DIABETIC SUPPLIES REBATE AGREEMENT

DIABETIC SUPPLIES REBATE AGREEMENT This Diabetic Supplies Rebate Agreement (the Agreement ) is made and entered into as of October 1, 2012 ( Effective Date ) by and between Magellan Medicaid Administration, Inc. ( MMA ), the Participating States, and, ( Manufacturer ). RECITALS: WHEREAS, various state agencies have entered into agreements, either directly or indirectly, with MMA or its Affiliates to provide certain pharmacy benefit administration services ( PBA Services ) to the state Medicaid and/or other CMS approved state pharmaceutical assistance programs; WHEREAS, some of those state agencies desire that MMA or its Affiliates contract with manufacturers of diabetic supplies to enable the Participating States to obtain rebates for diabetic supplies utilized by enrollees of the Participating States Medicaid and/or other CMS approved state pharmaceutical assistance programs; WHEREAS, Manufacturer manufactures and/or distributes the diabetic supplies listed on Exhibits 2-1 and 2-2 (hereinafter individually Product and collectively the Products ); WHEREAS, the States, through MMA, desires to obtain Rebates for Products dispensed to Members and covered under the Eligible Programs and Manufacturer desires to provide such Rebates to the State. NOW, THEREFORE, this Agreement sets forth the terms and conditions upon which Manufacturer will pay Rebates to MMA or the States, as applicable, and in consideration of their respective promises to each other, MMA and Manufacturer agree as follows: 1. Definitions: Capitalized terms used herein and not defined herein shall have the following meanings: 1.1 Affiliate means an entity that controls a party, is controlled by a party, or is under common control with a party. 1.2 Covered or Coverage means a diabetic supply dispensed to or on behalf of a Member that is paid in whole or in part by a Participating State under an Eligible Program. 1.3 Eligible Program(s) means those Medicaid and/or other CMS approved state pharmaceutical assistance programs offered by Participating States, which offer a diabetic supply benefit to Members. 1.4 Member means a Beneficiary of a state Medicaid program and/or other CMS approved state pharmaceutical assistance programs and receives Coverage for his/her Covered diabetic supplies under an Eligible Program. 1.5 National Drug Code or NDC means an eleven (11) digit number assigned by the manufacturer of the pharmaceutical product representing the pharmaceutical product name, manufacturer, strength, dosage form and package size. 1

1.6 Net Price Per Unit means the dollar value per unit per NDC set forth in Exhibits 2-1 and 2-2, which is used to calculate Rebates due hereunder. 1.7 Participating State(s) means state agencies that have entered into agreements with MMA or its Affiliates to provide certain pharmacy benefit administration services ( PBA Services ) to the state s Eligible Programs and executed a State Participation Addendum, such addendum to be attached as Exhibit 5. The agreement between the Participating State and MMA or an MMA Affiliate may be directly (i.e., as a prime contractor to the Participating State for PBA Services), or indirectly (i.e., as a subcontractor of (i) a prime contractor that contracts with the Participating State, or (ii) a subcontractor that contracts with a prime contractor that contracts with the Participating State). 1.8 Preferred Drug List means the current written list(s) of pharmaceutical products and diabetic supplies (in whatever forms they are maintained and promulgated, including, without limitation, via the internet and other electronic mediums), as periodically amended, that has been developed by a Participating State and distributed to relevant providers and Members for the purpose of identifying those pharmaceutical products (i) Covered under the Program, and/or (ii) for which Coverage is available without prior authorization, whereas pharmaceutical products and diabetic supplies not on the Preferred Drug List are subject to prior authorization. 1.9 Product means all diabetic supplies manufactured or distributed by or on behalf of Manufacturer, set forth in Exhibits 2-1 and 2-2. 1.10 Quarterly Submission means a Participating State s quarterly invoice and supporting data regarding its State Product Volume that must be submitted to Manufacturer as described in Section 4 of this Agreement. 1.11 Rebate means a retrospective reimbursement, based on the Product Volume, to be paid or credited to a Participating State under this Agreement. 1.12 State Product Volume means with respect to each Product, the total number of units of such Product dispensed to Members in the United States (including the District of Columbia, Puerto Rico and U.S. Territories) Covered by a Participating State under an Eligible Program, in a calendar quarter. 1.13 Supplier means any licensed pharmacy or other entity located in the United States, Puerto Rico, and U.S. Territories that is authorized to dispense or otherwise sell diabetic supplies on an outpatient basis. 1.14 Therapeutic Class or Therapeutic Category means the grouping of pharmaceutical products based on a common mechanism of action of such pharmaceutical products. The Therapeutic Class for each Product shall be identified in Exhibit 4. 1.15 Wholesale Acquisition Cost (WAC) means the Manufacturer s U.S. Dollar wholesale acquisition price in effect on the last day of a quarter on a unit basis as published by a third party source, such as First Databank, for each product and represents the Manufacturer's published price for a drug product to wholesalers. 2

2. Identification of Participating States. Participating States shall be those states that have signed a Participating State Addendum as communicated by MMA to Manufacturer. If a Participating State signs an Addendum after the Effective Date of this Agreement, such State s participation under this Agreement shall be the effective date of the Participating State Addendum. 3. Rebates. 3.1 Preferred Drug List Status Requirements. 3.1.1 As a condition of receiving Rebates for a Product for a quarterly reporting period, that Product shall be: listed on the Participating State s Preferred Drug List or similar web based document applicable to the Eligible Program for the time period for which Rebates are claimed; not be subject to prior authorization; dispensed by a Supplier and the claim for such Product submitted to the Participating State for payment via a real-time point-of-service claims processing ( POS ) system. The parties understand and agree that in some instances the POS system may be unavailable or inaccessible and claims may be submitted via paper. Such paper claims shall be eligible for Rebates hereunder when all other conditions are satisfied; and Paid by the Participating State as indicated by the "Paid Date" in the Participating State's records, during the time period for which Rebates are claimed; and satisfy any other conditions set forth in Exhibits 2, 2-1 or 2-2, as applicable. In addition, any products not on the Preferred Drug List must be subject to prior authorization. Participating States reserve the right to not include certain Medicaid eligible participants from this program. If a Participating State exercises such right, no utilization data for any such excluded participants shall be submitted for or eligible for rebates hereunder. Nothing in this Agreement shall be construed to limit the ability of a Participating State, or require a Participating State, to remove or add any pharmaceutical products (including Products) from/to a Preferred Drug List. 3.1.2 No Rebate amounts shall be due from Manufacturer for that portion of a calendar quarter for any Product dispensed to a Member and Covered by a Participating State when the conditions set forth in Section 3.1.1 above and Exhibits 2, 2-1 or 2-2, as applicable, are not met with respect to such Product. A Participating State shall be entitled to a Rebate for a Product for that 3

portion of a calendar quarter during which the requirements of Section 3.1.1 and Exhibits 2, 2-1 or 2-2, as applicable, were satisfied. 3.1.3 Manufacturer understands and acknowledges that the selection and evaluation of pharmaceutical products for inclusion or exclusion on an Eligible Program s Preferred Drug List is performed in accordance with applicable state law and may include but is not limited to, an Eligible Program s Pharmacy and Therapeutics ( P&T ) Committee, the State Medicaid Director or his/her designee. 3.1.4 The Participating State, or MMA or an Affiliate of MMA, shall notify the Manufacturer whenever a Participating State adds or deletes a Product to/from its Preferred Drug List or adds or deletes a pharmaceutical product in the same Therapeutic Category to/from the Preferred Drug List. 3.1.5 Each Participating State, at the commencement of such State s participation under this Agreement, will make its best effort to implement an NDC block for all non-preferred pharmaceutical products in the same Therapeutic Class as Product within ninety (90) days following the State s formal announcement of Product s addition to the Participating State s Preferred Drug List. 3.2 Calculation of Rebates. Rebates payable to the Participating States hereunder shall be calculated in accordance with the methodology set forth in Exhibits 2, 2-1 or 2-2, as applicable, attached hereto. 3.3 Payment. 3.3.1 Manufacturer shall pay, or cause its distributor of the specific Product to pay the rebates due hereunder, to the applicable Participating State within thirty (30) days of its receipt of the Participating State s Quarterly Submission. In the event Manufacturer disputes any portion of a Quarterly Submission provided under the Agreement, Manufacturer shall remit, or cause its distributor of the specific Product to remit, payment to the applicable Participating State for undisputed amounts within thirty (30) days of receipt of the Participating State s Quarterly Submission along with complete documentation of the reason and amount of the disputed portion. Manufacturer and the Participating State, or MMA or an MMA Affiliate acting on behalf of the Participating State, shall work in good faith to reconcile any disputed Quarterly Submission within thirty (30) days of written notification of such a disputed amount. Upon resolution of any disputed Quarterly Submission, the negotiated amount due the other party shall be paid within thirty (30) days of such resolution. 3.3.2 Interest on the Rebates payable under Section 3.3.1 of this Agreement begins accruing thirty-eight (38) days after the invoice postmark date of the Participating State s Quarterly Submission and interest will continue to accrue until the postmark date of the Manufacturer's payment. The interest calculation shall be the same as that calculated for CMS guaranteed rebates, see http://www.cms.hhs.gov/medicaiddrugrebateprogram/11_interestcalc.asp, or such other website address as notified by MMA. 4

3.3.3 Manufacturer agrees to continue to pay Rebates, in accordance with the terms of this Agreement and any addenda, for as long as this Agreement is in force, regardless of whether the Manufacturer continues to market that drug. Manufacturer s obligation to pay Rebates shall terminate twelve (12) months following the last expiration date of the last lot of Product sold by the Manufacturer. Notwithstanding the above, in the event Manufacturer's Product(s) is/are sold to another manufacturer, Manufacturer shall have no liability for rebates on utilization beyond those required by the Medicaid program. Manufacturer shall promptly provide the Participating State and MMA with notice of the sale of said Product(s), but no later than ten (10) days following such sale. 3.3.4 Unless notified otherwise, Manufacturer will send Rebate payments by certified mail, return receipt requested, to the address provided to Manufacturer in each individual Participating State s addendum. 3.4 Annual Enhancement Period. On at least an annual basis or at the sole discretion of MMA, Manufacturer shall have the opportunity to lower the net cost (increase the level of Rebate) for its Products set forth in Exhibits 2, 2-1 and 2-2. 4. Submission of Data. The Participating States, MMA or an MMA Affiliate acting on behalf of a Participating State, shall submit the Quarterly Submission to Manufacturer for Rebates within sixty (60) days after the end of each calendar quarter. The format for the Quarterly Submission is set forth in Exhibit 3, attached hereto and made a part hereof. A Participating State, or MMA or an MMA Affiliate acting on behalf of a Participating State, may make corrections to the quarterly Product Volume file after it has been submitted to Manufacturer. 5. Record Retention and Maintenance. 6. Audits. 5.1 Each Participating State shall maintain complete and accurate electronic claim records for the most recent four quarters that will permit Manufacturer to verify through an audit process, as described in Section 6 below, the Quarterly Submission provided by a Participating State. 5.2 Manufacturer shall maintain complete and accurate records regarding the payment and calculation of Rebates for the most recent four quarters. The Manufacturer shall have the right, not more frequently than annually, subject to mutually agreed upon audit and confidentiality policies, at the auditing party s expense and upon sixty (60) days prior notice to the other party, to inspect the records described in Section 5 of this Agreement that relate to claims submitted for Rebates and Rebates paid, without undue interruption to the other party s business operations. If the Manufacturer designates an agent(s) to perform an audit, such party shall designate agents who maintain no conflict of interest with the Participating State or MMA or an Affiliate of MMA, and are otherwise reasonably acceptable to such party. If auditing agents are designated, such agents shall sign a confidentiality agreement reasonably acceptable to the party being audited. Any information 5

provided by the audited party shall be subject to the Confidentiality provision of this Agreement, as described in Section 8, and applicable state and federal law. If any audit by either party discloses overpayment or underpayment of reimbursement hereunder, such undisputed overpayments or underpayments shall be paid by the respective party within thirty (30) days written notice from the party due any refund or additional payment. 7. Contract Term and Termination. 7.1 Term. This Agreement shall commence on the Effective Date and remain in effect until September 30, 2013, unless terminated sooner as provided in Section 7.2. 7.2 Termination. 7.2.1 Termination for Breach. Either party may terminate this Agreement upon at least thirty (30) days prior written notice of such termination to the other party upon material default or material breach by such party of one or more of its obligations hereunder, unless such material default or material breach is cured within thirty (30) days of the written notice of termination. 7.2.2 Immediate Termination. This Agreement may be immediately terminated, in its entirety or with respect to a Product(s) as follows: 7.2.2.1 By MMA in its sole discretion at any time due to (a) a suspension, withdrawal, expiration, non-renewal or revocation of any license, registration, certificate or other legal credential or authorization required to be obtained or maintained by Manufacturer related to the manufacturing, marketing, sale or distribution of any of its Products; (b) Manufacturer s indictment or conviction for a felony or for any criminal charge related to Manufacturer s manufacturing, marketing, sale or distribution of any pharmaceutical products; (c) a suspension, exclusion or debarment of Manufacturer from participation in the Medicare or Medicaid programs; or (d) a filing in bankruptcy, the appointment of a receiver, the marshaling of debts or assets, or the proposed settlement of outstanding debts under applicable reorganization or insolvency laws filed by or against Manufacturer; or 7.2.2.2 By Manufacturer in its sole discretion at any time due to (a) a suspension, withdrawal, expiration, non-renewal or revocation of any license, registration, certificate or other legal credential or authorization required to be obtained or maintained by MMA to enable it to conduct the business covered by this Agreement; (b) MMA s indictment or conviction for a felony or for any criminal charge related to MMA s conduct of its business covered by this Agreement; (c) an exclusion, suspension or debarment of MMA from participation in the Medicare or Medicaid programs; or (d) a filing in bankruptcy, the appointment of a receiver, the marshaling of debts or assets, or the proposed settlement of outstanding debts under applicable reorganization or insolvency laws filed by or against MMA. Each party shall provide immediate notice to the other party of any of the termination events listed above in this Section 7.2.2. 6

7.2.3 Termination of MMA or an MMA Affiliate s PBA Services Contract. Termination of the PBA Services contract between: (i) MMA or an MMA Affiliate; and (ii) the Participating State (if MMA or an MMA Affiliate holds the PBA Services Contract with the Participating State), or another entity that contracts directly or indirectly with the State to provide PBA Services; shall, as of the same termination effective date, terminate this Agreement as to that Participating State. 7.3 Obligations Upon Termination. Any termination shall not affect the rights and obligations of the parties accruing prior to the effective date of such termination, including any Rebates or interest still due and payable from the Manufacturer under Section 3.3 for which such obligation to reimburse arose prior to the effective date of termination of this Agreement. 8. Confidentiality. 8.1 Terms of Agreement. No party hereto shall disclose the terms of this Agreement to any other person or entity other than (i) a party, (ii) an entity that is an Affiliate of a party and the Affiliate needs such information to assist the party in performing its obligations hereunder, (iii) to a non-affiliate of a party where such disclosure is necessary to fulfill a party s obligations hereunder and provided such non-affiliate person or entity enters into a written agreement with the party which it supports and agrees to abide by the requirements set forth in this Section 8, or (iv) as required by law. 8.2 Maintain Confidentiality. Both parties and any entity listed in Section 8.1 (ii) or (iii) above shall take all reasonable precautions to maintain the confidentiality of this Agreement and any related information provided to or discovered by the other party or its authorized representatives. 8.3 Non-Disclosure. During the term of the Agreement, each party may find it necessary to disclose confidential and proprietary information to the other (hereinafter Information ). The Information may include but is not limited to Product Volume data, client information, Eligible Program design and development, pricing generally, special contract pricing, manufacturing schedules, sales amounts, sales figures, and aggregate Rebate payment information. During the term of this Agreement and for three (3) years thereafter, regardless of any termination earlier than the expiration of the term of this Agreement, each party shall maintain the Information in confidentiality and shall not reveal the Information to third parties without fifteen (15) days prior written notice to the other party, except as required by law, or as necessary to administer this Agreement, provided such third party non-affiliates comply with Section 7.1(iii) above. Each party shall use the Information only for the purposes of this Agreement. These restrictions shall not apply to Information that: 8.3.1 is in the public domain at the time of disclosure; 8.3.2 after receipt, becomes part of the public domain by publication or otherwise, except by breach of this Agreement by party receiving the Information; 7

8.3.3 the party receiving the Information can establish by competent proof the Information was in its possession at the time of disclosure by the other party; 8.3.4 comes to the party receiving the Information from third parties not under an obligation to maintain its confidentiality; 8.3.5 is independently developed by employees of the party receiving the Information hereunder who have had no access to such Information as shown by competent proof; or 8.3.6 is required to be disclosed by law, by a judicial or administrative order, or by a regulatory agency with appropriate jurisdiction. 8.4 Return of Information. Upon termination of this Agreement, each party will immediately discontinue use of the other party s Confidential Information, and shall return the other party s Confidential Information to it, or destroy the other party s Confidential Information in its possession or control. However, each party may retain the other party s Confidential Information to the extent such Confidential Information has been used in or integrated into reports, studies, analyses, compilations or other documents in the receiving party s possession or control, or is necessary to retain such records for legitimate business reasons. Any oral Information will continue to be subject to the terms of this Agreement. 8.5 No Disclosure of PHI. Under no circumstances, including but not limited to the performance of an audit pursuant to Section 6 of this Agreement, shall Manufacturer have access to any Individually Identifiable Information, as such term is construed under regulations promulgated under the federal Health Insurance Portability and Accountability Act ( HIPAA ), during or after the term of the Agreement. In the event that Manufacturer receives any Individually Identifiable Information in contravention of this prohibition, it shall immediately report such receipt and any uses or disclosures of such information to the party or Participating State that provided such information. 8.6 Disclosure Required as Part of PDL Review Process. The parties understand and agree that Participating States, may have an obligation under law, to disclose information to the public about this agreement as part of its PDL review process. Such disclosure shall not include the financial terms of this Agreement. 9. Miscellaneous. 9.1 Role of MMA. MMA, as the pharmacy benefit administrator for the Participating States, may assist the Participating States in fulfilling their responsibilities hereunder and is a party to this Agreement solely in its capacity as agent for, and subject to the supervision and oversight of, the Participating State(s). 9.2 Use of Trademarks, Etc. Neither party shall use any patented, trade-named, trademarked, service-marked or copyrighted material or property belonging to the other party, except as expressly permitted by this Agreement or otherwise authorized in writing by the other party. 9.3 Notices. Any notice required or permitted to be given pursuant to the terms and provisions hereof shall be effective only if given in writing and sent by overnight 8

delivery service with proof of receipt, by facsimile (with proof of successful transmission to the facsimile number(s) listed below) or by certified mail return receipt requested. Notices shall be sent to the following addresses (which may be changed by giving notice in conformity with this section): Magellan Medicaid Administration, Inc. 4300 Cox Rd Glen Allen, VA 23060 Attn: Rebate Contacting Dept. FAX Number : 804-965-2711 And to Manufacturer at: 9.4 Assignment. Neither party shall be entitled to assign its rights and obligations hereunder without the prior written consent of the other party; provided, however, a party shall be entitled, without the prior written consent of the other party, to assign its rights and obligations to an Affiliate, but such assignment shall not relieve the assigning party of its obligations hereunder. 9.5 Entire Agreement. This Agreement (including its exhibits and any amendments) contains the entire agreement and understanding of the parties with respect to the subject matter thereof and supersedes any and all prior or contemporaneous oral or written communications or proposals not expressly included herein. This Agreement may not be amended or modified except as permitted by this Agreement or upon the written agreement of the parties. 9.6 Waiver of Breach. The failure of either party to insist upon the strict observation or performance of any provision of this Agreement, or to exercise any right or remedy shall not impair or waive any such right or remedy in the future. Every right and remedy given by this Agreement to the parties may be periodically exercised as often as possible. 9.7 Severability. Any determination that any provision of this Agreement or any application thereof is invalid, illegal or unenforceable in any respect in any instance shall not affect the validity, legality and enforceability of such provision in any other instance, or the validity, legality or enforceability of any other provision of this Agreement. 9.8 Compliance with Laws. The Manufacturer agrees to be bound by the laws of the United States of America and with respect to each Participating State, the law of that Participating State. Proper venue in any legal action shall be the venue of the Participating State that is party to the proceeding. Proper venue in any legal action shall be the Commonwealth of Virginia. Any action brought by Manufacturer must be 9

brought separately against individual Participating States or MMA, unless all affected Participating States and MMA consent to joinder of the actions. 9.9 Independent Contractors. The parties hereto are independent contractors engaged in the operation of their own respective businesses. Nothing herein shall be deemed or construed to create any other relationship between the parties. 9.10 Third Party Beneficiaries. Other than Participating States, no third parties or entities are intended to be, or are, third party beneficiaries under this Agreement. 9.11 Force Majeure. Noncompliance with the obligations of this Agreement due to force majeure, laws or regulations of any government, war, fire, earthquake and any other causes beyond the reasonable control of the parties shall not constitute breach of contract. 9.12 Survival. The provisions of Sections 1, 5, 6, 7.3, 8, and 9 shall survive expiration or termination of this Agreement, regardless of the cause giving rise to termination. 9.13 Headings. The headings contained in this Agreement are included for purposes of convenience only, and shall not affect in any way the meaning or interpretation of any of the terms of this Agreement. 9.14 Disclaimer of Representations and Warranties. MMA makes no representation, warranty or guarantee as to any volume of business, the number of Participating States who may place Products on their Preferred Drug Lists, the number of providers who may prescribe the Products, the number of Members who may use the Products, any percentage of market share or change in the market share for Manufacturer or the Products. 9.15 Dispute Resolution and Arbitration. 9.15.1 In the event that in any quarter a discrepancy in a Participating State's State Product Volume data is questioned by the Manufacturer, which the Manufacturer and the Participating State in good faith are unable to resolve, the Manufacturer will provide written notice of the discrepancy to the Participating State and MMA. 9.15.2 If the Manufacturer in good faith believes the Participating State's State Utilization Data is erroneous, the Manufacturer shall pay the Participating State that portion of the rebate claimed, that is not in dispute by the required date. The balance in dispute, if any, will be paid by the Manufacturer to the Participating State by the due date of the next quarterly payment after resolution of the dispute and interest shall be paid in accordance with Section 3.3.2. 9.15.3 The Participating State and the Manufacturer will use their best efforts to resolve the discrepancy within 60 days of receipt of written notification. Should additional information be required to resolve disputes, the Participating State and First Health will cooperate with the Manufacturer in obtaining the additional information. 10

9.15.4 In the event that the Participating State and the Manufacturer are not able to resolve a discrepancy regarding State Utilization Data as provided for in Sections 7.1 through 7.3, the Manufacturer may request a reconsideration of the Participating State's determination within 30 days after the end of the 60 day period identified in Section 6.3. The Manufacturer shall submit with its written request its argument in writing, along with any other materials, supporting its position to the Participating State and First Health. The Participating State shall review the written argument and materials and issue a decision in the matter. 9.16 Indemnification. Manufacturer agrees to indemnify, defend and hold harmless the Participating States and MMA, their officers, agents and employees from any and all claims and losses accruing or resulting to any person, firm or corporation who may be injured or damaged by the Manufacturer solely as a direct result of the Manufacturer s failure to perform in accordance with this Agreement. 9.17 Limitation on Liability. Neither party shall be liable to the other for consequential, special, or indirect damages, including, but not limited to, lost profits or revenues. IN WITNESS WHEREOF, the undersigned parties have executed this Agreement as of the date first above written. MAGELLAN MEDICAID ADMINISTRATION, INC. MANUFACTURER (Manufacturer Name) By: By: (Signature) (Signature) Name: Title (Print) Name Title (Print) Date Date 11