Express Scripts 2015 Annual Report Download - page 27

25 Express Scripts 2015 Annual Report
If one or more of our large clients either terminates or does not renew a contract for any reason or if the provisions of a
contract with a large client are modified, renewed or otherwise changed with terms less favorable to us, our financial results
could be materially adversely affected and we could experience a negative reaction in the investment community resulting in
stock price declines or other adverse effects. In addition, we are currently in discussions with Anthem regarding the periodic
pricing review process pursuant to the terms of our PBM agreement with Anthem. While we are actively engaged in good faith
discussions with Anthem and intend to continue to comply with the requirements of the agreement, Anthem has made public
statements threatening litigation. At this time we are unable to provide a timetable or an estimate as to the potential outcome of
these events, any of which could result in a material adverse effect on our business and results of operations.
If we are not able to replace lost business or margin by generating new sales with comparable operating margins or
successfully executing other corporate strategies, our revenues and results of operations could suffer. In addition, if certain of
our key clients are negatively impacted by business conditions or other economic trends, or if such clients are acquired,
consolidated or otherwise fail to successfully maintain or grow their business, our business and results of operations could be
adversely impacted.
If significant changes occur within the pharmacy provider marketplace, or if other issues arise with respect to our pharmacy
networks, including the loss of or adverse change in our relationship with one or more key pharmacy providers, our business
and financial results could be impaired.
More than 70,000 retail pharmacies, which represent over 97% of all United States retail pharmacies, participated in
one or more of our networks at December 31, 2015. The ten largest retail pharmacy chains represent approximately 62% of the
total number of stores in our largest network. In certain geographic areas of the United States, our networks may be comprised
of higher concentrations of one or more large pharmacy chains. Contracts with retail pharmacies are generally non-exclusive
and are terminable on relatively short notice by either party. If one or more of the larger pharmacy chains terminates its
relationship with us, or is able to renegotiate terms that are substantially less favorable to us, our members’ access to retail
pharmacies and/or our business could be materially adversely affected. In addition, the entry of one or more large pharmacy
chains into the PBM business in addition to the current pharmacy chain competitors, the consolidation of existing pharmacy
chains or increased leverage or market share by the largest pharmacy providers, could increase the likelihood of negative
changes in our relationship with such pharmacies. Changes in the overall composition of our pharmacy networks, or reduced
pharmacy access under our networks, could have a negative impact on our claims volume and/or our competitiveness in the
marketplace, which could cause us to fall short of certain guarantees in our contracts with clients or otherwise impair our
business or results of operations.
Changes to government policies, including policies designed to manage healthcare costs or other healthcare financing
practices could adversely impact our business and results of operations.
From time to time, certain legislative and/or regulatory proposals are made which seek to manage the healthcare
industry, including managing prescription drug cost, regulating drug distribution and managing health records. Such proposals
include, but are not limited to, “single-payer” government funded healthcare, changes in reimbursement rates, restrictions on
access or therapeutic substitution, limits on more efficient delivery channels, taxes on goods and services, price controls on
prescription drugs, incentivizing the use of electronic health records, regulating the use of maximum allowable cost pricing and
other significant healthcare reform proposals. In addition, changes to government policies not specifically targeted to the
healthcare industry, such as an increase in the corporate tax rate or government spending cuts, could have significant impacts
on the PBM marketplace. We are unable to predict whether any such policies or proposals will be enacted, or the specific terms
thereof. Certain of these policies or proposals could, if enacted, adversely impact our business and results of operations.
A significant disruption in service within our operations or among our key suppliers or other third parties could materially
adversely affect our business and results of operations.
Our business is dependent on a number of different operations, products and processes, many of which involve third
parties. A disruption in our business operations could result from, among other things, contamination of drugs or a failure to
maintain appropriate shipment and storage conditions (such as temperature), an error in mail order processing, the
unavailability of services or products (including drugs) provided by suppliers or pharmaceutical manufacturers, vendors or
shipping carriers, labor disruptions, or unanticipated disruptions at our mail order facilities, call centers, data centers or
corporate facilities. Such disruptions or our failure to implement adequate business continuity and disaster recovery strategies
could, temporarily or indefinitely, significantly reduce, or partially or totally eliminate our ability to process and dispense
prescriptions and provide products and services to our clients and members, which could have a material adverse effect on our
business and results of operations.
Regulatory changes relating to Medicare Part D, our failure to comply with CMS regulatory requirements, our failure to
comply with CMS contractual requirements applicable to us as a Medicare Part D sponsor or our failure to otherwise execute
on our strategies related to Medicare Part D, could adversely impact our business and our results of operations.