CVS 2008 Annual Report Download - page 48

44 CVS CAREMARK
Notes to Consolidated Financial Statements
SIGNIFICANT ACCOUNTING POLICIES
Description of business. CVS Caremark Corporation (the
“Company”) operates one of the largest pharmacy services
businesses and the largest retail pharmacy business (based
on revenues and store count) in the United States.
Pharmacy Services Segment (the “PSS”). The PSS provides a
full range of prescription benefi t management services including
mail order pharmacy services, specialty pharmacy services, plan
design and administration, formulary management and claims
processing. The Company’s customers are primarily employers,
insurance companies, unions, government employee groups,
managed care organizations and other sponsors of health benefi t
plans and individuals throughout the United States.
As a pharmacy benefi ts manager, the PSS manages the dispens-
ing of pharmaceuticals through our mail order pharmacies and
national network of approximately 60,000 retail pharmacies
(which include our CVS/pharmacy® and Longs Drug® stores)
to eligible participants in the benefi ts plans maintained by our
customers and utilizes its information systems to perform,
among other things, safety checks, drug interaction screenings
and brand to generic substitutions.
The PSS’s specialty pharmacies support individuals that
require complex and expensive drug therapies. The specialty
pharmacy business includes mail order and retail specialty
pharmacies that operate under the Caremark® and CarePlus
CVS/pharmacyTM names.
The PSS also provides health management programs, which
include integrated disease management for 27 conditions,
through our Accordant® health management offering.
In addition, through our SilverScript Insurance Company
(“SilverScript”) and Accendo Insurance Company (“Accendo”)
subsidiaries, the PSS is a national provider of drug benefi ts to
eligible benefi ciaries under the Federal Government’s Medicare
Part D program. The PSS acquired Accendo in the Longs
Acquisition (see Note 2 later in this document), and, effective
January 1, 2009, Accendo replaced RxAmerica® as the
Medicare-approved prescription drug plan for the RxAmerica
Medicare Part D drug benefi t plans.
Our pharmacy services business generates net revenues primarily
by contracting with clients to provide prescription drugs to plan
participants. Prescription drugs are dispensed by our mail order
pharmacies, specialty pharmacies and national network of retail
pharmacies. Net revenues are also generated by providing
additional services to clients, including administrative services
such as claims processing and formulary management, as well
as health care related services such as disease management.
The pharmacy services business operates under the Caremark
Pharmacy Services®, Caremark®, CVS CaremarkTM, CarePlus
CVS/pharmacyTM, CarePlusTM, RxAmerica®, Accordant Care™
and TheraCom® names. As of December 31, 2008, the Pharmacy
Services Segment operated 58 retail specialty pharmacy stores,
19 specialty mail order pharmacies and 7 mail service pharmacies
located in 26 states, Puerto Rico and the District of Columbia.
Retail Pharmacy Segment (the “RPS”). The RPS sells prescrip-
tion drugs and a wide assortment of general merchandise,
including over-the-counter drugs, beauty products and cosmet-
ics, photo fi nishing, seasonal merchandise, greeting cards and
convenience foods through our CVS/pharmacy and Longs Drug
retail stores and online through CVS.com®.
The RPS also provides health care services through its
MinuteClinic health care clinics. These health care clinics utilize
nationally recognized medical protocols to diagnose and treat
minor health conditions and are staffed by nurse practitioners
and physician assistants.
As of December 31, 2008, our retail pharmacy business included
6,923 retail drugstores (of which 6,857 operated a pharmacy)
located in 41 states and the District of Columbia operating
primarily under the CVS/pharmacy® or Longs Drug® names, our
online retail website, CVS.com® and 560 retail health care clinics
operating under the MinuteClinic® name (of which 534 were
located in CVS/pharmacy stores).
Basis of presentation. The consolidated fi nancial statements
include the accounts of the Company and its wholly-owned
subsidiaries. All material intercompany balances and transactions
have been eliminated.
Fiscal year change. On December 23, 2008, the Board of
Directors of the Company approved a change in the Company’s
fi scal year end from the Saturday nearest December 31 of each
year to December 31 of each year to better refl ect the Company’s
position in the health care, rather than the retail industry. The
fi scal year change was effective beginning with the fourth quarter
of fi
scal 2008. Prior to Board approval of this change, the Saturday
nearest December 31, 2008 would have resulted in a 53-week
fi scal year that would have ended January 3, 2009.
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