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EXHIBIT 10.1
Portions of this Exhibit marked with an * have been omitted
and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.
PRIME VENDOR AGREEMENT
This agreement is made October 1, 1998, between Coram
Healthcare Corporation ("Coram") and Cardinal Health ("Cardinal"), who hereby
agree as follows:
1. DESIGNATION AS PRIMARY WHOLESALER
During the term of this Agreement, Coram will designate
Cardinal as the primary wholesale pharmaceutical supplier for its
branches, whether now or hereafter owned, managed or operated by Coram
(collectively, the "Facilities" and individually, a "Facility"). A
current list of the Facilities is attached hereto as Appendix A.
Additional alternate care and other health care organizations may be
made parties to this Agreement from time to time subject to the prior
approval of Coram and Cardinal. Coram will use its best efforts to
actively promote the implementation of this Agreement to all
Facilities.
2. SALE OF MERCHANDISE
Coram will purchase from Cardinal during the term of this
agreement its Primary Requirements of pharmaceuticals ("Rx Products")
and, may, at its option, purchase certain other inventory carried by
Cardinal ("Non-Rx Products" and together with Rx Products, collectively
the "Merchandise") for delivery directly to the Facilities. The term
"Primary Requirements" means that Coram will purchase for each Facility
not less than * its requirements of Rx Merchandise from Cardinal.
Cardinal reserves the right at all times to reasonably determine what
Merchandise it will carry based upon product quality, manufacturer
indemnity, insurance, and other policies, and other standards
reasonably determined by it, and may delete from its available
inventory items of Merchandise with limited or no movement activity.
3. PURCHASE PRICE
Coram will pay a purchase price for all Merchandise purchased
under this agreement in an amount equal to Cardinal's Cost minus the
appropriate percentage as found in the Pricing Matrix (Exhibit A)
effective *.
The term "Prepay Deposit" means an amount paid by Coram to
Cardinal, in which Coram hereby grants to Cardinal a security interest.
Cardinal may upon prior notice to Coram apply the Prepay Deposit to the
outstanding invoices due to Cardinal, with any excess refunded to
Coram. Cardinal shall have no obligation to segregate the Prepay
Deposit from its other funds or accounts.
For purposes of this agreement: (a) the term "Cardinal's Cost"
shall mean the manufacturer's published wholesale acquisition cost for
Merchandise at the date of Cardinal's invoice to the Facility, adjusted
to reflect any then-applicable contract pricing,
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but without reduction for cash discounts; and (b) the term "Qualified
Monthly Purchases" shall mean all purchases made and paid for by Coram
and/or the Facilities under the terms of this agreement, net of all
returns, credits, rebates, late charges, or other similar items.
Manufacturer off invoice quantity discounts and promotional allowances
will be made available consistent with Cardinal's normal and customary
practices. In order to qualify for this pricing, each Coram facility
must purchase its Primary Requirements from Cardinal and the aggregate
annual volume must remain above *. Failure of Coram to meet either or
both of these basic requirements may result in a change in the pricing
by Cardinal upon 30 days' written notice to Coram.
*
All orders must be electronically transmitted via the
CardinalCHOICE(TM) pharmacy system or other electronic order entry
system approved by Cardinal to qualify for the pricing specified in the
Pricing Matrix. Non-electronically transmitted orders are subject to
Cardinal's Cost plus *.
4. PAYMENT TERMS
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5. DELIVERY
Cardinal will deliver the Merchandise FOB to the Facilities
and exercise its good faith efforts to provide an efficient delivery
schedule designed to meet the mutual needs of Cardinal and the
Facilities. All deliveries will be accompanied by an invoice and,
except as otherwise provided below, *. Delivery schedules and purchase
order deadlines will be established by the applicable servicing
division of Cardinal. Facilities will be eligible for three (3)
deliveries per week, except that larger volume Facilities may request
five (5) deliveries subject to mutual agreement with the servicing
Cardinal division. Additional deliveries, if required, will incur a
separate delivery charge at Cardinal's cost for such deliveries.
Delivery schedules and purchase order deadlines may be reviewed and
changed from time to time as mutually agreed upon by Cardinal and the
Facilities.
DEA Form 222 may be mailed to the applicable Cardinal
distribution center. Schedule 11 orders will be delivered within one
business day of Cardinal's receipt of a signed original DEA Form 222.
6. OTHER SERVICES
Cardinal will provide comprehensive support services to Coram
and the Facilities in accordance with Cardinal's customary terms and
practices for managed care customers. A list of those programs,
services, and reports is attached as Exhibit B to this agreement.
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7. EMERGENCY DELIVERIES
Cardinal will provide a twenty-four (24) hour, seven (7) day
per week emergency delivery service. * emergency deliver* per month
will be made free of charge. Thereafter, the courier charge for such
orders will be F.O.B. prepaid and added to the invoice. A listing of
key management personnel and emergency order procedures will be
supplied to each Facility.
8. CONTRACT ADMINISTRATION
Cardinal will recognize and administer the Manufacturer
Contracts subject to their continued validity in accordance with
applicable laws; however, if manufacturers' chargebacks for contract
items submitted by Cardinal are disallowed or unreconcilable, then the
disputed charge will be billed back to Coram. Coram will notify
Cardinal of all manufacturer contracts between Coram or any Facility
and any manufacturer (collectively, "Manufacturer Contracts"). In
addition, Coram or the Facilities will notify Cardinal of all new
Manufacturer Contracts"). In addition, Coram or the Facilities will
notify Cardinal of all new Manufacturer Contracts entered into after
the Commencement Date and all renewals, replacements or terminations of
Manufacturer Contracts not less than 45 days prior to the effective
date of such new Contract, to discontinue the service level provisions
of Section 9 hereof until 45 days after delivery of accurate usage data
for the new items.
In order to facilitate Cardinal's inventory management
requirements, Coram will provide Cardinal with respect to each Facility
accurate six month's usage figures (including NDC numbers) on both
contract and non-contract items in compatible electronic (disk) format
30 days prior to participation under this agreement by that Facility.
All purchases under this agreement by Coram will be for the Facilities'
"own use" as that term is defined in judicial or legislative
interpretation, and Coram will comply with applicable manufacturers'
pricing criteria and policies.
9. SERVICE LEVEL
Cardinal will exercise all reasonable efforts to provide
Facilities with an aggregate average monthly service level on Rx
Products of at least * calculated quarterly in accordance with the
standards and procedures specified in Exhibit C. Failure by Cardinal
through its own fault to maintain an average monthly service level
based on the prior three-month period) of at least * will entitle the
affected Facility to a reduction of * in the Cardinal Cost-plus
percentage applicable for deliveries of Merchandise to that Facility
during the following two-month period.
10. ORDER CONFIRMATION/DROP SHIP INVOICING
Cardinal operates a "Live" inventory system that allocates
inventory at the moment of order transmission. Order allocations are
transmitted to the Facility within approximately 15 minutes of placing
the order and contain invoice level detail.
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In the event that a discrepancy is identified regarding
invoicing of items drop shipped to the facilities from the manufacturer
or additional information is requested by either party in connection
with such drop shipments, then both parties will use all reasonable
efforts to obtain the information and resolve the discrepancy within
sixty (60) days of notification of such discrepancy or need for such
additional information.
11. RETURN GOODS POLICY
Cardinal will accept Merchandise for return from Facilities in
accordance with the Standard Cardinal Return Goods Policy (the
"Cardinal Returns Policy") in effect from time to time during the term
of this agreement. A current copy of the Cardinal Returns Policy in
effect as of the Commencement Date is attached as Exhibit D. Credits to
be issued to Coram in connection with timely notification by Coram in
accordance with the Cardinal Returns Policy will be made no later than
the tenth (10th) business day following Cardinal's authorization of
such return.
12. TERM
The initial terms of this Agreement will be for a period of
five years beginning October 1, 1998 (the "Commencement Date"). Either
party to this Agreement may effect an early termination of this
agreement upon the default of a material provision of this agreement by
the other party and that party's failure to cure such default within 30
days following written notice from the non-defaulting party.
Notwithstanding the foregoing, either party to this Agreement may
effect an early termination of this Agreement by providing written
notice of termination to the other party at least ninety (90) days
prior to the specified early termination date. Notwithstanding the
foregoing, no termination notice from any Coram to Cardinal will be
effective until such time as Cardinal has received payment for all
amounts due from Coram.
13. NOTICES
Any notice or other communication required or desired to be
given to either party under this Agreement shall be in writing and
shall be deemed given when: (a) deposited in the United States mail,
first-class postage prepaid, and addressed to that party at the address
for such party set forth at the end of this Agreement; (b) delivered to
Federal Express, Airborne, or any other similar express delivery
service for delivery to that party at that address; or (c) sent by
facsimile transmission, with electronic confirmation, to that party at
its facsimile number set forth at the end of this Agreement. Either
party may change its address or facsimile number for notices under this
Agreement by giving the other party notice of such change.
14. TAXES/COMPLIANCE WITH LAWS
Coram will pay when due any sales, use, excise, gross
receipts, or other federal, state, or local taxes or other assessments
(other than any tax based solely on the net
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income of Cardinal) and related interest and penalties in connection
with or arising out of the transactions contemplated by this Agreement.
If Cardinal pays any such amounts which Coram is obligated to pay under
this section, if any, then Coram will promptly reimburse Cardinal in an
amount equal to the amount so paid by Cardinal.
If an to the extent any discounts, credits, rebates or other
purchase incentives are paid or applied by Cardinal with respect to the
Merchandise purchased under Agreement, then applicable provisions of
the Medicare/Medicaid and state health care fraud and
abuse/anti-kickback laws (collectively, "fraud and abuse laws") may
require disclosure of the applicable price reduction on Coram's claim
or cost reports for reimbursement from governmental or other third
parties. Coram agrees to comply with all applicable provisions of the
fraud and abuse laws and to indemnify and hold Cardinal harmless for
any failure on Coram's part to do so.
15. FORCE MAJEURE
This Agreement constitutes the entire agreement and
understanding of the parties with respect to the subject matter hereof,
and supersedes all prior and contemporaneous agreements, proposals,
bids/bid responses, and understandings between the parties relative to
the subject matter of this Agreement. Neither Cardinal nor Corm may
assign its rights under this Agreement without the written consent of
the other; provided, however, that Cardinal may delegate its rights and
obligations to any entity which is controlled by or under common
control with Cardinal Health, Inc. This Agreement will be binding on,
inure to the benefit of, and be enforceable by and against the
respective successors and assigns of each party to this Agreement.
16. RECORDS AND AUDIT
Cardinal will maintain records pertaining to the
pharmaceutical products purchased by Coram under this Agreement as
required by applicable FDA requirements. Not more than once in any
twelve-month period, and following 60 days' advance written notice to
Cardinal, Coram will have the right to appoint one or more of its
employees or a business contracted by Coram (for which contracted costs
will be paid by Coram) to review those relevant records applicable to
its pharmaceutical purchases for the sole purpose of verifying
compliance with the pricing terms of this Agreement. Any such review
will be limited to twelve months of historical information as of the
date such review begins and will be subject to a confidentiality
agreement mutually agreed to by Cardinal and Coram, prepared by
Cardinal and signed by Coram and its employee(s) and contracted
business, if applicable, who will have access to the information prior
to beginning the review.
17. RETURN OF SOFTWARE
Upon termination of this Agreement for any reason, Coram's
rights as a licensee of the CardinalCHOICE(TM) or other Cardinal
software will automatically expire, and Coram will promptly return such
software to a return location specified by Cardinal.
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18. ENTIRE AGREEMENT; SUCCESSORS
This Agreement constitutes the entire agreement and
understanding of the parties with respect to the subject matter hereof,
and supersedes all prior and contemporaneous agreements, proposals,
bids/bid responses, and understandings between the parties relative to
the subject matter of this Agreement. Neither Cardinal nor Coram may
assign its rights under this Agreement without the written consent of
the other; provided, however, that Cardinal may delegate its rights and
obligations to any entity which is controlled by or under common
control with Cardinal Health, Inc. This Agreement will be binding on,
inure to the benefit of, and be enforceable by and against the
respective successors and assigns of each party to this Agreement.
19. AMENDMENTS
No changes to this Agreement will be made or be binding on any
party unless made in writing and signed by each party to this
Agreement.
20. WAIVER
The failure of either party to enforce any provision of this
Agreement will not be considered a waiver of any future right to
enforce such provision.
Coram Healthcare Corporation Cardinal Health*
0000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000 553 Xxxxxxx Court
Denver, Colorado 80202 Xxxxxx, Xxxx 00000
Telecopy: (000) 000-0000 Telecopy: (614) 717-_____
By: /s/ By: /s/
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Title: Title:
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* The terms "Cardinal" or "Cardinal Health" shall include the following
affiliated and operating companies: Cardinal Syracuse, Inc., a New York
corporation (Syracuse, New York); Balley Drug Company, a Delaware corporation
(Zanesville, Ohio); Marmac Distributors, Inc., a Connecticut corporation
(Hartford, Connecticut); Xxxxx X. Xxxx, Inc., a Massachusetts corporation
(Peabody, Massachusetts); Ohio Valley-Clarksburg, Inc., a Delaware corporation
(Wheeling, West Virginia); Xxxxxxx Drug Company, a Tennessee corporation
(Knoxville, Tennessee); Solomons Company, a Georgia corporation (Savannah,
Georgia); National PharmPak Services, Inc., an Ohio corporation (Zanesville,
Ohio); National Specialty Services, Inc., an Ohio corporation (Nashville,
Tennessee); Xxxxxxxx Distribution Corporation, a Delaware corporation (Folsom,
California); Xxxxxxx, Inc., a Texas corporation (Waco, Texas); William's Drug
distributors, Inc., a Delaware Corporation (Zanesville, Ohio); and any other
affiliate of Cardinal Health, Inc. ("CHI"), an Ohio corporation, as CHI may
designate.
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EXHIBIT A
Pricing Matrix
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A-1
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EXHIBIT B
Other Services
The services offered in this Agreement are designed to facilitate
aggressive asset management at the Facilities. Additionally, Cardinal offers a
highly sophisticated information system that will assist Coram in evaluating
system wide product movement, pricing, service level, and compliance to group
contracts.
A. The following services will be provided to Coram and each designated
site:
1. Order entry equipment, shelf labels, price stickers and bar
coded labels are available upon request.
2. Reports (available through CardinalCHOICE)
a. Contract Report - printed in alpha sequence
describing contract items available to a specific
institution. Included in this report is the contract
cost NDC#, product description, E.O.E. number,
manufacturer and distribution center availability
(monthly distribution).
b. Monthly Purchase Profile - printed in alpha sequence
defining a twelve (12) month rolling purchase profile
(monthly distribution).
c. DEA Report - a listing of controlled substances
purchased from Cardinal for each month (monthly
distribution).
d. 80/20 Report (dollar volume sequence) - a listing of
all purchases from a previous quarter by descending
dollar volume sequence with units displayed
(quarterly distribution).
e. Vendor Purchase Report - a listing of purchases by
vendor displaying both unit and dollar volume for
the preceding quarter (quarterly distribution).
B. Physical Inventory Report - generated by entering inventory into the
order entry equipment and transmitting with proper code to Cardinal
computer via telephone. A printout will be delivered within seven (7)
days showing description, unit price, extended price and total
inventory. A normal fee of $50 per inventory will be charged. No charge
will be applied if CardinalCHOICE generates the reports.
C. CardinalCHOICE - will be made available to Coram and Facilities
utilizing Cardinal as the preferred vendor. The fee associated with
CardinalCHOICE and future updates will be waived for Coram.
D. CardinalCHOICE HQ - one system will be provided to Coram corporate
office at no charge for the term of the Agreement.
Exhibit B-1
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E. Hardware - all hardware and software provided by CHI for use by Coram
in conjunction with this Agreement shall remain the property of
Cardinal health and software shall be returned to Cardinal upon
termination of this Agreement.
F. Sales Representation - upon execution of this Agreement, each site
will have an assigned account representative who specializes in
Alternate Care. A mutually-convenient call schedule will be
established. On these visits, the account representative will review
pertinent contract charges, price increases or decreases, special
"deals" of interest to Coram and returns as required.
Exhibit B-2
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EXHIBIT C
Service Level Definition
1. Manufacturer back orders/temporary outs;
2. Non-stock and/or discontinued items due to non-movement or
discontinuation by manufacturer;
3. Rx Products shipped within three (3) working days of initial order
(including those filled by an affiliate of Cardinal) which shall
instead be counted as a line filled;
4. Items where a Facility has failed to provide accurate usage figures;
5. Items where a Facility's historical demand is exceeded by 150% over
the preceding two months;
6. Same item ordered more than once within five days.
The service level guaranty for Facilities added to this Agreement after
the Commencement Date shall commence 60 days following receipt by Cardinal of
accurate usage data. This will allow Cardinal to gain usage information and
adjust inventory levels appropriately.
Coram shall notify Cardinal at least 45 days prior to the expiration of
any manufacturer's contract which is being replaced with a different contract,
and shall cooperate with and assist Cardinal in disposing of any excess
inventory of Merchandise previously stocked at Coram's or a Facility's request.
Failure to comply with these notice requirements shall entitle Cardinal to
discontinue the service level guaranty to the Facilities until 60 days after
delivery of accurate usage data for the new items.
Exhibit C-1
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EXHIBIT D
Cardinal Health Returned Goods Policy
(Hospitals, Charitable Institutions, and Other Health Care Entities)
General Policy
Product in "merchantable condition" (as defined below) may generally be returned
to the Cardinal Health Company from which the product was originally purchased
if the return is made within the time frames and subject to the terms and
conditions described below:
Return Made Within Normal Credit Amount
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* *
"Merchantable condition" will be determined by Cardinal Health based upon its
ability to return the item to its inventory for resale in the normal course of
its business without special preparation, testing, handling, or expense and will
exclude the following:
A. Any item which has been used or opened, is a partial dispensing unit or
unit of sale, is without all original packaging, labeling, inserts, or
operating manuals, or that is stickered, marked, damaged, defaced, or
otherwise cannot readily be resold by Cardinal for any reason.
B. Short-dated (less than ___ months expiration dating), outdated, or
seasonal product and items purchased on a "special order" basis,
including non-stock and drop ship items.
C. Any sterile or refrigerated merchandise, unless Cardinal is specially
assured that such merchandise was properly stored and protected at all
times and such merchandise is returned separately in a package marked
as such and accompanied by a separate credit request form.
D. Any low stability product, including Epogen(TM), Eminase(TM) or other
products which are usually sensitive to temperature and handling
conditions.
E. Any product not intended for return to a wholesaler in accordance with
the return policies of the applicable manufacturer.
Unmerchantable Product
Any item not eligible for return in accordance with Cardinal's General Policy
(above) will not be accepted for return without special written authorization
and will generally require return directly to the manufacturer. If Cardinal does
participate in the return process for any product not in
Exhibit D-1
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"merchantable condition," any return credit to the customer will be based upon
the actual credit issued by the manufacturer and will be subject to a minimum
25% handling charge.
Controlled Substances
Credit for the return of controlled substances requires a separate Merchandise
Return Authorization From (the "MRA Form") and must comply with all federal and
state procedures and requirements in addition to the terms and conditions
described herein.
Shorts and Damaged Merchandise
Claims of order shortages (e.g., invoiced but not received) and damage must
generally be reported within five business days from the applicable invoice
date. Controlled substance shortage claims must be reported immediately per DEA
requirements. Pricing and other errors/mistakes must be reported within 10
business days from the invoice date.
Notice to Manufacturer
Upon approval of the return by Cardinal Health, the customer will be responsible
to: (a) promptly forward a copy of the credit memo and MRA Form to the
applicable manufacturer; (b) retain a copy of the credit memo and MRA Form; and
(c) make such copies available to the manufacturer and to the authorized
federal, state, and local law enforcement officers upon request, all as required
pursuant to FDA guidelines.
Ongoing Assurance and Cardinal Credit Request Form
Prior to returning any product to Cardinal, each customer must execute and
deliver to Cardinal an Ongoing Assurance verifying that all returned merchandise
has been kept under proper conditions for storage, handling, and shipping. All
request for credit must be submitted via EOE, on the CardinalCHOICE(TM) system
or by approved EDI interface. A fully completed MRA Form must accompany all
merchandise to be returned. A fully completed form includes, but is not limited
to, the following information: the invoice number and invoice date for the
merchandise to be returned.
Other Restrictions
This policy is subject to charge without notice by Cardinal Health. This policy
is further subject to modification as may be deemed necessary or appropriate by
Cardinal health to comply with applicable federal and/or state regulations, FDA
guidelines, state law, and other restrictions applicable to returned
merchandise.
Exhibit D-2
