Delivering Value Today,
Ensuring Growth
for Tomorrow
Jon Roberts
Executive Vice President &
President CVS/caremark
President,
Agenda
Demonstrating
Demonstrating Value:
Value:
PBM
P
f
Highlights
Hi
hli ht
PBM Performance
Performance
Highlights
Addressing Clients
Clients’ Top Concern: Cost
Ensuring Growth: Our Integrated Model and the
E l i Health
Evolving
H lth Care
C
Market
M k t
2
Continued Strong PBM Performance
Net Revenue
Operating Profit
($, billions)
($, billions)
15.6%
15.0%
121.5
4.4
CAGR
CAGR
3.5
88.4
2.2
58.9
2011
2014
Note:
1. 2016E based on midpoint of 2016 guidance.
3
2016E
2011
2014
2016E
Another Successful Selling Season:
Gross New Business Wins of $13.5 Billion for 2016
13 5B
13.5B
$1.8B
$11.2B
IN NEW
BUSINESS WINS
State of Oklahoma
State
St
t off
Illinois
Health Plan
Government & Union
Employer
Notes:
1. As of 12/04/2015.
2. Gross wins exclude Medicare Part D SilverScript individual products.
4
Net New Client Business of $11.5 Billion for 2016
with 98% Retention
Revenues
60% of client
($, billions)
13.5
non-renewals
l
due to acquisition
and retirees
0.8
0.4
0.8
11.5
Business Not Renewed
Gross New
B i
Business
Acquired
Moved to Exchange Competitive
(P i
(Primarily
il R
Retirees)
ti
)
/ Other
Oth
Net New Business
Expect another highly successful welcome season
Notes:
1. As of 12/04/2015.
2. Gross wins exclude Medicare Part D SilverScript individual products.
5
Gross New Business Creates Share Gain Opportunity
GROSS WINS BY CHANNEL
ENTERPRISE SHARE
54%
$0.6B
Mail Choice
28%
$1.8B
22%
Specialty
data
$11.1B
$
Retail
Networks
New
Existing
Existing
Business Health Plan Employer
Notes:
1. Enterprise share represents the percent of Rx volume dispensed through a CVS Health enterprise channel (Mail, Specialty, Retail).
2. All claims on a 30-day equivalent basis.
6
Client Priorities: Prescription Drug Cost
Top Concern Across Segments
AVOIDING
DISRUPTION
MEDICARE
EXPERTISE
MEMBER
SERVICE
UTILIZATION
& CLINICAL
PROGRAMS
LEVEL OF IMPORTANCE
7
CLIENT
SERVICE
PRESCRIPTION
DRUG COST
Our Model Provides Flexibility to
Address
dd ess C
Client
e t Priorities
o t es
Employers
AVOIDING
DISRUPTION
MEDICARE
EXPERTISE
MEMBER
SERVICE
UTILIZATION
& CLINICAL
PROGRAMS
LEVEL OF IMPORTANCE
8
CLIENT
SERVICE
PRESCRIPTION
DRUG COST
Our Model Provides Flexibility to
Address
dd ess C
Client
e t Priorities
o t es
Health Plans
AVOIDING
DISRUPTION
MEDICARE
EXPERTISE
MEMBER
SERVICE
UTILIZATION
& CLINICAL
PROGRAMS
LEVEL OF IMPORTANCE
9
CLIENT
SERVICE
PRESCRIPTION
DRUG COST
Our Model Provides Flexibility to
Address Client Priorities
Medicare
AVOIDING
DISRUPTION
MEDICARE
EXPERTISE
MEMBER
SERVICE
UTILIZATION
& CLINICAL
PROGRAMS
LEVEL OF IMPORTANCE
10
CLIENT
SERVICE
PRESCRIPTION
DRUG COST
Multi-segment PBM Market Demands Flexibility
Employers
p y
Government
and Unions
Health
Plans
Expertise, flexibility and proven performance support our continued growth
11
Delivering on Client Priorities:
Clients and Members Highly Satisfied with Service
2015 Client Satisfaction
2015 Member Satisfaction
96%
95%
CVS/caremark scored highest in overall customer satisfaction
in 2015 PBMI Survey
Source: PBMI 2015 Pharmacy Benefit Management Customer Satisfaction Report; PBMs with >20M members.
12
Delivering on Client Priorities: Medicare
Consultative Services
Competitiveness
Actuarial
A
t
i l / bid,
bid formulary
f
l
and plan
design support
Progressive and
integrated strategies to
help manage trend
MEDICARE
HEALTH
PLAN
Star Ratings
g
73% of client lives are
4 to 5 Star p
plans
Compliance
p
Robust compliance
support for complex
regulatory environment
Note:
1. Star ratings for 2016 based on internal analysis of CMS data released October 2015. Star rating based on weighted average enrollment by parent
organization. Only plans that were CVS/caremark managed for the 2016 measurement period and received a Star rating were included.
13
Delivering on Client Priorities: Clinical Programs
MEDICATION
RECONCILIATION
48% reduction in hospital
p
readmissions; $3,300
savings per patient
counseled
PHARMACY ADVISOR
Pharmacist counseling:
4% increase in
adherence; 7.5%
reduction in gaps
in care
ROBUST UTILIZATION
PROGRAMS
6% savings for medical
and pharmacy
benefits from
specialty utilization
management
SPECIALTY CARE
MANAGEMENT NURSE
Enhanced outreach:
60% engagement
rate; reduce
hospitalizations
by 23%
Note:
1. Savings quoted may vary based on various factors including things such as plan design, programs adopted and demographics.
Sources:
Pharmacy Advisor : CVS/caremark internal data
data, 2013
2013. Medication Reconciliation: CVS/caremark sample study
study, 2014
2014. Robust UM (integrated PA)
CVS/caremark Specialty Client Solutions and Trend Management, 2013, internal analyses for estimated program savings. Specialty engagement source:
Accordant® - Comprehensive Data Warehouse; SQL Server 2008. Greensboro, NC: care management Health Services, a CVS/caremark Company; 2013
www.hpminstitute.org/content/wellness-and-disease-management-podcast-industry-specialist-judy-mueller.
14
Agenda
Demonstrating Value:
PBM Performance
P f
Highlights
Hi hli ht
Clients’ Top Concern: Cost
Addressing Clients
Ensuring Growth: Our Integrated Model and the
E l i Health
Evolving
H lth Care
C
Market
M k t
15
Size and Scale Ensures Competitive Cost
Generic
Purchasing
•
Sourced through Red Oak, the largest generic sourcing
entity in the U.S.
Formulary
Management
•
$6.4B in incremental client savings ‘12-’16E from our
leading formulary management strategy
Specialty
Pharmacy
•
Largest specialty pharmacy; able to manage cost across
pharmacy and medical benefit
Competitive
Networks
•
1.34B adjusted claims estimated in 2016 through our
multiple networks
Cost of
Service
•
•
Streamlining continues to deliver value as volume grows
Technology investments enable regulatory compliance
Note:
1. 2016E based on midpoint of 2016 guidance.
16
Comprehensive Program Addresses 3 Possible
Areas of Fraud, Waste and Abuse
MEMBER
• Medication abuse / misuse
• Doctor shopping
• Pharmacy shopping
CVS/caremark provides:
PRESCRIBER
high risk
• Review of high-risk
prescribing patterns
• Illegal or irresponsible prescribing
• Robust network pharmacy
credentialing program
PHARMACY
• Pharmacy
Ph
audits
di
• Fraudulent billing
• Inaccurate dispensing
• Drug diversion
• High- and low-touch
interventions
• Active and retrospective
claims monitoring
For 2015, CVS/caremark pharmacy audits will lead to more than $240M in
savings and recovery of incorrect
incorrect, improper or fraudulently-billed claims
Source: CVS/caremark internal data.
17
2014 Double-digit Pharmacy Trend: A Call to Action
IMPACT TO TREND
1 0%
1.0%
2.0%
3.4%
(5.9)%
1.5%
11.8%
2.1%
7.7%
2014 Book
of Business
Trend
Nonspecialty
Brand
Inflation
Specialty Utilization
Brand
Inflation
Note:
1. Trend is net of rebates.
Source: CVS Health Enterprise Analytics, Book of Business Trend Cohort.
18
Hep C Compounds Generic
Inflation
Drug Mix
RxInsights: Client-Specific Reporting on Trend
Performance and Key
y Metrics
EXECUTIVE SUMMARY
Note:
1. Sample data, actual results may vary.
19
CVS HEALTH - COMPREHENSIVE SOLUTIONS TO MANAGE TREND
IDENTIFY
EMERGING
TREND
EXPLORE
ROOT CAUSES
MANAGE
THROUGH
FORMULARY
OPTIMIZE
CHANNEL
Interactive RxInsights
Individual classes are p
plotted below. The g
graph
p is showing
g the relationship
p between Cost and Contribution to Trend. Size represents
p
the Cost/Days
y Supply
pp y for a g
given class.
CLASS ANALYSIS BY CONTRIBUTION
5%
TREND
11.2%
4%
RxInsights
Demo
3%
2%
1%
0%
-1%
-2%
-3%
$0
$1
$2
$3
$4
$5
$6
$7
$8
GROSS COST PMPM TREND
$
$120
$100
$80
J
January
2014
M 2014
May
S t b 2014
September
J
January
2015
M 2015
May
S t b 2015
September
©2015 CVS Health and/or one of its
affiliates: Confidential and Proprietary
Strong Adoption of Key Cost Management Solutions
… Meaningful Opportunity Remains
Current Lives
Total Lives
Opportunity
Savings
MAINTENANCE
CHOICE
23M
44M
Up to 4%
TOTAL NETWORK
STRATEGIES
37M
75M
Up to 4%
FORMULARY
STRATEGIES
25M
53M
Up to 12%
EXCLUSIVE
SPECIALTY
35M
50M
Up to 7%
SPECIALTY MEDICAL
MANAGEMENT
10M
41M
Up to 13%
Notes:
1 Current Lives includes 2016 known enrollments
1.
enrollments.
2. Exclusive Specialty savings apply to specialty spend under the pharmacy benefit.
3. Specialty Medical Management opportunity based on Health Plan lives in PBM book of business; savings apply to specialty spend under the medical benefit.
4. Savings results will vary based on a variety of factors including demographics, plan design and other programs implemented by the client.
21
Adoption of Our Plan Designs Helps Reduce Plan
Costs While Growing Enterprise Share
Enterprise Share Growth in a Multi-state Health Plan
11.4 pp
increase
31.3%
26.7%
19.9%
2010
2013
2016E
Plan has implemented programs that reduce plan and member cost
and grow enterprise share
22
2014 Year-to-date
2015
Double-digit Trend
Pharmacy
Summary
Trend: A Call to Action
JAN THROUGH SEP COMMERCIAL TREND
11.8%
1.6%
(0.3)% (1.9)%
0.8%
2.3%
6.4%
2015
2014
YTD
Book
Book
of Business
Trend
6 7%
6.7%
Nonspecialty
Brand
Inflation
Specialty Utilization
Brand
Inflation
Note:
1. Trend is net of rebates.
Source: CVS Health Enterprise Analytics, Book of Business Trend Cohort.
23
(2.8)%
Hep C Compounds Generic
Inflation
Drug Mix
Agenda
Demonstrating Value:
PBM Performance
P f
Highlights
Hi hli ht
Addressing Clients
Clients’ Top Concern: Cost
Ensuring Growth: Our Integrated Model and the
E l i Health
Evolving
H lth Care
C
Market
M k t
24
Driving Market Evolution: Government Programs
Linking
g Payments
ay e ts to Qua
Quality
ty
1 in 3
Americans are currently
covered by governmentsponsored
p
health
insurance programs
$1off every $2
spent on health care goes
through Medicare and
M di id
Medicaid
50% of traditional
Medicare spending
will be linked to quality incentives by 2018
% OF MEDICARE
SPENDING TIED TO
QUALITY INCENTIVES
50%
20%
2014
2018
To succeed, payors and providers must align with CMS focus on quality
Notes:
1. Health Affairs – National Health Expenditure Projections 2014-2024, July 2015.
2. Modern Healthcare, January 26, 2015.
25
Our Model Uniquely Meets Evolving Needs
Integrated Assets
and Ability to Improve Outcomes
Position Us for Growth
Data and
analytics to guide
interventions
and help optimize
outcomes
Effective outreach
to consumers
between visits to
the doctor
Connectivity and
coordination
with providers to
help them succeed
in new risk models
1
2
3
Capabilities to
reduce risk of
readmissions
and support
transitions in care
Supporting market initiatives linking payments to quality
26
4
We Make Data Actionable and Deliver It When and
Where Interventions Can Do the Most Good
Patient
Providers
Hospitals
Optimal Interventions
P
Powered
d by
b the
th
Health Engagement Engine
Foundation of rich data and analytic expertise
27
1
Data/Analytics Guide Interventions
Post-acute Care
CVS Health Uses Pharmacy Data to Help Providers
Reduce Risk and Improve Quality
Which of my
patients are high
p
g
risk?
Risk Adjustment Targeting:
Accurate assessment of p
population
p
risk to help
p
optimize reimbursement
Who will drop
off therapy
and when?
Adherence Prediction:
Assess a patient’s risk of non-adherence to more
effectively target adherence interventions
Who could incur
high costs in the
next 12 months?
Vulnerable Patient Index:
Identify patients at high risk of steep increase in health
care costs to enable interventions to improve adherence,
safety and outcomes
Vulnerable patients have 3.5X higher cost of care
Note:
1. CVS Health uses and shares data as allowed by applicable law, our agreements and our information firewall.
Source: CVS/caremark internal analysis.
28
1
Data/Analytics Guide Interventions
Connected Assets Support Effective
Consumer Outreach
CVS/omnicare
™
Adherence
counseling
Support for
self-management
of chronic conditions
Medication
reviews for high
risk patients
Wellness support
Specialty condition
management
Note:
1. CVS Health uses and shares data as allowed by applicable law, our agreements and our information firewall.
29
2
Effective Consumer Outreach
Omnicare
Omnicare
support
Supportfor
for
Transitions
transitions inincare
Care
Connecting with At-risk Providers and Extending
the Care Team to Help Them Succeed
Adh
Adherence
opportunities
t iti
Intervention
results
Medication
M
di ti and
d
allergy info
MinuteClinic
visit summaries
Provider
Affiliated with 60+ health systems to share data and support patient
interventions and better outcomes
Note:
1. CVS Health uses and shares data as allowed by applicable law, our agreements and our information firewall.
30
3
Provider Connectivity
Supporting Patients After Discharge from Hospital:
Care Transitions Challenge the System
1/5 readmitted within 30 days
3/4 of these readmissions
are preventable
2/3 readmissions related to medication
issues
Costs: $12B per year
Sources:
1. Health Affairs Health Policy Brief, November 12, 2013, Medicare Hospital Readmission Reduction Program.
2. Annals of Internal Medicine; The Incidence and Severity of Adverse Events Affecting Patients after Discharge from the Hospital, 2003.
31
4
Transitions in Care
Supporting Patients After Discharge from Hospital:
Reducing Risk, Improving Outcomes
Medication Reconciliation by Pharmacist
Shown to reduce readmissions by 48%
Home Infusion Services
Earlier discharge; alternative, lower-cost sites of care
High-touch Specialty Services
Adherence support; rare disease management
Skilled Nursing or Long-term Care
Helping patients through complex changes in
regimen as they transition
Only CVS Health can provide this end-to-end solution
Note:
1. CVS/caremark sample study, 2014.
32
4
Transitions in Care
One-of-a-kind: Assets and Capabilities to Connect
and Coordinate with All Stakeholders
LARGEST SPECIALTY
PHARMACY
LARGEST
RETAIL CLINIC
RETAIL PHARMACY
FOOTPRINT
INDUSTRY-LEADING
PBM PROGRAMS
33
Integrated
Model Helps
Lower Costs
and
Improve
Outcomes
LARGEST HOME
INFUSION
LEADING POST-ACUTE
PHARMACY SERVICES
The Right Strategy for an Evolving Health Care Market
Demonstrating Value
Industry-leading trend management tools / solutions
to People, Payors and Providers
Provider and patient support that improves outcomes
Growing
g the Core,,
Broadening the Base
Always Looking
Ahead
Driving Sustainable
Enterprise Growth
Flexibility to meet evolving market needs
Adding value with new capabilities
IInnovative
ti solutions
l ti
foster
f t expanded
d d payor and
d
provider relationships
Integrated assets serve expanding market segments
and evolving payment models
Delivering Value Today, Ensuring Growth for Tomorrow
Endnote
1.
35
, CVS/caremark, CVS Caremark, RxInsights, Maintenance Choice, Health Engagement
Engine and CVS/omnicare are trademarks or registered trademarks of CVS Pharmacy, Inc.