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Express Scripts 2012 Annual Report2
1
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 “Part I — Item 1 — Business — Forward-Looking Statements and Associated Risks” and “Part I — 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. For millions of people, prescription drugs provide the hope of improved health and quality of life.
Total medical costs for employers continue to outpace the rate of overall inflation. National health expenditures as
a percentage of Gross Domestic Product are expected to increase to 19.6% in 2021 from an estimated 17.9% in 2012
according to the Centers for Medicare & Medicaid Services (“CMS”). In response to cost pressures being exerted on health
benefit providers such as managed care organizations, health insurers, employers and unions, pharmacy benefit
management (“PBM”) companies work to develop innovative strategies designed to keep medications affordable.
PBM companies combine retail pharmacy claims processing, formulary management, utilization 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 that deliver a more effective solution than many retail pharmacies in
providing treatments for diseases that rely upon high-cost injectable, infused, oral or inhaled drugs. 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
On July 20, 2011, Express Scripts, Inc. (“ESI”) entered into a definitive merger agreement (the “Merger
Agreement”) with Medco Health Solutions, Inc. (“Medco”), which was amended by Amendment No. 1 thereto on
November 7, 2011, providing for the combination of ESI and Medco under a new holding company named Aristotle
Holding, Inc. The transactions contemplated by the Merger Agreement (the “Merger”) were consummated on April 2,
2012. Aristotle Holding, Inc. was renamed Express Scripts Holding Company (the “Company” or “Express Scripts”)
concurrently with the consummation of the Merger. “We,” “our” or “us” refers to Express Scripts Holding Company and its
subsidiaries for periods following the Merger and ESI and its subsidiaries for periods prior to the Merger, unless otherwise
noted.
We are the largest PBM company, offering a full range of services to our clients, which include managed care
organizations, 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:
Q evaluating drugs for price, value and efficacy in order to assist clients in selecting a cost-effective formulary
Q leveraging purchasing volume to deliver discounts to health benefit providers
Q promoting the use of generics and low-cost brands
Q 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 chain and to improve members’ health outcomes and satisfaction.
Suboptimal prescription-related decisions by patients, caregivers and providers continue to cause unhealthy
clinical and financial outcomes. Healthier outcomes require better decisions. Express Scripts applies behavioral science,
clinical specialization and insight from actionable data to address major healthcare challenges, an approach made possible
from our proven legacy strengths as well as a new capability made possible since the Merger. Our legacy Express Scripts
organization was known for Consumerology®, or the advanced application of the behavioral sciences to healthcare. Our
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