Rite Aid 2016 Annual Report Download - page 22

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We are subject to governmental regulations, procedures and requirements; our noncompliance or a significant
regulatory change could adversely affect our business, the results of our operations or our financial condition.
Our business is subject to numerous federal, state and local laws and regulations. Changes in these
regulations may require extensive system and operating changes that may be difficult to implement.
Untimely compliance or noncompliance with applicable regulations could result in the imposition of
civil and criminal penalties that could adversely affect the continued operation of our business,
including: (i) suspension of payments from government programs; (ii) loss of required government
certifications; (iii) loss of authorizations to participate in or exclusion from government reimbursement
programs, such as the Medicare and Medicaid programs; (iv) loss of licenses; or (v) significant fines or
monetary penalties. The regulations to which we are subject include, but are not limited to, federal,
state and local registration and regulation of pharmacies; dispensing and sale of controlled substances
and products containing pseudoephedrine; applicable Medicare and Medicaid Regulations; the Health
Insurance Portability and Accountability Act or (‘‘HIPAA’’); regulations relating to the protection of the
environment and health and safety matters, including those governing exposure to and the management
and disposal of hazardous substances; regulations enforced by the U. S. Federal Trade Commission, the
U. S. Department of Health and Human Services and the Drug Enforcement Administration as well as
state regulatory authorities, governing the sale, advertisement and promotion of products we sell;
anti-kickback laws; false claims laws and federal and state laws governing the practice of the profession
of pharmacy. We are also governed by federal and state laws of general applicability, including laws
regulating matters of wage and hour laws, working conditions, health and safety and equal employment
opportunity.
Additionally, Congress passed the Patient Care Act in 2010, which is resulting in significant
structural changes to the health insurance system. Although many of the structural changes enacted by
Patient Care Act were implemented in 2014, some of the applicable regulations and sub-regulatory
guidance have not yet been issued and/or finalized (e.g., nondiscrimination in health programs and
activities, excise tax on high cost employer sponsored coverage). Therefore, uncertainty remains as to
the full impact of Patient Care Act on our business. We cannot predict what effect, if any, the
remaining Patient Care Act changes may have on our retail pharmacy and pharmacy services
businesses. It is possible that other unanticipated legislative or market-driven changes in the health care
system could also occur, and the upcoming presidential election may result in additional proposals
and/or changes to health care system legislation.
Certain risks are inherent in providing pharmacy services; our insurance may not be adequate to cover any
claims against us.
Pharmacies are exposed to risks inherent in the packaging and distribution of pharmaceuticals and
other healthcare products, such as with respect to improper filling of prescriptions, labeling of
prescriptions, adequacy of warnings, unintentional distribution of counterfeit drugs and expiration of
drugs. In addition, federal and state laws that require our pharmacists to offer counseling, without
additional charge, to their customers about medication, dosage, delivery systems, common side effects
and other information the pharmacists deem significant can impact our business. Our pharmacists may
also have a duty to warn customers regarding any potential negative effects of a prescription drug if the
warning could reduce or negate these effects. Although we maintain professional liability and errors
and omissions liability insurance, from time to time, claims result in the payment of significant
amounts, some portions of which are not funded by insurance. We cannot assure you that the coverage
limits under our insurance programs will be adequate to protect us against future claims, or that we
will be able to maintain this insurance on acceptable terms in the future. Our results of operations,
financial condition or cash flows may be adversely affected if in the future our insurance coverage
proves to be inadequate or unavailable or there is an increase in liability for which we self-insure or we
suffer reputational harm as a result of an error or omission.
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