Express Scripts 2009 Annual Report Download - page 20

Express Scripts 2009 Annual Report 18
Information included in or incorporated by reference in this Annual Report on Form 10-K, other filings with
the Securities and Exchange Commission (the “SEC”) and our press releases or other public statements, contain or may
contain forward looking statements. Please refer to a discussion of our forward looking statements and associated risks
in “Item 1—Business—Forward Looking Statements and Associated Risks” and “Item 1A—Risk Factors” in this
Annual Report on Form 10-K.
PART I
THE COMPANY
Item 1 — Business
Industry Overview
Prescription drugs play a significant role in healthcare today and constitute the first line of treatment for many
medical conditions. As pharmaceutical research increases the potential for even more effective drugs, demand can be
expected to increase. For millions of people, prescription drugs equate to the hope of improved health and quality of life. At
the same time, prescription drug costs are becoming one of the most persistent challenges to health care financing. Even as
pharmaceutical development opens new paths to better healthcare, we confront the possibility that high costs may limit
access to these therapies.
Employer total medical costs continue to outpace the rate of overall inflation. National health expenditures as a
percentage of Gross Domestic Product are expected to increase from an estimated 17.3% in 2009 to 19.3% in 2019
according to the Centers for Medicare & Medicaid Services (“CMS”) estimates. In response to cost pressures being exerted
on health benefit providers such as managed care organizations, health insurers, employers and unions, we work to develop
innovative strategies designed to keep medications affordable.
Pharmacy benefit management (“PBM”) companies combine retail pharmacy claims processing, formulary
management and home delivery pharmacy services to create an integrated product offering to manage the prescription drug
benefit for payors. Some PBMs also offer specialty services to provide treatments for diseases that rely upon high-cost
injectable, infused, oral or inhaled drugs which deliver a more effective solution than many retail pharmacies. PBMs have
also broadened their service offerings to include compliance programs, outcomes research, drug therapy management
programs, sophisticated data analysis and other distribution services.
Company Overview
We are one of the largest PBMs in North America, offering a full range of services to our clients, which include
HMOs, health insurers, third-party administrators, employers, union-sponsored benefit plans, workers’ compensation plans
and government health programs. We help health benefit providers address access and affordability concerns resulting
from rising drug costs while helping to improve healthcare outcomes. We manage the cost of the drug benefit by
performing the following functions:
• evaluating drugs for price, value and efficacy in order to assist clients in selecting a cost-effective formulary;
• leveraging purchasing volume to deliver discounts to health benefit providers;
• promoting the use of generics and low-cost brands; and
• offering cost-effective home delivery pharmacy and specialty services which result in drug cost savings for plan
sponsors and co-payment savings for members.
We work with clients, manufacturers, pharmacists and physicians to increase efficiency in the drug distribution
chain, to manage costs in the pharmacy benefit and to improve members’ health outcomes and satisfaction. In an effort to
deliver a superior clinical offering which targets the reduction of waste and the improvement of health outcomes, we apply
a unique behavior-centric approach to changing consumer behavior which we call Consumerology.
Plan sponsors who are more aggressive in taking advantage of our effective tools to manage drug spend have seen
actual reduction in their prescription drug trend while preserving healthcare outcomes. Greater use of generic drugs and
lower-cost brand drugs has resulted in significant reductions in spending for commercially insured consumers and their
employers.
We have organized our operations into two business segments based on products and services offered: PBM and
Emerging Markets (“EM”).