Medco 2014 Annual Report Download - page 24

Express Scripts 2014 Annual Report
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•our failure to attract and retain talented employees, or to manage succession and retention for our Chief
Executive Officer or other key executives
•other risks described from time to time in our filings with the SEC
These and other relevant factors, including those risk factors in “Part I — Item 1A — Risk Factors” in this Annual
Report and any other information included or incorporated by reference in this Report, and information which may be
contained in our other filings with the SEC, should be carefully considered when reviewing any forward-looking statement. We
note these factors for investors as permitted under the Private Securities Litigation Reform Act of 1995. Investors should
understand it is impossible to predict or identify all such factors or risks. As such, you should not consider either foregoing
lists, or the risks identified in our SEC filings, to be a complete discussion of all potential risks or uncertainties.
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Item 1A — Risk Factors
General Risk Factors
We operate in a very competitive industry, which could compress our margins and impair our ability to attract and retain
clients. Our failure to effectively differentiate our products and services from those of our competitors could magnify the impact
of the competitive environment.
Weoperateinahighlycompetitiveenvironmentandanindustrysubjecttosignificantmarketpressuresbrought
aboutbycustomerdemands,legislativeandregulatorydevelopmentsandothermarketfactors.Wemustremaincompetitivein
ordertoattractnewclientsandretainandcross-selladditionalproductsandservicestoourexistingclients.Strongcompetition
inthePBMmarketplacehasgeneratedgreaterclientdemandforlowerpricing,increasedrevenuesharingandenhanced
productandserviceofferings.Thesecompetitivefactorshavehistoricallyappliedpressureonouroperatingmarginsandcaused
manyPBMs,includingus,toreducethepriceschargedforcoreproductsandserviceswhilesharingagreaterportionofthe
formularyfeesandrelatedrevenuesreceivedfrompharmaceuticalmanufacturerswithclients.Wecannotassumepositive
trendssuchaslowerdrugpurchasingcosts,increasedgenericusage,drugpriceinflation,increasedrebates,favorable
demographicsandspecialtygrowthwouldoffsetthesepressuresinthefuture.Ourinabilitytomaintainthesepositivetrends,or
failuretoidentifyandimplementnewwaystomitigatepricingpressures,couldnegativelyimpactourabilitytoattractorretain
clientsorselladditionalservices,whichcouldnegativelyimpactourmarginsandhaveamaterialadverseeffectonour
businessandresultsofoperations.
Inaddition,ourclientsarewellinformedandorganizedandcaneasilymovebetweenusandourcompetitorsas
ourclientcontractsaregenerallythreeyears.Manyclientsworkthroughknowledgeableconsultantsandourlargerclients
typicallyseekcompetingbidsfromourcompetitorspriortocontractexpiration.Thesefactorstogetherwiththeimpactof
competitivepressurescouldmakeitdifficultforustoattractnewclients,retainexistingclientsandcross-selladditional
services,whichcouldmateriallyandadverselyaffectourbusinessandresultsofoperations.
TosucceedinthehighlycompetitivePBMmarketplace,itisimperativewemaintainastrongreputationaswellas
differentiateourbusinessofferingsbyinnovatinganddeliveringproductsandservicesthatdemonstrateenhancedvaluetoour
clients,particularlyinresponsetomarketchangesfrompublicpolicy.Thenegativereputationalimpactofasignificantevent,
includingafailuretoexecuteonclientcontractsortosuccessfullyoperatethecomplexstructureofourbusinessorotherwise
innovateanddeliverproductsandservicesthatdemonstrategreatervaluetoourclients,couldthereforeaffectourabilityto
growandretainprofitableclientswhichcouldhaveamaterialadverseeffectonourbusinessandresultsofoperations.
The delivery of healthcare-related products and services is an evolving and rapidly changing industry. Our failure to anticipate
or appropriately adapt to changes or trends within the industry could have a negative impact on our ability to compete and
adversely affect our business and results of operations.
Wehavedesignedourbusinessmodeltocompetewithinthecurrentindustrystructure.Ourclientcontractsare
generallythreeyearsandourpharmaceuticalmanufacturerandretailcontractsaretypicallynon-exclusiveandterminableon
relativelyshortnoticebyeitherparty.AnysignificantshiftsinthestructureofthePBMindustryorthehealthcareproductsand
servicesindustryingeneralcouldaltertheindustrydynamicsandadverselyaffectourabilitytoattractorretainclients.Such
industryshiftscouldresultfrom,amongotherthings:alargeintra-orinter-industrymerger,strategicalliances,anewentrant
(includingthegovernment),aneworalternativebusinessmodel,ageneraldecreaseindrugutilization,changesintheUnited
StatesPostalServiceortheconsolidationofshippingcarriers,anincreasedabilityofconsultantstoinfluencethemarket,
increaseddrugacquisitioncost,changesinthegenericdrugmarketorthefailureofnewgenericdrugstocometomarket,rapid
technologicalshiftsorthenecessarychangesorunintendedconsequencesofthefederalAffordableCareAct,asamendedby
theHealthReformLaws.Ourfailuretoanticipateorappropriatelyadapttochangesintheindustrycouldnegativelyimpactour
competitivepositionandadverselyaffectourbusinessandresultsofoperations.