Express Scripts 2012 Annual Report Download - page 17

Express Scripts 2012 Annual Report 15
Legislation regulating PBM activities in a comprehensive manner has been and continues to be considered in a
number of states. In the past, certain organizations, such as the National Association of Insurance Commissioners
(“NAIC”), an organization of state insurance regulators, have considered proposals to regulate PBMs and/or certain PBM
activities, such as formulary development and utilization management. While the actions of the NAIC would not have the
force of law, they may influence states to adopt model legislation that such organizations promulgate. Certain states have
adopted PBM registration and/or disclosure laws and we have registered under such laws and are complying with
applicable disclosure requirements. In addition to registration laws, some states have adopted legislation mandating
disclosure of various aspects of our financial practices, including those concerning pharmaceutical company revenue, as
well as prescribing processes for prescription switching programs and client and provider audit terms. Other states are
considering similar legislation, and as more states consider these bills it will be difficult to manage the distinct requirements
of each.
FDA Regulations. The Health Reform Laws create a regulatory approval pathway for biosimilars (alternatively
known as generics) for biological products and provide that an innovator biological product will be granted 12 years of
exclusivity. At this time, we are unable to fully evaluate the impact of the changes to biosimilars to our business.
Our clinical research activities are also subject to a number of complex and stringent regulations affecting the
biotechnology and pharmaceutical industries. We offer services relating to the conduct of clinical trials and the preparation
of marketing applications and are required to comply with applicable regulatory requirements governing, among other
things, the design, conduct, performance, monitoring, auditing, recording, analysis and reporting of these trials. In the
United States, the Food and Drug Administration (“FDA”) governs these activities pursuant to the agency’s Good Clinical
Practice regulations.
HIPAA and Other Privacy Legislation. Most of our activities involve the receipt or use of confidential health
information concerning individuals. In addition, we use aggregated and anonymized data for research and analysis purposes
and, in some cases, provide access to such data to pharmaceutical manufacturers and third-party data aggregators. Various
federal and state laws, including the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), regulate and
restrict the use, disclosure and security of confidential health information, and new legislation is proposed from time to time
in various states.
The HHS privacy and security regulations included as part of HIPAA impose restrictions on the use and disclosure
of individually identifiable health information by certain entities. The security regulations relate to the security of protected
health information when it is maintained or transmitted electronically. Other HIPAA requirements relate to electronic
transaction standards and code sets for processing of pharmacy claims. We are required to comply with certain aspects of
the privacy, security and transaction standard regulations under HIPAA. As part of the American Recovery and
Reinvestment Act signed into law on February 17, 2009, Congress adopted the Health Information Technology for
Economic and Clinical Health Act (“HITECH”). HITECH significantly broadens many of the existing federal and security
requirements under HIPAA and introduces more vigorous enforcement provisions and penalties for HIPAA violations. Like
many other companies subject to HIPAA, the HITECH standards may have significant operational and legal consequences
for our business.
We believe that we are in compliance in all material respects with HIPAA and other state privacy laws, to the
extent they apply to us. To date, no patient privacy laws have been adopted that materially impact our ability to provide
PBM and pharmacy services, but there can be no assurance that federal or state governments will not enact legislation,
impose restrictions or adopt interpretations of existing laws that could have a material adverse effect on our business and
financial results.
Other Business Operations Services. Many of the laws and regulations cited above with respect to our PBM
activities also apply with respect to our various Other Business Operations services. Of particular relevance are the federal
and state anti-kickback laws, state pharmacy regulations and HIPAA, which are described above. In addition, as a condition
to conducting our wholesale business, we must maintain various permits and licenses with the appropriate state and federal
agencies and we are subject to various wholesale distributor laws that regulate the conduct of wholesale distributors,
including, but not limited to, maintaining pedigree papers in certain instances.
Service Marks and Trademarks
We, and our subsidiaries, have registered certain service marks including “EXPRESS SCRIPTS®,” “MEDCO®,”
“CURASCRIPT®,” “ACCREDO®,” “CONSUMEROLOGY®,” “UBC®,” “MY RX CHOICES®” and “RATIONALMED®”
with the United States Patent and Trademark Office. Our rights to these marks will continue so long as we comply with the
usage, renewal filings and other legal requirements relating to the usage and renewal of service marks.