Corcoran et al v. CVS Health Corporation

Northern District of California, cand-4:2015-cv-03504

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7 Exhibit N 7 Christopher Corcoran, et al. v. CVS Pharmacy, Inc. Civil Action No. 15-CV-3504-YGR Expert Report of John D. Jones, BS Pharm, JD, FAMCP JDJ-RPhJD Consulting, Inc. jdjonesrphjd@icloud.com Date: December 9, 2016 CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER 7 INTRODUCTION I have been engaged by Williams & Connolly LLP on behalf of CVS Pharmacy, Inc. ("CVS") to provide expert opinions on PBM practices in contracting with employers, health plan clients and network pharmacies, as well as administering prescription drug claims. In particular, I have been asked to provide background on the PBM industry, including a description of the network of contracts that govern different aspects of reimbursement, the claims adjudication process, generic discount programs in general and membership programs in particular; to explain PBM industry practice in defining and determining usual and customary ("U&C") pricing for purposes of claims submission; and to evaluate whether it was consistent with that industry practice for CVS not to include prices associated with its Health Savings Program as U&C when submitting claims to PBMs. QUALIFICATIONS AND EXPERIENCE In preparing my opinions, I have relied upon my experience in negotiating pharmacy network contracts on behalf of health plans and Pharmacy Benefit Managers ("PBMs") over the past 25 years. Between December 1990 and March 2016, I was employed in various management and executive capacities at PBMs or Third Party Payors that managed their own pharmacy benefit, including Blue Shield of California ("Blue Shield") and OptumRx (which operated under the name Prescription Solutions when I initially joined). I was employed at Blue Shield between 1990 and 1994. Blue Shield is a health care insurer, and during my employment I developed for Blue Shield a competitive internal pharmacy benefits product. My responsibilities included developing pharmacy networks and an on-line electronic prescription claims system to support the health plan's prescription drug benefits, and when I left Blue Shield in 1994 I held the position of Director of Pharmacy Relations. 1 7 I was employed by OptumRx or its predecessors between 1994 and 2016. When I began work at that company, which was one of the early PBMs, it was named Prescription Solutions, and it was a wholly-owned subsidiary of an insurer, PacifiCare Health Systems. For the first approximately seven years I was employed there, my responsibilities included pharmacy network contracting, pharmacy reimbursement and appeals, and pharmacy audits. I became Vice President of legal and regulatory affairs in 2001, and joined the executive management team of the PBM. Later in 2005, PacifiCare Health Systems (and Prescription Solutions) was acquired by UnitedHealth Group. Prescription Solutions was later rebranded as OptumRx. During that period, I became Senior Vice President of Professional Practice and Pharmacy Policy. I remained on the executive management team after the UnitedHealth acquisition and through the rebranding to OptumRx. In these roles, I developed strategies for the PBM regarding policy, legislation, and regulation, and was responsible for advocating on the PBM's behalf with state and federal policymakers. I also was routinely included in contracting decisions with pharmacies when issues arose during negotiations concerning non-standard terms and conditions. I attended monthly meetings to discuss company products and operations, the competitive nature of the PBM market, pharmacy network composition, MAC pricing, and client1 and pharmacy network contracting. During these meetings, I received detailed information regarding negotiations relating to new and existing business, as well as information regarding the pharmacy contracts including trends and development of new networks. From approximately 2008 until 2016, I was also an active member in the committee that reviewed pharmacies' compliance with contract terms. This committee would terminate 1 Optum's clients included various types of TPPs, such as insurance companies, health and welfare benefit funds, and third-party administrators. 2 7 pharmacies for violating contract terms or create corrective action plans as a condition of further participation if it was determined that they were allowed to continue in the networks. In 2015 and 2016, I was involved in the acquisition and integration of CatamaranRx (then the fourth largest PBM in the United States) by OptumRx (then the third largest PBM in the United States). Through this integration process, I became familiar with the operations and network contracts of CatamaranRx and how they were similar to, or different than, those of OptumRx. When I separated from OptumRx in March 2016, I was senior vice president and a member of the executive management team. In addition to my twenty-five years of experience in the PBM industry, I also have relied on my fifteen years of experience as a practicing pharmacist in a variety of pharmacy settings, including independent community pharmacies, chain pharmacies, skilled nursing facilities, and hospitals. I currently hold adjunct professor status at the University of California, San Diego, Skaggs School of Pharmacy and Pharmaceutical Sciences, Chapman University School of Pharmacy, and Marshall B. Ketchum University School of Pharmacy. I hold a Bachelor of Science in Pharmacy degree from Idaho State University and a Juris Doctor degree from the University of San Francisco. I have authored or participated in the development of publications concerning the pharmacy benefit management industry, including the chapter on "Pharmacy Benefit Design, Marketing and Customer Contracting" in Managed Care Pharmacy Practice (2d ed. 2009) and the Academy of Managed Care Pharmacy Guide to Pharmaceutical Payment Methods (v1.0 2007). 3 7 A more detailed description of my experience, including a list of cases in which I have offered expert testimony in the past four years, is attached as Exhibit A. MATERIALS CONSIDERED In preparing this report, I have considered pleadings and discovery materials supplied to me by Williams & Connolly, LLP, as well as documents that are available to the public. A list of documents I considered in forming the opinions set forth in this declaration is attached as Exhibit B. GENERAL BACKGROUND Most prescription purchases in the United States are paid for in part by health insurance of some kind. The component of health insurance that covers the purchase of prescription drugs, sometimes referred to as a "pharmacy benefit," typically involves several different kinds of participants:  Plan Members: Plan members, or beneficiaries, are the actual individual customers who use the prescription drugs that are subject to the prescription benefit.  Third-Party Payors: Third-party payors ("TPPs") are entities that ultimately pay all or part of the cost of prescriptions on behalf of individuals or groups of consumers. TPPs can include insurance companies (which can offer many different types of health plans), health and welfare benefit funds, federal, state and local governments, etc. TPPs can be self-insured or fully insured through an insurance company.  PBMs: Although some TPPs choose to perform some or all of their own pharmacy benefit management, the investment in infrastructure to do so competitively is substantial. Most TPPs contract with a PBM instead. PBMs are companies that contract with TPPs to administer the prescription drug portion of the health care 4 7 benefit those TPPs offer. Among other services, PBMs organize and maintain networks of retail pharmacy providers, with whom the PBM contracts.  Pharmacies: Retail pharmacies like CVS offer clinical guidance to customers, dispense prescriptions and charge customers a share of the cost as directed through the electronic adjudication process.2 In an insurance arrangement, plan members or groups pay premiums to an insurer, and in return, the insurer covers part or all of the cost of plan members' prescriptions (assuming the prescriptions are covered and the plan member has satisfied any deductible). Plan members also typically have some cost share responsibility, but this can take a variety of forms.  Copay: A fixed copay may be specified under the benefit but there are often different tiers of copay such as for generic (tier 1), brand preferred (tier 2) or brand nonpreferred (tier 3).  Coinsurance: A coinsurance amount is typically a fixed percentage of the contracted price with the network pharmacy. Coinsurances may be applied to branded or specialty drugs to share the risk on expensive drugs between the health plan and its members.  Deductible: A deductible amount may be applied to the overall health plan or specifically to the pharmacy benefit. The deductible amount would need to be 2 See Applied Policy, Concerns Regarding the Pharmacy Benefit Management Industry at 2, NATIONAL COMMUNITY PHARMACISTS ASSOCIATION (Nov. 2015), http://www.ncpa.co/pdf/applied-policy-issue-brief.pdf (outlining "major players in the prescription drug supply chain"). 5 7 satisfied before any plan payment. So a member would have to pay the entire cost of a prescription until the deductible amount has been met.3 Copayment, coinsurance, and deductible obligations vary significantly based on the health plan's benefit design and the particular medication. For some preventive medications covered under the Affordable Care Act, there is no cost share at all.4 Under some benefit designs, an insured may pay for the prescription and then be reimbursed. If there is an insurance gap (as there is with Medicare Part D), there may be some portion of the benefit where the member bears 100% of the cost.5 With plans where there is a maximum out-of-pocket provision that applies to the prescription benefit, prescriptions filled after the maximum out-of-pocket dollar amount has been met are either paid 100% by the plan or leave the member with a small percentage of coinsurance. PBMs offer numerous services to their clients and their clients' plan members, including processing prescription claims, negotiating discounted prices and rebates with pharmaceutical manufacturers and pharmacies, managing formularies, establishing pharmacy networks, operating (or contracting with) mail service and specialty pharmacies, and offering drug utilization review and disease management and treatment adherence programs. Currently, there are 27 PBMs accredited through the URAC Pharmacy Benefit Management Accreditation 3 See Glossary, HEALTHCARE.GOV (2016), https://www.healthcare.gov/glossary/ (providing definitions of copayment, coinsurance, and deductible). 4 See, e.g., Preventive Services Covered by Private Health Plans Under the Affordable Care Act, KAISER FAMILY FOUNDATION (Aug. 4, 2015), http://kff.org/health-reform/fact-sheet/preventive- services-covered-by-private-health-plans/. 5 See Closing the Coverage Gap—Medicare Prescription Drugs Are Becoming More Affordable, at 6, MEDICARE PRESCRIPTION DRUG COVERAGE (Jan. 2015), https://www.medicare.gov/pubs/pdf/11493.pdf (listing patients' cost shares during the coverage gap for Medicare Part D). 6 7 program (although there are likely PBMs that have not sought accreditation).6 Between 2008 and 2015, the leading PBMs included Medco, Express Scripts, and Caremark.7 CVS had contracts with all of the leading PBMs.8 The PBM industry is very competitive and constantly changing.9 TPPs will often switch their business from one PBM to another when there is a significantly better financial opportunity, better service, new management tools or where there is dissatisfaction with the incumbent PBM. When there are mergers and acquisitions of TPPs, there may be different PBMs serving different plans in the combined organization. It is not unusual to have different groups within the same business using competing PBMs. For example, after the UnitedHealth acquisition of PacifiCare, the UnitedHealth Medicare Part D business was awarded to the acquired PBM (which became Optum Rx) while the commercial drug benefits were continued through an existing contract with Medco, a competitor of OptumRx. Also, where a large group has a cafeteria offering of health plan benefits, there may be different PBMs that serve the disparate offerings. If an employer offers a choice of health plans offered by, for example, Aetna, Blue Cross, or Kaiser Permanente, the employee's benefit would be administered by a different PBM depending on which plan he chose. It would therefore be unreasonable to expect that in all (or even most) cases, a single 6 https://accreditnet2.urac.org/UracPortal/directory/directorysearch. URAC is a not for profit quality accreditation organization operating nationally. 7 Consider, for example, Dr. Adam Fein's post on his blog describing 2012 market shares in the PBM industry. Adam Fein, ESRX-MHS: Analysis of the FTC Decision, DRUG CHANNELS EXPERT INSIGHTS ON PHARMACEUTICAL ECONOMICS AND THE DRUG DISTRIBUTION SYSTEM (Apr. 2, 2012), http://www.drugchannels.net/2012/04/esrx-mhs-analysis-of-ftc-decision.html. 8 See Deposition of Scott Tierney ("Tierney Dep.") 133:8–15, 191:1–16. 9 Statement of the Federal Trade Commission Concerning the Proposed Acquisition of Medco Health Solutions by Express Scripts, Inc., FTC No. 111-0210, at 2–6 (Apr. 2, 2012). 7 7 PBM would administer the entirety of a TPP's pharmacy benefits in a uniform manner over a period of many years. CONTRACTUAL RELATIONSHIPS THAT DETERMINE REIMBURSEMENT Individual members are covered by health plans offered by TPPs that establish the terms and conditions for eligibility, benefits, and the member's exercise of the benefit. The benefit design documents for these plans detail the premiums, cost share structure (including deductibles, coinsurance, copayment amounts at various tiers, if any), the drugs covered under a formulary, and other aspects of the member's plan benefits. The prescription price paid by a TPP and a plan member is determined by those plan benefits as well as a network of contracts involving the TPP, PBM, and pharmacy. TPP-PBM Contract Most TPPs retain a PBM to provide a bundle of different services related to the administration of its pharmacy benefits (some TPPs do not outsource the administration of pharmacy benefits, and instead perform that role themselves). The prices agreed to by the TPP and PBM as well as the scope of those services, and the manner in which the PBM will be reimbursed, are carefully negotiated and set forth in the parties' contract. The TPP-PBM contract includes a description of the benefit design for the health plan(s) offered by the TPP, which include the formulary (what drugs are covered), what amounts of the drug can be obtained on a monthly basis, and the copayment structure (including whether a deductible must be satisfied). The benefit design is submitted to the PBM by the TPP, and the PBM is responsible for implementing it. While the PBM may advise the TPP on the impact of various formulary and copayment structures, the final decision regarding formulary and copayment structure discussions and recommendations rests with the TPP. 8 7 Provisions in the contract governing reimbursement are usually carefully negotiated and narrowly defined. They are subject to audit and recovery if not administered according to the terms of the contract. Among the many items negotiated in the TPP-PBM contract that are relevant to this action are: Reimbursement methodology for individual transactions (i.e., how much the TPP will pay), such as "lesser-of" provisions; calculation of copayments/coinsurance/deductibles (i.e., how much the customer will pay); aggregate reimbursement rates, such as a generic effective rate ("GER"); U&C definitions; and provisions relating to MAC lists. PBMs and their contracted TPPs may have hundreds or thousands of different clients, many with different structures as to how their members share in the cost of the prescriptions. Members of some TPPs may pay 100% of the contracted rate when they are in the deductible phase of their benefit. Others may pay a percentage of the prescription cost. Yet others may pay a fixed copay that may vary according to the formulary placement of the drug being dispensed. Sometimes, after a specified annual out-of-pocket member cost has been met, the TPP pays all or nearly all of the drug cost until the end of the benefit year. It is possible that member copayments could be calculated without reference to U&C where the prescription benefit has a fixed copay regardless of whether the prescription cost is lower or higher than the copay. PBM-Pharmacy Contract PBMs contract with pharmacies to create networks of pharmacies at which TPP members may fill prescriptions.10 10 As previously noted, some TPPs do not outsource the administration of pharmacy benefits to a PBM. These TPPs will contract with pharmacies directly and perform the other tasks that PBMs typically perform. 9 7 Each PBM generally offers its own standard agreement to a pharmacy, but each term therein is subject to negotiation. Even if the terms are fairly standard, it is common for pharmacies with a stronger bargaining position to propose or demand wording changes. Pharmacies, particularly large chains like CVS and Walgreens, have significant leverage when it comes to negotiating contractual terms (such as definitions).11 Terms in these contracts, including reimbursement rates, change over time as new fee schedules are added and existing fee schedules and terms are periodically renegotiated. There are a number of provisions contained in the contract that relate to determining the reimbursement the pharmacy will receive for a given prescription. They include:  Reimbursement methodology for individual transactions, such as "lesser-of" provisions that may reference different price sources (e.g., a negotiated discount from the average wholesale price ("AWP"), a maximum allowable cost ("MAC") established unilaterally by the PBM, or the pharmacy's U&C price);  Aggregate reimbursement rates, such as a generic effective rate ("GER")—which is generally an aggregate percentage discounted from AWP for the generic market basket;  Provisions relating to the pharmacy's collection of copayments, including prohibiting the pharmacy from discounting or waiving customer copayments; and  U&C definitions. 11 See Adam J. Fein, Surprise PSAO Consolidation: H.D. Smith and AAP Form Fourth-Largest Pharmacy-PBM Negotiating Group, DRUG CHANNELS EXPERT INSIGHTS ON PHARMACEUTICAL ECONOMICS AND THE DRUG DISTRIBUTION SYSTEM (Mar. 1, 2016), http://www.drugchannels.net/2016/03/surprise-psao-consolidation-hd-smith.html (comparing negotiating power of large pharmacies and independent pharmacies). 10 7 The PBM-Pharmacy contract generally does not contain provisions relating to the specific benefit design of the health plans offered by the PBM's clients (i.e., the TPPs with which the PBM contracts). This is because the PBM, not the pharmacy, is responsible for implementing and administering its clients' particular benefit designs, including the calculation of the plan member's copayment. Pharmacies understand and expect that the PBM will administer the benefit plans of its clients, and pharmacies generally take no responsibility for knowing or understanding these plans and their terms. PBM-Pharmacy contracts thus do not describe how plan members' copayments will be calculated.12 Instead, the contracts instruct the pharmacy to collect the full copayment, as determined by the PBM. In my career, I have never seen or participated in negotiating a PBM- pharmacy contract that described how an individual plan member's copayment would be calculated. The reimbursement paid to a pharmacy by the PBM may differ from reimbursement paid by the TPP to the PBM, since the two amounts are governed by different contracts. The methodologies for calculating total reimbursement in the TPP-PBM contract and the PBM- Pharmacy contract may not be identical. For example, where a PBM has a "spread" pricing structure, the PBM negotiates one reimbursement rate with the TPP and guarantees that rate. The PBM may have a higher or lower rate of reimbursement with the pharmacies in the network according to their bargaining positions.13 Spread pricing could result in different reimbursement 12 See, e.g., Deposition of John Zevzavadjian ("Zevzavadjian Dep.") 36:5–8; Deposition of Scott Tierney ("Tierney Dep.") 213:15–214:5. 13 See Adam J. Fein, Solving the Mystery of Employer-PBM Rebate Pass-Through, DRUG CHANNELS EXPERT INSIGHTS ON PHARMACEUTICAL ECONOMICS AND THE DRUG DISTRIBUTION SYSTEM (Jan. 14, 2015), http://www.drugchannels.net/2016/01/solving-mystery-of-employer- pbm-rebate.html. 11 7 methodologies being utilized in the TPP-PBM and PBM-pharmacy contracts. It is possible that, under a spread contract, the PBM-pharmacy contract might cap the pharmacy's reimbursement at U&C, while the TPP-PBM contract might not impose a similar cap on the price paid by the insurer. This could happen when there is a guaranteed price charged by the PBM to the TPP for each claim. In such cases, claims that were more costly or less costly than the guaranteed price become irrelevant because the TPP is billed at the guaranteed price for every claim. Provider manuals may be incorporated into the contract by reference and reflect client- specific information or communication to the pharmacy on how the benefits will be administered.14 Provider manuals may include information to guide the pharmacy on administration of the benefits or claim submission. CLAIMS ADJUDICATION Real-time claims adjudication is a critical element of pharmacy benefit management. By this process, a PBM provides a pharmacy with confirmation as to whether a particular member and the prescription which the member wishes to fill are covered by insurance, as well as information and instructions that pertain to filling the prescription and obtaining reimbursement. The process consists of two main steps: the submission of the claim by a pharmacy ("claim submission"), and the adjudication of the claim by a TPP or PBM ("claim adjudication"). Claim Submission: First, the customer presents the prescription at the pharmacy or it is received electronically by the pharmacy from the customer's prescriber. The customer also 14 For example, Medco's Pharmacy Provider Manual defined U&C for the purposes of the relationship between CVS and Medco. Medco Pharmacy Provider Manual § 3.3.1 (2009); Medco Pharmacy Provider Manual § 3.3.1 (2011). 12 7 presents his insurance card.15 The pharmacy staff (the pharmacist, pharmacy technician or billing clerk) then submits a claim for the prescription using the information printed on the drug benefit card, such as an insurance card. The insurance card itself generally contains little or no detail regarding the terms of the members' pharmacy benefit. Instead, it identifies the PBM and/or TPP and also provides numerical codes that are entered by the pharmacy as part of the claim so that the electronic claim is directed to the appropriate PBM's or other claims processor's computer system for adjudication. Electronic claims are submitted in a HIPAA-mandated format established by the National Council for Prescription Drug Programs (NCPDP). The NCPDP standard contains numerous data fields, some of which are mandatory and others of which are optional. PBMs periodically issue "Payer Sheets" specifying which fields the pharmacy must submit on a claim to the PBM. Where necessary to meet a specific business need, the contract may define the requirements for data submission more specifically. Claim Adjudication: After receiving the claim, the PBM will perform a number of steps necessary to "adjudicate" the claim based on information the PBM has regarding the PBM's contract with the Health Plan and the details of the member's health benefit. Adjudication is typically completed by the PBM within less than a minute of receiving the claim from the pharmacy. 15 Once the customer provides the insurance card, the information on the insurance card may be saved by the pharmacy as part of a customer record so that the insurance card can be retrieved on future visits even if the customer is unable to physically present the card. 13 7 One key element of claim adjudication is coverage determination. The PBM determines whether the member has current eligibility, what the coverage is, and whether and how the drug is covered, based on information the PBM has regarding the member's plan benefits. Another key element of claim adjudication is reimbursement determination. The PBM determines the reimbursement to the pharmacy according to the terms of the network agreement as entered into the PBM's claim system. This includes determining how much the TPP will pay for the prescription as per the terms of the TPP-PBM contract through contractual information present in the claim system, and how much the customer will pay out-of-pocket for the prescription according to the prescription benefit design. The PBM, where necessary, also keeps a running tally of the member/customer's out-of-pocket costs in order to track satisfaction of a deductible (if any) or an annual maximum out-of-pocket. The PBM—not the pharmacy—determines eligibility, the total reimbursement amount, and the customer's copayment/share of cost. The pharmacy generally is not aware of the plan details that are necessary in order to make such determinations, and thus generally has no insight into how the PBM calculates the reimbursement rate or copayment. The pharmacy usually must collect the adjudicated amount of the share of cost by the customer when they dispense the prescription and is typically contractually prohibited from charging an amount different than the amount returned by the PBM. GENERIC PROGRAMS Late in 2006 Wal-Mart introduced and publicized a flat-fee discount generic list. This pricing was automatically given to any customer who filled a prescription at the store, without the need to ask for it, register for a program, or pay a membership fee. 14 7 These price lists received significant press. Other grocery stores and mass-market retailers, including Kroger and Target, responded by adopting similar offerings.16 PBMs began to audit insured prescription claims to assure that Wal-Mart and other pharmacies with similar offerings were submitting U&C pricing consistent with the flat-fee prices charged to cash customers. OptumRx electronically audited claims submitted by Wal-Mart and other pharmacies with similar price lists to ensure that the flat-fee discount generic price was submitted as the U&C value. Walgreens, RiteAid, and other pharmacies responded by establishing membership programs.17 The membership programs differed from the lists offered by Wal-Mart and others in that membership programs generally involved a fee to join and required the member to enroll by filling out an application in which the member agrees to the programs' terms and conditions, which may include a HIPAA waiver. The application generally involved the customer establishing a relationship with the pharmacy allowing for use of customer information for purposes of targeting marketing to customer needs and establishing a closer relationship than simply a discounted drug list. After taking these steps, a program member would be eligible to receive special pricing on a defined set of generic drugs (and possibly brand drugs as well). These membership programs by and large were developed to attract and keep customers who might otherwise be lured away by Wal-Mart and others that had adopted flat-fee discount generic 16 Target, Kroger Now Offer $4 Generic Prescription Drugs, THE AUSTIN TIMES, Dec. 26, 2010, available at http://www.theaustintimes.com/2010/12/target-kroger-now-offer-4-generic- prescription-drugs/. 17 Walgreens established the Walgreens Prescription Savings Club in 2007. RiteAid launched the Rx Savings Program in September 2008. Dinah Wisenberg Brin, Pharmacies Fight Tough Battle on Generic Prices, THE WALL STREET JOURNAL, Dec. 22, 2008, available at http://www.wsj.com/articles/SB122990612110525373. 15 7 lists. CVS was the last of the top pharmacy chains in the United States to implement a membership program, launching the HSP program in November 2008.18 Membership programs are a form of unfunded prescription benefit. Membership programs require that a customer actively enroll in the program, and often require the customer to pay a fee, in return for access to a potentially beneficial pricing structure. Most prescriptions purchased using the membership benefit go through the claims adjudication process described previously, meaning that the claim is submitted to a PBM, adjudicated by the PBM, and the pharmacist collects from the customer the amount returned by the claims adjudication system.19 Unlike insurance, however, a membership program is "unfunded," meaning the customer always bears 100% of the cost of the drug. CASH DISCOUNT CARDS Cash discount cards are another form of non-insurance prescription benefit that have become common in the pharmacy industry since the mid-2000's. Customers generally obtain the card at no cost, and often acquire them by simply downloading them on the internet from a sponsor's website. A customer with a cash discount card may access special pricing that typically is less than the pharmacy's retail cash price, and which can apply across a wide range of prescriptions (not just a limited list of generics). That pricing, as well as an administrative or "marketing" fee that is added to each transaction, is contractually agreed upon by the cash discount card sponsor and the pharmacies that accept the card. Like a PBM servicing a commercial insurance plan, the discount card sponsor contracts with a broad network of 18 Deposition of Thomas E. Morrison ("Morrison TX Dep.") 66:1–67:1; 72:16–73:3. 19 Some sophisticated membership programs may operate an internal adjudication component, which, like an outside PBM, makes coverage and reimbursement determinations. I am not aware of any membership program that operates without at least some adjudication component. 16 7 pharmacies. Discount cards are unfunded, and prescriptions purchased using the discount card are adjudicated by a PBM.20 CASH TRANSACTIONS Cash transactions for prescriptions are those that do not involve insurance or any other kind of pharmacy benefit program. Because there is no pharmacy benefit program, there is no need to send the claim to a third party for adjudication—in fact, there is no need for an adjudication component whatsoever. The customer pays the retail price set/calculated by the pharmacy, as opposed to an adjudicated price returned by a PBM or claims processor. OPINIONS Opinion 1: U&C is determined by agreement between PBM and pharmacy. PBM-pharmacy contracts or related documents, such as provider manuals or policies, determine whether a pharmacy is required to submit U&C at all.21 If a PBM-pharmacy contract does not require submission of U&C, then the pharmacy is under no obligation to do so. If a PBM-pharmacy contract does require submission of U&C, then it will typically contain a definition of U&C. The definitions vary from contract to contract (and can even vary within the same contract over time). "Usual and customary," like other contract terms, thus means what the parties to a particular contract agree that it means with respect to that contract.22 20 For a discussion of cash discount cards, see Devon Herrick, Uninsured Shoppers May Lose their Drug Discounts Unless they Find a New Card, NATIONAL CENTER FOR POLICY ANALYSIS HEALTH POLICY BLOG (Feb. 18, 2016), http://healthblog.ncpa.org/uninsured-shoppers-may-lose- their-drug-discounts-unless-they-find-a-new-card/#sthash.J1J7WnYa.dpbs. 21 Though the obligation typically appears in the PBM-pharmacy contract, as described above, Medco obligated CVS to submit the U&C defined in its provider manuals. Medco Pharmacy Provider Manual § 3.1 (2009); Medco Pharmacy Provider Manual § 3.1 (2011). 22 As explained above, pharmacies are required to submit electronic claims using the NCPDP telecommunication standard, including the NCPDP's definitions of the various data fields, and this can impose practical limits on what the parties can agree with respect to what will be 17 7 Furthermore, because it is a term that can affect reimbursement, PBMs and pharmacies are attentive to the definition of "usual and customary." For example, a contract that defines "usual and customary" to include "applicable discounts" would require that the pharmacy submit a usual and customary price for a given plan member that incorporates any discounts the pharmacy would apply if the plan member satisfies the requirements for those discounts (e.g., a senior discount would be applied if the Plan Member satisfied the age requirement).23 Insofar as a pharmacy's reimbursement is based on its U&C price, such a definition will tend to result in reduced reimbursement to the pharmacy as compared to a definition that does not require the pharmacy to include applicable discounts. As with other terms in these agreements, whether to incorporate U&C pricing and how to define it are subject to negotiation. If one party seeks to change the definition of U&C in a way that is economically favorable to that party, my experience is that that the other party will often demand a price before agreeing—either a direct offset in reimbursement or a clause of similar value in another part of the contract. For example, assume a PBM wanted to change the definition of U&C to require a pharmacy to include a broader definition of applicable discounts when submitting U&C. That would potentially reduce the reimbursement that the pharmacy would receive for certain generic drugs, so the pharmacy might insist upon more favorable terms included in a particular field. NCPDP defines field 426-DQ, the 'Usual & Customary Charge" field, as the price charged to the "cash customer," but does not define "cash customer." Thus there is latitude for PBMs and pharmacies to interpret and define U&C within the boundaries of that definition. Furthermore, while NCPDP governs what goes in particular fields of the claim submission, it does not restrict PBMs and pharmacies from making economic arrangements that are external to the claims submission process, for example, reconciliation. 23 CVS entered such contracts. See Aetna Health Management § 1.54 (2009) ("The cash price less all applicable customer discounts which Pharmacy usually charges customers for providing pharmaceutical services."). 18 7 in other areas of the contract to offset the amount of that lost value (i.e. higher branded prescription reimbursement, GER, or a more favorable level of exclusivity among competitors). Sometimes the contract itself does not explicitly define U&C, or defines it in such a way that leaves uncertainty as to how the definition should be applied in a particular situation.24 In such cases, it is possible that an agreement between the parties regarding the definition and/or application of the term may be reflected elsewhere. PBMs and pharmacies sometimes encounter uncertainty regarding how particular terms are to be operationalized, and when they do so, it is not uncommon for them to communicate regarding the issue and reach a common understanding that may or may not be documented in correspondence. Dr. Robert Navarro, an expert witness for the Plaintiffs in this matter, has correctly observed that the parties' contractual agreement regarding U&C is what ultimately controls the parties' respective obligations, and that the opinions and views of the PBM and pharmacy regarding the meaning of U&C are important.25 Therefore, to understand what exactly a pharmacy should submit as U&C with respect to a particular contract, one would need to consider the contract itself and potentially any other documents or communications that would illuminate the parties' understanding of the subject. Opinion 2: U&C is not generally interpreted to include membership program pricing. During the period of time contemplated by this action, membership programs involving applications and/or fees to join were not widely considered by the PBM industry to be discounts for inclusion into U&C pricing claim submissions because they were not available to all cash 24 Consider CVS's contract with American Health Care, which described U&C as "The price that the Company Pharmacy would have charged the Member for the same Prescription on the same day if the Member was a cash customer." American Health Care Ex. A (2009). 25 Navarro Deposition 37:23–25, 104:4–14.; Declaration of Robert P. Navarro ("Navarro Decl.") ¶¶ 14, 16, 28. 19 7 customers. At OptumRx, our management team was aware of the membership programs because some were widely advertised. We recognized that the membership program pricing was available only to a subset of customers (i.e,. the members) and not to all customers who came to the pharmacy paying cash. After considering the structure of such programs, we determined that the membership program pricing was not being submitted as the U&C price and we did not challenge that practice or determine it violative of any industry standard. This conclusion also is supported by material that was published during the relevant time period.26 Respected sources such as the AMCP drug pricing guides and statements by Dr. Adam Fein on his widely-read Drug Channels website published during that time period show that our position was reflective of others dealing with the same question. Dr. Fein has reiterated this point in his recent 2016 Economic Report on Retail, Mail, and Specialty Pharmacies: "Because of the enrollment fees and membership requirements, these programs do not change the U&C retail list price. Consequently, these pharmacies are eligible to receive the higher reimbursement amounts on the drugs from a third party payer, minimizing the impact on generic margins."27 This conclusion is also supported by the testimony of PBM personnel that I have reviewed in connection with this matter. That testimony uniformly supports the notion that PBM personnel were aware of and agreed with CVS's practice of not submitting its HSP prices as its U&C prices:  "[I]t was generally known in the industry that CVS was offering such [membership] programs." Deposition of William Barre 29:12–14 (Nov. 17, 2016); 26 Adam J. Fein, Pharmacy Profits and Wal-Mart, DRUG CHANNELS (Jan. 15, 2009); AMCP Guide to Pharmaceutical Payment Methods, 2009 Update (Version 2.0), 15 JOURNAL OF MANAGED CARE PHARMACY, S7 (2009). 27 Adam J. Fein, The 2016 Economic Report on Retail, Mail, and Specialty Pharmacies, PEMBROKE CONSULTING, INC., AND DRUG CHANNELS INSTITUTE, at 190–91 (Jan. 2016). 20 7  "Based on my understanding of the program, CVS was not required to submit the HSP price as its U&C price on Medco claims." Declaration of William Strein ¶ 11;  "[Medco] decided that pharmacies who charged customers a fee to enroll in a membership-based generic program were not required to submit the program price as U&C. . . ." Declaration of Franceen Spadaccino ¶ 6; and  "Caremark considers, and has always considered, HSP a 'Club Plan.' Accordingly, CVS, like all other pharmacy companies with whom Caremark contracts and who operate Club Plans, was not required nor expected to submit its HSP program price as its usual and customary price on Caremark claims." Declaration of John Lavin ¶ 20. As previously noted, there was general awareness in the industry that many chain pharmacies operated membership programs, and pharmacies did not submit the membership program pricing as U&C when submitting claims to PBMs. It is difficult to imagine how any PBM could not have been aware of those facts. PBMs are sophisticated entities that carefully track news and developments in the industry; most if not all PBMs would therefore quickly learn of any publicly announced membership program launched by a major pharmacy chain. The terms of the pharmacy's membership program, including the list of covered drugs and the special pricing that members would receive for those drugs, were publicly available. PBMs routinely audit pharmacies for contractual compliance, and it would have been straightforward for a PBM that believed that its contract with a pharmacy required membership program pricing to be submitted as U&C to audit the claims submitted by a pharmacy and to determine whether the pharmacy was doing so or not. For example, the list of generic drugs for which members of the HSP program received special pricing as of November 2013 is available on the internet at 21 7 http://www.4dollardrugs.com/wp-content/uploads/2014/03/CVS-November-2013.pdf. That price list reflects that, for example, HSP members could obtain a 90 day supply of Loratadine 10 MG Tabs for $11.99. If a PBM believed that CVS was contractually obligated to submit this price (or a lower price) as its U&C pursuant to the PBM's contract with CVS, the PBM could have easily examined claims actually submitted by CVS to that PBM for 90 day supplies of Loratadine 10 MG Tabs. It would have been immediately apparent to the PBM whether CVS had submitted a U&C greater than $11.99 for 90 day supplies of Loratadine 10 MG Tabs. It is my experience that when a PBM believes that a pharmacy is violating contractual reimbursement provisions, the PBM acts quickly and forcefully to enforce their understanding of the provisions; typically, the pharmacy will either come into compliance or else be removed from the PBM's network. In my many years of experience negotiating and enforcing PBM- pharmacy agreements, I cannot think of any situation in which a PBM has been aware that pharmacies were violating a contractual reimbursement provision, yet took no action in response. At the very least a cease and desist letter would be sent to stop the pricing practice that the PBM found violative of the network contract.28 For Plaintiffs and Dr. Navarro to be correct regarding their asserted industry standard, one would have to accept that not just one PBM stood passive in the face of what it considered to be a contractual violation by pharmacies, but that many did so for nearly a decade. That is highly implausible. Contrary to the assertion of Plaintiffs and Dr. Navarro, the general industry understanding during the time period was that membership program pricing was not a "discount" or "applicable discount" for purpose of submitting U&C, even when a contract required inclusion of discounts 28 See Caroline Humer, Carl O'Donnell & Tim Reid, Exclusive: U.S. Insurer Caught on to Odd Billing at Valeant-Linked Pharmacy, REUTERS BUSINESS NEWS (Nov. 4, 2015), http://www.reuters.com/article/us-valeant-pharmacies-claims-idUSKCN0ST2EU20151104. 22 7 when submitting U&C. The term "discount" as applied to U&C pricing definitions is widely understood within the PBM industry to mean discounts offered to cash customers who would otherwise pay the pharmacy's retail price. The special pricing structure that customers with a pharmacy benefit (including a membership program) may receive is therefore not a "discount," because a customer using a pharmacy benefit is not a cash customer. If U&C pricing were not limited to "cash customers," then a "lesser of" provision incorporating U&C would effectively become a "most favored nation" clause requiring the pharmacy to charge the lowest rate it accepts from anyone (including, for example, negotiated rates paid by PBMs). Such clauses are quite rare, and I am not aware of anyone in the industry having taken the position that "lesser of" provisions be interpreted to be equivalent to "most favored nation" clauses. Furthermore, even as to cash customers, a discount is "applicable" only if the customer otherwise would have qualified for the discount had they been a cash customer. For example, in CVS stores in which a cash customer over 60 was entitled to a senior discount, that same discount was also "applicable" to the U&C submitted on transactions involving insured customers over 60 if the contract expressly included "discounts" or "applicable discounts" in its definition of U&C. The special pricing that enrollees in a membership program receive is contingent on their membership in the program, which in the case of CVS, I understand included payment of an annual fee, completion of a membership form, and an agreement to be contacted regarding various offers. The fact that few if any insured patients would have satisfied these requirements is yet another reason why the special pricing that enrollees in a membership program receive would not constitute CVS's "U&C" price. 23 7 Opinion 3: U&C is not determined based on the price point most frequently charged. None of the CVS contracts I have reviewed define U&C as the most frequently charged price. Nor am I aware of a contract between a PBM/TPP and any other pharmacy that defines U&C in this manner. From my experience in contracting with pharmacies, it would be very difficult if not impossible to convince a pharmacy to acquiesce to including such a provision in the PBM/pharmacy contract. Determining the "most frequently charged" price would require the pharmacy to undertake a constant retrospective claims analysis to analyze historical pricing data from the days/weeks/months prior to the transaction at issue. In some cases, there might be no relevant data at all, creating significant uncertainty as to how the pharmacy could provide U&C at all. I have never heard of a pharmacy utilizing such a process, nor would it be commercially reasonable or technically feasible to do so. Opinion 4: State Medicaid statutes have no bearing on commercial definitions of U&C. A pharmacy's relationship with state Medicaid programs is fundamentally different from its relationship with its commercial trading partners. Compensation and contractual participation under state Medicaid programs is state specific and typically does not involve negotiations beyond acceptance of the pharmacy of the Medicaid contract in its entirety. State Medicaid fee for service prescription drug benefit programs have the power to implement whatever U&C definition they prefer, and to force pharmacies either to comply or leave the Medicaid program.29 29 See Executive Summary, Research: Medicaid Pharmacy Savings Opportunities: National and State-Specific Estimates, PHARMACEUTICAL CARE MANAGEMENT ASSOCIATION (May 2013), https://www.pcmanet.org/research-medicaid-pharmacy-savings-opportunities-national-and-state- specific-estimates/ ("In most states, Medicaid pharmacy payments are set by statute, not negotiated with pharmacies."). 24 7 In the commercial context, by contrast, pharmacies like CVS have sufficient leverage that a TPP/PBM cannot impose its preferred U&C definition without the agreement of the pharmacy. As a result, I have never seen a contract in which a pharmacy agreed to a U&C definition that included special pricing associated with pharmacy benefits such as insurance, a cash discount card, or a membership-based program. Such a provision would be a deviation from standard industry practice. Furthermore, Plaintiffs' expert Dr. Robert Navarro draws the wrong conclusion from the fact that a handful of state Medicaid programs have changed their regulations to explicitly require pharmacies to include membership programs when submitting U&C to those Medicaid programs. This does not demonstrate an industry-wide belief or practice that pharmacies will include membership programs when submitting U&C prices. It demonstrates the opposite. The fact that these few Medicaid programs considered it necessary to change their regulations demonstrates an awareness that, absent an explicit requirement, the industry-wide standard is that pharmacies will not include membership programs when submitting U&C. If Dr. Navarro were correct in his assertion regarding industry standard, I would expect there to be widespread consensus and action among most if not all state Medicaid agencies to enforce Dr. Navarro's asserted industry standard both retrospectively and prospectively without explicit changes to their regulations. But Dr. Navarro identifies no evidence that has occurred, and I am aware of no evidence that it has occurred. 25 7 7 Exhibit A 7 CURRICULUM VITAE John D. Jones, BS Pharm, JD, FAMCP 725 N Rancho Santiago Blvd. Orange, CA 92869 JDJ-RPhJD Consulting, Inc. E-Mail Address: jdjonesrphjd@icloud.com Professional Experience May 2016 to Chapman University School of Pharmacy August 2016 Irvine, California Adjunct Faculty—Presented a 14 week course on Law and Ethics to pharmacy students focusing on Prescribing and Dispensing of Opiates for Chronic Pain in the Context of a National Opiate Abuse Epidemic OptumRx September 1994 Irvine, California to March 2016 Senior Vice President of Professional Practice & Pharmacy Policy – Responsible for public policy, regulatory compliance, quality assurance, reimbursement policy and risk management for a pharmacy benefit management company serving sixty-five million covered lives • Represent health plan and pharmacy benefit management company regarding pharmacy policy at both federal and state levels • Respond to press and regulatory inquiries regarding pharmacy benefit management issues • Oversee national quality and compliance accreditations for PBM and mail service operations • Supervise clinical activities including pharmacy and therapeutics committee, formulary development and maintenance and prior authorization program for regulatory compliance • Contract and administer nationwide pharmacy network of 60,000 pharmacies while automating network communications and improving staff efficiencies • Develop and implement quality management programs for the pharmacy network including performance report cards, pharmacy auditing, pursuit of fraud, waste and abuse and complaint tracking • Contract with pharmaceutical companies for rebates and discounts • Train pharmacy residents and students in legal and regulatory issues affecting managed care pharmacy January 2010 University of California, San Diego, Skaggs School of to Present Pharmacy and Pharmaceutical Sciences La Jolla, California Adjunct Faculty – Pharmacy Law & Ethics • Prepare and coordinate the instruction of pharmacy law and ethics • Instruct first year pharmacy students on law and ethics • Perform annual comprehensive law review for graduating students December 1990 to Blue Shield of California September 1994 San Francisco, California Director of Pharmacy Relations - Responsible for business and strategic planning, budget development, financial analysis and operations management of the pharmacy services department of an insurer with 1.7 7 million covered lives • Developed and implemented a retail prescription drug electronic point of sale program, selected pharmacy third party administrator, negotiated administrative contracts, implemented successful conversion and managed TPA/vendor performance • Implemented open managed care formulary in previously unmanaged HMO plan • Contracted a statewide managed care pharmacy network in California • Presented pharmacy programs and managed care concepts to sales, marketing, employer groups and customer service staff • Contracted for and directed vision plan benefits third party administrator May 1977 to December University of California, San Francisco 1990 San Francisco, California Director, Home Therapy Services – Clinical and management responsibilities in major teaching hospital inpatient pharmacy culminating with three year management position with responsibility for development, growth, operations, strategic planning and budgeting for a hospital based home health service • Developed and administered a home infusion therapy service • Hired and trained a staff of thirteen pharmacists, nurses, technicians and drivers • Automated the patient information data management and inventory control • Expanded physician referral base and established preferred provider contracts with third party accounts 1977 to 1978 Longs Drugs Pomona, California Pharmacist - Responsible for providing pharmacy services in a high volume chain store community pharmacy setting 1975 to 1977 Harry Race Druggist Sitka, Alaska Pharmacist - Responsible for providing pharmacy services in an independent community pharmacy, a small hospital and a skilled nursing facility in a community of seven thousand Education 1982 University of San Francisco San Francisco, California Juris Doctor, Emphasis on Medical and Business Law 1975 Idaho State University Pocatello, Idaho Bachelor of Science in Pharmacy 7 Invited Lectures and Presentations "Specialty Drugs: Opportunities to Improve Quality and Ensure September 2016 Affordability" The Hayes Client Symposium Philadelphia, Pennsylvania "Accepting Professional Responsibility" Western University of Health August 2016 Sciences School of Pharmacy White Coat Ceremony Address Pomona, California October 2015 "Ethics and Ethical Dilemmas in Pharmacy" Chapman University School of Pharmacy Irvine, California December 2013 "Essential Pharmacy Benefits for Exchanges: Benefit Design Strategies" Atlantic Information Services, Inc. (AIS) Webinar November 2013 "Inside the PBM Industry" International Foundation of Employee Benefit Plans San Diego, CA March 2012 "California State Board of Pharmacy Pharmacists-In-Charge Overview" Western School of Health Sciences School of Pharmacy Pomona, CA December 2011 "Transition of Care" & "Comparative Effectiveness Research" Foundation of Managed Care Pharmacy Washington, DC August 2011 "Detecting and Preventing Prescription Drug Fraud" Pharmacy Benefits Academy Chicago, IL October 2010 "Health Care Reform and Its Impact on Pharmacy Practice" Executive in Residence Address Western University of Health Sciences College of Pharmacy Pomona, CA June 2010 "GSK Panel on Healthcare Reform Implementation" Glaxo Smithkline Executive Management Meeting Herndon, VA February 2010 "Measurement of Medication Adherence" Pharmacy Benefits Management Institute Meeting Phoenix, AZ August 2009 "Quality in Pharmacy – What Is It?" Pharmacy Benefits Academy Chicago, IL March 2009 "California State Board of Pharmacy Pharmacists-In-Charge Overview" Western School of Health Sciences School of Pharmacy Pomona, CA 7 January 2009 "Prescription for Safer, More Effective Medication Use" Made in America, The 2009 Taft-Hartley Benefits Summit San Juan, Puerto Rico September 2008 "The Importance of URAC Accreditation of PBMs and What It Means to You" Pharmacy Benefits Academy Rosemont, IL August 2008 "Your White Coat – Welcome To Your Opportunity For Discovery And Accomplishment" White Coat Ceremony Keynote Western University of Health Sciences College of Pharmacy Pomona, CA April 2008 "Federal Legislative Update" Partners Rx 2008 Conference Scottsdale, AZ March 2008 "California State Board of Pharmacy Pharmacists-In-Charge Overview Western University of Health Sciences College of Pharmacy Pomona, CA February 2008 "Emerging National Trends in Public & Health Policy: Implications for Managed Care Pharmacy" Academy of Managed Care Pharmacy – Winter Leadership Meeting Scottsdale, AZ January 2008 "Exploring URAC PBM Accreditation" "Fiduciary Responsibility and PBM's" "The Pharmaceutical Middlemen: Exploring PBMs from Evolution To Revolution" AARP Meeting – The Public Policy Institute Washington, DC November 2007 "Part D Implementation – Lessons Learned" NCPDP Educational Meeting Washington, DC October 2007 "AMCP's Guide to Pharmaceutical Payment Methods" Capitol Hill Briefing Washington, DC March 2007 "California State Board of Pharmacy Pharmacists-In-Charge Overview Western University of Health Sciences College of Pharmacy Pomona, CA February 2007 "The URAC PBM and DTM Quality Accreditation Program" Pharmacy Benefits Management Institute Meeting Phoenix, AZ November 2006 "The Medicare Modernization Act: Lessons from the Trenches; Opportunities for the Future" NCPCP's Educational Summit Dallas, TX September 2006 "Formularies, Coverage Determinations and Appeals: Strategies to Maximize Quality, Access and Affordability for Beneficiaries" AHIP Medicare Meeting, Washington, DC 7 March 2006 "Pastries and Policies: Medicare Part D Implementation Lessons and Opportunities" APhA2006 Annual Meeting & Exposition San Francisco, CA March 2006 "California State Board of Pharmacy Pharmacists-In-Charge Overview Western University of Health Sciences College of Pharmacy Pomona, CA December 2005 "Self-Service Automated Prescription Delivery and Telepharmacy Systems" National Association of Boards of Pharmacy, Education Meeting Sunny Isle Beach, FL March 2009 "California State Board of Pharmacy Pharmacists-In-Charge Overview Western University of Health Sciences College of Pharmacy Pomona, CA March 2005 "Design and Management of the Part D Drug Benefit" - Audio conference McDermott, Will and Emery MCLE Presentation February 2005 "Statutory & Regulatory Changes Affecting Controlled Substances: What You Need to Know to Still Delivery Effective Pain Management" California Pharmacists Association Outlook Annual Meeting 2005 San Diego, CA December 2004 "Overview of California Board of Pharmacy" Indian Pharmacist Association Artesia, CA October 2004 "Medicare Modernization Act – Practitioner Issues and Requirements with relation to PBMs" Pharmaceutical Care Management Association Annual Meeting & Marketing Showcase 2004 Phoenix, AZ October 2004 "Medicare Modernization Act: Practitioner Issues for PBMs" Academy of Managed Care Pharmacy Educational Conference Baltimore, MD October 2004 "Legal & Regulatory Challenges in Managed Care Pharmacy" California Health Plan Pharmacist's (CHPP) Meeting #12 San Diego, CA September 2004 "Opportunities to be Catalysts in the Evolution of Pharmacy Practice" Executive in Residence Lecture Series Idaho State University Boise, ID August 2004 "Framework for Medication Therapy Management and Chronic Care Improvement Programs Established by the Medicare Modernization Act" National Association of Chain Drug Stores Annual Pharmacy Forum Panel San Diego, CA June 2004 Testimony on SB 1307 Wholesaler Legislation Assembly Committee on Health, California State Legislature Sacramento, CA May 2004 "Update in Pharmacy Law" University of Southern California, School of Pharmacy Los Angeles, CA 7 May 2004 "The California State Board of Pharmacy Recent Changes in Pharmacy Law" San Diego County Pharmacist Association San Diego, CA May 2004 "Role of the PBM in Constructing An Affordable Medicare Drug Benefit" Foundation for Managed Care Pharmacy Phoenix, AZ April 2004 "Maximizing the Success of the Medicare Prescription Drug Program" Academy of Managed Care Pharmacy Annual Meeting San Francisco, CA April 2004 "Review of State Legislation to Regulate PBMs" Pharmacy Benefit Management Institute, Inc. Scottsdale, AZ March 2004 "Legislation Affecting Delivery of Prescriptions and Pharmaceutical Care" Pinsonault 6th Annual PBM Symposium San Diego, CA March 2004 "Pharmacy Benefit Managers and Managed Care: New Developments Every Healthcare Attorney Should Know" National Teleconference for American Health Lawyers Association February 2004 "California Board of Pharmacy Legislative Update" Phi Delta Chi Pharmacy Alumni University of Southern California Los Angeles, CA January 2004 "Update in Pharmacy Law" for Graduating Class Western University of Health Sciences, College of Pharmacy Pomona, CA November 2003 "California Board of Pharmacy Legislative Update" California Pharmacists Association Coachella Valley Chapter Rancho Mirage, CA July 2003 "California Board of Pharmacy Legislative Update" California Pharmacists Association Santa Barbara Chapter Santa Barbara, CA May 2003 "California Board of Pharmacy Legislative Update" California Pharmacists Association Orange County Chapter Garden Grove, CA May 2003 "California Board of Pharmacy Legislative Update" California Society of Health-systems Pharmacists Long Beach, CA April 2003 Testimony before Joint Sunset Review Committee of the California Legislature regarding Laws and Regulations Governing Pharmacy Sacramento, CA April 2003 "Update on Pharmacy Law and the California State Board of Pharmacy" California Pharmacists Association San Diego Chapter San Diego, CA April 2003 "Prescription Drug Policy: What's the Next Move" Pharmaceutical Care Management Association Legislative Conference 7 Washington, DC March 2003 "Legislation Affecting PBMs" Pinsonault 5th Annual PBM Symposium San Diego, CA February 2003 "Update on Pharmacy Law and the California State Board of Pharmacy" California Pharmacists Association Outlook 2003 Program Anaheim, CA November 2002 "Programs for Detection of Negligence and Illegal Pharmacy Activities in California" National Association Boards of Pharmacy, Educational Conference San Antonio, TX November 2002 Testimony to the Joint Legislative Sunset Review Committee Sacramento, CA October 2002 "Medicare Payment for Currently Covered Injectable Prescription Drugs" Testimony before The Health Subcommittee of the U.S. House of Representatives Ways and Means Committee Washington, DC March 2002 "Medicare Issues in 2002" National Council for Prescription Drug Programs Phoenix, AZ October 2001 "Advancements in Prescription Drugs" International Foundation of Employee Benefit Plans San Francisco, CA September 2001 "Hot Issues for Managed Care" Johnson & Johnson Managed Care Group Coronado, CA August 2001 "HIPAA, Medicare, and State Legislative Issues" Bristol-Myers Squibb Managed Care Group Aliso Viejo, CA May 2001 "Regulating for Outcomes—Socratic Dialogue" National Association Boards of Pharmacy Annual Meeting Seattle, WA March 2001 "Prescription Drug Rebate Accounting Practices - Health Care Receivables" Testimony before the Statutory Accounting Principles Working Group National Association of Insurance Commissioners Nashville, TN February 2001 "Medicare Reform: Providing Prescription Drug Coverage for Seniors" Testimony before the Health Subcommittee of the U.S. House of Representatives Energy and Commerce Committee Washington, DC February 2001 "Managed Care Challenges in 2001" Pinsonault Annual PBM Symposium La Jolla, CA February 2001 "Pharmaceutical Pricing Policy Issues on the Federal Level" Health Insurance Group Purchasing Association Las Vegas, NV December 2000 Keynote Address – "Institute of Medicine Report on Veterans Affairs Formulary System" 7 American Society of Health-System Pharmacists Mid-Year Clinical Meeting Las Vegas, NV November 2000 "Legislation Affecting Managed Care Pharmacy" Academy of Managed Care Pharmacy/University of Southern California Management Development Program Pasadena, CA November 2000 "Issues in Managing Prescription Drug Benefits for Retirees" National Health Care Purchasing Institute Washington, DC August 2000 "Pharmaceutical Practices, Utilization and Cost" Panel Participant – for Conference Sponsored by U.S. Department of Health and Human Services Washington, DC June 2000 "Consumer Protection and the Question of Whether to Regulate Pharmacy Benefit Managers" Testimony before National Association of Insurance Commissioners Nashville, TN May 2000 "Medicaid Best Price Discussion" National Governors Association Washington, DC April 1999 "Medicare Prescription Drug Coverage: Tackling the Issues of Demand and Cost" The Academy of Managed Care Pharmacy 11th Annual Meeting & Showcase Minneapolis, MN May 1999 "Key Concerns for Health Plans, Providers, and Consumers" 1999 Managed Care Seminar Los Angeles, CA July 1998 "Contracting in a Long-Term Care Environment" Pinsonault Associates The Graying of America, A National Long-Term Care Conference for the Healthcare Industry San Francisco, CA November 1998 "Quality of Life Drugs: The Dilemma" A Forum on Physician Well-Being A Conference for Northern California Physicians San Francisco, CA April 1998 "The Legislative and Regulatory Arena: What's in Store for the Future" The Academy of Managed Care Pharmacy Annual Meeting New Orleans, LA June 1997 "Making the Transition to Pharmaceutical Care and New Innovative Roles for pharmacists in the 21st Century" The Southern California Society of Health-Systems Pharmacists Los Angeles, CA 1981-1990 "Pharmacy Law Update" Clinical Externship Lectures University of California San Francisco Adjunct Faculty San Francisco, CA 7 Health Policy Councils/Committees August 2016-Present Washington State SSB 6569 - Patient Out-of-Pocket Prescription Costs Taskforce Seattle, Washington September 2013- Present Chapman University School of Pharmacy Dean's Advisory Council October 2013- Present University of California San Diego Skaggs School of Pharmaceutical Sciences Dean's Community Pharmacy Practice Advisory Board March 2011-Present Chair, "Pharmacy Is Right For Me" Website Advisory Group An American Pharmacists Association, American Association of Colleges of Pharmacy and OptumRx Collaboration Washington, DC January/March/May National Council for Prescription Drug Programs – Average Wholesale 2010 Price Replacement Benchmark Focus Group Scottsdale, AZ March 2009 Pharmacy Leadership Summit University of California, San Francisco San Francisco, CA January 2009 MedPAC Expert Panel on Generic Biologics Washington, DC April 2008-2009 Board of Advisors Alliance for Aging Research Washington, DC February 2008 MedPAC Expert Panel on Medicare Part D Performance Measurement Washington, DC May 2007-Present Idaho State University College of Pharmacy Dean's Advisory Council Pocatello, ID 2006-2008 Drug Payment Methodologies Task Force The Academy of Managed Care Pharmacy Alexandria, VA 2006 Continuing Education Provider Advisory Committee Accreditation Council for Pharmacy Education Chicago, IL 2004 "Leveraging the Future of Pharmacy Study" University of California San Francisco Pharmacy Leadership Institute San Francisco, CA 2003 School of Pharmacy Accreditation Panel, University of California, San Diego Accreditation Council for Pharmacy Education San Diego, CA 2003 Policy Advisory Committee on Direct-to-Consumer Advertising California HealthCare Foundation Oakland, CA 7 Western University of Health Sciences College of Pharmacy March 2002-Present Dean's Advisory Council Pomona, CA Committee for the Description and Analysis of the Veterans Administration 2000 National Formulary National Academy of Sciences, Institute of Medicine, Washington, DC The White House Council on the Year 2000 Transition 1999 Panel on Health Policy Issues Washington, DC Book Chapters 2009 Pharmacy Benefit Design, Marketing and Customer Contracting. Managed Care Pharmacy Practice, Second Edition, Robert P. Navarro, PharmD. Jones and Bartlett Publishers, 2009. 51-94 2007 Managed Care Pharmacy: The Past and Present. Handbook of Pharmaceutical Public Policy, Thomas R. Fulda, BA, MA, Albert I Wertheimer, PhD, MBA. Pharmaceutical Products Press, 2007. 227-246 2005 Alternative Prescription Drug Plans and Their Impact on Employers. The Handbook of Employee Benefits, Sixth Edition, Jerry S. Rosenbloom, Editor, McGraw-Hill. 2005. 267-294 1999 Pharmacy Benefit Design, Contracting and Marketing, Managed Care Pharmacy Practice, Robert P. Navarro. Gaithersburg Aspen Publishers. 1999. 47-87 Publications June 2009 "Pharmacy Benefit Management, A Clearer PBM Picture for Employers" EmployersWeb.com January 2009 "PBM Purchasers Guide: A Quality Management Toolkit, Evaluation and Managing PBM Services" URAC in partnership with National Business Coalition on Health September 2007 "The AMCP Guide to Pharmaceutical Payment Methods" The Academy of Managed Care Pharmacy, AMCP.org January 2003 "Developing an Effective Generic Prescription Drug Program" Benefits Quarterly October 2002 "Improving Outcomes and Managing Costs: It's Time for PBMs to Step Up to the Plate" Drug Benefit Trends 1998 "How a PBM Develops Its Drug Formulary" Drug Benefit Trends December 1998 "A Difficult Pill to Swallow: The Importance of Educating Plan Sponsors on Prescription Benefit Programs" Health Insurance Underwriter September 1998 "Formulary Legislation Highlights – Areas of Agreement Debate and Need to Find Common Ground" California Pharmacist 7 February 1998 "Developments in the Prescription Solutions Managed Formulary" Drug Benefit Trends February 1996 "Easier to Swallow: Strategies for Managing Pharmaceutical Costs" Risk Management November 1995 "Strategies for PBM Risk Sharing: A Look at Today's Competitive Marketplace" Benefits Quarterly Awards & Special Recognitions 2012 Foundation of Managed Care Pharmacy, Steven G. Avey Award 2010 Western University of Health Sciences College of Pharmacy, Executive in Residence 2007 URAC, Outstanding Leadership Award 2005 Academy of Managed Care Pharmacy, Spirit of Volunteerism Award 2004 Idaho State University College of Pharmacy, Executive in Residence 2004 Fellow of the Academy of Managed Care Pharmacy 2004 Academy of Managed Care Pharmacy, Distinguished Service Award 2002 Pharmacy Care Management Association, Excellence in Pharmaceutical Care Award 1999 PacifiCare, President's Circle Award 1988 University California at San Francisco, Employee of the Year 1974 Rho Chi Society, Alpha Epsilon Chapter Expert Witness Testimony 2014 Board of Pharmacy, Department of Consumer Affairs, State of California v. I.V. Solutions, Inc and Renee Sadow Case No. 3606 OAH No. 2011050988 Expert Witness Report June 2014; Witness during Administrative Law Trial July 8-September 18, 2014 2016 Pharmaceutical Care Management Association v. Leslie Rutledge No. 4:15-CV-00510-BSM United States District Court for the Eastern District of Arkansas; Expert Witness Report June 24, 2016; Deposed by Arkansas Deputy Attorney General July 15, 2016 7 Professional Affiliations Academy of Managed Care Pharmacy 1990 to Present Alexandria, District of Columbia President 2000-2001 Fellow 2004; Chair Legislative Committee 2004-2005,2008-2009 Chair Nominations Committee 2002-2003 Board of Directors 2006-2008 Treasurer 2009-2011 1994 to Present Pharmaceutical Care Management Association Arlington, Virginia Member of the State Health Affairs Committee Member of Coordinating Council Member of ePrescribing Board of Governors June 1998 to 2006 California Board of Pharmacy Sacramento, California Vice President 2001-2002 President 2002-2003; 2003-2004 June 1998 to Present National Association of Boards of Pharmacy Member HIPAA Task Force 2002-2003 June 2005 to Present URAC Director, Board of Directors Vice Chairman, Board of Directors 2011-2012 Chairman, Board of Directors 2013-2014 Chairman, Pharmacy Advisory Group Other Professional Affiliations America's Health Insurance Plans American Pharmaceutical Association American Bar Association American Society of Health-System Pharmacists American Society for Pharmacy Law California Association of Health Plans California Pharmacists Association California Society of Health-System Pharmacists California State Bar Association National Association of Boards of Pharmacy National Council for Prescription Drug Programs 7 Exhibit B 7 Materials Considered Articles and Public Materials  Wal-Mart Cuts Generic Prescription Medicines to $4, Walmart.com (September 2006)  Target, Kroger Now Offer $4 Generic Prescription Drugs, Austin Times (December 2010)  Brin, Pharmacies Fight Tough Battle on Generic Prices, The Wall Street Journal (December 2008)  Gerencher, Save at the Drugstore, The Patriot-News (December 2011)  Best Buy Drugs Article, Consumer Reports (March 2011)  Klepacki, Discount Generics Programs Flood Retail, Drug Store News (November 2008)  Ryan, Patient-centered Healthcare, Boston Globe (June 2009)  Fein, Pharmacy Profits and Walmart, Drug Channels Blog (2009)  Prescription Drug Price Trends, GAO (2004)  AMCP Guide to Pharmaceutical Payment, 2013 Update (Version 3)  AMCP Guide to Pharmaceutical Payment Methods, 2009 Update (Version 2)  AMCP Guide to Pharmaceutical Payment Methods, 2007 Update (Version 1)  Fein, The 2016 Economic Report on Retail, Mail, and Specialty Pharmacies (2016)  4dollardrugs.com  Applied Policy Issue Brief, Nat'l Comm. Pharmacists Assoc.  Closing the Coverage Gap, Medicare Part D  Healthcare.gov  Fein, ESRX-MHS Merger, Drug Channels Blog (2012)  Fein, Surprise PSAO, Drug Channels Blog (2016)  Fein, Solving the Mystery, Drug Channels Blog (2015)  Humer, U.S. Insurer Caught on to Valent Billing, Reuters (2015)  PCMA, Executive Summary of Medicaid Research (2013)  Kaiser Family Foundation, Preventive Services Under the ACA (2015)  Statement of the FTC Regarding ESRX-MHS Merger No.111-0210 (2012)  Herrick, Uninsured Shoppers May Lose Drug Discounts, National Center for Policy Analysis Health Policy Blog (2016)  Urac.org Court Filings  Rite-Aid Amicus Brief in Garbe v. Kmart Corporation, Case No. 15-1502 (7th Cir. 2015)  Plaintiffs' Third Amended Complaint, Case No. 15-CV-3504-YGR, Dkt. No. 101 (N.D. Cal. Apr. 4, 2016)  CVS's Answer to Plaintiffs' Third Amended Complaint, Case No. 15-CV-3504-YGR, Dkt. No. 144 (N.D. Cal. Aug. 8, 2016)  CVSC-0000091  CVSC-0254314  CVSC-0000112 7  CVSC-0000174  CVSC-0000190  CVSC-0000191  CVSC-0000192  CVSC-0356466  Caremark-0000829  CHSP0001157 Depositions and Declarations  Declaration of Professor Joel W. Hay, PhD  Declaration of Robert P. Navarro, Pharm. D.  Deposition of Robert P. Navarro, Pharm. D.  Deposition of William Barre  Declaration of John Lavin  Declaration of Franceen Spadaccino  30(b)(6) Deposition of Hillary Dudley  Deposition of William Boyd and Exhibits  Deposition of Tom Gibbons (Texas) and Exhibits  Deposition of Elizabeth Wingate (Texas and Corcoran)  Deposition of John Zevzavadjian  Deposition of Tom Morrison (Texas)  Deposition of Scott Tierney  Declaration of William Strein Contracts  BCBS of Michigan CVSC- 0322909  Express Scripts CVSC -0325306  Aetna CVSC-0323277  ProCare PBM/RX CVSC-0346524  SXC Health Solutions, Inc. CVSC-0005440  Prescription Solutions SolutioNet CVSC-0005696  BCBS of Florida CVSC-0006144  BCBS of Georgia CVSC-0006241  Innoviant CVSC-0006412  Total Script CVSC-0014340  Serv-U Prescription Services CVSC-0014349  BCBS of Texas CVSC-0014519  John Deere Health Care CVSC-0014580 7  ACS/Consultec CVSC-0014647  American Health Care CVSC-0014729; CVSC-0342412  PBM Plus LOA CVSC-0019063  MedTrak Services CVSC-0024519  US Script CVSC-0024587  Netcard Systems CVSC-0029379  Selecthealth CVSC-0283954  Benecard PBF CVSC-0323062  Blue Shield of CA CVSC-0323374  Blue Shield of CA CVSC-0323398  Geisinger Health Plan LOA CVSC-0323623  Geisinger Health Plan CVSC-0323710  Coventry CVSC-0323965  AdvancePCS CVSC-0324071  EHO CVSC-0324101  Catamaran Main Agreement CVSC-0324752  Excellus Health Plan, Inc. CVSC-0325126  Envision RxOptions CVSC-0325563  Data Rx CVSC-0325597  Envision RxOptions CVSC-0326136  Independent Health Association LOA CVSC-0327529  MaxorPlus CVSC-0327537  Netcard Systems Interim LOA CVSC-0327565  Rx Options CVSC-0327919  OptumRX CVSC-0327927  Magellan CVSC-0328017  Paid Prescriptions LLC CVSC-0328027  Navitus Health Solutions LLC CVSC-0328069  Humana Inc CVSC-0328301  Navitus Health Solutions LLC LOA CVSC-0328379  HealthSystems CVSC-0328419  AmeriHealth Mercy Health Plan CVSC-0328806  Script Care, LTD CVSC-0328835  Prime Therapeutics CVSC-0329324  IdealScripts CVSC-0329513  Restat CVSC-0333688  Sav-Rx CVSC-0333711  DirectComp Rx CVSC-0333761  MedImpact CVSC-0333819 7  Coventry Health Care, Inc. CVSC-0336509  Coventry CVSC-0336739  Envision RxOptions CVSC-0337113  BCBS of Kansas CVSC-0337445  Prescription Solutions CVSC-0342343  Argus CVSC-0342672  BeneScript Services, Inc. CVSC-0343071  Catalyst Rx CVSC-0343448  Capital Health Plan of Florida CVSC-0343696  Cigna Health Corporation CVSC-0343770  Employee Health Insurance Management (EHIM) CVSC-0344155  Global Provider Synergies Network CVSC-0344176  Emblem Health CVSC-0344180  Future Scripts CVSC-0344217  GHS Data Management Inc. CVSC-0344362  Health Trans LOA CVSC-0344482  Health Trans CVSC-0344493  Horizon New Jersey Health CVSC-0344615  Keystone Mercy Health Plan CVSC-0345001  Lovelace Health Plan CVSC-0345024  MaxCare RX CVSC-0345105  MC-21 CVSC-0345267  MemberHealth CVSC-0345569  Navitus Health Solutions LLC CVSC-0345740  National Pharmaceutical Services CVSC-0346000  PBM Plus Inc. CVSC-0346276  PCN CVSC-0346242  PICA CVSC-0346444  Ramsell Public Health Rx CVSC-0346838  RESTAT CVSC-0347104  Rocky Mountain Health Plan CVSC-0347195  RX America LLC CVSC-0347336  ScripNet CVSC-0347325  SelectHealth Inc. CVSC-0347439  TimeSys, Inc. CVSC-0347545  Wellpoint Pharmacy Management CVSC-0348315  BCBS of Kansas City CVSC-0351432  CIGNA Healthcare of Massachusetts CVSC-0351476  MedImpact CVSC-0351768 7  Medco Health Solutions Inc CVSC-0355806  PharmaCare Management Services, Inc. PDM00000001 Other Documents  Medco Provider Manual 2009  Medco Provider Manual 2011