Transcript Diplomat - Michigan Association of Health Plans

STRENGTH
Confidential
I am a mother.
I am a long distance swimmer.
I have Multiple Sclerosis.
I am not defined by my illness.
I know The Diplomat Difference.
Vicki
Bellingham, Washington
August 2014
2015 MAHP Summer Conference
July 15, 2015
These materials may not be used or relied upon for any purpose other than as specifically contemplated by a written agreement with Credit Suisse AG or its Affiliates (hereafter “Credit Suisse”).
Diplomat Pharmacy, Inc.
Industry Trends
Important note
This presentation may contain “forward-looking” statements that involve risks, uncertainties and assumptions. If the risks or uncertainties
ever materialize or the assumptions prove incorrect, our results may differ materially from those expressed or implied by such forwardlooking statements. All statements other than statements of historical fact could be deemed forward-looking, including, but not limited to,
any projections of financial information; any statements about historical results that may suggest trends for our business and results of
operations; any statements of the plans, strategies and objectives of management for future operations; any statements of expectation or
belief regarding future events, health care developments, or specialty pharmaceutical industry market sizes, shares, trends or growth; and
any statements of assumptions underlying any of the foregoing.
Any forward-looking statements contained in this presentation are based on management's good-faith belief and reasonable judgment
based on current information, and these statements are qualified by important factors, many of which are beyond our control, that could
cause our actual results to differ materially from those in the forward-looking statements, including changes in global, regional or local
economic, business, competitive, market, regulatory and other factors, many of which are beyond our control, including but not limited to
the following risks related to our business: our ability to adapt to changes or trends within the specialty pharmacy industry; significant and
increasing pricing pressure from third-party payors, our relationships with key pharmaceutical manufacturers; our limited history with
integrating acquisitions; and the effects of competition. These and other risks and uncertainties associated with our business are described
in the prospectus for our proposed follow-on offering, including under the heading “Risk Factors.” We assume no obligation and do not
intend to update these forward-looking statements.
In addition to U.S. GAAP financials, this presentation includes certain non-GAAP financial measures. These historical and forward-looking
non-GAAP measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with
GAAP. A reconciliation between GAAP and non-GAAP measures is included in the appendix to this presentation.
Diplomat is a registered trademark of Diplomat Pharmacy, Inc. This presentation also contains additional trademarks and service marks of
ours and of other companies. We do not intend our use or display of other companies’ trademarks or service marks to imply a relationship
with, or endorsement or sponsorship of us by, these other companies.
Confidential
1
Diplomat: Largest independent specialty pharmacy
Diplomat at a glance
Exceptional above market revenue growth

Founded: 1975; Headquarters: Flint, MI

Employees: ~1,500

FY 2014 revenue: ~$2.2 billion

Diversified base of marquee partners
Market share ($78 billion total market size) (1)
Others
20%
($ in millions)
Scaled business: National footprint
Springfield, MA
CVS Health/
Omnicare
33%
Avella 1%
OptumRx/
Catamaran
8%
(2)
Savage, MN
Flint, MI
Urbandale, IA
Enfield, CT
Chicago, IL
Ontario, CA
Carlsbad, CA
Woburn, MA
GLDC
Cincinnati, OH
Greensboro, NC
Scottsdale, AZ
Raleigh, NC
3%
Ft. Lauderdale, FL
Walgreens
10%
Express Scripts
25%
Corporate Office
Diplomat locations
BioRx locations
National Distribution Center
(1)
(2)
Source: 2014 – 2015 Economic Report on Retail, Mail and Specialty Pharmacies, Drug
Channel Institute and Morgan Stanley Research
Based on mid-point of management’s estimate range for FY 2015
Confidential
2
Specialty pharmacy industry continues to show
exceptional growth
Specialty spend under pharmacy benefit to more than
double(2)
Specialty share of spend growing dramatically(1)
2012A
2015E
2018E
2012A
2018E
Diplomat 2%
30%
58%
42%
50% 50%
70%
$51million
billion
$51
$118 billion
Traditional
58%
Specialty
Traditional
Specialty continues to dominate top 10 drug spend(3)
2013A

6 out of top 10
2020E

9 out of top 10
Source:
(1)
Specialty Drug Trend Across the Pharmacy and Medical Benefit – Artemetrx 2013.
(2)
2013-2014 Economic Report on Retail, Mail and Specialty Pharmacies.
(3)
Pembroke Consulting analysis of World Preview 2014, Outlook to 2020, EvaluatePharma.
Confidential
3
Vision for specialty pharmacy
• Proportion of the prescription drug spend utilized on specialty pharmaceuticals will continue to
rise
• Cost trend for specialty expected to continue at 15% to 25%
• Pipeline: Oncology, Hepatitis C, Cystic Fibrosis, MS
• Limited distribution networks
• “Specialty lite” products
• Continued focus on specialty spend under medical benefit in addition to pharmacy
• Anticipation of biosimilars and generics – formulary opportunities and rebate opportunities
• Specialty at retail and health systems –
nationally
leader in specialty at retail and health
• 340B and Accountable Care Organization opportunities
systems
Journey of a specialty patient
Diplomat monitors adherence and
collects data
Patient visits
physician
Patient
Physician
Patient
receives
drugs
Physician
writes script
Patient
Diplomat
dispenses drug
Payor
Diplomat provides:
Benefit verification
Prior authorization
Clinical intervention
Payor approves script
Confidential
5
Patient’s Journey Begins
PROBLEM
SOLUTION
Education
Frustration
Fear
PA and Appeals Coordination
Funding and Co-pay Coordination
24/7 Access
Anxiety
Confusion
Adherence
Clinical Monitoring
Side Effect Management
Confidential
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Communication Summary
24.19%
55.35%
20.46%
2014
Communication*/Unique Patient
33.19 Communications/Year
2.8 Communications/Month
*Communication represent contact or contact attempt with the defined party
•Inbound and Outbound Calls
•Pharmacist, Nurse, Patient Care Coordinator
•Physician Office Faxes
Proprietary and Confidential of Diplomat Pharmacy Inc.
7
Unique competitive position
LARGE PBM / RETAIL
PHARMACY


Diversification
distracts from
specialty pharmacy
Less flexible / less
nimble

Singularly focused
on specialty

High-touch model

Flexible and nimble

Entrepreneurial
culture

National reach

Scalable
infrastructure
SMALLER SPECIALTY
PHARMACIES




Limited scale
Most focused on one
or a few disease
states
Fragmented market
Consolidation
opportunity for
Diplomat
Confidential
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Leader in Limited-Distribution Access
Diplomat has access to dozens of limited-distribution drugs:
Revlimid®
Supprelin® LA
lenalidomide
histrelin acetate
Tobi®
Podhaler™
Nexavar®
Serostim®
Sylatron™
Tykerb®
Zelboraf®
sorafenib
somatropin
peginterferon alfa-2b
lapatinib
vemurafenib
Signifor® LAR
Synagis®
Valstar®
Zolinza®
pasireotide
palivizumab
valrubicin
vorinostat
Synribo®
Vantas®
Zorbtive®
omacetaxine mepesuccinate
histrelin acetate
somatropin
Natpara®
Actemra®
Cometriq®
Gazyva®
Istodax®
tocilizumab
Cabozantinib
obinutuzumab
romidepsin
parathyroid
hormone
Adcetris®
Cosentyx™
Healon®
Jakafi®
brentuximab vedotin
secukinumab
sodium hyaluronate
ruxolitinib
Aldurazyme®
Dacogen®
Hizentra®
Kalydeco®
laronidase
Decitabine
immune globulin, human
ivacaftor
sodium nitrite, sodium
thiosulfate
Dysport®
Pediatric Indications
Only
Krystexxa®
Nplate®
Simponi®*
pegloticase
romiplostim
golimumab
Ampyra®
dalfampridine
Humira®
abobotulinumtoxinA
Nithiodote™
Zaltrap®
ziv-aflibercept
tobramycin
adalimumab
Arzerra®
Elaprase®
Hycamtin®
Lemtrada™
Otezla®
Simponi® Aria®
Tafinlar®
Vidaza®
Zydelig®
ofatumumab
idursulfase
topotecan hydrochloride
Alemtuzumab
apremilast
golimumab
dabrafenib
azacitidine
idelalisib
Aubagio®
Esbriet®
Lumizyme®
Ozurdex®
Soliris®
Tarceva®
Votrient®
Zykadia™
teriflunomide
pirfenidone
Immune Globulin 10%
(human) with
Recombinant Human
Hyaluronidase
alglucosidase alfa
dexamthasone
eculizumab
erlotinib
pazopanib
ceritinib
Aveed®
Erivedge®
Ibrance®
Lynparza™
Plegridy™
Soltamox®
Tecfidera®
Vpriv®
Zytiga®
testosterone undecanoate
vismodegib
palbociclib
olaparib
interferon beta-1a
tamoxifen citrate
dimethyl fumarate
velaglucerase alfa
abiraterone
Pomalyst®
Somatuline®
Thalomid®
Xalkori®
pomalidomide
lanreotide
thalidomide
crizotinib
Faryak
HyQvia®
Makena®
Bethkis®
Exjade®
Imbruvica®
tobramycin inhalation solution
deferasirox
ibrutinib
hydroxyprogesterone
caproate
Bosulif®
Eylea®
Inlyta®
Mekinist™
Prialt®
Stivarga®
Thyrogen®
Xtandi®
Iressa
bosutinib
aflibercept
axitinib
trametinib
ziconotide
regorafenib
thyrotropin alfa
enzalutamide
gefitinib
Tobi® inhalation
solution
Yervoy®
Cerezyme®
Firazyr®
imiglucerase
icatibant
Intron® A
interferon alfa-2b,
recombinant
Myozyme®
Promacta®
Sutent®
alglucosidase alfa
eltrombopag
sunitinib malate
ipilimumab
tobramycin
* Ulcerative colitis only
LAST UPDATE: 02/20/15
Proprietary and Confidential of Diplomat Pharmacy Inc.
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Limited distribution a central and growing theme in Specialty
Benefits to biotech / pharma




What is limited distribution?
Completely eliminate or reduce
reliance on wholesaler
Real-time clinical data
Commercialization assistance
Improves appropriate utilization



Benefits to Diplomat
Targeted channel strategy
Provides certain specialty pharmacies
with exclusive or preferred
dispensing rights to certain drugs
Fast-growing trend




Barrier to entry
Deeper, and earlier, partnerships with
pharma / biotech
Increased value proposition to payors
Market share opportunity
Traditional:
Manufacturer
Multiple Wholesalers
65,000 Pharmacies
Limited:
Manufacturer
One/few pharmacies
Patient
Patient
Portfolio of over 80 limited distribution drugs, comprising approximately 40% of revenue in 2014,
and well positioned for disproportionate growth from future drug approvals
Recent unique oncology limited panels…Diplomat exclusive or semi-exclusive
(2012)
DPLO EXCLUSIVE
(2013)
DPLO LARGEST OF 5
(2014)
DPLO LARGEST OF 4
(2014)
DPLO EXCLUSIVE
The drug pipeline is projected to deliver continued new therapies, many of which will be limited distribution.
Confidential
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Unique strategic partnerships with leading retailers and
health systems
Needs / benefits for retail /
health systems
How does Diplomat support retail
and health system partners?
Traditional drug trend low to mid
single digit growth
 Participate in high growth
specialty without having to build
expensive infrastructure
internally

One stop shop for patients /
consumers
 Improve portfolio of wellness
solutions


Benefits to Diplomat
Fee-for-service offering

High margin business
− Clinical and administrative
support services

Leverage infrastructure

Improved value proposition
with pharma

Pharmacy of choice for limited
distribution drugs
− Patient engagement
− Adherence programs
− Integrated with retailers’
dispensing platforms
− Private label programs
Diplomat’s retail and health system partners
Recent wins
Strong pipeline of future opportunities
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PA Navigator
• Providing full delegation of prior authorization
review for specialty therapies.
• Diplomat can seamlessly work with all PBM’s
Payor Benefits:
 Full transparency – all records
completely auditable
 Improved response times for
patient and provider
 Absolute benefit guideline
compliance
 Customizable criteria
 Unlimited access to clinical
expertise
 Automation reduces risk of delay
of therapy start or missed doses
 Access to IROs for appeals
(Independent Review Organizations)
 Customizable reporting
Proprietary and Confidential of Diplomat Pharmacy Inc.
12
Value of True Partner
Avoidable excess spend = $150,000
PBM Approved
Sovaldi + Olysio combo therapy –
Rx sent to Diplomat
Diplomat identifies
lack of clinical
evidence to
support approval
DSP notifies
payor partner
1. Patient does not have stage 3 or greater fibrosis per
criteria (has liver score of 1 with normal liver function)
2. No physician confirmation of alcohol or illicit drug
abstinence per criteria
3. Patient does not have any contraindications to peginterferon per criteria
1. Decision made to continue therapy to avoid risk of
future relapse
2. Rationale: Patient had already initiated therapy
3. PBM required to reimburse payor cost of
Sovaldi + Olysio therapy
*Above data from an employer’s Q3 2014 results reported.
Proprietary and Confidential of Diplomat Pharmacy Inc.
13
Hepatitis C Case Study
Hepatitis C – Harvoni™
 Diplomat identified a patient who received
a prior authorization approval for one
month of therapy.
 Diplomat contacted the plan to determine
if approving one month of therapy was
standard protocol. Medication had not
been shipped yet.
 Client determined the authorization should
not have been approved
 PBM internally entered approval for one
month
 Clinical review completed previously by the
plan denied the prior authorization due to
patient not meeting guideline criteria
Proprietary and Confidential of Diplomat Pharmacy Inc.
“Just wanted to forward a sincere
appraisal to you and your team for
the outstanding work you do for our
team and our members. It's instances
such as this one that greatly highlight
the attention to detail and expertise
Diplomat utilizes on a day-to-day
basis, inclusive to maintaining an
exceptional production level. I'm
grateful for the role I have and the
pleasure of interacting with
professionals such as yourself.
Thank you for being such a wonderful
partner!”
Director of Pharmacy
Plan with 300,000 covered lives
SAVINGS TO THE PLAN
30 days of Harvoni™, $31,564 per month
14
Proper Management Minimizes Discontinuation
http://www.modernhealthcare.com/article/20140917/NEWS/309179963
Proprietary and Confidential of Diplomat Pharmacy Inc.
15
Adherence Monitoring
Motivational interviewing techniques identify non-adherence
Nurse asks patient for number of
capsules remaining and response
doesn’t match patient record
Patient had been
hospitalized, reducing the
number of capsules
required with next refill
Doctor
contacted
for new
Rx
Six fewer Revlimid® capsules resulted
in savings of $2,858.52
*Above data from a health plans Q3 2012 results reported.
Proprietary and Confidential of Diplomat Pharmacy Inc.
16
Partial-Fill Strategy
Therapeutic
Category
Extensive Program
Drug List
Oncology
Sutent
Oncology
Tafinlar
Cometriq™
Oncology
Tarceva
Erivedge™
Oncology
Targretin
Gleevec
Oncology
Tasigna
Imbruvica™
Oncology
Harvoni™
Oncology
Votrient
Jakafi
Oncology
Xalkori
Kalydeco™
Cystic Fibrosis
Xtandi
Oncology
Zelboraf
Olysio™
Hepatitis C
Zolinza
Sovaldi™
Hepatitis C
Zydelig
Oncology
Zytiga
Oncology
Oncology
Zykadia™
Oncology
Extensive Program
Drug List
Afinitor
Bosulif
®
®
®
®
Inlyta
®
Nexavar
Sprycel
®
®
®
Stivarga
®
Therapeutic
Category

Program consists of a
two-week supply of select
specialty medications for
an initial one to three
months of therapy

Specific medications
targeted for program due
to high discontinuation
rate, poor response,
adverse effects, and/or
noncompliance

Increases opportunities
for clinical care for newly
diagnosed patients

Proven strategy to
effectively manage waste
Oncology
®
®
®
®
®
®
®
®
®
®
®
Oncology
Oncology
Oncology
Oncology
Hepatitis C
Oncology
Oncology
Oncology
Oncology
Oncology
Oncology
Proprietary and Confidential of Diplomat
Pharmacy Inc.
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Oncology Pathways
PRM (Physician Resource Management) - comprehensive data reporting on
care provided by oncologists caring for patients, alerts to treating
oncologists, care coordination for oncology patients, electronic health
record integration, and electronic prescribing from the oncologist office to
Diplomat.
 CARET Portal for treating physician- full visibility to specialty pharmacy record
information on a patient by patient basis.
 Social media Style Alerts to Practices and Physicians- daily digest emails + real time
alerts for urgent matters.
 Care Coordination- shared protocols + care coordination guides with details on product
specific recommendations on appropriateness of products under currently in use
oncology protocols, recommended interventions + adjunctive therapies.
 EHR Integration- actively working with vendors representing the most widely utilized
EHR systems within the oncology community to have interfaces in place by the end of
Q1 2015.
 Direct Order Oral Scripts from CARET and Certain EHRs- automation of referral forms
and prescriptions from within CARET to be transmitted via facsimile (for pharmacy law
compliance reasons) and electronically (to prevent data entry errors) to the specialty
pharmacy.
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Proprietary and Confidential of Diplomat Pharmacy Inc.
Hepatitis C Comprehensive Care
Primrose Healthcare - reduce the treatment cost-per-member and deliver
optimal cure rates for our health plan clients:
Pre-Treatment: Optimize the health of patients who are HCV+ but are either
disease free or are inappropriate for antiviral therapy, while ensuring that they
obtain an optimal outcome if and when they come to treatment




HCV Work Up: Determine health & family history
Assess Compliance Issues: Visits, lab work & Provider recommendations
Address Adherence Concerns: Review lifestyle, social & other concerns
Address Clinical Morbidities: Evaluate chronic diseases & conditions
Treatment: HCV- status
 Education & Training: Medication guidance, push alerts & notifications
 Adherence Checks: Daily/weekly adherence check monitoring
 Clinical & Lab Reminders: Appointment reminders
Post-Treatment: Optimize liver function and overall patient
health
 Outcome data: Complete review of the entire patient journey & HCV treatment
 Scheduled Follow up: Ongoing engagements with the patient to prevent the
return of the disease
 Regular review of Medications: Monitor for use of unfriendly medications for
the liver.
Proprietary and Confidential of Diplomat Pharmacy Inc.
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Health Plan Specialty Strategies
Provider Reimbursement

New contracts for ambulatory infusion
– Review and renegotiate pricing for ambulatory clinics
– Create preferred infusion network

Site of care for drug administration
– Reduce or eliminate high cost sites of care (e.g. hospital outpatient clinics) where
clinically appropriate
– Mandate through plan design or prior authorization
– Voluntary method through lower member cost share

ACO
– ACOs will increase use of lower cost drugs
– ACOs will encourage prescribing based on evidenced base guidelines

Oncology clinical pathways
– 52% of health plans surveyed by EMD Serono use third party vendors for clinical
pathways1
– Palliative and end of life care are less likely to be included in current pathways
– Bonus to physicians who follow guidelines and use lower cost drugs
Serono Specialty Digest™, 10th Edition
Managed Care Strategies for Specialty Pharmaceuticals 2014
1 EMD
20
Impact of Specialty Management
Strategies
Physicians
•
•
•
Payment change/reform
Oncology pathways
Patient engagement
•
•
•
Site of service changes
Infusion networks
ACO other vendor coordination
Preferred products
Prior authorization
Outcome based formularies
EMD Serono Specialty Digest™, 10th Edition
Managed Care Strategies for Specialty Pharmaceuticals 2014
•
•
•
Higher cost share
Benefit design changes
More participation in care
Specialty Pharmacies
Pharma Manufacturers
•
•
•
Patients
Medical Benefit Providers
•
•
•
Partial fill
Adherence programs
Measuring & reporting results
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Thank you.
Confidential
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