Gaining Lives With Our
Unique PBM Capabilities
Jon Roberts
Executive Vice President &
President, CVS/caremark
Agenda
Performance Highlights
Pharmacy Trends and Cost Management
Programs
Well Positioned to Grow in Evolving Health Care
Environment
©2014 CVS Health
2
Delivering on Our Promises with Strong
PBM Performance
Net Revenue
Operating Profit
($, billions)
($, billions)
13.6%
CAGR
98.2
14.6%
CAGR
76.2
3.1
58.9
2011
3.8
2.2
2013
2015E
2011
2013
2015E
Notes:
1. 2013 excludes Provigil.
2. 2015 reflects midpoint of guidance ranges.
©2014 CVS Health
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2015 Gross New Business of $6.6 Billion
$1.3
billion
$6.6$3.2
billion
$2.1
billion
billion
State of Florida
Health Plan
Government & Union
Employer
Notes:
1. As of 12/4/14.
2. Gross Wins excludes Medicare Part D SilverScript individual products.
©2014 CVS Health
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Net New Client Business of $3.2 Billion
with 96% Retention
Revenues
75% of client non-
($, billions)
6.6
renewals due to
acquisition and
retirees
1.8
0.8
0.8
3.2
Business Not Renewed
Gross New
Business
Acquired
Moved to Exchange
(Primarily Retirees)
Other
Net New Business
4 million members implemented in 2014 … clients highly satisfied
Notes:
1. As of 12/4/14.
2 Net New Client Business excludes Medicare Part D SilverScript individual products.
2.
products
3. Client retention rate is defined as: 1 less (projected 2015 lost revenues from known terminations occurring after January 1, 2014,
divided by estimated 2015 PBM revenues) expressed as a percentage. Both terminations and PBM revenues exclude the individual
PDP business.
©2014 CVS Health
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How We Win: Compete on Price, Differentiate with
Service and Capabilities
Exclusive
Specialty
©2014 CVS Health
Network Strategies
Preferred Network,
Maintenance
Choice®
Advanced
Formulary
y
Strategies
Adherence
Programs
6
Aetna: Continuing to Expand Our Partnership
Aetna Medicare
us ess
Business
Q1 2015
Coventry Commercial
and
a
d Medicaid
ed ca d
Q1 2016
2017
Coventry
M di
Medicare
Maintenance Choice® and Pharmacy Advisor® continue to expand
Note:
1. Aetna Medicare Business lives are moving to the CVS/caremark platform in Q1 of 2015.
©2014 CVS Health
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Maintenance Choice®: Client and Member Value
Drive Continued Adoption
Maintenance Choice Adoption
(members, millions)
~34
20 to 21
10.8
2.9
2009
2012
Maintenance Choice 1.0
2015E
Runway
Maintenance Choice 2.0
Note:
1. Maintenance Choice 1.0 includes Mandatory, Mandatory Opt-Out and Incentive based.
©2014 CVS Health
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Specialty ConnectTM: Like Maintenance Choice®,
Only CVS Health Can Offer
Choose Where to
g Prescription
p
Send / Bring
Counseling From
Therapy-specific
CareTeams
CVS/specialty
CVS/pharmacy
Choose Preferred
Delivery Location
Home / Location of Choice
Full Integration With
CVS/specialty
CVS/pharmacy
~75,000 patients served … half choose the retail pick-up option
©2014 CVS Health
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Pharmacy Advisor® Serves All Our Lines of Business
Cumulative Counseling Interventions
(millions)
99
9.9
7.2
3.8
• Delivering value
in Medicare on
Clinical Star
Measures
1.3
Q4'11
Q4
11
Q4'12
Q4
12
Retail
• Successfully
d l
deployed
d across
Commercial,
Medicare and
Medicaid
Q4'13
Q4
13
Q3'14
Q3
14
Call Center
Note:
1. PBM: Commercial, Medicare, Medicaid and Exchanges.
©2014 CVS Health
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CVS/minuteclinic Savings Strategy Continues to
Grow
Client Adoption
(members, thousands)
14,500
1,200
~14X
88
108
2012
2013
239
2014
2015 Runway
• ~14 fold increase in member
lives enrolled in three years
• Launched capability to
adjudicate CVS/minuteclinic
services through PBM benefit
• Significant opportunity to grow
lives with CVS/minuteclinic
remains
1.2 million total implemented and committed lives to date
Note:
1. CVS Caremark Product Team master client pipeline tracking. Based on implemented plans thru 2014.
©2014 CVS Health
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Enterprise Share: ~40% of PBM Prescriptions
Through CVS Health Channels
CVS Health Share of CVS/caremark Prescriptions
58%
40%
28%
Book of Business
Employer
Health Plan
Opportunity to drive additional enterprise share with health plans
Note:
1. Enterprise share (includes mail) for the nine months ended September 2014.
2. Book of Business includes Medicare Part D SilverScript individual products .
©2014 CVS Health
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Agenda
Performance Highlights
Pharmacy Trends and Cost Management
Programs
Well Positioned to Grow in Evolving Health Care
Environment
©2014 CVS Health
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Fewer New Generics to Mitigate Trend: Spend
Management Programs Increase in Importance
Total Brand Market Sales of Expected Generic Launches
($, billions)
35.0
24.4
14.7
16.5
12.3
5.8
2012
2013
2014E
2015E
2016E
2017E
Note:
1 2013 and
1.
d prior
i iincludes
l d allll actual
t l llaunches.
h
2. 2014E forward includes all actual and expected generic launches in total brand numbers.
3. Forward-looking information assumes no “at risk” launches.
Source: Total brand market sales estimates represent 12 months of sales as reported in the IMS Health NSP file.
©2014 CVS Health
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Specialty is Growing in Absolute Dollars
and Percent of Total Spend
Total Industry Specialty Spend
($, billions)
235
179
127
17%
CAGR
92
2012
2014E
2016E
2018E
30%
38%
45%
50%
Pharmacy spend
Medical spend
Specialty
Percent
of Total
Drug
Spend
Infused oncology
Source: NHE, Artemetrix, CVS/caremark internal analysis, 2013.
©2014 CVS Health
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Return of Double-digit Trend Requires Tighter
Cost Controls
Payor Trend
10 3%
10.3%
3.8%
0.1%
2012
2013
2014E
Source: 2014 - Enterprise Analytics as of Q314; excludes compounds due to client-specific strategies.
©2014 CVS Health
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Our Unique Set of Tools to Manage Trend
Traditional /
Non-specialty Drugs
F
Formulary
l
Managed
Managed,
Advanced, Value
30- and 90-day Retail,
Networks Mail,, Maintenance Choice
Utilization
Management
Prior Authorization,
Retrospective review
Site Of
Care
Claims
Editing
Care
Coordination
©2014 CVS Health
Specialty Drugs
In Pharmacy
Specialty Drugs
In Medical
Ad
Advanced
d Specialty
S
i lt
Preferred, Exclusive and Infusion Networks
Cross-Benefit Clinical Guideline
Management and PA
Site of Care Transition Management
with Coram Nurses
Prior Authorization,
Authorization
Retrospective Review
Pharmacy Advisor®
Pharmacy Benefit
Claims Edits
Medical Benefits Claims
Edits with Novologix
Technology
CareTeam including Pharmacist,
Accordant and Coram Nurses
17
A Closer Look: Our Formulary Options Save Clients
Money and Drive Increased Use of Generics
Managed
Formulary
CVS/caremark led industry with
introduction of strategy to exclude certain
branded drugs from formulary
• Approach delivers savings to clients and
their members
• Improved rebates on formulary brands
• Increased penetration of generics
Have excluded more drugs to date than
other traditional PBMs
Incremental savings of over $3
$3.5
5 billion expected ’12
12 through ‘15
15
Source: CVS/caremark internal data, 2014.
©2014 CVS Health
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A Closer Look: Our Formulary Options Save Clients
Money and Drive Increased Use of Generics
Savings
Less
More
Managed
Formulary
Advanced
Formulary
Value
Formulary
Client
S i
Savings
1% to 2%
3% to 5%
10% to 12%
GDR
Increase
0 5%
0.5%
1 0%
1.0%
8% tto 10%
Incremental savings of over $3
$3.5
5 billion expected ’12
12 through ‘15
15
Source: CVS/caremark internal data, 2014.
©2014 CVS Health
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A Closer Look: Our Network Options Offer Savings
and Choice
Savings
Less
Retail 90
Maintenance Choice®
2.0
More
Maintenance Choice®
1.0
90-day
Network
National
Advanced ChoiceTM
Exclusive Choice
68,000
50,000
pharmacies
h
i
19,000
pharmacies
h
i
30-day
30
day pharmacies
h
i
Network
©2014 CVS Health
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Agenda
Performance Highlights
Pharmacy Trends and Cost Management
Programs
Well Positioned to Grow in Evolving Health Care
Environment
©2014 CVS Health
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Evolving Health Care Environment:
Consumer is at the Center
150%
%
3X
growth in
CDH
enrollment
expected
covered lives
by 2018
CONSUMERS
10K
people per
day turning
65
40+%
projected
increase
in lives from
2013
Source: CDH - Employer Health Benefits Survey 2014; Exchanges - CBO 2014 beginning with 2013 enrollment; Medicaid – Avalere 2014; Medicare: Pew Research
Center.
©2014 CVS Health
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Five Factors Positioning Us for Solid Growth
Positioned To Grow
With Our
O Integrated
I t
t d Assets
A
t
and Deep Expertise
1
2
3
Only CVS –
Differentiated
Member
Experience
Growth in
Government
Programs:
Medicare and
Medicaid
Winning With
Health Plans
4
5
Supporting
Providers in
New
Reimbursement
Models
Exceptional
Service
Investing for the Future
©2014 CVS Health
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Only CVS – Differentiated Member Experience:
Helps Members Better Manage Health and Costs
1
CVS/minuteclinic
Nurse
CVS Retail
Pharmacist
Call Center
Pharmacist
CVS/specialty Care
Team
Benefit Opportunity
Specialist
Infusion Nurse
Digital Tools
©2014 CVS Health
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Growth in Government Programs: Medicare Growth
Through SilverScript and Our Health Plan Partners
SilverScript Choice
and SilverScript Plus
2
Medicare Members By PBM
(millions)
8.4
OptumRx
• Competitively priced
7.2
Express Scripts
• Zero deductible and
low premium
CVS Health
• Personalized
marketing
Catamaran
69
6.9
6.3
Humana
3.9
1.6
Cigna
Prime
MedImpact
Envision
Captive
p
PDP
1.5
0.7
0.4
Captive
p
MAPD
NonCaptive
p
Source: CMS (Membership figures as of October 3, 2014)
©2014 CVS Health
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Growth in Government Programs: Medicare
Membership Projected to be ~7.5
7.5 Million
2
January 2015 CVS/caremark Projected Medicare Members
(millions)
0.2
7.5
Health Plan
& EGWPs
2015E
Medicare
Members
0.4
6.9
2014
Medicare
Members
Individual
PDP
Note: Preliminary projections on 12/8/14 after the close of the Medicare Annual Enrollment Period.
©2014 CVS Health
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2
Growth in Government Programs: Increased
Medicaid Enrollment with Lives Growth
Managed Medicaid Enrollment
2015 Managed Medicaid PBM
(lives, millions)
(estimated % of lives)
40+%
9.9
31
31.7
44.4
Express Scripts
21%
Other
34%
2.8
8
MedImpact
2013 MCO Increased
Enrollment Utili
Utilization
ti off
MCOs and
Organic
Growth
2016 MCO
New
Enrollees Enrollment
from ACA
Eligibility
Expansion
8%
Prime
2%
Catamaran
6%
OptumRX
19%
10%
Source: CVS/caremark analysis, Avalere September 2014. MCO = Managed Care Organization
©2014 CVS Health
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Winning with Health Plans: $3.2 Billion Gross New
Business and 30 Total Exchange Clients in 2015
Unique
q PBM
Model
Comprehensive
p
services that meet needs for cost
control, quality, enhanced capabilities
Comprehensive
p
Specialty
Solutions
Holistic approach to manage specialty pharmacy
across both pharmacy and medical benefits
Member Access
and Engagement
Enterprise services that create competitive
advantage in the B2C environment
Expertise in
Government
Programs
Line of business expertise to drive growth,
compliance and innovation
©2014 CVS Health
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28
Supporting Providers in New Reimbusement
Models: Patient-centered
Patient centered Medical Home Example
CVS/pharmacy
CVS/caremark
Adherence counseling
and Electronic Health
Record notification of
patient non-adherence
and gaps in therapy
Pharmacists provide
counseling on adherence
and comprehensive
medication review for
vulnerable patients
CVS/minuteclinic
CVS/specialty
Support their patient
management with
programs
such as diabetes
counseling and
smoking cessation
©2014 CVS Health
Patient-centered
M di l Home
Medical
H
4
CareTeam p
pharmacist
and Accordant nurse
serve as extension of
clinical team
29
Supporting Providers in New Reimbusement
Models: Patient-centered
Patient centered Medical Home Example
CVS/pharmacy
CVS/caremark
Adherence counseling
and Electronic Health
Record notification of
patient non-adherence
and gaps in therapy
Pharmacists provide
counseling on adherence
and comprehensive
medication review for
vulnerable patients
CVS/minuteclinic
CVS/specialty
Support their patient
management with
programs
such as diabetes
counseling and
smoking cessation
©2014 CVS Health
Patient-centered
M di l Home
Medical
H
4
CareTeam p
pharmacist
and Accordant nurse
serve as extension of
clinical team
30
Exceptional Service: We’re Raising the Bar to
Ensure Continued Success
Continue to Evolve
Service Culture
Invest in
Infrastructure
• Define success
• Integrated delivery
channels
• Make the metrics
visible
• Reward achievement
©2014 CVS Health
• Automated benefit
builder
5
Monitor
Performance
Metrics
• Holistic view of
operational
performance
• Artificial intelligence
in call centers
• Early detection of
trends; avoidance of
escalated issues
• Digital capabilities
• Speedy resolution
31
Positioned for Today, Preparing for Tomorrow
Made the Right Moves
Investments and Innovations address payor needs
Effectively engaging members and providers
Winning in the marketplace with integrated model
Still … Onl
Only CVS
S l and
Scale
d expertise
ti ensure competitive
titi pricing
i i
Differentiated offerings drive client retention and wins
Looking Ahead …
Continued Innovation
Sustainable Growth
Continue to expand unique breadth of capabilities
Partnering with health plans to meet their needs
Unmatched capabilities to win in fast-growing sectors
Positioned for sustainable growth as market evolves
Gaining Lives With Our Unique PBM Capabilities
©2014 CVS Health
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