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EXHIBIT 10.18
PRIME VENDOR AGREEMENT*
BETWEEN
TENNESSEE PHARMACY PURCHASING
ALLIANCE
AND
D & K HEALTHCARE RESOURCES, INC.
*Confidential portion omitted and filed separately with the Commission.
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* indicates deleted material
PRIME VENDOR
AGREEMENT
This Agreement ("Agreement") is made as of the 25th day of August,
1999, is by and between Tennessee Pharmacy Purchasing Alliance, ("TPPA") on its
own behalf and on behalf of its member pharmacies ("Members"), and D & K
Healthcare Resources, Inc., ("D & K").
1. Prime Vendor. Subject to the terms and conditions hereof, TPPA
and each of the Members hereby designate D & K as its Prime
Vendor for pharmaceutical and OTC products for the Members.
TPPA shall update changes to the list of Members at least
quarterly. As used herein, Prime Vendor means the preferred
supplier to fulfill at least ninety percent (90%) of the
branded pharmaceutical (i.e. non-generic) requirements of the
Members. D & K shall endeavor to supply all branded
pharmaceutical products ordered by Members hereunder.
2. Stocking Requests. D & K agrees to stock all routinely ordered
source contract items for the Members. D & K will respond to
all stocking requests on a timely basis. Upon receipt of a
written request from Members that includes NDC number, monthly
usage, and an order to cover the first shipment, D & K will
immediately initiate the stocking and ordering process.
Products are usually in stock and available for shipment
within one (1) to three (3) weeks of the original request
date.
3. Contract Administration. To accelerate the contract loading
and manufacturer confirmation process, Members shall provide D
& K with the following contract information: NDC number,
product description, negotiated price, effective dates, and
vendor contract or reference number.
4. Chargeback Denials by Manufacturers. D & K will make
reasonable efforts to accurately maintain contract pricing
agreements in its system including confirming both pricing and
eligibility. If manufacturers deny chargeback claims to D & K,
Members shall upon receipt of invoice from D & K, pay to D & K
the amount of the denied chargeback. Prior to such invoicing,
D & K will make reasonable efforts to recover the denied
chargeback from the manufacturer.
5. Orders. Telxon and Resource orders may be placed weekdays
until 6:00 P.M. local time for next business day delivery.
Telephone and fax orders may be placed with the Customer
Service Department weekdays until 5:30 P.M. local time for
next business day delivery.
6. Deliveries. Orders will be delivered in a sealed, returnable
plastic tote. A signature may be required by the individual
accepting the shipment to verify the number of cartons
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received. D & K makes every effort to deliver all customer orders
before 12:00 P.M., but in the event of an unreasonable delay in such
delivery, D & K shall endeavor to provide notice.
7. Freight Terms. Freight will be F.O.B. destination (prepaid and absorbed
by D & K) on all regularly scheduled deliveries to Members. D & K
agrees to waive all daily minimum order requirements to qualify for
prepaid freight. For special requests such as airfreight, express
courier service, or bus shipments, D & K will ship prepaid and xxxx the
freight charges on a separate invoice.
8. Information Services and Systems. D & K maintains a decentralized
Information Services Department to ensure technical assistance is
readily available to its customers. Experienced personnel are staffed
locally at each Division to provide the day-to-day and developmental
support needed to keep both D & K and its customers on the leading edge
of technological change. A partial list of D & K's technology offerings
follows:
A. RESOURCE: D & K'S Resource order management software has many
advanced features designed to automate the order creation,
transmission, and confirmation process. The system provides
product availability information and reduces acquisition cost
by ensuring contract compliance. For example, prior to
transmission, the system will scan the order to identify items
for which there is either a lower cost, or a contract
alternative. The D & K Resource order management system is
feature rich and considered to be one of the easiest to use
among all ordering systems on the market today. Resource
operated on any IBM compatible 486 or better computer using
MS-DOS with 4M of RAM. Key system features include:
- Order by item number, NDC number or description
- Stock status
- AB ratings
- Generic equivalent search
- Order confirmation within 20 minutes
- Contract compliance and best price scanning
- Purchase history
- Report package
- Import from Telxon or pharmacy system
- Inventory capability
- Daily price updates
B. Customized Management Reports: D & K has a variety of
customized management reports available to its customers. Such
reports include, but are not limited to: DEA reports, history
reports, price changes, contract compliance, etc. D & K will
work with TPPA to develop customized reports as may reasonably
be requested by TPPA.
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C. Physical Inventory Assistance: D & K will make two physical
inventory options available to Members. Resource and mainframe
programs. Additional Telxons will be provided, as well as
inventory preparation training. System features include:
i. Whole or partial units may be entered
ii. Inventory printed in transmission or department
sequence
iii. Inventory report includes: item number, average
wholesale price (AWP), customer cost, customer retail
price gross margin dollars, and percent by
department.
iv. Multiple transmissions combined into single inventory
report
D. Business Reviews: D & K recommends semi-annual meetings as an
opportunity to formally review the performance of the
Agreement to ensure maximum economic benefit is being realized
by the trading partners, to explore mutually beneficial
programs, and to establish specific action items for the next
period.
9. Prime Vendor Services. D & K shall provide the following services to
Members.
A. Customer Service Department: D & K's customer service
department is professionally staffed from 8:00 A.M. to 6:00
P.M. local time excluding weekends and holidays.
B. Emergency Orders: D & K provides twenty-four (24) hour, seven
(7) day-a-week emergency delivery service in life-threatening
situations. Members will be provided with emergency telephone
and pager numbers.
C. Drop-Ship Service: D & K shall provide drop-ship service to
Members upon request. Manufacturers will typically call for
authorization to xxxx through D & K and approval will be
promptly given. Manufacturer drop-ship invoices will be
promptly processed by D & K within two business days of
receipt.
D. Price Stickers: D & K offers multiple encoded price sticker
formats for both Rx and OTC products. Information provided on
the sticker is AWP, net landed price, quantity purchased, date
purchased and the D & K item number.
E. Shelf Labels. D & K will provide scannable shelf labels upon
request.
F. Material Safety Data Sheets: D & K will provide Material
Safety Data Sheets (MSDS) upon request.
10. Pricing. The prices for products supplied hereunder are set forth in
the attached Schedule B. All prices quoted in this Agreement and all
other obligations of D & K described herein are based on the agreement
that TPPA has designated, and the Members will utilize, D & K as its
and their Primary Vendor.
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11. Definitions of Cost. For this Agreement, the following definitions of
costs will apply:
Individual Contracts: TPPA contract items purchased by D & K through
API will be priced at*.
Net-Priced Items: D & K offers a selected group of net-priced products,
including non-contract generic vendor items, special promotional and
drop-ship merchandise. Net priced generic items will not effect
contract generic pricing. A listing of net-priced items is available
separately and is included in the D & K catalog.
Other Items: For the purpose of this Agreement, items not covered under
buying group, individual contracts, or net-priced, cost is defined to
be the manufacturer's scheduled price, including promotions, special
contract pricing, volume discounts and free goods, but excluding cash
discounts. Off invoice allowances and free goods are subject to
manufacturers' promotional calendars and may be subject to minimum
order quantities.
12. Credits. Credit for returned goods will be processed within five days
of receipt of the merchandise. Credit for billing errors or mispicks is
processed immediately. A copy of the credit memo will be sent with the
Member's next order. Returns authorization requests may be transmitted
electronically via Telxon at the Member's convenience.
13. Return Goods Policy. D & K's Return Goods Policy is attached hereto as
Schedule C. D & K reserves the right to change such policy upon thirty
(30) days prior written notice to TPPA.
14. Medicare/Medicaid. TPPA and Members acknowledge that any discounts or
rebates to it hereunder on items reimbursable by Medicare or a state
healthcare program such as Medicaid, may be reportable under applicable
law by TPPA and Members to federal or state healthcare authorities
respectively.
15. No Warranty. D & K makes no representation or warranty of
merchantability, fitness for a particular purpose, or otherwise,
expressed or implied, with respect to any products; and TPPA and the
Members acknowledge and agree that any representations or warranties
that relate to any products are made only by the manufacturer of such
products. TPPA and the Members acknowledge and agree that its sole
recourse for the breach of any such manufacturer's representation and
warranty is against the manufacturer.
16. No Liability. Notwithstanding anything in this Agreement to the
contrary, D & K shall have no liability for any special incidental,
indirect or consequential damages, including, without limitation, loss
of opportunity, revenue or profit, in connection with or arising out of
this Agreement or D & K's performance hereunder, even if such damages
were foreseeable.
*Confidential portion omitted and filed separately with the Commission.
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17. Extension of Credit. D & K shall extend credit subject to Members
furnishing evidence of financial responsibility, posting of security,
and execution of a security agreement and other documents as D & K may
require from time to time. Notwithstanding the foregoing, if at
anytime, or from time to time, D & K believes that a Member's ability
to make payments hereunder is impaired or a Member's financial
condition has materially deteriorated, D & K may require additional
security and may withhold deliveries until such security is received
and may amend the payment terms hereunder. Members shall abide by D &
K's standard credit terms and conditions.
18. Term. The term of this Agreement will be for a period of
three (3) years, commencing as of the date first set forth above,
and, unless sooner terminated as provided below, shall renew
automatically thereafter for successive one (1) year periods, unless
written cancellation notice is provided by either party at least
thirty (30) days prior to the end of the initial term.* Either
party may terminate this Agreement if the other party is in breach of
any of its obligations hereunder and fails to cure such breach within
ninety (90) days (fifteen (15) days for failure to make payments when
due) after receipt of notice of such breach; and D & K may terminate
this Agreement at any time if TPPA or its assets (whether voluntarily
or involuntarily) become the subject of any bankruptcy or insolvency
proceeding or if TPPA makes an assignment for the benefit of its
creditors.
19. Delays. Notwithstanding any provision of this Agreement to the
contrary, each party's obligations under this Agreement (other then
Member's payment obligations) will be excused if and to the extent that
any delay or failure to perform such obligation is due to acts of
nature, governmental actions, strikes or labor disputes or other causes
or situations beyond the reasonable control of that party.
20. Confidentiality. Each party agrees to maintain in confidence the terms
and conditions herein, and disclose the contents of this Agreement only
to those within its organization who have a reasonable need to know of
such information, except as otherwise agreed by the other party or as
required by law.
21. Taxes. Members will pay, when due, any sales, use, excise, gross
receipts or other federal, state local taxes or other assessments
(other than any tax based solely on the net
*Confidential portion omitted and filed separately with the Commission.
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income of D & K) and related interest and penalties that D & K is at
any time obligated to pay or collect in connection with or arising out
of the transactions, contemplated by this Agreement. If D & K pays any
such amounts which a Member is obligated to pay under this section,
then such Member will promptly reimburse D & K in an amount equal to
the amount so paid by D & K.
22. Insurance. D & K will at all times during the term of this Agreement
maintain product liability insurance at levels not less than two
million dollars ($2,000,000.00), and will provide TPPA with a
certificate confirming such insurance coverage promptly following
request for same. Such policies will include TPPA as an additional
named insured.
23. Severability. The unenforceability or invalidity of any term or
provision herein, or of any portion thereof, will not affect the
validity of enforceability of any other term or provision, or portion
thereof, herein contained.
24. 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.
25. Governing Law. This Agreement shall be construed and enforced under the
law of the State of Missouri without regard to its conflict of laws
principles.
26. Notices. All notices under this Agreement shall be in writing and shall
be deemed duly given on the date received, if personally delivered,
sent by facsimile transmission, or by overnight courier, and addresses
to the parties at the following addresses:
If to TPPA to:
Tennessee Pharmacy Purchasing Alliance
000 Xxxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx, CEO
Fax: (000) 000-0000
Phone: (000) 000-0000
If to D & K to:
D & K Healthcare Resources, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xx. Xxxxx, XX 00000
Attention: Xxxxxx Xxxxxx, President
Fax: (000) 000-0000
Phone: (000) 000-0000
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28. Headings. The headings of this Agreement are used only as a matter
of convenience, and in no way define limit, construe or describe
the scope or intent of any section of this Agreement.
29. Representation. TPPA represents and warrants that it is authorized
to act on behalf of its members.
30. Incorporation of Request for Proposals (RFP). All terms, covenants
and representations contained in D & K's response to TPPA's
request for proposals (see Schedule A) and information provided to
TPPA 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.
31. Change of Control. In the event that a third party acquires all or
substantially all of the outstanding voting stock of D & K, then
TPPA shall have the right to terminate this Agreement upon thirty
(30) days advance written notice to D & K or such third party
acquirer as applicable, at any time following the effective date
following the closing of such acquisition.
In Witness Whereof, the parties have caused this Agreement to be executed
by authorized representatives.
D & K HEALTHCARE RESOURCES, INC. TENNESSEE PHARMACY
PURCHASING ALLIANCE
BY: X. Xxxx Xxxxxxxxx, III BY: Xxxxx Xxxxxxxx
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ITS: Chairman and CEO ITS: Board Chairman
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DATE: 8/25/99 DATE: 8/25/99
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SCHEDULE A
"TENNESSEE PHARMACIST PURCHASING ALLIANCE"
TENNESSEE PHARMACY COALITION
JUNE 11, 1999
***REQUEST FOR PROPOSAL***
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TENNESSEE PHARMACY COALITION
TENNESSEE PHARMACIST PURCHASING ALLIANCE
REQUEST FOR PROPOSAL
GENERAL INFORMATION
I. WHOLESALER INFORMATION
a) Provide the name and address of your corporation.
D&K HEALTHCARE RESOURCES, INC.
CORPORATE OFFICE: 0000 XXXXXXXX XXXXXX
XXXXX 000
XX. XXXXX, XXXXXXXX 00000
CAPE GIRARDEAU DIVISION: 0000 XXXX XXXXXX
XXXX XXXXXXXXX, XXXXXXXX 00000
LEXINGTON DIVISION: 000 XXXX XXXXXX XXXXXX
XXXXXXXXX, XXXXXXXX 00000
b) Provide the address and primary contact for all correspondence and
notices.
XXX XXXXXXX
DIVISION VP & GENERAL MANAGER - CAPE GIRARDEAU DIVISION
0000 XXXX XXXXXX
XXXX XXXXXXXXX, XXXXXXXX 00000
(000) 000-0000
c) List all key personnel, contacts and addresses. Please include name,
title, telephone number, fax number and e-mail address.
PLEASE REFER TO EXHIBIT 1 FOR A COMPLETE LIST OF KEY CONTACTS FOR BOTH
THE CAPE GIRARDEAU AND LEXINGTON DIVISIONS. PLEASE REFER TO EXHIBIT 2
FOR A LIST OF D&K'S MANAGEMENT TEAM.
D&K Healthcare Resources, Inc. Proposal
July 15, 1999 Page 1 of 3
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d) Provide an outline of your customer service program.
EACH D&K DISTRIBUTION CENTER IS STAFFED WITH AN EXPERIENCED CUSTOMER
SERVICE TEAM CONSISTING OF HIGHLY TRAINED REPRESENTATIVES WHO ARE WELL
PREPARED TO PROVIDE TPC/TPPA MEMBER PHARMACIES WITH THE SUPPORT THEY
NEED. OUR TOLL-FREE NUMBERS WILL ACCESS OUR CUSTOMER SERVICE
DEPARTMENTS DIRECTLY FOR ASSISTANCE WITH:
- PRODUCT INFORMATION AND AVAILABILITY
- DROP SHIP SERVICE
- EMERGENCY ORDERS
- MATERIAL SAFETY DATA SHEETS
- PRICE STICKER
- SHELF LABELS
CUSTOMER SERVICE DEPARTMENT - CAPE GIRARDEAU DIVISION
PHONE: (000) 000-0000
HOURS: MONDAY THROUGH THURSDAY: 8:00 AM - 6:00 PM (CT)
FRIDAY: 8:00 AM - 5:00 PM (CT)
CUSTOMER SERVICE DEPARTMENT - LEXINGTON DIVISION
PHONE: (000) 000-0000
HOURS: MONDAY THROUGH FRIDAY 8:00 AM - 5:30 PM (ET)
e) If you are chosen as our Prime Vendor we will need one contact person
for all divisions for resolving any problems that may arise.
CONTACT FOR CAPE GIRARDEAU DIVISION: XXX XXXXXXX
DIVISION VP & GENERAL MANAGER
CONTACT FOR LEXINGTON DIVISION: XXXX XXXXX
DIRECTOR OF SALES
D&K Healthcare Resources, Inc. Proposal
July 15, 1999 Page 2 of 3
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II. SERVICES AND PROGRAMS
a) MANAGING INVENTORY: Propose an effective program to manage store
inventories. Include in your proposal methods to control inventory
shrink, reduce outdates, improve store turns and to shorten days of
inventory and discuss what tools would be available. Please provide
data on current service levels.
D&K HAS PROPOSED OUR PARTNERS PROGRAM AS THE INVENTORY MANAGEMENT
SOLUTION FOR TPC/TPPA MEMBER PHARMACIES. THIS ADVANCED SOFTWARE PROGRAM
IS THE PROVEN SYSTEM TO CONTROL INVENTORIES, REDUCE OUTDATES, AND IMPROVE
INVENTORY TURNS IN THE FAST PACED COMMUNITY PHARMACY SETTING. IT IS THE
ONLY STATISTICALLY BASED, AUTOMATED INVENTORY REPLENISHMENT PROGRAM
CURRENTLY IN USE TODAY BY INDEPENDENT PHARMACIES. D&K HAS HAD THIS FULLY
FUNCTIONING PROGRAM IN PLACE AND OPERATING IN CUSTOMER PHARMACIES FOR THE
PAST TWO YEARS. PARTNERS IS THE ONLY PROGRAM IN USE IN THE MARKET TODAY
THAT IS FULLY AUTOMATED AND USES HISTORICAL DISPENSING/USAGE DATA TO
PRODUCE ORDERS BASED ON PROJECTED DEMAND. PARTNERS CONTROLS INVENTORY BY
UTILIZING TWENTY-FOUR (24) MONTHS OF PRODUCT MOVEMENT HISTORY FROM THE
STORE'S PHARMACY SYSTEM WHICH IS DOWNLOADED INTO THE D&K AS/400 COMPUTER.
TO GET STARTED, D&K WILL TAKE A PHYSICAL INVENTORY TO DETERMINE INVENTORY
BALANCES IN DISPENSING UNIT OF MEASURE. WITH THESE INVENTORY BALANCES AND
PRIOR 24 MONTHS DEMAND DOWNLOADED TO OUR AS/400, PLUS RECEIVING A DAILY
PRODUCT USAGE TRANSMISSION FROM THE CLIENT PHARMACY SYSTEM, PARTNERS WILL
ACCURATELY FORECAST DEMAND AND CREATE AN ORDER TO PROVIDE JUST-IN-TIME
INVENTORY. PARTNERS IS DESIGNED TO REDUCE INVENTORY BY 25% WHILE
INCREASING SERVICE LEVELS. PARTNERS WILL ALSO CUT LABOR COSTS BY
MINIMIZING THE TIME SPENT BY THE PHARMACY STAFF ORDERING, CHECKING AND
STOCKING PRODUCT. THE HIDDEN COSTS ASSOCIATED WITH RETURNING ORDERING
ERRORS AND CARRYING EXCESS INVENTORY IS ALSO ELIMINATED.
WITH BRANDED RX SERVICE LEVELS APPROACHING 100%, D&K TAKES PRIDE IN ITS
ABILITY TO CONSISTENTLY DELIVER INDUSTRY LEADING FILL-RATE PERFORMANCE.
D&K HAS INVESTED HEAVILY IN SOPHISTICATED INVENTORY CONTROL SYSTEMS TO
PERPETUALLY TRACK ITS INVENTORY, ANALYZE DEMAND HISTORY AND ACCURATELY
PROJECT FUTURE DEMAND TO ENHANCE FILL RATE PERFORMANCE. THE RESULT OF
THIS COMPREHENSIVE INVENTORY MANAGEMENT SYSTEM ALLOWS D&K THE ABILITY TO
CONSISTENTLY OFFER AN OVERALL FILL RATE THAT EXCEEDS 97.5%.
D&K Healthcare Resources, Inc. Proposal
July 15, 1999 Page 3 of 3
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b) VENDOR CONTRACTS: Vendor contracts are submitted by the manufacturer
to a wholesaler contracts department. Explain your procedure for loading
vendor contract prices. Include in your explanation how will the contract
be verified, what time frame is involved, appointed contact personnel,
and responsible parties for contract maintenance. What guarantee of
performance do you have on TPC/TPPA's generic contracts?
D&K TAKES GREAT PRIDE IN ITS ABILITY TO EFFECTIVELY PROVIDE CONTRACT
ADMINISTRATION SUPPORT TO TPC/TPPA MEMBER PHARMACIES. UPON RECEIPT OF
VENDOR CONFIRMATIONS, D&K IMMEDIATELY INITIATES THE CONTRACT LOADING OR
UPDATING PROCESS. TO EXPEDITE THE PROCESS, D&K ACCEPTS VENDOR
CONFIRMATIONS BY FAX OR EDI, IN ADDITION TO MAIL. THE CONTRACT ROLL-OVER
PROCESS TAKES TWO WEEKS AND CAN BE REDUCED TO ONE WEEK WHEN RECEIVED VIA
EDI. UPDATES RECEIVED BY 12:00 NOON ARE ROUTINELY LOADED THE SAME DAY AS
RECEIVED AND ARE REFLECTED ON THAT EVENING'S INVOICES. D&K ALSO VERIFIES
PHARMACY ELIGIBILITY TO MINIMIZE DENIED CHARGEBACKS. THE CONTRACT
ADMINISTRATORS ARE XXXXX XXX, CAPE GIRARDEAU DIVISION AND XXXXX
XXXXXXXXXX, LEXINGTON DIVISION. TO MONITOR TPC/TPPA'S GENERIC CONTRACT
PERFORMANCE, D&K PROVIDES TPC/TPPA COPIES OF API PURCHASE ORDERS AND
RECEIVERS. IN ADDITION, WE PROVIDE A DETAILED REPORT DOCUMENTING API'S
FILL-RATE PERFORMANCE.
c) DSD POLICY AND PROCEDURE: What is your procedure for stores
deliveries? Include in your explanation, order cut-off time, delivery
days, delivery times, Holiday scheduling, "emergency" orders, your policy
on shelf life of products, storage requirements during transportation,
"special order" items, etc. Attach a copy of your current Policy and
Procedures. Delivery must be by 12:00 noon to all members.
D&K RECOGNIZES AND UNDERSTANDS THE CRITICAL ROLL THAT CONSISTENT, TIMELY
DELIVERING OF MERCHANDISE PLAYS IN A PHARMACY'S DAY-TO-DAY OPERATION. TO
INSURE QUALITY DELIVERY SERVICE, WE CONSTANTLY MONITOR THE PERFORMANCE OF
THE D&K DELIVERY FLEET AND OUR CONTRACT CARRIERS. ALL DELIVERIES ARE MADE
BEFORE 12:00 NOON, THE NEXT BUSINESS DAY, MONDAY THROUGH FRIDAY. ORDER
CUT-OFF TIME IS 6:30 PM. REFRIGERATED ITEMS ARE SENT IN COOLERS PACKED
WITH FROZEN COLD PACKS TO INSURE ITEM TEMPERATURE INTEGRITY. HOLIDAY
SHIPPING SCHEDULES ARE PUBLISHED AND DISTRIBUTED TO THE PHARMACIES WELL
IN ADVANCE OF THE HOLIDAY TO ENSURE MINIMAL DISRUPTION TO THE ORDERING
ROUTINE. PLEASE REFER TO EXHIBIT 1 FOR A LIST OF ALL APPROPRIATE
PERSONNEL, ALONG WITH PAGER AND CELL PHONE NUMBERS. THESE NUMBERS MAY BE
USED FOR LIFE-THREATENING EMERGENCY ORDERS ON WEEKENDS, HOLIDAYS OR AFTER
HOURS. WEEKDAY EMERGENCY ORDERS WILL BE HANDLED WITH TOP PRIORITY AND
SHIPPED EXPRESS OR AIRFREIGHT. D&K ALSO HAS IN PLACE AN EMERGENCY
BACK-ORDER RELAY SYSTEM BETWEEN OUR FOUR DIVISIONS TO ACT AS A BACK UP
MEASURE IN CASE ANY DIVISION IS OUT OF A PARTICULAR PRODUCT. D&K WILL
HONOR ANY REQUEST FROM OUR CUSTOMERS TO STOCK AN ITEM. WE PREFER THAT
CUSTOMERS GIVE US AN APPROXIMATE MONTHLY USAGE ON PRODUCT ADDITION
REQUESTS TO ENSURE PROPER STOCKING LEVELS ARE ESTABLISHED. IT IS D&K'S
POLICY TO SHIP PRODUCT WITH A MINIMUM OF SIX MONTHS SHELF LIFE REMAINING.
THE EXCEPTIONS TO THIS POLICY WOULD BE BIO-TECHNOLOGY AND OTHER PRODUCTS
THAT ARE ONLY AVAILABLE WITH SHORTER SHELF-LIFE.
FOR YOUR CONVENIENCE A COPY OF OUR POLICY AND PROCEDURE MANUAL HAS BEEN
SENT UNDER SEPARATE COVER.
D&K Healthcare Resources, Inc. Proposal
July 15, 1999 Page 4 of 8
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d) PRICING: If your bid is based on one price for pharmaceuticals, will
all pharmaceuticals including OTC's be sold at the same pricing? Must be
one price for all members. No tiered pricing will be accepted. List all
payment options for our members (i.e. credit terms). Does Rx trade name
include pass through pricing?
PHARMACEUTICALS AND OTC/HBA MERCHANDISE WILL BE INVOICED AT THE SAME
PRICE, AND IN ADDITION, D&K AGREES TO INVOICE ALL MEMBER PHARMACIES AT
THE SAME PRICE BASED UPON THE PAYMENT TERMS SELECTED. ALL MANUFACTURERS'
PROMOTIONAL DISCOUNTS AND ALLOWANCES WILL BE PASSED THROUGH TO TPC/TPPA
MEMBER PHARMACIES DURING THE MANUFACTURERS' PROMOTIONAL PERIODS. PLEASE
REFER TO EXHIBIT 3 FOR D&K'S PROPOSED PRICING FOR TPC/TPPA.
e) RETURNS: What is your procedure for returning products? Attach a copy
of your company's returns policy. Also, include answers for the
following: (a) Some manufacturers require all returns to be processed
through the wholesaler-even partials. Do you accept returns on these
products? (i.e. Xxxx Xxxxxxx Nutritional) (b) Will there be a deduction
taken on our credits for manufacturer credits processed through your
accounting office? What is the turnaround on credits for manufacturer
credits processed through your accounting office? What is the turnaround
on credits? We prefer no more than one week.
D&K USES RADIO FREQUENCY (RF) TECHNOLOGY TO EXPEDITE RETURN PROCESSING ON
ALL IN HOUSE RETURNS. NORMAL RETURN MERCHANDISE WILL BE PROCESSED IN ONE
WEEK AND WILL BE INCLUDED ON THE TPC/TPPA MEMBER PHARMACY'S CURRENT
STATEMENT. WE FOLLOW ALL MANUFACTURERS' RETURNED GOODS POLICIES. IF A
MANUFACTURER ONLY ACCEPTS PARTIAL RETURNS THROUGH A WHOLESALER, WE WILL
ACCEPT THOSE RETURNS FOR CREDIT. WE ALSO OFFER THE SERVICES OF CAPITAL
RETURNS TO HANDLE MERCHANDISE NOT RETURNABLE TO WHOLESALERS. CAPITAL
RETURNS WILL ACCEPT MERCHANDISE OVER ONE YEAR OUT-OF-DATE, OUTDATED
SCHEDULE II'S, PARTIAL BOTTLES, AND HAZARDOUS MATERIALS. D&K WILL CREDIT
ALL RETURNS PROCESSED THROUGH CAPITAL RETURNS ON TPC/TPPA MEMBER
PHARMACIES' STATEMENTS. D&K CHARGES 10% ON ALL OUTDATED OR NON-SALEABLE
MERCHANDISE RETURNED FOR CREDIT. CREDITS FROM THE MANUFACTURER FOR DIRECT
RETURNS ARE PASSED THROUGH TO THE CUSTOMER, WITHOUT ANY DEDUCTIONS,
WITHIN ONE WEEK OF RECEIPT. PLEASE REFER TO EXHIBIT 4 FOR OUR COMPLETE
RETURNED GOODS POLICY.
f) List all fees for any services and programs you may offer.
PLEASE REFER TO EXHIBIT 5 FOR A SUMMARY OF SERVICE AND PROGRAM FEES.
D&K Healthcare Resources, Inc. Proposal
July 15, 1999 Page 5 of 8
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III. INVOICING
Is your company capable of providing custom invoicing? If yes, are you
capable of placing data such as customer-requested vendor numbers on
invoices? Are you able to identify contract pricing on invoices? Are you
capable of categorizing and separating invoices according to "control"
products, "noncontrol" products and "supply" products? Do you offer
customer price tags? What is the procedure for stocking new items for our
members?
D&K'S INVOICES ARE SEPARATED BY PRESCRIPTION, OTC/HBA, CONTROL PRODUCTS,
SCHEDULE II'S, AND SUPPLIES. ALL DROP-SHIPPED ORDERS ARE BILLED ON D&K'S
INVOICES, WITH A REFERENCE TO THE MANUFACTURER PO NUMBER FOR EASY
REFERENCE. CONTRACT ITEMS ARE CODED ON THE INVOICE AS WELL AS ANY PRICE
INCREASE OR DECREASE. D&K OFFERS MULTIPLE ENCODED PRICE STICKER FORMATS
FOR BOTH RX AND OTC PRODUCTS. INFORMATION PROVIDED ON THE STICKER IS AWP,
NET LANDED PRICE, QUANTITY PURCHASED, DATE PURCHASED, AND D&K'S ITEM
NUMBER. PRICE STICKERS MAY BE CUSTOMIZED AND ENHANCED TO BETTER MEET THE
NEEDS OF TPC/TPPA MEMBER PHARMACIES. D&K WILL HONOR REQUESTS FROM
TPC/TPPA MEMBER PHARMACIES TO STOCK AN ITEM. WE PREFER THAT THE STORE
PROVIDE US AN APPROXIMATE MONTHLY USAGE ON PRODUCT ADDITION REQUESTS TO
ENSURE THAT PROPER STOCKING LEVELS ARE ESTABLISHED.
IV. REPORT DATA
Explain what measures for reporting data (80/20, purchase histories,
monthly dollars, etc.) are available. Include in your answer, forms used
(i.e. electronic, on-line viewing, hard copy, etc.) and tools provided by
the wholesaler (for example, hardware and software). What is the time
frame for getting reports? How are "special request" reports handled? Any
changes incurred for `special request" reports? Please provide a copy of
your annual report.
ONE OF D&K'S STRENGTHS IS ITS ABILITY TO PROVIDE CUSTOMIZED MANAGEMENT
REPORTS TO MEET THE UNIQUE NEEDS OF OUR CUSTOMERS. WE RECOGNIZE THE VALUE
OF INFORMATION AND HOW IMPORTANT IT IS TO ACCESS CRITICAL DATA IN A
TIMELY AND ACCURATE MANNER. CUSTOMIZED REPORT REQUESTS ARE TYPICALLY
PROCESSED AND AVAILABLE WITHIN TWO BUSINESS DAYS. D&K IS PRESENTLY
SUPPLYING A NUMBER OF REPORTS DESIGNED TO TPC/TPPA'S SPECIFICATIONS. IN
ADDITION, TPC/TPPA IS ALSO UTILIZING D&K'S RESOURCE HQ, A POWERFUL
PC-BASED ONLINE REPORTING SYSTEM. THE INFORMATION IS UPDATED DAILY AS
TPC/TPPA DIALS IN TO RECEIVE PURCHASE HISTORY REPORTS IDENTIFYING
CONTRACT, NON-CONTRACT AND API GENERIC PURCHASES. D&K ALSO PROVIDES
COPIES OF ALL REPORTS AT THE END OF EACH MONTH. PRINTED REPORTS ARE SENT
DIRECTLY TO TPC/TPPA HEADQUARTERS WITH A COPY TO XXXXX XXXXXXXX. ALL
HARDWARE, SOFTWARE AND REPORTS ARE PROVIDED AT NO CHARGE. D&K IS ANXIOUS
TO PROVIDE ADDITIONAL REPORTS IN THE DESIRED FORMAT, AS REQUESTED BY
TPC/TPPA AND ITS MEMBER PHARMACIES. PLEASE REFER TO EXHIBIT 6 FOR D&K'S
ANNUAL REPORT.
D&K Healthcare Resources, Inc. Proposal
July 15, 1999 Page 6 of 8
16
V. SUPPORTIVE MEASURES
What supportive measures are available through your company? Include in
your answer, measures regarding managers, meetings, store grand openings,
promotional programs, merchandising support, personnel, amount of time it
would take to convert stores to your company, etc. Provide number of
location of houses available to service this contract.
D&K BELIEVES IT IS IMPERATIVE THAT SEMI-ANNUAL BUSINESS REVIEW MEETINGS
ARE HELD WITH THE MANAGEMENT OF BOTH TPC/TPPA AND D&K. THESE
PARTNERSHIP-BUILDING SESSIONS OFFER BOTH PARTIES THE OPPORTUNITY TO
MAXIMIZE THE ECONOMIC BENEFIT OF THE AGREEMENT AND TO ENSURE THE MUTUALLY
AGREED UPON OBJECTIVES RECEIVE THE PROPER FOCUS IN BOTH ORGANIZATIONS. IN
ADDITION TO THE SEMI-ANNUAL MEETING, D&K PROPOSES QUARTERLY MEETINGS
BETWEEN TPC/TPPA'S REPRESENTATIVE, XXXXX XXXXXXXX, AND D&K'S MANAGEMENT
TEAM.
D&K SERVICING DIVISION PERSONNEL WILL ATTEND STORE GRAND OPENINGS. D&K
WILL ALSO PROVIDE A GRAND OPENING GIVE-AWAY PRIZE AS WELL AS SECURE
AVAILABILITY OF NO-CHARGE PROMOTIONAL MERCHANDISE FROM OTC MANUFACTURERS.
OPENING ORDERS WILL BE GIVEN ADDITIONAL DATING WITH NO PAYMENT DUE FOR
THE FIRST 90 DAYS, THEN PAYMENTS OF 1/3 OF OPENING ORDER FOR THE NEXT
THREE MONTHS. D&K ESTIMATES IT WILL TAKE 1-2 DAYS TO TAG A NEW MEMBER
PHARMACY. RESETS AND REMODELS WOULD DEPEND UPON THE SIZE AND SCOPE OF THE
PROJECT.
PLEASE REFER TO EXHIBIT 7 FOR A COMPLETE LIST OF D&K'S PROMOTIONAL
PROGRAMS.
D&K REALIZES HOW CRUCIAL IT IS TO PROPERLY MERCHANDISE, ACCURATELY TAG
AND EXPEDITIOUSLY COMPLETE THE STORE CONVERSION PROCESS. TO ACCOMMODATE
THESE PROCEDURES, D&K HAS RECENTLY MORE THAN DOUBLED ITS MERCHANDISING
STAFF AND HAS UPGRADED THE LAPTOP/PC-BASED SHELF LABELING SYSTEM, USED TO
CONVERT NEW TPA/TPPC MEMBER PHARMACIES TO D&K. MED PLUS MERCHANDISER IS
D&K'S CUSTOMIZED VERSION OF THE X.X. XXXXXXXX TEMPS PLAN-O-GRAM PROGRAM.
IT IS DESIGNED TO D&K'S SPECIFICATIONS ENSURING THE REGIONAL NEEDS OF OUR
CUSTOMERS ARE MET. D&K'S MERCHANDISERS ARE AVAILABLE FOR IN-STORE
DEPARTMENT RESET ASSISTANCE, ALLOWING TPC/TPPA MEMBER PHARMACIES TO
PLAN-O-GRAM THEIR FRONT-END DEPARTMENTS TO MAXIMIZE THIS HIGH MARGIN
OPPORTUNITY. IN ADDITION, D&K PROVIDES A CHOICE OF THREE ZONE RETAIL
PRICING OPTIONS. THERE IS NO CHARGE FOR STORE TAGGING OR STORE
PLAN-O-GRAMS.
D&K DIVISIONS ARE LOCATED IN MINNEAPOLIS, MINNESOTA, LEXINGTON, KENTUCKY,
CAPE GIRARDEAU, MISSOURI, AND ABERDEEN, SOUTH DAKOTA.
D&K Healthcare Resources, Inc. Proposal
July 15, 1999 Page 7 of 8
17
VI. REPACKS
Explain the type of repack program available through your company.
Include in your explanation buying re-packs, lead-times, pricing issues,
credits, returns and morgue products. Please provide your generic program
including rebates.
D&K IS PLEASED TO OFFER SAVPAK, ONE OF THE MOST EXTENSIVE REPACK PROGRAMS
IN THE INDUSTRY. DISCOUNTS OF UP TO 5% ARE ROUTINELY AVAILABLE ON OVER
140 BRANDED PRODUCTS. REPACK ITEMS MAY BE AUTOMATICALLY SUBSTITUTED FOR
BRANDED ITEMS.
VII. INTERNET CAPABILITIES
What capabilities do you offer utilizing the Internet? List all available
options of ordering systems.
D&K, THROUGH OUR TYCON SUBSIDIARY, IS IN THE PROCESS OF CREATING AN
INTERNET PHARMACY CAPABILITY FOR OUR CUSTOMERS. THIS WILL PERMIT TPC/TPPA
MEMBER PHARMACIES TO PROTECT THEIR BUSINESSES FROM OTHER INTERNET
PHARMACIES AND ALLOW THEM TO PARTICIPATE IN THIS EMERGING HEALTHCARE
TREND. D&K WOULD WELCOME THE OPPORTUNITY TO HAVE TPC/TPPA AND ITS MEMBER
PHARMACIES INVOLVED IN THE FINAL DEVELOPMENT OF THIS PROGRAM.
VIII. GENERICS
What is your markup above dead net cost on generics inclusive of all
manufacturer rebates and special prices?
D&K WILL INVOICE NON-CONTRACT GENERIC PHARMACEUTICAL PRODUCTS BASED ON
THE MANUFACTURER'S PUBLISHED WHOLESALER PRICE (WAC) IN EFFECT AT THE TIME
OF DELIVERY. THE PRODUCTS WILL BE DISCOUNTED FROM WAC BY THE AMOUNT OF
THE TPC/TPPA BUY-PLAN IN AFFECT AT THE TIME OF ORDERING. ALL DISCOUNTS
AND ALLOWANCES WILL BE PASSED THROUGH TO TPC/TPPA MEMBER PHARMACIES
DURING THE MANUFACTURERS' PROMOTIONAL PERIOD.
D&K Healthcare Resources, Inc. Proposal
July 15, 1999 Page 8 of 8
18
SCHEDULE B*
*Confidential portion omitted and filed separately with the Commission.
