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Agenda 11/18/2008 Item #16E 3 Agenda Item No. 16E3 November 18, 2008 Page 1 of 42 EXECUTIVE SUMMARY Recommendation to approve the Second Amendment to the Express Scripts, Inc. Prescription Drug Program Agreement to provide Pharmacy Benefit Management Services to the Collier County Group Health Insurance Plan. OBJECTIVE: To provide pharmacy benefit management services to the Collier County Group Health Insurance Plan, CONSIDERATION: The Board of Commissioners through the Risk Management Department administers a partially self-funded group health program (the Plan) for its employees and their covered dependents, A significant component of the Plan provides coverage for prescription medications, The Plan currently utilizes the services of Express Scripts, Inc, to provide pharmacy benefit management services, These services include the provision of a retail pharmacy network for the distribution of acute and chronic medications and a mail order pharmacy network for chronic medications, The use of Express Scripts enables the county to purchase medications at rates which are significantly below average wholesale rates, In June, 2008 the members of the Collier County Healthcare Consortium (the "CCHCC") consisting of Collier County Government, the Collier County Sheriff, the District School Board of Collier County, and the NCH Healthcare System issued a joint Request for Proposals, The RFP was released through the Purchasing Department of the District School Board of Collier County with the Consortium members serving as the selection committee, Willis Group Holdings, consultant to the Consortium members, provided technical assistance to the committee, The RFP was released to eight vendors, The goal of the RFP was to leverage the purchasing power of the Consortium with its 22,000 covered lives to obtain competitive terms and pricing for the respective member agencies and their covered members, The CCHCC committee that prepared the RFP, reviewed the analysis, and participated in the interviews with the top two vendors, was made up of the following members: Collier County BCC: Jeff Walker, CPCU ARM, Director, Risk Management Alice Toppe, Group Insurance Manager Sonya Sweet, Benefits Analyst Brian Settle, VP Human Resources Daryl Kilpatrick, Benefits Manager Renee Thigpen, Benefits Analyst Carol Golightly, Finance Director Alice Mase, Risk Manager Allun Hamblett, Executive Director, Human Resources Jane Manalich, Director, Insurance Cynthia Battle, Benefits Manager Linda Thoman, Benefits Coordinator NCH Healthcare System: ccso: District School Board: Upon completion of the initial review of proposals received, the committee created a shortlist of two vendors for an interview, These companies were Express Scripts and Caremark, The committee interviewed both companies to complete its assessment of their programs, Although Express Scripts and Caremark were very close in price, the overwhelming consensus of the committee was that the current pharmacy benefits vendor, Express Scripts, Inc., offered more favorable financial terms when ~ considering their generic substitution guarantee, For Collier County, Express Scripts is guaranteeing an increase in the generic fill rate from 60% currently to 66% by the end of calendar year 2012, A 1 % Aoenda Item No, 16E3 ~ November 18. 2008 Page 2 of 42 increase in the generic fill rate equates to a 1 % reduction in overall drug spend, If this target is not met, Express Scripts will refund the difference, This was a critical issue in the committee's analysis, The performance of Express Scripts over the past three years has been both prompt and responsive, Finally, the committee estimates that Express Scripts will provide a savings to all CCHCC members in excess of $11 million over the four-year contract as compared to the previous agreement Of that figure, Collier County will enjoy a savings of $2,601,548 based upon estimated claims volume and existing plan design, This cost savings includes a 25% improvement on retail generic pricing, a 10% improvement on retail brand pricing, and a 60% improvement in rebates, The District School Board approved the award to Express Scripts on October 16, 2008, Each CCHCC entity has or will be making similar recommendations to their respective authority for approval. The members of the CCHCC have finalized a common contract amendment with Express Scripts to be utilized by each entity, The effective date of this Second Amendment will be January 1, 2009, FISCAL IMPACT: It is estimated that this Second Amendment to the Express Scripts Agreement will result in total savings of $2,601,548 to the Board's Health Insurance Program over the four year agreement when compared to the current agreement Funds are budgeted within Fund 517, Group Health and Life, Insurance Claims for this purpose, Estimated expenditures for pharmacy benefits in calendar year 2009 are expected to be $4,697,827, GROWTH MANAGEMENT IMPACT: There is no growth management impact associated with this item, LEGAL CONSIDERATIONS: This Executive Summary is approved by William E, Mountford, ACA, for legal sufficiency, RECOMMENDATION: That the Board of Commissioners approves the Second Amendment to the Express Scripts, Inc, Prescription Drug Program Agreement for Pharmacy Benefit Management Services, and authorize the chairman to execute said Second Amendment subject to the approval as to legal sufficiency by the County Attorney's Office, PREPARED BY: Jeff Walker, CPCU, ARM, Director, Risk Management Page lof2 Agenda Item No. 16E3 November 18, 2008 Page 3 of 42 COLLIER COUNTY BOARD OF COUNTY COMMISSIONERS Item Number: Item Summary: 16E3 Meeting Date: Recommendation to approve the Second Amendment to the Express Scripts, Inc. Prescription Drug Program Agreement to provide Pharmacy Benefit Management Servtces to the Collier County Group Health Insurance Plan. 11/18/2008 900.00 AM Prepared By Jeffrey A. Walker, CPCU, ARM Risk Management Director Date Administrative Services Risk Management 10/21/200810:03:26 AM Approved By Lyn Wood Purchasing Agent Date Administrative Services Purchasing 10/23/20082:19 PM Approved By Jeffrey A. Walker, CPCU, ARM Risk Management Director Date Administrative Services Risk Management 10/28/20088:30 AM Approved By William Mountford Assistant County Attorney Date County Attorney County Attorney Office 10/29/20084:26 PM Approved By Steve Carnell Purchasing/General SVGS Director Date Administrative Services Purchasing 10131120089:24 AM Approved By Len Golden Price Administrative Services Administrator Date Administrative Services Administrative Services Admin. 1113/2008 10:48 AM Approved By OMS Coordinator Applications Analyst Date Administrative Services Information Technology 11/4/20089:20 AM Approved By Jeff Klatzkow Assistant County Attorney Date County Attorney County Attorney Office 1114120081:48 PM Approved By Laura Davisson Management & Budget Analyst Date County Manager's Office Office of Management & Budget 11/5/2008 1 :24 PM file://C:\AgendaTest\ExDort\116-November%20 18.%202008\ 16,%20CONSENT%20AGE.., 11112/2008 Page 2 of2 Agenda Item No, 16E3 November 18, 2008 Page 4 of 42 Approved By James V. Mudd Board of County Commissioners County Manager Date County Manager's Office 11/10/20083:50 PM file://C:IAQendaTestIFxnortl 11 h-Novemher%20l R.%20700RI 1 h%?OCONSFNT%70AGF I 1/1 7 I?OOR Agenda Item No, 16E3 November 18, 2008 Page 5 of 42 SECOND AMENDMENT TO EXPRESS SCRIPTS, INC, PRESCRIPTION DRUG PROGRAM AGREEMENT This SECOND AMENDMENT (the "Amendment") is entered into as of the Effective Date, by and between EXPRESS SCRIPTS, INC" a Delaware corporation ("ESI"), and COLLIER COUNTY GOVERNMENT, organized under the laws of the State of Florida ("Sponsor"), RECITALS 1 , ES I and Sponsor are parties to a Managed Prescription Drug Program Agreement dated as of January 1, 2006, a8 amended from time to time (the "Agreement"), pursuant to which ESI provides certain prescription drug benefit management services to Sponsor, 2, Sponsor and ESI desire to update and amend the Agreement in accordance with the terms and condition8 set forth herein, NOW, THEREFORE, in consideration of the premise8 and other conditions contained herein, the partie8 hereto hereby agree as follows: TERMS OF AMENDMENT 1, Definitions, For purposes of this Amendment, any capitalized term not otherwise defined herein shall have the meaning set forth in the Agreement. "CuraScript" means CuraScript, inc, or another pharmacy wholly-owned or operated by ESI or its wholly-owned subsidiaries that primarily dispenses Specialty Products, "PM PM" means per Member per month, as determined by ESI by reference to the Eligibility Files, "Specialty Drug list" means the standard list of Speciaity Products and their reimbursement rates under the applicable (exclusive or open) option (described in Exhibit A-1) provided to Sponsor with this Agreement and as updated from time to time, "Specialty Products" means those injectable and non-injectable drugs on the CareLogic Drug List and typically having one or more of several key characteristics, including: frequent dosing adjustments and intensive clinical monitoring to decrea8e the potential for drug toxicity and increase the probability for beneficial treatment outcomes; intensive patient training and compliance assistance to facilitate therapeutic goals; limited or exclusive product availability and distribution; specialized product handling andlor administration requirements andlor cost in excess of $500 for a 30 day supply, 2, Fees and Rebates, The fees for the services ESt provides shall consist of the fees specified on Exhibits A -1 throuah A-3 of this Amendment, which shall replace the exi8ting pricing terms of the Agreement. Rebates shall be as specified on Exhibit B of this Amendment, which shall replace the existing Rebate terms of the Agreement. 2, Pharmacv Manaaement Funds, The following shall be added as a new Section 2,3: 2,3 Pharmacv Manaaement Funds, Subject to the following, ESI will provide Pharmacy Management Funds ("PMF") of up to $3,00 per Member as of the Effective Date, solely to fund implementation expenses upon transition to ESI, and mutually agreed upon services, projects and programs directly related to the pharmacy benefit administered under this Agreement: (a) PMF amount8 must be ba8ed on the fair market value of the direct expenses of the implementation or the service, project or program funded, and either Sponsor or ESI may use the PMF to cover the fair market value of expenses for projects requiring joint resources, Funds may not be used in 145276v2 Agenda Item No, 16E3 November 18, 2008 Page 6 of 42 connection with the Medicare Part 0 program without ESI's consent, which consent will not unreasonably be withheld following a regulatory assessment. (b) Sponsor will submit adequate documentation to support reimbursement within 180 days of incurring the applicable expense, (c) Sponsor represents and warrants that (i) it will only use the PMF as reimbursement for its actual expenses incurred in implementing the transition to ESt, andlor the service, project or program and the such expenses were incurred and the applicable service, project or program was performed or provided; (II) the amount of the reimbursement is equal to or less than the reasonable fair market value of the actual expenses incurred by Sponsor; (iii) it will notify and disclose the amount and the terms of any PMF reimbursements to Members and other third parties to the extent required by applicable laws and regulations, (d) ESI intends to amortize the PMF over the Initial Term of the Agreement on a straight-line basis, unless otherwise required by law or accepted accounting principles, Sponsor will have no right to interest on, or the time value of, any PMF, Unused funds shall be retained by ESL In the event of a termination of thi8 Agreement for any reason other than ESl's uncured material breach of thi8 Agreement prior to the expiration of the Initial Term, Sponsor will reimburse ESt an amount equal to any paid but unamortized portion of the PMF, Reimbursement to ESI by Sponsor pursuant to this Section will not be in lieu of any other rights or remedies ESI may have in connection with the termination of thi8 Agreement, including monetary or other damages, PMF reimbursements are not payable until this Agreement is executed, 3, Section 3.1(c) is deleted in its entirety and the following substituted therefor: (c) Soecialty Products, Members may have prescriptions filled through CuraScript on an exclusive basis, or through CuraScript and Participating Pharmacies (each as described in Exhibit A-1), ESI will assist in the transfer of prescriptions to, or assist Members to obtain new prescriptions to be filled at, CuraScript for Members filling Specialty Products through the Mail Service Pharmacy (if applicable), Sponsor hereby authorizes ESI and CuraScript to communicate with Members and physicians regarding the transition from Mail Service Pharmacy (or other pharmacies) to CuraScript, as well as to advise Members filling Specialty Products at Participating Pharmacies of the availability of filling prescription through CuraScript. 4, Section 6,1 is hereby restated in its entirety as follows: "6,1 Comoliance with Law; Chanoe in Law: Pricino Benchmarks, (a) Comoliance with Law; Chanoe in Law, Each party shall be responsible for ensuring its compliance with any laws and regulations applicabie to its business, including maintaining any necessary licenses and permits, Sponsor shall be responsible for any governmental or regulatory charges and taxes imposed upon the services provided hereunder, other than taxes based on the net income of ESL With respect to any Plan that is subject to the provisions of ERISA, the Sponsor or the plan sponsor shall ensure that its activities in regard to such program are in compliance with ERISA, Sponsor acknowledges and agrees that it is responsible for disclosing to Members any and all information relating to the Plan and this Agreement a8 required by law to be disclosed, including any information relating to Plan coverage and eligibility requirement8, commissions, rebates, discounts, or provider discounts referred to in Section 6.4 hereof, If there is a change in federal or state laws or regulations or the interpretation thereof, regulatory, judicial or legal action that, among other things, materially burdens ESI, requires ESI to increase payments or shorten payment times for Covered Orugs to Participating Pharmacies, or materially changes the scope of services hereunder, then there shall be an appropriate modification of the services, reimbursement rates, administrative fees and/or Rebates such that the parties are returned to their comparable economic position as of the Effective Date. If the parties cannot agree on a modification or adjusted fee or rates, then either party may terminate the Agreement on thirty (30) days prior written notice to the other, 145276vl 2 Agenda Item No. 16E3 November 18, 2008 Page 7 of 42 (b) Pricino Benchmarks, The partie8 understand that pricing indices historically u8ed, (and that are the basis in this Agreement), for determining the financial components of pharmacy billing rates are outside the controi of Sponsor and ESI. The parties also understand there are extra-market industry, legal, government and regulatory activities which may lead to changes relating to, or elimination of, these pricing indices that could alter the financial positions of the parties as intended under this Agreement. The parties agree that, upon entering into this Agreement and thereafter, their mutual intent has been and is to maintain pricing stability as intended and not to advantage either party to the detriment of the other, Accordingly, to preserve this mutual intent, if ESI undertakes any or all of the following: (i) changes the AWP source across its book of business (e.g" from First DataBank to MediSpan); or (ii) maintains AWP as the pricing index with an appropriate adjustment as described below, in the event the AWP methodology and/or Its calculation is changed, whether by the existing or alternative sources; or (iii) transitions the pricing index from AWP to another index or benchmark (e,g" to Wholesale Acquisition Cost), Participating Pharmacy, CuraScript and Mail Service Pharmacy rates, rebates and guarantees, as applicable, will be modified as reasonably and equitably necessary to maintain the pricing intent under this Agreement. ESI shall provide Sponsor with at ieast ninety (90) days notice of the change (or if such notice is not practicable, as much notice as is reasonable under the circumstances), and written illustration of the financial impact of the pricing source or index change (e,g" specific drug examples), If Sponsor disputes the illustration or the financial impact of the pricing source, the parties agree to cooperate in good faith to resolve such disputes." 5, Section 6.2 is amended by adding the following; "6.2 State Fiduciarv Laws, ESI will have the right to terminate PBM Services to any Plan (or, if applicable, Member8) located in a state requiring a pharmacy benetn manager to be a fiduciary to Sponsor, a Plan, or a Member in any capacity." 6, A new provision, section 8,8, is hereby added to the Agreement as follows; "8,8 Medicare (QRPDP) Services, The parties agree that as relates to any qualified retiree prescription drug plan ("QRPDP") established by Sponsor under Medicare for the purpose of applying for subsidy payments as defined under 42 CFR S423,886, ESI shall provide the service8 under the terms and conditions set forth in Exhibit H." 7, Performance Standards, Exhibit F of the Agreement is hereby deleted in its entirety, and Exhibit F hereto shall be substituted therefor, 8, Commissions, Exhibit G of the Agreement is hereby deleted in its entirety, and Exhibit G hereto shall be substituted therefore, 9, Effective Date; Extension, This Amendment shall be effective the later of January 1, 2009, or the date that is ten (10) busines8 days following ESt's execution of this Amendment. The term of the Agreement is extended until December 31, 2012, subject to extension thereafter as provided therein, 10, Effect of Amendment. Except as expressly provided herein, the terms and conditions of the Agreement shall remain in full force and effect. In the event of a conflict between this Amendment and the Agreement, the terms of this Amendment shall prevail. J45276v2 3 Agenda Item No, 16E3 November 18, 2008 Page 8 of 42 11, Choice of Law, This Amendment shall be construed by and governed in all respects according to the laws of the state indicated in the Agreement IN WITNESS WHEREOF, the undersigned have executed this Amendment a8 of the day and year beiow 8et forth, WITNESSETH EXPRESS SCRIPTS, INC, By: Titie: Date: ATTEST Dwight Brock, Clerk BOARD OF COUNTY COMMISSIONERS OF COLLIER COUNTY By: By: Tom Henning, Chairman Approved as to Form and Le al Sufficie cy: 145276v2 4 Agenda Item No, 16E3 November 18, 2008 Page 9 of 42 EXHIBIT A PHARMACY PROGRAM FEES Sponsor will pay to ESI the amounta set forth below, net of applicable Copaymenta. Sales or excise tax or other governmental surcharge, if any, will be the responsibility of Sponsor, If ESI pays a particular Participating Pharmacy a higher rate because Sponsor has requested such pharmacy be included in the network, the rate charged to Sponsor will be the net ingredient cost plus the dispensing fee paid by ESI to such pharmacy, plus applicable sales or excise tax or other governmental surcharge, if any, A Member's Copayment charged for a Covered Drug will be the lesser of the applicable Copayment or the U&C, ESI 8hall be Sponsor's exclusive provider of PBM Services for Sponsor's Plans offering a prescription benefit. The financial term8 8et forth in Exhibit A are conditioned on such exclusive arrangement and all other specified conditions expressly incorporated in such exhibit8, including, but not limited to the adoption by Sponsor of the specified network, qualifying co-payment structures, Formulary, a minimum of 4,500 Members implemented on the Effective Date of this Agreement, and no Members in a 100% co-payment plan (if applicable), In the event one or more of the following occurs (whether between the date of the Cost Proposal and the Effective Date, or during the Term), ESI will have the right, upon notice, to make an equitable adjustment to the rates, administrative fees andlor Rebates, solely as necessary to return ESI to ita contracted economic position as of the effective date of such event: (a) There is a material change in: (i) the conditions or assumptions stated in this Agreement; or (i1) the size, demographics or gender distribution of Sponsor's Membership compared to data provided by Sponsor; (b) Sponsor changes ijs Formulary, benefit designs, implements OTC plans, clinical or trend programs or otherwise takes an action that has the effect of lowering the amount of Rebates earned by Sponsor (whether between the date of the Cost Proposal and the Effective Date, or during the Term); (c) Sponsor elects to use on-site clinics or pharmacies to dispense pre8cription drug8 to Members which materially reduces Rebates and/or the number of Covered Drug claims submitted on-line; andlor status, (d) Rebate revenue is materially decreased because Brand Drugs move off-patent to generic For purposes of this Exhibit A, the terms: "Average Wholesale Price" or "AWP" means the average wholesale price of a prescription drug as identified by drug pricing services such as First Data Bank or other source nationally recognized in the retail prescription drug industry selected by ESI for all clients, The applicable AWP for prescriptions filled in the Mail Service Pharmacy will be the AWP for the lesser of: (i) the NDC code for the package size from which the prescription drug was dispensed, or (ii) package sizes of 100 units or 16 ounce quantities, or the next larger quantity if such specified quantities are not availabie, "Compound Drug8" means a customized medication derived from two or more raw chemicals, powders and devices, of which at least one ingredient is a federal legend drug, prepared by a pharmacist according to a doctor's specifications, "Generic Drug" means a prescription drug, whether identified by its chemical, proprietary, or non- proprietary name, that is therapeutically equivalent and interchangeable with drugs having an identical amount of the same active ingredient(s) and approved by the FDA The designation of a product a8 "generic" andlor subject to MAC ("Maximum Allowabie Cost") is determined by ESI using data elements provided by First OataBank or other source nationally recognized in the retail drug industry, 145276v2 Agenda Item No. 16E3 November 18, 2008 Page 10 of 42 "Maximum Reimbur8ement Amount" or "MRA" means the maximum price for the particular Generic Drug, as specified on ESI's MAC iist. The MAC list i8 structured with the intent that the weighted average MRA discount for the entire MAC list is equivalent to a discount off of AWP with a range of 40% to 50%, but Sponsor's actual weighted average MRA discount may vary within, or above or below, this range depending upon Sponsor's actual Generic Drug mix and utilization and Sponsor's plan design, ESI periodically update8 the MAC list and MRA to reflect changes in Generic Drug availability and prices, "Single Source Generic Drug" means a Generic Drug licensed and currently marketed from only one non repackager generic labeler within a generic class number (GCN), 'Usual and Customary Price" or "U&C" means the retail price charged by a Participating Pharmacy for the particular drug in a cash transaction on the date the drug i8 dispen8ed as reported to ESI by the Participating Pharmacy, 145276\'2 6 Agenda Item No, 16E3 November 18, 2008 Page 11 of 42 Exhibit A-1 Pharmacy Reimbursement Rates I. Participatina Pharmacy Reimbursement Rates 2- Tier Plan Design Hier Plan Design Less than $15.00 Copay Differential (Plan A) or 3- Tier Plan Design Minimum $15.00 Copay Differential (Plan B) ESl National Preferred Fonnularv Network Minimum 50,000 Participating Phannacy Network Ingredient Coat - Brand single source Generic Drugs are priced as brands 2009 Lesser of AWP - 17%, or U&C 2010 Lesser of AWP -17,5%, orU&C 2011 Lesser of AWP - 18%, or U&C 2012 Lesser of AWP - 18%, or U&C Ingredient Coat - Generic single source Generic Drugs are priced as brands Lesser 01 AWP - 17%, MRA or U&C Ingredient Cost. Compound Drugs Lesser of U&C or combined AWP plus applicable service fee Brand Dispensing FeelRx $1.20 Generic Dispensing FeelRx $1.20 Adminialrlltiye FeelRx $0,00 Notwithstanding the preceding, ESI will guarantee a minimum average discount for Generic Drugs as set forth in the table below, I 45276v2 7 Agenda Item No, 16E3 November 18, 2008 Page 12 of 42 II. Mail Pharmacy Reimbursement Rates 2. Tier Plan Design 3- Tier Plan Design Less than $15,00 Copay Dlllerential (Plan Al or 3.Tier Plan Design Minimum $15,00 Copay Differential (Plan B) ESI National Preferred Fonnularv 1-34 Days' Supply 35-90 Days' Supply Ingredient Cost- Brand Drugs single source Generic Drugs are priced as brands 2009 AWP -17% AWP - 24,5% 2010 AWP-17% AWP - 25% 2011 AWP-17% AWP - 25,5% 2012 AWP-17% AWP - 25,5% Ingredient Cost - Generic Drugs AWP - 24,5% or, if lower, AWP - 24,5% or, if lower, MRA MRA Ingredient Cosl. Compound Drugs Lesser of U&C or combined AWP plus applicable service fee Brand Dispensing Fee!Rx $1.20 $0,00 Suhiect to chan~ for eIlan"'" in delive'" rates Generic Dispensing FeelRx $1.20 $0,00 S~;;~ to"";'""" for eIlanaBS in delive'" rates Administrative FeelRx $0,00 $0,00 Minimum Rate I Rx $8,99 $8,99 Notwithstanding the preceding, ESI will guarantee a minimum average discount for Generic Drugs as set forth in the table below. III, Pricina Guarantees: [A,] Inaredient Cost Guarantee. ESI will guarantee a minimum average discount as reflected below on Sponsor utilization to be calculated as follows: [1-(total discounted AWP ingredient cost (excluding dispensing fees and claims with ancillary charges, and prior to application of Copayments) of applicable Prescription Orug Claims for the annual period divided by total undi8counted AWP ingredient C08t (both amounts will be calculated as of the date of adjudication) for the annual period)], Discounted ingredient cost will be the lesser of MRA, U&C or AWP discount adjudication methodology. Type of Participating Mail Service Claims Included Claims Excluded Guarantee Phannacv Phannaov Generic MRA, AWP, U&C and OTC, Products subject to 2009 AWP -61% AWP-67% zero balance due - patent actions, Single Source 2010 AWP-62% AWP - 67.5% discounted cost before Generic Drugs and Specialty 2011 AWP - 63% AWP-68% copay Products 2012 AWP-63% AWP-68% 145276\12 8 Agenda Item No, 16E3 November 18, 2008 Page 13 of 42 B, Disoensino Fee: ESI will guarantee a maximum per claim dispensing fee on Sponsor utilization to be calculated as follows: [total dispensing fee of applicable claims for the annual period divided by total claims for the annual period], Oi8pen8ing fees will be calculated using the les8er of MRA, U&C or AWP discount adjudication methodology, Generic Drug Dispensing Rate Guarantee Contract Participatin9 Mall Service Pharmacy Year Pharmacies 1 62,0% 55.0% 2 2% Increment over actual of preceding year 2% Increment over actual of preceding year 3 1 % Increment over actual of preceding year 1 % Increment over actual of preceding year 4 1 % Increment over actual of preceding year 1% Increment over actual of preceding year Guarantees will be measured and reconciled on an annual basis within 90 days of the end of each contract year, To the extent Sponsor changes its benefit design or Formulary during the term of the Agreement, the guarantee Will be equitably adjusted if there is a material impact on the discount achieved, ESI will pay the difference of Sponsor's net cost for any shortfall between the actual result and the guaranteed result. Any excess achieved in any other guarantee offered pursuant to this Agreement will be used to make up for, and offset, a shortfall in other guarantee(s), The guarantees will be calculated as follows: (a) The total Participating Pharmacy Generic Prescription Drug Claims divided by total Participating Pharmacy Generic and Brand Prescription Drug Claims (and the same for Mail Service Pharmacy Prescription Drug Claims), (b) The Generic Drug dispensing guaranteed percentage baseline in contract years two and three will be set to the preceding year's actual Generic Drug dispensing percentage plus the increment guaranteed for Participating Pharmacies and Mail Service Pharmacy, respectively, (c) ESI will pay a penalty for any shortfall between the actual percentage result and the guaranteed percentage for each of the Participating Pharmacy and Mail Service Pharmacy guarantee8, respectively, If the actual Generic Drug dispensing percentage for a contract year is below the guaranteed percentage, the penalty will be calculated as the guaranteed Generic Drug dispensing percentage for the contract year minus the actual Generic Drug dispensing percentage for the contract year times the actual claims volume times the applicable Payment Factor below, Separate calculation8 will be performed for Participating Pharmacies and Mail Service Pharmacy and for each contract year, Payment Factor Contract Year ParticiDating Pharmacies Mail Service Pharmacv 1 $64,16 $175,06 2 $68,05 $185,82 3 $73,79 $199,19 4 $73,79 $199,19 (d) Guarantees will be measured and reconciled separately for Participating Pharmacy and Mail Service Pharmacy on an annual basis within ninety (90) days of the end of each contract year, Any excess achieved in either the Participating Pharmacies or Mail Service Pharmacy guarantee will be used to offset a shortfall in the other guarantee, if any, To the extent Sponsor changes its utilization management programs, benefit design or Formulary, or there are material changes to the demographics and geography of the Members during the term of the Agreement, the guarantee will be equitably adjusted if there is a material impact on the Generic Drug dispensing percentage achieved, 145276v2 9 Agenda Item No. 16E3 November 18, 2008 Page 14 of 42 (e) The following conditions apply to the Dispensing Fee guarantee8: . Current utilization management programs or equally effective ones will remain in place . Standard ESI Formulary assumed . Con8istent demographics and geography of the Membership . Benefit design changes will not reduce the current Copayment advantage of generics over brands or reduce availability of generics IV. Specialty Products (a) Exclusive, CuraScript is the exclusive provider of Specialty Products for the reimbursement rate8 8hown on the Exclusive CuraScript Specialty Product List. Any Specialty Product dispensed from a pharmacy other than CuraScript (for example, iim~ed distribution products not then available through CuraScript or overrides) will be reimbursed at the standard Participating Pharmacy Specialty Product rates shown below, Upon CuraScript acquisition of limited distribution products, Members will obtain prescriptions through CuraScript. (b) Ooen, Specialty Products shall be available through CuraScript and Participating Pharmacies for the Participating Pharmacy Specialty Product reimbursement rates, STANDARD DISCOUNTS: Except for the specific items listed in the Exceptions or Lim~ed Distribution tables below, Specialty drugs will have the followin discounts: ~..\ ' '"'.: 1;:'_" " ,,~',~~-i":~;::<'.-',: CuraScript . Exclusive The lower of: . AWP-17%. or . MRA $0,00 . Open The lower of: . AWP-15%,or . MRA $0,00 Participating Pharmacies The lowest of: . AWP -15% plus Dispensing Fee $2,00 . MRA plus Dispensing Fee or . U&C Specialty products wiil not be available through the Express Scripts Mail Service Pharmacy. Limited Distribution Drugs Distribution of a small number of all specialty drugs is limited by the manufacturer to specific pharmacy providers, The drugs, listed below, are not avaiiable through CuraScript. If CuraScript receives a prescription for one of the following Limited Distribution medications, CuraScript will: . Determine the pharmacy that is able to dispense the medication, . Validate that the pharmacy is contracted to provide the medication based on the patient's insurance information and will: o Work with the patient and prescribing physician to initiate the transfer of the script to the appropriate pharmacy for fulfillment, or o Provide the patient and physician with information regarding pOSSible patient assistance programs, 145276v2 10 Agenda Item No, 16E3 November 18, 2008 Page 15 of 42 The cost of the medication will be billed through your regular invoice if it is a covered product. 145276v2 11 Agenda Item No, 16E3 November 18, 2008 Page 16 of 42 ADAGEN APOKYN ARALAST ARCALYST BEXXAR CEPROTIN EXJADE FLOLAN KEPIVANCE MIRENA ORFADIN ORTHOCLONE OKT-3 PRIVIGEN PROLASTIN REMODULlN SOMAVERT VENTAVIS XYREM ZEMAIRA ZEVALlN Exceptions to Standard Pricing The following specialty drugs have the discounts shown for each distribution channel. Shaded cells indicate the Standard pricing above applies for the channel indicated, ADVATE 25,0% 26,0% ALPHANATE 25,0% 26,0% ALPHANINE 25,0% 26.0% ATGAM 15.0% BEBULlN 16,0% BENEFIX 16.0% BONIVA 13.0% 13.0% 15,0% BOTOX 15,0% CELLCEPT 15,0% CIMZIA 15,0% CYCLOSPORINE 15.0% EUFLEXXA 15,0% FEIBA 25,0% 26,0% FORTEO 13.0% 13.0% 13.0% HELlXA TE FS 25.0% 26,0% HEMOFIL M 25,0% 26,0% HUMATE-P 25.0% 26,0% HYALGAN 15.0% IMPLANON 0,0 0.0% 3.0% IRESSA 13.0% 13,0% 14.0% KDATE-DVI 25.0% 26.0% KDGENA TE 25.0% 26,0% LUPRON 15,0% LUPRDN DEPOT 15,0% METHOTREXATE 15.0% MDNARC-M 25,0% 26,0% MONOCLATE-P 25,0% 26.0% MONONINE 25.0% 26.0% MYOBLOC 15.0% NDVOSEVEN 25.0% 26.0% ORTHOVISC 15,0% PROFILNINE 25,0% 26,0% PROGRAF 15,0% RECLAST 13.0% 13.0% 15,0% RECOMBINATE 25.0% 26.0%, REFACTO 16.0% RIBAPAK 25.0% 30.0% RIBASPHERE 25.0% 30,0% RIBATAB 25.0% 30,0% RIBAVIRIN 50,0% 55,0% SANOIMMUNE 15,0% SOMAVERT 10.0% 145276v2 12 Agenda Item No, 16E3 November 18, 2008 Page 17 of 42 SUPARTZ 15.0% SYNVISC 15,0% XYREM 12,0% ZENAPAX 15,0% UPDATES Express Scripts updates the specialty drug lists as new products are introduced to the market, or a8 CuraScript gains access to additional limited distribution drugs, and provides a monthly notice (c) Specialty Products will be excluded from any price guarantees 8et forth In the Agreement. CuraScript or ESI will be entitled to charge a fuel surcharge fee of the amount in excess of any carrier charged fee over $5,00, In no event will the Mall Service Pharmacy or Participating Pharmacy pricing specified in the Agreement apply to Specialty Products, (d) ESI will notify Spon80r no more frequently than monthly of new Specialty Products that are Introduced to the market and added to the Specialty Drug List on or after the Effective Date of this Agreement with their applicable Specialty Drug List reimbursement rates ("Notice"), The parties agree as follows: (i) If Sponsor has expressiy excluded a 8pecific therapy class or product on a Set- Up Form, Specialty Products in such excluded classe8 will automatically be deemed excluded from coverage and will reject as "NDC Not Covered" through Participating Pharmacies, Mail Service Pharmacy and CuraScript; otherwise, all other Specialty Products will be implemented as Covered Drugs at the rate specified in the applicable Specialty Drug List or Notice, and Sponsor acknowledges and agrees to same, If Sponsor desires to cover otherwise excluded Specialty Products, Sponsor must notify ESI in writing that it desires to cover the Specialty Product before ESI will adjudicate as a Covered Drug, and if ESI receives 8uch confirmation of coverage from Sponsor such Specialty Product will be loaded thereafter as a Covered Drug at the applicable Specialty Drug List reimbursement rate set forth in the Notice, (Ii) Sponsor must notify ESI in writing if it wants to exclude the Specialty Product from coverage, The exclusion will be implemented within seven (7) business days after the date of ESI's receipt of such the notification, There will not be any retroactive denials for Prescription Drug Claims processed prior to ESt's receipt of the rejection notice and implementation of the exclusion as provided above and Sponsor will be responsible for the payment of such Prescription Drug Claims processed prior to the rejection of coverage, (e) For Specialty Products filled through CuraScript only, Member8 may receive the following services from CuraScript, depending on the particular therapy class or disease state: (i) Patient Intake Services: patient enrollment, initial referral processing, insurance eligibility and benefit8 verification, alternative coverage searches, schedule of initial Specialty Product order, and coordination of patient education and instruction for each new patient; (Ii) Pharmacv Dispensino Services: dispensing the Specialty Product pursuant to a prescription in accordance w~h applicable law, deposit of such Specialty Product with a third party carrier to facll~ate the delivery of same per the Member's instructions, and the provision of certain ancillary supplies (e,g" syringes, needle8, and alcohol swabs) and related Items in connection with the Specialty Product that may be necessary or useful to the Member in connection with the administration of the Specialty Product; (Iii) Onooino Clinical and Specialtv Pharmacy Support Services: self-injection teaching support, patient education, assessment, clinical interventions and clinical screenings, therapy adherence counseling and related clinical patient management activities and programs, physician consultations, authorization maintenance, assistance with Member coverage appeals, refill follow-up calls, managing ongoing medication orders, and insurance follow-up and related ongoing delivery coordination; and 145276v2 13 .L\genda Item No, 16E3 November 18, 2008 Page 18 of 42 (iv) Social Services: patient advocacy, hardship reimbursement support, and indigent and patient assi8tance programs, The aforementioned services do not include home infusion supplies and related home health 8ervices and may require the payment of additional fees, I 45276v2 14 Agenda Item No, 16E3 November 18, 2008 Page 19 of 42 Exhibit A-2 Administrative Services and Clinical Proaram Fees I. Administrative Services ~ , , . ~3;<.'~2,\~' Customer service for members Electroniclon-line eligibility submission Standard coordination of benefits (COB) (reject for primary carrier) FSA eli ibili feeds :~.... Electronic claims processing Plan setup Software training for access to our on-line system(s) ;r,:~I,~>'7~'~~"'.:S;':~i;~:.''3~l:,:o/fr\'.: Web-based client reporting produced by client Annual Strategic Account Plan report Billing reports Inquiry access to claims processing system Ad-hoc desktop parametrtc reports Claims detail extract file electronic (NCPDP format) Load 12 months claims history for clinical reports and re crtin '<..~iJ.',~;j""F~(t;,'Ol~1~. '~. Express-Scrtpts,com for Clients & Advisors - access to reporting tools, eligibility update capability, contact directory, sales and marketing information, and benefit and enrollment support Express~Scripts,com for Members - access to benefit, drug, health and wellness Information; prescription ordering capability; and customer service Express Preview enrollment option available during open enrollment to enable members to evaluate prescription benefit plan options Digital Certificates (up to five certificates) .' Prior Authorization - Administrative Non-clinical Prior Authorization LosUstolen overrides Vacation su lies Prior Authorization Clinical Base List Blood Glucose Meter program Therapeutic Interchange 145276v2 15 Agenda Item No, 16E3 November 18, 2008 Page 20 of 42 Additional PBM Services ;:::;~:'.:-~\ . ~,.... .~ ," :"... ~_ r _.::.:4..;;~~ . ~~~ti;:;'-:'$::~~~;~";;~:' ,,:~.;;~~:... ,j~4~.. ' Part 0 Subsidy enhanced service (Express Scripts sends reports to CMS on behalf of clien1) and Part B package . Notice of Creditable Coverage Part D Subsidy enhanced service (Express Scripts sends reports to CMS on behalf of client) . Notice of Creditable Coverage r.f-':",,", $1,50 PMPM for Medicare-quallfied members with a minimum annual fee of $7 ,SOO . $1 ,35~etter + postage $1.12 PM PM for Medicare-qualified members with a minimum annual fee of $7,500 . Part D Subsidy standard service (Express Scripts sends reports to client) . Notice of Creditable Covera e $1 ,35~etter + postage $0,62 PMPM for Medicare-qualified members with a minimum annual fee of $5,000 $1 ,35~etter + postage II. Selected ClinicallTrend Proarams. ESI offers a comprehensive list of trend, 8afety, care and disease management programs, a limited number of which are identified below, and which may change or be discontinued from time to time, ESI also offers savings guarantees under certain conditions, Information concerning such programs, guarantees and fees, if applicable, is available from the ESI Account Team, ,,-.' ;2:::;;:{A;_j~ii,L':':;;' .:~~( Drug Quantity Management. Prior Authorization - Clinical Supplemental list * Prior Authorization - Other Clinical Overrides (e.g. non- standard Prior Authorization medications, medical exceptions) $0,02 PM PM $0,03 PMPM $20/request $25/physician review Step Therapy Individual modules and packages available More than 25 modules available. The most utilized include: ACE inhibitors and angiotensin-2 receptor blockers (ARBs), non-steroidal anti-inflammatory drugs (NSAIDS) and COX-2s, proton pump inhibitors (PPls), selective serotonin reuptake inhibitors (SSRls), HMG-enhanced, calcium channel blockers, leukotriene pathway inhibitors, topical immunomodulators, other anlide ressants. Formulary Rapid Response Pricing varies by module $0.G1 PM PM 145276v:? 16 Agenda Item No. 16E3 November 18, 2008 Page 21 of 42 $0 Generic Copay $1.25/member mailing or $1 ,000 for member identification and authorization " List of drugs subject to change at the discretion of Express Scripts, Retrospective OUR Retros ctIve OUR - Seniors RxPredict$ ~.~i~~*~~i,~~'lj~~f5~1.:' " $0,02 PMPM Includes all seven modules $0,03/Rx $0,02/Rx $0,05 PM PM for six months each time the report is run (e,g, 100,000 members "$0,05 PMPM" six months), A subsequent charge will occur with the second report. There is a minimum cha e of $3,000, '.-"~~~~f4~~,tiih~::; ('~ $0,01/claim - Asthma $O.01/claim - Cardiovascular Disease $0,02/claim - CHF $0,02/ciaim - Depression $O.D1/claim - Diabetes $0,03/claim - GI Disease $0,02/claim - Hypertension $0,02/claim - Mi raine Priced upon request $0,35 PMPM $0.20 PMPM $0,18 PMPM $0,05 PMPM for six months each time the report is run (e,9, 100,000 members" $0,05 PMPM" six months), A subsequent charge will occur with the second report. There is a minimum cha e of $3000, High Utiiizer & Case Management Report $150/report .... All programs are optional and will only be implemented upon client request. Disease Management Three-disease suite Fjve~disease suite Six-disease suite ExpressAlliance Level 1 5,000-20,000 iives 20.000-50,000 iives 50,000+ iives ExpressAlliance Level 2 5,000-20,000 iives 20,000-50,000 lives 50,000+ iives ExpressAlliance Level 3 5,000-20,000 lives 20,000-50,000 iives 50,000+ livBS RxPredict$ $0,04 PMPM $0,02 PMPM $0,01 PMPM $0.20 PMPM $0.10 PMPM $0,09 PMPM 145276v2 17 Agenda item No. 16E3 November 18, 2008 Page 22 of 42 EXHIBIT A-3 Rebates 1, ESI will pay to Sponsor an amount equal to the greater of 100% or the fiat amount shown below: 2. Tier Plan Design 3- Tier Plan Design Less than $15,lJO Copay Differential (Plan A) or 3- Tier Plan Design Minimum $15.00 Copay Differential (Plan B) ESI National Preferred Fonnularv Participating Phannacies and Mall Service Phannacy CuraScriDl Per Brand Praacription Drug Claim PlanA 2009 $6,00 $25.00 2010 $6,25 $26,00 2011 $6,50 $27,00 2012 $6,50 $27.00 PlanB 2009 $7.75 $30,00 2010 $8,00 $31,00 2011 $8,25 $32,00 2012 $8,25 $32,00 2, Member Submitted and Subrogation Claims, OTC products, Plans that do not meet eligibility requirements set forth herein, claims older than 180 days, claims through Sponsor-owned or 340b pharmacies, claims for 100% copayment (cash and carry) plans not offered in connection with a health pian benefit, and other similar claims may not be eligible for Rebates, 3, Guaranteed amounts are calculated based upon a thirty (30) day supply for Participating Pharmacy claims and a ninety (90) day supply for Mail Service Pharmacy claims, Guarantees are measured in the aggregate and reconciled annually, Amounts representing the Rebates allocated to Sponsor pur8uantto the terms of this Agreement will be paid on a quarterly basis approximately 150 days following the end of each quarterly period, ESI retains all right, titie and interest to any and all actual Rebates received from manufacturers, except that ESI will pay Sponsor amounts equal to the Rebate amounts allocated to Sponsor, as specified above, from ESl's general assets (neither Sponsor, its Members, nor Sponsor's plan retains any beneficial or proprietary interest in ESl's general assets), Sponsor ackno,,^edges and agrees that neither it, its Members, nor its Plan will have a right to interest on, or the time value of, any Rebate payments received by ESI during the collection period or moneys payable under this Section, No Rebates will be paid until this Agreement is executed by Sponsor. ESI will have the right to apply Sponsor's allocated Rebate amount to unpaid Fees and will have the right to delay payment of Rebates to allow for final adjustments upon termination of this Agreement. 4. Sponsor acknowledges that it may be eligible for Rebates under this Agreement only 80 long as Sponsor, its affiliates, or its agents do not contract directly or indirectly with anyone else for discounts, utilization limits, rebates or other financial incentives on pharmaceutical products or formulary programs for claims processed by ESI pursuant to the Agreement, without the prior written consent of ESI. In the event that Sponsor negotiates or arranges with a pharmaceutical manufacturer for Rebates or similar discounts for any Covered Drugs hereunder, but without limiting ESI's right to other remedies, ESI may immediately withhold any Rebates earned by, but not yet paid to, Sponsor as necessary to prevent duplicative rebates on Covered Drugs, To the extent Sponsor knowingly negotiates and/or contracts for discounts or rebates on claims for Covered Drugs without prior written approval of ESI, such activity will I 45276v2 18 Agenda Item No. 16E3 November 18, 2008 Page 23 of 42 be deemed to be a material breach of this Agreement. entitling ESI to suspend payment of Rebates hereunder and to renegotiate the terms and conditions of thi8 Agreement. I 45276v2 19 Agenda Item No. 16E3 November 18, 2008 Page 24 of 42 EXHIBIT F PERFORMANCE STANDARDS All gucrantees, excluding the implementation gJarantees, are fa' the initial term r:i the conIracl In no event shall the sum r:i the payments to Colier County Government" as a resu~ r:i Express Soipts' failure to meet any performance gJarantees, exceed $31,500 per year, The performance gJarantees ire based on an erroIlment r:i 4,500 membln on the effective date r:i the ag-eement Within 45 business days after the end r:i each c3enda' quarter, Express Soipts shall provide CoIiier County GcNernment with a report assessing Express Scripts' performlO"lCe under each perfonnance g.aantee, In the event Express Scripts does not meet a performance gJarantee, Express Scripts will caiculate the applicable amount due to the Colier County G<Nemment within 90 da~ after the end r:i the oontracl year, Wa oontracl is executed prior to the effective date, the performance gucrantees offered wil become effective from the date r:i i'nplementation, In the event the plan is i'nplemented without a signed c:cntract, the performance g.aantees will become effective the first calendar quarter fdlCMling the receipt r:i an executed contract Annual maxinum penaties will be prorate:! for any year for which the effi:ctive measurement year is less than twelve months, Service Feature Guarantee Penalty Conlact Cenl8r Express Scripts guarantees that calls will be Express Script8 will pay answered in an average of 30 seconds or less with the exception of a faiiure in a third-party Collier County Government communication system. $2,250 for each full second This guarantee is predicated on the installation of a above the standard 30 Average Speed of seconds on an annual Answer: toll-free telephone number unique to Collier County basis, The maximum Government. annual penalty will be Express Scripts' Member Choice Center calls will $4,500, The calculation be excluded from this guarantee, will be based on the This standard will be measured and reported average speed of answer, ouarterlv, Express Scripts will guarantee a blockage rate of Express Scripts will pay 2% or less with the exception of a failure in a third- Collier County Government party communication system, Blockage is defined $2,250 for each full as a caller receiving a busy signal. percentage point above the Blockage Rate This guarantee is predicated on the installation of a standard 2%, on an annual basis, The maximum (Busy Signal: toll-free number unique to Collier County annual penalty will be Government. $4,500, The calculation Express Scripts' Member Choice Center calls will will be based on the be excluded from this guarantee. This standard will blockage percentage, be measured and reported quarterly, Express Scripts guarantees that the call Express Scripts will pay abandonment rate will be 3% or less with the Collier County Government exception of a failure in a third-party communication $2,250 for each full Percent of Calls system, The abandonment rates do not include percentage point above the Abandoned: calls terminated by members in less than 30 standard 3% on an annual seconds, basis, The maximum This guarantee is predicated on the installation of a annual penalty will be $4,500, The calculation toll-free number unique to Collier County will be based on the Government. averaoe oercentaoe of 145276v2 20 Agenda Item No, 16E3 November 18, 2008 Page 25 of 42 Service Feature Gu,lr<1ntcc Pcmlty Express Scripts' Member Choice Center calls will calls abandoned, be excluded from this guarantee, This standard will be measured and reported quarterly, Mail Service Express Scripts will pay Collier County Government $2,250 for each full Whereas Expres8 Scripts strives for 100% percentage point below the Dispensing accuracy, Expre88 Script8 guarantees 99,98% standard of 99,9%, on an accuracy in dispen8ing the correct drug, strength, annual basis, The Accuracy: and dosage, unless the error is a prescriber error, maximum annual penalty will be $4,500, The calculation will be based on the average prescription accuracy, Express Scripts guarantees di8pensing and Express Scripts will pay shipping (or return) of prescriptions not subject to Collier County Government intervention within an average of two (2) business $2,250 for each full day Turnaround Time for days of their receipt at Express Scripts' Mail Service above the standard two (2) Routine (Clean) Pharmacy, business days on an Prescriptions This standard will be mea8ured and reported annual basis, The quarterly, maximum annual penalty will be $4,500, Expre88 Scripts guarantees dispensing and I Expres8 Scripts will pay 8hipping (or return) of prescriptions subject to intervention within an average of five (5) business Collier County Government Turnaround Time for days of their receipt at Express Scripts' Mail Service $2,250 for each full day Prescription8 Subject Pharmacy, above the standard five (5) to Intervention This standard will be measured and reported business days on an quarterly, annual basis, The maximum annual penalty will be $4,500, Data 9,A...Rt Data System8 Express Saipts guarantees 99% avai~lily ci the point.cr- For each full percentage point AvaUabiiily and sale adjudication system, except for da~y scheduled which the yearly average ci the Adjudication mainterance and IeIecommunicalions fa~ure, online computer systems avai~lilyi8 belC1oN99%, Express Saipts will pay Collier County Government $2,250. The maximum annual penalty for avaiabUily and adjudication will be $4,500, 145276v2 2t Aoenda Item No. 16E3 - November 18, 2008 Page 26 of 42 EXHIBIT G BROKER/CONSULTANT OF RECORD AUTHORIZATION ESI will pay a quarterly commission to Willis Americas Administration, Inc, for broker activities performed, and Sponsor acknowledges, directs, and con8ents to the 8ame, ESI reserves the right to discontinue payment8 to broker at any time in accordance with the terms and conditions set forth in that certain broker services agreement between ESI and the broker. Such commission rate shall be as follows: $Q,25/Claim 145276....2 22 Agenda Item No, 16E3 November 18, 2008 Page 27 of 42 EXHIBIT H MEDICARE QR.PDP ADDENDUM THIS MEDICARE OR-PDP ADDENDUM (the "OR-PDP Addendum") i8 made for the purpose of delineating the terms and conditions under which Express Scripts Senior Care, Inc" a wholly owned subSidiary of ESI ("Senior Care") will provide certain QR-PDP services to Spon80r as set forth below, A, Under the Medicare Prescription Drug Benefit Program set forth in Part D of The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act"), employers may establish a Ouaiified Retiree Prescription Drug Plan (as defined below) in order to continue to provide prescription drug benefits for its Medicare-eligible Members; B, ESI has established a subsidiary, Senior Care, that is responsible for providing certain services related to Medicare Plans, including Qualified Retiree Prescription Drug Plans under the Act; and NOW, THEREFORE, in consideration of the mutuai covenants herein contained, the parties hereto agree a8 follows: 1, Definitions, Unless otherwise defined below, capitalized terms used herein shall have the same meaning assigned to such terms in the Agreement or the Medicare Drug Rules, as appropriate, "CMS" means the Centers for Medicare and Medicaid Services, "Medicare Manufacturer Administrative Fees" means th08e administrative fees of up to 3,5% of the AWP of certain Covered Drugs paid by pharmaceutical manufacturers to, or otherwise retained by, Senior Care pursuant to a contract between Senior Care or an affiliate, and the manufacturer and directly in connection with Senior Care's administering, invoicing, allocating and collecting the Rebates for Medicare plans operating under the Act, including OR-PDPs, "Medicare Drug Rules' means the Act and any and all related rule8, guidance, interpretations and operational directives adopted by CMS or other governmental agency with jurisdiction over the enforcement of the Act. "Medicare Member" means a Member eligibie for benefits through the OR-PDP in accordance with the Medicare Drug Rules as identified by Sponsor through the Eligibility Files, "Medicare Rebates" means retrospective rebates that are paid to Senior Care, or otherwise retained by Senior Care, pursuant to the terms of a rebate contract negotiated independently by Senior Care or an affiliate with a manufacturer, and directly attributable to the utilization of certain pharmaceuticals by Medicare Members, Rebates do not include Medicare Manufacturer Administrative Fee8, or product discounts or similar remuneration received by subsidiary pharmacies of ESI or Senior Care, "Subsidy Payment" means the subsidy amount paid to sponsors of OR-PDPs under 42 CFR 9423,886 of the Medicare Drug Rules, "Subsidy Reports" means the following reports in a format and with content consistent with the requirements of the Medicare Drug Rules: (i) monthly eligibility file (list of individuals believed to be enrolled as defined by the Medicare Drug Rule or other CMS guidance); and (ii) cost data extract (covered retiree plan-related prescription drug costs) for monthly, quarterly, or annual reporting for payment of subsidy, 2, OR-PDP Services, 145276v2 23 Agenda Item No. 16E3 November 18, 2008 Page 28 of 42 (a) Services, In consideration of the fees set forth below, ESI and Senior Care shall provide Sponsors and Medicare Members the same services then presently provided under the Agreement to Eligible Enrollees, If elected below, Senior Care shall provide the Sub8idy ReportB enable Sponsor to file for Subsidy Payments and meet its OR-POP reporting obligation8 under the Medicare Drug Rules (collectively, the "OR-POP Services"), The then applicable financial term8 and conditions of the Agreement relating to Participating Pharmacy, Mail Service Pharmacy, Specialty Products, administrative fees, Member communication fees shall apply to the OR-POP, The Medicare Pharma Revenue shall reflect the same Rebate and Manufacturer Administrative Fee terms set forth in the Agreement. Notwithstanding the terms of the Agreement, no commissions. marketing fees or other remuneration will be paid by ESI or Senior Care to brokers, TPAs or consultants relating to Prescription Orug Claim8 attributable to Medicare Members, (b) OR-POP Fees, Sponsor agrees to pay the applicable fee if electing Senior Care to provide services to its OR-POP. If the Spon80r elects OR-POP services, but no option is selected. the default shall be the Standard Option with Member communications: o PACKAGE OPTION - PART 0 (SUBSIDY) ENHANCED PLUS PART B PROGRAM: $1.50 Per Medicare Member per Month ($7,500 minimum annual charge) n ENHANCED OPTION: $1.12 Per Medicare Member per Month ($7,500 minimum annual charge) Senior Care submits reports to eMS o STANDARD OPTION: $0.62 Per Medicare Member per Month ($5,000 minimum annual charge)- Senior Care submits reports to Sponsor ~ Member Materials (Notices of Creditable coverage) - $1,35 per piece plus postage, o Prior Authorization (Part B and Part 0 drugs) - standard PA fees n No Subsidy Reports; Medicare Rebate Filing Only - $0,42 Per Medicare Member per Month ($1,500 annual minimum) (c) OR-PDP Subsidv Reoorts, If elected, Senior Care shall timely provide to Sponsor Subsidy Reports, In order for Senior Care to be able to prepare the Subsidy Report8. Sponsor shall provide to Senior Care in a timely manner any elements and data now and hereafter required under the Medicare Orug Rules (e,g" Member social security numbers, the CMS issued ROS Plan Sponsor 10 and Application 10) in a format reasonably required by ESt. (d) Senior Care. Senior Care hereby assumes all responsibility and obligation for the preparation of Subsidy Reports, and the contracting, administration, allocation and collection of Medicare Rebates under the Agreement as relates solely to the eligible utilization of Medicare Members, (e) Federal Funds, Senior Care hereby acknowledges, in accordance with 42 CFR 423,884(c)(3)(ii) that information provided to CMS in connection with the ROS Plan Sponsor Application is for purposes of obtaining Federal funds. (f) Certification, Senior Care certifies that the information it provides to Sponsor hereunder and pursuant to the Agreement is accurate and complete, Senior Care agrees that it will assist the Sponsor in complying with its obligation to disclose information to CMS as necessary for Sponsor to obtain the subsidy, 3, Term, The term of this OR-POP Addendum shall be coterminous with the Agreement. 145276v2 24 Collier County Health Care Consortium Requestfor Proposal/or Managed Pharmacy Services; Analysis and Recommendations Agenda Item No. 16E3 November 18, 2008 Septem~l!ll'1i1le80f 42 Execntive Summary Express Scripts provides managed pharmacy services to the Collier County Health Care Consortium (CCHCC), which is comprised of The District School Board of Collier County (DSBCC), Collier County Government (CCG), Collier County Sheriffs Office (CCSO) and NCH Healthcare System (NCH), Effective December 31 ", the current three-year agreement with Express Scripts will expire, It is expected that these four employers will spend over $90 million dollars on pharmacy benefits over the next four years, To ensure that Express Scripts represents the best pharmacy cost solution to the CCHCC, the members asked that the National Actuarial Practice of Willis to prepare a request for proposal, solicit competitive bids and help analyze the responses, Before the best and final offer was presented, Caremark showed yearly savings of $506,666 over Express Scripts, Express Scripts was able to refine their pricing with higher discounts at retail and narrowed the annual gap to $280,513, That advantage was further reduced by the $]52,943 with greater generic efficiency guarantees than Express Scripts offered, The remaining savings from changing would amount to a little over $,50 per employee a month. Further, it is difficult to know with certainty whether the savings will actually materialize, Express Scripts is a known quantity that has performed well and been a good partner to the CCHCC members, Community Health Partners and the local provider community, In addition, they have agreed to provide individual member drug statements on an annual basis, These statements will include patient specific data regarding how they can lower the cost of medications both to themselves and their employers, The group unanimously agreed that a savings of $,50 per employee per month just did not warrant the expense and disruption associated with a change. Therefore, as a result of an extensive request for proposal process, the selection team made up of representatives of each employer of the CCHCC unanimously recommended that each employer enter into a four-year agreement with Express Scripts to provide pharmacy benefit services, The balance of this document outlines the history and process used to reach this recommendation, Background On January 1, 2002, members of the Collier County Health Care Consortium (CCHCC) consolidated administration of their pharmacy benefit programs with Express Scripts, Through this consolidation, the members achieved the following: . A consistent approach to administration and pricing . Lower administrative fees and greatcr rebates . A uniform formulary for plan members and pbysicians . Leveraged purchasing power to ensure Express Scripts committnent and flexibility in working with CCHCC members and Community Health Partners (CHP) to develop innovative and meaningful pharmacy cost management strategies and processes . Direct online access to phannacy data for Willis and CHP to support analysis of phannacy costs and utilization w Page 1 Collier County Health Care Consortium Request for Proposal for Managed Pharmacy Services: Ana(vsis and Recommendations Agenda Item No, 16E3 November 18, 2008 sep"mfi'e;lpw,:iliOsof 42 . Direct online access to the Express Scripts claims system allowing CHP to pre-authorize specific drugs and profile physicians prescribing patterns Since the consolidation, Express Scripts served the needs of CCHCC and its individual members welL In the spring 01'2005, the CCHCC deemed it appropriate to conduct a due diligence process to review the financial and service terms offered by Express Scripts, The results of this process and the decision are summarized below: In 2005, it could have been concluded that Caremark's program was superior because it would save the CCHCC over $400,000 over the three year term of the agreement versus staying with Express Scripts, However, this savings would be spread over a three-year period and shared among four employers, The employee per month savings amounted to less than $1,00, a small portion of total health plan costs, Further, this savings is not guaraoteed, but an estimate based on a comparison of quotes, average drug costs, average discounts, and a static mix of drugs, Actual claims and drug mix will change the relativity of the final comparison, perhaps eliminating any apparent savings shown in the estimates, The group collectively considered the analyses and projected savings on several scenarios against the cost of making a change, After considerable thought and deliberation, the group unanimously elected not to make a change and accept the revised terms Express Scripts quoted for a three-year contract In reaching this decision, the group identified the following reasons why a change was not in the best interest of the CCHCC or any individual memher: C6" Express Scripts has done an excellent job in serving the needs of the employers and employees, ~ As part of its services, Express Scripts provides a proven online data analysis that allows real time access to physician prescribing profiles, utilization/cost, and benchmarking data, eJiP The savings cannot be guaranteed and are based on a static mix of drugs, discounts and rebates, In reality, formularies differ, discounts are renegotiated, and the mix of drugs utilized changes; hence, the ultimate cost will be different than projected in the ,completed analyses, All of these factors are subject to constant change, as are the costs. c? Depend1l1g upon the area of focus, rebates, administrative costs or ingredient cost, the results of the anal ysis change, 'liP' The savings under any analysis approach were not sufficient to justify the cost associated with a change in educating plan members and providers on a completely new formulary, T As a result of the process, Express Scripts "sharpened their pencil" and provided initial projected savings in excess of $2,5 million over the three-year term of the ab'feement 'i"~ Finally, when asked to narrow the gap, Express Scripts further reduced the dispensing fee by $0,25 per prescription, providing an additional savings of approximately 5203,000 over the threc-ycar tenn of the agreement The CCHCC entered into a three-year contact with Express Scripts to provide managed pharmacy services in 2005, This three-year agreement is slated to expire on December 31" of 2008, The b'fOUP deemed it appropriate to again conduct a due diligence process to ensure that Express Scripts continues to be the best overall partner for the CCHCC. w Pngc 2 Collier County Health Care Consortium Request/or Proposal/or Managed Pharmacy Services: Analysis and Recommendations Agenda Item No. 16E3 November 18, 2008 Seplem~11lll :iMgof 42 Request for Proposal Process The members of the CCHCC asked Willis to develop a request for proposal (RFP) document and assist in the evaluation of responses, The RFP document was developed and finalized after several meetings and in-depth discussion, A copy of the RFP document and accompanying documentation furnished with it is included with this report as Exhibit A. This document outlines the objectives of the RFP process, key selection criteria and the evaluation process, This RFP was distributed to the following vendors on May 1, 2008, . Medco Health Services . Express Scripts . Caremark . Navitus . RxEDO . Medlmpact . MMHC.com . Walgreens Health Initiative These vendors were selected to receive the RFP because of their national scope, experience in Florida and demonstrated ability to deliver transparent innovative pharmacy services to large public employers, Proposals were due back to Willis on May 30, 2008, We did not receive quotes from Navitus and MMHC. Medco provided a quote on August 1" claiming it had been sent by the May 30th deadline, They were not able to provide a copy of the original e-mail to rellect that they met the deadline, As a result, their proposal was not accepted, The purchasing department of the DSBCC supervised the process and provided input to the evaluation and procurement process, How Pharmacy Benefit Managers Make Money and How It Affects Comparisons Between Them In approaching the process of evaluating prospective pharmacy benefit managers, it is important to recognize the various ways that pharmacy benefit managers make money, It is not as simple as looking at a fee to process claims, In conducting an analysis of tenns, a varying emphasis can produce different results, Willis analyzed the responses in a variety of ways to allow the CCHCC to assess vendors from a variety of perspectives, The following examines each area and the considerations involved: What are the components that comprise the cost of a pharmacy program? I, Administrative fees 2. Dispensing fees 3, Ingredient cost 4, Rebates 5, Special items (cost management programs, communications, ID cards, etc,) w Page 3 Collier County Health Care Consortium Request/or Proposal/or Managed Pharmacy Services; Anazvsis and Recommendations Agenda Item No. 16E3 November 18, 2008 Septemtroillllf! i0asof 42 How do Pharmacy Benefit Managers (PBMs) make money - what are their "revenue" centers? or Administrative fees or Dispensing fees or Ingredient cost r Rebates ,7 Mail order ~F Special items (cost management programs, communicationsl ID cards, etc.) Administrative fees q Billed by PBM and paid by the client to cover operating expense, q Billed on either a per script or per employee per month basis, q May be waived and offset with other "revenue" components, q Begin the concept of marketing a "free" service, Dispensing fees q Generally cover pharmacy costs to fill the bottle, q Billed with ingredient cost for each script. q May be different for brand and generic drugs, q May be waived and offset with other "revenue" components, q Differs from pharmacy to pharmacy - generally $ 1.25 to $2,50 renegotiated on an annual basis, Ingredient cost q The amount paid to the phannacy for a member's prescription by the PBM, q Nol necessarily what the client is billed by the PBM for that members prescription, q "Spread" you are billed between the lesser of the stated discount or what was actually charged - true for generic, MAC and brand name medications, q For brand name drugs, typically maximum payment is a percent off of "Average Wholesale Price or A WP", Lawsuits have shown this is an inflated number. q There are different sources for A WP that are updated at different times, q For generic drugs, pay "Maximum Allowable Cosi" or MAC - a flat fee for a medication irrespective of who made it or the package size, q MAC lists vary from PBM to PBM and day to day within a given PBM, Uno MAC, pricing defaults to discount off A WP, q The actual percentage discount off A WP can differ from chain to chain, region to region and pharmacy to pharmacy, Arc you looking at an average, effective or net rate? Mail order q Mark-ups can vary considerably, q NDC is national drug code and defines the drug, package size it came in, dosage and type (pill, caplets, injectable, etc,) Repackaging for a unique NDC and price provides further variation. q PBMs can easily manipulate every cost component with mail order without knowledge by their clients, w Page 4 Collier County Health Care Consortium Requestfor Proposalfor Managed Pharmac}' Services; Analysis and Recommendations Agenda Item No, 16E3 November 18, 2008 Septemfi'eil~ iiXlsof 42 Rebates q Generally driven by brand name drugs q Generic may be included q Come from manufacturer to PBM and are then shared (maybe) with the client q Are volume sensitive on a retrospective basis q Can be pass through, guaranteed or pocketed "Rebates" more is not always better, Bigger rebates always look good especially if they are guaranteed- however, larger rebates come from the more expensive brand name drug. Generic usage reduces rebates, but reduces overall cost at a more rapid rate offsetting the loss of rebates! Special Items q Cost containment programs q Special reports q Other "Transparency" versus "Pass Through" versus "Guarantees" - which is best? q Transparency - You know what you will pay for each component and what portion of the rebates you will get, but how do you evaluate which one is best? The agreements are different with each PBM! q Pass Through - you get all the rebates, no spread; you only pay what the PBM pays the pharmacy, Sounds great, however, how do you evaluate what the rebates will be, what each pharmacy's discounts are, who will use which pharmacies, what VCR will be at a given pharmacy, etc, Each PBM will be different! q Guarantees - The basis for comparison is clear, During the last RFP process as well as this one, the CCHCC members carefully examined the issue of transparency and full pass through of rebates, In the past they decided it is best to go with a guarantee rather than full pass through, Further as is outlined in this report, the way the two finalists (Express Scripts and Caremark) handle rebates results in transparency, For Express Scripts the rebates credited will be the greater of the guarantee or 100% of the rebates, In the case of Caremark, they would provide the greater of the guaranteed amount or 80% of the actual rebates, Approach to Analysis of Responses As examined in the prior section, pharmacy benefit managers make money in different ways, The various ways that firms make money will result in different ranking depending upon how the analysis is structured, Since Express Scripts "qualitative" perfonnance (customer service, account representation, data support, v;illingness to partner in new prol,'fams, etc,) has been more than acceptable, the following analysis approach was used, First, a detailed analysis of financial terms would be completed prior to a detailed qualitative review of responses or vendor interviews, This allowed the l,'fOUp to determine whether significant financial advantage resulted from the financial terms quoted by the vendors, If the financial analysis demonstrated w Page 5 Collier County Health Care Consortium Request/or Proposal.for Managed Pharmacy Services; Analysis and Recommendations Agenda Item No, 16E3 November 18, 2008 s'p"ml?eil~:ilJd8of 42 a significant economic advantage justifying a possible change, a detailed qualitative analysis of each proposal would be completed as well as interviews with the top ranked vendors, Everyone agreed sufficient financial gain must be present to warrant further consideration of a change due to the resulting expense and time associated with a detailed analysis of the qualitative responses and interviews. Willis performed a detailed financial analysis of the following four areas affecting the ultimate cost of a pharmacy benefit program: L Total expected cost based on all facets of the program, quoted discounts, rebates and administrative fees. 2, Impact of rebates, }, Fixed administrative fees, dispensing fees and other related administrative expenses if, applicable, 4, The per pill cost of the most common pharmacy drugs used by the CCHCC as quoted by the members, 5, Generic fill rates as a percentage of total drugs dispensed, Consideration was also given to how the vendors addressed the issue of "transparency" in pricing and how rebates would be passed back to each employer. To begin the analysis, Willis accessed the Express Scripts system to accumulate actual drug plan utilization for 2007 for the four employers, including number of prescriptions and ingredient cost for brand and generic drugs, retail and mail order, and the amounts paid, Based on current enrollment and the actual experience data, prescription drug plan ingredient costs and number of prescriptions for the respective members were projected forward through 2012 assuming no plan desif,'D changes, a 7% annual trend for drug inf,>redient cost (inflation and mix of drugs), and a 3% trend annually in the number of prescriptions, This was consistent with the drug trend observed for the CCHCC as a whole for 2007 as compared to 2008, The cost and number of prescriptions was trended separately, This approach is more representative of total drug trend and provides a better determination of ultimate cost when some vendors charge fees based on the number of drugs and others on the number of employees, A four year time frame was utilized in the financial analysis since that is the period of time vendors were asked to guarantee terms, The ingredient cost of drugs was projected on an "undiscounted" basis, This step was taken to ensure a uniform basis against which to compare the discounts each vendor was quoting, This was accomplished by "backing out" the average discount received from Express Scripts under their current pricing, For example, if the discounted cost is $85, and the current discount is A WP -15%, then the undiscounted ingredient cost would be $100, Going to the next step, if a vendor's quoted discount was AWP-16%, for example, then the discounted cost shown in the comparison would be $84, For the four-year comparison, the quoted administration fees, dispensing fecs, ingredient cost, and rebates were applied to each member's projected prescriptions, number of employees, and undiscounted ingredient cost to develop the four-year total costs, w Page 6 Collier County Health Care Consortium Request/or Proposal/or Managed Pharmacy Services; Analysis and Recommendations Agenda Item No. 16E3 November 18, 2008 Septeml5'eilm;ii _of 42 Willis also conducted a per pill analysis to see if costs for the top 50 brand name medications supported the percentage discounts quoted on brand name medications, A similar analysis was done for the top 50 generic medications, Seventy-three percent (73%) of total spend will come from brand name medications in 2008 and twenty-seven percent (27%) from generics, Results of Analysis of Financial Terms This section summarizes the results of the different ways that Willis analyzed the terms provided by each of the vendors, It also provides an outline of the financial impact of additional negotiations that occurred after the initial quotes were analyzed, Total Expected Cost Based on an aggregate analysis of all terms, Caremark provided the most competitive financial package for the four year term ofthe proposed agreement. This analysis incorporated an analysis of all factors, discounts, rebates and administrative fees. Based on the original quotes the estimated four-year cost of the top three vendors was as follows, 1. Caremark (Traditional) 2, Express Scripts 3, Caremark (Transparent) 4, Walgreens $88,998,465 $9] ,025, 131 $9],417,320 $92,782,017 Caremark (Traditional) was $2,026,665 lower over the four-year term of the agreement. The Caremark (Transparent) was slightly higher than Express Scripts over the four-year tenn and Wa1greens was higher. The difference between the "Transparent" and "Traditional" approaches is as follows: Under a "traditional" approach the rebates are guaranteed, Under a transparent approach, 100% of the rebates are given to the client, but the amounts are not guaranteed, The group met to discuss the preliminary results of the analysis outlined above on July lOth, The group directed Willis to approach Express Scripts and Caremark and ask them to carefully review their terms to see if more favorable terms could be obtained, Willis worked diligently to negotiate the best offers from the incumbent (Express Scripts) and the vendor that provided the best terms (Caremark), Walgreen's later approached NCH Heathcare System and also asked to be allowed to submit a best and final offer. After some consideration the group agreed to allow Walgreens to also submit a best and final offer on August 22"d Below is outlined the impact of the best and final offers on expected total cost over the four-year term of the agreement: 1. Caremark (Traditional) 2, Express Scripts 3, Walf,'feens 4, Caremark (Transparent) $88,998,465 $90,120,517 $91,032,6]5 $91,702,707 Through revised terms, Express narrowed the gap from $2,026,666 to $1.]22,052, The reason Caremark terms changed was related to the national agreement Willis has negotiated with Caremark that provides more favorable terms for a traditional approach versus a transparent one--a traditional plan will pass w Page 7 Collier County Health Care Consortium Requestfor Proposalfor Managed Pharmacy Services; Analysis and Recommendations Agenda Item No. 16E3 November 18, 2008 Septeml?eilW, :OOsof 42 through on 80% of the rebates when the guarantee is exceeded, The initial quote was not based on the Willis National Agreement. In the last marketing process in 2005, the group had agreed that they felt more comfortable with a traditional agreement where the rebates were guaranteed, Walgreen's also improved their quote, but the new terms did not change the overall order of the respondents, The differences in total expected costs are summarized below: L Caremark Traditional Network 2, Express Scripts Traditional Network 3, Walgreens Transparent Network 4, Caremark Transparent Network lowest +$1,122,052 +$2,034,149 +$2,704,242 In this scenario Caremark is estimated to be $Uless than Express Scripts over the four-year term of the agreement. If the savings are expressed as an annual amount per member, the savings would be allocated as follows: Caremark's Estimated Annual Savings Allocated by Member LCG $61,086 CCSO $42,832 DSBCC $110,146 INCH $66,449 trota) Savings $280,513 As has been discussed in consortium meetings, PBMs make money in a variety of areas, This makes some of the analysis difficult do complete as we are forecasting what will happen in the future, F or example, some PBMs may offer a bigger discount but charge a larger dispensing fee, Depending on how utilization and costs trend into the future, what may appear to be the better deal under one set of assumptions may not be the best deal under a different set. F or this reason, Willis analyzed the terms of the top three vendors from several perspectives to see how the expected costs change when different parts are analyzed separately, The following shows the impact of rebates on the analysis: Total Expected Costs Net of Rebates Significant issues arise when comparing rebate proposals, Vendors stated they would either pass through 100% of their rebates to the CCHCC members (providing transparency and pass through) or guarantee the rebate amounts (using various assumptions; i,e" all drugs, rcbatabJe drugs, etc,), Many times organizations focus on rebates using the assumption that the bigger they are, the better. However, higher rebates do not necessarily convert to lower ultimate cost. Vendors with higher rebates may generate those r~bates from more costly drugs, which could end up costing a sponsor more in total spend even with higher rebates and comparable discounts, Here is how that may happen--if a vendor provides a rebate of $1 0 per prescription, and vendor B provides a rebate of $8, it may be tempting to select vendor A because of the larger rebates. However, the ultimate cost of the drug to the plan is a function of its cost as well as the rebates, For example, if vendor A's cost [or the drug on its formulary was $98, and the rebate $10, the ultimate cost to Ll]e plan is $88. If vendor B's cost for the drug in that same class on its fonnulary is S93, and the rebate is w Page 8 Collier County Health Care Consortium Requestfor Proposal/or Managed Pharmacy Services; Analysis and Recommendations Agenda Item No, 16E3 November 18, 2008 Septeml?eilllll! iiJilsof 42 $8, the ultimate cost to the plan is $85, With these assumptions, vendor B is the better cost because it provides the lowest ultimate cost to the plan, Further, there are differences in the rebate guarantees, Both Caremark and Express Scripts guarantee the rebates, However, the nature of guarantees is a bit different. Express Scripts guarantees the stated rebates and will pass any amount in excess ofthe guarantee to the CCHCC. Caremark will guarantee the rebates but only provide additional rebates if the 80% of the actual rebates exceed the guaranteed amount. We did do a formulary disruption analysis for Express Scripts, When looking at the top 30 drugs that are currently being utilized by the Consortium, Caremark does not cover Crestor and Ambien as part of their formulary, In replacement of Crestor, Caremark would cover Pravastatin, Simvastatin, Lipitor and Vytorin, In replacement of Ambien, Caremark would cover Zolpidem and Lunesta, Here is how this change could impact the CCHCC. First Vytorin is more expensive than Crestor, and Lipitor which is not on the Express Script formulary is much more expensive than Simvastatin, Migration to either Vytorin or Lipitor can result in the ability by Caremark to provide greater rebates while at the same time presenting the potential to increase overall drug spend, The same holds true for Lunesta versus Ambien, The average ingredient cost per prescription for Lunesta is $127,98 versus $127,45 for Ambien, If rebates are eliminated from the comparison, the four-year difference in the top four vendors is as follows: I, Caremark Traditional Network 2, Express Scripts Traditional Network 3, Walgreens 4, Caremark Transparent Network Lowest bidder +$655,213 +$1,219,344 +$2,731,608 Administrative and Dispensing Fees: Some organizations believe they can work with the vendor to impact utilization and generic fill rates by innovative plan design and cost management programs, They further believe that rebates are false savings and that all the large pharmacy benefit mangers are really obtaining equivalent discounts, In that case the only thing that matters is administrative costs, Below you will find a four-year total for Administration Fees, This comparison is similar to comparing third-party administrator fees for a medical plan, For a phannacy plan, these costs are overhead to the ingredient costs and are the most straightforward to compare, There are two components of administrative cost: an administrative fee per script and the dispensing fee paid to pharmacies, When comparing administrative fees, the top four vendors rank as follows over the four-year term of the agreement: L Express Scripts Traditional Network 2, Caremark Traditional Network 3, MedImpact 4, Walgreens Low bidder +$0 +$126,025 +$760,405 Another fixed cost is the dispensing fees paid by the PBM to the pharmacy vendor to dispense the medication, Below is a four-year total for Dispensing Fees, w Page 9 Collier County Health Care Consortium Request/or Proposal/or Managed Pharmacy Services; Al1a~vsis and Recommendations Agenda Item No. 16E3 November 18, 2008 Scptem5i.P\?W :iiJ8sof 42 L Express Scripts Traditional Network 2, Walgreens 3, Caremark Traditional Network 4, Caremark Transparent Network Low bidder -'-$203,481 +$305,221 +$305,221 However, the vendors who show no administrative fees or dispensing fees are offsetting those costs in other areas. Per Pill Prices To cross-check our analysis of the respective vendor's discounts and their impact on the ingredient cost comparison, we also asked the vendors to provide the average per pill prices contracted on select medications. The medications selected for this study were the top 50 prescription drugs by highest dollars paid for the CCHCC for the first 5 months of 2008, In 2007 the top 50 medications represented 32.4% of total drug spend for the CCHCC. The prices requested for the top 50 were the contracted rates as of April I, 2008, The results of this comparison should be consistent with the four-year ingredient cost results, However, it is not, which illustrates that the impact of the mix of drugs, selection of pharmacies utilized, as well as, price per pill will have impact on ultimate cost. The discounts quoted by the vendors represent weighted average discounts across all pharmacies. If the mix of which pharmacies is used changes, the weighted average discount provided to a plan sponsor will change, Taking a simple example where the network is comprised only ofCVS and Walgreens phannacies, if Caremark provides a 20% discount at its own CVS pharmacies and negotiates a 16% discount at Walgreens, the average weighted discount assuming a 50 - 50 distribution in drug spend is 18%, However, if the split is 60% of the spend at CVS and 40% at Wa1b'l'eenS, the weighted discount is 18.4%, The weighted per pill costs based on the top 50 drugs utilized collectively by the CCHCC is shown in the table below, Both Express Scripts and Caremark use First DataBank to derive A WP, This is an important step because it ensures the same starting point when deriving the per pill analysis, Retail Too 50 Per Pill Analvsis 0/0 Difference From $ Difference From Weighted Lowest \Veighted Lowest \Veighted Veodors A vera"e A vera"e A "eraoe Caremark Traditional S11.07 0.00%) SO.OO V\Talgreens Transparent SJ 1.23 1.421% SO,16 Caremark Transparent $11.34 2.43t;o $0,27 Express Scripts (Actual 2008) $11.35 2.50%) SO.28 Express Scripts (Quoted) S10.67 -3.63% -$040 InfonnedRx S11.46 3.46% SO.38 MedImpact (Traditional) $11.47 3.56% $0.39 Medlmpact (Transparent) $11.53 4.17% $0.46 RxEDO $11.R3 6.840/0 $0.76 w Page ]0 Collier County Health Care Consortium Request/or Proposalfor Managed Pharmacy Services; Ana(vsis Qnd Recommendations Agenda Item No, 16E3 November 18, 2008 SeptemR,;l1!l!) :iWsof 42 To further show the impact that mix of utilization and pharmacy choice have on cost, we have presented two sets of figures for Express Scripts, The first is an actual per pill cost Willis calculated using the first 5 months of actual data from Express Scripts, The second is the average per pill costs they provided for their book of business and responded with in the RFP, We also performed an analysis listing the top 4 pharmacies that the Consortium utilized between 1/1/2008 through 6130/2008, Below you will find the results: Retail Phannacv Plan Cost % of Total L Walgreens $2,309,734 27% 2, CVS $1,145,240 13% 3, Publix $719,439 8% 4, Curascript $573,537 7% If the total cost analysis presented on page 6 is adjusted for the per pill prices above on a total cost basis, the results are as follows: Retail Pharmacv From Page 6 Based on Per Pill 1, Caremark (Traditional) 2, Express Scripts $88,998,465 $90,120,517 $89,262,536 $90,120,517 The total difference now reduces from $1,122,052 to $857,981 over the 4-year term, [fthe quoted per pill pricing was used for Express Scripts, Express Scripts would be $574,206 less than Caremark. Generic Fill Rate Guarantees Recognizing that the actual value of discounts and rebates is difficult to measure, more organizations are beginning to focus on tbe true measure of managing pharmacy cost which is total drug spend, The best way to control overall drug spend is to minimize the use of brand name medications and maximize the use of generics, As part of the finalist process, Willis asked Caremark and Express Scripts to provide performance guarantees on generic utilization rates, This is referred to as Generic Fill Rate or GFR GFR is defined as total generic scripts over total scripts, For example, if generic scripts equal 100 and brand scripts equal 80, then GDR would equal 100/180 = 55,56%, The higher the GFR, the more savings the CCHCC will realize, Most studies suggest that every 1 % increase in GFR equates to a 1% decrease in cost For example, if an organizations 2008 ingredient cost is 18 million and GDR equals 55%, total cost will decrease by $180,000 ifGFDR were increased to 56%, w Page 11 Collier County Health Care Consortium Requestfor Proposal/or Managed Pharmacy Services; Anafvsis and Recommendations Agenda Item No, 16E3 November 18, 2008 Septeml?..gw. 2W8of 42 The results are summarized in the table below, Year 1 Express Scripts Members CCSO CCG DSBCC NCH Total Guarantee GFR at Retail 58.5% 62,0% 61,0% 66.5% Guarantee GFR at Retail 60.5% 64.0% 63.0% 68.5% Guarantee GFR at Retail 61.5% 65.0% 64,0% 69,5% Three Year Total Savings $408,894 $399,257 $1,094,363 $620,605 $2,523,119 Caremark ....,. Year 1 ... .' '; Year 2,., ...... Year 3 '.' .......... Guarantee GFR at Guarantee GFR at Guarantee GFR at Three Year Total Members Retail Retail Retail Savings Caremark 58.5% 59.5% 61,0% $2,370,176 Total $2,370,176 In looking at the data in the table, it is important to keep in mind what GFR is, There are two ways to increase GFR, First and most common is as a substitute when the identical chemical becomes available from multiple sources but also as an alternative medication in a class of medications, An example of this is using Simvastatin instead of Zocor (the brand name of Simvastatin), The CCHCC members have already maximized this savings by limiting the payment for Zocor to the MAC cost of Simvastatin, The second way is to substitute a generic for medications for brand name medication in the same class for which a generic is not available, An example of this is to use Simvastatin as an alternative to Lipitor and Crestor which are not the same chemicals as Simvastatin, but have the similar therapeutic effects, This second fonn of generic substitution is accomplished through memberlphysician out reach, memberlphysician education and step therapy, The cost impact of increasing generic fill rates is very significant in terms of total cost. Therefore, another key area to focus on in evaluating who may be the best vendor is to assess who will provide the highest generic fill rate (GFR), The table above shows that Express Scripts is offering a more aggressive guarantee than Caremark by $152,943, Recommendations Caremark and Express Scripts are superior over all the other vendors when observing each measureable category listed above, The question is are the Caremark savings sufficient to justify a change, and are the qualitative (service) aspects hetween Express Scripts and Caremark comparable? Further, do 'He believe that Caremark will actually generate these savings? w Page 12 Collier County Health Care Consortium Requestfor Proposalfor Managed Pharmacy Services; Analysis and Recommendations Agenda Item No, 16E3 November 18, 2008 Septemi?oilW, 2Il~gOf 42 It is clear that the process produced measurable savings to the CCHCC as a whole and to each of the memhers, The new terms from Express Scripts represent over a $11 million dollar savings over the four- year term of the agreement. The savings to each memher is as follows: Exoress Scriots Current Rates vs. EXDress Scriots ProDosed Rates CCG $650,387 CCSO $367.220 DSBCC $1,062,153 NCH $748,735 Total $2,828,495 This change in cost will reduce trend and stems from 25% improvement on retail generic pricing, a 10% improvement on retail brand pricing and a 60% improvement in rehates, Ai; for Express Scripts compared to Caremark, is Caremark actually less or is it a combination of rebates, utilization and phannacy mix that are driving the change? It is difficult to know with any certainty unless the two programs were run concurrently and that is not possible, It is the opinion of Willis that from an ingredient cost perspective only, Caremark would have a slight edge over Express Scripts since Caremark would likely provide itself with better discounts at the CVS pharmacies than the other vendors because Caremark is owned by CVS, However, this assumes that Caremark obtains comparable discounts from other pharmacy chains, In spite of the assumption that Caremark has deeper discounts on the whole, who will provide the lowest ultimate cost is difficult to determine, Ultimate drug spend is the key, and generic utilization can provide more savings for the CCHCC if one vendor is better than the other in this area than discounts or fixed fees, As members are shifted from brand drugs to generics, this will decrease overall cost. For every I % increase in "Generic Dispensing Rate," total cost will decrease by I %, Express Scripts outperforms Caremark in this area further reducing the difference, if any, Before the best and final offer was presented, Caremark showed yearly savings of $506,666 over Express Scripts, Express Script was able to refine their pricing with higher discounts at retail and narrowed the annual gap to $280,513, That advantage was further reduced by the $152,943 greater generic efficiency guarantee that Express Scripts offered, The savings from changing wonld amount to a little over $,50 per employee a month, The group unanimously agreed that a savings of $.50 per employee per month just did not warrant the expense and disruption associated with a change, Further, Express Scripts is a known quantity that has performed well and been a good partner to the CCHCC members, Community Health Partners and the local provider community, In addition, they have agreed to provide individual member drug statements on an annual basis, These statements will include patient specific data regarding how they can lower the cost of medications both to themselves and the employers, For these reasons the Evaluation Team unanimously af,'feed to recommend that the employers enter into a four-year agreement with Express Scripts, w Page 13 Collier County Health Care Consortium Requestfor Proposalfor Managed Pharmac.v Services; Analysis and Recommendations Agenda Item No. 16E3 November 18, 2008 Septem5!illlW,:ffiasof 42 Evaluation Team Throughout this report, reference is made to the "group" evaluation of responses and analysis prepared by Willis, The group included the following representatives of the member organizations comprising the CCHCC who participated in reviewing the results and making the recommendation outlined in this report, CCG: Jeff Walker Alice T oppe Sonja Sweet NCH: Brian Settle Daryl Kilpatrick Renee Thigpen CCSO: Carol Golightly Alice Mase DSBCC: Allun Hamblett Cynthia Battle Linda Thoman Jane Knoble-Manalich Because of the importance of the PBM's support to Community Health Partners in system wide provider support of phannacy initiatives, select members of CHP and local physicians also participated in the process. Willis provided technical guidance and financial analysis and assisted the group in "Titing this report and recommendation, The following individuals fonn Willis assisted in this process: . Douglas J. Ley, Senior Vice President I Director, National Actuarial Practice, Willis Employee Benefits . Clete R, Anderson, Assistant Vice President, National Actuarial Practice, Willis Employee Benefits . Sheryl Henry FSA, MAAA, Vice President, National Actuarial Practice, Willis Employee Benefits . Orlando Neal, MBA Actuarial Analyst National Actuarial Practice, Willis Employee Benefits . Susan Wiesing, Senior Client Manager, Willis Employee Benefits . Mike Meredith, Executive Vice President, South Florida Practice Leader, Willis Employee Benefits This process was conducted under the supervision of the District School Board of Collier County's Purchasing Department. w Page 14