1. 10228PH001MG.PPT/008-17-49183 5/2005 Pharmaceutical Coalition Transparency in Pharmaceutical Purchasing Solutions (TIPPS) Initiative May 2008

2. 10228PH001MG.PPT/008-17-49183 5/2005 2 The Challenge Pharmacy Benefit Managers (PBMs) rely heavily on “indirect” revenue streams to support their business model –PBMs can mark-up drug prices (they “buy low” from pharma manufacturers, then “sell high” to employers) –PBMs can retain drug rebates and other pharma credits, sometimes over 7% of actual drug costs –PBM revenue vastly exceeds the typical administrative fee that employers pay them

3. 10228PH001MG.PPT/008-17-49183 5/2005 3 The Challenge Traditional contracts are convoluted and complicated, difficult for employers to understand how PBMs earn revenue potential conflicts of interest exist –PBMs may steer a patient towards a more expensive therapy if it results in higher rebate revenue for them –PBMs may encourage a patient to use an unnecessary drug if PBM could earn a “mark- up” profit on that drug

4. 10228PH001MG.PPT/008-17-49183 5/2005 4 The Long Term Solution Move the industry to a “cost-plus” or “transparent” business model –move PBMs away from all indirect revenue streams –ensure that PBMs “pass-through” their negotiated discounts and rebates to employers –allow PBMs to earn revenue through a full and fair administrative fee –remove potential for PBM conflicts of interest –drive more competitive employer pricing – and better health management – through transparency

5. 10228PH001MG.PPT/008-17-49183 5/2005 5 The Solution Takes Shape Pharmaceutical Coalition formed in 2004 Includes almost 60 employers, chaired by Sidney C. Banwart, VP Human Services Division at Caterpillar Inc. Coalition’s goal is to promote a truly transparent or cost-plus business model for PBMs and employers

6. 10228PH001MG.PPT/008-17-49183 5/2005 6 The Solution Takes Shape Coalition started the Transparency In Pharmaceutical Purchasing Solutions (TIPPS) Initiative: –evaluates the financial transparency of all major PBMs –TIPPS Certifications are issued annually to endorse those PBMs that demonstrate true transparency Powerful tool to educate employers and facilitate negotiations with PBMs Raises bar and creates accountability for PBMs Enables PBMs to publicly demonstrate commitment to transparency

7. 10228PH001MG.PPT/008-17-49183 5/2005 7 Affiliated Computer Services, Inc.General Mills, Inc.PepsiCo, Inc. ALCOA Inc.Georgia PacificPPG Industries, Inc. Armstrong World IndustriesGuardian Industries Corp.Prudential Financial, Inc. AT&T Inc.HCA Inc.Quest Diagnostics Incorporated BAE SystemsHewitt Associates LLCRolls-Royce North America Inc. Caterpillar Inc.Hilton Hotels CorporationShell Oil Company Cox Enterprises, Inc.The Home Depot, USA Inc.Sodexho, Inc. DTE EnergyHoneywell International Inc.Starbucks Coffee Company Eaton CorporationIBM CorporationSunoco, Inc. EMC CorporationInternational Paper CompanySwift Transportation Co., Inc. Emerson Electric Co.Johnson Controls, Inc.Texas Instruments Incorporated Exelon CorporationKeyCorpTXU Business Services Federal-Mogul CorporationLowe’s Companies, Inc.United Technologies Corp. First Data CorporationMaersk, Inc. University of Missouri System FMC CorporationMarathon Petroleum Company LLC Verizon Communications FMC TechnologiesMcDonald’s Corporation Verizon Wireless Ford Motor CompanyMotorola, Inc. The Walt Disney Company FPL Group, Inc.Northrop Grumman Corporation General Dynamics CorporationNorthwestern Mutual Pharmaceutical Coalition Members

8. 10228PH001MG.PPT/008-17-49183 5/2005 8 Response to Coalition’s TIPPS Initiative PBMs offering greater transparency, more competitive pricing on traditional arrangements At least seven Coalition companies have transitioned to TIPPS arrangements 12 or more employers currently evaluating TIPPS arrangements More evaluations anticipated for Q2-Q4 2008

9. 10228PH001MG.PPT/008-17-49183 5/2005 9 Current Certified PBMs In 2005, only 3 PBMs met TIPPS certification By 2008, 13 PBMs became TIPPS-certified: Aetna Pharmacy Management BlueCross and Blue Shield of Alabama CVS Caremark Catalyst Rx, A HealthExtras Company Cigna Pharmacy Management Express Scripts Humana Pharmacy Medco Health Solutions, Inc. Prime Therapeutics LLC RESTAT SXC Health Solutions, Inc. Walgreens Health Initiatives WellPoint NextRx

10. 10228PH001MG.PPT/008-17-49183 5/2005 10 Washington Post Ad Sponsored by HR Policy

11. 10228PH001MG.PPT/008-17-49183 5/2005 11 Wall Street Journal Ad by Aetna Announcing TIPPS Certification

12. 10228PH001MG.PPT/008-17-49183 5/2005 12 Exploring TIPPS for Your Company Steps for clients interested in learning more: –Confirm up-to-date membership in the Hr-Policy Association’s TIPPS initiative (mmilton@hrpolicy.org)mmilton@hrpolicy.org –Contact the TIPPS consulting partner, Hewitt Associates (joshua.golden@hewitt.com), to begin the TIPPS evaluation processjoshua.golden@hewitt.com Process will include a financial comparison of current PBM arrangement vs. one or more TIPPS proposals Evaluation typically takes approximately 6 weeks to complete Can drive significant savings for employers, and improves the transparency of the PBM relationship

13. 10228PH001MG.PPT/008-17-49183 5/2005 13 For More Information… HR Policy Association Pharmaceutical Coalition Executive Director: Marisa Milton MMilton@hrpolicy.org 202-789-8671 MMilton@hrpolicy.org Hewitt’s TIPPS Project Manager: Joshua Golden joshua.golden@hewitt.com 404-862-3605 joshua.golden@hewitt.com