Rite Aid 2016 Annual Report Download - page 14

Seasonality
We experience moderate seasonal fluctuations in our results of operations concentrated in the first
and fourth fiscal quarters as the result of the concentration of the cough, cold and flu season and the
holidays. We tailor certain front end merchandise to capitalize on holidays and seasons. We increase
our inventory levels during our third fiscal quarter in anticipation of the seasonal fluctuations described
above. Our results of operations in the fourth and first fiscal quarters may fluctuate based upon the
timing and severity of the cough, cold and flu season, both of which are unpredictable.
Regulation
Our business is subject to federal, state and local laws, regulations, and administrative practices
concerning the provision of and payment for health care services, including, without limitation: federal,
state and local licensure and registration requirements concerning the operation of pharmacies and the
practice of pharmacy; Medicare, Medicaid and other publicly financed health benefit plan regulations
prohibiting kickbacks, beneficiary inducement and the submission of false claims; the Patient Protection
and Affordable Care Act (ACA); regulations of the U.S. Food and Drug Administration and the U.S.
Drug Enforcement Administration, including regulations governing the purchase, sale, storing and
dispensing of controlled substances and other products, as well as regulations promulgated by state and
other federal agencies concerning automated outbound contacts such as phone calls, text messages and
emails and the sale, advertisement and promotion of the products we sell, including tobacco and
alcoholic beverages.
Our business is also subject to patient privacy and other obligations, including corporate, pharmacy
and associate responsibility imposed by the Health Insurance Portability and Accountability Act. As a
covered entity, we are required to implement privacy standards, train our associates on the permitted
uses and disclosures of protected health information, provide a notice of privacy practice to our
pharmacy customers and permit pharmacy customers to access and amend their records and receive an
accounting of disclosures of protected health information. We are also subject to federal and state
privacy and data security laws with respect to our receipt, use and disclosure by us of personally
identifiable information, which laws require us to provide appropriate privacy and security safeguards
for such information. In addition, we are also subject to the Payment Card Industry Data Security
Standard promulgated by the payment card industry in connection with handling credit card data. This
standard contains requirements devised to aid entities that process, store or transmit credit card
information to maintain a secure environment.
We are also subject to laws governing our relationship with our associates, including health and
safety, minimum wage requirements, overtime, working conditions, equal employment opportunity and
unionizing efforts.
In addition, in connection with the ownership and operations of our stores, distribution centers and
other sites, we are subject to laws and regulations relating to the protection of the environment and
health and safety matters, including those governing the management and disposal of hazardous
substances and the cleanup of contaminated sites.
PBMs are subject to federal, state, and local statutes and regulations, which govern their
operations. In addition, certain quasi-regulatory organizations, including the National Association of
Boards of Pharmacy and the National Association of Insurance Commissioners (‘‘NAIC’’) have issued
model regulations or may propose future regulations concerning PBMs and/or PBM activities. Similarly,
credentialing organizations such as the National Committee for Quality Assurance (‘‘NCQA’’) and the
Utilization Review Accreditation Commission (‘‘URAC’’) may establish voluntary standards regarding
PBM or specialty pharmacy activities. While the actions of these quasi-regulatory or standard-setting
organizations do not have the force of law, they may influence states to adopt their requirements or
recommendations and influence client requirements for PBM or specialty pharmacy services. Moreover,
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