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Press Release

Independence Blue Cross Benefits Customers With Sweeping Changes To Prescription Drug Program

Greater Philadelphia's leading health insurer announces FutureScriptsTM, also gives members a break on generic drugs with first-ever three-month "No Pay Copay" waiver

Philadelphia, PA - October 2, 2006 - Independence Blue Cross (IBC) today announced sweeping changes to its approach to managing prescription drug benefits that are expected to provide $100 million in savings to IBC's group customers over the next five years. Paramount among these changes is a partnership with FutureScriptsTM, a new pharmacy benefits management company, that will help employers manage rising prescription drug costs without sacrificing quality coverage.

"As a market leader in health benefit solutions, we focus on innovative programs that support top quality care to keep our members well," said Joseph A. Frick, CEO and president of Independence Blue Cross. "We are also always looking for ways to keep health care affordable and save employers and members money on health care expenses."

"We listened to our customers' concern about ever increasing pharmacy costs — more than 22 cents of each health care dollar spent in our market pays for prescription drugs," said Frick. "We responded by dramatically changing our prescription drug program to hold down pharmacy expenses and still provide broad coverage. Making good coverage affordable is important because we believe that prescription drugs are vital to preventing and treating illness and helping avoid more costly medical problems."

IBC's significantly enhanced approach to managing pharmacy benefits is one of a host of customer-focused, cost saving initiatives that will be rolled out following a recent in-depth study by IBC of its business and markets.

IBC is working with the new pharmacy benefits management company FutureScripts to provide more cost effective drug benefits for its employer group customers and members — plus quality drug coverage. FutureScripts will negotiate drug pricing and develop rates for generics directly with its comprehensive network of more than 56,000 retail pharmacies nationwide, including all major chains. FutureScripts will also negotiate directly with pharmaceutical manufacturers for discounts on brand drugs. Finally, to help effectively manage the cost of pharmacy coverage, FutureScripts will encourage the appropriate use of lower cost generics and cost effective brand name drugs.

For all members who have prescription drug benefits with IBC, other than those enrolled in Medicare Part D, the transition to FutureScripts occurred October 1, 2006. The transition for Medicare Part D members will occur on January 1, 2007. IBC is sending members who have IBC pharmacy benefits new ID cards this month.

Members' current benefit coverage provided under existing contracts will not be changed by the switch to the independent pharmacy benefits company, FutureScripts.

Other benefits of the significant changes IBC is making to its approach to managing prescription drug benefits include:

  • Faster access to new, less costly generics and brand drugs recently approved by the U.S. Food and Drug Administration (FDA). IBC will update its list of approved drugs every quarter.
  • Enhanced reporting for employers to explain what's driving their pharmacy expenses and how to provide quality coverage while containing costs.
  • The convenience of expanded access to lower cost self-injectable medications through pharmacy benefits. While most often used in the last decade to treat cancer or rare inherited diseases, injectable drugs are now used to treat more common conditions, such as migraines, psoriasis and arthritis. Traditionally, these medications were available only through medical benefits.

To help introduce these sweeping changes, IBC will offer members genuine savings on out-of-pocket prescription drug costs by waiving copayments/coinsurance for new prescriptions or refills for covered generics during the first quarter of 2007. IBC's "No Pay Copay" promotion will facilitate the long-term increased use of generics, which will favorably impact future premiums for customers.

IBC expects to save group customers roughly $100 million over the next five years as FutureScripts and the other elements of the pharmacy initiative lower pharmacy drug costs for customers, thus reducing premium increases.

Facts About Drug Cost Trends

IBC is enhancing its drug program to help customers better manage prescription drug cost trends that have been fueling premium increases. According to the Henry J. Kaiser Family Foundation's June 2006 report on prescription drugs, the number of prescription drugs purchased in the United States from 1994 to 2005 increased 71 percent, compared to population growth of 9 percent. In the same period, retail prescription prices increased an average of 8.3 percent a year, more than triple the annual inflation rate of 2.5 percent, the June 2006 Kaiser research shows. Drug spending increased nationwide in the last five years by an average of 10 percent per year, according to Kaiser.

Nationwide, prescription drug costs accounted for 16 cents of the premium dollar in 2005, according to the Pricewaterhouse Coopers 2006 report on the factors fueling rising health care costs. In the Philadelphia market, more than 22 cents of every health care dollar on average covers pharmacy expenses, according to IBC analysts.

"Given the rising cost and use of drugs, managing prescription drug benefits effectively is one of the most important services a health insurer can provide its customers," said Dick Tewksbury, client leader of Trion, one of the nation's largest benefits consulting firms. "If a health insurer does it right, the consumer saves money and has ready access to new and less expensive generic drugs — which leads to better health."

Introducing "No Pay Copay"

To help introduce the sweeping changes to its approach to managing prescription drug benefits, IBC will waive copays for members for generics for three months. This first-ever promotion, called "No Pay Copay," will waive copayments/coinsurance for new prescriptions or refills for covered generics during the first quarter of 2007. The goal is to increase the appropriate long-term use of generics, which will favorably impact future premiums for customers.

"This year alone, half a dozen blockbuster drugs used to treat high cholesterol, insomnia, depression, and digestive disorders will lose their patents and become available as generics. We want our members to understand that, where appropriate, generics are a safe, effective and less expensive alternative to brand name drugs," said IBC's CEO Frick. "Our 'No Pay Copay' promotion is designed to encourage customers to begin using more generic drugs during the first quarter of 2007 to reduce their out-of-pocket expenses, and then continue using generics to help hold down drug costs long-term, since prescription drug costs feed rising medical costs which drive premium increases."

Dr. I. Steven Udvarhelyi, Independence Blue Cross's senior vice president and chief medical officer said, "This 'No Pay Copay' waiver is an opportunity for our members to talk to their physicians and pharmacists about whether switching to a generic drug might be right for them. Generic drugs can provide the same therapeutic benefits as their brand name counterparts, but at far less cost, and generics meet the same rigorous health and safety standards set by the FDA as brand name drugs."

Indistinguishable in composition and quality to their brand name counterparts, generic drugs may be used interchangeably with brand name drugs to treat the identical health conditions. Generics, however, have significantly lower development and marketing costs than brand name drugs and, as a result, will often cost a fraction of their brand name equivalents. According to the Congressional Budget Office, generic drugs save consumers an estimated $8 to $10 billion a year at retail pharmacies with no sacrifice in quality.

IBC's "No Pay Copay" waiver is effective January 1, 2007 through March 31, 2007 for new prescriptions or refills at a participating pharmacy or through mail order. Most members with IBC pharmacy benefits are eligible for the waiver. Not eligible are members with Medicare Part D drug plans or integrated prescription drug coverage such as Major Medical, Comprehensive Major Medical (CMM) and Personal Choice® HSA-Qualified, and Keystone Health Plan East HMO members who belong to the Federal Employee Health Benefits Program.

More About the IBC Pharmacy Initiative

In addition to promoting generics using the "No Pay Copay" promotion, Independence Blue Cross will also enhance its pharmacy benefits in these ways:

Continuous Updating of Approved Drugs

By updating its list of approved drugs, or formulary, every quarter versus semi-annually, IBC will provide customers with more rapid access to new, less costly generics and to brand drugs newly approved by the FDA. When a new generic drug appears on the market, IBC will add it to the formulary as quickly as possible and cover it at the lowest copay. Likewise, the brand equivalent will be removed from the formulary and will be covered at the highest copay. After a review by a committee of primarily independent physicians and pharmacists, new brand drugs approved by the FDA in categories covered by IBC's drug plans will be added quarterly and covered at higher copays — either as a preferred drug covered at a mid-level copay or as a non-preferred drug covered at the highest copay. Some drugs may require prior authorization by a physician.

Superior Reporting on Pharmacy/Medical Benefit Usage

IBC will provide group customers with detailed reporting about the usage of both medical and pharmacy benefits, which will allow employers to analyze and better manage these expenses. This is an important service because the cost of employee health benefits constitute on average almost 25 percent of employee benefits, according to the U.S. Bureau of Labor Statistics.

Injectable Drug Strategy

Injectable medications, which are increasing in number, popularity and cost, are frequently coming into the market. These medications are often very costly per dose. Even for injectables with a lower cost per injection, a course of injectable drug treatment may cost thousands of dollars. Until recently, medical professionals in hospitals or physician offices administered most injectable drugs. Now some injectable medications, known as self-injectables, may be administered by the patient at home with careful monitoring by a doctor.

Currently, many self-injectable drugs are covered by IBC benefit plans only under medical benefits. Beginning on October 1, members enrolled in an IBC Select Drug Benefit program will have the convenience of being able to get many self-injectable medications at their local pharmacies. Employer groups will benefit from the discounts that FutureScripts has negotiated.

Independence Blue Cross is the leading health insurer in Southeastern Pennsylvania. Nationwide, IBC and its affiliates provide coverage to nearly 3.4 million people. For nearly 70 years, Independence Blue Cross has offered quality health care products and services tailored to meet the changing needs of members, employers, groups and providers.

Independence Blue Cross received the highest ratings from the National Committee for Quality Assurance for its HMO and PPO health care plans. In addition, in 2005, Independence Blue Cross's Personal Choice was rated the No. 1 PPO in the nation and its Keystone Health Plan East HMO was ranked the No. 1 HMO in the region in a leading independent consumer magazine. Independence Blue Cross and Keystone Health Plan East are independent licensees of the Blue Cross Blue Shield Association.