EXHIBIT 10.7
FORMULARY AGREEMENT
This Formulary Agreement (the "Formulary Agreement") is entered into as of
January 1, 1996, between Foundation Health Pharmaceutical Services, d.b.a.
Integrated Pharmaceutical Services (" Integrated"), a California corporation,
with a principal office located at 0000 Xxxx Xxxxx, Xxxxxx Xxxxxxx, Xxxxxxxxxx
00000 and National Medical Health Card Systems, Inc. ("Sponsor") a New York
corporation with a principal office located at 00 Xxxxxx Xxxx Xxxxx, Xxxx
Xxxxxxxxxx, Xxx Xxxx 00000.
RECITALS
A. Sponsor desires to include a drug formulary as part of its service to
health plans. Integrated and Sponsor wish to implement the Formulary
Program under the terms and conditions stated herein.
B. Sponsor wishes to utilize Integrated's manufacturer volume discount
program, whereunder Integrated and Sponsor will share certain rebates from
the selected drug manufacturers offering rebates specifically with respect
to the existence of Sponsor's Formulary Program.
Integrated will arrange for printing of the initial and subsequent annual
updates of the Formularies (including pocket formularies) and their
delivery to Covered Persons. All expenses for such printing, and delivery
shall be shared equally between Integrated and Sponsor and Integrated's
portion will be deducted from the total rebate collected from drug
manufacturers under the Formulary Program prior to calculation of the
rebate amount.
C. Sponsor and Integrated will establish a process to provide for the regular
review and updating of the Formulary, including additions and deletions of
medications. Integrated shall consult with Sponsor, to suggest changes to
the Formulary made desirable by changes in the pharmaceutical industry,
new legislation and regulations, the experience of Sponsor with the
existing Formulary and recommendations developed by Integrated based on
its experience.
D. Integrated and Sponsor shall use reasonable efforts to ensure that their
respective activities relative to the provision of prescription drugs
through their mail order operations, drug utilization review and other
education programs support the Formulary Program. Integrated shall hold
all contracts with manufacturers for any such manufacturer's volume
discount programs related to prescriptions received by Covered Persons and
shall be the sole administrator of such programs. Sponsor agrees not to
maintain or enter into any volume discount or rebate contracts directly or
indirectly with pharmaceutical manufacturers during the term of this
Agreement unless agreed upon by Integrated.
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E. The parties agree that the terms and conditions of this Formulary
Agreement shall remain confidential. Neither party shall distribute this
Formulary Agreement, or any part thereof, to other parties unless required
by law or regulation, or if such disclosure is necessary to carry out the
terms hereof. Sponsor agrees that Integrated's performance under this
Formulary Agreement relating to clinical management services and details
respecting a manufacturer's volume discount program including, but not
limited to, contracts, documents and arrangements with manufacturers and
third party providers, and Integrated's reporting programs, shall remain
confidential and shall be treated as proprietary to Sponsor and shall not
be disclosed to any third party. The respective obligations of the parties
to maintain confidentiality under this Formulary Agreement shall survive
the termination of this Formulary Agreement.
I. DEFINITIONS
The following definitions shall apply to this Formulary Agreement:
"Business Day" shall mean each day other than a Saturday or Sunday or a
day on which Integrated is closed for business.
"Claim" shall mean a Prescription Product claim made by a Covered Person
for reimbursement in accordance with a health plan of Sponsor so long as
such claim:
a) Is received by Integrated within thirty (30) days following the last
day of the calendar quarter in which the Prescription Product was
dispensed; and
b) Contains sufficient information for Integrated to process such claim
in accordance with the terms and conditions of the health plan, and
process and/or cause to be processed a request for a Rebate.
"Drug Manufacturer" means a pharmaceutical corporation which has entered
into an agreement with Integrated to participate in the Formulary Program.
"Product" means a pharmaceutical product of a Drug Manufacturer for which
reimbursement is available under the Formulary Program.
"Rebates" shall mean all amounts received by Integrated from a Drug
Manufacturer with respect to Products dispensed to Covered Persons under a
health plan during such period.
"Reports" shall mean the reports provided by Integrated pursuant to
Section IV of this Formulary Agreement.
"Covered Persons" shall mean those individuals eligible for prescription
benefits pursuant to the terms of a health care or prescription benefits
plan.
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II. TERM
This Formulary Agreement shall be effective as of January 1, 1996, and
shall remain in effect until terminated in accordance with the terms of
this Formulary Agreement.
III. REPRESENTATIONS
A. Sponsor represents and warrants as follows:
1. This Formulary Agreement, and the agreements referenced herein
to which Sponsor is a party, constitutes the legal, valid and
binding obligation of Sponsor, and is enforceable in
accordance with their terms.
2. Sponsor has reviewed the Formulary Program and approved the
contents. terms and conditions thereof.
3. That the Formulary Program is consistent with the terms and
conditions of its health plan and that it will provide Covered
Persons with notice of the Formulary Program.
4. Sponsor's agreements with its Customers are in compliance with
all applicable laws, rules and regulations including, but not
limited to, ERISA.
B. Integrated represents and warrants that Sponsor shall be eligible to
participate in the Formulary Program as long as it:
1. Provides client/program specific information as required by
Drug Manufacturers to qualify for Rebates. The parties
acknowledge that Drug manufacturers may periodically change
such requirements. Integrated will update Sponsor as to any
changes in eligibility criteria required by individual Drug
Manufacturers.
2. Provides Claims data for Customers to Integrated, or its
designee, within thirty (30) days, after the end of each
calendar quarter in which such Claims were adjudicated, in a
mutually agreeable format for Rebate submission to Drug
Manufacturers.
IV. DUTIES OF INTEGRATED
Following the effective date. Integrated will, upon receipt of the
required information from Sponsor:
A. Provide to Drug Manufacturers the necessary claims data in the
format required for the purpose of obtaining Formulary Rebates. and
disburse the
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Rebates to Sponsor in accordance with Section VI(A) of this
Formulary Agreement.
B. Provide clinical support for Sponsor presentations, not to exceed
six (6) meetings annually including "Pharmacy and Therapeutics"
Committee meetings, at the expense of Integrated.
C. Provide a representative to attend quarterly meetings of Sponsor's
Pharmacy and Therapeutics Committee, at Integrated's expense.
D. The opportunity to allow National Medical Health Card Systems, Inc.
to participate jointly in risk/capitation programs with Integrated
through use of its parent company's insurance operations. Terms are
to be negotiated and agreed upon by each opportunity National
Medical Health Card Systems, Inc. presents.
E. Assist in development of gain sharing methods for National Medical
Health Card Systems, Inc.'s, HMO clients for meeting targeted
requirements.
F. Provide opportunity for National Medical Health Card Systems, Inc.
to participate in disease management programs at a financially
agreed upon rate to clients when and where they are applicable.
V. DUTIES OF SPONSOR
Sponsor shall:
1. Provide Integrated on an on-going basis with sufficient and accurate
information concerning quarterly utilization data in a format
mutually agreeable that will facilitate report generation and
invoicing to participating Drug Manufacturers: such information to
be provided in Sponsor format and contain all data elements required
for processing or NCPDP format, whichever Sponsor selects.
2. Provide all Covered Persons with complete and accurate information
describing the Formulary;
3. Not participate in any other formulary or similar discount program
during the Term of this Agreement:
4. Take reasonable steps on its own initiative and upon the request of
Integrated, to encourage physicians to utilize the formulary:
5. Distribute the formulary, amendments thereto and other related
formulary information to the physician network:
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6. Enter into agreements ("Joinder Agreements") with each of the Drug
Manufacturers participating in the Formulary, to join Sponsor to the
agreements between Integrated and such Drug Manufacturers; and
7. The parties acknowledge and agree that Integrated's performance
under this Formulary Agreement, and Sponsor participation in
Integrated's Manufacturer Charge Back Program, is contingent upon
Sponsor providing to Integrated claims data for all prescription
drug claims from Participating Pharmacies for Prescription Drug
Services dispensed to Covered Persons. On a quarterly basis, Sponsor
shall submit to Integrated, by magnetic tape which is in a format
acceptable to Integrated, as outlined in V(i) above, prescription
claims information, including at least the following items for each
claim:
a) Physician ID number;
b) Pharmacy ID number;
c) Covered Person ID number;
d) Date of service;
e) Prescription number;
f) Refill indication;
g) Quantity;
h) Days supply;
i) National Drug Code (NDC) number;
j) Submitted ingredient cost;
k) Dispensing fee;
l) Covered Person copayment;
m) Amount paid.
The information for Claims processed in a particular quarter shall
be received by Integrated by the last day of the month immediately
following the end of the quarter.
All information will be submitted by magnetic tape. The tape layout
will be sent in an addendum in an agreed format between Integrated
and Sponsor as outlined in V(1) above. Any tape which does not meet
the requirements of this section may be rejected by Integrated, and
Sponsor shall resubmit an acceptable tape.
VI. REBATES
A. In consideration of the performance by Sponsor of its obligations
hereunder, Sponsor shall receive an amount equal to **
** of the Rebates provided that the Drug Manufacturer pays the
Rebate. Integrated will remit to Sponsor eighty percent (80%) of the
projected quarterly rebate no later than one hundred twenty (120)
days after the end of the applicable quarter.
** Confidential portion filed separately with the Commission.
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Integrated and Sponsor will reconcile the remainder due until
Sponsor receives a total of ** of the total
rebates collected.
1. The reports reconciling the amounts billed to the Drug
Companies and the rebate provided will be included with the
payment. Such payment shall be by check payable to:
National Medical Health Card Systems, Inc.
00 Xxxxxx Xxxx Xxxxx
Xxxx Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx, President
B. In consideration of the performance by Integrated of its obligations
hereunder, Integrated shall receive an amount (the "Integrated
Rebate") equal to ** of the Rebates.
C. Integrated may from time to time adjust Sponsor Rebates to reflect
revised accounting from Integrated or a Drug Manufacturer. Any
Rebates overpaid to the parties at Integrated's option shall be
either repaid to Integrated within five (5) days of written notice
specifying the amount overpaid, or credited again the next Rebate
amounts due to the parties. All amounts which previously were
underpaid shall be disbursed to the parties by Integrated within
five (5) days of receipt from the Drug Manufacturer.
D. Sponsor acknowledges and agrees that Integrated shall not be
responsible in any manner for any failure of a Drug Manufacturer to
pay any Rebate amount or otherwise perform any of its obligations
under the Rebate Agreements or the Joinder Agreements.
VII. INCOME FROM INTEGRATED DRUG DATA BANK
Income derived by Integrated in the marketing of the Drug Data Bank shall
be shared equally between Integrated and the Sponsor. It is the
understanding of the parties that such income may be based, in part, on
the volume of certain prescription drug services provided to Covered
Persons.
VIII. REPORTS, RECORDS AND DATA
A. Integrated may change the Reports at any time with the approval of
Sponsor, such approval shall not be unreasonably withheld, provided
that any change does not materially reduce the overall amount,
character or frequency of information provided to Sponsor.
Integrated may also change the Reports in any manner at the same
time and in the manner provided for administrative fee changes in
the Sponsor Agreement provided such change does not compromise
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** Confidential portion filed separately with the Commission.
that information which is necessary for Sponsor to document credits
for monies received.
B. Ownership rights over all compilations, analyses, reports,
recommendations property and services generated by Integrated and/or
Sponsor shall be retained equally by Integrated and Sponsor.
Ownership rights shall include, but are not limited to, all rights
associated with publication, trade secrets, copyrights, trademarks
and patents. Integrated shall retain the right to use all data and
information received from Sponsor, Drug Manufacturers, or
participating Pharmacies in any manner it sees fit, provided such
use shall not violate the right of privacy of Sponsor, any client of
Sponsor, and/or any Covered Person.
C. All records, reports and other data provided by Integrated to
Sponsor or a Drug Manufacturer under this Agreement are for such
entity's use in Claims administration and Rebate calculation, and
Integrated disclaims all liability arising out of Sponsor's or a
Drug Manufacturer's other use or dissemination of the reports, data,
information and/or summaries. Sponsor and Drug Manufacturers shall
treat as confidential any information which individually identifies
a participating Pharmacy, a Covered Person and/or client of Sponsor.
D. Integrated shall maintain complete and accurate records relating to
all amounts payable to Sponsor by Integrated. These records shall
remain accessible to Sponsor for examination and audit by Sponsor or
an auditor selected by Sponsor, throughout the calendar year in
which they are established and for three (3) calendar years
thereafter. Such audits may be conducted, upon written notice, at
reasonable intervals during the regular business hours of
Integrated.
IX. LIMITATION OF LIABILITY
A. Nothing in this Formulary Agreement shall be construed or be deemed
to create any rights or remedies in any third party, including but
not limited to a Covered Person.
B. The parties disclaim and in no event shall either have any liability
for consequential, incidental, exemplary, punitive or special
damages incurred directly or indirectly in connection with their
performance hereunder. Each party's liability with respect to any
Claim processed hereunder shall be limited to Rebates earned by such
party hereunder with respect to such Claim.
C. The parties agree that neither party shall be responsible to the
other party, its officers, directors, employees, successors and
assigns (collectively, the "Other Party") for and each hereby
waives, releases and forever discharges the Other Party from, any
and all claims, demands, losses, attorney's fees, costs,
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expenses and liabilities of any nature whatsoever, whether or not
now existing, known or unknown. Suspected or claims, arising from:
1. Any failure by Drug Manufacturer to pay any Rebate;
2. Any breach of an agreement related to the Formulary Program or
the transactions contemplated by this Formulary Agreement by
any Drug Manufacturer; or
3. Any negligence or willful misconduct of any Drug Manufacturer.
X. TERMINATION
Each party may terminate this Formulary Agreement with or without cause at
any time upon ninety (90) days written prior notice to the other party.
The liability of the parties hereto for obligations incurred prior to the
effective termination dates shall survive termination.
XI. MISCELLANEOUS
1. Assignment. This Formulary Agreement may not be assigned by either
party without the prior written consent of the other and consent
will not be unreasonably withheld.
2. Construction. In all cases, the language in all parts of this
Formulary Agreement shall be construed simply, according to its fair
meaning and not strictly for or against any party.
3. Governing Law. This Formulary Agreement and the instruments and
documents herein referred to shall be governed by and construed in
accordance with the laws of the State of the defending party.
4. Further Documentation. The parties hereby agree to execute such
further documents as from time to time may reasonably be required in
order to give full force and effect to this Formulary Agreement.
5. Counterparts. The parties may execute this Formulary Agreement in
any number of counterparts, each of which shall be deemed an
original instrument but all of which together shall constitute one
agreement.
6. Entire Agreement. This Formulary Agreement together with the other
agreements referenced herein, reflect the entire agreements between
the parties and supersedes all prior agreements, including any oral
understandings with respect to Claims and Rebates or any other
transactions contemplated under this Formulary Agreement.
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7. Exhibits. All exhibits attached hereto are hereby incorporated into
the Formulary Agreement by this reference for all purposes.
8. Captions. The captions and paragraph headings contained herein are
for convenience only and shall not be used in construing or
enforcing any of the provisions of this Formulary Agreement.
9. Modification. Any change to this Formulary Agreement shall be made
only in writing and executed by all of the parties hereto.
10. Recitals. The Recitals of this Formulary Agreement are incorporated
into and made a part hereof.
11. Independent Contractor. It is expressly understood that the parties
are independent contractors of one another, and that neither has the
authority to bind the other to any third person or otherwise to act,
in any way as the representative of the other, unless otherwise
expressly agreed to in writing signed by both parties hereto.
12. Force Majeure. Neither party shall be liable in any manner for any
delay or failure to perform its obligations hereunder due to
strikes, labor disputes, riots, earthquakes, storms, floods or other
outbreak of hostilities, delay of carriers or other acts of nature.
13. Neutral. Binding Mandatory Arbitration. Any controversy or claim
arising out of or relating to this Agreement or the breach thereof,
whether in tort or in contract, in law or equity, shall be settled
by arbitration in accordance with the laws governing arbitration in
the county of the defending party, and judgment upon the award
rendered by the arbitrator may be entered in any court having
jurisdiction thereof. If any arbitration action is brought to
enforce or interpret the provisions of this Agreement in regard
to any controversy or claim arising out of or related to this
Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees and costs of the action, in addition to any other
relief deemed just and proper by the arbitrator.
14. Exclusivity. During the term of this Agreement and for a period of
twenty-four (24) months thereafter, Integrated shall not endorse,
market or provide to Customers of Sponsor any product or service
that directly competes with any product or service endorsed,
marketed or provided by Sponsor. Integrated represents and warrants
that its execution and delivery of this Agreement does not violate
or conflict with any Agreement to which it is presently a party.
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The parties have duly executed this Agreement as of the Effective Date.
National Medical Health Card Integrated Pharmaceutical Services
Systems, Inc.
/s/ Xxxxx Xxxxxxx /s/ Xxxxx X. Xxxxxxxx
-------------------------------- -------------------------------------------
Name Name
Xxxxx Xxxxxxx Xxxxx X. Xxxxxxxx
-------------------------------- -------------------------------------------
Print Name Print Name
President President and Chief Operating Officer
-------------------------------- -------------------------------------------
Title Title
1/24/96 1/16/96
-------------------------------- -------------------------------------------
Date Date
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