Whats Causing Increased Rx Costs ? (and more

Whats Causing Increased Rx Costs ? (and more importantly) What Can Your Health Plan Do About It? Linda Cahn, Esq. President & Pharmacy Benefits Consultants, Inc. (0) 973-975-0900 Email: [email protected] www.PharmacyBenefitConsultant Audrey Browne, Esq. Director of Regulatory Compliance Contract Procurement DC 37 Health & Security Plan 125 Barclay Street

New York, NY 10007 (212) 815-1304 Email: [email protected] Pharmacy Benefit Consultants & Moabuddy 1 How many in this room have a drug problem? 2 We can just say NO! Or

3 1. Do you represent a PBM or other vendor selling services? ___ Yes ___ No 2. Do you represent a co. or union providing a Rx drug plan? ___ Yes ___ No 3. Do you think your health plan and members are paying too much for drugs? ___ Yes ___ No 4 We all have a prescription drug problem

but why? The cost of drugs continue to rise 3x faster than other sectors of the economy 5 So, why do you think the cost of prescription drugs is going up so much faster than the other sectors of our economy? (raise your hand for each one that applies) PBMs stuff their clients contracts with loopholes that PBMs manipulate to increase clients costs the drug industry isnt well regulated manipulation of drug pricing by those in pharma industry drug cos are bringing more high-cost drugs to the market

ads are increasing drug use aging baby boomers unhealthy lifestyles all of the above 6 So, with the cost of drugs increasing at 3x the rate of other sectors of the economy, can we save our drug plans? What can YOU do to fix this situation?

7 If Youre a Vendor: Take Two Steps To Change the Marketplace 1. Represent Your Clients Interests 2. Be a Whistleblower & Expose Illegal Activities (We know lawyers who work with whistleblowers!) 8 If Youre A Plan Rep: Use the 3-Pronged Approach To Control Drug Costs

1. Contracts 2. Litigation 3. Legislation 9 DC 37 Has Taken All 3 Steps We Conducted A RFP, and Executed An Entirely Different PBM Contract We Actively Litigate As A Class Plaintiff We Lobby for Legislative Change 10 By Demanding An Entirely Different PBM Contract,

We Dramatically Decreased Our Total Drug Costs Year Increase / Decrease 2004 (old contract) 2005 (old contract) 2006 (old contract) 2007 (new contract)

11 Every Corporate, Union & Govt Health Plan Should Demand An Entirely Different PBM Contract With - New Contract Definitions REAL Pass-Through Pricing REAL Pass-Through Of ALL Financial Benefits (not just rebates) Enforceable Financial Guarantees & Performance Guarantees (and lots more.) 12 Exs of Contract Definitions That Must Be Changed - and Why Claim

AWP Brand Drug / Generic Drug Rebates ( and lots more) 13 Another Critical Contract Change All Health Plans Should Make Transform -FAKE Pass Through Pricing To -REAL Pass Through Pricing 14 Whats The Difference?

Stop the Hidden Spreads! Almost all PBMs claim their contracts provide pass through pricing, but they dont ! Real pass-through pricing requires your PBM to invoice you using the SAME price it paid - for ALL 3 types of drugs FAKE Pass-Through Pricing Retail Drugs REAL Pass Through Pricing Retail Drugs

Mail Order Drugs Specialty Drugs 15 Another Critical Contract Change All Health Plans Should Make Require Your PBM To -- Pass-Through ALL Manuf & Other Third Party Financial Benefits (not just rebates) 16 Whys This Matter?

I Want ALL Finl Benefits! PBMs Execute Two Types of Contracts: With Clients (Health Plans Like Yours) Rebates With Manufacturers (& Other Third Parties) Rebates Prompt Payment Discounts Purchase Discounts Other Discounts

Administrative Fees Health Mgt Fees Data Sales Fees Other Fees Grants etc, etc, etc.. 17 Another Critical Contract Change All Health Plans Should Make TRANSFORM -- FAKE Financial Guarantees To -REAL Financial Guarantees

18 Whats The Difference? I want REAL Gees ! Virtually all PBM Contract Guarantees Are Fake Guarantees. e.g. PBMs Generic Drug Guarantees almost always state: We guarantee that our PBMs average discount for all generic drugs that we MAC will be AWP-___% PBMs Generic Drugs With MACs: 500 Drugs

PBMs Generic Drugs Without MACs: 1,000s of Other Generic Drugs 19 You Must Demand A Contract with Numerous Guarantees, & Make Sure EVERY Guarantee Is -- Airtight (it means what you intend) Auditable (it identifies an agreed-upon methodology) Enforceable (it specifies how damages are to be

calculated - and paid - if the PBM breaches the guarantee) 20 Another Critical Contract Change All Health Plans Should Make TRANSFORM -- FAKE Performance Guarantees Into -REAL Performance Guarantees 21 Whats A Performance Guarantee? Customer Call Center Guarantee

e.g. We guarantee that our customer call center will answer 99% of all calls within 20 seconds e.g. Accurate Dispensing Guarantee We guarantee that our PBM will dispense all mail prescriptions with 99.9999% accuracy 22 Virtually ALL PBM Contracts Contain MEANINGLESS Performance Guarantees

Why? 1) Contracts dont require PBMS to provide the necessary info to allow Auditors to audit the guarantee, and dont specify an audit method The Fox has been left to guard the coop! 2) Therefore, only PBMs can audit their guarantees ! 3) Even if auditors could conduct audits, contract penalties for PBMs violation of guarantees are meaningless (eg: $10,000)

23 You Must Demand A Contract with Numerous Performance Guarantees, & Make Sure EVERY Guarantee - Identifies each doc and type of data your PBM must provide to allow your auditor to audit Identifies an audit methodology Contains Appropriate Penalties 24 Other Contract Changes You Must Make To Dramatically DECREASE Your Costs Specialty Drugs

Your PBMs Termination Rights Your Plans Termination Rights Formulary Issues Transparency/ Detailed Audit Terms Punitive Damages Clause

(And Lots More.) 25 Can You Actually Get An Airtight Contract From A PBM ? If So, How??? Yes! Do so by conducting a RFP. But you must conduct your RFP in an entirely different way ! New Type of RFP: Have your consulting firm draft YOUR Own Form of Contract Attach the Contract To Your RFP Require Every PBM Contestant To Markup - & Execute - The Contract It Will Accept Use the RFP To Negotiate and EXTRACT the Contract YOU Want !

26 Why Conducting A RFP Is Critical 1. It will save your benefit plan money 2. Youll never get the contract terms youre trying to get without a RFP. (In fact, youll swap contract drafts with your PBM endlessly and do nothing but waste a lot of resources) 3. It wont cost you much. (Given your total drug spend, your total RFP costs will equal about 1 to 3 days of your total drug costs). 4. It wont take that much time. (RFPs typically take about 3 months from start to finish) 5. The RFPs leverage will make YOU the 800 lb gorilla and give YOU the ability to get exactly the

contract terms that you want 27 What Else Can You Do To Help the Entire Marketplace Change? 2. Litigation 3. Legislation 28 Pharmaceutical Industry Congress

FDA Brand Manufacturers Generic Manufacturers Publishers of Brand Drug Prices Drug Wholesalers PBMs off label use

Detailers Retail Pharmacy Mail Order Med School free samples free trips your doc 29 Reasons for not getting involved in lawsuits: 1. I dont know how

(Im not a lawyer) 2. Who can I trust? (How do I pick a firm that will fairly represent me and not just be in it for the attorney fees?) 3. I dont have the time (I cant keep up with the work I have nowhow can I take on more?) 30

Reasons for bringing class action litigation: 1. It will save your benefit plan money 2. It will teach the bad actors in the pharmaceutical industry a lesson and curb further abuses 3. If more health plans band together, we will be the 800 lb. gorilla, and we will obtain leverage to decrease our Rx costs. 31 Government Employees Hosp. Association, District Council 37, Health & Security Plan Trust and Health Net, Inc. v. Merck Serono International, S.A., Serono

Laboratories, Inc. and EMD Serono, Inc. , No. 05-cv11935 (PBS) & Francis v. Serono, No. 06-cv-10613 (PBS) Case involved the illegal marketing of an AIDS wasting drug Settled for $24 million to be distributed to : Insurers Third Party Payors (TTPs) (our plan & yours) Consumers (including our members & yours) What we had to do: Read the complaint & participate in discovery Obtain claims information from PBM Submit to Claims Administrator who will distribute settlement monies pro-ratably to all who file timely claims. What else can you get?

Attorney fees (if your attorney is actively involved in case) Payment for participating as a named plaintiff Amazing good will of members & consumers 32 New England Carpenters Health Benefits Fund, District Council 37 Health & Security Plan, et al. v. First Databank, Inc. and McKesson Corp., C.A. No. 1:05-cv-11148 (PBS) Alleged conspiracy by FDB (publisher of AWP) & McKesson (a very large wholesaler) to artificially inflate the cost of brand drugs by 5%. Proposed $4 billion settlement against FDB requiring it to lower the price of brand drugs prospectively & to abolish AWP as a pricing mechanism What we had to do so far:

Read complaint Participate in discovery by producing many documents & claims data Had plan administrator deposed What was accomplished so far? Brought to everyones attention how flawed and susceptible AWP and other non-transparent pricing mechanisms are to manipulation. 33 In re Modafinil Antitrust Litigation Civil Action No. 06-1797 (E.D. Pa.) Anti-trust case involving conspiracy with generic drug manufacturers to keep their less expensive products off the market

Involves alleged bribes of $136 million to generic manufacturers by Cephalon, the manufacturer of the brand drug, Provigil (a sleep disorder drug) to keep generic equivalent drugs off the market. What We Had To Do: Read complaint Produce claims data 34 DC 37 Health & Security Plan, et al. v Eli Lilly (E.D.N.Y.) This case involves off-label marketing by Lilly of its psychotropic drug, Zyprexa, which is supposed to be prescribed to treat schizophrenia and bi-polar disorders.

This very expensive drug (we spent over $9 million) was marketed for use in patients, including the elderly, for non-indicated diagnoses. Weve participated in discovery & case is waiting to be certified as a class action. Secret settlement negotiation documents between Lilly & the U.S. Govt related to Medicaid payments were inadvertently emailed by someone to a NY Times reporter who happen to have the same last name as one of Lillys lawyers copies of 35 Legislation & Policies Until we have universal health care, states, cities and even medical schools have filled the void left by the federal government by coming up with innovative laws, regulations

and policies to regulate the pharmaceutical industry and improve public health. See below: Maine: state law mandated transparency for PBMs Minnesota, Vermont: pharma to report payments to docs who advise on state purchases for Medicaid (bill pending in New York) Nevada: bars from service on therapeutics committee anyone w/ ties to pharma industry New York City: no smoking ordinance UC Davis School of Medicine: ban on all vendor gifts Memorial Sloan-Kettering: ceased all commercial support for research Senators Kohl & McCaskill: have called for a national

36 How to Join the Legis Lobbying Effort Contact The National Legislative Assn on Prescription Drug Pricing NLARx Phone: 207 622-5597 www.reducedrugprices.org Join the Email Distribution List, & help them testify at state hearings 37 To follow class action litigation:

Join PAL (Prescription Access Litigation) Project (its free) www.prescriptionaccess.org Great free sources of information on pharma: PharmacyOneSource.com pharmalot.com Kaiser Family Foundation 38 Presented by: Linda Cahn, Esq. President Pharmacy Benefit Consultants (office) 973 975-0900

email: [email protected] www.PharmacyBenefitConsultants.com Audrey A. Browne, Esq. Director Regulatory Compliance & Contract Procurement District Council 37 Health & Security Plan (office) 212 815-1304 email: [email protected] Pharmacy Benefit Consultants & moabuddy 39

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