Express Scripts 2014 Annual Report Download - page 53

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Express Scripts 2014 Annual Report
INCOME TAXES
ACCOUNTINGPOLICY
Deferredtaxassetsandliabilitiesarerecordedbasedontemporarydifferencesbetweenthefinancialstatement
basisandthetaxbasisofassetsandliabilitiesusingpresentlyenactedtaxrates.Weevaluatetaxpositionstodeterminewhether
thebenefitsoftaxpositionsaremorelikelythannotofbeingsustaineduponauditbasedonthetechnicalmeritsofthetax
position.
FACTORSAFFECTINGESTIMATE
Thefactorsthatcouldimpactourestimatesofuncertaintaxpositionsareasfollows:
• likelihoodofbeingsustaineduponauditbasedonthetechnicalmeritsofthetaxposition
• assumedinterestandpenaltiesassociatedwithuncertaintaxpositions
OTHER ACCOUNTING POLICIES
Weconsiderthefollowinginformationaboutrevenuerecognitionpoliciesimportantforanunderstandingofour
resultsofoperations:
PRESCRIPTIONDRUGREVENUES
Revenuesfromthesaleofprescriptiondrugsbyretailpharmaciesarerecognizedwhentheclaimisprocessed.
Whenweindependentlyhaveacontractualobligationtopayournetworkpharmacyprovidersforbenefitsprovidedtoour
clients’members,weactasaprincipalinthearrangementandweincludethetotalprescriptionprice(ingredientcostplus
dispensingfee)wehavecontractedwiththeseclientsasrevenue,includingmemberco-paymentstopharmacies.
Revenuesfromdispensingprescriptionsfromourhomedeliveryandspecialtypharmaciesarerecordedwhen
prescriptionsareshipped.Theserevenuesincludetheco-paymentreceivedfrommembersofthehealthplansweserve.Atthe
timeofshipment,wehaveperformedsubstantiallyallofourobligationsunderthecustomercontractsanddonotexperiencea
significantlevelofreshipmentsorreturns.
Whenwemerelyadministeraclient’snetworkpharmacycontractstowhichwearenotapartyandunderwhichwe
donotassumecreditrisk,weearnanadministrativefeeforcollectingpaymentsfromtheclientandremittingthecorresponding
amounttothepharmaciesintheclient’snetwork.Inthesetransactions,drugingredientcostisnotincludedinourrevenuesor
inourcostofrevenues.
REBATESANDADMINISTRATIVEFEES
Grossrebatesandadministrativefeesearnedfortheadministrationofourrebateprograms,performedin
conjunctionwithclaimsprocessingservicesprovidedtoclients,arerecordedasareductionofcostofrevenuesandtheportion
oftherebatepayabletocustomersistreatedasareductionofrevenues.
Whenweearnrebatesandadministrativefeesinconjunctionwithformularymanagementservices,butdonot
processtheunderlyingclaims,werecordrebatesreceivedfrommanufacturers,netoftheportionpayabletocustomers,in
revenues.
MEDICAREPRESCRIPTIONDRUGPROGRAM
OurrevenuesincludepremiumsassociatedwithourMedicarePartDPrescriptionDrugProgram(“PDP”)risk-
basedproductofferings.TheseproductsinvolveprescriptiondrugdispensingforbeneficiariesenrolledinMedicarePartD
planssponsoredbyuspursuanttoourcontractswiththeCentersforMedicare&MedicaidServices(“CMS”).Inadditionto
MedicarePartDPDPpremiums,therearecertainco-paymentsanddeductibles(the“costshare”)duefrommembersbasedon
prescriptionordersbythosemembers,someofwhicharesubsidizedbyCMSincasesoflow-incomemembership.Ourcostof
revenuesincludesthecostofdrugsdispensedbyourhomedeliverypharmaciesorretailnetworkformemberscoveredunder
ourMedicarePartDPDPproductofferingsandisrecordedatcostasincurred.
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