CVS 2007 Annual Report Download - page 22

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18 I CVS Caremark

The Caremark Merger
Effective March 22, 2007, we closed our merger with Caremark
Rx, Inc. (“Caremark”). Following the merger with Caremark
(the “Caremark Merger”), we changed our name to “CVS
Caremark Corporation.”
We believe CVS and Caremark are complementary companies
and the merger is expected to yield benefits for health plan
sponsors through more effective cost-management solutions
and innovative programs and for consumers through expanded
choice, improved access and more personalized services. We
also believe we can operate the combined companies more
efficiently than either company could have operated on its own.
In that regard, the merger has enabled us to achieve significant
synergies from purchasing scale and operating efficiencies.
Purchasing synergies are largely comprised of purchase discounts
and/or rebates obtained from generic and brand name drug
manufacturers and cost efficiencies obtained from our retail
pharmacy networks. Operating synergies include decreases in
overhead expense, increases in productivity and efficiencies by
eliminating excess capacity, decreases in prescription dispensing
costs and other benefits made possible by combining comple-
mentary operations. During 2007, we achieved approximately
$400 million in purchasing and operating synergies (the vast
majority of which were purchase related). We expect purchasing
synergies to increase substantially as we realize a full year benefit
from the Caremark Merger.
Over the longer term, we expect that the Caremark Merger
will create significant incremental revenue opportunities. These
opportunities are expected to be derived from a variety of new
programs and benefit designs that leverage our client relationships,
our integrated information systems and the personal interaction
of our more than 20,000 pharmacists, nurse practitioners and
physician assistants with the millions of consumers who shop our
stores on a daily basis. Examples of these programs include new
prescription compliance and persistency programs, enhanced
disease management programs, new ExtraCare card programs
for plan beneficiaries, increased use of MinuteClinics by plan
The following discussion should be read in conjunction with
our audited consolidated financial statements and our Cautionary
Statement Concerning Forward-Looking Statements that are
presented in this Annual Report.
Overview of Our Business
CVS Caremark is the largest provider of prescriptions and related
healthcare services in the United States. We fill or manage more
than one billion prescriptions annually. As a fully integrated
pharmacy services company, we drive value for our customers by
effectively managing pharmaceutical costs and improving health-
care outcomes through our approximately 6,200 CVS/pharmacy®
stores; our pharmacy benefit management, mail order and
specialty pharmacy division, Caremark Pharmacy Services; our
retail-based health clinic subsidiary, MinuteClinic®; and our online
pharmacy, CVS.com®.
Today’s healthcare delivery system is rapidly changing. Health-
care is becoming more consumer-centric as the U.S. healthcare
system strains to manage growing costs and employers shift
more responsibility for managing costs to employees. In addition,
an aging population, increasing incidence of chronic disease and
increasing utilization of the Medicare drug benefit is fueling
demand for prescriptions and pharmacy services. Further, cost-
effective generic drugs are becoming more widely available and
new drug therapies to treat unmet healthcare needs and reduce
hospital stays are being introduced. Consumers require medica-
tion management programs and better information to help them
get the most out of their healthcare dollars. As a fully integrated
pharmacy services company, we are well positioned to provide
solutions that address these trends and improve the pharmacy
services experience for consumers.
We also strive to improve clinical outcomes, resulting in better
control over healthcare costs for employers and health plans.
In that regard, we offer broader disease management, health
assessment and wellness services to help plan participants
manage and protect against potential health risks and avoid
future health costs.