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2007-272S \our documents\ordinances\07\express scripts ordinance.doc ORDINANCE NO. 4VO / -A 7A AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DENTON, TEXAS, AUTHORIZING THE CITY MANAGER TO EXECUTE A PHARMACY BENEFIT MANAGEMENT AGREEMENT FOR SELF-FUNDED PRESCRIPTION BENEFITS WITH EXPRESS SCRIPTS, INC.; AUTHORIZING THE EXPENDITURE OF FUNDS THEREFOR; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, Express Scripts, Inc. ("ESI") engages in pharmacy benefit management services, including, among other things, pharmacy network contracting, pharmacy claims processing, mail and specialty drug pharmacy, and formulary and rebate administration services; and WHEREAS, the City of Denton desires to enter into an agreement with ESI to provide pharmacy benefit management services for the City's self-funded health benefits program; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The City Manager, or his designee, is hereby authorized to execute an agreement with ESI in substantially the form of the Pharmacy Benefit Management Agreement, which is attached hereto and incorporated herein by reference. SECTION 2. The expenditure of funds as provided for in the attached Agreement is hereby authorized. SECTION 3. This Ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the )14 day of ~&UM44t) , 2007. PERRY K McNEILL, MAYOR ATTEST: JENNIFER WALTERS. CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: EDWIN M. SNYDER, CITY ATTORNEY BY: EXPRESS SCRIPTS, INC. PHARMACY BENEFIT MANAGEMENT AGREEMENT THIS PHARMACY BENEFIT MANAGEMENT AGREEMENT ("Agreement') will be effective as of the date set forth in Section 7.1 and is entered into by and between EXPRESS SCRIPTS, INC., a Delaware corporation on behalf of itself and its subsidiaries ("ESI"), -and CITY OF DENTON, a municipality, organized and operating under the laws of Texas ("Sponsor"). RECITALS A. ESI, either directly or through its subsidiaries, engages in pharmacy benefit management services, including, among other things, pharmacy network contracting, pharmacy claims processing, mail and specialty drug pharmacy, and formulary and rebate administration ("PBM.Services"). B. Sponsor provides or arranges for the provision of health benefits, including a prescription drug benefit. C. ESI and Sponsor desire that ESI be the exclusive provider of PBM Services for Sponsor's self-funded welfare benefit Plans offering a prescription benefit under the terms and conditions set forth herein. . THEREFORE, in consideration of the mutual promises contained herein, the parties hereto agree as follows: TERMS OF AGREEMENT ARTICLE I - DEFINITIONS "Average Wholesale Price" or "AWP" means the average wholesale price of a prescription drug as identified by drug pricing services such as First Data Bank or other source recognized in the retail prescription drug industry selected by ESI for all clients. The applicable AWP for prescriptions filled in (a) Participating Pharmacies and CuraScript will be the AWP for the package size from which the prescription drug was dispensed, and (b) in the Mail Service Pharmacy the AWP for the lesser of: (i) the NDC code for the package size from which the prescription drug was dispensed, or (ii) package sizes of 100 units or 16 ounce quantities, or the next larger quantity if such specified quantities are not available. Brand Drug" means a prescription drug product that is not a Generic Drug. "CareLogic Drug List" means the standard list of Specialty Products and their reimbursement rates (as described in Exhibit A-1) provided to Sponsor with this Agreement and as updated from time to time. "Copayment" means that portion of the charge for each Covered Drug dispensed to the Member that is the responsibility of the Member (e.g., copayment, coinsurance and/or deductible) as indicated on the Set-Up Forms. "Covered Drug(s)" means those prescription drugs, supplies, Specialty Products (if applicable), and other items that are covered under the Plan, each as indicated on the Set-Up Forms. "CuraScript" means CuraScript, Inc. or another pharmacy wholly-owned or operated by ESI or its wholly-owned subsidiaries that primarily dispenses Specialty Products. "Eligibility Files" means the list submitted by Sponsor to ESI in reasonably acceptable electronic format indicating persons eligible for drug benefit coverage services under the Plan. 131097v2 "Formulary" means the list of FDA-approved prescription drugs and supplies developed by ESI's Pharmacy and Therapeutics Committee and/or customized by Sponsor, which is selected and adopted by Sponsor. "Generic Drug" means a prescription drug, whether identified by its chemical, proprietary, or non- proprietary name; that is therapeutically equivalent and interchangeable with drugs having an identical amount of the same active ingredient(s) and approved by the FDA. "HIPAA" means the Health Insurance Portability and Accountability Act of 1996, as amended. "Mail Service Pharmacy" means a duly licensed pharmacy operated by ESI or its subsidiaries, other than CuraScript, where prescriptions are filled and delivered to Members via mail delivery service. "Manufacturer Administrative Fees" means those administrative fees paid by pharmaceutical manufacturers to, or otherwise retained by, ESI pursuant to a contract between ESI and the manufacturer and directly in connection with EST's administering, invoicing, allocating and collecting the Rebates. "MAC List" means a list of prescription drug products identified as readily available as a Generic Drug, generally equivalent to a Brand Drug (in which case the Brand Drug may also be on the MAC List) and which are deemed to require pricing management due to the number of manufacturers, utilization and pricing volatility. The MAC List is intended to result in a weighted average discount range of 51 % to 59%, but Sponsor's actual experience may vary within, or above or below this range depending upon Sponsors Generic Drug and Brand Drug mix and plan design. "MRA" or "Maximum Reimbursement Amount" is the price charged to Sponsor for a prescription drug, product on the MAC List. "Medicaid Subrogation Claim" means subrogation claims submitted by any state under Medicaid or similar United States or state government health care programs for which Sponsor is the primary payor. "Member" means each person who Sponsor determines is eligible to receive prescription drug benefits as indicated in the Eligibility Files. "Member Submitted Claim means a paper claim submitted by a Member for Covered Drugs dispensed by a pharmacy other than a Participating Pharmacy or for which the Member paid cash. "Participating Pharmacy" means any licensed retail pharmacy with which ESI has executed an agreement to provide Covered Drugs to Members. "Plan" means Sponsor's welfare benefit plan(s) that contains a prescription drug benefit. "Prescription Drug Claim" means a Member Submitted Claim, Medicaid Subrogation Claim or claim for payment submitted to ESI by a Pharmacy as a result of dispensing Covered Drugs to a Member. "Protected Health Information" or "PHI" has the meaning ascribed to it under HIPAA. "Rebates" means retrospective rebates that are paid to ESI, or otherwise retained by ESI, pursuant to the terms of a rebate contract negotiated independently by ESI with a pharmaceutical manufacturer, and directly attributable to the utilization of certain pharmaceuticals by Members. Rebates do not include Manufacturer Administrative Fees, or product discounts or similar remuneration received by subsidiary pharmacies of ESI as more fully described in Exhibit F. 131097v2 "Set-Up Forms" means any standard ESI document or form, which when completed and signed by Sponsor, will describe the essential benefit elements and coverage rules adopted by Sponsor for its prescription drug program. "Specialty Products" means those injectable and non-injectable drugs on the CareLogic Drug List and typically having one or more of several key characteristics, including: frequent dosing adjustments and intensive clinical monitoring to decrease the potential for drug toxicity and increase the probability for beneficial treatment outcomes; intensive patient training and compliance assistance to facilitate therapeutic goals; limited or exclusive product availability and distribution; specialized product handling and/or administration requirements and/or cost in excess of $500 for a 30 day supply. "Usual and Customary Price" or "U&C" means the retail price charged by a Participating Pharmacy for the particular drug in a cash transaction on the date the drug is dispensed as reported to ESI by the Participating Pharmacy. "UM Company' means an independent, third party utilization management company as further described in Section 3.2(d). ARTICLE II - ESTABLISHMENT OF THE PRESCRIPTION DRUG PROGRAM 2.1 Eligibility/Set Up. Sponsor will submit a completed Set-Up Forms and Eligibility Files (initial and updated) on a mutually determined basis, and ESI will accurately implement the Set-Up Forms and Eligibility Files. Changes to the Set-Up Forms must be documented on EST's standard amendment forms. Eligibility performed manually by ESI for Sponsor, or material changes to the Eligibility File processes requested by Sponsor during the term may be subject to additional fees set forth on Exhibit A-2. Sponsor will be responsible for all Prescription Drug Claims during the period of the Member's eligibility as indicated on the Eligibility File, except in the event of ESI's negligence. ES] will not be responsible for Prescription Drug Claims for retroactively termed Members. 2.2 Performance Standards. ESI will conform to the performance standards set forth on Exhibit G hereto. The payments set forth in Exhibit G will be Sponsor's sole monetary remedy for any failure by ESI to meet a performance standard in addition to any correction or reimbursement associated with payment or billing errors. ARTICLE III - PBM SERVICES 3.1 Pharmacv Network (a) Participating Pharmacies. ESI will maintain a network(s) of Participating Pharmacies as identified in Exhibit A, and will make available an updated list of Participating Pharmacies on-line. ESI maintains multiple networks, and periodically consolidates networks or migrates clients to other networks, in order to capitalize on certain operational efficiencies and other benefits associated with a streamlined network offering. ESI will notify Sponsor of any changes that would materially adversely affect Member access to Participating Pharmacies and work with Sponsor in good faith to mitigate any such effects. (i) ESI will require each Participating Pharmacy to meet ESI's participation requirements, including but not limited to licensure, insurance and provider agreement requirements. ESI also performs electronic and on-site audits of Participating Pharmacies to determine compliance with provider agreements with ESI. ES] will attempt recovery of identified overpayments through offset, demand or other reasonable means; provided that ESI will not be required to institute litigation. Recovered overpayments are credited to Sponsor. To compensate ESI for the cost of conducting audits, ESI charges an audit fee in the amount set forth in Exhibit A upon recovery of overpayments attributable to the Plan. Copies of the Participating Pharmacy participation requirements and auditing processes are available upon request. 131097v2 (ii) ESI does not direct or exercise any control over the professional judgment exercised by any pharmacist in dispensing prescriptions or otherwise providing pharmaceutical related services at a Participating Pharmacy. (b) Mail Service Pharmacv. Members may have prescriptions filled through the Mail Service Pharmacy. Subject to applicable law, ESI may communicate with Members regarding benefit design, cost savings, availability and use of the Mail Service Pharmacy, as well as provide supporting services. If the prescription and applicable law do not prohibit substitution of a Generic Drug for the prescribed Brand Drug, or if the Mail Service Pharmacy obtains the consent of the prescriber, the Mail Service Pharmacy will dispense the Generic Drug substitute to the Member. (c) Specialty Products. Members may have prescriptions filled through CuraScript on an exclusive basis (as described in Exhibit A-1). ESI will assist in the transfer of prescriptions to, or assist Members to obtain new prescriptions to be filled at, CuraScript for Members filling Specialty Products through the Mail Service Pharmacy (if applicable). Sponsor hereby authorizes ESI and CuraScript to communicate with Members and physicians regarding the transition from Mail Service Pharmacy (or other pharmacies) to CuraScript, as well as to advise Members filling Specialty Products at Participating Pharmacies of the availability of filling prescription through CuraScript. (d) Pharmacy Help Desk: ESI will provide 24-hours a day, 7-days a week toll-free telephone support and Internet site to assist Pharmacies with Member eligibility verification and questions regarding reimbursement, Covered Drug benefits under the Plan or other related concerns. 3.2 Claims Processin (a) On-Line Claims Processing. ESI will perform claims processing services for Covered Drugs dispensed by Participating Pharmacies, Mail Service and. CuraScript. ESI will perform a standard concurrent drug utilization review ("DUR") analysis of each prescription submitted for processing on-line by a Pharmacy in order to assist the dispensing pharmacist and prescribing physician in identifying potential drug interactions, incorrect prescriptions or dosages, and certain other circumstances that may be indicative of inappropriate prescription drug usage. ESI's DUR processes are not intended to substitute for the professional judgment of the prescriber, the dispensing pharmacist or any other health care professional providing services to the Member. Sponsor or its third party designee (as applicable) will have the final responsibility for all decisions with respect to coverage of a Prescription Drug Claim and the benefits allowable under the Plan, including determining whether any rejected or disputed claim will be allowed. (b) Member Submitted and Medicaid Subrogation Claims. If elected by Sponsor, ESI will process Member Submitted Claims and/or Medicaid Subrogation Claims in accordance with the Plan rules set forth in the Set-Up Forms and ESI's standard procedures. (c) Prior Authorization. For the fees set forth on Exhibit A-2 (if applicable), ESI will provide prior authorization ("PA") services as specified and directed by Sponsor for drugs designated on the Set- Up Form. Prior authorized drugs must meet Sponsor-approved guidelines ("Guidelines") before they are deemed to be Covered Drugs. Sponsor authorizes coverage for an otherwise excluded use in the event of co-morbidities, complications and other factors not otherwise expressly set forth in the Guidelines, unless Sponsor directs that Sponsor be provided such issue for determination. In determining whether to authorize coverage of such drug under the PA Program, ESI will apply only the Guidelines and may rely entirely upon information about the Member and the diagnosis of the Member's condition provided to it from sources deemed reliable to ESL ESI will not undertake to determine medical necessity, to make diagnoses or substitute ESI's judgment for the professional judgment and responsibility of the physician. (d) Appeals. ESI shall perform a first level of review of written requests for appeal from Members or Participating Pharmacies who maintain that individual Prescription Drug Claims were incorrectly adjudicated. EST's review shall consist of the ministerial verification that the claim or claims in question were properly adjudicated according to the Sponsor's Plan (including whether properly denied or 13167v2 covered), provided that ESI shall not have or exercise discretionary authority to deviate from the Plan. ESI shall establish and obtain Sponsor approval of procedures for such appeals, and for making adjustments in payment in accordance with Sponsor's policies. (e) Call Center. ESI will provide 24-hours a day, 7-days a week toll-free telephone, IVR and Internet support to assist Sponsor, Sponsor's agents and Members with Member eligibility and benefits verification, location of Pharmacies or other related Member concerns. 3.3 Formularv Support and Rebate Management (a) Formulary Adherence and Clinical Programs. Upon written election of Sponsor, ESI will provide the then available Formulary management, clinical, safety and/or trend programs identified on Exhibit A-2, or such other programs as ESI may introduce from time to time, some of which may require payment of additional fees. (b) Rebate Program. ESI will pay to Sponsor the amounts set forth on Exhibit B. 3.4 Program Operations. (a) Reporting. ESI will make available to Sponsor EST's on-line standard management information reporting applications. At the request of Sponsor, ESI may develop special reporting packages or perform custom programming at ESI's standard hourly rate for such services, as set forth in Exhibit A-2. (b) Claims Data. (i) Claims Data Retention. ES] will retain Sponsor's claims data in media and formats determined by ESI for a total of seven' (7) years from the date the prescription is filled. Thereafter ESI will dispose of such data in accordance with its standard policies and practices and applicable state and federal law. Disposition of PHI shall be in accordance with the Business Associate Agreement. (ii) Claims Data to Vendors. Upon Sponsor's written request and at no additional charge, ESI will provide regular prescription claims data in ESI's standard format(s) to Sponsor's vendors ("Vendors") for disease management, flexible savings account and other "payment," "treatment" and "healthcare operations" purposes (as defined under HIPAA). Requests for retrieval of data beyond thirty (30) months are subject to the hourly custom programming charge set forth in Exhibit A-2. (iii) De-Identified Claims Data. ESI may use both during and after the term of this Agreement and/or transfer to third parties the anonymized PHI (de-identified in accordance with HIPAA) drug and related medical data collected by ESI or provided to ESI by Sponsor for research, provider profiling and other databases for benchmarking, drug trend, cost analyses, cost comparisons or other business purposes of ESI. (c) Sponsor Audits. Provided that this Agreement has been duly executed by Sponsor and Sponsor's account does not reflect a delinquent balance at the commencement of or during an audit, Sponsor may audit the prescription management services provided under this Agreement consistent with the Audit Protocol set forth in Exhibit C. Sponsor may use an independent auditor ("Auditor'), if such auditor does not have a conflict of interest with ESI, (e.g., Auditor serves as expert witness in litigation against ESI, or routinely requests information outside the reasonable scope of the audit). If Sponsor selects an Auditor that also has been appointed by ESI's shareholders to conduct the independent audit of ESI, then such firm must provide to ESl a letter stating that such engagement performed on behalf of Sponsor will in no way infringe upon said firm's independence with respect to ESI's audit. Such letter must be signed by the audit firm and approved by the engagement audit partner performing the ESI audit. Auditors must execute a mutually acceptable standard confidentiality agreement with ESI priorto 13109741 commencement of the audit. Any requests by Sponsor to permit an auditor to perform an audit will constitute Sponsor's direction and authorization to ESI to disclose PHI to the auditor. ARTICLE IV - FEES; BILLING AND PAYMENT 4.1 Fees. In consideration of the PBM Services provided by ESI, Sponsor will pay the applicable claims reimbursement amounts and other administrative fees ("Fees') set forth in Exhibit A. Fees and Rebates are conditioned on ESL's exclusive status hereunder. 4.2 Billing and Payment. (a) Billing. ESI will invoice Sponsor weekly for all applicable Fees (b) Payment. Sponsor will pay ESI by wire, ACH transfer or pre-authorized debit within five (5) business days from the date of Sponsor's receipt of each ESI invoice. Sponsor will be responsible for all costs of collection, and agrees to reimburse ESI for such costs and expenses, including reasonable attorneys' fees. All amounts not paid by the due date thereof will bear interest at the rate of 1.5% per month or, if lower, the highest interest rate permitted by law. In addition to any rights under Section 7.2, ESI may apply Rebate amounts otherwise owed to Sponsor against any unpaid Fees. (c) Deposit. If, at any time: (i) Sponsor has two or more invoices past due and outstanding, or (ii) ESI has reasonable grounds to believe Sponsor may be delinquent in payment of fees based on Sponsor's financial data (e.g., persistent negative cash flow, bankruptcy or insolvency), ESI may require that the Sponsor provide to ESI a deposit in an amount equal to the average of the last three (3) months of billing history as the basis for determining the one (1) month deposit amount or, if three (3) months billing history is not available, the most recent month of billing history as the basis. ESI will retain the deposit until the earlier of termination of this Agreement (following any run-off period), or six (6) consecutive months of timely payments of all Fees following submission of the deposit, and may apply the deposit to delinquent fees until return of the deposit. ARTICLE V - HIPAA; CONFIDENTIAL INFORMATION 5.1 HIPAA. The parties agree that as relates to use and disclosure of PHI, electronic transaction standards and security of electronic PHI under HIPAA, they are subject to the terms of the Business Associate Agreement set forth in Exhibit D. 5.2 Confidential Information. (a) Each party agrees that the terms of this Agreement and information of the other party, including, but not limited to the following, will constitute confidential and proprietary information ("Confidential Information"): (i) with respect to ESI: EST's reporting and other web-based applications, eligibility and adjudication systems, system formats and databanks (collectively, "EST's Systems"), clinical or formulary management operations or programs, information and contracts relating to Rebates and Manufacturer Administrative Fees, prescription drug evaluation criteria, drug pricing information, and Participating Pharmacy agreements; and (ii) with respect to Sponsor: Sponsor and Member information data, Eligibility Files, business operations and strategies. Neither party will use the other's Confidential Information, or disclose it or this Agreement to any third party (other than Sponsor attorneys and accountants), at any time during or after termination of this Agreement, except as specifically contemplated by this Agreement or upon prior written consent, which will not unreasonably be withheld. Upon termination of this Agreement, each party will cease using the other's Confidential Information, and all such information will be returned or destroyed upon the owner's direction. Confidential Information does not include information which is or becomes generally available to the public; was within the recipient's possession or knowledge prior to its being furnished to the recipient pursuant to this Agreement, or is independently developed by the recipient under circumstances not involving a breach of this Agreement. 131097v2 r. (b) Sponsor will not, and will not permit any third party acting on Sponsor's behalf to, access, attempt to access, test or audit EST's Systems or any other system or network connected to ESI's Systems. Without limiting the foregoing, Sponsor will not:,(i) access or attempt to access any portion or feature of ESI's Systems, by circumventing EST's Systems access control measures, either by hacking, password "mining" or any other means; or (ii) probe, scan, audit or test the vulnerability of EST's Systems, nor breach the security or authentication measures of EST's Systems. ARTICLE VI - COMPLIANCE WITH LAW; PRICING BENCHMARKS; FIDUCIARY ACKNOWLEDGEMENTS; FINANCIAL DISCLOSURE 6.1 Compliance with Law: Change in Law. Each party shall be responsible for ensuring its compliance with any laws and regulations applicable to its business, including maintaining any necessary licenses and permits. Sponsor shall be responsible for any governmental or regulatory charges and taxes, if any, imposed upon the services provided hereunder, other than taxes based on the net income of ESI. Notwithstanding the forgoing, Sponsor represents that Sponsor is a tax exempt organization under applicable tax laws and not subject to any such taxes. Sponsor acknowledges and agrees that it is responsible for disclosing to Members any and all information relating to the Plan and this Agreement as required by law to be disclosed, including any information relating to Plan coverage and eligibility requirements, Rebates or provider discounts referred to in Section 6.4 hereof. If there is a change in federal or state laws or regulations or the interpretation thereof, regulatory, judicial or legal action that, among other things, materially burdens ESI, requires ESI to increase payments or shorten payment times for Covered Drugs to Participating Pharmacies, or materially changes the scope of services hereunder, then there shall be an appropriate modification of the services, reimbursement rates, administrative fees and/or Rebates such that the parties are returned to their comparable economic position as of the Effective Date. If the parties cannot agree on a modification or adjusted fee or rates, then either party may terminate the Agreement on thirty (30) days prior written notice to the other. 6.2 Pricing Benchmarks. The parties understand that pricing indices historically used, (and that are the basis in this Agreement), for determining the financial components of pharmacy billing rates are outside the control of Sponsor and ESI. The parties also understand there are extra-market industry, legal, government and regulatory activities which may lead to changes relating to, or elimination of, these pricing indices that could alter the financial positions of the parties as intended under this Agreement. The parties agree that, upon entering into this Agreement and thereafter, their mutual intent has been and is to maintain pricing stability as intended and not to advantage either party to the detriment of the other. Accordingly, to preserve this mutual intent, if ESI undertakes any or all of the following: (a) changes the AWP source across its book of business (e.g., from First DataBank to MediSpan); or (b) maintains AWP as the pricing index with an appropriate adjustment as described below, in the event the AWP methodology and/or its calculation is changed, whether by the existing or alternative sources; or (c) transitions the pricing index from AWP to another index or benchmark (e.g., to Wholesale Acquisition Cost), Participating Pharmacy, CuraScript and Mail Service Pharmacy rates, rebates and guarantees, as applicable, will be modified as reasonably and equitably necessary to maintain the pricing intent under this Agreement. ESI shall provide Sponsor with at least ninety (90) days notice of the change (or if such notice is not practicable, as much notice as is reasonable under the circumstances), and written illustration of the financial impact of the pricing source or index change (e.g., specific drug examples). If Sponsor disputes the illustration or the financial impact of the pricing source, the parties agree to cooperate in good faith to resolve such disputes. 6.3 Fiduciary Acknowledgements. In providing services under this Agreement, Sponsor acknowledges and agrees that neither it nor the Plan will name ESI or any of. EST's wholly-owned 131097v2 - 7 subsidiaries as a "plan fiduciary." Sponsor further acknowledges and agrees that neither ESI nor any of EST's wholly-owned subsidiaries: (i) are acting on behalf of any employee welfare benefit plan (as defined in Section 3(1) of ERISA or under state law) or participants in such plans, or as a fiduciary (as defined in Section 3.21(a) of ERISA or under state law) of any Plan; (ii) have any discretionary authority or control respecting management of the Plan's prescription benefit program, but rather provides administrative services for the drug benefit program within a framework of policies, interpretations, rules, practices, and procedures chosen by Sponsor; or (iii) exercise any .authority or control respecting management or disposition of the assets of the Plan or Sponsor, if any exist. Sponsor further acknowledges that all such discretionary authority and control with respect to the management of the Plan and plan assets, if any, is retained by Sponsor, the Plan or some other person or entity. ESI will have the right to terminate PBM Services to any Plan (or, if applicable, Members) located in a state requiring a pharmacy benefit manager to be a fiduciary to Sponsor, a Plan, or a Member in any capacity. 6.4 . Disclosure of Certain Financial Matters. In addition to the administrative fees paid to ESI by Sponsor, if any, ESI and EST's wholly-owned subsidiaries derive margin from fees and revenue in one or more of the ways as further described in the Financial Disclosure to ESI PBM Clients set forth in Exhibit E hereto ("Financial Disclosure"). In negotiating any of the fees and revenues described in the Financial Disclosure or in this Agreement, ESI and EST's wholly-owned subsidiaries act on their own behalf, and not for the benefit of or as agents for Sponsor, Members or the Plan. ESI and EST's wholly-owned subsidiaries retain all proprietary rights and beneficial interest in such fees and revenues described in the Financial Disclosure and, accordingly, Sponsor acknowledges that neither it, any Member, nor the Plan, has a right to receive, or possesses any beneficial interest in, any such fees or revenues; provided, that ESI will pay Sponsor amounts equal to the amounts expressly set forth on Exhibit B. Nothing in the Financial Disclosure is intended to supersede any of the specific financial terms and conditions to under this Agreement. ARTICLE VII - TERM AND TERMINATION; DEFAULT AND REMEDIES 7.1 Term. This Agreement will commence effective as of January 1, 2008, (Effective Date"), and will _ continue for a period of-three-(3)-year(s) ("Initial-Term"),-and maybe-terminated-earlier-or-extended in- - - accordance with the terms of Section 7.2 below. Thereafter, this Agreement will automatically renew with the same terms and conditions as set forth herein for successive one (1) year renewal terms, subject to the right of termination as otherwise provided herein. 7.2 Termination (a) Non-Renewal Upon Notice. Not less than ninety (90) days prior to the end of the Initial Term or any renewal term of this Agreement either party may notify the other party in writing that it desires to terminate this Agreement effective as of the end of the then current term. Notwithstanding any provision in this Agreement to the contrary, in no event will this Agreement be terminable "without cause" prior to the expiration of the Initial Term by either party. (b) Breach or Default. Either party may give the other written notice of a material, substantial and continuing breach of this Agreement. If the breaching party has not cured said breach within thirty (30) days from the date such notice was sent, this Agreement may be terminated at the option of the non- breaching party. If the amount of time commercially reasonable for the breach to be cured is longer than thirty (30) days, this Agreement may not be terminated by the non-breaching party pursuant to this provision until such commercially reasonable period of time has elapsed; provided, however, that in no event will such period exceed sixty (60) days. (c) Non-Payment. Notwithstanding anything to the contrary herein, ESI (and its wholly- owned subsidiaries) may terminate or suspend their performance hereunder and cease providing or authorizing provision of Covered Drugs to Members upon forty-eight (48) hours written notice if Sponsor fails to pay ESI or provide a deposit, if required, in accordance with the terms of this Agreement. ESI attempts collection through written and verbal communications with Sponsor prior to sending the notice described herein. 131097v2 (d) Obligations Upon Termination. Upon notice of termination of this Agreement, the parties will mutually develop a run-off plan providing for: (a).Sponsor notification to Members of the timing of any transition to a successor pharmacy benefit manager at least thirty (30) days prior to the effective date of such termination; (b) ESI provision of open Mail Service Pharmacy refill files and standard claims data and PA files for transition to the successor pharmacy benefit manager in accordance with then existing industry protocol; and (c) whether Sponsor elects for ESI to process Participating Pharmacy, Member Submitted and/or Medicaid Subrogation Claims for prescriptions filled during the Term but filed with ESI after the effective date of termination ("Termination Date"). Sponsor will continue to pay ESI in accordance with this Agreement for any Fees for PBM Services provided during the term and any run-off period. ESI will continue filing for Rebates for claims incurred prior to the Termination Date and will pay Sponsor Rebates for such claims in accordance with the Rebate payment schedule set forth in Exhibit B. 7.3 Remedies. (a) Remedies Not Exclusive. A party's right to terminate this Agreement under Article VII will not be exclusive of any other remedies available to the terminating party under this Agreement or otherwise, at law or in equity. (b) Force Maieure. Neither party will lose any rights under this Agreement or be liable in any manner for any delay to perform its obligations under this Agreement that are beyond a party's reasonable control, including, without limitation, any delay or failure due to strikes, labor disputes, riots, earthquakes, storms, floods or other extreme weather conditions, fires, explosions, acts of terrorism, epidemics, embargoes, war or other outbreak of hostilities, government acts or regulations, the failure or inability of carriers, suppliers, or telecommunications providers to provide services necessary to enable a party to perform its obligations hereunder, or any other reason where failure to perform is beyond the party's reasonable control, and is not caused by the negligence, intentional conduct or misconduct of the defaulting party; provided, however, that this clause may not be invoked to excuse a partys payment obligations hereunder. ESI represents that it maintains and continually updates a business continuity plan designed to mitigate any disruption to the services provided by ESI under this Agreement. (c) Limitation of Liability. Except for the indemnification obligations set forth in Section 7.3(d), each party's liability to the other hereunder will in no event exceed the actual proximate losses or damages caused by breach of this Agreement. In no event will either party or any of their respective affiliates, directors, employees or agents, be liable for any indirect, special, incidental, consequential, exemplary or punitive damages, or any damages for lost profits relating to a relationship with a third party, however caused or arising, whether or not they have been informed of the possibility of their occurrence. (d) .Indemnification. (i) In addition to any indemnification obligations set forth in the Business Associate Agreement, ESI will indemnify and hold Sponsor harmless from and against any loss, cost, damage, expense or other liability, including, without limitation, reasonable costs and attorney fees ("Costs') incurred in connection with any and all third party claims, suits, investigations or enforcement actions ("Claims") which may be asserted against, imposed upon or incurred by Sponsor and arising as a result of (A) ESI's negligent acts or omissions or willful misconduct, or (B) EST's breach of this Agreement. (ii) To the extent permitted by law, Sponsor will indemnify and hold ESI harmless _ - - from and against any Costs for Claims which maybe asserted against, imposed upon or incurred by ESI and arising as a result of Sponsor's (A) negligent acts or omissions or willful misconduct, (B) benefit design and coverage decisions, (C) breach of this Agreement, or (D) from any use Sponsor may make of PHI provided to Sponsor by ESI. Notwithstanding the preceding, ESI , disclaims all liability in connection with, and Sponsor shall not attempt to recover from ESI, any Costs for Claims which may be asserted against, imposed upon or incurred by Sponsor and arising as a result of (ii)(A-D) above. 131097J2 (iii) As a condition of indemnification, the party seeking indemnification will notify the indemnifying party in writing promptly upon learning of any Claim for which indemnification may be sought hereunder, and will tender the defense of such claim to the indemnifying party. No party will be obligated to indemnify the other with respect to any claim settled without the written consent of the other. - 7.4 Survival. The parties' rights and obligations under the last sentences of Sections 3.4(b)(i) and (iii), Articles IV, V and VI; and Sections 7.2(d), 7.3 and 7.4 will survive the termination of this Agreement for any reason. ARTICLE Vlll - MISCELLANEOUS 8.1 Liability Insurance. Each party will maintain such policies of general liability, professional liability and other insurance of the types and in amounts customarily carried by their respective businesses. Proof of such insurance will be available upon request. ESI agrees, at its sole expense, to maintain during the term of this Agreement or any renewal hereof, commercial general liability insurance, pharmacists professional liability insurance for the Mail Service and CuraScript pharmacies, and managed care liability with limits, excess of a self insured retention, in amounts of not less than $5,000,000 per occurrence and in the aggregate. ESI does not maintain liability insurance on behalf of any Participating Pharmacy, but does contractually require such pharmacies to maintain a minimum amount of commercial liability insurance or, when deemed acceptable by ESI, to have in place a self-insurance program 8.2 Notice. Any notice or document required or permitted to be delivered pursuant -to this Agreement must be in writing and will be deemed to be effective upon mailing and must be either (a) deposited in the United States Mail, postage prepaid, certified or registered mail, return receipt requested, or (b) sent by recognized overnight delivery service, in either case properly addressed to the other party at the address set forth below, or at such other address as such party will specify from time to time by written notice delivered in accordance herewith: Express Scripts, Inc. Attn: President One Express Way St. Louis, Missouri 63121 With copy to Legal Department Fax No. (800) 417-8163 City of Denton Attn: Scott Payne 601 East Hickory, Suite A Denton, Texas 76205 Fax No. (940) 349-7803 8.3 Independent Parties. No provision of this Agreement is intended to create or will be construed to create any relationship between ESI and Sponsor other than that of independent entities contracting with each other solely for the purpose of effecting the provisions of this. Agreement. Neither parry, nor any of their respective representatives, will be construed to be the partner, agent, fiduciary, employee, or -representative of-the-other-and _neither party _will_have the right to_make any-representations -concerning-- - the duties, obligations or services of the other except as consistent with the express terms of this Agreement or as otherwise authorized in writing by the party about which such representation is asserted. 8.4 Successors and Assigns. This Agreement will be binding upon, and inure to the benefit of and be enforceable by, the respective successors and permitted assigns of the parties hereto; provided that this Agreement may not be assigned by Sponsor without the prior written consent of ESI following a standard credit review, which consent will not unreasonably be withheld. 131097v2 10 8.5 Integration: Amendments. This Agreement and any Exhibits hereto constitute the entire understanding of the parties hereto and supersedes any prior oral or written communication between the parties with respect to the subject matter hereof. If there is a separate Business Associate Agreement between the parties, such an agreement will be incorporated herein for all applicable purposes. No modification, alteration, or waiver of any term, covenant, or condition of this Agreement will be valid unless in writing and signed by the parties or the agents of the parties who are authorized in writing. 8.6 Choice of Law. This Agreement will be construed and governed in all respects according to the laws in the State of Texas, without regard to the rules of conflict of laws thereof. 8.7' Waiver. The failure of either party to insist upon the strict observation or performance of this Agreement or to exercise any right or remedy will not be construed as a waiver of any subsequent breach of this Agreement or impair or waive any available right or remedy. - 8.8 Third Party Beneficiary Exclusion. This Agreement is not a third party beneficiary contract, nor will this Agreement create any rights on behalf of Members as against ESI. Sponsor and ESI reserve the right to amend, cancel or terminate this Agreement without notice to, or consent of, any Member. 8.9 Freedom of Information Act. ESI acknowledges that Sponsor, as a government agency, may be subject to applicable freedom of information laws and must, upon request, disclose such materials as are covered by and not exempted from such laws. Pursuant to Section 5.2 hereof, Sponsor acknowledges that certain information contained herein or subject to this Agreement is proprietary and confidential to ESI and shall be exempt from that Act to the fullest extent permitted by law. Sponsor agrees to give ESI notice and a reasonable amount of time to oppose any freedom of information request pertaining to this Agreement or any proposal related hereto. IN WITNESS WHEREOF, the undersigned have executed this Pharmacy Benefit Management Agreement as of the day and year below set forth. EXPRESS SCRIPTS, INC By Printed Name: Title: Date: I k • G - 07 Ed Ignoczok Executive Vice Presided Sales & Marketing Phone: 314-692-1901 Fax: 800.662-9135 CITY OF DENTON By: Printe me: 'Q*~ C._(e.,p tt Title: C"U Phone: + -349- 93 Fax: q 0- 749- "leoz Federal ID Number:" - 00051 Date: 11N APPROVED AS TO FORM: CITY ATTORNEY CITY OF DENTON, TEXAS BY, 131097v2 11 EXHIBIT A PHARMACY PROGRAM FEES . Sponsor will pay to ESI the amounts set forth below, net of applicable Copayments. Sales or excise tax or other governmental surcharge, if any, will be the responsibility of Sponsor. If ESI pays a particular Participating Pharmacy a higher rate because Sponsor has requested such pharmacy be included in the network, the rate charged to Sponsor will be the net ingredient cost plus the dispensing fee paid by ESI to such pharmacy, plus applicable sales or excise tax or other governmental surcharge, if any. A Member's Copayment charged for a Covered Drug will be the lesser of the applicable Copayment or the U&C. ESI shall be Sponsor's exclusive provider of PBM Services for Sponsor's self-funded welfare benefit Plans offering a prescription. benefit. The financial terms set forth in Exhibits A and B are conditioned on such exclusive arrangement and all other specified conditions expressly incorporated in such exhibits, including, but not limited to the adoption by Sponsor of the specified network, qualifying co- payment structures, Formulary, a minimum of 2,400 Members implemented on the Effective Date, and no Members in a 100% co-payment plan. To the extent: (a) There is a material change in: (i) the conditions or assumptions stated in this Agreement; or (ii) the size, demographics or gender distribution of Sponsor's Membership compared to data provided by Sponsor; (b) Sponsor. changes its Formulary, benefit designs, implements clinical programs or otherwise takes an action that has the effect of lowering the amount of Rebates earned by Sponsor (whether between the date of the Cost Proposal and the Effective Date, or during the Term); (c) Sponsor elects to use on-site clinics or pharmacies to dispense prescription drugs to Members which materially reduces Rebates and/or the number of Covered Drug claims submitted on-line; and/or (d) Rebate revenue is materially decreased because Brand Drugs move off-patent to generic status; then ESI will have the right, upon notice, to make an equitable adjustment to the rates, administrative fees and/or Rebates, solely as necessary to return ESI to its contracted economic position as of the effective date of such event. In addition, ESI shall have the right to make an equitable adjustment to the Rebates in the event Sponsor (without the knowledge of ESI) has in place as of the Effective Date of this Agreement, any clinical or trend programs, and/or the drugs within the programs that increase Generic or OTC utilization. 131097V2 12 Exhibit A-1 Pharmacy Reimbursement Rates Participating Pharmacy Reimbursement Rates (Does Not Apply to Specialty Products) Option 1 Option 2 3-Tier Plan Design 3-Tier Plan Design Minimum $15.00 Copay Differential Minimum $15.00 Copay Differential ESI National Preferred Formulary ESI National Preferred Formulary Network Minimum 50,000 Participating Pharmacy Minimum 40,000 Participating Pharmacy Network Network Ingredient Cost - Brand and Generic Lesser of AWP -16.5%, MRA or U&C Lesser of AWP - 17.5%, MRA or U&C Single Source Generic Drugs are priced as brands Ingredient Cost - Lesser of U&C or combined AWP plus Lesser of U&C or combined AWP plus Compound Drugs applicable service fee applicable service fee Dispensing FeelRx $1.50 $1.40 Administrative Fee1Rx $0.00 $0.00 II. Mail Service Pharmacy Pricing (Does Not Apply to Specialty Products) Option 1 Option 2 3-Tier Plan Design 3-Tier Plan Design Minimum $15.00 Copay Differential Minimum $15.00 Copay Differential ESI National Preferred Formulary ESI National Preferred Formulary . 1-34 Days' Supply 35.90 Days' Supply 1.34 Days' Supply 3590 Days' Supply Ingredient Cost - Brand Drugs AWP-16.5% AWP-24% AWP-17.5% AWP-24% Single Source Generic Drugs are priced as brands Ingredient Cost - Generic AWP - 16.5% or, if AWP - 24% or, AWP - 17.5% AWP - 24% or, if Drugs lower, MRA if lower, MRA or, if lower, MRA lower, MRA Ingredient Cost - Compound Lesser of U&C or combined AWP plus Lesser of U&C or combined AWP.plus Drugs applicable service fee applicable service fee Dispensing FeelRx $1.50 $0.00 $1.40 $0.00 Subjed to change for changes in delivery rates Administrative FeelRx $0.00 $0.00 $0.00 $0.00 Minimum Rate 1 Rx $8.99 $8.99 $8.99 $8.99 III. Specialty Products. (a) Exclusive. CuraScript is the exclusive provider of Specialty Products for the reimbursement rates shown on the CareLogic Drug List for CuraScript - Exclusive. Any Specialty Product dispensed from a pharmacy other than CuraScript (for example, limited distribution products not then available through CuraScript or overrides) will be reimbursed at EST's standard Participating Pharmacy 131097v2 13 network Specialty Product rates shown below. Upon CuraScript acquisition of limited distribution products, Members will obtain prescriptions through CuraScript. CareLo is Ingredient Cost Dispensing Fee CuraScript See Exdusive CareLogic Drug List $0.00 Lesser of AWP discount, U&C or MRA Participating Pharmacy See retail CareLogic Drug List $2.75 Lesser of AWP discount, U&C or MRA (b) Specialty Products will be excluded from any price guarantees set forth in the Agreement. CuraScript or ESI will be entitled to charge a reasonable fuel surcharge fee to cover fuel surcharges imposed by carriers in connection with the delivery of Specialty Products by CuraScript. In no event will the Mail Service Pharmacy or Participating Pharmacy pricing specified in the Agreement apply to Specialty Products. (c) ESI will notify Sponsor no more frequently than monthly of new Specialty Products that are introduced to the market and added to the CareLogic Drug List on or after the Effective Date of this Agreement with their applicable CareLogic Drug List reimbursement rates ("Notice"). The parties agree as follows: (i) If Sponsor has expressly excluded a specific therapy class or product on a Set- Up Form, Specialty Products in such excluded classes will automatically be deemed excluded from coverage and will reject as "NDC Not Covered" through Participating Pharmacies, Mail Service Pharmacy and CuraScript; otherwise, all other Specialty Products will be implemented as Covered Drugs at the rate specified in the applicable CareLogic Drug List or Notice, and Sponsor acknowledges and agrees to same. If Sponsor desires to cover otherwise excluded Specialty Products, Sponsor must notify ESI in writing that it desires to cover the Specialty Product before ESI will adjudicate as a Covered Drug, and if ESI receives such confirmation of coverage from Sponsor such Specialty Product will be loaded thereafter as a Covered Drug at the applicable CareLogic Drug List reimbursement rate set forth in the Notice. (ii) Sponsor must notify ESI in writing if it wants to exclude the Specialty Product from coverage. The exclusion will be implemented within seven (7) business days after the date of ESI's receipt of such the notification. There will not be any retroactive denials for Prescription Drug Claims processed prior to ESI's receipt of the rejection notice and implementation of the exclusion as provided above and Sponsor will be responsible for the payment of such Prescription Drug Claims processed prior to the rejection of coverage. (d) Members may receive the following services from CuraScript, depending on the particular therapy class or disease state: (i) Patient Intake Services: patient enrollment, initial referral processing, insurance eligibility and benefits verification, alternative coverage searches, schedule of initial Specialty Product order, and coordination of patient education and instruction for each new patient; (ii) Pharmacy Dispensing Services: dispensing the Specialty Product pursuant to a prescription in accordance with applicable law, deposit of such Specialty Product with a third party carrier to facilitate the delivery of same per the Member's instructions, and the provision of certain ancillary supplies (e.g., syringes, needles, and alcohol swabs) and related items in connection with the Specialty Product that may be necessary or useful to the Member in connection with the administration of the Specialty Product; (iii) Ongoing Clinical and Specialty Pharmacy Support Services: self-injection teaching support, patient education, assessment, clinical interventions and clinical screenings, therapy adherence counseling and related clinical patient management activities and programs, physician consultations, authorization maintenance, assistance with Member coverage appeals, 131097v2 14 re-fill follow-up calls, managing ongoing medication orders, and insurance follow-up and related ongoing delivery coordination; and (iv) Social Services: patient advocacy, hardship reimbursement support, and indigent and patient assistance programs. The aforementioned services do not include home infusion supplies and related home health services. I31097v2 1$ Exhibit A-2 Administrative and Clinical Program Fees L Administrative Fees PBM Services - No Additional Fee ♦ Customer service for Members + Electronic claims processing Electronic/on-line eligibility submission- - ♦ Plan setu ♦ Standard coordination of benefits (COB) reject for primary carrier ♦ Software training for access to our on-line system(s) ♦ FSAeligibility feeds Network Pharmacy Services ♦ Pharmacy help desk ♦ Pharmacy reimbursement ♦ Pharmacy network management ♦ Network development (upon request) Home Delivery Services ♦ Benefit education ♦ Prescription delivery - standard Reporting Services ♦ . Web-based client re rtin - produced b Sponsor ♦ Annual Strategic Account Plan report ♦ Ad-hoc desktop parametric reports # Billing reports ♦ Claims detail extract file electronic NCPDP format ♦ Inquiry access to claims processing system ♦ Load 12 months daims history for clinical reports and reporting Website Services Express-Scripts.com for Clients - access to reporting tools, eligibility update capability, contact directory, sales and marketing information, and benefit and enrollment support ♦ Express Previewsm enrollment option - available during open enrollment to enable members to evaluate prescription benefit plan options ♦ Express-Scripts.com for Members - access to benefit, drug, health and wellness information; prescription ordering capability; and customer service ♦ Digital Certificates (up to five certificates) Implementation Package and Member Communications ♦ New Member packets (includes two standard resin ID . cards) ♦ Member replacement cards printed via web ♦ Implementation support Safe Management ♦ Concurrent Drug Utilization Review ♦ Emerging Therapeutics Trend Management ♦ Prior Authorization - Administrative ♦ Prior Authorization - Clinical Base List • Non-clinical Prior Authorization ♦ Blood Glucose Meter program • Losdstolen overrides • Vacation su lies ♦ Therapeutic Interchange Care Mana ement ♦ Care Management Level 1 Member Portal 13109742 16 PBM Services Fees ♦ Manual/hardco eligibility submission $1.001update (includes initial entry) ♦ Member-submitted paper claims processing $2.50/claim ♦ Medicaid subrogation claims $2.50/claim Network Pharmacy Services ♦ Pharmacy audit recoveries 20% of audit recoveries Re porting Services ♦ Web-based client reporting - produced by $100/report ESI ♦ Custom ad-hoc reporting $150/hour, with a minimum of $500 Re placement Member Communication Packets ♦ Member requested replacement packets $1.50 + postage per packet ♦ Sponsor requested re-Cardin $1.50 + postage per packet Ap peals b MCMC ♦ Clinical appeals $3501review ♦ Non-clinical appeals $160/review Plans subject to state law (non-ERISA plans) will be charged a retainer fee of $1000 per month for appeals _ handled b MCMC Medicare Part D Subsidy - - ♦ Standard reporting (ESI sends reports to Sponsor) $0.62 PMPM for Medicare-qualified Members with a minimum annual fee of $5,000 • Notice of Creditable Coverage $1.35/letter + postage ♦ Enhanced reporting(ESI sends reports to CMS on $1.12 PMPM for Medicare-qualified Members with a behalf of Sponsor) minimum annual fee of $7,500 • Notice of Creditable Coverage $1.351letter + postage 131o97J2 17 II. Selected Clinical/Trend Programs. ESI offers a comprehensive list of trend, safety, care and disease management programs, a limited number of which are identified below, and which may change or be discontinued from time to time. ESI also offers savings guarantees under certain conditions. Information concerning such programs, guarantees and fees, if applicable, is available from the ESI Account Team. Programs Fees ♦ Retrospective DUR ♦ Retrospective DUR - Seniors Trend Management ♦ .Drug Quantity Management ♦ ' Prior Authorization - Clinical Supplemental List ♦ Prior Authorization - Other Clinical Overrides (e.g. non-standard prior authorization medications, medical exceptions) ♦ Step Therapy - Individual modules and packages available Over 25 modules available. The most utilized include: ACE inhibitors and angiotensin-2 receptor blockers (ARBs), non- steroidal anti-inflammatory drugs (NSAIDS) and COX-2s, proton pump inhibitors (PPls), selective serotonin reuptake inhibitors (SSRIs), HMG - enhanced, calcium channel blockers, leukotriene pathway inhibitors, topical immunomodulators, other antidepressants. Formulary Rapid Response ♦ $0 Generic Copay ♦ RxPredict$ Care Management ♦ Care Management (Level 2) * List of drugs subject to change at the discretion of Express Scripts. 131097v2 $0.02/Rx $0.03 PMPM $20/request $25/physician review Pricing varies by module $0.01 PMPM $1.25/member mailing or $1,000 for member identification and authorization $0.05 PMPM for six months each time the report is run (e.g. 100,000 members $0.05 PMPM * 6 months). A subsequent charge will occurwith the second reoort. There is a minimum - - - is Zlitl.Ul /claim - Asthma $0.011claim - Cardiovascular Disease $0.02/claim - CHF $0.02/claim - Depression $0.01 /claim - Diabetes $0.03/claim - GI Disease $0.02/claim - Hypertension Rn 09/rlaim - Minminc EXHIBIT B REBATES A. Subject to the terms and conditions set forth below, ESI will remit to Sponsor amounts equal to the following: Option 1 and Option 2 3-Tier Plan Design Minimum $15.00 Copay Differential ESI National Preferred Formulary Participating Pharmacies and Mail Service Pharmacy CuraScrit Per Prescription Drug Claim $3.00 $12.00 B. Conditions of the Rebate Program. 1. Rebates are conditioned upon (i) Sponsor's election of, and conformance to, the identified Formulary and qualifying co-payment benefit designs; (ii) distribution of the Formulary (or a summary thereof) to Members and/or physicians; (iii) 100% of Members included in the applicable benefit plan design(s); and (iv) compliance with other reasonable, generally applicable requirements for participation by all clients in the Rebate program, as are communicated by ESI to Sponsor from time to. time. 2. Certain Member Submitted Claims and OTC products, Plans that do not meet eligibility requirements set forth herein, claims older than 180 days, as well as claims for 100% copayment (cash and carry) plans not offered in connection with a health plan benefit, may not be eligible for Rebates. 3. Guaranteed amounts are calculated in the aggregate. ESI retains Rebates in excess of such amount or percentage, if any. Amounts representing the Rebates allocated to Sponsor pursuant to the terms of this Agreement will be paid on a quarterly basis approximately 150 days following the end of each quarterly period; provided, however, that ESI will make quarterly payments as provided herein only to the extent of the Rebate payments it receives approximately 120 days following the end of the quarterly period. Payments attributable to Rebate amounts that ESI receives later than 120 days following the end of a quarter will be included by ESI in the next quarterly payment. ESI retains all right, title and interest to any and all actual Rebates received from manufacturers, except that ESI will pay Sponsor amounts equal to the Rebate amounts allocated to Sponsor, as specified above, from EST's general assets (neither Sponsor, its Members, nor Sponsor's plan retains any beneficial or proprietary interest in ESI's general assets). Sponsor acknowledges and agrees that neither it, its Members, nor its Plan will have a right to interest on, or the time value of, any Rebate payments received by ESI during the collection period or moneys payable under this Section. No Rebates will be paid until this Agreement is executed by Sponsor. ESI will have the right to apply Sponsor's allocated Rebate amount to unpaid Fees and will have the right to delay payment of Rebates to allow for final adjustments upon termination of this Agreement. 4. Sponsor acknowledges that it may be eligible for Rebates under this Agreement only so long as Sponsor, its affiliates, or its agents do not contract directly or indirectly with anyone else for discounts, utilization limits, rebates or otherfinancial incentives on pharmaceutical products or formulary programs for claims processed by ESI pursuant to the Agreement, without the prior written consent of ESI. In the event that Sponsor negotiates or arranges with a pharmaceutical manufacturer for Rebates or similar discounts for any Covered Drugs hereunder, but without limiting ESI's right to other remedies, ESI may immediately withhold any Rebates earned by, but not yet paid to, Sponsor as necessary to prevent duplicative rebates on Covered Drugs. To the extent Sponsor knowingly negotiates and/or contracts for 131097v2 19 discounts or rebates on claims for Covered Drugs without prior written approval of ESI, such activity will " be deemed to be a material breach 'of this Agreement, entitling ESI to suspend payment of Rebates hereunder and to renegotiate the terms and conditions of this Agreement. 131097J2 20 EXHIBIT C AUDIT PROTOCOL 1. Audit Principles. ESI recognizes the importance of Sponsors ensuring the integrity of their business relationship by engaging from time to time in audits of their financial arrangements with ESI, and will make every - reasonable-effort to address Sponsor concerns by facilitating a responsive and responsible audit process. Subject to the provisions of the Agreement regarding Sponsor audits, ESI and Sponsor agree that this Standard Audit Protocol is intended to facilitate Sponsor's audit of ESI by: (a) clearly defining the scope of the review to be performed; (b) enabling production of timely and accurate results; (c) minimizing administrative burdens on both parties; and (d) ensuring that standard accounting and auditing practices are followed. 2. Audit Prerequisites and Procedures A. An audit involves a review of more than three (3) months of claims data, and addresses broad operational areas including claim pricing accuracy, concurrent eligibility, formulary compliance and, when applicable, rebates. General claim inquiries, which do not require an audit, can be initiated by contacting Sponsor's Express Scripts Account Management team at any time. B. Sponsor agrees to supply a written request to begin an audit, which includes a clear definition of the intent and scope of the audit, after which ESI will retrieve necessary data to perform the audit in a time frame not to exceed thirty (30) days. C. Audits may be performed once annually, and due to the extraordinary demands placed on ESI' staff during the annual renewal period of December and January, no audits may be initiated or conducted during these months. 3. Auditing Prescription Claims fields. If requested, ESI will supply Sponsor with claim detail history on CD-ROM in NCPDP standard B. The initial audit scope will cover a period not to exceed eighteen (18) months immediately preceding the audit. Requests for older data may be subject to payment of fees for retrieval of data from off-site storage. The audited period may not be reaudited once the audit is complete. C. Most audits can be performed remotely via transfer of data on CD-ROM, hardcopy documents, etc. Any requested on-site audits will be conducted during normal business hours at ESI offices, during the months of February through November. D. Other ESI documentation (e.g. policies and procedures) requested during the course of the audit, other than that needed to determine the accuracy of Sponsor claims payments, will be provided at ESI' reasonable discretion. E. Sponsor will be given data sufficient for Sponsor to determine that ESI has billed Sponsor in accordance with contract terms for claims processing, including access to Participating Pharmacy provider agreements to verify pass through pricing, if applicable. F. Results of ESI's most recent SAS-70 audit conducted by a national accounting firm will be provided upon request. The Sponsor Audit may not duplicate a SAS-70 control audit regarding areas for which ESI has obtained a SAS-70 audit. However, this does not preclude Sponsor from obtaining a reasonable understanding from ESI personnel of any areas covered within the SAS-70 audit. G. During the course of an audit, all data, including claims detail and any copies of claims (or compilations thereof) supplied by ESI may be retained by Sponsor. 4. Auditing Rebates from Manufacturers A. The initial scope of any rebate audit may not exceed two (2) calendar quarters during the twelve (12) month period immediately preceding the audit. In the event findings from the initial review period warrant an increase in calendar quarters to be reviewed, ESI and Sponsor will mutually agree on a process by which additional calendar quarters may be reviewed by Sponsor. 131097JL 21 B. ESI's contracts with pharmaceutical manufacturers for drug product rebates are highly confidential and proprietary. Nevertheless, Sponsor may audit payments under rebate contracts applicable to Sponsor, and may select five (5) initial manufacturer contracts to be audited, or such larger initial number of contracts that will enable Sponsor to audit fifty percent (50%) of total rebate payments due to Sponsor. In the event findings from the initial rebate contract audits warrant an increase in the number of contracts to be audited, ESI and Sponsor will mutually agree on a process by which additional contracts may be reviewed by Sponsor. C. ESI will permit Sponsor to perform an on-site review of the applicable rebate rate components of the manufacturer rebate agreements which are relevant and necessary to audit the calculation of the rebate payments made to Sponsor by ESI for the selected drugs. D. Sponsor should bring, or otherwise supply its independent auditor with, the most recent Allocation Report (PSG), which should be brought to the on-site rebate audit. Additional reasonable charges may occur if ESI is asked to re-produce these reports. E. Sponsor will not be permitted to copy or retain any such manufacturer agreements (in part or in whole) or documents provided or made available by ESI in connection with the rebate audit. Sponsor will be entitled, however, to take and retain notes to the extent necessary to document any identified exceptions. ESI will be entitled to review any notes to affirm compliance with this paragraph. 5. Verification or Explanation of Disputed Claims A. After ESI has supplied the claims data, Sponsor will provide ESI with a written exception report stating the entire error population, if any, and dollar amount associated with such errors. In addition to the written report, Sponsor will provide an electronic extrapolation of errors representative of the entire population of errors not to exceed an initial compilation of two hundred (200) (hereafter referred to as "representative sample"). B. ESI will research and investigate the "representative sample" within thirty (30) days. If additional time is reasonably required, ESI will notify Sponsor within these thirty (30) days. C. In the event findings warrant an increase in the representative sample of drug claims or the scope. of the rebate audit period, ESI and Sponsor will mutually determine the scope of such increase. D. Overpayments or underpayments will be promptly paid and/or credited by ESI (or the Sponsor, as the case may be). No overpayments or underpayments will be made that exceed the eighteen (18) months preceding the audit. E. Automatic closure of the audit will occur if Sponsor or Auditor fails to communicate research updates within ninety (90) days of ESI supplying the audit data. 131097v2 22 EXHIBIT D BUSINESS ASSOCIATE AGREEMENT THIS BUSINESS ASSOCIATE AGREEMENT is made for the purpose of delineabng the terms and conditions under which ESI ("Business Associate") and Sponsor ("Covered Entity") shall comply with obligations under HIPAA relating to the PBM Services ESI provides to Sponsor under the PBM Agreement. 1., Definitions. (a) "Designated Record Ser will mean a group of records maintained by or for Plan that is (i) the medical records and billing records about individuals maintained by or for Plan, (ii) the enrollment, payment, claims adjudication, and case or medical management record systems maintained by or for a health plan; or (iii) used, in whole or in part, by or for Plan to make decisions about individuals. (b) "HIPAA Rules" means the collective privacy, transaction and security regulations promulgated pursuant to the Health Insurance Portability and Accountability Act, as codified at 45 CFR Parts 160, 162 8164. (c) "Health Plan" or "Plan" will have the same meaning as the term "Health Plan' in 45 CFR 160.103. (d) "Individual" will have the same meaning as the term "individual" in 45 CFR § 164.501 and will include a person who qualifies as a personal representative in accordance with 45 CFR § 164.502(g). (e) "PBM Agreement" means the Pharmacy Benefit Management Agreement to which this Business Associate Agreement is attached. (0 "Protected Health Information" or "PHI" will have the same meaning as the term "protected health information" in 45 CFR § 164.501, limited to the information created or received by ESI from or on behalf of Plan. (g) "Privacy Rule will mean the Standards for Privacy of Individually Identifiable Health Information at 45 CFR Part 160 and Part 164, as they exist now or as they may be amended. (h) "Required By Law"will have the same meaning as the term "required by law" in 45 CFR § 164.501. (i) "Secretary" will mean the Secretary of the Department of Health and Human Services or his designee. U) "Security Standards" will mean the Security Standards, 45 C.F.R. parts 160, 162 and 164, as they exist now or as they may be amended. (k) "Transaction Standards" will mean the Standards for Electronic Transactions, 45 C.F.R. 160 and 162, as they exist now or as they may be amended. Terms used, but not otherwise defined, in this-Addendum will have the same meaning as those terms in 45 CFR 160.103 and 164.501. 2. General Use and Disclosure Provisions. ESI and the Plan acknowledge and agree as follows: (a) Except as otherwise limited in this Agreement, ESI may use and disclose PHI to properly provide, manage and administer the services required under the PBM Agreement and consistent with applicable law to assist the Plan in its operations, as long as such use or disclosure would not violate the HIPAA Rules if done by the Plan. (b) ESI will take reasonable efforts to limit requests for, use and disclosure of PHI to the minimum necessary to accomplish the intended request, use or disclosure. (c) Except as otherwise limited in this Agreement: (i) ESI may use PHI for the proper management and administration of ESI or to carry out ESI's legal responsibilities. (ii) ESI may disclose PHI to third parties for the proper management and administration of ESI or to carry out the legal responsibilities of ESI, provided that the disclosures are Required by Law, or ESI obtains reasonable assurances from the person to whom the information is disclosed that it will remain confidential and used or further disclosed only as Required by Law or for the purpose for which it was 131097v2 23 disclosed to the person, and the person notifies ESI of any instances of which it is aware in which the confidentiality of the information has been breached. (iii) ESI may use PHI to perform Data Aggregation services on behalf of the Plan as permitted by 45 CFR 164.504(e)(2)(i)(B). (d) ESI agrees to promptly notify the Plan if ESI has knowledge that PHI has been used or disclosed by ESI in amanner that violates applicable law. (e) ESI agrees to use appropriate safeguards, consistent with applicable law, to prevent use or disclosure of PHI in a manner that would violate this Agreement. ESI will provide the Plan with such information concerning such safeguards as the Plan may reasonably request from time to time. (f) ESI agrees to mitigate, to the extent practicable, any harmful effect that is known to ESI of a use or disclosure of PHI by ESI in violation of this Agreement or the PBM Agreement. (g) ESI agrees to ensure that any agent, including a subcontractor, to whom it provides PHI received from, or created or received by ESI on behalf of the Plan agrees to the same restrictions and conditions that apply through this Agreement to ESI with respect to such information. (h) Within fifteen (15) business days of a request from the Plan, ESI will provide access to the Plan to PHI in a Designated Record Set in order to meet the requirements under 45 CFR 164.524. If ESI receives a request directly from an Individual, or if the Plan requests that access be provided to the Individual, ESI will provide access to the Individual to PHI it a Designated Record Set within thirty (30) days in order to meet the requirements under 45 CFR 164.524. (i) Within sixty (60) days of a request of the Plan or subject Individual, ESI agrees to make any appropriate amendment(s) to PHI in a Designated Record Set that the Plan directs or agrees to pursuant to 45 CFR 164.526. G) ESI agrees to document disclosures of PHI and information related to such disclosures as would be required for the Plan to respond to a request by an Individual for an accounting of disclosures in accordance with 45 CFR §164.528. (k) Within thirty (30) business days of a proper request by the Plan, ESI agrees to document and make available to the Plan, for a reasonable cost-based fee (under conditions permitted by HIPAA if an Individual requests an accounting more than once during a twelve month period), such disclosures of PHI and information related to such disclosures necessary to respond to such request for an accounting of disclosures of PHI, exclusive of those disclosures for payment, treatment or healthcare operations, in accordance with 45 CFR 164.528. Within sixty (60) days of proper request by subject Individual, ESI agrees to document and make available to the Individual the information described above. ESI will retain copies of any accountings for a period of six (6) years from the date the accounting was created. (1) Within fifteen (15) business days of a request of the Plan, ESI agrees to evaluate a request to restrict the use or disclosure of PHI on behalf of an Individual in accordance with 45 CFR 164.522. received (om, or created or received 'by ESI on behalf oofo he Plan available relating to the Plan withn dtedisclosure of PHI n (10) business days, or at the request of the Plan or the Secretary of HHS ("Secretary'), to the Secretary in a time and manner directed by the Secretary, for purposes of the Secretary determining the Plan's compliance with the HIPAA Rules. 3. - Plan Obligations. (a) Plan will notify ESI of any limitation(s) in the notice of privacy practices of Plan in accordance with 45 C.F.R. §164.520, to the extent that such limitation may affect EST's use or disclosure of PHI. (b) Plan will notify ESI of any changes in, or revocation of, permission by an Individual to use or disclose PHI, to the extent that such changes may affect ESI's use or disclosure of PHI. with 45 Plan will notify C.F.R. accordance §164.522, 1 to of any restriction to the use or the extent that such restriction may affect ESs use ordisc)sure of PHI.to in (d) Plan will not request that ESI use or disclose PHI in any manner that would exceed that which is minimally necessary under the HIPAA Rules or that would not be permitted by a Covered Entity. 131097v2 24 4. Transactions Standards. To the extent applicable, ESI will comply with the applicable transactions standards for claims processing functions between ESI and provider pharmacies. The parties each hereby agree that it will not change any definition, data condition or use of a data element or segment in a standard, add any data elements or segment to the maximum defined data set, use any code or data elements that are either marked "not used" in the standard's implementation specification or are not in the implementation specification, or change the meaning or intent of the implementation specification. 5. Security Standards. To the extent that ESI creates, receives, maintains or transmits electronic PHI, ESI will: (a) Implement administrative, physical and technical safeguards that reasonably and appropriately protect the confidentiality, integrity, and availability of the Electronic PHI that ESI creates, receives, maintains or transmits on behalf of the Plan as required by the Security Standards; (b) Ensure that any agent, including a subcontractor, to whom ESI provides Electronic PHI agrees to implement reasonable and appropriate safeguards to protect the PHI; and (c) Report to Plan any Security Incident involving Electronic PHI of which ESI becomes aware. 6. Breach: Termination. (a) Without limiting the termination rights of the parties pursuant to the PBM Agreement, upon the Plan's knowledge of a material breach by ESI of this Agreement, the Plan will notify ESI of such breach and ESI will have thirty (30) days to cure such breach. In the event ESI does not cure the breach, or cure is infeasible, the Plan will have the right to immediately terminate this Agreement and the PBM Agreement. If cure of the material breach is infeasible, Plan will report the violation to the Secretary. (b) To the extent feasible, upon termination of the PBM Agreement for any reason, ESI will, and will cause any subcontractors and agents to, return or destroy and retain no copies of all PHI received from, or created or received by ESI on behalf of, the Plan. If return or destruction of such information is not feasible, ESI will continue to limit the use or disclosure of such information as set forth in this Agreement as if the PBM Agreement had not been terminated. 7. Indemnification. ESI will indemnify and hold harmless Plan from and against any claim, cause of action, liability, damage, cost or expense, including reasonable attorneys' fees and court or proceeding costs, arising out of or in connection with any (a) unauthorized use or disclosure of PHI, (b) failure in security measures affecting PHI; or (c) other material breach of the terms of this Agreement by ESI or any person or entity under ESI control. Indemnification is conditioned upon the Plan notifying ESI in writing promptly upon leaming of any claim for which indemnification may be sought hereunder, and will tender the defense of such claim to ESI. ESI will not be required to indemnify Plan if any claim is settled without EST's written consent 8. Miscellaneous. . (a) Amendment. The parties acknowledge that the foregoing provisions are designed to comply with the mandates of the HIPAA Rules. Should the provisions of the HIPAA Rules change or be amended after the date of this Agreement, the parties will engage in negotiations to amend the provisions of this Agreement to comply with such changes or amendments. If the parties fail to agree on reasonable amendment to the provisions of this Agreement, either party may terminate this Agreement upon ninety (90) days written notice. b electronic transactions,t thion PBM Agreement. Except as relates to the use, secu rity and s Agreement is not intended to change the terms and conditions of,l or the rights and obligations of the parties under, the PBM Agreement. (c) No Third-Party Beneficiaries. Nothing express or implied in the PBM Agreement or in this Agreement is intended to confer, nor will anything herein confer, upon any person other than the parties and the respective successors or assigns of the parties, any rights, remedies, obligations or liabilities whatsoever. (d) Interpretation. Any ambiguity in this Agreement will be resolved in favor of a meaning that permits the Plan to comply with the HIPAA Rules. 131097v2 25 EXHIBIT E FINANCIAL DISCLOSURE TO ESI PBM CLIENTS Express Scripts is a provider of.pharmaceutical benefits management ("PBM") and other related services to thousands of client groups including managed care organizations, health insurers, employer groups, third party administrators and government entities. Express Scripts' subsidiary companies, some of which provide services related to supporting our PBM services, include ESI Mail Pharmacy Service, Inc., CuraScript, Inc., Express Scripts Specialty Distribution Services, Inc., and Phoenix Marketing Group, LLC. This disclosure provides an overview of the revenue sources that allow us to deliver competitive pricing arrangements to our clients. Express Scripts offers its clients, either directly or through its subsidiary companies, a variety of services related to the management of prescription drug benefits. The specific services provided to each client are documented under the Pharmacy Benefit Management Agreement, or other similar agreement, with our client. Express Scripts' PBM services typically include claims processing and adjudication, pharmacy network contracting and management, formulary development and management, rebate management and administration, trend management, and clinical program development and fulfillment. Some of our clients also utilize our mail service pharmacy to provide their members with convenient access to safe and affordable prescription drugs through home delivery. In addition to the administrative fees paid to us by our clients for. these core PBM services, Express Scripts derives revenue from other sources, including arrangements with pharmaceutical manufacturers and retail pharmacies. Some of this revenue relates to utilization of products by members of the clients for whom we provide PBM services: Network Pharmacies - Express Scripts contracts for its own account with retail pharmacies to dispense prescription drugs to members of the clients for whom we provide PBM services. The rates paid by Express Scripts to these pharmacies differ from one network of pharmacies to the next, and among pharmacies within a network. Express Scripts generally contracts with clients to be paid an ingredient cost for drugs dispensed in a given retail network selected by the client at a uniform rate that applies to all pharmacies in the selected network. Thus, where the rate paid by a client exceeds the rate negotiated with a particular pharmacy, Express Scripts will realize a positive margin on the applicable prescription. The reverse may also be true, resulting in negative margin for Express Scripts. In addition, when Express Scripts receives payment from a client before payment to a pharmacy is due, Express Scripts retains the benefit of the use of the funds between these payments. Manufacturer Rebates and Associated Administrative Fees - Express Scripts contracts for its own account with pharmaceutical manufacturers to obtain rebates attributable to the utilization of certain prescription products by individuals who receive benefits from clients for whom we provide PBM services. Rebate amounts vary based on the volume of utilization as well as the benefit design and formulary position applicable to utilization of a product. Express Scripts often pays all or a portion of the rebates it receives to a client based on the client's PBM services agreement. Express Scripts retains the financial benefit of the use of any funds held until payment is made to a client. In connection with our maintenance and operation of the systems and other infrastructure necessary for managing and administering the rebate process, Express Scripts also receives administrative fees from pharmaceutical manufacturers participating in the rebate program discussed above. The services provided to participating manufacturers include making certain drug utilization data available, as allowed by law, for purposes of verifying and evaluating the rebate payments. The administrative fees paid to Express Scripts by manufacturers for participation in the rebate program do not exceed 3.5% of the AW P of the rebated products. Pharmacy Dispensing and Distribution - Express Scripts has several licensed pharmacy subsidiaries, including our specialty pharmacies. These entities purchase prescription drug inventories, either directly from manufacturers or from drug wholesalers, for dispensing to patients or for distribution to physician offices. Purchase discounts off the acquisition cost of these products are made available by manufacturers in the form of both up- front and retrospective discounts. Such discounts are not considered part of the rebates paid to Express Scripts by manufacturers in connection with our rebate program. While rebates are directly attributable to the utilization of pharmaceutical products by individuals who receive benefits from clients for whom we provide PBM services, product acquisition price discounts are based on a pharmacy's inventory needs and, in the case of specialty pharmacies, the performance of related patient care service obligations. The purchase discounts obtained by these facilities are not based on any client's benefit design. When an Express Scripts subsidiary pharmacy dispenses or distributes,a product from its inventory, the purchase price paid for the dispensed product, including applicable dispensing fees, may be greater or less than the pharmacy's acquisition cost for the product net of purchase discounts. In general, our pharmacies realize an overall positive margin between this net acquisition cost and the amounts paid for the dispensed products. 13109742 26 ' Pharmaceutical Program Services - Our specialty pharmacies, including CuraScript, Inc. and Express Scripts Specialty Distribution Services, Inc., receive compensation from manufacturers for their administration of programs related to the distribution of certain pharmaceutical products. This compensation is based on the fair market value of the services provided and is unrelated to the drug formulary development process or drug utilization applicable to the clients for whom we provide PBM services. Examples of these services include (i) administering patient assistance programs for indigent patients; (ii) administering product sample distribution programs; and (iii) dispensing prescription medications to patients enrolled in clinical trials. Data Reporting - Express Scripts sells certain data resulting from its PBM and pharmacy services to healthcare data aggregators and similar entities from time to time. We do not sell any data unless we are permitted to do so by the terms of our client contract and by applicable patient privacy laws. In addition, as a condition to receiving access to certain products, a specialty pharmaceutical manufacturer often will require a purchasing specialty pharmacy to report selected information to the manufacturer. regarding the pharmacy's service levels and other de-identified dispensing-related data with respect to patients who receive such manufacturer's product. _ A portion of the -discounts or other compensation made available to our specialty pharmacies represents compensation for such reporting. All such reporting activities are conducted in compliance with applicable patient privacy laws. Other Pharmaceutical Manufacturer Services - Phoenix Marketing Group, LLC specializes in the provision of sample fulfillment, sample accountability, alternative sampling, direct mail fulfillment, and literature fulfillment services for pharmaceutical manufacturers. Because its services involve only warehousing and fulfillment-related functions, this subsidiary entity does not review products clinically and it never uses, sells or has access to Express Scripts' client or member information. Compensation paid to Phoenix Marketing Group, LLC by pharmaceutical manufacturers is based on the fair market value of such services, as established most often through an "RFP° process, and any such compensation is unrelated to the drug formulary development process or drug utilization applicable to the clients for whom Express Scripts provides PBM services. July, 2005 131097v2 27 EXHIBIT G PERFORMANCE STANDARDS In the event that any failure by ESI to meet any performance standard is due to a "force majeure" as defined in the Agreement, failure of Sponsor to perform its obligations under the Agreement; or actions or inactions of Sponsor that adversely impact ESI's ability to maintain the subject standard (e.g., faulty eligibility, changes in benefit design not adequately communicated to Members and benefit designs that substantially change the Members' rights under the Plan), ESI will be excused from compliance with such performance standards until such circumstances have been resolved and any existing backlogs or other related effects have been eliminated. Within forty-five (45) business days after the end of each measurement period, ESI will provide Sponsor with a report (i) assessing EST's performance under each performance standard, and (ii) if ESI did not meet a performance standard, calculating the applicable amount due to Sponsor. Amounts due, if any, will-be paid to- - Sponsor-on an annual basis within ninety (90) days of each anniversary of the Agreement. No performance penalties, if any, will tie paid until this Agreement is executed by Sponsor. In no event will the sum of the payments to Sponsor as a result of ESI's failure to meet the performance standards exceed $42,500 annually for the first year of the Agreement including the implementation standard, and $17,500 annually year two and after. The following performance standards are based on a minimum Member count of 2,400 as of the Effective Date. Any material change below such number may result in a renegotiation of the standards and penalties set forth below. 13I097J2 1 28 Im lementation Service Feature Im tation and Start-up Standard ESI will guarantee the implementation of Sponsor to be completed in accordance within mutually agreed upon timelines. Each of the ESI guarantees are dependent upon receiving specific information from Sponsor. All Implementations are a 90 day implementation project. Loading of eligibility and production of ID cards are dependent. upon receiving group structure and benefit plan design sign off from Sponsor. A delay in receipt of data or information from Sponsor may require rescheduling of all subsequent deliverable dates. The ESI Implementation Project Manager will provide regular updates to Sponsor tracking the status.of the implementation. A completed Sponsor implementation sign-off manual will be provided to Sponsor five business days prior to the effective date. The ESI Implementation Project Manager will conduct a post-implementation review meeting with Sponsor within 30 days after the effective date. Penalt The following dollars will be paid to Sponsor if ESI does not complete the ESI deliverables by the dates mutually agreed upon, assuming that Sponsor has provided the information necessary to complete these deliverables: Group Structure, Benefit Plan Design $5,000 Eligibility Load $5,000 ID Cards $5,000 Toll Free Number $5,000 Communications $5,000 The implementation performance standards are one time only standards to be based on Sponsor effective date. The maximum implementation penalty will be $25,000. 131097v2 29 Call Center Service Feature Customer Service Call - Average Speed of Answer Standard ESI guarantees that the customer service average call response time will be 30 seconds or less. This standard excludes call volume for the month of January. This standard is predicated on the installation of a toll-free number unique to Sponsor. Penal The maximum annual penalty will be $2,500. Based on the annual average speed of answer result, ESI will pay Sponsor according to the following penalty scale: Avg. Speed Penal 0-30 0 31-40. $625 41-45 $1,250 46+ $2,500 This standard will be monitored and reported quarterly. Any applicable penalties will be paid annually based on the annual average. Call Center Service Feature Customer Service Response Time - Blockage Rate (Busies) Standard ESI will guarantee a blockage rate of 3% or less. Blockage is defined as a caller receiving a busy signal. This standard is predicated on the installation of a toll-free number unique to Sponsor. Penal The maximum annual penalty will be $2,500. Based on the annual blockage percentage result, ESI will pay Sponsor according to the following penalty scale: Percentage Penalty <3% 0 4% $625 5% $1,250 >6% $2,500 This standard will be monitored and reported quarterly. Any applicable penalties will be paid annually based on the annual average. 13109iv2 30 Call Center Service Feature Customer Service Response Time - Percent of Calls Abandoned Standard ESI guarantees that the call abandonment rate will be 5%a or less unless the failure is due to a failure in a third-party telecommunications system. The abandonment rate does not include calls terminated by members in less than 30 seconds. This standard is predicated on the installation of a toll-free number unique to Sponsor. Penal The maximum annual penalty will be $2,500. Based on the annual percentage of calls abandoned, ESI will pay Sponsor according to the following penalty scale: Percentage Penalty 0- 5% 0 6- 9% $625 10-14% $1,250 >15% $2,500 This standard will be monitored and reported quarterly. Any applicable penalties will be paid annually based on the annual average. Mail Service Service Feature Dispensing Accuracy Standard Whereas ESI strives for 100% accuracy, ESI guarantees 99.9% accuracy in dispensing the correct drug, strength, and dosage, unless the error is a prescriber error. -Penal - - - - ESI will pay Sponsor the lesser of $1,250 or $1.00 per mail service prescription for each full percentage point which the annual dispensing accuracy is below 100%. The maximum annual penalty will be $2,500. This standard will be monitored and reported quarterly. Any applicable penalties will be paid annually based on the annual average. 131097v2 31 Mail Service Service Feature . Turnaround Time for Routine Mail Service Prescriptions Standard ESI guarantees dispensing and shipping (or return) of prescriptions not subject to intervention within an average of 3 business days of receipt of the order at Express Scripts's Pharmacy. "Interventions" include calls to members or prescribers to clarify the prescriber's direction, to obtain consent for formulary programs, generic or therapeutic substitution,. or otherwise. Penal ESI will pay Sponsor the lesser of $1,250 or $1.00 per mail service prescription for each full day the annual average turnaround time for mail-service prescriptions exceeds 3 business days. The maximum annual penalty will be $2,500. This standard will be monitored and reported quarterly. Any applicable penalties will be paid annually based on the annual average. Mail Service Service Feature Turnaround Time for Mail Service Prescriptions subject to intervention Standard ESI guarantees dispensing and shipping (or return) of prescriptions subject to intervention within an average of 5 business days of receipt of the order at Express Scripts's pharmacy. Penal ESI will pay Sponsor the lesser of $1,250 or $1.00 per mail service prescription subject to intervention for each full day the annual average turnaround time for mail-service prescriptions exceeds 5 business days. The maximum annual penalty will be $2,500. This standard will be monitored and reported quarterly. Any applicable penalties will be paid annually based on the annual average. 131097v2 32 Data Systems Service Feature Data Systems Availability & Adjudication Standard ESI guarantees 99% availability of the point-of-sate adjudication system, except for daily scheduled maintenance and telecommunications failure. Penal For each full percentage point which the yearly average of the on-line computer systems availability is below 99%, ESI will pay Sponsor $1,250. The maximum annual penalty for availability and adjudication will be $2,500. This standard will be monitored and reported quarterly. Any applicable penalties will be paid annually based on the annual average. 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