Corcoran et al v. CVS Health Corporation

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

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1 Exhibit O 1 Christopher Corcoran, et al., v. CVS Pharmacy, Inc. Case No. 15‐CV‐03504‐YGR (N.D. Cal.) EXPERT REPORT OF EDWARD G. McGINLEY, RPh MBA December 9, 2016 CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER 1 I. INTRODUCTION A. ASSIGNMENT I have been retained by Williams & Connolly LLP on behalf of CVS Pharmacy, Inc. to provide expert opinions on pharmacy generally and issues involved in this case that relate to the entire pharmacy reimbursement process at a retail pharmacy practice site, including the claim submission process, adjudication, the role of the pharmacy and pharmacist in this activity, the various retail pharmacy prescription programs that were in place in 2008, and to respond to opinions of experts retained by the Plaintiffs to the extent they involve the practice of pharmacy and these prescription programs. B. QUALIFICATIONS I am a licensed pharmacist in Delaware, New Jersey, New York, and Pennsylvania. I received my BS in Pharmacy from Temple University, and I hold a Master's Degree in Business Administration from Temple University Fox School of Business. I am a former Fellow of the Wharton School and Leonard Davis Institute of Health Economics, University of Pennsylvania. My resume is attached as Exhibit A. As a partner at my consulting firm, PMC, I currently provide consultative services to pharmacy and healthcare related businesses primarily in the areas of business management and administration, regulatory compliance, and technology. Prior to PMC, I was Vice President of Pharmacy for Chain Drug Consortium ("CDC"), an entity formed by its regional chain drug store members in 2001 to achieve savings in the purchasing process and create efficiencies in dealings with suppliers, and to engage in pharmaceutical care negotiations and contracting. In this role, I provided consolidated pharmacy services and business expertise to the fifteen regional drug chains that composed the consortium on subjects including store operations, contract negotiations, and information technology. In my current role at PMC and my former role at CDC, I draw upon my professional practice, business, and technical experience gained over a forty‐year career in retail chain pharmacies. Between 1972 and 2008, I worked at Pathmark Stores, Inc., a regional supermarket chain with over 130 pharmacies, beginning there as a pharmacy student and ultimately rising to the position of Director of Pharmacy Services. Among other job duties, I was responsible for corporate implementation of third‐party contracting, pharmacy systems integration, and pharmacy and corporate level regulatory compliance to all insurance, state, and federal programs. Other positions I held at Pathmark during my career there include Regional Pharmacy Supervisor, in which I was responsible for sales and operations of over 40 pharmacy departments in two states, and Manager of Pharmacy Systems, in which I was responsible for pharmacy software performance and maintaining up‐to‐date clinical, price, drug, and insurance plan files. Between 2008 and 2009, I was Vice President of Pharmacy at Drug Fair Group, Inc., a regional retail pharmacy chain with more than fifty stores. In that role, my responsibilities included store operations and overall profitability of the pharmacy business unit. I am a former President and Vice‐President of the New Jersey Board of Pharmacy (2002‐2013). I currently serve as Chair of that Board's Rules and Regulations Committee, which drafts pharmacy practice standards in New Jersey. I am also a former President and current Chairperson of the National Association of Boards of Pharmacy ("NABP"). NABP is an independent association that assists its 1 1 member boards and jurisdictions for the purpose of protecting the public health and offers programs that promote safe pharmacy practices for the benefit of consumers.1 I also have been a member of the Pharmacy Standards Oversight Committee at the Center for Pharmacy Practice Accreditation (CPPA) since 2012. The mission of CPPA is to serve the public health by raising the level of pharmacy delivered patient care through accreditation of the pharmacy practice.2 In my role as a committee member, I provide expertise to oversee and coordinate the development of consensus‐ based pharmacy practice standards and ensure that the standards developed align with the vision of CPPA, including the pharmacy profession taking a leadership role in accreditation. My other current affiliations include membership in the National Association of Chain Drug Stores (NACDS), the National Community Pharmacists Association (NCPA), the New Jersey Council of Chain Drug Stores (NJCCDS), the American Pharmacist Association (APhA), and the New Jersey Pharmacist Association (NJPhA). I was a member of the National Council for Prescription Drug Programs ("NCPDP") from 1996 to 1999. I continue to stay abreast of the changes in the practice of pharmacy. This includes monitoring the increased emphasis on positive patient outcomes, STAR ratings, pharmacist dispensing and counseling roles, and protection of the public through my PMC responsibilities, New Jersey Board of Pharmacy activities, and NABP work. My current PMC responsibilities and memberships expose me to the current happenings of provider network competition, new and emerging pharmaceutical services reimbursement models, and pharmacy benefit manager ("PBM") services, to name a few areas. Within the last four years, I have offered expert testimony in United Sates ex rel. Spay v. CVS Caremark Corp., et al., Case No. 2:09‐cv‐04672‐RB (E.D. Pa.). I have not authored any publications within the last ten years. C. COMPENSATION I am being compensated at a rate of four hundred fifty dollars ($450) per hour for my work on this matter, including any testimony I may provide. My compensation is not contingent on the substance of my opinions. D. MATERIALS CONSIDERED I have relied upon my forty years of retail pharmacy experience as a student, dispensing pharmacist, manager, adjunct instructor, regional supervisor, corporate manager, director, and vice president, among other roles. I have also considered pleadings and discovery materials supplied to me by Williams & Connolly LLP. A list of the materials I considered in forming the opinions set forth in this report are attached as Exhibit B. 1 (10/18/16) 2 (11/28/16) 2 1 II. BACKGROUND ON PHARMACY REIMBURSEMENT A. The different ways in which retail pharmacy patients pay for their prescriptions. A pharmacy customer3 has limited insight into the processes that occur "behind the scenes" when they fill a prescription. The customer's interaction is limited to (1) handing their prescription to the pharmacist, (2) providing the pharmacist with their prescription benefit information, such as an insurance or a prescription membership card, (3) waiting for the pharmacist to fill the proper quantity and dosage of medicine and include the appropriate labels and patient information sheets, (4) occasionally asking questions about their medication, and (5) paying whatever price the pharmacist states is required for the prescription. The processes that occur "behind the scenes" determine how much the customer will pay and how much the pharmacy will be paid. These processes vary depending on whether the customer pays for their prescription with a form of prescription benefit or not. A prescription benefit is any kind of assistance that a customer can use to help pay for their prescriptions. There are a number of types of prescription benefit programs, including insurance, discount card programs, and membership programs. The remainder of customers that purchase prescription medication—those who do not have any type of prescription benefit— are called "cash customers" in the industry, because they pay for their prescriptions themselves, either through cash, check, or credit card, with no prescription benefit to offset the cost of their prescriptions. More than 90% of pharmacy customers use some form of prescription benefit to help pay for their medicine. Prescription benefits may be offered by many entities, including a patient's employer, commercial insurance plans, third party administrators ("TPAs"), managed care companies, retail pharmacies, health maintenance organizations ("HMOs"), or governmental agencies at the local, state, or federal level. There are a variety of different kinds of prescription benefit programs. The most common types of prescription benefits are commercial and government insurance. Government‐sponsored insurance programs such as Medicare Part D and Medicaid accounted for 52% of prescriptions filled in independent retail pharmacies in 2015, with commercial insurance accounting for 39%.4 With an insurance prescription benefit, the cost of the prescription is often shared between the insurer and the patient. This cost sharing can take several forms. The most common are deductibles, coinsurance, and copayments. A deductible is the amount the patient pays for their prescription before their benefit or insurance plan begins to pay. Coinsurance is usually a percentage that represents the percentage cost that the patient will need to pay and the insurance plan will pay towards eligible prescription expenses. For example, a patient's insurance plan may cover 80% of the cost of the prescription, which means the patient's coinsurance would be 20%. Often coinsurance takes effect after the patient has paid their deductible. A copayment is usually a per‐prescription charge, and the copay amount can vary based upon the insurance plan design. From patient to patient and claim to claim, a different payment price may be 3 The terms consumer, customer, and patient will be used interchangeably in my explanations. It is important to note that a pharmacist in a retail setting is trying to manage multiple needs as the person they are servicing is their patient and customer. 4‐ncpa‐digest‐spon‐cardinal.pdf 3 1 calculated during adjudication for the exact same medication fill depending upon these variable deductible, coinsurance, and copayment determinations. The prescription benefit can also be in the form of a discount card or membership program. These types of programs are usually administered by claims processors like PBMs or TPAs, and the cost of the prescription is paid entirely by the patient. There are a variety of discount card programs in the marketplace. These cards are marketed as free in some instances and generally offer a discount on brand and generic prescriptions. Examples include the AARP Prescription Discounts, the WebMD Rx Savings Card, the Georgia Drug Card, the UNA Rx Card, and the Welldyne Rx Card. Customers using these cash discount cards pay for the prescription themselves, but the amount they pay is determined by a special pricing structure established by the contract between the pharmacy and discount card sponsor. The pharmacy's reimbursement rate is generally based on the drug's Average Wholesale Price ("AWP") or a Maximum Allowable Cost ("MAC") list established by the sponsor/PBM. An additional "administrative fee," payable to the discount card sponsor, is added to the pharmacy's reimbursement rate to get the total price of the prescription. All of this occurs in the background when the pharmacist submits the prescription claim to the card's PBM to determine coverage eligibility and payment. Membership programs are another form of prescription benefit that provide cost savings for prescriptions. A variety of these programs are offered by pharmacy retailers and often promote savings on generic medications. Enrollment and often a membership fee are required to participate. Membership programs sometimes offer additional benefits beyond prescription cost savings, such as discounts on non‐prescription products or services. The Walgreens Prescription Savings Club and Rite Aid Rx Savings are two examples of membership programs.5 My former employer, Pathmark Stores, also operated a membership program. Pathmark customers who wanted to join had to enroll in the program to receive the membership benefits, and at the outset of the program there was an annual membership fee also. CVS's Health Savings Pass ("HSP") program was also a membership program prescription benefit. B. Explanation of the claims adjudication process and the roles of the insurer, PBM, and pharmacy Utilizing a prescription benefit typically involves a process known as adjudication. Adjudication is a multi‐step process that involves a pharmacist electronically transmitting information about the patient and the prescription to a PBM or other third‐party processor. The information transmitted by the pharmacist is known as a claim. The electronic transmission of claims information is accomplished using a standardized framework of codes and data fields developed by the National Council for Prescription Drug Programs (NCPDP). The adjudication process performed by the PBM determines a patient's eligibility for their prescription benefit, the scope of the prescription benefit's coverage, and the amount a customer (and/or the customer's health plan) must pay for a prescription. 5‐savings/rite‐aid‐prescription‐savings‐program; 4 1 Three different entities can, but do not always, participate in the creation and adjudication of pharmacy benefits. With respect to insurance, the most common form of prescription benefit, the following entities are involved: (1) Insurers, (2) PBMs, and (3) Pharmacies. 1. Insurer: Insurance companies sell policies to consumers, both individually and through groups (such as employers). For each policy it offers, an insurer determines which medications the policy will cover and how the cost of the medication will be divided between the insurer and the plan member. Insurers provide their members with a handbook or summary of benefits about their coverages. This describes the member's out‐of‐pocket costs for their prescriptions, including any copayments, coinsurance, or deductibles. Coverage limitations, such as which drugs will be covered (formulary6 versus non‐ formulary), out‐of‐pocket costs based on the pharmacy used (in‐network or out‐of‐network), days' supply of medication ordered, and other limitations in coverage (prior authorization, medical diagnosis, etc.), may be detailed in these benefit documents. The plan benefit can be extensive or very limited. 2. PBM: The vast majority of insurers rely on PBMs (or claims processors) to handle their plan members' prescription claims. The PBM is responsible for checking a plan member's eligibility and then calculating the price of the prescription. The PBM assists in designing a formulary of covered drugs, imposing generic substitution requirements,7 performing drug utilization review (DUR),8 determining when prior authorization9 to dispense is required, creating stepped therapy management,10 and utilizing other programs to manage both benefit eligibility and cost sharing. All of these benefit plan parameters are applied and verified during the adjudication process. 3. Pharmacy: The pharmacist is responsible for dispensing the prescription, which involves utilizing their professional judgment and training to review the patient's past medication history; performing a DUR to determine if there are any potential interactions with the current drug regimen, possible side effects, or allergic reactions; ascertaining that dosing is correct; preparing, labeling, and dispensing the prescription to the patient or caregiver; and providing counseling as appropriate. The pharmacist is also responsible for initiating the adjudication process. Adjudication is generally required for all transactions involving a prescription benefit meaning the pharmacist must submit a prescription claim to a PBM or other processing entity for eligibility and pricing determination. The pharmacist generally uses the patient's insurance or member ID card to obtain the needed information to submit the prescription claim. The card information includes the member's identification number, along with plan specific information such as the group number, BIN (bank identification number), and PCN (processor control number). The benefit card information is often added and stored 6 A formulary, or drug list, is a list of brand and generic prescription drugs that are eligible for coverage and payment. 7 Generic substitution refers to substituting a lower cost, equivalent medication to the brand name medication when these equivalent (non‐brand name or generic) medications are available. 8 Drug Utilization Review (DUR) is a process of reviewing and appraising a patient's medication to determine proper utilization, effectiveness, and potential reactions, interactions and/or side effects. 9 Prior authorization (PA) is a requirement that a physician obtain approval to prescribe a specific medication for a patient in order for the medication to be covered by the benefit plan. 10 Stepped therapy management is a process of first trying a less expensive drug that has been proven effective for most people with the patient's condition before moving up a "step" to a more expensive drug. 5 1 as part of the patient profile record in the pharmacy's dispensing system, so patients typically need not present their insurance card for every prescription. The pharmacist generally performs the prescription filling steps and DUR as outlined above up to the point of preparing and labeling the medication. At that point, the pharmacist will begin the adjudication process using the BIN and PCN numbers entered into the pharmacy's dispensing system, along with the patient's prescription information.11 The system uses the BIN and PCN numbers to route the patient and prescription information to the proper PBM who administers the patient's prescription benefit. The PBM then conducts eligibility and other checks and sends back a response message that either the claim is approved or rejected. Once the PBM checks eligibility and determines any applicable benefit plan criteria (e.g., formulary) have been met for payment, it returns an approved response to the pharmacy. The approved response contains pricing information for the prescription claim, including the amount (if any) the pharmacy must collect from the patient. Once the approved response is received, the pharmacist prepares the prescription for dispensing. When the patient picks up the prescription, the pharmacist counsels the patient if necessary, collects the amount transmitted by the PBM, and gives the patient the prescription. The processes that occur "behind the scenes" are much less complex when a customer purchases a prescription without a prescription benefit, i.e., as a "cash customer." If a customer does not have a prescription benefit, they generally pay the retail price set by the pharmacy. This price is known in the industry as the pharmacy's retail or "cash" price. A pharmacy is free to set the retail price in its discretion, and this price can vary from day‐to‐day, store‐to‐store, and other common metrics such as quantity and dosage form. Additionally, pharmacies generally set a "minimum retail price" for cash prescriptions in order to ensure they cover the costs of dispensing the prescription. My former employer, Pathmark Stores, had a minimum retail price of $7.99. At Drug Fair, I raised the minimum retail price to $8.99. When a cash customer provides a pharmacist with a prescription, the pharmacist enters the prescription into the pharmacy's dispensing system. The system scans the pharmacy's database for the retail price corresponding to the drug, quantity, and dosage of the prescription and provides that price to the pharmacist. The cash customer is then typically charged the pharmacy's retail price for that drug. A transaction with a cash customer does not involve any adjudication steps in the prescription‐filling process. When a customer purchases a prescription using some form of prescription benefit, the claim submitted for adjudication generally includes the pharmacy's "Usual and Customary" ("U&C") price. The U&C price is often specifically defined in the contract between the PBM and pharmacy, but it is generally understood within the industry to refer to the pharmacy's retail price for that particular prescription at that particular pharmacy on that particular day. Prescription benefit programs are not typically factored into the U&C price submitted by the pharmacy on third‐party claims. For example, my former employer, Pathmark Stores, did not submit its prescription membership program price as its U&C price. 11 In addition to transmitting the patient benefit and prescription information, the pharmacy dispensing system transmits a series of data fields that are related to the specific drug identified in the prescription. The information in these data fields often includes the drug identifying code, brand, generic, or multisource identifier, type or class of drug, and amount billed. 6 1 C. Explanation of the PBM‐pharmacy contracts from the perspective of the pharmacy The dispensing pharmacist in a chain pharmacy environment usually has no exposure to PBM‐pharmacy contracts. These contracts are negotiated by administrators at a corporate level, and the dispensing pharmacist does not typically interact with these administrators. Dispensing pharmacists work to facilitate PBM approval for the patient's prescription, but they do not have usually any insight into how a PBM calculates a patient's payment based on their prescription benefit. A PBM‐pharmacy contract will have terms related to the pharmacy's reimbursement rate for the prescription. Payment or reimbursement12 for the dispensed prescription can be based on a number of factors, which are described in these contracts. Reimbursement for brand drugs is often different than generic drugs. Reimbursement is most often a "lesser of" calculation, meaning there are several calculations of price performed, and the lowest of the calculated amounts is paid to the pharmacy. There are several cost bases that can be used to calculate the price. Each drug has an AWP price, which is set by commercial publishers of drug pricing data. In addition, many generic drugs have a MAC price, which is not published and is set (if at all) by each individual PBM. In cases where a drug has an AWP and a MAC price, reimbursement is typically "the lesser of" the AWP less a discount, or the MAC price. Government funded programs may use Federal Upper Limit ("FUL") or State Maximum Allowable Cost ("SMAC") metrics in place of MAC. The pharmacy's U&C price is another cost basis that can be included in a "lesser of" calculation. When a customer purchases a prescription using a prescription benefit, the pharmacy's reimbursement may come from multiple sources, including the insured customer's copayment (if any) that is paid at the point of sale or the PBM/insurer's reimbursement payment (if any) that will be sent to the pharmacy after‐the‐fact. The pharmacist usually has no insight into the calculation of the pharmacy's reimbursement rate or the patient's copayment. The pricing calculations, member eligibility, drug selection, and other clinical reviews performed as part of the prescription benefit's parameters are all done electronically within seconds after the claim is submitted. The information transmitted back and forth between the pharmacy and the PBM during this real‐time adjudication is formatted according to a standard established by the NCPDP. When the PBM's response transaction tells the pharmacist the copayment amount to be collected from the customer, the pharmacist is generally required to collect that copayment before dispensing the prescription. The PBM‐pharmacy contract generally requires the pharmacy to collect the full customer copayment returned by the PBMs and pharmacy operators ensure that pharmacists comply with this requirement through multiple means including training, company policy memoranda, compliance checks, and disciplinary actions. A pharmacist usually cannot tell whether the PBM/processor has calculated the total price of the drug or the customer's copayment correctly. Again, all of the pricing logic and other plan benefit information is 12 Reimbursement involves calculation of the price the third‐party payer (such as a health plan) will pay to the pharmacy. This reimbursement is common to prescription benefit programs, but not all prescription benefit programs have reimbursement. 7 1 maintained at the PBM, and adjudication of the claim occurs within the PBM's own system after receiving it from the pharmacy. A pharmacy does not have the time or the resources to ensure that it is being reimbursed accurately according to its contract at the time the approved response is received. In a pharmacy chain environment this checking and monitoring is usually done at the corporate level. Based upon the contract terms, examining payments received on a claim‐by‐claim basis may not necessarily indicate that the pharmacy has been reimbursed properly. Chain pharmacies, like CVS, generally track PBMs' compliance with contractual reimbursement rates on an aggregate basis, through mechanisms like Generic Effective Reimbursement ("GER"). A GER is an average discount based on the AWPs of a bucket drugs. Pharmacies and PBMs often negotiate an aggregate GER for all generic medications, such as "AWP – 40%." The PBM may set and adjust its MAC prices for specific drugs at its discretion, which may cause the price the PBM pays the pharmacy for particular claims to fluctuate, but if the PBM's total average discount exceeds the GER, it must pay the pharmacy the difference. Put simply, the PBM often has discretion to set (or change) a pharmacy's reimbursement on a given prescription, subject to certain broad parameters. Pharmacies thus often lack the practical ability to determine, on an individual claim‐ by‐claim basis, whether the reimbursement calculated by the PBM complies with the terms of the parties' contract, but may do so on a periodic, aggregate basis through mechanisms such as GER. II. Background on Fixed‐formulary generic drug offerings Walmart disrupted the marketplace when it introduced its $4 generic price list in late 2006. The offering immediately affected both the business and the practice of pharmacy. As the price list gained publicity (and popularity), patients became much more price conscious. K‐Mart and others introduced similar programs around the same time. As new offerings launched, even more patients became price conscious, and customers started asking to have their prescriptions transferred citing price, not service, as the reason for the transfer. While Walmart charged a fixed price ($4) on certain generics to every customer who came in to the store and filled a prescription for an eligible medication, the programs that other retailers began introducing in response to Walmart varied. The core component of these programs was typically a special pricing structure that applied to a fixed formulary of generic drugs. Some, especially pharmacy chains, created membership programs, which required customers to opt in to a program, and sometimes pay a membership fee, in order to access special pricing on a fixed formulary of drugs. Enrollment was required. In many programs, there was a brief application form, a membership fee, and a membership card. Depending upon the program design, a waiver of HIPAA rights may be requested in order to identify savings opportunities unique to the member. At my former employer, Pathmark Stores, a regional supermarket chain with a pharmacy department in its stores, our solution to the Walmart $4 program was to develop a membership program. The program was defensive in nature, intended to retain existing customers that might otherwise leave. The program was called the SmartCare Prescription Program. It was given this name as an extension of our pre‐existing SmartCare suite of pharmacy services including online prescription refills. The program featured hundreds of generic medications available in either 30‐day or 90‐day quantities at prices that 8 1 closely matched the Walmart program.13 As I briefly mentioned above, enrollment was required, an annual membership fee was charged, and a membership card was issued. The membership fee was assessed when the first prescription claim was adjudicated. After the program had been in effect for some time we removed the annual fee requirement, but enrollment was still required. When I joined Drug Fair in early 2008, they had already begun the Drug Fair Prescription Savings Club. It was also a membership program. It offered a fixed generic formulary of over 350 items. It also offered savings on more than 5,000 brand‐name and generic drugs covering all drug classes, including insulin. The annual enrollment fee was $5.00 per person. The enrollment fee was added to the price of the first prescription dispensed using the card. A customer could visit any Drug Fair location to sign up, or they could enroll online. A customer could find out about the Prescription Savings Club price before going to the pharmacy by using an online pricing tool on the Drug Fair website. Membership programs were preferable to a fixed‐price list like Walmart's because they were more sophisticated from a business perspective— they inspired loyalty and reduced the risk customers would split prescriptions with another pharmacy. From the pharmacist's perspective, these membership programs also provided a clinical benefit to the patient, because using multiple pharmacies (polypharmacy) creates the potential for medication mishaps such as duplicate dosing or medication therapy gaps. Having patients fill all of their prescriptions at one pharmacy permits the pharmacist full visibility into the patient's medication regimen, which enables the pharmacist to provide professional services that require knowing the complete prescription profile. The membership program model was prevalent prior to the launch of CVS's HSP program in November 2008. For example, the major pharmacy chains Walgreens and Rite Aid had launched their programs in fall 2007 and September 2008, respectively. Besides the examples of Pathmark and Drug Fair, other regional supermarkets and drug chains (Giant Eagle, Kerr Drug, etc.) had all launched membership programs before CVS launched HSP. OPINIONS Customers who enroll in a membership‐based generic discount program are not cash customers. At the time when pharmacies were launching membership programs, the common understanding in the pharmacy industry was that membership programs were not the pharmacy's U&C price. This continues to be the understanding of the industry. I am not aware of any pharmacy that had a membership program and submitted the special pricing for that program as U&C when submitting claims to PBMs. To my knowledge, no PBM ever objected to Pathmark's or Drug Fair's policies of not submitting their program prices as their U&C prices. There is an industry‐wide understanding that a pharmacy's U&C price is the price it would charge to a cash customer for a particular medication, in a particular quantity, on a particular day, in a particular store. A "cash customer" is a customer who pays for a prescription without using any type of benefit program – no insurance, no cash discount card, no membership program. Because membership programs require customers to take affirmative steps to enroll in and utilize the program, the price at 13 Other membership benefits included streamlined check‐cashing privileges, discounts on Pathmark‐labeled items and photo development, and other promotional tie‐ins intended to strengthen both the Pathmark Pharmacy brand and the loyalty card program in place in the supermarket. 9 1 which members purchase medication is not considered the pharmacy's U&C price. This is well understood and accepted in the pharmacy and PBM industries. As previously noted, there were several features that distinguished membership programs from, for example, Walmart's $4 price list for certain drugs, which was automatically provided to all customers. These features included the requirement that customers enroll in the program, agree to its terms and conditions, and, in most cases, charge a membership fee. Customers who join membership programs differentiate themselves from cash customers or the general public because they must affirmatively enroll to participate in the program, they often pay an enrollment fee, they sometimes waive their HIPAA rights, and they may receive benefits beyond their prescription drug purchase by being a member. Not all customers choose to join. For customers who fill a very limited number of prescriptions, the annual fee might wipe out any savings the customer would receive from the special membership pricing. And some customers would not sign up for a membership program even if it would save them money. Membership programs typically operated with an adjudication component, in which the pharmacist submitted the claim for patient, formulary item, quantity, days' supply, and eligibility per the program design, and received back the amount to charge the patient. Transactions with cash customers do not involve the adjudication process. Pharmacies do not determine their U&C based on the "most frequently charged" price In my four decades of experience working in and advising retail pharmacies, I have never heard of a pharmacy determining its U&C price by utilizing a look‐back process to determine what was the most commonly charged retail price in the days/weeks/months prior to the submission of a given pharmacy claim. I am not aware of any technology that could execute such a process. Moreover, a look‐back process would be financially unworkable, because it could require the pharmacy to submit a U&C price that was different from the retail price currently being charged to cash customers, unless and until the number of transactions at the current price exceeded the number of transactions at the previous price. Confining price‐setting methodology to historical prices precludes a pharmacy's ability to adapt to oftentimes significant variations in drug prices in the market place. Fixed formulary generic drug offerings were not intended to replace a patient's insurance benefits. Membership programs were intended to help uninsured customers afford their prescriptions, not to replace a customer's insurance benefit. The enrollment materials and membership cards clearly expressed that the programs are not insurance plans. Insurers prefer, and sometimes demand, that pharmacies submit all claims for their plan members, rather than processing those claims as cash transactions or submitting them through a discount card or membership program. The rationale for this demand is that it allows the insurer complete visibility into the entire range of prescriptions being taken by the plan member, enabling it to monitor things such as drug interactions and adherence. Insurers construct their members' medication history based upon the prescription claims submitted. Not submitting all claims to the insurer can mis‐indicate gaps in therapy 10 1 and poor medication adherence when the insurer applies its DUR. Patients adhering to their medication regimens have been proven to reduce the insurer's costs over the long term.14 For example, the Centers for Medicare and Medicaid Services ("CMS") have established "Star Ratings" to rank Medicare Part D plans on certain metrics. Medicare Part D beneficiaries can use the Star Ratings in deciding which plan they want to join. Additionally, Part D plans can receive quality bonuses from the government when they achieve high star ratings. Since at least 2013, one component of the Star Ratings has been plan members' medication adherence for certain types of medication (diabetes, hypertension, and cholesterol), as measured by the number of claims submitted for those medications by the plan's members. The Star Ratings implicate membership programs (and cash discount cards) because many membership program formularies contain medications treating diabetes, hypertension, and cholesterol, and Part D beneficiaries could be obtaining their prescriptions through one of these programs rather than through their Part D plan. Pharmacies generally do not affirmatively advise patients on pricing or how to achieve the "best" or "lowest" cost. Pharmacists provide clinical/ drug‐related information to patients. Their education in the sciences and training is geared to ensure (1) they are knowledgeable about the medicines provided to patients, (2) they can tell whether the prescribed medicines are suitable for that particular patient's needs, and (3) they can advise and answer questions from patients about their medicines, including how to take them, what reactions may occur. A pharmacist's training does not typically include educating patients on how to save money on prescriptions. Pharmacists do not proactively do price comparisons for customers. Pharmacists are not typically experts on pricing and lack full access to the information that is relevant to advise customers with prescription benefits about what they should expect to pay or how they can get the "best" price on any medication. From my experience as a pharmacist and as a regulator, I know that there is no code of pharmacy ethics or a pharmacy rule in New Jersey that requires pharmacists to affirmatively raise this issue with patients. I would not expect other states to have materially different ethical requirements in this regard. There are good reasons why we do not want pharmacists performing this role. The myriad of plans, the differences in benefit levels, and the lack of access to this information all limit the pharmacist's ability to competently provide this information. Discussing a generic discount program (like HSP) with every customer who filled a program‐eligible prescription would dramatically increase the amount of time it would take the pharmacist/pharmacy staff to fill prescriptions and service customers. This is all time spent outside the pharmacist's expertise. Therefore, if a customer raised the issue, a pharmacist could advise the patient of any discount program of which he or she was aware, but that advice would not be comprehensive. It would be unusual (and certainly not required) for a pharmacist to bring the topic up themselves. 14 11 1 1 EXHIBIT A 1 Edward G. McGinley, MBA DPh RPh 59 Bella Road Lumberton, NJ 08048 (908) 963-2098 SUMMARY Possess a firm understanding of the issues and challenges that face the pharmacy profession and healthcare. This understanding has been developed from over 40 years of professional and retail experience including pharmacy operations, services, procurement, professional affairs, regulatory compliance, and technology. Have strong leadership skills with a long track record of delivering results beyond expectations. Abilities include foresight, planning, goal setting and achievement of success through motivation, communication, mentoring, and teamwork. NOTABLE ACHIEVEMENTS Currently serve as Chairperson of the National Association of Boards of Pharmacy (NABP). Prior NABP positions include one-year terms of President, President-Elect, and Treasurer. Prior to officer positions served a three-year term on the NABP Executive Committee, with responsibilities including Chairperson of Committee on Constitution and Bylaws, Liaison to Task Force on the Control and Accountability of Prescription Drugs, and Task Force on Drug Return and Reuse Programs, Member of the Standards Oversight Committee for Center for Community Pharmacy Practice Accreditation, and Interim Planning/Budget & Finance Subcommittee. Served on NABP Task Force to Develop Recommendations to Best Reduce Medication Errors in Community Pharmacy Practice, NABP Task Force to Standardize Student Pharmacist Experiential Requirements, NABP Task Force on Prescription Drug Diversion from Common Carriers, NABP Task Force on Prescription Drug Monitoring Standards. Member of New Jersey Board of Pharmacy from 2000 to present, and elected by fellow board members to President or Vice President eleven times in twelve years, serving as President nine years. As Chairperson of NJ Board of Pharmacy Rules and Regulations Committee facilitated adoption of a new Pharmacy Practice Act, new continuing education standards, electronic prescription, central fill prescription handling, technician registration, out of state pharmacy registration, pharmacist immunizations, collaborative practice, sterile and non-sterile compounding regulations and three revisions of the complete NJ Administrative Code of pharmacy regulations. Extensive project management experience including launch of a $100M multi-regional chain purchasing alliance, multi-million dollar RFP and RFQ initiatives, HIPAA standards implementation and compliance, several pharmacy software system conversions, and numerous technology projects to improve efficiency, quality assurance, patient safety, and customer service. Negotiation of numerous contracts that bolstered operating revenue or advanced strategic initiatives including pharmacy acquisitions, in-store health clinics, immunization services, pharmacy provider agreements, patient medication adherence, medication therapy management agreements, product procurement, robotic automation, and other technology services. 1 Establishment of numerous clinical and marketing programs with hospitals and manufacturer partners to provide health fairs, diabetic screenings, and health education programs. Establishment of a Shared Faculty program with Ernest Mario School of Pharmacy at Rutgers, The State University of New Jersey, to implement and provide community pharmacy clinical services. Participation in Trade and Customer Advisory Meetings to provide industry insight and guidance for new product launches and new products development with pharma and technology companies. Leading key pharmacy regulatory compliance and education initiatives by guiding senior management committees, serving as guest lecturer at Ernest Mario School of Pharmacy at Rutgers, and delivering educational programs to pharmacists and other stakeholders at events including National Rx Drug Abuse & Heroin Summit, DEA Pharmacy Diversion Awareness Conference, Tri- Regulator Symposium, NABP District Meetings and Interactive Forums. Graduate of Executive Management Program for Pharmacy Leaders at The Wharton School, Leonard Davis Institute of Health Economics, University of Pennsylvania. Recipient of Bowl of Hygeia from New Jersey Pharmacists Association and awarded 'Pharmacist of the Year' by New Jersey Council of Chain Drug Stores. Received 'National Silver Beaver Award' by Boy Scouts of America for distinguished and noteworthy service to youth. PROFESSIONAL EXPERIENCE Pharmacy Management Consultants, LLC 06/14-Present Partner – Provide pharmacy related management, technology, and regulatory consultancy services. Chain Drug Consortium, LLC Mt. Laurel, NJ 07/09-02/15 Vice President of Pharmacy - - Provided consolidated pharmacy services and business expertise to a consortium of fifteen regional drug chains totaling over 1,000 stores including procurement, information technology, administration, professional services, store operations, gross profit and category management, contract negotiation, regulatory compliance, legislative and government affairs. Drug Fair Group, Inc Somerset, NJ 02/08-06/09 Vice President of Pharmacy - - Responsible for sales, marketing, procurement, administration, store operations, regulatory compliance, and overall profitability of the pharmacy business unit for this 50+ store regional chain with annual pharmacy sales exceeding $360M. Pathmark Stores, Inc Carteret, NJ 1972-02/08 Director Pharmacy Services - -Directed day to day activities of the corporate staff and field operations team for 128 pharmacies, responsible for wholesaler, vendor, and brand manufacturer relationships, third party contract negotiations, insurance plan audit activities and correspondence, contract administration, labor relations, regulatory and government affairs, professional services, software systems operation and support, pharmacy advertising and marketing, Pathmark branded prescription benefit plan account services, strategic partnerships, and development and implementation of all business strategies to maximize sales and profits. 1 Director Pharmacy Business Development - -Responsible for research, development, and implementation of all technology and pharmacy business initiatives, special project management, regulatory compliance, pharmacy government affairs, pharmacy software systems operation and technical support for chain. Regional Pharmacy Supervisor - -Responsible for sales, profit, merchandising, inventory, legal compliance, and staffing in 43 stores. Region consistently led company in sales and profitability. Manager Pharmacy Systems - -Responsible for all store and host computer systems operation and technical support, including system performance, security and regulatory parameters, file integrity, network communications, and file maintenance. Duties included integration of new technologies to enhance department efficiency and profits. Project Coordinator - -Responsible for all pharmacy management software conversion project planning, testing, state and federal regulatory compliance, data conversion integrity, procedure development, corporate and store staff training, and technical support. Project spanned over 18 months, and involved corporate teams, numerous vendors, and over 600 associates in 137 stores in 5 states. Supervising Pharmacist - -Responsible for daily operations in two high-volume units in PA. Inter-store and Staff Pharmacist--Developed a thorough understanding of all aspects associated with retail pharmacy practice in PA and NJ. Assistant and General Store Manager – Served in store management for ten years, managing 5 different stores, the last store taken from ($250K) store income to $1Mil Dollar Earnings Club. EDUCATION and LICENSES Temple University College of Pharmacy B.S. Pharmacy Temple University Fox School of Business MBA Human Resource Administration Fellow, Wharton School and Leonard Davis Institute of Health Economics, University of Pennsylvania Doctor of Pharmacy (Hon.) Licensed Pharmacist in NJ, NY, PA, DE OTHER AFFILIATIONS and ACTIVITIES Member, New Jersey Council of Chain Drug Stores (NJCCDS) Member, New Jersey Pharmacists Association (NJPhA) Member, National Community Pharmacist Association (NCPA) Advisory Board Member, Past Audit Committee Chairperson, and Past Treasurer, Past Vice President of Finance, Garden State Council, Boy Scouts of America. 1 EXHIBIT B 1 McGinley - Materials Considered 1. Third Amended Class Action Complaint, Case No. 15-CV-3504-YGR, Dkt. No. 101 (N.D. Cal. Apr. 4, 2016) and exhibit. 2. Defendant CVS Pharmacy, Inc.'s Answer to Plaintiffs' Third Amended Class Action Complaint, Case No. 15-CV-3504-YGR, Dkt. No. 144 (N.D. Cal. Aug. 12, 2016). 3. Rule 30(b)(6) Deposition Transcript of CVS Pharmacy, Inc., Case No. 15-CV-3504-YGR (N.D. Cal. Sept. 20, 2016) and exhibits. 4. HSP Enrollment Applications (CVSC-0000091, CVSC-0254314) 5. HSP Initial Marketing Materials (CVSC-0000112, CVSC-0000174, CVSC-0000190-92) 6. Plaintiffs' Notice of Motion and Motion for Class Certification; Memorandum of Points and Authorities in Support Thereof, Case No. 15-CV-3504-YGR, Dkt. No. 172 (N.D. Cal. Oct. 3, 2016) and exhibits. 7. Deposition Transcript of Thomas J. Gibbons, State of Texas, Office of Attorney General Examination under Oath (Sept. 30, 2014) and exhibits. 8. Letter from E. Wingate to Connecticut Department of Social Services, dated October 27, 2010. 9. Deposition Transcript of William Boyd, Case No. 15-CV-3504-YGP (N.D. Cal. Sept. 9, 2016) and exhibits. 10. Deposition Transcript of Elizabeth Wingate, State of Texas, Office of Attorney General Examination under Oath (Feb. 23, 2016) and exhibits. 11. Letter from C. Calvin Corum, Vice president, Pharmacy Network Management, Medco, to Tina L. Egan, Esq., Vice President, HealthCare Regulatory, CVS Caremark Corp. (April 30, 2009) (CVSC-0356466) 12. E-mail correspondence between CVS Caremark employees regarding generic prescription drug program offered by Giant Eagle (Jan. 12, 2010) (Caremark-0000829) 13. E-mail correspondence from Tom E. Morrison (Sept. 27, 2008) (CHSP001157) 14. National Community Pharmacists Association 2016 Digest, available at 15. Rite Aid Rx Saving Program website (visited Nov. 16, 2016), available at savings-program 16. Walgreens Prescription Savings Club website (visited Nov. 16, 2016), available at 17. Alexandra Tungol, PharmD, et al., Generic Drug Discount Programs: Are Prescriptions Being Submitted for Pharmacy Benefit Adjudication?, 18(9) Journal of Managed Care Pharmacy 690-700 (2012). 1 18. Prime Therapeutics Study Raises New Questions in the Battle Over Nonadherence, Drug Benefit News (May 11, 2012),