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Administrative Services Agreement_Express Scripts Inc.
THE CITY OF ~ Dubuque -~• ~''' DUB E ~~'~~~' Masterpiece on the Mississippi 2007 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Administrative Services Agreement between the City of Dubuque and Express Scripts, Inc. DATE: December 14, 2009 Personnel Manager Randy Peck recommends City Council approval of an Administrative Services Agreement with Express Scripts for pharmacy benefit management services for the City of Dubuque. Based on the terms of this new agreement, our estimated annual savings will be 13% of drug claims, or $130,000. I concur with the recommendation and respectfully request Mayor and City Council approval. Michael C. Van Milligen MCVM:jh Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager Randy Peck, Personnel Manager 'THE CITY OF Dubuque Dui ~ iAll-AmericaCitY 1 Masterpiece on the Mississippi 2007 TO: Michael C. Van Milligen, City Manage FROM: Randy Peck, Personnel Manager SUBJECT: Administrative Services Agreement between the City of Dubuque and Express Scripts, Inc. DATE: December 14, 2009 In 2004, the Health Care Committee participated in an RFP process for pharmacy benefit managers, sponsored by the Iowa Employer Coalition and conducted by Gallagher, Inc., our benefit and actuarial consultant. The Iowa Employer Coalition is a coalition of other Iowa cities and counties. There was no cost to the City to participate in the RFP process. Express Scripts, our current pharmacy benefit manager, was selected as the pharmacy benefit manager for the Iowa Employer Coalition. Attached is the new Administrative Services Agreement with Express Scripts. Based on the the terms of this new agreement, our estimated annual savings will be 13% of drug claims or $130,000. The savings come primarily from higher formulary rebates and larger discounts. The Agreement is effective on January 1, 2010, and will remain in effect for three years. Thomson Reuters, Inc., the pharmacy benefit consulting firm representing the coalition of employers, has performed an extensive review of this agreement to ensure that the pricing, discounts and guarantees listed in the contract are consistent with the renewal offer provided by Express Scripts to the employer coalition. City Attorney Barry Lindahl has reviewed the indemnity provisions and has found the language acceptable. The Health Care Committee recommends approval of the Agreement. I concur in their recommendation. I request that the City Council approve a motion authorizing you to sign the Agreement. If you have any questions, please feel free to call. RP:tlb Attachment MANAGED PRESCRIPTION DRUG PROGRAM AGREEMENT THIS MANAGED PRESCRIPTION DRUG PROGRAM AGREEMENT ("Agreement") is entered into as of January 1, 2010 ("Effective Date") by and between Express Scripts, Inc., a Delaware corporation, on its behalf and on behalf of its subsidiaries ("PBM"), and City of Dubuque, an Iowa corporation ("Employer') for the purpose of setting forth the terms pursuant to which PBM will provide prescription drug benefit management services to Employer. SECTION I -DEFINITIONS The following terms shall have the meanings set forth below: 1.1 "Administrative Services Plari' or "AS Plan" means a benefit plan self funded by Employer, for the benefit of Members. 1.2 "Average Wholesale Price" or "AWP" means the average wholesale price of a Covered Drug on the date the Covered Drug is dispensed according to the most current information provided to PBM by First Da~taBank national drug data reporting source, if available or another nationally recognized source in the prescription drug industry used by PBM for all of its clients, which may be audited by Employer or its authorized representative through standard audit protocol processes. PBM will use the identical, single data reporting source for (i) using indicators from such source when determining Prescription Drug Claim classifications as Brand or Generic, (ii) Employer's AWP discounts and (iii) Pharmacy Network reimbursement. Under the Mail Service Pharmacy Program, AWP is based on the actual package size acquired by the Mail Service Pharmacy. PBM shall not use or allow AWPs of licensed repackagers and will implement appropriate system edits to prevent the use of AWPs of licensed repackagers. The applicable AWP for Prescription Drug Claims filled at a Participating Pharmacy, including retail Prescription Drug Claims, retail on-line Prescription Drug Claims, and Member Submitted Claims, will be the AWP for the actual eleven digit National Drug Code (NDC) package size used by the Participating Pharmacy to fill the prescription. If First DataBank, or other applicable reporting sources, changes the methodology for calculating AWP in a way that changes the economics of this Agreement (e.g., adjustment ~of WAC to AWP markup factor), ceases to publish AWP, or the marketplace transitions from AWP to another pricing benchmark, then the rates, rebates, and guarantees provided herein, will be modified as reasonably and equitably necessary to maintain the pricing intent under this Agreement (the "Rate Change"). In such event PBM shall provide Employer with at least ninety (90) days notice prior to effective date of the Rate 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 Employer disputes the illustration, the parties agree to cooperate in good faith to resolve such is~sss~i -1- 1.17 "Generic Drug' means a single and/or multisource non-brand prescription drug, whether identified by its chemical, proprietary, or nonproprietary name, as determined by PBM using: (i) indicators provided by First DataBank's National Drug Data File, if available, or such other nationally recognized source adopted by PBM for all of its clients; and (ii) PBM's proprietary algorithm. As part of any Employer audit conducted pursuant to the terms of this Agreement, Employer or its authorized representative may audit PBM's application of PBM's algorithm to confirm that PBM is making Generic Drug determinations consistent with such algorithm. 1.18 "ID Card" means a printed identification card containing information about the prescription drug benefits to which a Member is entitled and the applicable PBM pharmacy network logos or other method of identifying the fact that PBM is the provider of prescription drug benefit services in a form acceptable to PBM and Employer. 1.19 ""MAC" or "Maximum Allowable Cost" is the price charged to Employer for a prescription drug product on the MAC List. 1.20 "MAC List" means a list of prescription drug products identified as readily available as Generic Drugs, 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. Whether a Prescription Drug Claim processes at the MAC rates set forth on Exhibit A is subject to the Covered Drug's inclusion on the MAC List and the, application of "dispensed as written" protocols and Employer defined plan design and coverage policies. A copy of the current MAC List will be provided to Employer and/or its authorized designee upon Employer's request. 1.21 "Mail Service Pharmacy" means a duly licensed pharmacy operated by PBM or its subsidiaries, other than a Specialty Pharmacy (e.g., CuraScript), where prescriptions are filled and delivered to Members via the mail service. 1.22 "Member' means each person who is eligible, as determined solely by Employer, to receive prescription drug benefits under a plan administered pursuant to this Agreement, who is indicated by Employer as such in the Eligibility Records. 1.23 "Member Submitted Claim" means (i) a claim for reimbursement submitted to PBM by a Member for Covered Drugs dispensed by a pharmacy other than a Participating Pharmacy or Mail Service Pharmacy; (ii) a claim for reimbursement submitted to PBM for Covered Drugs filled at a Participating Pharmacy for which the Member paid cash; or (iii) subrogation claims for Covered Drugs submitted by the United States or any state under Medicaid or similar government health care programs. 1.24 "Plan Benefit Worksheet" or "PBW" means PBM's standard prescription drug is~sss~i -4- benefit set-up form provided to Employer which, when completed and signed by Employer, will describe the essential elements of Employer's Plan(s) including but not limited to Program drug coverage, days' supply limitation, Copayment/Coinsurance, Formulary and other Program specifications applicable to the Program as designated by Employer as set forth in this agreement or as may be otherwise specified in writing by Employer. PBWs may be amended only in accordance with Section 2.4(b) of this Agreement. 1.25 "Non-Participating Pharmacy" means any pharmacy that does not have an agreement or an agreement through athird-party arrangement with PBM to participate in the applicable PBM-contracted pharmacy network to dispense Covered Drugs to Members. 1.26 "Participating Pharmacy" means any licensed retail pharmacy, other than a Mail Service Pharmacy or Specialty Pharmacy, that has executed a written agreement with PBM to participate in the Employer accepted pharmacy network to provide Covered Drugs to Members. 1.27 "Plan" means the Employer's Health Care Plan that contains a prescription drug benefit. 1.28 "Prescription Drug Claim" means (i) a Member Submitted Claim; (ii) any other prescription claim processed by PBM in accordance with the terms of this Agreement in connection with the Employer's Plan. 1.29 "Program" means a prescription drug benefit program, including, but not limited to, PBM Services, as specified in this Agreement. 1.30 "Pricing Index Change Date" means September 26, 2009, the date that changes to the First DataBank pricing index resulting from the MediSpan and FirstDatabank AWP class action lawsuit and settlement (the "AWP Settlement") are due to go into effect, provided that appeals and motions do not stay the AWP Settlement. If appeals and motions do stay the AWP Settlement, the Pricing Index Change Date shall be the date upon which changes to the First DataBank pricing index occur, if at all, following the conclusion of all such appeals and motions. 1.31 Program Pricing Terms" mean the (i) financial or pricing terms and allowances set forth in this Agreement, and (ii) the Rebate terms set forth in this Agreement. 1.32 "Protected Health Information' or "PHI" means protected health information as defined in 45 CFR Part 164, as may hereafter be amended. 1.33 "Rebate Program" means PBM's manufacturer rebate program under which PBM, on its own behalf and for its own benefit, contracts or makes other arrangements is~sssvi -5- with pharmaceutical manufacturers for the payment of Rebates on selected Covered Drugs to PBM. 1.34 "Rebates" means retrospective rebates that are paid to PBM pursuant to the terms of a rebate contract negotiated independently by PBM 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 other remuneration received by subsidiary pharmacies of PBM, as more fully described in Exhibit G. 1.35 "Retail Pharmacy Program" means the program described herein in which Members may purchase Covered Drugs from a Participating Pharmacy, upon verification of Program eligibility and payment of the applicable Copayment/Deductible, and the claim is submitted by the Participating Pharmacy to PBM for payment in accordance with this Agreement and the applicable PBM Participating Pharmacy agreement. 1.36 "Specialty Drug' means those injectable and non-injectable drugs set forth on PBM's Specialty Drug List 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 fora 30-day supply. PBM updates the Specialty Drug List as new drugs are brought to market. PBM shall provide Employer monthly updates to the Specialty Drug List. 1.37 "Specialty Drug List" means a list of Specialty Drugs and their applicable rates maintained by PBM. 1.38 "Specialty Pharmacy" means CuraScript, Inc. or other duly licensed pharmacy, owned and/ or operated by PBM or its subsidiaries, where Specialty Drugs are dispensed for, and delivered to, Members. 1.39 "Third Parties" means those companies or individuals doing business with Employer that do, or may in the course of their business receive, protected "non-public personal financial information" or "non-public personal health information' defined in and regulated by state or federal law. 1.40 "Thomson Reuters (Healthcare) Inc. (formally known as Trivantage Pharmacy Strategies)" means the pharmacy benefit consulting firm representing the Employer. Subject to Section 4.4, PBM recognizes and approves of Thomson Reuters (Healthcare) Inc. (formally known as Trivantage Pharmacy Strategies) as a claims pricing validator/Auditor. 157555v1 -6- 1.41 "Unfunded Program Claim" means a claim adjudicated under an Unfunded Program. 1.42 "Usual and Customary Price" or "U&C" means the actual retail price charged by a Participating Pharmacy for a specific drug in a cash transaction on the date the drug is dispensed as reported to PBM by the Participating Pharmacy. 1.43 "Zero Balance Claim' or "ZBC" means any pharmacy claim transaction that is equal to or less than the Member pay amount. SECTION II -STATEMENT OF SERVICES; THE PRESCRIPTION DRUG PROGRAM 2.1 Exclusive Provider. During the Initial Term and any Renewal Term thereafter (as such terms are defined in Section 7.1 of this Agreement), or portion thereof, as applicable, for Members covered under the Plan, Employer shall use PBM as the exclusive provider and administrator of prescription drug benefit services, including, but not limited to, Specialty Pharmacy, as set forth in this Agreement, excluding Members that enroll in a Medicare Part D Prescription Drug Plan. For purposes of clarifying the foregoing with respect to Specialty Pharmacy, while ESI will be the exclusive provider of Specialty Pharmacy services, Employer will select, during implementation or at any time during the Term, either the "CuraScript -Exclusive" option (pursuant to which Members must fill Specialty Drugs at CuraScript, Inc., except in circumstances such as limited distribution drugs or Plan overrides, in order to be covered under the Plan) or the "CuraScript -Open" option (pursuant to which Members may fill Specialty Drugs at CuraScript or Participating Pharmacies). The provisions of this Section 2.1 shall not apply to any Employer Unfunded Programs. 2.2 Member Eligibility. (a) Employer or its designee shall provide PBM with Eligibility Records as often as up to a daily basis containing the names of all Members and any other information specified by PBM and agreed to by Employer that is necessary to administer the Program hereunder. Eligibility Record transactions received by PBM shall be applied and active in the PBM's system within 48 hours of receipt of processable Eligibility Records. The Employer's designated representative will be notified immediately in writing and verbally if any Eligibility Records are not applied and active in PBM's system within 48 hours, based on business days, of receipt of processable Eligibility Records for any reason whatsoever. PBM shall provide a confirmation report, via electronic transmission to Employer or its designee within twelve (12) hours of receipt of any Eligibility Records provided by Employer or its designee. Eligibility resubmissions from Employer or its designee shall be applied and active in the PBM's system within 48 hours, based on business days, of receipt. is~sss~i -~- Employer may enter Eligibility Records directly on-line to PBM's eligibility system, consistent with this Agreement and PBM's standard processes for such direct eligibility loads. (b) Employer or its designee shall be solely responsible for ensuring the accuracy of its Eligibility Records as submitted to PBM, and shall be obligated to pay PBM for all amounts due to PBM hereunder for Prescription Drug Claims, except Member liability amounts such as Copayments or Deductibles, for Members shown as eligible on the date the claim was adjudicated, unless Member eligibility was wrongly established due to a PBM system issue or error or unless PBM incorrectly accepted the Prescription Drug Claims or incorrectly performed a manual eligibility submission. PBM will perform a full file compare of Employer data on a quarterly basis, or more frequently as mutually agreed to by Employer and PBM. PBM shall promptly provide Employer with the results of such comparisons. 2.3 Member Identification Cards and Other Materials. At the option of Employer and for the fees set forth in Exhibit A, if applicable, PBM shall print and deliver, to the Member or Employer as directed by Employer, the ID Cards and, if applicable, other mutually agreed upon Member materials, for all or a portion of its Members, within a mutually agreed upon time frame. Employer will be entitled to one PBM ID Card per Member (two per family) and initial Member communications and postage, at PBM's expense. In addition, the PBM shall provide at least one annual benefits statement on- line showing low cost alternatives at no cost to the Employer. Should new ID cards, Member materials or marketing materials need to be issued as a result of PBM making a change to its standard ID cards, Member materials, or marketing materials (versus, for example, a Employer or Member driven change such as Employer making a benefit change or a Member requesting new ID cards), all costs, including production and distribution, will be the responsibility of PBM. Other conditions applicable to ID Cards are set forth on Exhibit A to this Agreement. At Employer's request, PBM will provide Employer with a CD version of the Participating Pharmacies on asemi-annual basis. 2.4 Plan Benefit Worksheet. (a) Prior to the provision of any services under this Agreement, Employer will complete an executed PBW for the Plan. PBM shall assist with the preparation of a PBW. By signing the PBW, Employer represents that the PBW accurately describes the pharmacy benefit provisions of the Plan at the time of Employer's representation. PBM shall reimburse Employer for any and all amounts for which Employer otherwise would not have been liable that result from the negligence of PBM or the inaccurate administration of Employer's PBW. In addition, at the Employer's request, PBM will provide data regarding Plan benefit design and, at Employer's request, PBM will review the relevant portions of the Summary Plan Description, as prepared by Employer for the Plari s prescription drug benefit, solely to compare such Summary Plan Description against the PBW and advise Employer accordingly. Notwithstanding 157555v1 -8- the foregoing, Employer acknowledges and agrees that Employer has the sole responsibility and authority for the preparation and content of the Summary Plan Description and that PBM is not responsible for its content or accuracy. (b) If Employer elects to change certain prescription drug benefit design features of the Plan after initial setup, including but not limited to changes in Copayments and/ or Deductibles, Covered Drugs, prior authorization requirements, or otherwise (all such changes are subject to Paragraph 1 of Exhibit A such change shall be communicated by Employer to PBM by fax, email or by submitting a revised PBW. Within three (3) business days of the date that the revised PBW is submitted to PBM, PBM will acknowledge the request in writing to Employer and, subject to Paragraph 1 of Exhibit A, PBM will work with Employer to determine the implementation date as agreed upon by the parties. PBM shall use commercially reasonable efforts to ensure that the implementation occurs as agreed. In addition, Employer shall be responsible for notifying its Members of the change prior to its effective date. 2.5 System Access and Interface and Other Web-Based Products. (a) Members, Employer, and Participating Pharmacies shall have access to PBM's suite of on-line, web-based tools, applicable to each of these groups. Members will be able to access features such as personalized pharmacy benefit information, prescription ordering and status, customer service, and prescription history. Employer will have access to on-line real time eligibility, utilization information, and management reporting applications which identify standard pharmacy data, costs and utilization on Employer Members, at PBM expense. Employer will be able to access PBM's eligibility system for the purpose of changing, deleting or adding Members and PBM's claim system to enter authorizations or override prior authorization denials, at PBM's expense, consistent with this Agreement and PBM's standard process regarding such direct access. Participating Pharmacies will have access to PBM's on-line tools for pharmacists, as updated and enhanced from time to time. Employer shall be responsible for obtaining any necessary hardware and shall bear the cost of any telecommunication charges associated with its on-line access. Notwithstanding the foregoing, PBM shall notify Employer in writing within one hundred and twenty (120) days prior to any change in PBM's operations that may necessitate a change in Employer's current systems, and will include a detailed description of the change. Prior to implementation of system changes, PBM will use its commercially reasonable efforts in testing all eligibility, all claims; all benefit plans, clinical programs and system platforms. (b) PBM will promptly identify and provide written and verbal notification to Employer of any system outages directly relating to claims processing and eligibility and will provide the expected plan for restoration, but in no event later than one hour after the outage commences. In addition, PBM will use best efforts to restore any system outages within 24 hours, but in no event later than 56 hours, of a system outage. is~sss~i -9- (c) PBM and Employer shall develop interfaces or links within the Employer website to PBM for Members and from PBM for Members to the Employer website. Such links shall permit Member access to PBM-hosted web pages through which Members may order mail order prescription refills, check order status of mail order prescriptions, access Prescription Drug Claim pricing information and lower cost alternatives, use the pharmacy locator function, access drug information, and engage in other transactions and tools, as updated and enhanced from time to time. Each party shall bear its own costs and expenses in making any software modifications to its own website as may be required to integrate the other party's software so as to facilitate the provision of services contemplated herein. Employer also agrees to cooperate with PBM as reasonably necessary to aid in the development of custom content and linking needs. (d) PBM will provide training and user documentation, including updates, on the operation and use of PBM's on-line systems by Employer at PBM's expense. PBM will provide Employer with access to technical support on the use of its on-line systems during normal business hours (i.e., Monday through Friday, 7 a.m. to 7 p.m.), at no cost to Employer. (e) Other than the access and usage terms expressly outlined in this Section 2.5 or elsewhere in this Agreement, Employer will not, and will not permit any third party acting on Employer's behalf to, access, attempt to access, test or audit PBM's systems or any other system or network connected to PBM's systems. Without limiting the foregoing, Employer will not: (i) access or attempt to access any portion of feature of PBM's systems, by circumventing PBM's systems' access control measures, either by hacking, password "mining" or any other means; of (ii) probe, scan, audit or test the vulnerability of PBM's systems, nor breach the security or authentication measures of PBM's systems. SECTION III -PBM SERVICES 3.1 Pharmacy Network. (a) Participating Network Pharmacies. (i) Pharmacy Network. PBM has created and shall use commercially reasonable efforts to maintain a national network of Participating Pharmacies ("Pharmacy Network") consisting of at least 50,000 Participating Pharmacies, including all national and regional chain Participating Pharmacies. PBM agrees to include all current (i.e., as of the Effective Date) Employer filling pharmacies in the Pharmacy Network, subject to any such pharmacy that is not currently in PBM's network contracting with PBM pursuant to PBM's standard Participating Pharmacy terms and conditions, unless otherwise agreed to in writing between the parties. Upon 157555v1 -Za presentation of an ID Card, Members may obtain prescriptions for Covered Drugs through the Pharmacy Network. Upon Employer's request, PBM shall have the right to create for Employer a subnetwork of Participating Pharmacies. For purposes of this Agreement, "Pharmacy Subnetwork" shall mean any Employer-specified single variation to the Pharmacy Network. PBM will make available a current list of Participating Pharmacies in such Pharmacy Network(s) on-line, such list to be updated by PBM no less often than quarterly and upon request by Employer. Each Participating Pharmacy is contractually required to verify the Member's eligibility through PBM's on- line claims processing system prior to dispensing a prescription. Participating Pharmacies will dispense prescriptions to Members in a quantity not to exceed a 30-day supply unless otherwise specified in the PBW. PBM shall contractually require Participating Pharmacies to charge and collect the applicable Copayment and/or Deductible from Members based on the PBW, unless otherwise specified in writing by Employer. The Copayment and/ or Deductible charged for a Covered Drug shall be the lesser of the applicable Member liability set forth on the PBW, Drug Spend or the U&C. (ii) Access of Members. PBM shall use commercially reasonable efforts to include additional pharmacies in its Pharmacy Network upon Employer's reasonable request so long as any such pharmacy meets PBM's standard Participating Pharmacy terms and conditions for contracting, including PBM's credentialing requirements. If PBM recruits additional pharmacies to the Pharmacy Network at Employer's request, the additional pharmacies shall accept PBM's usual, contracted rate and PBM shall obtain Employer's written approval prior to adding such pharmacies. Subject to applicable law and pharmacy provider agreements, Employer shall have the right to request that PBM add or delete a Participating Pharmacy or chain of Participating Pharmacies to or from the Pharmacy Network and the parties shall reach a mutual agreement regarding the addition or deletion of a Participating Pharmacy from the Pharmacy Network. PBM shall use commercially reasonable efforts to respond to Employer and Member complaints about a Participating Pharmacy. PBM shall provide prior written notice to Employer of additions or deletions that have a material negative effect on Member's access to the Pharmacy Network on a quarterly basis. For purposes of this subsection, "material negative effect on Member's access to the Pharmacy Network" shall mean when any of the following occur: A) the Pharmacy Network no longer meets the access or availability standards required by state or applicable law or that Employer has represented it complies with to a state insurance department or other regulatory authority; B) the percentage of Members' residences in urban areas that are within five (5) miles of a Participating Pharmacy drops below 97%, contingent upon the existence of a pharmacy and/ or pharmacies with which PBM could contract; or C) the percentage of Members' residences in suburban and rural areas that are within five miles of a Participating Pharmacy drops below 97%, contingent upon the existence of a pharmacy and/ or pharmacies with which PBM could contract. If there is a materially negative effect on Members' access to the Pharmacy Network, then PBM will have sixty (60) days within which to cure such materially negative effect. If PBM is unable to cure the materially negative effect within sixty (60) days then the Employer may terminate is~sss~i -11- this Agreement upon written notice to PBM one hundred twenty (120) days from the date that the parties were unable to reach agreement. (b) Requirements for Participation. PBM represents and warrants that each Participating Pharmacy is contractually required to meet PBM's participation requirements, including but not limited to, licensure, insurance, and provider agreement requirements. The parties to this Agreement acknowledge that neither Employer nor PBM directs or exercises any control over the professional judgment exercised by any pharmacist in dispensing prescriptions or otherwise providing pharmaceutical-related services at a Participating Pharmacy. Participating Pharmacies are independent contractors of PBM and PBM. With regards to the dispensing of prescription drugs, except for a breach of its obligations under this Agreement, neither party shall have liability to the other, any Member or any other person for any act or omission of any Participating Pharmacy or its agents or employees, unless such act or omission is at such party's direction or resulted on account of such party's action or omission. If requested, and subject to: (i) paragraph 1. of Exhibit A; and (ii) the designated Participating Pharmacy accepting PBM's standard extended supply network terms and conditions, PBM will administer Employer's offering of a retai190 day supply program at designated pharmacies and will apply such program systematically at the point of sale. (c) Participating Pharmacy Audits. (i) on-line audits: PBM shall perform on- going on-line audits. These audits shall consist of no less than one hundred percent (100%) of Participating Pharmacies having claims meeting PBM's standard audit criteria; (ii) field audits: Annually PBM shall at a minimum perform field audits of no less than one percent (1.0%) of Participating Pharmacies as warranted under PBM's standard audit criteria to determine compliance with its agreement with PBM. The field audit may be conducted by PBM's internal auditors or PBM's outside auditors, at the pharmacy or by a review of electronically transmitted claims. At the request of Employer, an overview document summarizing PBM's standard audit criteria shall be provided to Employer prior to the execution of this Agreement; (iii) Employer will be notified, in advance, of any material changes to PBM's standard audit criteria applicable to the Pharmacy Network. In the event and to the extent that such changes are required by applicable pharmacy law, PBM will notify Employer of such changes to be made and such changes will be considered to be approved by Employer; (iv) Any and all audit recoveries made on behalf of Employer will be promptly paid or credited to Employer by PBM, but no later than sixty (60) days after recovery. PBM shall promptly notify Employer of any amount that is not successfully recovered. (d) Mail Service Pharmacy and Specialty Pharmacy Audits. PBM will follow stringent quality control protocols, in addition to performing internal audits designed to ensure compliance with applicable laws and to detect dispensing errors. A copy of PBM's current Type II SAS-70 may be provided to Employer upon request consistent with PBM's standard audit protocol and subject to the confidentiality provisions of this is~sss~i -12- Agreement. PBM agrees to credit or refund Employer 100% of funds recovered due to mail service and/ or specialty pharmacy audits designed to ensure compliance with applicable laws and to detect dispensing errors, and to notify Employer of any amount of funds not successfully recovered. (e) Pharmacy Help Desk Services. PBM will provide 24-hours a day, 7-days a week telephone and internet support via atoll-free number and Internet web site access to assist Participating Pharmacies with Member eligibility verification and questions regarding reimbursement, Covered Drug benefits under Employer's Plan or other related concerns. There shall be no additional charge to Employer for PBM providing the Participating Pharmacies' telephone and Internet support. (f) Mail Service Pharmacy. Members may have prescriptions filled through a Mail Service Pharmacy. PBM represents and warrants that the Mail Service Pharmacy will maintain required licenses and permits, as well as maintain insurance coverage as outlined in Section 5.1. Employer shall have the right, subject to paragraph 1. of Exhibit A to modify the inclusion or exclusion status of the Mail Service Pharmacy in a Plan PBW at any time, consistent with the procedures set forth in Section 2.4. Upon presentation of a prescription by a Member, the Mail Service Pharmacy shall, based on Employer-supplied eligibility information, process the prescription pursuant to the terms of the PBW. If the prescription and applicable law do not prohibit substitution of a Generic Drug equivalent to the prescribed drug, or if the Mail Service Pharmacy obtains the consent of the prescriber, the Mail Service Pharmacy, subject to applicable law, shall dispense the Generic Drug equivalent to the Member. PBM will notify members when a prescription is changed or delayed outside of standard Mail Service protocols or procedures. Prescriptions will be dispensed in accordance with the Mail Service Pharmacy Program Plan designs in the PBW, with a Plan design of a quantity not to exceed a 90-day supply. The Copayment and/ or Deductible charged and collected by the Mail Service Pharmacy for a Covered Drug shall be the lesser of the applicable Member liability set forth on the PBW or the Drug Spend. Employer shall have the right to implement utilization management programs as indicated in a Plan's PBW. On-line ordering shall be available to Members, subject to Employer's prior written approval. (g) Shortfall in Member Copayments. If a Member submits a prescription to the Mail Service Pharmacy or Specialty Pharmacy and underpays or does not include payment, the medication will be shipped and the Member will be billed as long as the total cost of the order and any previous balance the Member may have does not exceed $150. If the total cost of the order plus any previous balance exceeds $150, a courtesy call may be made to the Member to notify them of the total cost and they will be asked to provide payment by credit card in order for the medication to be shipped. This amount may be changed by PBM at PBM's discretion; provided, however, that any such change will be applied consistently across all of PBM's clients. Subject to the preceding, PBM will not suspend shipment of a Covered Drug. isnss~i -13- 3.2 Claims Processing. (a) On-Line Claims Processing. PBM will perform claims processing services for Covered Drugs dispensed by a Participating Pharmacy, Mail Service Pharmacy and Specialty Pharmacy. Such services include: (i) verifying eligibility; (ii) performing drug utilization review ("DUR") subject to Section 3.3(b) of this Agreement; (iii) verifying the prescriber identification number is valid for controlled substances; (iv) processing the claims in accordance with the PBW; and (v) paying Participating Pharmacies. PBM shall transmit to Employer and/or its authorized designee an electronic claims extract file including, but not limited to, paid and rejected pharmacy claims, by line of business within five (5) calendar days from the end of each billing cycle. PBM will separately notify Employer of any appeals or conflicts with respect to claims processing within 48 hours from the end of each week or more often, as appropriate. Employer may question any claims paid by PBM and require the reversal of any paid or rejected pharmacy claims. In all cases, including through the claims appeals process, Employer shall have the final decision with respect to coverage of a Prescription Drug Claim and the benefits allowable under the Plan, including determining whether any rejected or disputed claim shall be allowed. (b) Member Submitted Claims. If provided for on the PBW, PBM shall process Member Submitted Claims using the same protocols employed for on-line claims processing. If requested; PBM shall coordinate benefits for the Member, and the Member shall be responsible for submitting such claims directly to PBM on a standard form provided by PBM with proof of payment and within the time period set forth on the PBW. PBM shall process Prescription Drug Claims submitted by Members and Medicaid agencies and, if appropriate, PBM shall reimburse such Members and agencies within fifteen (15) days of receipt of Member or agency Submitted Claims on behalf of Employer the lesser of the amount invoiced or the amount PBM should reimburse in accordance with the applicable PBW. Employer shall reimburse PBM for all amounts, less any Member liability, paid to Members and Medicaid agencies under this Section and the applicable Member Submitted Claim administrative fee set forth in Exhibit A to this Agreement. (c) Appeals of Denied Claims for Benefits. PBM will not conduct any appeals of denied "claims for benefits," however, Employer may elect to have PBM facilitate appeals through MCMC, LLC ("UM Employer") for the fees set forth in Exhibit A, or through a third party of Employer's choice. In any case, PBM will route Member appeals to UM Employer (Employer or other Employer designated entity). In the event Employer elects to utilize the UM Employer, the UM Employer will be responsible for conducting the appeal on behalf of Employer in accordance with ERISA, and Employer acknowledges and agrees that: is~sss~i -1~ (i) PBM is not acting as a fiduciary in connection with the appeals being conducted by the UM Employer, and PBM will not be named by Employer as a fiduciary in connection with such appeals; the UM Employer, and not PBM, will be conducting appeals on behalf of Employer; the UM Employer is an independent contractor of PBM and PBM does not in any way control or direct the UM Employer with respect to appeals conducted by the UM Employer; and (ii) PBM represents to Employer that UM Employer has contractually agreed that: (A) UM Employer will conduct appeals in accordance with the Claims- Rules and Employer's plan, (B) Employer is a third party beneficiary of UM Employer's agreement with PBM (a copy of which is available upon request) and the remedies set forth therein, and (C) UM Employer will indemnify Employer for third party claims caused by the UM Employer's negligence or willful misconduct in providing the appeal services. PBM will not be liable to Employer for any injury or damages arising as a result of the UM Employer's acts or omissions. (d) Member Call Center Services. PBM will provide 24 hours a day, 7 days a week toll-free telephone, interactive voice response ("IVR") and Internet support to assist Employer, Employer's designees and Members with Member eligibility and benefits verification, location of Participating Pharmacies or other related Member concerns. (e) Member Issue Resolution. PBM will initiate resolution of Member issues within 24 hours of receipt. 3.3 Clinically-Based Programs and Services. PBM will provide mutually agreed to clinically-based programs and services, which shall include drug utilization review ("DUR"), prior authorization, Formulary development and management services, and emerging therapeutic issue notification to Members, physicians, and/ or Participating . Pharmacies. Unless otherwise expressly stated herein, such programs are provided at no charge. (a) Clinical Programs. PBM shall provide to Employer general support and consultative services regarding pharmacy benefit and Formulary design, drug monographs, prior authorization criteria, and drug utilization review, as well as those clinical programs identified on Exhibit C to this Agreement. In addition, PBM shall contact Participating Pharmacies and physicians to promote preferred product therapeutic substitution opportunities for both preferred brand and generic drugs through informational messages to Participating Pharmacies and communications to Members and/or physicians, subject to the restrictions set forth in Section 6.1 of this Agreement and provided that such communications to Members and physicians shall be approved by Employer at the time of implementation of each program, such approval not to be unreasonably withheld. In all cases the prescribing physician, in 157555v1 -15- consultation with the Member, shall have final authority over the drug that is dispensed to the Member. PBM shall provide Employer with a copy of the preferred product list, will notify Employer of any changes thereto and any changes shall be subject to Employer's prior written approval prior to any Member communication and PBM and Employer will mutually agree upon a Member notification strategy, in accordance with standard business practices and applicable law. (b) Drug Utilization Review. PBM shall perform a standard concurrent and retrospective DUR (drug utilization review) analysis of each prescription filled through the Mail Service Pharmacy and submitted for processing on-line by a Participating Pharmacy to assist the pharmacist in identifying potential drug interactions, incorrect prescriptions or dosages, and certain other circumstances that may be indicative of inappropriate prescription drug usage. PBM will perform its standard DUR free of charge upon request of Employer and shall communicate the results of such reviews, if warranted, to a Member, pharmacy, Member's physician or Employer, in accordance with standard guidelines. Upon Employer's request, PBM shall provide to Employer quarterly summary reports concerning PBM interventions under the selected modules, if any. PBM's DUR processes are educational programs designed to enhance information available to the pharmacist in filling prescriptions, and are based only on the current claim for Covered Drugs and such Member information as has been previously provided to PBM and is available in PBM's on-line claims processing system. PBM'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 Member. PBM will not be liable for any damages arising from the use, or lack of use of the DUR process by Pharmacies or physicians except that PBM shall be responsible for .proper maintenance and updates of the DUR system and processes. Nothing in this Section shall operate to relieve PBM of the customary professional obligations of the dispensing pharmacists at its Mail Service Pharmacy or CuraScript Pharmacy. (c) Prior Authorization. PBM shall, upon request, provide prior authorization ("PA") services for drugs designated by Employer. Prior authorized drugs must meet Employer-approved guidelines ("Guidelines") before they are deemed to be Covered Drugs, except that Employer authorizes PBM to approve coverage for an otherwise excluded use in the event of co-morbidities, complications, and other factors not otherwise expressly set forth in the Guidelines. The PA program shall include exception reviews and overrides, as appropriate, for quantity limits, nonformulary determinations, and benefit exclusions as specified and directed by Employer. In administering the PA Program, PBM shall 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 by PBM at the time that the prescription is to be dispensed, and upon such prior authorization Guidelines. Employer acknowledges that prior authorization programs are based on objective criteria and the limited amount of patient information available to PBM. PBM shall not is~sss~i -16- undertake, and is not required hereunder, to determine medical necessity to make diagnoses or substitute PBM's judgment for the professional judgment and responsibility of the physician. Appeals and final determinations to confirm or override a denial shall be made by Employer or its designee. PBM's PA program shall be consistent with the stricter of applicable URAC standards, state or federal law, or ERISA claims processing requirements. 3.4 Program Management. (a) Employer Data and On-line Reports. Employer shall have the right, through PBM's Trend Central application, to access certain Employer prescription benefit data and on-line reports according to the terms PBM specifies. (b) Access to Member Drug Coverage Benefits. Without charge, Employer shall have the right, through on-line access, to make Plan exceptions, prior authorization overrides, and similar Member level exceptions according to the terms PBM specifies. (c) Request for Proposal. This Agreement shall control in the event of a specific discrepancy in the obligations between the parties as outlined in the terms of this Agreement and PBM's response to the Request for Proposal of Pharmacy Benefit Management Services for Employer and any subsequent written correspondence related to the Proposal Response and the data and information provided to PBM by Employer, up to the execution date of this Agreement (the "Proposal Response"); provided, however, that the Proposal Response may be the point of first reference to resolve any ambiguity in the Agreement terms to determine the services provided and obligations under this Agreement. 3.5 Formulary and Rebate Program. (a) Subject to the conditions and requirements set forth in this Section 3.5(a), PBM grants Employer the right to use, during the term of this Agreement, PBM drug formularies ("PBM Formulary") to create drug formularies adopted by Employer. Employer understands and agrees that this right is limited solely to Employer's staff, attorneys and consultants, in connection with Plans for which PBM provides services under this Agreement. Employer further understands and agrees that, except in connection with a transition as set forth in Section 7.6 of this Agreement, future request for proposal ("RFP") or as required by law, Employer's staff, attorneys and consultants shall at no time copy, distribute, sell, or otherwise provide the PBM Formulary to any third party without PBM's prior written approval. PBM retains all copyright and other proprietary rights in the PBM Formulary, other than as specifically allowed in this Agreement. Employer agrees to include PBM's copyright notice on all copies of the PBM Formulary that it provides to Members. 157555v1 -17- (b) PBM will pay amounts to Employer provided in Exhibit A to this Agreement and as set forth below: (b)(1) PBM shall pay Employer the Guaranteed Rebates as defined in Chart A. Amounts representing Guaranteed Rebates will be credited to Employer under the Program ninety (90) days after the end of each Contract Quarter. Upon expiration or termination of this Agreement, PBM shall, subject to the remaining terms of this Agreement, continue to invoice pharmaceutical manufacturers for Rebates based on Member utilization prior to the effective date of expiration or termination and shall pay Employer alI Guaranteed Rebate amounts due to Employer consistent with the terms of this Agreement. CHART A GUARANTEED REBATE AMOUNTS PER BRAND CLAIM -Open Formulary and 3 Tier Formulary with less than a $15 copay differential between brand tiers Retail Retail Mail Service Contract Pharmacy Maintenance Pharmacy Program Year Program and Pharmacy Specialty Program Pharmac 1 $12.00 $12.00 $36.00 2 $12.00 $12.00 $36.00 3 $12.00 $12.00 $36.00 GUARANTEED REBATE AMOUNTS PER BRAND CLAIM-3 Tier Formulary with greater than or equal to a $15 copay differential between brand tiers Retail Retail Mail Service Contract Pharmacy Maintenance Pharmacy Program Year Program and Pharmacy Specialty Program Pharmac 1 $16.00 $16.00 $48.00 2 $16.00 $16.00 $48.00 3 $16.00 $16.00 $48.00 (c) Participation in the Rebate Program is subject to Employer meeting the following requirements: is~sss~i -ls- (i) Employer's election of, and conformance to, either the PBM or Employer Formulary under the Rebate Program and any plan design requirements associated therewith; (ii) The distribution of the Formulary (or a summary thereof) to Members, as applicable; and (iii) Employer acknowledges that it may be eligible for Guaranteed Rebates under this Agreement only so long as Employer, its affiliates, or its agents do not contract directly or indirectly with anyone else for discounts, utilization limits, rebates or other financial incentives on pharmaceutical products or formulary programs for claims processed by PBM pursuant to the Agreement, without the prior written consent of PBM. In the event that Employer 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, PBM may immediately withhold any Guaranteed Rebates earned by, but not yet paid to, Employer as necessary to prevent duplicative rebates on Covered Drugs. To the extent Employer knowingly negotiates and/ or contracts for discounts or rebates on claims for Covered Drugs without prior written approval of PBM, such activity will be deemed to be a material breach of this Agreement, entitling PBM to suspend payment of Guaranteed Rebates hereunder and to renegotiate the terms and conditions of this Agreement. (iv) Employer's compliance with this Section 3.5(c) is a condition precedent to PBM's obligations set forth in Section 3.5(b) above. (d) PBM will not implement a drug interchange program if the net cost (cost to Employer prior to the application of Rebates and cost to Member excluding Rebates on a per Prescription Drug Claim basis) to the Employer and/ or Member is higher than the ingredient cost plus dispensing fee of the originally prescribed drug; and (e) The Formulary may be amended from time to time. Subject to Paragraph 1 of Exhibit A, Employer shall at all times retain full control over product selection decisions with respect to the creation of the custom Formulary, and Employer shall advise PBM in advance of any proposed addition or deletion of a particular drug or drugs to or from the PBM's National Preferred Formulary. Solely with respect to PBM's National Preferred Formulary, PBM will limit deletions to the Formulary to once annually. If Employer elects to use another Formulary, the foregoing shall not apply. Should the parties be unable to agree on a modification of the Guaranteed Rebates, either party shall have the right to terminate the Agreement on one hundred fifty (150) days written notice prior to the effective date of such change or if such change is retroactive to a certain date, then either party shall have the right to terminate this Agreement on one hundred fifty (150) days prior written notice to the other party. 157555v1 -19- (f) Guaranteed Rebates will be payable on covered Specialty Drugs as set forth in Chart A. (g) Employer further acknowledges that its eligibility to receive payments for Rebates may change over time due to changes in laws or regulations governing Rebates. If such changes materially modify the economics of this Agreement, the parties agree to modify the Guaranteed Rebates to preserve the parties' relative economics before such change. Should the parties be unable to agree on a modification of Guaranteed Rebates, Employer shall have the right to terminate the Agreement on one hundred twenty (120) days written notice and prior to the effective date of such change or, if such change is retroactive to a certain date, then Employer shall have the right to terminate this Agreement on one hundred twenty (120) days prior written notice to PBM.. 3.6 Participation in Additional Services and Programs. PBM shall allow Employer to participate in any new programs, services, or initiatives. 3.7 Performance Standards. PBM shall comply with the performance standards set forth on Exhibit E hereto and, in addition, shall perform the services for which it is responsible under this Agreement using the same degree of skill and care in such performance as an experienced provider of pharmacy benefit management services, acting in a like capacity and familiar with such matters, would use under similar circumstances. The penalties set forth in Exhibit E to this Agreement shall be Employer's sole monetary remedy for any failure by PBM to meet the performance standards; provided, however, that the foregoing shall not in any way limit any Employer right or remedy with respect to: (i) PBM's indemnification obligations under Section 7.5, or at law or in equity, related to third party claims against Employer as a result of PBM's negligent acts or omissions or breach or nonperformance of this Agreement; or (ii) Employer's termination right under 7.2(a) upon PBM's material nonperformance of the services underlying the performance standards. PBM agrees to supply to the Employer or any of its agents and/ or consultants, subject to such agents and/ or consultants executing a mutually agreeable confidentiality agreement, data necessary to audit all aspects of the performance guarantees, consistent with the audit provisions set forth in Section 4.4 of this Agreement. 3.8 Lowest Net Cost Strategy. PBM shall provide its services to Employer consistent with the terms of this Agreement, which may include clinical, trend, and other programs offered by PBM aimed at lowering the overall net cost for the Plan, as selected and adopted by Employer from time to time. Employer's lowest net cost strategy is to maintain the lowest costs incurred by the Plan while still maintaining access to medications and related services regardless of source. Subject to Paragraph 1 of Exhibit A Employer from time to time may pursue its own alternative lowest net cost strategies by itself or outside the scope of PBM service capabilities. Employer will discuss any such lowest net cost strategy with PBM and PBM agrees to illustrate for Employer the financial impact of such strategy so that Employer may further evaluate the merits of 157555v1 -20- such strategy. If Employer moves forward with any such lowest net cost strategy, Employer shall give PBM the opportunity to support Employer's specific lowest net cost strategy, and if PBM is unable or unwilling to accommodate Employer's alternative strategy, Employer may pursue such strategy subject to Paragraph 1 of Exhibit A. 3.9 Modification of PBM Services. In the event that PBM desires to change the scope of the PBM Services provided under this Agreement in any material way, including, but not limited to, changes in setting up and implementing plans, the claims adjudication process, or administering Eligibility Records, then PBM shall first provide Employer a written description of the material terms of any such request for change in scope of the PBM Services (a "Request for Change"). Employer shall have thirty (30) calendar days following receipt of the Request for Change to evaluate the change, during which time PBM shall use all reasonable efforts to respond to any requests by Employer for additional information. Employer may, within thirty (30) calendar days following receipt of the Request for Change, accept the Request for Change and mutually agree with PBM upon the implementation date for such change or object to the change; provided, however, that Employer shall not unreasonably refuse a PBM Request for Change. If Employer objects to the Request for Change and PBM nonetheless substantially implements the change, such implementation shall be considered a material breach of this Agreement by PBM without opportunity for cure pursuant to Section 7.2 (a) of this Agreement. 3.10 Management of Relationship. PBM will assign to Employer the following PBM representatives for the term of this Agreement. PBM shall not, within six months following the Effective Date of this Agreement, replace the assigned Account Manager and Clinical Account Manager without Employer's prior written consent, unless a promotional opportunity or employment termination is the reason for replacement. Beginning six months following the effective date of this Agreement, PBM shall provide as much prior notice as is practicable for such change as a result of a promotional opportunity or employment termination, and at least sixty (60) days prior notice for any such change as a result of other reasons. The Account Manager and/ or Account Executive will conduct no less than quarterly on-site meetings or meetings mutually agreed to in writing by Employer and PBM. a. Executive Contact; b. Account Manager; c. Account Executive and team; d. Sales Contact; e. Clinical Pharmacist; f. Business Analysis; g. Legal Contact 3.11 Data Transfer. Upon request, PBM will provide to Employer and/or its authorized designee, in a suitable format to Employer and/or its authorized designee, a is~sss~i -21- detailed claim data file, no more frequently than quarterly, containing all claims incurred during each Contract Year, at no cost to Employer and/or its authorized designee. SECTION IV -FEES AND PAYMENT 4.1 Calculation of Fees. The fees for the services provided hereunder shall consist of the fees specified on Exhibit A to this Agreement and any mutually agreed to applicable fees for optional Clinical Programs set forth on Exhibit C hereto, as elected by Employer in writing (collectively, the "Fees"). 4.2 Payment Procedures. (a)(i) Invoicing. PBM will invoice Employer twice per month for claims reimbursement and administrative fees related to Covered Drugs dispensed by the Mail Service Pharmacy, Participating Pharmacies, and, if applicable, for Member-Submitted Claims, less applicable Member contributions. PBM's invoice shall contain sufficient detail to support the requested payment. (a)(ii) Each and every payment by Employer to PBM, whether representing Fees, Covered Drug costs or otherwise, will be subject to reconciliation and audit pursuant to the audit provisions of this Agreement, including, but not limited to, the Audit Protocol set forth on Exhibit F, and no such payment by Employer will constitute a waiver of its rights to reconciliation or audit. Upon notice to PBM of any amounts that Employer or its auditor contend, following any audit, have been overpaid by Employer, PBM shall have ninety (90) days to investigate and make a final determination once it receives such notice by Employer requesting a refund or overpayment of such amounts. With respect to each and every payment by Employer to PBM, PBM will refund to Employer within thirty (30) business days following such ninety (90) day period all undisputed amounts determined by reconciliation or audit to have been overpaid by Employer. Should PBM not notify Employer of the results of PBM's investigation of Employer's claim(s) of overpayment within ninety (90) days, such lack of response shall be considered a determination in favor of Employer and the fifteen (15) day timeframe for repayment shall commence. (b) Payment Method. (i) Claims Fees. Employer agrees to pay PBM for claim fees and alI related claims processing administrative fees as provided in this agreement ("Claim Fees") by wire or ACH transfer within seven (~ days from the date of Employer's receipt of the hard copy of PBM's invoice; provided, however, recognizing that, on a limited basis, circumstances may occur that will result in a short delay of payment, Employer shall be afforded a three (3) business day payment extension, subject to the following: (i) Employer must provide advance is~sss~i -22- written notice via e-mail or facsimile to PBM of such anticipated extension, to the extent reasonably possible; and (ii) Employer will be entitled to no more than two such extensions per calendar year, unless PBM consents to additional extensions, which consent shall not be unreasonably withheld by PBM. If Employer disputes all or a portion of any invoice for Claims Fees outlined in this Section 4.2(b), Employer will pay the invoice in full and notify PBM within thirty (30) days, in writing, of the specific reason and amount of any dispute. PBM and Employer will work together, in good faith, to resolve any dispute (including any dispute regarding penalty amounts) as soon as reasonably practical (the parties' mutual intent is to attempt to resolve all such disputes within no later than fifteen (15) business days), and the parties will reconcile the amount due the other, if any, as the parties agree based on the resolution. PBM shall not suspend services prior to a resolution of such a dispute. (ii) Administrative Fees. Employer will pay PBM for all other non claims related fees (i.e., all fees that are not claims fees or claims processing administrative fees) for administrative products and services ("Administrative Fee"), if applicable, in accordance with the Administrative Fee provisions set forth in Exhibit A to this Agreement. PBM will provide Employer with an Administrative Fee invoice, if applicable, in accordance with PBM's Administrative Fee cycle (i.e., currently, this cycle is monthly). Employer agrees to pay PBM for all undisputed Administrative Fees by wire, check or ACH transfer within fifteen (15) days of invoice date. If Employer disputes all or a portion of any invoice for Administrative Fees, Employer will pay the invoice in full or the undisputed amount and notify PBM within thirty (30) days, in writing, of the specific reason and amount of any dispute. PBM and Employer will work together, in good faith, to resolve any dispute (including any dispute regarding penalty amounts) as soon as reasonably practical (the parties' mutual intent is to attempt to resolve all such disputes within no later than fifteen (15) business days), and the parties will reconcile the amount due the other, if any, as the parties agree based on the resolution. PBM shall not suspend services prior to a resolution of such a dispute. (c) Limitation on Collections; Member Hold Harmless. PBM, the Mail Service Pharmacy, or any other pharmacy owned or operated by PBM shall not, except in instances of fraud or other wrongful act by a Member, charge, collect a deposit from or have any recourse against a Member or any person acting on behalf of such Member for the Covered Drugs provided hereunder; provided that this does not prohibit PBM or the Mail Service Pharmacy from charging a Member for applicable Deductibles or Copayments or for drugs or services not covered by the Plan. Substantively similar provisions shall be included in PBM's contracts with Participating Pharmacies. The terms of this section shall survive the termination of this Agreement for those Covered Drugs provided prior to such termination, regardless of the cause of the termination. is~sss~i • -23- (d) Deposit. If, at any time, Employer has two or more invoices past due and outstanding, PBM may require that the Employer provide to PBM a stand by letter of credit or a one (1) month deposit in an amount equal to the one (1) month 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. PBM 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. 4.3 Access to Prescription Records. Notwithstanding any other provision of this Agreement, (a) PBM will maintain Employer's claims data supporting invoices adjudicated by PBM for the duration of this Agreement and for a period of seven (7) years from the date of their creation. Upon request of Employer, PBM shall provide such data to Employer in a format mutually agreed upon by the parties. PBM shall comply with Employer's ERISA retention obligations under applicable law and shall use commercially reasonable efforts to assist Employer to meet the Employer's reporting and disclosure obligations under ERISA. Subject to the preceding sentence after expiration of the retention period, and after 30 days prior written notice to Employer, PBM may dispose of Employer data in accordance with its standard policies and state and federal law applicable to Employer. (b) Both parties shall maintain, for the duration of this Agreement and for seven (7) years from the invoice date, complete and accurate books and records of all transactions subject to this Agreement; provided that claim records maintained by PBM shall be retained in accordance with prudent standards of insurance record keeping and applicable state pharmacy laws. 4.4 Employer Audits. (a) Consistent with the Standard Audit Protocol attached hereto as Exhibit F, once each year (or more frequently if warranted, as reasonably determined by Employer) and for up to two (2) years after termination hereof, Employer's third party auditor ("Auditor"), as approved by PBM (which approval shall not be unreasonably withheld) and provided such Auditor executes a mutually acceptable Confidentiality Agreement, may inspect and verify Prescription Drug Claim data, billing records, pricing discounts and terms, Brand Drug and Generic Drug Classifications, claims adjudication systems, pharmacy benefits, Rebate payment calculations, manufacturer agreements, clinical programs, and other compensation from any party directly related to Employer's Member prescription drug utilization and services, performance guarantees, AWP rate adjustments, and operational processes relating to the services provided to Employer pursuant to this Agreement to ensure PBM's compliance with the 157555v1 -24- terms and conditions of this Agreement, as Employer reasonably deems appropriate, including but not limited to, 100% of the claims data for such reasonable time period Employer then determines acting in good faith, taking into account PBM's limitations to respond quickly to longer periods of time and older data. Notwithstanding Section 1.41, PBM reserves its right to not accept Thomson Reuters (Healthcare) Inc. (formally known as Trivantage Pharmacy Strategies) as Employer's Auditor in the event that the use of Thomson Reuters (Healthcare) Inc. (formally known as Trivantage Pharmacy Strategies) presents a conflict of interest (e.g., Thomson Reuters (Healthcare) Inc. (formally known as Trivantage Pharmacy Strategies) serves as an expert witness in litigation against PBM), for so long as any such conflict of interest exists. At the request of Employer, PBM shall provide all claims data, in a format suitable to Auditor, at PBM's cost. All audits shall be conducted during normal business hours at PBM offices upon sixty (60) days' prior written notice. If PBM performs a discount and dispensing fee guarantee calculation, PBM's guarantee report results will be shared with Employer's Auditor prior to any payment being made to Employer (if applicable). Any payment that may result from PBM's discount and dispensing fee calculation will only be provided to Employer after Employer's Auditor has completed its annual audit and coordinated appropriate reconciliation. Any and all costs and expenses of each party associated with Employer's audit shall be borne by that party. Results of the most recent SAS-70 audit will be provided by PBM to Employer. The parties agree that the scope of audits by Employer or Auditor will not be duplicative of the SAS-70 audit, but may include inspection and/ or verification of certain information provided in the SAS- 70 audits to the extent necessary to give Employer a more thorough understanding of and support for such information. Audit materials or documentation provided by PBM will be confined to Employer-specific information. (b) If the audit discloses an overpayment of Fees or claim payments to PBM by Employer or an underpayment of Rebates or guarantees or performance standard penalties to Employer by PBM, or other economic benefits received by PBM in excess of what PBM is entitled to under this Agreement, then PBM shall pay the amount owed to Employer within a commercially reasonable time period after completion of the audit, but not to exceed thirty (30) days. If the audit discloses Employer underpayments to PBM, Employer shall pay PBM the balance within a commercially reasonable time, but not to exceed thirty (30) days after completion of an audit. Notwithstanding anything herein to the contrary, Employer hereby acknowledges and agrees that overpayments, if any, resulting from audits of AWP pricing guarantees, which are measured, reconciled, and audited in the aggregate across all employer.groups (and corresponding utilization) in the Public Sector Coalition that contract with PBM for the pricing arrangement as set forth in this Agreement, shall be paid in the aggregate to the Public Sector Coalition, which shall then distribute such payments to the employer groups in the Public Sector Coalition on an a pro rata basis. (c) Any requests by Employer or a third party auditor designated by Employer shall constitute Employer's direction and authorization to PBM to disclose 157555v1 -25- Member information to the auditor subject to the terms, and conditions of this Agreement. 4.5 PBM Disclosure. Consistent with the Financial Disclosure to PBM Clients set forth in Exhibit G hereto ("Financial Disclosure"), PBM shall disclose, and update on an annual basis all revenue sources of PBM from pharmaceutical manufacturers, distributors and/ or other third parties that are related to or are as a result of the services and benefits provided under this Agreement. SECTION V -INSURANCE REQUIREMENTS; COMPLIANCE WITH LAW 5.1 Insurance Requirements. PBM agrees, at its sole expense, to maintain during the term of this Agreement or any renewal hereof, comprehensive general liability insurance coverage in an amount of not less than $5,000,000 per occurrence, and $5,000,000 in the aggregate, excess of any applicable self insurance reserves. PBM also agrees to maintain pharmacist's professional liability insurance (including errors and omissions) in an amount not less than $5,000,000 per occurrence, $5,000,000 in the aggregate, excess of any applicable self insurance reserves, for protection from such claims for bodily injury as may arise from operation of the Mail Service Pharmacy, or any other pharmacy owned or operated by PBM, under this Agreement. PBM shall maintain a commercial crime policy covering employee dishonesty in an amount not less than $5,000,000. PBM does not maintain liability insurance on behalf of any Participating Pharmacy, but shall contractually require such Participating Pharmacies to maintain commercial liability insurance with limits not less than $1,000,000 per occurrence and $1,000,000 in aggregate per pharmacy or such higher limit as may be required by federal or state law, including pharmacy errors and omissions coverage. 5.2 Compliance with Law. (a) Each party shall be responsible for ensuring its compliance with any laws and regulations applicable to its business and responsibilities under this Agreement, including maintaining any necessary licenses and permits. PBM shall assist Employer in any and all compliance obligations imposed upon Employer for services provided by PBM under the terms of this Agreement. (b) Employer acknowledges and agrees that it is responsible for disclosing to Members any and all information relating to the Plans as required by law to be disclosed, including any information relating to the calculation of Copayment and/or Deductibles, and any other program coverage and eligibility requirements in connection with the Plan, and any other information concerning commissions, rebates, discounts, or provider discounts referred to in Section 4.5 hereof. In providing services under this Agreement, Employer acknowledges and agrees that neither PBM nor any of PBM's wholly-owned subsidiaries are acting as a fiduciary (as defined in Section 3(21)(A) of the Employee Retirement Income Security Act of 1974, as amended is~sss~i -26- ("ERISA")) of any Plan, and Employer shall not name PBM or any of PBM's wholly- owned subsidiaries as a plan fiduciary. PBM and PBM's wholly-owned subsidiaries provide administrative services for the drug benefit Program within a framework of policies, interpretations, rules, practices, and procedures chosen by Employer. Employer acknowledges that neither PBM nor any PBM wholly-owned subsidiary: (i) has any discretionary authority or control respecting management of the prescription benefit Program; or (ii) exercises any authority or control respecting management or disposition of the assets of such Program, if any exist. 5.3 Disclosure of Certain Financial Matters. If PBM provides certain administrative services and data to drug manufacturers and/ or third parties (other than the administrative services performed by PBM pursuant to its rebate contracts with manufacturers and associated administrative service fees already disclosed elsewhere in this Agreement), and such manufacturers and/or third parties pay PBM a fee for such services and data, upon request by Employer but no more than annually, PBM shall disclose such sources to Employer and any corresponding remunerations (as a percentage of overall PBM revenue), which are directly or indirectly related to or a result of pharmaceuticals or services provided under this Agreement. 5.4 Change in Law. From time to time, federal, state and local legislative bodies, boards, departments or agencies may enact or issue laws, rules, or regulations pertinent to this Agreement. To the extent that any such enactment or issuance has the effect of materially altering the obligations of either PBM or Employer or has a material negative financial impact to either party hereunder, or to the extent that any court of competent jurisdiction makes a determination or otherwise takes action that renders invalid or unenforceable, or has the effect of materially altering, any term or provision of this Agreement, or has a negative financial impact to either party hereunder, the parties shall negotiate in good faith a modification of the services and/ or pricing terms as necessary to maintain the parties' comparable economic positions as of the Effective Date. If the parties are unable, despite good faith efforts, to negotiate a modification of the services and/ or pricing terms, either party may terminate this Agreement upon at least ninety (90) days prior written notice to the other party. SECTION VI -CONFIDENTIAL AND PROPRIETARY INFORMATION 6.1 Confidential Information. PBM will sign a mutually agreed upon Business Associate Agreement as shown in Exhibit D concurrently with this Agreement. Subject to the Business Associate Agreement provisions to the contrary as they relates to the confidentiality, use, and disclosure of PHI under the applicable privacy provisions of the Health Insurance Portability and Accountability Act of 1996, as amended ("HIPAA"), PBM and Employer acknowledge and agree as follows: 157555v1 -27- During the course of providing services to Employer, PBM may have access to information that (1) relates to or derives from (a) any Member; (b) any transaction between Employer and any Member; or (c) any list, description, or other grouping of Members (and publicly available information pertaining to them) that is derived using any personally identifiable information that is not publicly available, which may include, but is not limited to, application information, health information, claims information, account balance or payment information, the fact that the individual is or has been a Member, Member name and address, Member social security numbers, and information from a consumer report; or (2) is otherwise regarded as confidential by Employer (collectively referred to as "Confidential Information'). Notwithstanding the foregoing, the above shall not apply to claims data or information which is not identifiable on a Employer or Member basis. PBM shall not use or distribute any forms to Members for release of data or information without Employer's prior written approval as to form and content. In connection therewith, the following subsections shall apply: (a) Confidential Information may be used by PBM only to assist PBM in fulfilling its obligations under this Agreement. (b) PBM will not, at any time, without the prior written consent of Employer, use Confidential Information in any fashion, form, or manner, except in its capacity as an independent contractor to Employer hereunder. Under no circumstances may PBM provide and or sell Confidential Information which is identifiable either on a Employer or Member basis to any third party for any purpose. (c) PBM may disclose Confidential Information: (i) as reasonably necessary to its auditors, accountants, counsel, and regulators who are under an obligation to maintain the confidentiality of the Confidential Information; and (ii) to respond to a properly authorized civil, criminal, judicial process or regulatory. investigation or subpoena or summons issued by a federal, state or local authority having jurisdiction over PBM for examination, compliance, or other purposes as authorized by law; however, any such disclosure may be made only after giving Employer prior notice of the potential disclosure as soon as reasonably practical before such disclosure is made so that a protective order or other appropriate remedy may be sought or compliance with the provisions of this Agreement may be waived by Employer. If such protective order or other remedy is not obtained or if compliance with any provision of this Agreement is waived by Employer, PBM will furnish only that part of Confidential Information that, upon the advice of counsel, is legally required and will exercise its commercially reasonable efforts to obtain reliable assurance that confidential treatment will be accorded such information. (d) Except as permitted in this Section VI, PBM shall not disclose, directly or indirectly, to anyone any Confidential Information. PBM may permit its employees, officers, and agents to have access to the minimum necessary amount of Confidential is~sss~i -28- Information required to permit PBM to perform its contractual obligations to Employer. Employer shall be entitled to audit PBM's use of, and procedures to protect, Confidential Information during regular business hours upon Employer's reasonable advance notice to PBM. (e) PBM shall not use or distribute any authorization forms to Members for release of data, Private Health Information or Confidential Information without Employer's prior written approval as to form and content. (f) PBM shall implement adequate safeguards to assure the security and confidentiality of Confidential Information, including without limitation, the following: (i) requiring employees, subcontractors, and agents to maintain the strict security and confidentiality of Confidential Information required of PBM under this Agreement; (ii) immediately reporting to Employer, when PBM may become aware, any use or disclosure of Confidential Information prohibited by the terms of this Agreement; (iii) implementing adequate technological safeguards to prevent unauthorized access or interception of Confidential Information; and (iv) not using or disclosing Confidential Information in any manner that would be considered a violation by Employer of the privacy provisions of the HIPAA or a violation of any other applicable law. (g) As requested by Employer and upon termination of this Agreement and completion of PBM's obligations hereunder, all Confidential Information gathered by or made available to PBM, including copies thereof, shall be destroyed or returned to Employer, as the Employer may direct. (h) PBM shall cooperate in transferring data to other entities, as instructed in writing from Employer, at no additional cost to Employer. 6.2 Proprietary Information. Each party agrees that information of the other party, including, but not limited to the following, shall constitute confidential and proprietary information ("Proprietary Information') unless otherwise public: (a) with respect to PBM, its Proprietary Information shall include, but not be limited to, reporting and system applications, databanks, clinical or formulary management operations, procedures or programs, information concerning Rebates, prescription drug evaluation criteria, contract pricing terms, and Participating Pharmacy agreements; and (b) with respect to Employer, its Proprietary Information shall include, but not be limited to: (1) information concerning Employer's past, present, or future research, development, or business activities; (2) information concerning proprietary products, materials, service, technical knowledge, customer information files, business operations, strategies, Plan names or identities, and Member information; and (3) the terms of this Agreement. Neither party shall use the other's Proprietary Information, or disclose it to any third party, at any time during or after termination of this Agreement, except as explicitly authorized by this Agreement or upon prior written consent of the other party. With respect to the Employer, "third party" does not include Employer's staff, attorneys, is~sss~i -29- actuaries and consultants subject to such persons being obligated, including in the case of consultants, by a written confidentiality agreement executed with PBM. If Proprietary Information of a party is disclosed to or otherwise acquired by another party to this Agreement, such Proprietary Information will be held in confidence by the receiving party and surrendered by the receiving party to the disclosing party upon the termination of this Agreement or upon prior written request by the disclosing party unless such Proprietary Information is needed to carry out the services under this Agreement, future request for proposal ("RFP"), transition to another PBM or for operation of Employer. 6.3 Ownership of Marks. Each party acknowledges the other party's sole and exclusive ownership of its respective trade names, commercial symbols, trademarks, service marks, and derivatives thereof, whether presently existing or later established (collectively "Marks"). No party shall use the other party's name, designs, symbols, or Marks in advertising or promotional materials or otherwise without the owner's prior written consent ;provided, however, that Employer may publicize the fact that PBM provides prescription drug benefit services to Employer's Health Care Plan. SECTION VII -TERM AND TERMINATION; DEFAULT; INDEMNIFICATION 7.1 Term. The initial term of this Agreement shall begin on the Effective Date and end on December 31, 2012 (the "Initial Term') and may be terminated earlier or extended in accordance with the terms hereof. Not less than one hundred twenty (120) days' prior to the end of the Initial Term or any Renewal Term of this Agreement, Employer may notify PBM in writing that it wishes to terminate this Agreement effective as of the end of the then current term. If no such written notification is given, this Agreement shall automatically renew with the same terms and conditions as set forth herein for additional one (1) year renewal terms (each, a "Renewal Term"), subject to the right of termination as otherwise provided herein. 7.2 Termination. (a) Breach or Default. Either party may terminate this Agreement by providing the other party with written notice of a material breach or nonperformance of this Agreement. If the breaching party has not cured said breach within sixty (60) days from the date such notice was sent, to the reasonable satisfaction of the non-breaching party, this Agreement may be terminated at the option of the non-breaching party effective as of the ninetieth day following written notice of the breach. (b) Insolvency. To the extent permitted by applicable law, PBM may terminate this Agreement, or suspend performance hereunder, upon the insolvency of Employer, and Employer may terminate this Agreement upon the insolvency of PBM. The "insolvency" of a party shall mean the filing of a petition commencing a voluntary 157555v1 -sa or involuntary case (if such case is an involuntary case, then only if such case is not dismissed within sixty (60) days from the filing thereof) against such party under the United States Bankruptcy Code; a general assignment by such party for the benefit of creditors; the inability of such party to pay its debts as they become due; such party's seeking or consenting to, or acquiescence in, the appointment of any trustee, receiver, or liquidation of it, or any material part of its property; the commencement against such party of an involuntary case under the United States Bankruptcy Code; or a proceeding under any receivership, composition, readjustment, liquidation, insolvency, dissolution, or like law or statute, which case or proceeding is not dismissed or vacated within sixty (60) days. (c) Material Negative Effect. Employer shall have the right to terminate this Agreement upon ninety (90) days prior written notice when PBM gives notice to Employer of a material negative effect on Members' access to the Pharmacy Network, as set forth in Section 3.1(a)(ii), above; provided, however, that if PBM is able to cure the material negative effect on Members' access within the ninety (90) day notice period, Employer's notice of termination shall be considered null and void, and this Agreement shall remain in effect. For purposes of this subsection, "material negative effect on Members' access to the Pharmacy Network" shall be defined as set forth in Section 3.1(a) (ii). (d) Lack of Competitiveness. Following the first eighteen (18) months after the Effective Date (but not before), Company reserves the right to renegotiate pricing terms and performance guarantees, to take advantage of favorable aggregate pricing terms and performance guarantees in the pharmacy benefit market, as determined in conjunction with Company's consultant(s), Thomson Reuters (Healthcare) Inc. (formally known as Trivantage Pharmacy Strategies) and/ or Gallagher Benefits Services, Inc. Favorable aggregate pricing terms may include movements in market pricing terms for PBM services with regard to fees, discounts and Formulary Rebates offered, which have a positive impact to Company. Favorable performance guarantees may include improvement in current or new performance guarantees for PBM services, which have a positive impact to Company. PBM will provide after eighteen (18) months and before twenty (20) months into this Agreement a market check report to Thomson Reuters (Healthcare) Inc. (formally known as Trivantage Pharmacy Strategies) and to Gallagher Benefits Services, Inc. identifying movements in market pricing terms and performance guarantees based on PBMs data base and knowledge of the market. If the market check report and discussions results in a finding that market conditions can enable Company more favorable aggregate pricing terms and or performance guarantees then the parties will discuss in good faith revisions to the pricing terms and or performance guarantees prior to twenty four (24) months into the PBM Agreement. All changes will be effective at the beginning of the third year of the PBM agreement. If the PBM is unwilling to agree to the more favorable aggregate pricing terms and or performance guarantees, then Company may terminate this agreement anytime during the third year of this Agreement by giving PBM, at least ninety (90) days' prior written notice designating the 157555v1 -31- termination date. If Company chooses to exercise its option under this section, Company shall not be subject to any penalties associated with early termination. 7.3 Remedies. (a) A party's right to terminate this Agreement under this Section VII shall not be exclusive of any other remedies available to the terminating party under this Agreement or otherwise at law or in equity. (b) Neither party shall be liable in any manner for any delay to perform its obligations hereunder which are beyond a party's reasonable control, including, without limitation, any delay or failure due to riots, boycotts, lockouts, acts of terrorism, earthquakes, storms, floods or other extreme weather conditions, fires, explosions, acts of God, or the public enemy, embargoes, war, or other outbreak of hostilities, government acts, or regulations, or the failure or inability of suppliers, delivery services, or telecommunications providers to provide services necessary to enable a party to perform its obligations hereunder or by reason of the judgment, ruling, or order of any court or agency of competent jurisdiction or change of law or regulation (or change in the interpretation thereof) subsequent to execution of this Agreement (collectively, "Force Majeure"). (c) Except to the extent permitted in Section 7.5, each party's liability to the other hereunder shall in no event exceed the actual proximate losses or damages caused by breach of this Agreement. In no event shall either party or any of their respective affiliates, directors, employees, or agents, be liable to the other 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. This section shall not apply to third party claims. 7.4 Obligations Upon Termination. Employer or its agent shall pay PBM in accordance with this Agreement for all claims for Covered Drugs dispensed and services provided to Employer and Members on or before the effective date of termination ("Termination Date"). Further, PBM or its agent shall pay Employer in accordance with this Agreement for all performance guarantee penalties and Rebate payments owed to Employer for services provided on or before the Termination Date. Claims for Covered Drugs dispensed after the Termination Date shall be processed and adjudicated for a period up to 12 months at the request of Employer in accordance with a mutually determined run-off plan. Both parties shall pay all other fees or charges due or payable to the other party under this Agreement consistent with the payment terms set forth in Sections 3.5(b)(2) and 4.2(b), after the Termination Date. is~sss~i -32- 7.5 Indemnification Obligations. (a) PBM will indemnify, defend and hold harmless Employer and its officers, directors, employees, agents, successors, assigns ("Employer Indemnitees") for, from and against any and alI claims, demands, damages, costs and reasonable attorney's fees, actually incurred by any Employer Indemnitee, as a result of PBM's (or any of its officers', employees', or subcontractors') negligent performance, nonperformance, gross negligence, fraud, violation of law, material breach or willful or reckless malfeasance in performing PBM Services under this Agreement. (b) Employer will indemnify, defend and hold harmless PBM and PBM and their officers, directors, employees, agents, successors, assigns ("PBM Indemnitees") for, from and against any and all claims, demands, damages, costs and reasonable attorney's fees, actually incurred by any PBM Indemnitee, as a result of the negligent performance, nonperformance, breach or willful or reckless malfeasance of Employer or any of its officers, employees, agents or subcontractors in the performance of its (or their) obligations under this Agreement. (c) The party seeking indemnification shall notify the indemnifying party in writing as soon as practicable upon learning of any Claim for which, or determining that, indemnification may be sought hereunder, and shall tender the defense of such claim to the indemnifying party. No party shall indemnify the other with respect to any Claim settled without the indemnifying party's written consent. 7.6 Transition Assistance. (a) PBM shall use all commercially reasonable efforts to assist Employer in effecting a transition of Services to another vendor chosen by Employer ("Transition Services"). Transition Services shall include, without limitation, (i) providing Employer all data required to transition all aspects of the Program (copy of formulary, claims detail, eligibility format, NABPs, Mail Service and Specialty Pharmacy open refill file, prior authorization files, clinical detail and accumulators), (ii) providing parallel services until Employer notifies PBM of its transition to a new system, (iii) providing technical support and any information or documentation regarding services as reasonably requested by Employer, (iv) cooperating with Employer or its designated vendor in developing required interfaces, and (v) such other services as shall be reasonably necessary or appropriate to facilitate, without interruption, the orderly transition of services to Employer and or its new provider of services, at no cost to Employer. (b) PBM shall have no right to withhold or limit Transition Services on the basis of any alleged breach of this Agreement by Employer, other than (i) a failure by Employer to timely pay the amounts due for services rendered during the transition period. is~sss~i -33- 7.7 Survival. The parties' rights and obligations under Sections 3.1(c), Section IV, Sections 5.2 and 5.3, Section VI, Sections 7.2, 7.3, 7.4, 7.5, 7.6, 7.7 and Section VIII shall survive the termination of this Agreement for any reason. SECTION VIII -MISCELLANEOUS PROVISIONS 8.1 Notice. Any notice or document required or permitted to be delivered pursuant to this Agreement must be in writing and shall be deemed to be effective upon receipt 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; or (c) sent via FACSIMILE with confirmation of receipt; and properly addressed to the other party at the address set forth below, or at such other address as such party shall specify from time to time by written notice delivered in accordance herewith: Express Scripts, Inc. Attention: Account Management One Express Way St. Louis, Missouri 63121 City of Dubuque Attn: Randy Peck 50 West 13~ Street Dubuque, Iowa 52001 8.2 Successors and Assigns; Change in Control. 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 either party without the prior written consent of the other, which consent shall not be unreasonably withheld. 8.3 Delegation of Duties. Employer agrees that PBM may delegate certain administrative/clerical duties hereunder (e.g., database management functions, printing and postal fulfillment) to independent contractors; provided that (i) if applicable or required by law, any such independent contractor enters into a confidentiality agreement no less extensive than the confidentiality provisions of this Agreement; and (ii) subject to 7.5(a) of this Agreement, PBM retains full responsibility and liability for the performance of the delegated administrative/clerical service. Notwithstanding any provision to the contrary, PBM will be prohibited from delegating any claim, member services and/ or management activities to any third party without Employer's prior written approval. 8.4 Independent Relationship. No provision of this Agreement is intended to create or shall be construed to create any relationship between PBM and Employer other than 157555v1 -34- that of independent entities contracting with each other solely for the purpose of effecting the provisions of this Agreement. Neither party, nor any of its respective representatives, shall be construed to be the partner, agent, fiduciary, employee, or representative of the other, and neither party shall 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. 8.5 Waiver. The failure of either party to insist upon the strict observation or performance of this Agreement or to exercise any right or remedy shall not be construed as a waiver of any subsequent breach of this Agreement or impair or waive any available right or remedy. 8.6 Severability. If any provision of this Agreement is held invalid or unenforceable by a competent authority, such invalid or unenforceable provision shall not invalidate or affect the other provisions of this Agreement which shall remain in effect and be construed as if such provision were not a part hereof; provided that if the invalidation or unenforceability of such provision shall, in the opinion of either party to the Agreement, have a material effect on such party's rights or obligations under this Agreement, then the Agreement may be terminated by such party upon thirty (30) days' prior written notice by such party to the other party. 8.7 Choice of Law. This Agreement and the performance under it shall be construed and governed in all respects according to the laws of the State of Connecticut. 8.8 No Third Party Beneficiaries. This Agreement is not a third party beneficiary contract, nor shall this Agreement create any rights on behalf of Members as against PBM. Employer and PBM reserve the right to amend, cancel, or terminate this Agreement without notice to, or consent of, any Member. 8.9 Modification of Plan Design. The Program pricing terms set forth in this Agreement are based upon the Plan and Program specifications reflected in this Agreement and the PBW. Any material modification of the Plan or Program specifications shall be subject to the provisions set forth in Paragraph 1 or Exhibit A. 8.10 Emergency Disaster Recovery Program. At all times during the term of this Agreement, PBM shall have in place an emergency disaster recovery plan ("DRP"), which shall include maintaining a contract with a recovery site vendor to provide an alternative computer capability to re-establish PBM's data center should the processing function be destroyed or interrupted and procedures to reestablish claims processing services within forty-eight (48) hours after a disaster is declared by PBM. At least once per calendar year, PBM shall certify to Employer that its DRP has been reviewed and tested and is fully operational. is~sssvi -35- 8.11 Intel?ration: Amendments. This Agreement, and any Exhibits hereto, each of which is incorporated herein for all purposes, constitutes the entire understanding of the parties hereto and supersede any prior oral or written communication between the parties with respect to the subject matter hereof. No modification, alteration, or waiver of any term, covenant, or condition of this Agreement shall be valid unless in writing and signed by both Parties. This Agreement may be executed in one or more counterpart copies, each of .which shall be deemed an original, and all of which shall together be deemed to constitute one Agreement. 8.12 Authority. Each party represents and warrants that it has the necessary power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement. IN WITNESS WHEREOF, the undersigned have executed this Managed Prescription Drug Program Agreement as of the day and year below set forth. Express Scripts, Inc. City of Dubugixe By: By: Printed Name: Printed Name: Michael C. van Milligen Title: Title: city Manager Date: Phone: s63-sag-4i2s FaX: 563-690-602s Da 157555v1 -36- F.XHTRTT A PRESCRIPTION DRUG PROGRAM FEES 1. Program Pricing Terms are guaranteed for three Contract Years. Guarantee periods are measured 12 month periods starting as of the effective date of this Agreement. Notwithstanding the foregoing, the financial terms set forth in this Exhibits A are conditioned on PBM's exclusive status as set forth in Section 2.1. In addition, to the extent: (a) Employer changes its Formulary, benefit designs, implements clinical programs or otherwise takes an action that has the effect of lowering the Rebates amounts earned by Employer; and/or (b) Employer elects to use on-site clinics or pharmacies to dispense prescription drugs to Members which materially reduces Rebates and/ or the number of Prescription Drug Claims submitted on- line; then PBM will have the right, upon notice, to make an equitable adjustment to the rates, administrative fees and/or Rebates, solely as necessary to return PBM to its contracted economic position as of the effective date of such event. 2. Pharmacy Network discounts off average wholesale price (AWP) must represent PBM's national network containing at a minimum 50,000 pharmacies nationwide. 3. RETAIL BRAND AND GENERIC DISCOUNT GUARANTEES IDENTIFIED IN THE CHART BELOW WILL ADHERE TO THE FOLLOWING CRITERIA: a. Retail Brand Discount Guarantees: The brand discount guarantees must be based on Non-secondary claims, using the actual eleven (11) digit National Drug Code (NDC), submitted by a Participating Pharmacy at the time of adjudication for Federal Legend Drugs at the decimal-level quantity dispensed, excluding Compound Prescriptions. Usual and Customary (U&C) claims greater than the member's copay that apply will be excluded from the discount guarantee calculations. Specific 11-digit Multi-source drug claims when generic drugs are dispensed will be excluded from the brand discount guarantee calculations. The financial impact (e.g. difference in cost between the brand and generic drug plus copay) of additional member payments that apply to multi-source drug claims due to specific mandatory generic penalties will be excluded from the discount guarantee calculations, but the actual discount on the brand drug claims excluding any penalty amounts will be included. (a)(i) Brand discount guarantee excluding Zero Balance Claims (ZBCs): Exclude all ZBCs from the discount guarantee calculation. (ZBCs are claims whose total cost are equal to or less than the member pay amount.) (a)(ii) Brand discount guarantee including Zero Balance Claims (ZBCs): Include all ZBCs in the discount guarantee calculation, where ZBCs are measured at the PBM-calculated discounted ingredient cost. b. Retail Generic Discount Guarantees: 'The overall generic discount guarantees must be based on Non- secondary claims, using the actual eleven (11) digit National Drug Code (NDC), submitted by a Participating Pharmacy at the time of adjudication for Federal Legend Drug at the decimal-level quantity dispensed, excluding Compound Prescriptions. Usual and Customary (U&C) claims greater than the member's copay that apply will be excluded from the discount guarantee calculations. Specific 11-digit multi-source drug claims when brand drugs are dispensed will be excluded from the discount guarantee calculations. Single source generic drug claims will be excluded from the generic discount guarantee calculations until such time as multiple manufacturers/distributors of the generic drug exist, or only for the first six months from the day of the first generic drug approval as reported by First DataBank, whichever comes first. The financial impact (e.g. difference in cost between the 157555v1 -37- brand and generic drug plus copay) of additional member payments that apply to multi-source drug claims due to specific mandatory generic penalties will be excluded from the discount guarantee calculations, but the actual discount on the generic drug claims excluding any penalty amount will be included. (b) (i) Generic discount guarantee excluding ZBCs: Exclude all Zero Balance Claims (ZBCs) from the discount guarantee calculation. (Zero Balance Claims are claims whose total cost are equal to or less than the member pay amount.) (b)(ii) Generic discount guarantee including ZBCs: Include Zero Balance Claims (ZBCs) in the discount guarantee calculation, where ZBCs are measured at the PBM-calculated discounted ingredient cost. 4. MAIL SERVICE BRAND AND GENERIC DISCOUNT GUARANTEES IDENTIFIED IN THE CHART BELOW WILL ADHERE TO THE FOLLOWING CRITERIA: a. Mail Service Brand Discount Guarantees: The brand discount guarantees must be based on Non- secondary claims, at the time of adjudication for Federal Legend Drugs at the decimal-level quantity dispensed, excluding Compound Prescriptions. Multi-source drug claims when generic drugs are dispensed will be excluded from the brand discount guarantee calculations. The financial impact (e.g. difference in cost between the brand and generic drug plus copay) of additional member payments that apply to multi-source drug claims due to specific mandatory generic penalties will be excluded from the discount guarantee calculations, but the actual discount on the brand drug claims excluding any penalty amounts will be included. (a)(i) Brand discount guarantee excluding Zero Balance Claims (ZBCs): Exclude all ZBCs from the discount guarantee calculation. (ZBCs are claims whose total cost are equal to or less than the member pay amount.) (a)(ii) Brand discount guarantee including Zero Balance Claims (ZBCs): Include all ZBCs in the discount guarantee calculation, where ZBCs are measured at the PBM-calculated discounted ingredient cost. b. Mail Service Generic Discount Guarantees: The overall generic discount guarantees must be based on Non-secondary claims, at the time of adjudication for Federal Legend Drugs at the decimal-level quantity dispensed, excluding Compound Prescriptions. Multi-source drug claims when brand drugs are dispensed will be excluded from the discount guarantee calculations. Single source generic drug claims will be excluded from the generic discount guarantee calculations until such time as multiple manufacturers/ distributors of the generic drug exist, or only for the first six months from the day of the first generic drug approval as reported by First DataBank, whichever comes first. The financial impact (e.g. difference in cost between the brand and generic drug plus copay) of additional member payments that apply to multi-source drug claims due to specific mandatory generic penalties will be excluded from the discount guarantee calculations, but the actual discount on the generic drug claims excluding any penalty amount will be included. (b)(i) Generic discount guarantee excluding ZBCs: Exclude all Zero Balance Claims (ZBCs) from the discount guarantee calculation. (Zero Balance Claims are claims whose total cost are equal to or less than the member pay amount.) (b)(ii) Generic discount guarantee including ZBCs: Include Zero Balance Claims (ZBCs) in the discount guarantee calculation, where ZBCs are measured at the PBM-calculated discounted ingredient Cost. 157555v1 -38- 5. Calculation of the Guaranteed Pharmacy Network and Mail Service AWP Discounts and Dispensing Fees. The following calculations apply to retail brand, retail generic, mail service brand and mail service generic drug claims (collectively referred to herein as "Pricing Components") where certain types of drug claims (e.g. U&C, ZBC) may be included or excluded from individual calculations as required by the definitions of specific guarantees as set forth in this section Exhibit A. a) AWP Discount Calculations. The actual paid amount by Employer will be calculated separately for each of the Pricing Components by aggregating each Pricing Component's total discounted AWP billed to Employer for drug claims incurred during the Contract Year. The guaranteed AWP discount, for each Pricing Component will be calculated by multiplying the AWP for each drug claim dispensed during the Contract Year by one (1) minus the applicable discount as set forth in the Program Pricing Terms table in this section Exhibit A. (For reference, this can be expressed for each Pricing Component as AWP*(1-guaranteed discount as set forth in the Program Pricing Terms table). b) Dispensing Fee Calculations. No explicit Dispensing Fee will be charged for drug claims paid at U&C. Therefore, U&C drug claims will be excluded from guarantee calculations. Separately for each Pricing Component, the actual average dispensing fee billed to Employer will be calculated by summing all qualifying prescription drug claims divided by the number of qualifying claims. Dispensing fee guarantees will be calculated by multiplying the number of qualifying claims by the applicable fee as set forth in the Program Pricing Terms table in this section Exhibit A. c) True-up Procedure. i) If there is more than one guarantee for a Pricing Component Category (e.g. AWP discount guarantees, one including ZBCs and one excluding ZBCs) then only the guarantee with the greatest financial advantage to Employer, if applicable, will be used for reconciling that specific guarantee. The results for (a) and (b) above will be calculated for each Pricing Component. If an individual calculation results in a negative number (e.g. actual AWP discount or dispensing fee did not meet the guarantee to Employer referenced in this Exhibit A), that Pricing Component will be deemed "in Deficit". Any Pricing Component in Deficit based on the guarantee will be aggregated for payment to Employer in accordance with Section (d) below. Any Pricing Component calculation that results in a positive number (e.g. actual discount or dispensing fee exceeded the guarantee to Employer referenced in this Exhibit A), that Pricing Component will be deemed "in Surplus." No payment will be due PBM by Employer for "in Surplus' amounts. In any event, where more than one calculation is performed for either AWP discount guarantees or dispensing fee guarantees, only the single result in each category with the greatest financial advantage to Employer will be used. ii) If the true-up process reveals a disparity in findings between Employer's Auditor and those of the PBM, the PBM shall provide to Employer and/ or Employer's Auditor, upon request and at no cost, a claim summary file of the disparate claims for each of the Pricing Components subcategorized by analysis rationale (e.g. brand vs. generic classification, single-source generic status, OTC status, etc.). The claim summary file must contain at least the following data elements for each subcategory of each Pricing Component: total number of claims, total dispensing fee, total ingredient cost and total AWP. d) Payments Under Guarantees. Within ninety (90) days following the end of the Contract Year, the calculations described as set forth in this section shall be made and will be consistent with the other requirements or exclusions provided for in this Exhibit A or elsewhere in the Agreement. If the calculations above result in a negative number (e.g., actual AWP discounts or dispensing fees did not meet the guaranteed amounts), then PBM shall credit or pay the absolute value of the negative number is~sss~i -39- within 30 days from the date of mutual agreement by the parties of the reconciliation amount due. If credits apply after termination of this Agreement, then amounts will be reimbursed to Employer by check. If the result of the calculation is positive (e.g., actual AWP discounts and dispensing fees were better than the guaranteed amounts), no amounts shall be due PBM from Employer. e) All AWP pricing guarantees are average annual aggregate guarantees, not per claim guarantees. f) All AWP pricing guarantees are measured, reconciled, and audited in the aggregate across all employer groups (and corresponding utilization) in the Public Sector Coalition that contract with PBM for the pricing arrangement as set forth in this Agreement. 157555v1 -40- Retail Brand AWP Retail Pharmacy Network brand AWP discount guarantee including ZBCs Retail Pharmacy Network brand AWP discount guarantee excluding ZBCs Retail Generic AWP Retail Pharmacy Network generic AWP discount guarantee including ZBCs Retail Pharmacy Network generic AWP discount guarantee excluding ZBCs Retail Dispensing Fees Retail Pharmacy Network brand Dispensing Fee guarantee Retail Pharmacy Network generic Dispensing Fee guarantee Retail Non-Drug and OTC's Guaranteed retail OTC non-drug items discount off AWP Guaranteed retail federal legend non- drug items discount off AWP Guaranteed retail OTC drug items discount off AWP Mail Service Brand AWP Mail Service Pharmacy brand AWP discount guarantee including ZBCs Mail Service Pharmacy brand AWP discount guarantee excluding ZBCs Mail Service Generic AWP Mail Service Pharmacy generic AWP discount guarantee including ZBCs Mail Service Pharmacy generic AWP discount guarantee excluding ZBCs Measured individually (i.e., including ZBCs /Excluding ZBCs), and then reconciled consistent with the terms of Section 5(c)(i) above Measured individually (i.e., including ZBCs /Excluding ZBCs), and then reconciled consistent with the terms of Section 5(c)(i) above Measured and reconciled individually Measured and reconciled individually Measured and reconciled individually Measured and reconciled individually Measured and reconciled individually Measured individually (i.e., including ZBCs /Excluding ZBCs), and then reconciled consistent with the terms of Section 5(c)(i) above Measured individually (i.e., including ZBCs /Excluding ZBCs), and then reconciled consistent with the terms of Section 5(c)(i) above isnss~i -41- Mail Dis ensin Fees Mail Service Pharmacy brand Measured and reconciled individually Dis ensin Fee arantee Mail Service Pharmacy generic Measured and reconciled individually dis ensin fee arantee Mail Non-Dru and OTC's Guaranteed mail service OTC non- Measured and reconciled individually dru items discount off AWP Guaranteed mail service federal Measured and reconciled individually legend non-drug items discount off AWP Guaranteed mail service OTC drug Measured and reconciled individually items discount off AWP PBM shall not use AWPs of licensed repackagers as a cost basis for calculating AWP discounts and charging Employer for Mail Service Pharmacy discounts. 7. PBM's MAC list of products is identical for all programs and delivery channels, and MAC pricing is the same or better for prescriptions dispensed via the Mail Service Pharmacy. 8. PBM shall not charge Employer and/ or Member dispensing fees on U&C Prescription Drug Claims. PBM will charge Employer for pharmacy network claims at the lower of the following less Member Copayments or Deductibles: i. Participating pharmacies usual & customary (U&C) price ii. AWP discount (ingredient cost) plus the guaranteed dispensing fee, if applicable, or iii. Maximum allowable cost (MAC) plus the guaranteed dispensing fee, if applicable 10. PBM shall provide a pharmacy network whereby the Members are always charged, in all cases, the lower of the following: i. Participating pharmacies usual & customary (U&C) price, or ii. AWP discount/MAC (ingredient cost) plus the guaranteed dispensing fee, if applicaY or iii. Copayrnent 11. On Mail Service claims, PBM will charge Employer in all cases the lower of i. AWP discount plus guaranteed dispensing fee if applicable or ii. MAC plus guaranteed dispensing fee if applicable 12. On Mail Service claims, PBM will charge the member in all cases the lower of the following: i. AWP discount plus dispensing fee or, ii. MAC plus dispensing fee or, iii. Copay 13. Third Party Commissions and Consulting Fees. Employer hereby directs and authorizes PBM to facilitate the payment of commissions of $0.12 per Prescription Drug Claim to Gallagher Benefits Services, Inc. is~sss~i -42- ("Gallagher"), and consulting fees of $0.18 per Prescription Drug Claim to Thomson Reuters (Healthcare) Inc. (formally known as Trivantage Pharmacy Strategies) ("Consultant") on behalf of Employer for the broker, consulting and related services such parties provide to Employer. ESI agrees to facilitate the commissions and consulting fees subject to the following: (a) Employer has executed this Agreement, and Employer is current in its payment obligations to PBM. PBM understands that Employer may direct PBM to cease paying commissions and/or consulting fees, and Employer shall hold PBM harmless with respect to any dispute between Employer and Gallagher or Consultant regarding the payments if PBM has paid the applicable commission or consulting fees in accordance with the terms above. Except as provided herein, commissions and consulting fees are paid on a quarterly basis within 30 days from the end of each contract quarter for the term of the agreement, including renewals. (b) Employer hereby represents and warrants that the commissions and consulting fees are fair and reasonable, commensurate with other standard commissions in the industry and not in violation of any law or regulation, including ERISA. PBM will not pay per prescription commissions on Medicare subsidy utilization. 14. PBM represents that the table below is a list of all PBM revenue sources. REVENUE SOURCES Category Revenue Source: 1 Administrative (claims rocessin )Fee No 2 Retail Brand Dru AWP Discounts Yes 3 Retail Generic Drug AWP Discounts Yes 4 Retail Brand Dru Dispensin Fees Yes 5 Retail Generic Drug Dispensing Fees Yes 6 Mail Brand Drug AWP Discounts Yes 7 Mail Generic Drug AWP Discounts Yes 8 Mail Brand Dru Dis ensin Fees No 9 Mail Generic Dru Dispensing Fees No 10 Specialty Dru AWP Discounts Yes 11 Specialty Drug Dispensing Fees Yes 12 Rebates Yes 13 Third Party Data Sales No 14 Optional Clinical Program Fees Yes 15 Other Revenue Source(s): (Describe): Yes 157555v1 -43- 15. Program pricing terms-national network Service Items Associated Fees/Comments 1 Minimum number of pharmacies in network 50,000 50,000 Rates effective prior to Rates effective as of the the Pricing Index Change Pricing Index Change Date Date 2 Retail paid claim administration fee $0.00 $0.00 3 Mail service paid claim $0.00 administration fee $0.00 4 Rejected claim administration fee $0.00 (Retail & Mail) $0.00 5 Claim reversals Redos) $0.00 $0.00 6A Guaranteed retail network brand discount off AWP (exclude usual and customary (U&C) and zero balance claims) AWP-18% AWP -14.90% 6B Guaranteed retail network brand discount off AWP (exclude usual and customary (UBiC) and include zero balance claims) AWP-18% AWP -14.90% 6C Guaranteed retail maintenance network brand discount off AWP (exclude usual and customary (U&C) and zero balance claims) AWP-21% AWP-18.02% 6D Guaranteed retail maintenance network brand discount off AWP (exclude usual and customary (U&C) and include zero balance claims) AWP-21% AWP-18.02% 7A Guaranteed retail network brand dispensing fee $1.20/Rx $1.20/Rx 7B Guaranteed retail maintenance network brand dispensing fee $0.40/Rx $0.40/Rx 157555v1 -44- 8 Retail network generic discount off Retail AWP-18% Retail AWP-14.9% AWP (non-MAC) Retail Maintenance AWP Retail Maintenance AWP -21% -18.02% 9A Guaranteed retail network generic dispensing fee $1.30/Rx $1.30/Rx 9B Guaranteed retail maintenance network generic dispensing fee $0.50/Rx $0.50/Rx 10 Percentage of all available generics on maximum allowable cost (MAC) list for Employer 98.86% 98.8b% 11 Overall retail MAC discount off AWP (includes zero balance claims) AWP-64 % AWP-64 12A Guaranteed overall retail network generic discount off AWP (include MAC and non-MAC, exclude U&C and zero balance claims) AWP-64% AWP-64% 12B Guaranteed overall retail network generic discount off AWP (include MAC, non-MAC, and zero balance claims, exclude U&C) AWP-64% AWP-64% 12C Guaranteed overall retail maintenance network generic discount off AWP (include MAC and non-MAC, exclude U&C and zero balance claims) AWP-b4% AWP-64% 12D Guaranteed overall retail maintenance network generic discount off AWP (include MAC, non-MAC, and zero balance claims, exclude U&C) AWP-64% AWP-b-364% 13 Guaranteed retail OTC non-drug Retail Network AWP-18% Retail Network AWP- items discount off AWP Retail Maintenance 14.90% Network AWP-21 % Retail Maintenance Network AWP-18.02% 14 Guaranteed retail federal legend Retail Network AWP-18% Retail Network AWP- non-drug items discount off AWP Retail Maintenance 14.90% Network AWP-21 % Retail Maintenance Network AWP-18.02% 15 Guaranteed retail OTC drug items Retail Network AWP-18% Retail Network AWP- discount off AWP Retail Maintenance 14.90% Network AWP-21 % Retail Maintenance Network AWP-18.02% 157555v1 -45- 16 Is there a price differential Yes Yes between the amount billed to Employer and the amount paid to the harmac for brand dnx s? 17 Is there a price differential Yes Yes between the amount billed to Employer and the amount paid to the harmac for eneric dru s? 18A Guaranteed mail service brand discount off AWP (exclude zero balance claims) AWP-25.5 % AWP-22.61 18B Guaranteed mail service brand discount off AWP (include zero balance claims) AWP-25.5 % AWP-22.61 19 Guaranteed mail service brand dispensing fee $0.00 $0.00 20A Guaranteed mail service generic MAC with a minimum MAC with a minimum discount off AWP (exclude zero overall guarantee of overall guarantee of balance claims) AWP- 68 % AWP- 68 20B Guaranteed mail service generic MAC with a minimum MAC with a minimum discount off AWP (include zero overall guarantee of overall guarantee of balance claims) AWP- 68 % AWP- 68 21 Guaranteed mail service generic $0.00 $0.00 dispensing fee 22 Overall mail service MAC discount off AWP (includes zero balance claims) AWP-70 % AWP-70 23 Guaranteed mail service OTC non- drug items discount off AWP AWP-25.5% AWP-22.61 24 Guaranteed mail service federal legend non-drug items discount off AWP AWP-25.5 % AWP-22.61 25 Guaranteed mail service OTC drug items discount off AWP AWP-25.5% AWP-22.61% 26A Open formulary rebate % share $12.00 per brand claim $12.00 per brand claim and per retail claim (all Plan and Member paid claims) guarantee including funded discount ro am claims 26B Open formulary rebate % share $12.00 per brand claim $12.00 per brand claim and per retail maintenance claim (all Plan and Member paid claims) guarantee including funded discount ro am claims is~sssvi -46- 27 Open formulary rebate% share and $36.00 per brand claim $36.00 per brand claim per mail claim (all Plan and Member paid claims) guarantee including funded discount ro am claims 2811 Incentivized formulary rebate % $16.00 per brand claim $16.00 per brand claim share and per retail claim (all Plan and Member paid claims) guarantee 28B Incentivized formulary rebate % $16.00 per brand claim $16.00 per brand claim share and per retail maintenance claim (all Plan and Member paid claims) guarantee 29 Incentivized formulary rebate % $48.00 per brand claim $48.00 per brand claim share and per mail claim (all Plan and Member paid claims) guarantee 30 Member-submitted (paper) claim $2.50/claim $2.50/claim administration fee 31 COB claim administration fee Included Included 32 Electronic COB claim Included Included administration fee 33 Medicaid claims administration fee $2.50 per Medicaid $2.50 per Medicaid (does not apply to Network Subrogation claim Subrogation claim Rental) 34 Toll-free number for members Included Included 35 Member communication materials Included Included 36 Initial Member Identification (ID) Included Included cards 37 Replacement ID cards $1.50 plus postage per $1.50 plus postage per packet, Included if packet, Included if printed by Employer via printed by Employer via the Web the Web 38 Combination Medical & Drug ID Included Included cards 38 Cards mailed to Employer Included Included including communication materials 40 Cards mailed to members Included Included including communication materials 41 Concurrent DUR Included Included 42 Retrospective DUR $0.03per rx, $0.02 per rx $0.03per rx, $0.02 per rx for seniors for seniors 43 Disease management programs Asthma - $0.01 per claim, Asthma - $0.01 per claim, er ro am Cardiovascular Disease - Cardiovascular Disease - 157555v1 -47- $0.01 per claim, CHF - $0.02 $0.01 per claim, CHF - $0.02 per claim, Depression - $0.02 per claim, Depression - $0.02 per claim, Diabetes - $0.01 per claim, Diabetes - $0.01 per claim, GI Disease - $0.03 per claim, GI Disease - $0.03 per claim, Hypertension - per claim, Hypertension - $0.02 per claim, Migraine - $0.02 per claim, Migraine - $0.02 per claim, DM suites - $0.02 per claim, DM suites - riced u on re uest riced u on re uest 44 Administrative authorizations (e.g. Included Included lost/ stolen, vacation overrides) 45 Clinical prior authorizations Clinical Base list - Clinical Base list - Included Included Clinical Supplement list - Clinical Supplement list - $0.03pmpm $0.03pmpm Other Clinical overrides - Other Clinical overrides - $20 per review or $25 per $20 per review or $25 per h sician review h sician review 46 Ste thera edits Varies b module Varies b module 47 12 month Claim history load: 47A Claim rocessin warehouse Included Included 47B Prior Auth/Deductible/ etc Included Included 47C Re ortin warehouse Included Included 48 Annual benefit statement, Included Included including lower cost alternatives 49 Benefit appeal reviews Clinical appeals $350 per Clinical appeals $350 per review review Non-Clinical appeals $160 Non-Clinical appeals $160 er review er review 50 Pharmac hel desk access Included Included 51 Electronic eli 'bill submission Included Included 52 Access to online eli 'bill s stem Included Included 53 Manual (hardcopy) eligibility $1.00 per update (includes $1.00 per update (includes submission initial entry initial entr ) 54 Claims detail file provided to Included Included Employer and/ or designee once weekl and annuall . 55 Standard reports provided Included Included quarterly (printed, CD, or Internet access) 56 Online re orts run b Em to er Included Included 57 Software provided for online NA as reporting system is NA as reporting system is re ort s stem online online 58 Trainin for online re ort s stem Included Included 59 Custom/ad hoc report requests $150 per hour with a $150 per hour with a minimum of $500 minimum of $500 60 Pharmac directories Included online Included online 61 Specialty pharmacy products filled Refer to the Specialty Refer to the Specialty at s ecial harmac Pharmac Pricin Chart Pharmac Pricin Chart is~sss~i -48- 62 Specialty pharmacy dispensing fee $0.00 $0.00 at s ecial harmac ) 63 Specialty pharmacy products filled Varies by specialty drug Varies by specialty drug at retail network pharmacy See AWP converted drug See AWP converted drug (include dispensing fee) table table lus $2.00 dis ensin fee lus $2.00 dis ensin fee 64 Discount program -funded Standard Discount Standard Discount Guarantees a 1 Guarantees a 1 65 Discount program -unfunded Retail Retail Brand AWP-14.5% +$2.15 Brand AWP-11.27% dispensing fee +$2.15 dispensing fee Generic Lower of MRA, Generic Lower of MRA, U/C or AWP -14.5% plus U/C or AWP -11.27% $2.15 dispensing fee plus $2.15 dispensing fee Mail Mail Brand AWP- 24% +$0.00 Brand AWP- 21.05% dispensing fee +$0.00 dispensing fee Generic AWP - 58% + Generic AWP - 58% + $0.00 dispensing fee $0.00 dispensing fee Adnnistration Fee $0.90 Administration Fee $0.90 per claim per claim Rebates $0.75 per retail Rebates $0.75 per retail claim, $5.00 per mail claim, $5.00 per mail claim claim 66 Generic dispensing rate guarantee Retail - Yr 1: 68%, Yr 2: Retail - Yr 1: 68%, Yr 2: (include penalty for not meeting +0.5% increase of Year 1 +0.5% increase of Year 1 the guarantee) actual, Yr 3: +0.5% increase actual, Yr 3: +0.5% increase of Year 2 actual; Mail Service of Year 2 actual; Mail Service This generic dispensing rate - Yr 1: 56 %, Yr 2: +0.5 % - Yr 1: 56 %, Yr 2: +0.5 guarantee does not apply to the increase of Year 1 actual, Yr increase of Year 1 actual, Yr 3: +0.5% increase of Year 2 3: +0.5% increase of Year 2 Discount program-unfunded actual; Penalty Factors: actual; Penalty Factors: Retail - Yr 1: $84.27, Yr 2: Retail - Yr 1: $84.27, Yr 2: $92.36, Yr 3: $100.42; Mail $92.36, Yr 3: $100.42; Mail Service - Yr 1: $200.96, Yr 2: Service - Yr 1: $200.96, Yr 2: $217.23, Yr 3: $232.58 $217.23, Yr 3: $232.58 67 Any other services not included Web-based client reporting Web-based client reporting above produced by ESI - No produced by ESI - No charge; Part D Subsidy (ESI charge; Part D Subsidy (ESI sends reports to CMS) - sends reports to CMS) - $1.12 PMPM for Medicare- $1.12 PMPM for Medicare- qualified members with a qualified members with a minimum annual fee of minimum annual fee of $7,500; Part D Notice of $7,500; Part D Notice of Creditable Coverage - Creditable Coverage - $1.35/letter + postage; Part $1.35/letter + postage; Part D Subsidy standard service D Subsidy standard service (ESI send report to Public (ESI send report to Public Sector) - $0.62 PMPM for Sector) - $0.62 PMPM for Medicare- ualified members Medicare- ualified members 157555v1 -49- with a minimum annual fee with a minimum annual fee of $5,000; Part D using of $5,000; Part D using Outside Cost Outside Cost Reporter/ Vendor (ESI Reporter/ Vendor (ESI provides final rebate figures) provides final rebate figures) - $0.42 PMPM; Part B - $0.42 PMPM; Part B services (retail and mail services (retail and mail benefit) - $0.42 PMPM for benefit) - $0.42 PMPM for Medicare-qualified Medicare-qualified members; Trend members; Trend Management Management Programs:Drug Quantity Programs:Drug Quantity Management $0.02 PMPM, Management $0.02 PMPM, Formulary Rapid Response - Formulary Rapid Response - $0.01 PMPM, $0 Generic $0.01 PMPM, $0 Generic Copay - $1.25/member Copay - $1.25/member mailing or $1,000 for mailing or $1,000 for member identification and member identification and authorization; Managing authorization; Managing Medication Therapy and Medication Therapy and Safety: Medication Safety: Medication Adherence - $0.02 PMPM for Adherence - $0.02 PMPM for all 7 modules, RxPredict$ - all 7 modules, RxPredict$ - $0.05 PMPM for 6 months $0.05 PMPM for 6 months each time the report is run, each time the report is run, subsequent charge for subsequent charge for second report, minimum second report, minimum char e of $3,000 char e of $3,000 16. Specialty pharmacy pricing- Exclusive Express Scripts' Exclusive specialty option is designed to offer clients maximum cost savings and superior patient care. Under this option, patients obtain all specialty medications through our CuraScript specialty pharmacy at the reimbursement rates set forth below. Specialty drugs will not be available through other pharmacies except for: • limited distribution products not available at CuraScript • initial courtesy fills as allowed by Sponsor's plan design, and overrides for urgent situations. Open Under the Open specialty option, patients may obtain specialty products through either our CuraScript specialty pharmacy, when available, or participating pharmacies at the reimbursement rates set forth below. is~sss~i -50- STANDARD DISCOUNTS: Except for the specific items listed in the Exceptions or Limited Distribution tables below, Specialty drugs will have the following discounts: Distribution Channel Standazd Discounts Dis ensin "` Fee ' i CuraScript • Exclusive The lower of: • AWP -17%, or $0.00 • MRA • Open The lower of: • AWP -15%, or $0.00 • MRA Participating Pharmacies The lower of: • AWP -15% plus Dispensing Fee $2.00 • 1VIRA plus Dispensing Fee or • U&C Specialty products will not be available through the Express Scripts Mail Service Pharmacy. Limited Distribution Drugs Distribution of a small number of all specialty drugs is limited by the manufacturer to specific pharmacy providers. The drugs, listed below, are not available through CuraScript. If CuraScript receives a prescription for one of the following Limited Distribution medications, CuraScript will: • Determine the pharmacy that is able to dispense the medication. • Validate that the pharmacy is contracted to provide the medication based on the patient's insurance information and will: o Work with the patient and prescribing physician to initiate the transfer of the script to the appropriate pharmacy for fulfillment, or o Provide the patient and physician with information regarding possible patient assistance programs. The cost of the medication will be billed through your regular invoice if it is a covered product. Drug Name ADAGEN FLOLAN REMODULIN APOKYN KEPNANCE SOMAVERT ARALAST MIRENA VENTAVIS ARCALYST ORFADIN XYREM BEXXAR ORTHOCLONE OKT-3 ZEMAIRA CEPROTIN PRIVIGEN ZEVALIN EXJADE PROLASTIN Exceptions to Standard Pricing The following specialty drugs have the discounts shown for each distribution channel. Shaded cells indicate the Standard pricing above applies for the channel indicated. 157555v1 -51- -Rates effective rior to the Pricin Index Chan a-Date Full Name ~ Retail Curascri t 0 en `" r ~._x s. - ~~ Curascri f Exclusive, 8-MOP 15% 15% 17% ABRAXANE 15% 15% 17% ACTHAR H.P. 15% 15% 17% ACTIMMUNE 15% 15% 17% ADAGEN 15% LIMITED DISTRIBUTION LIMITED DISTRIBUTION ADRIAMYCIN 15% 15% 17% ADRUCIL 15% 15% 17% ADVATE 15% 25% 26% AFINITOR 15% 15% 17% ALDURAZYME 15% 15% 17% ALFERON N 15% 15% 17% ALIMTA 15% 15% 17% ALKERAN 15% 15% 17% ALPHANATE 15% 25% 26% ALPHANINE SD 15% 25% 26% AMEVIVE 15% 15% 17% AMIFOSTINE 15% 15% 17% APOKYN 15% LIMITED DISTRIBUTION LIMITED DISTRIBUTION ARALAST 15% LIMITED DISTRIBUTION LIMITED DISTRIBUTION ARANESP 15% 15% 17% ARCALYST 15% LIMITED DISTRIBUTION LIMITED DISTRIBUTION AREDIA 15% 15% 17% ARIXTRA 15% 15% 17% ARRANON 15% 15% 17% ATGAM 15% 15% 15% AVASTIN 15% 15% 17% AVONEX 15% 15% 17% BAYHEP B 15% 15% 17% BEBULIN VH 15% 15% 16% BENEFIX 15% 15% 16% BETASERON 15% 15% 17% BEXXAR 15% LIMITED DISTRIBUTION LIMITED DISTRIBUTION BICNU 15% 15% 17% BLENOXANE 15% 15% 17% BLEOMYCIN SULFATE 15% 15% 17% BONIVA 13% 13% 15% BOTOX 15% 15% 15% BOTOX COSMETIC 15% 15% 15% BRAVELLE 15% 15% 17% 157555v1 -52- BUSULFEX 15% 15% 17% CAMPATH 15% 15% 17% CAMPTOSAR 15% 15% 17% CARBOPLATIN 15% 15% 17% CARIMUNE NF NANOFILTERED 15% 15% 17% CELLCEPT 15% 15% 15% CEPROTIN 15% LIMITED DISTRIBUTION LIMITED DISTRIBUTION CEREDASE 15% 15% 17% CEREZYME 15% 15% 17% CERUBIDINE 15% 15% 17% CETROTIDE 15% 15% 17% CHORIONIC GONADOTROPIN 15% 15% 17% CIMZIA 15% 15% 15% CINRYZE 10% 10% 12% CISPLATIN 15% 15% 17% CLADRIBINE 15% 15% 17% COPAXONE 15% 15% 17% COPEGUS 15% 15% 17% COSMEGEN 15% 15% 17% CYCLOPHOSPHAMIDE 15% 15% 17% CYCLOSPORINE 15% 15% 15% CYTARABINE 15% 15% 17% CYTOGAM 15% 15% 17% CYTOXAN 15% 15% 17% DACARBAZINE 15% 15% 17% DACOGEN 15% 15% 17% DAUNORUBICIN HCL 15% 15% 17% DAUNOXOME 15% 15% 17% DDAVP 15% 15% 17% DEFEROXAMINE MESYLATE 15% 15% 17% DEGARELIX 15% 15% 15% DEPOCYT 15% 15% 17% DESFERAL 15% 15% 17% DESMOPRESSIN ACETATE 15% 15% 17% DEXRAZOXANE 15% 15% 17% DOXIL 15% 15% 17% DOXORUBICIN HCL 15% 15% 17% DTIC-DOME IV 15% 15% 17% ELAPRASE 15% 15% 17% ELIGARD 15% 15% 17% ELITEK 15% 15% 17% ELLENCE 15% 15% 17% ELOXATIN 15% 15% 17% ELSPAR ENBREL 15% 15% 15% 15% 17% 17% EPIRUBICIN HCL 15% 15% 17% EPOGEN 15% 15% 17% 157555v1 -53- EPOPROSTENOL 15% LIMITED DISTRIBUTION * LIMITED DISTRIBUTION * ERBITUX 15% 15% 17% ETHYOL 15% 15% 17% ETOPOPHOS 15% 15% 17% ETOPOSIDE 15% 15% 17% EUFLEXXA 15% 15% 15% EXJADE 15% LIMITED DISTRIBUTION LIMITED DISTRIBUTION FABRAZYME 15% 15% 17% FASLODEX 15% 15% 17% FEIBA VH 15% 25% 26% FLEBOGAMMA 15% 15% 17% FLEBOGAMMA DIF 15% 15% 17% FLOLAN 15% LIMITED DISTRIBUTION LIMITED DISTRIBUTION FLOXURIDINE 15% 15% 17% FLUDARA 15% 15% 17% FLUDARABINE PHOSPHATE 15% 15% 17% FLUOROURACIL 15% 15% 17% FOLLISTIM AO 15% 15% 17% FORTED 13% 13% 13°/a FRAGMIN 15% 15% 17% FUDR 15% 15% 17% FUSILEV 15% 15% 17% FUZEON 15% 15% 17% GAMASTAN 15% 15% 17% GAMMAGARD LIQUID 15% 15% 17% GAMMAGARD S/D 15% 15% 17% GAMUNEX 15% 15% 17% GANIRELIX ACETATE 15% 15% 17% GEMZAR 15% 15% 17% GENOTROPIN 15% 15% 17% GEREF DIAGNOSTIC 15% 15% 17% GLEEVEC 15% 15% 17% GONAL-F 15% 15% 17% GONAL-F RFF 15% 15% 17% HEALON 15% 15% 17% HEALON GV 15% 15% 17% HELIXATE FS 15% 25% 26% HEMOFIL M 15% 25% 26% HEPAGAM B 15% 15% 17% HERCEPTIN 15% 15% 17% HUMATE-P 15% 25% 26% HUMATROPE HUMIRA 15% 15% 15% 15% 17% 17% HYALGAN 15% 15% 15% HYCAMTI N 15% 15% 17% HYPERHEP B S/D 15% 15% 17% HYPERRAB S/D HYPERRHO S/D 15% 15% 15% 15% 17% 17% 157555v1 -54- IDAMYCIN PFS 15% 15% 17% IDARUBICIN HCL 15% 15% 17% IFEX 15% 15% 17% IFEX/MESNEX 15% 15% 17% IFOSFAMIDE 15% 15% 17% IFOSFAMIDE/MESNA 15% 15% 17% IMMUNE GLOBULIN 15% 15% 17% IMOGAM RABIES-HT 15% 15% 17% IMPLANON 0% 0% 3% INCRELEX 15% 15% 17°/a INFERGEN 15% 15% 17% INNOHEP 15% 15% 17% INTRON A 15% 15% 17% IRESSA 13% 13% 14% IRINOTECAN HCL 15% 15% 17% IXEMPRA 15% 15% 17% KEPIVANCE 15% LIMITED DISTRIBUTION LIMITED DISTRIBUTION KINERET 15% 15°/a 17% KOATE-DVI 15% 25% 26% KOGENATE FS 15% 25% 26% KUVAN 15% 15% 17% LETAIRIS 15% 15% 17% LEUCOVORIN CALCIUM 15% 15% 17% LEUKINE 15% 15% 17% LEUPROLIDE ACETATE 15% 15% 17% LEUSTATIN 15% 15% 17% LOVENOX 15% 15% 17% LUCENTIS 15% 15% 17% LUPRON 15% 15% 15% LUPRON DEPOT 15% 15% 15% LUPRON DEPOT-PED 15% 15% 15% LUVERIS 15% 15% 17% MACUGEN 15% 15% 17% MENOPUR 15% 15% 17% MESNA 15% 15% 17% MESNEX 15% 15% 17% METHOTREXATE 15% 15% 15% MICRHOGAM 15% 15% 17% MIRENA MITOMYCIN 15% 15% LIMITED DISTRIBUTION 15% LIMITED DISTRIBUTION 17% MITOXANTRONE HCL 15% 15% 17% MONARC-M 15% 25% 26% MONOCLATE-P 15% - 25% 26% MONONINE 15% 25% 26% MOZOBIL 15% 15% 17% MUSTARGEN MUTAMYCIN 15% 15% 15% 15% 17% 17% MYLOTARG 15% 15% 17% 157555v1 -55- MYOBLOC 15% 15% 15% MYOZYME 15% 15% 17% NABI-HB 15% 15% 17% NAGLAZYME 15% 15% 17% NATRECOR 15°/a 15% 17% NAVELBINE 15% 15% 17% NEULASTA 15% 15°/a 17% NEUMEGA 15% 15% 17% NEUPOGEN 15% 15% 17% NEXAVAR 15% 15% 17% NIPENT 15% 15% 17% NORDITROPIN 15% 15% 17% NORDITROPIN NORDIFLEX 15% 15% 17% NOVANTRONE 15% 15% 17% NOVAREL 15% 15% 17% NOVOSEVEN 15°/a 25% 26% NPLATE 15% 15% 17% NUTROPIN 15% 15% 17% NUTROPIN AO 15% 15% 17% OCTAGAM 15% 15% 17% OCTREOTIDE ACETATE 15% 15% 17% OMNITROPE 15% 15% 17% ONCASPAR 15% 15% 17% ONTAK 15% 15% 17% ONXOL 15% 15% 17% ORENCIA 15% 15% 17% ORFADIN 15% LIMITED DISTRIBUTION LIMITED DISTRIBUTION ORTHOCLONE OKT-3 15% LIMITED DISTRIBUTION LIMITED DISTRIBUTION ORTHOVISC 15% 15% 15% OVIDREL 15% 15% 17% PACLITAXEL 15% 15% 17% PAMIDRONATE DISODIUM 15% 15% 17% PANRETIN 15% 15% 17% PARAPLATIN 15% 15% 17°/a PEGASYS 15% 15% 17% PEG-INTRON PEG-I NTRON REDIPEN 15% 15% 15% 15% 17% 17% PHOTOFRIN 15% 15% 17% PLENAXIS 15% 15% 17% POLYGAM S/D 15% 15% 17% PREGNYL 15% 15% 17% PRIALT 15% 15% 17% PRIVIGEN 15% 15% 17% PROCRIT 15% 15% 17% PROFILNINE SD PROGESTERONE 15% 15% 25% 15% 26% 17% PROGESTERONE IN OIL 15% 15% 17% 157555v1 -56- PROGRAF 15% 15% 15% PROLASTIN 15% LIMITED DISTRIBUTION LIMITED DISTRIBUTION PROLEUKIN 15% 15% 17% PROMACTA 15% 15% 17% PROVISO 15% 15% 17% PULMOZYME 15% 15% 17% RAPTIVA 15% 15% 17% REBETOL 15% 15% 17% REBIF 15% 15% 17% RECLAST 13% 13% 15% RECOMBINATE 15% 25% 26% REFACTO 15% 15% 16% REFLUDAN 15% 15% 17% REMICADE 15% 15% 17% REMODULIN 15% LIMITED DISTRIBUTION * LIMITED DISTRIBUTION REPRONEX 15% 15% 17% RETROVIR IV 15% 15% 17% REVATIO 15% 15% 17% REVLIMID 15% 15% 17°/a RHOGAM 15% 15% 17% RHOGAM PLUS 15% 15% 17% RHOPHYLAC 15% 15% 17% RIBAPAK 15% 25% 30% RIBASPHERE 15% 25% 30% RIBATAB 15% 25% 30% RIBAVIRIN 15% 50% 55% RILUTEK 15% 15% 17% RITUXAN 15% 15% 17% ROFERON-A 15% 15% 17% SAIZEN 15% 15% 17% SANDIMMUNE 15% 15% 15% SANDOSTATIN 15% 15% 17% SANDOSTATIN LAR 15% 15% 17% SEROSTIM SIMPONI 15% 15% 15% 15% 17% 16% SIMULECT 15% 15% 17% SOLIRIS 15% 15% 17% SOMATULINE DEPOT 15% 15% 17% SOMAVERT 10% 15% 16% SPRYCEL 15% 15% 17% SUCRAID 15% 15°/a 17% SUPARTZ 15% 15% 15% SUPPRELIN LA 15% 15% 17% SUTENT 15% 15% 17% SYNAGIS 15% 15% 17% SYNVISC TARABINE PFS 15% 15% 15% 15% 15% 17% TARCEVA 15% 15% 17% TASIGNA 15% 15% 17% 157555v1 -57- TAXOL 15% 15% 17% TAXOTERE 15% 15% 17% TEMODAR 15% 15% 17% TEV-TROPIN 15% 15% 17% THALOMID 15% 15% 17% THERACYS 15% 15% 17% THIOTEPA 15°/a 15% 17% THYMOGLOBULIN 15% 15% 17% THYROGEN 15% 15% 17% TOBI 15% 15% 17% TOPOSAR 15% 15% 17% TORISEL 15% 15% 17% TRACLEER 15% 15% 17% TREANDA 15% 15% 17% TRELSTAR DEPOT 15% 15% 17% TRELSTAR LA 15% 15% 17% TRISENOX 15% 15% 17% TYKERB 15% 15% 17% TYSABRI 15% 15% 17% VANTAS 15% 15% 17% VARICELLA-ZOSTER IMM GLOBULIN 15% 15% 17% VECTIBIX 15% 15% 17% VELCADE 15% 15% 17% VENTAVIS 15% LIMITED DISTRIBUTION LIMITED DISTRIBUTION VIADUR 15% 15% 17% VIDAZA 15% 15% 17% VINBLASTINE SULFATE 15% 15% 17% VINCRISTINE SULFATE 15% 15% 17% VINORELBINE TARTRATE 15% 15% 17% VISUDYNE VIVAGLOBIN 15% 15% 15% 15% 17% 17% VIVITROL 15% 15% 17% VUMON 15% 15% 17% WINRHO SDF 15% 15% 17% XELODA 15% 15% 17% XENAZINE 15% 15% 17% XOLAIR 15% 15% 17% XYNTHA 15% 25% 26% XYREM 12% 13% 13.5% ZANOSAR 15% 15% 17% ZAVESCA 15% 15% 17% ZEMAIRA 15% LIMITED DISTRIBUTION LIMITED DISTRIBUTION ZENAPAX 15% 15% 15% ZEVALIN ZINECARD 15% 15% LIMITED DISTRIBUTION 15% LIMITED DISTRIBUTION 17% ZOLADEX 15% 15% 17% ZOLINZA 15% 15% 17% 157555v1 -58- ZOMETA 15% 15% 17% ZORBTIVE 15% 15% 17% Rates effective as of the Pricin Index Chan e Date Full Name Retail Curascri t O en Curascri~ t Exclusi ve 8-MOP 11.46% 11.46% 13.54% ABRAXANE 11.46% 11.46% 13.54% ACTHAR H.P. 11.46% 11.46% 13.54% ACTIMMUNE 15.00% 15.00% 17.00% ADAGEN 15.00% LTD DIST LTD DIST ADRIAMYCIN 11.46% 11.46% 13.54% ADRUCIL 11.43% 11.43% 13.51 ADVATE 11.46% 21.88% 22.92% AFINITOR 11.46% 11.46% 13.54% ALDURAZYME 11.46% 11.46% 13.54% ALFERON N 11.46% 11.46% 13.54% ALIMTA 11.46% 11.46% 13.54% ALKERAN 11.46% 11.46% 13.54% ALPHANATE 11.14% 21.59% 22.64% ALPHANINE SD 11.41% 21.83% 22.87% AMEVIVE 11.46% 11.46% 13.54% AMIFOSTINE 11.46% 11.46% 13.54% APOKYN 11.46% LTD DIST LTD DIST ARALAST 9.90% LTD DIST LTD DIST ARANESP 11.46% 11.46% 13.54% ARCALYST 11.46% LTD DIST LTD DIST AREDIA 11.46% 11.46% 13.54% ARIXTRA 11.45% 11.45% 13.53% ARRANON 11.46% 11.46% 13.54% ATGAM 11.46% 11.46% 11.46% AVASTIN 11.46% 11.46% 13.54% AVONEX 11.46% 11.46% 13.54% BAYHEP B 15.00% 15.00% 17.00% BEBULIN VH 10.87% 10.87% 11.92% BENEFIX 11.06% 11.06% 12.11% BETASERON 11.46% 11.46% 13.54% BEXXAR 11.46% LTD DIST LTD DIST BICNU 11.46% 11.46% 13.54% BLENOXANE 11.46% 11.46% 13.54% BLEOMYCIN SULFATE 11.46% 11.46% 13.54% BONIVA 9.38% 9.38% 11.46% BOTOX 11.46% 11.46% 11.46% BOTOX COSMETIC 11.46% 11.46% 11.46% BRAVELLE 11.46% 11.46% 13.54% BUSULFEX 11.46% 11.46% 13.54% 157555v1 -59- CAMPATH 11.46% 11.46% 13.54% CAMPTOSAR 11.46% 11.46% 13.54% CARBOPLATIN 11.46% 11.46% 13.54% CARIMUNE NF NANOFILTERED 15.00% 15.00% 17.00% CELLCEPT 11.46% 11.46% 11.46% CEPROTIN 11.30% LTD DIST LTD DIST CEREDASE 11.46% 11.46% 13.54% CEREZYME 11.46% 11.46% 13.54% CERUBIDINE 11.46% 11.46% 13.54% CETROTIDE 11.46% 11.46% 13.54% CHORIONIC GONADOTROPIN 11.45% 11.45% 13.54% CIMZIA 11.46% 11.46% 11.46% CINRYZE 6.25% 6.25% 8.33% CISPLATIN 11.46% 11.46% 13.54% CLADRIBINE 11.46% 11.46% 13.54% COPAXONE 11.46% 11.46% 13.54% COPEGUS 11.46% 11.46% 13.54% COSMEGEN 11.46% 11.46% 13.54% CYCLOPHOSPHAMIDE 11.47% 11.47% 13.55% CYCLOSPORINE 11.46% 11.46% 11.46% CYTARABINE 11.46% 11.46% 13.54% CYTOGAM 11.46% 11.46% 13.54% CYTOXAN 11.46% 11.46% 13.54% DACARBAZINE 11.46% 11.46% 13.54% DACOGEN 11.46% 11.46% 13.54% DAUNORUBICIN HCL 11.46% 11.46% 13.54% DAUNOXOME 11.46% 11.46% 13.54% DDAVP 11.46% 11.46% 13.54% DEFEROXAMINE MESYLATE 11.47% 11.47% 13.55% DEGARELIX 11.46% 11.46% 11.46% DEPOCYT 15.00% 15.00% 17.00% DESFERAL 11.46% 11.46% 13.54% DESMOPRESSIN ACETATE 11.46% 11.46% 13.55% DEXRAZOXANE 11.46% 11.46% 13.54% DOXIL 11.46% 11.46% 13.54% DOXORUBICIN HCL 11.46% 11.46% 13.54% DTIC-DOME IV 15.00% 15.00% 17.00% ELAPRASE 11.46% 11.46% 13.54% ELIGARD 11.46% 11.46% 13.54% ELITEK 11.46% 11.46% 13.54% ELLENCE 11.46% 11.46% 13.54% ELOXATIN 11.46% 11.46% 13.54% ELSPAR 11.46% 11.46% 13.55% ENBREL 11.46% 11.46% 13.54% EPIRUBICIN HCL 11.46% 11.46% 13.54% EPOGEN 11.46% 11.46% 13.54% EPOPROSTENOL 11.45% LTD DIST LTD DIST 157555v1 -60- ERBITUX 11.46% 11.46% 13.54% ETHYOL 11.46% 11.46% 13.54% ETOPOPHOS 11.46% 11.46% 13.54% ETOPOSIDE 11.41% 11.41% 13.50% EUFLEXXA 11.46% 11.46% 11.46% EXJADE 11.46% LTD DIST LTD DIST FABRAZYME 11.46% 11.46% 13.54% FASLODEX 11.46% 11.46% 13.54% FEIBA VH 11.73% 22.12% 23.15% FLEBOGAMMA 11.46% 11.46% 13.54% FLEBOGAMMA DIF 11.46% 11.46% 13.54% FLOLAN 11.46% LTD DIST LTD DIST FLOXURIDINE 11.46% 11.46% 13.54% FLUDARA 11.46% 11.46% 13.54% FLUDARABINE PHOSPHATE 11.46% 11.46% 13.54% FLUOROURACIL 11.46% 11.46% 13.54% FOLLISTIM AQ 11.46% 11.46% 13.54% FORTED 9.38% 9.38% 9.38% FRAGMIN 11.45% 11.45% 13.53% FUDR 11.46% 11.46% 13.54% FUSILEV 11.46% 11.46% 13.54% FUZEON 11.46% 11.46% 13.54% GAMASTAN 11.46% 11.46% 13.54% GAMMAGARD LIQUID 11.46% 11.46% 13.54% GAMMAGARD S/D 11.46% 11.46% 13.54% GAMUNEX 11.46% 11.46% 13.54% GANIRELIX ACETATE 11.46% 11.46% 13.54% GEMZAR 11.46% 11.46% 13.54% GENOTROPIN 11.46% 11.46% 13.54% GEREF DIAGNOSTIC 15.00% 15.00% 17.00% GLEEVEC 11.46% 11.46% .13.54% GONAL-F 11.46% 11.46% 13.54% GONAL-F RFF 11.46% 11.46% 13.54% HEALON 15.00% 15.00% 17.00% HEALON GV 15.00% 15.00% 17.00% HELIXATE FS 11.19% 21.64% 22.68% HEMOFIL M 11.14% 21.59% 22.64% HEPAGAM B 15.00% 15.00% 17.00% HERCEPTIN 11.46% 11.46% - 13.54% HUMATE-P 11.46% 21.88% 22.92% HUMATROPE 11.46% 11.46°/a 13.54% HUMIRA 11.46% 11.46% 13.54% HYALGAN 11.46% 11.46% 11.46% HYCAMTIN 11.46% 11.46% 13.54% HYPERHEP B S/D 11.46% 11.46% 13.54% HYPERRAB S/D 11.46% 11.46% 13.54% HYPERRHO S/D 15.00% 15.00% 17.00% IDAMYCIN PFS 11.46% 11.46% 13.54% 157555vi -61- IDARUBICIN HCL 11.46% 11.46% 13.54% IFEX 11.46% 11.46% 13.54% IFEX/MESNEX 15.00% 15.00% 17.00% IFOSFAMIDE 11.46% 11.46% 13.54% IFOSFAMIDE/MESNA 15.00% 15.00% 17.00% IMMUNE GLOBULIN 15.00% 15.00% 17.00% IMOGAM RABIES-HT 11.46% 11.46% 13.54% IMPLANON -4.1.7% -4.17% -1.04% INCRELEX 11.46% 11.46% 13.54% INFERGEN 15.00% 15.00% 17.00% INNOHEP 11.46% 11.46% 13.54% INTRON A 11.46% 11.46% 13.54% IRESSA 9.38% 9.38% 10.42% IRINOTECAN HCL 11.46% 11.46% 13.54% IXEMPRA 11.46% 11.46% 13.54% KEPIVANCE 11.46% LTD DIST LTD DIST KINERET 11.47% 11.47% 13.55% KOATE-DVI 11.46% 21.88% 22.92% KOGENATE FS 11.46% 21.88% 22.92% KUVAN 11.46% 11.46% 13.54% LETAIRIS 11.46% 11.46% 13.54% LEUCOVORIN CALCIUM 11.41 % 11.41 % 13.49% LEUKINE 11.46% 11.46% 13.54% LEUPROLIDE ACETATE 11.46% 11.46% 13.54% LEUSTATIN 11.46% 11.46% 13.54% LOVENOX 11.46% 11.46% 13.55% LUCENTIS 11.46% 11.46% 13.54% LUPRON 11.46% 11.46% 11.46% LUPRON DEPOT 11.46% 11.46% 11.46% LUPRON DEPOT-PED 11.46% 11.46% 11.46% LUVERIS 11.45% 11.45% 13.54% MACUGEN 11.46% 11.46% 13.54% MENOPUR 11.46% 11.46% 13.54% MESNA 11.46% 11.46% 13.54% MESNEX 11.46% 11.46% 13.54% METHOTREXATE 11.46% 11.46% 11.46% MICRHOGAM 11.45% 11.45% 13.53% MIRENA 11.46% LTD DIST LTD DIST MITOMYCIN 11.46% 11.46% 13.54% MITOXANTRONE HCL 11.46% 11.46% 13.54% MONARC-M 11.10% 21.56% 22.61 MONOCLATE-P 11.63% 22.03% 23.07% MONONINE 11.46% 21.88% 22.92% MOZOBIL 11.46% 11.46% 13.54% MUSTARGEN 11.46% 11.46% 13.54% MUTAMYCIN 15.00% 15.00% 17.00% MYLOTARG 11.46% 11.46% 13.54% 157555v1 -62- MYOBLOC 11.46% 11.46% 11.46% MYOZYME 11.46% 11.46% 13.54% NABI-HB 11.46% 11.46% 13.54% NAGLAZYME 11.46% 11.46% 13.54% NATRECOR 15.00% 15.00% 17.00% NAVELBINE 11.46% 11.46% 13.54% NEULASTA 11.46% 11.46% 13.54% NEUMEGA 11.46% 11.46% 13.54% NEUPOGEN 11.46% 11.46% 13.54% NEXAVAR 11.46% 11.46% 13.54% NIPENT 11.46% 11.46% 13.54% NORDITROPIN 11.46% 11.46% 13.54% NORDITROPIN NORDIFLEX 11.46% 11.46% 13.54% NOVANTRONE 11.46% 11.46% 13.54% NOVAREL 11.47% 11.47% 13.55% NOVOSEVEN 11.37% 21.80% 22.84% NPLATE 11.46% 11.46% 13.54% NUTROPIN 11.46% 11.46% 13.54% NUTROPIN AQ 11.46% 11.46% 13.54% OCTAGAM 11.46% 11.46% 13.54% OCTREOTIDE ACETATE 11.46% 11.46% 13.54% OMNITROPE 15.00% 15.00% 17.00% ONCASPAR 15.00% 15.00% 17.00% ONTAK 11.46% 11.46% 13.54% ONXOL 15.00% 15.00% 17.00% ORENCIA 11.46% 11.46% 13.54% ORFADIN 15.00% LTD DIST LTD DIST ORTHOCLONE OKT-3 11.46% LTD DIST LTD DIST ORTHOVISC 11.46% 11.46% 11.46% OVIDREL 11.45% 11.45% 13.53% PACLITAXEL 11.46% 11.46% 13.54% PAMIDRONATE DISODIUM 11.46% 11.46% 13.54% PANRETIN 11.46% 11.46% 13.54% PARAPLATIN 11.46% 11.46% 13.54% PEGASYS 11.46% 11.46% 13.54% PEG-INTRON 11.46% 11.46% 13.54% PEG-INTRON REDIPEN 11.46% 11.46% 13.54% PHOTOFRIN 11.46% 11.46% 13.54% PLENAXIS 15.00% 15.00% 17.00% POLYGAM S/D 15.00% 15.00% 17.00% PREGNYL 11.46% 11.46% 13.55% PRIALT 11.46% 11.46% 13.54% PRIVIGEN 11.46% 11.46% 13.54% PROCRIT 11.46% 11.46% 13.54% PROFILNINE SD 15.00% 25.00% 26.00% PROGESTERONE 11.45% 11.45% 13.53% PROGESTERONE IN 15.00% 15.00% 17.00% 157555v1 -63- OIL PROGRAF 11.46% 11.46% 11.46% PROLASTIN 11.14% LTD DIST LTD DIST PROLEUKIN 11.46% 11.46% 13.54% PROMACTA 11.46% 11.46% 13.54% PROVISO 11.46% 11.46% 13.54°/a PULMOZYME 11.47% 11.47% 13.55% RAPTIVA 11.46% 11.46% 13.54% REBETOL 11.46% 11.46% 13.54% REBIF 11.46% 11.46% 13.54% RECLAST 9.38% 9.38% 11.46% RECOMBINATE 11.81% 22.19% 23.23% REFACTO 11.76% 11.76% 12.79% REFLUDAN 11.46% 11.46% 13.54% REMICADE 11.46% 11.46% 13.54% REMODULIN 15.00% LTD DIST LTD DIST REPRONEX 11.46% 11.46% 13.54% RETROVIR IV 15.00% 15.00% 17.00% REVATIO 11.46% 11.46% 13.54% REVLIMID 11.46% 11.46% 13.54% RHOGAM 11.46% 11.46% 13.54% RHOGAM PLUS 11.46% 11.46% 13.54% RHOPHYLAC 11.46% 11.46% 13.54% RIBAPAK 15.00% 25.00% 30.00% RIBASPHERE 15.00% 25.00% 30.00% RIBATAB 15.00% 25.00% 30.00% RIBAVIRIN 13.58% 49.17% 54.25% RILUTEK 11.46% 11.46% 13.54% RITUXAN 11.46% 11.46% 13.54% ROFERON-A 15.00% 15.00% 17.00% SAIZEN 11.46% 11.46% 13.54% SANDIMMUNE 11.45% 11.45% 11.45% SANDOSTATIN 11.43% 11.43% 13.52% SANDOSTATIN LAR 11.46% 11.46% 13.54% SEROSTIM 11.46% 11.46% 13.54% SIMPONI 15.00% 15.00% 16.00% SIMULECT 11.46% 11.46% 13.54% SOLIRIS 11.46% 11.46% 13.54% SOMATULINE DEPOT 11.46% 11.46% 13.54% SOMAVERT 6.25% 11.46% 12.50% SPRYCEL 11.46% 11.46% 13.54% SUCRAID 11.46% 11.46% 13.54% SUPARTZ 15.00% 15.00% 15.00% SUPPRELIN LA 11.46% 11.46% 13.54% SUTENT 11.46% 11.46% 13.54% SYNAGIS 11.46% 11.46% 13.54% SYNVISC 11.46% 11.46% 11.46% TARABINE PFS 11.51 % 11.51 % 13.59% 157555v1 -64- TARCEVA 11.46% 11.46% 13.54% TASIGNA 11.46% 11.46% 13.54% TAXOL 11.46% 11.46% 13.54% TAXOTERE 11.46% 11.46% 13.54% TEMODAR 11.46% 11.46% 13.54% TEV-TROPIN 15.00% 15.00% 17.00% THALOMID 11.46°/a 11.46% 13.54% THERACYS 11.46% 11.46% 13.54% THIOTEPA 11.46% 11.46% 13.54% THYMOGLOBULIN 11.46% 11.46% 13.54% THYROGEN 11.46% 11.46% 13.54% TOBI 11.45% 11.45% 13.53% TOPOSAR 11.45% 11.45% 13.53% TORISEL 11.46% 11.46% 13.54% TRACLEER 11.46% 11.46% 13.54% TREANDA 11.46% 11.46% 13.54% TRELSTAR DEPOT 11.46% 11.46% 13.54% TRELSTAR LA 11.46% 11.46% 13.54% TRISENOX 11.46% 11.46% 13.54% TYKERB 11.46% 11.46% 13.54% TYSABRI 11.46% 11.46% 13.54% VANTAS 11.46% 11.46% 13.54% VARICELLA-ZOSTER IMM GLOBULIN 15.00% 15.00% 17.00% VECTIBIX 11.46% 11.46% 13.54% VELCADE 11.46% 11.46% 13.54% VENTAVIS 11.46% LTD DIST LTD DIST VIADUR 11.46% 11.46% 13.54% VIDAZA 11.46% 11.46% 13.54% VINBLASTINE SULFATE 11.46% 11.46% 13.54% VINCRISTINE SULFATE 11.46% 11.46% 13.54% VINORELBINE TARTRATE 11.46% 11.46% 13.54% VISUDYNE 11.46% 11.46% 13.54% VIVAGLOBIN 11.46% 11.46% 13.54% VIVITROL 11.46% 11.46% 13.54% VUMON 11.46% 11.46% 13.54% WINRHO SDF 11.46% 11.46% 13.54% XELODA 11.46% 11.46% 13.54% XENAZINE 11.46% 11.46% 13.54% XOLAIR 11.46% 11.46% 13.54% XYNTHA 11.42% 21.84% 22.88% XYREM 8.33% 9.38% 9.90% ZANOSAR 11.46% 11.46% 13.54% ZAVESCA 11.46% 11.46% 13.54% ZEMAIRA 9.90% LTD DIST LTD DIST ZENAPAX 11.46% 11.46% 11.46% ZEVALIN 15.00% LTD DIST LTD DIST ZINECARD 11.46% 11.46% 13.54% 157555v1 -65- ZOLADEX 11.46% 11.46% 13.54% ZOLINZA 11.46% 11.46% 13.54% ZOMETA 11.46% 11.46% 13.54% ZORBTIVE 11.46% 11.46% 13.54% UPDATES Express Scripts updates the specialty drug lists as new products are introduced to the market, or as CuraScript gains access to additional limited distribution drugs, and provides a monthly notice of added drugs. Pricing for these new products will be determined by Express Scripts and Sponsor will have the option of covering or not covering the medication. The full current list is always available on request from your Account team. 1s~sss~i -66- EXHIBIT B MANAGEMENT REPORTS Management reports available through PBM's Trend Central reporting tool (or successor reporting tool) will be made available through Employer's and Gallagher's web application, and/or at the written request of Employer, delivered on CD-ROM, via email, or hard copy, at no cost to Employer or Gallagher; provided, however, that PBiv1 will not provide reports containing PHI, if any, through any means other than PBM's Trend Central (or successor reporting tool). is~sss~i -67- EXHIBIT C OPTIONAL CLINICAL PROGRAMS 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. Trend Management Programs Fees • Drug Quantity Management' $0.02 PMPM • Prior Authorization -Clinical Supplemental List * $0.03 PMPM • Prior Authorization -Other Clinical Overrides (e.g. non- $20/request standard Prior Authorization medications, medical exceptions) $25/physician review • Step Therapy -Individual modules and packages available Pricing varies by module • More than 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 (PPIs), selective serotonin reuptake inhibitors (SSRIs), HMG-enhanced, calcium channel blockers, leukotriene pathway inhibitors, topical immunomodulators, other antidepressants. • Formulary Rapid Response $0.01 PMPM • $0 Generic Copay $1.25/Member mailing or $1,000 for Member identification and authorization " List of drugs subject to change at the discretion of ESI. PMPM means per Member per Month as determined by ESI by reference to the Eligibility Files for the applicable time period. Total Health Management Programs Fees o tional, im lementation onl at S onsor re uest Managing Medication Therapy and Safety • Medication Adherence $0.02 PMPM Includes all seven modules • Retrospective DUR $0.03/Rx • Retros ective DUR -Seniors $0.02/Rx • RxPredict$ $0.05 PMPM for six months each time the report is run (e.g. 100,000 members * $0.05 PMPM "six months). A subsequent charge will occur with the second report. There is a minimum char a of $3,000. Managing Overall Health • Care Management $0.01/claim -Asthma $0.01/claim -Cardiovascular Disease $0.02/claim - CHF $0.02/claim -Depression $0.01/claim -Diabetes $0.03/claim - GI Disease $0.02/claim -Hypertension $0.02/claim - Mi raine • Disease Management Priced upon request • Three-disease suite • Five-disease suite Six-disease suite 157555v1 -68- Total Health Management Programs Fees (optional, implementation onl at S onsor re uest) ExpressAlliance Level 1 5,000-20,000 lives $0.04 PMPM 20,000-50,000 lives $0.02 PMPM 50,000+ lives $0.01 PMPM ExpressAlliance Level 2 5,000-20,000 lives $0.20 PMPM 20,000-50,000 lives $0.10 PMPM 50,000+ lives $0.09 PMPM ExpressAlliance Level 3 5,000-20,000 lives $0.35 PMPM 20,000-50,000 lives $0.20 PMPM 50,000+ lives $0.18 PMPM High Utilizer & Case Management Report $150/report 157555v1 -69- EXHIBIT D BUSINESS ASSOCIATE ADDENDUM PBM and Employer are parties to an agreement ("PBM Agreement") whereby PBM provides certain pharmacy benefit management services to the Employers prescription drug plan (Employer and Employer's prescription drug plan collectively referred to hereinafter as "Plan"). The PBM Agreement addresses the parties' rights and obligations concerning the use and disclosure of patients' protected health information. The HIPAA Rules (as defined below) require PBM and the Plan to enter into a "business associate agreement" to comply with applicable sections of the HIPAA Rules as of the applicable Compliance Dates. Definitions. (a) "Breach" shall mean the unauthorized acquisition, access, use, or disclosure of Protected Health Information that compromises the security or privacy of such information, except where an unauthorized person to whom such information is disclosed would not reasonably have been able to retain such information. "Breach" shall not include: (i) any unintentional acquisition, access, or use of PHI by an employee or individual acting under the authority of Plan or PBM, as long as such acquisition, access, or'use was made in good faith and within the course and scope of the employment or other professional relationship of such employee or individual with Plan or PBM and such information is not further acquired, accessed, used, or disclosed by any person; or (ii) an inadvertent disclosure from an individual who is otherwise authorized to access PHI at a facility operated by Plan or PBM to another similarly situated individual at the same facility, provided that any such information received as a result of such disclosure is not further acquired, accessed, used, or disclosed by any person. (b) "Compliance Date(s)" shall mean the date established by HHS or the United States Congress for effective date of applicability and enforceability of the HIPAA Rules and HITECH Standards. (c) "Designated Record Set" shall 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. (d) "Electronic Health Record" shall mean an electronic record of health-related information on an individual that is created, gathered, managed, and consulted by authorized health care clinicians and staff. 160.103. (e) "Electronic PHI" shall have the same meaning as the term "electronic protected health information" in 45 C.F.R. § (f) "Health Plan" or "Plan" shall have the same meaning as the term "Health Plan" in 45 C.F.R. § 160.103. (g) "HIPAA Rules" means the collective privacy, transaction and code sets, and security regulations promulgated pursuant to the Health Insurance Portability and Accountability Act, as codified at 45 C.F.R. Parts 160, 162 & 164. (h) "HITECH Standards" means the privacy, security and security Breach notification provisions applicable to a Business Associate under Subtitle D of the Health Information Technology for Economic and Clinical Health Act ("HITECH"), which is Title XIII of the American Recovery and Reinvestment Act of 2009 (Public Law 111-5), and any regulations promulgated thereunder. (i) "Individual" shall have the same meaning as the term "individual" in 45 C.F.R. § 160.103 and shall include a person who qualifies as a personal representative in accordance with 45 C.F.R. § 164.502(8). (j) "Protected Health Information" or "PHI" shall have the same meaning as the term "protected health information" in 45 C.F.R. § 160.103, limited to the information created or received by PBM from or on behalf of Plan. (k) "Privacy Rule" shall mean the Standards for Privacy of Individually Identifiable Health Information at 45 C.F.R. Part 160 and 45 C.F.R. Part 164, Subpart A and Subpart E, as they exist now or as they may be amended. (I) "Required by Law' shall have the same meaning as the term "required by law" in 45 C.F.R. § 164.103. (m) °Secretary" shall mean the Secretary of the Department of Health and Human Services or his designee. (n) °Security Incident" shall have the same meaning as "security incident" in 45 C.F.R. § 164.304 157555v1 -70- (o) "Security Standards" shall mean the Security Standards, 45 C.F.R. Part 160 and 45 C.F.R. Part 164, Subpart A and Subpart C, to be effective no later than April 20, 2005, as they exist now or as they may be amended. (p) "Transactions Standards" shall mean the Standards for Electronic Transactions, 45 C.F.R. Parts 160 and 162, as they exist now or as they may be amended. Terms used, but not otherwise defined, in this Business Associate Agreement shall have the same meaning as those terms in the HIPAA Rules and the HITECH Standards. 2. General Use and Disclosure Provisions. PBM and Plan acknowledge and agree as follows: (a) Use or Disclosure. PBM agrees not to use or further disclose PHI other than as expressly permitted or required by this Business Associate Agreement or as Required by Law. (b) Minimum Necessary. PBM 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) Specific Use or Disclosure Provisions. Except as otherwise limited in this Business Associate Agreement, PBM 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, or such use or disclosure is expressly permitted in (i) through (iii) below: (i) PBM may use PHI for the proper management and administration of PBM or to carry out PBM's legal responsibilities. (ii) PBM may disclose PHI to third parties for the proper management and administration of PBM or to carry out the legal responsibilities of PBM provided that the disclosures are Required by Law, or PBM obtains reasonable assurances from the person to whom the information is disclosed that: (A) the information will remain confidential, (B) the information will be used or further disclosed only as Required by Law or for the purpose for which it was disclosed to the person, and (C) the person notifies PBM of any instances of which it is aware in which the confidentiality of the information has been breached. (iii) PBM may use PHI to perform Data Aggregation services on behalf of the Plan as permitted by 45 C.F.R. § 164.504(e)(2)(i)(B). (d) Reporting. PBM agrees to promptly notify Plan if PBM has knowledge that PHI has been used or disclosed by PBM in a manner that violates this Business Associate Agreement. To the extent that PBM creates, receives, maintains or transmits Electronic PHI, PBM agrees to report promptly to Plan any Security Incident, as determined by PBM, involving PHI of which PBM becomes aware. Effective thirty (30) calendar days after the effective date of applicable regulations issued by the Secretary, PBM shall, following the discovery of a Breach of Unsecured PHI, notify Plan of such Breach without unreasonable delay and in no event later than sixty (60) calendar days after the discovery, including the identification of each individual whose Unsecured PHI has been, or is reasonably believed to have been, accessed, acquired or disclosed during the Breach. A Breach shall be treated as discovered as of the first day on which such Breach is known or reasonably should have been known by PBM. (e) Safeguards. PBM agrees to use appropriate safeguards, consistent with applicable law, to prevent use or disclosure of PHI in a manner that would violate this Business Associate Agreement. PBM shall provide Plan with such information concerning such safeguards as Plan may reasonably request from time to time. To the extent that PBM creates, receives, maintains or transmits Electronic PHI, PBM agrees to use appropriate administrative, physical and technical safeguards to protect the confidentiality, integrity and availability of the Electronic PHI that PBM creates, receives, maintains or transmits on behalf of the Plan as required by the Security Standards. (f) Mitigation. PBM agrees to mitigate, to the extent practicable, any harmful effect that is known to PBM of a use or disclosure of PHI by PBM in violation of this Business Associate Agreement or the PBM Agreement. (g) Subcontractors and Agents. PBM agrees to ensure that any agent, including a subcontractor, to whom it provides PHI received from, or created or received by PBM on behalf of the Plan, agrees to the same restrictions, terms and conditions that apply through this Agreement to PBM with respect to such information, including the requirement that it implement reasonable and appropriate safeguards to protect any Electronic PHI that is disclosed to it by PBM. (h) Access. Within fifteen (15) business days of a request by the Plan, PBM shall provide access to Plan to PHI in a Designated Record Set in order to meet the requirements under 45 C.F.R. § 164.524. If PBM receives a request directly from an Individual, or if requested by the Plan that access be provided to the Individual, PBM shall provide access to the Individual to PHI in a Designated Record Set within thirty (30) days in order to meet the requirements under 45 C.F.R. § 164.524. 157555v1 -71- (i) Amendment. Within sixty (60) days of a request by the Plan or subject Individual, PBM agrees to make any appropriate amendment(s) to PHI in a Designated Record Set that Plan directs or agrees to pursuant to 45 C.F.R. § 164.526. (j) Accounting. Within thirty (30) days of a proper request by the Plan, PBM agrees to document and make available to 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, in accordance with 45 C.F.R. § 164.528. Within sixty (60) days of proper request by subject Individual, PBM agrees to make available to the Individual the information described above. PBM shall retain copies of any accountings far a period of six (6) years from the date the accounting was created. (k) Restrictions on Use or Disclosure. Within fifteen (15) business days of a request of the Plan, PBM agrees to consider restrictions on the use or disclosure of PHI agreed to by the Plan on behalf of an Individual in accordance with 45 C.F.R. § 164.522. (I) Audit and Inspection. PBM agrees to make internal practices, books, and records relating to the use and disclosure of PHI received from, or created or received by PBM on behalf of the Plan, available to Plan within ten (10) business days, or at the request of the Plan or the 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. Any release of information regarding PBM's practices, books and records is proprietary to PBM and shall be treated as confidential and shall not be further disclosed without the written permission of PBM, except as necessary to comply with the HIPAA Rules. (m) Compliance with the HITECH Standards. Notwithstanding any other provision in this Business Associate Agreement, no later than February 17, 2010, unless a separate effective date is specified by law or this Business Associate Agreement for a particular requirement (in which case the separate effective date shall be the effective date for that particular requirement), PBM shall comply with the HITECH Standards, including, but not limited to: (i) compliance with the requirements regarding minimum necessary under HITECH § 13405(b); (ii) requests for restrictions on use or disclosure to health plans for payment or health care operations purposes when the provider has been paid out of pocket in full consistent with HITECH § 13405(a); (iii) the prohibition of sale of PHI without authorization unless an exception under HITECH § 13405(d) applies; (iv) the prohibition on receiving remuneration for certain communications that fall within the exceptions to the definition of marketing under 45 C.F.R. § 164.501 unless permitted by this Agreement and Section 13406 of HITECH; (v) the requirements relating to the provision of access to certain information in electronic access under HITECH § 13405(e); (vi) compliance with each of the Standards and Implementation Specifications of 45 C.F.R. §§ 164.308 (Administrative Safeguards), 164.310 (Physical Safeguards), 164.312 (Technical Safeguards) and 164.316 (Policies and Procedures and Documentation Requirements); and (vii) as of the separate compliance date set forth in regulations promulgated under HITECH on this topic, the requirements regarding accounting of certain disclosures of PHI maintained in an Electronic Health Record under HITECH § 13405(c) to the extent that PBM discloses any PHI maintained in an Electronic Health Record on behalf of the Plan pursuant to this Business Associate Agreement. 3. Plan Obligations. (a) Plan shall notify PBM 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 PBM's use or disclosure of PHI. (b) Plan shall notify PBM of any changes in, or revocation of, permission by an Individual to use or disclose PHI, to the extent that such changes may affect PBM's use or disclosure of PHI. (c) Plan shall notify PBM of any restriction to the use or disclosure of PHI that Plan has agreed to in accordance with 45 C.F.R. § 164.522, to the extent that such restriction may affect PBM's use or disclosure of PHI. (d) Plan shall not request that PBM 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. (e) Plan agrees that it will have entered into "Business Associate Agreements" with any third parties (e.g., case managers, brokers or third party administrators) to which Plan directs and authorizes PBM to disclose PHI. 157555v1 -72- 4. Transactions Standards. The HIPAA Rules provide for certain Transactions Standards for transfer of data between trading partners. While certain of the standards may or may not be adopted by the Plan (e.g., for eligibility), PBM will be prepared to accept the following in accordance with 45 C.F.R. Part 162.1502: ASC X12N 834 -Benefit Enrollment and Maintenance. In addition, to the extent applicable, PBM shall comply with other applicable transactions standards for claims processing functions between PBM and provider pharmacies. Each party hereby agrees that it shall 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. Breach; Termination. (a) Without limiting the termination rights of the parties pursuant to the PBM Agreement, upon Plan's knowledge of a material breach by PBM of this Business Associate Agreement, Plan shall notify PBM of such breach and PBM shall have thirty (30) days to cure such breach. In the event PBM does not cure the breach, or cure is infeasible, Plan shall have the right to immediately terminate this Business Associate Agreement and the PBM Agreement. If cure of the material breach is infeasible, Plan shall report the violation to the Secretary. (b) As of February 17, 2010 and without limiting the termination rights of the parties pursuant to the PBM Agreement, upon PBM's knowledge of a material breach by the Plan of this Business Associate Agreement, PBM shall notify Plan of such breach and the Plan shall have thirty (30) days to cure such breach. In the event the Plan does not cure the breach, or cure is infeasible, PBM shall have the right to immediately terminate this Business Associate Agreement and the PBM Agreement. If cure of the material breach is infeasible, PBM shall report the violation to the Secretary. (c) To the extent feasible, upon termination of the PBM Agreement for any reason, PBM shall, and shall cause any subcontractors and agents to, return or destroy and retain no copies of all PHI received from, or created or received by PBM on behalf of, the Plan. If PBM determines, in its sole discretion, that return or destruction of such information is not feasible, PBM shall 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. 6. Indemnification. Each party (the "Indemnifying Party') shall indemnify and hold the other party and its officers, directors, employees and agents (each an "Indemnified Party") harmless from and against any claim, cause of action, liability, damage, cost or expense ("Liabilities") to which the Indemnified Party becomes subject to as a result of third party claims (including reasonable attorneys' fees and court or proceeding costs) brought against the Indemnified Party, which arise as a result of: (i) the material breach of this Business Associate Agreement by the Indemnifying Party; or (ii) the gross negligence or willful misconduct of the Indemnifying Party, except to the extent such Liabilities were caused by the Indemnified Party. A party entitled to indemnification under this Section 6 shall give prompt written notification to the Indemnifying Party of the commencement of any action, suit or proceeding relating to a third party claim for which indemnification is sought, subject to applicable confidentiality constraints. The Indemnifying Party shall be entitled to assume control of the defense of such action, suit, proceeding or claim with competent counsel of its choosing. Indemnification shall not be required if any claim is settled without the Indemnifying Party's consent, which such consent shall not be unreasonably withheld. NOTWITHSTANDING THE FOREGOING PROVISIONS OF THIS SECTION 6, IN NO EVENT WILL AN INDEMNIFYING PARTY BE LIABLE TO AN INDEMNIFIED PARTY UNDER CONTRACT, TORT, OR ANY OTHER LEGAL THEORY FOR INCIDENTAL, CONSEQUENTIAL, INDIRECT, PUNITIVE, OR SPECIAL LOSSES OR DAMAGES OF ANY KIND. 7. Miscellaneous. (a) Amendment. The parties acknowledge that the foregoing provisions are designed to comply with the mandates of the HIPAA Rules and HITECH Standards. PBM shall provide written notice to Plan to the extent that any final regulation or amendment to final regulations promulgated by the Secretary under HITECH requires changes to this Business Associate Agreement. Such written notice shall include any additional amendment required by any such final regulation and the Business Associate Agreement shall be automatically amended to incorporate the changes set forth in such amendment provided by PBM to Plan, unless Plan objects to such amendment in writing within fifteen (15) days of receipt of such written notice. In the event that Plan objects timely to such amendment, the parties shall work in good faith to reach agreement on an amendment to the Business Associate Agreement that complies with the final regulations. If the parties are unable to reach agreement regarding an amendment to the Business Associate Agreement within thirty (30) days of the date that PBM receives any written objection from the Plan, either PBM or Sponsor may terminate this Business Associate Agreement upon ninety (90) days written notice to the other party. Any other amendment to this Business Associate Agreement unrelated to compliance with applicable law and regulations shall be effective only upon execution of a written agreement between the parties. (b) Effect on PBM Agreement. Except as relates to the use, security and disclosure of PHI and electronic transactions, this Business Associate Agreement is not intended to change the terms and conditions of, 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 Business Associate Agreement is intended to confer, nor shall 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. 157555v1 -73- (d) Interpretation. Any ambiguity in this Business Associate Agreement shall be resolved in favor of a meaning that permits the Plan to comply with the HIPAA Rules and the HITECH Standards. Effective Date. This Business Associate Agreement shall be effective as of the applicable Compliance Dates or the effective date of the PBM Agreement, whichever is later. 157555v1 -74 EXHIBIT E PERFORMANCE STANDARDS Terms and Conditions All guarantees are for term of the contract. In no event shall the sum of the payments as a result of PBM' failure to meet any performance guarantees, exceed $120,000 in years one, two or three in the aggregate for the Public Sector Coalition. The performance guarantees are based on an enrollment of 18,500 Members (in the aggregate for the entire Public Sector Coalition) on the effective date of the agreement. Within 45 business days after the end of each calendar quarter, PBM shall provide Gallagher for the Public Sector Coalition with a report assessing PBM' performance under each performance guarantee. In the event PBM does not meet a performance guarantee, PBM will calculate the applicable amount due to the Public Sector Coalition within 90 days after the end of the contract year. Unless otherwise stated, standards are measured and reported quarterly. Penalties are paid annually. If a contract is signed prior to the effective date, the performance guarantees offered will become effective from the date of implementation. In the event the plan is implemented without a signed contract, the performance guarantees will become effective at the next contract anniversary subsequent to the receipt of a signed contract. PBM shall have no liability for the reporting of performance guarantees or performance guarantee penalties during any period PBM is administering the plan without a signed contract. The performance guarantees offered are considered to be a component of the financial offer. If the financial offer is accepted it is assumed the performance guarantees, offered as a component of the financial offer, are accepted as well. If, during the contracting process, performance guarantees are renegotiated, PBM reserves the right to renegotiate all components of the financial offer. All performance guarantees will be measured for the Public Sector Coalition in aggregate, not at the individual group level. 157555v1 -75- Service Feature Standard Penalty Account Management ESI guarantees that Public Sector Coalition satisfaction with ESI will put $6,000 as a total amount of penalty Account Management is rated as satisfactory. The following at risk. categories will be measured annually by Public Sector Coalition as satisfactory or not satisfactory: • Timely issues resolution by the account management (20% of total amount of penalty at risk) Account Management- Consultative services (20% of total amount of penalty at Satisfaction risk) • Timeliness of reporting and annual reviews (20% of total amount of penalty at risk) • Frequency of meetings/plan updates (20% of total amount of penalty at risk) • One mutually agreed upon category (20% of total amount of penalty at risk) Client Services Administration One random sample member survey will be completed ESI will put $6,000 as a total amount of penalty annually on acompany-wide basis. ESI guarantees that 90% at risk. Satisfaction Survey of survey participants' responses to a question measuring overall satisfaction with the prescription benefit program will indicate "satisfied" or "very satisfied." Contact Center Express Scripts guarantees that calls will be answered in an ESI will pay Public Sector Coalition $2,000 for average of 30 seconds or less with the exception of a failure each full second above the standard 30 in a third-party communication system. seconds on an annual basis. The maximum Average Speed of Answer This standard is predicated on the installation of a toll-free annual penalty will be $6,000. The calculation will be based on the average speed of answer. telephone number unique to Public Sector Coalition. ESI's Member Choice Center calls will be excluded from this standard. This standard will be measured and re orted uarterl . ESI will guarantee a blockage rate of 2% or less with the ESI will pay Public Sector Coalition $2,000 for exception of a failure in a third-party communication system. each full percentage point above the standard Blockage is defined as a caller receiving a busy signal. 2%, on an annual basis. The maximum annual Blockage Rate This standard is predicated on the installation of a toll-free Penalty will be $6,000. The calculation will be based on the blockage percentage. (Busy Signal) number unique to Public Sector Coalition. ESI's Member Choice Center calls will be excluded from this standard. This standard will be measured and reported quarterly. ESI will guarantee that annually 95% or more of written ESI will put $6,000 as a total amount of penalty Customer Service Response inquiries will be responded to within five (5) business days at risk. Time to Written Inquiries and that annually 100% of written inquiries will be responded to within ten (10) business days. ESI guarantees that the call abandonment rate will be 3% or ESI will pay Public Sector Coalition $2,000 for less with the exception of a failure in a third-party each full percentage point above the standard Percent of Calls Abandoned communication system. The abandonment rates do not include calls terminated by members in less than 30 seconds. 3% on an annual basis. The maximum annual penalty will be $6,000. The calculation will be This standard is predicated on the installation of a toll-free based on the average percentage of calls abandoned. is~sss~i -76- Service Feature Standard Penalty number unique to Public Sector Coalition. ESI's Member Choice Center calls will be excluded from this standard. This standard will be measured and reported quarterly. Customer Service -First Call ESI guarantees that greater than 85% of telephone inquiries ESI will put $6,000 as a total amount of penalty Resolution to ESI's Contact Center will be resolved at the first point of at risk. contact. Home Delivery Whereas ESI strives for 100% accuracy, ESI guarantees ESI will pay Public Sector Coalition $2,000 for 99.98% accuracy in dispensing the correct drug, strength, and each full percentage point below the standard dosage, unless the error is a prescriber error, on an annual basis. The maximum of 99.98% Dispensing Accuracy - , annual penalty will be $6,000. The calculation will be based on the average prescription accuracy. ESI guarantees dispensing and shipping (or return) of ESI will pay Public Sector Coalition $2,000 for prescriptions not subject to intervention within an average of each full day above the standard two (2) Turnaround Time for Routine two (2) business days of their receipt at ESI's Mail Service business days on an annual basis. The (Clean) Prescriptions Pharmacy. maximum annual penalty will be $6,000. The This standard will be measured and reported quarterly. calculation will be based on the average turnaround time for routine prescriptions. ESI guarantees dispensing and shipping (or return) of ESI will pay Public Sector Coalition $2,000 for prescriptions subject to intervention within an average of five each full day above the standard five (5) Turnaround Time for (5) business days of their receipt at ESI's Mail Service business days on an annual basis. The Prescriptions Subject to Pharmacy. maximum annual penalty will be $6,000. The Intervention This standard will be measured and reported quarterly. calculation will be based on the average turnaround time for prescriptions subject to intervention. Data Systems ESI guarantees an annual average 99% system availability of ESI will put $6,000 as a total amount of penalty the point-of-sale adjudication system. at risk. System Availability This standard excludes systems downtime attributed to regularly scheduled systems maintenance or systems downtime attributed to telecommunications failure or other circumstances outside the control of ESI. Reporting ESI guarantees access to the online reporting data will be ESI will put $6,000 as a total amount of penalty Timely Production of available within an annual average of ten (10) days after at risk. Management Reports month-end. Billing data will be available within an annual average of ten (10) days after the billing cycle. Replacement ID Card Production Timely Production of ESI guarantees that standard replacement ID cards will be ESI will put $6,000 as a total amount of penalty Replacement ID Cards produced within an annual average of five (5) business days at risk. of the receipt ofmachine-readable eligibility information. Electronic Claims ESI guarantees that 100% of POS claims will be processed ESI will put $6,000 as a total amount of penalty accurately. This is contingent upon the claims adjudication at risk POS Accuracy system being 100% accurate, which will be tested prior to . contract start date and signed off on. is~sssvi -77- Service Feature Standard Penalty Paper Claims ESI guarantees that member submitted claims requiring no ESI will put $6,000 as the total amount of development will be reimbursed or responded to within an penalty at risk. average of ten (10) business days or less and claims requiring development will be reimbursed within an average of fourteen Penalties are paid annually. Paper Claims Processing Time (14) business days or less. This standard will be measured and reported quarterly. Eligibility Eligibility -Timeliness of ESI guarantees that electronic eligibility will be installed and ESI will put $6,000 as a total amount of penalty Installations eligibility status will be effective within an annual average of at risk. two (2) business days of receipt. ESI guarantees that electronic eligibility records will be loaded ESI will put $6,000 as a total amount of penalty with 99.5% accuracy (as provided by Public Sector Coalition). at risk. This standard is contingent upon receipt of clean eligibility Eligibility -Accuracy data delivered in an agreed upon format and that it can be determined with certainty that ESI incorrectly loaded the eligibility. This standard will be measured across ESI's client base. Retail Pharmacy Network ESI guarantees that at least 92% of members, based on ESI will pay Public Sector Coalition $6,000 if client-supplied eligibility, will have a retail network pharmacy this standard is not met. within atwo-mile radius of their residence in the Minimum This standard will be measured and reported Network Pharmacy Geographic 50,000 Participating Pharmacies Network, if there is an annually using information provided by Access existing pharmacy within that radius. Additionally, ESI GeoAccess or similar service. guarantees that 95% of members, based on client-supplied eligibility, will have access to a retail network pharmacy within a five-mile radius of their residence, if there is an existing pharmacy within that radius. ESI guarantees that 100% of participating pharmacies will be ESI will pay Public Sector Coalition $6,000, if subject to statistical audits and that 25% of participating this standard is not me#. Network Audits pharmacies will be subject to further investigation (e.g., desk This standard will be measured and reported audits, on-site audits, etc.) as a result of the statistical audits. annually. 157555v1 -78- Service Feature Standard Penalty Benefit Plan Less complex changes, such as the addition of new plan ESI will put $6,000 as a total amount of penalty benefit (basic), or new benefit using an existing benefit, at risk. changes in benefit copays/days supply, or change in pharmacy network would be implemented within an average of five (5) business days. Moderately complex changes, such as benefit designs requiring research, adding copays for specific drugs, adding multiple groups involving lower level demographic changes, adding maintenance benefit/maintenance list, or drug Benefit Design Changes -Set changes would be implemented within an average of ten (10) up only business days. Very complex changes such as Prescription Drug Program revisions with major changes/research, administration of extensive, client-specific clinical programs (e.g. Step Therapy), or creation of complex custom programs would be implemented within agreed upon time frames, generally greater than ten (10) days. All of the above standards are based upon the receipt of complete information on a signed benefit add/change form from the client. is~sss~i -79- EXHIBIT F AUDIT PROTOCOL 1. AUDIT PRINCIPLES PBM recognizes the importance of its clients ensuring the integrity of their business relationship by engaging in periodic audits of their financial arrangements with PBM. PBM provides this audit right to each and every client. In granting this right, PBM's primary interest is to facilitate a responsive and responsible audit process. In order to accomplish this goal, for all clients, PBM has established the following Protocol. Our intent is in no way to limit Employer's ability to determine that PBM has properly and accurately administered the financial aspects of the Agreement, but rather to create a manageable process in order to be responsive to our clients and the independent auditors that they may engage. If Employer has any concern that this Protocol will prohibit Employer from fully confirming its financial arrangement with PBM, we encourage Employer to express such concern at the audit kick-off meeting. 2. AUDIT PREREQUISITES A. The financial aspects of the Agreement can be broken down into the following three main components. Employer has the right to audit any or all three of these components, if applicable: • Claims • Rebates • Performance Guarantees At Employer's discretion, Employer may conduct an audit of each component separately, or may combine all three components in one audit. In addition to the above audit rights, Employer may address general claim inquiries, which do not require an audit, by contacting Employer's PBM Account. Management team at any tune. B. PBM will provide all data reasonably necessary for Employer to determine that PBM has performed in accordance with contractual terms. C. PBM engages a national accounting firm, at its sole cost and expense, to conduct a SAS 70 audit on behalf of its clients. Upon request, PBM will provide the results of its most recent SAS 70 audit. Testing of the areas covered by the SAS 70 is not within the scope of Employer's audit rights (i.e., to confirm the financial aspects of the Agreement) and is therefore not permitted. However, if requested, PBM will explain the SAS 70 audit process and findings to Employer in order for Employer to gain an understanding of the SAS 70. 3. AUDITS A. PBM recommends that the initial audit period for a claims audit cover a timeframe not to exceed twenty-four (24) months immediately preceding the request to audit (the "Audit Period"). This Audit Period allows a reasonable amount of tune for both parties to conclude the audit before claims data is archived off the adjudication system. PBM will accommodate reasonable requests to extend the Audit Period, but this may delay PBM's response time to audit findings due to the age of the claims. B. When performing a Rebate audit, Employer may perform an on-site review of the applicable Rebate rate components of manufacturer agreements, selected by Employer, as reasonably necessary to audit the calculation of the Rebate payments made to Employer by PBM. C. PBM recommends that Employer select an initial number of manufacturer contracts to enable Employer to audit fifty percent (50%) of the total Rebate payments due to Employer for two (2) calendar quarters during the twelve (12) month period immediately preceding the audit. PBM will accommodate reasonable requests to extend this audit scope, but this may delay PBM's on-site preparation time as well as response time to audit findings. D. Irt order to verify pass-through pricing, if applicable, Employer may perform an on-site review of the applicable rate components of Participating Pharmacy agreements, selected by Sponsor, as reasonably necessary to audit the calculation of the billings made to Sponsor by ESI. ESI recommends that Sponsor select ten (10) initial pharmacy contracts to be audited from the list of Participating Pharmacies in the applicable network. ESI will accommodate reasonable requests to increase the number of contracts, but this may delay ESI's on-site preparation time as well as response time to audit findings. 1s7555v1 -80- 4. AUDIT FINDINGS A. Following Employer's initial audit, Employer (or its Auditor) will provide PBM with a written report of suspected errors, if any. In order for PBM to evaluate Employer's audit report, Employer shall provide an electronic data file in a mutually agreed upon format containing either a representative sample of claims, or the entire suspected error population, and the dollar amount associated with the suspected errors. B. PBM will use commercially reasonable best efforts to respond to the audit report in no more than thirty (30) days from PBM's receipt of the report. Please be aware, however, that audits that require evaluation of six (6) or more findings typically require additional time to respond due to the complex nature of such audits. Our pledge to respond within the foregoing timeframe is predicated on a good faith and cooperative effort between Employer and/or its Auditor and PBM. C. Following PBM's evaluation of Employer's (or its Auditor's) audit report, if the audit findings warrant an increase in the Audit Period or the number of contracts reviewed, then PBM and Employer will mutually determine the scope of further analysis. D. Employer agrees that once audit results are accepted by both parties, the audit shall be considered closed and final. E. PBM shall promptly pay overpayments (or Employer shall promptly pay underpayments, if applicable) upon closure of the audit. 5. CONFIDENTIALITY PBM's contracts are highly confidential and proprietary. For this reason, PBM only permits on-site review rather than provide copies to our clients. During on-site contract review, Employer (or its Auditor) may take and retain notes to the extent necessary to document any identified errors, but may not copy (through handwritten notes or otherwise) or retain any manufacturer or Participating Pharmacy agreements (in part or in whole) or related documents provided or made available by PBM in connection with the audit. PBM will be entitled to review any notes to affirm compliance with this paragraph. 157555v1 -81- F.XHiBiT G FINANCIAL DISCLOSURE TO ESI PBM CLIENTS This disclosure provides an overview of the principal revenue sources of Express Scripts, Inc. ("ESI") and does not supersede any of the specific financial terms and conditions between ESI and an individual client. In addition to administrative and dispensing fees paid to ESI by our clients for pharmaceutical benefit management ("PBM") services, ESI derives revenue from other sources, including arrangements with pharmaceutical manufacturers, wholesale distributors, and retail pharmacies. Some of this revenue relates to utilization of prescription drugs by members of the clients receiving PBM services. ESI may pass through certain manufacturer payments to its clients or may retain those payments for itself, depending on the contract terms between ESI and the client. Network Pharmacies -ESI contracts for its own account with retail pharmacies to dispense prescription drugs to client members. Rates paid by ESI to these pharmacies may differ among networks (e.g., Medicare, Worker's Comp, open and limited), and among pharmacies within a network. PBM agreements generally provide that a client pay ESI an ingredient cost, plus dispensing fee, for drug claims at a uniform rate. If the rate paid by a client exceeds the rate contracted with a particular pharmacy, ESI will realize a positive margin on the applicable claim. The reverse also may be true, resulting in negative margin for ESI. ESI also enters into pass- through arrangements where the client pays ESI what the pharmacy is paid. In addition, when ESI receives payment from a client before payment to a pharmacy, ESI retains the benefit of the use of the funds between these payments. Brand/Generic Classifications -Prescription drugs may be classified as either a "brand" or "generic;" however, the reference to a drug by its chemical name does not necessarily mean that the product is recognized as a generic for adjudication, pricing or copay purposes. ESI distinguishes brands and generics through a proprietary algorithm ("BGA") that uses certain published elements provided by First DataBank (FDB) including price indicators, Generic Indicator, Generic Manufacturer Indicator, Generic Name Drug Indicator, Innovator, Drug Class and ANDA. The BGA uses these data elements in a hierarchical process to categorize the products as brand or generic. The BGA also has processes to resolve discrepancies and prevent "flipping" between brand and generic status due to price fluctuations and marketplace availability changes. The elements listed above and sources are subject to change based on the availability of the specific fields. Updated summaries of the BGA are available upon request. Maximum Allowable Cost/Maximum Reimbursement Amount ("MAC") - As part of the administration of the PBM services, ESI maintains a MAC List of drug products identified as requiring pricing management due to the number of manufacturers, utilization and/or pricing volatility. The criteria for inclusion on the MAC List are based on whether the drug has readily available generic product(s), is generally equivalent to a brand drug, is cleared of any negative clinical implications, and has a cost basis that will allow for pricing below brand rates. ESI also maintains correlative MAC price lists based on current price reference data provided by FDB or other nationally recognized pricing source, market pricing and availability information from generic manufacturers and on-line research of national wholesale drug company files. Similar to the BGA, the elements listed above and sources are subject to change based on the availability of the specific fields. Updated summaries of the MAC methodology are available upon request. Manufacturer PBM Formulary Rebates and Associated Administrative Fees -ESI contracts for its own account with manufacturers to obtain formulary rebates attributable to the utilization of certain brand drugs and supplies by PBM client members (and possibly certain authorized generics marketed under a brand manufacturer's new drug application). Formulary rebate amounts vary based on the volume of utilization as well as a client's benefit design and formulary position applicable to the drug or supplies, and in certain instances also may vary based on the product's market-share. ESI often pays an amount equal to all or a portion of the formulary rebates it receives to a client based on the client's PBM agreement terms. ESI retains the financial benefit of the use of any funds held until payment of formulary rebate amounts is made to the client. In addition, ESI provides administrative services to formulary rebate contracted manufacturers, which includes access to drug utilization data, as allowed by law, for purposes of verifying and evaluating the rebate payments and participation in ESI's PBM rebate program. ESI receives administrative fees from the participating manufacturers for the maintenance and operation of the systems and other infrastructure necessary for managing and administering the PBM formulary rebate process. These administrative fees are calculated based on the price of the rebated drug or supplies and do not exceed the greater of (i) 3.5% of the average wholesale price, or (ii) 4.375% of the wholesale acquisition cost of the products. (Currently 3.5% of AWP is the equivalent of 4.375% of WAC) ESI Subsidiary Pharmacies -ESI has several licensed pharmacy subsidiaries, including our specialty pharmacies. These entities may maintain product purchase discount arrangements and/orfee-for-service arrangements with pharmaceutical manufacturers and wholesale distributors. These subsidiary pharmacies contract for these arrangements on their own account in support of their various pharmacy operations. Many of these subsidiary arrangements relate to services provided outside of PBM arrangements, and are entered into irrespective of whether the particular drug is on one of ESI's national formularies. Discounts and fee-for-service payments received by ESI's subsidiary pharmacies are not part of the PBM formulary rebates or associated administrative fees paid to ESI in connection with ESI's PBM formulary rebate programs. In addition, these subsidiary pharmacy arrangements are negotiated separately from ESI's PBM formulary rebate contracts.. The following provides additional information regarding ESI subsidiary pharmacy discount arrangements and fee-for-service arrangements: ESI Subsidiary Pharmacy Discount Arrangements -ESI subsidiary pharmacies purchase prescription drug inventories, either from manufacturers or wholesalers, for dispensing to patients. Often, purchase discounts off the acquisition cost of these products are made available by manufacturers and wholesalers in the form of either up-front discounts or retrospective discounts. These purchase discounts, obtained through separate purchase contracts, are not formulary rebates paid in connection with our PBM rebate programs since they are not based on any PBM client's benefit design, formulary or member utilization. Drug purchase discounts are based on a pharmacy's inventory needs and, at times, the 157555v1 -82- performance of related patient care services and other performance requirements. When a subsidiary pharmacy dispenses a product from its inventory, the purchase price paid for the dispensed product, including applicable dispensing fees, may be greater or less than that pharmacy's acquisition cost for the product net of purchase discounts. In general, our pharmacies realize an overall positive margin between the net acquisition cost and the amounts paid for the dispensed drugs. ESI Subsidiary Pharmacy Fee-For-Service Arrangements - ESI's subsidiary pharmacies also may receive fee-for-service payments from manufacturers, which may be in lieu of or in addition to product purchase discounts, in conjunction with various programs or services, such as: (i) patient assistance programs for indigent patients; (ii) dispensing prescription medications to patients enrolled in clinical trials; (iii) various therapy adherence and fertility programs, and (iv) various other specialty pharmacy programs and services. As a condition to having access to certain specialty products, and sometimes related to certain FDA requirements, a specialty pharmaceutical manufacturer often will require a specialty pharmacy to report selected information to the manufacturer regarding the pharmacy's service levels and other dispensing-related data with respect to patients who receive that manufacturer's product. A portion of the discounts or other fee-for-service payments made available to our specialty pharmacies represents compensation for such reporting. In addition, specialty pharmacies may sell non-patient identifiable claim information they receive in connection with the performance of their pharmacy services to data aggregators or manufacturers on afee-for-service basis. All reporting activities are conducted in compliance with applicable patient and pharmacy privacy laws. Note, however, that ESI does not sell data resulting from its PBM services to healthcare data aggregators or similar entities at this time. Should this change, ESI would do so only if expressly permitted under the PBM agreements with its clients and applicable law. Other Manufacturer Arrangements -ESI also owns a wholesale distribution business, a group purchasing organization, and various other businesses that provide additional services for manufacturers. Compensation derived through these business arrangements is not part of the PBM formulary rebates or associated administrative fees paid to ESI in connection with ESI's PBM formulary rebate programs. In addition, these business arrangements are negotiated separately from ESI's PBM formulary rebate contracts and are unrelated to the PBM drug formulary development process. The following is an overview of these other businesses: Wholesale Distribution -ESI owns a wholesale distribution business. The wholesale distributor purchases products from pharmaceutical manufacturers and distributes products to physicians, physician clinics and other healthcare providers (and sometimes secondary wholesalers). Often, purchase discounts (either up-front or retrospective) off the acquisition cost of these products are made available to Priority Healthcare by the pharmaceutical manufacturers. The purchase price paid by the physician or similar client for product distributed by Priority Healthcare may be greater or less than Priority Healthcare's acquisition cost for the for the product from the pharmaceutical manufacturer, with Priority Healthcare often recognizing a positive margin on the sale transaction. In lieu of, or in addition to, these purchase discounts, Priority Healthcare may enter into various fee-for-service arrangements with pharmaceutical manufacturers related to its wholesale distribution services. Group Purchasing Organization -ESI owns a group purchasing organization, servicing primarily physicians who enroll as members of Matrix to obtain preferential product purchase rates made available to group purchasing organizations through pharmaceutical manufacturers. Matrix receives group purchasing organization administrative fees from manufacturers, and sometimes wholesale distributors, in addition to 'securing member product purchase discounts from pharmaceutical manufacturers. From time to time, Matrix may also enter into other ancillary fee-for-service arrangements with manufacturers to perform other services. ESI also maintains other lines of business that provide the following services for pharmaceutical manufacturers on a fee- for-service basis: (i) product reimbursement support service programs and related hub services; (ii) patient assistance program services; and (iii) drug and sample fulfillment and accountability, alternative sampling, and direct mail and literature fulfillment services through Phoenix Marketing Group, LLC. In addition, certain materials provided by ESI to patients and prescribers may be provided or funded by pharmaceutical manufacturers, in compliance with applicable laws. Services related to the Other Manufacturer Arrangements described above are provided to manufacturers irrespective of whether a drug is on one of ESI's national formularies. October 2008 THIS EXHIBIT REPRESENTS ESI'S CURRENT FINANCIAL POLICIES. ESI MAY PERIODICALLY UPDATE ITS FINANCIAL DISCLOSURES TO REFLECT CHANGES IN ITS BUSINESS PROCESSES• THE CURRENT FINANCIAL DISCLOSURE IS AVAILABLE UPON REQUEST AND ACCESSIBLE ON EXPRESS-SCRIPTS.COM FOR CLIENTS AND ADVISORS. 157555v1 -83- INSURANCE SCHEDULE C INSURANCE REQUIREMENTS FOR PROFESSIONAL SERVICES TO THE CITY OF DUBUQUE All policies of insurance required hereunder shall be with an insurer authorized to do business in Iowa. AI•I insurers shall have a rating of A better in the current A.M. Best Rating Guide. 2. All Certificates of Insurance required hereunder shall provide a thirty (30) day notice of cancellation to the City of Dubuque, except for a ten (10) day notice for non- payment, if cancellation is prior to the expiration date. 3. shall furnish a signed Certificate of Insurance to the.City of Dubuque, Iowa for the coverage required in Paragraph 6 below. Such Certificates shall include copies of the following endorsements: a) Commercial General Liability policy is primary and non-contributing. b) Commercial General Liability additional insured endorsement. c) Governmental Immunities Endorsement. shall upon request, provide Certificates of Insurance for all subcontractors and sub-sub contractors who perform work or services pursuant to the provisions of this contract. Said certificates shall meet the insurance requirements as required of 4. Each certificate shall be submitted to the contracting department of the City of Dubuque. 5.. Failure to provide minimum coverage shall not be deemed a waiver of these requirements by the City of Dubuque. Failure to obtain or maintain the required insurance shall be considered a material breach of this agreement. 6. Contractor shall be required to carry the following minimum coverage/limits or greater if required by law or other legal agreement: a) COMMERCIAL GENERAL LIABILITY General Aggregate Limit Products-Completed Operations Aggregate Limit Personal and Advertising Injury Limit ~M~h QrriirrcnCe I imit Fire Damage limit (any one occurrence) Medical Payments $2,000,000 $1, 000,000 $1, 000, 000 ~~ ,~nn,nnn $ 50,000 $ 5,000 1 of 2 January 2008 INSURANCE SCHEDULE C (Continued) INSURANCE REQUIREMENTS FOR PROFESSIONAL SERVICES TO THE CITY OF DUBUQUE This coverage shall be written on an occurrence form, not claims made form. All deviations or exclusions from the standard ISO commercial general liability form CG 0001 or Business owners BP 0002 shall be clearly identified. Form CG 25 04 03 97 `Designated Location (s) General Aggregate Limit' shall be included. Governmental Immunity endorsement identical or equivalent to form attached. Additional Insured Requirement: The City of Dubuque; including all its elected and appointed officials, all its employees and volunteers, all its boards, commissions and/or authorities and their board members, employees and volunteers shall be named as an aclaitionai insured on General Liability including "ongoing operations" coverage equivalent to ISO CG 20100704. b) Automobile $1,000,000 combined single limit. c) WORKERS COMPENSATION & EMPLOYERS LIABILITY Statutory for Coverage A Employers Liability: Each Accident $ 100,000 Each Employee Disease $ 100,000 Policy Limit Disease $ 500,000 d) PROFESSIONAL LIABILITY $1,000,000 e) UMBRELLA/EXCESS LIABILITY *Coverage and/or limit of liability to be determined on a case-by-case basis by Finance Director. Completion Checklist ^ Certificate of Liability Insurance (2 pages) ^ Designated Location(s) General Aggregate Limit CG 25 04 03 97 (2 pages) ^ Additional Insured CG 20 10 07 04 ^ Governmental Immunities Endorsement 2 of 2 January 2008 AcoRO~ CERTIFICATE OF LIABILITY INSURANCE X2,;;200 DDUCER {563) 123-4567 FAx (563) 987-6543 THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE •.urance Agency HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR _reet Address ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. URED ~mpany :reet ST Zip Code St Code INSURERS AFFORDING COVERAGE INSURER A Insurance Company -IE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOlwrl rfs IANUIN~ ANY EQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, iE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. - - ---- --- - ---'-- -.._.._...........~ .,~r•., .,.-..,,non ov enm rt nines J R URCV ADO'L /'11C LIIVIIIJ JfIVVV,•,v,r~~ ~,r,.r ~.-.- E OF INSURANCE ••••--------~ ~~'-- -------- POLICY NUMBER POLICY EFFECTIVE DATE (MM/DD/YY) POLICY EXPIRATION DATE (MMIDD/Yl') LIMITS 2 INSRD TYP L LIABILITY EACH OCCURRENCE S 1 , 000 , 000 GEN ERA DAMAGE TO RENTED 000 S 50 X L GENERAL LIABILITY PREMISES Ea occurrence , COMMERCIA ~ MED EXP (An one arson) S 5 , 000 X OCCUR CLAIMS MADE PERSONAL 8 AUV INJURY = i ~ `' ~ + OO O GENERAL AGGREGATE S 2 , 000, 000 ES PER ' PRODUCTS -COMP/OP AGG S 1 , 000 , 000 : L AGGREGATE LIMIT APPLI GEN PRO- POLICY X JECT LOC AUT OMOBILE LIABILITY COMBINED SINGLE LIMIT (Ea accident) S 1,.000, 000 X ANY AUTO ALL OWNED AUTOS BODILY INJURY (Per person) S SCHEDULED AUTOS HIRED AUTOS BODILY INJURY Per accident) S ( NON-0WNED AUTOS PROPERTY DAMAGE i S dent) (Per acc AUTO ONLY - EA ACCIDENT S GA RAGE LJABILITY OTHER THAN EA ACC S ANY AUTO AUTO ONLY: AGG S EACH OCCURRENCE S 1 , 000 , 000 EXCESSIUMBRELLA LIABILITY 000 000 1 ~ AGGREGATE , , S CLAIMS MADE X OCCUR S le DEDUCTIBLE '( ~ V~ S X RETENTION $ 0 ~ O 1 WC STATU- OTH- X TORY LIMffS ER WORKERS COMPENSATION AND ^ ! ti 000 100 EMPLOYERS' LIABILITY CO v j E.L. EACH ACCIDENT , 5 ANY PROPRIETOR/PARTNER/EXECUTIVE OFFICERlMEMBER EXCLUDED? - _IDI~/ '(J'f " E.L. DISEASE - EA EMPLOYEE 100, 000 S If yes, describe under I y E.L. DISEASE -POLICY LIMIT S 500 , 000 SPECIAL PROVISIONS below $1, 000, 000 OTHER professional Liability , nnn~ncin rac SCRIPTIONOFOPERATIONS/COCA UC~NarvenwLw~cn~.w~,..~.~.+._.~~~~-•-•---••--~°-~ -- e City o£ Dubuque is an additional insured on general liability policies including ongoing 6 completed operations ..A;?rto eavival.ent to ZSO CG 2010 0704 6 CG 2037 0709. General Liability policy is primary b non-contributing. Form 250= 0397 "Designated. Locations" ger_aral liability aggregate li.Zit ~s included. Goverr_me~ital immuniziss endor~ry.entl TE City of Dubuque 50 West 13th Street Dubuque, IA 52001 SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, THE ISSUING INSURER WILL ENDEAVOR TO MAIL 3O DAYS WRITTEN NOTICE TO THE CERTIFlCATE HOLDER NAMED TO THE LEFT, BUT' FAILURE TO DO SO SHALL IMPOSE NO OBLIGATJON OR LIABILITY OF ANY KIND UPON THE AUTHORIZED REPRESENTATIVE ORD 25 (2001/08) 0~5 (Di De>.os AMS VMP Mortgage Solutions, Inc. (BDl))327-0545 ®ACORD CORPORATION 1988 Page 1 of 2 IMPORTANT If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be endorsed. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). DISCLAIMER The Certificate of Insurance on the reverse side of this form does not constitute a contract between the issuing insurer(s), authorized representative or producer, and the certificate holder, nor does it affirmatively or negatively amend, extend or alter the coverage afforded by the policies listed thereon. s~h~ ~ona~ Pr'°f ess N ACORD 25 (2001108) INS025 to~oe).os AMS Page 2 of 2 POLICY NUMBER: COMMERCIAL GENERAL LIABILITY CG 25040397 THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. DESIGNATED LOCATION(S) GENERAL AGGREGATE LIIVIpT This endorsement modifies insurance provided under the following: COMMERCIAL GENERAL LIABILITY COVERAGE PART SCHEDULE Locati ANY AND ALL COVERED LOCATIONS (If no entry appears above, information required to complete this endorsement will be shown in the Declarations as applicable to this endorsement.) A. For all sums which the insured becomes legally obligated to pay as damages caused by "occur- rences" under COVERAGE A (SECTION I), and for all medical expenses caused by accidents under COVERAGE C (SECTION I), which can be attributed only to operations at a single desig- nated "location" shown in the Schedule above: 1. A separate Designated Location General Aggregate Limit applies to each designated "location", and that limit is equal to the amount of the General Aggregate Limit shown in the Declarations. 2. The Designated Location General Aggregate Limit is the most we will pay for the sum of all damages under COVERAGE A, except dam- ages because of "bodily injury" or "property damage" included in the "products-completed operations hazard", and for medical expenses under COVERAGE C regardless of the num- ber of: a. Insureds; b. Claims made or "suits" brought; or c. Persons or organizations making claims or bringing "suits". 3. Any payments made under COVERAGE A for . damages or under COVERAGE C for medical ~;xpenses shaii reduce the vesignstad Lcca- tion General Aggregate Limit for that desig- nated "location". Such payments shall not re- duce the General Aggregate Limit shown in the Declarations nor shall they reduce any other Designated Location General Aggre- gate Limit for any other designated "location" shown in the Schedule above. 4. The limits shown in the Declarations for Each Occurrence, Fire Damage and Medical Ex- pense continue to apply. However, instead of being subject to the General Aggregate Limit shown in the Declarations, such limits will be subject to the applicable Designated Location General Aggregate Limit. B. For all sums which the insured becomes legally obligated to pay as damages caused by "occur- rences" under COVERAGE A (SECTION I), and for all medical expenses caused by accidents under COVERAGE C (SECT-ION I), which can- not be attributed only to operations at a single designated "location" shown in the Schedule above: 1. Any payments made under COVERAGE A for damages or under COVERAGE C for medical expenses shall reduce the amount available under the General Aggregate Limit or. the Products-Completed Operations Aggregate Limit, whichever is applicable; and 2. Such payments shall not reduce any Desig- nated Location General Aggregate Limit. Page 1 of 2 CG 25 04 03 97 CG 25 04 03 97 C. When coverage for liability arising out of the "products-completed operations hazard" is pro- vided, any payments for damages because of "bodily injury" or "property damage" included in the "products-completed operations hazard" will reduce the Products-Completed Operations Ag- gregate Limit, and not reduce the General Ag- gregate Limit nor the Designated Location Gen- eral Aggregate Limit. D. For the purposes of this endorsement, the Defi- nitions Section is amended by the addition of the following definition: "Location" means premises involving the same or connecting lots, or premises whose connection is interrupted only by a street, roadway, waterway or right-of--way of a railroad. E. The provisions of Limits Of Insurance (SECTION III) not otherwise modified by this endorsement shall continue to apply as stipulated. . Copyright, Insurance Services Office, Inc., 1996 Page 2 of 2 CG 25040397 POLICY NUMBER: COMMERCIAL GENERAL LIABILITY CG 20 10 07 04 THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. A®DITIONAL INSURED -OWNERS, LESSEES OR CONTRACTORS - SCI-IE~l.!L E~ l~LERSON OR ORGANIZATION This endorsement modifies insurance provided under the following: COMMERCIAL GENERAL LIABILITY COVERAGE PART SCHEDULE Name Of Additional Insured Person(s) Or Organization(s): The City of Dubuque, including all its elected and appointed officials, all its employees and volunteers, all its boards, commissions and/or authorities and their board members, employees and volunteers. Location(s) Of Covered Operations Information re uired to com lete this Schedule, if not shown above, will be shown in the Declarations. A. Section II -Who Is An .Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule, but orily with respect to liability for "bodily injury", "property damage" or "personal and advertising injury" caused, in whole or in part, by: 1. Your acts or omissions; or r,,,,, __a,. .,.r,iocinng n' thnga artinn f'ln ~iOUr behalf; in the performance of your ongoing operations for the additional insureds) at the location(s) desig- Hated above. B. With respect to the insurance afforded to these additional insureds, the following additional exclu- sions apply: This insurance does not apply to "bodily injury" or "p~i3jicity 1~air'iay2" occurring cfter: Page 1 of 2 CG 20 10 07 04 All work, including materials, parts or equip- 2. That portion of "your work" out of which the ment furnished in connection with such work, injury or damage arises has been put to .its in- on the project (other than service, maintenance tended use by any person or organization or repairs) to be performed by or on behalf of enh ar ted in perform ng operations for a tprantor the additional insureds) at the location of the a9as a art of the same project. covered operations has been completed; or P P All terms and conditions of this p©licy zpply unless modified by this endorsement. © ISO Properties, Inc., 2004 CG 20 10 07 04 Page 2 of 2 . CITY OF DUBUQUE, IOWA GOVERNMENTAL IMMUNITIES ENDORSEMENT Nonvvaiver of Governmental Immunity. The insurance carrier expressly agrees and states that the purchase of this policy and the including of the City of Dubuque, Iowa as an Additional Insured does not waive any of the defenses of governmental immunity available to the City of Dubuque, Iowa under Code of Iowa. Section 670.4 as it is now exists and as it may be amended from time to time. 2. Claims Coverage. The insurance carrier further agrees that this policy of insurance shall cover only those claims not subject to the defense of governmental immunity under the Code of Iowa Section 670.4 as it now exists and as it may be amended from time to time. Those claims not subject to Code of Iowa Section 670.4 shall be covered by the terms. and conditions of this insurance policy. 3.. Assertion of Government Immunity. The City of Dubuque, Iowa shall be responsible for asserting any defense of governmental immunity, and may do so at any time and shall do so upon the timely written request of the insurance carrier. 4. Non-Denial of Coverage. The insurance carrier shall not deny coverage under this policy and the insurance carrier shall not deny any of the rights and benefits accruing to the City of Dubuque, Iowa under this policy for reasons of governmental immunity unless and until a court of competent jurisdiction has ruled in favor of the defense(s) of governmental immunity asserted by the City of Dubuque, Iowa. No Other Change in Policy. The above preservation of governmental immunities shall not otherwise change or alter the coverage available under the policy. SPECIMEN 1 of 1 ~ . January 2008