04-28 JULY, 2007
IN REVIEWING THIS FILE, IT WAS DETERMINED THAT AN EXECUTED COPY
OF THE AGREEMENT LISTED BELOW WAS NEVER RETURNED TO THE
CLERK'S OFFICE.
ALL THAT IS AVAILABLE IS THE ATTACHED DRAFT COPY OF THE
AGREEMENT AND ITS SUPPORTING PAPERWORK.
REFERENCE: RESOLUTION NO. 04-28
PASSED: FEBRUARY 11, 2004
SUBJECT: AGREEMENT WITH NATIONAL MEDICAL HEALTH CARD
SYSTEMS, INC. FOR PHARMACY BENEFITS MANAGEMENT FOR
THE PERIOD BETWEEN MARCH 1, 2004 THROUGH FEBRUARY
28, 2007
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INWilsonJonese WHITE-ORIGINAL CANARY-DUPLICATE 44-900•Duplicate
Resolution No. 04-28
RESOLUTION
AUTHORIZING EXECUTION OF AN AGREEMENT WITH
NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. FOR
PHARMACY BENEFITS MANAGEMENT
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGIN,ILLINOIS,that
David M.Dorgan, City Manager,be and is hereby authorized and directed to execute an agreement
on behalf of the City of Elgin with National Medical Health Card Systems, Inc. for pharmacy
benefits management for the period March 1, 2004 through February 28, 2007, a copy of which is
attached hereto and made a part hereof by reference.
s/Ed Schock
Ed Schock, Mayor
Presented: February 11, 2004
Adopted: February 11, 2004
Vote: Yeas: 6 Nays: 0
Attest: •
s/Dolonna Mecum
Dolonna Mecum, City Clerk
•
ruk Resolution No. 04-28
RESOLUTION
AUTHORIZING EXECUTION OF AN AGREEMENT WITH
NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. FOR
PHARMACY BENEFITS MANAGEMENT
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGIN,ILLINOIS,that
David M. Dorgan, City Manager,be and is hereby authorized and directed to execute an agreement
on behalf of the City of Elgin with National Medical Health Card Systems, Inc. for pharmacy
benefits management for the period March 1, 2004 through February 28, 2007, a copy of which is
attached hereto and made a part hereof by reference.
Ed Schock, Mayor
Presented: February 11, 2004
Adopted:
Vote: Yeas Nays:
Recorded:
Attest:
eimk
Dolonna Mecum, City Clerk
r
NATIONAL MEDICAL HEALTH CARD SYSTEMS,INC.
PHARMACY BENEFITS MANAGEMENT AGREEMENT
THIS PHARMACY BENEFITS MANAGEMENT
AGREEMENT entered into as of the day of "Member Pharmacy Agreement" means the agreement entered
200_, and effective March 1, 2004 (the "Effective Date"),by and into between the Manager and the Member Pharmacy.
between NATIONAL MEDICAL HEALTH CARD SYSTEMS,
INC. with a principal office at 26 Harbor Park Drive, Port "Non-Member Pharmacy" means a pharmacy that does not
Washington,NY 11050(hereinafter referred to as the "Manager") participate in the Plan.
and CITY OF ELGIN with a principal office at 150 Dexter Court,
Elgin,IL 60120(hereinafter referred to as the"Client"). "Out-of-Network Claim Form" means a claim form that is
approved by the Manager and the Client and is utilized when
RECITALS: filling a prescription at a Non-Member Pharmacy.
WHEREAS,the Client desires to provide a prescription drug plan "Semi-Monthly Account Statement" means a statement provided
(hereinafter referred to as the "Plan") to Eligible by the Manager to the Client on the 15th and the last day of the
Employees/Members(as hereinafter defined); month, which details various claim and billing information in
addition to Managerial Fees (as defined herein) incurred for a
WHEREAS, the Manager has developed a system for paying specific period.
claims and furnishing other related services through a network of
pharmacies and mail order facilities based upon a specific plan "Specialty Drugs " means those biotech and other prescription
design(hereinafter referred to as the "System")for the purpose of drug products identified on Exhibit D that require special ordering,
managing the Plan;and handling and/or Member services.
WHEREAS, the Client desires to engage the Manager for SECTION 2. PLAN TO BE MANAGED.
14111)
purposes of managing the Plan on behalf of the Client through the
use of the System, and the Manager desires to provide such 2.1 Plan Design. (a) Within a reasonable time prior to the
services to the Client. effective date of the Plan, the Client shall furnish the Manager
with the details of the Plan. This information must be complete
NOW, THEREFORE, in consideration of the mutual promises and accurate and in a format and media approved by the Manager.
hereinafter contained,the parties agree as follows: The Manager and the Member Pharmacies are entitled to rely on
the accuracy and completeness of this information. This
SECTION 1. DEFINITIONS. For purposes of this information shall include the following (collectively, the "Plan
Agreement,the following terms shall be defined as follows: Design"):
"Claim Voucher" means the voucher that is utilized by a Member (i) the proposed effective date of the Plan;
pharmacy when filling a prescription that is not communicated
electronically. (ii) enrollee file data required to administer the Plan
including but not limited to the classes of dependents covered,
"DUR"means the concurrent and/or retrospective drug utilization including any age limits applicable to dependent children;
review programs used by the Manager.
(iii) estimated number of Eligible Employees, listed by
"Eligible Employee" or "Member" means an employee of the location;
Client, or a dependent of such employee, who has met the criteria
required to become a participant in the Plan. (iii) basis by which payments are determined when
prescriptions are furnished by both Member and Non-Member
"Member Identification Card" means an identification card issued Pharmacies;
to each Plan Member.
(iv) expiration date of the Plan,if applicable;
"Member Pharmacy" means a pharmacy that has entered into a
Member Pharmacy Agreement with the Manager and is a (v) the amount of deductible and co-payments,if any;
participating pharmacy under the Plan.
C:\Documents and Settings\Folarin_f007\Local Settings\Temporary Internet Files\Content.1E5\EXW5KPU5\PBM Agreement-City of
Elgin[I l.doc
(vi) manner of distribution of NMHC cards, if any, to reimbursement provided pursuant to this Section 2.3 shall be
Members; based upon the same schedule in effect for Member Pharmacies.
a list of names of all persons to be covered under the (b) The Plan shall provide that if the Plan reimburses a
Plan(the"Enrollment Roster"); Member for the cost of prescription drugs purchased at non
Member Pharmacies, such benefits payable under the Plan are not
(viii) a description of drugs that are included and excluded assignable to a third party and any assignment or attempted
from the Plan. assignment thereof shall be null and void.
(ix) prescriber file data, if any, required to administer the SECTION 3. SERVICES.
Plan;and
3.1 The Manager shall manage the Plan, including the
(x) other information relevant to the benefit Plan Design as provision of the following products and services to the Client(the
the Manager may reasonably request for the effectual operation of "Services"):
the System.
(a) provide Member Pharmacies that are available to
(b) Based on the Plan Design and other information dispense medication to Members in agreed upon geographic areas;
provided by the Client, the Manager shall create and maintain
computerized files containing the current Plan Design. (b) furnish each Member Pharmacy with a description of the
Plan;
2.2 Benefit Design or Members Changes. (a) The Client is
responsible for notifying the Manager immediately by written (c) require Member Pharmacies to comply with the terms of
notice of any changes or updates in the Plan or Enrollment Roster. the Manager's Member Pharmacy Agreement;
Such changes or updates shall be implemented by the Manager
within three (3) business days of such notification, provided, (d) process Claim Vouchers and/or electronic claims
however,that if the change or update necessitates operating system received from Member Pharmacies;
software modification, the Manager shall advise the Client of the
estimated time and additional cost(if any)to the Client required to (e) process completed Out-of-Network Claim Forms
rhe such software modifications,and the parties shall agree upon received from Members for prescriptions which have been
.mplementation date of such change. The Client shall be furnished by Non-Member Pharmacies;
solely responsible for ensuring that any such change or update
complies with the terms of the Plan and any contracts between the (f) determine whether claims submitted qualify for
Client and its Members. If such changes have a material impact reimbursement in accordance with the terms of the Plan and the
on the Manager's obligations under this Agreement, then the payment applicable for such claim;
Client agrees to negotiate in good faith appropriate relief for the
Manager. (g) return unacceptable Claim Vouchers and claim forms to
the submitting party, pursuant to the System and in accordance
(b) The Client is solely responsible for any liability arising in with applicable law;
connection with the Client's Plan Design. The Manager makes no
representation or warranty that the Plan Design selected by the (h) perform electronic edits to validate pharmacy submitted
Client is in compliance with any law that applies to the Client,and cost and reimbursement monies based upon Member Pharmacy
the Manager has no responsibility to advise the Client about contracted price;
Client's compliance with any applicable law.
(i) fill Member prescriptions through the mail order
(c) The Client shall be liable for all incurred charges under pharmacy'
the Plan relating to the unauthorized or fraudulent use of a
Member's identification card unless the charges incurred were due 0) fill Specialty Drugs through the specialty pharmacy (a
to the failure by the Manager to implement the required copy of the list of Specialty Drugs is attached hereto as Exhibit D,
updates/changes within the time period specified in Subsection which may be modified from time to time as other specialty drug
2.2(a). products become available);and
2.3 Non-Member Pharmacy Reimbursement. (a) If the Plan (k) furnish the Client with a Semi-Monthly Account
provides for reimbursement to a Member of some or all of the cost Statement which sets forth a summary of cost of claims to the Plan
of prescription drugs purchased at Non-Member Pharmacies,then during the preceding period. Such summary shall indicate the total
Plan shall provide for such reimbursement only upon the number of claims and the cost to the Plan and shall include such
nission of an Out-Of-Network Claim Form. The level of other data and be in such form as agreed upon by the parties,
provided that such form is compatible with the System.
2
3.2 The Manager shall follow the grievance and appeals (ii) the Manager has and may continue to consult with
procedures established by the Plan for its Members. In all cases, outside software and other vendors, as well as consulting healt
the Plan shall remain the fmal arbiters of grievances and appeals care professionals and any recognized compendia, to provid
from Members. databases and other information as the Manager deems necessary
or helpful to include in the DUR system;
SECTION 4. ADDITIONAL AGREEMENTS AND
ACKNOWLEDGMENTS. (iii) the DUR system may not contain all currently available
information on accepted medical practice or prescribing practices.
4.1 Pharmacist Discretion. (a) The Manager, on behalf of
the Client, shall advise Member Pharmacies that the information (b) The Manager shall update the DUR database or any other
generated in connection with the DUR system is intended as an databases and reports upon which the Manager's Services are
information guide and shall not be relied upon by the Member based upon.
Pharmacies as a substitute for the professional judgment,
knowledge, expertise, or skill of any physicians, pharmacists or (c) The Manager shall update the DUR system on a
health care providers. reasonable basis to reflect changes in standards for pharmaceutical
prescribing.
(b) The Client acknowledges and agrees that the DUR
system will provide information to the Member Pharmacies and 4.4 Prior Authorization. (a) The Manager will provide
providers and that the Member Pharmacies or providers, may or the Client with its standard Prior Authorization Program. In
may not, in their sole discretion,dispense prescriptions or provide determining whether to authorize dispensing of a drug under the
other goods and services that correlate with the information they Prior Authorization Program, the Manager may rely entirely upon
receive through the DUR system. Accordingly, the Manager information about the Member and the diagnosis of the Member's
assumes no liability to the Client or any other person in connection condition provided to it from sources deemed reliable to the
with the DUR process, including,without limitation, the failure of Manager at the time that the prescription is to be dispensed, and
the DUR process to identify a prescription that results in injury to upon the Plan's adopted prior authorization protocols. The Client
a Member. acknowledges that prior authorization programs are
nondiscretionary processing techniques intended to provide better
4.2 Patient Information Limitations. The Client management of the prescription drug program based on objectiv
acknowledges that the DUR system (i) is a highly automated criteria and the limited amount of patient information available t
system, without individual review in most circumstances, and (ii) the Manager. The Manager shall not undertake, and is not
is necessarily limited by the amount,accuracy and completeness of required hereunder, to determine medical necessity,
data concerning Members inputted into the System or obtained appropriateness of therapies, to make diagnoses or substitute the
from prescription claims and from information provided by the Manager's judgment for the professional judgment and
Client. The Manager shall have no obligation to acquire responsibility of the prescriber. The Client shall indemnify and
information regarding any Member beyond the information that is hold harmless the Manager, its employees, directors, officers, and
included in the Manager's eligibility database or the submitted agents from and against any and all awards, losses, claims, suits,
claim. Providers are individually responsible for acting or not damages, liability,judgments,fines,penalties,settlement amounts,
acting upon information generated and transmitted through the and expenses, including reasonable attorneys fees (collectively,
DUR services, and for performing services in each jurisdiction "Damages") arising from or as a result of the Manager's decision
consistent with the scope of their licenses. In performing DUR to authorize or initially deny coverage of any such drug in
services, the Manager will not, and is not required by this accordance with the Plan's adopted protocols,except to the extent
Agreement to deny claims or require physician, pharmacist, or that any such Damages arise from the Manager's gross negligence
patient compliance with any norm or suggested drug regimen, or or willful misconduct.
in any way substitute the Manager's judgment for the professional
judgment or responsibility of the physician or pharmacist. The (b) At the Client's request, the Manager will supply to the
absence of a warning for a given drug or drug combination shall Client a list of suggested prior authorization criteria for review,
not be construed to indicate that the drug or drug combination is modification, and/or adoption by the Client. The Client will have
safe,appropriate,or effective for any Member. final approval over the criteria to be utilized that will be evidenced
in writing by the Client. The Manager will administer the criteria
4.3 Database Limitations. (a) The Client acknowledges the as approved by the Client. No changes will be made to the criteria
following: except pursuant to the Client's written request. From time to time,
new information on a specific drug therapy may become available.
(i) the DUR system is a collection of databases of clinical This new information may make it necessary or desirable to
drug data and drug dispensing information developed and modify existing prior authorization criteria. The Manager will
maintained in part by the Manager and in part by independent drug notify the Client of proposed changes to the criteria. If the Client
database companies; does not wish to accept the proposed changes to the Prior
3 .
Authorization criteria, the Client agrees to notify the Manager in The Manager shall have no fmal discretionary authority over or
writing within ten business days and may terminate this Agreement responsibility for the Plan's administration. Further, because the
rcordance with Sections 7 and 8, or adopt customized criteria Manager is not an insurer, plan sponsor, plan contract
mutually agreed upon fee. After ten business days,the Client administrator, or a provider of health services to Members, the
will be deemed to have approved any proposed changes to the Manager shall have no responsibility for (i) funding of Plan
criteria unless it has notified the Manager in writing of its benefits; (ii) any insurance coverage relating to the Client, any
objection as described herein. Plan contract administrator, the Plan or the Members; or(iii) the
nature or quality of professional health services rendered to
4.5 Rebates. The Manager shall collect rebates on behalf of Members. In all cases, the Client shall have the fmal
the Client as set forth in Exhibits A and B attached hereto. The responsibility for all decisions with respect to coverage of the
Manager contracts with certain pharmaceutical manufacturers and prescription drug program and the benefits allowable thereunder,
other third parties for rebate programs. The Client acknowledges including determining whether any rejected or disputed claim will
that whether and to what extent manufacturers are willing to be allowed.
provide rebates to the Client will depend upon the Plan Design
adopted by the Client, as well as the Manager receiving sufficient 4.8 Drug Classification and Pricing. The Manager shall use
information regarding each claim that is submitted to the latest edition of the First Data Bank Blue Book (with
manufacturers for rebates. The Client acknowledges and agrees supplements),or the Medi-Span Master Drug Pricing Source(with
that it shall not have a right to interest on,or the time value of,any supplements),or other industry comparable database,as the source
rebate payments received by the Manager or monies payable under for purposes of pricing and classifying drugs(e.g.,legend vs.over
this Agreement. In addition to any security required under Section the counter,brand vs.generic)in connection with this Agreement.
5.4, if any, the Manager may delay remittance of rebates to allow
for fmal adjustments upon termination of this Agreement. The 4.9 Reports and Statements. The Client will review all
Client waives, releases, and forever discharges the Manager from reports and statements provided by the Manager and will notify
any claims, demands, losses, attorneys' fees, costs, expenses, or the Manager in writing of any errors or objections within 30 days
liabilities of any nature,whether known or unknown, arising from of receipt. Until the Client notifies the manager of any errors or
(i)a manufacturer's failure to pay any rebate;(ii)a manufacturer's objections,the Manager will be entitled to rely on the information
breach of an agreement related to this Agreement; or (iii) a contained in the report or statements. If the Client does not notify
manufacturer's negligence or misconduct. The Client the Manager of any errors or objections within the 30-day period,
phgowledges that rebates will not be paid with respect to claims the information contained therein will be deemed accurate,
mitted by Medicaid agencies or other federal or state complete,and acceptable to the Client.
healthcare programs.
4.10 Compliance with Law;Change in Law. (a) Each party
4.6 Audits of Member Pharmacies. The Manager shall is responsible for ensuring its compliance with any laws and
maintain criteria, which it may amend from time to time, to regulations applicable to its business. No party shall make
establish when and how a Member Pharmacy shall be audited to payments or perform services under this Agreement that would be
determine compliance with is agreement with the Manager. The prohibited by law. No part of this Agreement shall be construed to
audit may be conducted by the Manager's internal auditors or its induce or encourage the referral of patients,and no payment made
outside auditors, and at the pharmacy or at the Manger's by a pursuant to this Agreement of any other agreement between the
review of electronically transmitted claims. To the extent the Manager and the Client shall be construed to induce the purchase,
Manager determines as the result of its auditing procedures, that lease, order or arrangement for the furnishing of healthcare
amounts have been overpaid to Member Pharmacies due to products or services. The Client shall be responsible for any
pharmacy error or fraud, the Manager will make reasonable governmental or regulatory charges and taxes imposed on its
attempts to collect such overpayments. Any collected prescription drug program, other than taxes based on the net
overpayments will be paid to the Client. The Manager shall not be income of the Manager. If the Manager's performance of its
required to institute litigation to collect any overpayments. The duties under this Agreement is made materially more burdensome
Manager's obligations to attempt collection shall be the Manager's or expensive due to a change in federal, state or local laws or
sole obligation and liability with respect to remedying such regulations, or the interpretation thereof, or an unforeseen change
overpayments. in the industry, the parties shall negotiate an appropriate
adjustment to the fees paid to the Manager. If the parties cannot
4.7 Client's Authority over Plan. The Client acknowledges agree on an adjusted fee, the Manager may terminate this
that it has the sole authority to control and administer the Plan. Agreement.
The Client further acknowledges that the Manager is engaged to
perform services as an independent contractor and not as a (b) The Client shall ensure that its activities in regard to the
fiduciary of the plan or as an employee or agent of the Client, or prescription drug program are in compliance with ERISA, if
�wC plan contract administrator. Nothing in this Agreement shall applicable. The Client acknowledges and agrees that it is
construed or deemed to confer upon the Manager any responsible for disclosing to its Members any and all information
responsibility for or control over the terms or validity of the Plan. relating to the prescription drug program as required by law to be
4
disclosed, including any information relating to copayments, security in such amount and form as the Manager deems
coinsurance and/or deductibles, any other program coverage and necessary.
eligibility requirements in connection with the prescription drug
program, and any other information concerning commissions, 5.5 If the Client is delinquent in payment, the Manager, aftt
rebates,discounts,and price differentials. making a reasonable effort to collect and upon notice to the Client
may,in addition to its remedies under this Agreement,at law or in
4.11 Exclusivity. The Client hereby grants the Manager equity, do any or all of the following: (i)suspend performance of
during the term of this Agreement and any renewals hereof, the any or all of the manager's obligation under or in connection with
exclusive right to provide the Services to the Client. The Client this Agreement, including the Manager's obligation to process
further agrees that, during the term of this Agreement, and any claims; (ii) apply all or any portion of any security posted by the
renewals hereof, it will not negotiate, contract, or agree with any Client with the Manager to the Client's delinquent account;or(iii)
pharmaceutical manufacturer for the purpose of obtaining rebates set off against any amounts payable to the Client (including any
or other discounts related to Members under this Agreement. The rebates the Manager receives from manufacturers on behalf of the
Client also agrees to cancel any existing agreements or contracts Client)any amounts due from the Client.
with any pharmaceutical manufacturers related to such rebates or
discounts as of the effective date of this Agreement. In the event 5.6 The amount that the Client pays to the Manager under
of a breach of this Section by the Client, the Manager may this Section 5 is not an asset of the Client's prescription benefit
terminate this Agreement or the Client's participation in the plan.
rebates and may retain 100% of any and all rebates that have not
been remitted to the Client as the date of such termination. 5.7 In the event the Client fails to timely pay the Manager
any amount for which the Client is obligated under this
SECTION 5. PAYMENTS DUE. Agreement,the Client agrees to pay the Manager reasonable costs
and expenses, including reasonable attorneys' fees incurred in
5.1 The Manager shall provide the Client with Semi-Monthly collecting such amounts and interest charges from the date the
Account Statements, which shall include (i) the cost of claims for account statement was due at the rate of one and one-half percent
prescriptions approved for payment under the Plan in accordance (1.5%)per month.
to the pricing terms set forth in Exhibit B attached hereto and(ii)
the amount due to the Manager for processing and paying claims SECTION 6. MAINTENANCE OF RECORDS;AUDIT.
during the preceding period as outlined in Exhibit A attached
hereto (the "Managerial Fee"). The Client agrees to make all 6.1 The Manager shall maintain in electronic form, curren
payments by check or by wire transfer to the account set forth in files of all claims received, including any paper claims vouchers
Exhibit C within five(5)business days from the date of the Semi- received from Member Pharmacies and Members for services
Monthly Account Statement. rendered by Non-Member Pharmacies. The Manager shall also
maintain adequate records to establish cost of drugs to the Client.
5.2 Any additional charges for special services, supplies, These records shall remain accessible to the Client for
reports, etc. for which a separate fee is agreed to by the parties as examination and audit by the Client throughout the calendar year
outlined in Exhibit A attached hereto, shall be remitted by the in which they are established and for six (6) calendar years
Client within thirty(30) days after receipt of such Semi-Monthly thereafter. Such audits may be conducted, upon written notice, at
Account Statement or other invoice by the Client from the reasonable intervals during the regular business hours of the
Manager. Manager. All Claim Vouchers, claim forms and other records
pertaining to the management of the Plan and the System are the
5.3 In the event the Client objects to any cost in the Semi- property of the Manager.
Monthly Account Statement,the Client is still obligated to remit
payment of the full payment amount to the Manager within 6.2 The Manager disclaims all liability arising out of the
agreed upon payment terms. Within thirty(30)business days of Client's use or dissemination of the data, records, reports,
the Client's receipt of the account statement, the Client shall summaries and other information provided by the Manager to the
identify and fully explain the basis for such objections in writing Client under this Agreement.
to the Manager. The Client and the Manager shall then work
together to determine the validity of the claims to which the SECTION 7. TERMS OF AGREEMENT.
Client has objected,and if the Client's objection is valid,a credit
shall be given on the next Semi-Monthly Account Statement. 7.1 The effective date of this Agreement shall be the date
first hereinabove written.
5.4 If at any time during the term of this Agreement, the
Manager shall determine, in its sole judgment, that there are 7.2 This Agreement is for an initial term of three years from
reasonable grounds for insecurity as to the ability of the Client to the Effective Date, and will automatically continue in effect for
meet its financial commitments hereunder as they become due,the successive three-year terms thereafter,unless otherwise terminated
Manager shall have the right to require the Client to provide pursuant to Sections 7 or 8 of this Agreement.
5
CONTAINED IN THE DATABASES AND HAS OBTAINED
7.3 In the event litigation proceedings are initiated by either SUCH INFORMATION FROM SOURCES BELIEVED TO BE
left and/or an arbitration process is initiated,the losing party will RELIABLE. THE MANAGER, HOWEVER, DOES NOT
id liable for legal fees expended by both parties. WARRANT THE ACCURACY OF REPORTS, ALERTS,
CODES, PRICES, OR OTHER DATA CONTAINED IN THE
SECTION 8. TERMINATION OF AGREEMENT. DATABASES. THE MANAGER DOES NOT WARRANT
THAT ITS SERVICES WILL BE UNINTERRUPTED OR
8.1 Notwithstanding the provisions contained in Section 7.3 ERROR FREE.
above, the Manager shall reserve the right to suspend services or
terminate this Agreement upon the occurrence of any of the 9.2 The Manager does not direct or exercise any control over
following events: the professional judgment exercised by any pharmacist in
dispensing prescriptions or otherwise providing pharmaceutical
(a) an irresolvable dispute over a fee increase, as described related services. Member Pharmacies are independent contractors
in Section 7 above;or of the Manager, and the Manager shall have no liability to the
Client, any Member, or any other person or entity for any act or
(b) the failure of the Client to remit payments due to the omission of any Member Pharmacy or its agents or employees.
Manager within five (5)business days in accordance with Section
5.1 above;or 9.3 The Client shall indemnify,defend and hold harmless the
Manager, its officers, directors, stockholders, employees and
8.2 The Client shall notify the Manager by written notice agents from and against any and all claims, actions, demands,
within two (2) business days after a finding of impairment or costs and expenses, including reasonable attorney fees and
insolvency or an order to cease and desist from doing business disbursements, as a result of a breach by the Client of any of its
from the Insurance Commission or other regulatory agency, and obligations under this Agreement or arising out of the negligent act
upon receipt of such notice from the Client, the Manager shall or omission or willful misconduct of the Client.
have the option to terminate this Agreement immediately.
9.4 The Manager shall indemnify, defend and hold harmless
8.3 Either party may terminate this Agreement upon a the Client, its officers, directors, stockholders, employees and
material breach by the other party under this Agreement(except as agents from and against any and all claims, actions, demands,
Aillikrwise set forth in Section 8.1 above) if such breach is not costs and expenses, including reasonable attorney fees and
,died within sixty(60) days following the receipt of a written disbursements, as a result of a breach by the Manager of any of its
notice from the injured party specifying the nature of such breach. obligations under this Agreement or arising out of the negligent act
or omission or willful misconduct of the Manager, subject to
8.4 Unless otherwise agreed to by the parties at the time of Sections 2.2(b), 4.3(b) and 6.2 and provided that, the Managers'
termination, this Agreement shall continue to be operative with maximum liability to the Client, regardless of the form of action
respect to obligations incurred hereunder prior to the date of and whether for damages, indemnification or otherwise, shall not
termination, including, but not limited to any obligations in exceed the Average Monthly Fees of the Client. For purposes of
connection with issued and unexpired Member Identification this Section 9.2, "Average Monthly Fees" shall mean the greater
Cards issued by the Manager on behalf of the Client. of(i) the average of the aggregate Managerial Fees and all other
optional service fees (if any) paid by the Client to the Manager
SECTION 9. INDEMNIFICATION AND LIMITATIONS under this Agreement of the preceding three (3) month
ON LIABILITY. immediately prior to the date in which the alleged damage or
injury occurred (the "Injury Date") and (ii) the aggregate of the
9.1 Warranty. This Agreement is not a contract for the sale Managerial Fees and all other optional service fees (if any)paid
of goods. The Manager will perform the Services in a good and by the Client under this Agreement during the month immediately
workmanlike manner in accordance with the customs, practices, preceding the Injury Date.
and standards of providers skilled in the industry. EXCEPT AS
WARRANTED IN THIS SECTION 9.1, THE MANAGER 9.5 Neither the Manager nor any manufacturer or supplier of
DISCLAIMS ALL EXPRESS AND ALL IMPLIED computer equipment and/or software or services shall be liable for
WARRANTIES OF ANY KIND, INCLUDING THE any indirect, special, or consequential damages or lost profits,
SUITABILITY FOR ANY PARTICULAR PURPOSE OF THE arising out of or related to performance of this Agreement or a
DATA GENERATED THROUGH THE MANAGER'S breach of this Agreement,even if advised of the possibility of such
SYSTEM. THE MANAGER RELIES ON FIRST DATA damages or lost profits.
BANK, MEDI-SPAN, OR INDUSTRY COMPARABLE
DATABASES IN PROVIDING CLIENT AND MEMBERS 9.6 The Manager (and its affiliates, directors, employees,
NDRUG UTILIZATION REVIEW SERVICES. THE agents, successors or assigns) will not be liable for any claim
AGER HAS UTILIZED DUE DILIGENCE IN which is asserted by the Client more than ninety days after the
COLLECTING AND REPORTING THE INFORMATION Client is or reasonably should have been aware of such claim,and
6
will in no event be liable for any claim which is asserted by the to obtain or does not seek a protective order and the Receiving
Client more than twelve months after the event resulting in Party is legally compelled to disclose such Confidential
damages or loss. Information, disclosure of such Confidential Information may b
made without liability.
SECTION 10. CONFIDENTIALITY.
(c) For purposes of this Agreement, "Confidential
10.1 The Manager and the Client each acknowledges that Information" means any data or information that is proprietary
certain information, reports and data generated under this to the Disclosing Party and not generally known to the public,
Agreement are subject to applicable confidentiality of medical whether in tangible or intangible form, whenever and however
record laws, and the parties agree to comply in all respects with disclosed, including, but not limited to: (i) any marketing
such laws. The Client represents that it has received or will obtain strategies, plans, financial information, or projections,
Member consents and authorizations required, if any, for the operations, sales estimates, business plans and performance
Manager to obtain, possess, and use prescription and medical results relating to the past,present or future business activities of
information relating to the Members for the purposes described in such party, its affiliates, subsidiaries and affiliated companies;
this Agreement, and for the Manager to contact Members, (ii)plans for products or services,and customer or supplier lists;
Members' physicians, and Member Pharmacies in order to (iii) any scientific or technical information, invention, design,
promote therapeutic and generic substitution opportunities and to process, procedure, formula, improvement, technology or
perform any other services or activities contemplated by this method (iv) any concepts, reports, data, know-how, works-in-
Agreement that may require such contact. Subject to Sections 10 progress, designs, development tools, specifications, computer
and 11 of this Agreement, the Manager and the Client may use, software, source code, object code, flow charts, databases,
reproduce, or adapt information obtained in connection with this inventions, information and trade secrets; and (v) any other
Agreement, including claims information and eligibility information that should reasonably be recognized as confidential
information, in any manner they deem appropriate, except that information of the Disclosing Party. Confidential Information
each party and its agents, employees and contractors shall need not be novel,unique,patentable,copyrightable or constitute
maintain the confidentiality of this information to the extent a trade secret in order to be designated Confidential Information.
required by applicable law,and may not use the information in any The Receiving Party acknowledges that the Confidential
way prohibited by law. The Manager shall retain full ownership Information is proprietary to the Disclosing Party, has been
rights over all compilations, analyses, and reports prepared by the developed and obtained through great efforts by the Disclosing
Manager. Party and that Disclosing Party regards all of its Confidential
Information as trade secrets.
10.2 (a) The Manager and the Client each (d) Notwithstanding anything in the foregoing to the
acknowledges that in the course of dealings between the parties,
it(the"Receiving Party")may acquire Confidential Information contrary, Confidential Information shall not include information
(as defined below) proprietary to the other party (the which: (i)was demonstrably known by the Receiving Party prior
"Disclosing Party"). The Receiving Party agrees to use the to receiving the Confidential Information from the Disclosing
Confidential Information solely in connection with the current or Party; (b)becomes rightfully known to the Receiving Party from
contemplated business relationship between the parties and not a third party source under no obligation to Disclosing Party to
for any purpose other than as authorized by this Agreement maintain confidentiality; (c) is or becomes publicly available
without the prior written consent of an authorized representative through no fault of or failure to act by the Receiving Party in
of the Disclosing Party. No other right or license, whether breach of this Agreement; (d) is required to be disclosed in a
expressed or implied, in the Confidential Information is granted judicial or administrative proceeding,or is otherwise required to
Confidential be disclosed by law, although the requirements of paragraph 4
to the Receiving Party hereunder. Title to the Con
Information will remain solely in the Disclosing Party. hereof shall apply prior to any disclosure being made; and(e) is
or has been independently developed by employees, consultants
(b) Notwithstanding anything in the foregoing to the or agents of the Receiving Party without violation of the terms of
contrary, the Receiving Party may disclose Confidential this Agreement or reference or access to any Confidential
Information pursuant to any governmental, judicial, or Information.
administrative order, subpoena, discovery request or similar SECTION 11. HIPAA COMPLIANCE.
method, provided that the Receiving Party promptly notifies the
Disclosing Party in writing of such demand for disclosure so that 11.1 As part of its continued efforts to comply with the Health
the Disclosing Party, at its sole expense, may seek to make such Insurance Portability and Accountability Act of 1996 (HIPAA),
disclosure subject to a protective order or other appropriate
remedy to preserve the confidentiality of the Confidential the Manager hereby represents and covenants that on the
Information. The Receiving Party agrees that it shall not oppose applicable compliance dates established by the Department of
and shall cooperate with the Disclosing Party with respect to any Health and Human Services(HHS)or the United States Congress,
such request for a protective order or other relief. it shall comply with (i) the requirements applicable to "business
Notwithstanding the foregoing, if the Disclosing Party is unable associates" under 42 C.F.R. §164.504, and (ii) the electronic
7
transactions standards for the transmission of health information market share or other factors. The term rebates as used in this
specified in 45 CFR Part 162. The parties hereto agree to the Agreement does not include these fees and discounts which belong
ores of the Business Associate Addendum attached hereto as exclusively to the Manger or its mail order pharmacy,respectively.
ndix A The Client agrees to fully cooperate with the The Client acknowledges for itself, its Members, and any
Manager in carrying out its obligations set forth in this Section employee welfare benefit plan, that, except as may be expressly
11.1. provided herein, neither it, nor any Member, nor any employee
welfare benefit plan in which a Member may participate, has a
SECTION 12. NOTICES. right to receive, or possess any beneficial interest in, any such
discounts or payments.
12.1 All notices, requests, demands and other
communications hereunder shall be in writing and shall be (b) The Client acknowledges that the Manager has made all
deemed to be effective only if delivered by hand or mailed by necessary disclosures to it if and to the extent required by law and
prepaid registered or certified mail, return receipt requested, to the Client agrees to comply with any disclosure requirements to
the parties at their respective addresses set forth below, or to Members relating to this Agreement if and to the extent required
such other address as each party may specify by written notice to by law.
the other from time to time in accordance with the terms of this
paragraph. Such notices, requests, demands and other 13.2 Property. All computer programs,software or other data
communications hereunder shall be deemed to have been duly• generated or utilized by the Manager are and at all times shall
given upon receipt thereof. remain the property of the Manager.
If to the Manager: 13.3 Entire Agreement. The parties hereto agree that this
National Medical Health Card Systems,Inc. Agreement and the Exhibits attached hereto and made a part
26 Harbor Park Drive hereof constitute the entire agreement and understanding between
Port Washington,NY 11050 the parties relating to the subject matter hereof.
Attention:James J.Bigl,President
Telephone:516-626-0007 13.4 Amendment. The parties further agree that this
Fax: 516-626-8002 Agreement cannot be orally changed, modified, or discharged
except by an agreement in writing and signed by the other party.
Aiiiw the Client:
of Elgin 13.5 Governing Law. This Agreement and all matters
150 Dexter Court concerning its interpretation, performance or the enforcement
Elgin,IL 60120 hereof, shall be governed by and construed in accordance with the
Attention:Femi Folarin laws of the State of New York.
Telephone:847-931-5619
Fax:847-831-5906 13.6 Binding Effect. The rights created by this Agreement
shall inure to the benefit of, and the obligations created hereby
SECTION 13. MISCELLANEOUS. shall be binding upon, the successors, heirs and assigns of the
respective parties hereto.
13.1 Disclosure. (a) In addition to the compensation in the
form of Managerial Fees as described in Exhibit A hereto and 13.7 Enforceability. If any provision hereof shall be deemed
rebates as described in Exhibit B hereto, the Manager may to be unenforceable by law, the remaining provisions of this
receive, directly or indirectly, additional compensation through Agreement shall be enforced and the offending provision shall be
(i) margins from lower contract pricing with participating deemed to be re-written so as to give maximum effect to the intent
pharmacies; (ii) reasonable administrative fees retained by it or of the parties.
related or unrelated third party contractors for their respective
role in securing rebates, (iii) defined services provided on 13.8 Assignment. This Agreement or any of the functions to
behalf of prescription drug manufacturers intended to inform be performed hereunder may be assigned by the Manager to
patients and/or health care professionals of significant clinical another party,provided that, any such assignment shall not relieve
findings or situations that offer Members the opportunity to save the Manager of its obligations hereunder.
on out-of-pocket costs for their prescription drugs; and(iv) fees
or other compensation from pharmaceutical manufacturers, 13.9 Force Majeure. The Manager shall not be liable for
including, without limitation, administrative fees not exceeding failure to perform under this Agreement arising out of any cause
three percent of the aggregate cost of the pharmaceutical products beyond its control or without its fault or negligence.
dispensed to Members, and fees for property provided or services
40,dered to a manufacturer. In addition,the Manager's mail order 13.10 Headings. The headings or captions in this Agreement
-macy may negotiate on its own behalf directly with are for convenience and reference only and do not in any way
manufacturers for discounts, including rebated discounts based on
8
modify, interpret or construe the intent of the parties or affect
any of the provisions of this Agreement.
13.11 Third Party Beneficiary Exclusion. This Agreement is 4111)
not a third party beneficiary contract, nor shall this Agreement
create any rights on behalf of Members as against the Manager.
The Client and the Manager reserve the right to amend, cancel
or terminate this Agreement without notice to,or consent of, any
Member.
[The remainder of this page is intentionally left blank]
A,
A)
9
IN WITNESS WHEREOF, the parties have caused this
Phh-ment to be duly executed as of the date and year first above
n by their respective officers or representatives, duly
authorized to do so.
NATIONAL MEDICAL HEALTH CARD SYSTEMS,INC.
By:
Print Name: James J.Bigl
Title: President
Date:
CITY OF ELGIN
(Name of the Client)
By:
Print Name:
Title:
10
EXHIBIT A*
MANAGERIAL FEE
The Manager will manage the basic prescription program (the "Plan") for a Managerial Fee of
$0.25 per processed claim.
The Plan will provide for the following menu of services (the "Services") to be included for the
Manager's standard per claim Managerial Fee:
- Semi-Monthly Claims Report. A computerized semi-monthly claims report with each invoice,
which lists all claims for the prior two week period.
Coordination of Benefits. Coordination of retail,mail order and e-pharmacy claims data among the
Manager,mail order provider,e-pharmacy provider and the Client.
- Computerized quarterly drug usage reports.
- Toll free WATS Service. Toll free WATS Service throughout the United States.
Standard Forms. Health Card standard forms needed for the effective operation of the Plan.
Handling and Postage Expense. Handling and postage expense for checks to pharmacies and
Members with explanation.
41111,
- Membership List. Computer generated alphabetical listing of Members on a reasonably required
basis by the Client.
- Pharmacy List. Computer generated listing of Member-Pharmacies as reasonably required basis by
the Client.
- Educational Materials. Standard educational materials as needed for Plan participants, physicians
and pharmacists relative to the management of the prescription benefit program.
Pharmacy Audits. Audit of pharmacies and return of funds to the Client where appropriate.
- Member Identification Cards. The Client's logo in black and white on Member Identification Cards
Out-of-Network Claim Forms. provision of standard paper Out-Of-Network Claim Forms for
Members who use Non-Member Pharmacies.
- Standard Concurrent Drug Utilization Review.
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•
Additional Services**
Claims history tape(one tape each cycle). $50.00 per tape
Mailings direct to Members. Postage and handling charges
Postage and handling fees will be charged for any
mailings directly to Members except those covered
by the Managerial Fee described above.
Customized Member Identification Cards. $0.25
Member Identification Cards with colored logos or other
customization.
Customized card set up charges $0.25
Ad Hoc Reporting $TBD per hour programming time
Direct Member Reimbursement(DMR)
Administrative Fee. $1.50 per processed DMR claim
* Rates are guaranteed during the term of this Agreement, buy may be subject to change pursuant to the
terms of the Agreement.
r **The basic Managerial Fee does not include the Additional Services.
Charges for services not listed above will be quoted upon request. Such services include but are not limited
to:
- Custom employee communications
- Profiling prescribers
Member survey services
•
2
EXHIBIT B**
PRICING
RETAIL
Brand: AWP*minus 15%
Dispensing Fee: $2.25
Generic: MAC with an effective overall average discount of AWP-53%
Dispensing Fee: $2.40
MAIL ORDER
Brand: AWP* minus 20.5%
Dispensing Fee: $0.00
Generic: MAC with an effective overall average discount of AWP-53%
Dispensing Fee: $1.00
SPECIALTY
Brand: AWP*minus 14%
Dispensing Fee: $5.00
Generic: MAC
Dispensing Fee: $5.00
*AWP refers to Average Wholesale Price of drug ingredient cost and the discount set forth above is an effective 41111)
average rate rather than actual.
Dispensing fee refers to amount paid to the participating pharmacy for filling a prescription. The Manager's contract
pricing with participating pharmacies may be higher or lower than the client contracted pricing. MAC refers to the
Manager's maximum allowable cost pricing. Non-MAC generic pricing defaults to brand rates.
U&C or usual and customary refers to the retail price charged by a Member Pharmacy for the particular drug in a cash
transaction on the date the drug is dispensed as reported to the Manager by the Member Pharmacy. U&C is estimated
to be up to an additional 1.5% discount off the brand AWP. U&C is established by the retail pharmacy and is not
controlled by the Manager. U&C is driven solely by the competitiveness of the pharmacy provider's marketplace for a
specific drug at a specific time in order to create walk-in-business in their store. The Client is not charged a dispensing
fee on U&C claims. In instances where the U&C discount is greater than the discount off AWP, the U&C discount
shall apply to the aggregate book of business of the Manager,as measured over the term of this Agreement. The mark-
up rate on the U&C discount shall be 5%.
Specialty Drugs are subject to the maximum allowable reimbursement rates.
MANUFACTURER REBATE
For two-tier open formulary: The formulary rebate is guaranteed to be at least$0.75 per claim.
For three-tier closed formulary(with a $15 co-pay differential between preferred and non-preferred brand
drugs): The formulary rebate is guaranteed to be at least$1.50 per claim.
**Rates, including rebates,are guaranteed during the term of this Agreement,but may be subject to change pursuant to
41111)
the teens of the Agreement.
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EXHIBIT C
National Medical Health Card Systems, Inc.
26 Harbor Park Drive
Port Washington,NY 11050
Please wire transfer to:
BANK: JP Morgan Chase Bank
ADDRESS: 4 New York Plaza
New York,NY
FOR ACCOUNT OF: . National Medical Health Card Systems,Inc.
ACCOUNT NUMBER: 777-739313
ABA NUMBER: 021000021
rak
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EXHIBIT D
LIST OF SPECIALTY DRUGS
41111)
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APPENDIX A
BUSINESS ASSOCIATE ADDENDUM
1. Definitions
a. General. Terms used,but not otherwise defined,in this Addendum shall have the same
meaning as those terms in the Privacy Rule.
b. Specific.
"Business Associate" shall mean National Medical Health Card Systems,Inc.
"Covered Entity" shall mean City of Elgin.
"Individual" shall have the same meaning as the term "individual" in 45 CFR § 164.501 and shall
include a person who qualifies as a personal representative in accordance with 45 CFR§ 164.502(g).
"Privacy Rule" shall mean the Standards for Privacy of Individually Identifiable Health
Information at 45 CFR Part 160 and Part 164, Subparts A and E. •
"Protected Health Information" or "PHI" shall have the same meaning as the term"protected
health information" in 45 CFR§ 164.501, limited to the information created or received by Business
Associate from or on behalf of Covered Entity.
"Required By Law" shall have the same meaning as the term "required by law" in 45 CFR§
164.501.
"Services Agreement" shall mean any present or future agreements, either written or oral,
between Covered Entity and Business Associate under which Business Associate provides services to
Covered Entity which involve the use or disclosure of Protected Health Information.
2. Obligations and Activities of Business Associate
a. Use and Disclosure. Business Associate agrees to not use or disclose Protected Health
Information other than as permitted or required by the Services Agreement or as Required By Law.
b. Appropriate Safeguards. Business Associate agrees to use appropriate safeguards to
prevent use or disclosure of the Protected Health Information other than as provided for by the Services
Agreement.
c. Reporting. Business Associate agrees to report to Covered Entity any use or disclosure
of the Protected Health Information not provided for by the Services Agreement of which it becomes
aware.
d. Agents. Business Associate agrees to ensure that any agent, including a subcontractor,to
whom it provides Protected Health Information received from, or created or received by Business
Associate on behalf of Covered Entity agrees to the same restrictions and conditions that apply through
this Addendum to Business Associate with respect to such information.
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411)e. Access to Designate Record Sets. To the extent that Business Associate possesses or
maintains Protected Health Information in a Designated Record Set,Business Associate agrees to provide
access, at the request of Covered Entity,in a reasonable time and manner, to Protected Health
Information in a Designated Record Set, to Covered Entity or, as directed by Covered Entity,to an
Individual in order to meet the requirements under 45 CFR§ 164.524.
f. Amendments to Designated Record Sets. To the extent that Business Associate
possesses or maintains Protected Health Information in a Designated Record Set,Business Associate
agrees to make any amendment(s)to Protected Health Information in a Designated Record Set that the
Covered Entity directs or agrees to pursuant to 45 CFR § 164.526 at the request of Covered Entity or an
Individual, in a reasonable time and manner
g. Access to Books and Records. Business Associate agrees to make internal practices,
books, and records, including policies and procedures and Protected Health Information,relating to the
use and disclosure of Protected Health Information received from, or created or received by Business
Associate on behalf of Covered Entity, available to Covered Entity, or at the request of Covered Entity or
the Secretary,to the Secretary, in a reasonable time and manner or as otherwise designated by the
Secretary, for purposes of the Secretary determining Covered Entity's compliance with the Privacy Rule.
h. Accountings. Business Associate agrees to document such disclosures of Protected
Health Information and information related to such disclosures as would be required for Covered Entity
to respond to a request by an Individual for an accounting of disclosures of Protected Health Information
in accordance with 45 CFR § 164.528.
i. Requests for Accounting. Business Associate agrees to provide to Covered Entity or an
Individual for a reasonable cost-based fee, in a reasonable time and manner upon request, information
collected in accordance with Section 2.h. of this Addendum, to permit Covered Entity to respond to a
request by an Individual for an accounting of disclosures of Protected Health Information in accordance
with 45 CFR§ 164.528.
3. Permitted Uses and Disclosures by Business Associate
a. Services Agreement. Except as otherwise limited in this Addendum,Business Associate
may use or disclose Protected Health Information to perform functions, activities, or services for,or on
behalf of, Covered Entity in accordance with the Services Agreement,provided that such use or
disclosure would not violate the Privacy Rule if done by Covered Entity or the minimum necessary
policies and procedures of the Covered Entity. Such permitted uses and disclosures include but are not
limited to:
(i) providing PHI to members on behalf of Covered Entity;
(ii) providing PHI for payment, treatment and healthcare operations purposes;
(iii) providing data aggregation services to Covered Entity as permitted by 42 CFR §
164.504(e)(2)(i)(B); and
(iv) performing appropriate administrative,management, or legal activities as set forth in the
Services Agreement.
2
A
b. Use for Administration of Business Associate. Except as otherwise limited in this
Addendum,Business Associate may use Protected Health Information for the proper management and
administration of the Business Associate or to carry out the legal responsibilities of the Business
Associate.
c. Disclosure for Administration of Business Associate. Except as otherwise limited in this
Addendum,Business Associate may disclose Protected Health Information for the proper management
and administration of the Business Associate,provided that disclosures are Required By Law, or
Business Associate obtains reasonable assurances from the person to whom the information is disclosed
that it will remain confidential and used or further disclosed only as Required By Law or for the purpose
for which it was disclosed to the person, and the person notifies the Business Associate of any instances
of which it is aware in which the confidentiality of the information has been breached.
d. Reporting Violations of Law. Business Associate may use Protected Health Information
to report violations of law to appropriate Federal and State authorities, consistent with § 164.502(j)(1).
4. Obligations of Covered Entity
a. Limitations on Privacy Practices. Covered Entity shall notify Business Associate of any
limitation(s) in its notice of privacy practices of Covered Entity in accordance with 45 CFR§ 164.520,to
the extent that such limitation may affect Business Associate's use or disclosure of Protected Health
Information.
b. Changes in Permission. Covered Entity shall notify Business Associate of any changes
elw in,or revocation of, permission by Individual to use or disclose Protected Health Information, to the
extent that such changes may affect Business Associate's use or disclosure of Protected Health
Information.
c. Restrictions on Use. Covered Entity shall notify Business Associate of any restriction to
the use or disclosure of Protected Health Information that Covered Entity has agreed to in accordance
with 45 CFR § 164.522,to the extent that such restriction may affect Business Associate's use or
disclosure of Protected Health Information.
d. Impermissible Request by Covered Entity. Except as otherwise set forth in Section 3 of
this Addendum,Covered Entity shall not request Business Associate to use or disclose Protected Health
Information in any manner that would not be permissible under the Privacy Rule if done by Covered
Entity.
e. Representation. Covered Entity represents and warrants that it has entered into
"Business Associate Agreements"with any third parties to which Covered Entity directs and authorizes
Business Associate to disclose PHI.
5. Term and Termination
a. Term. This Addendum shall be effective as of the date of this Addendum, and shall
terminate when all of the Protected Health Information provided by Covered Entity to Business
Associate, or created or received by Business Associate on behalf of Covered Entity, is destroyed or
returned to Covered Entity, or, if it is infeasible to return or destroy Protected Health Information,
r protections are extended to such information, in accordance with the termination provisions in this
Section.
3
a
b. Termination for Cause.Upon Covered Entity's knowledge of a material breach by
Business Associate,Covered Entity shall either:
(i) Provide an opportunity for Business Associate to cure the breach or end the violation. If
Business Associate does not cure the breach or end the violation within 90 days from the
time of notification by Covered Entity,Covered Entity shall terminate: (A)this
Addendum and (B) all of the provisions of the Services Agreement that involve the use
or disclosure of Protected Health Information.
(ii) Immediately terminate: (A)this Addendum and (B) all of the provisions of the Services
Agreement that involve the use or disclosure of Protected Health Information if Business
Associate has breached a material term of this Addendum and cure is not possible; or
(iii) If neither termination nor cure is feasible,Covered Entity shall report the violation to the
Secretary.
c. Effect of Termination.
(i) Except as provided in paragraph(ii)of this section, upon termination of this Addendum,
for any reason,Business Associate shall return or destroy all Protected Health
Information received from Covered Entity, or created or received by Business Associate
on behalf of Covered Entity. This provision shall apply to Protected Health Information
that is in the possession of subcontractors or agents of Business Associate. Business
Associate shall retain no copies of the Protected Health Information.
(ii) In the event that Business Associate determines that returning or destroying the Protected
Health Information is infeasible,Business Associate shall provide to Covered Entity
notification of the conditions that make return or destruction infeasible. Upon mutual
agreement that return or destruction of Protected Health Information is infeasible,
Business Associate shall extend the protections of this Addendum to such Protected
Health Information and limit further uses and disclosures of such Protected Health
Information to those purposes that make the return or destruction infeasible, for so long
as Business Associate maintains such Protected Health Information.
6. Miscellaneous
a. Regulatory References. A reference in this Addendum to a section in the Privacy Rule
means the section as in effect or as amended.
b. Amendment. The parties agree to take such action as is necessary to amend this
Addendum from time to time as is necessary for Covered Entity to comply with the requirements of the
Privacy Rule and the Health Insurance Portability and Accountability Act of 1996,Pub.L.No. 104-191.
c. Survival. The respective rights and obligations of Business Associate under Section 5.c.
of this Addendum shall survive the termination of the Services Agreement.
d. Interpretation. Any ambiguity in this Addendum shall be resolved to permit Covered
Entity to comply with the Privacy Rule.
4