SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ____________ to
_____________.
Commission File Number: 0-20199
EXPRESS SCRIPTS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 43-1420563
(State of Incorporation) (I.R.S. employer identification no.)
14000 RIVERPORT DR., MARYLAND HEIGHTS, MISSOURI 63043
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 770-1666
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
Common stock outstanding as of April 30, 1997: 8,985,180 Shares Class A
7,510,000 Shares Class B
<PAGE>
EXPRESS SCRIPTS, INC.
INDEX
PAGE NUMBER
Part I Financial Information 3
Item 1 Financial Statements
a) Consolidated Balance Sheet 3
b) Consolidated Statement of Operations 4
c) Consolidated Statement of Changes in Stockholders'
Equity 5
d) Consolidated Statement of Cash Flows 6
e) Notes to Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II Other Information
Item 1. Legal Proceedings - (Not Applicable)
Item 2. Changes in Securities - (Not Applicable)
Item 3. Defaults Upon Senior Securities -
(Not Applicable)
Item 4. Submission of Matters to a Vote of
Security Holders - (Not Applicable)
Item 5. Other Information - (Not Applicable)
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Index to Exhibits 15
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
EXPRESS SCRIPTS, INC.
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
March 31 December 31
1997 1996
<S> <C> <C>
---------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
Assets
Current assets:
Cash and cash equivalents $11,034 $25,211
Short term investments 54,837 54,388
Receivables, less allowance for doubtful
accounts of $2,705 and $2,335 respectively
Unrelated Parties 169,433 144,963
Related Parties 18,459 18,842
Inventories 27,658 17,491
Deferred taxes and prepaid expenses 2,994 2,254
---------- ----------
Total current assets 284,415 263,149
Property and equipment, less accumulated
depreciation and amortization 25,777 21,447
Other assets 12,916 15,829
---------- ----------
Total assets $323,108 $300,425
========== ==========
Liabilities and Stockholders' Equity Current liabilities:
Claims payable $114,264 $98,865
Accounts payable 16,841 16,347
Accrued expenses 20,347 19,678
---------- ----------
Total current liabilities 151,452 134,890
---------- ----------
Deferred rents and taxes 1,575 1,445
---------- ----------
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized, and
no shares issued and outstanding
Class A Common Stock, $.01 par value, 30,000,000 shares authorized,
8,978,000 and 8,974,000 shares issued and outstanding, respectively 90 90
Class B Common Stock, $.01 par value, 22,000,000 shares authorized,
7,510,000 and 7,510,000 shares issued and outstanding, respectively 75 75
Additional paid-in capital 99,054 98,958
Foreign currency translation adjustments (9) (2)
Retained earnings 77,860 70,219
---------- ---------
177,070 169,340
Class A Common Stock in treasury at cost,
237,500 and 182,500 shares respectively (6,989) (5,250)
---------- ---------
Total stockholders' equity 170,081 164,090
========== =========
Total liabilities and stockholders' equity $323,108 $300,425
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
EXPRESS SCRIPTS, INC.
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------------------------------
1997 1996
<S> <C> <C>
--------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net revenues $261,990 $168,389
--------- ----------
Cost and expenses:
Cost of revenues 237,298 148,985
Selling, general & administrative 13,298 10,387
--------- ----------
250,596 159,372
--------- ----------
Operating income 11,394 9,017
--------- ----------
Other income (expense):
Interest income 1,259 235
Interest expense (18) (13)
--------- ----------
1,241 222
--------- ----------
Income before income taxes 12,635 9,239
Provision for income taxes 4,994 3,659
--------- ----------
Net income $7,641 $5,580
========= ==========
Primary earnings per share $0.46 $0.36
========= ==========
Weighted average number of common
shares outstanding during the period 16,436 15,483
========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
EXPRESS SCRIPTS, INC.
Consolidated Statement of Changes in Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Numbers of Shares Amount
----------------------- ----------------------------------------------------------------------------------
Foreign
Class A Class B Class A Class B Additional currency
Common Common Common Common paid-in translation Retained Treasury
Stock Stock Stock Stock capital adjustments Earnings Stock
<S> <C> <C> <C> <C> <C> <C> <C>
---------- --------- ---------- --------- ---------- ------------- ----------- --------
(IN THOUSANDS)
Balance at December 8,974 7,510 $90 $75 $98,958 ($2) $70,219
31, 1996 ($5,250)
Net income for ---- ---- ---- ---- ---- ---- 7,641
three months ended
March 31, 1997
Foreign currency ---- ---- ---- ---- ---- (7) ---- ----
translation
adjustments
Purchase of ---- ---- ---- ---- ---- ---- ---- (1,739)
treasury stock
Tax benefit ---- ---- ---- ---- 22 ---- ---- ----
relating to
employee stock
options
Exercise of stock 4 ---- ---- ---- 74 ---- ---- ----
options
---------- -------- --------- -------- ---------- ------------- ----------- ---------
Balance at March
31, 1997 8,978 7,510 $90 $75 $99,054 ($9) $77,860 ($6,989)
========== ========= ========== ========= ========== ============= =========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
EXPRESS SCRIPTS, INC.
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------------------------------------
1997 1996
<S> <C> <C>
--------------- ---------------
(IN THOUSANDS)
Cash flows from operating activities:
Net income $7,641 $5,580
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 2,087 1,341
Tax benefit relating to employee stock options 22 92
Changes in operating assets and liabilities:
Receivables (24,087) (21,060)
Inventories 10,167) (4,267)
Prepaid expenses and other assets 1,840 (512)
Claims payable 15,399 14,056
Accounts payable and accrued expenses 1,293 2,923
--------------- -------------
Net cash (used in) operating activities (5,972) (1,847)
--------------- -------------
Cash flows from investing activities:
Purchases of property and equipment (6,083) (2,878)
Short term investments (450) 0
--------------- -------------
Net cash (used in) investing activities (6,533) (2,878)
--------------- -------------
Cash flows from financing activities:
Acquisition of treasury stock (1,739) ----
Exercise of stock options 74 154
--------------- -------------
Net cash provided by (used in) financing activities (1,665) 154
--------------- -------------
Effect of foreign currency translation adjustments (7) (32)
--------------- --------------
Net increase (decrease) in cash and cash equivalents (14,177) (4,603)
Cash and cash equivalents at beginning of period 25,211 11,506
--------------- --------------
Cash and cash equivalents at end of period $11,034 $6,903
=============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
EXPRESS SCRIPTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial statement note disclosures, normally included in financial
statements prepared in conformity with generally accepted accounting principles,
have been omitted in this Form 10-Q pursuant to the Rules and Regulations of the
Securities and Exchange Commission. However, in the opinion of the Company, the
disclosures contained in this Form 10-Q are adequate to make the information
presented not misleading when read in conjunction with the notes to consolidated
financial statements as included in the Company's Annual Report on Form 10-K for
the Year Ended December 31, 1996, as filed with the Securities and Exchange
Commission on March 26, 1997.
In the opinion of the Company, the accompanying unaudited consolidated
financial statements reflect all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the Consolidated Balance
Sheet at March 31, 1997, the Consolidated Statement of Operations for the three
months ended March 31, 1997, and 1996, the Consolidated Statement of Changes in
Stockholders' Equity for the three months ended March 31, 1997, and the
Consolidated Statement of Cash Flows for the three months ended March 31, 1997,
and 1996.
NOTE 2 - PRIMARY EARNINGS PER SHARE
Primary earnings per share are computed by dividing net income by the
weighted average number of shares of common stock outstanding and common stock
equivalents. Common stock equivalents include shares issuable upon the assumed
exercise of all stock options having an exercise price less than the average
market price of the common stock using the treasury stock method.
NOTE 3 - ADOPTION OF FINANCIAL ACCOUNTING STANDARDS NO. 128 "EARNINGS PER SHARE"
In February 1997, the Financial Accounting Standards Board issued Statement
128, "Earnings Per Share" (FAS 128). The terms of FAS 128 are effective for all
earnings per share disclosures subsequent to December 15, 1997 and requires all
prior period earnings per share disclosures be restated to conform with FAS 128.
FAS 128 requires a presentation of both "Basic" earnings per share and "Diluted"
earnings per share. "Basic" earnings per share computes per share earnings using
the weighted average number of common shares outstanding during the period,
while "Diluted" earnings per share computes per share earnings in the same
manner as "Basic" earnings per share plus the number of additional common shares
that would have been outstanding for the period if the dilutive potential common
shares had been issued. Because early adoption of FAS 128 is not allowed, the
Company expects to adopt the requirements of FAS 128 subsequent to the December
15, 1997 effective date. However, had the company adopted the provision of FAS
128 at March 31, 1997, "Basic" earnings per share would have been $.47 and $.37,
respectively for the periods ended March 31, 1997 and March 31, 1996, and
"Diluted" earnings per share would have been $.46 and $.36, respectively for the
periods ended March 31, 1997 and March 31, 1996.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INFORMATION INCLUDED IN THIS QUARTERLY REPORT ON FORM 10-Q, AND INFORMATION
THAT MAY BE CONTAINED IN OTHER FILINGS BY THE COMPANY WITH THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") AND RELEASES ISSUED OR STATEMENTS MADE BY
THE COMPANY, CONTAIN OR MAY CONTAIN FORWARD-LOOKING STATEMENTS, INCLUDING BUT
NOT LIMITED TO STATEMENTS OF THE COMPANY'S PLANS, OBJECTIVES, EXPECTATIONS OR
INTENTIONS. SUCH FORWARD-LOOKING STATEMENTS NECESSARILY INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE
PROJECTED OR SUGGESTED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT
CAUSE SUCH A DIFFERENCE TO OCCUR INCLUDE, BUT ARE NOT LIMITED TO: HEIGHTENED
COMPETITION, INCLUDING INCREASED PRICE COMPETITION IN THE PHARMACY BENEFIT
MANAGEMENT MARKET; THE POSSIBLE TERMINATION OF THE COMPANY'S CONTRACTS WITH
CERTAIN KEY CLIENTS; CHANGES IN PRICING OR DISCOUNT PRACTICES OF PHARMACEUTICAL
MANUFACTURERS; THE ABILITY OF THE COMPANY TO CONSUMMATE CONTRACT NEGOTIATIONS
WITH PROSPECTIVE CLIENTS; COMPETITION IN THE BIDDING AND PROPOSAL PROCESS;
ADVERSE RESULTS IN CERTAIN LITIGATION AND REGULATORY MATTERS; THE ADOPTION OF
ADVERSE LEGISLATION OR REGULATIONS OR A CHANGE IN THE INTERPRETATION OF EXISTING
LEGISLATION OR REGULATIONS, AND OTHER RISKS DESCRIBED FROM TIME TO TIME IN THE
COMPANY'S FILINGS WITH THE COMMISSION.
COMPANY OVERVIEW
The Company primarily derives its revenues from the sale of pharmacy
benefit management services in the United States and Canada. The Company's net
revenues include the ingredient cost of pharmaceuticals dispensed to members of
health benefit plans sponsored by the Company's clients by pharmacies
participating in one of the nationwide networks of retail pharmacies maintained
by the Company, or by one of the Company's mail service pharmacies, unless the
Company's mail service pharmacies dispense pharmaceuticals supplied by the
Company's clients. In this case, as in instances where the Company only
administers the contracts between its clients and their own retail pharmacy
networks, the Company records only its administrative fees as net revenue. The
Company also derives revenue from (i) the sale of pharmaceuticals for and the
provision of infusion therapy services through its IVTx division ("IVTx"), (ii)
the sale of eyeglasses and contact lenses and related administrative fees
through its Express Scripts Vision Corporation and PhyNet, Inc. subsidiaries
(collectively, "ESVC"), (iii) the sale of informed decision counseling services
through its Express Health LineSM division, and (iv) the sale of medical
information management services, which include provider profiling, disease
management support services and outcomes assessments, through its Practice
Patterns Science, Inc. ("PPS") subsidiary.
RESULTS OF OPERATIONS
The following table sets forth certain financial data of the Company for
the periods presented as a percentage of net revenues and the percentage change
in the dollar amounts of such financial data for the three months ended March
31, 1997 compared to 1996.
<PAGE>
<TABLE>
<CAPTION>
Percentage of Net Revenues Percentage Increase
---------------------------------------------------------------
Three Months Ended Three Months Ended
March 31 March 31, 1997
-----------------------------------
1997 1996 Over 1996
<S> <C> <C> <C>
---------------------------------------------------------------
Net revenues:
Unrelated clients 82.7% 80.2% 60.4%
Related clients 17.3 19.8 36.1
----------------------------------
Total net revenues 100.0 100.0 55.6
----------------------------------
Cost and expenses:
Cost of revenues 90.6 88.4 59.3
Selling, general & administrative 5.1 6.2 28.0
----------------------------------
95.7 94.6 57.2
----------------------------------
Operating income 4.3 5.4 26.4
Other income, net 0.5 0.1 459.0
----------------------------------
Income before income taxes 4.8 5.5 36.8
Provision for income taxes 1.9 2.2 36.5
----------------------------------
Net income 2.9% 3.3% 36.9%
==================================
</TABLE>
FIRST QUARTER ENDED MARCH 31, 1997, COMPARED TO 1996
NET REVENUES. Net revenues for the first quarter of 1997 increased
$93,601,000, or 55.6%, compared to the first quarter of 1996. Net revenues from
the Company's claims processing services and mail pharmacy services business
segments increased by 56.3% this quarter, compared to the first quarter of 1996.
The primary reason for this increase was a $68,821,000, or 62.7%, increase in
revenues from pharmacy claims processed reflecting a 22.5% increase in the
number of claims processed, and a 32.9% increase in average revenue per claim,
compared to 1996. Revenue from the Company's mail pharmacy services increased
$21,867,000, or 42.5%, reflecting a 35.3% increase in the number of
prescriptions dispensed, and a 5.4% increase in the average revenue per
prescription dispensed. The increase in average revenue per claim is primarily
due to a shift in the mix of customers towards utilizing pharmacy networks
established by the Company (for which the drug ingredient costs, dispensing fee
and administrative fees are included as revenues), rather than networks arranged
by the Company's clients (for which the Company records only its administrative
fee as net revenue). Increases in drug costs for customers utilizing the
Company's pharmacy networks also contributed to the increased revenues. These
increases in revenues were, however, partially offset by lower pricing offered
by the Company in response to continued competitive pressures.
The increase in the number of claims processed and the number of mail
service pharmacy prescriptions dispensed reflects a 21.1% increase in the number
of members served to approximately 10.9 million members at March 31, 1997 from
approximately 9.0 million members at March 31, 1996. The percentage increase in
claims processing revenues continues to exceed the percentage increase in mail
service revenues, due to the additional revenue recorded as a result of the
shift in the mix of business towards the Company's retail pharmacy networks and
away from networks arranged by its clients, as described above, and the
continued decrease in the price difference between mail pharmacy prescriptions
and network pharmacy prescriptions. Management believes this trend will continue
in 1997. Net revenues from the Company's vision and infusion therapy services
and integrated medical and drug data analysis services increased 40.7%, compared
to 1996, primarily as a result of the growth in both the number of and
utilization by members who receive vision and infusion services and a greater
number of clients under contract with PPS.
COST OF REVENUES. Cost of revenues for the first quarter of 1997 increased
$88,313,000, or 59.3%, compared to the first quarter of 1996. The percentage
increase in cost of revenues was 3.7 percentage points greater than the increase
in revenues, thus gross profit margins decreased. For claims processing
services, the cost of revenue as a percentage of net revenues increased by 2.7
percentage points primarily due to the increase in the utilization of the
Company's networks, as opposed to those arranged by its clients, and to lower
prices offered in response to competitive pressures in the marketplace. The
impact of these items is partially offset by economies of scale in the direct
processing costs associated with the operations of the claims processing system.
The lower mail pharmacy gross margin is primarily the result of competitive
pressures causing lower prices to be offered by the Company, which is partially
offset by economies of scale in the mail processing operations. The Company also
experienced an overall reduction in both business segments, as a percentage of
net revenues, in the fees received from drug manufacturers in connection with
the Company's drug purchasing and formulary management programs. The cost of
revenue for vision and infusion therapy services increased 28.2%, principally
due to costs related to the continued expansion of vision and infusion therapy
service operations.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased $2,911,000, or 28.0%, for the first quarter of 1997 compared
to 1996. The primary reason for the increase was the additional expenditures
incurred to expand the Company's marketing capabilities, together with increases
in expenses for information systems, additional clinical programs and added
costs for site and administrative support functions to enhance management of the
pharmacy benefit. The Company is continuing its commitment to expand its
capability to provide for future growth and enhance the level of service for its
members. However, in spite of the increase, selling, general and administrative
expenses, as a percentage of net revenues, decreased from 6.2% in the first
quarter of 1996 to 5.1% in the comparable quarter of 1997, reflecting overall
economies of scale and expense control measures in these areas of the Company's
operations, as well as the effects of the shift in the mix of business towards
utilization of the Company's pharmacy networks, and away from networks arranged
by its clients.
OTHER INCOME, NET. Other income, net was $1,241,000 for the first quarter
of 1997 compared to $222,000 for 1996, primarily as a result of the investment
of the proceeds from the sale of 1,150,000 shares of the Company's Class A
Common Stock in April 1996, increased cash flow from operations and higher
interest rates on invested cash balances as compared to the first quarter of
1996.
PROVISION FOR INCOME TAXES. The provision for income taxes for the quarter
ended March 31, 1997, was $4,994,000 compared to $3,659,000 in the prior year.
The effective tax rate was 39.5% in 1997 compared to 39.6% for 1996.
NET INCOME. As a result of the foregoing, net income for the quarter ended
March 31, 1997, increased $2,061,000, or 36.9%, compared to 1996.
EARNINGS PER SHARE. The Company reported earnings per share of $.46 in the
first quarter of 1997 compared to $.36 in the comparable quarter of 1996, a
27.8% increase. The weighted average number of shares used in the calculations
was 16,436,000 in 1997 and 15,483,000 in 1996, or an increase of 6.2%. The
increase was primarily due to the April 1996 stock offering of 1,150,000 shares
and the April 1996 issuance of 227,273 shares in connection with the contractual
agreement with Premier, Inc. offset by the acquisition of 237,500 shares of
Treasury Stock by the Company.
LIQUIDITY AND CAPITAL RESOURCES. The Company added approximately 1 million
lives during the first quarter of 1997, reaching a total of approximately 10.9
million members utilizing the Company's services at March 31, 1997. As in the
past, the sizable growth in new members served during the first quarter resulted
in a significant growth in receivables. In the first quarter of 1997,
receivables increased $24,087,000. This increase was primarily financed by an
increase in current liabilities of $16,692,000. Management expects to continue
to fund a substantial portion of its future anticipated capital expenditures and
net increases in non-cash working capital with operating cash flow and the
short-term investments resulting from the proceeds of the public offering.
The Company maintains a $25 million line of credit with the Mercantile Bank
of St. Louis, N.A., which will expire on May 28, 1997, and a $25 million line of
credit with the First National Bank of Chicago, which will expire on October 30,
1997. Both credit facilities have substantially the same terms and conditions.
At March 31, 1997, there were no borrowings outstanding on either of these lines
of credit.
As of March 31, 1997, the Company had repurchased a total of 237,500 shares
of its Class A Common Stock under the open-market stock repurchase program
announced by the Company on October 25, 1996. The Company's Board of Directors
approved the repurchase of up to 850,000 shares, and placed no limit on the
duration of the program. Purchases will be in such amounts and at such times as
the Company deems appropriate based upon prevailing market and business
conditions. Management believes the Company's capital resources are sufficient
to fund this program.
The Company has reviewed and currently intends to review potential
acquisitions and affiliation opportunities. The Company believes that available
cash resources including the proceeds of the offering of the Company's common
stock referred to above, bank financings and the issuance of additional common
stock would be used to finance such acquisitions or affiliations. There can be
no assurance the Company will make an acquisition or affiliation in 1997.
OTHER MATTERS. In February 1997, the Financial Accounting Standards Board
issued Statement 128, "Earnings Per Share" (FAS 128). The terms of FAS 128 are
effective for all earnings per share disclosures subsequent to December 15, 1997
and requires all prior period earnings per share disclosures be restated to
conform with FAS 128. FAS 128 requires a presentation of both "Basic" earnings
per share and "Diluted" earnings per share. "Basic" earnings per share computes
per share earnings using the weighted average number of common shares
outstanding during the period, while "Diluted" earnings per share computes per
share earnings in the same manner as "Basic" earnings per share plus the number
of additional common shares that would have been outstanding for the period if
the dilutive potential common shares had been issued. Because early adoption of
FAS 128 is not allowed, the Company expects to adopt the requirements of FAS 128
subsequent to the December 15, 1997 effective date. However, had the company
adopted the provision of FAS 128 at March 31, 1997, "Basic" earnings per share
would have been $.47 and $.37, respectively for the periods ended March 31, 1997
and March 31, 1996, and "Diluted" earnings per share would have been $.46 and
$.36, respectively for the periods ended March 31, 1997 and March 31, 1996.
On March 13, 1997, the Company announced that it had reached an agreement
with RightCHOICE Managed Care, Inc. ("RightCHOICE"), a publicly held subsidiary
of Blue Cross and Blue Shield of Missouri whereby the Company will provide
pharmaceutical benefit management services to RightCHOICE. The three year
agreement became effective March 17, 1997, and initially covers approximately
500,000 members. The agreement also offers the Company the opportunity to
provide service to an additional 1.4 million members enrolled in plans sponsored
or administered by organizations affiliated with RightCHOICE.
PacifiCare Health Systems, Inc. ("PacifiCare") completed its acquisition of
FHP International, Inc. ("FHP"). The Company has a contract to provide pharmacy
benefit services to FHP's members (currently about 2.0 million) through December
31, 1997. While FHP is the Company's largest single client in terms of
membership, its contribution to the Company's net revenues is less than 2% (due
to the fact that the Company only records the fees related to administering
FHP's network prescriptions and dispensing mail pharmacy prescriptions) and its
contribution to the Company's earnings is substantially less than the
relationship of FHP membership to total membership. PacifiCare has indicated to
the Company that it will not enter into a long-term extension of the agreement;
however, the Company and PacifiCare are presently engaged in discussions
regarding services to be provided through 1997, and with some services
potentially continuing into 1998. The Company will amortize the remaining
discount on the Class A Common Stock previously issued to FHP over the remaining
service period.
IMPACT OF INFLATION. Changes in prices charged by manufacturers and
wholesalers for pharmaceuticals affect the Company's net revenue and cost of
revenues. To date the Company has been able to recover price increases from its
clients under the terms of its agreements. As a result, changes in
pharmaceutical prices have not adversely affected the Company.
<PAGE>
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. See Index to Exhibits on page 18.
(b) REPORTS ON FORM 8-K. On March 13, 1997 , the Company
filed a Current Report on Form 8-K regarding a press
release issued on behalf of the Company.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EXPRESS SCRIPTS, INC.
(Registrant)
Date: May 6, 1997 By: /s/ Barrett A. Toan
Barrett A. Toan, President
and Chief Executive Officer
Date: April 30, 1997 By: /s/ Kurt D. Blumenthal
Kurt D. Blumenthal, Vice
President and Acting Chief
Financial Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
3.1 Certificate of Incorporation, incorporated by reference to
Exhibit No. 3.1 to the Company's Registration Statement on
Form S-1 filed June 9, 1992 (No. 33-46974) (the
"Registration Statement").
3.2 Certificate of Amendment of the Certificate of
Incorporation of the Company, incorporated by reference
to Exhibit No. 10.6 to the Company's Quarterly Report on
Form 10-Q for the quarter ending June 30, 1994.
3.3 Second Amended and Restated Bylaws, incorporated by
reference to Exhibit No. 3.2 to the Company's Annual Report
on Form 10-K for the year ending 1993.
4.1 Form of Certificate for Class A Common Stock, incorporated
by reference to Exhibit No. 4.1 to the Registration
Statement.
10.1*+ First Amendment to Amended and Restated Managed
Prescription Drug Program Agreement and Consent to
Assignment dated as of January 1, 1997, by and between
the Company, New York Life Insurance Company and NYLCare
Health Plans, Inc.
10.2*+ Managed Prescription Drug Program Agreement dated as of
December 31, 1995 by and between the Company and
WellPath Community Health Plan, Inc.
10.3*+ Managed Prescription Drug Program Agreement dated as of
May 1, 1996 by and between the Company and NYLCare
Health Plans of Maine, Inc.
27.1* Financial Data Schedule (provided for the information of
the U.S. Securities and Exchange Commission only)
- -------------------------
* Filed herein.
+ Confidential treatment requested for certain portions of these exhibits.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 11,034
<SECURITIES> 54,837
<RECEIVABLES> 190,597
<ALLOWANCES> 2,705
<INVENTORY> 27,658
<CURRENT-ASSETS> 284,415
<PP&E> 42,478
<DEPRECIATION> 16,701
<TOTAL-ASSETS> 323,108
<CURRENT-LIABILITIES> 151,452
<BONDS> 0
0
0
<COMMON> 165
<OTHER-SE> 169,916
<TOTAL-LIABILITY-AND-EQUITY> 323,108
<SALES> 261,990
<TOTAL-REVENUES> 261,990
<CGS> 237,298
<TOTAL-COSTS> 237,298
<OTHER-EXPENSES> 13,298
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> 12,635
<INCOME-TAX> 4,994
<INCOME-CONTINUING> 7,641
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,641
<EPS-PRIMARY> .46
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 10.1
FIRST AMENDMENT
TO
AMENDED AND RESTATED
MANAGED PRESCRIPTION DRUG PROGRAM AGREEMENT
AND
CONSENT TO ASSIGNMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED MANAGED PRESCRIPTION DRUG
PROGRAM AGREEMENT AND CONSENT TO ASSIGNMENT (this "Amendment") is made and
entered into as of January 1, 1997, by and among EXPRESS SCRIPTS, INC., a
Delaware corporation ("ESI"), NEW YORK LIFE INSURANCE COMPANY, a mutual
insurance company organized under the laws of the State of New York ("NYL"), and
NYLCARE HEALTH PLANS, INC., a Delaware corporation ("NYLCare").
RECITALS
1. ESI and NYL are parties to that certain Amended and Restated Managed
Prescription Drug Program Agreement dated as of September 1, 1995 (as amended
from time to time, the "Agreement"; capitalized terms used herein and not
otherwise defined shall have the meaning given them in the Agreement), pursuant
to which ESI provides, among other things, certain pharmacy benefit management
services to NYL and its Clients.
2. NYL and NYLCare have requested ESI's consent to an assignment by NYL of
all its right, title and interest in and to the Agreement to NYLCare, said
assignment to be effective as of January 1, 1996, which consent ESI is willing
to grant on the terms and conditions stated herein.
3. ESI and NYLCare further desire to amend certain of the terms and
provisions of the Agreement and to implement ESI's ExpressPreferenceSM drug
therapy management program, all as more particularly set-forth herein.
AGREEMENT
1. DEFINITIONS.
"ExpressPreferenceSM Product List" means a list consisting of pairs of
prescription drugs such that each pair of drugs shall include a preferred drug
and a corresponding non-preferred drug. The ExpressPreferenceSM Product List
shall be developed by ESI in consultation with the ESI/NYLCare Pharmacy and
Therapeutics Committee, and is subject to change from time to time based on
changes in drug prices, new product introductions, new generic competition,
changes in approved indications for existing drugs, and other relevant factors.
"Non-Preferred Drug" means the prescription drug in a pair of prescription
drugs listed on the ExpressPreferenceSM Product List that is designated as
"non-preferred." Under the ExpressPreferenceSM program, the prescribing and/or
dispensing of the Non-Preferred Drug is discouraged in favor of the
corresponding Preferred Drug.
"Preferred Drug" means the prescription drug in a pair of prescription
drugs listed on the ExpressPreferenceSM Product List, which is designated as
"preferred." Under the ExpressPreferenceSM program, the prescribing and/or
dispensing of the Preferred Drug is encouraged in lieu of the corresponding
Non-Preferred Drug.
"Retrospective Discounts" mean the retrospective discounts or rebates
collected from drug manufacturers that are attributable to Covered Drug
utilization by Members of Clients that have elected to participate in the
ExpressPreferenceSM drug therapy management program.
2. ASSIGNMENT TO NYLCARE; CONSENT TO ASSIGNMENT; APPLICABILITY OF AGREEMENTS.
(a) NYL hereby assigns all its right, title and interest in and to the
Agreement to NYLCare, effective as of January 1, 1996, and NYLCare hereby
assumes and agrees to perform all of NYL's obligations thereunder and be bound
by the terms and provisions thereof from and after said date. ESI hereby
consents to the assignment of the Agreement by NYL to NYLCare. From and after
said January 1, 1996, the defined term "Sponsor" in the Agreement shall be
deemed to refer to NYLCare.
(b) ESI and NYLCare acknowledge that they are parties to that certain
Amended and Restated Agreement dated as of March 29, 1995, pursuant to which
various individual Managed Prescription Drug Program Agreements between ESI and
certain health plans owned or operated by NYLCare have been and may in the
future be executed (each a "Site Agreement" and collectively the "Site
Agreements"). In connection with the assignment referred to in subsection (a)
above, ESI and NYLCare desire to clarify the circumstances under which the
pricing and other terms set forth in the Agreement and the Individual Site
Agreements shall apply.
(i) The Agreement shall apply to and govern pharmaceutical
benefit management services provided by ESI for:
(A) policies issued by NYL or New York Life and
Health Insurance Company ("NYLHIC") (i.e.,
indemnity insurance and minimum premium
business);
(B) "point-of-service" policies issued by NYL or NYLHIC;
(C) indemnity/preferred provider organization
benefits under a multi-option plan under
which benefits are chosen by a member at the
time of enrollment in the plan; and
(D) administrative services only (ASO) business
for which the underlying plan or benefit
design is most similar to that described in
subpart (A), (B) or (C) of this Section
2(b)(i).
(ii) The Individual Site Agreements shall apply to:
(A) prepaid, managed care policies or agreements (i.e.,
managed care business conducted by the various NYLCare
sites);
(B) "point-of-service" plans in which both
in-network and out-of-network benefits are
offered under policies or agreements issued
by a NYLCare managed care site;
(C) dual contract "point-of-service" plans where
in-network benefits are offered under
policies or agreements issued by a NYLCare
site and out-of-network benefits available
under a NYL or NYLHIC policy;
(D) managed care benefits under a multi-option plan in which
benefits are chosen by a member at the time of
enrollment in the plan; and
(E) administrative services only (ASO) business
for which the underlying plan or benefit
design is most similar to that described in
subpart (A), (B), (C) or (D) of this Section
2(b)(ii).
It is the intention of the parties hereto that so far as practicable
the pricing under the Agreement and under the Site Agreements shall
continue to apply to those lines of business conducted by NYL and
NYLCare prior to the assignment of the Agreement to NYLCare.
3. FEES AND CHARGES.
Effective as of January 1, 1997, the following terms and provisions of the
Agreement, relating to fees and charges, shall be amended as follows:
(a) Subsection (a) of Section 4.1 of the Agreement is amended to read in
its entirety as follows:
"(a) The fees and charges for the Prescription Drug
Programs provided hereunder shall consist of the Covered Drug
charges and fees specified in EXHIBIT A of this Agreement,
subject to adjustment in the overall dispensing fee for
prescriptions dispensed by Participating Pharmacies, as set
forth in EXHIBIT A, effective as of the date set forth, and
the applicable ExpressPreferenceSM drug therapy management
program fees and charges set forth in Section 4 of the First
Amendment to Amended and Restated Managed Prescription Drug
Program Agreement and Consent to Assignment by and between
ESI, Sponsor and NYLCare Health Plans, Inc., dated as of
January 1, 1997. ESI will give Sponsor at least sixty (60)
days prior written notice of a proposed change in the
dispensing fee. Should Sponsor not object to the revised fees,
such revised fees will take effect as of the date set forth in
the notice."
(b) EXHIBIT A to the Agreement, relating to Prescription Drug
Program fees, is hereby deleted in its entirety and replaced by EXHIBIT
A attached hereto and made a part hereof.
(c) ESI and NYLCare each hereby waive their respective right set-forth in
Section 4.1(b) of the Agreement to request a revision to ESI's fees and charges
(other than the Participating Pharmacy dispensing fee) prior to January 1, 1999.
4. EXPRESSPREFERENCESM DRUG THERAPY MANAGEMENT PROGRAM.
(a) ESI shall make its Incentive Formulary and Physician Preference
versions of its ExpressPreferenceSM drug therapy management program available to
NYLCare and its Clients with respect to the Prescription Drug Program. For those
Clients who elect to participate in the ExpressPreferenceSM drug therapy
management program, NYLCare authorizes ESI and Participating Pharmacies to
contact Members, Members' physicians and/or Participating Pharmacies to promote
therapeutic and generic substitution opportunities to reduce drug costs. The
forms to be used for written communication from ESI to Members or their
physicians shall be subject to the prior approval of NYLCare, which approval
shall not be unreasonably withheld. NYLCare will reimburse ESI for the cost of
making any material modifications to any standard ESI Member or physician
communications. ESI will not distribute coupons to encourage ExpressPreferenceSM
product switches in the Mail Service Pharmacy to Members without the consent of
NYLCare. Except with respect to generic substitutions that may legally be made
without contacting the prescriber, the prescriber shall have final authority
over the drug that is dispensed to the Member. In addition, if the Member
attempts to refill a prescription at a Participating Pharmacy after the
prescribing physician has approved the substitution but before the Participating
Pharmacy has received the new prescription, ESI may authorize an interim
prescription for up to a four-day supply of the originally prescribed drug and
may waive the Member's Copayment for this interim supply.
(b) The Incentive Formulary and Physician Preference versions of the
ExpressPreferenceSM program are designed to identify and promote opportunities
to select Preferred Drugs over Non-Preferred Drugs from the ExpressPreferenceSM
Product List. ESI will make reasonable efforts to promote these programs to
Participating Pharmacies. [*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS
DOCUMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT*]
(i) The Incentive Formulary program involves only communication from ESI to
the Participating Pharmacy during the on-line claim adjudication process in
which the substitution opportunity is identified. The Participating Pharmacy
then decides whether to promote the substitution opportunity to the Member and
the Member's physician. ESI does not contact the Member or the Member's
physician in this program. Effective January 1, 1998, the Incentive Formulary
version of the ExpressPreferenceSM drug therapy management program shall no
longer qualify NYLCare for rebates with respect to Covered Drug utilization by
Members of Clients enrolled therein, as described in Section 5 hereof.
(ii) The Physician Preference program involves the proactive education of
Members and their physicians about substitution opportunities. ESI shall
identify the substitution opportunity to the Participating Pharmacy during the
on-line claim adjudication process. If the substitution is not made by the
Participating Pharmacy at the time of the initial fill ESI will attempt to
contact the prescriber to explain and promote the substitution opportunity. If
the prescriber's consent is obtained, ESI will communicate the change and
rationale to the Member, and "hard block" the next fill for the Non-Preferred
Drug. The hard block can be overridden by ESI if the new prescription for the
Preferred Drug is not received by the Participating Pharmacy by the time the
Participating Pharmacy is required to refill the original prescription. If the
initial attempt to contact the prescriber is unsuccessful, the prescription will
be filled as written, and ESI will attempt to effect the substitution on the
next refill. If the prescriber cannot be contacted on the next refill, or if the
prescriber is contacted and refuses consent to the substitution, ESI will not
make further attempts to effect the substitution. In order to attempt to effect
a substitution ESI must receive a valid DEA number that ties to a valid
physician name and address. Once the Preferred Drug is dispensed to the Member,
the "hard block" is removed from ESI's system.
(c) The following fees and charges shall apply to Clients participating in
the ExpressPreferenceSM drug therapy management program:
(i) For both the Incentive Formulary and Physician Preference versions of
the ExpressPreferenceSM drug therapy management program, NYLCare shall pay ESI a
fee of $[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT*] This fee shall be paid to ESI by offset against any
Retrospective Discounts owing to NYLCare hereunder.
(ii) For the Physician Preference version of the ExpressPreferenceSM drug
therapy management program, NYLCare shall pay ESI an additional management fee
of $[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT*]
ESI's invoices to NYLCare shall reflect the administrative fees associated
with successful interventions resulting from ESI's ExpressPreferenceSM Program.
Such fees shall not be reflected as an administrative fee nor as a portion of
ingredient cost. NYLCare shall have the right, upon reasonable advance notice,
to inspect during regular working hours, ESI's records supporting the
calculation of the above-referenced fees and savings. ESI shall be responsible
for all costs associated with printing the ExpressPreferenceSM Product List for
calendar year 1998 and thereafter.
(d) NYLCare may terminate its participation in the ExpressPreferenceSM
program by giving not less than 30 days' prior written notice to ESI. ESI shall
not contact Members, Members' physicians or Participating Pharmacies to
encourage them to take advantage of new substitution opportunities after receipt
of such termination notice, but shall provide follow-up assistance concerning
substitution opportunities for which communication was begun prior to receipt of
such notice. ESI shall be entitled to receive the management fee described in
Section 4(c)(ii) above with respect to any substitutions effected prior to
termination.
(e) Within thirty (30) days of the end of each calendar month, ESI shall
provide NYLCare with its standard ExpressPreferenceSM program tracking reports.
5. RETROSPECTIVE DISCOUNTS.
(a) NYLCare hereby appoints ESI as its exclusive drug formulary manager for
those business lines identified in Section 2(b)(i) above for the remaining term
of the Agreement. NYLCare acknowledges and agrees that ESI shall have the sole
and exclusive right to develop and implement a program of retrospective
discounts/rebates from drug manufacturers. The scope of ESI's services in this
capacity shall include but not be limited to the following activities:
(i) Requesting and evaluating Retrospective Discount proposals from drug
manufacturers;
(ii) Negotiating Retrospective Discount rates and terms; and (iii) Billing
for and collecting Retrospective Discounts from drug manufacturers and remitting
certain proceeds thereof to NYLCare in accordance with the terms of Section 5(b)
below.
The ESI/NYLCare Pharmacy and Therapeutics Committee shall meet regularly to
determine the status of drugs on the formularies and the ExpressPreferenceSM
Product List applicable to the Prescription Drug Program, consistent with ESI's
contractual relationships with the various manufacturers.
(b) ESI shall remit certain proceeds of the Retrospective Discounts
collected with respect to Covered Drug utilization under the Agreement as
follows:
(i) [*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT*]
(ii) [*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT*]
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT*]
(c) Within sixty (60) days of the end of each calendar quarter (or earlier
upon NYLCare's reasonable request), ESI shall use its best efforts to provide
NYLCare with an estimate of the Retrospective Discounts for such quarter, net of
any offset for fees paid to Participating Pharmacies in connection with the
ExpressPreferenceSM program.
(d) NYLCare acknowledges that state and/or federal governments may make the
payment and collection of Retrospective Discounts by drug manufacturers illegal.
In that event, ESI shall not be responsible for the payment of any amount of any
Retrospective Discounts to NYLCare, and the provisions of Section 5(b) hereof
shall be void. Additionally, pharmaceutical manufacturers may discontinue or
reduce Retrospective Discount programs at will, or applicable laws regarding
Retrospective Discounts may change. In the event of a material adverse change in
any Retrospective Discount program by a pharmaceutical manufacturer (e.g.,
manufacturer discontinues Retrospective Discount program or reduces payments
thereunder), the Retrospective Discount payments payable to NYLCare under
Section 5(b) hereof shall be modified proportionately.
(e) If it should be declared unlawful by the applicable state and/or
federal government for ESI to negotiate, bill and/or collect any Retrospective
Discounts from any drug manufacturers on behalf of NYLCare, but it is not
declared unlawful for NYLCare to negotiate, bill and/or collect such
Retrospective Discounts on its own behalf, then NYLCare may negotiate, bill and
collect such Retrospective Discounts. In such event, the parties shall
negotiate, in good faith, an amendment to the Agreement to compensate ESI for
services it provides in processing claim data to enable NYLCare to collect such
Retrospective Discounts.
6. EFFECT OF AMENDMENT. Except as specifically provided herein, the terms
and provisions of the Agreement shall remain in full force and effect. In the
event of a conflict between the Agreement and this Amendment, the terms and
provisions of this Amendment shall govern.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the day and year first above written.
EXPRESS SCRIPTS, INC.
By:/S/ BARRETT TOAN
Name: Barrett Toan
Title: President and Chief
Executive Officer
NYLCARE HEALTH PLANS, INC.
By:/S/ JOSEPH LYNAUGH
Name: Joseph Lynaugh
Title: President and CEO
NEW YORK LIFE INSURANCE COMPANY
By:/S/ JULIUS ALBERICO
Name: Julius Alberico
Title: Senior Vice President
<PAGE>
EXHIBIT A
EXPRESS SCRIPTS PRESCRIPTION DRUG PROGRAM FEES
1. Prescription Drugs filled at ESI Participating Pharmacies in ESI's PERxSM
and PERxSelectSM Networks:
A. INGREDIENT COST AND DISPENSING FEE
(1) [*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS
DOCUMENT AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT*], plus applicable sales or
excise tax or other governmental surcharge, if any.
(2) [*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS
DOCUMENT AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT*]
B. CLAIMS ADMINISTRATION FEE
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT*]
C. ADDITIONAL NETWORK
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT*]
2. Prescription Drugs filled at ESI's Mail Service Pharmacy:
A. INGREDIENT COST
Brand Drugs: [*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM
THIS DOCUMENT AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT*],
plus applicable sales or excise tax or other
governmental surcharge, if any.
Generic Drugs: [*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM
THIS DOCUMENT AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT*], plus
in either case applicable sales or excise tax
or other governmental surcharge, if any.
B. DISPENSING FEE
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT*]
C. CLAIMS ADMINISTRATION FEE
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT*]
D. ADDITIONAL DEFINITIONS
"Average Wholesale Price" or "AWP" means the average wholesale
price of a prescription drug as determined by ESI from the
most current information provided to ESI by First DataBank
drug pricing service. The applicable AWP for prescriptions
filled in the Mail Service Pharmacy will be the AWP for the
most commonly dispensed size for such drug. If such pricing
service ceases to be reasonably commercially available, AWP
shall be determined from an alternative source generally
recognized in the retail prescription drug industry selected
by ESI.
"Maximum Reimbursement Amount" or "MRA" means the maximum
allowable price for a generic drug established by ESI using a
variety of factors, including but not limited to the First
DataBank drug pricing service's published baseline price and
the "maximum allowable cost" determined by the U.S. Health
Care Financing Administration. ESI periodically updates the
MRA to reflect changes in drug prices, in its sole discretion.
"Usual and Customary Retail Price" means the usual and
customary retail price to the general public at the pharmacy
dispensing the Covered Drug on the date such Covered Drug is
dispensed.
3. Member-Submitted Claims
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT*]
4. Implementation Fees:
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT*] for implementation of the Prescription Drug Program if
Sponsor provides Express Scripts with Member eligibility on electronic medium in
ESI's format. If ESI must create a Member eligibility file by manually entering
employee data, there will be a [*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS
DOCUMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT*] implementation fee.
5. Identification Cards:
ESI will provide [*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT*]. Additional Identification Cards will be
provided for [*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT*]
6. Materials Distribution Fee:
On initial implementation and renewals [*CONFIDENTIAL TERMS HAVE BEEN
OMITTED FROM THIS DOCUMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT*]. If Sponsor
requests that such materials be mailed to the individual Members, Sponsor will
pay ESI a distribution charge of [*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM
THIS DOCUMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT*].
EXHIBIT 10.2
MANAGED PRESCRIPTION DRUG PROGRAM AGREEMENT
This Managed Prescription Drug Program Agreement is entered into as of the
31st day of December, 1995, by and between Express Scripts, Inc., a Delaware
corporation ("ESI"), and WellPath Community Health Plan, Inc., a North Carolina
corporation ("Sponsor").
RECITALS
1. ESI is in the business of providing, managing and administering
prescription drug programs, including the maintenance of a nationwide network of
pharmacies, claims administration, mail service dispensing and delivery of
prescription drugs, generation of prescription drug management and utilization
reports and other pharmacy management services.
2. Sponsor is engaged in the business of arranging for the provision of
health care services pursuant to applicable federal and state laws, including
but not limited to the Employee Retirement Income Security Act of 1974, as
amended (29 U.S.C. Sec. 1001 et. seq.) and the Health Maintenance Organization
Act of 1973, as amended (42 U.S.C. Section 300e ET SEQ.), the applicable laws of
the State of North Carolina and the rules and regulations promulgated thereunder
(such rules, laws and regulations, collectively, the "HMO Laws"), to persons
enrolled in Sponsor's prepaid health care plans or who participate in
employee-funded health plans administered by Sponsor.
3. Sponsor and ESI desire to enter into an agreement concerning the terms
and conditions under which ESI will provide, manage and administer a
prescription drug program for Sponsor.
TERMS AND CONDITIONS
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, and intending to be legally bound thereby, the parties hereto hereby
agree as follows:
SECTION I
DEFINITIONS
The following capitalized terms used in this Agreement shall have the
meanings set forth below:
"Agreement," "hereof" and "hereunder" and words of similar import,
refer to this Managed Prescription Drug Program Agreement, including
all exhibits hereto, as it may be amended from time to time in
accordance herewith.
"Average Wholesale Price" or "AWP" means the average wholesale price of
a prescription drug as determined by the most current issue of First
DataBank Services; provided, however, that should such pricing service
not be reasonably commercially available at any time, the AWP shall be
determined from a mutually agreed upon alternative source generally
recognized in the retail drug industry.
"Copayment" means that portion of the charge for each prescription for
a Covered Drug, after the Member's Deductible has been satisfied, that
is the responsibility of the Member. The Copayment shall be determined
as set forth on EXHIBIT B hereto.
"Covered Drug" means those prescription drugs, supplies and other items
that are covered under the Prescription Drug Program, as indicated on
EXHIBIT A hereto.
"Deductible" means the aggregate annual amount the Member is required
to pay for Covered Drugs before becoming entitled to the benefits under
the Prescription Drug Program, in addition to Copayments, as set forth
on EXHIBIT B.
"Effective Date" means October 1, 1995.
"Eligibility Reports" means the reports issued by Sponsor to ESI
pursuant to Section 2.2 hereof, which shall indicate the name of each
current Member as of the date of such report and such other information
as ESI may reasonably request.
"Extended Day Supply" means a supply of Covered Drugs dispensed by
certain Participating Pharmacies that have contracted with ESI to
dispense a quantity of Covered Drugs in excess of a 30 day supply but
not to exceed a 90 day supply based on applicable statutory
requirements. A list of such Participating Pharmacies shall be provided
to HMO in accordance with the terms hereof.
"Formulary" means a list of prescription drugs and preferred products
that physicians are encouraged to prescribe, consistent with their
professional medical judgment and applicable medical and pharmacy laws
and procedures.
"Identification Card" means a printed identification card issued by
Sponsor to a Member containing specific information about such Member
and the Plan benefits to which he or she is entitled, provided that,
upon Sponsor's request, ESI will issue Identification Cards to selected
out-of-area Members.
"MAC" means the maximum allowable cost of a prescription drug as
determined by the United States Health Care Financing Administration,
which is established for certain prescription drugs.
"Mail Service Pharmacy" means a duly licensed pharmacy operated by ESI
which dispenses Covered Drugs to Members via the United States Postal
Service, United Parcel Service, or other delivery service.
"Member" is a subscriber or dependent of a subscriber who is enrolled
in or participates in a health benefits plan issued or administered by
Sponsor, and who is covered by a Rider or similar outpatient
prescription drug benefit.
"Member Submitted Claim Form" means the claim form provided by ESI that
the Member must submit to ESI or Sponsor in order to qualify for
reimbursement of certain claims under the Prescription Drug Program, as
set forth in Section 2.5 hereof.
"Metropolitan Area" means a city and all of its suburbs within a
reasonable commuting distance.
"MRA" means the average price per generic drug established generally by
ESI for certain clients using a variety of factors, including but not
limited to the First DataBank's published baseline price and the MAC.
ESI periodically updates the MRA from time to time to reflect changes
in generic drug prices over time, in its sole discretion.
"Non-Participating Pharmacy" means any pharmacy that does not have an
agreement with ESI to provide Covered Drugs to Members pursuant to the
Prescription Drug Program.
"Non-Participating Pharmacy Claim" shall have the meaning specified in
Section 2.5 hereof.
"Participating Pharmacy" means any pharmacy which has executed an
agreement with ESI to provide Covered Drugs to Members pursuant to the
Prescription Drug Program.
"Plan" means the Member's health benefits plan that includes the
Prescription Drug Program.
"Prescription Drug Program" means the prescription drug services and
benefits specified by Sponsor which are provided to Members under this
Agreement.
"Rider" means a supplement to a Plan under which Members are entitled
to the prescription drug benefits described in such supplement.
"Usual and Customary" means the usual and customary retail price to the
general public in a cash transaction at the pharmacy dispensing the
Covered Drug on the date such Covered Drug is dispensed.
SECTION II
PRESCRIPTION DRUG SERVICES
2.1 ELIGIBILITY OF MEMBERS
Sponsor shall provide ESI with an Eligibility Report, in a format agreed
upon by the parties, of the Members of each Plan at least ten (10) days prior to
the effective date of such Plan. From time to time thereafter, but no less
frequently than monthly, Sponsor shall provide ESI with an updated Eligibility
Report notifying ESI of a Member's addition to or termination from a Plan. Not
less than three (3) business days after ESI has received this notification in
computer readable form or five (5) business days after ESI has received this
notification in writing, ESI shall enter the eligibility data into its computer
and thereafter shall (i) deny all claims for Covered Drugs dispensed to Members
after the effective date of termination from a Plan and (ii) accept all claims
for Covered Drugs dispensed to new Members after the effective date of their
eligibility for a Plan.
2.2. MAIL SERVICE PHARMACY
Members may present prescriptions for Covered Drugs to the Mail Service
Pharmacy. After presentation of such prescription, ESI shall determine whether
the Member is eligible for prescription drug benefits, using the Eligibility
Reports provided by Sponsor, and whether the prescription is for a Covered Drug.
If the prescription and applicable law do not prohibit substitution of a generic
drug equivalent to the prescribed drug, or if ESI obtains the consent of the
prescriber, ESI shall dispense the generic substitute to the Member. If the
prescription and applicable law permit substitution of a generic substitute and
ESI fails to dispense the generic substitute, Sponsor shall only be responsible
for the generic drug ingredient cost, and not the brand drug ingredient cost.
All prescriptions received by the Mail Service Pharmacy will be reviewed prior
to filling for potential allergies disclosed to ESI by Member or interactions
with other drugs dispensed by the Mail Service Pharmacy or a Participating
Pharmacy. If, in the opinion of the dispensing pharmacist, a potentially harmful
allergy or drug interaction may exist, the dispensing pharmacist will contact
the prescriber to obtain the prescriber's oral consent to fill such
prescription. No prescriptions will be refilled without authorization from both
the Member and the prescriber. ESI will use its best efforts to fill a
prescription within 48 hours of receipt of the prescription at the Mail Service
Pharmacy.
Covered Drugs will be dispensed from the Mail Service Pharmacy in the
quantity prescribed by the prescriber, but not to exceed a ninety (90) day
supply. ESI shall charge and each Member shall pay the applicable Copayment for
each Covered Drug dispensed after any Deductible is satisfied. ESI shall
determine when the Deductible is satisfied in accordance with the rates set
forth in EXHIBIT C. All prescriptions received by the Mail Service Pharmacy
prior to the effective date of termination of the Agreement shall be paid for by
Sponsor in accordance with the terms hereof.
2.3 PARTICIPATING PHARMACIES
(a) NETWORK. Members may fill prescriptions for Covered Drugs through a
network of Participating Pharmacies maintained by ESI. EXHIBIT C identifies the
ESI network for Sponsor's Prescription Drug Program. ESI shall provide Sponsor
with an initial list of the Participating Pharmacies and will notify Sponsor of
additions to and deletions from its network of Participating Pharmacies from
time to time, but no less frequently than quarterly. Additions to and deletions
from the network shall be mutually agreed to by ESI and Sponsor. ESI shall
require each Participating Pharmacy to have all licenses and permits required by
law for dispensing prescription drugs in the states in which such pharmacy
operates, and to comply with all standards and procedures set by ESI with
respect to the quality of services provided pursuant to this Agreement.
(b) CREDENTIALING FILES. ESI shall maintain credentialing files for each
participating Pharmacy. These files are established when a pharmacy becomes a
Participating Pharmacy. These files shall contain evidence of licensure and
insurance as required by ESI, and in accordance with this Agreement. These files
shall also contain records of any complaints received by ESI concerning
Participating Pharmacies and any investigation or other action taken by ESI in
response to such complaints. Any other materials prepared or maintained by ESI
with respect to the quality of service provided by Participating Pharmacies,
including reports of any audits pursuant to Section 2.3(e) below, shall also be
included in the credentialing files. Each Participating Pharmacy shall (i) be
duly licensed in good standing in the state in which it dispenses prescriptions,
and (ii) maintain all certifications required by the official and professional
boards or bodies having authority over the practice of pharmacy in the
applicable states. ESI shall require additional evidence of licensure and
insurance from a Participating Pharmacy when a state pharmacy board publication
indicates that such pharmacy has had disciplinary action taken against it. ESI
shall receive copies of state pharmacy newsletters from all states in which
Participating Pharmacies are located and review these newsletters for
disciplinary action. Sponsor shall have the right to audit ESI's credentialing
files during regular business hours at Sponsor's cost, upon reasonable prior
notice to ESI.
(c) FILLING A PRESCRIPTION. To fill a prescription for a Covered Drug at a
Participating Pharmacy, the Member shall present a valid Identification Card and
the prescription at a Participating Pharmacy. The Participating Pharmacy will be
required to verify the Member's eligibility through ESI's designated on-line
computer system. Participating Pharmacies will be required to dispense Covered
Drugs to Members in the amount specified by the prescriber, but not to exceed a
thirty (30) day supply, provided that this dispensing limit may be adjusted by
Sponsor from time to time, in its sole discretion, upon reasonable notice to
ESI, and further provided, that those Participating Pharmacies who have
contracted with ESI to dispense an Extended Day Supply shall be permitted to
dispense certain maintenance medications in the amount specified by the
prescriber, but not to exceed a ninety (90) day supply. After each Member has
met his or her Deductible, Participating Pharmacies shall be required to charge
the Member and collect the applicable Copayment for each Covered Drug dispensed.
(d) CLAIMS PROCESSING. ESI shall provide the following claims processing
services through its on-line computer system for all claims submitted for
approval by Participating Pharmacies.
- Verification of the eligibility of the Member and any applicable
Copayments or Deductibles
- Verification that the prescriber is an authorized prescriber under
the Prescription Drug Program, if Sponsor requests
- Verification that the claim is for Covered Drugs
- Verification that the claim is in compliance with the Formulary,
if applicable
In all cases Sponsor shall have the final authority to determine whether any
rejected or disputed claim shall be allowed.
(e) PARTICIPATING PHARMACY AUDITS. ESI shall maintain a set of criteria for
establishing when a Participating Pharmacy shall be audited and the type of
audit that shall be conducted, whether written or on-site, conducted by ESI's
internal auditors or its outside auditor. Such audit shall determine the
pharmacy's compliance with its agreement with ESI. Sponsor may request that ESI
audit a particular individual or chain pharmacy which is a Participating
Pharmacy, which request shall be considered by ESI as one of the audit criteria.
Such requests shall be directed to ESI's Provider Relations Department. If
Sponsor has a reasonable basis for believing that a Participating Pharmacy may
be non-compliant with any quality, quality assurance or quality-of-care
standards of ESI, or that the Participating Pharmacy may be engaged in
fraudulent activities, Sponsor may require that ESI conduct an audit of the
Participating Pharmacy. ESI shall provide Sponsor with a copy of a summary of
the audit report produced as a result of such audit on a timely basis.
2.4 PRESCRIPTION DRUG FORMULARIES
(a) DEVELOPMENT AND PROMOTION. ESI will develop and maintain certain
Formularies for use by Sponsor, which will apply to Members who obtain Covered
Drugs from both the Mail Service Pharmacy and Participating Pharmacies. These
Formularies will be revised from time to time, and periodic newsletters will be
prepared at ESI's sole cost for Sponsor to distribute to physicians. In
addition, at no additional cost to Sponsor, ESI will meet periodically with
Sponsor regarding Formulary matters and, as reasonably requested by Sponsor,
meet periodically with physicians to encourage Formulary compliance. ESI will
also assist Sponsor in developing and promoting Riders which encourage Formulary
compliance. ESI shall have representation on any committee of Sponsor's which
evaluates the Formularies developed by ESI.
Sponsor shall assist in the development and promotion of the Formularies,
which shall include the following:
(i) If appropriate, staff of Sponsor shall participate in
the Pharmacy & Therapeutics ("P&T") Committee
established by ESI, which will develop and
periodically review and revise the Formularies;
(ii) Develop methodologies for informing physicians
concerning the Formularies and encouraging Formulary
compliance, including distribution of the
Formularies, a quarterly newsletter and other
communications concerning the Formularies.
(b) DISEASE MANAGEMENT PROGRAMS SPONSORED BY PHARMACEUTICAL MANUFACTURERS.
Sponsor and ESI shall jointly evaluate any disease management program provided
by any pharmaceutical manufacturer to ensure consistency with the Formularies
developed by ESI prior to the time Sponsor agrees to or enters into any such
program with a pharmaceutical manufacturer.
2.5 CLAIMS PROCESSING INVOLVING NON-PARTICIPATING PHARMACIES
Upon submission of claims in accordance with the terms hereof, ESI shall
process claims on behalf of Members for Covered Drugs dispensed by pharmacies
other than Participating Pharmacies ("Non-Participating Pharmacy Claims") as
provided in Section 2.3(d) hereof. Non-Participating Pharmacy Claims shall also
include claims from Members who have obtained prescriptions from Participating
Pharmacies without using their Identification Cards. For such a claim to be
processed, the Member must submit a hard-copy Member Submitted Claim Form
directly to ESI. ESI shall use reasonable efforts to process such claims in
accordance with Section 2.3(d) hereof and send a reimbursement to the Member
with five (5) business days of the date the completed claim is received.
2.6 MANAGEMENT INFORMATION REPORTS
On a quarterly basis at no additional charge, ESI shall provide Sponsor
with certain management information reports which shall include the information
set forth below by employer or covered group:
- The Top 100 Drugs Dispensed.
- The Number of Generic Drugs Dispensed
- Exception Reports for Heavy Utilization
- The Average Cost of Prescriptions Filled
- Cost by Member number
ESI will also provide Sponsor with certain standard drug utilization review
reports that ESI also provides to other clients, upon Sponsor's request and at
no additional charge. As of the date hereof, these reports include the reports
set forth on EXHIBIT D hereto.
2.7 CONSULTING SERVICES
ESI will, for no additional compensation, upon Sponsor's reasonable
request, provide quarterly management letters that include interpretation of
Management Information Reports and cost analysis of the Prescription Drug
Program.
2.8 QUALITY MANAGEMENT/IMPROVEMENT
ESI agrees to cooperate and require Participating Pharmacies to cooperate
with Sponsor's and ESI's quality improvement and quality management programs
that are consistent with the managed care industry standards, including but not
limited to providing information on quality matters and assisting in the
implementation of corrective action plans, provided that Sponsor has provided
ESI with copies of such programs.
2.9 COMPLAINTS AND GRIEVANCES
Any complaints or grievances Sponsor receives from Members with respect to
services provided pursuant to this Agreement will be resolved in accordance with
Sponsor's procedures; provided, however, that Sponsor agrees to solicit ESI's
views in a timely manner on any grievance or complaint concerning ESI or a
Participating Pharmacy. ESI agrees to cooperate and require Participating
Pharmacies to cooperate in the resolution of Member complaints and grievances.
ESI shall provide Sponsor with information concerning Member complaints and
grievances and assist in the implementation of corrective action plans.
2.10 RECORDS AND SOFTWARE
(a) OWNERSHIP OF RECORDS. All records prepared and maintained by ESI or
Sponsor in the course of their respective operations, including but not limited
to all books of account, enrollment records, administrative records and records
pertaining to Plans and Members, shall be and remain the sole property of such
entity.
(b) INSPECTION AND CONFIDENTIALITY OF RECORDS. Sponsor shall have the
right, upon reasonable request and at its cost, to inspect during regular
working hours any accounting, enrollment, administrative or medical records ESI
maintains pursuant to this Agreement regarding Sponsor or any Member to the
extent such inspection is permitted by applicable law. Sponsor and ESI shall
adopt procedures that seek to preserve the confidentiality of each other's
records, and will comply with all applicable laws and regulations regarding such
records. Sponsor shall be responsible for maintaining the confidentiality of
information available to Sponsor through Sponsor's access to ESI's computer
system. Neither Sponsor nor ESI shall disclose information from prescription
records of individual Members or information received from the Member's
physician pursuant to the physician-patient relationship without such Member's
consent, except as required or permitted by applicable law.
(c) COMPUTER PROGRAMS AND SOFTWARE. The parties agree that any and all
computer programs and software and related information, including but not
limited to reporting packages, system formats and other system information and
user documentation, developed by a party shall remain the property of the party
which developed it and the other party will not use such programs, software, and
related information, or disclose it to any third party, at any time during or
after the term of this Agreement, without the express written consent of the
party which developed it. Upon termination of this Agreement, all such programs,
software and related information, along with systems, manuals, procedures and
equipment provided by one party to the other, shall be returned immediately to
the party which provided it.
2.11 ADDITIONAL ESI SERVICES
(a) ELIGIBLE PRESCRIBER REVIEW. Upon written request of Sponsor with
respect to a particular Plan, ESI (with respect to Mail Service Pharmacy
prescriptions) and the Participating Pharmacies (with respect to prescriptions
Members submit to them) shall verify that the prescriber is a member of
Sponsor's closed panel for such Plan based on the most recent eligibility report
of prescribers submitted by Sponsor to ESI. If the prescriber is not an eligible
prescriber, such claim shall be denied. The eligibility report shall be provided
in a mutually acceptable form. Sponsor shall be solely responsible for ensuring
the accuracy of the eligibility report provided to ESI, and ESI may rely on such
report in processing claims under Section 2.3(d).
(b) TOLL-FREE CUSTOMER LINE. ESI shall maintain toll-free customer inquiry
telephone capability for Members to request the status of their prescriptions
and for other purposes.
(c) ON-CALL PHARMACIST. ESI shall provide a twenty-four (24) hour on-call
pharmacist for emergency medical situations.
(d) ON-LINE ACCESS. ESI shall provide Sponsor with on-line access to ESI's
prescription drug claims data base regarding Members for the purpose of
permitting Sponsor to look up claims data and make prior authorization
determinations with respect to prescription drug claims. All telecommunications
related costs as a result of such access shall be borne by Sponsor. Sponsor
shall comply with any and all security policies and procedures established by
ESI regarding such access. At ESI's request, Sponsor shall execute, and cause
specified employees to execute, a security access form. If, as a result of such
access, Sponsor obtains any confidential information, Sponsor agrees to keep
such information confidential and use it only as permitted by this Agreement,
provided that this requirement shall not apply to information that Sponsor
possessed prior to receiving it from ESI, or that Sponsor obtains from a third
party.
SECTION III
FEES; BILLING AND PAYMENT
3.1 FEES.
The fees for the Prescription Drug Program provided hereunder shall consist
of the fees specified in EXHIBIT C of this Agreement.
3.2 BILLING AND PAYMENT
ESI will bill Sponsor as follows:
(i) no more often than weekly for all Covered Drugs
sent to Members from the Mail Service Pharmacy,
less applicable Copayments and Deductibles;
(ii) no more often than weekly, for Covered Drugs
dispensed to Members by Participating Pharmacies and
for Non-Participating Pharmacy Claims (less
applicable Copayments and Deductibles); and
(iii) bi-weekly or monthly, at ESI's option, for all other
fees specified in EXHIBIT C of this Agreement.
The billings shall be in the form of a readable computer printout or a
magnetic tape in a mutually agreed upon format or such other method mutually
agreed to by the parties. Sponsor shall pay ESI by wire transfer within one (1)
business day of Sponsor's receipt of an ESI bill, except for that portion of the
billed amount that is disputed in good faith. Sponsor will give ESI the
telephone number and name of the contact person for purposes of the wire
transfer. Any disputes regarding billed amounts must be handled in accordance
with the provisions of Section 6.9 hereof. Any amount not paid by the due date
thereof, including disputed amounts that are subsequently determined to be due,
shall bear interest at the prime rate until paid in full; provided that in the
case of amounts disputed in good faith in accordance with the procedures set
forth in Section 6.9 hereof, interest on disputed amounts which are ultimately
paid shall not accrue until the day after ESI disputes in writing Sponsor's
adjudication results as presented to ESI in the explanation of benefits.
3.3 LIMITATION ON COLLECTIONS
Except with respect to Deductibles and Copayments, which are solely the
responsibility of the Member, ESI shall look solely to Sponsor for compensation
for Covered Drugs and other services provided to Members pursuant to this
Agreement. In no event, including but not limited to nonpayment by Sponsor or
Sponsor's insolvency or breach of this Agreement, shall ESI bill, charge,
collect a deposit from, seek compensation, remuneration or reimbursement from,
or have any recourse against Members or persons acting on their behalf (other
than Sponsor) for services provided pursuant to the Agreement. ESI shall,
however, bill Members directly for all non-covered drugs and services, and
Deductibles and Copayments. ESI further agrees that (a) this provision shall
survive the termination of this Agreement regardless of the cause giving rise to
Termination and shall be construed for the benefit of the Member, and (b) this
provision supersedes any oral or written agreement to the contrary now existing
or hereafter entered into between ESI and Members or any persons acting on their
behalf. Any modifications, additions or deletions to the provisions of this
section shall become effective on a date no earlier than thirty (30) days after
the Commissioner for Insurance for the jurisdiction in question has received
written notice of such proposed changes. ESI represents and warrants that ESI's
agreement with each Participating Pharmacy shall also contain limitations on
such provider substantially identical to those imposed on ESI as set forth in
this Section 3.3.
SECTION IV
INSURANCE; INDEMNIFICATION; COMPLIANCE WITH APPLICABLE LAW
4.1 INSURANCE
(a) ESI INSURANCE. ESI shall maintain, at its sole expense, such policies
of general liability, professional liability and other insurance of the types
and in amounts customarily carried by pharmacies of comparable size with respect
to their operations. Upon Sponsor's request, ESI shall provide certificates
evidencing such insurance coverage. Such coverage shall include, at a minimum,
comprehensive general and professional liability insurance coverage in an amount
of not less than ten million dollars ($10,000,000) per occurrence and as an
annual aggregate, including without limitation, pharmacist's professional
liability coverage for such claims for bodily injury as may arise from operation
of the Mail Services Pharmacy under this Agreement.
(b) SPONSOR INSURANCE. Sponsor shall maintain, at its sole expense, such
policies of general liability, professional liability and other insurance of the
types and in the amounts customarily carried by health maintenance
organizations. Upon ESI's request, Sponsor shall provide certificates evidencing
such insurance coverage.
(c) NOTICES OF CHANGES IN INSURANCE. Each policy obtained pursuant to
Section 4.1(a) and (b) hereof shall provide for at least thirty (30) days
advance written notice of cancellation or non-renewal to the insured. ESI and
Sponsor shall each notify the other in writing promptly if it receives such
notice or otherwise learns that its insurance coverage is to be terminated or
coverage is to be material reduced but in any event, within the period required
by the applicable state law for such notice.
(d) PARTICIPATING PHARMACY AGREEMENTS. ESI's agreement with each
Participating Pharmacy shall require each such pharmacy to maintain
comprehensive general and professional liability insurance coverage in an amount
of not less than one million dollars ($1,000,000) per occurrence and as an
annual aggregate, or, when deemed acceptable by ESI, to have in place an
equivalent self-insurance program. ESI shall verify that the Participating
Pharmacies have the required insurance coverage during the process of
credentialing as described in Section 2.3(b) above.
(e) NO PARTICIPATING PHARMACY INSURANCE. It is understood and agreed that
nothing in this Agreement shall be interpreted to mean that ESI holds or is
required to hold liability insurance on behalf of any Participating Pharmacy.
4.2 INDEMNIFICATION
(a) DEFINITIONS:. As used in this Section 4.2:
(i) "Claims" means civil, administrative and criminal actions,
claims, suits and legal proceedings of any kind, arising in connection with the
performance of this Agreement by Sponsor and ESI, that are brought against an
Indemnitee by a third party unaffiliated with such Indemnitee.
(ii) "Costs" means damage, settlements, judgement, losses,
expenses, interest, penalties, reasonable legal fees and disbursements
(including without limitation fees and costs for investigators, expert witnesses
and other litigation advisors) and other actual costs incurred by an Indemnitee
to investigate, defend or settle a Claim, except that no settlement payment
shall be included in Costs unless the Indemnitor has given prior, express
written consent to the settlement.
(iii) "Indemnitee" means a person or entity entitled to
indemnification in accordance with this Section 4.2.
(iv) "Indemnitor" means a person or entity who is required to
indemnify an Indemnitee in accordance with this Section 4.2.
(b) INDEMNIFICATION BY SPONSOR. Subject to and in accordance with Section
4.2(d) below, Sponsor shall indemnify and hold harmless ESI, its directors,
officers and employees (the "ESI Indemnitees") from and against Claims and Costs
resulting from the grossly negligent acts or omissions or intentional misconduct
of Sponsor, its directors, officers, employees or authorized agents in
connection with the performance of this Agreement: provided, however, that
Sponsor shall not be obligated to indemnify or hold harmless ESI Indemnitees to
the extent that such Claims or Costs arise from any grossly negligent acts or
omissions or intentional misconduct by ESI Indemnitees or persons or entities
acting on their behalf, including without limitation the acts or omissions by
Participating Pharmacies.
(c) INDEMNIFICATION BY ESI. Subject to and in accordance with Section
4.2(d) below, ESI shall indemnify and hold harmless Sponsor, its directors,
officers, employees and affiliates (the "Sponsor Indemnitees") from and against
Claims and Costs resulting from the grossly negligent acts or omissions or
intentional misconduct of ESI, its directors, officers, employees or authorized
agents in connection with the performance of this Agreement; provided, however,
that ESI shall not be obligated to indemnify or hold harmless Sponsor
Indemnitees to the extent that such Claims and Costs arise from (i) any grossly
negligent acts or omissions or intentional misconduct by Sponsor Indemnitees or
persons or entities (other than ESI) acting on their behalf, or (ii) the acts or
omissions of Participating Pharmacies or persons or entities (other than ESI)
acting on their behalf.
(d) OTHER CONDITIONS OF INDEMNIFICATION. After receiving written notice of
any Claim for which indemnification would be available under this Section 4.2,
the Indemnitee shall give written notice thereof to the Indemnitor, except that
the Indemnitee need not give such notice if the Indemnitor has otherwise
received written notice of the Claim. The Indemnitor may at any time, in its
sole discretion, assume the defense of the Claim by giving written notice to the
Indemnitee. Beginning at the point when the Indemnitor assumes the defense of
the Claim, all future Costs relating to the Claim shall be borne by the
Indemnitor, provided that the Indemnitee cooperates with the Indemnitor in the
defense of the Claim. If the Indemnitor elects to assume the defense of the
Claim, the Indemnitee shall be represented by legal counsel chosen by the
Indemnitor. This may be the same counsel representing the Indemnitor, unless the
parties cannot appropriately be represented by the same counsel due to actual or
potential conflict of interest, in which case the Indemnitor shall choose
separate counsel for the Indemnitee.
Except to the extent the Indemnitor elects to assume the defense of the
Claim as provided in this Section 4.2(d), the Indemnitee shall defend the Claim
at its own expense, subject to reimbursement by the Indemnitor in accordance
with this Section 4.2. The timing of such reimbursement shall be determined by
agreement of the parties; if they are unable after good faith negotiations to
agree, the issue shall be handled in accordance with Section 6.9 below.
Notwithstanding any other provision of this Section 4.2, no indemnification
shall be available hereunder (i) for any settlement to which the Indemnitor did
not give prior, express written consent, (ii) for any Claim of which Indemnitor
did not receive notice as provided in this Section 4.2(d) or (iii) if the
Indemnitee fails to cooperate with the Indemnitor in the defense of the Claim.
Nothing in this Section 4.2 shall change or diminish in any way the
statutory or common law rights of any Indemnitee to contribution from any
Indemnitor.
(e) SURVIVAL. With respect to Claims arising during the life of this
Agreement, this Section 4.2 shall survive termination (including expiration) of
the Agreement for a period of five (5) years following such termination,
provided that if the Indemnitee has given the Indemnitor written notice of a
potential Claim within such five (5) year period, the indemnification for such
Claim provided hereunder shall survive such termination.
4.3 COMPLIANCE WITH LAW
Sponsor and ESI each hereby acknowledge that it has sole and exclusive
responsibility for its obligations under all relevant federal, state and local
statutes, ordinances, rules and regulations, and common law obligations,
notwithstanding the existence of this Agreement. Sponsor and ESI shall each
perform their duties and exercise their rights in accordance with the standards
of the managed health care industry applicable to their operations.
SECTION V
TERM AND TERMINATION
5.1 TERM
The initial term of this Agreement shall begin on the Effective Date and
extend through and including December 31, 1999, and may be renewed for
additional one (1) year terms as provided herein. At least ninety (90) days
prior to the end of the initial term or any renewal term, should either Sponsor
or ESI desire not to continue this Agreement beyond the end of such term, such
party shall so notify the other party in writing. Should neither party so notify
the other, this Agreement shall continue with the same terms, covenants, and
conditions as are herein contained for an additional one (1) year term.
5.2 CURE PERIOD FOR ALLEGED BREACHES OR DEFAULTS
In the event either ESI or Sponsor materially breaches or defaults in
performance of any of its obligations under this Agreement (other than payment
obligations) and good faith efforts to cure such breach or default have not
begun within thirty (30) days after the breaching or defaulting party receives
written notice thereof, or if good faith efforts to cure have begun within such
thirty (30) day period but such cure is not complete within sixty (60) days
after receipt of such notice if such breach or default could reasonably be cured
within such period, the other party shall have the right by further written
notice to pursue the dispute resolutions procedures set forth in Section 6.9
hereof.
5.3 EFFECT OF TERMINATION
Notwithstanding termination (including expiration) pursuant to Section 5.2
hereof, the rights and obligations of the parties arising as a result of
services provided prior to such termination shall remain in full force and
effect for period of one (1) year following termination provided that the
parties' rights to indemnification under Section 4.2 shall survive as set forth
in Section 4.2 hereof. ESI shall complete the processing of prescriptions and
claims received by it or by a Participating Pharmacy prior to the effective date
of termination of the Agreement.
SECTION VI
MISCELLANEOUS
6.1 NOTICE
Any notice which may or must be given under the terms of this Agreement
must be in writing and shall be deemed effective upon receipt. Such notice must
be (i) sent certified or registered mail, return receipt requested, postage
prepaid, or (ii) sent by recognized overnight delivery service, in any case and
properly addressed to ESI or Sponsor at the address set forth below, or at such
other address as either party shall designate by like notice to the other party.
To Sponsor at:
WellPath Community Health Plans, Inc.
6330 Quadrangle Drive, Suite 500
Chapel Hill, North Carolina 27514
Attn: Vice President, Network Management
and to ESI at:
Express Scripts, Inc.
14000 Riverport Drive
St. Louis, Missouri 63043
Attn: President
Any notice given in the manner specified herein shall be deemed received on the
date evidenced by the return receipt card or, in the case of overnight delivery
service, other proof of delivery.
6.2. INDEPENDENT PARTIES
No provision of this Agreement is intended to create or shall be construed
to create any relationship between ESI and Sponsor other than that of
independent entities contracting with each other solely for the purpose of
effecting the provisions of this Agreement. Neither party, nor any of their
respective representatives, shall be construed to be the partner, agent,
employee, or representative of the other and neither party shall have the right
to make any representations concerning the duties, obligations or services of
the other except as consistent with the express terms of this Agreement or as
otherwise authorized in writing by the party about which such representation is
made.
6.3 SUCCESSORS AND ASSIGNMENTS
The words ESI and Sponsor as used herein include, apply to, bind and
benefit the successors and permitted assigns of ESI and Sponsor. Neither party
may assign this Agreement or any of its rights or obligations hereunder without
the express written consent of the other party (which consent may not be
unreasonably withheld, qualified or delayed), except that either party may
without the other party's consent, assign this Agreement or any of its rights or
obligations hereunder to a corporate affiliate of such party; provided, however,
that (i) the affiliated assignee or delegatee shall agree, in writing, to be
bound by the provisions set forth in Section 6.9 hereof regarding dispute
resolution, (ii) no such assignment or delegation shall relieve the party so
assigning its rights or delegating its obligations hereunder from its
obligations under this Agreement without the written consent of the other party
to this Agreement.
6.4 AMENDMENTS
No modification, alteration, or waiver of any term, covenant, or condition
of this Agreement shall be valid unless in writing and signed by both parties or
the agents of the parties who are authorized in writing.
6.5 CHOICE OF LAW
This Agreement shall be construed and governed in all respects according to
the internal laws in the State of Missouri.
6.6 WAIVER
No waiver of a breach of any covenant or condition shall be construed to be
a waiver of any subsequent breach. No act, delay or omission done, suffered, or
permitted by the parties shall be deemed to exhaust or impair any right, remedy
or power of such party hereunder.
6.7 VALIDITY
Should for any reason any clause or provision of this Agreement (other than
Section III) be held or ruled unenforceable or ineffective under the law, such a
ruling will in no way affect the validity or enforceability of any other clause
or provision of this Agreement.
6.8 THIRD PARTY BENEFICIARY EXCLUSION
Except as set forth in Section 3.3 hereof, this Agreement is not a third
party beneficiary contract and shall not, in any manner whatsoever, increase the
rights of any Member or any other person with respect to Sponsor or ESI or the
duties of Sponsor or ESI to any Member or any other person or create any rights
on behalf of any Member or any other person with respect to ESI or Sponsor.
Sponsor and ESI reserve the right to amend or terminate this Agreement without
notice to, or consent of, any Member or any other person.
6.9 ARBITRATION
If ESI and Sponsor are unable to resolve any dispute arising under this
Agreement, such dispute shall be resolved by binding arbitration, which, unless
the parties otherwise agree in writing shall be conducted in accordance with the
following rules:
(a) INITIATION OF ARBITRATION. Either party may initiate arbitration
hereunder by written notice to the other describing in detail the nature of the
default or other dispute to be resolved.
(b) SELECTION OF ARBITRATOR. Unless the parties agree on the selection of
the arbitrator within 15 days after initiating the arbitration proceeding, each
of ESI and Sponsor shall select its own representative and the two
representatives so selected shall select the arbitrator. Each representative and
the arbitrator shall be (i) a person with not less than 5 years experience at a
senior management level in the managed health care industry, or (ii) an attorney
with not less than 10 years experience in managed healthcare law. Neither the
representatives nor the arbitrator shall have any present or past affiliation
with ESI or Sponsor, or any major shareholder or any member of the senior
management or board of directors of ESI of Sponsor.
(c) TIME AND PLACE OF ARBITRATION. Unless the parties agree otherwise, the
arbitration shall occur on a date to be set by the arbitrator, which shall be no
more than 30 days after the selection of the arbitrator, and shall be held in
New York City.
(d) EXPENSE OF ARBITRATION. The parties shall bear equally the arbitrator's
fee and other costs of arbitration such as rental of the hearing room and costs
of a court reporter, and each party shall bear its own costs (including
attorneys' fees) incurred in preparation for the arbitration; PROVIDED, HOWEVER,
that the arbitrator may award costs and attorneys' fees, in whole or in part, to
the prevailing party in his/her discretion.
(e) TRANSCRIPT. A transcript of the proceedings will be prepared by a
licensed court reporter selected by the arbitrator. A copy of the transcript
will be made available to the parties prior to any briefing of the issues that
the arbitrator may request.
(f) REMEDIES GENERALLY. The arbitrator shall grant such relief to the
non-defaulting party as shall be necessary to put such party in the position
such party would have been in absent default. Such relief may include, without
limitation, awarding monetary damages for breach, or relieving the
non-defaulting party from any further obligation under this Agreement. No
punitive damages shall be awarded.
(g) RULES OF ARBITRATION APPEAL. Except as otherwise provided in this
Section, any arbitration will be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (but not under the
auspices of such organization). The arbitrator's award shall be issued within 30
days of the conclusion of the arbitration proceeding and shall be accompanied by
written findings of fact and conclusions of law. The arbitrator's award and
opinion shall be final and binding on all parties.
6.10. EFFECT OF AGREEMENT.
This Agreement supersedes in its entirety any and all written or oral
agreements between the parties with respect to the subject matter hereof as to
any transactions occurring or circumstances arising after the Effective Date.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Managed Prescription
Drug Program Agreement as of the day and year first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION
PROVISION THAT MAY BE ENFORCED BY THE PARTIES.
EXPRESS SCRIPTS, INC. WELLPATH COMMUNITY HEALTH PLAN, INC.
By: /S/ STUART BASCOMB By: /S/ ANNA M. LORE
Name: STUART BASCOMB Name: ANNA M. LORE
Title: EXECUTIVE VICE PRESIDENT Title: PRESIDENT/CEO
<PAGE>
EXHIBIT A
COVERED AND EXCLUDED DRUGS
A. Covered Drugs:
See applicable Rider or similar description of outpatient prescription
drug benefit.
B. Excluded Drugs:
See applicable Rider or similar description of outpatient prescription
drug benefit.
<PAGE>
EXHIBIT B
COPAYMENTS AND DEDUCTIBLES
1. Copayments per prescription:
PARTICIPATING PHARMACIES COPAYMENT:
Branded Drugs $______*
Generic Drugs $______*
MAIL SERVICE PHARMACY COPAYMENT:
Branded Drugs $______*
Generic Drugs $______*
MEMBER SUBMITTED CLAIM COPAYMENT
Branded Drugs $______*
Generic Drugs $______*
ESI's agreements with Participating Pharmacies shall require that where the
amount of the Copayment exceeds the Participating Pharmacy's Usual and Customary
retail price of the Covered Drug at the time the prescription is filled, such
pharmacy shall charge such retail price as full compensation for filling that
prescription.
2. Annual Deductibles
For Member's Deductibles, see applicable Rider or similar description of
outpatient prescription drug benefit.
- -----------------------------
* See applicable Rider or Plan provisions.
<PAGE>
EXHIBIT C
EXPRESS SCRIPTS PRESCRIPTION DRUG PROGRAM FEES
I. Prescription Drugs dispensed by Participating Pharmacies in the
PERxSelecttm Network:
A. INGREDIENT COST
Brand Drugs: [*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS
DOCUMENT AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT*] plus
applicable sales or excise tax or other
governmentalsurcharge, if any.
Generic Drugs: [*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM
THIS DOCUMENT AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT*]
plus applicable sales or excise tax or other
governmental surcharge, if any.
B. DISPENSING FEE
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT*]
C. CLAIMS ADMINISTRATION FEE
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT*]
II. Prescription Drugs dispensed by ESI's Mail Service Pharmacy:
A. INGREDIENT COST
Brand Drugs: [*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS
DOCUMENT AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT*] plus
applicable sales or excise tax or other
governmental surcharge, if any.
Generic Drugs: [*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM
THIS DOCUMENT AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT*] plus
applicable sales or excise tax or other
governmental surcharge, if any.
B. DISPENSING FEE
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT*]
C. CLAIMS ADMINISTRATION FEE
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT
AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT*]
III. Extended Day Supply dispensed at Participating Pharmacies:
A. INGREDIENT COST
Brand Drugs: [*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS
DOCUMENT AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT*] plus
applicable sales or excise tax or other
governmental surcharge, if any.
Generic Drugs: [*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM
THIS DOCUMENT AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT*] plus
applicable sales or excise tax or other
governmental surcharge, if any.
B. DISPENSING FEE
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT*]
C. CLAIMS ADMINISTRATION FEE
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT*]
IV. Member Submitted Claims:
A. PRESCRIPTION COST:
Actual amount paid by Member for the Covered Drug
less the applicable Copayment, and/or Deductible.
B. CLAIMS ADMINISTRATION FEE:
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT*]
V. Implementation fees:
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT*] for
implementation of the Express Scripts program if Sponsor
provides ESI with initial Member eligibility on electronic
medium in ESI's format. If ESI must create a Member
eligibility file by manually entering the data, there will be
a [*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT*]
implementation fee.
<PAGE>
EXHIBIT D
DRUG UTILIZATION REVIEW (DUR) REPORTS
1. PCP Analysis
2. Prescriber Analysis
3. Drug Ranking - Number of Scripts by Therapy Class
4. Drug Ranking - Amount Paid by Therapy Class
5. Drug Ranking Report on YTD Claim Amount
Includes Alphabetical Drug List
6. Top 40 Prescribers for a Specific Drug
7. Pharmacy Dispensing Report
8. High Utilization Member Activity Report
9. Controlled Substance - High Utilization Member Activity Report
10. Network to Mail Order Movement
11. Member Ranking Report
12. Group and Rider Stratification Report
13. Group Claim Activity Report
14. Rider Recap by Group
15. Rider Recap by Site
16. Summary of Prescription Drug Utilization
17. Summary of Drug Utilization by Therapy Class
18. Controlled Substance Prescribing Physician Analysis Report
Ranked by # of Rxs
19. Top __ Drugs by Generic Class Name - Based on Ingredient Cost
20. Top __ Drugs by Generic Class Name - Based on # of Rxs
21. Pharmacy DUR Performance Report
<PAGE>
ADDENDUM ONE
MEDICARE SERVICES ADDENDUM
This Medicare services addendum ("Medicare Addendum") supplements the
Managed Prescription Drug Program Agreement (the "Agreement") between WellPath
Select, Inc., formerly WellPath Community Health Plan, Inc. ("WellPath") and
Express Scripts, Inc. ("ESI") to which it is annexed.
WHEREAS, WellPath intends to enter into an agreement ("Medicare Contract")
with the Health Care Financing Administration ("HCFA"), under which WellPath has
agreed to provide pre-paid coverage for certain health care services to be
provided to Medicare beneficiaries who are members of the WellPath 65 Health
Plan; and
WHEREAS, WellPath and ESI desire to give members of the WellPath 65 Health
Plan access to Covered Drugs provided or arranged for by ESI pursuant to the
Agreement; and
WHEREAS, WellPath and ESI desire to incorporate this Medicare Addendum into
the Agreement, so as to permit ESI to provide or arrange for Covered Drugs to
members of the WellPath 65 Health Plan pursuant to the Agreement as supplemented
by this Medicare Addendum.
NOW THEREFORE, the parties agree as follows:
1. DEFINITIONS. Terms used in this Medicare Addendum that are defined in
the Agreement shall have the definitions contained in the Agreement. Additional
terms used in this Medicare Addendum are defined as follows:
COMMERCIAL MEMBER means a Member who is not a Medicare Member.
MEDICARE-CERTIFIED or MEDICARE CERTIFICATION, as applied to a
physician, hospital or other provider of health care services,
means that the provider has been approved by HCFA to
participate in the Medicare program.
MEDICARE MEMBER means a member of the WellPath 65 Health Plan,
enrolled pursuant to WellPath's Medicare Contract with HCFA.
Except as specified in this Medicare Addendum, all provisions
of the Agreement applicable to Members shall apply to Medicare
Members.
2. SERVICES. ESI shall provide or arrange for the provision of Covered
Drugs to Medicare Members in accordance with the Agreement as supplemented by
this Medicare Addendum. ESI shall and shall require in its provider agreements
with Participating Pharmacies that they not discriminate against Medicare
Members because of race, color, national origin, ancestry, religion, sex,
marital status, sexual orientation, age, health status, source of payment, or by
reason of the fact that they are Medicare Members.
3. PAYMENT FOR SERVICES. WellPath shall compensate ESI for services
rendered to Medicare Members in accordance with Section III of the Agreement.
ESI shall be responsible for paying Participating Pharmacies for providing and
arranging to provide Covered Drugs to Medicare Members, and shall require
Participating Pharmacies to look solely to ESI for such payment. Payment of
Claims for services rendered to Medicare Members may not be delayed pending
receipt of information regarding coordination-of-benefits when WellPath is the
secondary plan.
4. REPORTS AND OTHER INFORMATION
4.1 REQUIRED REPORTS. WellPath shall prepare and submit to HCFA or
any other duly authorized agent of the federal government all
legally required reports concerning the provision of Covered
Drugs to Medicare Members. ESI shall cooperate with WellPath
in the preparation of such reports by providing to WellPath,
on a timely basis, all documents, information, data and other
materials that ESI is obligated to provide under the
Agreement. Any additional documents, information, data or
other materials shall be provided at ESI's standard rates.
4.2 PATIENT RECORDS. WellPath and ESI shall require in the
provider agreements with Participating Pharmacies that
Participating Pharmacies shall, in accordance with state and
federal laws and regulations regarding the confidentiality of
patient records, comply with valid requests by HCFA or any
other duly authorized agent of the federal government to
review and copy records pertaining to the diagnosis, treatment
and health of Medicare Members.
4.3 RECORD RETENTION AND ACCESS. As required by federal law, until
the expiration of four (4) years after the provision of any
services to Medicare Members under this Medicare Addendum, ESI
shall and shall require in its provider agreements with
Participating Pharmacies that Participating Pharmacies will
make available for inspection, evaluation and audit, upon
written request of the Secretary of Health and Human Services
or the Comptroller General of the United States or any of
their duly authorized representatives, copies of the
Agreement, this Medicare Addendum and any books, documents,
records and other data of ESI pertaining to any aspect of such
services that may be necessary to evaluate the quality,
appropriateness and timeliness of such services and certify
the nature and extent of costs incurred by WellPath or ESI in
connection with such services to the extent require by law. If
ESI performs any of his/her obligations pertaining to Medicare
Members under this Medicare Addendum through a subcontract
with a related entity, as defined in 42 C.F.R '417.484, ESI
will cause such subcontract to contain a clause to the effect
that, until the expiration of four (4) years after the
provision of any services pursuant to such subcontract, the
subcontractor will make available, upon written request of the
Secretary of Health and Human Services or the Comptroller
General of the United States or any of their duly authorized
representatives, copies of said subcontract and any books,
documents, records and other data of such subcontractor that
may be necessary to evaluate the quality, appropriateness and
timeliness of such services and certify the nature and extent
of costs incurred by WellPath or ESI in connection with such
services to the extent required by law.
5. TERM AND TERMINATION. This Medicare Addendum will take effect
("Effective Date") on the later of the date this Medicare Addendum is signed by
all parties to this Agreement or the effective date of HCFA's approval of HMO's
operation as a Medicare Risk contractor, and shall remain in effect until the
termination or expiration of the Medicare Contract, the Agreement or this
Medicare Addendum, whichever comes first. WellPath shall give ESI notice of the
termination or expiration of the Medicare Contract. This Medicare Addendum may
be terminated by either party in accordance with the provisions for termination
contained in the Agreement. Upon the termination of this Medicare Addendum, the
Agreement shall remain in full force and effect with respect to Commercial
Members, unless the Agreement has also terminated or expired;
The termination of this Medicare Addendum shall not prejudice the rights or
obligations of either party that accrued before such termination.
6. ALL OTHER TERMS OF AGREEMENT TO REMAIN UNCHANGED. This Medicare Addendum
shall supplement the Agreement and apply solely to Covered Drugs for Medicare
Members. Except as specified herein, the terms of the Agreement shall remain in
full force and effect and shall govern the provision of Covered Drugs to
Medicare Members as if fully set forth herein.
IN WITNESS WHEREOF, the parties have executed and delivered this Addendum
as of April 7, 1997.
WELLPATH SELECT, INC. EXPRESS SCRIPTS, INC.
/S/ ANNA M. LORE /S/ STUART BASCOMB
Authorized Signature Authorized Signature
ANNA M. LORE STUART BASCOMB
Print Name Print Name
PRESIDENT/CEO EXECUTIVE VICE PRESIDENT
Title Title
APRIL 3, 1997 APRIL 7, 1997
Date Signed Date Signed
EXHIBIT 10.3
MANAGED PRESCRIPTION DRUG PROGRAM AGREEMENT
This Managed Prescription Drug Program Agreement is made to be effective as
of the 1st day of May, 1996, by and between Express Scripts, Inc., a Delaware
corporation ("ESI"), and NYLCare Health Plans of Maine, Inc., a Maine
corporation ("Sponsor").
RECITALS
1. ESI is in the business of providing, managing and administering
prescription drug programs, including the maintenance of a nationwide network of
pharmacies, claims administration, mail service dispensing and delivery of
prescription drugs, generation of prescription drug management and utilization
reports and other pharmacy management services.
2. Sponsor is engaged in the business of arranging for the provision of
health care services pursuant to applicable federal and state laws, including
but not limited to the Employee Retirement Income Security Act of 1974, as
amended (29 U.S.C. Sec. 1001 ET. SEQ.) and the Maine Health Maintenance
Organization Act of 1975, as amended (24-A MRSA Sec. 4201 ET. SEQ.), and is
licensed as a health maintenance organization under the applicable laws of the
State of Maine and the rules and regulations promulgated thereunder (such rules,
laws and regulations, collectively, the "Health Laws"), to persons enrolled in
Sponsor's prepaid health care plans or who participate in employer-funded health
plans administered by Sponsor.
3. Sponsor is a majority owned subsidiary of NYLCare Health Plans, Inc., a
Delaware corporation ("NYLCare"), formerly known as Sanus Corp. Health Systems.
4. NYLCare and ESI are parties to an Amended and Restated Agreement entered
into as of March 29, 1995 (the "NYLCare Agreement").
5. Sponsor and ESI desire to enter into an agreement concerning the terms
and conditions under which ESI will provide, manage and administer a
prescription drug program for Sponsor.
SUBJECT TO APPROVAL OF THE STATE OF MAINE
DEPARTMENT OF INSURANCE.
<PAGE>
AGREEMENT
SECTION I
DEFINITIONS
The following terms used in this Agreement shall have the meanings set
forth below:
"Agreement," "hereof" and "hereunder" and words of similar import, refer to
this Managed Prescription Drug Program Agreement, including all exhibits hereto,
each as it may be amended from time to time in accordance herewith.
"Average Wholesale Price" or "AWP" means the average wholesale price of a
prescription drug as determined by the most current issue of First DataBank
Services; provided, however, that should such pricing service not be reasonably
commercially available at any time, the AWP shall be determined from a mutually
agreed upon alternative source generally recognized in the retail drug industry.
"Copayment" means that portion of the charge for each prescription for a
Covered Drug, after the Member's Deductible has been satisfied, that is the
responsibility of the Member. The Copayments shall be determined as set forth on
EXHIBIT B hereto.
"Covered Drug" means those prescription drugs, supplies and other items
that are covered under the Prescription Drug Program, as indicated on EXHIBIT A
hereto.
"Deductible" means the aggregate annual amount the Member is required to
pay for Covered Drugs before becoming entitled to the benefits under the
Prescription Drug Program, in addition to Copayments, as set forth on EXHIBIT B.
"Effective Date" means May 1, 1996.
"Eligibility Reports" means the reports issued by Sponsor to ESI pursuant
to Section 2.2 hereof, which shall indicate the name of each current Member as
of the date of such report and such other information as ESI may reasonably
request.
"ESI Products" shall have the meaning set forth in Section 2.12 hereof.
"Formulary" means a list of prescription drugs and preferred products that
physicians are encouraged to prescribe, consistent with their professional
medical judgment and applicable medical and pharmacy laws and procedures.
"Identification Card" means a printed identification card issued by Sponsor
to a Member containing specific information about such Member and the Plan
benefits to which he or she is entitled, provided that, upon Sponsor's request,
ESI will issue Identification Cards to selected out-of-area Members.
"Mail Service Pharmacy" means a duly licensed pharmacy operated by ESI
which dispenses Covered Drugs to Members via the United States Postal Service,
United Parcel Service, or other delivery service.
"Maximum Reimbursement Amount" or "MRA" means the average price for a
generic drug established by ESI using a variety of factors, including but not
limited to the First DataBank drug pricing service's published baseline price
and the "maximum allowable cost" determined by the U.S. Health Care Financing
Administration. ESI periodically updates the MRA to reflect changes in generic
drug prices, in its sole discretion.
"Member" is a subscriber or dependent of a subscriber who is enrolled in or
participates in a health plan of Sponsor's, including plans issued or
administered by Sponsor, and who is covered by a Rider or similar outpatient
prescription drug benefit.
"Member Submitted Claim Form" means the claim form provided by ESI that the
Member must submit to ESI or Sponsor in order to qualify for reimbursement of
certain claims under the Prescription Drug Program, as set forth in Section 2.5
hereof.
"Metropolitan Area" means a city and all of its suburbs within a reasonable
commuting distance.
"Non-Participating Pharmacy" means any pharmacy that does not have an
agreement with ESI to provide Covered Drugs to Members pursuant to the
Prescription Drug Program.
"Non-Participating Pharmacy Claim" shall have the meaning specified in
Section 2.5 hereof.
"NYLCare" shall have the meaning specified in the Recitals hereto.
"NYLCare Agreement" shall have the meaning specified in the Recitals
hereto.
"Participating Pharmacy" means any pharmacy which has executed an agreement
with ESI to provide Covered Drugs to Members pursuant to the Prescription Drug
Program.
"Plan" means the Member's health plan that includes the Prescription Drug
Program.
"Prescription Drug Program" means the prescription drug services and
benefits specified by Sponsor which are provided to Members under this
Agreement.
"Rider" means a supplement to a Plan under which Members are entitled to
the prescription drug benefits described in such supplement.
"Usual and Customary Retail Price" means the usual and customary retail
price to the general public in a cash transaction at the pharmacy dispensing the
Covered Drug on the date such Covered Drug is dispensed.
SECTION II
PRESCRIPTION DRUG SERVICES
2.1 ELIGIBILITY OF MEMBERS
Sponsor shall provide ESI with an Eligibility Report, in a format agreed
upon by the parties, of the Members of each Plan at least ten (10) days prior to
the effective date of such Plan. From time to time thereafter, but no less
frequently than monthly, Sponsor shall provide ESI with an updated Eligibility
Report notifying ESI of a Member's addition to or termination from a Plan. Not
less than three (3) business days after ESI has received this notification in
computer readable form or five (5) business days after ESI has received this
notification in writing, ESI shall enter the eligibility data into its computer
and thereafter shall (i) deny all claims for Covered Drugs dispensed to Members
after the effective date of termination from a Plan and (ii) accept all claims
for Covered Drugs dispensed to new Members after the effective date of their
eligibility for a Plan.
2.2. MAIL SERVICE PHARMACY
Members may present prescriptions for Covered Drugs to the Mail Service
Pharmacy. After presentation of such prescription, ESI shall determine whether
the Member is eligible for prescription drug benefits, using the Eligibility
Reports provided by Sponsor, and whether the prescription is for a Covered Drug.
If the prescription and applicable law do not prohibit substitution of a generic
drug equivalent to the prescribed drug, or if ESI obtains the consent of the
prescriber, ESI shall dispense the generic substitute to the Member. If the
prescription and applicable law permit substitution of a generic substitute and
ESI fails to dispense the generic substitute, Sponsor shall only be responsible
for the generic drug ingredient cost, and not the brand drug ingredient cost.
All prescriptions received by the Mail Service Pharmacy will be reviewed prior
to filling for potential allergies disclosed to ESI by the Member or
interactions with other Covered Drugs dispensed by the Mail Service Pharmacy or
a Participating Pharmacy. If, in the opinion of the dispensing pharmacist, a
potentially harmful allergy or drug interaction may exist, the dispensing
pharmacist will contact the prescriber to obtain the prescriber's oral consent
to fill such prescription. No prescriptions will be refilled without
authorization from both the Member and the prescriber. ESI will use its best
efforts to fill a prescription within 48 hours of receipt of the prescription at
the Mail Service Pharmacy.
Covered Drugs will be dispensed from the Mail Service Pharmacy in the
quantity prescribed by the prescriber, but not to exceed a ninety (90) day
supply. ESI shall charge and each Member shall pay the applicable Copayment for
each Covered Drug dispensed after any Deductible is satisfied. ESI shall
determine when the Deductible is satisfied in accordance with the rates set
forth in EXHIBIT C. All prescriptions received by the Mail Service Pharmacy
prior to the effective date of termination of the Agreement shall be paid for by
Sponsor in accordance with the terms hereof.
2.3 PARTICIPATING PHARMACIES
(a) NETWORK. Members may fill prescriptions for Covered Drugs through a
network of Participating Pharmacies maintained by ESI. EXHIBIT C identifies the
ESI network for Sponsor's Prescription Drug Program. ESI shall provide Sponsor
with an initial list of the Participating Pharmacies and will notify Sponsor of
additions to and deletions from its network of Participating Pharmacies from
time to time, but no less frequently than quarterly. Additions to and deletions
from the network shall be mutually agreed to by ESI and Sponsor. ESI shall
require each Participating Pharmacy to have all licenses and permits required by
law for dispensing prescription drugs in the states in which such pharmacy
operates, and to comply with all standards and procedures set by ESI with
respect to the quality of services provided pursuant to this Agreement.
(b) CREDENTIALLING FILES. ESI shall maintain credentialling files for each
Participating Pharmacy. These files are established when a pharmacy becomes a
Participating Pharmacy. These files shall contain evidence of licensure and
insurance as required by ESI, and in accordance with this Agreement. These files
shall also contain records of any complaints received by ESI concerning
Participating Pharmacies and any investigation or other action taken by ESI in
response to such complaints. Any other materials prepared or maintained by ESI
with respect to the quality of or service provided by Participating Pharmacies,
including reports of any audits pursuant to Section 2.3(e) below, shall also be
included in the credentialling files. Each Participating Pharmacy shall (i) be
duly licensed in good standing in the state in which it dispenses prescriptions,
and (ii) maintain all certifications required by the official and professional
boards or bodies having authority over the practice of pharmacy in the
applicable states. ESI shall require additional evidence of licensure and
insurance from a Participating Pharmacy when a state pharmacy board publication
indicates that such pharmacy has had disciplinary action taken against it. ESI
shall receive copies of state pharmacy newsletters from all states in which
Participating Pharmacies are located and review these newsletters for
disciplinary action. Sponsor shall have the right to audit ESI's credentialling
files during regular business hours at Sponsor's cost, upon reasonable prior
notice to ESI.
(c) FILLING A PRESCRIPTION. To fill a prescription for a Covered Drug at a
Participating Pharmacy, the Member shall present a valid Identification Card and
the prescription at a Participating Pharmacy. Each Participating Pharmacy will
be required to verify the Member's eligibility through ESI's designated on-line
computer system. Participating Pharmacies will be required to dispense Covered
Drugs to Members in the amount specified by the prescriber, but not to exceed a
thirty (30) day supply, provided that this dispensing limit may be adjusted by
Sponsor from time to time, in its sole discretion, upon reasonable notice to
ESI. After each Member has met his or her Deductible, Participating Pharmacies
shall be required to charge the Member and collect the applicable Copayment for
each Covered Drug dispensed.
(d) CLAIMS PROCESSING. ESI shall provide the following claims processing
services through its on-line computer system for all claims submitted for
approval by Participating Pharmacies:
- Verification of the eligibility of the Member and any applicable
- Copayments or Deductibles Verification that the prescriber is an
authorized prescriber under the Prescription Drug Program,
if Sponsor requests
- Verification that the claim is for Covered Drugs
- Verification that the claim is in compliance with the Formulary,
if applicable
In all cases Sponsor shall have the final authority to determine whether any
rejected or disputed claim shall be allowed.
(e) PARTICIPATING PHARMACY AUDITS. ESI shall maintain a set of criteria for
establishing when a Participating Pharmacy shall be audited and the type of
audit that shall be conducted, whether written or on-site, conducted by ESI's
internal auditors or its outside auditor. Such audit shall determine the
pharmacy's compliance with its agreement with ESI. Sponsor may request that ESI
audit a particular individual or chain pharmacy which is a Participating
Pharmacy, which request shall be considered by ESI as one of the audit criteria.
Such requests shall be directed to ESI's Provider Relations Department. If
Sponsor has a reasonable basis for believing that a Participating Pharmacy may
be non-compliant with any quality, quality assurance or quality-of-care
standards of ESI, or that the Participating Pharmacy may be engaged in
fraudulent activities, Sponsor may require that ESI conduct an audit of the
Participating Pharmacy. ESI shall provide Sponsor with a copy of a summary of
the audit report produced as a result of such audit on a timely basis.
2.4 PRESCRIPTION DRUG FORMULARIES
(a) DEVELOPMENT AND PROMOTION. ESI will develop and maintain certain
Formularies for use by Sponsor, which will apply to Members who obtain Covered
Drugs from both the Mail Service Pharmacy and Participating Pharmacies. These
Formularies will be revised from time to time, and periodic newsletters will be
prepared at ESI's sole cost for Sponsor to distribute to physicians. In
addition, at no additional cost to Sponsor, ESI will meet periodically with
Sponsor regarding Formulary matters and, as reasonably requested by Sponsor,
meet periodically with physicians to encourage Formulary compliance. ESI will
also assist Sponsor in developing and promoting Riders which encourage Formulary
compliance. ESI shall have representation on any committee of Sponsor's which
evaluates the Formularies developed by ESI.
Sponsor shall assist in the development and promotion of the Formularies,
which shall include the following:
(i) If appropriate, staff of Sponsor shall participate in the Pharmacy &
Therapeutics ("P&T") Committee established by ESI, which will develop and
periodically review and revise the formularies; and
(ii) Develop methodologies for informing physicians concerning the
Formularies, and encouraging Formulary compliance, including distribution of the
Formularies, a quarterly newsletter and other communications concerning the
Formularies.
(b) DISEASE MANAGEMENT PROGRAMS SPONSORED BY PHARMACEUTICAL MANUFACTURERS.
Sponsor and ESI shall jointly evaluate any disease management program provided
by any pharmaceutical manufacturer to ensure consistency with the Formularies
developed by ESI prior to the time Sponsor agrees to or enters into any such
program with a pharmaceutical manufacturer.
2.5 CLAIMS PROCESSING INVOLVING NON-PARTICIPATING PHARMACIES
Upon submission of claims in accordance with the terms hereof, ESI shall
process claims on behalf of Members for Covered Drugs dispensed by pharmacies
other than Participating Pharmacies ("Non-Participating Pharmacy Claims") as
provided in Section 2.3(d) hereof. Non-Participating Pharmacy Claims shall also
include claims from Members who have obtained prescriptions from Participating
Pharmacies without using their Identification Cards. For such a claim to be
processed, the Member must submit a hard-copy Member Submitted Claim Form
directly to ESI. ESI shall use reasonable efforts to process such claims in
accordance with Section 2.3(d) hereof and send a reimbursement to the Member
within five (5) business days of the date the completed claim is received.
2.6 MANAGEMENT INFORMATION REPORTS
On a quarterly basis at no additional charge, ESI shall provide Sponsor
with certain management information reports which shall include the information
set forth below by employer or covered group:
o The Top 100 Drugs Dispensed.
o The Number of Generic Drugs Dispensed
o Exception Reports for Heavy Utilization
o The Average Cost of Prescriptions Filled
o Cost by Member number
ESI will also provide Sponsor with certain standard drug utilization review
reports that ESI also provides to other clients, upon Sponsor's request and at
no additional charge. As of the date hereof, these reports include the reports
set forth on EXHIBIT D hereto.
2.7 CONSULTING SERVICES
ESI will, for no additional compensation, upon Sponsor's reasonable
request, provide quarterly management letters that include interpretation of
Management Information Reports and cost analysis of the Prescription Drug
Program.
2.8 QUALITY MANAGEMENT/IMPROVEMENT
ESI agrees to cooperate and require Participating Pharmacies to cooperate
with Sponsor's and ESI's quality improvement and quality management programs
that are consistent with the managed care industry standards, including but not
limited to providing information on quality matters and assisting in the
implementation of corrective action plans, provided that Sponsor has provided
ESI with copies of such programs.
2.9 COMPLAINTS AND GRIEVANCES
Any complaints or grievances Sponsor receives from Members with respect to
services provided pursuant to this Agreement will be resolved in accordance with
Sponsor's procedures; provided, however, that Sponsor agrees to solicit ESI's
views in a timely manner on any grievance or complaint concerning ESI or a
Participating Pharmacy. ESI agrees to cooperate and require Participating
Pharmacies to cooperate in the resolution of Member complaints and grievances.
ESI shall provide Sponsor with information concerning Member complaints and
grievances and assist in the implementation of corrective action plans.
2.10 RECORDS AND SOFTWARE
(a) OWNERSHIP OF RECORDS. All records prepared and maintained by ESI or
Sponsor in the course of their respective operations, including but not limited
to all books of account, enrollment records, administrative records and records
pertaining to Plans and Members, shall be and remain the sole property of such
entity.
(b) INSPECTION AND CONFIDENTIALITY OF RECORDS. Sponsor shall have the
right, upon reasonable request and at its cost, to inspect during regular
working hours any accounting, enrollment, administrative or medical records ESI
maintains pursuant to this Agreement regarding Sponsor or any Member to the
extent such inspection is permitted by applicable law. Sponsor and ESI shall
adopt procedures that seek to preserve the confidentiality of each other's
records, and will comply with all applicable laws and regulations regarding such
records. Sponsor shall be responsible for maintaining the confidentiality of
information available to Sponsor through Sponsor's access to ESI's computer
system. Neither Sponsor nor ESI shall disclose information from prescription
records of individual Members or information received from the Member's
physician pursuant to the physician-patient relationship without such Member's
consent, except as required or permitted by applicable law. ESI shall, subject
to state and federal laws and regulations regarding the confidentiality of
patient records, comply with valid requests by the Commissioner of Human
Services of Maine and any other duly authorized agent of the State government to
review and copy records pertaining to the diagnosis, treatment and health of
Members.
(c) COMPUTER PROGRAMS AND SOFTWARE. The parties agree that any and all
computer programs and software and related information, including but not
limited to reporting packages, system formats and other system information and
user documentation, developed by a party shall remain the property of the party
which developed it and the other party will not use such programs, software, and
related information, or disclose it to any third party, at any time during or
after the term of this Agreement, without the express written consent of the
party which developed it. Upon termination of this Agreement, all such programs,
software and related information, along with systems, manuals, procedures and
equipment provided by one party to the other, shall be returned immediately to
the party which provided it.
2.11 ADDITIONAL ESI SERVICES
(a) ELIGIBLE PRESCRIBER REVIEW. Upon written request of Sponsor with
respect to a particular Plan, ESI (with respect to Mail Service Pharmacy
prescriptions) and the Participating Pharmacies (with respect to prescriptions
Members submit to them) shall verify that the prescriber is a member of
Sponsor's closed panel for such Plan based on the most recent eligibility report
of prescribers submitted by Sponsor to ESI. If the prescriber is not an eligible
prescriber, such claim shall be denied. The eligibility report shall be provided
in a mutually acceptable form. Sponsor shall be solely responsible for ensuring
the accuracy of the eligibility report provided to ESI, and ESI may rely on such
report in processing claims under Section 2.3(d).
(b) TOLL-FREE CUSTOMER LINE. ESI shall maintain toll-free customer inquiry
telephone capability for Members to request the status of their prescriptions
and for other purposes.
(c) ON-CALL PHARMACIST. ESI shall provide a twenty-four (24) hour on-call
pharmacist for emergency medical situations.
(d) ON-LINE ACCESS. ESI shall provide Sponsor with on-line access to ESI's
prescription drug claims data base regarding Members for the purpose of
permitting Sponsor to look up claims data and make prior authorization
determinations with respect to prescription drug claims. All telecommunications
related costs as a result of such access shall be borne by Sponsor. Sponsor
shall comply with any and all security policies and procedures established by
ESI regarding such access. At ESI's request, Sponsor shall execute, and cause
specified employees to execute, a security access form. If, as a result of such
access, Sponsor obtains any confidential information, Sponsor agrees to keep
such information confidential and use it only as permitted by this Agreement,
provided that this requirement shall not apply to information that Sponsor
possessed prior to receiving it from ESI, or that Sponsor obtains from a third
party.
2.12 EXCLUSIVITY.
Pursuant to Article V of the NYLCare Agreement, Sponsor shall use ESI as
its exclusive provider of the managed care products and services provided by ESI
to its clients, including programs for pharmacy, vision care and infusion
therapy benefits (the "ESI Products"), subject to the availability of such ESI
Products to meet Sponsor's needs.
SECTION III
FEES; BILLING AND PAYMENT
3.1 FEES.
The fees for the Prescription Drug Program provided hereunder shall consist
of the fees specified in EXHIBIT C of this Agreement. ESI represents and
warrants that such fees were calculated as of the Effective Date of this
Agreement in accordance with the requirements of Section 5.4.a. of the NYLCare
Agreement.
3.2 BILLING AND PAYMENT
ESI will bill Sponsor as follows:
(i) no more often than weekly, for all Covered Drugs sent to Members from
the Mail Service Pharmacy, less applicable Copayments and Deductibles;
(ii) no more often than weekly, for Covered Drugs dispensed to Members by
Participating Pharmacies and for Non-Participating Pharmacy Claims (less
applicable Copayments and Deductibles); and
(iii) bi-weekly or monthly, at ESI's option, for all other fees specified
in EXHIBIT C of this Agreement.
The billings shall be in the form of a readable computer printout or a
magnetic tape in a mutually agreed upon format or such other method mutually
agreed to by the parties. Sponsor shall pay ESI by wire transfer within one (1)
business day of Sponsor's receipt of an ESI bill, except for that portion of the
billed amount that is disputed in good faith. Sponsor will give ESI the
telephone number and name of the contact person for purposes of the wire
transfer. Any disputes regarding billed amounts must be handled in accordance
with the provisions of Section 7.9 hereof. Any amount not paid by the due date
thereof, including disputed amounts that are subsequently determined to be due,
shall bear interest at the prime rate until paid in full; provided that in the
case of amounts disputed in good faith in accordance with the procedures set
forth in Section 7.9 hereof, interest on disputed amounts which are ultimately
paid shall not accrue until the day after ESI disputes in writing Sponsor's
adjudication results as presented to ESI in the explanation of benefits.
3.3 LIMITATION ON COLLECTIONS
Except with respect to Deductibles and Copayments, which are solely the
responsibility of the Member, ESI shall look solely to Sponsor for compensation
for Covered Drugs and other services provided to Members pursuant to this
Agreement. In no event, including but not limited to nonpayment by Sponsor or
Sponsor's insolvency or breach of this Agreement, shall ESI bill, charge,
collect a deposit from, seek compensation, remuneration or reimbursement from,
or have any recourse against Members or persons acting on their behalf (other
than Sponsor) for services provided pursuant to the Agreement. ESI shall,
however, bill Members directly for all non-covered drugs and services, and
Deductibles and Copayments. ESI further agrees that (a) this provision shall
survive the termination of this Agreement regardless of the cause giving rise to
termination and shall be construed for the benefit of the Member, and (b) this
provision supersedes any oral or written agreement to the contrary now existing
or hereafter entered into between ESI and Members or any persons acting on their
behalf. Any modifications, additions or deletions to the provisions of this
section shall become effective on a date no earlier than thirty (30) days after
the Commissioner for Insurance for the jurisdiction in question has received
written notice of such proposed changes. ESI represents and warrants that ESI's
agreement with each Participating Pharmacy shall also contain limitations on
such provider substantially identical to those imposed on ESI as set forth in
this Section 3.3.
SECTION IV
INSURANCE: INDEMNIFICATION; COMPLIANCE WITH APPLICABLE LAW
4.1 INSURANCE
(a) ESI INSURANCE. ESI shall maintain, at its sole expense, such policies
of general liability, professional liability and other insurance of the types
and in amounts customarily carried by pharmacies of comparable size with respect
to their operations. Upon Sponsor's request, ESI shall provide certificates
evidencing such insurance coverage. Such coverage shall include, at a minimum,
comprehensive general and professional liability insurance coverage in an amount
of not less than ten million dollars ($10,000,000) per occurrence and as an
annual aggregate, including without limitation, pharmacist's professional
liability coverage for such claims for bodily injury as may arise from operation
of the Mail Service Pharmacy under this Agreement.
(b) SPONSOR INSURANCE. Sponsor shall maintain, at its sole expense, such
policies of general liability, professional liability and other insurance of the
types and in the amounts customarily carried by health maintenance
organizations. Upon ESI's request, Sponsor shall provide certificates evidencing
such insurance coverage.
(c) NOTICES OF CHANGES IN INSURANCE. Each policy obtained pursuant to
Section 4.1(a) and (b) hereof shall provide for at least thirty (30) days
advance written notice of cancellation or non-renewal to the insured. ESI and
Sponsor shall each notify the other in writing promptly if it receives such
notice or otherwise learns that its insurance coverage is to be terminated or
coverage is to be materially reduced but in any event, within the period
required by the applicable state law for such notice.
(d) PARTICIPATING PHARMACY AGREEMENTS. ESI's agreement with each
Participating Pharmacy shall require each such pharmacy to maintain
comprehensive general and professional liability insurance coverage in an amount
of not less than one million dollars ($1,000,000) per occurrence and as an
annual aggregate, or, when deemed acceptable by ESI, to have in place an
equivalent self-insurance program. ESI shall verify that the Participating
Pharmacies have the required insurance coverage during the process of
credentialling as described in Section 2.3(b) above.
(e) NO PARTICIPATING PHARMACY INSURANCE. It is understood and agreed that
nothing in this Agreement shall be interpreted to mean that ESI holds or is
required to hold liability insurance on behalf of any Participating Pharmacy.
4.2 INDEMNIFICATION
(a) DEFINITIONS. As used in this Section 4.2: (i) "Claims" means civil,
administrative and criminal actions, claims, suits and legal proceedings of any
kind, arising in connection with the performance of this Agreement by Sponsor
and ESI, that are brought against an Indemnitee by a third party unaffiliated
with such Indemnitee.
(ii) "Costs" means damages, settlements, judgments, losses, expenses,
interest, penalties, reasonable legal fees and disbursements (including without
limitation fees and costs for investigators, expert witnesses and other
litigation advisors) and other actual costs incurred by an Indemnitee to
investigate, defend or settle a Claim, except that no settlement payments shall
be included in Costs unless the Indemnitor has given prior, express written
consent to the settlement.
(iii) "Indemnitee" means a person or entity entitled to indemnification in
accordance with this Section 4.2.
(iv) "Indemnitor" means a person or entity who is required to indemnify an
Indemnitee in accordance with this Section 4.2.
(b) INDEMNIFICATION BY SPONSOR. Subject to and in accordance with Section
4.2(d) below, Sponsor shall indemnify and hold harmless ESI, its directors,
officers and employees (the "ESI Indemnitees") from and against Claims and Costs
resulting from the grossly negligent acts or omissions or intentional misconduct
of Sponsor, its directors, officers, employees or authorized agents in
connection with the performance of this Agreement; provided, however, that
Sponsor shall not be obligated to indemnify or hold harmless ESI Indemnitees to
the extent that such Claims or Costs arise from any grossly negligent acts or
omissions or intentional misconduct by ESI Indemnitees or persons or entities
acting on their behalf, including without limitation the acts or omissions by
Participating Pharmacies.
(c) INDEMNIFICATION BY ESI. Subject to and in accordance with Section
4.2(d) below, ESI shall indemnify and hold harmless Sponsor, its directors,
officers, employees and affiliates (the "Sponsor Indemnitees") from and against
Claims and Costs resulting from the grossly negligent acts or omissions or
intentional misconduct of ESI, its directors, officers, employees or authorized
agents in connection with the performance of this Agreement; provided, however,
that ESI shall not be obligated to indemnify or hold harmless Sponsor
Indemnitees to the extent that such Claims and Costs arise from (i) any grossly
negligent acts or omissions or intentional misconduct by Sponsor Indemnitees or
persons or entities (other than ESI) acting on their behalf, or (ii) the acts or
omissions of Participating Pharmacies or persons or entities (other than ESI)
acting on their behalf.
(d) OTHER CONDITIONS OF INDEMNIFICATION. After receiving written notice of
any Claim for which indemnification would be available under this Section 4.2,
the Indemnitee shall give written notice thereof to the Indemnitor, except that
the Indemnitee need not give such notice if the Indemnitor has otherwise
received written notice of the Claim. The Indemnitor may at any time, in its
sole discretion, assume the defense of the Claim by giving written notice to the
Indemnitee. Beginning at the point when the Indemnitor assumes the defense of
the Claim, all future Costs relating to the Claim shall be borne by the
Indemnitor, provided that the Indemnitee cooperates with the Indemnitor in the
defense of the Claim. If the Indemnitor elects to assume the defense of the
Claim, the Indemnitee shall be represented by legal counsel chosen by the
Indemnitor. This may be the same counsel representing the Indemnitor, unless the
parties cannot appropriately be represented by the same counsel due to actual or
potential conflict of interest, in which case the Indemnitor shall choose
separate counsel for the Indemnitee.
Except to the extent the Indemnitor elects to assume the defense of the
Claim as provided in this Section 4.2(d), the Indemnitee shall defend the Claim
at its own expense, subject to reimbursement by the Indemnitor in accordance
with this Section 4.2. The timing of such reimbursement shall be determined by
agreement of the parties; if they are unable after good faith negotiations to
agree, the issue shall be handled in accordance with Section 8.9 below.
Notwithstanding any other provision of this Section 4.2, no indemnification
shall be available hereunder (i) for any settlement to which the Indemnitor did
not give prior, express written consent, (ii) for any Claim of which Indemnitor
did not receive notice as provided in this Section 4.2(d) or (iii) if the
Indemnitee fails to cooperate with the Indemnitor in the defense of the Claim.
Nothing in this Section 4.2 shall change or diminish in any way the
statutory or common law rights of any Indemnitee to contribution from any
Indemnitor.
(e) SURVIVAL. With respect to Claims arising during the life of this
Agreement, this Section 4.2 shall survive termination (including expiration) of
the Agreement for a period of five (5) years following such termination,
provided that if the Indemnitee has given the Indemnitor written notice of a
potential Claim within such five (5) year period, the indemnification for such
Claim provided hereunder shall survive such termination.
4.3 COMPLIANCE WITH LAW
Sponsor and ESI each hereby acknowledge that it has sole and exclusive
responsibility for its obligations under all relevant federal, state and local
statutes, ordinances, rules and regulations, and common law obligations,
notwithstanding the existence of this Agreement. Sponsor and ESI shall each
perform their duties and exercise their rights in accordance with the standards
of the managed health care industry applicable to their operations. ESI
represents and warrants that, with respect to this Agreement, it shall comply
with the Maine Third-Party Prescription Program Act, Title 32 M.R.S.A. Secs.
13771-13777 (the "Act"), as it may be amended and in effect from time to time,
including without limitation, Sec. 13773 of the Act, requiring ESI to (i) file
written notice of the provisions of the Prescription Drug Program with the
Superintendent of Insurance and the Board of Commissioners of the Profession of
Pharmacy of the State of Maine, and (ii) furnish written notice of the
commencement of the Prescription Drug Program to all Non-Participating
Pharmacies located in those counties in Maine in which Sponsor is authorized by
law to serve Members at least thirty (30) days in advance of commencement. The
notice shall also advise such pharmacies that they have at least a thirty (30)
day period in which they may apply to ESI to become a Participating Pharmacy.
Sponsor and ESI shall each perform their duties and exercise their rights in
accordance with the standards of the managed health care industry applicable to
their operations.
SECTION V
TERM AND TERMINATION
5.1 TERM
The initial term of this Agreement shall begin on the Effective Date and
extend through and including December 31, 1999, and may be renewed for
additional one (1) year terms as provided herein. At least ninety (90) days
prior to the end of the initial term or any renewal term, should either Sponsor
or ESI desire not to continue this Agreement beyond the end of such term, such
party shall so notify the other party in writing. Should neither party so notify
the other, this Agreement shall continue with the same terms, covenants, and
conditions as are herein contained for an additional one (1) year term.
5.2 CURE PERIOD FOR ALLEGED BREACHES OR DEFAULTS
In the event either ESI or Sponsor materially breaches or defaults in
performance of any of its obligations under this Agreement (other than payment
obligations) and good faith efforts to cure such breach or default have not
begun within thirty (30) days after the breaching or defaulting party receives
written notice thereof, or if good faith efforts to cure have begun within such
thirty (30) day period but such cure is not complete within sixty (60) days
after receipt of such notice if such breach or default could reasonably be cured
within such period, the other party shall have the right by further written
notice to pursue the dispute resolutions procedures set forth in Article 7.9
hereof.
5.3 EFFECT OF TERMINATION
Notwithstanding termination (including expiration) pursuant to Section 5.2
hereof, the rights and obligations of the parties arising as a result of
services provided prior to such termination shall remain in full force and
effect for a period of one (1) year following termination, provided that the
parties' rights to indemnification under Section 4.2 shall survive as set forth
in Section 4.2 hereof. ESI shall complete the processing of prescriptions and
claims received by it or by a Participating Pharmacy prior to the effective date
of termination of the Agreement.
SECTION VI
MEDICAL DATA
6.1 TYPES OF DATA
(a) To permit ESI or an authorized agent of ESI to conduct outcome studies
and analyses related to prescription drugs and facilitate ESI's management of
the pharmacy benefit for NYLCare and Sponsor, Sponsor shall provide to ESI the
following data in the possession of Sponsor, and such other data as ESI may
reasonably request regarding a subset of Members that is in the possession of
Sponsor (all such data, collectively, the "Medical Data"), in accordance with
the terms hereof:
(a) Hospital inpatient encounters and/or claims data
(b) Emergency room encounters and/or claims data
(c) Hospital outpatient encounters and/or claims data
(d) Physician office visits encounters and/or claims
(e) Ancillary services encounters and/or claims
At ESI's request, Sponsor shall provide ESI with Medical Data for such Members
which shall go back no less than three (3) years from the date of ESI's request,
provided that if Sponsor must retrieve it from archives, ESI will reimburse
Sponsor's reasonable actual costs of retrieval.
Sponsor agrees that, upon ESI's reasonable request, it will assist ESI in
requesting access to physician and hospital medical records with respect to
Members for such studies and analyses.
(b) Although Medical Data will be provided by individual Member, the
confidentiality of each Member's Medical Data will be protected in accordance
with the provisions of Section 2.10(b) and 6.3 hereof.
6.2 PROVISION OF DATA
Sponsor will provide ESI with the Medical Data within sixty (60) days of
ESI's written request for such data, which request shall identify the data
requested with reasonable specificity. Sponsor shall also provide to ESI, upon
request, updates of any Medical Data previously provided to ESI within sixty
(60) days of receipt of a written request. If the Medical Data are not provided
to ESI within such sixty (60) day period (for a reason other than ESI's breach
of this Article VI), the pricing for the Prescription Drug Program, as set forth
on EXHIBIT C, shall be adjusted retroactive to the date the Medical Data should
have been provided to ESI in accordance with this Section 6.2. Claims and
encounter data shall be provided to ESI on electronic tape or such other format
mutually acceptable to ESI, NYLCare and Sponsor.
6.3 USE OF DATA
ESI will not sell or provide the Medical Data to any third parties,
including any third party which owns an interest in (i) ESI or (ii) in an
affiliate (as defined below) of ESI, without the prior written consent of
NYLCare on behalf of Sponsor.
In addition, notwithstanding any other provision of this Agreement, ESI
agrees that no Medical Data will be provided to any affiliate of ESI (which is
defined, for purposes of this section as a person, entity, or enterprise that
controls ESI, is controlled by ESI, or is under common control with ESI) if such
an affiliate is partially owned by a health maintenance organization, or by a
managed care organization that is, or ESI knows intends to be, a competitor of
Sponsor in the Metropolitan Area in which Sponsor is located, unless such
affiliate builds a "Chinese Wall" between the affiliate and such health
maintenance organization or managed care organization which prevents the
transmission of Medical data from the affiliate to such health maintenance
organization or managed care organization which is acceptable to and approved by
the Board of Directors of ESI. However, if ESI is no longer controlled, directly
or indirectly, by New York Life Insurance Company, ESI shall have no right
whatsoever to assign or otherwise provide any Medical Data to any affiliate of
ESI if such an affiliate is partially owned by a health maintenance
organization, or by a managed care organization that is or ESI knows it intends
to be a competitor of Sponsor in the Metropolitan Area in which Sponsor is
located.
ARTICLE VII
MISCELLANEOUS
7.1 NOTICE
Any notice which may or must be given under the terms of this Agreement
must be in writing and shall be deemed effective upon receipt. Such notice must
be (i) sent certified or registered mail, return receipt requested, postage
prepaid, or (ii) sent by recognized overnight delivery service, in any case and
properly addressed to ESI or Sponsor at the address set forth below, or at such
other address as either party shall designate by like notice to the other party.
To Sponsor at:
NYLCare Health Plans of Maine, Inc.
One Monument Square, 5th Floor
Portland, Maine 04101
Attn: President
and to ESI at:
Express Scripts, Inc.
14000 Riverport Drive
St. Louis, Missouri 63043
Attn: President
Any notice given in the manner specified herein shall be deemed received on the
date evidenced on the return receipt card or, in the case of overnight delivery
service, other proof of delivery.
7.2. INDEPENDENT PARTIES
No provision of this Agreement is intended to create or shall be construed
to create any relationship between ESI and Sponsor other than that of
independent entities contracting with each other solely for the purpose of
effecting the provisions of this Agreement. Neither party, nor any of their
respective representatives, shall be construed to be the partner, agent,
employee, or representative of the other and neither party shall have the right
to make any representations concerning the duties, obligations or services of
the other except as consistent with the express terms of this Agreement or as
otherwise authorized in writing by the party about which such representation is
made.
7.3 SUCCESSORS AND ASSIGNMENTS
The words ESI and Sponsor as used herein include, apply to, bind and
benefit the successors and permitted assigns of ESI and Sponsor. Neither party
may assign this Agreement or any of its rights or obligations hereunder without
the express written consent of the other party (which consent may not be
unreasonably withheld, qualified or delayed), except that either party may
without the other party's consent, assign this Agreement or any of its rights or
obligations hereunder to a corporate affiliate of such party; provided, however,
that (i) the affiliated assignee or delegatee shall agree, in writing, to be
bound by the provisions set forth in Section 7.9 hereof regarding dispute
resolution, (ii) no such assignment or delegation shall relieve the party so
assigning its rights or delegating its obligations hereunder from its
obligations under this Agreement without the written consent of the other party
to this Agreement and (iii) if ESI assigns any rights with respect to Medical
Data, the affiliated assignee shall agree, in writing, to be bound by the
provisions of Section VI hereof.
7.4 AMENDMENTS
No modification, alteration, or waiver of any term, covenant, or condition
of this Agreement shall be valid unless in writing and signed by both parties or
the agents of the parties who are authorized in writing.
7.5 CHOICE OF LAW
In so far as this Agreement affects the rights of Members located within
the State of Maine, the internal laws of the State of Maine shall apply, but as
to all other matters, including the relationship between ESI and Sponsor, this
Agreement shall be construed and governed according to the internal laws of the
State of Missouri.
7.6 WAIVER
No waiver of a breach of any covenant or condition shall be construed to be
a waiver of any subsequent breach. No act, delay or omission done, suffered, or
permitted by the parties shall be deemed to exhaust or impair any right, remedy
or power of such party hereunder.
7.7 VALIDITY
Should for any reason any clause or provision of this Agreement (other than
Section III) be held or ruled unenforceable or ineffective under the law, such a
ruling shall in no way affect the validity or enforceability of any other clause
or provision of this Agreement.
7.8 THIRD PARTY BENEFICIARY EXCLUSION
Except as set forth in Section 3.3 hereof, this Agreement is not a third
party beneficiary contract and shall not, in any manner whatsoever, increase the
rights of any Member or any other person with respect to Sponsor or ESI or the
duties of Sponsor or ESI to any Member or any other person or create any rights
on behalf of any Member or any other person with respect to ESI or Sponsor.
Sponsor and ESI reserve the right to amend or terminate this Agreement without
notice to, or consent of, any Member or any other person.
7.9 MEDIATION; ARBITRATION
(a) MEDIATION
If a dispute between Sponsor and ESI occurs that arises under or relates to
the Agreement or any agreement between ESI and NYLCare, the aggrieved party
shall notify the other in writing, specifying in detail the nature of the
dispute and proposing a resolution thereof. Within fifteen (15) calendar days of
the receipt of such notice, each party shall designate no more than two (2)
representatives who shall meet to mediate the dispute. At least one (1) of the
Sponsor representatives shall be an employee of NYLCare. To ensure uniform
interpretation of contract terms at all Sites, NYLCare shall resolve all issues
of contract interpretation and construction on behalf of all Sites, and any such
interpretation shall be binding on all Sites except to the extent that
materially differing factual circumstances may reasonably render such
interpretation inapplicable to a subsequent dispute. If the representatives of
the party receiving the notice shall fail to meet with the representatives of
the party sending the notice within the fifteen (15) day period, or if the
representatives meet but the dispute is not resolved within thirty (30) days of
the receipt of the notice of dispute, then the aggrieved party may initiate
binding arbitration pursuant to Section 7.9(b) hereof.
(b) ARBITRATION
If any dispute is not resolved by mediation pursuant to the preceding
subparagraph a., such dispute shall be resolved by means of binding arbitration
pursuant to the rules of the American Arbitration Association as then in effect,
using a panel of three arbitrators (ESI and NYLCare each to select one
arbitrator and the two arbitrators so selected to jointly choose the third).
7.10 SOLICITATION OF MEMBERS
In the event that ESI desires to conduct outcomes-related surveys of
Members for the benefit of NYLCare or the Sites, ESI shall
(i) protect Member confidentiality in accordance with the
provisions of Section 2.10(b); and
(ii) obtain the prior written consent of NYLCare to any such
survey, which consent shall not be unreasonably withheld,
qualified or delayed, provided that ESI shall submit its
proposed survey to NYLCare and NYLCare shall raise any and all
issues with respect to such survey as submitted, and grant or
deny its consent, within thirty (30) days of the date NYLCare
receives such survey, and shall respond to each subsequent
request for consent to a revision of such survey within
fifteen (15) days of the date it receives such revision. If
ESI revises such survey to include one or more new subjects,
that shall be determined to be a new survey.
7.11 EFFECT OF AGREEMENT.
This Agreement supersedes in its entirety any and all written or oral
agreements between the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the undersigned have executed this Managed Prescription
Drug Program Agreement to be effective as of the day and year first above
written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION
PROVISION THAT MAY BE ENFORCED BY THE PARTIES.
EXPRESS SCRIPTS, INC. NYLCARE HEALTH PLANS OF
MAINE, INC.
By: /S/ STUART L. BASCOMB By: /S/ MITCHELL TAKS
Name: STUART L. BASCOMB Name: /S/ MITCHELL TAKS
Title: EXECUTIVE VICE PRESIDENT Title: TREASURER/CONTROLLER
<PAGE>
EXHIBIT A
COVERED AND EXCLUDED DRUGS
A. Covered Drugs:
See applicable Rider or similar description of outpatient prescription drug
benefit.
B. Excluded Drugs:
See applicable Rider or similar description of outpatient prescription drug
benefit.
<PAGE>
EXHIBIT B
COPAYMENTS AND DEDUCTIBLES
1. Copayments per prescription:
PARTICIPATING PHARMACIES COPAYMENT:
Brand Drugs $______ *
Generic Drugs $______ *
MAIL SERVICE PHARMACY COPAYMENT:
Brand Drugs $______ *
Generic Drugs $______ *
MEMBER SUBMITTED CLAIM COPAYMENT
Brand Drugs $______ *
Generic Drugs $______ *
ESI's agreements with Participating Pharmacies shall require that where the
amount of the Copayment exceeds the Participating Pharmacy's usual and customary
retail price of the Covered Drug at the time the prescription is filled, such
pharmacy shall charge such retail price as full compensation for filling that
prescription.
2. Annual Deductibles
For Member's Deductibles, see applicable Rider or similar description of
outpatient prescription drug benefit.
- -----------------------------
* See applicable Rider.
<PAGE>
EXHIBIT C
EXPRESS SCRIPTS PRESCRIPTION DRUG PROGRAM FEES
I. Prescription Drugs dispensed by Participating Pharmacies in ESI's
PERxSelectSM Network:
A. INGREDIENT COST AND DISPENSING FEE
The lower of:
(1) [*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS
DOCUMENT AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT*] plus applicable sales or
excise tax or other governmental surcharge, if any;
or
(2) [*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS
DOCUMENT AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT*] plus applicable sales or
excise tax or other governmental surcharge, if any.
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS
DOCUMENT AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT*] plus applicable sales or
excise tax or other governmental surcharge, if any.
B. CLAIMS ADMINISTRATION FEE
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS
DOCUMENT AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT*]
II. Prescription Drugs filled at ESI's Mail Service Pharmacy:
A. INGREDIENT COST
Brand Drugs: [*CONFIDENTIAL TERMS HAVE BEEN
OMITTED FROM THIS DOCUMENT AND FILED
SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT*]
plus applicable sales or excise tax or
other governmental surcharge, if any.
Generic Drugs: [*CONFIDENTIAL TERMS HAVE BEEN
OMITTED FROM THIS DOCUMENT AND FILED
SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT*]
plus applicable sales or excise tax or
other governmental surcharge, if any.
B. DISPENSING FEE
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT*]
C. CLAIMS ADMINISTRATION FEE
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT*]
III. Member Submitted Claims:
A. PRESCRIPTION COST:
Actual amount paid by Member for the Covered Drug less
the applicable Copayment, and/or Deductible
B. CLAIMS ADMINISTRATION FEE:
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT*]
IV. Implementation fees:
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT*] for implementation of the ESI
program if Sponsor provides ESI with initial Member eligibility on
electronic medium in ESI's format. If ESI must create a Member
eligibility file by manually entering the data, there will be a
[*CONFIDENTIAL TERMS HAVE BEEN OMITTED FROM THIS DOCUMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT*] implementation fee.
<PAGE>
EXHIBIT D
DRUG UTILIZATION REVIEW (DUR) REPORTS
1. PCP Analysis
2. Prescriber Analysis
3. Drug Ranking - Number of Scripts by Therapy Class
4. Drug Ranking - Amount Paid by Therapy Class
5. Drug Ranking Report on YTD Claim Amount
Includes Alphabetical Drug List
6. Top 40 Prescribers for a Specific Drug
7. Pharmacy Dispensing Report
8. High Utilization Member Activity Report
9. Controlled Substance - High Utilization Member Activity Report
10. Network to Mail Order Movement
11. Member Ranking Report
12. Group and Rider Stratification Report
13. Group Claim Activity Report
14. Rider Recap by Group
15. Rider Recap by Site
16. Summary of Prescription Drug Utilization
17. Summary of Drug Utilization by Therapy Class
18. Controlled Substance Prescribing Physician Analysis Report
Ranked by # of Rxs
19. Top __ Drugs by Generic Class Name - Based on Ingredient Cost
20. Top __ Drugs by Generic Class Name - Based on # of Rxs
21. Pharmacy DUR Performance Report
