The document discusses chargeback programs, including the Federal Supply Schedule (FSS) and 340B Drug Pricing Program. It provides data on product sales, chargebacks, and top wholesalers from 3Q 2009 to 4Q 2010. The top programs by chargeback amount were the AIDS Drug Assistance Program (ADAP), Public Health Service (PHS), and FSS, which constituted 93% of payments in 4Q 2010. It also describes the process for validating chargeback claims and ensuring products are purchased by eligible entities.

2. Contract Contract Price: $70 Purchase Price: $70 WAC Price: $100 Chargeback: $30 Chargeback Model Wholesaler Contract Pharmacy Eligible Entity Manufacturer

3. Chargeback Programs Federal Supply Schedule (FSS) Offered to in-patient and out-patient use at the following facilities: Dept of Veterans Affairs (VA); Dept of Defense (DoD); Indian Health Services (IHS); Coast Guard; Bureau of Prisons Public Health Services (PHS) – 340B Program Offered to out-patient use at the following facilities: Community Health Centers (CHC); Disproportionate Share Hospitals (DSH); Family Planning Clinics (FPC); Federally Qualified Health Centers (FQHC); HIV Clinics; STD Clinics; Ryan White Programs (RW) Special PHS (SPHS) A voluntary incremental discount to the PHS/340B price to individual customers AIDS Drug Assistance Program (ADAP) – 340B Program Provides FDA-approved HIV-related prescription drugs to low-income people living with HIV/AIDS who have limited or no prescription drug coverage. (Ryan White II Direct Purchase) AIDS Health Foundation (AHF) Individual contract with AIDS Health Foundation that provides ADAP pricing to member entities not otherwise eligible for ADAP pricing

4. Contract: Products & Pricing

5. Contract: Membership

6. Sales and Discounts U.S. Sales and Discounts from 3Q’09 to 4Q’10 Total product sales in 4Q’10 was $1.48M, a 6% increase from 3Q’10 and 27% increase from 4Q’09 Total chargeback payments in 4Q’10 was $172 K, reducing the sales revenue by 12% Total = $1,479 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 3Q 2009 4Q 2009 1Q 2010 2Q 2010 3Q 2010 4Q 2010 Dollar (in thousands) Sales - Discounts Chargebacks Rebates $102 $87 $872 $109 $119 $941 $112 $128 $1,060 $141 $130 $1,073 $156 $154 $1,085 $180** $172 $1,128

7. Top 5 Wholesalers by CB Amount Paid in 4Q’10 The top 4 wholesalers constitute 96% of total chargeback payments in 4Q’10 AVITAN, McAllister, AmeriDrug, and Borris & Dawson are consistently the top 4 wholesalers receiving chargeback payments due to their high volume purchases every quarter. Top 5 Wholesalers $10 $20 $30 $40 $50 $60 $70 AVITAN McAllister AmeriDrug Borris & Dawson Whole Drug CB Amount (in thousands) $63.2 $43.3 $34.6 $24.3 $3.1

8. CB Claims Processed from 3Q’09 to 4Q’10 AVITAN, McAllister, and AmeriDrug constitute 94% of total chargeback submissions in 4Q’10 The total number of chargeback claims submitted by all wholesalers in 4Q’10 was >370,000 For the TTM, the total number of chargeback claims submitted by all wholesalers was >1,250,000 Chargeback Claims Volume 20,000 40,000 60,000 80,000 100,000 120,000 140,000 AVITAN McAllister AmeriDrug Borris & Dawson Number of Chargeback Claims 3Q 2009 4Q 2009 1Q 2010 2Q 2010 3Q 2010 4Q 2010

9. Top 5 Programs by CB Amount Paid from 3Q’09 to 4Q’10 ADAP, PHS, and FSS constitute 93% of total chargeback payments in 4Q’10 ADAP, PHS, and FSS are consistently the top 3 programs receiving chargeback payments due to high volume purchases by eligible entities. (ADAP and PHS programs are subsets of the 340B Program.) Top 5 Programs $10 $20 $30 $40 $50 $60 $70 $80 ADAP AHF FSS PHS SPHS CB Amount (in thousands) 3Q 2009 4Q 2009 1Q 2010 2Q 2010 3Q 2010 4Q 2010

10. Sometimes we can’t tell which entity is purchasing our product until we request more information from the wholesaler. Example: Wholesaler submits ‘ship-to’ entity info only. If we are uncertain about the purchaser, we request an invoice in order to see the ‘bill-to’ entity. Sample Invoice Ship-to info on wholesaler submission Bill-to info not on wholesaler submission

11. Sample Claim Line Chargeback amount requested WAC HIN # (Health Identification Number) or DEA # NDC (National Drug Code) Contract # Contract Price Eligible Entity Wholesaler Contract

12. Validating Eligibility Customer ID HIN # – validated through HIBCC database DEA # – validated through DEA registry PHS & ADAP Membership (340B) Validated through OPA - HRSA database FSS Membership Validated through DSCP and VA databases

13. Validation Example

14. Warning, 4.49% Fatal, 1.11% Error, 0.18% Valid, 93.86% Percent of Claims Validated in 4Q’10 Valid claims are auto-closed All other validation warning/fatal/error require investigation Claim Statuses Overridden-Accept, 0.33% Overridden-Reject, 0.04% Status Percent # of Lines Valid 93.86% 347,540 Warning 4.49% 16,620 Fatal 1.11% 4110 Overridden-Accept 0.33% 1220 Error 0.18% 650 Overridden-Reject 0.04% 130

15. Wholesaler Contract Pharmacy Patient of Eligible Entity (PHS) CP Serves Multiple 340Bs Eligible Entity (PHS)

16. Who is Purchasing?

17. Questions?