Merck Co., Inc. Summary of Medicare Part D and Vaccines

1. Merck & Co., Inc.Summary of Medicare Part D and Vaccines December 2007

2. 2 This information is intended to be an overview from Merck�s perspective, and reflects our general understanding of Medicare coverage and processes for vaccines. Other organizations will need to assess how Medicare issues specifically affect their operations in these circumstances.

3. 3 Objectives Present basic information regarding Medicare coverage of vaccines Describe differences between Part B and Part D coverage of vaccines Provide information on reimbursement processes for Part D vaccine product costs and administration fees Discussion of potential Part D vaccine processes for 2008 Q & A

4. 4 Medicare Coverage of Vaccines New vaccine benefit in Part D starting January 1, 2006 The Medicare Modernization Act (MMA) of 2003 included �vaccines licensed under Section 351 of the Public Health Service Act� as Part D covered drugs CMS information describing if a vaccine is under Part B or Part D �If a vaccine was previously covered under Part B, it will continue to be covered under Part B. If it was previously not covered, then it may be covered under Part D.� Information available at: www.cms.hhs.gov/MLNMattersArticles/downloads/SE0570.pdf

5. 5 Medicare Coverage of Vaccines:Differences between Parts B and D Part B Covers influenza, pneumococcal and Hepatitis B (for high and intermediate risk individuals) vaccines No beneficiary out-of-pocket costs for influenza and pneumococcal vaccines, Copayments and deductible apply for Hepatitis B vaccine Also can cover vaccines in cases of injury or direct exposure (e.g., tetanus toxoid) Physicians bill for product and administration fee on standard medical claim form in well-established process Part B has been primary vehicle for delivery of adult vaccines Part D Copayments, deductibles and coverage gap can be factors for vaccines covered in Part D Vaccine cost reimbursed by Part D, administration fee paid by Part B in 2007, and Part D in 2008 and thereafter Part D does not have well established processes for vaccines 2007 process requires billing vaccine cost to Part D plan, and administration fee to Part B Processes to reimburse 2008 administration fee under Part D are still developing Part D operates on NCPDP 5.1 pharmacy claims system

6. 6 Part D Vaccine Coverage in 2008:Recent CMS Guidance to Part D Plans Final 2008 Call Letter Available at: http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/CallLetter.pdf -the Call Letter describes CMS goals, provides new information and operational reminders to Medicare Advantage organizations and Part D plans for contract year 2008 Section 5 � Vaccine Formulary Coverage, p. 63 ��we will review all sponsors� formularies to ensure they contain all commercially available vaccines (unless excluded due to available reimbursement under Part B, e.g., influenza or pneumococcal vaccines)

7. 7 Part D and Vaccines: Administration Fee Tax Relief and Health Care Act (TRHCA) of 2006, signed by the President on 12/20/06, requires that Medicare providers be reimbursed for administration fees for vaccines covered by Part D beginning 1/1/07 Per TRHCA, Part B will cover the administration fees in 2007, while Part D will cover for 2008 and thereafter CMS has created a G code (G0377) to be used for the administration of Part D vaccines in 2007. Part B deductibles and copayments do apply to the administration fee for Part D vaccines Health care professionals (HCPs) administering Part D vaccines cannot bill Part B for administration fees as of January 1, 2008 General CMS instruction (see bullet below) starting January 1, 2008, is for HCPs to collect administration fee from patient in addition to vaccine product cost, then patient submits paper claim to his\her individual Part D plan for reimbursement If Part D vaccine is billed and reimbursed through a pharmacy, or if a web-based billing mechanism is used, the HCP may not need to collect administration fee from patient A CMS educational article entitled �Important Notice Regarding Vaccine Administrations in 2008� (MLN Matters Article SE0723) and a Merck cover letter provide more information on this topic Merck can provide CMS article and cover letter

8. 8 CMS Guidance to Part D Plans on 2008 Vaccine Administration Fee May 14, 2007 Guidance Document on Vaccine Administration Under Medicare Part D in 2008 Available at: http://www.cms.hhs.gov/PrescriptionDrugCovContra/downloads/MemoVaccineAdministration_05.14.07.pdf CMS encourages billing of vaccine and administration on one claim form Guidance language may lead to stronger consideration of web portal and pharmacy-based vaccination mechanisms CMS expects plans to review claims when vaccine and admin fee are not billed together Vaccine administration fees to be negotiated between plans and pharmacies CMS expects plans to consider factors (e.g, supplies, indirect costs, etc.) used to develop current Medicare administration fees CMS states Part D plans must allow any provider authorized by state law to do so to administer a Part D vaccine Guidance allows pharmacies to establish relationships with immunizers to facilitate processing of vaccine administration fees

9. 9 Part D and Vaccines: Plan Options In Network Options Retail Pharmacy Vaccination at pharmacy allowed in many states Specialty Pharmacy Out of Network Options Default mechanism from Part D regulation � out of network physician office process HCP\Office collects up front payment from patient and patient submits paper claim to his\her Part D plan for reimbursement eDispense Web-Based Billing Mechanism CMS indicated plans could develop other mechanisms to improve access in addition to those listed above

10. Paper Claim Process Financial risk is borne by the beneficiary Beneficiary often uncertain of amount, if any, that will be reimbursed at time of vaccine administration Up front out-of-pocket cost is potential financial barrier to vaccine access for some people; particular disadvantage for low income individuals (Dual Eligibles and others eligible for Part D subsidies) Paper claims processing may be cumbersome for beneficiary; may lead to member dissatisfaction Paper claims processing likely more expensive for plan than automated claims process

11. In-Network Retail Pharmacy

12. Specialty Pharmacy Process May 2007 CMS guidance to plans may reduce interest in the use of specialty pharmacy model for Part D vaccines among plans Eliminates up front out-of-pocket payment Keeps administration in physician office More expensive distribution model for plans for single dose product with lower cost (compared to most specialty products) SPs may lack necessary shipping infrastructure Non-acute nature of vaccines may result in: Lower consumer satisfaction and participation in two visit model

13. eDispense Web-portal Process  Four major Part D plans are implementing this mechanism currently, with more expected to do so in 2008 eDispense launched August 2007 eDispense should be able to process 2008 administration fee billing and reimbursement Negates need for HCP\office to collect all Part D vaccine costs up front Physician subject to portal user agreement Possible issues with integration into physician billing system

14. 14 Long Term Care � Part D Vaccines During Medicare Part A Stays in NFs Q: Can a vaccine reimbursed under Medicare Part D be provided to a Medicare beneficiary in a nursing facility during a Part A (Medicare-covered) stay? A: Yes. According to a CMS letter, Part D covered vaccines are reimbursable for Medicare beneficiaries during a Part A stay because preventive vaccines are outside the scope of the Part A benefit, and no benefit category exists for Part D vaccines in Part B Merck can provide a copy of the CMS letter along with other contextual information

15. Important CMS Resources on Part D and Vaccines December 2006 - CMS Educational Articles to Providers Containing Information on Part D Vaccine Administration Fee Implementation http://www.cms.hhs.gov/MLNMattersArticles/downloads/MM5443.pdf http://www.cms.hhs.gov/MLNMattersArticles/downloads/MM5459.pdf January 2007 - Medicare Rx Update and Educational Article � Informs Pharmacies of Part D Vaccine Administration Fee Implementation http://www.cms.hhs.gov/Pharmacy/downloads/update010107.pdf http://www.cms.hhs.gov/MLNMattersArticles/downloads/MM5486.pdf January 2007 � CMS Educational Article to Providers Furnishing Services under the Hospital Outpatient Prospective Payment System http://www.cms.hhs.gov/MLNMattersArticles/downloads/MM5438.pdf April 2007 � Final 2008 Call Letter to Medicare Advantage Organizations and Part D Sponsors http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/CallLetter.pdf May 2007 � CMS Memo to Part D Plans on Vaccine Administration in 2008 http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/MemoVaccineAdministration_05.14.07.pdf July 2007 � CMS Educational Article on Reimbursement for Vaccines and Vaccine Administration Under Part D http://www.cms.hhs.gov/MLNMattersArticles/downloads/SE0727.pdf August 2007 � CMS Educational Article, Important Notice Regarding Vaccine Administrations in 2008 http://www.cms.hhs.gov/MLNMattersArticles/downloads/SE0723.pdf