EXHIBIT 10.3
PHARMACY BENEFIT MANAGEMENT AGREEMENT
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This PHARMACY BENEFIT MANAGEMENT AGREEMENT (this "Agreement") is
between UNITED HEALTHCARE SERVICES, INC., on behalf of itself and its affiliates
from time to time, located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(hereinafter "United HealthCare"), and MERCK MEDCO MANAGED CARE, L.L.C. located
at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (hereinafter "PBM"). This
Agreement is effective on the date the parties have each executed it (the
"Effective Date"). It concerns services provided as of the "Commencement Date,"
as hereinafter defined. This Agreement supersedes and replaces any existing
agreements between the parties related to the same subject matter.
W I T N E S S E T H:
WHEREAS, United HealthCare desires to contract with a pharmaceutical
benefits management entity for pharmaceutical benefit management and related
services that United HealthCare will make available, together with other United
HealthCare services, to Health Plans, as hereinafter defined, and other
non-Health Plan business (affiliated with United HealthCare or to which United
HealthCare provides services) through contracts with United HealthCare; and
WHEREAS, PBM provides pharmaceutical benefits management and related
services and desires to contract with United HealthCare to provide such
management and services.
NOW, THEREFORE, in consideration of the terms and conditions set forth
in this Agreement, the undersigned parties agree as follows:
SECTION 1. DEFINITIONS
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1.1. Definitions. In addition to the capitalized terms defined
elsewhere in this Agreement, the following terms shall have the following
meanings:
(a) "Average Wholesale Price" or "AWP" means the average wholesale
price of the Covered Prescription Drug Services dispensed, utilizing
the current price list in the Blue Book and its supplements. If PBM
ceases to use the Blue Book and its supplements, PBM shall use such
other nationally recognized pricing source as PBM uses for all of its
remaining customers; or, if PBM uses more than one source, then the
source used for United HealthCare shall be the source mutually agreed
to by the parties. Under the Retail Pharmacy Program, AWP is based on
the package size submitted. Under the Mail Service Program, AWP is
based on package sizes of 100 units or 16 oz. quantities, or smaller
quantities if such quantities are not commercially available.
(b) "Benefit Contract" means a benefit plan that: (i) is sponsored,
purchased, issued or administered by Payor and (ii) contains the terms
and conditions of a Covered Person's coverage. A Benefit Contract is
also known as a certificate of coverage, summary plan description,
evidence of coverage, or group services agreement.
(c) "Commencement Date" means June 1, 2000 or such earlier date on
which PBM begins to provide services under this Agreement in accordance
with Section 3.24.
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(d) "Copayment or Coinsurance or Deductible or Other Charge"
collectively known as "Copayment" means the charge, in addition to the
premium, which a Covered Person is required to pay for certain covered
services provided under the Benefit Contract and Pharmacy Rider.
Copayment or Coinsurance or Deductible or Other Charge may be either a
defined dollar amount or a percentage of eligible expenses. A Covered
Person is responsible for the payment of any Copayment directly to the
pharmacy at the time the prescription is dispensed.
(e) "Covered Person" means an individual eligible to receive coverage
for outpatient prescription pharmacy benefits who is currently enrolled
under a United HealthCare or Payor Benefit Contract that includes a
Pharmacy Rider.
(f) "Covered Prescription Drug Services" means those covered outpatient
prescription drugs and covered pharmacy products, services and supplies
pursuant to a Covered Person's Benefit Contract and/or Pharmacy Rider.
(g) "Health Plan" means a licensed health maintenance organization
("HMO") or other similar organization that is either (i) owned by
United HealthCare where "Owned" means that United HealthCare owns not
less than a majority of the voting securities; or (ii) managed by
United HealthCare, where "Managed" means that United HealthCare manages
the pharmacy program or provides other management or administrative
services such as claims processing services, where the local managed
health plan assumes medical risk other than as defined below. Health
Plan includes an HMO or other similar organization Owned or Managed
that offers an array of products including but not limited to
fully-insured, self-insured products (where such self-insured products
use the provider networks, medical management and other similar
services used by the HMO or similar organization), commercial HMO
products, Medicare risk products (Medicare+ Choice), Medicaid, EPO
products, PPO products, and all combination products that include an
in-network and out-of-network component such as point-of-service
("POS") products. When such organization is Managed by United
HealthCare, not Owned by United HealthCare, Health Plan includes such
organization only to the extent it has elected to receive services
pursuant to this Agreement. The term Health Plan is not intended to
include: (i) United HealthCare Insurance Company (UHI) products unless:
(A) such products use provider networks, medical management and other
similar services in a manner comparable to the HMOs or similar
organization; and (B) United HealthCare is responsible for medical
underwriting risk; or (ii) fully insured or self-funded products sold
through United HealthCare's Strategic Business Services division; or
(iii) Medicare supplemental products (MediGap); or (iv) *** of this
Agreement.
(h) "Intellectual Property" means all patents, patents pending,
trademarks, service marks, trade names, service names, slogans,
registered copyrights, commercially significant unregistered
copyrights, technology rights and licenses, computer software
(including, without limitation, any source or object codes or related
documentation), trade secrets, franchises, know-how, and inventions and
all improvements to such intellectual property.
*** Represents text deleted pursuant to a confidentiality treatment claim
filed with the Securities and Exchange Commission pursuant to Rule
406 under the Securities Act of 1933, as amended.
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(i) "Mail Service Program" means a program contemplated by this
Agreement in which Covered Persons may mail a prescription together
with the applicable Copayment to PBM for dispensing of a 90 day maximum
supply of a covered drug via mail service.
(j) "Maximum Allowable Cost" or "MAC" means a list established by PBM
for its book of business showing the maximum allowable cost for a list
of prescription drug ingredients. Any generic or branded generic drug
on the MAC list dispensed at retail will be reimbursed at the maximum
allowed by such list.
(k) "Participating Pharmacy" means a pharmacy, including a retail or
mail service pharmacy, which has entered into an agreement with PBM
under which pharmacy has agreed to provide Covered Prescription Drug
Services to Covered Persons and to comply with (i) contractual
requirements pursuant to this Agreement; and (ii) regulatory
requirements.
(l) "Payor" means United HealthCare or the entity or person that has
the financial responsibility to United HealthCare for payment for
services covered by a Benefit Contract and/or Pharmacy Rider.
(m) "Pharmacy Rider" means that rider to the Covered Person's Benefit
Contract that in addition to the Benefit Contract, states the details
of Covered Person's prescription drug coverage. The Benefit Contract
and Pharmacy Rider are used by PBM in processing outpatient
prescription drug claims in connection with this Agreement.
(n) "Pharmacy & Therapeutics Committee" or "P&T Committee" means that
United HealthCare committee that: (i) reviews a prescription drug for
inclusion on the United HealthCare Preferred Drug List or other
comparable formularies; and, (ii) develops other criteria, procedures
and rules for the Program including but not limited to quantity level
and prior authorization.
(o) "Preferred Drug List" or "PDL" means a list that identifies those
Federal Drug Administration ("FDA") approved prescription drug products
that are preferred by United HealthCare for dispensing to Covered
Persons.
(p) "Program" means all pharmacy services provided under the Benefit
Contract and Pharmacy Rider to Covered Persons, including days supply
limitation, Copayment, Preferred Drug List and other program
specifications set forth in this Agreement or otherwise agreed to, in
writing, between or among the parties.
(q) "PDL Rebate(s)" means ***
(r) "Retail Pharmacy Program" means that part of the pharmacy program
where Covered Persons may purchase a maximum of a 34 day supply (except
as otherwise mutually agreed) of Covered Prescription Drug Services
from a retail Participating Pharmacy upon providing verification of
eligibility and payment of the applicable Copayment.
(s) "Substantial Change" means a change in law or regulation applicable
to a party to this Agreement that materially adversely affects the
benefits such party reasonably expected to receive under this
Agreement.
*** Represents text deleted pursuant to a confidentiality treatment claim
filed with the Securities and Exchange Commission pursuant to Rule
406 under the Securities Act of 1933, as amended.
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(t) "United HealthCare" means the party to this Agreement or another
wholly owned affiliate, subsidiary or business division to whom United
HealthCare may assign this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES
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2.1. Representations and Warranties of PBM.
2.1.1. Organization and Qualification. PBM represents and warrants
to United HealthCare that it is a limited liability company duly
organized, validly existing and in good standing under the laws of
New Jersey. PBM has the corporate power and authority necessary to
own and operate its properties and to carry on its business as now
conducted. PBM is qualified to do business as a foreign
corporation in every jurisdiction in which the nature of its
business and/or its ownership of property requires it to be so
qualified.
2.1.2. Corporate Authorization. PBM represents and warrants to
United HealthCare that the execution, delivery, and performance of
this Agreement and the provision of the services contemplated
hereby are within its corporate powers. All requisite authority
necessary to enter into this Agreement has been obtained, and PBM
has duly and validly executed and delivered this Agreement.
Assuming this Agreement constitutes the valid and binding
agreement of United HealthCare, this Agreement constitutes a valid
and binding agreement of PBM enforceable against PBM in accordance
with its terms.
2.1.3. No Conflict; Required Filings and Consents. PBM represents
and warrants to United HealthCare that the execution, delivery and
performance of this Agreement does not, and the provision of the
services contemplated hereby will not: (a) conflict with the
Articles of Organization or Bylaws of PBM; (b) conflict with or
violate any laws applicable to PBM or by which any of its
properties is bound or affected; or (c) result in any breach of or
constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration
or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of PBM pursuant to
any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to
which PBM is a party, or by which PBM or any of its properties is
bound or affected. The execution and delivery of this Agreement by
PBM does not, and the performance of this Agreement by PBM and the
provision of the services contemplated hereby by PBM will not,
require any consent, approval, authorization or permit of, or
filing with or notification to, any third party, except for
certain filings required by certain state governmental entities.
2.2. Representations and Warranties of United HealthCare.
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2.2.1. Organization and Qualification. United HealthCare
represents and warrants to PBM that it is a corporation duly
incorporated, validly existing and in good standing under the laws
of Minnesota. United HealthCare has the corporate power and
authority necessary to own and operate its properties and to carry
on its business as now conducted. United HealthCare is qualified
to do business as a foreign corporation in every jurisdiction in
which the nature of its business or its ownership of property
requires it to be so qualified.
2.2.2. Corporate Authorization. United HealthCare represents and
warrants to PBM that the execution, delivery, and performance of
this Agreement are within its corporate powers. All requisite
authority necessary to enter into this Agreement has been
obtained, and United HealthCare has duly and validly executed and
delivered this Agreement. Assuming this Agreement constitutes the
valid and binding agreement of PBM, this Agreement constitutes a
valid and binding agreement of United HealthCare enforceable
against United HealthCare in accordance with its terms.
2.2.3. No Conflict; Required Filings and Consents. United
HealthCare represents and warrants to PBM that the execution,
delivery and performance of this Agreement does not, and the
performance of this Agreement by United HealthCare will not: (a)
conflict with the Articles of Incorporation or Bylaws of United
HealthCare; (b) conflict with or violate any laws applicable to
United HealthCare or by which any of its properties is bound or
affected; or (c) result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would
become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance on any of the properties
or assets of United HealthCare pursuant to any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which United
HealthCare is a party, or by which United HealthCare or any of its
properties is bound or affected. The execution and delivery of
this Agreement by United HealthCare does not, and the performance
of this Agreement by United HealthCare will not, require any
consent, approval, authorization or permit of, or filing with or
notification to any third party, except for certain filings
required by certain state governmental entities.
SECTION 3. OBLIGATIONS OF PBM: PHARMACY MANAGEMENT AND SERVICES
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3.1. General PBM Services. PBM shall provide to United HealthCare the
services described in this Agreement and in Exhibit A. PBM acknowledges
that its position as a premier company capable and desirous of
providing industry leading products and services is an inducement on
which United HealthCare is relying in entering into this Agreement.
3.2. Laws, Regulations and Licenses. PBM, at its own cost, shall: (a)
maintain all federal, state, and local licenses that are materially
necessary to provide services under this Agreement and the lack of
which could adversely affect United HealthCare; (b) shall comply with
all applicable statutes and regulations in providing all services
pursuant to this Agreement; and (c) require all Participating
Pharmacies employed by or under contract with PBM to comply with (a)
and (b).
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3.3. Personnel and Other Resources. PBM shall provide sufficient,
dedicated personnel, information systems support and other resources,
as reasonably required to successfully administer a high quality,
cost-effective Program for United HealthCare pursuant to this
Agreement. PBM and United HealthCare shall review the appropriateness
of resource allocation on a regular basis, no less often than
quarterly. United HealthCare has the right to interview and approve of
any recommended new hires for the Dedicated Pharmacy Management Unit
discussed below. United HealthCare also has the right to have a PBM
employee removed from providing services for United HealthCare. PBM
shall be responsible for all compensation, benefits and taxes of PBM's
employees. If the parties agree to locate any PBM employees at a United
HealthCare location, United HealthCare shall be responsible to provide
workspace, supplies and equipment to PBM within a mutually agreed upon
reasonable time frame and at a mutually agreed upon cost.
3.3.1. PBM agrees to have a Dedicated Pharmacy Management Unit
located in Minneapolis as part of the pharmacy management services
provided for United HealthCare. PBM agrees to have this unit fully
operational prior to the Commencement Date. United HealthCare will
designate the name of this dedicated unit, subject to the approval
of PBM.
3.3.2. PBM agrees that the senior management team dedicated to
United HealthCare shall be located in Minneapolis and shall
consist of a senior level employee who has decision-making
authority. In addition to general PBM management expertise, PBM
shall have individuals located in the Dedicated Pharmacy
Management Unit with expertise in: (a) clinical and analytical
services, (b) customer account services, (c) marketing and sales
support, (d) pharmacists to work with the Health Plans, and (e)
account management for Health Plan and non-Health Plan business.
PBM shall also provide the following support to the Dedicated
Pharmacy Management Unit's activities for United HealthCare from
PBM's corporate or other offices: customer service, legal and
regulatory compliance, information systems, network management,
operational support, underwriting, manufacturer activity and
clinical programs.
3.3.3. PBM agrees that the services provided by PBM's dedicated
pharmacy management services include: (a) work with United
HealthCare to position United HealthCare's prescription drug
Programs for economic and service success in a changing
competitive market place; (b) formulate appropriate pharmacy goals
with and for United HealthCare; (c) develop and execute a pharmacy
marketing plan that will enable United HealthCare to meet its
sales and growth goals; and (d) help with pharmacy cost management
including United HealthCare's trend management and per member per
month (pmpm) cost management.
3.3.4. PBM agrees to provide dedicated management and sales
support as reasonably requested to optimize the value of United
HealthCare's Program and to attain United HealthCare's identified
goals. PBM's marketing and sales support shall include but not be
limited as the market changes from time to time, to the following:
(a) strategic consultation, training and education; (b) advanced
training modules for sales representatives; (c) continuing
education programs; (d) site visits and video presentations; (e)
focus groups and related consulting; (f) press release development
and recommendations; (g) strategies to successfully market against
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competitors; (h) presentation and reference materials for use by
sales representatives; (i) client sales support during finalist
presentations; (j) professionally designed marketing literature
that effectively positions United HealthCare and communicates the
clients' prescription benefit programs; and (k) customized
communication programs to motivate and inform selected audiences.
3.3.5. PBM agrees that different marketing strategies will be
provided to United HealthCare for growth goals based on revenue,
profit, and membership.
3.4. Retail Participating Pharmacy Network. PBM agrees to provide
national networks of retail Participating Pharmacies under contract
with PBM to provide dispensing services to Covered Persons under the
Retail Pharmacy Program. PBM agrees that United HealthCare may require
the termination of a specific retail pharmacy for good cause including
quality of care issues. PBM shall notify United HealthCare of any
terminations in the Participating Pharmacy network. PBM shall send
letters to Covered Persons, who have utilized a Participating Pharmacy
in the prior twelve months, notifying them of the termination of such
Participating Pharmacy, after receiving from United HealthCare: (a) the
addresses of the affected Covered Persons; and (b) the approval of the
letters by United HealthCare. United HealthCare shall be responsible
for the postage costs of any mailings to Covered Persons when a
Participating Pharmacy is terminated at United HealthCare's request.
PBM shall be responsible for the postage costs of any mailings to
Covered Persons when Participating Pharmacy is terminated at PBM's
request.
3.4.1. PBM will provide United HealthCare with at least three
network alternatives by the Commencement Date as described in the
Financial Appendix:
3.4.1.1. PBM shall provide and maintain a
Participating Provider network that is taken as a
whole no less favorable in terms of number, location,
and quality of providers than the network available
to United HealthCare as of the period just prior to
the Commencement Date and PBM shall guarantee no
deterioration in reimbursement during the term of
this Agreement as compared to the period just prior
to the Commence Date. This network may upon parties'
mutual written consent be contracted through United
HealthCare.
3.4.1.2. PBM shall make available its CCNIII network.
3.4.1.3. PBM shall make available its CCN+ network.
3.4.2. PBM agrees to use reasonable commercial efforts to create
alternative retail networks for any new products or other
offerings that may be developed by United HealthCare from time to
time.
3.4.3. For the network described in Section 3.4.1.1, PBM agrees
that during the term of this Agreement all PBM customized pharmacy
provider agreements for such retail pharmacy network shall be
assignable to United HealthCare. Such assignment shall be made at
United HealthCare's sole discretion and at a time determined by
United HealthCare.
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3.5. Mail Service. PBM shall provide to United HealthCare and Health
Plans shall use PBM's mail service program as its exclusive mail
service program, as more fully described in the Financial Appendix.
United HealthCare shall use its reasonable commercial efforts to
encourage non-Health Plan business to use PBM's mail service. PBM
agrees to interface with other mail service vendors utilized by
non-Health Plan business as reasonably requested using PBM's
specifications.
3.6. Customized Installation Materials. PBM agrees to provide to United
HealthCare customized installation materials for United HealthCare that
are accurate and support the specific language in the Benefit Contract
and Pharmacy Rider. PBM is responsible for administering the Benefit
Contract and Pharmacy Rider accurately and in accordance with all
regulatory requirements. At United HealthCare's option and approval,
PBM shall produce brochures, and other Covered Person materials for
Covered Persons specific to Covered Prescription Drug Services. PBM
agrees to provide an accompanying explanatory brochure and direct
reimbursement claim forms for use by Covered Persons who have not
received or who have lost their Identification Cards. PBM agrees that
any Covered Person materials must be approved by United HealthCare.
United HealthCare shall be responsible for all postage costs related to
mailings to Covered Persons except as otherwise provided in this
Agreement.
3.7. Eligibility. PBM agrees to administer eligibility of Covered
Persons according to eligibility information provided by United
HealthCare via tape or telecommunication or such other reasonably
practicable method in a mutually agreeable acceptable format. PBM
agrees to provide toll-free access for Covered Persons to PBM's
Customer Service Department for eligibility and claims processing
assistance. PBM may rely on eligibility information provided by United
HealthCare for all purposes related to this Agreement.
3.8. Covered Person Protection Provision. PBM hereby agrees that it
shall not seek payment, other than Copayments, from any Covered Person
for Covered Prescription Drug Services under any circumstances. This
Section shall survive the Agreement.
3.9. Communications. PBM agrees that all written communications sent to
United HealthCare Covered Persons, participating providers or
facilities that relate in any way to United HealthCare's Benefit
Contract or Pharmacy Rider must be reviewed and approved by United
HealthCare before such communications are sent out to any such
individuals or groups. PBM agrees that all program communication
protocols to be used with United HealthCare participating physician
providers will be reviewed and approved by United HealthCare prior to
use. United HealthCare shall approve or disapprove all such materials
within a reasonable time after submission by PBM.
3.10. Claims Processing.
3.10.1. PBM shall process Covered Persons' Covered Prescription
Drug Services claims in accordance with regulatory requirements,
the Benefit Contract and Pharmacy Rider, and PBM's standard
operating procedure.
3.10.2. At the end of each bi-weekly claims cycle, or other
processing time period as mutually agreed to by the parties, PBM
shall provide claims reports and written notice to United
HealthCare of the amount necessary to pay claims processed and
fees due to PBM for claims processed.
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3.10.3. Any disputes over claims shall be resolved prior to
payment by PBM. If PBM makes an error or omission in claims
processing, PBM shall be solely responsible for any related
costs.
3.10.4. All postage costs related to payment or denial of direct
reimbursement claims is the responsibility of PBM.
3.11. Claim Appeals. In the event of a claim denial by PBM, PBM shall
promptly communicate to the Covered Person the right to appeal
according to the Covered Person's Benefit Contract and Pharmacy Rider
and applicable law.
3.12. Claims and Pharmacy Auditing. PBM shall regularly audit its
electronic and on-site claim processing activities and shall regularly
audit its retail pharmacies, in accordance with PBM's standard audit
procedures. PBM shall provide United HealthCare with a report on such
audits containing specific audit information and containing such other
information as United HealthCare reasonably requests. United HealthCare
shall receive one hundred percent of any such audit recoveries that
were incorrectly paid pursuant to the United HealthCare Program. When
any such overpayment was the result of errors or omissions by PBM,
payment of such audit recovery shall include interest at the prevailing
prime rate of interest as determined by the Wall Street Journal for the
period of time from the payment of the claim to receiving recovery from
PBM.
3.13. Reports. PBM agrees to provide aggregate reports and
Payor-specific reports in a format and containing such information as
United HealthCare reasonably requests; provided in no event shall PBM
be required to incur costs substantially in excess of expenses incurred
by the PBM industry generally to provide such reports. This reporting
shall include PBM's EXPERxT and Standard PLUS Reports and reports
pursuant to Exhibit A.
3.14. Coordination of Benefits. When United HealthCare provides
required information, PBM agrees to process Level I and II coordination
of benefits in accordance with PBM's coordination of benefits rules.
3.15. Health Management Program. PBM agrees to provide Health
Management Programs to Covered Persons at United HealthCare's option.
Health Management Programs developed during the term of this Agreement
by PBM shall be made available to United HealthCare. ***
3.16. Physician-based Pharmaceutical Care Application Information
System. *** This systems program shall be a knowledge-based system for
physicians which includes but is not limited to PDL compliance and drug
compatibility capabilities.
3.17. Demand Management Services. PBM agrees to utilize reasonable
efforts to contract exclusively with United HealthCare for Demand
Management Services by the Commencement Date.***
3.18. ***
3.19. National Accounts. The parties agree to use reasonable commercial
efforts to work together to increase joint pharmacy National Account
business. United HealthCare
*** Represents text deleted pursuant to a confidentiality treatment claim
filed with the Securities and Exchange Commission pursuant to Rule
406 under the Securities Act of 1933, as amended.
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agrees to utilize PBM as United HealthCare's exclusive PBM for National
Accounts to the extent required under Section 9. ***
3.20. Service Performance Standards. United HealthCare and PBM shall
each use good faith and reasonable commercial efforts to perform their
respective duties and obligations in a diligent, professionally
responsible and efficient manner. The parties agree to cooperate with
and assist each other as reasonably necessary in the performance of
their respective duties and in developing timely responses to the needs
of United HealthCare's business. Notwithstanding the general and
specific Service Performance Standards and Guarantees applicable to PBM
identified in Exhibit B, PBM shall perform the services for which it is
responsible under this Agreement using the same degree of skill and
care in such performance as a prudent person engaged in pharmacy
benefit management services would use under substantially similar
circumstances in the management of a similar pharmacy benefit
management business of United HealthCare's magnitude. PBM agrees to
accept the Service Performance Standards and Guarantees set forth in
Exhibit B, including the dollars which shall be at risk should PBM's
aggregate performance or guarantees be below the indicated targets. PBM
shall provide to United HealthCare: (a) monthly or quarterly reports as
applicable of PBM's performance; and (b) annual statistics, within
ninety (90) days of the end of the calendar year, demonstrating whether
PBM met the Service Performance Standards and Guarantees described in
Exhibit B. At the same time PBM provides such statistics to United
HealthCare, PBM shall reimburse United HealthCare any monies owed
because of PBM's failure to meet such Service Performance Standards and
Guarantees.
3.21. Insurance. PBM shall procure by the Effective Date and shall
maintain, at its own expense: (a) professional liability insurance in
the amount of $5,000,000.00 per occurrence and $10,000,000.00 annual
aggregate including coverage for errors and omissions; (b) general
liability insurance in the amount of $1,000,000.00 per each occurrence
and $3,000,000.00 annual aggregate; and (c) umbrella/excess liability
insurance in the amount of $10,000,000.00 each occurrence and
aggregate. United HealthCare must be named as an "additional insured"
on the policies referenced above for claims affecting United
HealthCare's interests.
3.22. Guaranty. PBM's and United HealthCare's parent corporations will
guaranty the fulfillment of all of the parties' financial and other
obligations by the delivery of a fully executed Guaranty Agreement in
the form set forth at Attachment 1 and Attachment 2.
3.23. Claims and Regulatory Inquiries. PBM shall promptly, within ten
(10) days, provide information to United HealthCare about all
non-routine inquiries by regulatory departments, pharmaceutical
manufacturers, attorneys, Covered Persons, or other individuals or
entities with respect to PBM's services pursuant to this Agreement
including but not limited to the denial of any claims or any causes of
action.
3.24. ***
SECTION 4. OBLIGATIONS OF UNITED HEALTHCARE
--------------------------------
*** Represents text deleted pursuant to a confidentiality treatment claim
filed with the Securities and Exchange Commission pursuant to Rule
406 under the Securities Act of 1933, as amended.
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4.1. Obligations of United HealthCare.
4.1.1. United HealthCare will be the entity that contracts with
Health Plans and non-Health Plans related to the services provided
under this Agreement. Non-Health Plans include but are not limited
to entities, groups, competitors and individuals. Such agreements
between United HealthCare and Health Plans and non-HealthPlans may
provide for additional services by United HealthCare and shall
make provision for fees and other terms that United HealthCare, in
its discretion, determines to establish.
4.1.2. United HealthCare agrees to provide information reasonably
needed by PBM to administer its responsibilities under this
Agreement including (a) Benefit Contract and Pharmacy Rider
documents; (b) timely eligibility and enrollment data on Covered
Persons; (c) specific United HealthCare customer information and
needs; (d) participating pharmacy information when PBM's pharmacy
network is not utilized or is used in addition to another
participating pharmacy network; (e) patient identifiable
prescription drug claims (including prescription drug claims from
prior pharmacy benefit management vendors); and (f) patient
identifiable medical claims reasonably necessary for PBM to
implement and operate its clinical management programs for United
HealthCare. Information shall be provided in a mutually agreeable
format.
4.1.3. United HealthCare or Payor shall be solely responsible for
drafting United HealthCare's Benefit Contract and Pharmacy Rider.
4.1.4. United HealthCare shall identify its targeted pharmacy
growth and benefit objectives on at least an annual basis and
provide such objectives to PBM.
4.2. Claims Payment. United HealthCare shall establish a bank
account(s) (the "Program Account") from which PBM will make claims
payments as set forth below, using United HealthCare check stock.
United HealthCare will pay PBM Administrative Fee payments, as set
forth below through Automated Clearing House transfer. Banking
arrangements may change from time to time subject to the mutual
agreement of the parties.
4.2.1. Claims. PBM shall provide United HealthCare with a
bi-weekly consolidated statement of expected payments to be made
from the Program Account for services provided by PBM under the
Program during such claim cycle ***
4.2.2. Administrative Fees. PBM will provide United HealthCare
with an Administrative Fee statement in accordance with PBM's four
(4) week administrative fee cycle *** Within two (2) days after
receipt of each statement from PBM as set forth in this Section
4.2.2 above, United HealthCare shall transfer such funds via
Automated Clearing House transfer.
*** Represents text deleted pursuant to a confidentiality treatment claim
filed with the Securities and Exchange Commission pursuant to Rule
406 under the Securities Act of 1933, as amended.
11
4.3. Regulatory Compliance. United HealthCare shall (a) maintain all
material federal, state, and local licenses that are reasonably required to
operate its business; (b) comply with all material applicable statutes and
regulations; and, (c) make reasonable commercial efforts to cause Health
Plans to comply with (a) and (b).
4.4. Insurance. United HealthCare agrees to maintain adequate insurance
related to the operation of its business and its obligations under the
Agreement.
4.5. Claims and Regulatory Inquiries. United HealthCare shall promptly
provide information to PBM within ten days about all non-routine inquiries
by regulatory departments, pharmaceutical manufacturers, Covered Persons,
or other individuals or entities with respect to the services provided by
PBM under this Agreement.
4.6. Minimum PDL Enrollment. United HealthCare agrees that it shall
maintain a minimum of *** Health Plan Covered Persons and *** non-Health
Plan Covered Persons receiving services under this Agreement including
participating in United HealthCare's PDL by January 1, 2001 and throughout
the term of this Agreement. ***
SECTION 5. MUTUAL OBLIGATIONS
------------------
5.1. Pharmacy Strategic Council. United HealthCare and PBM shall create a
Pharmacy Strategic Council ("Strategic Council"), the members of which shall be
three or four representatives from and designated by each of United HealthCare
and PBM. The Strategic Council shall meet no less frequently than quarterly
throughout the term of this Agreement and shall be responsible for (a)
overseeing the performance of the parties under this Agreement; (b) enhancing
communication of decisions made by the parties or the Strategic Council, (c)
resolving disputes as directed by this Agreement; and (d) establishing a forum
for the discussion of common strategic objectives of United HealthCare and PBM.
United HealthCare shall be responsible to convene meetings of the Strategic
Council.
5.2. Expenses. Except as expressly set forth in this Agreement, each of the
parties shall bear the expenses incurred by it in connection with its
performance under this Agreement.
5.3. Audits.
5.3.1. United HealthCare shall keep reasonable documentation of
all Covered Persons related to this Agreement. PBM shall have the
right to review such data at reasonable times upon reasonable
notice
5.3.2. PBM shall maintain adequate medical, financial and
administrative records related to Program services in a manner
consistent with the standards of the community and in accordance
with all applicable statutes and regulations including, but not
limited to, reasonable documentation of all the data of Covered
Persons related to PBM's services under this Agreement to
determine that PBM is performing its obligation under the
Agreement and correctly billing United
*** Represents text deleted pursuant to a confidentiality treatment claim
filed with the Securities and Exchange Commission pursuant to Rule
406 under the Securities Act of 1933, as amended.
12
HealthCare. United HealthCare shall have the right to review such
data at reasonable times and upon reasonable notice. If any audit
reveals an underpayment or overpayment by United HealthCare to PBM
such discrepancy will be reported to PBM and PBM will respond
within forty-five (45) days. Any amounts PBM deemed payable as a
result thereof shall be promptly repaid to the appropriate party
with accrued interest (whether or not this Agreement has
terminated). If the parties disagree on the amount to be repaid,
the matter shall be sent to the Strategic Council. This obligation
shall survive the expiration or earlier termination of this
Agreement.
5.3.3. PBM's agreements with pharmaceutical manufacturers are
subject to confidentiality agreements. Any audit of PBM's
agreements with pharmaceutical manufacturers conducted pursuant to
this Agreement, shall be conducted by a third party public
accounting firm reasonably acceptable to PBM whose audit
department is a separate stand alone function of its business,
subject to execution of a confidentiality agreement, and shall
include only those portions of such pharmaceutical manufacturer
agreements as necessary to determine PBM's compliance with Section
5.5.2 in respect to PDL Rebates.
5.4. Preferred Drug List. Beginning on the Commencement Date and
continuing through the term of this Agreement, PBM shall administer the
United HealthCare PDL or other formularies as developed by United
HealthCare from time to time pursuant to the Benefit Contract, Pharmacy
Rider and this Agreement. All Health Plans shall participate in the PDL
unless otherwise agreed, in writing, by United HealthCare and PBM.
United HealthCare agrees to make reasonable commercial efforts to have
non-Health Plan business utilize this PDL.
5.4.1. United HealthCare Preferred Drug List. The Preferred Drug
List ("PDL") is a list that identifies those Federal Drug
Administration ("FDA") approved prescription drug products that
are preferred by United HealthCare for dispensing to Covered
Persons.
5.4.1.1. United HealthCare and its P&T Committee have
complete control in deciding what prescription drugs are
placed on the PDL from time to time.
5.4.1.2 PBM shall have the right to present clinical data
and rationale to the P&T Committee in conjunction with its
evaluation of prescription drugs, but shall not be a voting
member of the P&T Committee.
5.4.2. Preferred Drug List Compliance. United HealthCare has in
effect certain Program features designed to promote prescribing of
PDL drugs by participating providers, dispensing of PDL drugs by
Participating Pharmacies, and awareness of the advantages of the
PDL by Covered Persons. Such features include, but are not limited
to, incented benefit plan designs and corresponding levels of
Copayments. United HealthCare shall notify PBM, in advance, of any
proposed Program modifications that are reasonably anticipated to
have a material effect on PDL compliance. Additionally, United
HealthCare shall participate in PBM's formulary communications
programs, which may include communications with United HealthCare
Covered Persons, Participating Pharmacies and/or physicians, and
financial incentives to Participating
13
Pharmacies for their participation in the PDL. PBM shall notify
United HealthCare, in advance, of all PDL communications programs.
United HealthCare shall approve and may make reasonable changes to
the content of such PDL communication programs before they are
provided to the above United HealthCare groups and individuals.
5.4.3. Exclusive PDL Administration. Beginning on the Commencement
Date, United HealthCare agrees that PBM will be the exclusive
administrator of the United HealthCare PDL for those entities
covered by the exclusivity requirements of Section 9 of this
Agreement. After the Commencement Date, United HealthCare agrees
not to accept any funds the receipt of which would influence the
selection of prescription drugs for inclusion on United
HealthCare's PDL without the express written consent of PBM.
5.5. PDL Rebate Program. Pursuant to agreements entered into between
PBM and certain pharmaceutical manufacturers ("Manufacturer
Agreements"), PBM receives PDL Rebates from certain drug manufacturers
as a result of the inclusion of such manufacturer's branded products on
the PDL ("PDL Rebates"). *** United HealthCare acknowledges that PBM
also receives and retains additional rebates and/or fees from certain
manufacturers which may take into account various factors including the
utilization of certain drugs within their respective therapeutic
categories for PBM's book of business in aggregate as a result of
various commitments, services and programs including, but not limited
to, formularies, e.g. cost effective, incentive, volume, and
market-share rebates.
5.5.1. ***
5.5.2. Good Faith Rebate Negotiations and Distribution. ***
5.5.3. Customer ERISA Requirements. As part of the standard
Administrative Fee, PBM agrees to provide a report to United
HealthCare, which discloses ERISA required information about
rebates for United HealthCare customers. PBM agrees to assist
United HealthCare as reasonably requested in providing disclosure
information to each of its self-insured customers. PBM
acknowledges that as required by ERISA, United HealthCare's
self-insured customers retain the right to terminate use of the
PDL if customer does not agree with a PDL selection.
5.5.4. Drug Formulary Only Administration. PBM shall, at United
HealthCare's request, provide drug formulary only rebate
administration for no additional fee for pharmacy claims processed
by other entities, if such business qualifies for PDL Rebates.
Such entities shall comply with PBM's data format requirements and
processes. The PDL Rebate Guarantee shall not apply to Drug
Formulary Only accounts.
5.5.5. Government and Other Actions. In the event any government
action, including a change in statute or regulation or a change in
the interpretation of
*** Represents text deleted pursuant to a confidentiality treatment claim
filed with the Securities and Exchange Commission pursuant to Rule
406 under the Securities Act of 1933, as amended.
14
statute or regulation that has a material adverse affect on the
availability of PDL Rebates, parties shall negotiate in good faith
*** to reflect the effect of such event.
5.6. Conversion Costs and Services. It is the intent of this Agreement
that PBM shall provide the majority of services required to convert
United HealthCare's present pharmacy benefit management service from
its current vendor to PBM. The parties agree that such costs for
conversion services are included in the Administrative Fee. The
conversion services provided by PBM shall include, but are not limited
to: (a) communications to Covered Persons, physicians, pharmacies; (b)
group training of United HealthCare pharmacy, sales and other staff;
(c) development of Covered Person materials; (d) required modification
of PBM's information systems; (e) development of the Minnesota
Dedicated Pharmacy Management Unit; (f) analytical support for the
conversion of models and tools for rebates, networks and guarantees;
and (g) printing of physician and Covered Person PDLs. United
HealthCare's only responsibility for conversion costs and services is
limited to postage, pharmacy management implementation leadership,
internal United HealthCare communications, limited internal United
HealthCare information system programming, state filings, and servicing
of customer calls coming directly into United HealthCare. The parties
agree that if the conversion to PBM services results in unanticipated
problems, the parties shall commit such additional resources, as
mutually agreed, in order to implement this program in accordance with
the terms of this Agreement.
SECTION 6. CONFIDENTIALITY
---------------
6.1. Confidential and Proprietary Information. In fulfilling the
objectives of this Agreement, United HealthCare and PBM may provide to
each other or learn (directly or indirectly) certain information which
a party considers to be confidential or proprietary ("Confidential
Information"). Confidential Information shall include, without
limitation, information relating to Covered Person and provider
identities; reimbursement procedures; claims adjudication procedures;
software and financial systems; the specific financial sections and
provisions, specific operational aspects, financial guarantees
contained in this Agreement, and other information relating to each
party's business which is not generally available to the public. Each
party's Confidential Information shall also include confidential,
proprietary information which a third party has disclosed to a party,
and which such party is obligated to maintain as confidential.
Notwithstanding the foregoing, PBM and United HealthCare acknowledge
the other party's obligation to provide its pharmaceutical
manufacturers and customers with information generally regarding this
Agreement and consistent with the foregoing agrees that such parties
may disclose generally the terms of this Agreement.
6.1.1. Neither party shall have any obligation to disclose its
Confidential Information to the other party, unless such an
obligation is set forth elsewhere in this Agreement.
6.1.2. Each party agrees to maintain the secrecy of and not to use
or disclose the other party's Confidential Information, except as
required in order for a party
*** Represents text deleted pursuant to a confidentiality treatment claim
filed with the Securities and Exchange Commission pursuant to Rule
406 under the Securities Act of 1933, as amended.
15
to perform under this Agreement. A party may disclose the other
party's Confidential Information only to the receiving party's
directors, officer, employees, agents and representatives
(collectively, the "Representatives"), but only if a
Representative needs to know the Confidential Information in order
for the receiving party to perform under this Agreement. The
parties agree to inform their Representatives of the confidential
nature of the disclosing party's Confidential Information, and
each party shall require any Representative, who is not an
employee of the receiving party to sign an appropriate
confidentiality agreement to protect the disclosing party's
Confidential Information from unauthorized use or disclosure. Each
party shall direct its Representatives to treat the other party's
Confidential Information confidentially, and not to use it, other
than to perform under this Agreement. Each party shall be
responsible for its Representatives' use and disclosure of the
other party's Confidential Information.
6.1.3. The restrictions in this Section 6.1 shall not apply to:
(a) information which is or becomes generally available to the
public, other than as a result of a disclosure by the receiving
party; (b) information a party obtains from a third party which
has no obligation to keep the information confidential; (c)
information which a party had in its possession prior to receiving
Confidential Information from the disclosing party; (d)
information which is independently developed by a party without
reference to the Confidential Information disclosed by the other
party; or (e) information required to be disclosed by law, subject
to compliance with Section 6.1.4.
6.1.4. The parties agree that if a party is required (by subpoena,
civil investigative demand or similar process) to disclose the
other party's Confidential Information, the disclosing party shall
notify the other party of the request or requirement so that the
other party may seek an appropriate protective order or waive
compliance with the sections or provisions of this Agreement. The
parties agree to exercise their commercially reasonable efforts to
assist each other in obtaining a protective order or other
reliable assurance that confidential treatment will be accorded
the Confidential Information.
6.1.5. Upon termination of this Agreement each party will
immediately discontinue use of the other party's Confidential
Information, and shall return the other party's Confidential
Information to it, or destroy the other party's Confidential
Information in its possession or control. However, each party may
retain the other party's Confidential Information to the extent
such Confidential Information has been used in or integrated into
reports, studies, analyses, compilations or other documents in the
receiving party's possession or control. Any oral Information will
continue to be subject to the terms of this letter agreement. The
parties agree that the Confidentiality obligations of this Section
6 shall survive termination of this Agreement.
6.2. Privacy of Individually Identifiable Health Information. United
HealthCare and PBM will maintain the privacy and confidentiality of all
individually identifiable information regarding Covered Persons and
non-Covered Persons in accordance with all applicable statutes and
regulations. PBM and United HealthCare shall require all employees to
comply with this section. PBM agrees that all Covered Person
information provided to PBM by United HealthCare belongs exclusively to
United HealthCare.
16
6.3. United HealthCare's Database. Subject to Section 6.4 below, PBM
agrees that all data of United HealthCare and its affiliates, including
but not limited to Covered Person, customer, and provider related data,
which is in PBM's possession, whether obtained by PBM in the course of
providing services for United HealthCare or as a result of a data
transfer between United HealthCare and PBM, belongs solely to United
HealthCare. PBM has the right to possess and use such data only to the
extent permitted by contracts between the parties or as otherwise
provided in this Agreement subject to applicable legal restrictions.
All information contained in United HealthCare's database and systems
belongs exclusively to United HealthCare. PBM shall not have direct
access to United HealthCare's database and systems without signing a
separate agreement with United HealthCare. PBM and United HealthCare
recognize and agree that only information necessary for PBM performance
under the Agreement shall be supplied by United HealthCare to PBM and
PBM agrees that such data belongs exclusively to United HealthCare.
6.4 PBM Use of Data. Notwithstanding the foregoing provisions of this
Section 6, PBM may incorporate prescription data into PBM's
prescription database when that database is used by PBM or provided to
others for research, statistical, marketing, sales tracking or similar
purposes. PBM agrees that if such prescription data is identifiable as
to (a) Covered Persons, (b) employers and/or customers, and/or (d)
United HealthCare, such identifiable information will be deleted or
encrypted before it is provided to others. This section only applies to
PBM's use of prescription data and does not apply to medical data.
SECTION 7. INTELLECTUAL PROPERTY
---------------------
7.1. Any Intellectual Property developed solely by PBM without using
United HealthCare's Confidential Information shall remain the property
of PBM. United HealthCare's right to use such PBM Intellectual Property
shall be limited to those permitted by this Agreement or as otherwise
agreed to in writing by the parties.
7.2. Any Intellectual Property developed solely by United HealthCare,
without utilizing PBM's Confidential Information shall remain the
property of United HealthCare. PBM's right to use such Intellectual
Property shall be limited to those permitted by this Agreement or as
otherwise agreed to in writing by the parties.
7.3. The parties agree that any Intellectual Property or work product:
(a) created jointly by the parties; or (b) created by PBM under this
Agreement; or (c) created by PBM upon United HealthCare's request (the
"Work Product"), shall be the joint property of PBM and United
HealthCare.
SECTION 8. YEAR 2000 WARRANTY
------------------
PBM and United HealthCare warrant that (a) the goods and services to be provided
under this Agreement are in a state of Year 2000 Compliance, (b) the delivery of
the goods or services provided under this Agreement to parties will not be
adversely affected by Year 2000 Compliance (including without limitation the
Year 2000 Compliance of parties' information and/or operating systems or those
of any third parties that assist parties in the fulfillment of its
17
obligations under this Agreement); (c) the goods or services provided under this
Agreement to the parties will not affect or impair the Year 2000 Compliance of
the parties or any third party that has a business relationship with parties;
and (d) The parties have taken all necessary or appropriate steps to insure that
it is in compliance with the foregoing warranties. "Year 2000 Compliance" means
the ability of information or other systems to: (x) record, store, process,
provide, and insert true and accurate dates and calculations for dates including
and following January 1, 2000; and (y) process records containing dates after
January 1, 2000; and (z) be interoperable in such respects with other systems
used by the parties PBM, the PBM's parties' vendors of any kind, or the parties
, including without limitation those which may deliver records to, receive
records from or otherwise interact with the goods or services provided by the
parties.
SECTION 9. EXCLUSIVITY
-----------
9.1 Except as defined in Section 9 and its subparts, United HealthCare
Services, Inc. agrees that it shall not enter into a contract, or any
other similar arrangement, for pharmacy benefit management services
with a third party other than PBM with respect to services beginning
with the Commencement Date and continuing until the term of this
Agreement expires or until the Agreement is terminated.
9.2 This exclusivity section does not apply to any entities who: (a)
are acquired by or merged with United HealthCare Services, Inc. and its
affiliates and subsidiaries after this Agreement is executed; and (b)
have a contractual relationship with another pharmacy benefit
management company, at the time this Agreement is executed. The parties
agree that in no event will United HealthCare be required to terminate
another pharmacy benefit management vendor prior to the expiration of
such vendor's contract. United HealthCare agrees to convert any such
entity to coverage under this Agreement as soon as said entity's
contract with such other pharmacy benefit manager expires or can be
reasonably terminated without the payment of any additional fees,
fines, penalties, or damages. United HealthCare shall use its
reasonable commercial efforts to include such entities under this
Agreement. Within sixty (60) days after execution of this Agreement,
United HealthCare shall provide PBM with the name of any such entity
that has a contractual relationship in effect with another pharmacy
benefit manager, the termination date of said contract and the
approximate number of persons covered under such contract.
9.3 Notwithstanding the foregoing, United HealthCare shall not be
required to include government-defined benefit programs or any entity
for which United HealthCare provides management or administrative
services but does not own a controlling interest unless such entity
agrees to utilize the services contemplated by this Agreement.
9.4 The parties acknowledge and agree that United HealthCare may not be
able to transition all Covered Persons and participating Health Plans
to PBM: (a) on the Commencement Date; and/or (b) immediately in the
event of an acquisition, merger or similar transaction that occurs
prior to or during the term of this Agreement. The parties agree that a
reasonable transition of Covered Persons and participating Health Plans
related to (a) and (b) of this section shall not be considered a breach
of this Section 9 or of this Agreement. Notwithstanding the foregoing,
United HealthCare shall transition all existing Health Plans that will
be covered under this Agreement within a six (6) month period of the
Commencement Date unless otherwise mutually agreed to by the parties.
This is not meant to restrict United HealthCare's ability to add other
Health Plans and non-Health Plans during the term of this Agreement.
18
SECTION 10. RENEGOTIATION DUE TO SUBSTANTIAL CHANGE
---------------------------------------
In the event of a Substantial Change the parties agree to renegotiate in good
faith so as to reflect as nearly as possible the economic factors that were the
basis for this Agreement prior to the Substantial Change. In the event such
renegotiations do not result in a mutually agreeable economic solution or the
parties are not able to agree as to whether a Substantial Change has occurred,
such issue shall be submitted pursuant to the dispute resolution procedure set
forth in Section 13. 6.
SECTION 11. INDEMNIFICATION
---------------
11.1. United HealthCare agrees to indemnify and hold PBM, its
subsidiaries and affiliates, and their respective officers, directors,
agents and employees harmless from and against any and all liabilities,
losses, proceedings, actions, damages, claims or expenses of any kind,
including reasonable attorneys' fees, which result from (a) a breach by
United HealthCare of any of its obligations under this Agreement or (b)
the negligence or willful acts or omissions by United HealthCare, its
agents, directors, officers, or employees, in connection with the
representations, duties and obligations of United HealthCare under this
Agreement.
11.2. PBM agrees to indemnify and hold United HealthCare, its
subsidiaries and affiliates, and their respective officers, directors,
agents and employees harmless from and against any and all liabilities,
losses, proceedings, actions, damages, claims or expenses of any kind,
including reasonable attorneys' fees, which result from (a) a breach by
PBM of any of its obligations under this Agreement or (b) the
negligence or willful acts or omissions by PBM, its agents, directors,
officers, or employees, in connection with the representations, duties
and obligations of PBM under this Agreement.
SECTION 12. TERM AND TERMINATION
--------------------
12.1. Term. The term of this Agreement is for the period commencing on
the Effective Date and ending December 31, 2005, with performance
beginning on the Commencement Date, unless terminated earlier as
outlined in Section 12.2.
12.2. Termination. This Agreement may be terminated as follows:
12.2.1. By either party, after a ten day notice period, in the
event of a payment default, unless such default is cured within
such notice period, unless the defaulting party is able to give
assurances to the other party's reasonable satisfaction.
12.2.2. By either party, effective 30 days after not less than 60
days written notice and cure period in the event of a material
breach other than a payment default of this Agreement by the
other party.
19
12.2.3. By either party, effective immediately upon provision of
written notice to the other party, if the other party has become
insolvent or has been dissolved or liquidated, or makes a general
assignment for the benefit of creditors or has a receiver
appointed for a substantial portion of its assets.
12.2.4. Automatically and without any notice or other action on
the part of either party if either party files, or has filed
against it, a petition in bankruptcy and such petition is not
dismissed within 60 days of the filing unless the party which is
not subject to such petition elects to waive such termination
prior to the expiration of such 60 day period.
12.2.5. By either party immediately due to loss of insurance or
inability to self-insure as required under this Agreement.
12.2.6. By United HealthCare, effective at a time reasonable to
transferring the pharmacy management services to a new vendor but
no later than 180 days after notice to PBM, if a change of
control of PBM occurs. For purposes of this Section, "Change of
Control" means: (a) any transaction or series of transactions
that cause 50% or more of the stock of PBM or United HealthCare,
as the case may be, to be held by individuals or entities who are
not stockholders of PBM or United HealthCare, as the case may be,
on the date hereof; or (b) any sale of PBM assets or United
HealthCare, as the case may be, that are essential to the
business of PBM or United HealthCare, as the case may be; or (c)
any merger where PBM or United HealthCare, as the case may be, is
not the surviving entity.
12.3. United HealthCare Change of Control. If during the term of the
Agreement, there is a Change of Control of United HealthCare, as
defined above, United HealthCare has the option to terminate the
Agreement by providing PBM with ninety (90) days prior written notice
and by paying to PBM within sixty days of termination date an amount
equal to the aggregate payments that have been made to United
HealthCare by PBM under Trend Guarantee and PDL Rebate Guarantee as
addressed in the Financial Appendix. If any such termination occurs
prior to payment by PBM of any Trend Guarantee or PDL Rebate Guarantee,
United HealthCare shall pay to PBM within 60 days after such
termination date an amount equal to the transition costs paid by PBM to
United HealthCare pursuant to Provision 8 of the Financial Appendix.
12.4. Information to Covered Persons. PBM acknowledges the right of
United HealthCare to inform Covered Persons of PBM's termination.
12.5. End of Term or Termination. In the event this Agreement is
terminated for any reason prior to its expiration or upon the end of
the term, PBM and United HealthCare shall cooperate reasonably with
each other for up to a six month period following such termination or
expiration to effect a quality, cost-effective and smooth transition of
United HealthCare's business previously operated or managed by PBM to
United HealthCare or United HealthCare's designee. ***
12.5.1. ***
12.5.2. ***
*** Represents text deleted pursuant to a confidentiality treatment claim
filed with the Securities and Exchange Commission pursuant to Rule
406 under the Securities Act of 1933, as amended.
20
12.5.2.1 ***
12.5.2.2. ***
12.5.2.3. ***
12.5.2.4. ***
12.5.3. ***
SECTION 13. GENERAL PROVISIONS
------------------
13.1. Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be delivered
personally, by commercial overnight delivery service, by facsimile or
sent by certified, registered or express air mail, postage prepaid, and
shall be deemed given when so delivered personally, by overnight
delivery service or by facsimile, or if mailed, five days after the
date of mailing, addressed as follows:
------------------------------------------------------------------------
If to PBM: If to United HealthCare:
------------------------------------------------------------------------
Merck Medco Managed Care, L.L.C. United HealthCare Services, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇▇
Montvale, New Jersey 07645-1753 ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇, Esq. Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
General Counsel General Counsel
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
------------------------------------------------------------------------
or to such other address or to such other person as may be designated
by written notice given from time to time during the term of the
Agreement by one party to the other.
13.2. Right of First Offer. Subject to such confidentiality
arrangements as PBM may reasonably propose, PBM agrees to provide
United HealthCare with reasonable prior notice of any event that might
lead to a change of control of PBM (which shall include any sale of
more than 10% of the voting securities to an entity not wholly owned by
Parent. Any notice herein contemplated shall be given to the Chief
Executive Officer or General Counsel of United HealthCare. Such advance
notification shall be maintained strictly confidential to the Chief
Executive Officer and General Counsel, except with the written consent
of the person giving notification.
13.3. Force Majeure. Noncompliance with the obligations of this
Agreement due to force majeure, laws or regulations of any government,
war, civil commotion, destruction of production facilities and
materials, fire, earthquake or storm, labor disturbances, shortage of
materials, failure of public utilities or common carriers, and any
other causes beyond the reasonable control of the applicable party,
shall not constitute breach of contract.
*** Represents text deleted pursuant to a confidentiality treatment claim
filed with the Securities and Exchange Commission pursuant to Rule
406 under the Securities Act of 1933, as amended.
21
13.4. Assignment. United HealthCare may assign all or any of its rights
and responsibilities under this Agreement to any entity controlling,
controlled by or under common control with United HealthCare. United
HealthCare may make such an assignment that is effective only after the
party to which such rights or responsibilities are assigned (the
"Assignee") no longer controls, is controlled by or is under common
control of such party; provided, however, that any such entity is
reasonably able to perform any responsibilities which it assumes.
United HealthCare may assign its rights and responsibilities in such a
way that both United HealthCare and Assignee share in the rights and
responsibilities that, prior to such assignment, were solely those of
United HealthCare. PBM may assign all or any of its rights and
responsibilities under this Agreement to any entity controlling,
controlled by, or under common control with such party. PBM and United
HealthCare each acknowledge that persons and entities under contract
with such party or in the case of United HealthCare, a Participating
Plan, may perform certain administrative services under this Agreement.
Other than above, United HealthCare and PBM agree that they shall not
assign any of the rights and responsibilities under this Agreement
without the prior written consent of the other party.
13.5. Amendment. Any amendments to this Agreement shall require written
approval of the parties.
13.6. Dispute Resolution. Any controversy or claim arising out of or
relating to this Agreement or a breach of the Agreement shall initially
be submitted to the Strategic Council for resolution. The Strategic
Council shall have the authority to: (a) waive the controversy, claim
or breach; (b) designate specific corrective or alternative action; (c)
set a time period for certain performance; (d) submit the matter to
mediation; or (e) allow a party to litigate the issue. Any action taken
by the Strategic Council shall be evidenced by a written notice to both
parties. During the period of time in which such issues are being
examined by the Strategic Council or are under mediation or litigation,
the parties shall proceed diligently with the performance of their
duties under this Agreement in a businesslike and efficient manner. In
the event the Strategic Council cannot resolve the matter within sixty
days or the matter is not one which must be submitted to the Strategic
Council, then within a reasonable time, a party or the Strategic
Council may submit the matter to mediation or litigation in
Minneapolis, Minnesota.
13.7. Relationship Between United HealthCare and PBM. The relationship
between United HealthCare and PBM is solely that of independent
contractors and nothing in this Agreement or otherwise will be
construed or deemed to create any other relationship, including one of
employment, agency or joint venture.
13.8. Invalidity/Governing Law. If any section or provision of this
Agreement is finally declared or found to be illegal or unenforceable
by a court of competent jurisdiction, both parties shall be relieved of
all obligations arising under such section or provision, but if capable
of performance, the remainder of this Agreement shall not be affected
by such declaration or finding.
13.9. Accreditation Compliance. PBM agrees to provide United HealthCare
with reasonable assistance and cooperation in meeting all accreditation
standards, including but not limited to National Committee for Quality
Assurance and Joint Commission, applicable to the services provided
pursuant to this Agreement.
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13.10. Name, Symbol and Service ▇▇▇▇. During the term of this
Agreement, PBM and United HealthCare agree that they shall not use each
other's name, symbol or logo, or service ▇▇▇▇ for any purpose
whatsoever including without limitation in connection with marketing or
publications describing, explaining, or otherwise discussing the
Program without the prior approval of the other party.
13.11. Headings. The headings of the various sections herein are for
convenience of reference only and shall not define, limit or otherwise
affect any of the terms or sections or provisions hereof.
13.12. Original Agreement. The parties agree that they shall execute
two identical originals of this Agreement. Each party shall retain one
of the originals. Each identical original shall serve as an original of
the Agreement but all such originals together shall constitute a single
original contract.
13.13. Governing Law. This Agreement shall be governed by and construed
in accordance with applicable Minnesota law without giving effect to
conflict of law principle.
13.14. Entire Agreement. This Agreement and its Financial Appendix,
Exhibits A and B, and Attachments 1 and 2 constitute the entire
Agreement between the parties in regard to its subject matter.
13.15. Regulatory Approval. The parties agree and acknowledge that the
terms of this Agreement may be subject to review by state regulators.
13.16. Approvals. Approvals required under this agreement shall not be
unreasonably delayed or withheld.
13.17. Additional Agreements. Upon request, PBM agrees to enter into an
additional separate agreement with any United HealthCare affiliate
receiving services hereunder reflecting the services received and
obligations of such affiliate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
UNITED HEALTHCARE SERVICES, INC. MERCK MEDCO MANAGED CARE, L.L.C.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Date: November 11, 1998 Date: November 10, 1998
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