate period” is still a calendar quarter Can quarterly figures be derived as weighted average of monthly figures, even if monthly figures use smoothing methodology? What figures will be used to calculate Base date AMP and PHS price going forward?

5. Authorized Generics (AG)  DRA Changes  Effective January 2007, AMP/BP for innovator products must include prices associated with related products approved under 505(c) of FDCA Private label products included? What about biologics?  Open Issues  What prices for the AG go into the branded product’s AMP and BP Transfer Prices vs. Commercial Sale Prices Royalty, license, and revenue sharing payments  How is the AG’s pricing data incorporated into the branded product’s AMP/BP calculations?  Reporting obligation for the AG – branded or AG manufacturer?

6. AMP Formula Changes  DRA Changes  Effective January 2007, the AMP calculation formula to exclude prompt pay discounts to wholesalers for drugs distributed to retail class of trade  Will the definition of the retail pharmacy class of trade change too?  Open Issues  Application of new methodology to pre-2007 base date AMP quarters Is this a permanent penalty on top of the CPI-U penalty? If CMS permitted recalculation of base date AMPs, would you want to do so?  Definition of the term “wholesalers”  Details regarding the separate reporting format of Prompt Pay Discount  Re-definition of retail class of trade? Long Term Care Home Health Care Mail Order PBMs

7. Definition of Nominal Price for BP and ASP  DRA Changes  DRA narrows the definition of what types of nominal sales may be excluded from ASP and BP calculations  A Nominal Price will only be exempt from ASP and BP when extended to Covered Entity under 340B Program Intermediate Care Facility for Mentally Retarded State-owned or operated Nursing Facility Any other facility determined by HHS to be a safety net provider  Sales made on a FSS Master Agreement are exempt  Open Issues  Details regarding the reporting of excluded nominal price transaction data ASP statute already requires this, but not yet implemented

8. State Rebate Claims for Physician-Administered Drugs  DRA Changes  DRA requires States to collect, translate and submit utilization and NDC data on physician-administered drugs to CMS Jan 1, 2006 for single source drugs Jan 1, 2008 for 20 highest dollar volume multiple-source drugs  Grassley Letter: DRA Requires pro-rated rebates when Medicaid is secondary payor  Operational Concerns  Manufacturers of single source physician-administered drugs likely to see an increase in the amount of HCPCS coded rebates claimed by States For future and past quarters Identifying this utilization in state rebate claims  Increased emphasis for a robust Claims Processing system Confirm cross-walking accuracy Confirm pro-ration by State

9. CustomersPlan  Is there executive visibility and investment in your organization?  Have you formally studied implications of DRA?  Have you chartered a DRA implementation project? Evaluate  Each provision presents unique challenges  Are you evaluating AG Deals and Nominal Contracts?  Identify where key changes will occur  Which functions will feel impact of DRA? Take Action  Are you hiring more resources to help execute your DRA plan?  What types of system investments are needed?  Confidence in meeting deadlines?  Predict the post-DRA world Industry Benchmark Survey Are We Ready?

10. Survey Results Planning for DRA  High level of Executive Visibility in Organizations  Majority of manufacturers have started DRA projects  75% have studied impact on contract and pricing strategy  50% have studied financial impact

11. Survey Results Planning for DRA  Leveraging resources within and across organizations  58% of organizations utilizing internal and external resources  33% internal only  9% external only

12. Survey Results Evaluating DRA’s Impact

14.  More organizations are analyzing AG agreements than Nominal Price Contracts  Majority is not planning to modify AG agreements or delaying their decisions pending further guidance

15. Survey Results Preparing for 2007  Organizations are investing in systems, processes and resources  Planning to hire additional resources to execute DRA response:  42% Yes  17% No  41% Do Not Know

16. Survey Results Preparing for 2007  Do You Think You Will be Able to Meet the Current DRA Deadlines?  Yes  No  Do Not Know

17. Survey Results Preparing for 2007  Two thirds of respondents expect Government Pricing and Medicaid Rebate processes to be more complex in 2007  Remaining one third thinks it will remain as complex

18. Emerging Best Practices  Start Now!  Think Agility and Adaptability  Strategy  Methodology & SOPs  Data & Technology Infrastructure  Continue Dialog and Collaboration  Engage with CMS  Continue Executive Awareness and Education  Collaborate with Other Functions in the Organization  Take Advantage of the Opportunity  Influence Policy and Regulations  Align Commercial and Government Strategies  Rethink approach to technology infrastructure for the future

19. Alice Valder Curran avcurran@hhlaw.com www.hhlaw.com (202) 637-5997 Ali Tore ali@modeln.com dra.modeln.com (650) 610-4628 Thank You!