2015 CareFirst Formulary Options 200+ ASO Accounts

PROPRIETARY AND CONFIDENTIAL

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2015 CAREFIRST FORMULARY OPTIONS

200+ ASO ACCOUNTS

August 5, 2014


Agenda

• Purpose• Pharmacy Landscape• Guiding Principles• 2015 Options• Implementation

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Purpose of Today’s Training

• Why we are here• Understanding CareFirst’s strategic

decision• How CareFirst and downstream

accounts benefit

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Double Digit Increase in Pharmacy Trend Projected

UTILIZATION

*By 2016. CVS Caremark drug trend forecast. Trend calculations based on a trend cohort group. Trend cohort group includes funded Accounts with retail claims for the calendar year and includes Accounts in the commercial segments (health plan and employer), Medicare and Medicaid.

DRUG MIX

Overall cost of drug, including what Account and member pay

PRICE

Proportion of brand-name and generic drugs being dispensed

Intensity of drug use; approval of new drugs or indications

Influencers • Inflation• Source of drug• Lack of product competition• Site of service

Influencers• Generics• Formulary • Pharmaceutical marketing• New agents

Influencers• Changes in treatment guidelines• Demographic/economic changes

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Multiple Market Factors Increase Pressure on Accounts to Control Pharmacy Spend

• Generic dispensing rate topped 80% in 2013; 2012 was peak of patent cliff at $35B*

• 2014 generic launches make up half the market value of 2012 launches*

GENERIC LAUNCHES HAVE PEAKED; WILL NO LONGER OFFSET DRUG TREND

• 14.4% increase in non-specialty brand AWP in 2013*

• Manufacturers invested $4 billion annually1 between 2010 and 2011 to preserve market share and margin by going outside the standard supply chain

MANUFACTURER RESPONSE: PRICE INCREASES; SHARE RETENTION STRATEGIES

• Specialty drugs accounted for 22.5% of our Accounts’ pharmacy spend*

– Relative increase of more than 10% in a single year*

SPECIALTY CONTINUES TO DRIVE UP COSTS

*CVS/caremark Internal Analysis, 2013. 1. As reported by PCMA: Cleveland Research, “How Co-pay Discount Cards Are Affecting Drug Spend,” Presented at Pharmacy Benefits Academy, August 2011

Past plan performance is no guarantee of future results – accounts must employ a defined strategy to offset ongoing marketplace tactics

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Our Proactive Approach Positions Accounts at the Forefront of Market Changes

• Industry-leading formulary strategy: Built from our experience in anticipating marketplace changes

• Encourage continued savings: Help Accounts stay ahead of market shifts with innovative formulary and pipeline management

• Building on our success: Continue to help maximize savings for Accounts while minimizing plan member disruption

$41.13Average plan savings per transitioned prescription*

$28.69Average member savings per transitioned prescription*

2.5%Overall effective increase in GDR in targeted drug classes*

THE 2014 CVS/CAREMARK FORMULARY STRATEGY RESULTED IN:

*Indicates an average savings based on cohort results. Actual savings may vary per plan. Contact your CVS/caremark Account team for a personalized savings analysis.

A strategic approach to formulary management proactively positions Accounts to help mitigate the effects of future trend increases

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Guiding Principles of Formulary Management

*Specialty classes with similarity between chemical entities

Maintain clinical integrity

Target classes with sufficient generic availability, clinically interchangeable brands; evaluate appropriate specialty classes*

Secure competitive pricing for our Accounts

Continually assess marketplace to identify lower-cost options and opportunities to maximize manufacturer rebate values

Educate and engage members and physicians

Help ensure access to the drugs members need to stay healthy; provide resources for physicians to support member transition

20 years experience providing unique formulary strategies to meet Account goals

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Rx

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CareFirst Formulary Options in 2015

1. Source: CVS Caremark Enterprise Analytics, 2012. Projections based on CVS Caremark data. Individual results will vary based on plan design, formulary status, demographic characteristics and other factors. Based on Account specific modeling of CareFirst BCBS*Based on ingredient cost Drug Spend. Drug Spend pharmacy savings include rebate impact. Account savings may vary by plan design, pricing arrangement, drug mix and at-risk market launches. Member savings will vary based on several factors, some of which include plan design, plan performance, etc.

• Covers generics and most brands

• ~70 excluded products

• Exclusions updated yearly

• Up to 3-4% savings of drug spend compared to CareFirst Formulary 1*

CAREFIRST FORMULARY 2

SAVINGS

• Covers most generics and brands and specialty

• ~200 excluded products

• Exclusions updated quarterly



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•Open Formulary

•Currently in place for

CareFirst (all business)

•Tiering changes on

some drugs to drive

member behavior

•Quarterly tier changes


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CareFirst Formulary 1: Open Formulary

• Enhanced the current CareFirst open formulary to increase the overall rebate value

• Broad access to over 5,000 drugs with no brand drug exclusions

• Formulary tiering to drive member behavior

– 10.5% of the members were positively impacted by drugs moved to a lower cost sharing tier (July 15, 2014)

– Less than 2% of the members will have drugs moved to a higher cost sharing tier (January 1, 2015)

• Quarterly tier changes

– Targeted member communications will be sent to affected members 30 - 45 days prior to the effective date

Default option for CareFirst accounts Note: CareFirst Formulary 1 is a Custom Opt-out Formulary

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CareFirst Formulary 2: Generic and Rebate Improvement Formulary Effective 1/1/15

• For 200+ ASO accounts looking to be more aggressive in their pursuit of rebates

• ~70 drugs excluded – alternative medications available

– 2-3% of members affected by drug exclusions and negative tier changes

• Exclusions updated annually

• Increased rebate guarantees over CareFirst Formulary 1

• Reduces overall spend by nearly 3-4% compared to CareFirst Formulary 1

• Quarterly tier changes

– Targeted member and physician communications 30-90 days prior to the effective date

Note: CareFirst Formulary 2 is Standard Formulary

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CareFirst Formulary 3: Higher Control Formulary (Lowest Net Spend) Effective 1/1/15

• For 200+ ASO accounts seeking the lowest possible costs while retaining coverage within each therapeutic class

• Focuses on driving to generic drugs & driving higher rebate value

• ~ 200 drugs excluded – preferred alternative medications available

• 4-5% of members affected by drug exclusions and negative tier changes

• Exclusions and tier changes updated quarterly

• Creates savings by driving members to the lowest cost drugs


Note: CareFirst Formulary 3 is Advanced Control Formulary

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CareFirst Formulary 3: Integrates Preferred Product Strategy and Generics

• Extend savings by leveraging preferred product strategy along with shift to generics

– Quarterly updates

– Advanced specialty controls included

• Helps ensure trend management against costly new products that do not deliver clinical advantages

– Day one control of new product launches and line extensions, until reviewed

Note: CareFirst Formulary 2 is Standard Formulary

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CareFirst Formulary 3 Specialty Drives Additional Plan Savings

• Help manage specialty drug spend:

– Included in the new formulary option

– Addresses both appropriate utilization and preferred drug selection

• Currently focused on seven** therapy classes: MS, Biologic Disease-Modifying Agents (Rheumatoid Arthritis), fertility, hepatitis C interferons, growth hormone, PAH, osteoarthritis

– Quarterly updates

• Day one control of new product launches and line extensions, until reviewed; unless given pivotal drug status

**Number of classes may change. Accounts must accept all classes1. The Growing Cost of Specialty Pharmacy—Is it Sustainable? February 18, 2013) Note: CareFirst Formulary 3 is Advanced Control Formulary

Specialty growth expected to quadruple by 20181 – new specialty control strategies needed to address rapid growth

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Comparing CareFirst Formularies

*Savings based on drug ingredient cost. Savings include rebate impact. Account savings may vary by plan design, pricing arrangement, drug mix and at-risk market launches. Member savings will vary based on several factors, some of which include plan design, plan performance, etc. Note: CareFirst Formulary 1 is a Custom Opt-out Formulary, CareFirst Formulary 2 is Standard Formulary, CareFirst Formulary 3 is Advanced Control Formulary




Drug CoverageAll drugs coveredper plan design

Focus on generics and select brands. Exclusion updated annually

Select brand exclusions. May be updated quarterly

DesignTier placement and member copay only

Tier placement andmember copays; promotes generic dispensing when available

Tier placement and member copays; mandatory medical necessity review; drives lowest net cost

Excluded Medications

Zero ~70 ~200

Member Impact None~2-3% of members affected moving from CareFirst Formulary 1 to CareFirst Formulary 2

~4-5% members affected moving from CareFirst Formulary 2 to CareFirst Formulary 3.

Rebate Impact**check with UW for account specific info

Increased over CareFirst 2014 Formulary

Increased rebate value over CareFirst Formulary 1

Highest rebate value

Drug Spend Savings

Increased drug spend savings over CareFirst 2014 Formulary

Up to 3-4% savings of drug spend savings* compared to CareFirst Formulary 1

Up to 3-4% of drug spend savings* compared to CareFirst Formulary 2

Implementation Lead Time

n/a 90 days 90 days

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INTERNAL/FOR TRAINING PURPOSES ONLY

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Account Formulary Strategy – Key Considerations

Account Philosophy

Need for greatest savings/value

Union or other factors that may limit design choices

Past experience with similar approach

Marketplace considerations

INTERNAL/FOR TRAINING PURPOSES ONLY

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Support a Smooth Transition with Effective Member and Physician Engagement

•Member communication focuses on new savings options; encourages outreach to prescriber

•Current drug and recommended drug are clearly listed

•Provides support in contacting physician, if requested by member

We leverage best practices for the most comprehensive engagement strategies.

MID-OCTOBER MID-NOVEMBER

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Communication Strategy

CareFirst Formulary 1:• Member Communications Only

– Targeted Negative Tier Change Notifications» Mailed 30-45 days prior to Implementation date (Mid-November) and quarterly

thereafter» Final drug list targeted for 10/1/2014 – updated impact report expected by

10/5/14

CareFirst Formularies 2 & 3:• Member Communications

– Targeted Negative Tier Change Notifications» Mailed 30-45 days prior to Implementation date (Mid-November) and quarterly

thereafter– Targeted Excluded Drug Notifications

» Phase 1 Mailed Beginning October (and quarterly thereafter for CareFirst Formulary 3)

» Phase 2 Mailed Mid-November (and quarterly thereafter for CareFirst Formulary 3)

(CareFirst Formulary 2 doesn’t have quarterly exclusions – yearly only)• Physician Communications

– Targeted Member Specific Excluded Drug Notifications» Mailed Approximately 3 weeks after Member Letters (End – Early November)

and quarterly thereafter

Medical Necessity Exception Process: In place for physicians to submit on behalf of their members for medical necessity review 17


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Questions?

CareFirst BlueCross BlueShield is the shared business name of CareFirst of Maryland, Inc. and Group Hospitalization and Medical Services, Inc. which are independent licensees of the Blue Cross and Blue Shield Association. ® Registered trademark of the Blue Cross and Blue Shield Association. ®′ Registered trademark of CareFirst of Maryland, Inc.


• ID Cards

• CareFirst Marketing Materials

• Installation


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ID Cards Mock-Up – 200+ ASO (Facets)

ID cards will now include an indicator of which formulary: RX = CareFirst Formulary 1RX2 = CareFirst Formulary 2 RX3 = CareFirst Formulary 3


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ID Cards Mock-Up – Large Group (NASCO)

Before

After

Legend on card strip


CareFirst Formulary 2 & 3 Quote and Installation Process

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Account Manager

• Request a quote business as usual from Underwriting

• Notify your Underwriter if sold

Service Rep

• Facets

– No additional paperwork

– Service Rep indicates “Formulary 2 or Formulary 3” in SOCS form comments

• NASCO

– Pharmacy NAEGS & FirstForm updates

– Service Rep indicates “Formulary 2 or Formulary 3” in SOCS form comments


CareFirst Formulary Communication Resources

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Marketing Piece Purpose Audience Source Resource Number

Formulary Comparison Sheet

Sheet for sales to use in discussing formulary options with employer groups

Employer SOS SUM2656-1P

Member Communications on Formularies 1, 2 and 3

Negative tier change letters sent to impacted members

Member CVS

Member Communications on Formularies 2 and 3

Drug exclusions letters sent to impacted members

Member CVS

Provider Communications on Formularies 2 and 3

Drug exclusion letters sent to providers of impacted members

Provider CVS

Formulary Drug Removal Listing – Formulary 2

For Formulary 2, list indicating alternatives to drugs being excluded

Members SOS SUM2657-1P

Formulary Drug Removal Listing – Formulary 3

For Formulary 3, list indicating alternatives to drugs being excluded

Members SOS SUM2658-1P

Pre-Log In Drug Search Tool

• 24 hour drug tool to identify if drug covered on formulary.

• Also provides formulary PDF and Preferred Drug List

(updated quarterly: 1/1; 4/1; 7/1; 10/1)

Prospects and Members

www.carefirst.com/rx

Member On-Line Tools (My Account)

24 hour drug tools for ordering and refilling drugs and more

Member My Accountwww.CareFirst.com


CareFirst Formulary 1 Member Communications

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Value Add: Negative Notice of Tier Change (Drug moving to higher cost-sharing tier)

• Previously posted in Vitality

• NEW: 30-45 days prior to effective date, mailing sent to members taking a drug being moved to a higher cost-sharing tier (negative tier change notice)*

• Notice gives members lower-cost alternative(s)

• Call to action to provide information to provider

* NOTE: These negative change notices do NOT include notification of drugs changing tiers due to generic drug introduction. Per CVS, this is not a notifiable situation as this is an open formulary and the member had the choice to select the generic and not pay the higher cost share of the non-preferred brand.

• When a generic becomes available, the preferred brand drug moves to a non-preferred brand drug status (as noted in the contract)

• When member goes to the pharmacy, the member is notified by the pharmacist about the availability of the generic drug.

• 98% of members will buy the generic alternative


Formulary 2 Drug Removal List (MOCK-UP): Updated Annually

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Drug Search Tool – Pre-Log In

Search Function may change for 2015


Secure Log In--My Account

My Account “Drug and Pharmacy Resources” include:1. My Drug Home2. Drug coverage

and cost (Drug Pricing)

3. View Drug claims4. Find a Pharmacy5. Order and refill

prescriptions (Mail Order)

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NOTE: The Drug Pricing Tool provides pricing information for the plan the member currently has. A member cannot access pricing information for a plan that is effective in the future.

Example, Marta changes benefits effective January 2015. She will not be able to get drug pricing information on her new plan until January 2015.

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2015 CareFirst Formulary Options 200+ ASO Accounts

Documents

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