CVS 2010 Annual Report Download - page 24

Management’s Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and Cautionary
Statement Concerning Forward-Looking Statements that are included in this Annual Report.
Overview of Our Business
CVS Caremark Corporation (“CVS Caremark”, the “Company”, “we” or “us”), together with its subsidiaries is the largest
pharmacy health care provider in the United States. 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 benefit management, mail order and specialty pharmacy division, CVS Caremark Pharmacy Services® (“Caremark”);
our approximately 7,200 CVS/pharmacy® retail stores; our retail-based health clinic subsidiary, MinuteClinic®; and our online
pharmacy, CVS.com®. The Company has three business segments: Pharmacy Services, Retail Pharmacy and Corporate.
Overview of Our Pharmacy Services Segment
Our Pharmacy Services business provides a full range of pharmacy benefit management (“PBM”) services including mail order
pharmacy services, specialty pharmacy services, plan design and administration, formulary management and claims processing.
Our clients are primarily employers, insurance companies, unions, government employee groups, managed care organizations
and other sponsors of health benefit plans and individuals throughout the United States.
As a pharmacy benefits manager, we manage the dispensing of pharmaceuticals through our mail order pharmacies and national
network of approximately 65,000 retail pharmacies (which include our CVS/pharmacy stores) to eligible members in the benefit
plans maintained by our clients and utilize our information systems to perform, among other things, safety checks, drug interac-
tion screenings and brand to generic substitutions.
Our specialty pharmacies support individuals that require complex and expensive drug therapies. Our specialty pharmacy business
includes mail order and retail specialty pharmacies that operate under the CVS Caremark® and CarePlus CVS/pharmacy® names.
Substantially all of our mail service specialty pharmacies have been accredited by The Joint Commission.
We also provide health management programs, which include integrated disease management for 28 conditions, through our
strategic alliance with Alere, L.L.C. and our Accordant® health management offering. The majority of these integrated programs
are accredited by the National Committee for Quality Assurance.
In addition, through our SilverScript Insurance Company (“SilverScript”) and Accendo Insurance Company (“Accendo”) subsid-
iaries, we are a national provider of drug benefits to eligible beneficiaries under the Federal Government’s Medicare Part D
program. The Company acquired Accendo in the Longs Acquisition (defined 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
benefit plans. In December 2010, the Company announced it had entered into an agreement to acquire the Medicare Part D
business of Universal American Corp. (“UAC”) for approximately $1.25 billion. The transaction is subject to customary closing
conditions, including necessary regulatory approvals, as well as approval by UAC shareholders. The Company currently expects
that the transaction will close by the end of the second quarter of 2011.
Our Pharmacy Services segment generates net revenues primarily by contracting with clients to provide prescription drugs to
plan members. 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 segment operates under the CVS Caremark Pharmacy Services, Caremark®, CVS Caremark®, CarePlus
CVS/pharmacy®, CarePlus™, RxAmerica®, Accordant Care™ and TheraCom® names. As of December 31, 2010, the Pharmacy
Services segment operated 44 retail specialty pharmacy stores, 18 specialty mail order pharmacies and four mail service pharma-
cies located in 25 states, Puerto Rico and the District of Columbia.
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CVS Caremark 2010 Annual Report