Item 1.01. Entry into a Material Definitive Agreement.
Distribution Agreement.
On July 25, 2018, Vericel Corporation (the Company, Vericel or we) amended its Distribution Agreement, dated May 15, 2017 (the Distribution Agreement) by and between Orsini Pharmaceutical Services, Inc. (Orsini) and the Company, as previously amended (the Fourth Amendment).
The Fourth Amendment amends certain payment terms between the parties, including as a result of termination of the Distribution Agreement. Under the Fourth Amendment, the parties agreed to eliminate Orsinis right to serve as the Companys exclusive distributor for MACI as the Company is moving to a limited network of distributors. Orsini remains the exclusive pharmacy supplying MACI for only an enumerated list of Payors (as defined in the Distribution Agreement). Notwithstanding the elimination of Orsinis exclusivity, if the Company (a) does not submit a fixed number of MACI cases to Orsini prior to June 30, 2019 (and accordingly does not pay the dispensing and administrative fees for such fixed number of cases), and (b) terminates the Distribution Agreement pursuant to the terms of the Fourth Amendment, Orsini will be entitled to increased administrative fees based on such fixed number of cases. The Company will generally be required to pay an amount determined by amounts collected by Orsini and the difference between the fixed number and actual number of cases submitted to Orsini.
The revised payment terms in the Fourth Amendment apply only to a list of existing cases at the time of execution of the Fourth Amendment and any claims submitted after June 15, 2018. The Fourth Amendment includes a provision whereby the Company retains the credit and collection risk from the end customer on implants after June 15, 2018, and Orsini performs the collection activities. Pursuant to the Fourth Amendment, the Company will pay Orsini a dispensing fee on a per implant basis and an administrative fee related to Orsinis collection performance.
Dispensing Agreement.
On July 26, 2018, the Company entered into a Dispensing Agreement (the Dispensing Agreement) with AllCare Plus Pharmacy, Inc. (AllCare). Pursuant to the Dispensing Agreement, the Company appoints AllCare as a non-exclusive specialty pharmacy provider of MACI in the United States and Puerto Rico. The Company will pay to AllCare a fee for each patient to whom MACI is dispensed.
AllCare agrees to collect and pass on to the Company all reimbursement related to MACI. AllCare authorizes the Companys payment collections contractor to act as AllCares authorized representative with respect to billing, collection, credentialing and pre-authorization services for MACI with respect to payors. AllCare agrees to coordinate with the Company regarding the shipping of MACI from the Companys manufacturing facility to AllCares pharmacy location and from AllCares pharmacy location to the customer. AllCare generally retains risk of loss during delivery to AllCares pharmacy, but the Company retains risk of loss during delivery from AllCares pharmacy to the customer.
The Dispensing Agreement expires after a period of two (2) years, provided that the parties may mutually agree to renew the terms for two (2) additional two (2) year terms. In addition to termination for cause as provided in the Dispensing Agreement, either AllCare or the Company may terminate the Dispensing Agreement for any reason upon ninety (90) days written notice.
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