Rite Aid 2012 Annual Report Download - page 19

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drugs. In addition, federal and state laws that require our pharmacists to offer counseling, without
additional charge, to their customers about medication, dosage, delivery systems, common side effects
and other information the pharmacists deem significant can impact our business. Our pharmacists may
also have a duty to warn customers regarding any potential negative effects of a prescription drug if the
warning could reduce or negate these effects. Although we maintain professional liability and errors
and omissions liability insurance, from time to time, claims result in the payment of significant
amounts, some portions of which are not funded by insurance. We cannot assure you that the coverage
limits under our insurance programs will be adequate to protect us against future claims, or that we
will be able to maintain this insurance on acceptable terms in the future. Our results of operations,
financial condition or cash flows may be adversely affected if in the future our insurance coverage
proves to be inadequate or unavailable or there is an increase in liability for which we self-insure or we
suffer reputational harm as a result of an error or omission.
We will not be able to compete effectively if we are unable to attract, hire and retain qualified pharmacists.
Although more licensed pharmacists and new graduates are seeking positions in many markets
there is still an unmet demand for pharmacists in limited regions of the country that are challenging to
staff. We continue to offer competitive compensation plans to retain and attract current and future
pharmacists, work with colleges of pharmacy across the U.S. to recruit both pharmacy interns and
pharmacy graduates, but if the shortage recurs in one or more markets, our ability to compete
effectively in any market could be adversely impacted.
We may be subject to significant liability should the consumption of any of our products cause injury, illness
or death.
Products that we sell could become subject to contamination, product tampering, mislabeling or
other damage requiring us to recall our private brand products. In addition, errors in the dispensing
and packaging of pharmaceuticals could lead to serious injury or death. Product liability claims may be
asserted against us with respect to any of the products or pharmaceuticals we sell and we may be
obligated to recall our private brand products. A product liability judgment against us or a product
recall could have a material, adverse effect on our business, financial condition or results of operations.
If we fail to protect the security of personal information about our customers and associates, we could be
subject to costly government enforcement actions or private litigation.
Through our sales and marketing activities, we collect and store certain personal information that
our customers provide to purchase products or services, enroll in promotional programs, register on our
web site, or otherwise communicate and interact with us. We also gather and retain information about
our associates in the normal course of business. We may share information about such persons with
vendors that assist with certain aspects of our business. Despite instituted safeguards for the protection
of such information, security could be compromised and confidential customer or business information
misappropriated. Loss of customer or business information could disrupt our operations, damage our
reputation, and expose us to claims from customers, financial institutions, payment card associations
and other persons, any of which could have an adverse effect on our business, financial condition and
results of operations. In addition, compliance with tougher privacy and information security laws and
standards may result in significant expense due to increased investment in technology and the
development of new operational processes. For example, in July 2010, settlement orders between us
and the Federal Trade Commission and U.S. Department of Health and Human Services, Office for
Civil Rights were accepted by the agencies. The agencies’ allegations were that we failed to protect
patient and associate identifiable information. As a result of these settlement orders, we, without
admitting any liability, agreed to pay a $1.1 million penalty and are required to establish a
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