Medco 2014 Annual Report Download - page 31

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Express Scripts 2014 Annual Report
Changes in drug pricing or industry pricing benchmarks could materially impact our financial performance.
Contractsintheprescriptiondrugindustry,includingourcontractswithretailpharmacynetworksandwithPBM
andspecialtypharmacyclients,generallyuse“averagewholesaleprice”or“AWP,”whichispublishedbyathirdparty,asa
benchmarktoestablishpricingforprescriptiondrugs.Intheevent(i)AWPisnolongerpublishedbythirdparties,(ii)weadopt
otherpricingbenchmarksforestablishingpriceswithintheindustryor(iii)futurechangesindrugpricessubstantiallydeviate
fromourexpectations,wecangivenoassurancetheshort-orlong-termimpactofsuchchangestoindustrypricingbenchmarks
ordrugpriceswillnothaveamaterialadverseeffectonourbusinessandresultsofoperations.
Legislationandotherregulationsaffectingdrugpricesaredescribedinmoredetailunder“PartI—Item1—
Business—GovernmentRegulationandCompliance—LegislationandRegulationAffectingDrugPrices”above.
Pending and future litigation, investigations or other proceedings could subject us to significant monetary damages or
penalties and/or require us to change our business practices, which could have a material adverse effect on our business and
results of operations.
Wearesubjecttorisksrelatingtolitigation,enforcementaction,regulatoryproceedings,governmentinquiriesand
investigationsandothersimilaractionsinconnectionwithourbusinessoperations,includingwithoutlimitationthedispensing
ofpharmaceuticalproductsbyourspecialtyandhomedeliverypharmacies,servicesrenderedinconnectionwithourdisease
managementoffering,ourpharmaceuticalservicesoperations,pharmacybenefitmanagementservicesandmergersand
acquisitionsactivity.Theseproceedingsseekunspecifiedmonetarydamagesand/orequitablerelief.Whilewebelievethese
proceedingsarewithoutmeritandintendtocontestthemvigorously,wecannotpredictwithcertaintytheoutcomeofanysuch
proceedings.Ifoneormoreoftheseproceedingshasanunfavorableoutcome,wecannotprovideanyassuranceitwouldnot
haveamaterialadverseeffectonourbusinessandresultsofoperations,includingourabilitytoattractandretainclientsasa
resultofanynegativereputationalimpactofsuchanoutcome.Further,whilecertaincostsarecoveredbyinsurance,wemay
incuruninsuredcoststhatarematerialtoourfinancialperformanceinthedefenseofsuchproceedings.
Commercialliabilityinsurancecoveragecontinuestobedifficulttoobtainforcompaniesinourbusinesssector,as
suchinsurancecancauseunexpectedvolatilityinpremiumsand/orretentionrequirementsdictatedbyinsurancecarriers.We
haveestablishedcertainself-insuranceaccrualstocoveranticipatedlosseswithinourretainedliabilityforpreviouslyreported
claimsandthecosttodefendtheseclaims.However,therecanbenoassurancesuchaccrualswillcoveractuallossesorthat
general,professional,managedcareerrorsandomissions,and/orotherliabilityinsurancecoveragewillbereasonablyavailable
inthefutureorsuchinsurancecoverage,togetherwithourself-insuranceaccruals,willbeadequatetocoverfutureclaims.A
claim,orclaims,inexcessofourinsurancecoveragecouldhaveamaterialadverseeffectonourbusinessandresultsof
operations.
We face significant competition in attracting and retaining talented employees. Further, managing succession and retention for
our Chief Executive Officer and other key executives is critical to our success, and our failure to do so could have an adverse
impact on our future performance.
Ourabilitytoattractandretainaqualifiedandexperiencedworkforceisessentialtomeetcurrentandfuturegoals
andobjectivesandthereisnoguaranteewewillbeabletoattractandretainsuchemployeesorthatcompetitionamong
potentialemployerswillnotresultinincreasedsalariesorotherbenefits.Aninabilitytoretainexistingemployeesorattract
additionalemployees,oranunexpectedlossofleadership,couldhaveamaterialadverseeffectonourbusinessandresultsof
operations.
Inaddition,ourfailuretoadequatelyplanforsuccessionofourChiefExecutiveOfficer,seniormanagementand
otherkeyemployeesorthefailureofkeyemployeestosuccessfullytransitionintonewrolescouldhaveamaterialadverse
effectonourbusinessandresultsofoperations.Whilewehavesuccessionplansinplaceandemploymentarrangementswith
certainkeyexecutives,thesedonotguaranteetheservicesoftheseexecutiveswillcontinuetobeavailabletous.
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Item 1B — Unresolved Staff Comments
TherearenounresolvedwrittencommentsreceivedfromtheSECStaff180daysormorebeforetheendofour
fiscalyearrelatingtoourperiodicorcurrentreportsundertheSecuritiesExchangeActof1934.