CVS 2008 Annual Report Download - page 22

18 CVS CAREMARK
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
choice, improved access and more personalized services.
The Caremark Merger has enabled us to achieve signifi cant
synergies from purchasing scale and operating effi ciencies.
The purchasing synergies include additional purchase discounts
(including rebates obtained from pharmaceutical manufacturers)
and cost effi ciencies obtained from our national network of retail
pharmacies. Operating synergies include cost savings resulting
from productivity increases and other effi ciencies obtained by
eliminating duplicate facilities and excess capacity and combining
complementary operations.
We believe the Caremark Merger has also created signifi cant
incremental revenue opportunities for our Company through a
variety of new programs and plan designs that benefi t from our
client relationships, our integrated information systems and the
ability of our more than 25,000 pharmacists, nurse practitioners
and physicians assistants to interact personally with the millions of
consumers who shop our stores every day. In that regard, during
2008, we introduced Proactive Pharmacy Care™, an earlier,
easier, more effective approach to engaging plan participants in
behaviors that can help lower costs, improve health, and save
lives. Examples of Proactive Pharmacy Care programs include:
Maintenance Choice™ (a fl exible fulfi llment option that affords
eligible plan participants the convenient choice of picking up their
90-day supply of maintenance medications at any CVS/pharmacy
store or obtaining them through mail order, in either case at the
cost of mail for both the plan participant and payor); Bridge Supply
(which enables eligible plan participants to avoid gaps in care
while waiting for their medications to arrive in the mail by obtaining
a Bridge Supply of their prescriptions at any CVS/pharmacy at no
additional charge); and a new ExtraCare® Health Card program
(which offers discounts to eligible plan participants on certain
Flexible Spending Account-eligible over-the-counter health care
products sold in any of our CVS/pharmacy stores). We are also
creating new compliance and persistency programs designed to
ensure that patients take their medications in the correct manner
as well as enhanced disease management programs that are
targeted at managing chronic disease states. In addition, we are
working with our clients to (i) decrease unnecessary and expen-
sive emergency room visits by encouraging plan participants to
use our MinuteClinic locations for everyday common ailments and
(ii) create pilot programs that offer convenient, unique services
available at MinuteClinic such as injection training for specialty
pharmacy patients.
While certain of these programs (like Maintenance Choice,
Bridge Supply and the ExtraCare Health Card program) have
already been adopted by many CVS Caremark clients, others
are still in the formative stage and require additional information
system enhancements and/or changes in work processes.
The following discussion and analysis should be read in con-
junction with our audited consolidated fi nancial statements and
Cautionary Statement Concerning Forward-Looking Statements
that are included in this Annual Report.
OVERVIEW OF OUR BUSINESS
CVS Caremark Corporation (the “Company”) is the largest
provider of prescriptions in the United States. We fi ll or manage
more than one billion prescriptions annually. As a fully integrated
pharmacy services company, we believe we can drive value for
our customers by effectively managing pharmaceutical costs
and improving health care outcomes through our pharmacy
benefi t management, mail order and specialty pharmacy
division, Caremark Pharmacy Services®; our more than 6,900
CVS/pharmacy® and Longs Drug® retail stores; our retail-based
health clinic subsidiary, MinuteClinic®; and our online pharmacy,
CVS.com®.
We strive to improve clinical outcomes to help employers and
health plans control their health care costs. In that regard, we
offer disease management, health assessment and wellness
services to help plan participants manage and protect against
potential health risks and avoid future health costs.
Today’s health care delivery system is rapidly changing. Health care
is becoming more consumer-centric as the U.S. health care system
struggles to manage growing costs and employers are shifting more
of the responsibility for managing those costs to employees. In
addition, the aging population, increasing incidences of chronic
diseases and increasing utilization of the Medicare drug benefi t
are fueling the demand for prescriptions and pharmacy services.
Further, cost-effective generic drugs are becoming more widely
available and new drug therapies are being introduced to treat
unmet health care needs and reduce hospital stays. Consumers
require medication management programs and better information
to help them get the most out of their health care dollars. As a fully
integrated pharmacy services company, we believe we are well
positioned to provide solutions to address these trends and
improve the pharmacy services experience for consumers.
Our business includes two operating segments: Pharmacy
Services and Retail Pharmacy.
THE CAREMARK MERGER
Effective March 22, 2007, we closed our merger with Caremark
Rx., Inc. (the “Caremark Merger”). Following the Caremark
Merger we changed our name to CVS Caremark Corporation and
Caremark Rx, Inc. became a wholly-owned subsidiary, Caremark,
Rx, L.L.C. (“Caremark”). The Caremark Merger has positioned
our Company to deliver signifi cant benefi ts to (i) health plan
sponsors through effective cost management solutions and
innovative programs and (ii) consumers through expanded