Express Scripts 2012 Annual Report Download - page 20

Express Scripts 2012 Annual Report18
Q our failure to effectively execute on strategic transactions or successfully integrate the business operations or
achieve the anticipated benefits from any acquired businesses
Q uncertainty around realization of the anticipated benefits of the transaction with Medco, including the expected
amount and timing of cost savings and operating synergies and a delay or difficulty in integrating the
businesses of Express Scripts, Inc. and Medco or in retaining clients of the respective companies
Q the impact of our debt service obligations on the availability of funds for other business purposes, and the
terms of and our required compliance with covenants relating to our indebtedness
Q a failure in the security or stability of our technology infrastructure, or the infrastructure of one or more of our
key vendors, or a significant failure or disruption in service within our operations or the operations of such
vendors
Q a failure to adequately protect confidential health information received and used in our business operations
Q the termination, or an unfavorable modification, of our relationship with one or more key pharmaceutical
manufacturers, or the significant reduction in payments made or discounts provided by pharmaceutical
manufacturers
Q changes in industry pricing benchmarks
Q results in pending and future litigation or other proceedings which could subject us to significant monetary
damages or penalties and/or require us to change our business practices, or the costs incurred in connection
with such proceedings
Q our failure to attract and retain talented employees, or to manage succession and retention for our Chief
Executive Officer or other key executives
Q regulatory, compliance, competition and tax risks inherent in our international operations
Q other risks described from time to time in our filings with the SEC
These and other relevant factors, including those risk factors in “Part I — Item 1A — Risk Factors” in this Annual
Report and any other information included or incorporated by reference in this Report, and information which may be
contained in our other filings with the SEC, should be carefully considered when reviewing any forward-looking statement.
We note these factors for investors as permitted under the Private Securities Litigation Reform Act of 1995. Investors
should understand that it is impossible to predict or identify all such factors or risks. As such, you should not consider
either foregoing lists, or the risks identified in our SEC filings, to be a complete discussion of all potential risks or
uncertainties.
Item 1A — Risk Factors
General Risk Factors
We operate in a very competitive industry, which could compress our margins and impair our ability to attract and retain
clients. Our failure to effectively differentiate our products and services from those of our competitors in the marketplace
could magnify the impact of the competitive environment.
Our ability to remain competitive depends upon our continued ability to attract new clients and retain existing
clients, as well as cross-sell additional products and services to our clients. We operate in a highly competitive environment
and in an industry that is subject to significant market pressures brought about by customer demands, legislative and
regulatory developments and other market factors. Competition in the PBM marketplace has historically caused many
PBMs, including us, to reduce the prices charged for core services while sharing a greater portion of the formulary fees and
related revenues received from pharmaceutical manufacturers with clients. Increased client demand for lower pricing,
increased revenue sharing, enhanced service offerings and higher service levels create pressure on our operating margins.
We cannot assume that positive trends such as lower drug purchasing costs, increased generic usage, drug price inflation
and increased rebates would offset these pressures in the future. Our inability to maintain these positive trends, or failure to
identify and implement new ways to mitigate pricing pressures, could negatively impact our ability to attract or retain
clients which could negatively impact our margins and have a material adverse effect on our business and results of
operations.
In addition, our clients are well informed and organized and can easily move between us and our competitors. Our
client contracts are generally three years and our larger clients generally seek competing bids prior to the expiration of their
contract. These factors together with the impact of the competitive marketplace or other significant differentiating factors
between our products and services and those of our competitors may make it difficult for us to attract new clients, retain
existing clients and cross-sell additional services, which could materially and adversely affect our business and results of
operations.
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