Express Scripts 2011 Annual Report Download - page 25

Express Scripts 2011 Annual Report 23
either party. Our failure to anticipate or appropriately adapt to changes in the industry could negatively impact our
competitive position and adversely affect our business operations and financial results.
We operate in a complex and evolving regulatory environment. Changes in applicable laws or regulations, or their
interpretation or enforcement, or the enactment of new laws or regulations, could require us to make changes to how we
operate our business or result in the imposition of penalties. Further, we may be required to spend significant resources in
order to comply with new or existing laws and regulations.
Numerous state and federal laws and regulations affect our business and operations. The categories include, among
others, the following:
• healthcare fraud and abuse laws and regulations, which prohibit certain types of payments and referrals as well as
false claims made in connection with health benefit programs
• ERISA and related regulations, which regulate many aspects of healthcare plan arrangements
• state legislation regulating PBMs or imposing fiduciary status on PBMs
• consumer protection and unfair trade practice laws and regulations
• network pharmacy access laws, including ―any willing provider‖ and ―due process‖ legislation, that affect aspects of
our pharmacy network contracts
• wholesale distributor laws
• legislation imposing benefit plan design restrictions, which limit how our clients can design their drug benefit plans
• various licensure laws, such as managed care and third party administrator licensure laws
• drug pricing legislation, including ―most favored nation‖ pricing
• pharmacy laws and regulations
• privacy and security laws and regulations, including those under HIPAA and HITECH
• the Medicare prescription drug coverage rules
• other Medicare and Medicaid reimbursement regulations, including subrogation
• the Health Reform Laws
• federal laws related to our Department of Defense arrangement
• federal antitrust laws related to our pharmacy, pharmaceutical manufacturer, and client relationships
These and other regulatory matters are discussed in more detail under ―Part I — Item 1 — Business —
Government Regulation and Compliance‖ above.
We believe that we are operating our business in substantial compliance with all existing legal requirements
material to us. There are, however, significant uncertainties regarding the application of many of these legal requirements to
our business, and state and federal law enforcement agencies and regulatory agencies from time to time have initiated
investigations or litigation involving certain aspects of our business or our competitors’ businesses. Accordingly, we cannot
provide any assurance that one or more of these agencies will not interpret or apply these laws in a manner adverse to our
business, or, if there is an enforcement action brought against us, that our interpretation would prevail. In addition, there are
numerous proposed healthcare laws and regulations at the federal and state levels, many of which could materially affect
our ability to conduct our business or adversely affect our financial results. We are unable to predict whether additional
federal or state legislation or regulatory initiatives may be enacted in the future relating to our business or the healthcare
industry in general, or what effect any such legislation or regulations might have on us. Due to these uncertainties, we may
be required to spend significant resources in connection with such investigations or litigation or to comply with new or
existing laws and regulations.
Various governmental agencies have conducted investigations into certain PBM business practices. Many of these
investigations have resulted in other PBMs agreeing to civil penalties, including the payment of money and corporate
integrity agreements. We cannot predict what effect, if any, these investigations may ultimately have on us or on the PBM
industry generally (see ―Part I—Item 3—Legal Proceedings‖).
The District of Columbia previously enacted a statute that purports to declare that a PBM is a fiduciary with
respect to its clients, although the statute was overturned by federal courts in the District of Columbia (see ―Part I—Item 1
– Business – Government Regulations and Compliance – State Fiduciary Legislation‖). However, other states are
considering but have not yet enacted similar fiduciary statutes, and we cannot predict what effect, if any, these and similar
statutes, if enacted, may have on our business and financial results, nor can we predict how courts may view such laws.
Most of our activities involve the receipt or use of protected health information concerning individuals. In
addition, we use aggregated and anonymized data for research and analysis and other permitted business purposes and in
some cases provide access to data to pharmaceutical manufacturers and third party data aggregators in accordance with
applicable law. Various federal and state laws, including HIPAA, regulate and restrict the use, disclosure and security of