Express Scripts 2013 Annual Report Download - page 13

13 Express Scripts 2013 Annual Report
Our research & analytics team conducts timely, rigorous and objective research that supports evidence-based
pharmacy benefit management and evaluates the clinical, economic and member impact of pharmacy benefits. The creation of
predictive models and other analytical tools supports the development and improvement of our products and services. The team
also produces the Express Scripts Drug Trend Report, which examines trends in pharmaceutical utilization and cost, as well as
the factors that trigger these trends, including behaviors that result in wasteful spending in the pharmacy benefit. The team also
presents at client forums and professional meetings and publishes in health-related journals.
Information Technology. Our information technology department supports our pharmacy claims processing
systems, our specialty pharmacy systems and other management information systems that are essential to our operations.
Throughout 2013, clients were migrated towards a consolidated IT platform as part of the integration process from the Merger.
Uninterrupted point-of-sale electronic retail pharmacy claims processing is a significant operational requirement
for us. Claims for our PBM segment are presently processed in the United States through systems that are managed and
operated domestically by internal resources and an outsourced vendor. Canadian claims are processed through systems
maintained and operated by IBM in Canada and managed by us. We believe we have substantial capacity for growth in our
United States and Canadian claims processing facilities.
Specialty pharmacy operations are supported by multiple pharmacy systems that are managed and operated
internally.
We leverage outsourced vendor services to provide certain disaster recovery services for systems located at our
data centers. For systems not covered by a third-party vendor arrangement, such as our specialty pharmacy data centers, our
corporate disaster recovery organization manages internal recovery services.
Competition
There are a number of other PBMs in the United States against which we compete. Some of these are independent
PBMs, such as Catamaran and MedImpact. Others are owned by managed care organizations such as Aetna Inc., CIGNA
Corporation, Humana, OptumRx (owned by UnitedHealth Group) and Prime Therapeutics (owned by a collection of Blue
Cross Blue Shield Plans). Some are owned by retail pharmacies, such as CVS Caremark (owned by CVS). Wal-Mart Stores,
Inc. may continue to engage in certain activities competitive with PBMs. We also compete against adjudicators, such as Argus.
With the emergence of alternative benefit models through Private Exchanges, the competitive landscape also includes brokers,
health plans and consultants. Some of these competitors may have greater financial, marketing and technological resources. In
addition, other companies may enter into the business and become increasingly competitive as barriers to entry are relatively
low. We believe the primary competitive factors in the industry include the ability to contract with retail pharmacies to ensure
our retail pharmacy networks meet the needs of our clients and their members, the ability to negotiate discounts on prescription
drugs with drug manufacturers, the ability to navigate the complexities of governmental reimbursed business, including
Medicare Part D, Medicaid and the Public Exchanges, the ability to manage cost and quality of specialty drugs, the ability to
utilize the information we obtain about drug utilization patterns and consumer behavior to reduce costs for our clients and
members, and the level of service that we provide.
Government Regulation and Compliance
Many aspects of our businesses are regulated by federal and state laws and regulations. Since sanctions may be
imposed for violations of these laws, compliance is a significant operational requirement and we maintain a comprehensive
compliance program. We believe we are operating our business in substantial compliance with all existing legal requirements
material to the operation of our businesses. There are, however, significant uncertainties involving the application of many of
these legal requirements to our business. In addition, there are numerous proposed healthcare laws and regulations at the
federal and state levels, many of which could adversely affect our business or financial position. We are unable to predict what
additional federal or state legislation, regulations or enforcement initiatives may be enacted or taken in the future relating to our
business or the healthcare industry in general, or what effect any such legislation, regulations or actions might have on us. We
cannot provide any assurance that federal or state governments will not impose additional restrictions or adopt interpretations
of existing laws that could have a material adverse effect on our consolidated results of operations, consolidated financial
position and/or consolidated cash flow from operations.