Aetna 2009 Annual Report Download - page 44

Annual Report – Page 38
For more information regarding these matters, refer to Regulatory Environment beginning on page 22 and Litigation
and Regulatory Proceedings in Note 18 of Notes to Consolidated Financial Statements beginning on page 78.
We would be adversely affected if our prevention, detection or control systems fail to detect and implement
required changes to maintain regulatory compliance.
Federal and state governments have made investigating and prosecuting health care and other insurance fraud and
abuse a priority. Fraud and abuse prohibitions encompass a wide range of activities, including kickbacks for referral of
members, billing for unnecessary medical services, improper marketing, and violations of patient privacy rights. The
regulations and contractual requirements applicable to us and other participants are complex and subject to change.
Although we believe our compliance efforts are adequate, ongoing vigorous law enforcement and the highly technical
regulatory scheme mean that our compliance efforts in this area will continue to require significant resources.
Similarly, failure of our prevention, detection or control systems related to regulatory compliance and/or compliance
with our internal policies, including data systems security issues and/or unethical conduct by managers and/or
employees, could adversely affect our reputation and also expose us to litigation and other proceedings, fines and/or
penalties, any of which could adversely affect our business, operating results or financial condition.
We face risks related to litigation and regulatory proceedings.
We are growing by expanding into certain segments and subsegments of the health care marketplace. Some of the
segments and subsegments we have targeted for growth include Medicare, Medicaid, individual, public sector and
labor customers who are not subject to ERISA’ s limits on state law remedies. In addition, over the last several years
we have entered product lines in which we previously did not participate, including Insured Medicaid, Medicaid plan
management, international managing general underwriting, Medicare PDP, mail order pharmacy, specialty pharmacy
and ActiveHealth. These products subject us to regulatory and other risks that are different from the risks of providing
Commercial managed care and health insurance products and may increase the risks we face from litigation, regulatory
reviews, audits and investigations and other adverse legal proceedings. For example, our Medicaid products are more
highly regulated than our Commercial products, and we are dispensing medications at our mail order and specialty
pharmacies directly to members. In addition to the risks of purported dispensing and other operational errors, failure to
adhere to the laws and regulations applicable to the dispensing of pharmaceuticals could subject our pharmacy
subsidiaries to civil and criminal penalties.
In addition, we are party to a number of lawsuits, certain of which are purported to be class actions. The majority of
these cases relate to the conduct of our health care operations and allege various violations of law. Many of these
cases seek substantial damages (including non-economic or punitive damages and treble damages) and may also seek
changes in our business practices. We may also be subject to additional litigation and other adverse legal proceedings
in the future. Litigation and other adverse legal proceedings could materially adversely affect our business or
operating results because of reputational harm to us caused by such proceedings, the costs of defending such
proceedings, the costs of settlement or judgments against us, or the changes in our operations that could result from
such proceedings. For example, during 2009, Aetna and the New York Attorney General announced an agreement
relating to an industry-wide investigation into certain payment practices with respect to out-of-network providers.
Among other things, the agreement required Aetna to contribute $20 million towards the establishment of an
independent database system to provide fee information regarding out-of-network reimbursement rates. Refer to
Litigation and Regulatory Proceedings in Note 18 of Notes to Consolidated Financial Statements beginning on page 78
for more information.
Our products providing pharmacy benefit management services face regulatory and other risks and
uncertainties associated with the PBM industry that may differ from the risks of our core business of providing
managed care and health insurance products.
The following are some of the PBM and pharmacy related risks that could have a material adverse effect on our
business, financial condition or operating results:
 Federal and state anti-kickback and other laws that govern our PBM and mail order and specialty mail order
pharmacies’ relationship with pharmaceutical manufacturers, customers and consumers.
 Compliance requirements for PBM fiduciaries under ERISA, including compliance with fiduciary obligations
under ERISA in connection with the development and implementation of items such as drug formularies and
preferred drug listings.