Aetna 2012 Annual Report Download - page 67

Annual Report- Page 61
purported dispensing and other operational errors, and any failure to adhere to the laws and regulations applicable to
the dispensing of pharmaceuticals could subject them to civil and criminal penalties.
In addition, litigation may be brought against us by private individuals on behalf of the government through a qui
tam or “whistleblower” suit. Whistleblower suits have resulted in significant settlements between governmental
agencies and health care companies. When a private individual brings a whistleblower suit, the defendant often will
not be made aware of the suit for many months or even years, until the government commences its own
investigation or determines whether it will intervene. The significant incentives and protections provided under the
Dodd-Frank Wall Street Reform and Consumer Protection Act increase the risk that whistleblower suits will
become more frequent.
In addition, we are routinely involved in numerous claims, lawsuits, regulatory audits, investigations and other legal
proceedings arising in the ordinary course of our businesses. Certain of these lawsuits 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. While we currently have insurance coverage for
some of these potential liabilities, other potential liabilities may not be covered by insurance, insurers may dispute
coverage, or the amount of our insurance may not be enough to cover the damages awarded or costs incurred. In
addition, some types of damages, like punitive damages, may not be covered by insurance, and in some
jurisdictions the coverage of punitive damages is prohibited. Insurance coverage for all or some forms of liability
may become unavailable or prohibitively expensive in the future. We may also be subject to additional litigation
and other adverse legal proceedings in the future. The outcome of litigation and other adverse legal proceedings is
always uncertain, and outcomes that are not justifiable by the evidence or existing law or regulation can and do
occur. 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. Refer to “Litigation and Regulatory Proceedings” in Note 18 of Notes to Consolidated Financial
Statements beginning on page 124 for more information.
Our products providing PBM and pharmacy services face regulatory and other risks and uncertainties
associated with the PBM and/or pharmacy industries that may differ from the risks of our core business of
providing managed care and health insurance products.
The following are some of the PBM and pharmacy related risks that could have a material adverse effect on our
business, cash flows, financial condition or operating results:
• Federal and state anti-kickback and other laws that govern our PBM and mail order and specialty mail order
pharmacies' relationship with pharmaceutical manufacturers, customers and consumers.
• Compliance requirements for PBM fiduciaries under ERISA, including compliance with fiduciary
obligations under ERISA in connection with the development and implementation of items such as drug
formularies and preferred drug listings.
• Federal and state legislative proposals under consideration that could adversely affect a variety of pharmacy
benefit industry practices, including without limitation the receipt or required disclosure of rebates from
pharmaceutical manufacturers, the regulation of the development and use of drug formularies, legislation
imposing additional rights to access to drugs for individuals enrolled in health care benefits plans, and
restrictions on the use of average wholesale prices.
• The application of federal, state and local laws and regulations to the operation of our mail order pharmacy
and mail order specialty pharmacy products.
• The risks inherent in the dispensing, packaging and distribution of pharmaceuticals and other health care
products, including claims related to purported dispensing errors.
In addition, on July 27, 2010, we entered into the PBM Agreement with CVS Caremark, under which CVS
Caremark provides certain PBM services to us and our customers and members. The PBM Agreement has a term of
up to 12 years, although we have certain termination rights beginning in January 2018. CVS Caremark began
providing services under the PBM Agreement on January 1, 2011. Our operating results would be adversely