1. Value of Pharmaceuticals in Managed Care Pharmacy Presentation Developed for theAcademy of Managed Care Pharmacy Updated: February 2016

2. What is Managed Care Pharmacy? The practice of designing and implementing drug benefits for the more than 270 million Americans covered by public or private health insurance Managed care pharmacy focuses on: Developing drug benefits and utilization programs that promote medication use that improves patient wellbeing while reducing total cost of care

3. The Value Equation in Pharmaceuticals • If quality increases, and cost decreases, value of the pharmaceutical is increased substantially • If quality remains constant, and cost increases, the value decreases • If quality increases, and cost remains constant, the value increases Evidence-based treatments that increase the likelihood of achieving desired health outcomes Usually defined as drug cost, and as applicable administration and adverse effect costs Quality Cost VALUE =

4. Pharmaceuticals in the Total Healthcare Process The value of pharmaceuticals is also taken into consideration for the total healthcare delivery process Three options for treatment of disease Lifestyle changes Pharmaceuticals Surgical /Invasive intervention Least invasive, usually considered first, when appropriate Considering a choice between a pharmaceutical regimen or surgical /invasive procedure, most will choose a pharmaceutical regimen

5. Value of Pharmaceuticals Pharmaceuticals help people to manage their illnesses and live full, productive lives Pharmaceuticals may save money by preventing expensive hospital treatments and other therapies Today’s medicines fund research and development for tomorrow’s prescription drug innovations The FDA approved 39 novel drugs in 2014

6. Value of Pharmaceuticals New Medicines Account for 40% of Increase in Life Expectancy – 1988-2000 Source: FR Lichtenberg, “The Impact of New Drug Launches on Longevity: Evidence from Longitudinal, Disease-Level Data from 52 Countries, 1982-2001,” (Cambridge, Mass., National Bureau of Economic Research: June 2003).

7. Value of Pharmaceuticals • Medical innovation (i.e., newer drugs) accounted for a greater portion (60%) of the increase in life expectancy between 1991-2004 • Of the 3.88-year increase in life expectancy at birth, use of newer drugs accounted for 2.43 years (63%) • Of the 2.15-year increase in life expectancy at age 65, use of newer drugs accounted for 1.19 years (55%) Lictenberg F. “Why Has Longevity Increased More in Some States than in Others? The Role of Medical Innovation and Other Factors,” Manhattan Institute for Policy Research. Medical Progress Report No 4, July 2007.

8. Value of Pharmaceuticals Reductions in Disease Attributed Deaths EFPIA 1999-2002.

9. Value of Pharmaceuticals Diabetes Costs Reduced Through Improved Glycemic Control Source: E.H. Wagner, et al., “Effect of Improved Glycemic Control on Health Care Costsand Utilization,” Journal of the American Medical Association, 285 (2001): 2, 182-189.

10. Value of Pharmaceuticals Summary : The managed care pharmacist is well equipped to help purchasers, payers, providers and patients understand the overall value of pharmaceuticals

11. Thank you to AMCP member Carrie McAdam-Marx for updating this presentation for 2016.