The Healthcare Supply Chain: A Look Inside Steve Collis President and CEO AmerisourceBergen

Today’s Agenda

AmerisourceBergen: A Quick Primer

Four Disruptions in the Healthcare Supply Chain

Part 1

Part 2

Where Do We See Opportunities to Shape Healthcare Delivery? Part 3

Q&A Part 4

AmerisourceBergen: A Quick Primer

Provide more than 70,000 healthcare facilities with the right medication and supplies overnight.

Deliver over 1.5 million product lines from our 30+ distribution centers, located in the United States and Puerto Rico.

Help millions of patients safely receive the treatments they need for timely, successful care.

Who Are Our Customers?

AmerisourceBergen: By the Numbers

16,000 associates

140+ offices

50+ countries

Historic Growth for the Company

FY 2014 FY 2013 Change

Revenue

Gross Profit

Operating Income

Adjusted EPS

$119,569

$3,306

$1,556

$3.97

$87,959

$2,762

$1,290

$3.21

36%

20%

21%

24%

A Monumental Deal Among Industry Titans

Potentially transformational for ABC, creating a wholesaler with the broadest global reach.

The long-term relationship—both smart and unprecedented.

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Has the potential to transform the pharmaceutical supply industry on a global basis.

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Deal transforms global pill pipeline. Groundbreaking global partnership.

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Knowledge, Reach and Partnership on a Global Scale Local Presence in 50+ Countries

Solutions that Span The Industry’s Needs

Largest breadth and depth of commercialization services #1 provider in virtually every offering

About Me

Born in South Africa

Graduate of the University of Witwatersrand in Johannesburg with a degree in accounting

Lieutenant in the South African Air Force

Came to California in 1989 to work for an orthopedics distribution company

Joined Alternate Site Distributors (ASD) Healthcare in 1994 as the general manager

About Me

President of Bergen Brunswig Specialty Group in 1999

President, AmerisourceBergen Specialty Group (ABSG) following the merger of Amerisource Health and Bergen Brunswig in 2001

President of AmerisourceBergen Drug Corporation (ABDC) in 2009

President and CEO of AmerisourceBergen (ABC) in 2011

Four Disruptions in the Healthcare Supply Chain

Global Spending on Drugs Will Reach about $1.3 Trillion by 2018 Global Sales and Growth, 2009-2018

Source: IMS Health Market Prognosis, Sept. 2014, at ex-manufacturer price levels, not including rebates and discounts

Spending by Geography

US Pharmaceutical Trends Specialty Growth

Source: Evaluate Pharma, Team Analysis ; McKinsey data

1 Shifting Site of Care 2 Changing Patient Population 3 Biosimilars 4 Balancing Cost vs. Quality

Provider Consolidation and Integration Continues

Source: Kaufman, Hall and Associates, February 2015

Source: The Health Care M&A Information Source, February 2015

Physician Employment Trends (2008-2013)

Physicians have been leaving independent practice for hospital-employment.

However, majority of physicians are still practicing in an independent setting.

Health System Pharmacy Challenges

Generic price spikes

Drug shortages

Specialty distribution shift

340B coordination

Cost management—especially for specialty medications

Costs for Specialty Care Are Increasing – Regardless of Where the Care Is Administered

Shifting Site of Care: Key Takeaways

Issue runs deeper than just where products are delivered and administered

Regardless of where care is delivered, supply chain partners must be nimble enough to respond in a value-additive way

Market change creates increased needs for solutions that align with customer business goals

1 Shifting Site of Care 2 Changing Patient Population 3 Biosimilars 4 Balancing Cost vs. Quality

Virtual Care and Telehealth

Telehealth is a potential solution for challenges created as a result of an aging population and an increase in chronic disease states.

Additional benefits include an increase in quality care and decrease in healthcare expenditures.

Source: “Global Markets for Telemedicine Technologies,” BCC Research, available at http://www.bccresearch.com/; “Global Telehealth Market Set to Expand Tenfold by 2018

A Patient-centric Approach to Adherence Services

Changing Patient Population: Key Takeaways

Patient population growing in size and complexity

Aligning services with patient expectations will be key—not just for supply chain partners, but for all healthcare stakeholders

Reach and scale will still be key

1 Shifting Site of Care 2 Changing Patient Population 3 Biosimilars 4 Balancing Cost vs. Quality

Launch influenced by: Regulatory approval Patent challenges Commercial acceptance Interchangeability

Biosimilar Opportunities

Biosimilars: Key Takeaways

Still playing the waiting game for the big biosimilars rush

But waiting does not equate with inactivity

Winners will be determined by who’s best prepared to serve full spectrum of needs—both distribution and commercialization

1 Shifting Site of Care 2 Changing Patient Population 3 Biosimilars 4 Balancing Cost vs. Quality

Emergency Room Usage by Country

Source: 2013 Commonwealth Fund International Health Policy Survey in Eleven Countries.

Source: National Pharmaceutical Council

An Accountable Care Organization (ACO) is a group of health care providers who work to deliver coordinated care

and are collectively accountable for the cost and quality of care.

ACOs have the potential to improve the quality of care and lower costs.

To show success, ACOs must report on

specific quality measures.

A Shift from “Fee-for-service” to “Value-based” Care as a Result of the Affordable Care Act

Source: HIDA: “Healthcare Supply Chain 2015” Source: MM&M-online: Health systems are embracing value-based care: survey, December 2014.

Projected 2015 Private Health Insurance Spending Inpatient and professional services account for the largest amount of private health insurance spending

Source: PwC Health Research Institute, Medical cost trend: Behind the numbers 2015, June 2014 analysis based on the 2014 Millman Medical Index

The Hepatitis C Marketplace

A leading manufacturer planned to launch their Hepatitis C drug via limited distribution

They made the decision to instead launch full line wholesale

The result was expanded patient access and arguably the most successful healthcare product launch of this century

Financial Impact of New Hepatitis C Therapies 2015 – 2016 is the highest cumulative impact on benefit costs for employer plans

Source: PwC Health Research Institute estimate based on National Health and Nutrition Examination Survey and 2012 Truven claims data from employers23

Balancing Cost vs. Quality: Key Takeaways

Smarter spending—not just reduced spending

Results matter just as much as (or even more than) procedures

Support needed for providers entering into ACOs and other care coordination models

Where Do We See Opportunity to Shape Healthcare Delivery?

The community pharmacy industry represents 37% of all retail pharmacies in the US, an estimated $89 billion in annual revenue.

Top three disease state management services offered at a community pharmacy are immunizations, blood pressure monitoring and diabetes training.

Pharmacists play an increasingly important role in public health and many states are expanding the role of the pharmacist as provider.

The Independent Community Pharmacy

Source: IMS Health Data

Independents Remain a Formidable Presence

Customer Utilization of Pharmacies, by Dispensing Format, 2014

Dispensing Format 2012 2013 % Change 2012 2013 % Change

Prescriptions (millions) Share of Prescriptions

Chain drugstores 1,885 1,947 +3.3% 44.0% 45.3% +135 b.p.

Independent drugstores 723 719 -0.6% 16.9% 16.7% -13 b.p.

Mass merchants with pharmacies 439 442 +0.7% 10.2% 10.3% +5 b.p.

Supermarkets with pharmacies 522 536 +2.7% 12.2% 12.5% +30 b.p.

Mail pharmacies1 717 651 -9.2% 16.7% 15.2% -157 b.p.

Total 4,286 4,295 +0.2% 100.0% 100.0%

1. Excludes Tricare prescriptions. Prescription data for mail pharmacies show Equivalent Scripts (Actual Scripts x 3) Totals may not sum due to rounding. b.p. = Basis Point (one hundredth of one percent; 0.01%) Source: Pembroke Consulting analysis of IMS Health data; Pembroke Consulting estimates

Source: 2013-14 Economic Report on Retail, Mail, and Specialty Pharmacies, Drug Channels Institute, January 2014.

Independent Community Pharmacy Market Share of Prescription Revenues, 2013

Customer Satisfaction with Pharmacies

Customer Satisfaction with Pharmacies, by Dispensing Format, 2014 Customer Satisfaction Index Ranking (based on a 1,000-point scale)

Source: Pembroke Consulting analysis of 2014 U.S. National Pharmacy Study, J.D. Power and Associates, September 2014

Commitment to Oncology

Competitive Pricing on Products

Industry-leading and

industry-pioneering GPO structure in oncology

Ensuring reliable access to medications

Actionable Data and Analytics

Helping practices learn

more about themselves so they can care for patients more effectively

Data-driven care and operations

Information and Amplification

Educating practices on the

latest clinical and operational insights

Amplifying their voice to communicate their perspective to lawmakers and regulators

Not a one-size-fits-all approach Combine global best practices with localized

expertise and resources to create customized solutions for manufacturers

Unique markets demand unique, tailored approaches

Leveraging global presence to expand commercial operations (Australia 3PL). Leveraging ABC to expand clinical services (Cubixx).

Joint venture to merge local knowledge of Brazil market with proven solutions and approaches from U.S. and Canada.

Exploring how product commercialization lessons learned in Canada can be applied elsewhere—while continuing to improve operational excellence.

Animal Health Market Overview

The global animal health industry is worth an estimated $100 billion

The pharma segment globally is ~ $22bn, U.S. Market is $8bn)

Demographics 10,000 baby-boomers turning 65 every day until 2029.

Drug Innovation New drugs coming to market.

Healthy Drug Pricing Environment Specific to BRx and GRx.

2/3 of U.S. households now own a pet.

Demographics 10,000 baby-boomers turning 65 every day until 2029.

Aging Population

Take More Rx Drugs

Live Longer

Get A Pet

Questions & Discussion