2015 AnnuAl RepoRt

• 2014 in Review• Cooperative Performance• Financial Highlights

Dear Members:

As you are aware, Greg Horstman, our CEO of ten years, left on medical leave in January of 2014.

I speak with Greg often, and he is doing well. We here at National CooperativeRx are thankful for having had such an amazing CEO for our first decade of operation. Greg left us with the knowledge, skills, and sound base that allowed us to continue operating in his absence. It was his leadership, foresight, passion and organization — in combination with a hardworking team — that allowed us not only to propel through 2014, but to succeed.

The Cooperative added new members, hired staff, created a more simple pharmacy benefits plan for smaller members, increased the average case size being quoted, and finalized an enormous project using claims data to create aggregated member reports in-house. Additionally, all computer systems in-house were updated, we launched a new web site, revenue exceeded expenses and we came in 10% under budget. Member equity for 2014 reached $1,824,397.

It was a hard year with many unexpected trials, and I am extremely grateful and proud of my team for their achievements. We are also thankful for a Board of Directors that stepped up to help, and to our members for their understanding as we continue to find our new rhythm.

In the late autumn of 2014, the Board of Directors started taking steps to hire a new CEO. We hope that you, our members, join us in welcoming this new stage of National CooperativeRx as it unfolds. Thank you for being a member.

Sincerely,

A NoteFrom Deb Thomsen

Deb ThomsenVice President

Cooperative Benefits In 2014, we distributed quarterly rebates, true-up, patronage, equity, and audit results totaling: $13,892,252

Audit ResultsIndependent audits were conducted on cooperative business and on our PBM. Performed by two third parties, they reviewed 100% of claims assuring that all mail, retail, specialty, rebate and other financial guarantees were met.

Revenue and Expenses

2007 08 09 10 11 12 13 14 15

$2.5M

$2M

$1.5M

$1M

$500K

Revenue Expenses

Unaudited Budgeted

Dividends

2007 08 09 10 11 12 13 14 est.

$600K$500K$400K$300K$200K$100K

80%75%70%65%60%55%50%

Financial Highlights Cooperative ownership brings financial and non-financial benefits. Our legal agreement with our PBM partner stipulates that members see every part of the financial arrangement. Another benefit is “patronage capital,” paid to members when income exceeds expenses. Because we’re member-owned, this money is your money.

2007 08 09 10 11 12 13 14 14

National CooperativeRx Generic Dispensing RateOur GDR reached 81.4% in 2014.

Clinical Highlights We do not believe in a one-size fits all approach to clinical programs or plan design. Some of our members want turnkey clinical solutions based on best practices, while others want a fully-customizable program. We bring consultative expertise to help members with these important decisions, and offer a comprehensive suite of effective clinical programs at no or low cost to plans. The results speak for themselves.

NatR

x Bes

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Clas

s (86

.5%)

National CooperativeRx Performing Better Than Industry Giants

Cooperative members retained an aggregate $7-8 MILLION simply by being members of National CooperativeRx. When it came to controlling overall trend, our cooperative performed better than major industry players such as Express Scripts and CVS/caremark.

Book of Business trend Specialty trend

non-Specialty

trend

trend for Compounds

Compounds Gross Cost

pMpM

National CooperativeRx 8.2% 41.2% -0.6% 93.1% $1.47

CVS/caremarkEmployer 12.7% 31.6% 7.0% 374.0% $3.95

Express-Scripts Commercially Insured 13.1% 30.9% 6.4% 128.4% $3.84

Our members avoided potentially paying over $5 million when it came to Compound Drugs than they would have if their plan was directly with one of the bigger PBMs. Members benefited from our agility and ability to complement and supplement the leading market capabilities of our PBM. This resulted in the lower trend numbers posted above. While the cost of Compound Drugs increased by 93.1% for our members, other businesses saw drastically higher numbers.

Compound Drugs can be lifesaving, and we here at the Cooperative recognize the role they play. Simultaneously, efforts can be taken to ensure efficacy. For example, limiting the first supply to one month or even 10 days pays off. Not all drugs work for all people, and this small measure reduces wasted drugs and wasted money. As the pharmacy benefits industry continues to evolve, know that you can trust National CooperativeRx to save you money — while keeping the health of your participants our number one priority.

Please note: the estimated $7-8 million in avoided costs are in addition to the better pricing that members receive due to our combined purchasing power. Furthermore, these numbers do not take into account the $13+ million that was returned to members in 2014 due to our cooperative nature (100% pass through of rebates, patronage, equity, and audit results).

Looking Back at 2014• Financials(unaudited): Revenue: $2,276,255 Expenses: $1,956,460 (10% under budget) Net Earnings: $319,795 (member dividends)

• 19newmembers,representing29,786 participants, joined our cooperative. With every participant, National CooperativeRx gains strength to better represent our membersinthepharmacybenefitsindustry.

• NationalCooperativeRxbroughtinanewSalesManagertohelpsustainthegrowthmomentumandassurethatwealwaysmeettheneedsofourmembers.

• OpenBoardseatswereannounced,andacallforapplicantswassentouttomembers.Thelistofauthorizedvotingrepresentativeswasupdated,andtheprocesstoelectnewBoardRepresentativesbegan.ThenewBoardMemberswillbeannouncedatthe2015AnnualMeeting.

• MoneyDistributedtoMembersin2014: Rebates: $10,142,821 Rebate True-up: $ 2,989,665 Patronage: $ 208,000 Equityreleasedfrom2006-07 $323,000 Audit Results $ 228,766