Pressure from Increases in Cost, Pricing Implications, and Launch Considerations Craig Kephart, President & CEO Cen

1. Pressure from Increases in Cost, Pricing Implications, and Launch Considerations Craig Kephart, President & CEOCentric Health Resources, Inc.May 6, 2009

2. News • “…the PwC report recommends collaboration with non-drugmakers, particularly on disease management programs. Partnering with other companies on "holistic solutions" rather than "narrow treatments" is a more flexible and "value-enhancing" strategy than, say, mega-merging.” • “Drugmakers are going to have to think of themselves more broadly: They can't be makers of drugs. They have to be health gurus, project managers, hospital partners ... and so on.” • “Outsource R&D…Outsource manufacturing. Outsource sales and marketing, even. Then forge some links with tech companies…and insurers, healthcare providers and benefits managers. Reinvent yourselves, pharma! Don't you know that's the latest trend?” Source: Fierce Pharma, “Pharma: In 2020, it's not just drugs anymore,” April 30, 2009.

3. More News • “We’re going to see a growth in outcomes guarantees for pharmaceuticals, and it’s very healthy.” - Robert Seidman, formerly Chief Pharmacy Officer for WellPoint.

4. Agenda • Profile of a typical orphan drug • Key Differences • What Defines Success?

5. Profile of an Orphan Drug

6. Key Differences vs. Larger Drugs • Have to spread cost of service model and monitoring over fewer patients • Focused sales force, specialists, CSLs, etc. need to ensure physician that patient has access to drug and that ongoing care is consistent • Fewer patients means every patient is critical for sales – need to build high-touch compliance and loyalty program in order to keep patients on drug • Greater demand for outcomes – P4P, value based benefit design. Health management is most effective when fully integrated with distribution

7. What Defines Success GET APPROVAL LAUNCH DRUG Plan Ahead Build Contingency Plan Integrate with Distribution High-Touch Patient Services Exclusive Distribution REMS/Data MAXIMIZE SALES Access Compliance Find New Patients

8. Get Approval • Companies that are willing to put the right structure in place to monitor patients, collect data, and measure outcomes should find that the new regulatory model can work to their advantage. • The fewer questions left open, the more thorough the planning and preparation, and the more narrowly defined the REMS plan, the simpler the FDA application process. • Execution of this planning process can provide your organization with a competitive advantage over manufacturers who fail to build REMS requirements into their distribution.

9. MD/Hospital Payers Payers Manufacturer Intake Hub Wholesaler SP 2 SP 3 Patient Assistance SP 1 Patient Patient Typical Specialty Model Typical Specialty Model Buy / Sell

10. MD/Hospital Payers Payers MFR. Direct CENTRIC Manufacturer Wholesaler SP 2 Intake Hub Patient Assistance SP 1 SP 3 Patient Patient Exclusive, Buy Sell Mfr. Direct Exclusive Direct Buy / Sell

11. 3PL Specialty Pharmacy Hub Services /Reimbursement Nursing Disease / HealthManagement/REMS Manufacturer CHR Centric simplifies distribution Ideal for small patient populations Fewer transactions, lower costs, higher level of service Comprehensive Model

12. Safe Access Assure Safe Use Mandatory registry  Documentation of patient monitoring  Nurse training  Technology to collect data lab results, patient health measures Assessments and Monitoring Health management  Voluntary patient registry  Assessments  Therapy compliance and adherence  Integrated systems with pharmacy dispensing data Enhance Communications Pharmacist education/counseling  24/7 Clinical support  Training  Nurse training, education, and clinical services REMS Elements

13. Maximize Sales • Access • Compliance • Finding New Patients

14. Payer Physician Patient Manufacturer Health Mgt & PHC (residing at CHR or Pt. Adv) Integrated Health Management & Distribution Sell drug, service fees if req’d Fee for service Coordination, claims and reimbursement Aggregated Data & Reporting Rx Consented Patient data Pharmacy and clinical services Data

15. Buyer (Payer) Bargaining Power Products for ultra orphan therapies tend to cause weaker buyer (payer) bargaining power, thereby eliminating barriers to access. Source: Fadia T. Shaya, PhD, MPH, Associate Professor and Director, Center on Drugs and Policy, University of Maryland School of Pharmacy, CBI Strategic Pricing and Modeling Techniques to Demonstrate Product Value, April 6, 2009

16. Compliance • Adherence • Persistency • Patient retention • Patient satisfaction • Self empowerment • Clinical outcomes • Maximum benefit of therapy Distribution and Patient Outcomes Continuum Multiple SP providers with Integrate Hub Patient Registry, and Health Management Multiple Programs, Multiple Providers Integrated Distribution & Health Management No Program LOW HIGH

17. Why the Integrated Plan Works EDUCATION IS NOT THE SAME AS A WELL-INTEGRATED PLAN… PROGRAM DESIGN EDUCATION Significant effort is placed into the design of the program prior to launch To maximize effectiveness, education must be the right information at the right time and delivered in a customized, personalized way DISTRIBUTION Health management tied to distribution allows for interventions at many levels

18. Comprehensive Disease Profile Outcomes 1 6 Develop Intervention Goals Develop Assessment Dialogue Systems Configuration 2 3 4 PHC Deliver Interventions 5 Design Process Intervention Goals (Examples) 1. Achieve remission, manage relapses 2. Reduce risk from steroids 3. Decrease ADEs 4. Improve knowledge 5. Reduce relapses 6. Manage stress, depression 7. Improve QOL

19. Education

20. PHC Distribution OPPORTUNITY FOR PATIENT INTERVENTIONS ON MANY LEVELS PHARMACIST NURSE REIMBURSEMENT

21. $ Peer Health Coach Goals Goals Individual Health Plan Educate Quality of Life Capture Data Compliance Impact Outcomes

22. Why the Peer Health Coach Model Works Thus the development of PAGs… They want support, information, education. Patients are driven to interact with other patients.

23. Service Intensity Bonus Service Intensity and Loyal Customers • Service intensity is about cost-effectively building relationships with customers. • A company can’t offer more service than can be covered by the value of a customer's repeat business. • The right level of service intensity is therefore a function of long-term product revenue and cost. • Effective service intensity creates loyal customers. • You can measure service intensity.

24. Service Intensity Types of Health Care Data • There are many different kinds of health care data: • Prescription • Contact management information • Doctor and nurse notes • Billing records • Electronic medical records • Lab data—orders and results • Medical and pharmacy claims • Survey data—customer satisfaction and assessment data. • As long as it can be tied to a customer, it becomes a vehicle for discovery—for learning and improving the customer experience.

25. Service Intensity Infusions from Facility to Home • Patients that Centric assists in setting up home infusion services are 1/4 as likely to terminate as all other patients. • The process is labor intensive—filled with paperwork and phone calls, but the long-term payoff is loyal customers.

26. Service Intensity Alternative Funding Sources • Patients that Centric assists in finding alternative funding sources are also 1/4 as likely to terminate as all other patients. • Because almost 1/3 of Centric patients have new or additional payors year to year, inability to pay in one year does not mean the same for future years.

27. Service Intensity Extra Attention to Patient Concerns • Patients that Centric assists by finding answers to complicated questions are about 2/5 as likely to terminate as all other patients. • The process is labor intensive—but customers appreciate and reward the company’s propensity to give them extra attention.

28. Service Intensity Infusions during Travel • Patients that Centric assists in setting up infusion services during travel are 1/10 as likely to terminate as all other patients. • By enabling patients to be less held back by their condition, the company becomes an integral part of their lives.

29. Integrated Specialty Pharmacy Results Over 2,350 patients enrolled in program… 92.8% Compliance Patient Retention 95.8% 95% Patient Satisfaction 98% Program opt-in rate Time period measured: 2005 – 2007 Source: specialty pharmacy data

30. Cost Management • What are the costs of Distribution? • Managing multiple vendors • Risk of service breakdowns • Inconsistent Service • Counterfeiting or diversion • REMS requirements • Redundancy in data collection efforts • Compliance and health management • How to mitigate • Compress distribution channel • Integrate service model with distribution • Include distribution and patient services in pricing

31. Pricing & Reimbursement • Include Distribution and Patient Services in Pricing • Include cost of distribution • Include cost of REMS • Factor in increased risk • Consider impact of ASP • Margin pressure from SPs will force more discounts from the manufacturer • Discounts drive down ASP • Direct distribution can mitigate this impact

32. ASP Adoption Does your organization anticipate moving to ASP-based payments in the next 12-18 months? n = 81 Source: payer survey, reported August, 2008.

33. MFR SP PAYER Manufacturers must change how they look at distribution Payers are insourcing SP ASP ASP+6% AWP vs. ASP Pricing Margin loss to channel No incentive to SP SPs will look for margin on both fronts but will face challenges... The direct model addresses this issue with a Fee-for-Service approach

34. Summary • Profile of a typical orphan drug • …is changing • includes oral medications, subsets of larger patient populations, and personalized medicine • Key Differences • Require high-touch patient services • Higher demand for outcomes data and monitoring • What Defines Success? • Get Approval • Launch Drug • Maximize Sales