Transcript Cardio - Portfolio Management Institute

A Prescription for
Healthcare Reform
David B. Snow, Jr.
Chairman and Chief Executive Officer
Presentation to Citi Private Client Group
April 17, 2008
Forward-Looking Statements
This presentation contains “forward-looking statements” as that term is defined in the Private
Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that
may cause results to differ materially from those set forth in the statements. No forward-looking
statement can be guaranteed, and actual results may differ materially from those projected. We
undertake no obligation to publicly update any forward-looking statement, whether as a result of
new information, future events or otherwise. The forward-looking statements are not historical
facts, but rather are based on current expectations, estimates, assumptions and projections
about the business and future financial results of the pharmacy benefit management (“PBM”)
and specialty pharmacy industries, and other legal, regulatory and economic developments.
We use words such as “anticipates,” “believes,” “plans,” “expects,” “projects,” “future,” “intends,”
“may,” “will,” “should,” “could,” “estimates,” “predicts,” “potential,” “continue,” “guidance” and
similar expressions to identify these forward-looking statements. Medco’s actual results could
differ materially from the results contemplated by these forward-looking statements due to a
number of factors.
Forward-looking statements in this presentation should be evaluated together with the risks and
uncertainties that affect our business, particularly those mentioned in the Risk Factors section
of the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other
documents filed from time to time with the Securities and Exchange Commission.
© 2008 Medco Health Solutions, Inc. All rights reserved.
2
A Prescription for Healthcare Reform
 The Urgent Imperative
 A Roadmap to Reform
 Medco’s Contribution to Healthcare Reform
© 2008 Medco Health Solutions, Inc. All rights reserved.
3
Per Capita Health Spending ($)
U.S. Healthcare Costs are Highest
“Paying More Doesn’t Deliver More”
7000
U.S.
6000
5000
Switzerland
4000
France
Germany
3000
Italy
Japan
Sweden Canada
U.K.
2000
1000
0
0
20
40
60
80
Perceived Health Status Scale (1-100)
*Graph shows per capita health spending and perceived health status for 2005
Source: Organization for Economic Cooperation and Development (OECD) Health Data, 2007
© 2008 Medco Health Solutions, Inc. All rights reserved.
4
100
U.S. Life Expectancy is Lowest Among
Most Industrialized Nations
Life Expectancy at Birth
United States
United Kingdom
Germany
78.0
78.7
79.0
Italy
79.9
80.3
Canada
France
80.6
Sweden
80.6
Switzerland
80.6
Japan
82.0
Source: Central Intelligence Agency World Factbook 2007
© 2008 Medco Health Solutions, Inc. All rights reserved.
5
Worldwide Healthcare Inflation:
A Shared Concern
Healthcare Spending Per Capita 1995-2005
1995
2005
Annualized
Growth Rate
United Kingdom
$1,384
$2,724
7.01%
Germany
$2,225
$3,287
3.98%
Italy
$1,562
$2,532
4.95%
Canada
$2,057
$3,326
4.92%
France
$2,065
$3,374
5.03%
Sweden
$1,733
$2,918
5.35%
Switzerland
$2,571
$4,177
4.97%
Japan
$1,546
$2,348
4.31%
Average
$1,893
$3,087
5.07%
United States
$3,656
$6,401
5.76%
Source: Organization for Economic Cooperation and Development (OECD) Health Data, 2007
© 2008 Medco Health Solutions, Inc. All rights reserved.
6
The Challenge
Baseline U.S healthcare spending must
be reduced by $1 trillion annually to
move toward achieving per capita cost
parity versus other developed nations
 Unchecked U.S. healthcare costs will rise from
16 percent of GDP today to 49 percent of GDP in 2082
 “Current financial incentives encourage expensive
treatments and procedures even if evidence about their
effectiveness is limited.”
-- Congressional Budget Office
© 2008 Medco Health Solutions, Inc. All rights reserved.
7
Snow’s Principles for Reform
 Keep It Simple
 Think Evolutionary, Not Revolutionary
 Clearly Define Government / Private Sector Roles
~ Government: Promulgates and Regulates
~ Private Sector: Operates and Innovates
© 2008 Medco Health Solutions, Inc. All rights reserved.
8
Radical Healthcare Reform is Not a
Government Strength
“HillaryCare 1994”
© 2008 Medco Health Solutions, Inc. All rights reserved.
9
HMO’s Effectively Reduced Costs;
But Were Demonized, Scapegoated
Plan Could
Turn Health
Care Into
Federal Crime
THE HMO
HORROR
SHOW
In America;
Torture
by H.M.O.
HMO Denies
Teen Critical
Surgery
SOME WILL WAIT,
SOME WILL DIE,
WITH HEALTHCARE RATIONING
US Newswire
HMO Denies Cancer
Patient Treatment
That Doctors Say
Would Have Saved
Him, Says Law Firm
 From 1994 to 1999, annual growth in healthcare costs never exceeded 2.8%
 Managed care plan enrollment / excess capacity amplified negotiating leverage
 Politicians caved to populist pressures
© 2008 Medco Health Solutions, Inc. All rights reserved.
10
The Government Can Make a Difference
“Smokey Bear”
Wildfire Campaign
“Brain on Drugs”
Campaign
© 2008 Medco Health Solutions, Inc. All rights reserved.
“Crying Native American”
Littering Campaign
11
A Prescription for Healthcare Reform
 The Urgent Imperative
 A Roadmap to Reform
 Medco’s Contribution to Healthcare Reform
© 2008 Medco Health Solutions, Inc. All rights reserved.
12
Government Must Lead ‘Wired’ Healthcare
Hospitals
Laboratories
Payors
Electronic
Health Records
(EHRs)
Wiring Healthcare
Potential Cost
Savings
$162 Billion/year
Pharmacy
Consumers
Physician Office
Ambulatory Centers
Source: RAND Corporation study, 2005
© 2008 Medco Health Solutions, Inc. All rights reserved.
13
ROI: 20X / year
for each dollar invested
Medicare Financials in ‘Critical’ Condition
Workers per Retiree
Medicare Spend as % of GDP
15
41.9
10
5
5.1
3.4
2.1
2000
2040
0
1980
1990 2000 2010
2020 2030 2040
1945
2050
1960
Projection
Medicare’s Hospital Insurance Trust Fund Expected to Be Bankrupt in 2019
Source: Congressional Budget Office/ Dow Jones
© 2008 Medco Health Solutions, Inc. All rights reserved.
Source: Social Security Trustees Report
14
Medicare’s Actuarial Reality Has Changed
Problems Will Continue to Compound
Male
Female
88
74
 Today, 40,000
U.S. citizens are
over 100 years
old; by 2050
there could be
1 million
“Retirement Age”
48
46
1900
2000
“If I’d known I was gonna live this long, I’d have taken better care of myself.” –
Eubie Blake at age 100
Source: National Institute of Aging
CDC National Center for Health Statistics
© 2008 Medco Health Solutions, Inc. All rights reserved.
15
Final Year of Life Expenditures Account
for Nearly 30% of Medicare Spend
Medicare Expenditures Total $432 Billion
~30%
$25,358
National average to treat chronically ill
Medicare patients during the final six
months of life
~$130 B
Spent on
Last Year of
Life
14
Number of medical specialists seen in
the final six months of life
40 Percent
Number of New Jersey Medicare
patients who died or spent time in ICU
during the final months of life
Source: The Dartmouth Atlas of Healthcare Study 2008
Source: Centers for Medicare and Medicaid Services (CMS), Office of the Actuary
Department of Health and Human Services (HHS)
© 2008 Medco Health Solutions, Inc. All rights reserved.
16
The $200 Billion Cost of
Defensive Medicine
Estimated Breakdown of Insurance Premiums with
Medical Liability and Defensive Medicine Extracted, 2005
Outpatient
Prescription
Drugs
(Free-standing
& Hospital)
18%
15%
3%
Physician Services
Cost of Liability
& Defensive
Medicine
1%
Hospital Inpatient
$200 billion
4%
Outpatient
1%
Prescription Drugs
1%
Other Medical
Other
Medical
5%
Hospital
Inpatient
10%
17%
5%
3%
21%
6%
Consumer Services,
Provider Support
& Marketing
Physician
Services
Insurance Industry Profit
Government Payments, Compliance,
Claims Processing & Other Administration
Sources: Adapted from Centers for Medicare & Medicaid Services, National
Health Accounts, 2005 and Midwest Business Group on Health, April 2003.
© 2008 Medco Health Solutions, Inc. All rights reserved.
17
Strong Pipeline of Off-Patent Branded
Drugs Provides Some Relief
Approx. $35 Billion in Total Savings from Generics
$91.9 Billion in Brand Drugs Off-Patent
from 2008–2015
$20.9
Lipitor®
Effexor XR®
Actos®
Protonix®(2)
Zyprexa®
Levaquin®
Aricept®
$10.5
$9.7(1)
Risperdal®
Lamictal®
Fosamax®
Imitrex®
Prevacid®
Topamax®
Valtrex®
Aciphex®
2009
$103.1
$95.0
Plavix®
Singulair®
Seroquel®
Lexapro®
Diovan®
Crestor®
Avandia®
$80.1
$15.6
$6.1
$3.6
2010
($ Billions, prorated)
$21.7
$69.1
Nexium®
Vytorin®
Zetia®
Lyrica®
Nasonex®
$46.9
$35.1
$25.7
$3.8
Cymbalta®
Celebrex®
Flomax®
2008
Off-Patent Compounding Effect
$16.7
$6.5
Abilify®
2011
2012
2013
2014
2007 2008 2009 2010 2011 2012 2013 2014 2015
2015
(1) Limited supply of Protonix is not included in 2008 spend
(2) 2011 reflects the off patent date for Protonix; limited product released in 2008
Source: U.S. Drug spend estimates are based on IMS Health data for 2007. Brand drug
expirations based on expected patent expiration dates current as of February
2008. Changes may occur due to litigation, patent challenges, etc.
© 2008 Medco Health Solutions, Inc. All rights reserved.
18
Source: U.S. Drug spend estimates are based on IMS Health data for 2007 and
2006, compounded amounts prorated for mid-term expirations. Brand drug
expirations based on expected patent expiration dates current as of
February 2008. Changes may occur due to litigation,
patent challenges, etc.
37% of Prescriptions Dispensed are Brand
Name Drugs, Accounting for 84% of Spend
Drug Mix Trend (%)
47
53
47
54
1999 2000
47
53
2001
48
52
2002
51
50
53
47
2003 2004
Drug Spend Mix Trend (%)
57
61
12
11
10
11
12
12
13
15
16
88
89
90
89
88
88
87
85
84
63
43
39
37
2005
2006
MAT
2006/
2007
1999 2000 2001 2002
Total Prescriptions Dispensed (%)
MAT
2006/
2007
Total Expenditures on Prescription Drugs (%)
Brand Name
Generic
Source: New England Journal of Medicine, November 15, 2007
MAT denotes moving annual total; MAT 06/07 represents the 12 months ending in June 2007. Data are from IMS Health,
National Prescription Audit Plans, National Sales Perspective, June 2007.
© 2008 Medco Health Solutions, Inc. All rights reserved.
2003 2004 2005 2006
19
Government Must
Increase Access To Generics
1,200
More than
generic drug applications
are backlogged
Cost Savings
Increase
Funding
Improve
Resources
Clear
Backlog
Source: Office of Generic Drugs
© 2008 Medco Health Solutions, Inc. All rights reserved.
20
Increase
Competition
Government Action Required to
Provide a Pathway for Biogenerics
$12B
Specialty drug spend with expired patents1
$10B
Off-patent products by 20102
418
Biologic products in the pipeline
Sources: 1. Associated Press. “FDA cites challenges of generic biotech.” March 26, 2007
2. Coalition for a Competitive Marketplace
© 2008 Medco Health Solutions, Inc. All rights reserved.
21
The Cost of Non-Compliance and
Medication Errors is High
$177 B
in total U.S. annual direct medical and indirect
productivity costs from non-compliance1
50%
worldwide compliance by patients with
chronic illness2
7,000
U.S. deaths each year due to medication
errors3,4
3-7%
of U.S. hospitalizations are caused by adverse
drug events5
Sources: 1. Institute for Health and Productivity Management (IHPM)
2. World Health Organization
3. Alliance for Aging Research. Wash. DC, 1998
© 2008 Medco Health Solutions, Inc. All rights reserved.
4. To Err is Human, Wash. DC, 1999
5. Lundkvist. Fundamental and clinical Pharmacology 2004
22
Costly Knowledge Gaps/Delays
In Medical Practice
Adoption in Clinical Practice Lags Behind
Evidence by Many Years
Clinical Procedure
Landmark Trial Current Rate of Use
Flu vaccine
1968
55.0%
Thrombolytic therapy
1971
20.0%
Pneumococcal therapy
1977
35.6%
Diabetic eye exam
1981
38.4%
Beta blockers after MI
1982
61.9%
Mammography
1982
70.4%
Cholesterol screening
1984
65.0%
Fecal occult blood test
1986
17.0%
Diabetes foot care
1993
20.0%
Source: Balas EA, Boren SA: Managing clinical knowledge for health care Improvement. Yearbook of Medical Informatics 2000, pp65-70
© 2008 Medco Health Solutions, Inc. All rights reserved.
23
Wellness is Not a Top Priority Today
$314 Billion of Healthcare Costs
Are a Result of Unhealthy Lifestyles
 9.1% of total U.S. medical expenditures are attributed to being
overweight and obesity1
 $75.5 billion in healthcare costs directly related to smoking1
~ Healthcare costs for smokers are 40% higher than costs for nonsmokers
 Annual healthcare expenditures for drug and alcohol related
problems amount to $38.3 billion2,3
“The major cause of chronic disease is behavior.”
– Dr. James Prochaska, Director of Cancer Prevention Research Center, who
estimates changing behaviors can reduce healthcare costs by as much as 60%
Sources: 1. Centers for Disease Control and Prevention (CDC)
2. Office of National Drug Control Policy
3. Association of American Physicians, 1999
© 2008 Medco Health Solutions, Inc. All rights reserved.
24
The Estimated Savings from
Foundational Reform
Wiring Healthcare1
$162 Billion
Medicare: Last Year of Life2,3
$130 Billion
Eliminating Medical Liability and Defensive Medicine4,5
$200 Billion
Generics Opportunity6
$35 Billion
Creating a Biogeneric Pathway7,8
$15 Billion*
Increasing Compliance Efforts9
$177 Billion
Uninsured
$0
Promoting Healthy Lifestyles10,11,12
(Overweight & Obesity, Smoking, Drugs & Alcohol)
$314 Billion
$1.033 Trillion
*Medco estimate of savings from products with already expired patents and approaching off-patent products
Sources: 1. RAND Corporation study, 2005; 2. CMS, Office of the Actuary; 3. Department of Health and Human Services; 4. CMS, National Health
Accounts, 2005; 5. Midwest Business Group on Health, April 2003; 6. Medco data; 7. Associated Press. “FDA cites challenges of
generic biotech.” March 26, 2007; 8. Coalition for a Competitive Marketplace; 9. Institute for Health and Productivity Management; 10.
Centers for Disease Control and Prevention (CDC); 11. Office of the National Drug Policy; 12. Association of American Physicians
© 2008 Medco Health Solutions, Inc. All rights reserved.
25
U.S. Government Leadership Void Keeps
an Inefficient System Healthy
“While I will require all Americans to have healthcare, I will be
calling on employers to do their part as well. …The government
will provide tax credits to insure that every single American can
afford health insurance.”
“Senator Clinton believes the only way to achieve universal
healthcare is to force everybody to purchase it. And my belief is,
the reason people don’t have it is not because they don’t want it,
but because they can’t afford it. And so I emphasize reducing
costs.”
“The biggest problem with the American healthcare system is
that it costs too much. …Businesses and families pay more and
more every year to get what they consider inadequate attention
or poor care.”
© 2008 Medco Health Solutions, Inc. All rights reserved.
26
A Prescription for Healthcare Reform
 The Urgent Imperative
 A Roadmap to Reform
 Medco’s Contribution to Healthcare Reform
~ Efforts toward wiring healthcare
~ An efficient provider of generics
~ Advancing new science
~ Focus on compliance
© 2008 Medco Health Solutions, Inc. All rights reserved.
27
Medco Health Solutions:
Leading Pharmacy Benefit Manager
Fortune 100 Company with 2007 Revenues of $44.5 Billion
Largest Independent PBM Drug Spend Under Management
Largest Mail-Order Pharmacy
Most Sophisticated Specialty Pharmacy
Leader in Clinical Innovation
Industry Leading Drug Trend Management
© 2008 Medco Health Solutions, Inc. All rights reserved.
28
Strong EBITDA Per Adjusted Script Trend
$2.67
$2.24
$1.83
$1.89
2004
2005
$1.50
2003
2006*
* Excludes first-quarter 2006 legal settlements charge; see reconciliation to GAAP financial tables in the appendix.
© 2008 Medco Health Solutions, Inc. All rights reserved.
29
2007
Strong Earnings Per Share Growth
$1.63
$1.21
$1.03
$0.79
2003
$0.88
2004
2005
2006*
* Excludes first-quarter 2006 legal settlements charge; see reconciliation to GAAP financial tables in the appendix.
© 2008 Medco Health Solutions, Inc. All rights reserved.
30
2007
Record Low Drug Trend
25%
20.6%
20.0%
20%
16.9%
Trend
15.9%
15%
14.9%
14.4%
13.8%
12.9%
11.6%
10.2%
10%
8.5%
11.4%
6.9%
5.4%
5%
0%
2002
2.8%
2003
2004
PBMs
2005
Health Insurers
Sources: Buck Consultants National Healthcare Trend Survey, 14th Edition
© 2008 Medco Health Solutions, Inc. All rights reserved.
31
2006
Medco
2.0%
2007
Strong Pipeline of Off-Patent Branded
Drugs Provides Some Relief
$91.9 Billion in Brand Drugs Off-Patent
from 2008–2015
$20.9
Lipitor®
Effexor XR®
Actos®
Protonix®(2)
Zyprexa®
Levaquin®
Aricept®
$10.5
$9.7(1)
Risperdal®
Lamictal®
Fosamax®
Imitrex®
Prevacid®
Topamax®
Valtrex®
Aciphex®
2009
$103.1
$95.0
Plavix®
Singulair®
Seroquel®
Lexapro®
Diovan®
Crestor®
Avandia®
$80.1
$15.6
$6.1
$3.6
2010
($ Billions, prorated)
$21.7
$69.1
Nexium®
Vytorin®
Zetia®
Lyrica®
Nasonex®
$46.9
$35.1
$25.7
$3.8
Cymbalta®
Celebrex®
Flomax®
2008
Off-Patent Compounding Effect
$16.7
$6.5
Abilify®
2011
2012
2013
2014
2007 2008 2009 2010 2011 2012 2013 2014 2015
2015
(1) Limited supply of Protonix is not included in 2008 spend
(2) 2011 reflects the off patent date for Protonix; limited product released in 2008
Source: U.S. Drug spend estimates are based on IMS Health data for 2007. Brand drug
expirations based on expected patent expiration dates current as of February
2008. Changes may occur due to litigation, patent challenges, etc.
© 2008 Medco Health Solutions, Inc. All rights reserved.
32
Source: U.S. Drug spend estimates are based on IMS Health data for 2007 and
2006, compounded amounts prorated for mid-term expirations. Brand drug
expirations based on expected patent expiration dates current as of
February 2008. Changes may occur due to litigation,
patent challenges, etc.
Medco Mail-Order Volume Growth
Volume in millions
~105
88
87
89
2004
2005
2006
95
78
2003
© 2008 Medco Health Solutions, Inc. All rights reserved.
33
2007
2008E
Video Clip of Technology Innovations
with Our Back-End Pharmacy
© 2008 Medco Health Solutions, Inc. All rights reserved.
34
Specialty Pharmacy Spend on the Rise
Specialty Pharmacy Drug Spend
($ in billions)
More Than 400 Drugs
in Development Pipeline*
Cancer/Related Conditions
Infectious Diseases
Autoimmune Disorders
AIDS/HIV
Cardiovascular Disease
Neurologic Disorders
Diabetes/Related
Digestive Disorders
Respiratory Disorders
Blood Disorders
Genetic Disorders
Skin Disorders
Eye Conditions
Growth Disorders
Transplantation
Other
$111
$62
2006
Source: HealthStrategiesGroup
© 2008 Medco Health Solutions, Inc. All rights reserved.
2010E
210
50
44
22
22
17
15
14
13
10
9
7
6
4
4
18
*Source: PhRMA 2005 Survey: Medicines in Development, Oct. 2006
Some medicines are listed in more than one category.
35
Medco: Forging The Future of Pharmacy
 Medco Therapeutic Resource Centers™ (TRCs)
~ Full-service platform with specialized pharmacists to deliver superior clinical and
financial outcomes for clients and members
~ Focuses on chronic and complex conditions accounting for over 96 percent of
prescription and 75 percent of healthcare spending
~ Complements the retail acute-care model, which addresses less than 4 percent of
overall drug spending
 Pharmacogenomics (“Personalized Medicine”)
~ Leveraging the TRC platform, Medco launched two pilots using genetic tests to
personalize with precision drug selection/delivery/dosing
• Collaboration with The Mayo Clinic for Coumadin
• Collaboration with LabCorp for Tamoxifen
~ New Indiana automated dispensing facility includes a world-class research center for
personalized medicine
© 2008 Medco Health Solutions, Inc. All rights reserved.
36
50% of Members with Chronic & Complex
Conditions Account for 96% of Rx Costs
Complex
~3%
~ 50%
Members
16%
46%
Chronic
96%
Rx Cost
80%
17%
Acute
34%
Well
3%
1%
% Rx Cost
% Members
© 2008 Medco Health Solutions, Inc. All rights reserved.
37
Medco Therapeutic Resource Centers™
Health Care
Value
Map
Physicians
Patients
Specially Trained Pharmacists
Columbus
Fairfield
Texas
Hematology/
Oncology
Cardiovascular
 Hypertension
Diabetes
 High Risk
Neurology/
Psychiatry
Diabetes
Gastrointestinal
Nashville, TN
 Hemophilia
Disease
Management
Cardiovascular
 High Risk
Tampa
Cardiovascular
 High Cholesterol
Spokane
Pulmonary
Accredo
31 Branches
Warrendale, PA
(ATX/HHS)
(Accredo Therapeutics)
 Autoimmune diseases
~ Primary
Immunodeficiency
Syndrome
~ Autoimmune
disorders
 Nursing services
 Pulmonary hypertension
 Alpha 1 deficiency
 Autoimmune diseases
~ Primary
Immunodeficiency
Syndrome
 Autoimmune disorders
Columbus, OH
(Hemophilia Health Services)
N. Versailles
 Hepatitis C
 Multiple Sclerosis
 Oncology
 Infertility
 Anemia/Neutropenia
Best Practice Rules
 Appropriate Utilization
 Appropriate Coverage
Memphis, TN
(Nova Factor)
 Enzyme deficiencies
 Multiple Sclerosis
 RSV
 Growth Hormone
defects
 Rheumatoid Arthritis
 Osteoarthritis
 Psoriasis
Models & Analytics
 Clinical Appropriateness – Drug
Physician Profiling
 Episode Groupers
 Financial Opportunities  Patient Stratification Algorithms
 Appropriate Coverage
 Formulary Management
 RationalMed®
 Patient &
Integrated Data
Patient eligibility | Patient self-reported data | Pharmacy claims | Medical claims | Lab results
© 2008 Medco Health Solutions, Inc. All rights reserved.
Irving, TX
38
Case
Management
Quality Care is Delivered Through a
Unique Specialist Pharmacy Model
Rare &
Specialty
Oncology
& Immunology
Pulmonary
HIV
Diabetes
Cardiovascular
High Risk
Cardiovascular
Hypertension
Neurology
& Psychiatry
Cardiovascular
High Cholesterol
Medco Therapeutic Resource Centers™
© 2008 Medco Health Solutions, Inc. All rights reserved.
39
Gastrointestinal
Diabetes is a Leading Chronic Disease;
Cases Growing at a Rate of 15% a Year
& hypoglycemics
 CYP2C9Rare
– oral
Specialty
Personalized
Medicine
Oncology
Diabetes

Liberty
(PolyMedica)
& Immunology
~ With Medco members, creates the largest diabetes
center serving nearly 4 million lives
~ Opportunity to cross-sell pharmaceuticals and supplies
End-to-End
Cardio~ Ability to leverage well-known Liberty consumer brand
Service
vascular
Pulmonary
Neurology
~ Lab CLIA certified
in 49 states
High~Risk
& Psychiatry
Opens Medicare
Part B market
 Optimal Health
Specialized Practice Cardiovascular
ofHIV
Pharmacy
Hypertension
Cardio-Pharmacists for people
 Specialist
vascular
with
diabetes
GastroHigh Cholesterol
Medco Therapeutic Resource
© 2008 Medco Health Solutions, Inc. All rights reserved.
40
Centers™
intestinal
Janet Woodcock Interview
© 2008 Medco Health Solutions, Inc. All rights reserved.
41
Anticoagulation Center
for Cardiovascular High Risk Members
 Mayo Clinic
~ Collaborative research study for Warfarin (Coumadin®) to
demonstrate
Rare & that genetic testing improves dosing accuracy,
thereby reducing hospitalization rates
Specialty
~ Genetic testing for Warfarin alone has been estimated to save
$1.15 billion per year in total healthcare costs
Personalized
Medicine
Oncology
& Immunology
End-to-End
Service
Pulmonary
Specialized Practice Cardiovascular
ofHIV
Pharmacy
Diabetes
Cardiovascular
High Risk
Hypertension
 Specialist
Cardio-Pharmacists for people with high
riskvascular
cardiovascular conditions, using
Gastroanticoagulants
High
Cholesterol and anti-platelet drugs
Medco Therapeutic Resource
© 2008 Medco Health Solutions, Inc. All rights reserved.
Neurology
& Psychiatry
42
Centers™
intestinal
Oncology & Immunology Center
 LabCorp
~ A collaboration to study the drug Tamoxifen
which was developed to reduce the recurrence
of breast cancer
Rare &
~ It may
not be effective for 10% of the women who are poor
Specialty
metabolizers or non-metabolizers
~ A genetic test is available to determine if another therapy would
be better, yet very few doctors prescribe this life saving test
Personalized
Medicine
Oncology
& Immunology
End-to-End
Service
Pulmonary
Diabetes
 Patient-centric
platform ensures adherence to
Cardioevidence-based guidelines for erythropoietins
vascular
Neurology
®)
(i.e.,Risk
Aranesp®/Procrit
High
& Psychiatry
Specialized Practice Cardiovascular
ofHIV
Pharmacy
Hypertension
Cardio-Pharmacists for patients with cancer
 Specialist
andvascular
disorders involvingGastroimmune system
High Cholesterol
Medco Therapeutic Resource
© 2008 Medco Health Solutions, Inc. All rights reserved.
43
Centers™
intestinal
Medco’s New Business & Retention
$4.9B
2008 annualized new
named drug spend
$4.0B
2008 net new business
98%
2008 client retention rate
*As of fourth-quarter 2007 earnings call
© 2008 Medco Health Solutions, Inc. All rights reserved.
44
Medco Tops Fortune’s List
Most Admired in Health Care:
Pharmacy and Other Services
1. Medco Health Solutions, Inc.
People Management
1. Medco Health Solutions, Inc.
Long-Term Investment
1. Berkshire-Hathaway
2. Medco Health Solutions, Inc.
© 2008 Medco Health Solutions, Inc. All rights reserved.
Innovation
1. Apple
2. Nike
3. Medco Health Solutions, Inc.
45
®
© 2008 Medco Health Solutions, Inc. All rights reserved.
46
Reconciliation Tables
Medco Health Solutions, Inc.
Selected Information (Unaudited)
(In millions, except for EBITDA per adjusted prescription data)
Full Years Ended
EBITDA Reconciliation:
Net income
December 29,
20071
December 30,
2006
December 31,
20052, 3
$912.0
$ 630.2
$ 602.0
99.8
65.9
39.9
December 25,
2004
$ 481.6
December 27,
2003
$425.8
Add:
Interest and other (income) expense, net
Provision for income taxes
591.3
5
381.6
350.9
6
23.74
59.9
324.7
302.9
Depreciation expense
168.9
173.6
165.0
197.6
189.07
Amortization expense
228.1
218.5
192.5
179.9
94.3
$2,000.1
$1,469.8
$1,350.3
$ 1,243.7
$1,035.7
-
-
-
EBITDA
Legal settlements charge
8
EBITDA, excluding the legal settlements charge
Adjusted prescriptions 9
-
162.6
7
$2,000.1
$1,632.4
$1,350.3
$ 1,243.7
$ 1,035.7
748.3
729.9
714.1
678.3
688.2
EBITDA per adjusted prescription
$2.67
$2.01
$1.89
$1.83
$1.50
EBITDA per adjusted prescription, excluding the legal settlements charge
$2.67
$2.24
$1.89
$1.83
$1.50
1) Includes PolyMedica’s and Critical Care System Inc.’s operating results commencing October 31, 2007 and November 14, 2007, the dates of acquisition, respectively
2) 53-week fiscal year. All other fiscal years are comprised of 52 weeks.
3) Includes Accredo's operating results commencing August 18, 2005, the date of acquisition and for the subsequent periods.
4) 2003 excludes a one-time gain of $11 million from the sale of a minority equity investment in a nonpublic company.
5) 2006 includes a $20.0 million nonrecurring tax benefit reflected for the full year.
6) 2005 includes a $25.7 million non-recurring tax benefit reflected for the full year.
7) 2004 and 2003 include accelerated depreciation of $24.5 million and $13.3 million, respectively, associated with facility closures that took place in 2004.
8) This represents the pre-tax legal settlements charge of $162.6 million recorded in the first quarter of 2006. This charge reflected an agreement with the U.S.
Attorney's Office for the Eastern District of Pennsylvania to settle three previously disclosed federal legal matters.
9) Adjusted prescription volume equals the majority of mail-order prescriptions multiplied by 3, plus retail prescriptions. These mail-order prescriptions are multiplied by 3
to adjust for the fact that they include approximately 3 times the amount of product days supplied compared
with retail prescriptions.
© 2008 Medco Health Solutions, Inc. All rights reserved.
47
Reconciliation Tables
Medco Health Solutions, Inc.
Selected Information (Unaudited)
Full Years Ended
Earnings Per Share Reconciliation
GAAP diluted earnings per share
Adjustment for the 2006 legal settlements charge 1
Diluted earnings per share, excluding the legal charge
December 29,
2007
December 30,
2006
$1.63
$1.04
-
$0.17
$1.63
$1.21
1) This represents the pre-tax legal settlements charge of $162.6 million recorded in the first quarter of 2006. This charge reflected an agreement
with the U.S. Attorney's Office for the Eastern District of Pennsylvania to settle three previously disclosed federal legal matters.
© 2008 Medco Health Solutions, Inc. All rights reserved.
48