experience is ourstrength

Transcription

1 TREND REPORT 2008 Our experience is ourstrength

2 Certified by: Rated No.1 in overall member satisfaction in 2007 by:

3 contents Executive Summary Perspective: A Look at National Healthcare Trends Performance: Measures of Our Success Passion: Committed to Real-life Results Appendix 1: Methodology Appendix 2: Top Therapeutic Classes Walgreens Health Initiatives, Inc., a wholly owned subsidiary of Walgreen Co. All rights reserved. Material from this publication may not be reprinted or reproduced without advance written permission from Walgreens Health Initiatives, Inc. Brand names are the property of their respective owners. Claims made in this publication about the efficacy of the medications referenced have been made by the medication manufacturers. The inclusion of a medication in this publication is not deemed an endorsement by Walgreen Co., or its subsidiaries and affiliates. Numbers in this report may not total as expected due to rounding. CONTENTS 1

4 Experience, perspective, performance, and passion. Walgreens Health Initiatives embodies these strengths every day to help our clients achieve their benefit plan goals, including trend management. I m proud to announce that, in 2007, our clients average total prescription medication cost increase, or drug trend, was only 4.80%, excluding specialty medications. The overall trend was 5.66% when specialty pharmacy medications are included. This is an impressive 26.3% improvement over last year s trend, and represents our fourth consecutive year of single-digit trends. Demonstrating the effectiveness of our cost-management strategies is the highly managed plans trend of -0.07%, which illustrates the enormous impact our aggressive plan management options can have. As in past years, our methodology to calculate trend remains the same. Clearly defined, the trend was calculated by comparing the average per member per year total cost in 2007 and It is important to note that our trend is based on all clients meeting our inclusion criteria (see Appendix 1), rather than a random sampling of clients or clients members, a common industry practice. This approach demonstrates the company s commitment to transparency in business practice and philosophy. Our generic dispensing rate increased from 56.8% in 2006 to 61.2% in 2007 always a key objective, as our analysis shows that for every 1.0% increase in generic utilization, clients realize approximately a 2.0% savings in total plan cost. And, even more impressive was our generic dispensing rate of 69.6% for our entire book of business (including Medicare) outstanding in the PBM industry. Ninety-day supply dispensing through our mail service and retail Advantage90 programs increased, placing Walgreens Health Initiatives at the forefront of the industry in 90-day maintenance medications dispensed. These 90-day prescriptions, when normalized to 30-day supplies, represented 35.9% of our processed prescription claims. In 2007, medication prices increased by 3.54%, making price the most significant trend driver. Increases in utilization, defined as the change in the number of units dispensed per covered life from 2006 to 2007, occurred in 21 of the top 25 therapeutic classes. Product mix, decreasing 1.67% from 2006, served to moderate the trend, due to our aggressive promotion of generic utilization, preferred-brand alternatives, and appropriate over-thecounter choices. Therapeutic classes that were top contributors to the 2007 Walgreens Health Initiatives trend were antidiabetic medications, accounting for 11.9%, and antiasthmatic agents, accounting for 11.6%. New brand-name medications, which cost 4.7 times more than their generic counterparts in 2007, contributed just 0.62% to the overall trend. EXECUTIVE SUMMARY 2

5 Last year, for the fifth consecutive year, Lipitor, a cholesterol-lowering medication, was the No.1 brand-name medication dispensed. However, a significant decrease in spend for Lipitor is likely due to the June 2006 market entry of the generic alternative, simvastatin. For the fourth consecutive year, cholesterol-lowering medications accounted for the largest share of total spend at 9.8% in In 2007, Walgreens Health Initiatives clients saw a 16.8% increase in the costs of specialty medications, which accounted for just 0.4% of total prescriptions dispensed, but 8.0% of total spend. The average cost per prescription for a specialty medication was $1,690 in 2007, approximately 25.6 times more than the average cost for a nonspecialty medication. The share of spend for the hundreds of specialty pharmacy medications in the pipeline is projected to increase significantly. When it comes to choosing your PBM, it s performance that counts. Walgreens Health Initiatives was named the highest rated PBM nationally in overall member satisfaction in the 2007 WilsonRx PBM Member Satisfaction Survey.* We take pride in this reflection of our ability to balance plan savings and member satisfaction. With our experience, perspective, and passion, we can help deliver the strong performance you want in excellent client service, effective cost management, and quality patient care. The analyses contained in Walgreens Health Initiatives Outlook demonstrate how our strengths can not only help you to better understand the market forces that shaped pharmacy benefit management in 2007, but also to prepare for what lies ahead. Richard Ashworth, PharmD Executive Vice President Walgreens Health Initiatives, Inc. EXECUTIVE SUMMARY *Source: 2007 WilsonRx Pharmacy Survey, 2007 Wilson Health Information, LLC - New Hope, Pa. For information visit or info@wilsonrx.com. 3

6 Our strength is our PERSPECTIVE 4

7 A Look at National Healthcare Trends Growth in healthcare spending in the United States was projected to be 6.7% in 2007, according to the Centers for Medicare & Medicaid Services (CMS). Average annual growth was expected to remain near that rate for the next 10 years. The rate of growth in prescription medication expenditures slowed in 2007 but CMS anticipates that the growth rate will accelerate for the period from 2008 through 2017, due in part to a projected leveling off of growth in the generic dispensing rate (GDR) and evolving treatment guidelines that call for earlier introductions of pharmacotherapy. 1 Prescription Medication Developments in 2007 The prescription medication landscape is always changing. New medication approvals, combination agents, indications, dosage forms, first-time generics, and patent expirations are described in this section of the report. Selected New Medication Approvals There were a number of notable approvals in 2007 (see Table 1). In the nonsedating antihistamines (NSA) class, which currently has several generic and over-the-counter (OTC) options, Xyzal is a new addition. Tekturna represents a new class of blood pressure medications. Known as renin inhibitors, these medications work by a different mechanism than existing medications used in blood pressure treatment. Isentress TM and Selzentry TM represent two new classes of medications to treat HIV. Isentress is an integrase inhibitor, while Selzentry is an entry inhibitor. Many strains of HIV can be resistant to medication therapy. These new options expand the availability of HIV therapies. In the oral contraceptive category, Lybrel enables women to avoid menstruation completely by taking the medication year round. In the specialty medication category, U.S. Food and Drug Administration (FDA) approvals of new medications are increasing. A total of six new oncology medications were approved in 2007, as compared with three in Selected New Combination Medication Approvals Each of the four newly approved combination agents offers two commonly prescribed medications in a single dosage form to improve convenience and decrease cost for members (see Table 2). Janumet TM is a combination of sitagliptin and metformin that is taken twice daily. It reduces the number of pills taken by people with diabetes to improve adherence to therapy and blood glucose control. 1 Growth in national health expenditures projected to remain steady through 2017; health spending growth expected to continue to outpace economic growth and growth in general inflation [press release]. Washington, DC: Centers for Medicare & Medicaid Services; February 26, eckdate=&checkkey=&srchtype=1&numdays=3500&srchopt=0&srchdata=&srchopt=0&srchdata=&keywordtype=all&chknewstype=1%2c+2%2c+3%2c+4%2c+5&intpage=&showal l=&pyear=&year=&desc=&cboorder=date. Accessed March PERSPECTIVE 5

8 Table 1: Selected New Medication Approvals, , 2 Therapeutic Use Brand Name (Manufacturer) Generic Name FDA Approval Date 3 Projected Impact 4 Cost 5 Nonspecialty Medications Allergy Veramyst TM (GlaxoSmithKline) fluticasone 04/07 Low $$ Xyzal (UCB/Sanofi-Aventis) levocetirizine 05/07 Medium $ Attention deficit hyperactivity disorder (ADHD) Vyvanse TM (Shire US) lisdexamfetamine 02/07 Medium $$ Blood pressure lowering Bystolic TM (Forest Laboratories) nebivolol 12/07 Low $ Tekturna (Novartis) aliskiren 03/07 Medium $ HIV Isentress TM (Merck & Co.) raltegravir 10/07 Medium $$$$$ Selzentry TM (Pfizer) maraviroc 08/07 Medium $$$$$ Parkinson s disease Neupro (Schwarz Pharma) rotigotine 05/07 Low $$$ Specialty Medications Blood disorders Soliris (Alexion) eculizumab 03/07 Low $$$$$ Growth hormone Valtropin (BioPartners and LG Life Sciences) somatropin recombinant 04/07 Low $$$ Hormone therapy Somatuline Depot (Tercica) lanreotide 08/07 Low $$$ Supprelin LA (Indevus Pharmaceuticals) histrelin 05/07 Low $$$$$ Oncology Ixempra TM (Bristol-Myers Squibb) ixabepilone 10/07 Low $$$$$ Tasigna (Novartis) nilotinib 10/07 Low $$$$$ Torisel TM (Wyeth Pharmaceuticals) temsirolimus 05/07 Low $$$$$ Totect (TopoTarget) dexrazoxane 09/07 Low $$$$$ Tykerb (GlaxoSmithKline) lapatinib 03/07 Low $$$$$ 1 Drugs approved by the FDA (2007). CenterWatch Clinical Trials Listing Service. Accessed February New drugs approved by the FDA in Adapted from Pharmacist s Letter. 2008; vol 24: detail document Drugs@FDA. US Food and Drug Administration. Accessed February Range is low, medium, high, and is based on cost of medication and expected number of prescriptions. 5 Cost is for 30-day supply: Average wholesale price (AWP) X DACON X 30; DACON = daily average consumption = average quantity dispensed/average days supply; $ = < $100, $$ = $100 to $249, $$$ = $250 to $499, $$$$ = $500 to $1,000, $$$$$ = > $1,000. PERSPECTIVE 6

9 Table 2: Selected New Combination Medications, ,2 Therapeutic Use Brand Name (Manufacturer) Generic Name FDA Approval Date 3 Projected Impact 4 Cost 5 Blood pressure lowering Azor TM (Daiichi Sankyo/Forest Pharmaceuticals) amlodipine and olmesartan 09/07 Low $$ Exforge (Novartis) amlodipine and valsartan 06/07 Low $ Diabetes Janumet TM (Merck & Co.) sitagliptin and metformin 03/07 Medium $$ Glaucoma Combigan TM ophthalmic solution (Allergan) brimonidine and timolol 10/07 Low $$ 1 Significant new dosage forms. Adapted from Pharmacist s Letter. 2008; vol 24: detail document Drug and biological approvals for calendar year Center for Drug Evaluation and Research, US Food and Drug Administration. InternetNDA07.htm. Accessed February Drugs@FDA. US Food and Drug Administration. Accessed February Range is low, medium, high, and is based on cost of medication and expected number of prescriptions. 5 Cost is for 30-day supply: Average wholesale price (AWP) X DACON X 30; DACON = daily average consumption = average quantity dispensed/average days supply; $ = < $100, $$ = $100 to $249, $$$ = $250 to $499, $$$$ = $500 to $1,000, $$$$$ = > $1,000. Selected New Indications and Dosage Forms The statins Lipitor and Crestor received new indications that are likely to increase utilization (see Table 3). Cholesterollowering medications continue to rank the highest in total spend, but recent generic availability decreased the overall trend in Several other medications received new indications that may have contributed to increased utilization, including Humira, which was approved for treating moderate to severe Crohn s disease, and Lovenox, which received a new indication in the treatment of acute myocardial infarction (MI, or heart attack). Medications with new dosage forms include Pulmicort and Lantus SoloSTAR. AstraZeneca replaced its budesonide inhaler delivery system, the Pulmicort Turbuhaler, with a new delivery system that features a dose indicator, called the Flexhaler TM. The new delivery system may improve adherence. Lantus SoloSTAR provides an alternative to the traditional needle and syringe and allows patients to administer their dialed dose, from one to 80 units of insulin. PERSPECTIVE 7

10 Table 3: Selected New Indications and Dosage Forms, ,2 Therapeutic Use Brand Name (Manufacturer) Generic Name New Indication and/or Dosage Form Projected Impact 3 Cost 4 Nonspecialty Medications Alzheimer s disease Exelon Patch (Novartis) rivastigmine New topical patch formulation, applied once daily Low $ Antipsychotic Abilify (Otsuka Pharmaceutical Inc./ Bristol-Myers Squibb) aripiprazole New indication for treatment of major depressive disorder Low $$$ Asthma and chronic obstructive pulmonary disease (COPD) Pulmicort (AstraZeneca Pharmaceuticals) budesonide The current Turbuhaler system will be replaced with the new delivery system, the Flexhaler. Medium $$ Cholesterol lowering Crestor (AstraZeneca Pharmaceuticals) rosuvastatin New indication in slowing progression of plaque formation in blood vessels Medium $$ Lipitor (Pfizer) atorvastatin New indication for risk reduction of acute MI, stroke, heart failure, and chest pain in people with heart disease Medium $$ Diabetes Lantus SoloSTAR (Sanofi-Aventis) insulin glargine New prefilled, once-daily disposable insulin pen Medium $$ Oral contraceptive Yaz (Berlex) drospirenone and ethinyl estradiol New indication for moderate acne in women and girls age 14 and older Medium $ Osteoarthritis Voltaren (Novartis) diclofenac First and only topical gel formulation for osteoarthritis treatment Low $$ Osteoporosis Evista (Eli Lilly and Company) raloxifene New indication for risk reduction of breast cancer in postmenopausal women with osteoporosis and in postmenopausal women at high risk for breast cancer Low $$ Overactive bladder Sanctura XR TM (Indevus Pharmaceuticals) trospium Once daily, extended-release formulation Low $$ Seizure disorder Lyrica (Pfizer) pregabalin New indication for fibromyalgia Medium $$ Specialty Medications Biologic response modifiers Humira (Abbott) adalimumab New indication for treatment of moderately to severely active Crohn s disease in adults Medium $$$$$ Blood disorders Lovenox (Sanofi-Aventis) enoxaparin New indication for treatment of acute MI Medium $$$$$ Oncology Sutent (Pfizer) sunitinib New indication for treatment of advanced kidney cancer Low $$$$$ SOLUTIONS PERSPECTIVE XX 8 1 Significant new dosage forms. Adapted from Pharmacist s Letter. 2008; vol 24: detail document Drug and biological approvals for calendar year Center for Drug Evaluation and Research, US Food and Drug Administration. InternetNDA07.htm. Accessed February Range is low, medium, high, and is based on cost of medication and expected number of prescriptions. 4 Cost is for 30-day supply: Average wholesale price (AWP) X DACON X 30; DACON = daily average consumption = average quantity dispensed/average days supply; $ = < $100, $$ = $100 to $249, $$$ = $250 to $499, $$$$ = $500 to $1,000, $$$$$ = > $1,000.

11 Selected First-time Generic Approvals Significant generic approvals occurred within the blood pressure-lowering medication class in 2007 (see Table 4). These medications, including Coreg (carvedilol), Inderal LA (propranolol extended release), Lotrel (amlodipine and benazepril), Norvasc (amlodipine), and Toprol-XL (metoprolol extended release), are also used for a variety of other health conditions and will represent a large area of cost savings. Other first-time generics include Ambien (zolpidem), which was launched in April 2007, and Zyrtec (cetirizine), which became available as an OTC medication in early A generic version of the proton pump inhibitor (PPI) Protonix (pantoprazole) was launched in Soon after its launch, legal action halted further sales of the generic, but not before several months supply became available on the market. Patent litigation continues around this issue and a stable supply of the generic is expected in Table 4: Selected New Generics Approved in Therapeutic Use Brand Name (Manufacturer) Generic Name FDA Approval Date 2 Acid reflux Protonix (Wyeth) pantoprazole 12/07 Allergy Zyrtec (Pfizer) 3 cetirizine 12/07 Blood pressure lowering Coreg (GlaxoSmithKline) carvedilol 09/07 Inderal LA (Wyeth) propranolol extended release 01/07 Lotrel (Novartis) amlodipine and benazepril 05/07 Norvasc (Pfizer) amlodipine 03/07 Toprol-XL (AstraZeneca metoprolol extended release 05/07 Pharmaceuticals) 4 Infections Lamisil (Novartis) terbinafine 07/07 Insomnia Ambien (Sanofi-Aventis) zolpidem 04/07 1 First time generic approvals for calendar year Center for Drug Evaluation and Research, US Food and Drug Administration. InternetNDA07.htm. Accessed February Drugs@FDA. US Food and Drug Administration. Accessed February OTC versions of Zyrtec and generic cetirizine became available in January Prescription Zyrtec will no longer be manufactured. 4 The commonly used 50 mg, 100 mg, and 200 mg tablets became available as generics in Selected Patent Expirations, Some highly utilized medications will become available as generics in the next few years (see Table 5). Medications that became available as generics in early 2008 include Altace, which is used in the treatment of high blood pressure, and Fosamax, which is used to prevent and treat osteoporosis. Risperdal, a highly utilized antipsychotic will also likely become available as a generic in Other significant generics expected to become available in 2008 that may impact trend are Depakote, Depakote ER, and Topamax for seizures, Paxil CR for depression, Imitrex for migraine, and Requip for Parkinson s disease. (It is important to note that the availability of generics may be delayed by patent litigation.) The projected impact of new generic medications is based on an assessment of factors such as disease prevalence, availability of other brand-name and generic medications for a given indication, and utilization, where applicable. SOLUTIONS PERSPECTIVE XX 9

12 Table 5: Selected Patent Expirations, Therapeutic Use Brand Name (Manufacturer) Generic Name 2 Anticipated Availability 3 Impact 2008 Antipsychotic Risperdal (Janssen) risperidone 06/08 High Blood pressure lowering Altace (Monarch Pharmaceuticals) ramipril 01/08 High Depression Paxil CR (GlaxoSmithKline) paroxetine controlled release 10/08 Medium HIV Zerit (Bristol-Myers Squibb) stavudine 06/08 Low Insomnia Sonata (King Pharmaceuticals) zaleplon 06/08 Medium Migraine Imitrex (GlaxoSmithKline) sumatriptan 12/08 High Osteoporosis Fosamax (Merck & Co.) alendronate 02/08 High Parkinson s disease Requip (GlaxoSmithKline) ropinirole 05/08 Medium Prostate cancer Casodex (AstraZeneca Pharmaceuticals) bicalutamide 10/08 Low Seizures Depakote (Abbott) divalproex delayed release 07/08 High Depakote ER (Abbott) divalproex extended release 12/08 High Topamax (Ortho-McNeil Neurologics) topiramate 09/08 High 2009 Allergy Clarinex (Schering-Plough) desloratadine 10/09 Medium Blood pressure lowering Aceon (Solvay Pharmaceuticals) perindopril 10/09 Low Diabetes Glyset (Pharmacia & Upjohn Company Division of Pfizer) miglitol 01/09 Low Prandin (Novo Nordisk) repaglinide 03/09 Low Precose (Bayer) acarbose 09/09 Low Gastroesophageal reflux disease (GERD)/heartburn AcipHex (Eisai) rabeprazole 04/09 High Prevacid (TAP Pharmaceutical Products Inc.) lansoprazole 05/09 High Herpes Valtrex (GlaxoSmithKline) valacyclovir 12/09 Medium Obesity Xenical (Roche Pharmaceuticals) orlistat 06/09 Low Seizures Lamictal (GlaxoSmithKline) lamotrigine 07/09 High 2010 Alzheimer s disease Aricept (Eisai) donepezil 11/10 Medium Anti-infective Levaquin (OMP Division, Ortho-McNeil Pharmaceuticals) levofloxacin 12/10 Medium Asthma Advair HFA (GlaxoSmithKline) fluticasone and salmeterol 07/10 High Blood pressure lowering Cozaar (Merck & Co.) losartan 09/10 High Cholesterol lowering Lipitor (Parke Davis Division of Pfizer) atorvastatin 12/10 High PERSPECTIVE 10 Depression Effexor XR (Wyeth Pharmaceuticals) venlafaxine extended release 07/10 High Erectile dysfunction Muse (Vivus) alprostadil 09/10 Low continued

13 Table 5: Selected Patent Expirations, (continued) Therapeutic Use Brand Name (Manufacturer) Generic Name 2 Anticipated Availability 3 Impact 2011 Anti-infective Avelox (Bayer) moxifloxacin 12/11 Low Antipsychotic Seroquel (AstraZeneca Pharmaceuticals) quetiapine 08/11 Medium Zyprexa (Eli Lilly and Company) olanzapine 04/11 Low Blood pressure lowering Diabetes Platelet inhibitors Avapro (Bristol-Myers Squibb Sanofi- Synthelabo Partnership) Actos (Takeda Pharmaceuticals North America) Plavix (Bristol-Myers Squibb/Sanofi Aventis) irbesartan 08/11 High pioglitazone 01/11 High clopidogrel 09/11 High Seizures Tegretol XR (Novartis) carbamazepine 02/11 Low Alzheimer s disease Exelon Patch (Novartis) rivastigmine 08/12 Low 2012 Antipsychotic Geodon (Roerig Division of Pfizer) ziprasidone 03/12 Medium Asthma Symbicort (AstraZeneca Pharmaceuticals) budesonide and formoterol 08/12 Low Asthma or allergy Singulair (Merck & Co.) montelukast 02/12 High Blood pressure lowering Diovan (Novartis) valsartan 09/12 High Cholesterol lowering Crestor (AstraZeneca Pharmaceuticals) rosuvastatin 11/12 High Depression Lexapro (Forest Pharmaceuticals) escitalopram 10/12 High Diabetes Avandia (GlaxoSmithKline) rosiglitazone 07/12 High Sleep disorders Provigil (Cephalon) modafinil 08/12 Low 1 List is not all inclusive; adapted from Pharmacist s Letter. 2008; vol 24: pp Generic medications have manufacturers with approval or tentative approval to market the generic version of the medication. 3 Generic availability is subject to change due to pending litigations and patent exclusivities. Selected Medications in the Pipeline Significant impact on trend may occur with the potential approval of two new treatments for type 2 diabetes, alogliptin and saxagliptin (see Table 6). These medications are in the same class as Januvia TM, which was approved in 2006 as the first of a new class of oral diabetes medications known as dipeptidyl peptidase-4 (DPP-4) inhibitors. Alogliptin is currently under FDA review and saxagliptin is in phase III clinical trials. Effient TM (prasugrel) is a potential new antiplatelet therapy for cardiovascular disease, and acts similarly to Plavix. Effient has been shown to reduce cardiovascular events more effectively than Plavix, but shows a higher incidence of bleeding. Other medications that may significantly impact trend are Ampligen (atvogen) for chronic fatigue syndrome, and milnacipran for fibromyalgia. Specialty medications expected to enter the market within the next few years include the following: Oncology agents, such as lestaurtinib, Xcytrin (motexafin), and phenoxodiol, are being developed to treat resistant cancers. Ustekinumab and golimumab are injectable anti-inflammatory agents with potential use in a variety of conditions, such as psoriasis and rheumatoid arthritis. Teriflunomide is a novel therapy for multiple sclerosis. PERSPECTIVE 11

14 Table 6: Selected Medications in the Pipeline, 2008 and ,2 Therapeutic Use Brand Name (Manufacturer) Generic Name Comments Status 3 Projected Impact 4 Nonspecialty Medications Cardiovascular disease Effient TM (Daiichi Sankyo and Eli Lilly and Company) prasugrel Oral agent new to the existing antiplatelet class to manage acute coronary syndrome Under FDA review Medium NA (Otsuka America Pharmaceutical) tolvaptan Novel oral treatment for worsening heart failure and hyponatremia Under FDA review Low Chronic fatigue syndrome (CFS) Ampligen (Hemispherx Biopharma) atvogen First agent for the treatment of CFS; represents a new class of RNA-based therapies Under FDA review Low Diabetes Byetta Long Acting Release (Amylin Pharmaceuticals and Eli Lilly and Company) exenatide longacting release Once weekly injection for type 2 diabetes; Byetta immediaterelease is injected twice daily In phase III studies Medium NA (AstraZeneca and Bristol-Myers Squibb) saxagliptin Oral type 2 diabetes treatment in the DPP-4 inhibitor class In phase III studies Medium NA (Novo Nordisk) liraglutide Once daily injection for type 2 diabetes In phase III studies Medium NA (Takeda Pharmaceuticals) alogliptin Oral type 2 diabetes treatment in the DPP-4 inhibitor class Under FDA review Medium Fibromyalgia NA (Cypress Bioscience and Forest Laboratories) milnacipran Novel agent to the serotoninnorepinephrine reuptake inhibitor class; currently available in other countries under the brand name Ixel Under FDA review Medium Gastric acid reducers NA (TAP Pharmaceutical Products Inc.) dexlansoprazole Oral PPI for treatment of acid-related disorders Under FDA review Low HIV Intelence TM (Tibotec) etravirine Treatment of multi-drug-resistant HIV infection NA (Tibotec) rilpivirine Treatment of HIV in treatmentnaive patients and in those who have failed other therapies Obesity NA (Merck & Co.) taranabant Oral therapy that reduces cravings and promotes weight loss Approved January 2008 In phase II studies In phase III studies Low Low Low Osteoporosis Fablyn (Ligand Pharmaceuticals and Pfizer) lasofoxifene Prevention of osteoporosis Under FDA review Low PERSPECTIVE 12 Viviant TM (Wyeth Pharmaceuticals) bazedoxifene Prevention of osteoporosis Under FDA review Low continued

15 Table 6: Selected Medications in the Pipeline, 2008 and ,2 (continued) Therapeutic Use Brand Name (Manufacturer) Generic Name Comments Status 3 Projected Impact 4 Specialty Medications Amyloid A (AA) amyloidosis Kiacta TM (Neurochem) eprodisate If approved, would be first agent to treat AA amyloidosis Under FDA review Low Biologic response modifiers Actemra TM (Roche Pharmaceuticals) tocilizumab Has shown effectiveness in patients who have failed other biologic therapies for rheumatoid arthritis Under FDA review Low NA (Centocor) ustekinumab Injectable agent to treat plaque psoriasis NA (Centocor) golimumab Next generation, fully human anti-tnf-alpha monoclonal antibody to treat rheumatoid arthritis, psoriatic arthritis, and ankylosing spondylitis Under FDA review In phase III studies Low Low Cystic fibrosis NA (Inspire Pharmaceuticals) denufosol Inhalational agent for treatment of cystic fibrosis In phase III studies Low Multiple sclerosis NA (Novartis) fingolimod If approved, would be the first oral therapy for this condition In phase III studies Low NA (Sanofi-Aventis) teriflunomide Studied in combination with interferon-beta and Copaxone In phase III studies Low Oncology HuMax-CD20 (Genmab and GlaxoSmithKline) ofatumumab Injection for treatment of hematological malignancies; expected to compete with Rituxan In phase III studies Low Xcytrin (Pharmacyclics) motexafin Injection to treat brain metastases for patients with nonsmall-cell lung cancer Under FDA review Low NA (Cephalon) lestaurtinib Oral medication to treat acute myeloid leukemia In phase III studies Medium NA (Marshall Edwards) phenoxodiol Studied in prostate, ovarian, cervical, and vaginal cancers In phase III studies Low Osteoporosis NA (Amgen) denosumab Twice yearly injectable therapy In phase III studies Low Phenylketonuria Kuvan TM (BioMarin Pharmaceutical) sapropterin Treatment of this enzyme deficiency Approved January 2008 Low 1 Projecting future drug expenditures American Journal of Health-System Pharmacy. 2008; vol 65: pp New drug application submissions. Drugs.com. Accessed February Status as of March Phase II = intermediate phase of medication development; involves testing for safety and preliminary evidence of beneficial effects. These studies may involve several hundred patients and take about a year to complete. Phase III = last phase of medication development; involves safety and efficacy trials of the new medication. These studies usually include several hundred to several thousand patients and can take years to complete. Under FDA review = application has been filed with the FDA. 4 Range is low, medium, high, and is based on cost of medication and expected number of prescriptions. NA = not available PERSPECTIVE 13

16 Our strength is our PERFORMANCE 14

17 Measures of Our Success In 2007, clients of Walgreens Health Initiatives experienced an average total prescription medication cost increase, or trend, of 4.80%, which excluded specialty medications. 2 The overall trend of 4.80% increases to 5.66% when specialty medications are included. The 2007 trend compares favorably with the 2006 trend of 7.68%. It represents our fourth consecutive year of single-digit trends. To provide clients a complete picture of trend and performance, Walgreens Health Initiatives reports trend data for all medications being managed or covered under the benefit, including specialty medications. The trend was calculated by comparing the average per member per year (PMPY) total cost in 2007 with that of In 2007, the average PMPY cost without specialty medications for Walgreens Health Initiatives clients increased to $778, up from $743 in The average PMPY cost with specialty medications increased to $846, up from $801 in Key Trend Components Four major components of the overall prescription medication trend contribute to changes in prescription medication expenditures: price, utilization, product mix, and new medications. A share of the overall trend can be attributed to each factor. The sum of these four components yields the overall trend (see Figure 1). Price represents manufacturers price changes (inflation) and changes Figure 1: Components of Overall Trend, 2007 in contractual rates for medications available in 2006 and 2007, excluding rebates. Increasing by 3.54%, price was the largest component driving trend in % Utilization is defined as the change in quantities of medication dispensed, taking the following factors into account: 6% Number of members taking prescription medications Average number of prescriptions dispensed per utilizing member 4% Quantities dispensed per prescription Changes in demographic factors, such as age and gender 2% Utilization caused total expenditures to increase by 3.17%, making it the 0% second largest contributor to overall trend. Product mix is a measurement of the contribution of changes in the -2% types of medications dispensed, such as a shift from high-cost to low-cost medications, including brand-to-generic shifts. Changes in mix reduced expenditures and moderated the trend by -1.67%. New medications and therapies were a relatively minor factor, increasing expenditures by just 0.62%. % Distribution 3.54% Price 3.17% Utilization -1.67% Product Mix 0.62% New Medications 5.66% Total The Impact of Price Medication prices increased by 3.54%, making price the most significant trend driver in For this analysis, the impact of price changes was calculated by comparing the ingredient cost per unit of medication dispensed in 2007 to the ingredient cost in Generic average wholesale price (AWP) inflation, at 16.4%, was higher than AWP inflation for brand-name medications, which was 10.2%. However, ingredient cost inflation for generic medications, at 0.5%, was significantly lower than the ingredient cost inflation of brand-name medications, which was 9.9% in 2007 (see Figure 2). Walgreens Health Initiatives minimizes the client impact of AWP inflation by negotiating aggressive pricing and discounts while maximizing generic utilization. PERFORMANCE 2 Clients who had less than full-year 2006 and 2007 data were excluded from the analysis. For other inclusion and exclusion criteria, see Appendix 1. 15

18 Determining Actual Medication Prices One challenge for plan sponsors is to understand the true price of prescription medications. Walgreens Health Initiatives is committed to transparency in pricing and defines the common industry terms that pertain to pricing as follows: Ingredient cost = AWP negotiated discounts Total cost = ingredient cost + dispensing fee Plan cost = total cost member cost Figure 2: AWP and Ingredient Cost Price Change: by Brand-name and Generic Medications, 2007* % Change 20% 15% 10% 5% 0% 7.2% 1.7% Total 10.2% 9.9% Brand 16.4% AWP Ingredient Cost 0.5% Generic * Inflation for brand names and generics was calculated based on the products common to 2006 and Products that were converted from brand to generic in 2007 were excluded from the analysis. The Impact of Utilization Utilization is defined as the change in the number of units dispensed per covered life from 2006 to It can be influenced by four factors: The number of members taking prescription medications. This increased 0.6% from 2006 to (Of all eligible members, 78.0% used at least one prescription medication in 2007.) The average number of prescriptions dispensed per utilizing member. This remained unchanged in 2007 at 12 prescriptions per utilizing member per year. Quantities dispensed per prescription, which increased 3.8% in This was the most important factor underlying the utilization change. It was partially driven by an increase from 33.6 to 33.9 average days supply, which is likely due to an increase in 90-day supplies. Demographic changes. The percentage of members age 60 or older edged up from 9.7% to 10.6% of the population. The number of prescriptions per utilizing member in this group remained relatively high (approximately 2.8 times the utilization of younger age groups) but stable. This demographic change had a moderate effect on utilization. Utilization contributed to increases in 21 of the top 25 therapeutic classes in 2007; the remaining four classes saw a decrease in utilization as compared with The three fastest growing classes were hematological agents (19.6%), anticonvulsants (8.5%), and hypnotics (8.5%). Classes that experienced a decrease in utilization were migraine agents (-8.5%), antihistamines (-2.5%), and antiasthmatic agents (-2.1%). Drilling down to the medication level, utilization of three medications in the top 25 increased markedly. Cymbalta (44.9%), Plavix (40.4%), and Humira (24.9%) were the three fastest-growing medications. In contrast, Lipitor, Fosamax, and Advair Diskus experienced decreases in utilization of 13.1%, 11.0%, and 6.6%, respectively. PERFORMANCE The Impact of Product Mix Decreasing 1.67% from 2006, product mix served to moderate the trend. Of the top 25 therapeutic classes, 14 trended downward in product mix, with the three most notable being antihistamines (-8.7%), oncology (-7.5%), and ulcer medications (-7.5%). The impact of product mix on trend reflects the successful implementation of clinically appropriate cost-saving solutions by Walgreens Health Initiatives clients, including programs that direct members toward generic medications, preferred-brand 16

19 alternatives, and appropriate OTC choices. Also, with the growing number of expensive specialty pharmacy medications being used to treat common conditions, our clients recognize that Walgreens Health Initiatives clinical programs, such as specialty prior authorizations and adherence monitoring, are more important than ever. The Impact of New Medications New medications are brand-name medications made available for the first time. (See Table 1 for a list of significant new medications released in 2007.) This component contributed just 0.62% to the overall trend in The change attributable to new medications was calculated by dividing the total cost of the new brand-name medications launched in 2007 by the total increase in expenditures for A Closer Look at Spending on Brand-name Versus Generic Medications In 2007, brand-name medications cost 4.7 times more than their generic counterparts, on average (see Figure 3). The gap in ingredient cost for medications widened from $83 in 2006 to $99 in Generic ingredient costs decreased from $28 in 2006 to $26 in 2007, while ingredient costs for brand-name medications increased from $111 to $125 during that period. 3 Walgreens Health Initiatives continually promotes generic utilization through appropriate plan design, formulary, and clinical programs such as Informed Prescribing, step care therapy programs, and Medication Therapy Management. For Walgreens Health Initiatives clients, the GDR climbed from 56.8% in 2006 to a record-high 61.2% in 2007 (see Figure 4). Yet the total spend on generics was just 21.4% of total medication spend. Our analysis shows that for every 1.0% increase in generic utilization, Walgreens Health Initiatives clients realize approximately a 2.0% savings in total spend. Figure 3: Average Ingredient Cost for Brand-name and Generic Prescriptions, 2006 and 2007* Figure 4: Proportion of Brand-name and Generic Prescriptions in Total Dispensing, 2006 and 2007 Average Cost $150 $120 $90 $60 $30 $111 $28 $125 $26 80% 60% 40% 20% $0 0% % Dispensed 43.2% 56.8% 38.8% 61.2% Brand Generic Brand Generic *Normalized to 30-day supply PERFORMANCE 3 This includes all medications dispensed in 2006 and

20 Despite a significant drop in the percentage of brand-name prescriptions dispensed in 2007, dollars spent increased by 4.6% PMPY. This was attributable almost entirely to manufacturer price inflation. In contrast, the increase in spend on generics of 9.8% PMPY resulted primarily from the higher number of generic prescriptions dispensed, a key strategy in managing spend. Several major therapeutic classes experienced notable increases in generic utilization: A 31.6% increase in utilization of generic calcium channel blockers is attributable, in part, to FDA approval of a first-time generic formulation of amlodipine tablets (Norvasc) in March 2007 and amlodipine/benazepril capsules (Lotrel) in May Generic utilization of hypnotics increased 24.0%, reflecting FDA approval of a first-time generic formulation of zolpidem tablets (Ambien) in April In the antiemetics class, generic utilization went up 23.9%. The FDA approved a first-time generic formulation of ondansetron (Zofran ) in December Generic utilization of beta-blockers increased 15.7% in The FDA approved a first-time generic formulation of the more commonly used strengths of metoprolol extended-release tablets (Toprol-XL ) in May 2007 and carvedilol tablets (Coreg) in September Among the top 10 therapeutic classes, notable increases in generic utilization were observed for antidepressants (11.6%) and cholesterol-lowering agents (10.6%). As blockbuster medications lose patent protection during the next two years, first-time generics in a wide variety of categories will flood the marketplace. Opportunities to achieve higher generic utilization rates can be realized in classes that previously had no generic options, such as osteoporosis and migraine agents. A generic version of Fosamax (alendronate) was approved in February 2008 and a generic version of Imitrex (sumatriptan) is expected in late Changes in Plan Cost Versus Member Cost In 2007, plan cost increased by 7.2% while member cost increased by just 0.2%. Although the average annual member cost in dollars increased from $175 in 2006 to $ in 2007, the overall member share of total cost was 20.8%, down from 22.0% in Fixed copay plan designs impose an increasing burden on the plan s cost share, in large part due to increased dispensing of expensive specialty medications. Increased dispensing of generics, in which the member s share of the cost is usually higher than with brand-name medications, moderates some of that burden. Many plan sponsors continue to turn to percentage coinsurance plan designs to achieve a consistent member cost-share balance from year to year. The plan share of total spend was higher for brand-name medications than it was for generics in 2007, as in previous years. Plans managed by Walgreens Health Initiatives paid 81.9% of the total brand-name drug spend versus 69.1% of the generic spend (see Table 7). Although plan sponsors do not have direct control over prices set by manufacturers, increased dispensing of low-cost generic medications can help reduce total spend. Different benefit design features, such as copay differential, can also help plans reduce the cost burden that results from higher prices and increased use of expensive medications. Table 7: Cost Sharing Between Plan and Member by Brand-name and Generic Medications Plan Share Member Share Plan Share Member Share PERFORMANCE Brand 80.5% 19.5% 81.9% 18.1% Generic 68.9% 31.1% 69.1% 30.9% Overall 78.0% 22.0% 79.2% 20.8% 18

21 Differences Among Retail, Mail Service, and 90-day Retail Advantage90 offers Walgreens Health Initiatives clients and members an alternative to the traditional 30-day retail and 90-day mail service programs, enabling members to obtain a 90-day supply of maintenance medications at more than 39,000 participating retail network pharmacies. Compared with the 30-day retail channel, plans that offer Advantage90 reduce their medication costs through deeper AWP discounts, fewer dispensing and administrative fees, and higher generic utilization. In 2007, 8.2% of prescriptions were filled through the Advantage90 program, up from 7.3% in When mail service and Advantage90 statistics are combined, the number of prescriptions dispensed in 90-day supplies increased from 15.4% in 2006 to 15.7% in 2007 (see Figure 5). Advantage90 is a steady driver of 90-day supply dispensing. Figure 5: Share of Prescriptions Dispensed by Channel, 2006 and % Mail Service and Advantage % Retail 15.7% Mail Service and Advantage % Retail When mail and Advantage90 prescriptions are adjusted for 30-day supply, the percentage of adjusted prescriptions filled through 90-day channels 35.9% puts Walgreens Health Initiatives among the industry leaders. The Impact of Plan Management An array of clinical programs and plan design solutions are available to Walgreens Health Initiatives clients. Clients select programs and plan designs based on their financial goals and benefits philosophy. Many clients follow our guidance and enroll in a number of clinical programs. To assess the impact of management on plan results, Walgreens Health Initiatives analyzed select groups of clients with varying levels of plan management strategies. Table 8 shows the different management strategies adopted by each group. PERFORMANCE 19

22 Table 8: Management Strategies Utilized by Selected Clients Level of Management Three-Tier Formulary Copay Differential* Advantage90 Walgreens Specialty Pharmacy Total Number of Step Care or Clinical Prior Authorization (CPA) Programs Number of Step Care or CPA Programs Added in 2007 Plan Share of Cost High High Yes Yes 9 or more 2 75% Low Low No No 4 or fewer 0 > 75% * The copay difference between the second and third tier in three-tier low-differential formularies is less than $15, as compared with a copay difference of $15 or more in three-tier high-differential formularies. Analysis reveals that the highly managed plans reduced their prescription costs, achieving a trend of -0.07%, significantly lower than the overall trend of 5.66%. Clients who implemented few plan management strategies had a significantly higher trend, 9.67% (see Figure 6). Experience shows that clients who regularly add new clinical management programs to their existing portfolios may achieve a lower trend. Figure 6: Trend by Level of Management % Trend 10% 8% 6% 4% 2% 0% -2% 5.66% -0.07% 9.67% Overall High Low Level of Management 2007 Trend by Top 25 Brands For the fifth consecutive year, Lipitor, a cholesterol-lowering agent, was the No. 1 dispensed brand-name medication (see Table 9). However, there was a significant decrease in spend for Lipitor. This could reflect the availability of the generic alternative, simvastatin, which entered the market in June Within the cholesterol-lowering medication class, Vytorin, Zetia, and TriCor have notably increased trend, with Vytorin having the most significant increase of 30.2%. The PPIs Prevacid and Nexium hold the second and third spots, respectively, after Lipitor. However, overall spend remained fairly stable for Prevacid, while spend declined for Nexium. Among antidepressants, Effexor XR, Lexapro, and Cymbalta had trends of 9.4%, 13.4%, and 59.7%, respectively. Both market share and spending on Plavix increased in While the total spend on this platelet inhibitor increased from 0.9% in 2006 to 1.2% in 2007, the total prescription cost trend for Plavix increased by 38.9% in This occurred as supplies of the generic version were depleted and more physicians prescribed Plavix (in combination with aspirin) for patients with coronary artery stents for longer treatment durations. Additionally, a 5.6% decrease in spend for Fosamax occurred in PERFORMANCE 20

23 Table 9: Top 25 Brand-name Medications by Total Spend, 2006 and 2007 Brand Therapeutic Class Rank, 2007 Share of Total Spend, 2007 Rank, 2006 Share of Total Spend, 2006 Trend Lipitor Cholesterol lowering 1 3.8% 1 4.3% -7.8% Prevacid Ulcer medications 2 2.4% 2 2.4% 4.7% Nexium Ulcer medications 3 1.9% 3 2.0% 0.6% Enbrel Biologic response modifiers 4 1.7% 5 1.7% 8.8% Advair Diskus Antiasthmatics 5 1.7% 4 1.7% 2.9% Singulair Antiasthmatics 6 1.6% 6 1.5% 14.8% Effexor XR Antidepressants 7 1.5% 7 1.5% 9.4% Lexapro Antidepressants 8 1.3% 8 1.2% 13.4% Actos Antidiabetics 9 1.3% 9 1.2% 12.0% Vytorin Cholesterol lowering % % 30.2% Plavix Platelet inhibitors % % 38.9% Crestor Cholesterol lowering % % 23.7% Cymbalta Antidepressants % % 59.7% Topamax Anticonvulsants % % 21.4% Celebrex Analgesics/anti-inflammatories % % 8.3% Valtrex Antivirals % % 22.3% Zetia Cholesterol lowering % % 21.4% Humira Biologic response modifiers % % 35.6% Imitrex Migraine % % 9.8% Lamictal Anticonvulsants % % 30.2% Protonix Ulcer medications % % 4.2% TriCor Cholesterol lowering % % 15.5% Zyrtec Antihistamines % % 7.9% Fosamax Osteoporosis % % -5.6% Lantus Antidiabetics % % 23.3% 2007 Trend by Therapeutic Class The top 10 therapeutic classes accounted for a slightly lower proportion of the total drug spend in 2007, 57.1%, compared with 58.4% in 2006, as shown in Table 10. (See Appendix 2 for more information about therapeutic class terminology used in this report.) Changes among classes are influenced by the increased utilization of generic and OTC medications, the availability of new medications, additional indications for medications currently on the market, and increased implementation of successful clinical programs. PERFORMANCE 21

24 For the fourth consecutive year, cholesterol-lowering medications accounted for the largest share of total spend at 9.8% in 2007; however, the trend for this class decreased in 2007 (see Figure 7 and Table 10) due, in part, to the availability of generic simvastatin. Figure 7: Percent of Top 10 Therapeutic Classes in Total Spend, % Cholesterol lowering 8.5% Blood pressure lowering 6.7% Antidepressants 6.7% Ulcer medications 5.8% Antidiabetics 5.5% Antiasthmatics 4.1% Analgesics/anti-inflammatories 3.6% 3.2% Anticonvulsants Analgesics/narcotics 3.2% Antivirals 42.9% Others Table 10: Top 10 Therapeutic Classes by Total Spend, 2006 and 2007 Therapeutic Class Rank, 2007 Share of Total Spend, 2007 Rank, 2006 Share of Total Spend, 2006 Trend Rank of Rxs, 2007 Share of Rxs, 2007 Cholesterol lowering 1 9.8% % -2.1% 2 6.7% Blood pressure lowering 2 8.5% 2 8.9% 0.7% % Ulcer medications 3 6.7% 4 6.9% 3.6% 8 3.5% Antidepressants 4 6.7% 3 7.5% -4.8% 3 6.6% Antidiabetics 5 5.8% 5 5.5% 12.4% 5 4.4% Antiasthmatics 6 5.5% 6 5.2% 12.7% 6 3.7% Analgesics/ anti-inflammatories 7 4.1% 7 4.4% 0.1% % Anticonvulsants 8 3.6% 8 3.3% 16.7% % Antivirals 9 3.2% % 13.7% % PERFORMANCE Analgesics/narcotics % 9 3.1% 9.0% 4 6.1% 22

25 Significant trend increases over the previous year included anticonvulsant agents (16.7%), antiviral agents (13.7%), antiasthmatic agents (12.7%), and antidiabetic agents (12.4%). Shares in total spend for ulcer medications, blood pressurelowering agents, antivirals, and analgesics/narcotics have changed very little since Within the top 10 therapeutic classes, notable decreases in the trend were observed for cholesterol-lowering agents (-2.1%) and antidepressants (-4.8%). Overall, however, trend was not greatly affected by decreases within the top 10 therapeutic classes, nor were there were any notable increases in spend for medications outside of those classes. Turning to the percentage contribution of each of the top 10 therapeutic classes to the 2007 Walgreens Health Initiatives trend, antidiabetic medications were No. 1, accounting for 11.9%, followed by antiasthmatic agents and anticonvulsants, which accounted for 11.6% and 9.7% of the overall trend, respectively (Figure 8). For the overall trend, percentage contribution of cholesterol-lowering and antidepressant agents significantly decreased by 3.9% and 6.3%, respectively. Figure 8: Percentage Contribution of Top 10 Therapeutic Classes to 2007 Overall Trend* % Contribution 20% 10% 0% -10% Cholesterol lowering -3.9% 1.0% PERFORMANCE Blood pressure lowering Ulcer medications 4.3% Antidepressants -6.3% Antidiabetics 11.9% Antiasthmatics 11.6% 0.1% Analgesics/ anti-inflammatories Anticonvulsants 9.7% Antivirals 7.2% Analgesics/narcotics 5.0 % * Figure 8 shows the percentage contribution that each of the top 10 therapeutic classes made to the overall trend of 5.66%. For example, blood pressure-lowering medications increased $0.47 PMPY in 2007, which represented approximately 1% of the overall PMPY increase of $45 from 2006 to

26 Overall trend by therapeutic class and contribution of price, utilization, product mix, and other factors are presented in Figure 9. (See Appendix 2 for more information about therapeutic class terminology used in this report.) Figure 9: Trend Drivers of Top Therapeutic Classes, 2007 Cholesterol lowering A shift to generic products was evident. Continued aggressive treatment to help members reach cholesterol goals impacted utilization. Increased utilization of generic Zocor and Pravachol and reduced price were the primary drivers of the trend. Generic utilization 2007: 26.9%; 2006: 16.3% -8.8% OVERALL TREND -2.1% -1.4% 0.6% 7.5% Blood pressure lowering Several highly utilized blood pressure medications became available as generics: Norvasc, Lotrel, Coreg, and Toprol-XL. Use of these medications is reflected in the -16.0% product mix trend. Increased utilization is beneficial because multiple agents are often necessary to achieve blood pressure control. Generic utilization 2007: 62.9%; 2006: 51.9% OVERALL TREND 0.7% 12.1% 3.5% -16.0% 1.1% Ulcer medications The FDA approved a first-time generic for pantoprazole delayed-release tablets (Protonix) in August 2007 with OVERALL TREND 3.6% a subsequent launch in December However, a stable 3.4% supply of the generic version will not be available until 2.8% pending patent litigation issues are resolved. Availability -2.6% of the generic product may spur utilization and help 0% moderate price. Generic utilization 2007: 34.9%; 2006: 32.1% Antidepressants Increased generic utilization was the primary driver of the trend change. Generic versions of most selective serotonin reuptake inhibitors (SSRIs) are now on the market, including sertraline (Zoloft ), which became available in Generic utilization 2007: 62.3%; 2006: 50.7% OVERALL TREND -4.8% -6.9% 3.2% -1.1% 0% PERFORMANCE Price Utilization Product Mix New Medications 24

27 Antidiabetics Sitagliptin, a novel DPP-4 inhibitor, and a combination of sitagliptin with metformin marketed as Janumet were launched. Controversies surrounding the safety of Avandia may have shifted utilization to Actos and Januvia. Increased availability and use of brand combination agents may be contributing to the decline in generic utilization. Use of newer brand agents such as Januvia and Levemir is contributing to increased trend. Generic utilization 2007: 53.4%; 2006: 54.5% OVERALL TREND 12.4% 2.5% 2.9% 5.9% 1.1% Antiasthmatics Use of higher-cost agents is driving trend, likely because of the federally mandated switch from generic albuterol metered-dose inhalers (MDIs) that contained chlorofluorocarbons to branded MDIs that use hydrofluoroalkane, an environmentally friendly propellant. Generic utilization 2007: 32.3%; 2006: 34.6% OVERALL TREND 12.7% -2.2% 3.4% 1.0% 10.5% Analgesics/anti-inflammatories Sustained use of generics was evident. Celebrex (celecoxib) remains the only available COX-2 inhibitor. Generic utilization 2007: 77.7%; 2006: 72.5% OVERALL TREND 0.1% 0.3% 0.8% -1.0% 0% Anticonvulsants Increased utilization may be attributable to increased prescribing of Lyrica (pregabalin), which has several chronic pain management indications, including an indication for fibromyalgia granted in Utilization of Topamax continues to increase due to its multiple FDA-approved and off-label indications. Generic utilization 2007: 47.8%; 2006: 49.2% OVERALL TREND 16.7% 4.8% 8.7% 3.2% 0% Price Utilization Product Mix New Medications continued PERFORMANCE 25

28 Figure 9: Trend Drivers of Top Therapeutic Classes, 2007 (continued) Antivirals Selzentry and Isentress for treatment of HIV became available in 2007 and contributed to the price increase. Generic utilization 2007: 24.6%; 2006: 24.1% OVERALL TREND 13.7% 2.5% 2.6% 0.2% 8.4% Analgesics/narcotics Increased utilization is driving trend. Walgreens Health Initiatives programs such as MedMonitor OVERALL TREND 9.0% can control inappropriate utilization in this category. 0.4% OxyContin is available only as a branded product due to patent litigation that delayed availability of generic competition. 1.1% Generic utilization 2007: 95.9%; 2006: 95.8% 0% 7.5% Price Utilization Product Mix New Medications Figure 10: Trend Components for Specialty Medications, % 12% 9% 13.16% 16.80% 2007 Trend for Specialty Medications Specialty medications continued to have a significant impact on trend in Although the quantity of specialty medications dispensed is relatively low, this category s high cost makes the impact on overall spend significant. For Walgreens Health Initiatives clients, specialty medications accounted for just 0.4% of total prescriptions dispensed, but 8.0% of total spend. The average cost per prescription for a specialty medication was $1,690 in 2007, approximately 25.6 times more than the average cost for a nonspecialty medication. PERFORMANCE % Distribution 6% 3% 0% -3% Price 2.36% Utilization -0.03% Product Mix 1.31% New Medications Total Due to the high cost of specialty medications, a small increase in use can have a major impact on overall trend. For Walgreens Health Initiatives clients, specialty medication costs increased by 16.80% in The overall trend of 4.80% increases to 5.56% when specialty medications are included. The 16.80% increase in specialty medication trend was driven primarily by price (Figure 10), which contributed 13.16% to the overall trend. Utilization was also a factor, raising trend an additional 2.36%. New medications had a small effect, adding just 1.31% to specialty medication expenditures. The effect of product mix (-0.03%) was negligible. 26

29 2007 Trend by Specialty Medication The top 10 specialty medications accounted for 64.7% of total spend on specialty medications in Among the top 10 medications, Tracleer, Humira, Lovenox, and Copaxone showed a great increase in trend. Pegasys had a 4.6% decrease in trend, and its share of spend decreased from 2.6% to 2.1% (see Table 11). Table 11: Top 10 Specialty Medications by Total Specialty Spend, 2006 and 2007 Medication Therapeutic Class Rank, 2007 Share of Total Specialty Spend, 2007 Rank, 2006 Share of Total Specialty Spend, 2006 Trend Enbrel Biologic response modifiers % % 8.8% Humira Biologic response modifiers % 2 9.0% 35.6% Copaxone Multiple sclerosis 3 7.1% 3 6.9% 19.9% Avonex Multiple sclerosis 4 5.8% 4 6.5% 3.9% Lovenox Anticoagulants 5 5.2% 5 4.7% 30.1% Rebif Multiple sclerosis 6 4.2% 6 4.3% 14.0% Betaseron Multiple sclerosis 7 3.5% 7 3.5% 16.9% Xolair Antiasthmatics 8 2.6% 8 3.0% 3.3% Tracleer Pulmonary arterial hypertension 9 2.3% % 51.4% Pegasys Hepatitis C % % -4.6% 2007 Trend by Top Specialty Therapeutic Classes For the third year in a row, biologic response modifiers, which are agents used for conditions such as Crohn s disease, psoriasis, and rheumatoid arthritis, ranked as the No. 1 specialty therapeutic class by spend (see Table 12). Share of the total spend in this class increased to 2.7%, up from 2.4% in Based on the total spend, growth hormone had the most significant increase in trend of the specialty medication classes, at 23.4%. Increases in trend were also observed in the multiple sclerosis and blood modifiers classes of medications. The trend for hepatitis C medications decreased by 1.0%. Walgreens Health Initiatives offers medication management programs for the following therapeutic classes to help ensure appropriate utilization: Biologic response modifiers Chronic hepatitis C Erythropoietic agents Growth hormone deficiency PERFORMANCE 27

30 Table 12: Top Five Specialty Classes by Total Spend, 2006 and 2007 Therapeutic Class Rank, 2007 Share of Total Spend, 2007 Rank, 2006 Share of Total Spend, 2006 Trend Biologic response modifiers 1 2.7% 1 2.4% 16.5% Multiple sclerosis 2 1.7% 2 1.6% 13.9% Blood modifiers 3 0.5% 4 0.5% 2.3% Hepatitis C 4 0.5% 3 0.5% -1.0% Growth hormone 5 0.5% 5 0.4% 23.4% Overall trend by specialty therapeutic class and contribution of price, utilization, product mix, and new medications are presented in Figure 11. Figure 11: Trend Drivers of Top Five Specialty Therapeutic Classes, 2007 Biologic response modifiers Price inflation was a major contributor to trend increases. OVERALL TREND 16.5% Enbrel and Humira were the primary drivers of trend. Humira received new indications for Crohn s disease and juvenile rheumatoid arthritis. 1.0% 5.5% 0% 10.0% Multiple sclerosis Price inflation was the primary trend driver. OVERALL TREND 13.9% The multiple sclerosis medications Avonex, Copaxone, Rebif, and Betaseron were all in the top 10 specialty medications by total specialty spend for % -3.1% 0% 15.9% continued PERFORMANCE Price Utilization Product Mix New Medications 28

31 Figure 11: Trend Drivers of Top Five Specialty Therapeutic Classes, 2007 (continued) Blood modifiers Concerns about safety of Aranesp, Epogen, and Procrit may have decreased utilization. Price increase for Procrit remains the primary trend driver. OVERALL TREND 2.3% -3.6% -0.5% 0% 6.4% Hepatitis C Overall cost of agents in the class increased. Trend was moderated by decreased utilization in the class, likely due to the decreased prevalence of hepatitis C in recent years.* -15.7% OVERALL TREND -1.0% 5.5% 0.2% 9.0% Growth hormone Increased utilization was the primary driver of trend. Off-label use may be affecting utilization. OVERALL TREND 23.4% 0.1% 0% 4.2% 19.1% * Disease burden: CDC viral hepatitis. Centers for Disease Control and Prevention. Accessed February Price Utilization Product Mix New Medications PERFORMANCE 29

32 Our strength is our PASSION 30