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Corporate Integrity Agreement Dated As of March 29, 2005

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Sectors: Retail
Effective Date: March 29, 2005
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Exhibit 10.8

CORPORATE INTEGRITY AGREEMENT

BETWEEN THE OFFICE OF INSPECTOR GENERAL

OF THE

DEPARTMENT OF HEALTH AND HUMAN SERVICES

AND

PHARMERICA, INC., AND PHARMERICA DRUG SYSTEMS, INC.

I. PREAMBLE PharMerica, Inc., PharMerica Drug Systems, Inc., and their subsidiaries that furnish pharmaceutical items and products and related services reimbursable under Medicare, Medicaid or other Federal health care programs to long-term care, assisted living and other like facilities (PharMerica, Inc., PharMerica Drug Systems, Inc. and such subsidiaries being hereafter collectively referred to as " PharMerica" ) hereby enter into this Corporate Integrity Agreement (" CIA" ) with the Office of Inspector General (" OIG" ) of the United States Department of Health and Human Services (" HHS" ) to promote compliance with the statutes, related regulations, and written directives of Medicare, Medicaid, and all other Federal health care programs (as defined in 42 U.S.C. a7 1320a-7b(f)) (" Federal health care program requirements" ). Contemporaneously with this CIA, PharMerica, Inc. and PharMerica Drug Systems, Inc. are entering into a Settlement Agreement with the OIG, and this CIA is incorporated by reference into the Settlement Agreement. Prior to the Effective Date of this CIA, PharMerica established a voluntary compliance program, which includes a corporate compliance officer (" Compliance Officer" ), a corporate compliance committee (" Compliance Committee" ), a Code of Ethics & Business Conduct (the " Code of Conduct" ), written policies and procedures, educational and training initiatives, review and disciplinary procedures, a confidential disclosure program (" Disclosure Program" ), an ineligible persons screening program (" Screening Program" ), and internal audit and review procedures designed, as represented by PharMerica, to promote compliance with applicable laws, including Federal health care program requirements, and the promotion of ethical business practices. PharMerica shall continue the operation of the compliance program for the duration of the term of the CIA.

II. TERM AND SCOPE OF THE CIA

A. The period of the compliance obligations assumed by PharMerica under this CIA shall be five years from the effective date of this CIA, unless otherwise


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specified. The effective date shall be the date on which the final signatory of this CIA executes this CIA (" Effective Date" ). Each one-year period, beginning with the one-year period following the Effective Date, shall be referred to as a " Reporting Period."

B. Sections VIII, IX, X, XI, and XII shall expire no later than 120 days after OIG' s receipt of: (1) PharMerica' s final Annual Report; or (2) any additional materials submitted by PharMerica pursuant to OIG' s request, whichever is later.

C. The scope of this CIA shall be governed by the following definitions: 1. " Covered Persons" means:

a. all employees of PharMerica, including but not limited to, the PharMerica CEO and all members of PharMerica management inclusive of senior vice presidents, vice presidents, directors, and managers;

b. all contractors, subcontractors and agents engaged by PharMerica to provide pharmaceutical items or services to patients or to perform billing or coding functions;

c. all contractors, subcontractors and agents engaged by PharMerica to perform functions related to the marketing of items or services reimbursable by Federal health care programs;

d. all contractors, subcontractors and agents engaged by PharMerica to perform functions related to the preparation of claims or other requests for reimbursement for pharmaceutical items or services to patients on behalf of PharMerica; and

e. all contractors, subcontractors and agents engaged by PharMerica to provide functions related to the sale or acquisition of entities that engage in Federal health care program business, including but not limited to solicitation of sellers, valuation, due diligence, negotiation, drafting and review of documents related to such transactions, excluding lawyers, accountants and financial advisors except those accountants and financial advisors who are acting as agents of PharMerica in connection with a Covered Transaction (defined below).


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Notwithstanding the above, the term " Covered Persons" does not include part-time or per diem employees, contractors, subcontractors, and agents who are not reasonably expected to work more than 160 hours per year, except that any such individuals shall become " Covered Persons" at the point when they work more than 160 hours during the calendar year. " Covered Persons" who are entities shall have those obligations with respect to their employees and subcontractors that are set forth in section III.C.7 of the CIA. 2. " Arrangements" means every arrangement or transaction that involves directly or indirectly the offer, payment, solicitation, or receipt of anything of value; and is between PharMerica and any actual or potential source of health care business or referrals to PharMerica or any actual or potential recipient of health care business or referrals from PharMerica. For purpose of this definition, the term " source" shall mean any physician, contractor, vendor, or agent, and the term " health care business or referrals" shall include referring, recommending, arranging for, ordering, leasing, or purchasing of any good, facility, item, or service for which payment may be made in whole or in part by a Federal health care program.

3. " Covered Transaction" means any transaction pursuant to which PharMerica acquires or sells any interest in a business unit or entity that furnishes pharmaceutical items or products and related services that are reimbursable by Medicare, Medicaid or other Federal health care programs.

4. " Relevant Covered Persons" means a Covered Person who is involved with the development, approval, management, or review of any of PharMerica' s Arrangements.

III. CORPORATE INTEGRITY OBLIGATIONS

A. Compliance Officer and Committee . 1. Compliance Officer . Prior to the Effective Date of this CIA, PharMerica appointed a Compliance Officer who is responsible for developing and implementing policies, procedures, and practices designed to ensure compliance with the requirements set forth in this CIA and with Federal health care program requirements. The Compliance Officer is and


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shall remain a member of management of PharMerica, is and shall remain required to make periodic (at least quarterly) reports regarding compliance matters directly to the PharMerica Compliance Committee, and is and shall remain authorized to report on such matters directly to the PharMerica Compliance Committee and the Chief Executive Officer of PharMerica and shall have direct or indirect access to the Board or Directors of PharMerica, Inc.' s parent. The Compliance Officer is not and shall not be the General Counsel or Chief Financial Officer. The Compliance Officer is and shall remain responsible for monitoring the day-to-day compliance activities engaged in by PharMerica as well as for any reporting obligations created under this CIA. The Compliance Officer function outlined in this Section II.A.l shall continue during the Term of this CIA. PharMerica shall report to OIG, in writing, any changes in the identity or position description of the Compliance Officer, or any actions or changes that would affect the Compliance Officer' s ability to perform the duties necessary to meet the obligations in this CIA, within 15 days after such a change.

2. Compliance Committee . Prior to the Effective Date of this CIA PharMerica appointed a Compliance Committee. The Compliance Committee includes and shall continue to include the Compliance Officer and members of senior management responsible for finance, clinical, human resources, legal, sales and operations. The Compliance Committee supports the Compliance Officer in fulfilling his/her responsibilities ( e.g. , assists in the analysis of the organization' s risk areas and oversees monitoring of internal and external audits and investigations). The Compliance Committee function outlined in this Section II.A.2 shall continue during the Term of this CIA. PharMerica shall report to OIG, in writing, any changes in the composition of the Compliance Committee, or any actions or changes that would affect the Compliance Committee' s ability to perform the duties necessary to meet the obligations in this CIA, within 15 days after such a change.

B. Written Standards .

1. Code of Conduct . Prior to the Effective Date of this CIA, PharMerica adopted and distributed the Code of Conduct to all Covered Persons who are employees and the personnel file of each Covered Person who is an employee contains a written certification that he or she has


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received, read, understood, and shall abide by the Code of Conduct. PharMerica shall make the promotion of, and adherence to, the Code of Conduct an element in evaluating the performance of all employees. The Code of Conduct reflects:

a. a commitment to full compliance with all federal, state and local laws and regulations (which includes Federal health care program requirements);

b. the requirement that all of PharMerica' s officers, directors, and employees shall be expected to comply with all federal, state and local laws and regulations (which includes Federal health care program requirements); c. the requirement that all of PharMerica' s officers and employees shall be expected to report to the Compliance Officer, or other appropriate individual designated by PharMerica, suspected violations of the Code of Conduct or any Federal, state and local laws and regulations (which includes Federal health care program requirements); d. the possible consequences to both PharMerica and individuals of failure to comply with Federal health care program requirements and the failure to report such noncompliance; and

e. the right of all individuals to use the Disclosure Program described in Section III.F, and PharMerica' s commitment to non- retaliation .

Covered Persons who are not employees and new Covered Persons shall receive the Code of Conduct and shall complete the form of certification currently used for Covered Persons who are employees within the later of 120 days after the Effective Date or 30 days after becoming a Covered Person. PharMerica shall periodically review the Code of Conduct to determine if revisions are appropriate and shall make any necessary revisions based on such review. Any revised Code of Conduct shall be distributed within 60 days after any revisions are finalized. Each Covered Person shall certify, in writing, that he or she has received, read, understood, and shall abide by the revised Code of Conduct within 30 days after the distribution of the revised Code of Conduct.


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2. Policies and Procedures . Within 120 days after the Effective Date, PharMerica shall implement written Policies and Procedures regarding the operation of PharMerica' s compliance program and its compliance with Federal health care program requirements. At a minimum, the Policies and Procedures shall address: a. the subjects relating to the Code of Conduct identified in Section III.B.l; b. the expectation that all Covered Persons shall comply with the Code of Conduct, the Policies and Procedures required under this Section, and this CIA; and

c. 42 U.S.C. a7 1320a-7b(b) (" Anti-Kickback Statute" ) and related regulations and guidance; business or financial arrangements or contracts that may violate the Anti-Kickback Statute; and the applicability of the Anti-Kickback statute to Covered Transactions as that term is defined in Section II.C.3. Within 120 days after the Effective Date, the relevant portions of the Policies and Procedures shall be distributed to all individuals whose job functions relate to those Policies and Procedures. Appropriate and knowledgeable staff shall be available to explain the Policies and Procedures.

At least once per fiscal year of PharMerica (and more frequently, if appropriate), PharMerica shall assess and update as necessary the Policies and Procedures. Within 30 days after the effective date of any revisions, the relevant portions of any such revised Policies and Procedures shall be distributed to all individuals whose job functions relate to those Policies and Procedures.

C. Training and Education .

1. General Training . Within 120 days after the Effective Date, PharMerica shall provide at least one hour of General Training to each Covered Person. This training, at a minimum, shall explain the CIA requirements and PharMerica' s Compliance Program (including the Code of Conduct) as supplemented by this CIA.

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New Covered Persons shall receive the General Training described above within 30 days after becoming employed or engaged, or within 120 days after the Effective Date, whichever is later. After receiving the initial General Training described above, each Covered Person who is an employee shall receive at least one hour of General Training per fiscal year of PharMerica beginning on October 1, 2005.

2. Anti-Kickback Training . Within 120 days after the Effective Date, each Relevant Covered Person shall receive no less than two hours of training addressing:

a. Arrangements that potentially implicate the Anti-Kickback Statute and related regulations and guidance;

b. the policies, procedures and other requirements relating to Arrangements and the Anti-Kickback Statute, including the " Covered Transactions Procedures" (as defined in, and required by, Section III.D.l);

c. the personal obligation of each Relevant Covered Person to know the applicable legal requirements and PharMerica' s the policies and procedures;

d. the legal sanctions under the Anti-Kickback Statute; and

e. examples of violations of the Anti-Kickback Statute.

New Relevant Covered Persons shall receive this training within 30 days after becoming employed or engaged, or within 120 days after the Effective Date, whichever is later. A PharMerica employee who has completed the Anti-Kickback Training shall review the work of a new Relevant Covered Person on a Covered Transaction until such time as the new Relevant Covered Person completes his or her Anti-Kickback Training.

After receiving the initial Anti-Kickback Training described in this Section, each Relevant Covered Person shall receive at least one hour of Anti-Kickback Training per fiscal year of PharMerica beginning on October 1, 2005.


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3. Certification . Each individual who is required to attend training pursuant to this Section III.C shall certify, in writing, or in electronic form, if applicable, that he or she has received the required training. The certification shall specify the type of training received and the date received. The Compliance Officer (or designee) shall retain the certifications, along with all course materials. These shall be made available to OIG, upon request.

4. Qualifications of Trainer . Persons providing the training required by this Section III.C shall be knowledgeable about the subject area.

5. Update of Training . PharMerica shall at least once per fiscal year of PharMerica review the training programs developed to satisfy the requirements of this Section III.C, and, where appropriate, update the training to reflect changes in Federal health care program requirements, any issues discovered during internal audits, the Covered Transactions Procedures, and any other relevant information.

6. Training Methods . PharMerica may provide the training required under this CIA through videotape, DVD, appropriate computer-based training approaches or other comparable methods not involving in-person training. If PharMerica chooses to provide training pursuant to any such method, it shall make available at reasonable times appropriately qualified and knowledgeable staff or trainers to answer questions or provide additional information to the individuals receiving such training.

7. Entities . Where a Covered Person or Relevant Covered Person is an entity, the General Training obligations under this CIA shall be met so long as the training is provided to a member of management of the entity. PharMerica shall require the entity to take reasonable steps to apprise its employees and other personnel regarding the content of the training. In addition PharMerica shall require such entities to do the following:

a. agree to abide by the Code of Conduct or adopt its own Code of Conduct addressing substantially all of the requirements of Section III.B.1; b. distribute the following materials to its employees and subcontractors working on PharMerica matters: (1) PharMerica or its own Code of Conduct; (2) copies of relevant PharMerica policies and procedures relating to the work of the entity; and (3) information about PharMerica' s Disclosure Program (including the hotline number);


8 c. provide, either directly or through PharMerica, Anti-Kickback Training (as described in Section III.C.2) to its employees and subcontractors to the extent they are involved with the development, approval, management, or review of any of PharMerica' s Arrangements;

d. certify to PharMerica that all employees and subcontractors working on PharMerica matters have: (1) been screened to exclude Ineligible Persons in accordance with the requirements of Section III.G of the CIA; (2) received a copy of PharMerica' s Code of Conduct or its own Code of Conduct, copies of relevant PharMerica policies and procedures, and information about PharMerica' s Disclosure Program (including the hotline number); and (3) to the extent applicable, received Anti-Kickback training.

D. Compliance with the Anti-Kickback Statute .

1. Covered Transactions Procedures . Within 120 days after the Effective Date, PharMerica shall create procedures reasonably designed to ensure that Covered Transactions entered into from and after 120 days after the Effective Date do not violate the Anti-Kickback Statute, taking into account the related regulations and guidance (" Covered Transactions Procedures" ), These Covered Transactions Procedures shall apply to Covered Transactions entered into 120 days from and after the Effective Date and shall include the following: a. creating and maintaining a database of all Covered Transactions containing, at minimum (i) the name(s) of the acquiring and selling party(ies), (ii) the type of transaction ( e.g. , stock or asset acquisition), (iii) the purchase price, (iv) the name of the individual that provided the " Management Representation" as required by III.D.1.c, (v) the name of counsel who conducted the legal review required by Section III.D.l.d and the date the " Completion Memo" required by such Section was prepared by such counsel, (vi) the date of the closing of the Covered Transaction, and (vii) the file number for the Covered Transaction, as required by Section III.D.l.e (" Covered Transactions Database" );


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b. requiring that the agreement governing the Covered Transaction and all related arrangements between the parties thereto be set forth in writing and signed by, as applicable, PharMerica and the other parties thereto;

c. requiring that a written representation be obtained from the most senior member of PharMerica management involved in the Covered Transaction that the entirety of the arrangement between the parties to the Covered Transaction is reflected in written agreements and documents that were supplied to counsel conducting the review required by Section III.D. 1 .d (" Management Representation" );

d. establishing and implementing a written review and approval process that includes but is not limited to a legal review by counsel with expertise in the Anti-Kickback Statute and the creation of appropriate documentation of all such reviews and approvals, the purpose of which is to ensure that no Covered Transaction is consummated until such counsel has prepared a written memorandum (" Completion Memo" ) attesting to (i) the general completion of such review and approval process, (ii) the receipt of the Management Representation, and (iii) the completion of counsel' s own review of the Covered Transaction under Federal health care program requirements; e. assuring that PharMerica maintains a complete file (and assigns a number to such file permitting ready retrieval) for each Covered Transaction, which file shall contain, at minimum (i) all of the written agreements and documents required by Section III.D.l.b, (ii) the Management Representation, and (iii) the Completion Memo; f. requiring that the Compliance Officer review the Covered Transactions Database, Covered Transaction review and approval process required by Section III.D.1.d, and other Covered Transactions Procedures on at least a quarterly basis and provide a report on the results of such review to the Compliance Committee; and

g. implementing an effective response when violations of the Anti-Kickback Statute are discovered; such effective response may


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include disclosure of the violation to the OIG, unwinding the Arrangement, and repaying any associated Overpayments pursuant to Section III.I (Reporting) when appropriate.

2. Records Retention and Access . PharMerica shall retain and make available to OIG, upon request, the Covered Transactions Database and all supporting documentation of the Covered Transactions subject to Section and, to the extent available, all non-privileged communications related to such Covered Transactions. E. Review Procedures .

1. General Description .

a. Engagement of Independent Review Organization . Within 90 days after the Effective Date, PharMerica shall engage an individual or entity (or entities), such as an accounting, auditing, law or consulting firm (hereinafter " Independent Review Organization" or " IRO" ), to perform a review to assist PharMerica in assessing its compliance with the obligations pursuant to this CIA set forth in Section I1I.D (" Covered Transactions Review" ). The IRO engaged by PharMerica to perform the Covered Transactions Review shall have familiarity with the Anti-Kickback Statute and Federal health care program requirements.

Each IRO shall assess, along with PharMerica, whether it can perform the IRO review in a professionally independent and/or objective fashion, as appropriate to the nature of the engagement, taking into account any other business relationships or other engagements that may exist. The engagement of the IRO for the Covered Transactions Review shall not be deemed to create an attorney-client relationship between PharMerica and the IRO.

b. Frequency of Covered Transactions Review . The Covered Transactions Review shall be performed annually and shall cover each of the Reporting Periods. The IRO(s) shall perform all components of each annual Covered Transactions Review. c. Retention of Records . The IRO and PharMerica shall retain and make available to OIG, upon request, all work papers, supporting documentation, correspondence, and draft reports (those exchanged between the IRO and PharMerica) related to the Covered Transactions Reviews.


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d. Responsibilities and Liabilities . Nothing in this Section III.E affects PharMerica' s responsibilities for or liabilities under any criminal, civil, or administrative laws o
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