SpecialtyPharmacyOverviewBrianBurke VPNationalAccounts

9/14/2012

SpecialtyPharmacyisthepracticeofdispensingcomplextherapiesdeliveredbyexperthealthcarepractitionerstopatientswithchronicandacuteillnesses.Thismodelcoordinatesconditionspecificcoreservicesdesignedtoimprovepatientaccessandachieveoptimalclinicaloutcomes*

*AsdefinedbyCharterMembersofNationalCoalitionofSpecialtyPharmacies,October2008

Specialty Pharmacy Defined

WhatMakesaDrugaSpecialty? MorethanjustsayingItsabiologic Targetsadiseasewithasmalltomediumpopulation Seriousunmetmedicalneeds Includesoneormoreofthefollowingfeatures:

Usuallyalargemoleculeinjectible Increasingly,smallmoleculeoraldrug Coverageunderthemedicalbenefitbutincreasinglyunderthepharmacybenefit

Primarilyprescribedandadministeredbyaspecialist Oftenrequiresspecialhandling(expressorovernightshipping),refrigerationandstorage

Requiresdiseasemanagementservices(e.g.,patienteducation,monitoring,copayassistance,etc.)

HighCost(over$1,200permonth)

Specialty Pharmaceutical Defined

Factors Determining Classification as Specialty Pharmacy by Plans

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On a scale of 1-5, where 1 = no impact at all and 5 = extreme impact, please rate the impact each factor has in determining whether a drug category is classified as specialty pharmacy.

*Averageminimummonthlycosttomeetthehighcostcriteriawas$1,200in2010and$1,154in2011**Newselectionin2011

EMD Serono Specialty Digest, 8th edition

Specialty Product Disease States Defined

ALS Alzheimer's Arthritis Asthma BloodModifiers CMV COPD CrohnsDisease CysticFibrosis Dialysis EnzymeReplacement GrowthHormone Hemophilia

HIV/AIDS Infertility IVIG MentalHealth MultipleSclerosis Oncology Psoriasis RheumatoidArthritis RSV Osteoporosis Transplantation ViralHepatitis

Specialty Pharmacy Services Defined

PatientServices 24/7PatientSupport RegistryCapabilities EducationalServices ReimbursementSupport/Benefitinvestigation/Prior

Authorizations/FoundationSupport ComplianceInitiatives Outcomemonitoring

CoordinationofCarewithProviders ClearlyDefinedBusinessModel

PhysicianRelationships/Referrals DifferentiatedbyMarketingServices

Specialty Pharmacy Services..Value Proposition

PreLaunchPreLaunch

LaunchLaunch

ContinuumofCareContinuumofCare

Drug Development $1.3 Billion

Market Access: Rebate Accrual $$$Product Marketing: Agency $$$

Sales Force: Salary, Training. Travel $$$

An ounce of prevention is worth a pound of cureBenjamin Franklin

Specialty Pharmacy Services..Value Proposition

Service Expectations

ComprehensivePatientCare24/7NurseorpharmacistoncallBenefitsInvestigation/PAOvernightdeliverytohomeorofficeTemperaturecontrolledpackagingOnlinesupportgroups

Service Expectations

Clinical extensionofofficeCompliancemanagementCustomizeddosedeliveryReimbursementcoordinationCodingandbillingassistance

Service Expectations

CompetitivepricingCustomizedprograms(atgrouplevel)Seamless,dedicatedaccountmanagementandtransitionMarketingandsalessupport

ServiceExpectations

BroaddistributionSpecialhandling/temperaturecontrolOvernightdeliveryPatientandofficeassistanceDirectpatientinteractionReimbursementcoordinationPAP/REMSexecution

Patient Physician Payor Pharma/Manufacturer

PhysicianRegistryPatientRegistryPharmacyRegistry

REMSManagement

BenefitsVerificationPriorAuthorization&AppealPAP

ReimbursementSupport

WelcomeCallsProductEducationLatetoFillCalls

PatientEducationandSupport

ControlledNoLeakage867/852Data

Distribution

DispensingDataInterventionDataOutcomesData

Data

DrugAccessChallenges:ManufacturersandtheirIntendedVision

For Every 100 Prescriptions Initially Written, Only 15 to 20 Prescriptions are Continued After

the Initial Supply

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TheFoundationforManagedCarePharmacy.MedicationAdherence:ManagingforTotalValue.2010.Availableat:http://208.40.175.32/cecity/components/util/pdf/docs/pdf/15208_print.pdf

Factors Impacting Adherence and Persistency to Therapy Regimen

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WorldHealthOrganization(WHO).AdherencetoLongTermTherapies EvidenceforAction.2003.Availableat:http://www.who.int/chp/knowledge/publications/adherence_full_report.pdf.

AgingWorldPopulation: Over500millionorabout8%ofpeople(worldwide)areoverage65 Theelderlypopulationisexpectedtogrowtomorethan1billionby2030;

thiswillaccountfor13%oftheworldpopulation* Themostrapidincreaseintheelderlypopulationisindeveloping

countries

Source:UnitedNationsDepartmentofEconomicandSocialAffairs*U.S.StateDepartment

Specialty Pharma Growth Drivers

Specialty Pharmacy Overview

SpecialtyProductsareavailableformorethan30diseasestates

In2008,197BiotechnologydrugsonthemarketintheUS* 19%ofwhichwereInfusedProducts* Through2012,thetopthreespecialtydiseasestates,

inflammatoryconditions,MSandcancer,willaccountfortwothirdsofspecialtydrugspendunderpharmacybenefits^

*Source: Dean Erhardt. D2 Pharma Consulting LLC. Presented at ECRM, Scottsdale, AZ. November 17, 2008.

^Curascript 2009 specialty drug trend report.

Specialty Pharmacy Overview: Yesterday

$100billionspentin2010 Lessthan2%ofthepopulationrepresented20%ofthetotal

drugspend In2010,sixofthetop20therapeuticclasseswerespecialty In2010,sevenofthetop20drugswerespecialtyproducts 150+FDAmandatedRiskEvaluationMitigationStrategies

(REMS)everincreasing

20112012USPharmaceuticalMarket Specialtyisthefastedgrowingsegmentandisexpectedtogrowata

rateof20%to23.5%annually* Itisestimatedthatspecialtyspendwillclimbtomorethan40%of

totaldrugspendby2030** Thespecialtycategoryisreceivinghighattentionduetothehighcost

ofdrugs Ninemedicinesnowcostmorethan$200,000peryear^ Averageannualpercentchangeinmanufacturerpricesforwidelyusedspecialtyprescriptiondrugsremainshighin2010=9.2%^^

*Curascript 2009specialtydrugtrendreport.**Source:IMS2008HealthYearinReview^Herper M.Theworldsmostexpensivedrugs.Forbes.February22,2010.^^AARPPublicPolicyInstitute.RXWatchdogReport:BrandNameandSpecialtyDrugsPricesContinuetoClimb.Washington,DC:AmericanAssociationsofRetiredPersons.May2010.

Specialty Pharmacy Overview: Today

Limited Distribution Specialty Products

Manufacturer Drug Manufacturer Drug Manufacturer Drug Manufacturer Drug

Actelion Tracleer,Ventavis,Zavesca BayerMirena,Nexavar Novartis

Exjade,Visudyne

Organon Implanon

AstraZeneca Iressa,Synagis Biomarin Kuvan OrphanMedical XyremRareDiseaseTherapeutics Orfadin

Biogenidec Tysabri,Rituxan Celgene Revlimid Questcor ActharGel Shire Elaprase

BMS Erbitux GileadSciences Letairis Serono Zorbtive UnitedTherapeutics Remodulin

Endo SupprelinLA GenzymeCerezyme,Fabrazyme,Myozyme

Tercica Increlex,Somatuline ZLBBehring Vivaglobin

GenentechAvastin,Herceptin,Xoliar,Lucentis,

Nutropin,Raptiva,GSK Tykerb Pfizer Inlyta Alexion Soliris

Source: Armada Health Care internal data base.

Specialty Pharmacy Pipeline: Oncology

Oncologymakesup40%ofthespecialtypipeline Ashifttooralchemotherapyagentsisoneofthemajortrends

inspecialty Oraldrugsmakeup35%oftheoncologypipeline By2013,thepercentageoforaloncologydrugswillreach25%,up

from10%in2009

*WalgreensSpecialtyPharmacyStateoftheIndustryReport2009.

Specialty Product Pipeline

Specialty Manufacturer Pipelines

Specialty Pharmacy Pipeline: Deep Dive

Orphandrug:Rarediseasesaffectinglessthan200,000U.S.people Potential25to30millionpatientsacrosstheU.S. Research&DevelopmentisactivelyencouragedthroughtheNational

InstituteofHealthsrareandneglecteddiseaseinitiativeandtheU.S.FDA

ORPHAN DRUGS IN DEVELOPMENT

Category #

Other 37

Transplantation 20

Respiratory 14

Infectious Disorders 31

GrowthDisorders 5

Genetic 67

Gastrointestinal 10

Category #

EyeDisorders 11

Cardiovascular 6

Blooddisorders 12

Autoimmune 18

Cancerrelated 10

Skincancer 31

Bloodcancer 79

Cancer 107

SpecialtyPharmaceuticals:EvolvingCustomer

Armada Membership Profile

Consistsofthenationsleadinglocal,regionalandnationalSpecialtyPharmacyProvidersprovidingcomprehensiveprescriptionservicesanddiseasestatemanagementprogramsforspecificchronicconditions

HomeInfusion/Home

Health

Clinics/IDNs/OutpatientPharmacies

RetailChains/Independents

National

SpecialtyPharmacies

Regional

Independent

Specialty Pharmacy Players

TraditionalCustomer1. ClosedShopspecialtypharmacy

Largepubliccompanies PBMowned Independent Chainownedseparatelocation

2. Fullcontractloads3. Generallyhaveaccesstolimiteddistributionproducts4. Havephysician/payersalesforce5. Developedinternaldispensingsystem6. Armadaprovidescomplimentaryservices7. ArmadaprovidestypicalGPOservices8. Armadacollectsdailydispensingdataspecialtyproducts9. Armadaprovidescontractingopportunities

Specialty Pharmacy Players

NewSpecialtyCustomer1. SPpatientsareambulatory2. MoreproductsareaccessibletoOpenAccesspharmacies

35%ofoncologypipelineareoraldrugs

3. Stillafair#oflimiteddistributionproducts4. Trendtowardsgreaterpharmacyaccessfrompayers

i.e.UnionPlans

RetailCustomer1. Increasedaccesstopatients2. Basicpatientservices

Facetofacepharmacisttime Pointofsalemessaging

3. Limited,butgrowingaccesstomanufacturerdiscounts4. Lackofaccesstolimiteddistributionproducts5. Lackofpatientoutreachcapabilities6. LimitedresourcesforcomplicatedP