The Role of PBMs in the Pharmaceutical Enterprise Barrett Toan Chairman and Chief Executive Officer Express Scripts, Inc. Pharmaceutical Regulatory and Compliance Congress and Best Practices Forum Philadelphia, PA November 15, 2002
Express Scripts assists clients (plan sponsors) to provide an accessible pharmacy benefit to their members, which is more affordable, while making the use of prescription drugs little bit safer. 2
PBM Industry Overview 3
Affordability and Safety 1. What We Do 2. How We Do It 3. How We Are Doing 4
Affordability and Safety 1. What We Do 2. How We Do It 3. How We Are Doing 5
Affordability 56, 000 Retail Pharmacies @ $10/Rx for 30 -day supply 6
Access Creating the Infrastructure l Issue a card l Establish a network of local pharmacies l Point of sale claims system l Call center l Mail service for chronic medications l Web based ordering and information l Managing one of six prescriptions in the U. S. 7
Affordability Harnessing Market Forces l Discounts Ø Manufacturer Ø Network Ø Mail l Formulary l Consultation with clients l Plan design l Informing members and physicians 8
Affordability Helping the Uninsured l Patient Assistance Programs l Seniors l Manufacturer discount card programs 9
Affordability and Safety 1. What We Do 2. How We Do It 3. How We Are Doing 10
Affordability and Safety l Establish evidence l Evaluate clinical l Create formulary l Negotiate manufacturer discounts l Recommend l Inform designs members l Negotiate l Operate retail discounts mail 11
Affordability and Safety l Company financed research staff l Published in peer reviewed journals l Presented at Evidence Outcomes Conference l Made public 12
Affordability and Safety l Examples of Research Questions: Ö Are there drug interactions not in the standard DUR that require messaging? Ö Do co-payment structures affect safety? Ö Does aspirin use for cardiac protection create safety concerns? Ö Does prescription utilization vary geographically? 13
Affordability and Safety Drug Interactions l Study compared prevalence of inappropriate concomitant use of anticholinergic and donepezil (Aricept) among dementia patients Ø Older adults with dementia are especially sensitive to anticholinergic side effects l Over ¼ of patients taking donepezil used anticholinergics concomitantly on 50% of study days l Developed program to prevent concomitant use Roe CM, Anderson MJ, Spivack B. Journal of the American Geriatrics Society 2002; 50: 836 -842. 14
Affordability and Safety Aspirin/COX-2 s l Examined extent to which COX-2 users were taking OTC pain relievers – negating COX-2 therapeutic advantage l 50% aspirin use among chronic COX-2 users raising gastrointestinal safety concerns l Many new users not at risk of gastrointestinal adverse events l Supported programs first use of generics in step therapy Submitted for Publication 15
Affordability and Safety Three Tier Co-Pay Structures l Study found that implementation of three-tier copayment structure did not result in negative medical consequences. l Rates of emergency room visits and inpatient hospitalization were not impacted. l Study also found decreased cost because of greater economic incentives to use more cost effective medications. Motheral BR, Fairman KA. Medical Care 2001; 39(12): 1293 -304. 16
Affordability and Safety Geographic Variation 17
Affordability and Safety l Establish evidence l Evaluate clinical l Create formulary l Negotiate manufacturer discounts l Recommend l Inform designs members l Negotiate l Operate retail discounts mail 18
Safety Express Scripts Pharmacy and Therapeutics Committee Process Pharmacy and Therapeutics Committee made up of independent physicians reviews drugs for: - clinical effectiveness - safety Recommends which drugs: Must be included on the formulary - Should be excluded from the formulary - Can be included or excluded from the formulary Clients may select standard or clientspecific formulary best suited to their needs 19
Affordability and Safety l Establish evidence l Evaluate clinically l Create formulary l Negotiate manufacturer discounts l Recommend l Inform designs members l Negotiate l Operate retail discounts mail 20
More Affordable Prescription Drugs Affordable: Formulary Management Effectiveness Criteria Cost Efficacy Side Effects # Indications Cost per Prescription Ease of administration Likelihood of compliance 21
Affordability Creating a Formulary A B c (Generic) D E F 22
Affordability Step 1: Assess clinical value Relative clinical value B E F c D A 23
Affordability Step 2: Consider Cost Relative clinical value B E F c D A Cost of 30 -day supply (AWP + dispensing fee) 24
More Affordable Prescription Drugs Formulary Management: Class Example Step 3: Account for Market Conditions Relative clinical value B E F c D A Cost of 30 -day supply (AWP + dispensing fee) 25
More Affordable Prescription Drugs Formulary Management: Class Example Step 4: Recommend Formulary B Relative clinical value Market Share 77% E F c D A Cost of 30 -day supply (AWP + dispensing fee) 26
Affordability and Safety l Establish evidence l Evaluate clinically l Create formulary l Negotiate manufacturer discounts l Recommend l Inform designs members l Negotiate l Operate retail discounts mail 27
Affordability Manufacturer Discounts l Formulary is the foundation l System based largely on sealed bids from manufacturers l Disclosed to and auditable by clients 28
Affordability and Safety l Establish evidence l Evaluate clinically l Create formulary l Negotiate manufacturer discounts l Recommend l Inform designs members l Negotiate l Operate retail discounts mail 29
Affordability Plan Design Incentives l Based on both formulary and manufacturer discount process l Express Scripts recommends structured co-pay design that: Ø Promotes low cost generics, brands Ø Rewards patients with lower co-pay l Goal is to harness market forces for greater affordability 30
Affordability Designing a Three-Tier Co-Pay Structure Member share depends on Rx drug selected Non-preferred brand Preferred brand Generic Member share, Express Scripts Clients 31
Affordability Member Copay share Designing a Three-Tier Co-Pay Structure Non-pref $30 40% brand BUY UP Preferred brand $15 20% Generic $ 5 20% Member share, Express Scripts Clients 32
Affordability and Safety l Establish evidence l Evaluate clinically l Create formulary l Negotiate manufacturer discounts l Recommend l Inform designs members l Negotiate l Operate retail discounts mail 33
Affordability 34
Affordability • 30% switched to home delivery • Provides tailored out-ofpocket costs • 70% of those pricing multisource brands switched to generic • Mail & generic savings (if applicable) 35
Affordability 36
Affordability and Safety l Establish evidence l Evaluate clinically l Create formulary l Negotiate manufacturer discounts l Recommend l Inform designs members l Negotiate l Operate retail discounts mail 37
Affordability Retail Network Discounts l Discounts are negotiated with retail pharmacies as we build networks l Smaller the network, the bigger the discount 38
Affordability and Safety l Establish evidence l Evaluate clinically l Create formulary l Negotiate manufacturer discounts l Recommend l Inform designs members l Negotiate l Operate retail discounts mail 39
Affordability Mail Pharmacy @ $20/Rx for 90 -day supply 40
Alignment of Interests Patient Network Discounts No claim form at participating retail drug stores Plan Sponsor Pays lower price per prescription due to retail discount Express Scripts Paid for network management, claim processing Mail Order Pays lower co-pay Pays less for mail prescriptions than in network Makes margin on mail order prescriptions Formulary Pays lower co-pay for generics and low cost brand drugs. Receives most of the manufacturer discounts for promoting low cost brand drugs ESI’s retail, mail & manufacturer discounts pricing improve allowing greater savings to clients over time Receives a portion of the manufacturer discounts and incented to increase manufacturer discounts 41
Affordability and Safety 1. What We Do 2. How We Do It 3. How We Are Doing 42
Affordability 40% to 80% discount on a generic drug possible after market exclusivity compared to brand drugs. Promoting greater use of generics is one of ESI’s top business priorities Brand drug Generic Drug 43
Affordability Manufacturer discounts on low-cost brand drugs produce further savings 5% to 10% total discount per product when manufacturer discounts are considered on preferred low-cost brands. Non-preferred Brand Preferred Brand with Discount Manufacturer discounts are increasing due to Express Scripts formulary control and number of lives 44
Affordability Members, clients and Express Scripts all benefit when generics and low-cost formulary drugs are used 45
Affordability Network discounts 20% to 25% have increased with discount 7 -10% discount from clients’ retail cost ESI’s growth. Mail order operates at lower margins, saving clients and members each time it is used Usual & Customary Client retail cost Mail Cost 46
Affordability 25% to 35% individual client total discount possible from PBM tools: • Retail network management • Formulary management l Low-cost brands l Generics • Manufacturer Discounts • Mail pharmacy services Total Cost Client Cost to serve an average Costs with Express American without a PBM Scripts savings 47
Safety 48
Affordability and Safety Member Satisfaction Exceeds 95% 97% 96% 49
Affordability and Safety Thank You 50
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