protecting affordable access to next generation medical ...launch genasense (iv) genta fda decision...

Company Confidential - Do Not Copy1 6/4/2004 8:03 AM

Protecting Affordable Access to Next Generation Medical Solutions

Robert Seidman, PharmD, MPHVice President and Chief Pharmacy Officer

WellPoint Health Networks Inc.

June 8, 2004


Protecting Health Care Value

Right Drug or Device

Right Person

Right Duration

Right Price


Evidence Based Medicine or Hype?

To a man armed with a hammer, everything looks like a nail. To a society accustomed to open access to ALL pharmaceuticals, biotechnology and devices, human life may seem more amendable to improvement than it really is.


WellPoint’s Role

• Keep coverage and the benefit affordable

• Maintain broad access to life essential prescription drugs and devices

• Align manufacturer and patient interests within resource constraints

• Ethically manage all medical benefits, including pharmacy


How Much Will It Cost?


Overview• The health care market today

– Costs continue to rise– Utilization continues to increase– New technologies continue to diffuse and replace

existing interventions– 350 biotechnology drugs in development– Drug eluting stents– Artificial organs

• WellPoint utilizes a suite of interventions that assess value and protect affordability while assuring quality of care

Health Care Trends


WellPoint Integrated Health Care Management

• A bridge to better medical outcomes – Coordinated programs to use drugs as a

bridge to better medical outcomes– No silos– Integration with Health Improvement Programs– Integration of pharmacy and medical data to

support better outcomes– Quality of Care initiatives


The WellPoint Review Process

FDA Approval Process

DrugsBiologicsDevices

WLP Evaluation FDA

Approval

WLP Adoption of

Evidence Based

Medicine



WLPEvaluation &

Recommendation


Is the Marketplace Changing?• Surge in patent expirations• Growth in Rx to OTC conversions• Slow down in new drug and device approvals• Canadian Rx importation

– Not if, but when and how• Decrease in diffusion of new drugs• Medicare Rx benefit

– Number of required therapeutic class codes challenge the effectiveness of the benefit design

• Increased focus on healthcare outcomes– Evidence based medicine


14.5%13.2%

11.0%10.4%9.9%9.4%

6.1%5.8%5.1%4.9%

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

1980 1985 1990 1995 2000 2001 2002* 2003* 2008* 2012*0%2%4%6%8%10%12%14%16%

National Health ExpendituresPrescription DrugsPrescription Drugs as a Percent of National Health Expenditures

Cos

ts in

Bill

ions

*ProjectedSource: Centers for Medicare and Medicaid Services, 2003a

Percent of National H

ealth Expenditures

Pharmacy Costs and Share of Healthcare Dollar

Prescription Drug Expenditures Are Increasing at a Rate That Is Not Sustainable


Single Drugs As a Percentage of Pharma $$

$0$10$20$30$40$50$60$70$80

Pfizer

TAP

Wyeth

GSKJa

nssen

Merck

BMS

LipitorZoloftPrevacidEffexor XRAdvair DiskusWellbutrinAcipHexSingulairPravacholOther


New Technology Is Driving Utilization and Costs• New technology is adding to old technology

– MRI/CT + X ray– Drug eluting stents + statins– Implantable devices + drugs

• Patients like technology– MD is “smarter” if he/she uses new technology or drugs

• Technology may be used where it is not evidence based– Body scans

• Safer, less intrusive technology increases consumer use– Laparoscopic surgery– Safer drugs


Protecting Rx Affordability Is Challenging

$4.9 $6.0 $6.6 $7.2 $8.0$3.0

$3.4 $4.1 $4.3$4.8

$0.8$1.1

$1.3$1.8

$2.5

$0.5$0.5

$0.5$0.5

$0.5

$0

$5

$10

$15

$20

1996 1997 1998 1999 2000

Professional Journal AdvertisingDTC AdvertisingDetailingSampling

Source: Kaiser Family Foundation, Prescription Drug Trends: A Chartbook Update, 2001.

$9.2$11.0

$12.5$13.9

$15.7

($ in billions)


Only 1 in 4 Americans discuss the cost of medicines with their doctor

23%

43%

70%

14%

0% 20% 40% 60% 80% 100%

Doctor prescribed one drug rather thananother because it was less expensive

As part of these discussions, discussedthe different costs of different drugs

Discussed with doctor the pros andcons of different drugs he/she might

prescribe

Doctor prescribed a drug for me in thelast year

n=2,238

Source: The Wall Street Journal Online and Harris Interactive, 2/2/2004-2/4/2004

Disconnect Between the Patient and the System


Biotechnology Blockbusters?

2005

2005

2004

2005

---

2004

2005

2005

---

---

Expected Launch

200MelanomaFDA decisionGentaGenasense (IV)

250Lupus/Renal DiseaseFDA decisionLa JollaRiquent (IV)

1,000ThrombocytopeniaPhase IIAmgenAMG-531 (IV)

Genentech

Amylin

Amgen

Genentech

Amylin

Biogen

Abgenix

Principal Sponsor

500

250

500

500

500 – 1,000

1,000

500

Potential Sales

($million)*

DiabetesFDA decisionSymlin (SQ)

Lung CancerPhase IIITarceva (PO)

MucositisPhase IIIPalifermin (IV)

Colorectal CancerPhase IIABX-EGF (IV)

Crohn’s Disease, RA, MSPhase IIIAntegren (IV)

Macular DegenerationPhase IIILucentis (IVT)

DiabetesPhase IIIExenatide (SQ)

Indication StatusDrug/Route

*Source: Goldman Sachs Research


Increase in Biotechnology Drugs Brings Will Bring a Sharp Rise in Drug Spending

0

100

200

300

400

500

600

700

1990 1995 2000 2005 estimated$0$5$10$15$20$25$30$35$40$45$50Drugs in development

Drugs on marketProduct revenues (billions)

Source: Managed Care, April 2002, HMOs Should Prepare Now to Get Handle on Generics; 42H-42N


Is New Technology Always Better?


Cost Drivers Containment Strategy

New therapies

Price inflation

UtilizationDirect-to-consumer advertisingAging population

Chronic illnesses

New therapies

Price inflation

UtilizationDirect-to-consumer advertisingAging population

Chronic illnesses

Strong clinical evaluation from Pharmacy and Therapeutics CommitteeAggressive contracting and network generic programsUtilization management initiativesMember education and empowermentand provider educationSeniors Awareness and Response program and other programsTherapy Management Programs andHealth Improvement Programs

WLP Programs Address the Major Drivers of Healthcare Costs


Cost Drivers Containment Strategy

Prior Authorization

Formulary

Quantity Supply

Generic Select

Prior Authorization

Formulary

Quantity Supply

Generic Select

Ensure medical necessity and prevent inappropriate utilization

Maximize pharmacy benefits by promoting cost effective alternatives

Enforce the FDA dosage and prevent over dosage

Member empowerment and educationprogram to drive the use of generics

With Innovative Utilization Management Programs


•Asthma•Heart Disease•End Stage

Renal Disease

•Diabetes•Depression•Oncology•High risk

pregnancy

Members withchronic conditions

90%

7%

23%23%

WellPointMembership

WellPointMedical Costs

8%8%

24%24%

68%

70%70%

Act

ual E

xper

ienc

e

WellPointMembership

20%

80%

Prev

alen

ce in

pop

ulat

ion

WLP Focus on Outcomes


Average Employee Copays

High Cholesterol Drugs

Ulcer Drugs

Antidepressant Drugs

Generic Drugs

Brand Name Drugs

Hypertension Drugs

Do All New Brand Name Drugs Provide Optimal Value?

Note: Prices listed are the average cost to WellPoint.Retail costs of drugs are approx. 20% higher

$15

$83

$44

$15

$59 $55

$36

$116

$20$10

$30 $30 $26

$87

$6$11

$0$20$40$60$80

$100$120$140

Ave G

eneri

c Cop

ay

Ave B

rand C

opay

Ave B

rand C

opay -

NF

Brand S

tatins (

i.e. L

ipitor)

Generi

c Cho

l. Loweri

ng D

rugs A

ve C

ost

Brand A

CE/ARBs (i.e

. Coza

ar)

Generi

c ACE/ARBs A

ve C

ost

Brand B

eta B

lockers

(i.e.

Coreg)

Generi

c Beta

Blocke

r Ave

Cos

t

Brand C

a Cha

nnel

Blockers

(i.e.

Norvas

c)

Generi

c Ca C

hanne

l Bloc

kers

Ave C

ost

Diuretics

Brand P

roton Pum

p Inh

ibitor

s

Generi

c Ulce

r Drug

s Ave

Cos

t

Brand S

SRI's (i.

e. Paxil)

Generi

c Anti

depre

ssan

t Drugs

Ave

Cost


The Generic Solution

• Members– Benefit design

– GenericSelectSM

• Physicians– Generic coupons– Generic samples

• The Pharmaceutical Industry


GenericSelect Results

37.0%

38.0%

39.0%

40.0%

41.0%

42.0%

43.0%

Oct-02

Nov-02

Dec-02

Jan-03

Feb-03

Mar-03

Apr-03

May-03

Jun-03

Jul-03

Aug-03

Sep-03

Oct-03

Nov-03

Dec-03

Jan-04

% Generic Use for GenericSelect Classes Only

Program Implementation 2nd Mailing

1% Increasein generic utilization

for GenericSelectclasses results in

a 0.5 savings

3rd Mailing


Generic Sampling: Distributed System Integrates Into Practice Workflow

Insurance Eligibility

Clinical Information

Patient Benefit

Dispense + Route Refill


Individual Therapeutic Class ImpactAnti-Depressants (SSRIs)

0%

10%

20%

30%

40%

50%

60%

4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03

Practices’ Generic Dispensing Rate of Antidepressants


Claritin OTC Conversion:Reality vs. Hype

''Blue Cross wants to stop reimbursing for Claritin, so they've created this convenient fiction about [the] price [decreasing from a move to OTC]...''

Industry ConsultantUSA Today, April 12, 2000


Claritin OTC Conversion:Market Reality

$.50/day

$.90/day

$3.00/day

$.10/day


Specialty Injectables:Next Generations Solutions

PBM Scrubs Claim & Submits

To Plan in HCFA 1500 Form

Plan ReimbursesSpecialty Pharmacy

Specialty PharmacyBills PBM

Plan reimbursesSpecialty Rx atNegotiated Rate and generates

EOB

MD ordersOBI from

Specialty Rx

OBI Claim Submitted as an NDC

Claim Converted to J Code

and Submitted at Negotiated Rate


Reference PricingProtecting Affordability

Average Annual Retail AWP Cost = REFERENCE PRICE(Reimbursement Threshold by Therapeutic Class)

GenericCopay

Value Brand

Non-FormularyBrand &Generic

Net cost of Rx < Reference Price

Value Brand Copay Standard CopayGeneric Copay

Net cost of Rx > Reference Price

Co-Insurancew/max

Self Injectables


ePrescribing: The Time is Now• Increase efficiency and productivity

─ Decrease prior authorizations─ Formulary compliance─ Benefit and eligibility information

• Increase patient safety─ Drug interactions─ Duplicate therapy/polypharmacy─ Transcribing errors─ Evidence based medicine

• A requirement─ CMS initiative


The WellPoint Message

• Preserve the affordability of health care benefits

─Anticipate future FDA approvals

─Analyze the integrated data stream

─Develop and implement innovative and effective benefit design and clinical solutions that meet societal needs

protecting affordable access to next generation medical ...launch genasense (iv) genta fda decision...

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