Express Scripts 2009 Annual Report Download - page 27

Express Scripts 2009 Annual Report
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We are one of the founders of RxHub, an electronic exchange enabling physicians who use electronic prescribing
technology to link to pharmacies, PBM companies, and health plans. On July 1, 2008, the merger of RxHub and
SureScripts was announced. The new organization will enable physicians to securely access health information when
caring for their patients through a fast and efficient health exchange. We have retained one-sixth ownership in the merged
company. Due to the decreased ownership percentage, the investment is being recorded using the cost method, under
which dividends are the basis of recognition of earnings from an investment. This change did not have a material effect on
our consolidated financial statements (see Note 6).
On October 10, 2007, we purchased CYC, a leading provider of consumer directed healthcare technology
solutions to the employer, health plan and financial services markets. The purchase price was funded through internally
generated cash. The purchase agreement includes an earnout provision, payable after three years based on the performance
of the business. This acquisition is reported as part of our EM segment, and did not have a material effect on our
consolidated financial statements.
We regularly review potential acquisitions and affiliation opportunities. We believe available cash resources, bank
financing or the issuance of additional common stock or other securities could be used to finance future acquisitions or
affiliations. There can be no assurance we will make new acquisitions or establish new affiliations in 2010 or thereafter.
(see “Liquidity and Capital Resources – Acquisitions and Related Transactions”).
Company Operations
General. As of December 31, 2009, our PBM segment operated five dispensing home delivery pharmacies, three
non-dispensing order processing centers, eleven patient contact centers, and eight specialty drug pharmacies. Electronic
pharmacy claims processing for our U.S. operations takes place at facilities owned by an outsourced vendor. At our
Canadian facilities, we have sales and marketing, client services, pharmacy help desk, clinical, network contracting and
management, and certain management information systems capabilities.
Sales and Marketing. In the United States, our sales managers and directors market and sell PBM services,
supported by a team of client-service representatives, clinical pharmacy managers, and benefit analysis consultants. This
team works with clients to make prescription drug use safer and more affordable. A dedicated sales staff cross-markets EM
services to our PBM clients. In addition, sales personnel dedicated to our EM segment use direct marketing to generate
new customers and solidify existing customer relationships. In Canada, marketing and sales efforts are conducted by our
staff based in Mississauga, Ontario and Montreal, Quebec.
Pharma and Retail Strategy. Our Pharma and Retail Strategy group is responsible for contracting and
administering our pharmacy networks. To participate in our retail pharmacy networks, pharmacies must meet certain
qualifications, including the requirement that all applicable, credentialing state and/or licensing requirements are being
maintained. Pharmacies can contact our pharmacy help desk toll-free, 24 hours a day, 7 days a week, for information and
assistance in filling prescriptions for our clients’ members. In addition, our Pharma and Retail Strategy group audits
pharmacies in the retail pharmacy networks to determine compliance with the terms of their contracts.
Clinical Support. Our staff of highly-trained pharmacists and physicians provides clinical support for our PBM
services. These health care professionals are responsible for a wide range of activities including tracking the drug pipeline;
identifying emerging medication-related safety issues and notifying physicians, clients, and patients (if appropriate);
providing drug information services; formulary management; development of utilization management, safety (concurrent
and retrospective drug utilization review) and other clinical interventions, and/or contact physicians, pharmacists, or
patients.
Our staff works closely with the P&T Committee during development of our formulary and selected utilization
management programs. The P&T Committee ensures our decisions are evidence-based, clinically sound, and meet the
current standard of medical practice. The P&T Committee’s guidance results in decisions which are clinically appropriate
and not merely superseded by financial considerations.
We have a research team whose mission is to conduct timely, rigorous and objective research that supports
evidence-based pharmacy benefit management. Using pharmacy and medical claims data together with member surveys,
the research department conducts studies to evaluate clinical, economic and member impact of pharmacy benefits. The
release of our 2008 Annual Drug Trend report in April 2009 marked our twelfth consecutive year of tracking prescription
drug trends. Based on a large sample of our membership, the 2008 Annual Drug Trend report not only examines trends in
pharmaceutical utilization and cost, it also investigates the factors that underlie those trends. The current 2008 Annual
Drug Trend report and results of our other studies are shared at our annual Outcomes Conference. We also present at other