Express Scripts 2009 Annual Report Download - page 37

Express Scripts 2009 Annual Report
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results and financial condition. Even if we are able to integrate the PBM Business operations successfully, there can be no
assurance that this integration will result in the realization of the full benefits of synergies, cost savings, innovation and
operational efficiencies that may be possible or that these benefits will be achieved within a reasonable period of time.
We may incur significant transaction and acquisition-related costs in connection with the NextRx acquisition.
We have incurred significant costs, and expect to incur additional costs in the future, in connection with the
integration process of the NextRx acquisition. The substantial majority of these costs are non-recurring expenses related to
this acquisition, facilities and systems consolidation costs. We may incur additional costs to maintain employee morale and
to retain key employees as well as transaction fees and costs related to executing integration plans. Additional
unanticipated costs may be incurred in the integration of the PBM Business. Although we expect that the elimination of
duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow us
to more than offset incremental transaction and acquisition-related costs over time, this net benefit may not be achieved in
the near term, or at all.
The market price of our common stock may decline as a result of the NextRx acquisition.
The market price of our common stock may decline as a result of the NextRx acquisition if, among other things,
we are unable to achieve the expected growth in earnings, or if the operational cost savings estimates in connection with the
integration of the PBM Business are not realized, or if the transaction costs related to the acquisition are greater than
expected, or if the value of the election under Section 338(h)(10) of the Internal Revenue Code is less than anticipated. The
market price also may decline if we do not achieve the perceived benefits of the acquisition as rapidly or to the extent
anticipated by financial or industry analysts or if the effect of the acquisition on our financial results is not consistent with
the expectations of financial or industry analysts.
We are dependent on WellPoint for certain transitional services pursuant to a transition services agreement. The failure of
WellPoint to perform its obligations under the transition services agreement could adversely affect our business, financial
results and financial condition.
Our ability to effectively monitor and control the operations of the PBM Business that we acquired depends to a
large extent on the proper functioning of our information technology and business support systems. We are currently
dependent upon WellPoint to continue to provide certain information technology services, human resources services,
existing procurement vendor services, finance services, real estate services and print mail services for a period of time to
facilitate the transition of the PBM Business. The terms of these arrangements are governed by a transition services
agreement entered into as of the closing of the acquisition. If WellPoint fails to perform its obligations under the transition
services agreement, we may not be able to perform such services ourselves or obtain such services from third parties at all
or on terms favorable to us. In addition, upon termination of the transition services agreement, if we are unable to develop
the systems, resources and controls necessary to allow us to provide the services currently being provided by WellPoint or
to obtain such services from third parties, it could adversely affect our business, financial results and financial condition.
Pending and future litigation could subject us to significant monetary damages and/or require us to change our business
practices.
We are subject to risks relating to litigation, regulatory proceedings, and other similar actions in connection with
our PBM operations, including the dispensing of pharmaceutical products by our home delivery pharmacies, and the
services rendered in connection with our disease management and our pharmaceutical services operations. A list of a
number of the more significant proceedings pending against us is included under “Item 3—Legal Proceedings.” These
proceedings generally seek unspecified monetary damages and injunctive relief on behalf of a class of plaintiffs that are
either clients or individual members of health plans. While we believe these suits and proceedings are without merit and
intend to contest them vigorously, we can give no assurance that an adverse outcome in one or more of these suits or
proceedings would not have a material adverse effect on our business and financial results, including our ability to attract
and retain clients as a result of the negative reputational impact of such an outcome.
We and/or our subsidiaries are defendants in a number of lawsuits that purport to be class actions, as described in
“Item 3—Legal Proceedings.” We cannot predict with certainty what the result of any such inquiry might be. In addition
to potential monetary liability arising from these suits and proceedings, we are incurring costs in the defense of the suits
and in providing documents to government agencies. Certain of the costs are covered by our insurance, but certain other
costs are not insured. Such costs have become material to our financial performance and we can give no assurance that
such costs will not increase in the future.