Exhibit 10.5
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FORM OF MANAGED CARE AGREEMENT, dated as of , 2002, between
Merck & Co., Inc., a New Jersey corporation ("Merck"), and Merck-Medco Managed
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Care, L.L.C., a Delaware limited liability company ("Medco"; references to Medco
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in this Agreement shall include the Delaware corporation into which Merck-Medco
Managed Care, L.L.C. will be converted in connection with the IPO referred to
below).
WHEREAS, Medco, an independently managed wholly-owned Subsidiary of
Merck, is in the business of providing PBM Services to corporations, health
maintenance organizations, unions, insurance carriers, government employee plans
and others;
WHEREAS, Merck is a pharmaceutical company engaged in the discovery,
development, manufacturing and marketing of pharmaceutical products;
WHEREAS, subject to certain conditions, Merck intends (1) to effect an
initial public offering (the "IPO") of shares of the common stock of a successor
to Medco, and (2) to distribute Merck's remaining interest in that successor
entity to Merck's shareholders, in one or more transactions (the last such
transaction, the "Final Distribution"), within twelve months of the consummation
of the IPO; and
WHEREAS, in anticipation of the IPO, Merck and Medco desire to enter
into this Agreement to set forth (a) the terms upon which Medco will be entitled
to receive rebates from Merck for the utilization, from and after the Effective
Date, of Merck Products by Medco Plans and (b) other terms and provisions
governing the relations of Merck and Medco from and after the Effective Date.
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Definitions.
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"Acceptable Formulary Product" shall have the meaning set forth in
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Section 2.5.
"Acquiror(s)" means any Person or Persons (other than a Medco Party)
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party to a transaction that, if consummated, would constitute a Medco
Acquisition Transaction.
"Affiliate" means, with respect to any specified Person, any other
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Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person; provided, however, that for purposes of this Agreement, neither Merck
nor any of its Subsidiaries (other than Medco and its Subsidiaries) shall be
deemed to be Affiliates of any Medco Party, and no Medco Party shall be deemed
to be an Affiliate of Merck or any of its Subsidiaries (other than Medco and its
Subsidiaries).
"Aggregate Medco Cost" has the meaning reflected in Annex B.
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"Applicable Percentage" has the meaning referenced in Annex B.
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"Average Units Per Prescription Dispensed By A Medco Mail Service
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Pharmacy" for any Calendar Quarter shall be the total Units for a Merck Product
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or Competitive Product dispensed by all Medco Mail Service Pharmacies divided by
the total prescriptions of such Merck Product or Competitive Product dispensed
by all Medco Mail Service Pharmacies.
"Average Units Per Prescription Dispensed By A Pharmacy Participating
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In The Medco Retail Network Of Pharmacies" for any Calendar Quarter shall be the
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total Units for a Merck Product or Competitive Product dispensed by all
pharmacies participating in the Medco Retail Network of Pharmacies divided by
the total prescriptions of such Merck Product or Competitive Product dispensed
by all pharmacies participating in the Medco Retail Network of Pharmacies.
"Basis" shall have the meaning set forth in Section 2.4.
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"Best Price" with respect to any Merck Product shall have the meaning
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set forth in Section 1927 of the Social Security Act.
"Calendar Quarter" means the three-month period ending on each of March
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31, June 30, September 30 and December 31 of any Calendar Year; provided,
however, that (a) if the Effective Date is prior to July 1, 2002, for purposes
of Article 2, the first Calendar Quarter under this Agreement shall be deemed to
commence on the Effective Date and end on June 30, 2002 and (b) if this
Agreement is terminated in accordance with Article 8 as of a date other than
March 31, June 30, September 30 and December 31, for purposes of this Agreement,
the final Calendar Quarter shall begin on the day after the conclusion of the
preceding Calendar Quarter and end as of the date of such termination.
"Calendar Year" means each twelve-month period ending on December 31;
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provided, however, that if this Agreement is terminated in accordance with
Article 8 as of a date other than December 31, for purposes of this Agreement,
the final Calendar Year shall begin on the day after the conclusion of the
preceding Calendar Year and end as of the date of such termination.
"Catalog Price" means the per Unit price of any Merck Product as
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calculated based upon the catalog price published by Merck provided that, except
as expressly otherwise provided herein, if the catalog price of any Merck
Product as so published by Merck changes during any Calendar Quarter, the
"Catalog Price" shall be the per Unit price as calculated based upon the catalog
price so published for the largest number of days during such Calendar Quarter.
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"Claims-Level Data" means, for all utilization of any Merck Product,
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all Competitive Products and all other Pharmaceutical Products, individual
claims-level data in the NCPDP standard file format, as set forth in Schedule
1.1. The "Encrypted Patient ID Code" field is specifically excluded from the
definition of Claims-Level Data and has been replaced in Schedule 1.1 with a
designation of "Filler" indicating that no data shall be inserted into that
field. Medco shall not include such information in the data it delivers to
Merck.
"Competitive Products" mean, in relation to any Merck Product, for any
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Calendar Quarter, all other Pharmaceutical Products included in the same
Therapeutic Category as such Merck Product.
"Conversion Factor" for any Calendar Quarter shall be the number
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derived by dividing the Average Units Per Prescription Dispensed By A Medco Mail
Service Pharmacy into the Average Units Per Prescription Dispensed By A Pharmacy
Participating In The Medco Network Of Retail Pharmacies for each Merck Product
or Competitive Product.
"CPR Rules" shall have the meaning set forth in Section 9.2.
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"Dispute" shall have the meaning set forth in Article 9.
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"Distribution Channel" means the Medco Mail Services Pharmacies or the
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Medco Retail Network of Pharmacies, as applicable.
"Effective Date" means the earlier of the IPO Closing Date and July 1,
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2002.
"Eligible Medco Plan" means each Medco Plan that is not a Non-Eligible
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Medco Plan.
"Eligible Prescription" means any prescription for a Pharmaceutical
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Product dispensed by (a) a pharmacy participating in the Medco Retail Network of
Pharmacies for which an Eligible Medco Plan or a Member thereof is entitled to
reimbursement or (b) a Medco Mail Service Pharmacy for which an Eligible Medco
Plan or a Member thereof is entitled to reimbursement; but shall expressly not
include, unless otherwise determined by Merck in its sole discretion, (1) any
prescription for which an Eligible Medco Plan or a Member thereof is entitled to
any reimbursement from Medicaid, Medicare or any other federal or state program,
(2) any prescription dispensed under a Non-Eligible Medco Plan or any
prescription dispensed using quantities of a Merck Product purchased by Medco or
any of its immediate or intermediate suppliers outside the U.S. and (3) any
prescription of a Pharmaceutical Product dispensed under a Medco Plan the P&T
Committee of which has classified such Pharmaceutical Product as an Unacceptable
Formulary Product. If any prescription for a Merck Product or Competitive
Product that is not in a Unit Measured Therapeutic Category and which in
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accordance with the foregoing constitutes an Eligible Prescription is dispensed
by a Medco Mail Service Pharmacy, for purposes of calculating Medco Market Share
and otherwise under this Agreement, such prescription shall be multiplied by the
Conversion Factor for such Merck Product or Competitive Product, in order to
equate the prescriptions dispensed by any Medco Mail Service Pharmacy to
prescriptions dispensed by a pharmacy participating in the Medco Retail Network
of Pharmacies. If any prescription for a Merck Product or Competitive Product
that is in a Unit Measured Therapeutic Category and which in accordance with the
foregoing constitutes an Eligible Prescription contains a number of Units of
such Merck Product or Competitive Product that is more or less than the Merck
Unit Number for such Unit Measured Therapeutic Category, for purposes of
calculating Medco Market Share and otherwise under this Agreement, such
prescription shall be counted as that number of (or fraction of an) Eligible
Prescription(s) of such Merck Product or Competitive Product, as applicable,
that is equal to the number of Units contained in such prescription divided by
the Merck Unit Number for such Unit Therapeutic Category.
"Existing Medco Plan" means any March 31 Medco Plan or January 1 Medco
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Plan. Each Existing Medco Plan shall at all times during the term of this
Agreement be treated as such, regardless of any renewal, replacement, amendment
or modification of the agreement between Medco and such Medco Plan or the
sponsor thereof, except as provided in Section 10.6 of this Agreement.
"Existing Merck Product" means, with respect to each Existing Medco
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Plan, any Merck Product available to Members under such Existing Medco Plan as
of April 1, 2002.
"FDA" means the United States Food and Drug Administration.
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"Formulary" or "Formularies" means, with respect to any Plan, any list
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or lists of prescription products that Members or others are encouraged to
request and/or physicians are encouraged to prescribe, consistent with their
professional medical judgment and applicable medical and pharmacy laws and
procedures.
"Formulary Managed Medco Plan" means any New Medco Plan in respect of
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which a Medco Party designs and/or implements, directly or indirectly, the
applicable Medco Plan's Formulary and in respect of which a Medco Party
communicates with physicians and pharmacists on a routine basis to encourage
appropriate utilization consistent with the Medco Plan's Formulary, and either
(1) the benefit design of the Plan includes significant financial
incentives (e.g., three-tier co-payments with significant
differentials) for Members that are reasonably calculated to
promote compliance with the Medco Plan's Formulary; or
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(2) the Medco Party implements programs for the significant
movement of market share to Merck Products, such as, but not
limited to, Medco's Prescriber Choice Program, Medco's
physician-calling program or other at least equally effective
programs for the movement of market share, in at least three
of the Select Therapeutic Categories.
Any other New Medco Plan that Merck elects to treat as a Formulary Managed Medco
Plan, whether or not it meets the foregoing definition, shall be deemed to be a
Formulary Managed Medco Plan for the purposes of this Agreement.
"group of Members" means any group of Members under a Plan, all the
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Members of which are entitled to receive substantially similar benefits under
that Plan.
"IMS" means IMS Health Incorporated or any successor entity thereto (or
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any other Person selected by Merck that provides data and data services
substantially identical to the data and data services provided by IMS Health
Incorporated as of the date this Agreement).
"Individual Formulary Access Rebate Amount" shall have the meaning
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reflected in Annex B.
"IPO Closing Date" means the date upon which the IPO is consummated.
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"January 1 Medco Plan" means any Medco Plan for which any Medco Party,
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directly or through an intermediary, provided any PBM Services as of January 1,
2002 (or any successor Medco Plan).
"Managed Eligible Medco Plan" means any Eligible Medco Plan which
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utilizes (x) Medco's Preferred Prescriptions Formulary or Rx Selections
Formulary (or, in each case, any successor or similar Formulary of any Medco
Party), (y) a Formulary on which the status of the Merck Product and Competitive
Products are substantially similar to the status thereof on Medco's Preferred
Prescriptions Formulary or Rx Selections Formulary (or, in each case, any
successor or similar Formulary of any Medco Party) or (z) any Formulary adopted
with substantial input from a Medco Party. The fact that a Person other than a
Medco Party has discretion to approve or disapprove a Formulary or to make
decisions relating thereto in connection with an Eligible Medco Plan shall not
disqualify such Plan from being deemed a Managed Eligible Medco Plan, provided
that, if an independent P&T Committee is established unilaterally by any Medco
Plan or the sponsor thereof exclusively for one or more Medco Plans and is
unrelated to any Medco Party and to any P&T Committee established or utilized by
any Medco Party (an "Independent P&T Committee"), such Plan shall not be deemed
a Managed Eligible Medco Plan for purposes of this Agreement. Within 30 days
from the execution of this Agreement, Medco shall deliver to Merck a list of all
Medco Plans which Medco believes have an Independent P&T Committee, accompanied
by complete and accurate supporting
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documents and information, and within 30 days following the delivery of complete
and accurate documents and information Merck shall determine in its sole
discretion whether such Medco Plans are Managed Eligible Medco Plans or
Partially-Managed Eligible Medco Plans for purposes of this Agreement. Medco
shall update such list annually and more frequently if requested by Merck upon
not less than 10 business days' prior notice.
"Mandatory Formulary Product" shall have the meaning set forth in
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Section 2.5.
"March 31 Medco Plan" means any Medco Plan for which any Medco Party,
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directly or through an intermediary, provided any PBM Services as of March 31,
2002 (or any successor Medco Plan); provided that no Medco Plan that is a
January 1 Medco Plan shall be deemed to be a March 31 Medco Plan.
"MAS Premium Percentage" has the meaning reflected in Annex B.
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"Medco" shall have the meaning set forth in the preamble to this
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Agreement.
"Medco Acquisition Transaction" means any direct or indirect
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acquisition, by any Person or group of Persons acting together, in one or a
series of transactions (including by means of a merger, consolidation or other
business combination of or with Medco or any of its Affiliates), (i) of one or
more businesses or assets of Medco and/or its Subsidiaries that generated five
percent (5%) or more of the net revenue or net income of Medco and its
Subsidiaries on a consolidated basis during the four Calendar Quarters prior to
the consummation of such acquisition, or that constituted five percent (5%) or
more of the total assets of Medco and its Subsidiaries on a consolidated basis
as of the last day of the Calendar Quarter last ended prior to the consummation
of such acquisition, measured either on a book value basis or a fair market
value basis, or (ii) of beneficial ownership (as defined for purposes of
Regulations 13D-13G under the Securities Exchange Act of 1934) of fifteen (15%)
or more of any class of equity securities of Medco or of any Subsidiary of Medco
that generated five percent (5%) or more of the net revenue or net income of
Medco and its Subsidiaries on a consolidated basis during the four Calendar
Quarters prior to the consummation of such acquisition or that held five percent
(5%) or more of the total assets of Medco and its Subsidiaries on a consolidated
basis as of the last day of the Calendar Quarter last ended prior to the
consummation of such acquisition, measured either on a book value basis or a
fair market value basis.
"Medco Mail Service Pharmacies" means the pharmaceutical dispensing
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functions located in the U.S. of the Medco Parties which utilize the United
States Postal Service, common carriers or other means of distribution to deliver
Pharmaceutical Products to Members under Medco Plans.
"Medco Market Share" of a Pharmaceutical Product in any Therapeutic
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Category under one or more Medco Plans, for any Calendar Quarter (or other
period), shall be the percentage determined by dividing (a) the aggregate number
of Eligible Prescriptions
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actually dispensed of the applicable Pharmaceutical Product under such Medco
Plan or Medco Plans, as applicable during such Calendar Quarter (or other
period), by (b) the aggregate number of Eligible Prescriptions actually
dispensed of the applicable Pharmaceutical Product and all other Pharmaceutical
Products in such Therapeutic Category, under such Medco Plan or Medco Plans, as
applicable during such Calendar Quarter (or other period).
"Medco Parties" means Medco and all Persons that at any time are
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Affiliates of Medco.
"Medco Plan" means, for any Calendar Quarter, any Plan for which any
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Medco Party, directly or through an intermediary, provides any PBM Services
during such Calendar Quarter; provided, however, that any Plan for which a Medco
Party provides PBM Services pursuant to an agreement with Merck in its capacity
as an employer shall not be deemed a "Medco Plan" for purposes of this
Agreement.
"Medco Retail Network of Pharmacies" shall mean the retail pharmacies
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or any other entity or function located in the U.S. under contract with Medco
Parties to participate in providing prescription services to Members under Medco
Plans.
"Member" means, with respect to any Plan, any person entitled to
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benefits under that Plan.
"Merck Products" means initially the Pharmaceutical Products identified
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on Schedule 10.8 as "Merck Products." The Pharmaceutical Products constituting
Merck Products shall be adjusted from time to time after the date of this
Agreement in accordance with Section 10.8.
"Merck Quarterly Revenue Amount" for any Calendar Quarter means the
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Aggregate Medco Cost of all Eligible Prescriptions of all Merck Products
dispensed in that Calendar Quarter.
"Merck Unit Number" means, with respect to any Unit Measured
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Therapeutic Category, the number of Units of the Merck Product in such Unit
Measured Therapeutic Category generally included in one prescription of such
Merck Product.
"Minimum MAS Premium Percentage" has the meaning reflected in Annex B.
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"National Market Share" of any Merck Product, for any Calendar Quarter,
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means the percentage represented by (a) the number of prescriptions of such
Merck Product, dispensed in the U.S. during such Calendar Quarter (excluding
quantities of such Merck Product dispensed under Medco Plans), divided by (b)
the aggregate number of prescriptions of such Merck Product and all Competitive
Products in the same Therapeutic Category dispensed in the U.S. during such
Calendar Quarter (not including quantities of such Merck Product and Competitive
Products dispensed under Medco
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Plans). The numbers referred to in clauses (a) and (b) of this definition,
including, without limitation, the calculation of the amounts of Merck Products
and Competitive Products dispensed under Medco Plans to be excluded from the
computation of National Market Share, shall be determined by Merck based on
national third-party prescription data and national mail prescription data
furnished by IMS; provided, however, in the event that (x) the prescription data
furnished by IMS at any time reflects a methodology for determining the number
of prescriptions for Merck Products and/or any Competitive Products that is
different than the methodology reflected by the data furnished as of the date of
this Agreement by IMS to Merck and (y) in the judgment of Merck such change in
methodology is reasonably likely to result in a determination of National Market
Share for any Merck Product that is inconsistent with the determination that
would result from the methodology reflected by the data furnished as of the date
of this Agreement by IMS to Merck, the manner in which such National Market
Share shall be determined, or the data utilized to make such determination,
shall be adjusted to avoid such inconsistency.
"NCPDP" shall mean the National Council for Prescription Drug Programs.
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"New Competitive Product" means any Pharmaceutical Product that becomes
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a Competitive Product after the date of this Agreement.
"New Medco Plan" means any Medco Plan that is not an Existing Medco
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Plan.
"New Medco Plan Effective Date" means, with respect to any New Medco
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Plan, the first date upon which Members are or will be entitled to receive any
prescriptions under such New Medco Plan.
"New Merck Product" means each Merck Product that became or becomes a
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Merck Product after the date of this Agreement.
"Non-Eligible Medco Plan" means, for any Calendar Quarter, Medco's
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YOURxPlan; any cash card plan, including any cash card plan sponsored or
administered by a state, federal or local governmental agency or
instrumentality, for the purpose of providing discounts on Pharmaceutical
Products and any similar program; any Plan with respect to which the Medco
Parties' primary role is to provide claims processing services, including
Merck's patient assistance programs; any Plan with respect to which the Medco
Parties' primary role is to dispense Pharmaceutical Products utilizing Medco
Mail Service Pharmacies; any Plan pursuant to which Members pay all or a
substantial part of the cost of Pharmaceutical Products dispensed thereunder
without the right of Members to obtain subsequent reimbursement for a
substantial portion of such cost; and any New Medco Plan that is not a Formulary
Managed Medco Plan.
"Notification" shall have the meaning set forth Section 10.6.
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"Partially-Managed Eligible Medco Plan" means any Eligible Medco Plan
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that is not a Managed Eligible Medco Plan.
"P&T Committee" shall mean, with respect to any Medco Eligible Plan,
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the P&T Committee as defined in Section 2.5.
"PBM Services" means any substantial prescription drug benefit
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management services, including but not limited to management of retail pharmacy
networks, payment of claims to pharmacies for prescription drugs, drug
utilization review, Formulary management services and drug benefit management
services.
"Person" means any individual, corporation, association, partnership
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(general or limited), joint venture, trust, estate, limited liability company or
other legal entity or organization.
"Pharmaceutical Product" means any pharmaceutical product (a) approved
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by the FDA for a particular use; (b) which may be dispensed only pursuant to a
prescription under the rules and regulations of the FDA; and (c) for which the
manufacturer (or its licensees or assignees) has marketing exclusivity under the
Food, Drug and Cosmetic Act, the Orphan Drug Act of 1984, or any law, statute,
regulation or order having a similar effect, or by virtue of one or more patents
granted by the United States Patent and Trademark Office, such that no other
product can be marketed by another Person for the same purpose without violating
such marketing exclusivity or infringing such patent.
"Plan" means any third-party payor plan, agreement or arrangement
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through which Members are entitled to receive Pharmaceutical Products.
"prescription" means a legal and valid order to dispense a
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Pharmaceutical Product.
"Representatives" means, with respect to any Person, such Person's
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officers, employees, including account executives, agents and other
representatives.
"Select Therapeutic Categories" means initially the following
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Therapeutic Categories: ARBs, Arthritis & Analgesia, Asthma Controllers, HMGs,
Migraine, Osteoporosis. The Therapeutic Categories constituting Select
Therapeutic Categories shall be subject to adjustment in accordance with Section
10.8.
"Subsidiary" of any Person means any corporation or other organization
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whether incorporated or unincorporated, of which at least a majority of the
securities or interests having by the terms thereof ordinary voting power to
elect at least a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such Person or by any one or more of its
Subsidiaries, or by such Person and one or more of its Subsidiaries. For
purposes of this Agreement, neither Medco nor any of its Subsidiaries shall be
deemed to be a Subsidiary of Merck.
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"Therapeutic Category" means initially the categories set forth on
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Schedule 10.8, subject to adjustment in accordance with Section 10.8. Each
Therapeutic Category shall include initially the Merck Products and the
Competitive Products set forth with respect thereto on Schedule 10.8, subject to
adjustment in accordance with Section 10.8.
"Unacceptable Formulary Product" shall have the meaning set forth in
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Section 2.5.
"Unit" means the smallest quantity available for use as one
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administration of a Pharmaceutical Product.
"Unit Measured Therapeutic Category" means any Therapeutic Category for
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which the Medco Market Share of a Merck Product contained therein shall be
measured based on number of Units dispensed, rather than number of prescriptions
dispensed. Merck may from time to time designate or withdraw any Therapeutic
Category as a "Unit Measured Therapeutic Category" with respect to any one or
more Calendar Quarters by written notice to Medco. As of the date of this
Agreement, the Therapeutic Category that includes Maxalt(R) shall be deemed to
be a "Unit Measured Therapeutic Category."
"U.S." means the 00 xxxxxx xx xxx Xxxxxx Xxxxxx xx Xxxxxxx and the
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District of Columbia (and, if determined by Merck in its sole discretion with
respect to any Medco Plan, for purposes of such Medco Plan, Puerto Rico) .
"Zocor(R)General Control Eligible Medco Plan" means, with respect to
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any Calendar Quarter, each Eligible Medco Plan that (a) is an Existing Medco
Plan or a New Medco Plan that constitutes a Formulary Managed Medco Plan, and
(b) is not a Zocor(R)High Control Eligible Medco Plan.
"Zocor(R)High Control Eligible Medco Plan" means, with respect to any
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Calendar Quarter, each Eligible Medco Plan which Merck determines in its sole
discretion has features which enable the Plan or its sponsor to exercise a high
level of control over influencing the market share of Pharmaceutical Products in
the Therapeutic Category that includes Zocor(R). Examples of such features would
include (a) Zocor(R) being the only Pharmaceutical Product available to Members
of a Plan for which any reimbursement is provided by the Plan to a pharmacy or
Member during such Calendar Quarter in the Therapeutic Category that includes
Zocor(R) , (b) the co-payment payable by Members during such Calendar Quarter
for an Eligible Prescription of Zocor(R) being at least $15 less than the lowest
co-payment payable by Members for any Eligible Prescription of any Competitive
Product, or (c) active management of utilization within the Therapeutic Category
that includes Zocor(R) for the benefit of the utilization of Zocor(R) by Members
of such Plan. In no event shall a Medco Plan constitute a Zocor(R)High Control
Eligible Medco Plan unless such Plan is an Existing Medco Plan that constitutes
an Eligible Medco Plan or a New Medco Plan that constitutes a Formulary Managed
Medco Plan.
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2. Access.
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2.1. Existing Medco Plans. (a) Medco shall ensure that, at all times
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prior to the expiration of the term of this Agreement (or, if earlier, until the
time at which the applicable product is no longer a Merck Product), (x) each
Existing Merck Product under each Existing Medco Plan that is a Managed Eligible
Medco Plan shall continue to be made available to Members under such Existing
Medco Plan on a Basis no less favorable than the Basis upon which such Existing
Merck Product was made available to Members under such Existing Medco Plan as of
January 1, 2002 (in the case of a January 1 Medco Plan) or March 31, 2002 (in
the case of a March 31 Medco Plan) and (y) for each Existing Merck Product under
each Existing Medco Plan that is a Managed Eligible Medco Plan, the relative
level of the access of Members to, and the Formulary status of, such Existing
Merck Product under such Existing Medco Plan, as compared to the level of access
of Members to, and the Formulary status of, Competitive Products under such
Existing Medco Plan, shall be at least as favorable to such Existing Merck
Product as on January 1, 2002 (in the case of a January 1 Medco Plan) or March
31, 2002 (in the case of a March 31 Medco Plan).
(b) Medco shall use its best efforts to ensure that, at all times prior
to the expiration of the term of this Agreement (or, if earlier, until the time
at which the applicable product is no longer a Merck Product), (x) each Existing
Merck Product under each Existing Medco Plan that is a Partially-Managed
Eligible Medco Plan shall continue to be made available to Members under such
Existing Medco Plan on a Basis no less favorable than the Basis upon which such
Existing Merck Product was made available to Members under such Existing Medco
Plan as of January 1, 2002 (in the case of a January 1 Medco Plan) or March 31,
2002 (in the case of a March 31 Medco Plan) and (y) for each Existing Merck
Product under each Existing Medco Plan that is a Partially-Managed Eligible
Medco Plan, the relative level of the access of Members to, and the Formulary
status of, such Existing Merck Product under such Existing Medco Plan, as
compared to the level of access of Members to, and the Formulary status of,
Competitive Products under such Existing Medco Plan, shall be at least as
favorable to such Existing Merck Product as on January 1, 2002 (in the case of a
January 1 Medco Plan) or March 31, 2002 (in the case of a March 31 Medco Plan).
(c) Medco shall ensure that as promptly as practicable and in any event
within 30 days after any New Merck Product which is designated as a Merck
Product is determined by the responsible P&T Committee to be a Mandatory
Formulary Product or an Acceptable Formulary Product in accordance with the
provisions of Section 2.5 of this Agreement through the remainder of the term of
this Agreement (or, if earlier, until the time at which such New Merck Product
is no longer a Merck Product), (x) such New Merck Product shall be made
available to Members under each Existing Medco Plan for which such P&T Committee
is responsible that is a Managed Eligible Medco Plan on a Basis no less
favorable than the Basis upon which any Competitive Product is
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then made available to Members under such Existing Medco Plan and (y) the level
of access of Members to, and the Formulary status of, such New Merck Product
under each Existing Medco Plan for which such P&T Committee is responsible that
is an Eligible Medco Plan shall be no less favorable to such New Merck Product
than the level of access of Members to, and the Formulary status of, Competitive
Products under such Eligible Medco Plan.
(d) Medco shall use its best efforts so that as promptly as practicable
and in any event within 30 days after any New Merck Product which is designated
as a Merck Product is determined by the responsible P&T Committee to be a
Mandatory Formulary Product or an Acceptable Formulary Product (or to have any
similar classification) in accordance with the provisions of Section 2.5 of this
Agreement through the remainder of the term of this Agreement (or, if earlier,
until the time at which such New Merck Product is no longer a Merck Product),
(x) such New Merck Product shall be made available to Members under each
Existing Medco Plan for which such P&T Committee is responsible that is a
Partially-Managed Eligible Medco Plan on a Basis no less favorable than the
Basis upon which any Competitive Product is then made available to Members under
such Existing Medco Plan, and (y) the level of access of Members to, and the
Formulary status of, such new Merck Product under each Existing Eligible Medco
Plan for which such P&T Committee is responsible that is a Partially-Managed
Eligible Medco Plan shall be no less favorable to such New Merck Product than
the level of access of Members to, and the Formulary status of, any Competitive
Product under such Existing Eligible Medco Plan. The parties agree and
acknowledge that it would be inconsistent with Medco's "best efforts" obligation
under this Section 2.1(d) and under Section 2.2(b) for any Medco Party to enter
into or maintain in effect any agreement or arrangement that would provide
direct or indirect inducements for any Medco Plan to provide its Members with a
level of access to any Merck Product, or provide for a Formulary status with
respect to any Merck Product, that is less favorable to such Merck Product than
the level of access provided to Members with respect to, or Formulary status of,
any Competitive Product under such Medco Plan. In addition, for purposes of this
Section 2.1(d) and Section 2.2(b), Medco's obligation to use "best efforts"
shall require, at a minimum and without limitation, that (1) Medco use its best
efforts to cause any New Merck Product to be promptly and timely submitted to
the P&T Committee of each Partially-Managed Eligible Medco Plan and ensure that
each such P&T Committee gives timely consideration to the New Merck Product in
accordance with the requirements of Section 2.5 and (2) Medco ensure that, as
promptly as practicable and in any event within 30 days after such New Merck
Product is determined by the responsible P&T Committee to be a Mandatory
Formulary Product or an Acceptable Formulary Product (or to have any similar
classification) in accordance with the provisions of Section 2.5 of this
Agreement through the remainder of the term of this Agreement (or, if earlier,
until the time at which such New Merck Product is no longer a Merck Product),
such New Merck Product shall have a Formulary status under each Formulary of
each Partially-Managed Eligible Medco Plan that is no less favorable to such New
Merck Product than the status
12
of Competitive Products under such Formulary. In the event that, with respect to
any New Merck Product, Medco fails to comply with its obligation under clause
(2) of the prior sentence with respect to any Eligible Medco Plan, Medco shall
be deemed to have failed to comply with its obligations under Sections 2.1(d),
2.2(b), or 2.5(b), as applicable, with respect to such New Merck Product, under
that Eligible Medco Plan during the period from the time such New Merck Product
was designated as a Merck Product hereunder until the first full Calendar
Quarter during which the Formulary status of such New Merck Product under such
Eligible Medco Plan is no less favorable than the Formulary status of any
Competitive Product.
2.2. New Medco Plans.
---------------
(a) With respect to each New Medco Plan that is a Managed Eligible
Medco Plan, Medco shall ensure that, at all times from (x) in the case of a
Merck Product other than a New Merck Product, the New Medco Plan Effective Date
of such New Medco Plan or (y) in the case of a New Merck Product, the later of
(i) as promptly as practicable and in any event within 30 days after such New
Merck Product is determined by the responsible P&T Committee to be a Mandatory
Formulary Product or an Acceptable Formulary Product in accordance with the
provisions of Section 2.5 of this Agreement and (ii) the New Medco Plan
Effective Date of such New Medco Plan, in each case, through the remainder of
the term of this Agreement (or, if earlier, until the time at which such product
is no longer a Merck Product), (A) such Merck Product shall be made available
under such New Medco Plan on a Basis no less favorable than the Basis upon which
any Competitive Product is then made available to Members under such New Medco
Plan and (B) the level of access of Members to, and the Formulary status of,
such Merck Product under such New Medco Plan shall be no less favorable to such
Merck Product than the level of access of Members to, and the Formulary status
of, any Competitive Product under such New Medco Plan.
(b) With respect to each New Medco Plan that is a Partially-Managed
Eligible Medco Plan, Medco shall use its best efforts to ensure that, from (x)
in the case of a Merck Product other than a New Merck Product, the New Medco
Plan Effective Date of such New Medco Plan or (y) in the case of a New Merck
Product, the later of (i) as promptly as practicable and in any event within 30
days after such New Merck Product is determined by the responsible P&T Committee
to be a Mandatory Formulary Product or an Acceptable Formulary Product (or to
have any similar classification) in accordance with the provisions of Section
2.5 of this Agreement and (ii) the New Medco Plan Effective Date of such New
Medco Plan, in each case, through the remainder of the term of this Agreement
(or, if earlier, until the time at which such product is no longer a Merck
Product), (A) such Merck Product shall be made available under such New Eligible
Medco Plan on a Basis no less favorable than the Basis upon which any
Competitive Product is then made available to Members under such New Medco Plan
and (B) the level of access of Members to, and the Formulary status of, such
13
Merck Product under such New Medco Plan shall be no less favorable to such Merck
Product than the level of access of Members to, and the Formulary status of, any
Competitive Product under such New Medco Plan.
2.3. Availability of New Competitive Products; Representation to Medco
-----------------------------------------------------------------
Eligible Plans.
--------------
(a) Nothing contained in Sections 2.1 or 2.2 shall be interpreted to
prohibit any Medco Party from including in Formularies for any Eligible Medco
Plan any New Competitive Product, provided that no Merck Product in the same
Therapeutic Category is made available to Members under such Medco Plan on a
Basis less favorable than the Basis upon which such New Competitive Product is
made available to Members under such Eligible Medco Plan and the level of access
of Members to, and the Formulary status of, any such Merck Product is no less
favorable to such Merck Product than the level of access of Members to, and the
Formulary status of, such New Competitive Product under such Eligible Medco
Plan.
(b) Nothing contained in Sections 2.1, 2.2 or 2.3(a) shall be
interpreted to prohibit any Medco Party from representing on any Formulary to
Eligible Medco Plans and sponsors thereof, for any Merck Product, the daily cost
of therapy for such Merck Product relative to Competitive Products; provided
that any such representation of relative daily cost of therapy shall be based
upon relative net effective cost to the relevant Plan.
2.4. Definition of "Basis." A Merck Product shall be deemed to be made
--------------------
available to Members under an Eligible Medco Plan on a "Basis" less favorable
than (1) for purposes of Sections 2.1(a) and 2.1(b), the Basis upon which such
Merck Product was made available on January 1, 2002 (in the case of a January 1
Medco Plan) or March 31, 2002 (in the case of a March 31 Medco Plan) or (2) for
purposes of Sections 2.1(c), 2.1(d), 2.2(a), 2.2(b) and 2.3(a), the Basis upon
which a Competitive Product is made available, if:
(a) such Merck Product's status under the Eligible Medco Plan as the
therapy for a particular condition is less favorable than its status as therapy
for such condition on January 1, 2002 (in the case of a January 1 Medco Plan) or
March 31, 2002 (in the case of a March 31 Medco Plan) (for purposes of Section
2.1(a) and 2.1(b)), or is less favorable than that of any Competitive Product
(for purposes of Sections 2.1(c), 2.1(d), 2.2(a), 2.2(b) and 2.3(a)), except as
a result of a reclassification of such Merck Product from being either a
Mandatory Formulary Product or an Acceptable Formulary Product to being an
Unacceptable Formulary Product in accordance with Section 2.5(c). Although the
parties acknowledge that the definition of status as therapy for a condition
will be different from Medco Plan to Medco Plan, examples of levels of status of
14
Pharmaceutical Products under Medco Plans as therapy for a condition are (from
highest status downward): exclusive first-line therapy; first-line therapy on
equal status with a limited number of other specific Competitive Products;
second-line therapy on equal status with specific Competitive Products as the
second-line therapy, etc.;
(b) the amount of any co-payment payable by a Member to fill a
prescription for such Merck Product (i) is increased from the amount of the
co-payment in effect as of January 1, 2002 (in the case of a January 1 Medco
Plan) or March 31, 2002 (in the case of a March 31 Medco Plan) at an annual rate
(whether measured in dollars or as a percentage) that is greater than the rate
of co-payment increase applicable to any Competitive Product (for purposes of
Sections 2.1(a) and 2.1(b)), (ii) is decreased from the amount of the co-payment
in effect as of January 1, 2002 (in the case of a January 1 Medco Plan) or March
31, 2002 (in the case of a March 31 Medco Plan) at an annual rate (whether
measured in dollars or as a percentage) that is less than the rate of co-payment
decrease applicable to any Competitive Product (for purposes of Sections 2.1(a)
and 2.1(b)) or (iii) is greater than the co-payment applicable to any
Competitive Product (for purposes of Sections 2.1(c), 2.1(d), 2.2(a), 2.2(b) and
2.3(a)); or
(c) other forms of inducement or encouragement are offered or
communicated, directly or indirectly, by any Medco Party to any Eligible Medco
Plan or Members of such Eligible Medco Plan or any of their physicians or
pharmacists, that have the purpose or effect of encouraging such Eligible Medco
Plan, Members or physician or pharmacist to favor a Competitive Product over any
Merck Product.
2.5. P&T Committee.
-------------
(a) The parties acknowledge that the determination of the Formulary
status, if any, of any New Merck Product for each Eligible Medco Plan may be
subject to prior action with respect to such New Merck Product by the
independent Pharmacy and Therapeutics Committee of Physicians and Pharmacists
with the authority to evaluate Pharmaceutical Products for safety and efficacy
(the "P&T Committee") for such Eligible Medco Plan. Medco represents and
warrants that each P&T Committee established or utilized by Medco that is
responsible for any Managed Eligible Medco Plan is structured and managed so
that (a) its decisions with respect to Merck Products are based solely on
objective clinical factors and other factors unrelated to (i) the price or cost
of such Merck Product, (ii) other financial criteria or (iii) financial
objectives of Medco, (b) its evaluations of the safety of Merck Products are
based solely on clear and objective safety reasons based on valid scientific
data or authorized FDA directives specifically concerning the safety of such
products, and (c) it will take action with respect to a Merck Product to
classify such product as (x) mandatory for Formulary inclusion (a "Mandatory
Formulary Product"), (y) acceptable for Formulary inclusion (an "Acceptable
Formulary Product"), or (z) unacceptable for Formulary inclusion (an
"Unacceptable Formulary Product"), with respect to any or all of the
FDA-approved indications for such Merck Product; provided that any determination
under this clause (z) shall be based solely on
15
clear and objective safety reasons based on valid scientific data or authorized
FDA directives specifically concerning the safety of the relevant Merck Product.
Medco represents and warrants that each P&T Committee that is responsible for
any Partially-Managed Eligible Medco Plan is structured so that such P&T
Committee will take action with respect to a Merck Product to classify such
product as (x) a Mandatory Formulary Product or as having a similar
classification, (y) Acceptable Formulary Product or as having a similar
classification, or (z) an Unacceptable Formulary Product or as having a similar
classification, with respect to any or all of the FDA-approved indications for
such Merck Product. Medco further represents and warrants that each Existing
Merck Product is classified by each P&T Committee either as a Mandatory
Formulary Product or as an Acceptable Formulary Product.
(b) Medco shall (i) promptly and timely submit each New Merck Product
to the P&T Committee responsible for each Managed Eligible Medco Plan, (ii)
ensure that each such P&T Committee responsible for any Eligible Medco Plan
review the New Merck Product in accordance with the requirements of this Article
2 within 4 months from the date such New Merck Product becomes a Merck Product
and (iii) recommend that each New Merck Product be classified by the responsible
P&T Committee as an Acceptable Formulary Product or Mandatory Formulary Product
for each Managed Eligible Medco Plan. Medco shall (i) use its best efforts to
cause each New Merck Product to be promptly and timely submitted to the P&T
Committee responsible for each Partially-Managed Eligible Medco Plan, (ii) use
its best efforts to ensure that each such P&T Committee responsible for any
Partially-Managed Eligible Medco Plan review the New Merck Product in accordance
with the requirements of this Article 2 within 4 months from the date such New
Merck Product becomes a Merck Product and (iii) recommend to the Plan sponsor,
and use its best efforts to recommend to the responsible P& T Committee, that
each New Merck Product be classified by the responsible P&T Committee as an
Acceptable Formulary Product or Mandatory Formulary Product for each
Partially-Managed Eligible Medco Plan.
(c) Notwithstanding anything contained herein to the contrary, the P&T
Committee responsible for an Eligible Medco Plan may at any time determine to
reclassify a Mandatory Formulary Product or an Acceptable Formulary Product to
be an Unacceptable Formulary Product as a result of clear and demonstrated
objective safety reasons based on valid scientific data or authorized FDA
directives specifically concerning the safety of such product.
2.6. Adverse Impact on a Plan Sponsor/Removal of Therapeutic Category
----------------------------------------------------------------
by Plan Sponsor.
---------------
(a) Notwithstanding anything in this Article 2 to the contrary, in the
event that, in any Calendar Quarter, Medco fails, with respect to any Merck
Product under any Eligible Medco Plan, to ensure or to use best efforts to
ensure, as applicable, that (1) such Merck Product is made available to Members
under such Eligible Medco
16
Plan on the Basis required by Section 2.1 or 2.2 (without regard for this
Section 2.6), or (2) the level of access of Members to such Merck Product, or
the Formulary status of such Merck Product, under such Eligible Medco Plan
complies with Section 2.1 or 2.2 (without regard for this Section 2.6), such
failure shall not constitute a breach of such Section (subject to Section
2.6(c)) if and to the extent that (x) Medco's so ensuring or so using best
efforts to ensure would have a clear and objective material adverse economic
impact on a Plan sponsor (provided that the foregoing shall not excuse Medco
from taking any action that it would otherwise be required to take to comply
with Sections 2.1 and 2.2 if and to the extent that such action would not have a
clear and objective material adverse economic impact on a Plan sponsor) and (y)
Medco complies with Section 2.6(c).
(b) Notwithstanding anything in this Article 2 to the contrary, in the
event that any Existing Merck Product is not included, during any Calendar
Quarter (or portion thereof), in any Formulary under an Existing Medco Plan that
constitutes an Eligible Medco Plan as a result of the unilateral removal by the
Plan sponsor from such Formulary of all Pharmaceutical Products in the
Therapeutic Category that includes such Merck Product, Medco shall not be deemed
to have breached its obligations under Section 2.1(a) or 2.1(b), as applicable,
so long as Medco complies with Section 2.6(c).
(c) If at any time Medco learns, or has reason to expect, that Section
2.6(a) or 2.6(b) may become applicable with respect to any Merck Product or
Merck Products at one or more Eligible Medco Plans of a Plan sponsor, Medco
shall provide written notice to Merck within 5 business days after Medco learns
of or expects such circumstance, together with any information in Medco's
possession relating thereto (including, without limitation, such economic and
other information that forms the bases for Medco's view that Section 2.6(a) or
2.6(b) may become applicable), in order to permit Merck to engage in discussions
with Medco and with the relevant Plan sponsor(s) to seek to resolve such
circumstance. Medco shall cooperate with Merck in connection with the foregoing,
including participating in any meetings requested by Merck and assisting Merck
in seeking to resolve such circumstance. Medco shall keep Merck informed on a
current basis of any developments relating to any circumstance referred to in
this paragraph and shall provide Merck with adequate opportunity to take actions
to resolve that circumstance in a timely manner and in any event prior to the
time action is taken by Medco or any Plan sponsor that would adversely affect
Merck. Medco's providing of notice or information to Merck as contemplated by
this Section 2.6(c) and Merck's taking of any action in response to, or in
connection with, such notice or information from Medco shall not excuse any
failure by Medco to comply with any of its obligations under this Agreement,
including Sections 2.1, 2.2, 2.3, 2.4, 2.5 and 6.1. Medco represents and
warrants to Merck that, as of the date of this Agreement, Medco has no reason to
expect that Section 2.6(a) may become applicable with respect to any Merck
Product or Merck Products at one or more Eligible Medco Plans of any Plan
sponsor.
17
(d) In the event that, with respect to any Calendar Quarter, (1) Medco
would be in breach of Section 2.1 or 2.2 with respect to one or more Merck
Products under an Eligible Medco Plan (but for Section 2.6(a)) and (2) for the
preceding Calendar Quarter, the Aggregate Medco Cost for all Eligible
Prescriptions of such Merck Product or Merck Products under such Eligible Medco
Plan constituted 20% or more of the Aggregate Medco Cost for all Eligible
Prescriptions of all Merck Products under such Eligible Medco Plan, Merck shall
have the right to elect, with respect to such Calendar Quarter, that no
Individual Formulary Access Rebate Amount shall be paid in respect of any
Eligible Prescription under such Eligible Medco Plan.
(e) In the event that, with respect to any Calendar Quarter, Medco
would be in breach of Section 2.1(a) or 2.1(b) with respect to an Existing Merck
Product under an Existing Medco Plan that constitutes an Eligible Medco Plan
(but for Section 2.6(b)), Merck shall have the right to elect, with respect to
such Calendar Quarter, that no Individual Formulary Access Rebate Amount shall
be paid in respect of Eligible Prescriptions of such Existing Merck Product
under such Eligible Medco Plan.
3. Performance Parameters.
----------------------
3.1. Performance Requirements. For each Calendar Quarter beginning on
------------------------
or after July 1, 2002, the MAS Premium Percentage of all Merck Products under
all Eligible Medco Plans in the aggregate shall be no less than the Minimum MAS
Premium Percentage of all Merck Products for such Calendar Quarter.
3.2. Liquidated Damages.
------------------
(a) In the event that, for any Calendar Quarter, the Merck Products
fail to achieve the Minimum MAS Premium Percentage for such Calendar Quarter
required by Section 3.1, Medco shall pay to Merck, as liquidated damages, an
amount equal to the product obtained by multiplying (x) the excess of (i) the
amount determined by multiplying (A) the Merck Quarterly Revenue Amount for such
Calendar Quarter by (B) a fraction, (I) the numerator of which shall be equal to
the sum of the Minimum MAS Premium Percentage for such Calendar Quarter plus
100% and (II) the denominator of which shall be equal to the sum of the MAS
Premium Percentage for such Calendar Quarter plus 100%, over (ii) the Merck
Quarterly Revenue Amount for such Calendar Quarter by (y) the Applicable
Percentage.
(b) Any payment required to be made by Medco pursuant to 3.2(a) shall
be paid to Merck within ten business days after Medco's receipt of a written
request for such payment from Merck setting forth the calculations used by Merck
in determining the amount of such payment.
(c) The parties agree that Merck's rights under this Section 3.2 shall
not in any way impair Merck's rights to pursue any equitable remedy it may be
entitled to
18
pursue against Medco. The parties further agree that the agreement contained in
Section 3.1 is an integral part of this Agreement, that the damages that would
be suffered by Merck as a result of Medco's failure to meet its obligations with
respect to the required Minimum MAS Premium Percentage are inherently incapable
of precise calculation and that the amounts that Merck is entitled to receive
under this Section 3.2 as a result of any such failure are reasonable. The
parties agree that the amounts payable to Merck under this Section 3.2
constitute liquidated damages and not a penalty.
4. Rebates.
-------
4.1. Rebate Eligibility. With respect to each Calendar Quarter
------------------
beginning July 1, 2002, Medco shall be eligible to receive rebates, if any, with
respect to Merck Products determined in accordance with Annexes A and B. If the
Effective Date is prior to July 1, 2002, for the Calendar Quarter ended June 30,
2002, (i) Medco shall continue to provide rebates to Medco Plans based on
Members' access to Merck Products and at the rebate levels set forth in the
Pricing Grant from Merck to Medco in effect as of the date hereof, (ii) the
funding for the aggregate amount of such rebates shall be provided by Merck to
Medco for such Calendar Quarter based upon the percentage access rebate levels
in effect for each Medco Plan as of March 31, 2002, and (iii) Merck shall
provide aggregate rebate levels to Medco consistent with the funding levels
provided by Merck to Medco as of March 31, 2002; provided that Medco shall
comply with the information requirements set forth in Section 3 of Annex A with
respect to such Calendar Quarter.
4.2. Commercially Reasonable Efforts.
-------------------------------
(a) Definitions:
"Comparator Group" means those pharmacy benefit managers in the U.S.
----------------
(other than Medco Parties) selected by Merck, to which Merck granted Price
Reductions on a significant selection of Merck Products during the relevant
Calendar Year and whose business, in Merck's judgment, resembles Medco's books
of business among companies competing as pharmacy benefit managers in the U.S.;
provided that the Comparator Group shall not include Affiliates of any health
maintenance organization or other similar managed care organization or of any
pharmaceutical manufacturer.
"Comparator PBM" means the pharmacy benefit manager of the Comparator
--------------
Group which, during the relevant Calendar Year, received actual Price Reductions
from Merck on its utilization of Merck Products, measured in the aggregate
across all Merck Products that in the aggregate were the greatest Price
Reductions received by any member of the Comparator Group.
"Price Reductions" means discounts, rebates or other price reductions
-----------------
on Merck Products calculated as a percentage of product utilization with
reference to the Catalog Price thereof. Price Reductions shall not include
payments
19
pursuant to service agreements or any other arrangement other than one under
which the customer receives rebates, discounts or other price reductions
calculated as a percentage of product utilization by a group of Members. Price
Reductions shall be deemed to occur in the Calendar Quarter of utilization,
notwithstanding that the payment of such Price Reductions by Merck may not occur
until later as a result of the submission and reconciliation of data.
(b) Determining Rebate Levels. In determining rebate levels available
-------------------------
to Medco in each Calendar Year commencing with Calendar Year 2003, Merck shall
use commercially reasonable efforts (including by adjusting the parameters for
determining the amount of the rebates Medco is entitled to receive in accordance
with Annexes A and B) to ensure that, provided that throughout such Calendar
Year Medco is in full compliance with all of its obligations under Articles 2
and 7, and Sections 10.1, 10.3, 10.5, 10.6, 12.4, 12.9 and 12.10 of this
Agreement, Medco will have the opportunity to earn Price Reductions for Merck
Products dispensed during such year pursuant to Eligible Prescriptions, which,
when measured in the aggregate across all Merck Products are as favorable to
Medco as the Price Reductions actually earned by the Comparator PBM for Merck
Products dispensed during the relevant Calendar Year, measured in the aggregate
across all Merck Products, taking into account and adjusting for the following
factors at the Comparator PBM (but only to the extent that such factors can be
identified and measured based on publicly available information, e.g.,
formularies available to physicians, benefit design information available to
Members, IMS market share data, etc.) and at Medco:
(i) Formulary design and Formulary status of Merck Products;
(ii) Access to Merck Products by Members;
(iii) Applicable controls and interventions;
(iv) Plan benefit design (e.g., co-payment structure and amount of differential
co-payments, number of Competitive Products in Therapeutic Categories, etc.);
(v) Market share for Merck Products; and
(vi) Equalization of data parameters (collectively, the "Factors").
-------
The determination of rebate levels as set forth above shall be made by Merck
based on (a) information about Medco in Merck's possession, (b) information
about Price Reductions actually earned by members of the Comparator Group for
Merck Products dispensed during the relevant Calendar Year, and (c) publicly
available information about the Factors as relating to the members of the
Comparator Group. All of the Factors shall be taken into account and shall be
weighted as appropriate to reasonably compare the Comparator PBM with Medco. In
determining rebate levels available to Medco and
20
whether Medco will have the opportunity to earn rebates as specified above, the
provisions of this Agreement relating to Merck's remedies, including without
limitation those provisions which may under specified circumstances reduce or
eliminate rebates or require the payment of liquidated damages to Merck, shall
be disregarded.
Medco acknowledges and agrees that Merck's contracts with Medco's competitors
including those constituting the Comparator Group ("Competitor Agreements")
contain provisions which require Merck to treat and maintain certain information
as confidential and which in some cases restrict Merck's use of certain
information. In fulfilling its obligations under this Section 4.2 and Section
4.3, Merck will not be required to violate any of its obligations under any
Competitor Agreement. In no event will Merck be required to provide information
with respect to any member of the Comparator Group on an individual basis in
connection with any review or other proceeding relating to the subject matter of
this Article 4. Carve-Ins will not be taken into account in measuring the level
of Price Reductions in the Comparator PBM or Medco. A "Carve-In" is an
arrangement in which a specific Plan under a pharmacy benefit manager agrees,
either separately or through the pharmacy benefit manager, to treat one or more
Merck Products in a more advantageous fashion than such Merck Products are
treated by Plans under the pharmacy benefit manager generally in exchange for
higher discounts on such Merck Products.
4.3. Independent Verifying Party.
---------------------------
(a) In the event that with respect to any Calendar Year after 2002
(other than the Calendar Year 2006, which shall not be subject to review) Medco
shall notify Merck in writing not later than January 31 of the succeeding
Calendar Year that in its view Merck has failed to comply with Section 4.2
hereof with respect to the previous Calendar Year, Merck shall appoint a
nationally- recognized accounting firm that has not had a material relationship
with Merck during the prior twelve month period to review Merck's determination
pursuant to Section 4.2 (the "Independent Verifying Party"). The fees and
expenses of the Independent Verifying Party shall be equally shared by Merck and
Medco. Review by an Independent Verifying Party under Sections 4.3 and 4.4 shall
occur not more than once per Calendar Year and only at the specific request of
Medco.
(b) Merck shall provide to the Independent Verifying Party the results
of Merck's analysis pursuant to Section 4.2 on a blinded, aggregate basis, such
that the identity of any member of the Comparator Group shall not be disclosed
and the only Price Reductions disclosed shall be the Price Reductions, measured
in the aggregate across all Merck Products, which were actually earned by each
member of the Comparator Group during the relevant Calendar Year. Merck shall
also provide to the Independent Verifying Party the publicly available
information concerning the Factors that Merck employed in its analysis under
Section 4.2. Medco shall provide to the Independent Verifying Party access to
such information requested by the Independent Verifying Party and reasonably
available to Medco regarding Medco Plans, including the
21
Formulary status of Merck Products, the level of access of Members to Merck
Products and quantities of Merck Products dispensed to different groups of
Members under such Medco Plans, and the Factors as applied to Medco with respect
to Merck Products. For purposes of the verification process conducted by the
Independent Verifying Party, Merck shall provide information with respect to the
Comparator PBM and the Comparator Group and Medco shall provide information with
respect to Medco, in each case for the first three Calendar Quarters of the
relevant Calendar Year. The Independent Verifying Party shall be instructed not
to, and shall not, disclose to a party or its Affiliates or Representatives or
to any other Person any information provided to the Independent Verifying Party
by or on behalf of the other party. The sole purpose of the Independent
Verifying Party is to determine and report to Merck and Medco whether Merck
reasonably applied the standard set forth in Section 4.2 in determining the
rebates available to Medco.
(c) The Independent Verifying Party shall be instructed to prepare and
deliver to the parties, as promptly as practicable (but in any event within 45
days after the Independent Verifying Party's retention) a report setting forth
its conclusion as to whether Merck reasonably applied the standard set forth in
Section 4.2 in determining the rebates available to Medco. If the Independent
Verifying Party concludes that Merck failed to satisfy such obligation, the
Independent Verifying Party shall set forth in its report delivered to the
parties its conclusion as to the additional aggregate rebate amount, if any (the
"Additional Rebate Amount"), which Medco would have been entitled to receive in
respect of all Merck Products, in the aggregate, had Merck satisfied such
obligation. The conclusions of the Independent Verifying Party shall be final
and binding on the parties. The Independent Verifying Party shall not disclose
to Medco or Merck, as the case may be, in such report or otherwise, any
Confidential Information disclosed by the other to the Independent Verifying
Party.
4.4. Rebate Adjustment.
-----------------
(a) In the event that the Independent Verifying Party shall determine
that Medco is entitled to an Additional Rebate Amount with respect to any
Calendar Year, Merck shall adjust the rebates for the four consecutive Calendar
Quarters commencing with the Calendar Quarter beginning July 1 of the Calendar
Year in which the Independent Verifying Party determines that Medco is entitled
to an Additional Rebate Amount in such a way that Medco will have an opportunity
to earn the Additional Rebate Amount during that period of four consecutive
Calendar Quarters in addition to the rebates it would otherwise have an
opportunity to earn during those Calendar Quarters. Notwithstanding anything
herein to the contrary, Medco shall be entitled to no Additional Rebate Amount
and no such adjustment will be required or made to the extent that, in the
judgment of Merck, any such Additional Rebate Amount or any such adjustment
would, alone or together with any other price reduction or other payment
pursuant to this Agreement (including any rebate or prompt payment discount) at
any
22
time available to any Medco Party, establish a new Best Price for Merck during
any period with respect to any Merck Product, and the amount of any Additional
Rebate Amount to which Medco would otherwise be entitled under this Section 4.4
shall be allocated and reduced to the extent necessary in the judgment of Merck
so that such Additional Rebate Amount shall not establish a new Best Price with
respect to any Merck Product.
(b) Medco's sole remedy for Merck's failure to comply with Sections 4.2
and 4.3 shall be its right to have its rebates prospectively adjusted in
accordance with the terms of this Section 4.4.
5. Purchase Requirements.
---------------------
5.1. Requirements. After the Final Distribution, Medco shall purchase
------------
directly from Merck all Merck Products to be dispensed by or on behalf of the
Medco Mail Service Pharmacies in accordance with Merck's standard terms and
conditions as they may change from time to time during the remainder of the term
of this Agreement. During the term of this Agreement, no Medco Party shall
purchase any Merck Products to be dispensed by or on behalf of any Medco Mail
Service Pharmacy from any Person other than Merck and all Merck Products
dispensed by or on behalf of any Medco Mail Service Pharmacy during the term of
this Agreement shall have been purchased by a Medco Party directly from Merck.
5.2. Terms. All purchases of Merck Products by Medco parties pursuant
-----
to Section 5.1 shall be at the Catalog Price for such Merck Products as in
effect at the time of shipment thereof and otherwise on Merck's standard terms
and conditions (including with respect to prompt payment discounts) as may from
time to time be in effect.
6. Best Efforts for Merck Products.
-------------------------------
6.1. Best Efforts. Without limiting any of the obligations of Medco
------------
under this Agreement, including, without limitation, Article 2, Medco shall,
shall cause all other Medco Parties to, and shall use its best efforts to cause
each Medco Plan to, (i) avoid any practice which directly or indirectly
restricts, discourages or discriminates against use of Merck Products and not
take action to prefer, or encourage the use or exchange of any Competitive
Product over or for any Merck Product, in each case, except for clear and
objective safety reasons based on valid scientific data or authorized FDA
directives specifically concerning the safety of such products or where such
actions would have a clear and objective material adverse economic impact on a
Plan sponsor, and (ii) encourage utilization of Merck Products by Members of
Medco Plans where medically appropriate. Notwithstanding the foregoing, Medco
Parties may prefer generic drug products as a Formulary choice; provided,
however, that no Medco Party may actively attempt to switch prescriptions
written for a Merck Product for a generic drug product,
23
other than in accordance with Medco's Generics First program or any successor
program with respect to products which no longer constitute Pharmaceutical
Products, unless Medco Parties are making an identical attempt to switch
prescriptions written for Competitive Products to that generic drug product.
Best efforts under this Section 6 shall include ensuring that any management,
administrative or other fees payable to Medco Parties by any Eligible Medco Plan
shall be calculated on the same basis, and shall be payable at a rate that shall
not exceed, the management, administrative or other fees payable to Medco
Parties by such Eligible Medco Plan with respect to the products of other
manufacturers.
6.2. Notification of Exceptions. If at any time Medco learns, or has
--------------------------
reason to expect, that the exceptions set forth in clause (i) of Section 6.1 may
become applicable with respect to any Merck Product or Merck Products at one or
more Medco Plans, Medco shall provide written notice to Merck within 5 business
days after Medco learns of or expects such circumstance, together with any
information in Medco's possession relating thereto (including, without
limitation, such economic and other information that forms the bases for Medco's
view that the exceptions set forth in clause (i) of Section 6.1 may become
applicable), in order to permit Merck to engage in discussions with Medco and
with the relevant Medco Plan sponsor(s) to seek to resolve such circumstance.
Medco shall cooperate with Merck in connection with the foregoing, including
participating in any meetings requested by Merck and assisting Merck in seeking
to resolve such circumstance. Medco shall keep Merck informed on a current basis
of any developments relating to any circumstance referred to in this paragraph
and shall provide Merck with adequate opportunity to take actions to resolve
that circumstance in a timely manner and in any event prior to the time action
is taken by Medco or any Medco Plan sponsor that would adversely affect Merck.
6.3. No Excuse of Failure to Perform. For the avoidance of doubt,
-------------------------------
Medco's providing of notice or information to Merck as contemplated by Section
6.2 and Merck's taking of any action in response to, or in connection with, such
notice or information from Medco shall not excuse any failure by Medco to comply
with any of its obligations under this Agreement, including Sections 2.1, 2.2,
2.3, 2.4, 2.5 and 6.1 (without regard for the exceptions set forth in clause (i)
of Section 6.1). Medco represents and warrants to Merck that, as of the date of
this Agreement, Medco has no reason to expect that that the exceptions set forth
in clause (i) of Section 6.1 may become applicable with respect to any Merck
Product or Merck Products at one or more Medco Plans of any Plan sponsor.
7. Information and Data Requirements.
---------------------------------
7.1. Periodic Information Delivery. At Medco's expense, Medco shall
-----------------------------
provide to Merck promptly (x) (but in any event within 30 days) after each month
Medco Market Share data for such month for each Merck Product and each
Competitive Product by Eligible Medco Plan, for all Eligible Medco Plans, in the
aggregate, and by
24
Distribution Channel, (y) within 90 days following each Calendar Quarter, the
information specified in Section 7.2 and (z) (but in any event within 30
business days) after a written request therefor, all other data and information
requested by Merck for purposes of administering this Agreement.
7.2. Quarterly Data. Within 90 days following the close of each
--------------
Calendar Quarter, Medco shall deliver to Merck, in a mutually acceptable
electronic format, the information specifically described in Schedule 7.2 and
such other information as Merck shall deem reasonably necessary for purposes of
determining the rebate, if any, Medco shall be entitled to under this Agreement
(collectively, the "Quarterly Data").
7.3. General Information Delivery. At Medco's expense, Medco shall
----------------------------
promptly (but in any event within 30 business days of any request) provide to
Merck any information at any time requested by Merck that is relevant to the
performance by the parties of this Agreement or relates to the Merck Products,
including, but not limited to, information regarding drug management techniques
that affect the utilization of Merck Products.
7.4. Accuracy of Data. All data and information provided by Medco to
----------------
Merck pursuant to this Agreement shall be accurate and complete.
8. Term. The term of this Agreement shall commence as of the Effective Date and
----
shall remain in effect until July 1, 2007, unless earlier terminated in
accordance with the next sentence. The term of this Agreement may be terminated
at any time either by mutual agreement of the parties or at the option of Merck,
upon 120 days' written notice from Merck to Medco; provided that any such
termination at the option of Merck shall not be effective prior to July 1, 2003.
The termination or expiration of this Agreement shall not relieve any party of
any obligation or liability it may have to the other in respect of any period
prior to such expiration or termination nor shall it relieve any party from its
obligations under Sections of this Agreement that by their terms survive after
the expiration or termination of this Agreement.
9. DISPUTE RESOLUTION. ANY DISPUTE, CONTROVERSY OR CLAIM (A "DISPUTE") BETWEEN
------------------
THE PARTIES HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT, INCLUDING,
WITHOUT LIMITATION, DISPUTES CONCERNING THE VALIDITY, INTERPRETATION OR
PERFORMANCE OF OR UNDER THIS AGREEMENT OR ANY TERM OR PROVISION HEREOF, SHALL BE
EXCLUSIVELY GOVERNED BY AND SETTLED IN ACCORDANCE WITH THE PROVISIONS OF THIS
ARTICLE 9. THE TERMS OF THIS ARTICLE 9 SHALL SURVIVE THE EXPIRATION OR
TERMINATION OF THIS AGREEMENT.
9.1. Negotiation. The parties shall make a good faith attempt to
-----------
resolve any Dispute through negotiation. Within ten (10) days after notice of a
Dispute is given
25
by any party, each party shall select one or more Representatives who are
vice presidents, senior vice presidents or executive vice presidents of such
party and shall notify the other party in writing of the names and contact
details of its Representatives, which Representatives shall meet and make a good
faith attempt to resolve such Dispute and shall continue to negotiate in good
faith in an effort to resolve the Dispute without the necessity of any formal
proceedings. The specific format for such negotiations will be left to the
discretion of the designated Representatives but may include the preparation of
agreed upon statements of fact or written statements of position furnished to
the other party.
9.2. Binding Arbitration.
-------------------
(a) If such Representatives fail to resolve a Dispute within ten (10)
days after the date of delivery of the letter of the notices of selection of the
Representatives, unless otherwise mutually agreed, either party shall have the
right to submit such Dispute to final and binding arbitration. It is the intent
of the parties that any such arbitration be structured in such a way as to
result in a resolution of such Dispute as promptly as practicable in accordance
herewith. Except as otherwise provided in this Article 9, any arbitration shall
be conducted pursuant to the then current Rules for Non-Administered Arbitration
of the Center for Public Resources ("CPR Rules"), and the site of the
arbitration shall be New York County, New York.
(b) A party (a "Disputing Party") shall institute any arbitration
proceeding hereunder by providing written notice thereof to the other party (the
"Arbitration Demand") which shall describe in reasonable detail the nature of
the Dispute, the claims of the Disputing Party and the requested relief and, if
the Disputing Party is Merck, setting forth a list of at least five potential
independent and impartial arbitrators selected by Merck, each of whom shall not
have a personal or financial interest in the result of the arbitration or the
parties to the arbitration (provided that ownership of shares in a mutual fund
that owns securities of either of the parties shall not be considered a personal
or financial interest for this purpose) and shall be experienced in representing
clients in commercial arbitrations. Within thirty (30) days after the other
party's receipt of the Arbitration Demand, such other party shall furnish the
Disputing Party with a written statement (a "Response Statement") (1) answering
the claims set forth in the Arbitration Demand, (2) asserting any counterclaim,
describing in reasonable detail the nature of the Dispute relating to such
counterclaim and the requested relief for such counterclaims, and (3) if such
other party is Medco, selecting as the sole arbitrator for the proceeding one of
the potential arbitrators listed in the Arbitration Demand or if such other
party is Merck, setting forth a list of at least five potential impartial
arbitrators selected by Merck, each of whom shall not have a personal or
financial interest in the result of the arbitration and shall be experienced in
representing clients in the subject matter of the Dispute. If the Disputing
Party is Medco, Medco shall notify Merck within ten (10) business days of
Medco's receipt of the Response Statement of Medco's
26
selection as the sole arbitrator for the proceeding from the potential
arbitrators listed in the Arbitration Demand. If Medco fails within the
applicable time period to select an arbitrator from the list of potential
arbitrators included in Merck's Arbitration Demand or Response Statement, as
applicable, an arbitrator shall be selected in accordance with the CPR Rules
from such list of potential arbitrators.
(c) With respect to discovery in an arbitration proceeding, the
arbitrator must allow either party to make discovery requests for documents of
the other party where the information sought is reasonably calculated to lead to
the discovery of admissible evidence, and each party agrees to respond to such
discovery request within a reasonable time. The arbitrator is obligated to
construe the term "document" liberally to encompass data compilations in any
form.
(d) The arbitrator shall be instructed to use best efforts to complete
all arbitration hearings no later than three (3) months from the date of the
arbitrator's appointment and use best efforts to render a decision within four
(4) months from the date of the arbitrator's appointment.
(e) In the case of a Dispute between the parties, the arbitrator shall
allocate responsibility between the parties for the expenses, including costs
and reasonable attorneys' and other professional fees, incurred by the parties
in connection with the arbitration (including the fees and expenses of the
arbitrator), in a manner that the arbitrator deems appropriate in light of the
claims, and responses thereto, made by the parties and the ultimate success of
the parties with respect to such claims and responses.
(f) In connection with any Dispute, the arbitrator shall apply solely
principles of law.
(g) The decision of the arbitrator shall be final and non-appealable
and may be enforced in any court of competent jurisdiction.
(h) The use of any alternative dispute resolution procedures will not
be construed under the doctrine of laches, waiver or estoppel to adversely
affect the rights of either party.
9.3. Sensitive Information. During the course of negotiations and
---------------------
arbitration under this Article 9, all reasonable requests made by one party to
the other for information, including requests for copies of relevant documents,
will be honored; provided, however, that Merck shall be under no obligation to
furnish to Medco or to the arbitrator any information or documents if in the
judgment of Merck such information or documents include or contain competitively
sensitive data or information subject to a confidentiality agreement with any
other Person; provided, however, that this provision shall not be interpreted to
apply to any information or document other than the portion of
27
such information or document that in the judgment of Merck is competitively
sensitive or subject to a confidentiality agreement.
9.4. Equitable Relief. Medco agrees and acknowledges that Merck would
----------------
suffer irreparable harm in the event that Medco fails to perform any of its
obligations hereunder in accordance with its specific terms or otherwise
breaches any of such obligations. Medco further agrees and acknowledges that
money damages may be an inadequate remedy for such failure to perform or breach
by Medco. Accordingly, notwithstanding anything herein to the contrary, and
without waiving any remedy hereunder, Merck shall be entitled to seek specific
performance by Medco of its obligations under Articles 2, 3, 5, 6, 7, this
Article 9, and Sections 10.1, 10.2, 10.3, 10.6, 10.9, 12.1, 12.4, 12.9 and 12.10
of this Agreement and/or injunctive or other equitable relief to prevent or cure
breaches of Articles 2, 3, 5, 6, 7, this Article 9, and Sections 10.1, 10.2,
10.3, 10.6, 10.9, 12.1, 12.4, 12.9 and 12.10 of this Agreement in an arbitration
proceeding (without first complying with the negotiation provision of Section
9.1) or in court (subject to Section 12.1).
9.5. Continuity of Performance. Unless otherwise agreed in writing, the
-------------------------
parties will continue to honor all other commitments under this Agreement during
the course of dispute resolution pursuant to the provisions of this Article 9.
10. Certain Covenants.
-----------------
10.1. Audit Rights. Merck, shall have the right, upon at least ten
------------
business days' prior written notice, at Merck's expense, to review and audit (or
to perform other verification procedures with respect to) data and other
documentation of the Medco Parties and Medco Plans as Merck deems reasonably
necessary to verify Medco's performance and compliance with its obligations
under this Agreement. Such review and audit or verification may be conducted by
Merck at least on a quarterly basis and more frequently on no less than five
days prior written notice to Medco. An independent third-party auditor may, at
Merck's expense and in Merck's sole discretion, conduct any such review and
audit or verification; provided that such independent third-party auditor enters
into an agreement pursuant to which such auditor agrees to comply with Section
10.3 with respect to all Confidential Information (as defined in Section 10.3)
provided to it by Medco, not to provide any such information to any person other
than Merck, its Representatives and persons working on the review, audit or
verification process, and not to use any such information other than in
connection with such review, audit or verification. In connection with any such
review, audit or verification, Medco shall cause the work papers of Medco's
internal and external auditors and such other documentation and information
requested by Merck to be made available to Merck (or any independent third-party
auditor) promptly (but in any event within five (5) business days after request
therefor by Merck). Medco agrees that all work papers, documentation and other
information that it may provide to Merck (or the independent third-party
auditors) in connection with any review, audit or verification shall be accurate
and complete. Medco
28
shall also be responsible for any indemnification required by Medco's external
auditors in connection with any review, audit or verification. Medco
acknowledges that Merck's audit and verification rights hereunder are an
integral part of this Agreement and agrees to cooperate fully and
unconditionally with Merck (or any independent third-party auditor), in
connection with such review, audit or verification and treat any such review,
audit or verification procedures with the highest priority. The terms of this
Section 10.1 shall survive the expiration or termination of this Agreement for a
period of five years.
10.2. Access to Medco Clients. Notwithstanding anything contained in
-----------------------
this Agreement to the contrary, Merck shall have the right to engage in
discussions with any Medco customer, Medco Plan or any sponsor of any Medco Plan
or any Representative thereof that indicates that it may be interested in
working directly with Merck or that it is contemplating or in the process of
terminating its relationship with Medco as it relates to Merck or any Merck
Products. Medco expressly, for itself and all Medco Parties, waives any
provisions in any third party agreements that conflict with this Section 10.2.
10.3. Confidentiality. (a) Each of Medco and Merck shall, and shall
---------------
cause its Affiliates and Representatives to, maintain as confidential, and not
disclose to any Person other than such Party's Representatives (who agree to
comply with the provisions of this Section 10.3) the terms and conditions of
this Agreement, including but not limited to the rebate levels (and the criteria
for Medco's obtaining rebates) for the utilization of Merck Products provided
for hereunder (all such terms and conditions, "Agreement Confidential
Information") or any other proprietary or confidential information disclosed by
the other party (such other information, "Other Confidential Information," and
together with the Agreement Confidential Information, "Confidential
Information"), except when such disclosure is required by law (including,
without limitation, 42 C.F.R. ss.1001.952(h)(l)), regulation or any judicial or
governmental order or, in the case of Merck only, to its joint venture partners,
co-promotion partners and co-marketing partners on a need-to-know basis;
provided, that (1)Medco may disclose to any Eligible Medco Plan and the sponsor
thereof the net price of Merck Products to such Plan if such Plan and sponsor
are bound by a confidentiality obligation not to disclose such information to
any other Person and (2) Medco may disclose the conditions under which Medco is
entitled to rebates under this Agreement to any Eligible Medco Plan or the
sponsor thereof, or any independent third-party auditor of such Eligible Medco
Plan or sponsor, so long as (i) Medco simultaneously discloses to such Eligible
Medco Plan, sponsor or auditor similar information regarding the conditions
under which Medco is entitled to rebates under its agreements with all other
pharmaceutical manufacturers, (ii) Medco does not disclose to such Eligible
Medco Plan, sponsor or auditor more information regarding the conditions under
which Medco is entitled to rebates under this Agreement than Medco discloses to
such Eligible Medco Plan, sponsor or auditor regarding the conditions under
which Medco is entitled to rebates under any of its agreements with any other
pharmaceutical manufacturer, and (iii) such Eligible Medco
29
Plan, sponsor or independent third-party auditor enters into an agreement
pursuant to which such Eligible Medco Plan, sponsor or auditor, as applicable,
agrees to comply with this Section 10.3 with respect to all Confidential
Information provided to such Eligible Medco Plan, sponsor or auditor.
Notwithstanding the foregoing, Confidential Information shall exclude
information that: (i) was in the possession of a party to this Agreement or such
party's Representatives before receipt from the other party; (ii) is or becomes
a matter of public knowledge other than as a result of a breach of this
Agreement by a party to this Agreement or such party's Representatives; (iii) is
rightfully received by a party to this Agreement or such party's Representatives
from a third-party without a duty of confidentiality; or (iv) is independently
developed by a party to this Agreement or such party's Representatives.
(b) If either party hereto or any of its Affiliates or Representatives
is required by law, regulation or other applicable judicial or governmental
order to disclose any Confidential Information, then that party shall notify the
other party sufficiently in advance of releasing any Confidential Information to
enable the other party to seek an appropriate protective order. If, failing the
entry of a protective order after such notification, that party is, in the
opinion of its counsel, compelled to disclose Confidential Information, that
party may disclose that portion of the Confidential Information that its counsel
advised in writing that the party is compelled to disclose and will exercise
reasonable efforts to obtain assurance that confidential treatment will be
accorded to that portion of the Confidential Information that is being
disclosed. In any event, the disclosing party will not oppose action by the
other party to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Information.
(c) This Section 10.3 shall survive the expiration or termination of
this Agreement for a period of five years.
10.4. Patient Information. Medco will not provide any patient
-------------------
identifiable information to Merck. Medco will also not provide any other
information the disclosure of which is prohibited by laws or regulations
governing confidentiality of any subject matter, including but not limited to
medical records.
10.5. Indemnification; Set-Off Rights. (a) Without limiting the right
-------------------------------
of Merck and its Affiliates and its other respective Representatives to
indemnification under any agreement to be entered into by Merck and Medco in
connection with the IPO (and subject to the provisions and procedures of any
such agreement), Medco shall indemnify Merck and its Affiliates and its and
their respective Representatives against any and all losses, claims, damages or
liabilities to any third party, including Plan sponsors, Plans, Members of
Plans, in connection with or as result of this Agreement or the activities
carried out pursuant hereto. Such indemnification shall be subject to the
indemnification procedures and rules set forth in the Indemnification and
Insurance Matters Agreement to
30
be entered into by and among Merck and Medco; provided that any Dispute with
respect to any indemnification obligations shall be governed by the provisions
of this Agreement.
(b) In addition to, and not in limitation of, any other remedies any
member of the Merck Group or any Merck Indemnitee may be entitled to under the
Separation Agreement, any Ancillary Agreement or any Intercompany Agreement,
Merck shall have the right to satisfy any amounts owed to any member of the
Merck Group or Merck Indemnitee by any member of the Medco Group whether under
this Agreement, the Separation Agreement, any Ancillary Agreement, any
Intercompany Agreement, any other agreement or arrangement existing between any
member of the Merck Group and any member of the Medco Group, or otherwise, by
means of an offset against any amounts Merck may from time to time owe to Medco
under this Agreement. Capitalized terms used in this paragraph and not defined
in this Agreement have the meanings set forth in the Master Separation and
Distribution Agreement being entered into between Merck and Medco in connection
with the IPO and the Final Distribution.
(c) The terms of this Section 10.5 shall survive the expiration or
termination of this Agreement.
10.6. Determination of Zocor(R)High Control Eligible Medco Plan Status;
-----------------------------------------------------------------
Formulary Managed Medco Plan Status.
-----------------------------------
(a) Attached hereto as Schedule 10.6 (a) is a list as of the date of
execution of this Agreement, which Medco represents is complete and accurate, of
all Existing Medco Plans which constitute Zocor(R)High Control Eligible Medco
Plans. Such Plans shall initially be deemed to be Zocor(R)High Control Eligible
Medco Plans for purposes hereof.
(b) Within 30 days of any Medco Party's entering into any agreement or
arrangement for the provision of PBM Services with respect to any Plan that
constitutes a New Medco Plan, Medco shall provide to Merck with respect to the
applicable Medco Plan (the "Applicable Plan"), a written notice (a
"Notification") setting forth (i) the name of the Applicable Plan; (ii) the
identity of each group of Members (and the number of Members in each group) in
the Applicable Plan; (iii) the name of the sponsor of the Applicable Plan; and
(iv) whether, in Medco's view, the Applicable Plan will be deemed to be (A) a
Formulary Managed Medco Plan and/or (B) a Zocor(R) High Control Eligible Medco
Plan and/or (C) a Managed Eligible Medco Plan or a Partially-Managed Eligible
Medco Plan. Such Notification shall be accompanied by all information regarding
the terms and provisions of the Applicable Plan, including details of benefit
design, Formulary status and intervention techniques or other devices or factors
that have the purpose or effect of encouraging or discouraging utilization of
Pharmaceutical Products, for each group of Members under such Plan, as shall be
necessary to support Medco's view. Merck shall have the right to request from
Medco,
31
and Medco shall promptly provide to Merck, at Medco's expense, any additional
information that Merck shall deem necessary for purposes of the determination
required by this paragraph. Within 30 days after the receipt by Merck of all
such information, Merck shall determine in its sole discretion whether the
Applicable Plan shall constitute a Formulary Managed Medco Plan and/or Zocor(R)
High Control Eligible Medco Plan and/or Managed Eligible Medco Plan or
Partially-Managed Eligible Medco Plan and shall notify Medco in writing of its
determination. Merck's determination in accordance with the foregoing shall be
binding on the parties.
(c) Within 30 days of (1) any material change in benefit design under a
Zocor(R)High Control Eligible Medco Plan or Zocor(R) General Control Eligible
Medco Plan, (2) any change under any Zocor(R)High Control Eligible Medco Plan or
Zocor(R) General Control Eligible Medco Plan to the Formulary status of (or the
co-payment payable by Members for a prescription of) Zocor(R) or any Competitive
Product, including the addition of any Competitive Product to any Formulary
under such Plan or (3) any material change to the intervention techniques or
other devices or factors used by or under any Zocor(R)High Control Eligible
Medco Plan or Zocor(R) General Control Eligible Medco Plan with respect to
Zocor(R) and all Competitive Products that have the purpose or effect of
encouraging or discouraging utilization of Pharmaceutical Products, Medco shall
provide to Merck with respect to the applicable Plan (the "Applicable Zocor(R)
Plan"), a Notification setting forth (i) the name of the Applicable
Zocor(R)Plan; (ii) the identity of each group of Members (and the number of
Members in each group) in the Applicable Zocor(R) Plan; (iii) the name of the
sponsor of the Applicable Zocor(R) Plan; (iv) a description in reasonable detail
regarding the changes to the Applicable Zocor(R) Plan; and (v) whether, in
Medco's view, the Applicable Zocor(R) Plan continues to constitute (or now
constitutes) a Zocor(R)High Control Eligible Medco Plan. Merck shall have the
right to request from Medco, and Medco shall promptly provide to Merck, at
Medco's expense, any additional information that Merck shall deem necessary for
purposes of the determination required by this paragraph. Within 30 days after
the receipt by Merck of all such information, Merck shall determine in its sole
discretion whether the Applicable Zocor(R) Plan continues to constitute (or now
constitutes) a Zocor(R)High Control Eligible Medco Plan and shall notify Medco
in writing of its determination. Merck's determination in accordance with the
foregoing shall be binding on the parties.
(d) Within 30 days of any Medco Party's entering into any agreement or
arrangement providing for any material change in benefit design for a group of
Members under a Medco Plan, or the addition of any group of Members under a
Medco Plan, Medco shall provide to Merck with respect to the applicable Medco
Plan (the "Amended Plan"), a Notification setting forth (i) the name of the
Amended Plan; (ii) the identity of each group of Members (and the number of
Members in each group) in the Amended Plan affected by the material change in
benefit design or the identity of any
32
new group of Members (and the number of Members in such group), as applicable;
(iii) the name of the sponsor of the Amended Plan; and (iv) whether, in Medco's
view, the Amended Plan will be deemed to be a Formulary Managed Medco Plan
and/or Managed Eligible Medco Plan or Partially-Managed Eligible Medco Plan with
respect to the group or groups of Members affected by the change in benefit
design or the additional group of Members, as applicable. Such Notification
shall be accompanied by all information regarding the terms and provisions of
the Amended Plan, including details of benefit design, Formulary status and
intervention techniques or other devices or factors that have the purpose or
effect of encouraging or discouraging utilization of Pharmaceutical Products,
for each group of Members affected by the material change in benefit design
under such Plan for any new group of Members, as applicable, as shall be
necessary to support Medco's view. Merck shall have the right to request from
Medco, and Medco shall promptly provide to Merck, at Medco's expense, any
additional information that Merck shall deem necessary for purposes of the
determination required by this paragraph. Within 30 days after the receipt by
Merck of all such information, Merck shall determine in its sole discretion
whether the Amended Plan shall constitute a Formulary Managed Medco Plan and/or
Managed Eligible Medco Plan or Partially-Managed Eligible Medco Plan with
respect to the relevant group or groups of Members and shall notify Medco in
writing of its determination. Merck's determination in accordance with the
foregoing shall be binding on the parties.
(e) In the event that a Medco Party expects to make an offer to any
Plan or Plan sponsor with respect to (a) a proposed agreement or arrangement for
the provision of PBM Services with respect to any Plan, (b) a proposed material
change in benefit design for a group of Members under a Medco Plan, (c) a
proposed addition of any group of Members under a Medco Plan, (d) any material
change in benefit design under a Zocor(R)High Control Eligible Medco Plan or
Zocor(R) General Control Eligible Medco Plan, (e) any change under any
Zocor(R)High Control Eligible Medco Plan or Zocor(R) General Control Eligible
Medco Plan to the Formulary status of (or the co-payment payable by Members for
a prescription of) Zocor(R) or any Competitive Product, including the addition
of any Competitive Product to any Formulary under such Plan or (f) any material
change to the intervention techniques used by or under any Zocor(R)High Control
Eligible Medco Plan or Zocor(R) General Control Eligible Medco Plan with respect
to Zocor(R) and all Competitive Products, Medco may request in writing that
Merck provide Medco with a preliminary view as to whether, in Merck's judgment,
such Plan would constitute, or would constitute as to the relevant group or
groups of Members, as applicable, a Formulary Managed Medco Plan or Zocor(R)High
Control Eligible Medco Plan for the purposes of this Agreement. In connection
with any such request, Medco shall provide to Merck, to the extent available to
Medco, all information that Medco would be required to provide to Merck in
connection with a Notification. Within 30 days of its receipt of such
information from Medco, Merck shall provide to Medco Merck's preliminary view as
to whether, in Merck's judgment, based on the information provided by Medco,
such Plan would constitute, or would constitute as to the relevant group or
33
groups of Members, as applicable, a Formulary Managed Medco Plan or Zocor(R)High
Control Eligible Medco for the purposes of this Agreement. The parties agree and
acknowledge that any such view provided by Merck to Medco will by its nature be
preliminary and shall not be binding on Merck or Medco.
(f) Medco agrees that all information provided by it to Merck pursuant
to this Section 10.6 shall be accurate and complete.
(g) Each Medco Plan in respect of which a Notification is delivered
shall be deemed, with respect to the period beginning upon the commencement of
the Calendar Quarter in which an event occurring for which a Notification is
delivered until such time as Merck makes the determination required by the
applicable provisions of this Section 10.6 to have the status as (1) a Formulary
Managed Medco Plan or otherwise, (2) a Zocor(R) High Control Eligible Medco Plan
or Zocor(R) General Control Eligible Plan, and/or (3) a Managed Eligible Medco
Plan or a Partially-Managed Eligible Medco Plan, as the case may be, as
ultimately determined by Merck in accordance with Section 10.6.
(h) In the event of any material change in benefit design for a group
of Members under an Existing Medco Plan or the addition of any group of Members
under an Existing Medco Plan, with respect to those groups of Members that Medco
Plan will be treated as a New Medco Plan for purposes of this Agreement.
Notwithstanding the foregoing, (1) each March 31 Medco Plan shall be deemed to
be an Existing Medco Plan (notwithstanding the addition of a new group of
Members thereto) for so long as such Medco Plan is subject to the terms and
benefit design applicable to such Medco Plan as in effect as of March 31, 2002
as set forth on Schedule 11.3 and (2) each January 1 Medco Plan shall be deemed
to be a Existing Medco Plan (notwithstanding the addition of a new group of
Members thereto) for so long as such Medco Plan is subject to the terms, and
benefit design applicable to such Medco Plan in effect as of March 31, 2002 as
set forth on Schedule 11.3.
10.7. Notification of Loss of Plan, Plan Sponsor or Group of Members.
--------------------------------------------------------------
Upon Medco's becoming aware of a potential loss of a Medco Plan, any Plan
sponsor or any group of Members under any Medco Plan and upon the occurrence of
any such loss, Medco shall promptly provide Merck with Notification thereof.
10.8. Merck Products; Competitive Products; Therapeutic Categories.
------------------------------------------------------------
(a) The parties agree that, for purposes of this Agreement, (x) the
Pharmaceutical Products identified on Schedule 10.8 as Merck Products shall
initially be the "Merck Products" for purposes hereof, and (y) each such Merck
Product shall be included in the Therapeutic Category set forth with respect
thereto on Schedule 10.8 along with the Pharmaceutical Products identified on
such Schedule as "Competitive Products" with respect to such Therapeutic
Category.
34
(b) Merck may, at any time (x) designate as a Merck Product for
purposes of this Agreement, any Pharmaceutical Product (1) discovered,
developed, manufactured, marketed or sold by Merck or any of its existing or
future Affiliates, (2) in respect of which Merck or any of its Affiliates is
entitled to receive royalties or similar payments or (3) subject to any joint
venture, co-marketing or co-promotion arrangement involving Merck or any of its
Affiliates, or (y) (subject to the last sentence of this Section 10.8(b))
withdraw the designation of a Pharmaceutical Product as a Merck Product for
purposes of this Agreement, in each case by written notice to Medco. Any written
notice designating a Pharmaceutical Product as a Merck Product shall set forth
the Individual Formulary Access Percentage for such newly designated Merck
Product. Such percentage shall be deemed to be included thereafter in the
definition of "Individual Formulary Access Percentage." In connection with any
withdrawal of a Pharmaceutical Product as a Merck Product, the Individual
Formulary Access Percentage for such Merck Product shall be deleted from the
definition of "Individual Formulary Access Percentage." Any designation or
withdrawal of a Pharmaceutical Product as a Merck Product pursuant hereto shall
be effective beginning in the Calendar Quarter after delivery of the notice from
Merck to Medco with respect thereto, except that if a Merck Product loses its
patent or market exclusivity such that it ceases to be a Pharmaceutical Product
or is otherwise withdrawn from the U.S. market, no rebates will be payable with
respect to such Merck Product effective on the day after such Merck Product
ceases to be a Pharmaceutical Product. Merck shall not withdraw Zocor(R) as a
Merck Product under this Agreement unless and until the MAS Premium Percentage
of all Merck Products under all Eligible Medco Plans in the aggregate shall be
less than the 2001 MAS Premium Percentage of all Merck Products for any two
consecutive Calendar Quarters, in which case Merck may withdraw Zocor(R) as a
Merck Product for any Calendar Quarters thereafter.
(c) Merck may, at any time, designate new Therapeutic Categories and
Select Therapeutic Categories and designate new Merck Products and Competitive
Products to be included in Therapeutic Categories and Select Therapeutic
Categories, and may, on not less than 180 days' prior notice, remove one or more
of the existing Therapeutic Categories and/or Select Therapeutic Categories or
remove one or more Merck Products or Competitive Products from any Therapeutic
Category or Select Therapeutic Category, in each case by written notice to
Medco; provided that any Pharmaceutical Product that is withdrawn as a Merck
Product in accordance with Section 10.8(b) shall be deemed removed from the
Therapeutic Categories and Select Therapeutic Categories in which it is included
immediately (without 180 days' prior notice) upon the withdrawal thereof as a
Merck Product. Any designation or removal of a Therapeutic Category and/or
Select Therapeutic Category pursuant hereto, or the designation or removal of
Merck Products or Competitive Products to or from a Therapeutic Category
pursuant hereto, shall be effective beginning in the Calendar Quarter after
delivery of the notice from Merck to Medco with respect thereto, subject to the
advance notice obligations set forth in the prior sentence, if applicable.
35
(d) Promptly after any new drug application of Merck to the FDA for any
new product is approved by the FDA, Merck shall commence discussions with Medco
with respect to Merck's proposed pricing and rebates for such product.
11. Representations and Warranties. Medco represents and warrants to
------------------------------
Merck as follows:
11.1. Authorization and Binding Effect. Medco has full power and
--------------------------------
authority, organizational and otherwise, to execute and deliver this Agreement
and to perform its obligations hereunder. The execution and delivery of this
Agreement by Medco, and the performance by Medco of its obligations hereunder,
have been duly and validly authorized by all necessary organizational and other
action. This Agreement, including the Exhibits, Annexes and Schedules hereto,
constitutes the valid and binding obligation of Medco, enforceable against Medco
in accordance with the terms and conditions hereof and thereof.
11.2. No Conflict. The execution and delivery by Medco of this
-----------
Agreement does not and will not, and the performance by Medco of its obligations
hereunder does not and will not, (i) violate or conflict with the constitutional
documents of Medco, (ii) conflict with or violate any law, regulation, ethical
or professional code, order, judgment or decree applicable to Medco or any of
its Affiliates or by which any of their respective property is bound or
affected, (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, impair
Medco's or any of its Affiliates' rights under or alter the rights or
obligations of any other party to, give to others any rights of termination,
cancellation, vesting, modification, alteration or acceleration of any
obligation under, result in the creation of a lien, claim or encumbrance on any
of the properties or assets of Medco or any of its Affiliates pursuant to,
require the consent of any other party to, or result in any obligation on the
part of Medco or any of its Subsidiaries to repurchase (with respect to a
debenture, bond or note), pursuant to any Plan, agreement, contract, permit,
license or franchise to which Medco or any of its Subsidiaries is a party or by
which Medco, any of its Affiliates or any of their respective property is bound
or affected.
11.3. Existing Eligible Plans. Within ninety (90) days after the date
-----------------------
hereof, Medco shall provide to Merck Schedule 11.3 which shall set forth as to
each Existing Medco Plan and each New Medco Plan then in effect: (1) the name
thereof; (2) the identity of each group of Members (and the number of Members in
each group) as of March 31, 2002 and as of a date no earlier than 15 days prior
to the date of delivery of Schedule 11.3; (3) the name of the Plan sponsor; (4)
copies of all Formularies under such Medco Plans as of January 1, 2002 (in the
case of a January 1 Medco Plan) or March 31, 2002 (in the case of a March 31
Medco Plan) and, in each case, as of the date hereof and as of a date no earlier
than 15 days prior to the date of delivery of Schedule 11.3; (5) all
co-payments, deductibles and other payments required to be paid by Members under
such Medco Plans to fill a prescription for each Merck Product and each
Competitive Product;
36
(6) a true and accurate summary of the terms and benefit design features thereof
as of January 1, 2002 (with respect to each January 1 Plan) and March 31, 2002
(with respect to each March 31 Medco Plan) and as of a date no earlier than 15
days prior to the date of delivery of Schedule 11.3 and (7) with respect to each
January 1 Medco Plan, Quarterly Data for the Calendar Quarter ended December 31,
2001.
11.4. Continuing Representations. All representations and warranties
--------------------------
made by Medco herein or in any Annex or Schedule hereto shall be deemed to be
continuing representations during the term of this Agreement and to be repeated
as of the date of each delivery of information pursuant to Section 7.1.
12. Miscellaneous.
-------------
12.1. Governing Law; Forum. This Agreement shall be construed in
--------------------
accordance with, and all Disputes hereunder shall be governed by, the procedural
laws (except to the extent inconsistent with Article 9 of this Agreement) and
the substantive laws of the State of New York as to all matters regardless of
the laws that might otherwise govern under principles of conflicts of laws
applicable thereto. Under no circumstances may either party seek or be awarded
punitive damages. Any state court sitting in New York County, New York and/or
the United States District Court for the Southern District of New York shall
have exclusive jurisdiction and venue, and each party hereto hereby submits to
such jurisdiction and venue and irrevocably waives, to the fullest extent
permitted by applicable law, any objection it may now or hereafter have to such
jurisdiction or the laying of such venue over any Disputes between the parties
that are permitted to be brought in a court, or the enforcement of any decision
of the arbitrator, pursuant to Article 9 above. Each of the parties hereby
irrevocably waives any right to a jury trial with respect to a Dispute.
12.2. Descriptive Headings; Entire Agreement. The headings contained in
--------------------------------------
this Agreement or in any Annex, Exhibit or Schedule hereto are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Any capitalized term used in any Annex, Exhibit or Schedule but
not otherwise defined therein, shall have the meaning assigned to such term in
this Agreement. When a reference is made in this Agreement to a Section,
Article, Annex, Exhibit or Schedule, such reference shall be to a Section or
Article of, or an Annex, Exhibit or Schedule to, this Agreement unless otherwise
indicated. This Agreement and the Annexes, Exhibits and Schedules referenced or
attached hereto and thereto and the agreements to be entered into by the parties
in connection with the IPO will constitute the entire agreement between the
parties with respect to the subject matter hereof and thereof and shall
supersede all prior written and oral and all contemporaneous oral agreements and
understandings with respect to the subject matter hereof and thereof.
37
12.3. Notices. Notices, offers, requests, or other communications
-------
required or permitted to be given by either party pursuant to the terms of this
Agreement shall be given in writing to the respective party at the following
addresses:
if to Merck: Merck & Co., Inc.
Xxx Xxxxx Xxxxx
Xxxxxxxxxx Xxxxxxx, XX 00000-0000
Attention: General Counsel
Telecopy: (000) 000-0000
if to Medco: MedcoHealth Solutions, Inc.
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxx Xxxxx, XX 00000
Attention: General Counsel
Telecopy: (000) 000-0000
or at such other address as the party to whom notice is given may have
previously furnished to the other in writing as provided herein. Any notice
involving non-performance, termination, or renewal shall be sent by hand
delivery, recognized overnight courier or, within the United States, may also be
sent via certified mail, return receipt requested. All other notices may also be
sent by fax, confirmed by first class mail. All notices shall be deemed to have
been given and received on the earlier of actual delivery or three days from the
date of postmark.
12.4. Assignability; Medco Acquisition Transactions; Third-Party
----------------------------------------------------------
Beneficiaries. Medco may not, directly or indirectly, in whole or in part,
-------------
whether by operation of law or otherwise, assign or transfer this Agreement,
without Merck's prior written consent, and any attempted assignment, transfer or
delegation by Medco without such prior written consent shall be voidable at the
sole option of Merck. Medco shall not consummate or permit the consummation of
any Medco Acquisition Transaction by or with any Acquiror unless, at the
election of Merck, the Ultimate Parent Entity (as defined under the
Xxxx-Xxxxx-Xxxxxx Act of 1976, as amended) or Ultimate Parent Entities of such
Acquiror shall enter into an agreement reasonably satisfactory to Merck
containing terms and provisions applicable to such third party and all Plans of
such third-party and its Affiliates that are substantially similar to terms and
provisions hereof applicable to the Medco Parties and the Medco Plans; provided,
however, that under such agreement, Plans of such third party and its Affiliates
in effect immediately prior to the consummation of such transaction may be
excluded from the definition of "Medco Plan" (or any comparable definition)
under such agreement, but only with respect to groups of Members covered by such
Plans immediately prior to the consummation of such transaction (provided that
Medco shall use its best efforts to convert such groups to a Formulary providing
Members thereof with full and complete access to Merck Products in accordance
with the access standards set forth in Article 2 hereof); provided further,
38
that with respect to any new group of Members added to any such Plan after the
consummation of such transaction, such Plan shall be included under the
definition of "Medco Plan" (or any comparable definition) under such agreement.
Nothing in this Agreement shall restrict any assignment or transfer of this
Agreement by Merck, whether by operation of law or otherwise. Without limiting
the foregoing, this Agreement will be binding upon and inure to the benefit of
the parties and their permitted successors and assigns. This Agreement,
including the Annexes, Exhibits and Schedules and the other documents referred
to herein, shall be binding upon and inure solely to the benefit of each party
hereto and their legal representatives and permitted successors and assigns, and
nothing in this Agreement, express or implied, is intended to confer upon any
other Person any rights or remedies of any nature whatsoever under or by reason
of this Agreement.
12.5. Severability. If any term or other provision of this Agreement is
------------
determined by a court, administrative agency or arbitrator to be invalid,
illegal or incapable of being enforced by any rule of law or public policy or
for any other reason, all other conditions and provisions of this Agreement will
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the fullest extent
possible. If the parties are unable to reach an agreement with respect to any
such modification, arbitrators shall have the authority to do so in accordance
with Article 9.
12.6. Failure or Indulgence not Waiver; Remedies Cumulative. No failure
-----------------------------------------------------
or delay on the part of either party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
12.7. Amendment; Waiver. Except as expressly provided herein, no change
-----------------
or amendment may be made to this Agreement except by an instrument in writing
signed on behalf of each of the parties hereto. No term or provision hereof may
be waived by a party except by an instrument in writing signed on behalf of the
party waiving compliance thereto.
12.8. Reexecution. Medco shall reexecute and deliver this Agreement
-----------
immediately prior to the consummation of the IPO.
39
12.9. No Circumvention of this Agreement. Without the prior written
----------------------------------
consent of Merck, Medco shall not take any action intended to or which is
reasonably likely to circumvent, avoid or nullify any of Medco's obligations
under this Agreement or to materially and adversely affect the rights of, and
the benefits intended to be realized by, Merck pursuant to this Agreement, or
the financial capability of Medco to perform its obligations hereunder,
including, without limitation, any corporate reorganization, restructuring or
other corporate transaction, including transactions with Subsidiaries or
Affiliates of Medco.
12.10. Acknowledgement. The parties acknowledge that the type, nature
---------------
and scope of the services provided by the Medco Parties to Medco Plans will be
subject to change and revision from time to time during the term of this
Agreement in a manner which the parties hereto are unable to anticipate as the
date of this Agreement. The parties agree that, to the extent that, during the
term of this Agreement, changes or revisions occur to the type, nature and scope
of the services provided by the Medco Parties to Medco Plans or in the manner in
which Medco Parties deliver Pharmaceutical Products or effect the delivery of
Pharmaceutical Products, to Members under Medco Plans and in the judgment of
Merck such changes could adversely affect the benefits contemplated by Merck to
be realized by it pursuant to this Agreement, the parties shall amend the terms
of this Agreement as necessary to ensure that, notwithstanding such changes or
revisions, Merck obtains the benefits contemplated to be realized by it pursuant
to this Agreement.
40
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed in duplicate originals by its duly authorized representatives.
MERCK & CO., INC. MERCK-MEDCO MANAGED CARE, LLC
By: By:
------------------------------ ---------------------------------
Name: Name:
Title: Title:
41
ANNEX A
-------
1. For each Calendar Quarter after the Calendar Quarter ending June 30, 2002,
Merck shall pay to Medco the Total Rebate Amount, if any, in accordance
with, and subject to, the provisions of Sections 2, 3, 4 and 5 of this
Annex A. All capitalized terms used but not defined in this Annex A shall
have the meanings set forth with respect thereto in the Managed Care
Agreement to which this Annex A is attached (the "Agreement") or in Annex B
to the Agreement.
2. Notwithstanding anything herein to the contrary, to the extent that, in the
judgment of Merck, any rebate otherwise payable to Medco pursuant to the
Agreement in respect of a Calendar Quarter would, alone or together with
any other price reduction, including any prompt payment discount, at any
time available to any Medco Party, establish a new Best Price for Merck
during any period with respect to any Merck Product, the amount of such
rebate shall be reduced to the extent necessary in the judgment of Merck so
that such rebate shall not establish a new Best Price with respect to such
Merck Product and Medco shall have no right to receive any other form of
payment or compensation from Merck with respect to the rebate so reduced.
3. Within 90 days following the close of each Calendar Quarter, Medco shall
deliver to Merck, in a mutually acceptable electronic format, the Quarterly
Data required by Section 7.2 of the Agreement. Within 90 days after Merck's
receipt of complete and accurate Quarterly Data, Merck shall make any
rebate payment with respect to such Calendar Quarter due pursuant to the
Agreement (as adjusted in accordance with Section 2 of this Annex A).
Notwithstanding the foregoing, Merck shall not be required to pay any
rebates with respect to utilization that occurred during a Calendar Quarter
for which complete and accurate Quarterly Data is received by Merck more
than 180 days following the close of that Calendar Quarter.
4. If any error is discovered in the data submitted or rebates paid under this
Agreement, including the submission of information regarding utilization
not subject to rebates under this Agreement, the rebates due hereunder
shall be appropriately adjusted to reflect the error and Merck or Medco
shall make payment to the other as required to reflect such adjustment,
within 10 business days from the date such adjustment is determined. If
Merck has overpaid Medco, Merck may, at its sole discretion, deduct the
amount of the overpayment from future rebate payments due pursuant to this
Agreement.
5. At the time of each rebate payment, Merck shall provide Medco with
reconciliation statements. Medco acknowledges that it is aware of the
provisions with respect to the reporting of discounts pursuant to 42 C.F.R.
ss. 1001.952(h)(1) and agrees to use the reconciliation statements to
accurately report to private and governmental third-party payors, Plan
sponsors, patients, and other individuals or entities the net effective
- 1 -
discount price for each Merck Product for which a rebate has been paid
under this Agreement, to the extent required under applicable federal or
state law.
6. Medco represents and warrants to Merck that all Individual Formulary Access
Rebate Amounts received by Medco from Merck pursuant to the Agreement will
be passed on to Medco Plans, less any applicable management, administrative
or other fees, all of which shall comply with Section 6 of the Agreement.
2
ANNEX B
-------
"Aggregate Medco Cost" of any Merck Product for any Calendar Quarter
--------------------
means the product of (x) the Catalog Price of such Merck Product for such
Calendar Quarter and (y) the sum of the Units of such Merck Product from all
Eligible Prescriptions of that Merck Product dispensed in that Calendar Quarter.
"Applicable Percentage" shall have the meaning set forth on Schedule 4
---------------------
to this Annex B.
"Exclusion Period" means, for any New Merck Product under any Medco
----------------
Plan, a period ending as of the expiration of the fourth Calendar Quarter from
and including the first Calendar Quarter in which any of the following events
occurs: (i) the P&T Committee of such Medco Plan reviews such New Merck Product
for Formulary acceptance; (ii) such New Merck Product is listed on the Formulary
of such Medco Plan; or (iii) a period of four calendar months shall have elapsed
from the first date of sale of such New Merck Product by Merck.
"Formulary Access Rebate Amount" for any Calendar Quarter shall be: (x)
------------------------------
if, during such Calendar Quarter, (i) Medco shall have failed to comply with any
of its obligations under Article 7 or Sections 10.1, 10.3, 10.5, 10.6, 12.4,
12.9 or 12.10 of the Agreement, or (ii) the MAS Premium Percentage is less than
the Minimum MAS Premium Percentage, zero; and (y) in any other case, the sum of
the Individual Formulary Access Rebate Amounts for all Merck Products.
"Formulary Access Rebate Deduction" shall equal, for any Calendar
---------------------------------
Quarter in which the MAS Premium Percentage is lower than the 2001 MAS Premium
Percentage, (x) the applicable percentage set forth on Schedule 1 multiplied by
(y) the Formulary Access Rebate Amount for such Calendar Quarter.
"Individual Formulary Access Percentage" for each Merck Product shall
--------------------------------------
be as set forth on Schedule 2 to this Annex B.
"Individual Formulary Access Rebate Amount" for any Calendar Quarter,
-----------------------------------------
for any Merck Product (other than for Zocor(R)) shall be equal to (x) the
Individual Formulary Access Percentage for such Merck Product, multiplied by (y)
the Aggregate Medco Cost of all Eligible Prescriptions of such Merck Product
during such Calendar Quarter under Existing Medco Plans that constitute Eligible
Medco Plans and New Medco Plans that constitute Formulary Managed Medco Plans,
and for Zocor(R) shall be equal to the Zocor(R) Individual Formulary Access
Rebate Amount for such Calendar Quarter. Notwithstanding the foregoing, (a) no
Individual Formulary Access Rebate Amount shall be paid in respect of any
Eligible Prescription under any Existing Medco Plan or Formulary Managed Medco
Plan in respect of which Medco Plan (1) Medco breached any of its obligations
under Article 2 of the Agreement with respect to any Merck Product in such
Calendar Quarter or (2) Merck elects, in accordance with Section 2.6(d) of the
Agreement, that no Individual Formulary Access Rebate Amount be paid and (b) no
Individual Formulary Access Rebate Amount
1
shall be paid in respect of Eligible Prescriptions of any Merck Product under a
Medco Plan in respect of which Merck Product and Medco Plan Merck Elects, in
accordance with Section 2.6(e) of the Agreement, that no Individual Formulary
Access Amount be paid in respect of such Merck Product under such Medco Plan.
"MAS Premium Percentage" for any Calendar Quarter means the sum of all
----------------------
the Weighted Medco Market Share Premium Percentages for such Calendar Quarter;
provided that for purposes of the calculation of MAS Premium Percentage, any New
Merck Product shall not be treated as a Merck Product during the Exclusion
Period.
"MAS Rebate" shall equal, for any Calendar Quarter in which the MAS
----------
Premium Percentage is equal to or exceeds the Minimum MAS Premium Percentage,
the applicable percentage set forth on Schedule 3 to this Annex B multiplied by
the sum of the Aggregate Medco Cost of all Eligible Prescriptions of all Merck
Products dispensed during such Calendar Quarter under all Eligible Medco Plans.
Notwithstanding the foregoing, if during any Calendar Quarter, Medco shall have
failed to comply with any of its obligations under Article 7 or Sections 10.1,
10.3, 10.5, 10.6, 12.4, 12.9 or 12.10 of the Agreement, the MAS Rebate for that
Calendar Quarter shall be zero.
"Medco Share Weight" for any Merck Product for any Calendar Quarter
------------------
means the result (expressed as a percentage) obtained by dividing (x) the
Aggregate Medco Cost of that Merck Product in that Calendar Quarter by (y) the
sum of the Aggregate Medco Cost of all Merck Products in that Calendar Quarter.
"Minimum MAS Premium Percentage" means, for any Calendar Quarter, the
------------------------------
2001 MAS Premium Percentage less seven (7) percentage points. The Minimum MAS
Premium Percentage shall be subject to adjustment as follows: if (x) any Medco
Party enters into a contract to provide PBM Services to any New Medco Plan or
group of New Medco Plans having the same Plan sponsor that cover(s) more than
one million Members in the aggregate and that constitute(s) Eligible Medco
Plan(s) for purposes of the Agreement, and (y) assuming that such New Medco Plan
or New Medco Plans had been treated for purposes of computation of the MAS
Premium Percentage for the Calendar Quarter preceding the Calendar Quarter in
which such New Medco Plan or group of New Medco Plans became such Eligible Medco
Plan(s), the MAS Premium Percentage for such New Medco Plan or group of New
Medco Plans, calculated solely with respect to that New Medco Plan or group of
New Medco Plans (the "New Plan MAS Premium Percentage"), would have exceeded the
Minimum MAS Premium Percentage as in effect immediately prior to the adjustment
required by this sentence, then, effective as of the first day of the Calendar
Quarter in which such New Medco Plan or group of New Medco Plans become such,
the Minimum MAS Premium Percentage (and each of the Tiers set forth under "MAS
Premium Percentage" in Schedule 3 to this Annex B) shall be increased, by an
amount equal to the result obtained by multiplying (1) the excess of (A) the New
Plan MAS
2
Premium Percentage for such New Medco Plan or group of New Medco Plans over (B)
the Minimum MAS Premium Percentage as in effect immediately prior to the
adjustment required by this sentence, by (2) a fraction, the numerator of which
shall be the Aggregate Medco Cost for all Eligible Prescriptions of Merck
Products under such New Medco Plan or group of New Medco Plans for the
immediately preceding Calendar Quarter and the denominator of which shall be the
Aggregate Medco Cost for all Eligible Prescriptions of Merck Products under all
Eligible Medco Plans for the immediately preceding Calendar Quarter (for
purposes of this clause (2) (x) treating such New Medco Plan or group of New
Medco Plans as if they had been Eligible Medco Plans during such Calendar
Quarter, and (y) treating prescriptions dispensed under such New Medco Plan or
group of New Medco Plans (other than those described in clauses (1) through (3)
of the definition of Eligible Prescriptions) as Eligible Prescriptions,
including for purposes of calculating the number thereof, with each such
prescription dispensed by a mail service pharmacy under such New Medco Plan or
group of New Medco Plans deemed to have been dispensed by a Medco Mail Service
Pharmacy and each such prescription dispensed by a retail pharmacy under such
New Medco Plan or group of New Medco Plans deemed to have been dispensed by a
pharmacy participating in the Medco Retail Network of Pharmacies). In addition,
Merck recognizes that Zocor(R) is expected to lose its status as a
Pharmaceutical Product during 2006 and agrees to discuss with Medco possible
changes to this definition commencing approximately 18 months prior to the date
Zocor(R) is expected to lose its status as a Pharmaceutical Product. The
foregoing sentence shall not constitute a commitment on the part of Merck to
agree to any change to the Minimum MAS Premium Percentage.
"Total Rebate Amount" for any Calendar Quarter shall be equal to (1)
-------------------
the Formulary Access Rebate Amount for such Calendar Quarter, if any, plus (2)
the MAS Rebate for such Calendar Quarter, if any, less (3) the Formulary Access
Rebate Deduction for such Calendar Quarter, if any, and, solely in the case of
the fourth Calendar Quarter of any True-up Period, plus (4) the Zocor(R) Annual
Market Share Rebate Amount, if any. Notwithstanding any other provision of the
Agreement or Annex A or any of the Schedules thereto, if (x) any Medco Party
enters into a contract to provide PBM Services to any New Medco Plan or group of
New Medco Plans having the same Plan sponsor that cover(s) more than one million
Members in the aggregate and that constitute(s) Eligible Medco Plan(s) for
purposes of the Agreement, and (y) assuming that such New Medco Plan or New
Medco Plans had been treated for purposes of computation of the MAS Premium
Percentage for the Calendar Quarter preceding the Calendar Quarter in which such
New Medco Plan or group of New Medco Plans became such Eligible Medco Plan(s),
the New Plan MAS Premium Percentage for such New Medco Plan or group of New
Medco Plans would have been less than the Minimum MAS Premium Percentage as in
effect as of the last day of such preceding Calendar Quarter, then, until the
expiration of the fourth Calendar Quarter from and including the Calendar
Quarter in which such New Medco Plan or group of New Medco Plans became such,
prescriptions under such New Medco Plan or group of New Medco Plans (other than
those described in clauses (1) through (3) of
3
the definition of Eligible Prescriptions) shall be treated as Eligible
Prescriptions (including for purposes of calculating the number thereof, with
each such prescription dispensed by a mail service pharmacy under such New Medco
Plan or group of New Medco Plans deemed to have been dispensed by a Medco Mail
Service Pharmacy and each such prescription dispensed by a retail pharmacy under
such New Medco Plan or group of New Medco Plans deemed to have been dispensed by
a pharmacy participating in the Medco Retail Network of Pharmacies) solely for
purposes of calculating the Formulary Access Rebate Amount and not for purposes
of calculating any MAS Rebate and such New Medco Plan or group of New Medco
Plans shall not be taken into account for purposes of any calculation of MAS
Premium Percentage.
"True-up Period" means each of the four Calendar Quarter periods ending
--------------
on June 30 of 2003 and of each year thereafter during the term of the Agreement;
provided, however, that if the Agreement is terminated in accordance with
Article 8 as of a date other than June 30, for purposes hereof the final True-up
Period shall begin on the day after the conclusion of the preceding True-up
Period and end as of the date of such termination.
"2001 MAS Premium Percentage" means, (x) for the Calendar Quarter
---------------------------
ending June 30, 2002, the sum of all of the Weighted Medco Market Share Premium
Percentages for the Calendar Quarter ended December 31, 2001, and (y) for each
subsequent Calendar Quarter, the sum of all of the Weighted Medco Market Share
Premium Percentages for the Calendar Quarter ended December 31, 2001, excluding
from such calculation Prinivil(R)/Prinzide(R) and the Therapeutic Category that
includes Prinivil(R)/Prinzide(R). In computing the 2001 MAS Premium Percentage,
the Weighted Medco Market Share Premium Percentage for Zocor(R) to be utilized
in determining the sum of all Weighted Medco Market Share Premium Percentages
shall be calculated assuming the Medco Market Share for Zocor(R) for the
Calendar Quarter ended December 31, 2001 is three percentage points less than
the actual Medco Market Share for Zocor(R) for the Calendar Quarter ended
December 31, 2001. Medco shall deliver to Merck within 30 days from the date of
execution of the Agreement the Quarterly Data with respect to the Calendar
Quarter ended December 31, 2001. Within 30 days after receipt of complete and
accurate Quarterly Data for the Calendar Quarter ended December 31, 2001, Merck
shall calculate the 2001 MAS Premium Percentages referred to in clauses (x) and
(y) of the first sentence of this definition. The 2001 MAS Premium Percentage
shall be subject to adjustment as follows: if (x) any Medco Party enters into a
contract to provide PBM Services to any New Medco Plan or group of New Medco
Plans that cover(s) more than one million Members in the aggregate and that
constitute(s) Eligible Medco Plan(s) for purposes of the Agreement, and (y)
assuming that such New Medco Plan or New Medco Plans had been treated for
purposes of computation of the MAS Premium Percentage for the Calendar Quarter
preceding the Calendar Quarter in which such New Medco Plan or group of New
Medco Plans became such Eligible Medco Plan(s), the New Plan MAS Premium
Percentage for such New Medco Plan or group of New Medco Plans would have
exceeded the 2001 MAS Premium Percentage as in effect immediately prior to the
adjustment required by this sentence, then, effective as of the first day of the
Calendar Quarter in which such New Medco Plan or group of New Medco Plans become
such, the 2001 MAS Premium Percentage (and each of the Tiers set forth under
"MAS Premium Percentage" in Schedule 1 to this Annex B) shall be increased, by
an amount equal to the result obtained by multiplying (1) the excess of (A) the
New Plan MAS Premium Percentage for such New Medco Plan or group of New Medco
Plans over (B) the 2001 MAS Premium Percentage as in effect immediately prior to
the
4
adjustment required by this sentence, by (2) a fraction, the numerator of which
shall be the Aggregate Medco Cost for all Eligible Prescriptions of Merck
Products under such New Medco Plan or group of New Medco Plans for the
immediately preceding Calendar Quarter and the denominator of which shall be the
Aggregate Medco Cost for all Eligible Prescriptions of Merck Products under all
Eligible Medco Plans for the immediately preceding Calendar Quarter (for
purposes of this clause (2) (x) treating such New Medco Plan or group of New
Medco Plans as if they had been Eligible Medco Plans during such Calendar
Quarter and (y) treating prescriptions dispensed under such New Medco Plan or
group of New Medco Plans (other than those described in clauses (1) through (3)
of the definition of Eligible Prescriptions) as Eligible Prescriptions,
including for purposes of calculating the number thereof, with each such
prescription dispensed by a mail service pharmacy under such New Medco Plan or
group of New Medco Plans deemed to have been dispensed by a Medco Mail Service
Pharmacy and each such prescription dispensed by a retail pharmacy under such
New Medco Plan or group of New Medco Plans deemed to have been dispensed by a
pharmacy participating in the Medco Retail Network of Pharmacies). In addition,
Merck recognizes that Zocor(R) is expected to lose its status as a
Pharmaceutical Product during 2006 and agrees to discuss with Medco possible
changes to this definition commencing approximately 18 months prior to the date
Zocor(R) is expected to lose its status as a Pharmaceutical Product. The
foregoing sentence shall not constitute a commitment on the part of Merck to
agree to any change to 2001 MAS Premium Percentage.
"Weighted Medco Market Share Premium Percentage" for any Merck Product
----------------------------------------------
for any Calendar Quarter means the result (which may be zero, negative or
positive ) obtained by multiplying (x) the Medco Share Weight for that Merck
Product for that Calendar Quarter by (y) the result (expressed as a percentage)
obtained by (1) dividing (A) the Medco Market Share for that Merck Product for
that Calendar Quarter by (B) the National Market Share for that Merck Product
for that Calendar Quarter and (2) subtracting 100% from such quotient; provided
that if the result obtained pursuant to the calculation in this clause (y)
exceeds 100% with respect to any Merck Product, the result shall be deemed equal
to 100% for purposes of this clause (y).
"Zocor(R) Annual Market Share Rebate Amount" shall mean, for any
------------------------------------------
True-up Period in which the result obtained by subtracting (x) 100% from (y) the
quotient of the Medco Market Share for Zocor(R) for the four Calendar Quarters
in such True-up Period, divided by the National Market Share for Zocor(R) for
such four Calendar Quarters is equal to or greater than the Zocor(R) 2001
Premium Percentage, an amount
5
equal to the excess, if any, of (a) (i) the Zocor(R) Maximum Individual
Formulary Access Percentage set forth on Schedule 2 to this Annex B, multiplied
by (ii) the Aggregate Medco Cost of all Eligible Prescriptions of Zocor(R)
during all Calendar Quarters of the True-up Period under Zocor(R) High Control
Eligible Medco Plans and Zocor(R) General Control Eligible Medco Plans (other
than Zocor(R) High Control Eligible Medco Plans and Zocor(R) General Control
Eligible Plans in respect of which (1) Medco breached any of its obligations
under Article 2 of this Agreement during the applicable Calendar Quarter or (2)
Merck elects, with respect to the applicable Calendar Quarter, in accordance
with Section 2.6(d) of the Agreement, that no Individual Formulary Access Rebate
Amount be paid with respect to any Eligible Prescription or, in accordance with
Section 2.6(e) of the Agreement, that no Individual Formulary Access Rebate
Amount be paid with respect to Eligible Prescriptions of Zocor(R)) over (b) the
sum of all Zocor(R) Individual Formulary Access Rebate Amounts for all Calendar
Quarters of the True-up Period (other than Zocor(R) High Control Eligible Medco
Plans and Zocor(R) General Control Eligible Plans in respect of which (1) Medco
breached any of its obligations under Article 2 of this Agreement during the
applicable Calendar Quarter or (2) Merck elects, with respect to the applicable
Calendar Quarter, in accordance with Section 2.6(d) of the Agreement, that no
Individual Formulary Access Rebate Amount be paid with respect to any Eligible
Prescription or, in accordance with Section 2.6(e) of the Agreement, that no
Individual Formulary Access Rebate Amount be paid with respect to Eligible
Prescriptions of Zocor(R)); provided that the Zocor(R) Annual Market Share
Rebate Amount for any True-up Period shall be reduced by an amount that is
proportional to the aggregate amount of the reductions in the Formulary Access
Rebate Amounts for the four Calendar Quarters of such True-up Period pursuant to
Schedule 1 to this Annex B hereto. Notwithstanding the foregoing, if during any
Calendar Quarter in such True-up Period, Medco shall have failed to comply with
any of its obligations under Article 7 or Sections 10.1, 10.3, 10.5, 10.6, 12.4,
12.9 or 12.10 of the Agreement, the Zocor(R) Annual Market Share Rebate Amount
for such True-up Period shall be zero.
"Zocor(R) Alternative Individual Formulary Access Rebate Amount" for
--------------------------------------------------------------
any Calendar Quarter shall be equal to the sum of (1) (x) the Zocor(R) High
Control Individual Formulary Access Percentage set forth on Schedule 2 to this
Annex B, multiplied by (y) the Aggregate Medco Cost of all Eligible
Prescriptions of Zocor(R) during such Calendar Quarter under all Zocor(R)High
Control Eligible Medco Plans and (2) (a) the Zocor(R) General Control Individual
Formulary Access Percentage set forth on Schedule 2 to this Annex B, multiplied
by (b) the Aggregate Medco Cost of all Eligible Prescriptions of Zocor(R) during
such Calendar Quarter under all Zocor(R) General Control Eligible Plans.
"Zocor(R) Individual Formulary Access Rebate Amount" for any Calendar
--------------------------------------------------
Quarter shall be equal to the lesser of the Zocor(R) Alternative Individual
Formulary Access Rebate Amount and the Zocor(R) Maximum Individual Formulary
Access Rebate Amount.
6
"Zocor(R) Maximum Individual Formulary Access Rebate Amount" shall mean
----------------------------------------------------------
(x) the Zocor(R) Maximum Individual Formulary Access Percentage set forth on
Schedule 2 to this Annex B, multiplied by (y) the Aggregate Medco Cost of all
Eligible Prescriptions of Zocor(R) dispensed during such Calendar Quarter under
all Zocor(R)High Control Eligible Medco Plans and Zocor(R) General Control
Eligible Plans.
"Zocor(R) 2001 Premium Percentage" means the result (expressed as a
--------------------------------
percentage) obtained by (1) dividing (A) the Medco Market Share for Zocor(R) for
the Calendar Quarter ended December 31, 2001 less the Zocor(R) Permitted
Percentage Point Reduction set forth on Schedule 4 to this Annex B, by (B) the
National Market Share for Zocor(R) for that Calendar Quarter and (2) subtracting
100% from such quotient. Medco shall deliver to Merck within 30 days from the
date of execution of the Agreement the Quarterly Data with respect to Zocor(R)
for the Calendar Quarter ended December 31, 2001. Within 30 days after receipt
of complete and accurate Quarterly Data with respect to Zocor(R) for the
Calendar Quarter ended December 31, 2001, Merck shall calculate the Zocor(R)
2001 Premium Percentage.
7
