What does the future hold for pharmacy benefit managers (PBMs)? This webinar discusses: How to better manage patients; Advantages of formulary ownership; Is PBM transparency an answer to controlling drug costs? How to better understand data and what is really important. EXPERT PRESENTERS Ken Dowell, SVP, Excelsior Solutions; Chairman, Pharmacy Analytics Board Mike Moloney, VP, Supply Chain Emerging Services Operations, Premier Inc

1. Ken Dowell – Chairman Lockton Analytics
Board
A Pharmacy Discussion
March 21, 2016

2. 2 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
Optum buys Catamaran for $12,800,000,000
ESI buys Medco for $29,000,000,000
Envision buys Medtrak
• Rite Aid Buys Envision
• Walgreens Buys Rite Aid
Generic Inflation
PBM’s among best performers on the Street
$19 Billion in Specialty Drugs in Development (mostly Additive)
Market Forces

3. 3 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
Pharmacy Marketplace Issues Affecting Employers
Employers
Increased
Costs
Supply Chain
Optics
Direct-to-
Consumer
Ads
Specialty
Pharmacy
How Do You Plan
to Combat These
Challenges?
Increased Costs:
-Overall drug trend increased 13.1% in 20141
-Traditional medication costs up 6.5% in 2014 and
specialty costs up 30.9%1
Optics - Conflicting Goals:
-What you see may not be what
you’re getting
-Increased complexity of pricing
techniques
Specialty Pharmacy:
-Gilead paid $11.2 billion to
purchase the drug formula for
Sovaldi.
-In 2014, Gilead generated
$12.4 billion in sales of Sovaldi
and Harvoni3
-Projection for specialty spend
is 44% increase in next three
years1
DTC Ads:
- Top 20 pharma companies spent 5.2 billion in
DTC advertising in 20142
- Emerging trend of DTC ads for diagnostic
testing
- Pharma wants to increase their patient pool
Supply Chain – Conflicting
Goals:
-Suppliers want effective solutions
at the highest cost
-Payors want effective solutions at
the lowest cost
-ESI- ABBVIE Contract I Viekera
Pak
1The Express Scripts 2014 Drug Trend Report
2Pharma Marketing News Vol. 13 No. 5
3Sachs, Jeffrey, “The Drug that is Bankrupting America” Huffington Post February 16, 2015

4. 4 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
Average Wholesale Price (AWP)
Rebates
Other Manufacturer Revenue
MAC List
Traditional (Spread) Pricing
Transparent (Pass-through/Spread) Pricing
Glossary of Terms

5. 5 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
Pharmacy Contract Optics
Claims Fees
Pharma Grants
Admin Fees
Rebates
Network Spread
Data/Other
HOW PBM’S MAKE MONEY
SOLUTION: Clear contract optics, aggressive contract guarantee
monitoring, market checks, and RFP/renegotiation.

6. How A Simple Business Gets Complicated

7. 7 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
PBM Math
Assumptions:
AWP: $500
Client Rate: AWP-16% / DF: $1.00
Prov. Rate: AWP-18% / DF: $0.35
Client Pharmacy PBM Profit
AWP $500 $500
Ingredient
Cost
$420.00 $410.00 $10.00
Dispensing
Fee
$1.00 $0.35 $0.65
Total $421.00 $410.35 $10.65

8. 8 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
How are drug types defined?
What drug types are included in the calculations?
What drugs are excluded from the calculations?
What is the reconciliation timeline?
• Are reconciliations even required at all?
It’s all about the fine print

9. 9 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
“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” and that can be
produced by a licensed manufacturer
“Brand Drug” a drug that has a trade name and is protected by a patent
(can be produced and sold only by the company holding the patent)
Getting PBM’s to these definitions is very difficult
• Lockton has identified 23 different variations of these
definitions.
Contractual Definitions - Discounts

10. 10 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
Contractual Definitions - Discounts
Drug Type AWP Discount Drugs Included
Brands 18.75% Single Source Products
Generic 81.5% Multi-Source Products
Drug Type AWP Drug Cost Actual
Discount
Brand $175,000 $ 150,898 13.78%
Generic $100,000 $72,415 72.41%

11. 11 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
“No rebate shall be paid on any drug for which PBM does not receive a
rebate”
Assuming only 60% of brand claims are rebate-able, the effective
guarantees are:
Contractual Definitions – Rebates
1st trick
Channel Rebate Guarantee
Retail $20 per brand paid claim
Mail Order $100 per brand paid claim
Channel Rebate Guarantee
Retail $12 per brand paid claim
Mail Order $60 per brand paid claim

12. 12 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
“Rebate guarantees are based on a 30 day supply at retail and 90 day supply at mail order”
54% of Rx’s are less that this threshold
Contractual Definitions – Rebates
2nd Trick
Channel Rebate Guarantee
Retail $20 per brand paid claim
Mail Order $100 per brand paid claim
Channel Actual Rebate achieved
Retail $8.76 per brand paid claim
Mail Order $34.67 per brand paid
claim

13. 13 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
Per Claim vs. Per Paid Claim Administrative Fees
Admin Fee = $1.75
Administrative Fees
Claim Type Total Claims Per Claim
Admin Fee
Cost
Per Paid Claim
Admin Fee
Cost
Paid Claims 100,000 $175,000 $175,000
Rejected Claims 10,000 $17,500 $0
Reversed Claims 10,000 $17,500 $0
Total 120,000 $210,000 $175,000

14. Specialty Pharmacy

15. 15 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
The Financial Significance of Specialty Pharmacy
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Specialty
Traditional
70%
30%
99%
Specialty spend is split between medical and pharmacy. Understand
the cost implications of both.
Percentage of
Drug Spend
Percentage of
Membership
Affecting Drug Spend

16. 16 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
Key Pipeline Drugs
Drug Name Disease
Treated
Expected
Approval
Route of
Admin
Projected
Costs
Current
Treatments
Financial Impact
Viekira Pack
Hepatitis C,
genotype 1
Approved
12/19/2014
Oral
$75 - $90K
per tx course
Sovaldi, Olysio,
Harvoni,
Victrelis
SIGNIFICANT
Zepatier
Hepatitis C,
genotype 1
Approved
1/28/2016
Oral
$80 - $100K
per tx course
Sovaldi, Olysio,
Harvoni, Victrelis
SIGNIFICANT
The combination of two drugs in one tablet (Harvoni) represents the next evolution of oral treatment in Hepatitis C.
Lumacaftor Cystic Fibrosis June 2015 Oral
$300K per
year
First in class SIGNIFICANT
Lumacaftor is considered to be an orphan drug because it treats a very specific gene mutation in cystic fibrosis. Its use will be rare, but its
costs will be material when required. *Screening test under development.
Zinbryta
Relapsing
Multiple
Sclerosis
2016 Sub Q $40K per year
Copaxone,
Avonex, Rebif,
etc.
SIGNIFICANT
Zinbryta demonstrated a reduction in frequency and severity of MS relapses better than Avonex. Expect this to replace other therapies.
Evolocumab &
Alirocumab
Hypercholester-
olemia
Aug. 2015 Sub Q
$10 - $18K
per year
Statins SIGNIFICANT
Currently slated for narrow (and rare disease state) approval. However, if approved for broader treatment (as is likely) could replace or be
adjunct therapy with statins for cholesterol treatment. If granted broad approval, expect significant treatment protocol and cost increases for
cholesterol therapy. Has potential to redefine clinical management of high cholesterol with significant cost impacts vs. a “mature” (i.e., generic-
heavy) statin category

17. 17 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
Generic Name: alirocumab
Brand Name: Praluent
Manufacturer: Sanofi & Regeneron
Drug Class: “PCSK9 Inhibitor” (NEW, 1st of 2 to launch in Summer 2015)
PCSK9 is an enzyme involved in cholesterol metabolism
Effects: 60% reduction in “bad” cholesterol; 50% reduction in risk for
bad outcomes (stroke, heart attack, etc.)
Place in Therapy: 1) A rare type of genetic predisposition for high cholesterol
2) (POSSIBLE) patients who haven’t responded to statins;
3) (POSSIBLE) patients who can’t tolerate statins because of side effects
How Administered: Self injection
# Potential Patients: Possibly 20% of patients on statins
Short or Long-Term Use: Long-term
Replacement or Additive: Likely additive to baseline statin costs;
possibility for some minimal statin cost replacement
Most Likely Distribution: Retail pharmacy
High Cholesterol PCSK9: alirocumab
Expected Cost Impact: $1,000 per month; likely additive to statin cost Generic statin - $10 per month; PCSK9 therapy is 100x the cost
Genetic high cholesterol = 0.2% of population;
other indications = ~20% of patients on statins

18. Management Is Critical

19. 19 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
Specialty Drug Financial Impact Modeling Tool v1.0
Version 1.0
Analyzes a client’s potential financial
exposure to key (not all) specialty/high
cost drug categories
Targetskey drugs in the pipeline, recently
released drugs, specialty drugs, high
cost diseases, and expanded
indications for existing therapies
The tool was developed with FDA
guidelines and is piloted with the following
disease states:
• Hepatitis C
• High cholesterol PCSK9
• Multiple Sclerosis
• Cystic Fibrosis
• Idiopathic Pulmonary Fibrosis
Uses client-specific medical and Rx
data from InfoLock along with population
disease rates
Version 2.0
Adding disease states (MD, HAE,
Gaucher, etc.)
Adding Medical early “Alerts” for newly
diagnosed high cost medical procedures
(Cancer, Renal Failure, Transplant,
Trauma, Hemophilia, etc.)
CURRENT MODEL COMING SOON

20. 20 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
2016 Budget Impact

21. 21 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
How Can Employer Clients Manage Specialty?
SOLUTION: The Excelsior Specialty Pharmacy Strategy
GOAL: Ensure the Specialty Pharmacy Program is delivering
Have an Action Plan beyond traditional pharmacy cost management:
PREDICTIVE COST
MODELING
QUARTERLY TOP DRUGS
PIPELINE
CLEAR, SHAREABLE
CLINICAL INFORMATION
CLINICALLY-FOCUSED
CONTRACTING AND
PERFORMANCE
GUARANTEES
VALIDATION/AUDIT OF
APPROPRIATE DRUG
CONTROL MECHANISMS

22. 22 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
Don’t Lose sight of Rx management through the fog of
Specialty Fear
Creating Better Economics Trend Management Execution
Full Market Evaluation
 Assess current contract >
Renegotiate if preferred
 RFP that includes top PBMs >
Leverage health plan pricing
 Transparent contract > Insure terms
and conditions drive most favorable
results for client
RX Mart: Data Analytics
 Excelsior’s proprietary data solution
 Holds PBM accountable to contract
 Provides in depth utilization review
 Drill down capabilities for each
client's specific needs
Clinical Oversight
 Pharmacist review of data to
determine most effective PBM
programs, i.e. Step Therapy, QL, PA
 Narrow network evaluation
 Specialty Rx consulting
Ongoing Account Management
 Implementation oversight
 Quarterly review meetings
 Plan design benchmarking and
consulting
 Insuring PBM delivers on operational
and service commitments

23. 23 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
Ongoing Monitoring Critical
Holding your PBM accountable
How is your
PBM performing?

24. 24 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
Case Study: Pricing Guarantee Reconciliation (PGR)
Financial Results: 2013 Reconciliation
$18,696.35
$2,480.54
$13,704.39
$3,954.75
$32,499.73
$118,636.00
$19,947.00
$62,788.16
$7,444.70
$20,425.80
$1,430.60
$81,054.82
+ $1.6M RECOVERED
12 Clients with 48,500 total lives

25. 25 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
Mitigating Pharmacy Marketplace Forces – Get Expert Help!
Managed Pharmacy
Program
•Address increased costs, &
manage supply chain with
aggressive contract management &
re-negotiation
•Mitigate contracting optics with clear
contract terms
•Ongoing monitoring of pricing
guarantees
Integrated Specialty
Strategy
•Predict impact from robust drug
pipeline and expanded treatment
indications
•Pharmacy strategies for direct-to-
consumer ads
•Implement management strategies
for specialty meds
Integrated Pharmacy &
Medical Expertise
•Pharmacy + H&W consulting =
stronger management
•Combined medical & pharmacy
analytics
•Specialized, expert case
management

26. 26 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
 
No Benefit Changes
No Vendor Changes
Total Savings: $102M
[EMPLOYER]
Group
E-1
Group
E-2
Group
E-3
Group
E-4
$15.2M
$2.99M
$8.9M
$61.5M
$5.9M
$1.5M
$3.8M
$1.4M $860K
Group
T-1
Group
T-2
Group
T-3
Group
H-1
Group
H-2
[TPA/COMMERCIAL]
[HEALTH PLAN]
$11.61
AVERAGE SAVINGS PER SCRIPT
Case Study
2014 Pharmacy Contract Savings

27. 27 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
Ongoing Management is Key to controlling cost
 Prescription data analysis
 Claim extract and data management
 Quarterly performance report
 Annual contract compliance review
 Specialty pharmacy consulting
 Active formulary management (carve-out)
 Fraud/abuse detection
 Mid-term contract improvement
 Physician outreach (2014 deployment)
Managed Pharmacy
Program
Design and develop RFP specifications
Select markets
Analyze market responses
Negotiate pricing and contract terms
Finalize selection and contract
PBM implementation
Performance guarantee review
PBM Selection and
Implementation Program

28. 28 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
The Excelsior Solutions Difference
Expert pharmacy benefit management (PBM)
consulting team
• In-house pharmacists, PBM and Medicare
Part D experts
• Former C-level PBM executives averaging
20+ years
industry experience each
• Manage 20 million+ pharmacy lives
• Provide unbiased, impartial, expert advice
• Recommend solutions rather than products
• Acquired by Lockton in 2012
Specialize in working with self-funded employers,
health plans, TPAs and other payers to:
• Optimize PBM arrangements
• Leverage improved vendor relationships
• Identify additional opportunities for cost
savings
• Develop strategies in a dynamic
marketplace
Provide full disclosure on all compensation

29. Mike Moloney
2016: Utopian Scenarios for PBMs
March 22, 2016

30. 30 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.

31. 31 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
PREMIER MEMBER PHARMACY TASK FORCE RECOMMENDED A STRATEGIC
PARTNERSHIP STRATEGY:
Selected MedImpact as our pharmacy benefits administrator
MedImpact does not own any pharmacy fulfillment/distribution to better work with
health system partners with own fulfillment
PREMIER PBM STRATEGY VALUE TO ALLIANCE MEMBERS
Significant savings through increased purchasing power of alliance (5-20%)
Full transparency and pass-through pricing & rebates
Collaborative strength and knowledge sharing
Best-in-class data analytics and performance benchmarking
Innovative combination of Premier’s pharmacy supply chain expertise and data
assets with MedImpact’s agnostic role as a large scale pharmacy benefits
administrator

32. 32 PROPRIETARY & CONFIDENTIAL – © 2014 PREMIER, INC.
2016: Utopian Scenarios for PBMs
Thank you for participating in today’s webinar
The webinar was recorded and presentation slides will be
available to all participants
Ken Dowell Mike Moloney
Senior Vice President Vice President
Excelsior Solutions Premier, Inc.
952.562.5540 704.816.4589
kdowell@excelsiorsolutions.com Michael_Moloney@premierinc.com