HomeMy WebLinkAboutDelta Dental of Iowa - Administrative Services and Financial Agreement - 7.10.2006 ADMINISTRATIVE SERVICES and FINANCIAL AGREEMENT
THIS AGREEMENT is by and between Delta Dental of Iowa(Delta Dental), and
City of Waterloo (Employer).
WHEREAS,the following circumstances exist:
A. Delta Dental is a nonprofit corporation authorized by the Commissioner of Insurance for the
state of Iowa to transact business as a dental service plan.
B. Employer desires to create or has established a dental benefits plan for its eligible
Employees.
C. Employer desires to enter into a financial arrangement with Delta Dental under which
Employer is solely responsible for the Claims Paid for covered dental services provided to its
Members.
D. Employer desires that Delta Dental pay claims for dental services furnished to Members and
provide other administrative services.
NOW,THEREFORE, in consideration of the mutual promises and covenants hereinafter
set forth, it is hereby agreed as follows:
1. Definitions.
a. "Administrative Fee" means either an amount per contract or a
percentage of Claims Paid; whichever is applicable,that Delta Dental
charges the Employer and which includes allocations for Delta Dental's
cost of administering Employer's plan and general operating costs. The
Administrative Fee during the Contract Period is stated in the Financial
Exhibit attached to this Agreement.
b. "Administrative Services" means those services to be performed by Delta
Dental for Employer in connection with this Agreement, including, but not
limited to the following: claims processing,customer services, accounting
services, actuarial services, enrollment services,data processing services,
and such other related services as the parties may agree are appropriate and
necessary to accomplish the objectives of this Agreement. Administrative
Services expressly exclude any services for the administration of continued
dental coverage pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA),as amended,or any state or federal
law relating to continuation coverage of the Employer's plan.
Except that Delta Dental agrees to act as billing agent on behalf of
Employer for individuals identified by Employer as being eligible for
DDCP2001 continued coverage under COBRA.
92088-000-00000-00000
92089-000-00000-00000
1
C. "Agreement" means this Administrative Services and Financial
Agreement,Group Application,Financial Exhibit attached to it initially
and as such may be revised or amended,the Summary Plan Description(s),
and the
Subscribers' names and/or applications for coverage.
d. "Summary Plan Description (SPD)" means the written document(s)
which describe and define a welfare benefit plan for dental services which
the Employer established for their Members.
e. "Claims" means claims for dental services that are furnished to Members
with a date of service as defined in the Financial Exhibit as Claims Eligible
for Payment.
f. "Claims Paid" means the amount calculated by deducting from the
Covered Charges any amounts attributable to Provider Savings,
deductibles,copayment,coinsurance,or Contract Limitations as defined in
the SPD(s). The amount of Claims paid during the Contract Period is
determined by the date of Delta Dental's check or remittance.
g. "Contract Limitations" means the amounts which are the liability of the
Subscriber under this Agreement. These include the services which are not
covered,charges for dental services which are not dentally necessary,
penalties for failure to follow notification requirements,and charges for
services that have reached a contract maximum.
h. "Contract Period"means the period of time set forth in the Financial
Exhibit or the most recent revision to the Financial Exhibit.
i. "Covered Charges" means the amount a provider bills a Member,or
Delta Dental,less services not covered. Services which are covered are
those dentally necessary and dentally appropriate procedures as outlined in
the Benefits Section of the SPD(s).
j. "Delta Allowance" means the amount which equals the lesser of the
Covered Charge for a service, supply,or any dental procedure covered
under the dental plan or an amount which Delta Dental establishes,
annually,as its maximum allowable fee for the same service or supply.
For all dental procedures covered under the plan,the maximum allowable
fee is established by Delta Dental of Iowa for a covered dental procedure
that is dentally necessary and dentally appropriate. It is developed from
various sources,such as contracts with dentists, input from our dentist
consultants,the simplicity or complexity of the procedure, and the billed
charge for the same procedures by dentists in Iowa.
For services billed by providers outside of Iowa,the maximum allowable
fee is based on information from that state's Delta Dental Plan.
k. "Employee"means an active Employee of Employer for purposes of
Social Security laws or who otherwise is included as an Employee as
required by law(or a member of the Board of Directors of an Employer).
I. "Incurred Date" means the date dental services are provided. With
regard to inpatient hospital or facility services,the date of admission is the
Incurred Date.
2
M. "Member" means any person entitled to receive dental benefits as defined
in the SPD(s).
n. "Provider Savings" means the amount saved due to our contracts with
providers. It is calculated as the difference between the Covered Charge
and the Delta Allowance.
o. "Subscriber"means any individual identified by Employer as a person
eligible for dental coverage subject to the terms,conditions and limitations
described in the SPD(s).
2. Responsibilities of Employer.
a. Furnishing Information. Employer agrees to furnish Delta Dental with
timely reports and information in a form and manner required by Delta
Dental so that Delta Dental properly may discharge its responsibilities
under this Agreement, including but not limited to, information pertaining
to Members for the purpose of determining eligibility for coverage under
the SPD(s),and information necessary for the proper administration of
coordination of benefits and other limitations and exclusions contained in
the SPD(s).
b. Persons Eligible for Coverage. Prior to the Effective Date of this
Agreement,Employer shall deliver to Delta Dental a list of the names
and/or completed applications for each person that Employer shall
designate as being eligible for benefits set forth in the SPD(s).
On or before the first of each month thereafter Employer shall notify Delta
Dental in writing of those persons who are no longer eligible as of that
month,and thereafter Delta Dental shall not pay Claims for services
furnished such persons on or after the date of termination.
At any time during the Contract Period,Employer may certify to Delta
Dental the names of additional eligible persons. Delta Dental shall, from
and after the commencement date of coverage Delta Dental establishes for
such person,pay Claims with Incurred Dates on or after the effective date
of coverage in accordance with the terms and conditions set forth in this
Agreement.
C. Failure to Provide Information. Employer's failure to provide timely
and accurate information may cause Delta Dental to make incorrect
payments. In that event, Employer may be liable for all or part of any
incorrect payments made.
3. Payment of Claims and Administrative Fee. Employer authorizes Delta Dental
and Delta Dental agrees to process Claims on a regular basis, subject to the
limitations,conditions,and exclusions stated in the SPD(s). Employer will pay or
reimburse Delta Dental for the Claims Paid and Administrative Fee as set forth in
this paragraph.
a. Weekly Actual Claims Payment. Delta Dental will bill Employer weekly.
Once each week, Delta Dental will notify Employer of the total billing for
the week. Delta Dental will(1)generate an ACH transaction and draft the
3
amount of the billing from the bank account designated by Employer or(2)
the Employer will wire transfer to Delta Dental or(3)Employer will issue
a check to Delta Dental's office within one week of notification of the
amount of claims. The weekly billing will include the total of claims for the
week and the last week of the month will also include the Administrative
Fee for the current month.
4. Late Payments. All payments must be paid on time in accordance with paragraph
3. If the Employer fails to make timely payments in full,Delta Dental may,at its
option, immediately stop the payment of all claims for the Employer's Members,
regardless of the Incurred Date and may terminate this Agreement retroactively to
the last day of the month for which full payment was made without any further
notice. Payments not made when due also will be subject to an interest charge at
the then prevailing prime rate plus two percent(2%). The acceptance by Delta
Dental of any late payments or partial payments shall not constitute a waiver of this
provision.
5. Examination of Books and Records.
a. Delta Dental may examine the financial records of Employer reasonably
related to the administration of this Agreement,upon reasonable notice,as
often as Delta Dental deems appropriate,to determine whether Employer
has sufficient amounts on deposit to ensure payment of Claims and
Administrative Fee.
b. Employer or its authorized representative may examine or audit Delta
Dental's records reasonably related to Delta Dental's discharge of
Employer's liability to pay Claims. Such examination shall be conducted
during regular business hours, upon reasonable advance written notice.
Records subject to examination shall include case listings,third-party
explanations of dental benefits,eligibility records,claims history,and
coordination of benefits procedures. The examination period may cover
the current Contract Period and the two years previous only. Upon
completion of the examination, Employer shall share its examination
findings with Delta Dental and conduct an exit conference with Delta
Dental.
C. It is agreed that disclosure of any information under this paragraph to
Employer or Delta Dental has been made in reliance upon the other party's
representation that such information shall be used by it for the sole and
exclusive purpose of examining or auditing information related to the
administration of the dental plan. Such information shall not be disclosed
or otherwise made available to any person or organization not directly
involved in the examination or audit and Delta Dental and Employer shall
implement whatever reasonable safeguards are necessary to ensure that
such information remains confidential.
6. Change of Agreement.
a. If during the Contract Period,any material changes are made in the dental
benefits described in the SPD(s), including the addition or deletion of
benefits, or material changes are made to membership or eligibility
requirements,such as an increase in the ratio of family to single contracts
of more than twenty(20) percent,a change in the number of Employees of
more than ten(10)percent, percentage of Employees enrolled,types of
coverage offered,business entities covered,or offerings of other dental
4
e,
coverage to Employees,Delta Dental shall have the right at its option to
either amend the Agreement, including an adjustment to the financial terms
defined in the Financial Exhibit or terminate the Agreement.
b. Delta Dental will provide Employer thirty(30)day's prior written notice of
any amendment or termination under this paragraph.
C. Changes to this Administrative Services and Financial Agreement or
SPD(s)will be effective only when the written amendment has been signed
by an authorized representative of Delta Dental.
7. Liabilities of the Parties.
a. Employer has the liability for all Claims payments for its Members. Delta
Dental has no liability for Claims if Employer fails to pay or reimburse
Delta Dental in accordance with this Agreement.
Employer agrees to hold harmless and indemnify Delta Dental or any of its
directors,officers,or employees for any and all loss, liability,damage,
expense,or other cost or obligation, including reasonable attorneys' fees,
resulting from and arising out of claims,demands,or lawsuits brought
against Delta Dental by Members,or other persons by reason of the
performance or nonperformance of Employer's responsibilities under this
Agreement,or in connection with benefits or coverage information
disclosed at Employer's request or disclosed during an examination or
audit of books and records,provided the directors,officers, or employees
of Delta Dental shall have performed their duties with ordinary care and
diligence and such directors,officers,or employees of Delta Dental shall
not be liable for any mistake of judgement or other action taken in good
faith.
Delta Dental has made a good faith determination of what the premium tax
liability shall be under this Agreement based upon Iowa Code Chapter 432.
If the governmental authority responsible for collecting such taxes
determines that additional taxes should have been assessed for the charges
collected by Delta Dental under this Agreement,the Employer agrees to
indemnify Delta Dental for such liability.
b. Delta Dental agrees to hold harmless and indemnify Employer or any of its
directors,officers,or employees for any and all loss, liability,damage,
expense,or other cost or obligation, including reasonable attorneys' fees,
resulting from and arising out of claims, demands, or lawsuits brought
against Employer by reasons of Delta Dental's failure to perform its
responsibilities under this Agreement(or policy).
8. Use of Trademarks. Delta Dental and Employer reserve the right to control the
use of their respective corporate names and any other respective symbols,assumed
names,trademarks,and service marks, presently existing or subsequently
established. Delta Dental and Employer agree not to use the corporate name,
symbol, assumed names,trademarks,or service marks of the other in advertising,
promotional material,or otherwise without the prior written consent of the other.
Any previously approved usage will cease immediately upon the termination of this
Agreement and any materials using such names or marks are the property of the
appropriate namesake and will be returned to the appropriate property owner upon
request or at the termination of this Agreement.
5
9. Term and Termination.
a. Term and Notice of Termination. This Agreement shall become
effective on the date defined on the Financial Exhibit and shall continue in
force for the time period defined in the Financial Exhibit. However,either
party may terminate this Agreement at any time by giving written notice of
termination delivered to the other party at least sixty(60)days in advance
of the effective date of termination.
b. Renewal Terms. The parties may agree to renew the Agreement for
successive Contract Periods as defined in the Financial Exhibit. Delta
Dental may change Administrative Fee,stop loss premiums and other
financial factors upon renewal.
C. Immediate Termination. Delta Dental may terminate this Agreement at
any time without notice if Employer fails to make timely and complete
payments in accordance with this Agreement,or Delta Dental determines
that the Employer has inadequate funds to make payments required by this
Agreement. Delta Dental may terminate the Agreement retroactively to the
last day of the month for which Employer made full payment. Employer is
solely responsible for notifying its Subscribers of the termination of this
Agreement for nonpayment or for any other reason.
d. Effects of Termination. If Delta Dental terminates this Agreement for
nonpayment by the Employer, Delta Dental will not pay any Claims
beyond the effective date of the termination regardless of when the services
were received.
Any liability of either party to the other for amounts owed or owing,or for
indemnification for premium taxes under this Agreement shall not be extinguished
by the termination of this Agreement.
10. Termination and Claims Payments. If, following termination of this Agreement
for reasons other than Employer's nonpayment,Claims for the most recent Contract
Period are submitted to Delta Dental for payment in the period specified in the
SPD(s)for timely filing of claims, Delta Dental will pay claims in accordance with
this Agreement and bill Employer in accordance with the procedures set forth in
paragraph 3 above.
11. Force Majeure. The parties to this Agreement shall be excused from performance
under this Agreement for any period during which they are prevented from
performing any responsibilities under this Agreement, in whole or in part, as a result
of an Act of God,war,civil disturbance,court order, labor dispute,or other cause
beyond its reasonable control and such nonperformance shall not be grounds for
.termination or default.
12. Complete Agreement.The parties agree that this Agreement, including all, SPD(s),
Financial Exhibit, amendments, Group Application for coverage, and the
Subscribers' names and/or applications for coverage constitutes the complete
agreement between the parties and supersedes all related discussions and other
communications between the parties. All statements made by the Employer or by
the Employees are deemed to be representations and not warranties. No statement
made by any person insured shall be used in any context unless a copy of the
document containing the statement is furnished to such person.
6
y'v
13. Governing Law. To the extent not superseded by the laws of the United States,
this Agreement shall be construed in accordance with the laws of the State of Iowa.
Any action in regard to this Agreement or arising out of the terms of this Agreement
shall be instituted and litigated in the state or federal courts located in the State of
Iowa and no other.
14. Notices and Communication. Delta Dental shall be entitled to rely upon any
communication or notice from the Employer to Delta Dental in connection with this
Agreement to be genuine,truthful, and accurate,and to have been authorized,
signed, or issued by an officer or agent of Employer empowered to make such
representation on behalf of the Employer.
The mailing of written notices or other communications by regular U.S. Mail,
postage prepaid, shall be deemed sufficient service for the purpose of this
Agreement if addressed to the last address furnished in writing.
Notice to Delta Dental of Iowa may be addressed:
Delta Dental of Iowa
2401 SE Tones Dr., Suite 13
Ankeny, IA 50021
And until another address is furnished in writing, notice to Employer may be
addressed:
City of Waterloo
715 Mulberry
Waterloo,IA 50703
IN WITNESS WHEREOF,the parties have executed this Agreement, in duplicate counterparts,each
counterpart being deemed as original, on the date stated below.
Employer Delta nta o Iowa
By: By:
Title: Ct v D r Title President and CEO
Date:
Date: AUG 212006
By: � � J
Title Secretary
AUG 212006
Date:
7
a
Financial Exhibit
Employer/Plan Sponsor Full Legal Name and Address
City of Waterloo
715 Mulberry
Waterloo, IA 50703
Contract Period
Original Effective Date of Funding Arrangement 7/1/06
Schedule Date 7/1/06
Contract Period to Which this Schedule is Applicable
Begins 7/1/06 and Ends 6/30/08
Claims Eligible for Payment
I. X� Incurred means Claims with date of service within the Contract Period
2. CN Paid means all Claims regardless of Incurred Date
Fixed Fees Per Employee:
Aggregate
Administrative Stop Loss
Fee Premium Total
Per Employee $2.90 $0.00 $2.90
Aggregate Stop Loss Coverage
Aggregate Attachment Point is N/A of projected Claims Paid.
Aggregate Attachment Point
N/A
Losses Eligible for Reimbursement
1. 12/12" means the Losses were Incurred and Paid within the Contract Period
2. "Paid" means the Losses were Paid within the Contract Period. Losses must
have been incurred on or after the effective date of the Agreement.
3. "12/18" means the Losses were Incurred and Paid within that same Contract
Period or within the six months following the end of the Contract Period.
4. Not Applicable
Weekly Transfer Amount: Actual Claims
8
ADDENDUM TO ADMINISTRATIVE SERVICES AND FINANCIAL AGREEMENT
The Administrative Services and Financial Agreement ("Agreement") by and between Delta
Dental of Iowa("Delta Dental") and City of Waterloo ("Employer") is amended to read as
follows:
ARTICLE I: PROTECTION OF HEALTH INFORMATION
Notwithstanding anything to the contrary in this Agreement, but without limiting the
generality of the confidentiality, regulatory compliance and other requirements of Delta Dental
under this Agreement, the parties agree that the following provisions shall apply with respect to
all Protected Health Information (defined below):
A Definitions.
I. "Designated Record Set" shall mean a group of Records maintained by or
for the Employer that is:
a) The medical Records and billing Records about individuals
maintained by or for the Employer.
b) The enrollment, payment, claims adjudication, and case or medical
management Record systems maintained by or for a health plan.
C) Or used, in whole or in part, by or for the Employer to make
decisions about individuals.
As used in the Article I, the term "Record" means any item, collection, or
grouping of information that includes Protected Health Information and is
maintained, collected, used, or disseminated by or for the Employer.
2. "Health Information" shall mean any information, whether oral or
recorded in any form or medium that:
a) Is created or received by a health care provider, health plan, public
health authority, employer, life insurer, school or university, or
health care clearinghouse.
b) And relates to the past, present or future physical or mental health
of an individual; or the past, present or future payment for the
provision of health care to an individual.
3. "Electronic Media" shall mean the mode of electronic transmissions. It
includes the Internet, extranet (using Internet technology to link a business
with information only accessible to collaborating parties), leased lines,
dial-up lines, private networks, and those transmissions that are physically
moved from one location to another using magnetic tape, disk or compact
disk media.
1
4. "Individually Identifiable Health Information" shall mean information that
is a subset of Health Information, including demographic information
collected from an individual,
a) And is created or received by a health care provider, health plan,
employer, or health care clearinghouse;
b) And relates to the past, present or future physical or mental health
condition of an individual; the provision of health care to an
individual; or the past, present or future payment for the provision
of health care to an individual;
C) And identifies the individual, or with respect to which there is a
reasonable basis to believe the information can be used to identify
the individual.
5. "Privacy Standards" shall mean the Standards for Privacy of Individually
Identifiable Health Information, 45 C.F.R. Parts 160 and 164.
6. "Protected Health Information" shall mean Individually Identifiable
Health Information that is:
a) Transmitted by electronic media
b) Maintained in any medium constituting Electronic Media
C) Transmitted or maintained in any other form or medium
"Protected Health Information" shall not include education records
covered by the Family Educational Right and Privacy Act, as amended, 20
U.S.C. §1232g and records described in 20 U.S.C. §1232g (a)(4)(B)(iv).
B Use of Protected Health Information. Delta Dental may use Protected Health
Information to accomplish Delta Dental's duties expressly set forth in this
Agreement. Except as set forth in Article I (L) below, Delta Dental shall not, and
shall ensure that its directors, officers, employees, contractors and agents do not,
use Protected Health Information received from the Employer in any manner that
would constitute a violation of the Privacy Standards if done by the Employer.
C Disclosure of Protected Health Information. Delta Dental may disclose
Protected Health Information to accomplish Delta Dental's duties expressly set
forth in this Agreement. Except as set forth in Article I (L) below, Delta Dental
shall not, and shall ensure that its directors, officers, employees, contractors and
agents do not, disclose Protected Health Information received from the Employer
in any manner that would constitute a violation of the Privacy Standards if
disclosed by the Employer, except that Delta Dental may disclose Protected
Health Information in a manner permitted pursuant to this Agreement or as
required by law.
D Safeguards Against Misuse of Information. Delta Dental agrees that it will
create and implement all appropriate safeguards to prevent the use or disclosure of
2
Protected Health Information other than pursuant to the terms and conditions of
the Article I.
E Reporting of Disclosures of Protected Health Information. Delta Dental shall,
within five (5) days of becoming aware of a use or disclosure of Protected Health
Information in violation of this Article I by Delta Dental, its officers, directors,
employees, contractors or agents or by a third party to which Delta Dental
disclosed Protected Health Information pursuant to this Article I, report any such
disclosure to the Employer, such report to include a description of the
circumstances surrounding the unauthorized use or disclosure and a description of
the Protected Health Information used or disclosed in violation of this Article I.
F Agreements by Third Parties. Delta Dental shall enter into an agreement with
any agent, subcontractor, or any other third party to which Delta Dental will either
disclose or permit access to Protected Health Information that is received from, or
is created or received by Delta Dental on behalf of the Employer. That agreement
shall require such agent, subcontractor or other third party to agree to be bound by
the same restrictions,terms, conditions and required disclosures that apply to
Delta Dental pursuant to this Agreement with respect to such Protected Health
Information.
G Access to Information. Within five (5) business days of a request by the
Employer for access to Protected Health Information about an individual
contained in a Designated Record Set, Delta Dental shall make available to the
Employer such Protected Health Information for so long as such information is
maintained in the Designated Record Set. In the event any individual requests
access to Protected Health Information directly from Delta Dental, Delta Dental
shall take no direct action on the request. Delta Dental shall forward any such
request for Protected Health Information by an individual to the Employer within
three (3) business days of receiving such a request. Delta Dental shall cooperate
with the Employer to provide the requested information to any individual, at the
Employer's direction. Any denials of access to the Protected Health Information
requested shall be the responsibility of the Employer.
H Availability of Protected Health Information for Amendment. Within ten
(10) days of receipt of a request from the Employer for the amendment of an
individual's Protected Health Information or a Record regarding an individual
contained in a Designated Record Set (for so long as the Protected Health
Information is maintained in the Designated Record Set), Delta Dental shall
provide such information to the Employer for amendment and incorporate any
such amendments in the Protected Health Information as required by 45 C.F.R.
§164.526. In the event an individual requests directly to Delta Dental that
Protected Health Information be amended, Delta Dental shall take no direct action
on the request and shall forward such request to the Employer within three (3)
business days of Delta Dental's receipt of such request.
I Accounting of Disclosures. Within ten (10) days of a request by the Employer to
Delta Dental for an accounting of disclosures of Protected Health Information
3
a
made by Delta Dental regarding an individual during the six (6) years prior to the
date on which the accounting was requested, Delta Dental shall make available to
the Employer such information as is in Delta Dental's possession and is required
for the Employer to make the accounting required by 45 C.F.R. §164.528. At a
minimum, Delta Dental shall provide the Employer with the following
information;
1. The date of the disclosure
2. The name of the entity or person who received the Protected Health
Information, and if known, the address of such entity or person
3. A brief description of the Protected Health Information disclosed
4. A brief statement of the purpose of such disclosure that includes an
explanation of the basis for such disclosure
In the event the request for an accounting is delivered directly to Delta Dental,
Delta Dental shall take no direct action on the request and shall within three (3)
business days of receipt forward such request to the Employer. It shall be the
Employer's responsibility to prepare and deliver any such accounting requested.
Delta Dental shall implement an appropriated recordkeeping process to enable it
to comply with the requirements of this Article I and to assist the Employer in
responding to requests for an accounting.
J Availability of Books and Records. Delta Dental shall make its internal
practices, books and records relating to the use and disclosure of Protected Health
Information received from, or created or received by Delta Dental on behalf of,
the Employer available to the Secretary of Health and Human Services or any
other officer or employee of the Department of Health and Human Services to
whom authority has been delegated for purposes of determining the Employer's
and Delta Dental's compliance with the Privacy Standards.
K Termination for Breach or Violation of this Section. Notwithstanding
anything to the contrary in this Agreement, the Employer may terminate this
Agreement immediately upon thirty (30) days' notice to Delta Dental if the
Employer determines that Delta Dental has breached a material term of this
Article I. Upon termination under this paragraph or upon termination or
expiration under any other provision of this Agreement, Delta Dental shall, if
feasible, return or destroy all Protected Health Information received from, or
created or received by Delta Dental on behalf of the Employer. Delta Dental shall
retain no copies of such Protected Health Information. If the return or destruction
of such Protected Health Information is not feasible, Delta Dental shall;
1. Inform the Employer that the return or destruction is not feasible
2. Limit any further use or disclosure
3. And otherwise extend the provisions of this paragraph for so long as Delta
Dental maintains the Protected Health Information.
4
L Additional Permitted Uses and Disclosures. Notwithstanding anything to the
contrary in this Article I,Delta Dental shall be permitted to use and disclose
Protected Health Information;
1. To carry out proper management and administration of Delta Dental
2. To carry out the legal responsibilities of Delta Dental
3. And to provide data aggregation services relating to the health care
operations of the Employer
Delta Dental shall obtain reasonable assurances from any person or entity whom
Protected Health Information is disclosed under this Article I (L) that such
Protected Health Information will be held confidential and used or further
disclosed only as required by law or for the purpose for which it was disclosed to
the person or entity. Delta Dental shall obligate such person or entity to notify
Delta Dental of any instances in which the confidentiality of the Protected Health
Information has been breached.
M Indemnification. Delta Dental shall indemnify and hold harmless the Employer
for any claims, damages, penalties under the Privacy Standards, or expenses
(including reasonable attorney fees)to the extent they arise out of Delta Dental's
breach of this Article I. Disclosures made at the Employer's direction that violate
the Privacy Standards shall not trigger the Delta Dental's indemnification
obligation. The Employer shall indemnify and hold harmless Delta Dental for
any claims, damages, penalties under the Privacy Standards, or expenses
(including reasonable attorney fees)to the extent they arise out of the Employer's
breach of the Privacy Standards or this Article I.
IN WITNESS WHEREOF, Delta Dental and Employer execute this Agreement in multiple
originals to be effective on the last date written below.
CITY OF WATERLOO DELTA DENTAL OF IOWA
By: ��Ag By: -- - 111- -.---
v
Title: )OgAa vd t- Title: President and CEO
Date: Date: AUG 212006
By. � i2✓� `
Title: Secretary
Date: AUG 212006
MN 142502_I DOC
5
-� 7-
�� 5 99
EXPRESS SCRIPTS, INC.
PHARMACY BENEFIT MANAGEMENT AGREEMENT
THIS PHARMACY BENEFIT MANAGEMENT AGREEMENT ("Agreement") made to be effective
as of the date set forth in Section 7.1 and is entered into by and between EXPRESS SCRIPTS, INC., on
behalf of itself and its subsidiaries (collectively referred to as "ESI"), and CITY OF WATERLOO, INC., a
municipality organized under the laws of the State of Iowa ("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:
SECTION I - DEFINITIONS
The following terms shall have the meanings set forth below:
"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, 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.
"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.
"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.
"Mail Service Pharmacy" means a duly licensed pharmacy operated by ESI or its subsidiaries, other than
CuraScript, where prescriptions are filled and delivered to Members via the mail service.
"Member" means each person who is eligible, as determined solely by Sponsor, to receive prescription
This Agreement is confidential and may not be disclosed to any other party
without the express written consent of both parties.
116458v2
drug benefits as indicated in the Eligibility Files.
"Member Submitted Claim" means (i) a paper claim submitted by a Member for Covered Drugs dispensed
by a pharmacy other than a Participating Pharmacy; (ii) a paper claim submitted by a Member for Covered
Drugs for which the Member paid cash; or (iii) 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 Participating Pharmacies, Mail Service
Pharmacy, or ESI Specialty Pharmacy as the context of the provision dictates.
"Plan" means Sponsor's applicable 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 and other injectable prescription drug products requiring special
handling and Member services.
"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).
SECTION II - ESTABLISHMENT OF THE PRESCRIPTION DRUG PROGRAM
2.1 Exclusivity. At all times while this Agreement is in effect, 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,
Mail Service 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.
(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 both by Sponsor and ESI.
(b) The timing of loading full Eligibility Files will be determined upon consultation with the
Sponsor. Clean changes only files shall be loaded within an average of two (2) days. Sponsor shall
provide Eligibility Files for monthly reconciliation until such time that ESI determines that quarterly
reconciliations are adequate. ESI shall not be responsible for Prescription Drug Claims for retroactively
termed Members, although ESI will maintain updated Eligibility Files with the termed information. 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.
2.3 Benefit Design Form. Prior to the provision of any services under this Agreement, Sponsor will
submit a completed EBD. By signing the EBD, Sponsor certifies that the EBD accurately depicts the
116458v2 2
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.
2.4 Implementation Payment. Subject to Section 7.2(e), ESI will pay to Sponsor an implementation
payment equal to $2.50 per Member implemented as of Sponsor's "go live" date, subject to a maximum
payment of $50,000 in the aggregate (the "Implementation Payment"), intended solely to reimburse
Sponsor for the actual, fair market value of expenses to be incurred by Sponsor in transitioning to ESI.
Sponsor must submit adequate documentation of implementation expenses within 180 days of
implementation at which time a final reimbursement of eligible expenses will be made. Sponsor
represents and warrants that: (i) it will only use the Implementation Payment as reimbursement for its
actual implementation expenses incurred in transferring to ESI; (ii) the amount of the Implementation
Payment is equal to or less than the fair market value of the actual implementation expenses to be
incurred by Sponsor in transitioning to ESI; and (iii) the expenses for which Sponsor is receiving the
Implementation Payment are reasonable and consistent with the fair market value associated with such
expenses in an arm's length transaction. Implementation Payments may not be used in connection with
the Medicare Part D Program. ESI intends to amortize the Implementation Payment over the Initial Term
of the Agreement on a straight-line basis, unless otherwise required by law or accepted accounting
principles. Sponsor shall notify and disclose the amount and the terms of the Implementation Payment to
Members and other third parties to the extent appropriate under, or required by, applicable laws and
regulations and that it will only use such Implementation Payment in a manner consistent with the
applicable law. Implementation Payments are not payable until this Agreement is executed.
SECTION III - PBM SERVICES
3.1 Pharmacy Services.
(a) Participating Pharmacies. Upon presentation of an ID Card, Members may obtain
prescriptions for Covered Drugs through a Participating Pharmacy network. ESI will make available an
updated list of Participating Pharmacies in such network(s) on-line. Participating Pharmacies will
dispense prescriptions to Members in a quantity not to exceed the quantity listed in the EBD. 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.
(b) Mail Service Pharmacy. 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 the Mail Service Pharmacy, as well as provide web-based refill and related
service features. Prescriptions will be dispensed in a quantity not to exceed a 90-day supply, unless
otherwise specified in the EBD. 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.
(c) Specialty Products. Members may have Specialty Products filled through ESI Specialty
Pharmacy and Participating Pharmacies as set forth on Exhibit A.
(d) 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 negligent act or omission of any
Participating Pharmacy or their or its agents or employees.
(e) Audits of Participating Pharmacies. ESI shall maintain criteria, which it may amend from
116458v2 3
time to time, to establish when and how a Participating Pharmacy shall be audited to determine
compliance with its agreement with ESI. Audit criteria are available upon request. 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. To compensate ESI for the cost of conducting such audits, ESI shall
retain an audit fee from any recovered overpayment of the reimbursement Fees paid to ESI and
attributable to the Plan detected in the audit in the amount set forth in Exhibit A. Any balance of recovered
overpayments will be paid to Sponsor. ESI shall attempt recovery of overpayments through offsets or
demand of amounts due. ESI shall not be required to institute litigation to recover any overpayments.
(f) 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. Subject to the fees set forth on Exhibit A (if applicable), ESI shall
provide prior authorization ("PA") services, including exception reviews and overrides for quantity limits,
nonformulary determinations and benefit exclusions 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 deemed reliable to ESI. ESI shall
not undertake, and is not required hereunder, to determine medical necessity to make diagnoses or
substitute EST's judgment for the professional judgment and responsibility of the physician.
(d) Claims for Benefits.
(i) Processing. ESI agrees that if Sponsor is subject to Employee Retirement
Income Security Act, as amended, the processing of initial "claims for benefits" for Member
Submitted Claims and PA requests shall be conducted in a manner consistent with the
requirements for claim processing set forth in 29 CFR Part 2560 (as published in the Federal
Register, November 21, 2000), except that Sponsor shall be responsible for ensuring compliance
with any aspect of the requirements relating to functions performed or materials prepared by
Sponsor or any other third party.
(ii) Appeals. ESI will not conduct any appeals of denied "claims for benefits." If
Sponsor does not desire to conduct appeals itself, Sponsor may elect to have ESI facilitate
appeals through the UM Company (for as long as ESI has a contract with a UM Company) for the
fees set forth in Exhibit A. ESI will route to UM Company Member appeals properly sent to ESI's
116458v2 4
designated address. The UM Company will be responsible for conducting the appeal on behalf of
Sponsor in accordance with applicable law, and if an appeal is denied, the UM Company will be
responsible for sending a denial letter to the Member in accordance with applicable law. Sponsor
acknowledges and agrees that: (A) the UM Company, and not ESI, will be conducting appeals on
behalf of Sponsor; (B) the UM Company is an independent contractor of ESI, and ESI does not in
any way control or direct the UM Company with respect to appeals conducted by the UM
Company; (C) ESI is not acting as a fiduciary in connection with the appeals being conducted by
the UM Company, and ESI shall not be named by Sponsor as a fiduciary in connection with such
appeals; (D) ESI shall not be responsible for overseeing the UM Company's appeal process
(except that ESI shall require the UM Company to contractually agree that it will conduct appeals
in accordance with applicable law and Sponsor's plan), and ESI shall not be liable for any injury or
damages arising as a result of the UM Company's negligence or otherwise; (E) the UM Company
shall have full authority and full discretion to conduct appeals for which it has been designated by
Sponsor and shall have full authority and full discretion to interpret the terms of Sponsor's plan
with respect to those appeals and to make all findings of fact with respect to those appeals and
the UM Company's determination on appeal shall be final and legally binding on all parties; and
(F) Sponsor will forward to the UM Company all relevant plan language necessary for the UM
Company to conduct appeals.
(e) Drug Utilization Review (DUR). ESI shall perform a standard concurrent DUR 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 DUR 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 DUR process by Pharmacies,
except that ESI shall be responsible for proper maintenance and updates of the DUR 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.
(f) 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. The prescribing
physician always shall have final authority over the drug that is dispensed to the Member. In addition,
upon written election of Sponsor, ESI may provide clinical programs identified on Exhibit A, 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.
(b) Rebate Program. ESI will pay to Sponsor Rebates as 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 request of Sponsor, ESI may develop special
reporting packages at ESI's standard hourly rate for such services, as set forth in Exhibit A. Sponsor shall
make its personnel available to define the scope of Sponsor's reporting needs and to participate in the
testing and validation of any such projects.
(b) Claims Data Feeds. ESI maintains claims data on-line in a data warehouse for up to thirty
(30) months from the date the prescription is filled (the "On-Line Storage Period"). Thereafter, claims data
116458v2 5
is archived pursuant to Section 3.4(d) below. During the On-Line Storage Period, upon Sponsor's written
request, ESI shall provide regular prescription claims data in EST's standard format(s) for no additional
charge to Sponsor's vendors ("Vendors") for disease management, flexible savings account and other
"payment," "treatment" and "healthcare operations" purposes (as defined under HIPAA). Requests for
retrieval of data beyond the On-Line Storage Period are subject to the hourly charge as set forth in Exhibit
A. ESI disclaims any liability or responsibility related to the disclosure to and uses 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 and its affiliates. 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 date to pharmaceutical manufacturers.
(d) Claims Data Retention. ESI will retain Sponsor's claims data for a total of seven (7) years
(including the On-Line Storage Period) from the date the prescription is filled. Following the On-Line
Storage Period, ESI will maintain Sponsor's claims data on microfilm, microfiche or other form determined
by ESI for the remainder of the seven (7) year retention period. Following the expiration of the seven (7)
year retention period, ESI shall dispose of such data in accordance with its standard policies and practices
and applicable state and federal law. Subject to the foregoing, ESI will use reasonable efforts to
cooperate with Sponsor for purposes of meeting Sponsor's retention obligations under applicable 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 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. Sponsor shall bear its own costs associated with any audit.
Sponsor may use an independent auditor ("Auditor"), so long as such auditor does not have a conflict of
interest with ESI, as reasonably determined by 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 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. 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. Nothing in this Agreement shall preclude or conflict with Sponsor's compliance with the auditing
requirements of federal or state law.
(f) 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. ESI agrees, at its sole
expense, to maintain during the term of this Agreement or any renewal hereof, commercial general liability
insurance, pharmacists professional liability insurance and managed care liability with limits, excess of a
self insured retention, in amounts of not less than $2,000,000 per occurrence, and $4,000,000 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.
116458v2 6
SECTION IV- FEES; BILLING AND PAYMENT
4.1 Billing and Payments.
(a) Billing. ESI will bill Sponsor twice per month for all applicable 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 within seven (7) 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 rate of eighteen percent (18%) per
annum or, if lower, the highest interest rate permitted by 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 insecurity 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 CuraScript. ESI may suspend Mail Service Pharmacy and/or Specialty Pharmacy services to a
Member who is in default of payment of any Copayments owed the applicable pharmacy.
(e) Consultant/Broker Arrangements. The terms and conditions concerning any payments to
a third party consultant or broker are as set forth in Exhibit G.
SECTION V— HIPAA; PROPRIETARY INFORMATION
5.1 PHI. 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 Information") unless
otherwise public: (a) with respect to ESI: EST's reporting and other web-based applications, eligibility and
adjudication systems, system formats, and databanks (collectively, "ESI Systems"), clinical or formulary
management operations or programs, information concerning Rebates, prescription drug evaluation
criteria, drug pricing information, and Participating Pharmacy and Specialty Network Pharmacy
agreements; and (b) 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.
Upon termination of this Agreement, each party shall cease using the other's Proprietary Information, and
all such information shall be returned or destroyed upon the owner's direction.
116458v2 7
(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 ESI'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 ESI'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 publicize the fact that ESI provides prescription
drug benefit management services to Sponsor.
SECTION VI - COMPLIANCE WITH LAW; ERISA; FINANCIAL DISCLOSURE
6.1 Compliance with 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 benefit
management services and Covered Drugs 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, or (b) First
DataBank elects to stop publishing "AWP," then 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 adjusted
Fees, then either party may terminate the Agreement on thirty(30) days' prior written notice to the other.
6.2 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 ESI is not acting as a fiduciary (as defined in Section 3.21(a) of ERISA) of
Sponsor's Plan, and Sponsor shall not name ESI as a plan fiduciary. ESI has no 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 ESI does not have 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.
6.3 Disclosure of Certain Financial Matters. In addition to the administrative fees paid to ESI by
Sponsor, if any, ESI derives 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 acts on its own behalf, and not for the benefit of or as agent for Sponsor, Members or the
Plan. ESI retains 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.
SECTION VII -TERM AND TERMINATION; DEFAULT AND REMEDIES
7.1 Term. This Agreement will commence effective the later of July 1, 2006 or the date that is ten
(10) days following ESI's receipt of an executed copy from Sponsor ("Effective Date") and shall continue
for a period of three (3) one year terms commencing from the Effective Date, and may be terminated
116458v2 8
earlier or extended in accordance with the terms hereof ("Initial Term"). 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 ninety (90) days prior to the end of a term year
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 a term year 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 may terminate or
suspend its 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) Reimbursement of Implementation Payment. In the event of a termination of this
Agreement for any reason other than ESI's uncured material breach of this Agreement prior to the
expiration of the Initial Term, Sponsor will reimburse ESI an amount equal to the unamortized portion of
the Implementation Payment. Any payment made to ESI by Sponsor pursuant to this Section will not be in
lieu of any other rights or remedies ESI may have in connection with the termination of this Agreement,
including monetary or other damages.
(f) Obligations Upon Termination. Sponsor shall 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 or its agent shall pay ESI in accordance with this Agreement for all claims for
Covered Drugs dispensed and services provided to Sponsor and 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. 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.
116458v2 9
7.3 Remedies.
(a) Remedies Not Exclusive. A party's right to terminate this Agreement under this Section
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 Majeure. Neither party shall lose any rights under this Agreement or be liable in
any manner for any delay to perform its obligations under this Agreement that 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, acts of terrorism,
epidemics, embargoes, war or other outbreak of hostilities, government acts or regulations, 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, or any other reason where failure to
perform is beyond the party's reasonable control, and is not caused by the negligence, intentional conduct
or misconduct of the defaulting party; provided, however, that this clause may not be invoked to excuse a
party's payment 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) 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) ESI'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 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 or Auditor may make of
PHI provided to Sponsor or Auditor by ESI, 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.
7.4 Survival. The parties' rights and obligations under the last sentences of subsections 3.1(d) and
3.2(d), Sections IV and V; and subsections 6.1, 7.2(e) and (f), 7.3, and 7.4 shall survive the termination of
this Agreement for any reason.
SECTION 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
116458v2 10
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 Waterloo
Attn: Tim Hurley, Mayor
715 Mulberry Street
Waterloo, Iowa 50703
Fax No. (319) 291-4571
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 party shall have the right to make any representations concerning
the duties, obligations or services of the other except as consistent with the express terms of this
Agreement or as otherwise authorized in writing by the party about which such representation is 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 may assign this Agreement or
delegate any rights or obligation hereunder to a wholly-owned subsidiary of ESI, provided however, that
ESI retains full responsibility and liability for the performance of the Agreement.
8.4 Integration; 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. 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 Iowa, 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.
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.
8.9 Freedom of Information Act ("FOIA"). ESI acknowledges that Sponsor, as a public entity, may be
subject to the applicable FOIA laws and must, upon request, disclose such materials as are covered by
116458v2 11
and not exempted from such laws. Pursuant to Section 5.2 hereof, Sponsor acknowledges that certain
information contained herein or subject to this Agreement is proprietary and confidential to ESI and shall
be exempt from that Act to the fullest extent permitted by law. Sponsor agrees to give ESI notice and a
reasonable amount of time to oppose any FOIA request pertaining to this Agreement or any proposal
related hereto.
IN WITNESS WHEREOF, the undersigned have executed this Pharmacy Benefit Management
Agreement as of the day and year below set forth.
EXPRESS SCRIPTS., INC. CITY OF WATERLOO, INC.
IOWA
Al
By:
Printed me: By: 72:;:Z /k4�/
Title: Printed Name:
Title: yhavo✓
Date: Phone: 31x1 I P ql- 113A
Fax: 31 - - V5 '71
Edignae?dk
Sr.Vice Presiders Federal ID Number: ya- Oo a
Sales &AccountNsen'+e !ltleltsi Date:
Phone: 314.702.71b�t
FQa
RECEIVED AUG 2 1 2006
116458v2 12
EXHIBIT A
PHARMACY REIMBURSEMENT
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 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.
If any change in Federal or applicable state law or regulation (including the interpretation of
existing laws or regulations by a court or administrative agency or extension of a prescription drug benefit
under Medicare) occurs during the term of the Agreement, and in consequence thereof ESI increases
payments for Covered Drugs to Participating Pharmacies in the applicable jurisdiction under its provider
agreements, the Prescription Drug Program fees set forth below will be increased by the same amount.
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. 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.
ESI shall have the right to make equitable modifications to the reimbursement rates,
administrative fees and/or Rebates, as appropriate to the extent Sponsor elects to use on-site clinics or
pharmacies to dispense prescription drugs to Members and such use materially reduces (a) Rebates
generated by Sponsor hereunder, (b) the number of Covered Drug claims submitted on-line, and/or (c)
Formulary compliance.
For purposes of this Exhibit A, 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: (i) 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 MRA list. The MRA list is structured with the intent that the weighted
average MRA discount for the entire MRA list is equivalent to a discount off of AWP with a range of 50% -
60%, but Sponsor's actual weighted average MRA discount may vary within or beyond this range
depending upon Sponsor's actual Generic Drug mix and utilization and Sponsor's plan design. ESI
periodically updates the MRA to reflect changes in Generic Drug availability and prices.
116458v2
13
"Network Access Program" means a program in which Members obtain prescriptions through
Participating Pharmacies and bear the full cost of the Covered Drugs and may or may not be entitled to
reimbursement of a portion of the cost from Sponsor.
"Single Source Generic Drug" means a Generic Drug licensed and currently marketed from only
one non repackager generic labeler within a generic class number(GCN).
"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 rates set forth below are conditioned on the adoption by Sponsor of the specific Copayment
structure and Formulary:
I. Participatinq Pharmacy Reimbursement Rates (No Specialty Products)
2-Tier Plan Design 3-Tier Plan Design
ESI Formulary with a Minimum
$15 Copay Differential
ESI National Preferred Formulary
Minimum 50,000 Pharmacy Network Minimum 50,000 Pharmacy Network
Ingredient Cost The lower of AWP-15.5%,MRA,or The lower of AWP-15.5%,MRA,or
(Brand and Generic) U&C U&C
Single Source Generic
Drugs are priced as
brands
Ingredient Cost Lesser of U&C or combined AWP Lesser of U&C or combined AWP
(Compound Drugs)
Brand $1.70 $1.70
Dispensing Fee/Rx
Generic $1.90 $1.90
Dispensing Fee/Rx
Administrative Fee/Rx $0,00 1 $0.00
Notwithstanding the preceding, ESI will guarantee a minimum average discount for Generic Drugs as set
forth below.
H. Generic Guarantee
ESI guarantees a minimum average generic discount of AWP- 49% on Generic Drugs that are
Covered Drugs dispensed through Participating Pharmacies, to be applied, measured and reconciled in
the aggregate on an annual basis within ninety (90) days of the end of the Sponsor's contract year.
The overall generic guarantee is based on the actual drug specific eleven (11) digit National Drug
Code (NDC) submitted by a Participating Pharmacy at the time of adjudication. All Zero Balance Claims
(ZBCs) will be excluded from the guarantee. (ZBCs are claims that are equal to or less than a Member's
copay.) U&C claims greater than the Member's copay will be excluded from the guarantee. Specific 11
digit multi-source drug claims when brand drugs are dispensed will be excluded from the guarantee.
116458v2 14
Specific 11 digit multi-source drug claims when the actual Generic Drug is dispensed will be excluded
from the guarantee only for the first four (4) months from the day the Generic Drug comes to market if
there is only one Generic Drug manufacturer (single-source drug). If more than one pharmaceutical
manufacturer is providing a generic product then those generic claims will be included in the overall
guarantee immediately. The financial impact (difference in cost between the brand and Generic Drug plus
copay) of additional Member payments that apply to multi-source drug claims due to specific Dispense As
Written (DAW) codes will be excluded from the guarantee, but the claims and actual discount on the
Generic Drug claims will be included.
The guarantee is further subject to the following:
• The generic guarantee is offered based on the plan design assumptions provided by the
Sponsor in the RFP. To the extent the assumptions are incorrect as of the implementation date of
this Agreement, or Sponsor changes its benefit design or Formulary during the term of the
Agreement, the guarantee will be equitably adjusted if there is a material impact on the generic
discount achieved.
III. Mail Service Pharmacy Pricing (No Specialty Products)
2-Tier Plan Design 3-Tier Plan Design
1-34 35.90 1-34 35-90
Day Supply Day Supply Day Supply Day Supply
Brand Ingredient AWP—15.5% AWP—24% AWP—15.5% AWP—24%
Cost
Single Source
Generic Drugs are
priced as brands
Generic AWP-54% AWP—54% AWP—54% AWP—54%
Ingredient Cost
Compound Drug Combined AWP plus applicable service fee
Ingredient Cost
Brand
Dispensing $1.70 $0.00 $1.70 $0.00
Fee/Rx
Subject to change
for changes in
delivery rates
Generic
Dispensing $1.90 $0.00 $1,90 $0.00
Fee/Rx
Subject to change
for changes in
delivery rates
Administrative $0.00
Fee/Rx
Minimum $8.99
Rate/Rx
116458v2 15
IV. Specialty Program Fees
• 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
dispensed by CuraScript, in accordance with the payment terms described in the Agreement. In no
event shall Mail Service Pharmacy or non-Specialty Participating Pharmacy pricing be applied to the
Specialty Products.
• The list of Specialty Products is subject to modification from time to time upon mutual agreement, as
other Specialty Products become available.
• Services include the prescribed Specialty Product(s), delivery and the ancillary supplies necessary to
administer the Specialty Products.
• 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 above pricing may need to be modified until the short supply
situation is corrected.
• Rebates are not payable on CuraScript claims due to the deeper discount offered.
If Sponsor desires to include Specialty Products under its Prescription Drug Program, it should
select one of the following:
Option 1 - CuraScript Exclusive Option: (pricing below is conditioned on CuraScript being the
exclusive Specialty Product pharmacy)
Product CuraScript Product CuraScript Product CuraScri t
ACTHAR -17% FORTAZ -17% ONTAK -17%
ADRUCIL -17% FORTEO -17% ONXOL -35%
ADVATE -25% FRAGMIN -17% OVIDREL -18%
ALDURAZYME -17% FUZEON -17% PACLITAXEL -35%
ALFERON-N -17% GAMIMUNE -30% PAMIDRONATE -35%
ALIMTA -17% GAMMAGARD -30% PANGLOBULIN -30%
ALKERAN -17% GAMMAR P -30% PARAPLATIN -17%
ALOXI -17% GAMUNEX -30% PEGASYS -17%
ALPHANATE -32% GEMZAR -17% PEG-INTRON -17%
ALPHANINE -32% GENOTROPIN -18% PERGONAL -18%
AMEVIVE -17% GEREF -18% PLENAXIS -17%
ANZEMET -17% GLEEVEC -17% POLYGAM -30%
ARANESP -17% GONAL-F -18% PREGNYL -18%
AREDIA -17% GONAL-F RFF -18% PROCRIT -17%
ARIXTRA -17% HELIXATE -30% PROFASI -18%
AUTOPLEX -29% HEMOFIL -35% PROFILNINE -25%
AVASTIN -17% HERCEPTIN -17% PROGESTERONE -18%
AVONEX -17% HUMATE-P -32% PROLEUKIN -17%
BAYGAM -30% HUMATROPE -18% PROPLEX -5%
BAYHEP -17% HUMEGON -18% PROTROPIN -18%
BAYRHO-D -25% HUMIRA -17% PULMOZYME -17%
BEBULIN -9% HYCAMTIN -17% RAPTIVA -17%
116458v2 16
Product CuraScri t Product CuraScri t Product CuraScri t
BENEFIX -20% IFEX -17% REBETOL -17%
BETASERON -17% IFOSFAMIDE -35% REBETRON -17%
BICILLIN -17% INFERGEN -17% REBIF -17%
BICNU -17% INNOHEP -17% RECOMBINATE -31%
BLEOMYCIN -35% INTRON -17% REFACTO -17%
BOTOX -18% IRESSA -17% REMICADE -17%
BRAVELLE -18% IVEEGAM -30% REPRONEX -18%
CAMPATH -17% KINERET -17% RHOGAM -25%
CAMPTOSAR -17% KOATE-DVI -37% RIBAVIRIN -35%
CARBOPLATIN -35% KOGENATE -38% RIMSO-50 -17%
CARIMUNE -30% KYTRIL -17% RISPERDAL CONSTA -17%
CEREZYME -15% LEUCOVORIN -35% RITUXAN -17%
CETROTIDE -18% LEUKINE -17% ROCEPHIN -17%
CISPLATIN -35% LEUPROLIDE -35% ROFERON-A -17%
COPAXONE -17% LEUSTATIN -17% SAIZEN -18%
COPEGUS -17% LOVENOX -17% SANDOSTATIN -17%
CYTARABINE -35% LUPRON -17% SENSIPAR -17%
CYTOGAM -18% LUPRON DEPOT -17% SEROSTIM -17%
CYTOXAN -17% LUPRON DEPOT-PED -17% TARCEVA -17%
DACARBAZINE -35% MESNA -35% TAXOTERE -17%
DESFERAL -17% MESNEX -17% TEMODAR -17%
DOXIL -17% METHOTREXATE -35% THALOMID -17%
DOXORUBICIN -35% MITOMYCIN -35% THERACYS -17%
ELIGARD -17% MONARC-M -37% THIOTEPA -35%
ELLENCE -17% MONOCLATE-P -27% THYROGEN -17%
ELOXATIN -17% MONONINE -27% TICE -17%
ELSPAR -17% MUSTARGEN -17% TOBI -17%
ENBREL -17% MYLOTARG -17% VELCADE -17%
ENGERIX -17% MYOBLOC -17% VENOGLOBULIN -30%
ENGERIX-B -17% NABI-HB -17% VIDAZA -17%
EPOGEN -17% NAVELBINE -17% VINCASAR -35%
ERBITUX -17% NEULASTA -17% VINCRISTINE -35%
ETHYOL -17% NEUMEGA -17% VINORELBINE -35%
ETOPOPHOS -17% NEUPOGEN -17% WINRHO -30%
ETOPOSIDE -35% NIPENT -17% XELODA -17%
FABRAZYME -17% NORDITROPIN -18% XOLAIR -17%
FACTREL -18% NOVANTRONE -17% ZANOSAR -17%
FEIBA -37% NOVAREL -18% ZAVESCA -17%
FERTINEX -18% NOVOSEVEN -37% ZINECARD -17%
FLUDARABINE -35% NUTROPIN -18% ZOFRAN -17%
FLUOROURACIL -35% NUTROPIN AQ -18% ZOLADEX -17%
FOLLISTIM -18% ONCASPAR -17% ZOMETA -17%
FOLLISTIM AQ -18% ZORBTIVE -18%
116458v2 17
OPTION 2—Participating Pharmacy Network and CuraScript
Dispensing
Specialty Products-Open Ingredient Cost-%Off AWP Fee Rebates
Same as non-Specialty Products
Participating Pharmacies See Table below $2.75 dispensed through Participating
Pharmacies
CuraScript See Table below $0.00 $0.00
Participating Participating Participating
Product Pharmacy CuraScript Product Pharmacy CuraScript Product Pharmacy CuraScript
ACTHAR -13% -15% FORTAZ -13% -15% ONTAK -13% -15%
ADRUCIL -13% -15% FORTEO -13% -15% ONXOL -13% -30%
ADVATE -13% -25% FRAGMIN -13% -15% OVIDREL -13% -15%
ALDURAZYME -13% -15% FUZEON -13% -15% PACLITAXEL -13% -30%
ALFERON-N -13% -15% GAMIMUNE -13% -25% PAMIDRONATE -13% -30%
ALIMTA -13% -15% GAMMAGARD -13% -25% PANGLOBULIN -13% -25%
ALKERAN -13% -15% GAMMAR P -13% -25% PARAPLATIN -13% -15%
ALOXI -13% -15% GAMUNEX -13% -25% PEGASYS -13% -15%
ALPHANATE -13% -32% GEMZAR -13% -15% PEG-INTRON -13% -15%
ALPHANINE -13% -32% GENOTROPIN -13% -15% PERGONAL -13% -15%
AMEVIVE -13% -15% GEREF -13% -15% PLENAXIS -13% -15%
ANZEMET -13% -15% GLEEVEC -13% -15% POLYGAM -13% -25%
ARANESP -13% -15% GONAL-F -13% -15% PREGNYL -13% -15%
AREDIA -13% -15% GONAL-F RFF -13% -15% PROCRIT -13% -15%
ARIXTRA -13% -15% HELIXATE -13% -30% PROFASI -13% -15%
AUTOPLEX -13% -29% HEMOFIL -13% -35% PROFILNINE -13% -25%
AVASTIN -13% -15% HERCEPTIN -13% -15% PROGESTERONE -13% -15%
AVONEX -13% -15% HUMATE-P -13% -32% PROLEUKIN -13% -15%
BAYGAM -13% -25% HUMATROPE -13% -15% PROPLEX -5% -5%
BAYHEP -13% -15% HUMEGON -13% -15% PROTROPIN -13% -15%
BAYRHO-D -13% -25% HUMIRA -13% -15% PULMOZYME -13% -15%
BEBULIN -9% -9% HYCAMTIN -13% -15% RAPTIVA -13% -15%
BENEFIX -13% -20% IFEX -13% -15% REBETOL -13% -15%
BETASERON -13% -15% IFOSFAMIDE -13% -30% REBETRON -13% -15%
BICILLIN -13% -15% INFERGEN -13% -15% REBIF -13% -15%
BICNU -13% -15% INNOHEP -13% -15% RECOMBINATE -13% -31%
BLEOMYCIN -13% -30% INTRON -13% -15% REFACTO -13% -17%
BOTOX -13% -15% IRESSA -13% -15% REMICADE -13% -15%
BRAVELLE -13% -15% IVEEGAM -13% -25% REPRONEX -13% -15%
CAMPATH -13% -15% KINERET -13% -15% RHOGAM -13% -25%
CAMPTOSAR -13% -15% KOATE-DVI -13% -37% RIBAVIRIN -13% -30%
CARBOPLATIN -13% -30% KOGENATE -13% -38% RIMSO-50 -13% -15%
RISPERDAL
CARIMUNE -13% -25% KYTRIL -13% -15% CONSTA -13% -15%
CEREZYME -13% -15% LEUCOVORIN -13% -30% RITUXAN -13% -15%
CETROTIDE -13% -15% LEUKINE -13% -15% ROCEPHIN -13% -15%
CISPLATIN -13% -30% LEUPROLIDE -13% -30% ROFERON-A -13% -15%
COPAXONE -13% -15% LEUSTATIN -13% -15% SAIZEN -13% -15%
COPEGUS -13% -15% LOVENOX -13% -15% SANDOSTATIN -13% -15%
CYTARABINE -13% -30% LUPRON -13% -15% SENSIPAR -13% -15%
116458v2 18
Participating Participating Participating
Product Pharmacy CuraScri t Product Pharmacy CuraScri t Product Pharmacy CuraScri t
CYTOGAM -13% -18% LUPRON DEPOT -13% -15% SEROSTIM -13% -15%
LUPRON
CYTOXAN -13% -15% DEPOT-PED -13% -15% TARCEVA -13% -15%
DACARBAZINE -13% -30% MESNA -13% -30% TAXOTERE -13% -15%
DESFERAL -13% -15% MESNEX -13% -15% TEMODAR -13% -15%
METHOTREXAT
DOXIL -13% -15% E -13% -30% THALOMID -13% -15%
DOXORUBICIN -13% -30% MITOMYCIN -13% -30% THERACYS -13% -15%
ELIGARD -13% -15% MONARC-M -13% -37% THIOTEPA -13% -30%
ELLENCE -13% -15% MONOCLATE-P -13% -27% THYROGEN -13% -15%
ELOXATIN -13% -15% MONONINE -13% -27% TICE -13% -15%
ELSPAR -13% -15% MUSTARGEN -13% -15% TOBI -13% -15%
ENBREL -13% -15% MYLOTARG -13% -15% VELCADE -13% -15%
ENGERIX -13% -15% MYOBLOC -13% -15% VENOGLOBULIN -13% -25%
ENGERIX-B -13% -15% NABI-HB -13% -15% VIDAZA -13% -15%
EPOGEN -13% -15% NAVELBINE -13% -15% VINCASAR -13% -30%
ERBITUX -13% -15% NEULASTA -13% -15% VINCRISTINE -13% -30%
ETHYOL -13% -15% NEUMEGA -13% -15% VINORELBINE -13% -30%
ETOPOPHOS -13% -15% NEUPOGEN -13% -15% WINRHO -13% -25%
ETOPOSIDE -13% -30% NIPENT -13% -15% XELODA -13% -15%
FABRAZYME -13% -15% NORDITROPIN -13% -15% XOLAIR -13% -15%
FACTREL -13% -15% NOVANTRONE -13% -15% ZANOSAR -13% -15%
FEIBA -13% -37% NOVAREL -13% -15% ZAVESCA -13% -15%
FERTINEX -13% -15% NOVOSEVEN -13% -37% ZINECARD -13% -15%
FLUDARABINE -13% -30% NUTROPIN -13% -15% ZOFRAN -13% -15%
FLUOROURACIL -13% -30% NUTROPIN AQ -13% -15% ZOLADEX -13% -15%
FOLLISTIM -13% -15% ONCASPAR -13% -15% ZOMETA -13% -15%
FOLLISTIM AQ -13% -15% ZORBTIVE -13% -15%
V. Administrative Fees
PBM Services Fee
Customer Service for Members No additional fee
♦ Eligibility submission
• Electronic/on-line submission No additional fee
• Manual/hardcopy submission $1.00/Member submission
• FSA Feeds 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) No additional fee
• Medicare Coordination +65 population) $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
116458v2 19
Mail Services Fee
♦ Benefit Education No additional fee
♦ Prescription Delivery–standard No additional fee
Reporting Services
♦ Web-based Client Reporting – produced by Sponsor or No additional fee
TPA
♦ Web-based Client Reporting–produced by ESI $100 per report
♦ Ad hoc desk top parametric reports No additional fee
♦ Additional Reports
• Billing Reports No additional fee
• Annual Strategic Account Plan Report 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)
Formulary Support Services
♦ Annual Formulary Communications
• Posted at www,express-scripts.com No additional charge
• Mailed to Members' homes Additional charge TBD
Web Site
♦ Digital Certificates
• Up to 5 certificates No additional fee
• More than 5 certificates Up to$150 for additional users
♦ Express-Scripts.com for Clients—access to reporting tools, No additional fee
eligibility update capability, contact directory, sales and
marketing information, and benefit and enrollment support
♦ Express-Scripts.com for Members—access to benefit, No additional fee
drug, health and wellness information; prescription
ordering capability; and customer service
♦ Express Choicesm enrollment option—available during No additional fee
open enrollment to enable Members to evaluate
prescription benefit plan options.
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/Member address+ postage
• Replacement Cards $0.25/card
• Customized materials Priced upon request
Appeals by UM Company
♦ Clinical appeals $350 per review
♦ Non-clinical appeals $160 per review
Medicare PartD Subsidy
Standard Reporting(ESI sends reports to Sponsor) $0.62 PMPM for Medicare qualified members with a
minimum annual fee of$5,000
Notices of Credible Coverage $1.35 per letter+ osta e
Enhanced Reporting (ESI sends reports to CMS on behalf of $1.12 PMPM for Medicare qualified members with a
Sponsor) minimum annual fee of$7,500
Notices of Credible Coverage $1.35 per letter+postage
116458v2 20
VI. Clinical Programs
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. ESI also offers savings
guarantees under certain conditions. Information concerning such programs, guarantees and fees, if
applicable, is available from the ESI Account Team.
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
No charge
Note: List of drugs available upon request; subject to change
at the discretion of ESI.
Prior Authorization—Clinical Supplemental List
$0.03 PMPM
Note: List of drugs available upon request; subject to 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 Modules Individual module or
combined
available
Retro DUR $0.03/Rx
Retro DUR—Seniors $0.02/Rx
116458v2 21
EXHIBIT B
REBATES
Subject to the terms and conditions set forth below, ESI will pay an amount equal to the following:
A. Rebates/RxO)
2-Tier Plan Design 3-Tier Plan Design
ESI Formulary with a Minimum$15 Copay Differential
ESI National Preferred Formulary
Participating Mail Service Participating Mail Service
Pharmacy Pharmacy Pharmacy Pharmac
$1.50 $6.00 $2.75 $10.00
ESI shall retain Rebates, if any,which exceed the Rebate per claim.
B. Conditions of the Rebate Program
1. Rebates are conditioned upon (a) Sponsor's election of, and conformance to, the
Formulary indicated above; (b) Sponsor's adoption and conformance to certain plan design requirements
(e.g., implementation of qualifying copayment benefit designs and Drug Choice Management program);
(c) distribution of the Formulary (or a summary thereof) to Members and/or physicians, as applicable; (d)
100% of Members included in the applicable benefit plan design(s); and (e) 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, CuraScript and 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 and Sponsor each understand that market conditions, patent status and other factors
may influence Formulary decisions from time to time. The Formulary may be amended as appropriate by
mutual agreement, such agreement not to be unreasonably withheld by any party, each recognizing the
influence of Formulary actions on ESI's underlying assumptions in arriving at the Rebate amounts set forth
in this Exhibit. If(a) Sponsor changes its Formulary, benefit designs or otherwise takes an action that has
the effect of lowering the amount of Rebates earned by Sponsor, or (b) 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 Rebate as of the effective date of such event upon notice to
Sponsor.
4. Amounts representing the Rebates 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 allocable Rebate payments it receives approximately
120 days following the end of the quarterly period. Payments equal to allocable 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 Rebates received from manufacturers,
except that ESI shall pay Sponsor the amounts above from ESI's general assets. Sponsor acknowledges
and agrees that it shall not 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 may apply Rebates to unpaid Fees and may delay payment
of Rebates to allow for final adjustments upon termination of this Agreement.
5. 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
116458v2 22
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.
116458v2 23
EXHIBIT C
AUDIT PROTOCOL
1. Audit Principles
Express Scripts 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 Express Scripts,
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, Express Scripts and
Sponsor agree that this Audit Protocol is intended to facilitate Sponsor's audit of Express Scripts 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 Express Scripts 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
Express Scripts' 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, Express Scripts 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.
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 Express Scripts offices, during the months of February through November.
D. Other Express Scripts documentation (e.g. policies and procedures) requested during the
course of the audit, other than that needed to determine the accuracy of Sponsor claims
payments, will be provided at Express Scripts' reasonable discretion.
E. Sponsor will be given data sufficient for Sponsor to determine that Express Scripts has
billed Sponsor in accordance with contract terms for claims processing.
F. Results of Express Scripts' 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 Express Scripts has obtained a SAS-70 audit.
116458v2 24
However, this does not preclude Sponsor from obtaining a reasonable understanding
from Express Scripts personnel of any areas covered within the SAS-70 audit.
G. During the course of an audit, all data, including claims detail and any copies of claims (or
compilations thereof) supplied by Express Scripts 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 warrant an increase in calendar quarters to be reviewed, Express Scripts
and Sponsor will mutually agree on a process by which additional calendar quarters may
be reviewed by Sponsor.
B. Express Scripts' 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 number of 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, Express Scripts and Sponsor will mutually agree on a process by which
additional contracts may be reviewed by Sponsor.
C. Express Scripts 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 Express Scripts 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. Express Scripts 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 payments made to Sponsor by Express
Scripts 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 Express Scripts 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 Express Scripts 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. Express Scripts shall be entitled
to review any notes to affirm compliance with this paragraph.
5. Verification or Explanation of Disputed Claims
A. After Express Scripts has supplied the claims data, Sponsor will provide Express Scripts
with a written exception report stating the entire 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").
116458v2 25
B. Express Scripts will research and investigate the "representative sample" within thirty (30)
days. If additional time is reasonably required, Express Scripts 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, Express Scripts and Sponsor shall mutually
determine the scope of such increase.
D. Overpayments or underpayments shall be promptly paid and/or credited by Express
Scripts (or the Sponsor, as the case may be).
E. Automatic closure of the audit will occur if Sponsor or Auditor fails to communicate
research updates within 90 days of Express Scripts supplying the audit data.
116458v2 26
EXHIBIT D
BUSINESS ASSOCIATE AGREEMENT
1. Definitions.
(a) "Compliance Date(s)" shall mean the date established by HHS or the United States
Congress for effective date of applicability and enforceability of the HIPAA Rules.
(b) "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.
(c) "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.
(e) "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(8).
(f) "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.
(g) "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.
(h) "Required By Law" shall have the same meaning as the term "required by law" in 45 CFR
§ 164.501.
(i) "Secretary" shall mean the Secretary of the Department of Health and Human Services or
his designee.
(j) "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.
(k) "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)
ollows:(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.
116458v2 27
(c) Except as otherwise limited in this Agreement:
(i) ESI may use PHI for the proper management and administration of ESI or to
carry out EST'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 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 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 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 sixty (60) 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.
(j) 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 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.
(k) Within fifteen (15) business days of a request of the Plan, ESI shall consider requests to
restrict use or disclosure of PHI agreed to by the Plan on behalf of an Individual in accordance with 45
CFR 164.522.
(1) 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.
116458v2 28
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 EST'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 EST'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. No later than April 20, 2005, 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.
6. 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,
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.
116458v2 29
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 (after the Security Standard Compliance Date); 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 the 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'swritten consent.
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.
(e) Effective Date. This Agreement shall be effective as of the applicable Compliance Dates
or the effective date of the PBM Agreement, whichever is later.
116458v2 30
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, 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
116458v2 31
program. While rebates are directly attributable to the utilization of pharmaceutical products by 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, 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
THIS EXHIBIT REPRESENTS ESI'S CURRENT FINANCIAL POLICIES. THIS EXHIBIT MAY NOT BE
REVISED OR MODIFIED. ESI MAY PERIODICALLY UPDATE ITS FINANCIAL DISCLOSURES TO
REFLECT CHANGES IN ITS BUSINESS PROCESSES.
116458v2 32
EXHIBIT F
MEDICARE QR-PDP ADDENDUM
THIS MEDICARE QR-PDP ADDENDUM (the "QR-PDP Addendum") is made for the 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 QR-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-eligible Members;
B. ESI has established a subsidiary, Senior Care, that is responsible for providing certain
services related to Medicare Plans, 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 shall have the same
meaning assigned to such terms in the Agreement or the Medicare Drug Rules, as appropriate.
"CMS" means the Centers for Medicare and Medicaid Services.
"Medicare Manufacturer Administrative Fees" means those administrative fees of up to 3.5% of the AWP of
certain Covered Drugs paid by pharmaceutical manufacturers to, or otherwise retained by, Senior Care
pursuant to a contract between Senior Care or an affiliate, and the manufacturer and directly in connection
with Senior Care's administering, invoicing, allocating and collecting the Rebates for Medicare plans
operating under the Act, including QR-PDPs.
"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 the enforcement of the Act.
"Medicare Member" means a Member eligible for benefits through the QR-PDP in accordance with the
Medicare Drug Rules as identified by Sponsor through the Eligibility Files.
"Medicare Rebates" means retrospective rebates that are paid to Senior Care, or otherwise retained by
Senior Care, pursuant to the terms of a rebate contract negotiated independently by Senior Care or an
affiliate with a manufacturer, and directly attributable to the utilization of certain pharmaceuticals by Medicare
Members. Rebates do not include Medicare Manufacturer Administrative Fees, or product discounts or
similar remuneration received by subsidiary pharmacies of ESI or Senior Care.
"Subsidy Payment" means the subsidy amount paid to sponsors of QR-PDPs under 42 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 enrolled as defined by
the Medicare Drug Rule or other CMS guidance); and (ii) cost data extract net covered retiree plan-related
prescription drug costs) for monthly, quarterly, or annual reporting for payment of subsidy.
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 elected 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
116458v2 33
Pharmacy, Mail Service Pharmacy, Specialty Injectables, 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 QR-PDP. If the Sponsor elects QR-PDP services, but no option is selected, the default shall
be the standard option with Member communications.-
El
ommunications:❑ STANDARD OPTION: $0.62 Per Medicare Member per Month ($5,000 minimum annual charge)
- Senior Care submits reports to Sponsor
❑ ENHANCED OPTION: $1.12 Per Medicare Member per Month ($7,500 minimum annual charge)
- Senior Care submits reports to CMS
❑ Member Communications (Notices of Creditable Coverage): $1.35 per piece
❑ Prior Authorization (Part B and Part D drugs)—standard fees
❑ No Subsidy Reports; Filing for Medicare Rebates Only — No charge
(c) QR-PDP Subsidy Reports. If elected, 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 RDS Plan Sponsor ID and Application ID) 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 Agreement 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 as of the Effective Date of the Agreement, and terminating with
the Agreement.
1I6458v2 34
EXHIBIT G
BROKER/CONSULTANT OF RECORD AUTHORIZATION
During the term of this Agreement (or until otherwise indicated by Sponsor in writing), Sponsor hereby
authorizes and directs ESI to pay to Trivantage Pharmacy Strategies, Inc. ("Consultant") a quarterly
consulting fee in the amount of $0.18 per Prescription Drug Claim approved and filled by a Participating
Pharmacy directly under this Agreement ("Consulting Fees"). ESI may pay commission or other
remuneration to other brokers or consultants in connection with this Agreement and Sponsor acknowledges
and consents to same. Information of such commission or other remuneration will be provided by ESI upon
written request.
Subject to the terms and conditions herein, Broker/Consulting Fees will be paid to Broker/Consultant within
forty-five (45) days following the end of the calendar quarter for which the Broker/Consulting Fees are being
paid. Sponsor represents and warrants that: (i) the Broker/Consulting Fees are for actual and necessary
services rendered by Broker/Consultant in the ordinary course of Broker/Consultant's services, (ii) the
Broker/Consulting Fee amount is reasonable and appropriate in light of the actual services being performed,
or to be performed, by Broker/Consultant in connection with Sponsor's prescription drug program, and (iii)
payment of the Broker/Consulting Fee is permissible under applicable law. Sponsor acknowledges and
agrees that Broker/Consulting Fees paid by ESI to Broker/Consultant are to be paid from EST's general
assets, and ESI retains full proprietary rights such general assets. Except for nonpayment by ESI in violation
of the express terms hereunder, Sponsor shall indemnify and hold harmless ESI with respect to any dispute
or liability related to the Broker/Consulting Fees. Notwithstanding anything to the contrary herein, ESI shall
have no obligation to pay the aforementioned Broker/Consulting Fees for a given quarter unless, and until,
Sponsor has paid all fees owed to ESI by Sponsor hereunder for such quarter, and ESI shall not pay
Broker/Consulting Fees for Prescription Drug Claims processed by ESI prior to Sponsor's execution of this
Agreement. Sponsor shall be responsible for disclosing the Broker/Consulting Fees in accordance with
applicable law.
116458v2 35