Express Scripts 2013 Annual Report Download - page 18

Express Scripts 2013 Annual Report 18
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.
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”). Subsequently, on January 17, 2013, HHS announced a new rule to strengthen the privacy and security protections
established under HIPAA, the final Omnibus Rule (the “Omnibus Rule”). The Omnibus Rule enhances patients’ privacy
protections, provides patients new rights to their health information, and strengthens the government’s ability to enforce the
law. The changes expand many of the privacy and security requirements to business associates, such as contractors and
subcontractors. Business associates may also be liable for increased penalties for noncompliance. The Omnibus Rule
significantly changes the breach notification requirements provided by HITECH. Furthermore, the Omnibus Rule sets new
limits on how information is used and disclosed for marketing and fundraising purposes, and prohibits the sale of a patient’s
health information without his or her permission. As with many other companies subject to HIPAA, the Omnibus Rule 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 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®,”
“ACCREDO®,” “CONSUMEROLOGY®,” “UBC®,” “MY RX CHOICES®,” “RATIONALMED®,” “SCREENRX®” and
“EXPRESS ALLIANCE®” 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.