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EXHIBIT 10.24
PHARMACEUTICAL
SERVICES AGREEMENT
This Agreement ("Agreement") is entered into this 16th day of July, 1996, by and
between Anthem Prescription Management, Inc. (APM), ▇▇▇▇ ▇▇▇▇▇▇▇▇'▇ ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇ and D&K Wholesale Drug, Inc., (D&K) ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇.
WHEREAS, APM is an administrator of managed care pharmacy programs for persons
enrolled in health care plans;
WHEREAS, as a part of its managed care pharmacy programs, APM operates Priority
Rx ("Priority Rx"), a licensed mail service pharmacy, to dispense pharmaceutical
products to Members under certain terms and conditions;
WHEREAS, D&K is a wholesale distributor of pharmaceutical products;
NOW THEREFORE, the parties agree as follows:
1. DEFINITIONS
1.1 "Member" means all individuals enrolled in a APM administered managed
care pharmacy program as part of fully-insured, partially-insured,
self-insured or prepaid health benefit plans.
1.2 "Products" means the federally approved pharmaceutical drug products,
equipment, supplies and sundry items ordered and dispensed by APM to
Members.
1.3 "Acquisition Cost" means the lower of the contractual price negotiated
by APM with a drug manufacturer or the amount D&K pays for the Products
ordered by APM. In determining the amount D&K pays for Products, the
value of any and all rebates, free goods and cash discounts to which
D&K is entitled with respect to the Products sold by D&K to APM
hereunder shall be deducted from the price actually remitted to the
manufacturer by D&K.
2. RESPONSIBILITIES OF D&K
2.1 Sale of Products. D&K agrees to supply APM's requirements for Products
during the term of this Agreement. Such Products shall be dispensed
only to Members by Priority Rx for the personal use of such Members.
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2.2 Contract Maintenance. D&K agrees to charge APM the contract price for
Products negotiated between APM and a pharmaceutical manufacturer. D&K
further agrees to notify APM in the event that lower pricing for
generically equivalent items to such Products becomes available.
2.3. Fill Rate Guarantee. Commencing on August 1, 1996, and continuing
through the term of this Agreement, D&K shall accurately fill at least
97% of all Products ordered by APM on a weekly basis. The fill rate
shall be determined by dividing the total number of Products (defined
by NDC number) ordered by and delivered to APM by the number of
Products ordered. In the event D&K is unable to procure a particular
Product from a manufacturer, the fill-rate on subsequent orders shall
exclude the unavailable Product from the calculation until such time as
the Product becomes available. Failure to meet the above fill rate
shall constitute a breach of a material term of this Agreement.
2.4 Customer Service. D&K shall provide the following customer service
resources to APM:
2.4.1 On-Site Representative: D&K agrees to provide a person to serve
as a primary contact person for resolution of all questions and
inquiries from APM. Such person will be available at APM's facility in
Cincinnati, Ohio at such times as requested by APM.
2.4.2 In-house Representative: D&K also agrees to designate a specific
employee to provide and/or coordinate all customer service activities
for APM within D&K's Lexington Distribution Center.
2.4.3 Emergency Phone Number: D&K shall be available to provide
emergency services to APM 24 hours per day, seven days a week. D&K
shall designate a means for communicating emergency needs via
telephone.
2.5 Shipping Terms. D&K agrees to ship Products to APM under the
following terms:
a. All shipments shall be F.O.B. APM's facility in Cincinnati, Ohio
b. All Products ordered will be delivered without substitution,
unless expressly approved by APM prior to shipment.
c. D&K shall notify APM on-line within one hour of all Products
ordered by APM that D&K is unable to provide.
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d. All in-stock items ordered by APM before 8:00 p.m. will be
delivered by 6:30 a.m. the following morning, except that
Products obtained from D&K distribution centers located outside
of Lexington, Kentucky may be delivered up to 5:00 p.m. of the
day after the Products are ordered or up to 10:00 a.m. the
following day.
e. D&K will deliver order to APM Monday through Friday, except legal
holidays. Saturday delivery shall be available to APM upon
request at no additional charge to APM.
f. Emergency shipments shall be made within a reasonable time upon
APM's request.
g. D&K shall insure delivery of all Products which are schedule II
controlled substances to APM within 24 hours of ordering, except
for Saturdays and Sundays.
h. D&K shall, in the event of a stock outage, arrange for
drop-shipment of Products from manufacturers. In the event a
Product is not available from the manufacturer, D&K shall notify
APM of such outage and shall use its best efforts to find
alternative sources of such Product.
2.6 Systems Support. D&K agrees to provide (pursuant to D&K's licensing
agreements which are referenced in Exhibit C) and install at no charge
the following to APM, and or as dictated by business needs:
a. Three Resource(R) electronic ordering systems.
b. Three copies of the Partners(R) vendor managed inventory (VMI)
system.
c. Three copies of the Focus(R) group management information system.
d. On-site training, upon request by APM, for the Partners(R),
Resource(R) and Focus(R) systems.
e. The hardware described in Exhibit A. Upon termination, such
computer hardware shall be returned to D&K, or if APM leases
such hardware, to the lessor.
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2.7 Reporting. D&K shall provide the following standard reports, examples
of which are included in Exhibit B, to APM upon request. In addition,
D&K agrees to make reasonable efforts to provide specialized,
non-standard reports to APM upon request.
a. Narcotic and Controlled Substances Report, on at least a
monthly basis.
b. Therapeutic Category Report.
c. Purchase History Report, on at least a monthly basis.
d. Item Price Change Report, on at least a monthly basis.
e. Inventory Report, on at least a semi-annual basis.
2.8 Credit and Returned Goods Policies. D&K will issue, upon notification
by APM, a full credit for damaged or mispicked Products delivered to
APM and for Products returned to D&K by APM. Such credit memo will
accompany the next shipment to APM. D&K will issue, pursuant to D&K's
returned goods policies and upon notification by APM, a credit for
Products returned for reasons other than damage or mispicks. All
credits for returned goods will be issued within three days of receipt
of the goods by D&K. D&K will maintain the capability to accept notice
of returned Products through electronic transmission. D&K represents
that the returned good and credit policies are in conformance with all
applicable laws, including the Prescription Drug Marketing Act of 1987.
2.9 Physical Inventory Assistance. D&K agrees to provide, in lieu of the
Resource(R) system described above, access to D&K's mainframe computer
system to allow for physical inventory reporting by APM. In addition,
D&K shall provide Telxon machines (or reasonable equivalent) and
inventory preparation training to APM upon request. D&K will provide an
electronic file containing physical inventory data requested by APM, or
it's designee, within twelve hours of D&K's receipt of data from APM.
2.10 Shelf Labels, Price Stickers and MSDS Sheets. D&K will provide, upon
request, laminated shelf labels with bar coding, material data safety
sheets and encoded price stickers.
2.11 Notice of Impairment. D&K shall give APM immediate notice in the event
of a major occurrence experienced by D&K that could impair its ability
to perform the duties of this Agreement. This shall include but not be
limited to any shutdown of any D&K distribution center.
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2.12 Insurance. D&K agrees to obtain and maintain throughout the term of
this Agreement, general liability insurance in amounts of not less than
ten Million Dollars ($10,000,000) per aggregate.
2.12.1 D&K agrees to maintain in full force and effect general
liability insurance and other insurance in types and amounts
as are customary and usual within its industry or required by
law.
2.13 Competitive Circumstances. D&K warrants and represents that the pricing
provided herein would be available to other owners and operators of
mail service pharmacies on substantially the same terms and conditions,
provided that such mail service pharmacies performed substantially the
same services as APM and were similarly situated and whose volumes of
purchases were comparable to those of APM from D&K.
2.14 Warehousing Facility. D&K agrees to make available, as reasonably
needed and requested by APM, warehouse space to APM for the storage of
Products. Such space shall meet all reasonable specifications defined
by APM.
2.15 Compliance with Laws. D&K agrees to comply with all applicable state
and federal laws, including but not limited to Title VII of the Civil
Rights Act of 1964 (as amended), the Equal Pay Act of 1963 (sections 6,
7 and 12 of the Fair Labor Standards Act), the Age Discrimination and
Employment Act of 1967, all antitrust laws, Executive Orders 11246 and
11375, the Social Security Act Amendment of December 5, 1980 and the
Federal Acquisition Regulations (FAR) and Department of Defense
Acquisition Regulations (DFAR).
2.16 Implementation Plan. D&K agrees to comply with the terms and conditions
set forth in an implementation plan which will be mutually agreed upon.
Implementation will be completed within four weeks from the date of
execution of this agreement.
2.17 Audit & Inspection. D&K agrees to comply with all reasonable requests
made by APM to provide copies of records and reports related to this
Agreement for auditing purposes. Such records, may include without
limitation, financial records and reports relating to the purchase and
delivery of Products. Such profiles and records may be inspected
on-site during regular business hours, or, upon request, copies thereof
shall be sent to APM at no charge. The parties agree to keep all such
records confidential.
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Upon reasonable notice, APM may inspect D&K's premises, records and
operations to ensure that they are adequate to perform D&K's
obligations under this Agreement, are consistent with the intent and
purpose of this Agreement, and in conformance with applicable law.
a. D&K agrees that upon reasonable notice, APM, during regular
business hours, shall have free access for examination and
reproduction to all books, records of accounts, and other
documents, including without limitation computer files,
employee work schedules, invoices and prescription files, and
any other documents that may be required in the course of any
audit conducted pursuant to this Agreement, as requested by
APM.
b. All information obtained during any such audit shall be
maintained in confidence.
c. Audits may be performed at any time during the term of this
Agreement and up to one year following termination hereof.
3. RESPONSIBILITIES OF APM
3.1 Purchase Orders. APM shall provide, in a format acceptable to D&K,
purchase orders for Products. APM agrees to give D&K 30 days advance
notice of any expected increases in the volume of Products APM
reasonably expects to purchase from D&K.
3.2 Provision of Other Services. Other than the activities to be performed
by D&K pursuant to this Agreement, APM shall provide all required
public relations, legislative, marketing and operational support
necessary to ensure implementation and delivery of Products.
3.3 Notice of Impairment. APM shall give D&K immediate notice in the event
of a major occurrence experienced by APM that could impair APM's
ability to perform the duties of this Agreement.
3.4 Insurance. APM agrees to maintain in full force and effect general
liability insurance and other insurance in types and amounts as are
customary and usual within its industry.
3.5 Own Use. APM warrants and represents that Products shall be dispensed
only to Members by Priority Rx for the personal use of such Members.
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3.6 Credit Information. APM agrees to provide to D&K, upon request,
including reasonable financial information sufficient to allow for
D&K's evaluation of unsecured credit extended to APM.
4. COMPENSATION
4.1 Acquisition Costs and Fees. APM agrees to pay D&K the Acquisition Cost
for all Products ordered by APM and delivered by D&K pursuant to this
Agreement. In addition, APM agrees to pay D&K a fee of 0.1% of the
aggregate Acquisition Cost for services provided by D&K during the term
of this Agreement except as adjusted by section 4.3 below.
4.2 Timing of Payments. Payments to under Paragraph 4.1 shall be made by
APM weekly. Failure by APM to make payments due under Paragraph 4.1
shall be a material breach subject to Paragraph 5.2.1 of this
Agreement.
4.3 EFT Payment Discount. In the event that APM elects to make payments
pursuant to section 4.1 above, by means of an electronic funds transfer
method acceptable to D&K within one business day after receipt of
Products, D&K shall provide a discount to APM of 0.12% of the fees
specified in section 4.1.
4.4 Dock to Dock Shipment Discount. In the event that APM elects to utilize
"dock to dock" shipping arrangements, and provided that EFT payments
are made for such Products within 2 business days of receipt thereof,
D&K shall provide to APM a discount of 0.2% of the fees specified in
section 4.1.
4.5 Partners Shared Savings. APM agrees to negotiate, in good faith, an
agreement whereby D&K will receive compensation for any demonstrated
savings resulting to APM through the use of the Partners software
system.
5. TERM AND TERMINATION
5.1 Term. Except as provided in Section 5.2, the initial term of this
Agreement shall be from July 15, 1996 through June 30, 1998.
Thereafter, this Agreement shall be renewed for a successive 12 month
period upon mutual agreement of the parties. D&K agrees that APM may
extend this Agreement, at APM's option, for a period of 90 days
following the expiration of its term.
5.2 Termination. Either party may terminate this Agreement by giving the
other party at least 45 days written notice of its intention to
terminate the Agreement. In such event, APM shall purchase all Products
which are stocked solely for APM pursuant to Section 2.14 above.
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5.2.1 This Agreement may be terminated by either party for a
material breach of the agreement upon thirty (30) days advance
written notice specifying the facts and circumstances of the
breach if such is not cured within such thirty (30) day
period.
5.2.2 If any legislative enactment, court decision or regulatory
action by any governmental agency, or other circumstances
beyond the control of either party prevents such party from
performing its obligations hereunder, the failure to perform
shall not be considered a breach. Rather, the parties agree,
to negotiate the terms of this Agreement so that each party's
obligations may be performed in compliance with applicable
law. If, after the parties negotiate in good faith, no
agreement is reached, either party may terminate this
agreement upon giving thirty (30) days written notice to the
other party.
5.2.3 Notwithstanding any other provision of this Agreement, either
party to this Agreement shall have the right to cancel this
Agreement immediately and without prior notice, if the other
party is adjudicated bankrupt or makes an assignment for the
benefit of creditors without the other party's prior written
consent, or if a receiver is appointed for the other party, or
in the event the other party commits an illegal act that
affects the operation or management of services rendered under
this Agreement.
6. INDEMNIFICATION
6.1 APM will indemnify and hold harmless D&K, its successors and assigns,
officers and directors, employees, agents, affiliates and subsidiaries,
from any and all claims, demands, damages, judgments, liabilities and
expenses, including but not limited to reasonable attorney fees, that
arise directly or indirectly from any acts, omissions or negligence of
APM, or any failure of APM to perform its obligations under this
Agreement.
6.2 D&K will indemnify and hold harmless APM, its successors and assigns,
officers and directors, employees, agents, affiliates and subsidiaries,
from any and all claims, demands, damages, judgments, liabilities and
expenses, including but not limited to reasonable attorney fees, that
arise directly or indirectly from any acts, omissions or negligence of
D&K, or any failure of D&K to perform its obligations under this
Agreement.
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7. CONFIDENTIALITY
7.1 D&K and APM each agree to keep confidential and not to disclose to any
other party any or all information obtained or produced during the
performance of the Agreement, except that APM may provide
account-specific data to its accounts. Upon the request of the
disclosing party, the other party shall promptly return all such
information. Neither party shall release pricing information associated
with the Agreement to outside parties without the prior written consent
of the other party.
8. NON-EXCLUSIVITY
8.1 This is a non-exclusive agreement and either party shall have the right
to enter into similar agreements with other parties.
9. GENERAL PROVISIONS
9.1 Notice. Any notice required or permitted to be given in this Agreement
by either party to the other may be given by personal delivery in
writing, by facsimile transmission, or by registered or certified
mail, return receipt requested, to the following:
If to APM: If to D&K:
▇▇▇▇▇ ▇▇▇▇▇ D&K Wholesale Drug, Inc.
Pharmaceutical Purchaser ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇: ▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ With a copy to:
D&K Wholesale Drug, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Notices delivered personally or by facsimile transmission will be
deemed communicated as of the time of actual receipt; mailed notices
will be deemed communicated as of three days after mailing.
9.2 Severability. If any of the provisions of this Agreement, or the
application of any provision to any person or any circumstance, shall
be determined to be invalid or unenforceable, then such determination
shall not affect any other provision of the
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Agreement or the application of said provision to any other person or
circumstance.
9.3 ServiceMarks and Tradenames. Each party agrees not to use any service
▇▇▇▇ or tradename which the other party owns or to which it has rights
in any advertisement without the other's prior written consent.
9.4 Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
9.5 Assignment. This Agreement may not be assigned by either party without
the express written consent of the other party, except that either
party may assign this Agreement to another party that wholly owns it,
which it wholly owns or which is under common ownership with such
party.
9.6 Waiver. The failure of either party to enforce or insist upon
compliance with any provision of this Agreement in any instance shall
not be construed as or constitute a waiver of that party's right to
enforce or insist upon compliance with such provision, rule, or
regulation, either currently or in the future.
9.7 Headings. The subject headings of the provisions of this Agreement are
included for purposes of convenience only and shall not affect the
construction or interpretation of any of its provisions.
9.8 Incorporation of RFP. All terms, covenants and representations
contained in D&K's response to APM's request for proposals and
information provided to APM during site visits and presentation prior
to the award of this Agreement (collectively the "RFP Information") are
expressly included in this Agreement. In the event that the terms of
this Agreement and the RFP Information conflict, the terms of this
Agreement shall control. Other than the RFP Information, this Agreement
and its Exhibits supersede any and all agreements, either oral or
written, between the parties to this agreement with respect to the
subject matter contained in the Agreement, and contains all of the
covenants and agreements with respect to the purchase and sale of
Products within the scope of this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
authorized representatives.
Anthem Prescription Management, Inc. D&K Wholesale Drug, Inc.
BY: /S/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ BY: /S/ ▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, III
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TITLE: CEO, PRESIDENT TITLE: CHAIRMAN & CEO
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DATE: 7/16/98 DATE: 7/16/98
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