preparing for what’s on the prescription drug benefit horizon

Preparing for What’s on thePrescription Drug Benefit

Horizon

Brenda Motheral, PhDSenior Vice President

Research & Product Management

2 2007 Express Scripts, Inc. All Rights Reserved.

Topics

• Three Eras of Pharmacy Benefit Management

• Learnings From The Market’s 2006 Natural Experiments

• What’s Ahead in 2008


The Market Response

Supply Chain

1990 1995 2005

• PBMs aggregate purchasing power of plan sponsors

• Mail forces discipline into retail

• PBMs aggregate purchasing power of plan sponsors

• Mail forces discipline into retail


Low Cost Carrier Market Share 2002

St. LouisSt. LouisCity BCity B

25%

0%

*Nonstops in May 2002


Change in Ticket Price: 1998-2006

St. LouisSt. Louis2%

+25%

*Bureau of Transportation Statistics

City BCity B


Retail brand discountgrows for 15 years

0%

2%

4%

6%

8%

10%

‘90 ‘92 ‘95 ‘96 ‘98 ‘00 ‘02 ‘04Baseline


The Market Response

Supply Chain

Plan Sponsor Directed

1990 1995 2005

• Plan sponsors begin to adopt plan designs that incent or require cost-effective choices

• Plan sponsors begin to adopt plan designs that incent or require cost-effective choices


Employers Using Proven Tools (%)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Generic Policy Step Therapy Three-tier copay

1998 2002 2006


Lowest Drug Trend In a Decade

Express Scripts Internal Data, 2006

Note: Specialty tracked separately as of 2003

80%

60%

40%

20%

0%

Generic F

ill RateD

rug

Tre

nd

12.9%

16.1%

16.8%

17.4%

16.2%

16.7% 18.5%

14.5%

10.6%

7.9%

5.9%

0%

5%

10%

15%

20%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006


•Public and private plan sponsors pass responsibility for spend mgt to consumers

•Public and private plan sponsors pass responsibility for spend mgt to consumers

Partnership

The Market Response

Supply Chain

Plan Sponsor Directed

Consumer Directed

1990 1995 2005


Topics





Wal-Mart Market Share:Before and After $4 Generics

Hypothesis:

Low prices on selectedgenerics will result inmore volume of other generics and brands as well as increased non-pharmacy store sales

Finding:

Pricing strategy had minimal market impacton rx drug use.Impact on uninsured & non-pharmacy salesis unknown.


Medicare Part D

Hypothesis:

Part D beneficiaries willtake advantage of lower cost generics toavoid hitting the donuthole


0%

10%

20%

30%

40%

50%

60% GFR

% HitDonut

Medicare Part D Experience

56%

19%

49%

34%40%

45%

Plan A Plan B Plan C

* Potential GFR is calculated under the assumption that all target brands switched to the generic alternatives In reality, some target brands could be switched to brand preferred alternatives.


0%

10%

20%

30%

40%

50%

60% GFR

% HitDonut

Medicare Part D Experience

40%45%

Plan C

Savings PotentialOf $13.8 Million

$2.1 Lipids$2.6 Ulcer$9.1 Other

Plan COpportunity

65%

35%

* Potential GFR is calculated under the assumption that all target brands switched to the generic alternatives In reality, some target brands could be switched to brand preferred alternatives.


Medicare Part D

Hypothesis:

Part D beneficiaries willtake advantage of lower cost generics toavoid hitting the donuthole

Finding:

Many beneficiaries arehitting the donut holeunnecessarily and couldtake advantage of lower cost generics


2006 Market Experiments

• Wal-Mart• Medicare Part D• Consumer-Driven Health Plans


Consumer-Directed Health Plans

Hypothesis:

Employees enrolled in a high deductible plan willuse more generics andOTCs and discontinueunnecessary meds


Compared to Traditional Insurance:

CDHP Members Reduce Brand Use

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

CDHP

Traditional CDHPImplemented

CDS-matched dataset, N = 3,374 each group

JanJan‘‘0505

JulJul‘‘0505

JanJan‘‘0606

JulJul‘‘0606

DecDec‘‘0606


0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

CDHP

Traditional

CDHPImplemented

But Generic Use is Lower Too …

CDS-matched dataset, N = 3,374 each group

JanJan‘‘0505

JulJul‘‘0505

JanJan‘‘0606

JulJul‘‘0606

DecDec‘‘0606


Chronic Medication Persistency:CDHP Members May Switch to

OTC

But ….68%

40%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Antiulcer**

TraditionalCDHP

* p < .05 ** p < .01


CDHP Members: Lower Persistency in Some Classes w/o

OTC Options

68%

40%

75%65%

83%75%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Antiulcer** Antilipid** Antihypertensive*

TraditionalCDHP

* p < .05 ** p < .01


Consumer-Directed Health Plans

Hypothesis:

Employees enrolled in a high deductible plan willuse more generics andOTCs and discontinueonly unnecessary meds

Finding:

Without additionaleducational programs,enrollees did not usemore generics. Compliance decreasedin many therapy classes


Topics





Other Market Experiments

• Wellness Incentives

• Value-Based Insurance Design

• Care Coordination


Conclusions





Conclusions




Supply chain and plan sponsor-directed models willcontinue to drive value for pharmacy benefit mgt.

New hybrid models pose familiar challenges for rx.High liability and web tools alone will not be sufficient.While consumerism will evolve over many years, pharmacy represents a great near-term opportunity.

preparing for what’s on the prescription drug benefit horizon

Documents

lowest drug trend

estimated specialty

specialty estimates47

market responsepublic

private plan sponsors

walmart market share

nonspecialty trend

low cost carrier market