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APPROVED ?.,
1 EXPRESS' SCRIPTS, INC. FORM
PHARMACY BENEFIT MANAGEMENT AGREEMENT
THIS PHARMACY BENEFIT MANAGEMENT AGREEMENT ("Agreement".) shall be effective as
of the date set forth in Section 7.1 and is entered into by and between EXPRESS SCRIPTS, INC., a
Delaware corporation ("ESI"), and City of Carmel, Indiana, ("Sponsor"), by and through its Board of Public
Works and Safety, organized under the laws of the State of Indiana ("Sponsor') for the purpose of setting
forth the terms on which ESI will provide pharmacy benefit management services to Sponsor. The parties
agree as follows:
ARTICLE I - DEFINITIONS
"BACR" means a benefit add/change form utilized by ESI to document Sponsor changes to the benefit
design incorporated in the EBD.
"Copayment" means that portion of the charge for each Covered. Drug dispensed to the Member that is
the responsibility of the Member (e.g., copayment, coinsurance and/or deductible) as indicated on the
EBD.
"Covered Drug(s)" means those prescription drugs, supplies, Specialty Products (if applicable), and other
items that are covered under the Plan; each as indicated on the EBD.
"EBD" means a prescription drug benefit summary form which, when completed and approved by
Sponsor, will describe the essential features adopted by Sponsor for the prescription drug components of
its Plan(s). Changes to the EBD shall be made on BACR forms.
"Eligibility Files" means the list submitted by Sponsor to ESI in reasonably acceptable on-line, FTP, or
electronic format indicating persons eligible for drug benefit coverage services under the Plan. Updates
performed manually by ESI on behalf of Sponsor shall be subject to additional charge as set forth in
Exhibit A.
"ESI Specialty Pharmacy" means CuraScript Pharmacy, Inc. or another pharmacy wholly-owned or
operated by ESI or its wholly-owned subsidiaries that primarily dispenses Specialty Products. For
purposes of this Agreement, the ESI Specialty Pharmacy is not considered a Mail Service Pharmacy.
"Formulary" means the list of FDA-approved prescription drugs and supplies developed by EST's
Pharmacy and Therapeutics Committee and/or customized by Sponsor,.which is selected and adopted by
Sponsor.
"HIPAA" shall mean the Health Insurance Portability and Accountability Act of 1996, as amended.
"ID Card" means ESI's standard single.purpose (NCPDP format) printed identification card containing the
applicable ESI logo or other mutually acceptable method of identifying ESI as the provider of pharmacy
.benefit services.
"Implementation SOW" means a form completed and signed by Sponsor prior to implementation that
contains.the material elements of Sponsor's eligibility set-up, including processing fields, indemnity and
termination rules, file layout and alternative ID numbers, etc.
"Mail Service Pharmacy" means a duly licensed pharmacy operated by ESI or its subsidiaries, other than
ESI Specialty Pharmacy, where prescriptions are filled and delivered to Members via USPS or other mail
delivery service ("Home Delivery").
"Manufacturer Administrative Fees" means those administrative fees paid by pharmaceutical
manufacturers to, or otherwise.retained'by, ESI pursuant to a contract between ESI and the manufacturer
and directly in connection with EST's administering, invoicing, allocating and collecting the Rebates under
the Rebate program.
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"Member" means each person who is eligible, as determined solely by Sponsor, to receive prescription
drug benefits as indicated in the Eligibility Files.
"Member Submitted Claim" means (a) a paper claim submitted by a Member for Covered Drugs
dispensed by a pharmacy other than a Participating Pharmacy; (b) a paper claim submitted by a Member
for Covered Drugs for which the Member paid cash; or (c) subrogation claims submitted by the United
States or any state under Medicaid or similar government health care programs.
"Participating Pharmacy" means any licensed retail pharmacy with which ESI has executed an.agreement
to provide Covered Drugs to Members.
"Pharmacy" or "Pharmacies" refers from time to time to any or all of Participating Pharmacies, Mail
Service Pharmacy, or ESI Specialty Pharmacy, as the context of the provision dictates.
"Plan" means Sponsor's welfare benefit plan(s) that contains a prescription drug benefit.
"Prescription Drug Claim" means a Member Submitted Claim or claim for payment submitted to ESI by a
Pharmacy as a.result of dispensing Covered Drugs to a Member.
"Protected Health Information" or "PHI" shall have the meaning ascribed to it under HIPAA.
"Rebates" means retrospective rebates that are paid to ESI, or otherwise retained by ESI, pursuant to the
terms of a rebate contract negotiated independently by ESI with a pharmaceutical manufacturer, and
directly attributable to the utilization of certain pharmaceuticals by Members. Rebates do not include
administrative fees paid by pharmaceutical manufacturers to ESI, or product discounts or similar
remuneration received by subsidiary pharmacies of ESI.
"Specialty Products" means those biotech or injectable prescription drug products requiring special
handling and Member services, including, but not limited to, those Specialty Products listed in the
Specialty Product section of Exhibit A-3 (as that list is periodically modified in accordance with Exhibit A-3
from time to time).
"UM Company" means an independent, third party utilization management company with which ESI
contracts to provide appeal services at Sponsor's option, as further described in Section 3.2(d).
ARTICLE II - ESTABLISHMENT OF THE PRESCRIPTION DRUG PROGRAM
2.1 Exclusivity. Sponsor shall use ESI as the exclusive provider of pharmacy benefit management
services for all of its self-funded welfare benefit Plans offering a prescription benefit, including, but not
limited to, pharmacy network management, claims processing, Home Delivery Pharmacy, Specialty
Products, Formulary development and Rebate management. Pharmacy reimbursement rates,
administrative fees and Rebates are conditioned on ESI's exclusive status hereunder.
2.2 Eligibility/Set U
(a) ESI shall implement the Eligibility Files and Sponsor's set up in accordance with the
Implementation SOW. Any changes to the Implementation SOW must be documented on ESI's form of
amendment to Implementation SOW and signed by Sponsor prior to the effective date of these changes.
ESI shall provide Sponsor, via on-line or other agreed upon medium, load summary reports detailing
Eligibility File Statistics after each eligibility load. Sponsor shall be responsible for validating eligibility
loads and correcting rejected, erred and termed by absence Member records. Clean changes only files
shall be loaded within an average of two (2) business days. The timing of loading full Eligibility Files will
be determined upon consultation with Sponsor. Sponsor shall provide full Eligibility Files for term by
absence reconciliation and authorize ESI to apply the terminations or otherwise agree to provide
termination dates for all ineligible Members. ESI shall not be responsible for Prescription Drug Claims for
retroactively termed Members. Sponsor shall be responsible for all Prescription Drug Claims during the
period of the Member's eligibility as indicated on the Eligibility File, except in the event of ESI's
negligence.
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(b) Prior to the provision of any services under this Agreement, Sponsor will submit a
completed EBD certifying that the EBD accurately depicts the pharmacy benefit provisions of the Plan.
Sponsor is solely responsible for timely communication of the terms of and changes to the Plan to its
Members prior to the effective date of such provisions. Sponsor shall notify ESI in the event of change to
benefit design features of the Plan after initial setup, including but not limited to changes in Copayments,
Covered Drugs, or prior authorization requirements in writing, via BACR forms made available by ESI.
ARTICLE III - PBM SERVICES
3.1 Pharmacv Services
(a) Participating Pharmacies. ESI shall maintain a network of Participating Pharmacies to
serve Members. ESI will make available an updated list of Participating Pharmacies in such network(s)
on-line. Each Participating Pharmacy is required to verify the Member's eligibility through EST's on-line
claims processing system. ESI shall direct Participating Pharmacies to charge and collect the applicable
Copayment from Members for each Covered Drug dispensed; provided, a Member's Copayment charged
for a. Covered Drug shall be the lesser of the applicable Copayment or the U&C.
(i) Requirements for Participation. ESI shall require each Participating Pharmacy to
meet ESI's participation requirements, including but not limited to licensure, insurance and
provider agreement requirements. ESI does not direct or exercise any control over the
professional judgment exercised by any pharmacist in dispensing prescriptions or otherwise
providing pharmaceutical related services at a Participating Pharmacy. Participating Pharmacies
are independent contractors of ESI, and ESI shall have no liability to Sponsor, any Member or
any other person or entity for any act or omission of any Participating Pharmacy or its agents or
employees.
(ii) Audits of Participating Pharmacies. ESI shall audit Participating Pharmacies to
determine compliance with their provider agreements with ESI. The audit may be conducted by
ESI's internal auditors or its outside auditors, and at the pharmacy or at ESI by a review of
electronically transmitted claims in accordance with ESI pharmacy audit protocols. ESI shall
attempt recovery of identified overpayments through offset, demand or other reasonable means.
To compensate ESI for the cost of conducting such audits, ESI shall retain an audit fee in the
amount set forth in Exhibit A from any recovered overpayment- attributable to a Plan detected in
the audit. Anybalance of recovered overpayments will be paid to Sponsor.
(iii) Network Maintenance. ESI maintains multiple networks, and periodically
consolidates networks, or migrates clients to other networks, in order to capitalize on certain
operational efficiencies and other benefits associated with a streamlined network offering.
Existing networks may fluctuate from time to time. Sponsor acknowledges and consents to the
same, provided that Member access is not materially disrupted as a result of such fluctuations,
consolidations or transitions. If Sponsor elects to implement an Exclusive Home Delivery (aka
mandatory mail] plan design, certain Participating Pharmacies may elect not to participate in the
network serving Sponsor. ESI will notify Sponsor of any changes that would materially adversely
affect Member access to Participating Pharmacies and work with Sponsor in good faith to
mitigate any such affects.
(b) Home Delivery Service. Members may have prescriptions filled through the Mail Service
Pharmacy. Subject to applicable law, ESI may communicate with Members regarding benefit design, cost
savings, availability, and use of Home Delivery, as well as provide supporting services. If the prescription
and applicable law do not prohibit substitution of a generic drug equivalent, to the prescribed drug, or if
the Mail Service Pharmacy obtains the consent of the prescriber, the Mail Service Pharmacy shall
dispense the generic drug substitute to the Member. The Mail Service Pharmacy shall charge and collect
from Members the applicable Copayments and/or Deductibles prior to the Covered Drug being
dispensed.
(c) Specialty Products. Members may have Specialty Products filled through ESI Specialty
Pharmacy and/or Participating Pharmacies as described on Exhibit A-3.
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(d) Pharmacy Help Desk. ESI will provide 24-hours a day, 7-days a week toll-free telephone
support and Internet site to assist Pharmacies with Member eligibility verification and questions regarding
reimbursement, Covered Drug benefits under the Plan or other related concerns.
3.2 Claims Processing.
(a) On-Line Claims Processing. ESI will perform claims processing services for Covered
Drugs dispensed by a Pharmacy. Such services include (i) verifying eligibility; (ii) performing DUR; (iii)
calculating benefits in accordance with the EBD; (iv) enabling Pharmacies and physicians to verify
eligibility, Formulary, utilization history and benefit design; and (v) adjudicating the claims. Sponsor or its
third party designee (as applicable) shall have the final responsibility for all decisions with respect to
coverage of a Prescription Drug Claim and the benefits allowable under the Plan, including determining
whether any rejected or disputed claim shall be allowed.
(b) Member Submitted Claims. If provided on the EBD, ESI shall process Member Submitted
Claims. The Member (or Medicaid agency, as the case may be) shall be responsible for submitting such
claims directly to ESI on a form provided by ESI within the time period set forth on the EBD. ESI shall
reimburse such Member or agency on behalf of Sponsor, the lesser of the amount invoiced or the amount
ESI would have reimbursed the applicable Member for such.claim in accordance with the applicable EBD.
(c) Prior Authorization. For the fees set forth on' Exhibit A-2 (if applicable), ESI shall provide
prior authorization ("PA") services as specified and directed by Sponsor for drugs designated on the EBD.
Prior authorized drugs must meet Sponsor-approved guidelines ("Guidelines") before they are deemed to
be Covered Drugs. Sponsor authorizes coverage for an otherwise excluded use in the event of co-
morbidities, complications and other factors not otherwise expressly set forth in the Guidelines, unless
Sponsor directs that Sponsor be provided such issue for determination. Sponsor acknowledges that PA
programs are based on objective criteria and the limited amount of patient information available to'ESI. In
determining whether to authorize coverage of such drug under the PA Program, ESI shall apply only the
Guidelines and may rely entirely upon information about the Member and the diagnosis of the Member's
condition provided to it from sources reasonably deemed reliable to ESI. ESI shall not undertake, and is
not required hereunder; to determine medical necessity to make diagnoses or substitute ESI's judgment
for the professional judgment and responsibility of the physician.
(d) Drug Utilization Review (DUR). ESI shall"perform a standard concurrent OUR analysis of
each prescription submitted for processing on-line by a Pharmacy in order to assist the dispensing
pharmacist and prescribing physician in identifying potential drug interactions, incorrect prescriptions or
dosages, and certain other circumstances that may be indicative of inappropriate prescription drug usage.
ESI's OUR processes are not intended to substitute for the professional judgment of the prescriber, the
dispensing pharmacist or any other health care professional providing services to the Member. ESI will
not be liable for any damages arising from the use, or lack of use of the OUR process by Pharmacies or
physicians, except that ESI shall be responsible for proper maintenance and updates of the OUR system
and processes. Nothing in this Section shall operate to relieve ESI of the customary professional
obligations of the dispensing pharmacists at its Mail Service Pharmacy or CuraScript.
(e) Call Center. ESI will provide 24-hours a day, 7-days a week toll-free telephone, IVR and
Internet support to assist Sponsor, Sponsor's agents and Members with Member eligibility and benefits
verification, location of Pharmacies or other related Member concerns:
3.3 Formulary Support and Rebate Management.
(a) Clinical Programs. Subject to applicable law and the terms of the Business Associate
Agreement between the parties, ESI may inform Pharmacies, Members and physicians regarding
therapeutic substitution opportunities for both preferred brand and generic drugs. In addition, upon
written election of Sponsor, ESI may provide clinical programs identified on Exhibit A-2, or such other
programs as ESI may introduce from time to time, some of which may require payment of additional fees.
ESI is expressly permitted to contact Members, Members' physicians, Sponsor case managers and
Pharmacies to perform the services provided by ESI hereunder.
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(b) Rebate Program. ESI will pay to Sponsor the amounts set forth on Exhibit B
3.4 Program Operations. Subject to the terms of the Business Associate Agreement:
(a) Program Reporting. ESI shall make available to Sponsor ESI's on-line standard
management information reporting applications. At the written request of Sponsor, ESI (or its wholly-
owned subsidiaries) may develop special reporting packages at ESI's standard hourly rate for such
services, as set forth in Exhibit A-2.
(b) Claims Data Feeds. Upon Sponsors written request, ESI shall provide regular
prescription claims data in ESI's standard 'format(s) for no additional charge to Sponsors Vendors
("Vendors") for disease management, flexible. savings account-and other "payment," "treatment" and
"healthcare operations" purposes (as defined under HIPAA). ESI maintains claims data in a data
warehouse for up to twenty-seven (27) months from the date the prescription is filled. Written requests by
Sponsor for retrieval of data beyond twenty-seven (27) months is subject to the hourly charge as set forth
in Exhibit A-2. ESI disclaims any liability or responsibility related to the Sponsor-directed disclosure to,
and use of such claims data by, any such vendor.
(c) De-Identified Claims Data. Sponsor grants ESI permission to use both during and after
the term of this Agreement and/or transfer to third parties the anonymized PHI (de-identified in
accordance with HIPAA) drug and related medical data collected by ESI or provided to ESI by Sponsor
for research, provider profiling and other databases for benchmarking, drug trend, cost analyses, cost
comparisons or other business purposes of ESI. ESI shall retain full ownership rights over all
compilations, analyses and reports prepared by ESI other than those reports prepared specifically for
Sponsor under this Agreement. Other than as necessary for Rebate filing, ESI does not transfer any
claims data to pharmaceutical manufacturers.
(d) Claims Data Retention. ESI will maintain Sponsor's claims data supporting invoices for
Covered Drugs adjudicated by ESI during the term of this Agreement for a period of twenty-four (24)
months in their original forms, and thereafter on microfilm, microfiche or other form determined by ESI for
an additional five (5) years. ESI shall use reasonable efforts to cooperate with Sponsor for purposes of
meeting Sponsor's, retention obligations under applicable law; provided that after expiration of the
retention period; ESI shall dispose of such data in accordance with its standard policies and practices and
applicable state and federal law.
(e) Sponsor Audits. Provided that this Agreement has been duly executed by'Sponsor and
Sponsor's account does not reflect a delinquent balance at the commencement of or during an audit;
Sponsor may audit the prescription management services provided under this Agreement consistent with
the Audit Protocol set forth in Exhibit C once per twelve (12) month period. Sponsor shall bear its own
costs associated with any audit. Except as otherwise provided in Exhibit C, audit materials and
documentation provided by ESI will be limited to Sponsor-specific information. Contractual information
(e.g., reimbursement rates, fees and acquisition costs) concerning Pharmacies and other providers of
products and services, which is proprietary and confidential to ESI, will not be disclosed to Sponsor or
Auditor except as necessary to verify Participating Pharmacy reimbursement rates under pass-through
pricing arrangements, if applicable. Sponsor may use an independent auditor ("Auditor'), so long as such
auditor does not have a material and ongoing conflict of interest with ESI, (e.g., Auditor serves as expert
witness in litigation against ESI). If Sponsor selects an Auditor that also has been appointed by ESI's
shareholders to conduct the independent audit of ESI, then such firm must provide to ESI a letter stating
that such engagement performed on behalf of Sponsor shall in no way infringe upon said firm's
independence with respect to ESI's audit. Such letter must be signed by the audit firm and approved by
the engagement audit partner performing the ESI audit. Auditors must execute a mutually acceptable
standard confidentiality agreement with ESI prior to commencement of the audit. Any requests by
Sponsor to permit an Auditor to perform an audit shall constitute Sponsor's direction and authorization to
ESI to disclose PHI to the Auditor.
3.5 Liability Insurance. Each party shall maintain such policies of general liability, professional
liability and other insurance of the types and in amounts customarily carried by their respective
businesses. Proof of such insurance shall be available upon request. ES1 agrees, at its sole expense, to
maintain during the term of this Agreement or any renewal hereof, commercial general liability insurance,
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pharmacists professional liability insurance and managed care liability with limits, excess of a self-insured
retention; in amounts of not less than $2,500,000 per occurrence, and in the aggregate. ESI does not
maintain liability insurance on behalf of any Participating Pharmacy, but does contractually require such
pharmacies to maintain a minimum amount of commercial liability insurance or, when deemed acceptable
by ESI, to have in place a self-insurance program.
ARTICLE IV - FEES; BILLING AND PAYMENT
4.1 Financial Terms. The rates.and financial terms set forth in Exhibits A and B are conditioned on
ESI's exclusive-arrangement for PBM services and any specified conditions expressly incorporated in
such exhibits, as well as the adoption by Sponsor of the specified network, copayment structure and
Formulary. To the extent of one or more of the following: (a) there is a material change in any
assumptions or conditions stated herein, (o) Sponsor changes its Formulary, benefit designs, implements
clinical programs or otherwise takes an action that has the effect of lowering the amount of Rebates
earned by Sponsor (whether between the date of the Cost Proposal and the Effective Date, or during the
Term), (c) Sponsor elects to use of on-site clinics or pharmacies to dispense prescription drugs to
Members which materially reduces Rebates and/or the number of Covered Drug claims submitted on-line;
or (d) Rebate revenue is materially decreased because of brand products moving off-patent to generic
status, ESI shall have the right to make an equitable adjustment to the rates, administrative fees and/or
Rebates, as appropriate, as of the effective date of such event upon prior written notice to Sponsor.
4.2 Billing and Payment.
(a) Billing. ESI will bill Sponsor weekly for all applicable claims reimbursements and fees
and other amounts due hereunder as specified herein and the attached Exhibits (collectively "Fees").
(b) Payment. Sponsor agrees to pay ESI by wire, ACH transfer or pre-authorized debit
within two (2) days from the date of Sponsor's receipt of the ESI invoice. Sponsor shall be responsible for
all costs of collection, and agrees to reimburse ESI for such costs and expenses, including reasonable
attorneys' fees. Any amounts not paid by the due date thereof shall bear interest at, the highest interest
rate permitted by Indiana law. In addition to any rights under Section 7.2, ESI may.apply Rebates
otherwise owed to Sponsor against any unpaid Fees. If Sponsor disputes any item on an invoice,
Sponsor shall state the amount in dispute in writing within thirty (30) days of the date of the invoice.
Sponsor shall pay the full amount invoiced and shall notify ESI of the disputed amount. Sponsor and ESI
agree to negotiate and make good faith efforts to expeditiously resolve any disputes regarding Fees.
(c) Deposit. In the event the (i) Sponsor is delinquent in payment of Fees for two (2)
consecutive billing cycles, or (ii) ESI has reasonable grounds for insecuriy as to the ability of Sponsor to
meet its financial commitments because of Sponsor's published financial data, or state or federal
regulatory agency statements, findings or notice; then ESI shall have the sole option to require that the
Sponsor provide to ESI a deposit in an amount equal to the average of the last three (3) months of billing
history or, if three (3) months billing history is not available, the most recent month of billing history will be
the basis. ESI shall retain the deposit until the earlier of (y) termination of this.Agreement (following any
run-off period), or (z) six (6) consecutive months of timely payments of all-Fees following submission of
the deposit, and may apply the deposit to unpaid balances of Fees until return of the deposit.
(d) Payment by Member for Mail and Specialty Pharmacy Services. Members shall pay their
applicable Copayments to ESI prior to the'dispensing of a prescription through the Mail Service Pharmacy
and ESI Specialty Pharmacy. ESI may suspend Mail ServicePharmacy and/or ESI Specialty Pharmacy
services to a Member who is in default of payment of any Copayments owed the applicable pharmacy.
ARTICLE V - HIPAA; PROPRIETARY INFORMATION
5.1 HIPAA. The parties agree that as relates to use and disclosure of PHI, electronic transaction
standards and security of electronic PHI under HIPAA, they are subject to the terms of the Business
Associate Agreement set forth in Exhibit D.
5.2 Proprietary Information. (a) Each party agrees that information of the other party, including,
but not limited to the following, shall constitute confidential and proprietary information ("Proprietary
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Information") unless otherwise public: (i) with respect to ESI: ESI's reporting and other web-based
applications, eligibility and adjudication systems, system formats and databanks (collectively, "ESI's
Systems"), clinical or formulary management operations or programs, information concerning Rebates,
prescription drug evaluation criteria, drug pricing information, and Participating Pharmacy agreements;
and (ii) with respect to Sponsor: Sponsor and Member information files, business operations and
strategies. Neither party shall use the other's Proprietary Information, or disclose it or this Agreement to
any third party, at any time during or after termination of this Agreement, except as specifically
contemplated by this Agreement or upon prior written consent, which shall not unreasonably be withheld,
or as required by court order or applicable law. Upon termination of this Agreement, each party shall
cease using the others Proprietary Information, and all such information shall be returned or destroyed
upon the owners direction, in accordance with applicable law.
(b) Sponsor will not, and will not permit any third party acting on Sponsor's behalf to, access,
attempt to access, test or audit ESI's Systems or any other system or network connected to EST's
Systems. Without limiting the foregoing, Sponsor will not: (i) access or attempt to access any portion
or feature of ESI Systems, by circumventing the ESI Systems' access control measures, either by
hacking, password "mining" or any other means; or (ii) probe, scan,- audit or test the vulnerability of
ESI's Systems, nor breach the security or authentication measures of EST's System.
5.3 Trademarks. Each party acknowledges each other party's. sole and exclusive ownership of its
respective trade names, commercial symbols and trademarks (collectively "Marks"). No party shall use
the other party's Marks in advertising or promotional materials or otherwise without the owner's prior
written consent; provided, however, that the parties may inform Members and Participating Pharmacies
thatES1 provides prescription drug benefit management services to Sponsor.
ARTICLE VI - COMPLIANCE WITH LAW; ERISA; FINANCIAL DISCLOSURE
6.1 Compliance with Law Change in Law. Each party shall be responsible for ensuring its
compliance with any laws and regulations applicable to its business, including maintaining any necessary
licenses and permits. Sponsor shall be responsible for any governmental or regulatory charges and taxes
imposed upon the services provided hereunder, other than'taxes based on the net income of ESI. If (a)
there is a material change in federal, state or local laws or regulations or the interpretation thereof, that,
among other things, requires ESI to increase payments or shorten payment times for Covered Drugs to
Participating Pharmacies, or change the scope of services hereunder, (b) First DataBank elects to stop
publishing "AWP," (c) the parties shall negotiate an appropriate modification of the services,
reimbursement rates, administrative fees and/or Rebates such that the parties are returned to their
comparable economic position as of the Effective Date. If the parties cannot agree on a modification or
adjusted fee or rates, then either party may terminate the Agreement on thirty (30) days' prior written
notice to the other.
6.2 ERISA. Sponsor shall ensure that its activities in regard to the drug benefits provided to its
Members are in compliance with the Employee Retirement Income Security Act, as amended, 29 U.S.C.
§1001 et seq. ("ERISA"). Sponsor acknowledges and agrees that it is responsible for disclosing to
Members any and all information relating to the program as required by law to be disclosed, including any
information relating to the calculation of Copayments, and any other program coverage and eligibility
requirements in connection with the program, and any other information concerning, commissions,
rebates, discounts or provider discounts referred to in Section 6.3 hereof. In providing services under this
Agreement, Sponsor acknowledges and agrees that neither ESI nor any of ESI's wholly-owned
subsidiaries are acting as a fiduciary (as defined in Section 3.21(a) of ERISA) of Sponsors Plan, and
Sponsor shall not name ESI or any of EST's wholly-owned subsidiaries as a plan fiduciary. Neither ESI
nor any of ESI's wholly-owned subsidiaries have any power to make any decisions as to Plan policy,
interpretations, practices or procedures, but rather provides ministerial services within a framework of
policies, guidelines, interpretations, rules, practices, and procedures chosen by Sponsor. Sponsor
acknowledges that neither ESI nor any of EST's wholly-owned subsidiaries have any discretionary
authority or control respecting management of the Plan and does not exercise any authority or control
respecting management or disposition of the plan assets of the Plan, if any exist. Sponsor further
acknowledges that all such discretionary authority is retained by Sponsor or some other person or entity.
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6.3 Disclosure of Certain Financial Matters. In addition to the administrative fees paid to ESI by
Sponsor, if any, ESI and ESI's wholly-owned subsidiaries derive margin from fees and revenue in one or
more of the ways as further described in the Financial Disclosure to ESI PBM Clients set forth in Exhibit E
hereto ("Financial Disclosure"). In negotiating any of'the fees and revenues described in the Financial
Disclosure or in this Agreement, ESI and ESI's wholly-owned subsidiaries act on their own behalf, and not
for the benefit of or as agents for Sponsor, Members or the Plan. ESI and EST's wholly-owned
subsidiaries retain all proprietary rights and beneficial interest in such fees and revenues described in the
Financial Disclosure and, accordingly, Sponsor acknowledges for itself, its Members and the Plan that
neither it, any Member, nor the Plan, has a right to receive, or possesses any beneficial interest in, any
such fees or revenues; provided, that ESI will pay Sponsor amounts equal to the Rebate amounts
expressly set forth on Exhibit B.
ARTICLE VII - TERM AND TERMINATION; DEFAULT AND REMEDIES
7.1 Term. This Agreement will commence. effective as of January 1, 2006, ("Effective Date"), and
shall continue for a period of three (3) year(s) ("Initial Term"), and may be terminated earlier or extended
in accordance with the terms of Section 7.2 below. Thereafter, this Agreement shall automatically renew
with the same terms and conditions as set forth herein for successive one (1) year renewal terms, subject
to the right of termination as otherwise provided herein.
7.2 Termination.
(a) Non-Renewal Upon Notice. Not less than sixty (60) days prior to the end of the Initial
Term or any renewal term of this Agreement either party may notify the other party in writing that it
desires to terminate this Agreement effective as of the end of the then current term. Notwithstanding any
provision in this Agreement to the contrary, in no event will this Agreement be terminable "without cause"
prior to the expiration of the Initial Term by either party.
(b) Breach or Default. Either party' may give the other written notice of a material,
substantial and continuing breach of this Agreement. If the breaching party has not cured said breach
within thirty (30) days from the date such notice was sent, this Agreement may be terminated at the
option of the non-breaching party. If the amount of time commercially reasonable for the breach to be
cured is longer than thirty (30) days, this Agreement may not be terminated by the non-breaching party
pursuant to this provision until such commercially reasonable period of time has. elapsed; provided,
however, that in no event shall such period exceed sixty (60) days.
(c) Non-Payment. Notwithstanding anything to the contrary herein, ESI (and its wholly-
owned subsidiaries) may terminate or suspend their performance hereunder and cease providing or
authorizing provision of Covered Drugs to Members upon forty-eight (48) hours written notice if Sponsor
fails to pay ESI or provide a deposit, if required, in accordance with the terms of this Agreement. ESI also
may apply Rebates to any unpaid Fees.
(d) Insolvency. To the extent permitted by applicable law, ESI may terminate this
Agreement, or suspend performance hereunder, upon the insolvency of Sponsor, and Sponsor may
terminate this Agreement upon the insolvency of ESI. The "insolvency" of a party shall mean the filing of
a petition commencing a voluntary or involuntary case (if such case is an involuntary case, then only if
such case is not dismissed within sixty (60) days from the filing thereof) against such party under the
United States Bankruptcy Code; a general assignment by such party for the benefit of creditors; the
inability of such party to pay its debts as they become due; such party's seeking or consenting to, or
acquiescence in, the appointment of any trustee, receiver or liquidation of it, or any material part of its
property; or a proceeding under any receivership, composition, readjustment, liquidation, insolvency,
dissolution, or like law or statute, which case or proceeding is not dismissed or vacated within sixty (60)
days.
(e) Obligations Upon Termination. Sponsor shall if reasonably possible, make a good faith
effort to notify Members of the timing of any transition to a successor pharmacy benefit manager at least
thirty (30) days prior to the effective date of such termination. Sponsor shall pay ESI.in accordance with
this Agreement for all claims for Covered Drugs dispensed and services provided to Sponsor and
1108160 8
Members on or before the effective date of termination ("Termination Date"). ESI shall continue filing for
Rebates for claims incurred prior to the Termination Date and shall pay Sponsor Rebates for such claims
in accordance with the Rebate payment schedule set forth in Exhibit B. Claims submitted by Pharmacies
or Member-Submitted Claims filed with ESI after the Termination Date shall be processed and
adjudicated in accordance with a mutually determined run-off plan. Upon request of Sponsor, ESI shall
provide open refill files and standard claims data for transition to the successor pharmacy benefit
manager in accordance with then existing industry protocol. Notwithstanding the preceding, ESI may
require that Sponsor pay a reasonable deposit in the event ESI is requested to process after the
Termination Date claims incurred on or prior to such date.
7.3 Remedies.
(a) Remedies Not Exclusive. A party's right to terminate this Agreement under Article VII
shall not be exclusive of any other remedies available to'the terminating party under this Agreement or
otherwise, at law or in equity.
(b) Force Maieure. Neither party shall be liable in any manner for any delay to perform its
obligations hereunder which are beyond a party's reasonable control, including, without limitation, any
delay or failure due to strikes, labor disputes, riots, earthquakes, storms, floods or other extreme weather
conditions, fires, explosions, embargoes, war or other outbreak of hostilities, government acts or
regulations, or the failure or inability of carriers, suppliers, delivery services, or telecommunications
providers to provide services necessary to enable a party to perform its obligations hereunder.
(c) Limitation of Liability. Except for the indemnification obligations set forth in Section
7.3(d), each party's liability, to the other hereunder shall in no event exceed the actual proximate losses or
damages caused by breach of this Agreement. In no event shall either party or any of their respective
affiliates, directors, employees or agents, be liable for any indirect, special, incidental, consequential,
exemplary or punitive damages, or any damages for lost profits relating to a relationship with a third party,
however caused or arising, whether or not they have been informed of the possibility of their occurrence.
(d) Indemnification
(i) In addition to any indemnification obligations set forth in the Business Associate
Agreement, ESI will indemnify and hold Sponsor harmless from and against any loss, cost, damage,
expense or other liability, including, without limitation, reasonable costs and attorney fees ("Costs")
incurred in connection with any and all third party claims, suits, investigations or enforcement actions,
including claims of infringement of any intellectual property rights. ("Claims") which may be asserted
against, imposed upon or incurred by Sponsor and arising as a result of (A) EST's negligent acts or
omissions or willful misconduct, (B) EST's-breach of this Agreement, or (C) Sponsor's authorized use of
ESI's Marks, or use of or access to any ESI proprietary reporting and system applications, unless
Sponsor has modified or altered such applications without ESI's written consent.
(ii) Sponsor will indemnify and hold ESI harmless from and against any Costs for
Claims which may be asserted against, imposed upon or incurred by ESI and arising as a result ofand to
the extent of (A) Sponsor's negligent acts or omissions or willful misconduct, benefit design and coverage
decisions, or breach of this Agreement, (B) any improper use Sponsor, an Auditor or Vendor may make of
PHI provided to such party, or (C) ESI's authorized use of Sponsor's Marks in connection with the
services hereunder.
(iii) As a condition of indemnification, the party seeking indemnification shall notify
the indemnifying party in writing promptly upon learning of any Claim for which indemnification may be
sought hereunder, and shall tender the defense of such claim to the indemnifying party. No party shall
indemnify the other with respect to any claim settled without the written consent of the other, which
consent will not be unreasonably withheld.
7.4 Survival. The parties' rights and obligations under the last sentences of Sections 3.1(a)(i),
Articles IV and V; and Sections 6.1, 7.2(e), 7.3, and 7.4 shall survive the termination of this Agreement for
any reason.
1108160 9
ARTICLE VIII - MISCELLANEOUS
8.1 Notice. Any notice or document required or permitted to be delivered pursuant to this Agreement
must be in writing and shall be deemed to be effective upon mailing and must be either (a) deposited in
the United States Mail, postage prepaid, certified or registered mail, return receipt requested, or (b) sent
by recognized overnight delivery service, in either case properly addressed to the other party at the
address set forth below, or at such other address as such party shall specify from time to time by written
notice delivered in accordance herewith:
Express Scripts, Inc.
Attn: President
13900 Riverport Drive
Maryland Heights, Missouri 63043
With copy.to Legal Department
Fax No. (314) 702-7120
City of Carmel
Attn: Barbara Lamb
One Civic Square
Carmel, Indiana 46032
Fax No. (317) 571-2409
With copy to Legal Department
Fax No. (317) 571-2484
8.2 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; fiduciary, employee,
or representative of the other and neither parry 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
asserted.
8.3 Successors and Assigns. This Agreement will be binding upon, and inure to the benefit of and be
enforceable by, the respective successors and permitted assigns of the parties hereto; provided that this
Agreement may not be assigned by Sponsor without the prior written consent of ESI, which consent shall
not unreasonably be withheld after a standard credit evaluation. ESI will assign certain of the services to
be performed under this Agreement to its wholly-owned subsidiaries, as necessary to ensure proper
performance of such services, and ESI retains full responsibility and liability for the performance of such
services by its wholly-owned subsidiaries.
8.4 Integratiom Amendments. This Agreement and any Exhibits hereto constitute the entire
understanding of the parties hereto and supersedes any prior oral or written communication between the
parties with respect to the subject matter hereof. If there is a separate Business Associate Agreement
between the parties, such an agreement shall be incorporated herein for all applicable purposes, except
that in the event of a conflict, the terms of this agreement shall prevail. 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.
8.5 Choice of Law. This Agreement shall be construed and governed in all respects according to the
laws in the State of Missouri, without regard to the rules of conflict of laws thereof.
8.6 Waiver. The failure of either party to insist upon the strict observation or performance of this
Agreement or to exercise any right or remedy shall not be construed as a waiver of any subsequent
breach of this Agreement or impair or waive.any available right or remedy.
8.7 Third Party Beneficiary Exclusion. This Agreement is not a third party beneficiary contract, nor
shall this Agreement create any rights on behalf of Members as against ESI. Sponsor and ESI reserve
the right to amend, cancel or terminate this Agreement without notice to, or consent of, any Member.
1108160 10
8.8 Medicare (QRPDP) Services. The parties agree that as relates to any qualified retiree
prescription drug plan ("QRPDP") established by Sponsor under Medicare for the purpose of applying for
subsidy payments as defined under 42 CFR §423.886, ESI shall provide the services under the terms
and conditions set forth in Exhibit F.
IN WITNESS WHEREOF, the undersigned have executed this Pharmacy Benefit Management
Agreement as of the day and year below set forth.
CITY OF CARMEL, INDIANA
cJ h\ by and through its Board of
EXPRESS SCRiL
OV_RA ` ..lam Public Works and Safety
By ?°~
Printed Name: Title: a By
: J01
PPrinfed Name: James Brainard
Date: Titles Presiding Officer
Printed NarT& MaryAnn Burke
Title: Board Me7lb r S- U o
Date: // // a
1108160 ft
Phone: 317-571-2471
Fax: 317-571-2409
Federal ID Number: 35-6000972
EXHIBIT A
PRESCRIPTION DRUG PROGRAM FEES
Sponsor shall pay to ESI the amounts set forth below, net of applicable Copayments. Sales or
excise tax or other governmental surcharge, if any, shall be the responsibility of Sponsor. If ESI pays a
particular Participating Pharmacy a higher rate because Sponsor has requested in writing that such
pharmacy be included in the network, the rate charged to Sponsor shall be the net ingredient cost plus
the dispensing fee paid by ESI to such pharmacy, plus applicable sales or excise tax or other
governmental surcharge, if any.
For purposes of this Exhibit A (including A-1 through A-3), the terms:
"Average Wholesale Price" or "AWP" means the average wholesale price of a prescription drug
as identified by drug pricing. services such as First Data Bank or other source nationally recognized in the
retail prescription drug industry selected by ESI for all clients. The applicable AWP for prescriptions filled
in the Mail Service Pharmacy will be the AWP for the lesser of: (1) the NDC code for the package size
from which the prescription drug was dispensed, or (ii) package sizes of 100 units or 16 ounce quantities,
or the next larger quantity if such specified quantities are not available.
"Compound Drugs" means a customized medication derived from two or more raw chemicals,
powders and devices, of which at least one ingredient is a federal legend drug, prepared by a pharmacist
according to a doctor's specifications.
"Generic Drug" means a prescription drug, whether identified by its chemical, proprietary, or non-
proprietary name, that is therapeutically equivalent and interchangeable with drugs having an identical
amount of the same active ingredient(s) and approved by the FDA. The designation of a. product as
"generic" and/or subject to MAC ("Maximum Allowable Cost") is determined by ESI using data elements
provided by First DataBank or other source nationally recognized in the retail drug industry.
"Maximum Reimbursement Amount" or "MRA" means the maximum price for the particular
Generic Drug, as specified on ESI's MAC list. The MAC list is structured with the intent that the weighted
average MRA discount for the entire MAC list is equivalent to a discount off of AWP with a range of 40% -
50% but Sponsor's actual weighted average MRA discount may vary within, or above or below, this.range
depending upon Sponsor's actual generic drug mix and utilization and Sponsor's plan design. ESI
periodically updates the MAC list and MRA to reflect changes in generic drug availability and prices.
"Single Source Generic Drug" means a Generic Drug licensed and currently marketed from only
one non repackager generic labeler within a generic class number (GCH).
"Usual and Customary Price" or "U&C" means the retail price charged by a Participating
Pharmacy for the particular drug in a cash transaction on the date the drug is dispensed as reported to
ESI by the Participating Pharmacy.
The following are incorporated into Exhibit A:
EXHIBIT"A-1
PARTICIPATING PHARMACY AND MAIL SERVICE PHARMACY REIMBURSEMENT RATES
EXHIBIT A-2
ADMINISTRATIVE AND CLINICAL. PROGRAM FEES
EXHIBIT A-3
SPECIALTY PRODUCT REIMBURSEMENT RATES
1108160 12
EXHIBIT A-1
PARTICIPATING PHARMACY AND MAIL SERVICE PHARMACY REIMBURSEMENT
(The following rates do not apply to Specialty Products)
Participatino Pharmacy Reimbursement Rates
2-Tier Plan Design
ESI Formulary
ESI National Preferred
Formulary
Minimum'50,000 Participating
Pharmacy Network
Ingredient Cost - Brand
Single Source Genefic The lower of AWP - 16% or U&C
Drugs are priced as brands
Ingredient Cost - Generic
The lower of AWP - 16%, MRA,
or U&C
Ingredient Cost - Lesser of U&C or combined AWP
Compound Drugs plus applicable service fee
Brand Dispensing FeelRx $1.65
Generic Dispensing FeelRx $1.85
Administrative FeelRx $0.00
II. Mail Service Pharmacy Pricing
1.34 Day 35.90
Supply Da Supply
Brand Ingredient Cost
Single Source Generic Drugs are AWP - 16% AWP - 23%
iced as brands
Generic Ingredient Cost
AWP - 55% AWP - 55%
Compound Drug Ingredient Combined AWP plus
Cost a licable service fee
Brand Dispensing Fee 1 Rx
Subject to change for changes in delivery $1.65 $0.00
rates
Generic Dispensing Fee 1 Rx $1.85 $0.00
Subject to change for changes in delivery
rates
Minimum Rate I Rx $8.99
Administrative Fee $0.00
110816v3 13
Exhibit A-2
Administrative and Clinical Program Fees
A. Administrative Fees
PBM Services Fees
• Customer Service for Members No additional fee
• Eligibility submission
• Electroniclon-line submission
ManuaVhardcopy submission
FSA Feeds
No additional fee
$1.001update (includes initial entry)
No additional fee
• Software Training for Access to Our On-Line System(s) No additional fee
• Electronic Claims Processing No additional fee
• Member Submitted Paper Claims' Processing $1.50/claim
• COB (Coordination of Benefits)
Standard Process (reject for primary carrier)
Medicare Coordination +65 population)
No additional fee
$0.06 per claim
• Plan Setup No additional charge
Participating Pharmacies
• Pharmacy Audit Recoveries 20% of audit recoveries
• Pharmacy Help Desk No additional fee
• Pharmacy Network Management No additional fee
• Pharmacy Reimbursement No additional fee
• Network Development Upon Request No additional fee
Mail Services
• Benefit Education No additional fee
• Prescription Delivery - standard No additional fee
Reportind Services
• Web-based Client Reporting - produced by Sponsor No additional fee_
i Web-based.Client Reporting - produced by ESI $100 per report
Ad hoc desk top parametric reports No additional fee
• Additional Reports
Billing Reports
Annual Strategic Account Plan Report
No additional fee
No additional fee
• Custom Ad-Hoc Reporting $150 per hour, with a minimum of $500
• Claims detail extract file electronic (NCPDP format) No additional fee (avail. upon request)
Web Site
• Digital Certificates
• Up to.5 certificates
More than 5 certificates
No additional fee
U to $150 for additional users
• ExpressScripts.com for Clients-access to reporting tools,
eligibility update capability, contact directory, sales and
marketing information, and benefit and enrollment support No additional fee
• Express•Scnpts.com for Members-access to benefit; drug,
health and wellness information; prescription ordering
capability; and customer service No additional fee
• Express Choice- enrollment option-available during open
enrollment to enable members to evaluate prescription benefit
plan options. No additional fee
110816va 14
Implementation Package and Member Communications
• Implementation Support No additional charge
• Member Packets (Includes 2 standard resin ID cards)
Mailed to Sponsor' No additional charge
Mailed directly to Members $1.00 + postage / member address
Replacement Cards $0.25 / card
Customized materials Priced upon request
Appeals through UM Company
• Clinical appeals No additional charge
Non-clinical appeals No additional charge
B. Selected Clinical/Trend Programs.
ESI offers a comprehensive list of trend, safety, care and disease management programs, a
limited number of which are identified below, and which may change or be discontinued from time to time.
ESI also offers savings guarantees under certain conditions. Information. concerning such programs,
guarantees and fees, if applicable, is available from the ESI Account Team.
Program Fee
Drug Choice Management No charge
Drug Quantity Management
• Standard per Rx $0.02 PMPM
• Select per Rx (optional)
• Select per day supply (optional)
Note: List of drugs subject to change at the discretion of ESI
Prior Authorization-Administrative
• Lost/stolen overrides No charge
• Vacation supplies
Prior Authorization - Clinical Base List
Note: List of drugs available upon request; subject to No charge
change at the discretion of ESI.
Prior Authorization - Clinical Supplemental List
Note: List of drugs available upon request; subject to $0.03 PMPM
change at the discretion of ESI
Prior Authorization - Other Clinical Overrides
(e.g. Non-standard prior authorization medications, medical $20/request
exceptions) $25/physician review
Step Therapy Individual module or
combined available
Retro DUR $0.03/Rx
Retro DUR -.Seniors $0.02/Rx
1108160 15
Exhibit A-3
Specialty Product Reimbursement and Terms
A. All Specialty Product pricing is based upon the discount off of AWP for each Specialty Product, as
published by First Data Bank or other nationally recognized AWP source selected by ESI, on the date of
dispensing. Pricing also is based on electronic claims adjudication through ESI, using a National Council
for Prescription Drug Programs format. Sponsor shall pay ESI for the Specialty Products in accordance
with the payment terms described in the Agreement and the Specialty Product pricing specified below.
CuraScript or ESI shall be entitled to charge a reasonable fuel surcharge fee to cover fuel surcharges
imposed by carriers in connection with the delivery of Specialty Medications by CuraScript.
B. In no event shall the Mail Service Pharmacy or Participating Pharmacy pricing specified in Exhibit
AA=1 be applied to Specialty Products, regardless of the phiarmacy from which they are dispensed.
C. Some Specialty Products may be subject to availability from the pharmaceutical manufacturer or
because they are in short supply, subject to recall or allocation. Efforts will be made to find alternative
supply channels or pharmacies and the pricing below may need to be modified until the short supply
situation is corrected, with such modification effective upon advance written notice to Sponsor by ESI.
D. Each Specialty Product included on the applicable list below, including updates implemented as
described in the paragraph E below, will be considered a Covered Drug under the Plan subject to the
applicable pricing below unless Sponsor has designated such Specialty Product as a non-Covered Drug
in the EBD, or Sponsor has affirmatively elected in the EBD not to cover any Specialty Products. If both
the ESI Specialty Pharmacy Exclusive Option and the Open Option are included below, Sponsor must
select in the EBD which option will apply or that Sponsor does not desire to cover Specialty Products; and
until such time as, Sponsor makes such election in its EBD the ESI Specialty Pharmacy Exclusive Option
will apply by default.
E. The list of Specialty Products below is subject to addition, deletion, or modification from time to
time upon thirty (30) days advance written notice to Sponsor, ESNs written notice will indicate the specific
change (e.g., addition of a new Specialty Product to the list) and the AWP pricing associated with the
change to be paid by Sponsor. If Sponsor desires to reject the change, it must notify ESI in writing within
thirty (30) days from the date of Sponsor's receipt of ESI's notice that Sponsor does not accept the
change to the list. If Sponsor rejects the change,, the change will not be implemented, and
notwithstanding anything to the contrary herein or any other document, such drug to which the notice
pertains will not be considered,a "Covered Drug" for purposes of this Agreement and will reject in ESI's
system as such. If, however, Sponsor does not reject the change by notifying ESI in writing within the
aforementioned thirty (30) day notice period, the change will thereafter become immediately effective for
Sponsor and the list included herein will be deemed modified accordingly to reflect such change, and
Sponsor acknowledges and agrees to the same. If Sponsor requests that a new Specialty Product not
included on the Specialty Product list be available hereunder for a Member before the expiration of the
aforementioned thirty (30) day ESI notice period, or Sponsor's Plan immediately covers the new Specialty
Product even if the new Specialty Product is not included on the applicable Specialty Product list below,
such Specialty Product will be considered a Covered Drug and priced to Sponsor at ESI's standard
specialty rate for that new Specialty Product without advance notice to Sponsor, and Sponsor agrees to
pay the same.
F. If Sponsor has selected to use CuraScript for Specialty Products, Sponsor desires that CuraScript
provide its standard specialty pharmacy services for Members receiving Specialty Products from
CuraScript. As a specialty pharmacy, CuraScript typically provides a wide array of specialty pharmacy
services. Specifically, depending on the particular disease state, these specialty services provided to
Members using CuraScript may include but are not limited to:
0) Patient Intake Services: patient enrollment, initial referral processing, insurance eligibility
and benefits verification, alternative coverage searches, schedule of initial Specialty Product order, and
coordination of patient education and instruction for each new patient;
(ii) Pharmacy Dispensing Services: dispensing of the Specialty Product pursuant to a.
prescription, in accordance with applicable law, the deposit of such Specialty Product with a third party
1108160 16
carrier to facilitate the delivery of same as per the Member's instructions, and the provision of certain
ancillary supplies (e.g., syringes, needles, and alcohol swabs) and related items in connection with the
Specialty Product that are reasonably necessary or useful to the Member in connection with the
administration of the Specialty Product;
(iii) Ongoing Clinical and Specialty Pharmacy Support Services: self-injection teaching
support, patient education,. assessment, clinical interventions and clinical screenings, therapy adherence
counseling and related clinical patient management activities and programs (e.g., CuraScript's
Carelogic programs), physician consultations, authorization maintenance, assistance. with Member
coverage appeals, re-fill follow-up calls, managing ongoing medication orders, and insurance follow-up
and related ongoing delivery coordination; and
(iv) Social Services: patient advocacy, hardship reimbursement support, and indigent and
patient assistance programs.
G. If Sponsor desires additional information regarding CuraScript's specialty services in addition to
the information that already has been provided, CuraScript will provide Sponsor with the additional
information upon request.
If a Sponsor desires to make Specialty Products available under this Agreement, it should select one of
the following on its EBD:
OPTION 1 - ESI Specialty Pharmacy - Exclusive
Under this pricing option, Specialty Products will only be filled through ESI Specialty Pharmacy. Specialty
Products will not be available through either Participating Pharmacies or the Mail Service Pharmacy. If a
Member submits a prescription for a Specialty Product to the Mail Service Pharmacy, the claim will reject
with a "NDC not covered" message and ESI will automatically transfer the prescription to ESI Specialty
Pharmacy. If a Specialty Product is filled through a Participating Pharmacy for any reason, EST's
standard Specialty Product Participating Pharmacy Rate shall apply to such claim.
Specialty Products - Exclusive Ingredient Cost-
Off AWP Dispensing Fee
I ESI Specialty Pharmacy See Table below $0.00
Product %Off
AWP
ACTHAR 17.0%
ADRUCIL 17.01/6
ADVATE 25.0%
ALDURAZYME 17.0%
ALFERON 17.0%°
ALIMTA 17.0%
ALKERAN
ALOXI
ALPHANATE
ALPHANINE NROIA
AMEVIVE
ANTAGON
ANZEMET
ARANESP 17.0%
AREDIA 17.0%
ARIXTRA 17.0%
AUTOPLEX 29.0%
AVASTIN 17.0%
AVONEX 17.0%
Product % Off
AWP
BAYGAM 30.0%
BAYHEP B 17.0%
BAYRHO-D 25.0%
BEBULIN 9.0%
13ENEFIX 20.0%
BETASERON 17.0%
BICILLIN 17.0%
BICNU 17.0%
BLEOMYCIN 35.0%
BLEOMYCIN SULFATE 35.0%
BOTOX 18.0%
BRAVELLE 18.0%
CALCIJEX 17.0%
CAMPATH 17.0%
CAMPTOSAR 17.0%
CARBOPLATIN 35.0%
CEREZYME 15.0%
CETROTIDE 18.0%
CISPLATIN 35.0%
Product % Off
AWP
COPAXONE 17.0%
COPEGUS 17.0%
CYTARABINE 35.0%
CYTOGAM 18.0%
CYTOXAN 17.0%
CYTOXAN LYOPHILIZED 17.0%
DACARBAZINE 35.0%
DDAVP 17.0%
DESFERAL 17A%
DOXIL 17.0%
DOXORUBICIN 35.0%
ELIGARD 17.0%
ELLENCE 17.0%
ELOXATIN 17.0%
ELSPAR 17.0%
ENBREL 17.0%
ENGERIX 17.0°
ENGERIX-B 17.0%
EPOGEN 17.0%
110816v3 17
Product % Off
AWP
ERBITUX 17.0%
ETHYOL 17.0%
ETOPOPHOS 17.0%
ETOPOSIDE 35.0%
FABRAZYME 17.0%
FACTREL 18.0%
FEIBA 37.0%
FERTINEX 18.0%
FLUDARA 17.0%
FLUDARABINE 35.0%
FLUDARABINE 3U%
FLUOROURACIL 35.0%
FOLLISTIM 18.0%
FORTAZ 17.0%
FORTAZ 17.0%
FORTEO 17.0%
FRAGMIN 17AY°
FUDR 17.0%
FUZEON 17.0%
GAMIMUNE 30.0%
GAMIMUNE N 30.0%
GAMMAGARD 30.0%
GAMMAR-P 30.0%
GAMUNEX 30AY°
GEMZAR 17.0%
GENOTROPIN 18.0%
GEREF 18.0%
GEREF 18.0%
GLEEVEC 17.0%
GONAL-F 18.0%
GONAL-F RFF 18.0%
HELIXATE 30.0%
HEMOFIL 35.0%
HERCEPTIN 17.0%
HUMATE-P 32.0%
HUMATROPE 18.0%
HUMIRA 17.0%
HYALGAN 17.0%
HYCAMTIN 17.0%
IFEX 17.0%
IFOSFAMIDE 35.0%
INFERGEN 17.0%
INNOHEP 17.0%
INTRONA 17.0%
IRESSA 17.0%
IVEEGAM 30.0%
KINERET 17.0%
KOATE-DVI 37.0%
KOGENATE 38.0%
Product % Off
AWP
KYTRIL 17.0%
LEUCOVORIN 35.0%
LEUCOVORIN CALCIUM 35.0%
LEUKINE 17.0%
LEUPROLIDE 35.0%
LEUSTATIN 17.0%
LOVENOX 17.0%
LUPRON 17.0%
MESNA 35:0%
MESNEX 17.0%
MITOMYCIN 35.0%
MONARC-M 37.0%
MONOCLATE-P 27.0%
MONONINE 27.0%
MUSTARGEN 17.0%
MYLOTARG 17.07/6
MYOBLOC 17.0%
NAB[-HB 17.0%
NAVELBINE 17.0%
NEULASTA 17.0%
NEUMEGA 17.0%
NEUPOGEN 17,0%
NIPENT 17.0%
NORDITROPIN 18.0%
NOVANTRONE 17.0%
NOVAREL 18.0%
NOVOSEVEN 37.0%
NUTROPIN 18.0%
ONCASPAR 17.0%
ONTAK 17.0%
ONXOL 35.0%
OVIDREL 18.0%
PACLITAXEL 35.0%
PAMIDRONATE 35.0%
PAMIDRONATE 35.0%
PANGLOBULIN 30.0%
PANGLOBULIN/ 30.0%
PARAPLATIN 17.0%
PEGASYS 17.0%
PE-INTRON 17.0%
PERGONAL 18.0%
PLENAXIS 17.0%
POLYGAM 30.0%
PREGNYL 18.0%
PROCRIT 17.0%
PROFASI 18.0%
PROFILNINE 2H%
PROGESTERONE 18.0%
PROGESTERONE MOIL 18.0%
Product %Off
AWP
PROLEUKIN 17.0%
PROPLEX 5.0%
PROTROPIN 18.0%
PULMOZYME 17.0%
RAPTIVA 17.0%
REBETOL 17.0%
REBETRON 17.0%
REBIF 17.0%
RECOMBINATE 31.0%
REFACTO 17.0%
REMICADE 17.0%
REPRONEX 18.0%
RHOGAM 25.0%
RIBAVIRIN 35.0%
RIMSO-50 17.0%
RISPERDALCONSTA 17.0%
RITUXAN 17.0%
ROCEPHIN 17.0%
ROFERON-A 17.0%
SAIZEN 18.0%
SANDOSTATIN 17.0%
SENSIPAR 17.0%
SEROSTIM 17.0%
SUPARTZ 17.0%
SYNAGIS 17.0%
SYNVISC 17.0%
TARCEVA 17.0%
TAXOTERE 17.0%
TEMODAR 17.0%
TEV-TROPIN 18.0%
THALOMID 17.0%
THERACYS 17.0%
THIOTEPA 35.0%
THYROGEN 17.0%
TICE 17.0°h
TOBI 17.0%
TYSABRI 17.0%
VELCADE 17.0%
VENOGLOBULIN-S 30.0%
VIDAZA 17.0%
VINCASAR 35.0%
VINCRISTINE_ 35.0%
VINORELBINE
TARTRATE 35.0%
WINRHO
WINRHO50001USOV 1000MCG n
XELODA 17
XOLAIR
ZANOSAR 17.0%
110816v3 1
Product %Off
AWP
ZANOSAR STERILE 17.0%
POWDER
ZAVESCA 17.0%
ZINECARD 17.0%
Product % Off
AWP
ZOFRAN 17.0%
ZOLADEX 17.0%
ZOMETA 17.0%
ZORBTIVE 18.0%
OPTION 2 - Participating Pharmacy Network and. ESI Specialty Pharmacy - Open
Under this pricing option, Specialty Products may be filled through either ESI Specialty Pharmacy or
Participating Pharmacies. They will not be available through the Mail Service Pharmacy.
Specialty Products - Open Ingredient Cost* - Dispensing Fee
% Off AWP
Participating Pharmacy -13% $2.75
ESI Specialty Pharmacy See Table below $0.00
'Unique Products
BEBULIN -9% Same as above
PROPLEX -5%
Product CSP
% Off
AWP
ACTHAR 15.0%
ADRUCIL 15.0%
ADVATE 25.0%
ALDURAZYME 15.0%
ALFERON 15.0%
ALIMTA 15.0%
ALKERAN 15.0%
ALOXI 15.0%
ALPHANATE 32.0%
ALPHANINE 32.0%
AMEVIVE 15.0%
ANTAGON 15.0%
ANZEMET 15.0%
ARANESP 15.0%
AREDIA 15.0%
ARIXTRA 15.0%
AUTOPLEX 29.0%
AVASTIN 15.0%
AVONEX 15.0%
BAYGAM 25.0%
BAYHEP B 15.0%
BAYRHO-D 25.0%
BEBULIN 9.0%
BENEFIX 20.0%
BETASERON 15.0%
BICILLIN 15.0%
BICNU 15.0%
BLEOMYCIN 30.0%
Product CSP
% Off
AWP
BLEOMYCIN SULFATE 30.0%
BOTOX 15.0%
BRAVELLE 15.0%.
CALCIJEX 15.0%
CAMPATH 15.0%
CAMPTOSAR 15.0%
CARBOPLATIN 30.0%
CEREZYME 15.0%
CETROTIDE 15.0%
CISPLATIN 30.0%
COPAXONE 15.0%
COPEGUS 15.0%
CYTARABINE 30.0%
CYTOGAM 18.0%
CYTOXAN 15.0%
CYTOXAN LYOPHILIZED 15.0%
DACARBAZINE 30.0%
DDAVP 15.0%
DESFERAL 15.0%
DOXIL 15.0%
DOXORUBICIN 30.0%
ELIGARD 15.0%
ELLENCE 15.0%
ELOXATIN 15.0%
ELSPAR 15.0%
ENBREL 15.0%
ENGERIX 15.0%
ENGERIX-B 15.0%
Product CSP
% Off
AWP
EPOGEN 15.0%
ERBITUX 15.0%
ETHYOL 15.0%
ETOPOPHOS 15.0%
ETOPOSIDE 30.0 0
FABRAZYME 15.0%
FACTREL 15.0%
FEIBA 37.0%
FERTINEX 15.0%
FLUDARA 15.0%
FLUDARABINE 30.0%
FLUDARABINE 30.0%
FLUOROURACIL 30.0%
FOLLISTIM 15.0%
FORTAZ 15.0%
FORTAZ 150%
FORTEO 15.0%
FRAGMIN 15.0%
FUDR 15.0%
FUZEON 15.0%
GAMIMUNE 25.0%
GAMIMUNE N 25.0%
GAMMAGARD 25.0%
GAMMAR-P 25.0%
GAMUNEX 25.0%
GEMZAR 15.0%
GENOTROPIN 15.0%
GEREF 15.0%
110816v3 19
Product CSP
% Off
AWP
GEREF 15.0%
GLEEVEC 15.0%
GONAL-F 15.0%
GONAL-F RFF 15A%
HELIXATE 30.0%
HEMOFIL 35.0%
HERCEPTIN 15.0%
HUMATE-P 32.0%
HUMATROPE 15.0%
HUMIRA 15.0%
HYALGAN 15.0%
HYCAMTIN 15.0°k
IFEX 15.0%
IFOSFAMIDE 30.0%
INF.ERGEN 15.0%
INNOHEP 15.0%
INTRON A 15.0%
IRESSA 15.0%
IVEEGAM 25.0%
KINERET 15.0%
KOATE-DVI 37.0%
KOGENATE 38.0%
KYTRIL 15.0%
LEUCOVORIN 30.0%
LEUCOVORIN CALCIUM 30:0%
LEUKINE 15,0%
LEUPROLIDE 30.0%
LEUSTATIN 15.0%
LOVENOX 15.0/
LUPRON 15.0%
MESNA 30.0%
MESNEX 15.0%
MITOMYCIN 30.0%
MONARC-M 37.0%
MONOCLATE-P 27.0%
MONONINE 27.0°k
MUSTARGEN 15.0%
MYLOTARG 15.0%
MYOSLOC 15A%
NABI-HB 15.0%
NAVELBINE 15.0%
NEULASTA 15.0%
NEUMEGA 15.0%
NEUPOGEN 15.0%
NIPENT 15A%
NORDITROPIN 15.0%
NOVANTRONE 130%
NOVAREL 15.0%
NOVOSEVEN 37.0%
Product CSP
% Off
AWP
NUTROPIN 15.0%
ONCASPAR 15.0%
ONTAK 15.0%
ONXOL 30.0%
OVIDREL 15.0%
PACLITAXEL 30.0%
PAMIDRONATE 30.0%
PAMIDRONATE 30.0%
PANGLOBULIN 25.0%
PANGLOBULINI 25.0%
PARAPLATIN 15.0%
PEGASYS 15.0%
PEG-INTRON 15.0%
PERGONAL 15.0%
PLENAXIS 15.0%
POLYGAM 25.0%
PREGNYL 15.0%
PROCRIT 15.0%.
PROFASI 15.0%
PROFILNINE. 25.0%
PROGESTERONE 15.0%
PROGESTERONE IN OIL 15.0%
PROLEUKIN 15.0%
PROPLEX 5.0%
PROTROPIN 15.0%
PULMOZYME 15.0%
RAPTIVA 15.0%
REBETOL 15.0%
REBETRON 15.0%
REBIF 15.0%
RECOMBINATE 31.0%
REFACTO 17.0%
REMICADE 15.0%
REPRONEX 15.0%
RHOGAM 25.0%
RIBAVIRIN 30.0%
RIMSO-50 15.0%
RISPERDALCONSTA 15.0%
RITUXAN 15.0%
ROCEPHIN 15.0%
ROFERON-A 15.0%
SAIZEN 15.0%
SANDOSTATIN 15.0%
SENSIPAR 15.0%
SEROSTIM 15.0%
SUPARTZ 15.0%
SYNAGIS 15.0%
SYNVISC 15.0%
TARCEVA 15.0%
Product CSP
% Off
AWP
TAXOTERE 15.0%
TEMODAR 15.0%
TEV-TROPIN 15.0%
THALOMID 15.0%
THERACYS 15.0%
THIOTEPA 30.0%
THYROGEN 15.0%
TICE 15.0%
TOBI 15.0%
TYSABRI 15.0%
VELCADE 15.0%
VENOGLOBULIN-S 25.0%
VIDAZA 15.0%
VINCASAR 30.0%
VINCRISTINE 30.0%
VINORELBINE
TARTRATE 30.0%
WINRHO 25.0%
WINRHO5000IUSDV
1,000MCG 25.0%
XELODA 15.0%_
XOLAIR 15.0%
ZANOSAR 15.0%
ZANOSAR STERILE
POWDER 15.0%
ZAVESCA 15.0%
ZINECARD 15.0%
ZOFRAN 15.0%
ZLADEX
O 15.0%
OMETA
Z 15.0%
ZORBTIVE 15.0%
110816v3 20
EXHIBIT B
REBATES
A. Subject to the terms and conditions set forth below, ESI will remit to Sponsor amounts equal to
the following:
2-Tier Plan Design
ESI National Preferred Formula
Participating Pharmacies and Mail Service Pharmacy
ESI Specialty Pharmacy
Guarantee
per Rebateable Claim $1.30 $5.00
B. Conditions of the Rebate Program
1. Rebates are conditioned upon (a) Sponsor's election of, and conformance to, the
identified Formulary and qualifying copayment benefit designs); (b) distribution of the Formulary (or a
summary thereof) to Members and/or physicians, as applicable; and (c) Sponsor's compliance with other
reasonable, generally applicable requirements for participation by all clients in the Rebate Program, as
are communicated by ESI to Sponsor from time to time.
2. Certain Member Submitted Claims and OTC products, Plans that do not meet eligibility
requirements set forth in herein, claims older than 180 days, as well as claims for 100% copayment (cash
and carry) plans not offered in connection with a health plan benefit, may not be eligible for Rebates.
3. ESI shall retain all actual Rebates, but Sponsor shall be entitled to an amount equal to
the allocable Rebate amount specified above. ESI retains Rebates in excess of any guarantee, if
applicable. Guarantees are calculated in the aggregate. Amounts representing the Rebates allocated to
Sponsor pursuant to the. terms of this Agreement shall be paid on a quarterly basis approximately 150
days following the end of each quarterly period; provided, however, that ESI shall make quarterly
payments as provided herein only to the extent of the Rebate payments it receives approximately 120
days following the end of the quarterly period. Payments attributable to Rebate amounts that ESI
receives later than 120 days following the end of a quarter shall be included by ESI in the next quarterly
payment. ESI retains all right, title and interest to any and all actual Rebates received from
manufacturers, except that ESI shall pay Sponsor amounts equal to the Rebate amounts allocated to
Sponsor, as specified above, from ESI's general assets (neither Sponsor, its Members, nor Sponsor's
plan retains any beneficial or proprietary interest in ESI's general assets). Sponsor acknowledges and
agrees that neither it, its Members, nor its Plan shall have a right to interest on, or the time value of, any
Rebate payments received by ESI during the collection period or moneys payable under this Section. No
Rebates shall be paid until this Agreement is executed by Sponsor. ESI shall have the right to apply
Sponsor's allocated Rebate amount to unpaid Fees and shall have the right to delay payment of Rebates
to allow for final adjustments upon termination of this Agreement.
4. Sponsor acknowledges that it may be eligible for Rebates under this Agreement only so
long as Sponsor, its affiliates; or its agents do not contract directly or indirectly with anyone else for
discounts, utilization limits, rebates or other financial incentives on pharmaceutical products or formulary
programs for claims processed by ESI pursuant to the Agreement, without the prior written consent of
ESI. In the event that Sponsor negotiates or arranges with a pharmaceutical manufacturer for Rebates or
similar discounts for any Covered Drugs hereunder, but without limiting EST's right to other remedies, ESI
may immediately withhold any Rebates earned by, but not yet paid to, Sponsor as necessary to prevent
duplicative rebates on Covered Drugs. To the extent Sponsor knowingly negotiates and/or contracts for
discounts or rebates on claims for Covered Drugs without prior written approval of ESI, such activity shall
be deemed to be a material breach of this Agreement, entitling ESI to suspend payment of Rebates
hereunder and to renegotiate the terms and conditions of this Agreement.
1108160 21
EXHIBIT C
AUDIT PROTOCOL
1. Audit. Principles. ESI recognizes the importance of Sponsors ensuring the integrity of their
business relationship by engaging from time to time in audits of their financial arrangements with-ESI, and
will make every reasonable effort to address Sponsor concerns by facilitating a responsive and
responsible audit process. Subject to the provisions of the Agreement regarding Sponsor audits, ESI and
Sponsor agree that this Standard Audit Protocol is intended to facilitate Sponsor's' audit of ESI by: (a)
clearly defining the scope of the review to be performed; (b) enabling production of timely and accurate
results; (c) minimizing administrative burdens on both parties; and (d) ensuring that standard accounting
and auditing practices are followed.
2. Audit Prerequisites and Procedures
A. An audit involves a review of more than-three months of claims data, and addresses
broad operational areas including. claim pricing accuracy, concurrent eligibility, formulary compliance and,
when applicable, rebates. General claim inquiries, which do not require an audit, can be initiated by
contacting Sponsor's Express Scripts Account Management team at any time.
B. Sponsor agrees to supply a written request to begin an audit, which includes a clear
definition of the intent and scope of the audit, after which ESI will retrieve necessary data to perform the
audit in a time frame not to exceed thirty (30) days.
C. Audits may be performed once annually, and due to the extraordinary demands placed
on ESI' staff during the annual renewal period of December and January, no audits may be initiated or
conducted during these months.
3. Auditing Prescription Claims
A. If requested, ESI will supply Sponsor with claim detail history on CD-ROM in NCPDP
standard fields.
B. The initial audit scope will cover a period not to exceed eighteen (18) months immediately
preceding the audit. Requests for older data may be subject to payment of fees for retrieval of data from
off-site storage. The audited period may not be reaudited once the audit is complete.
C. Most audits can be performed remotely via transfer of data on CD-ROM, hardcopy
documents, etc. Any requested on-site audits shall be conducted during normal business hours at ESI
offices, during the months of February through November.
D. Other ESI documentation (e.g. policies and procedures) requested during the course of
the audit, other than that reasonably necessary to determine the accuracy of Sponsor claims payments,
will be provided at ESI' reasonable discretion.
E. Sponsor will be given data reasonably necessary for Sponsor to determine that ESI has
billed Sponsor in accordancewith contract terms for claims processing, including but not limited to,
access to Participating Pharmacy provider agreements to verify pass through pricing, if applicable.
F. Results'of ESI's most recent SAS-70 audit conducted by a national accounting firm will
be provided upon request. The Sponsor Audit may not duplicate a SAS-70 control audit regarding areas
for which £SI has obtained a SAS-70 audit. However, this does not preclude Sponsor from obtaining a
reasonable understanding from ESI personnel of any areas covered within the SAS-70 audit.
1108160 22
G. During the course of an audit, all data, including claims detail and any copies of claims
(or compilations thereof) supplied by ESI may be retained by Sponsor.
4. Auditing Rebates from Manufacturers
A. The initial scope of any rebate audit may not exceed two (2) calendar quarters during the
twelve month period immediately preceding the audit; In the event findings from the initial review period
reasonably warrant an increase in calendar quarters to be reviewed, ESI and Sponsor will mutually agree
on a process by which additional calendar quarters may be reviewed by Sponsor.
B. EST's contracts with pharmaceutical manufacturers for drug product rebates are highly
confidential and proprietary. Nevertheless, Sponsor may audit payments under rebate contracts
applicable to Sponsor, and may select five (5) initial manufacturer contracts to be audited, or such larger
initial numberof contracts that will enable Sponsor to audit fifty percent (50%) of total rebate payments
due to Sponsor. In the event findings from the initial rebate contract audits warrant an increase in the
number of contracts to be audited, ESI and Sponsor will mutually agree on a process by which additional
contracts may be reviewed by Sponsor.
C. ESI will use reasonable best-efforts to obtain manufacturer consent to disclose such
contracts when such consent is required. In the event that a selected manufacturer declines to permit
Sponsor to review the applicable rebate rate components, then ESI will use its best reasonable efforts to
secure permission from one or more additional manufacturers of Sponsor's choice which will enable
Sponsor to meet the initial targets of five (5) manufacturer contracts and fifty percent (50%) of total rebate
payments as set forth in paragraph 4B above.
D. ESI will permit Sponsor to perform an on-site review of the applicable rebate rate
components of the manufacturer rebate agreements which are relevant and necessary to audit the
calculation of the rebate paymerts made to Sponsor by ESI for the selected drugs.
E. Sponsor should bring, or otherwise supply its independent auditor with, the most recent
Allocation Report (PSG) or Sponsor Share Report (MS), which should be brought to the on-site rebate
audit. Additional reasonable charges may'occur if ESI is asked to-re-produce these reports.
F. Sponsor will not be permitted to copy or retain any such manufacturer agreements (in
part or in whole) or documents provided or made available by ESI in connection with the rebate audit.
Sponsor will be entitled, however, to take and retain notes to the extent necessary to document any
identified exceptions. ESI shall be entitled to review any notes to affirm compliance with this paragraph.
5. Verification or Explanation of Disputed Claims
A. After ESI has supplied the claims data, Sponsor will provide ESI with a written exception
report stating the entire known error population, if any, and dollar amount associated with such errors. In
addition to the written report, Sponsor will provide an electronic extrapolation of errors representative of
the entire population of errors not to exceed an initial compilation of 200 (hereafter referred to as
"representative sample").
B. ESI will research and investigate the "representative sample"' within thirty (30) days. If
additional time is reasonably required, ESI will notify Sponsor within these thirty (30) days.
C. In the event findings warrant an increase in the representative. sample of drug claims or
the scope of the rebate audit period, ESI and Sponsor shall mutually determine the scope of such
increase.
D. Overpayments or underpayments shall be promptly paid and/or credited by ESI (or the
Sponsor, as the case may be). No overpayments or underpayments shall be made that exceed the terms
of the Agreement.
110816v3 23
E. Automatic closure of the audit will occur if Sponsor or Auditor fails to communicate
research updates within 120 days from the last hate on which ESI supplied the audit data.
110816v3 24
EXHIBIT D
BUSINESS ASSOCIATE AGREEMENT
1. Definitions.
(a) "Designated Record Set" shall mean a group of records maintained by or for Plan that is
(i) the medical records and billing records about individuals maintained by or for Plan, (ii) the enrollment,
payment, claims adjudication, and case or medical management record systems maintained by or for a
health plan; or (iii) used; in whole or in part, by or for Plan to make decisions about individuals.
(b) "HIPAA Rules" means the collective privacy, transaction and security regulations
promulgated pursuant to the Health Insurance Portability and Accountability Act, as codified at 45 CFR
Parts 160, 162 & 164.
(d) "Health Plan" or "Plan" shall have the same meaning as the term "Health Plan" in 45 CFR
160.103.
(c) "Individual' shall have the same meaning as the term "individual" in 45 CFR § 164.501
and shall include a person who qualifies as a personal representative in accordance with 45 CFR §
164.502(g).
(d) "Protected Health Information" or "PHI" shall have the same meaning as the term
"protected health information" in 45 CFR § 164.501, limited to the information created or received by ESI
from or on behalf of Plan.
(e) "Privacy Rule" shall mean the Standards for Privacy of Individually Identifiable Health
Information at 45 CFR Part 160 and Part 164, as they exist now or as they may be amended.
(f) "Required By Law" shall have the same meaning as the term "required by law" in 45 CFR
§ 164.501.
(g) "Secretary" shall mean the Secretary of the Department of Health and Human Services or
his designee.
(h) "Security Standards" shall mean the Security Standards, 45 C.F.R. parts 160, 162 and
164, to be effective no later than April 20, 2005, as they exist now or as they may be amended.
(i) "Transaction Standards" shall mean the Standards for Electronic Transactions, 45 C.F.R.
160 and 162, as they exist now or as they may be amended.
Terms used, but not otherwise defined, in this Addendum shall have the same meaning as those
terms in 45 CFR §§ 160.103 and 164.501.
2. General Use and Disclosure Provisions. ESI and the Plan acknowledge and agree as follows:
(a) Except as otherwise limited in this Agreement, ESI may use and disclose PHI to properly
provide, manage and administer the services required under the PBM Agreement and consistent with
applicable law to assist the Plan in its operations, as long as such use or disclosure would not violate the
HIPAA Rules if done by the Plan.
(b) ESI will take reasonable efforts to limit requests for, use and disclosure of PHI to the
minimum necessary to accomplish the intended request; use or disclosure.
(c) Except as otherwise limited in this Agreement:
I10816v3 25
(i) ESI may use PHI for the proper management and administration of ESI or to
carry out ESI's legal responsibilities.
(ii) ESI may disclose PHI to third parties for the proper management and
administration of ESI or to carry out the legal responsibilities of ESI„ provided that the disclosures
are Required by Law, or ESI obtains reasonable written assurances from the person to whom the
information is disclosed that it will remain confidential and used or further disclosed only as
Required by Law or for the purpose for which it was disclosed to the person, :and the person
notifies ESI of any instances of which it is aware in which the confidentiality of the information has
been breached.
(iii) ESI may use PHI to perform Data Aggregation services on behalf of the Plan as
permitted by 45 CFR 164.504(e)(2)(i)(B).
(d) ESI agrees to promptly and in writing notify the Plan if ESI has knowledge that PHI has
been used or disclosed by'ESI in a manner that violates applicable law.
(e) ESI agrees to use appropriate safeguards, consistent with applicable law, to prevent use
or disclosure of PHI in a manner that would violate this Agreement. ESI shall provide the Plan with such
information concerning such safeguards as the Plan may reasonably request from time to time.
(f) ESI agrees to mitigate, to the extent practicable, any harmful effect that is known to ESI
of a use or disclosure of PHI by ESI in violation of this Agreement or the PBM Agreement.
(g) ESI agrees to ensure that any agent, including a subcontractor, to whom it provides PHI
received from, or created or received by ESI on behalf of the Plan in writing agrees to the same
restrictions and conditions that apply through.this Agreement to ESI with respect to such information.
(h) Within fifteen (15) business days of a request from the Plan. ESI shall provide access to
the Plan to PHI in a Designated Record Set in order to meet the requirements under 45 CFR 164.524. If
ESI receives a request directly from an Individual, or if the Plan requests that access be provided to the
Individual, ESI shall provide access to the Individual to PHI in a Designated Record Set within thirty (30)
days in order to meet the requirements under 45 CFR 164.524.
(i) Within thirty (30) business days of a request of the Plan or subject Individual. ESI agrees
to make any appropriate amendment(s) to PHI in a Designated Record Set that the Plan directs or agrees
to pursuant to 45 CFR 164.526.
Q) ESI agrees to document disclosures of PHI and information related to such disclosures
as would be required for the Plan to respond to a request by an Individual for an accounting of
disclosures in accordance with 45 CFR §164.528.
(k) Within thirty (30) business days of a proper request by the Plan, ESI agrees to document
and make available to the Plan, for a reasonable cost-based fee (under conditions permitted by HIPAA if
an Individual requests an accounting more than once during a twelve month period), such disclosures of
PHI and information related to such disclosures reasonably necessary to respond to such request for an
accounting of disclosures of PHI, exclusive of those disclosures for payment, treatment or healthcare
operations, in accordance with 45 CFR 164.528. Within sixty (60) days of proper request by subject
Individual, ESI agrees to document and make available to the Individual the information described above.
ESI shall retain copies of any accountings for a period of six (6) years from the date the accounting was
created.
(1) Within fifteen (15) business days of a request of the Plan, ESI agrees to evaluate a
request to restrict the use or disclosure of PHI on behalf of an Individual in accordance with 45 CFR
164.522.
1108160 26
(m) ESI agrees to make internal practices, books, and records relating to the use and
disclosure of PHI received from, or created or received by ESI on behalf of, the Plan available to the Plan
within ten (10) business days, or at the request of the Plan or the Secretary of HHS ("Secretary"), to the
Secretary in a time and manner directed by the Secretary, for purposes of the Secretary determining the
Plan's compliance with the HIPAA Rules.
3. Plan Obligations
(a) Plan shall notify ESI of any limitation(s) in the notice of privacy practices of Plan in
accordance with 45 C.F.R. §164.520, to the extent that such limitation may affect ESI's use or disclosure
of PHI.
(b) Plan shall notify ESI of any changes in, or revocation of, permission by an Individual to
use or disclose PHI, to the extent that such changes may affect ESI's use or disclosure of PHI.
(c) Plan shall notify ESI of any restriction to the use or disclosure of PHI that Plan has
agreed to in.accordance with 45 C.F.R. §164.522, to the extent that such restriction may affect ESI's use
or disclosure of PHI.
(d) Plan shall not request that ESI use or disclose PHI in any manner that would exceed that
which is minimally necessary under the HIPAA Rules or that would not be permitted by a Covered Entity.
4. Transactions Standards. The HIPAA Rules provide for certain Transactions Standards for
transfer of data between trading partners. While certain of the standards may or may not.be adopted by
the Plan (e.g., for eligibility), ESI will be prepared to accept the following in accordance with 45 CFR Part
162.1502: ASC X12N 834 - Benefit Enrollment and Maintenance. In addition, to the extent applicable,
ESI shall comply with other applicable transactions standards for claims processing functions between
ESI and provider pharmacies. The parties each hereby agree that it shall not change any definition, data
condition or use of a data element or segment in a standard, add any data elements or segment to the
maximum defined data set, use any code or data elements that are either marked "not used" in the
standard's implementation specification or are not in the implementation specification, or change the
meaning or intent of the implementation specification.
5. Security Standards. To the extent that ESI creates, receives; maintains or transmits electronic
PHI. ESI shall:
(a) Implement administrative, physical and technical safeguards that reasonably and
appropriately protect the confidentiality, integrity, and availability of the Electronic PHI that ESI creates,
receives, maintains or transmits on behalf of the'Plan as required by the Security Standards;
(b) Ensure that any agent, including a subcontractor, to whom ESI provides Electronic PHI
agrees to implement reasonable and appropriate safeguards to protect the PHI; and
(c) Report to Plan any Security Incident involving Electronic PHI of which ESI becomes
aware.
Breach; Termination.
(a) Without limiting the termination rights of the parties pursuant to the PBM Agreement,
upon the Plan's knowledge of a material breach by ESI of this Agreement, the Plan shall notify ESI of
such breach and ESI shall have thirty (30) days to cure such breach. In the event ESI does not cure the
breach, or cure is infeasible, the Plan shall have the right to immediately terminate this Agreement and
the PBM Agreement. If cure of the material breach is infeasible, Plan shall report the violation to the
Secretary.
(b) To the extent feasible, upon termination of the PBM Agreement for any reason, ESI shall,
1109160 27
and shall cause any subcontractors and agents to, return or destroy and retain no copies of all PHI
received from, or created or received by ESI on behalf of, the Plan. If return or destruction of such
information is not feasible, ESI shall continue to limit the use or disclosure of such information as set forth
in this Agreement as. if the PBM Agreement had not been terminated.
7. Indemnification. ESI will indemnify and hold harmless Plan from and against any claim, cause
of action, liability, damage, cost or expense, including reasonable attorneys' fees and court or proceeding
costs, arising out of or in connection with any (a) unauthorized use or disclosure of PHI, (b) failure in
security measures affecting PHI; or (c) other material breach of the terms of this Agreement by ESI or any
person or entity under ESI control. Indemnification is conditioned upon the Plan notifying ESI in writing
promptly upon learning of any claim for which indemnification may be sought hereunder, and shall tender
the defense of such claim to ESI. ESI shall not be required to indemnify Plan if any claim is settled
without ESI's consent, which consent will not be unreasonably withheld.
8. Miscellaneous.
(a) Amendment. The parties acknowledge that the foregoing provisions are designed to
comply with the mandates of the HIPAA Rules. Should the provisions of the HIPAA Rules change or be
amended after the date of this Agreement, the parties shall engage in negotiations to amend the
provisions of this Agreement to comply with such changes or amendments. If the parties fail to agree on
reasonable amendment to the provisions of this Agreement, either party may terminate this Agreement
upon ninety (90) days written notice.
(b) Effect on PBM Agreement. Except as relates to the use, security and disclosure of PHI
and electronic transactions, this Agreement is not intended to change the terms and conditions of, or the
rights and obligations of the parties under, the PBM Agreement.
(c) No Third-Party Beneficiaries. Nothing express or implied in the PBM Agreement or in
this Agreement is intended to confer, nor shall anything herein confer, upon any person other than the
parties and the respective successors or assigns of the parties, any rights, remedies, obligations or
liabilities whatsoever.
(d) Interpretation. Any ambiguity in this Agreement shall be resolved in favor of a meaning
that permits the Plan to comply with the HIPAA Rules.
110816v3 28
EXHIBIT E
FINANCIAL DISCLOSURE TO ESI PBM CLIENTS
Express Scripts is a provider of pharmaceutical benefits management ("PBM") and other related
services to thousands of client groups including managed care organizations, health insurers, employer
groups, third party administrators and government entities. Express Scripts' subsidiary companies, some
of which provide services related to supporting our PBM services, include ESI Mail Pharmacy Service,
Inc., CuraScript Pharmacy, Inc., Express Scripts Specialty Distribution Services, Inc., and Phoenix
Marketing Group, LLC. This. disclosure provides an overview of the revenue sources that allow us to
deliver competitive pricing arrangements to our clients.
Express Scripts offers its clients, either directly or through its subsidiary companies, a variety of
services related to the management of prescription drug benefits. The specific services provided to each
client are documented under the Pharmacy Benefit Management Agreement, or other similar agreement,
with our client. Express Scripts' PBM services typically include claims processing and adjudication,
pharmacy network contracting and management, formulary development and management, rebate
management and administration, trend management, and clinical program development and fulfillment.
Some of our clients also utilize our mail service pharmacy to provide their members with convenient
access to safe and affordable prescription drugs through home delivery. In addition to the administrative
fees paid to us by our clients for these core PBM services, Express Scripts derives revenue from other
sources, including arrangements with pharmaceutical manufacturers and retail pharmacies. Some of this
revenue relates to utilization of products by members of the clients for whom we provide PBM services.
Network Pharmacies - Express Scripts contracts for its own account with retail pharmacies to
dispense prescription drugs to members of the clients for whom we provide PBM services. The rates paid
by Express Scripts to these pharmacies differ from one network of pharmacies to the next, and among
pharmacies within a network. Express Scripts generally contracts with clients to be paid an ingredient
cost for drugs dispensed in a given retail network selected by the client at a uniform rate that applies to all
pharmacies in the selected network. Thus, where the rate paid by a client exceeds the rate negotiated
with a particular pharmacy, Express Scripts will realize a positive. margin on the applicable prescription.
The reverse may also be true, resulting in negative margin for Express Scripts. In addition, when Express
Scripts receives payment from a client before payment to a pharmacy is due, Express Scripts retains the
benefit of the use of the funds between these payments.
Manufacturer Rebates and Associated Administrative Fees - Express Scripts contracts for its
own account with pharmaceutical manufacturers to obtain rebates attributable to the utilization of certain
prescription products by individuals who receive benefits from clients for whom we provide PBM services.
Rebate amounts vary based on the volume of utilization as well as the benefit design and formulary
position applicable to utilization of a product. Express Scripts often pays all or a portion of the rebates it
receives to a client based on the client's PBM services agreement. Express Scripts retains -the financial
benefit of the use of any funds held until payment is made to a client. In connection with our maintenance
and operation of the systems and other infrastructure necessary for managing and administering the
rebate process, Express Scripts also receives administrative fees from pharmaceutical manufacturers
participating in the rebate program discussed above. The services provided to participating
manufacturers include making certain drug utilization data available, as allowed by law, for purposes of
verifying and evaluating the rebate payments. The administrative fees paid to Express Scripts by
manufacturers for participation in the rebate program do not exceed 3.5% of the AWP of the rebated.
products.
Pharmacy Dispensing and Distribution - Express Scripts, has several licensed pharmacy
subsidiaries, including our specialty pharmacies. These entities purchase prescription drug inventories,
either directly from manufacturers or from drug wholesalers, for dispensing to patients or for distribution to
physician offices. Purchase discounts off the acquisition cost of these products are made available by
manufacturers in the form of both up-front and retrospective discounts. Such discounts are not
considered part of the rebates paid to Express Scripts by manufacturers' in connection with our rebate
program. While rebates are directly attributable to the utilization of pharmaceutical products by
1108160 29
individuals who receive benefits from clients for whom we provide PBM services, product acquisition price
discounts are based on a pharmacy's inventory needs and, in the case of specialty pharmacies, the
performance of related patient care service obligations. The purchase discounts obtained by these
facilities are not based on any client's benefit design. When an Express Scripts subsidiary pharmacy
dispenses or distributes a product from its inventory, the purchase price paid for the dispensed product,
including applicable dispensing fees, may be greater or less than the pharmacy's acquisition cost for the
product net of purchase discounts. In general, our pharmacies realize an overall positive margin between
this net acquisition cost and the amounts paid for the dispensed products.
Pharmaceutical Program Services - Our specialty pharmacies, including CuraScript Pharmacy,
Inc. and Express Scripts Specialty Distribution Services, Inc., receive compensation from manufacturers
for their administration of programs related to the distribution of certain pharmaceutical products. This
compensation is based on the fair market value of the services provided and is unrelated to the drug
formulary development process or drug utilization applicable to the clients for whom we provide PBM
services. Examples of these services' include (i) administering patient assistance programs for indigent
patients; (ii) administering product sample distribution programs; and (iii) dispensing prescription
medications to patients enrolled in clinical trials.
Data Reporting - Express Scripts sells certain data resulting from its. PBM and pharmacy services
to healthcare data aggregators and similar entities from time to time. We do not sell any data unless we
are, permitted to do so by the terms of our client contract and by applicable patient privacy laws. In
addition, as a condition to receiving access to certain products, a specialty pharmaceutical manufacturer
often will require a purchasing specialty pharmacy to report selected information to the manufacturer
regarding the pharmacy's service levels and other de-identified dispensing-related data with respect to
patients who receive such manufacturer's product. A portion of the discounts or other compensation
made available to our specialty pharmacies represents compensation for such reporting. All such
reporting activities are conducted in compliance with applicable patient privacy laws.
Other Pharmaceutical Manufacturer Services -Phoenix Marketing Group, LLC specializes in the
provision of sample fulfillment, sample accountability, alternative sampling, direct mail fulfillment, and
literature fulfillment services for pharmaceutical manufacturers. Because its services involve only
warehousing and fulfillment-related functions, this subsidiary entity does not review products clinically and
it never uses, sells or has access to Express Scripts' client or member information. Compensation paid to
Phoenix Marketing Group, LLC by pharmaceutical manufacturers is based on the fair market value of
such services, as established most often through an "RFP" process, and any such compensation is
unrelated to the drug formulary development process or drug utilization applicable to the clients for whom
Express Scripts provides PBM services.
July, 2005
1108160 30
EXH ISIT F
MEDICARE.QR-PDP ADDENDUM
THIS MEDICARE QR-PDP ADDENDUM (the,"QR-PDP Addendum") is-made.forihe purpose of
delineating the terms and conditions under which Express Scripts Senior Care„ Inc„ a wholly owned
subsidiary of ESI ("Senior Care') will provide certain OR-PDP services.?to Sponsor as set forth below:
A. Under the Medicare Prescription Drug Benefit Program set forth in Part , D of The
Medicare Prescription Drug, Improvement and Modernization Act of'2003 (the "Act"), employers may
establish a.Qualified'Retiree ,Prescription Drug Plan (as defined below) in order to continue to provide
prescription ;drug .benefits for its Medicare-e3igible'Members
B. ESI,has established a subsidiary, Senior, Care, that, is. responsible for providing certain
services,related,to,i etlieare Plars: including Qualified Retiree Prescription Drug Plans:under the Act, and
NOW; THEREFORE; in consideration. of the mutual covenants herein contained', the parties
hereto agree. as follows:
1. Definitions. Unless otherwise-defined below. capitalized terms used.herein.snall have the same
meaning assigned, to. such terms in the Agreement orthe Madicare:Drug Rules,ras appropriate.
"CMS" means the Center for Medicare' 9and'Medicaid Services.
Medicare'Manufacturer,Admintstrative Fees means those adrninistrativepfees'of'up to 3.5% of the AVVP
of certain Covered Drugs paid by pharmaceutical manufacturers to, or otherwise retainetl by, Senior Care
pursuant to a contract between Senior Care or. 'an affiliate, and the manufacturer and directly in
connection with Senior Cares administering, invoicing,,.allocatl_hg?and collecting the Rebates for Medicare,
plans operating.underthe,Act including QR=P,DPs.
"Medicare Drug Rules means the Act. and any and all related rules, guidance, interpretations and
operational directives adopted by CMS or other governmental agency with jurisdiction over, tile'
enforcement of the Act.
"Medicare Member" means a Member eligibleJor benefitsahrough.the OR-PDP in accordance with the
Medicare Drug Rules as identified: by Sponsor through the Eligibility Files.
"Medicate Rebates" means retrospective rebates,that are paid to Senior Care,, or otherwise•retaihed_by
Senior Care, pursuant `to-the terms of a rebate'coritract negotiated indeperidently by Senior Care or.an
affiliate with. a manufacturer, and, directly attributable"iii the utilization of certain pharmaceuticals by
'
Medicare Members. Rebates do not include Medicare Manufacturer Administrative 'Fees, or,product
discounts or similar remuneration received bysu6sidia_rv phaemaciesof ESl or Senior Care.
"Subsidy Payment" means the subsidy amount=paid to sponsorsbf QR-PDPs under42 CFR § 423:886 of
the Medicare?Drug•Rules.
"Subsidy Reports" means the following reports in a: format and with content consistent with the
requirements. of the. Medicare Drug Rules:. (i) monthly eligibility file (list of`individuals believed to be
anrotled'as?defined by the Medicare Drug Rule or other CMS.guidance)j<and (ii) cost data extract (net
covered retiree plan-related prescription drug costs) `for, monthly, quarterly, oranriual'reporting by for
payment of subsidyj.
IIN160 '31
2. QR-PDP Services.
(a) Services. In consideration of the fees set forth below, ESI and Senior Care shall provide
Sponsors and Medicare Members the same services then presently provided under the Agreement to
Eligible Enrollees. If selected. below, Senior Care shall provide the Subsidy Reports enable Sponsor to
file for Subsidy Payments and meet its QR-PDP reporting obligations under the Medicare Drug Rules
(collectively, the "QR-PDP Services"). The then applicable financial terms and conditions of the
Agreement relating to Participating Pharmacy, Mail Service Pharmacy, Specialty Injectibles,
administrative fees, Member communication fees shall apply to the QR-PDP. The Medicare Pharma
Revenue shall reflect the same Rebate and Manufacturer Administrative Fee terms set forth in the
Agreement. Notwithstanding the terms of the Agreement, no commissions, marketing fees or other
remuneration will be paid by ESI or Senior Care to brokers, TPAs or consultants relating to Prescription
Drug Claims attributable to Medicare.Members.
(b) QR-PDP Fees. Sponsor agrees to pay the applicable fee if electing Senior Care to
provide services to its OR-PDP. If the Sponsor elects QR-PDP services, but no option is selected, the
default shall be the standard option with Member communications:
? STANDARD OPTION: $0.62 Per Medicare Member per Month ($5,000 minimum annual
charge) -Senior Care.submits reports to Clients
0 ENHANCED OPTION: $1.12 Per Medicare Member per Month ($7;500 minimum annual
charge) Senior Care submits reports to CMS
? Member Materials (Notices of Creditable coverage) - $1.35 per piece plus postage.
? Prior Authorization (Part 8 and Part D drugs) -standard PA fees
0 No Subsidy Reports;. Medicare Rebate Filing Only- No charge
(c) QR-PDP Subsidy Reports. If elected above, Senior Care shall timely provide to Sponsor
Subsidy Reports. In order for Senior Care to be able to prepare the Subsidy Reports, Sponsor shall
provide to Senior Care in a timely manner any elements and data now and hereafter required under the
Medicare Drug Rules (e.g., Member social security numbers, the CMS issued RIDS Plan Sponsor ID and
Application 1D) in a format reasonably required by ESI.
(d) Senior Care. Senior Care hereby assumes all responsibility and obligation for the
preparation of Subsidy Reports, and the contracting, administration, allocation and collection of Medicare
Rebates under the Agreement as relates solely to the eligible utilization of Medicare Members.
(e) Federal Funds. Senior Care hereby acknowledges, in accordance with 42 CFR
423.884(c)(3)(ii) that information provided to CMS in connection with the RDS Plan Sponsor Application is
for purposes of obtaining Federal funds.
(f) Certification. Senior Care certifies that the information,it provides to Sponsor hereunder
and pursuant to the EPA is accurate and complete. Senior Care agrees that it will assist the Sponsor in
complying with its obligation to disclose information to CMS as necessary for Sponsor to obtain the
subsidy.
3. Term. Notwithstanding anything set forth in Section 7.1 of the Agreement, the term of this
QR-PDP Addendum shall be one (1) year commencing January 1, 2006, and terminating December
31, 2006, unless otherwise extended by written agreement of the parties.
1108160 32