Exhibit 10.3
PHARMACY BENEFIT MANAGEMENT AGREEMENT
between
UNITED HEALTHCARE
SERVICES, INC.
and
MERCK MEDCO
MANAGED CARE, L.L.C.
PHARMACY BENEFIT MANAGEMENT AGREEMENT
This PHARMACY BENEFIT MANAGEMENT AGREEMENT (this "Agreement") is between UNITED HEALTHCARE SERVICES, INC., on behalf of itself and its affiliates from time to time, located at 9900 Bren Road East, Minnetonka, Minnesota 55343 (hereinafter "United HealthCare"), and MERCK MEDCO MANAGED CARE, L.L.C. located at 100 Summit Avenue, Montvale,
New Jersey 07645-1753 (hereinafter "PBM"). This Agreement is effective on the date the parties have each executed it (the "Effective Date"). It concerns services provided as of the "Commencement Date," as hereinafter defined. This Agreement supersedes and replaces any existing agreements between the parties related to the same subject matter.
W I T N E S S E T H:
WHEREAS, United HealthCare desires to contract with a pharmaceutical benefits management entity for pharmaceutical benefit management and related services that United HealthCare will make available, together with other United HealthCare services, to Health Plans, as hereinafter defined, and other non-Health Plan business (affiliated with United HealthCare or to which United HealthCare provides services) through contracts with United HealthCare; and
WHEREAS, PBM provides pharmaceutical benefits management and related services and desires to contract with United HealthCare to provide such management and services.
NOW, THEREFORE, in consideration of the terms and conditions set forth in this Agreement, the undersigned parties agree as follows:
SECTION 1. DEFINITIONS
1.1. Definitions. In addition to the capitalized terms defined elsewhere in this Agreement, the following terms shall have the following meanings:
(a) "Average Wholesale Price" or "AWP" means the average wholesale
price of the Covered Prescription Drug Services dispensed, utilizing
the current price list in the Blue Book and its supplements. If PBM
ceases to use the Blue Book and its supplements, PBM shall use such
other nationally recognized pricing source as PBM uses for all of its
remaining customers; or, if PBM uses more than one source, then the
source used for United HealthCare shall be the source mutually agreed
to by the parties. Under the Retail Pharmacy Program, AWP is based on
the package size submitted. Under the Mail Service Program, AWP is
based on package sizes of 100 units or 16 oz. quantities, or smaller
quantities if such quantities are not commercially available.
(b) "Benefit Contract" means a benefit plan that: (i) is sponsored,
purchased, issued or administered by Payor and (ii) contains the terms
and conditions of a Covered Person's coverage. A Benefit Contract is
also known as a certificate of coverage, summary plan description,
evidence of coverage, or group services agreement.
(c) "Commencement Date" means June 1, 2000 or such earlier date on
which PBM begins to provide services under this Agreement in accordance
with Section 3.24.
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(d) "Copayment or Coinsurance or Deductible or Other Charge"
collectively known as "Copayment" means the charge, in addition to the
premium, which a Covered Person is required to pay for certain covered
services provided under the Benefit Contract and Pharmacy Rider.
Copayment or Coinsurance or Deductible or Other Charge may be either a
defined dollar amount or a percentage of eligible expenses. A Covered
Person is responsible for the payment of any Copayment directly to the
pharmacy at the time the prescription is dispensed.
(e) "Covered Person" means an individual eligible to receive coverage
for outpatient prescription pharmacy benefits who is currently enrolled
under a United HealthCare or Payor Benefit Contract that includes a
Pharmacy Rider.
(f) "Covered Prescription Drug Services" means those covered outpatient
prescription drugs and covered pharmacy products, services and supplies
pursuant to a Covered Person's Benefit Contract and/or Pharmacy Rider.
g) "Health Plan" means a licensed health maintenance organization
("HMO") or other similar organization that is either (i) owned by
United HealthCare where "Owned" means that United HealthCare owns not
less than a majority of the voting securities; or (ii) managed by
United HealthCare, where "Managed" means that United HealthCare manages
the pharmacy program or provides other management or administrative
services such as claims processing services, where the local managed
health plan assumes medical risk other than as defined below. Health
Plan includes an HMO or other similar organization Owned or Managed
that offers an array of products including but not limited to
fully-insured, self-insured products (where such self-insured products
use the provider networks, medical management and other similar
services used by the HMO or similar organization), commercial HMO
products, Medicare risk products (Medicare+ Choice), Medicaid, EPO
products, PPO products, and all combination products that include an
in-network and out-of-network component such as point-of-service
("POS") products. When such organization is Managed by United
HealthCare, not Owned by United HealthCare, Health Plan includes such
organization only to the extent it has elected to receive services
pursuant to this Agreement. The term Health Plan is not intended to
include: (i) United HealthCare Insurance Company (UHI) products unless:
(A) such products use provider networks, medical management and other
similar services in a manner comparable to the HMOs or similar
organization; and (B) United HealthCare is responsible for medical
underwriting risk; or (ii) fully insured or self-funded products sold
through United HealthCare's Strategic Business Services division; or
(iii) Medicare supplemental products (MediGap); or (iv) the consumer
funded pharmacy program addressed in Section 3.18 of this Agreement.
(h) "Intellectual Property" means all patents, patents pending,
trademarks, service marks, trade names, service names, slogans,
registered copyrights, commercially significant unregistered
copyrights, technology rights and licenses, computer software
(including, without limitation, any source or object codes or related
documentation), trade secrets, franchises, know-how, and inventions and
all improvements to such intellectual property.
(i) "Mail Service Program" means a program contemplated by this
Agreement in which Covered Persons may mail a prescription together
with the applicable Copayment to PBM for dispensing of a 90 day maximum
supply of a covered drug via mail service.
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(j) "Maximum Allowable Cost" or "MAC" means a list established by PBM
for its book of business showing the maximum allowable cost for a list
of prescription drug ingredients. Any generic or branded generic drug
on the MAC list dispensed at retail will be reimbursed at the maximum
allowed by such list.
(k) "Participating Pharmacy" means a pharmacy, including a retail or
mail service pharmacy, which has entered into an agreement with PBM
under which pharmacy has agreed to provide Covered Prescription Drug
Services to Covered Persons and to comply with (i) contractual
requirements pursuant to this Agreement; and (ii) regulatory
requirements.
(l) "Payor" means United HealthCare or the entity or person that has
the financial responsibility to United HealthCare for payment for
services covered by a Benefit Contract and/or Pharmacy Rider.
(m) "Pharmacy Rider" means that rider to the Covered Person's Benefit
Contract that in addition to the Benefit Contract, states the details
of Covered Person's prescription drug coverage. The Benefit Contract
and Pharmacy Rider are used by PBM in processing outpatient
prescription drug claims in connection with this Agreement.
(n) "Pharmacy & Therapeutics Committee" or "P&T Committee" means that
United HealthCare committee that: (i) reviews a prescription drug for
inclusion on the United HealthCare Preferred Drug List or other
comparable formularies; and, (ii) develops other criteria, procedures
and rules for the Program including but not limited to quantity level
and prior authorization.
(o) "Preferred Drug List" or "PDL" means a list that identifies those
Federal Drug Administration ("FDA") approved prescription drug products
that are preferred by United HealthCare for dispensing to Covered
Persons.
(p) "Program" means all pharmacy services provided under the Benefit
Contract and Pharmacy Rider to Covered Persons, including days supply
limitation, Copayment, Preferred Drug List and other program
specifications set forth in this Agreement or otherwise agreed to, in
writing, between or among the parties.
(q) "PDL Rebate(s)" means those monies received by PBM through PBM's
rebate contracts with pharmaceutical manufacturers as a result of
inclusion of such manufacturer's drugs on the PDL, which monies are
paid to and earned by United HealthCare pursuant to Section 5.5 and its
subparts.
(r) "Retail Pharmacy Program" means that part of the pharmacy program
where Covered Persons may purchase a maximum of a 34 day supply (except
as otherwise mutually agreed) of Covered Prescription Drug Services
from a retail Participating Pharmacy upon providing verification of
eligibility and payment of the applicable Copayment.
(s) "Substantial Change" means a change in law or regulation applicable
to a party to this Agreement that materially adversely affects the
benefits such party reasonably expected to receive under this
Agreement.
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(t) "United HealthCare" means the party to this Agreement or another
wholly owned affiliate, subsidiary or business division to whom United
HealthCare may assign this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of PBM.
2.1.1. Organization and Qualification. PBM represents and
warrants to United HealthCare that it is a limited liability
company duly organized, validly existing and in good standing
under the laws of New Jersey. PBM has the corporate power and
authority necessary to own and operate its properties and to
carry on its business as now conducted. PBM is qualified to do
business as a foreign corporation in every jurisdiction in
which the nature of its business and/or its ownership of
property requires it to be so qualified.
2.1.2. Corporate Authorization. PBM represents and warrants to
United HealthCare that the execution, delivery, and
performance of this Agreement and the provision of the
services contemplated hereby are within its corporate powers.
All requisite authority necessary to enter into this Agreement
has been obtained, and PBM has duly and validly executed and
delivered this Agreement. Assuming this Agreement constitutes
the valid and binding agreement of United HealthCare, this
Agreement constitutes a valid and binding agreement of PBM
enforceable against PBM in accordance with its terms.
2.1.3. No Conflict; Required Filings and Consents. PBM
represents and warrants to United HealthCare that the
execution, delivery and performance of this Agreement does
not, and the provision of the services contemplated hereby
will not: (a) conflict with the Articles of Organization or
Bylaws of PBM; (b) conflict with or violate any laws
applicable to PBM or by which any of its properties is bound
or affected; or (c) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or encumbrance on any of the
properties or assets of PBM pursuant to any note, bond,
mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which
PBM is a party, or by which PBM or any of its properties is
bound or affected. The execution and delivery of this
Agreement by PBM does not, and the performance of this
Agreement by PBM and the provision of the services
contemplated hereby by PBM will not, require any consent,
approval, authorization or permit of, or filing with or
notification to, any third party, except for certain filings
required by certain state governmental entities.
2.2. Representations and Warranties of United HealthCare.
2.2.1. Organization and Qualification. United HealthCare
represents and warrants to PBM that it is a corporation duly
incorporated, validly existing and in good standing under the
laws of Minnesota. United HealthCare has the corporate power
and authority necessary to own and operate its properties and
to carry on its business as now conducted. United HealthCare
is qualified to do
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business as a foreign corporation in every jurisdiction in
which the nature of its business or its ownership of property
requires it to be so qualified.
2.2.2. Corporate Authorization. United HealthCare represents
and warrants to PBM that the execution, delivery, and
performance of this Agreement are within its corporate powers.
All requisite authority necessary to enter into this Agreement
has been obtained, and United HealthCare has duly and validly
executed and delivered this Agreement. Assuming this Agreement
constitutes the valid and binding agreement of PBM, this
Agreement constitutes a valid and binding agreement of United
HealthCare enforceable against United HealthCare in accordance
with its terms.
2.2.3. No Conflict; Required Filings and Consents. United
HealthCare represents and warrants to PBM that the execution,
delivery and performance of this Agreement does not, and the
performance of this Agreement by United HealthCare will not:
(a) conflict with the
Articles of Incorporationor Bylaws of
United HealthCare; (b) conflict with or violate any laws
applicable to United HealthCare or by which any of its
properties is bound or affected; or (c) result in any breach
of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration
or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of United
HealthCare pursuant to any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which United HealthCare is a
party, or by which United HealthCare or any of its properties
is bound or affected. The execution and delivery of this
Agreement by United HealthCare does not, and the performance
of this Agreement by United HealthCare will not, require any
consent, approval, authorization or permit of, or filing with
or notification to any third party, except for certain filings
required by certain state governmental entities.
SECTION 3. OBLIGATIONS OF PBM: PHARMACY MANAGEMENT AND SERVICES
3.1. General PBM Services. PBM shall provide to United HealthCare the
services described in this Agreement and in Exhibit A. PBM acknowledges
that its position as a premier company capable and desirous of
providing industry leading products and services is an inducement on
which United HealthCare is relying in entering into this Agreement.
3.2. Laws, Regulations and Licenses. PBM, at its own cost, shall: (a)
maintain all federal, state, and local licenses that are materially
necessary to provide services under this Agreement and the lack of
which could adversely affect United HealthCare; (b) shall comply with
all applicable statutes and regulations in providing all services
pursuant to this Agreement; and (c) require all Participating
Pharmacies employed by or under contract with PBM to comply with (a)
and (b).
3.3. Personnel and Other Resources. PBM shall provide sufficient,
dedicated personnel, information systems support and other resources,
as reasonably required to successfully administer a high quality,
cost-effective Program for United HealthCare pursuant to this
Agreement. PBM and United HealthCare shall review the
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appropriateness of resource allocation on a regular basis, no less
often than quarterly. United HealthCare has the right to interview and
approve of any recommended new hires for the Dedicated Pharmacy
Management Unit discussed below. United HealthCare also has the right
to have a PBM employee removed from providing services for United
HealthCare. PBM shall be responsible for all compensation, benefits and
taxes of PBM's employees. If the parties agree to locate any PBM
employees at a United HealthCare location, United HealthCare shall be
responsible to provide workspace, supplies and equipment to PBM within
a mutually agreed upon reasonable time frame and at a mutually agreed
upon cost.
3.3.1. PBM agrees to have a Dedicated Pharmacy Management Unit
located in Minneapolis as part of the pharmacy management
services provided for United HealthCare. PBM agrees to have
this unit fully operational prior to the Commencement Date.
United HealthCare will designate the name of this dedicated
unit, subject to the approval of PBM.
3.3.2. PBM agrees that the senior management team dedicated to
United HealthCare shall be located in Minneapolis and shall
consist of a senior level employee who has decision-making
authority. In addition to general PBM management expertise,
PBM shall have individuals located in the Dedicated Pharmacy
Management Unit with expertise in: (a) clinical and analytical
services, (b) customer account services, (c) marketing and
sales support, (d) pharmacists to work with the Health Plans,
and (e) account management for Health Plan and non-Health Plan
business. PBM shall also provide the following support to the
Dedicated Pharmacy Management Unit's activities for United
HealthCare from PBM's corporate or other offices: customer
service, legal and regulatory compliance, information systems,
network management, operational support, underwriting,
manufacturer activity and clinical programs.
3.3.3. PBM agrees that the services provided by PBM's
dedicated pharmacy management services include: (a) work with
United HealthCare to position United HealthCare's prescription
drug Programs for economic and service success in a changing
competitive market place; (b) formulate appropriate pharmacy
goals with and for United HealthCare; (c) develop and execute
a pharmacy marketing plan that will enable United HealthCare
to meet its sales and growth goals; and (d) help with pharmacy
cost management including United HealthCare's trend management
and per member per month (pmpm) cost management.
3.3.4. PBM agrees to provide dedicated management and sales
support as reasonably requested to optimize the value of
United HealthCare's Program and to attain United HealthCare's
identified goals. PBM's marketing and sales support shall
include but not be limited as the market changes from time to
time, to the following: (a) strategic consultation, training
and education; (b) advanced training modules for sales
representatives; (c) continuing education programs; (d) site
visits and video presentations; (e) focus groups and related
consulting; (f) press release development and recommendations;
(g) strategies to successfully market against competitors; (h)
presentation and reference materials for use by sales
representatives; (i) client sales support during finalist
presentations; (j) professionally designed marketing
literature that effectively positions United HealthCare and
communicates the clients' prescription benefit programs; and
(k) customized communication programs to motivate and inform
selected audiences.
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3.3.5. PBM agrees that different marketing strategies will be
provided to United HealthCare for growth goals based on
revenue, profit, and membership.
3.4. Retail Participating Pharmacy Network. PBM agrees to provide
national networks of retail Participating Pharmacies under contract
with PBM to provide dispensing services to Covered Persons under the
Retail Pharmacy Program. PBM agrees that United HealthCare may require
the termination of a specific retail pharmacy for good cause including
quality of care issues. PBM shall notify United HealthCare of any
terminations in the Participating Pharmacy network. PBM shall send
letters to Covered Persons, who have utilized a Participating Pharmacy
in the prior twelve months, notifying them of the termination of such
Participating Pharmacy, after receiving from United HealthCare: (a) the
addresses of the affected Covered Persons; and (b) the approval of the
letters by United HealthCare. United HealthCare shall be responsible
for the postage costs of any mailings to Covered Persons when a
Participating Pharmacy is terminated at United HealthCare's request.
PBM shall be responsible for the postage costs of any mailings to
Covered Persons when Participating Pharmacy is terminated at PBM's
request.
3.4.1. PBM will provide United HealthCare with at least three
network alternatives by the Commencement Date as described in
the Financial Appendix:
3.4.1.1. PBM shall provide and maintain a
Participating Provider network that is taken as a
whole no less favorable in terms of number, location,
and quality of providers than the network available
to United HealthCare as of the period just prior to
the Commencement Date and PBM shall guarantee no
deterioration in reimbursement during the term of
this Agreement as compared to the period just prior
to the Commence Date. This network may upon parties'
mutual written consent be contracted through United
HealthCare.
3.4.1.2. PBM shall make available its CCNIII network.
3.4.1.3. PBM shall make available its CCN+ network.
3.4.2. PBM agrees to use reasonable commercial efforts to
create alternative retail networks for any new products or
other offerings that may be developed by United HealthCare
from time to time.
3.4.3. For the network described in Section 3.4.1.1, PBM
agrees that during the term of this Agreement all PBM
customized pharmacy provider agreements for such retail
pharmacy network shall be assignable to United HealthCare.
Such assignment shall be made at United HealthCare's sole
discretion and at a time determined by United HealthCare.
3.5. Mail Service. PBM shall provide to United HealthCare and Health
Plans shall use ...