Aetna 2008 Annual Report Download - page 43

Annual Report - Page 38
The failure to adhere to the laws and regulations that apply to our PBM and/or pharmacies’ products could expose
our PBM and/or pharmacy subsidiaries to civil and criminal penalties and/or have a material adverse effect on our
business, financial condition and operating results.
We would be adversely affected if our prevention, detection or control systems fail to detect and implement
required changes to maintain regulatory compliance.
Failure of our prevention, detection or control systems related to regulatory compliance and/or compliance with our
internal policies, including data systems security issues and/or unethical conduct by managers and/or employees,
could adversely affect our reputation and also expose us to litigation and other proceedings, fines and/or penalties,
any of which could adversely affect our business, operating results or financial condition.
We face risks related to litigation and regulatory proceedings.
We are growing by expanding into certain segments and subsegments of the health care marketplace. Some of the
segments and subsegments we have targeted for growth include Medicare, Medicaid, individual, public sector and
labor customers who are not subject to ERISA’ s limits on state law remedies. In addition, over the last several years
we have entered product lines in which we previously did not participate, including Insured Medicaid, Medicaid plan
management, international managing general underwriting, Medicare PDP, mail order pharmacy, specialty pharmacy
and ActiveHealth. These products subject us to regulatory and other risks that are different from the risks of
providing Commercial managed care and health insurance products and may increase the risks we face from
litigation, regulatory reviews, audits and investigations and other adverse legal proceedings. For example, our
Medicaid products are more highly regulated than our Commercial products, and we are dispensing medications at
our mail order and specialty pharmacies directly to members. In addition to the risks of purported dispensing and
other operational errors, failure to adhere to the laws and regulations applicable to the dispensing of pharmaceuticals
could subject our pharmacy subsidiaries to civil and criminal penalties.
In addition, we are party to a number of lawsuits, certain of which are purported to be class actions. The majority of
these cases relate to the conduct of our health care operations and allege various violations of law. Many of these
cases seek substantial damages (including non-economic or punitive damages and treble damages) and may also seek
changes in our business practices. We may also be subject to additional litigation and other adverse legal
proceedings in the future. Litigation and other adverse legal proceedings could materially adversely affect our
business or operating results because of reputational harm to us caused by such proceedings, the costs of defending
such proceedings, the costs of settlement or judgments against us, or the changes in our operations that could result
from such proceedings. For example, Aetna and the New York Attorney General announced an agreement relating
to an industry-wide investigation into certain payment practices with respect to out-of-network providers. Among
other things, the agreement provides that Aetna will contribute $20 million towards the establishment of an
independent database system to provide fee information regarding out-of-network reimbursement rates. Refer to
Litigation and Regulatory Proceedings in Note 18 of Notes to Consolidated Financial Statements beginning on page
76 for more information. Also, we made certain changes to our business practices in connection with the settlement
in 2003 of a large provider class action that we must continue to implement effectively.
Managing CEO succession and retention of key executive talent is critical to our success.
We would be adversely affected if we fail to adequately plan for succession of our CEO and senior management and
retention of key executives. While we have succession plans in place and we have employment arrangements with
certain key executives, these do not guarantee that the services of these executives will continue to be available to us.
We would be adversely affected if we fail to adequately protect member health related and other sensitive
information.
The use and disclosure of personal health and other sensitive information is regulated at the federal, state and
international levels, and we collect, process and maintain large amounts of personal health and financial information
and other sensitive data about our members in the ordinary course of our business. Our business therefore depends
substantially on our members’ and customers’ willingness to entrust us with their health related and other sensitive
information. Events that negatively affect that trust, including failing to maintain appropriate safeguards to keep
sensitive information secure, whether as a result of our action or inaction or that of one of our vendors, could
adversely affect our reputation and also expose us to litigation and other proceedings, fines and/or penalties, any of
which could adversely affect our business, operating results or financial condition.