Annual health plan cost per employee

$3,939$4,349

$5,001

$5,752

$6,615

1999 2000 2001 2002 2003

Four year cumulative increase = 68 percent

John Erb, Deloitte & Touche, 2001

Health Care Costs Increase

• Diabetes prevalence growing - average treated diabetic has average blood sugar of 220 (Normal is less than 100)

• Despite spending over $15 Billion in cholesterol meds in 2002, only 18% at goal. Most people don’t even know their goal. (Pearson TA – LTAP Arch Internal Medicine 2000;160:459-67)

• 1 in 3 U.S. adults are obese. Total direct & indirect costs related to obesity in the U.S. totaled $117 Billion in 2000.

• Asthma prevalence is increasing and death rate among asthmatic children is rising.

As Costs Increase, Overall Health Declines

3.8 5.5 1237.7

6190.7

152.4

243.4

0

50

100

150

200

250

300

1965 1970 1980 1990 1995 2000 2003(p) 2008(p)

in Billions of dollars

Source: HHS, report to the President, April 2000, http://aspe.hhs.gov/health/reports/drugstudy/

Rising Pharmacy Costs

Cash Isn’t King Anymore

Source: HHS, report to the President, April 2000, http://aspe.hhs.gov/health/reports/drugstudy/

1990: 63% cash 1998: 65% Third Party

Rising Pharmacy Costs

Medical Condition

Brand Medications Aggregate 2001 Sales

Generic Alternative

Allergy Claritin, Zyrtec, Allegra $6.2 Billion Loratidine (Claritin)*

Antibiotic Zithromax, Augmentin, Cipro

$5.9 Billion Cefazolin, Amoxicilin, Bactrim

Arthritis Celebrex, Vioxx $5.7 Billion Ibuprofen*, Naprosyn*

Asthma Advair, Flovent, Serevent $3.7 Billion Ipratrop. Bromide, Aluterol Sulfate

Blood Pressure Norvasc, Zestril, Adalat $5.6 Billion Atenolol, Lisinopril, Verapamil

Cholesterol Lipitor, Pravachol, Zocor $15.3 Billion Lovastatin (Mevacor)

Depression Prozac, Paxil, Zoloft $7.2 Billion Fluoxetine (Prozac)

Diabetes Humulin, Glucophage $3.1 Billion Metformin, Insulin

Anti-ulcer Prilosec, Prevacid $9.2 Billion Omeprazol (Prilosec)*

WorldDoc believes Rx costs should be decreasing with all of the generics now available

*Available as Over the Counter

The Pharmacy Benefit Process

CustomerPharmacy

Pharmacy benefits managers (PBM) are companies that are hired to administer drug benefit programs for employers, government agencies, and health insurance carriers.

Claims Adjudication

Is the member eligible?

Is the drug covered?

What is the co pay?

Are there any interactions (DUR)

PBM Transaction Engines Can Be Rented

= Commodity

PBM Conflict of InterestThe PBM Revenue

Model Claims Processing – Fee paid on a per script basis by clients for adjudicating prescription claims (fees can vary per claim).

Rebates – A fee for achieving certain market share penetration (market share rebate). The rebates range from $6 to $12 for brand medications. [WorldDoc passes all rebates back to client]

Slotting Fee - Pharmaceutical companies pay fee to PBM for placement of brand drug on formulary (access rebate) [WorldDoc all slotting fees back to client]

Administration Fees – Catch all for other fees including management of rebate programs. [WorldDoc doesn’t charge administration fees]

Spreads – Negotiated difference between price PBM pays pharmacy compared to price charged to employer. [WorldDoc doesn’t do spreads]

WorldDoc Rx aligns economic interests of employer and employee with PBM

How generic drugs yield big profits

Example: A 30-day prescription of generic Prozac

Pharmacy Charge: $7.50Patient's co-payment to pharmacy : $5.00 PBM's payment to pharmacy : $2.50

Pharmacy Cost from manufacturer: $1.50 Pharmacy's profit: $6.00(Patient's co-payment plus PBM's payment minus manufacturer's price)

PBM bill to patient's employer: $13.00 PBM's profit: $10.50(PBM bill to employer minus payment to pharmacy)

Managers Take Markups and Still Offer 'Discounts'

By BARBARA MARTINEZ Staff Reporter of THE WALL STREET JOURNAL

Payments by Managers of Drug Plans Face ScrutinyBy MILT FREUDENHEIM December 11, 2003 - The pharmacy benefit companies that manage drug coverage for most working Americans commonly offer millions of dollars in payments to important customers when contracts with them are signed, according to industry executives and consultants. The practice is receiving widespread attention after Justice Department officials on Tuesday accused Medco Health Solutions, one of the largest pharmacy benefit managers, of violating kickback laws by paying $87.4 million to Oxford Health Plans. But industry experts said such payments often added to the drug costs that pharmacy benefit managers, or PBM's, were hired to shrink.

The PBMs claim that some payments are advances against future rebates from drug manufacturers that reward large purchases of certain drugs. Gerry Purcell, a consultant to health plans based in Atlanta, said one example of this was the several million dollars in a package of upfront payments the Texas Employees Retirement System collected from Medco.

The kickback accusations against Medco were added by the United States attorney in Philadelphia, Patrick L. Meehan, to a broader civil complaint against Medco filed in September. The complaint linked the payments to Medco's contracts with Oxford and Blue Cross and Blue Shield plans to provide drugs to federal employees and people in government financed health care programs.

The new filing also added Robert J. Blyskal, a former Medco executive vice president, as a defendant. He is accused of "conducting a coverup of intentional destruction of patient prescriptions at Medco Health's Tampa II mail-order pharmacy in 1998.''

What is WorldDoc Rx?

WorldDoc Rx Product Summary

• National Presence• Pharmacy Provider Network – 55,000 (95%) pharmacies• Customized Benefit Design• Claims Administration & Adjudication• Formulary/Preferred Drug List Management• Data Management/Analysis• Custom Reporting• Drug Utilization Management• Well Established DUR Committee• Health and Disease Management – Both Identification and

Interventions• Integration with WorldDoc Personal Evaluation System and

other health management tools

Personal Evaluation System

WorldDoc Rx

WorldDoc Rx

WorldDoc Rx

WorldDoc Rx

WorldDoc Rx

WorldDoc Rx

WorldDoc Rx

WorldDoc Rx

WorldDoc Rx

WorldDoc Rx Strategy

1. Educate consumers

2. Price transparency3. No Spreads4. No rebilling (right to audit pharmacies)5. Pass through on all rebates

6. Custom plan design that focuses on PMPM not PBM $ (Generics, trial dose, OTC, tablet split, etc)

Complete Product Integration

Health eValuation

EvidenceBased

Medicine

Preventive Services Disease Mgmt.

Demand Mgmt. Cost Control

Quality Control Cost Mgmt.

PES™ Rx

Empowering patients, payers and physicians to make better health care decisions

WorldDoc Mission Statement