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against a pharmaceutical company to collect Rebates, PBM may offset any reasonable costs, including reasonable attorneys' fees and expenses, arising from any such action. 5. Rebate amounts paid to Client pursuant to this Agreement are intended to be treated as "discounts" pursuant to the federal anti -kickback statute set forth at 42 U.S.C. § 1320a -7b and implementing regulations. Client is obligated if requested by the Secretary of the United States Department of Health and Human Services, or as otherwise required by applicable law, to report the Rebate amounts and to provide a copy of this notice. ESI will refrain from doing anything that would impede Client from meeting any such obligation. ESI's Inflation Protection Program ESI is pleased to offer our Inflation Protection Program to your organization. Under the program, ESI will pay to Sponsor $2.00 per Formulary Brand Drug claim (the "Sponsor Inflation Payment"). Subject to the conditions set forth herein, ESI shall pay Sponsor the Sponsor Inflation Payment within approximately one hundred and eighty (180) days following the end of each calendar quarter for utilization occurring during such quarter. Non -Formulary claims will be excluded. Terms and Conditions of the Inflation Protection Program The following claims will be excluded from all calculations related to the Inflation Protection Program: Medicare claims, Medicaid claims, any other government health care program claims, OTCs, member submitted claims, subrogation claims, compounds, Generic Drugs, claims submitted by Sponsor owned, in-house, or on-site pharmacies, 340B claims, claims submitted through a 100% member cost -share program, Biosimilars, drugs where the quantity or packaging has been changed by the manufacturer from the past year, and drugs for which there was no utilization in the calendar year prior to the calendar year for which the Inflation Guarantee payment is being determined. If Sponsor makes material changes to its Formulary or benefit design that negatively impact ESI's ability to control inflation relative to Sponsor's Formulary drug mix, then ESI reserves the right to make an equitable adjustment to the Inflation Guarantee. ESI's Inflation Protection Program, and the underlying economics, is separate and apart from, rebates and manufacturer administrative fees and the amounts described above will be paid to Sponsor in addition to any rebate payments to which Sponsor is entitled. Sponsor will not be entitled to receive any amounts related to drug price inflation or a related guarantee other than as set forth above. The following pricing assumptions shall apply for purposes of this Agreement: 1. If Client decides to implement a mandatory generic, mandatory mail, step therapy or other program during the Term, ESI has agreed that proposed pricing terms other than rebate guarantees will remain unchanged. 2. ESI must agree to propose pricing based on its broad national retail network that includes all major national and regional pharmacy chains. 3. Pricing is not based upon the assumption that ESI will be the exclusive PBM. Client reserves the right to purchase specialty products from other sources. Client will have the option to select an open or exclusive specialty provider. Additionally, Administrator will work with Client as needed to re -direct specialty medications to a preferred provider. DISCOUNTS 4. The proposed "effective"eg neric discount and theeg neric discount guarantee calculation INCLUDES the following: MAC Generics Non -MAC Generics Single Source Generics NOT FOR DISTRIBUTION. THE INFORMATION CONTAINED HEREIN IS CONFIDENTIAL, PROPRIETARY AND CONSTITUTES TRADE SECRETS OF ESI AND RXBENEFITS 29