CVS 2011 Annual Report Download - page 24

Management’s Discussion and Analysis of Financial Condition
and Results of Operations
CVS CAREMARK 22 2011 ANNUAL REPORT
The following discussion and analysis should be read in con-
junction 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 phar-
macy health care provider in the United States. We are
uniquely positioned to deliver significant benefits to health
plan sponsors through effective cost management solu-
tions and innovative programs that engage plan members
and promote healthier and more cost-effective behaviors.
Our integrated pharmacy services model enhances our abil-
ity to offer plan members and consumers expanded choice,
greater access and more personalized services to help them
on their path to better health. We effectively manage phar-
maceutical costs and improve health care outcomes through
our pharmacy benefit management, mail order and spe-
cialty pharmacy division, CVS Caremark® Pharmacy Services
(“Caremark”); our approximately 7,300 CVS/pharmacy® retail
stores; our retail-based health clinic subsidiary, MinuteClinic®;
and our online retail 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, includ-
ing plan design and administration, formulary management,
discounted drug purchase arrangements, Medicare Part D
services, mail order and specialty pharmacy services, retail
pharmacy network management services, prescription man-
agement systems, clinical services, disease management
services and pharmacogenomics.
Our clients are primarily employers, insurance companies,
unions, government employee groups, managed care orga-
nizations and other sponsors of health benefit plans and
individuals throughout the United States.
As a pharmacy benefits manager, we manage the dispens-
ing of pharmaceuticals through our mail order pharmacies
and national network of approximately 65,000 retail phar-
macies (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 interaction screenings and brand
to generic substitutions.
Our specialty pharmacies support individuals that require
complex and expensive drug therapies. Our specialty phar-
macy 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”), Accendo Insurance Company (“Accendo”)
and Pennsylvania Life Insurance Company (“Pennsylvania
Life”) subsidiaries, we are a national provider of drug ben-
efits to eligible beneficiaries under the Federal Government’s
Medicare Part D program. The Company acquired Accendo
as part of the acquisition of Longs Drug Store Corporation
in 2008 (the “Longs Acquisition”), and on April 29, 2011, we
acquired Pennsylvania Life in our acquisition of the Medicare
prescription drug business of Universal American Corp. (the
“UAM Medicare Part D Business”) for approximately $1.3 bil-
lion. The UAM Medicare Part D Business offers prescription
drug plan benefits to Medicare beneficiaries throughout the
United States through its Community CCRxSM prescription
drug plan. We currently provide Medicare Part D plan ben-
efits to approximately 3.6 million beneficiaries through the
above mentioned insurance companies.
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, includ-
ing administrative services such as claims processing and
formulary management, as well as health care-related ser-
vices such as disease management.
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