Medco 2014 Annual Report Download - page 17

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Express Scripts 2014 Annual Report
Prompt Pay Laws.UnderMedicarePartDandcertainstatelaws,someofwhichalsogovernthePublicExchanges,
PBMsandmanyofourhealthplanclients,wemaybeobligatedtopayretailpharmacyproviderswithinestablishedtime
periodsthatmaybeshorterthanexistingcontractedtermsand/orviaelectronictransferinsteadofbycheck.Changesthat
requirefasterpaymentmayhaveanegativeimpactonourcashflowfromoperations.
False Claims Act and Related Criminal Provisions.ThefederalFalseClaimsAct(the“FalseClaimsAct”)imposes
civilpenaltiesforknowinglymakingorcausingtobemadefalseclaimsorfalserecordsorstatementswithrespectto
governmentalprograms,suchasMedicareandMedicaid,inordertoobtainreimbursementorfailuretoreturnoverpayments.
Privateindividualsmaybringquitamor“whistleblower”suitsagainstprovidersundertheFalseClaimsAct,whichauthorizes
thepaymentofaportionofanyrecoverytotheindividualbringingsuit.TheHealthReformLawsalsoamendedthefederal
anti-kickbacklawstostateanyclaimsubmittedtoafederalorstatehealthcareprogramwhichviolatestheanti-kickbacklawis
alsoafalseclaimundertheFalseClaimsAct.TheFalseClaimsActgenerallyprovidesfortheimpositionofcivilpenaltiesand
fortrebledamages,resultinginthepossibilityofsubstantialfinancialpenalties.CriminalstatutessimilartotheFalseClaims
Actprovidethatifacorporationisconvictedofpresentingaclaimormakingastatementitknowstobefalse,fictitiousor
fraudulenttoanyfederalagencyitmaybefined.Convictionunderthesestatutesmayalsoresultinexclusionfromparticipation
infederalandstatehealthcareprograms.SomestateshavealsoenactedlawssimilartotheFalseClaimsActwhichmayinclude
criminalpenalties,substantialfinesandtrebledamages.
Government Procurement Regulations.Asdescribedabove,wehaveacontractwiththeDoD,whichsubjectsusto
alloftheapplicableFederalAcquisitionRegulations(“FAR”)andDepartmentofDefenseFARSupplementwhichgovern
federalgovernmentcontracts.Further,thereareotherfederalandstatelawsapplicabletoourDoDarrangementandother
clientsthatmaybesubjecttogovernmentprocurementregulations.Inaddition,certainofourclientsparticipateascontracting
carriersintheFederalEmployeesHealthBenefitsProgramwhichisadministeredbytheOfficeofPersonnelManagementand
containsvariousPBMstandards,includingPBMtransparencystandards.
Antitrust.Theantitrustlawsgenerallyprohibitcompetitorsfromfixingprices,dividingmarketsandboycotting
competitors,regardlessofthesizeormarketpowerofthecompaniesinvolved.Further,antitrustlawsgenerallyprohibitother
conductfoundtorestraincompetitionunreasonably,suchascertainattemptstotieorbundleservicestogetherandcertain
exclusivedealingarrangements.
ERISA Regulation.TheEmployeeRetirementIncomeSecurityActof1974(“ERISA”)regulatescertainaspectsof
employeepensionandhealthbenefitplans,includingself-fundedcorporatehealthplanswithrespecttowhichwehave
agreementstoprovidePBMservices.Webelievetheconductofourbusinessisnotgenerallysubjecttothefiduciary
obligationsofERISA.However,therecanbenoassurancetheUnitedStatesDepartmentofLabor(the“DOL”),whichisthe
agencythatenforcesERISA,wouldnotassertthefiduciaryobligationsimposedbyERISAapplytocertainaspectsofour
operationsorthatcourtswouldnotreachsucharulinginprivateERISAlitigation.
Inadditiontoitsfiduciaryprovisions,federallawrelatedtoERISAhealthplansimposescivilandcriminalliability
onserviceproviderstohealthplansandcertainotherpersonsifcertainformsofillegalremunerationaremadeorreceived.
TheseprovisionsofERISAaresimilar,butnotidentical,tothehealthcareanti-kickbackstatutesdescribedabove,although
ERISAlacksthestatutoryandregulatory“safeharbor”exceptionsincorporatedintothehealthcarestatutes.Likethehealthcare
anti-kickbacklaws,thecorrespondingprovisionsofERISAarebroadlywrittenandtheirapplicationtoparticularcasesisoften
uncertain.
EmployeebenefitplanssubjecttoERISAaresubjecttocertainrules,publishedbytheDOL,relatingtoannual
Form5500reportingobligations.Therulesincludecertainreportingrequirementsfordirectandindirectcompensationreceived
byplanserviceproviderssuchasPBMs.However,inFebruary2010,theDOLissuedtwofrequentlyaskedquestionsthat
providediscountandrebaterevenuepaidtoPBMsbydrugmanufacturersgenerallyneednotbereportedonaplan’sForm
5500asindirectcompensation.Also,self-fundedplanswhicharepartofSection125“cafeteriaplans”arecurrentlyexempt
fromsuchcompensationdisclosure.
InDecember2010,theDOLheldapublichearingregardingthedisclosureobligationsofserviceprovidersto
welfareplansundersection408(b)(2)ofERISA.Atthistime,weareunabletopredictwhetherregulationswillbeissued,the
formofanysuchregulationsorthepossibleimpactofanysuchchangesonourbusinesspractices.
State Fiduciary Legislation.StatuteshavebeenintroducedinseveralstatesthatpurporttodeclareaPBMisa
fiduciarywithrespecttoitsclients.Webelievethefiduciaryobligationssuchstatuteswouldimposewouldbesimilar,butnot
identical,tothescopeoffiduciaryobligationsunderERISA.Todateonlytwojurisdictions—MaineandtheDistrictof
Columbia—haveenactedsuchastatute.Ourtradeassociation,PharmaceuticalCareManagementAssociation(“PCMA”),filed
suitsinfederalcourtsinMaineandtheDistrictofColumbiaalleging,amongotherthings,thestatutesarepreemptedbyERISA
withrespecttowelfareplanssubjecttoERISA.In2011,Maine’sfiduciarylawwasrepealed,althoughtheUnitedStatesCourt
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