Medco Health Solutions Inc. Q3 2008 Earnings Call Transcript

| About: Medco Health (MHS)

Medco Health Solutions Inc. (NYSE:MHS)

Q3 2008 Earnings Call

November 5, 2008 8:30 am ET


Valerie Haertel - VP of IR

Dave Snow - Chairman and CEO

Rich Rubino - SVP of Finance, CFO and CAO

Kenny Klepper - President and COO

Tim Wentworth - President of Employer Group,

Tom Moriarty - General Counsel, Secretary and SVP of Pharmaceutical Contracting


Tom Gallucci - Merrill Lynch

Ross Muken - Deutsche Bank

Lisa Gill - JPMorgan

Robert Willoughby - Banc of America Securities

Charles Boorady - Citi

Larry Marsh - Barclays Capital

Randall Stanicky - Goldman Sachs

Glen Santangelo - Credit Suisse


Welcome everyone to the Third Quarter 2008, Medco Health Solutions Earnings Call.

All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.

I would now like to turn the call over to Valerie Haertel, Vice President of Investor Relations. Please go ahead

Valerie Haertel

Thank you for joining us today to review Medco's third quarter 2008 financial results, our expectations for the remainder of 2008, and our guidance for 2009.

With me today as speakers are Chairman and Chief Executive Officer, Dave Snow and Chief Financial Officer, Rich Rubino. Also joining us for a question-and-answer session are President and Chief Operating Officer, Kenny Klepper, President of our Employer Group, Tim Wentworth, and our General Counsel, Secretary and Senior Vice President of Pharmaceutical Contracting, Tom Moriarty.

As we announced during the quarter, Tim Wentworth has been appointed President of Medco's Employer Group and Steve Fitzpatrick, a veteran Accredo Executive has succeeded Tim as head of Accredo.

During the course of this call, we will make forward-looking statements as the term is defined in the Private Securities Litigation Reform Act of 1995. No forward-looking statement can be guaranteed, and actual results may differ materially from those projected.

We undertake no obligations to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Forward-looking statements made on this call should be evaluated together with the risks and uncertainties that affect our business, particularly those disclosed in our SEC filings.

Copies of Medco's filings are available from the SEC, the Medco website or from Medco Investor Relations. The copyrights for the content of this discussion and the written materials used on this earnings call are owned by Medco Health Solutions Inc. 2008.

Slides to accompany our presentation, which detail our financial and operating results and the guidance discussed on this call, can be found in the events section of the Investor Relations site on

At this time, I would like to turn the call over to Dave Snow. Dave?

Dave Snow

Thanks to all of you for joining us. Today, Medco announced strong third quarter results, delivering earnings and sales growth ahead of our expectations.

We have observed to-date, that as clients and members experienced these difficult economic times, they gravitate to the heart of our business model, which is mail service, generic medicine, formulary management programs, specialty drug management, and therapy management programs, which improve both clinical and financial outcomes.

We are reaffirming the 2008 full year guidance that we raised last quarter. In addition, we have announced 2009 diluted GAAP earnings per share guidance of 15% to 21% growth, demonstrating confidence in Medco's continued success.

Our financial priorities for 2009 that Rich will cover in detail, include growing our cash balances, improving our return on invested capital, and increasing cash flows from operations by 50% to $2 billion. In a predictable economic environment, these financial strategies are important.

In today's uncertain economy, we believe the value of these priorities increase exponentially, and will play an important role in driving continued long-term shareholder value.

Also, given recent market conditions impacting valuations in our strong earnings growth and cash generation expectations for 2009, Medco's Board of Directors approved a new $3 billion share repurchase program, that provides us with the flexibility to repurchase our shares in the open market through November 2010, while we also build our cash balances as I previously mentioned.

Over the past months Kenny Klepper and I have met with more than 400 of our clients in scores of prospect in various settings across the country. We consistently heard three themes.

First, in the current environment, our clients are increasingly dependent upon our consultative expertise to help enhance cost effectiveness of their drug benefits. They are more willing to take decisive action to drive appropriate behaviors by their respective membership. These are decisions that might have been avoided in the past when times were better.

Second, clients and prospects recognize that our clinical initiatives, including our Therapeutic Resource Centers and pharmacogenomics leadership will drive superior clinical and financial outcome.

Third, clients are very receptive to the transparency, accountability and guarantees that we are willing to provide around our ability to identify and close critical gaps in care. Clients and their members can clearly see and measure the value we deliver through our evidence-based protocol and reporting.

For those of you planning to attend our Analyst Day in November, we will show you samples of the data we are reporting to clients, proving that the care setting makes a major difference when seeking to drive clinical and financial excellence.

Our conclusion is that payers have become less willing to tolerate inefficient choices by the beneficiaries they are covering. This can only be positive for Medco.

Turning to our third quarter results, net revenues for the quarter rose 15% over third quarter 2007 to nearly $12.6 billion. Net income increased 37.7% to $295.7 million.

GAAP diluted earnings per share increased 48.7% to a record $0.58 per share compared to $0.39 per share in the third quarter of 2007. Excluding the amortization of intangible assets from the 2003 spin-off, third quarter 2008 diluted earnings per share increased 43.2% to $0.63 per share from $0.44 in the third quarter of 2007.

These results include a $0.05 per share non-recurring tax benefit, which was included and disclosed in our previous 2008 guidance. After removing the $0.05 benefit, our GAAP diluted earnings per share grew at almost 36% to $0.53 still, a Medco record on diluted adjusted basis.

EBITDA per adjusted script reached a record $3.19, up 22.2% from $2.61 in the third quarter of 2007 and up 4.6% sequentially from the second quarter of 2008.

Turning to our strategic growth drivers, I will begin with generics. This quarter we achieved a record high overall generic dispensing rate of 64.4%, up 4.1 percentage points from third quarter 2007. This delivered approximately $650 million in savings to our clients and members in the quarter, and over $2.1 billion year-to-date as a result of the use of lower cost generic drug.

As clients and their members seek to maximize savings opportunities for chronic medications, especially in the weakened economic environment, generic and mail-order become even more appealing. Large numbers of our clients are actively considering plan design changes. Many have already taken actions to update their plan designs for 2009 to optimize their benefit dollars.

Our mail-order prescription volume increased 11.1% from third quarter 2007 to 26.1 million scripts. Our mail penetration rate on an adjusted prescription basis increased 2 full percentage points to 40.4%, a new Medco record. We still expect 105 million mail-order prescriptions this year. This number has not changed since we provided our original 2008 guidance on our third quarter 2007 call.

You may have seen recent articles suggesting that patients are beginning to think hard about their prescriptions and whether or not they are discretionary. It is important to consider whether patients are insured or uninsured. For our insured members of mail, our Therapeutic Resource Centers strategy is an additional benefit during these times, helping members with medication compliance.

We proactively educate our members to close gap in [fear and drop] compliance and offer options to save money, thereby, making their essential medications more affordable. On behalf of our clients, our goal is to avoid the need for expensive emergency room visits or inpatient hospital admissions that are the consequence of noncompliance.

We are observing that the weak economy highlights the fact that mail-order and generics are more compelling to client and consumers. We believe that our record mail-order penetration rate this quarter points to that phenomenon.

New business growth in our specialty business was a record. For the third quarter, Accredo Health Group's net revenues increased 34.3% to over $2 billion. Accredo also generated an 8.1% gross margin and delivered operating income growth of 48.6% to a record $78 million.

Turning to sales, with the 2008 selling season drawing to a close, I will briefly discuss our current year results, and then focus my remarks on the 2009 selling season. For 2008, our annualized new name sales stand at $7.2 billion, up over 10% from the $6.5 billion we recorded last quarter. Our 2008 net new sales grew to $5.4 billion.

We have completed over 99% of our 2008 scheduled renewals. Our 2008 client retention rate across the entire book of business closed at a strong 98% and continues to represent the highest retention rate reported in the industry.

Following our record 2008 selling season, we are very pleased to report continued strength in new sales for 2009. To-date, we have sold a total of $6.4 billion in annualized new name business for 2009, up almost 40% from the $4.6 billion we announced last quarter. Our 2009 net new sales now stand at $4.9 billion, up nearly 70% from our previously reported $2.9 billion.

Our sales success extends across all of our market groups, including key accounts, employer accounts and health plan accounts. For 2009 net new sales, our health plan group has had extraordinary success, followed by our Systemed division situated within our employer accounts group, serving clients in the small to mid sized market.

Our 2009 scheduled renewals as well as our early elective renewals, such as United Healthcare represents $17.1 billion in annual drug expenditure. Our 2009 renewals to-date are 89% complete when considering the remaining open scheduled renewals. Of the 11% remaining, there are no accounts with more than $500 million in drug spend. Additionally, our 2009 client retention rate across our book of business currently stands at 96.5%.

With respect to our new business wins and renewals in the third quarter, pricing in the marketplace remained stable and Medco remains disciplined.

Turning to Medicare, we have experienced significant success in the Medicare market as a direct provider to CMS as a partner with health plan and in collaboration with our employer clients. Our success is driven by our Medicare expertise, our excellent service record and our technology platform advantage, which delivers flexibility and fees in a way that protects the client's intellectual property and unique differentiation in the marketplace, an important consideration for health plans.

While we are not authorized to name all of our new health plan clients, we have more than tripled the number of Medicare lives we serve from 2008 to 2009, a testament to the sophisticated solutions and overall value we offer.

As you may know, CMS completed the 2009 Medicare bidding process and has made awards to successful bidders. Medco's PDP was approved as a Part D provider in all 34 regions and was awarded dual eligible seniors in 22 regions for 2009.

Based upon this outcome, our total expected PDP individual membership in 2009 will be approximately 289,000, slightly higher than we originally planned. It is important to point out that our PDP has been profitably underwritten with predictable profitability each and every year back to 2006 when the Medicare Part D program commenced.

For the third quarter, Medco's Medicare PDP revenues increased 25.9% to $156.7 million from the same period last year. Our generic dispensing rate grew to 69.9% and our adjusted mail penetration was 26.1%.

As you can see from these results, this has been a very successful business for us as our offerings remain competitive in the marketplace, both from a pricing and value standpoint. I would like to touch on one last point here regarding some recent press reports that the Federal government may begin negotiating drug prices and/or rebates for Medicare.

Various studies have proven that private industry has been more effective in purchasing drugs at lower prices than the Federal government. So that may not necessarily be the right cost saving strategy for the government.

However, if prices or rebates are negotiated by the government, little would change for Medco. There would be no impact to Medco's bottom-line because Medco already passes back all rebate equivalents to members through premium. Medco will underwrite to whatever approach the Federal government decides to take.

Now I would like to provide you with an update on our recent acquisitions and international activities. First, I'm pleased to report that PolyMedica is performing in line with our expectations and has created a competitive differentiator for Medco in the diabetes category, serving 4 million members across the US.

The diabetes supplies business is a very important component of our Therapeutic Resource Centers strategy. We expect to see continued growth next year as we expand into testing and continue to work in partnership with clients to close critical gaps in diabetes care.

Second, our mail-order business in Germany, Europa Apotheek Venlo, or EAV for short, is performing ahead of our expectations. EAV has experienced strong volume growth and we are projecting very robust growth for this business in 2009.

At our Analyst Day on November 21, you'll have an opportunity to meet Michael Köhler, the Founder and Chief Executive Officer of EAV, who will share a more detailed overview of the German marketplace, our EAV business and its abundant opportunities.

With respect to our collaboration in Sweden, during the quarter we successfully delivered and tested the software to operate a point-of service drug utilization alert system with our Swedish partner, Apoteket, the government operated nationwide resale provider. This system will be used across all retail pharmacies in Sweden to significantly reduce the number of harmful drug to drug interactions.

Today, an estimated 33% of all emergency room visits in Sweden results from a dangerous drug to drug interaction. Our Swedish partners have told me personally that they are impressed with the product and that we're on track to complete delivery by the end of the year. Additionally, we're currently exploring additional opportunities to assist them in managing their drug expenditures in a safe and cost-effective manner.

Given last night's election outcome, I thought I would provide you with my thoughts on what the country's new leadership will mean to Medco. Now that President Elect, Obama has won the White House, we expect that will he try to solve for our nation's uninsured problem, support health information technology initiative, promote the use of generic medications and provide a pathway for bio-generic.

To the extent President Elect, Obama executes successfully in any of these areas, we expect Medco will be a beneficiary. In the case of the 46 million uninsured Americans in this country, funding coverage creates an opportunity for Medco to serve a group of people we do not serve today.

In regard to biogeneric, 15% of the brand biotech drugs Medco dispenses today have expired patents, and over $10 billion worth of biotech patents are scheduled to expire by 2010. Biogeneric pathway spells opportunity for both Medco and our clients, and the fact that President Elect, Obama, as a dominant Democratic Congressman improves the odds of achieving this objective.

Speaking of elections, I'm pleased to report that Nancy-Ann DeParle was elected in late last month to serve on the Medco Board of Directors.

Nancy-Ann is a health policy expert, who ran the centers for Medicare and Medicaid services overseeing $600 billion in annual spending, and providing healthcare to 74 million Americans. Currently Nancy-Ann is the Managing Director of CCMP Capital Advisors and a senior fellow of healthcare systems at the Wharton School at the University of Pennsylvania.

Her policy experience combined with her legal and financial expertise, makes her a perfect addition to our strong and diverse Board of Directors and we expect that she will be a strong contributor to Medco.

Now, I would like to move on to our guidance for 2008 and 2009. In light of our strong third quarter 2008 financial and operational performance and our continued confidence in our future, we are reaffirming our 2008 earnings per share guidance, which was raised again last quarter.

For 2008, we expect GAAP earnings per share to be in the range of $2.10 to $2.13, representing growth of 29% to 31%. Excluding the amortization of intangibles from the spin-off, diluted earnings per share is expected to be in the range of $2.30 to $2.33, representing a growth rate of 26% to 28% over 2007. As you can see, we are on track to deliver another very strong year of earnings per share growth to our shareholders.

For 2009, despite a slower economy, we expect GAAP diluted EPS to be in the range of $2.45 to $2.55, representing growth of 15% to 21% over 2008 guidance. Excluding the amortization of intangible assets, we expect diluted earnings per share to be in the range of $2.57 to $2.77, a 15% to 20% growth rate.

This represents strong growth, especially given that 2009 does not present a strong projected pipeline of new generic drug introduction. Rich will review the details behind our continued confident outlook in our assumptions for 2009 in his more detailed guidance discussion.

In summary, generics, mail order, specialty, Medicare tools have helped consumer find the lowest cost medicine in a unique and clearly differentiated clinical pharmacy model that helps reduce overall healthcare cost, are out coming together at the right time when the market has the greatest need.

We believe that our diversified and growing client base, our strategy that offers solutions to drive additional savings to clients and members, and our strong financial position will enable us to grow and innovate.

As I noted earlier, we are managing our business prudently, by increasing our cash flows from operations by approximately 50% over 2008 expectations to a projected $2 billion in 2009. We are building our cash balances, while also maintaining the flexibility to repurchase shares under our new authorization. We feel very confident in the short-term and long-term outlook for Medco.

Now I will turn the call over to our CFO, Rich Rubino, who will review in detail our third quarter 2008 financial performance and our guidance for full year 2008 and full year 2009.

Rich Rubino

Medco has always delivered a strong balance sheet, and solid cash flows and I am pleased to report that both are stronger still as of the end of the third quarter.

In today's troubled economy, including the tighter credit environment, the strength of company's balance sheet and its cash flow is of paramount importance. Key elements of our financial strategy through 2009 include building our cash balances, driving improvements in our return on invested capital, and accelerating cash flow generation.

We closed this quarter with $440.8 million of cash in our balance sheet, compared to $629.5 million at the end of the third quarter of 2007 and up from $371.7 million in the second quarter.

Correspondingly, our cash flow from operations for year-to-date 2008 was $797.2 million, compared to $816.4 million for year-to-date 2007 and $200.2 million for June year-to-date, reflecting nearly $600 million in cash flow from operations in the third quarter 2008 alone.

Our total debt declined sequentially by approximately $100 million to $4.6 billion. We expect to keep that level of debt through the end of 2009, inherently lowering our debt-to-EBITDA ratio, as our EBITDA grows. In addition, our inventory declined from June 2008 by over $140 million to less than $1.950 billion.

Looking ahead by year-end 2009, we expect to more than double our cash balances from September 2008 levels and plan to improve our cash flow from operations by 50% over our 2008 expectations to approximately $2 billion for full year 2009. We will achieve this by optimizing our invested capital, including improved inventory and receivables management, contributing to a year-over-year return on invested capital improvement of at least 2 full percentage points.

One last comment on our balance sheet, our capital expenditures for September 2008 year-to-date increased $63 million to $156.5 million. The increase reflects continued investments in our new automated pharmacy in Indiana and includes capital associated with PolyMedica, CCS and EAV.

We still expect capital expenditures to approximate $285 million for full year 2008, however we expect a decline to $225 million in 2009, as we complete construction for our third automated backend pharmacy in Indiana.

Moving to the income statement, for the third quarter Medco reported a 15% increase in net revenues to nearly $12.6 billion. The product net revenues component of the total increased 14.9% to $12.4 billion, which was the result of higher new business volumes and price inflation on brand-name drugs offset by higher generic dispensing rates.

The mail component of the product net revenues increased 25.7% to over $5.4 billion and the retail component increased 7.7% to over $6.9 billion. Our mail-order prescription volumes for the quarter of 26.1 million rose 11.1% or 2.6 million scripts over the same period last year. These mail-order prescription volumes included only prescription medications dispensed through Medco, PolyMedica Accredo and EAV.

We established a separate volume category to capture diabetes supplies and OTC medications, such as [Zetec] dispensed through our mail-order facility in the US and through our EAV facility severing Germany and the Netherlands. Combined volumes for these non-prescription items totaled approximately 1.6 million units in third quarter 2008, up 6.7% from the 1.5 million we reported for the second quarter of 2008, with the sequential increase primarily reflecting additional OTC volume from EAV.

Retail volume increased 2.3% from the third quarter of 2007, to 115.1 million prescriptions. The second to third quarter sequential retail volume decline of 4.5 million prescriptions or 3.8% was steeper in 2008, compared to 2007, while a mail-order volumes remained on track. There have been several published reports summarizing IMS’s most recent analysis, regarding softness mail script volume for the third quarter and fourth quarter to date. IMS’s data and the conclusions reached in the IMS analysis do not correlate with our data.

As I indicated on our last call, IMS has experienced accuracy issues with their reported data. It is important to understand that their mail-order data does not reflect Medco's total results and should therefore not be relied upon to predict our mail-order volume trends. In fact, our mail-order volumes in October were identical to September and the October exit rate was strong.

Total prescriptions adjusted for the difference in days supply between retail and mail was 193 million. Our adjusted mail-order penetration rate increased 2 full percentage points to a record 40.4% reflecting the steady track of mail-order volumes and the relatively weaker retail volumes.

Our generic dispensing rates continue to accelerate. Our overall generic dispensing rate increased 4.1 percentage points to a record 64.4%. Our generic dispensing rate of mail, which has a significant positive impact on our overall profitability rose 4.9 percentage points to 55.8%.

Our gross rebates earned in third quarter 2008, reached a record $1.125 billion, an increase of 31.4%. This growth reflects new business wins, improved contract terms and increased levels of formulary compliance posted by our harder mail-order penetration and the success of our clinical programs.

Our rebate retention rate was 18.2% in third quarter 2008, up 5.4 percentage points from the 12.8% in the third quarter 2007.

Our product margin increased 90 basis points to 6.5% in third quarter 2008, reflecting higher mail-order volumes and penetration and higher generic dispensing rates. Our overall gross margin for third quarter 2008, including services, increased 1 full percentage point from 6.4% to 7.4%.

Since Dave already covered the results of our specialty pharmacy segment, I would just like to reiterate how pleased we are with the performance of this business. Accredo's year-over-year revenue growth, gross margin expansion and operating income growth have been nothing short of impressive.

Company-wide, SG&A expenses for the third quarter of 2008 increased 31.9% or $84 million to $347.2 million. Over $63 million of the $84 million in growth is attributable to the acquisitions of PolyMedica and Critical Care in the fourth quarter of 2007 and majority-owned EAV in the second quarter of 2008, with the remainder primarily reflecting higher employee-related expenses associated with new business wins and clinical programs.

We expect this rate of increase to decline next quarter, since the PolyMedica and CCS acquisitions took place during the fourth quarter of 2007, creating more consistency in quarter-over-quarter comparisons.

Our third quarter EBITDA increased 29.3% to $616.2 million. We achieved a record EBITDA for adjusted prescription of $3.19 for the quarter compared to $2.61 in the third quarter of 2007 and $3.05 for the second quarter of 2008, primarily reflecting the improvements in the gross margin dynamics previously discussed.

Net interest and other expenses of $58.2 million increased from $25.5 million in the third quarter 2007, primarily from the March 2008 bond issuance to funds our acquisitions. Sequentially, net interest expenses rose 1.2% from the $57.5 million we reported for the second quarter 2008.

The effective tax rate for third quarter 2008 was 34% compared to 39.9% for the third quarter 2007. As previously disclosed and incorporated in this guidance, we recorded a non-recurring state income tax benefit of approximately $0.05 per share, which was primarily related to schedule statute of limitations expiration in certain states.

Net income increased 37.7% from third quarter 2007 to $295.7 million.

Moving on to share repurchases, Medco repurchased $8.3 million shares during the third quarter of 2008 at a cost of $391.7 million, representing an average share price of $47.23. Year-to-date through the end of the third quarter, our share repurchases totaled 41.8 million shares at a cost of approximately $2 billion.

In October, Medco repurchased approximately 600,000 shares for $29.7 million, leading to the completion of our previous $5.5 billion share repurchase authorization. From inception to-date, Medco repurchased 153.8 million shares at an average share price of $35.75.

Our weighted average fully diluted share count for the third quarter of 2008 of 513.4 million shares declined by 34.5 million shares compared to a split adjusted 547.9 million in third quarter 2007, largely attributed to the share repurchases made throughout the period, partially offset by the effective employee stock options.

We ended the third quarter of 2008 with 498.5 million basic shares outstanding plus a dilutive equivalent of approximately 10.2 million additional shares, bringing the total fully diluted share count to approximately $508.7 million on September 27, 2008. This fully diluted share count is the third quarter exit point, and therefore, becomes the entry point for the fourth quarter of 2008.

Turning to guidance. As Dave mentioned, we are reaffirming our 2008 EPS guidance. Our full year 2008 assumptions are fairly consistent with what we reported last quarter for 2008 as follows.

We continue to expect 105 million mail-order prescriptions. Our expectations for full year 2008 new generic EPS contribution is slightly higher than the $0.16 we provided last quarter, but this is largely offset by new client start-up costs associated with our significant new client wins.

Our SG&A expense for 2008 is expected to be approximately $1.4 billion, representing 26% growth over 2007. Our intangible amortization expense projection is in the range of $280 million to $290 million.

Our net interest expense is expected to be approximately $230 million. The incremental EPS contribution from Accredo is on track to reach the high end of our previous expectation at $0.05 with revenues exceeding $7.5 billion.

Our full year 2008 effective tax rate is expected to be in the range of 38.0% to 38.5%. Wrapping up 2008, our average diluted share count for the full year is estimated to be in the range of 520 million to 522 million shares.

Looking ahead to 2009, we expect to deliver GAAP earnings per share in the range of $2.45 to $2.55, representing growth of 15% to 21%. Excluding the amortization of intangibles from the 2003 spin-off, our EPS guidance is expected to be in the range of $2.67 to $2.77, representing growth of 15% to 20% over 2008.

We believe that the balance sheet strength I highlighted earlier will serve us well in a market where tight liquidity is a new reality. Our strong 2009 earnings projection reflects our confidence and our business model provides an important solution in a weak economy. In today's environment to deliver this level of strong double-digit growth is a testament to the value we provide to clients and members. The strength of our company is further illustrated by the fact that we expect to deliver this growth in a year where the benefit from new generic introduction is comparatively low.

Our 2009 guidance includes the following key assumptions. Incremental EPS contribution of approximately $0.11 per share from scheduled new generic introductions. The 2009 introduction are backend loaded in the year. About 10% of this benefit is expected in the first quarter, approximately 25% in each of the second and third quarters, and about 40% in the fourth quarter of 2009.

Of the 17.1 billion in annual 2000 renewals that Dave discussed, we expect approximately 90% of the new pricing on this drug expenditure in the first quarter, with the remaining 10% in the third quarter of 2009.

We expect mail-order prescriptions to be in the range of 105 million to 107 million prescriptions. This reflects the significant number of health plan client wins with lower mail penetration rates, the loss of accounts with higher mail order volumes and the unpredictable influence of protracted economic weakness.

While our overall mail penetration and gross margin percentages are expected to decrease compared to 2008 as a result of our 2009 client mix, our EBITDA for adjusted prescription is expected to grow modestly. Please note that retail volumes are an important component of these calculations and are difficult to predict with high levels of certainty, particularly in this economy.

Our net new sales are a strong $4.9 billion for 2009. However, our SG&A is expected to be flat with 2008, reflecting improved productivity across our SG&A areas. We continue to maintain strong expense controls and are actively pursuing opportunities across Medco to improve efficiencies and further lower expenses, thereby, growing both the top-line and the bottom-line.

We expect Accredo operating income growth to be greater than 20% with revenues of approximately $9 billion. Amortization of intangibles is expected to be in the $295 million to $305 million range.

We expect net interest expenses in the range of $220 million to $230 million. Again, debt is expected to remain flat from now through 2009, but we will incur a full year of interest in 2009 on the bonds that were issued in March of 2008.

Our effective tax rate is expected to be in the range of 38.5% to 39.5%.

Medco's Board of Directors approved a new share repurchase program, authorizing the repurchase of up to $3 billion of the company's common stock in the open market through November 2010. Our strong earnings growth and cash generation expectations for 2009 are (inaudible) to secure this authorization to repurchase shares.

Our first priority is to build our cash balances to more than double the September 2008 balance by the end of 2009. Along with that, we currently expect share repurchases during the end of 2008 and through 2009 to result in an average 2009 outstanding diluted share count in the range of 485 million to 500 million shares. We expect that share repurchases will be funded from free cash flow.

In summary, we are very pleased with our third quarter performance and our confidence in our prospects for 2008 and 2009 as demonstrated by our guidance.

Now, Dave and I would like to open the lines for questions.

Question-and-Answer Session


(Operator Instructions). Your first question comes from the line of Tom Gallucci with Merrill Lynch.

Tom Gallucci - Merrill Lynch

Just looking at guidance for next year, two questions, first, what would you consider sort of the key variables within the range? Maybe as a follow on to that, I think a big question we've been getting is how do you factor in membership expectations given the economy, given the potential for layoffs, obviously, companies like GM have gotten a lot of attention? So just wondering how you factored that into your outlook?

David Snow

Let me give a start with that Tom, and then I'll let Rich add anything he'd like to. Obviously, with the economy where it is, that's another variable to our estimates for next year that we had to account for in our guidance. When it comes to layoffs, to the extent people aren't immediately reemployed, most do have COBRA coverage, which is 18-month long and takes them into the 2010 timeframe. So the real impact on layoffs doesn't hit us in the '09 planning period.

The bigger variable that we need to plan for, although we aren't seeing it yet, is the concern I mentioned that there could be a point if the economy continues to deteriorate where consumers actually start treating their chronic drugs as discretionary.

Today, it's non-discretionary and we don't think it will become discretionary; however we can't say how bad the economy could become next year. We may have hit the bottom now. It could get worse. That's a factor in our guidance and that really will determine where we are within the range. We think we've adequately provided for the uncertainty in the range we've given you and it's really the bigger impact of the economy that the thing that we're going to watch most closely.

I think other than that,the things within Medco's control, we are pretty comfortable with and we're really pleased with all the elements of our performance in the key five growth drivers that I talked about in my formal comment.

Rich Rubino

Further to Dave's point that's exactly why we gave a range for mail-order volumes for 2009 of the 105 million to 107 million scripts because those are known in the economy and what may happen with regard to employment and so forth. Aside from that as you know mail volumes particularly generics mail are the key drivers to our profitability. So it's that volume that's really driving the range.

Tom Gallucci - Merrill Lynch

Dave, just wondering, what kind of data do you see? Do you know what the uptick is typically on corporate when people get laid off, that you might see on average there?

Dave Snow

When we look backward, it's not necessarily a great predictor going forward, because when you look backward lay-offs are really quickly absorbed by the rest of the economy. I suspect this time the absorption rate will be significantly lower because so many different companies are downsizing to manage their own businesses. So, I would expect the [COBRA] uptick will actually be higher than we've seen in the past.

Tom Gallucci - Merrill Lynch

Thank you.


Your next question comes from the line of Ross Muken with Deutsche Bank.

Ross Muken - Deutsche Bank

Good morning. So, just sort of feeding off of Toms comments, what's the thought on the specialty business relative to sort of economic weakness and what trends have been like there historically, when we've seen utilization change on some of the traditional or more chronic drugs and how are you thinking about that relative to '09?

Tim Wentworth

So, this is Tim, thanks for that question. In fact what we see is much less impact if you will due to the fact that lot of our patients are in government programs already or in compassionate care programs and so forth. The kind of patients we care for typically aren't the kinds that get thrown off of coverage. By and large inside these employers, obviously we will see that migration, but it's a smaller percentage of the Accredo book than it is the overall Medco book. In fact, we see the opposite, which is more plans, moving more aggressively into our more heavily managed programs on the medical side and so forth, to take advantage of significant amounts of savings for taking key things out of buy and bill and narrowing the channel.

So, when we look forward, as Rich said, we were projecting better than 20% growth for next year. We are very confident in those numbers as we look at it and we like the therapy mix a lot. So strong position there and again large part of our book of business moving their patients even more deeply into our managed programs.

You will see at Analyst Day, in fact, if you come, one of the things, I'm going to share is sort of how we save clients money and you will see, it's a fairly compelling story. We will give you a couple of specific patient examples, as well as a more macro look at what we've done with regard to trend and spend management.

Dave Snow

To just add to Tim's point, this is a broader comment. We are clearly a solution in a tough economy and I said it right up front, this negative economy place of the heart of the things that are important to Medco because to the extent our clients move more to the things Medco does well like mail for specialty, mail for the core, moves to our formulary management programs etcetera and so forth. Their financials improve and so do ours. So there's really a nice silver lining around this economic cloud that plays nicely for Medco.

Ross Muken - Deutsche Bank

Quickly for Rich, the cash flow from operations guidance is really impressive. Your business is already managed extremely well. Could you talk a bit about where that incremental savings is coming from on the accounts receivable and inventory line, is it from the new business, or is it sort of optimizing, the business that you've taken on over the last few years?

Rich Rubino

It's more a function of optimizing. Essentially what I'm doing next year and I started already is I'm unlocking the cash that's currently inherent at our invested capital, so from an inventory perspective we have a great business partnership with AmerisourceBergen and they've done a terrific job in getting us inventory shipments more quickly, therefore we don't have to carry as much inventory and also focusing on our safety stock levels and so forth.

Again, thanks to AmerisourceBergen and the great inventory management team we have, we're able to reduce those safety stock levels. In addition on the accounts receivable side, we are putting some technologies in place and changing some processes, such that we can get bills out, particularly rebate oriented bills out earlier to drive the cash into the business sooner and improve our overall turns on those accounts receivable.

Ross Muken - Deutsche Bank

Great, thanks, Rich, and congratulations, guys.

Rich Rubino

Thank you, Ross.


Your next question comes from the line of Lisa Gill with JPMorgan.

Lisa Gill - JPMorgan

Just a couple of follow up questions, Dave, I know you don't want to give specifics on the selling season around, how much came from each area, but your comments around Systemed really peaked my interest. Can you maybe just give us some more color around how much of the business came from Systemed and what you think the opportunities are around Systemed in that area of the business?

Secondly, when we think about the guidance Rich, I know you said EBITDA per script would be modestly up, but what should we be thinking about from a script perspective and just kind of going back to some of the earlier questions when we think about the auto industry, we think about 2010 and [FEBA], what's the timing aspect of that? What should we be seeing next year for an RFP, etcetera?

Dave Snow

Lisa, you're right. I don't like to give that with granular level of detail, but what I will tell you is when you look at our Systemed business from a performance point of view, meaning a performance year point of view, this has been a record year for Systemed.

I would tell you that the reasons I believe it's a record year, is the consultant community has moved from the large group market down to the middle market and they rested away the consulting farm brokers and the consultants are in this middle market are now looking for the same things we do in the national marketplace.

So they know our story, they know the Therapeutic Resource Centers, they know what we are doing in pharmacogenomics, they know what we're doing in transparency, they know what we're doing in reporting and they are taking that knowledge from the large group market to the middle market and when they go out bid, they are looking at it differently than perhaps they looked at it in the past and therefore Systemed is upping their win rate, which is very encouraging and I'm encouraged that they will have equally strong success in the 2009 selling season into 2010.

Lisa Gill - JPMorgan

When you think about coming into that market, are you winning the business from the traditional players or are you taking this now from some other players that perhaps maybe you weren't competing with before and now you're breaking into that middle market and taking the market share because the consultants know who Medco is, knows where your systems are, knows what you can provide to the customer. I am just trying to understand if any of the competitive dynamics are changing?

Dave Snow

I think the consultants being more prevalent in that middle market is the main dynamic honestly and they are doing a better job assessing the capabilities of the various players because the consultants are I think more thorough.

I'd also say that the [PPA] marketplace has lost business to the direct model quite a bit. It's more because these companies are looking for more precision and more transparency in their drug costs and the drug cost management. So I just think we are getting more opportunities than we've seen in the past as a result of that.

Lisa Gill - JPMorgan

Okay, great. And then Rich, any comments on how we should be thinking about scripts for next year, I know that we talked about EBITDA per script being modestly up but any thought just to how we should be modeling for scripts?

Rich Rubino

Well, I gave you the mail script volume range obviously. Of course projecting retail scripts is very difficult particularly in this economy, but I can tell from you a mail pen perspective that our mail penetration rate, which is this quarter was at 40.4%. For the year 2008, we'll probably end up balancing at just over 39%, and next year I'm expecting that will be slightly below 38%. And that's just a function of the change in client mix. So, based on that, you should have enough information to do your projections with regard to the retail components.

Lisa Gill - JPMorgan

Yes. Very helpful. Thanks for the transparency on all the guidance and congratulations.

Dave Snow

Thanks, Lisa.


Your next question comes from the line of Robert Willoughby with Banc of America Securities.

Robert Willoughby - Banc of America Securities

Hi. Dave or Rich, should we wave goodbye to the sub 2% SG&A expense ratio there? I mean, is the business mix permanently changed here that we cannot get that much lower than the 2.5% number we're hovering around for this year?

Rich Rubino

No, I wouldn't say that. I think our goal would be to ultimately improve that SG&A performance relative to revenue overtime.

Robert Willoughby - Banc of America Securities

If I look at historical number below 1%, I can't get back to that historical level. Could I or do you feel there is leverage to some of the businesses you've acquired?

Rich Rubino

Well, I think there's definitely leverage. It's that leverage regarding the businesses as we acquired that's getting us to our flat growth next year. And it's not just about next year. We are going to, hopefully, find year-over-year improvements for the next several years.

As a matter of fact, as you know, over the years we've generated considerable productivity in our distribution areas to the technologies that we've instituted, thanks to the work in Kenny Klepper's group. Going forward, we are keenly focused on doing the same thing in SG&A. When you look at our capital expenditure plans for next year and even in our longer term strategic plan, there is a lot of focus on driving improvement out of SG&A.

Robert Willoughby - Banc of America Securities

Okay. Maybe just reversing my previous thinking on one, if you are generating $2 billion in cash next year, presumably that's a lot of inventory coming off the balance sheet. What was the benefit of keeping that inventory on the balance sheet? Was there not some sort of margin you generated in an inflationary environment or what do I lose from an income statement perspective with that balance sheet dynamic?

Rich Rubino

I don't think you're going to lose anything from an income statement perspective. You see our guidance for 2009. It's very strong. As I pointed to an answer to an earlier question, we are again working with AmerisourceBergen, now able to manage our inventory days on hand to lower levels as we get quicker shipments, next day shipments from AmerisourceBergen.

Dave Snow

Bob, one of the biggest challenges we've faced historically is making absolutely certain we have enough inventory for the enormous volumes we pump through our backend mail facilities. Rich really put his finger on the key issue here. We've come up with better ways to manage just in time delivery. So we don't have to have that money sitting on a shelf to the level we've had to have in the past.

So it's really about making our process more efficient while still assuring there's never an outage on the line.

Robert Willoughby - Banc of America Securities

I'm definitely glad it's going. I just always wondered why it was there to start with. So I think it's a step in the right direction. Thanks.

Dave Snow

Thanks, Bob.


Your next question comes from the line of Charles Boorady with Citi.

Charles Boorady - Citi

Question on the guidance, which I think everybody appreciates getting in light of the uncertainties in the economy though, just curious the 15% to 20% range, that summarization, can you give us a sense exactly what that might have looked like were it not for concerns over the weak economy and weak employment, just so we get a gauge of how much factor of safety you are building into that?

Rich Rubino

No, I'm not going to give you that because essentially as you saw in the range of mail that we gave you, that range is already factored in. So we've got the uncertainty factor in there, the 2 million scripts in the range of the 15% to 20% on the cash EPS reflects what we believe is a realistic range of what the economy may contribute in the course of next year. So I think what you need to do, Charles, is focus on that 2 million mail script range, which, to a great extent, contributes to the range you are seeing in our earnings guidance next year and that's it.

So, by definition, if there weren't the economic uncertainties, we'd be a little bit toward the higher end of the range. And if we were very, very cautious, we might be below the range we've given you. So I think we've got a balanced range here. It's very difficult to project, but the economy has been soft for a few months now, very soft, and we're just happy that we're seeing our mail volumes as strong as they are. As I mentioned in my script, we exited October very strong and the economy has been getting progressively weaker.

Charles Boorady - Citi

Just so I understand that, Rich, is the high end of the range then the 20% what is achievable or what would be achievable were it not for a weak economy, or if you assume some sort of recovery next year?

Rich Rubino

I'm not assuming any recovery. I'm just assuming that basically things are staying pretty much where they are now, and I'm assuming that we're going to execute, do the blocking and tackling that we need to do. And that would get you to the higher end of the range. And again, if we do all the blocking and tackling we need to do, but the economy takes the turn for the worse that will bring into the lower end of the range.

Charles Boorady - Citi

I see. So the high end of the range does not assume any improvement in the economy.

Rich Rubino

That's right. That's why you have the volatility factor between the low and the high end, because that's soft economy on the low end, relative stability on the high end.

Dave Snow

Charles, the hardest things predict here is we've two floating variables. One is the consumer's behavior, the second is the employer's behavior or the client's behavior, and they all have their unique and individual things they are dealing with. So it's really a Rubik's Cube, but I think the most important thing to understand is the economy is driving behaviors at the consumer level and the client level that are hard to predict.

So we, as a management team, have fairly strong confidence in the guidance we gave you that we've taken those things into account, as well as the other things we are doing strategically to grow our business. So when you put them all together, we're comfortable with this range, just as comfortable as we've been in other years when we've given you our guidance.

Charles Boorady - Citi

Got it, thanks. That's helpful clarification. And then, finally, with elections being on the front pages, I just want to make sure that summarizing what you've told us the impacts, e-Prescribing, expanded coverage, both of those good, Part D, a little bit of risk around government negotiation for drug, you think it would have zero impact on you, and biogenerics, which would be positive.

I want to make sure that's the complete list and whether there are dollar amounts that you would be able to put on any of those four items in terms of what you might be including in our '09 guidance and then what could be expected longer term?

Dave Snow

The health IT plane is bigger, bigger than just e-Prescribing. I don't know if you've seen it, but I've been talking about a bigger healthcare reform platform. And we believe that Obama is going to embrace a bigger healthcare IT agenda.

What Medco is doing in their Therapeutic Resource Centers around protocol base practice of medicine within our therapies is something that would be enabled by health IT, such that we, as a society, can track this around evidenced-based protocol-driven medicine, which is a huge healthcare reform step.

So, we are very supportive of that e-Prescribing we've told you in the past, it's big for us. Administratively alone it's worth $2 a prescription. On top of that, you get better education, better front-end education of the physician at the point of prescribing, such that you get better channel shift, better formulary use and better generic use.

So e-Prescribing is big. Medco is going to monitor the Medicare law and we're honestly going to look to promote physician use of e-Prescribing tools and we may look at what else we can do to augment what the government is doing because we think it's a meaningful step in healthcare reform. So we think that's a big deal, a very positive take.

I think that the democrats have historically proven that they are big supporters of generics. They were the main push behind generic under the Hatch-Waxman Bill, under the science of chemistry. We think they are very likely to get through a bio generics or bio similar field within the next year, and that, again, is going to drive the same dynamic we see in our core business and we are pleased with that, we support that.

The other point that I can't emphasize enough, if the government decides to negotiate with pharma directly, first of all, even if they did it exclusively, from our perspective, it really does not change the business for us, just because of the way the PDP rules are set today. That's number one.

Number two; it's very unlikely to the extent that government steps in, that they will use it as a floor under which no one else can negotiate. Their point has been consistently, we like to do it to make sure that some of the smaller PDP players aren't disadvantaged that they get at least a minimum discounts for our membership. So frankly, that's fine and actually has no consequence whatsoever to our business. So, we are very comfortable with the healthcare platform that's been articulated up until now from the [Obama] campaign.

Rich Rubino

With regard to 2009 guidance, while you are seeing an uptick in e-prescribing, it's not a material uptick and the value of biogenerics would not be seen in our profitability until 2012, 2013 range.

Charles Boorady - Citi

Okay. Great, thanks. Congrats on the quarter.

Rich Rubino

Thank you.


Your next question comes from the line of Larry Marsh with Barclays Capital.

Larry Marsh - Barclays Capital

Dave, I did see your National Press Club piece and I like the way you started out, keeping it simple. The question I had really was around the reconciliation of the new business for '09 versus your scripts and you've gone through in some detail, I appreciate that but just help us understand, if you look at net new business, it's almost as good as '08 and you talked about health plan particularly strong.

Do we think of that, as some new customers outsourcing their PBM business? You mentioned Part D, is that a combination of those two? And as you think about sort of the scripts for '09 I'm assuming you're not assuming a big increase in script growth from United, but do we just think of this as an unusually low year for mail script growth in '09?

Dave Snow

Larry, the way to think about this, if you recall I think it was in 2005, we had enormous inflow of state business with low mail pen and this is a similar year where if you look at the losses in the '09 timeframe, the public losses were GE and BellSouth and they were heavy mail pen accounts. The wins are heavy retail accounts. You know that historically health plans with few exceptions for the most part health plans have had historically lower mail penetration volumes than employers direct.

So that's kind of the in and out relative to it, but we are really excited about the business coming in simply, because two things, it's an opportunity to move to mail. Just as the state business was and you've seen in the past our stats on our ability to move from retail to mail in those state accounts overtime and it's been a really nice contributor to savings at the state level and our bottom-line.

The other thing I would tell you is that health plans as a group have a far better understanding of the advantages of mail now than I would say they had even two years ago. So these accounts were winning even though they may come on board with lower mail pen have benefits that definitely lean to mail, number one, and number two, the health plans are really working cooperatively to drive mail.

So we think we've got kind of a handle on where we're comfortable in terms of mail volume going. However, depending on the efforts of these health plans and when they come on, there could be better than the volumes that are here. I mean it is how we work with our health plans and how they drive this business, but I can tell you this refreshing is the health plans really understand the advantage of mail? We are seeing efforts to drive it far better than we've seen in the past five years.

So, we are trying to assess this. Since there's a dependency between what we do and the sponsorship of the customer, in this case the health plan, we think we are being fairly accurate, but who knows where it could go because the co-operation is just very different than what we've seen in the past. Is it very positive.

Kenny Klepper

Certainly in the last three or four years we have the highest level of activity across the book of business, we're working with both the health plan and the employer side, they are requesting modeling for a much more aggressive plan design, around moving clients from retail to mail. We are busier doing that than we have ever been. Until we get the deals done, it's not something we could forecast, but we think that there is some substantial offset to the risk in the economy from the positive influence we are having for employers that are serving on the cost side of moving clients from retail to mail.

Larry Marsh - Barclays Capital

Okay. All right. Great. Thank you for that detail. Just a quick clarification for Mr. Rubino on the quarterly generic assumptions, do I read that to assume that I know you don't guide to quarters, but that the first quarter comparison will be by far your toughest and then the quarter '09 could conceptually be your easiest or is that too presumptive?

Rich Rubino

Certainly as it relates to the generic introductions you are absolutely correct.

Larry Marsh - Barclays Capital

Okay. But no more detail around trend at this point?

Rich Rubino


Larry Marsh - Barclays Capital

Okay. Maybe Dave, thanks so much for the review of the new administration, but from a policy of market standpoint and as you step back what is your biggest concern, if you sort of highlight the positives out there, what is your biggest concern say in the next two years and how would you address it?

Dave Snow

Honestly, Larry, its headline risk and you know as well as I do over the last five years the biggest thorn in our side has been headline risk, not actually the materiality of the concern underneath it. So, our best strategy around that is to be as open and transparent, as we possibly can with all of you and to give you our thoughts in a preemptive way so that the wrong conclusions aren't drawn and that's the best we are going to be able to do with the headline risk.

Larry Marsh - Barclays Capital

Right, okay. Very good, thank you.

Dave Snow

Thank you.


Your next question comes from the line of Randall Stanicky with Goldman Sachs.

Randall Stanicky - Goldman Sachs

Great, thanks very much for taking my question. I just have one and its fairy specific, Rich, as you think about the $0.11 in contribution from new generics, do you factor any non-AV rated Effexor XR now that Osmotica has launched and then generally how do you think about the driving share for new non-AV rated generic products?

Rich Rubino

Essentially, what we've got assumed in our $0.11 for next year, essentially, the effect of (inaudible) in the respective quarters that are being introduced. That's the primary driver of the generic effect that we are seeing next year. In addition to the profit contribution, as generics that have been introduced historically, including 2008, go from their exclusivity periods out of that period into a competitive period where our purchase price has improved

Dave Snow

Randall, let me just add one thing that may be obvious, but I'm going to say it anyway. As has been our practice in the past to the extent there's any rumor or any conversation about early introduction, we never put that in our guidance. So things happen when they happen. There's nothing provided for in our guidance around anything that's early relative to the schedule Rich went over in his formal comments.

Randall Stanicky - Goldman Sachs

Okay. So just to clarify, then it's fair to say that there's any meaningful contribution from Effexor XR in your outlook currently?

Dave Snow

That's true.

Randall Stanicky - Goldman Sachs

Okay. That's helpful. Thank you.

Dave Snow

Thank you.


Your next question comes from the line of Glen Santangelo with Credit Suisse.

Glen Santangelo - Credit Suisse

A quick follow-up question with respect to your 2009 guidance. Could you maybe give me a little bit of a sense for what your assumptions are behind the diabetes business because, as I think we all know, there's a reimbursement cut going into effect on January 1, and I'm curious to see as to what you think the potential headwind that created in '09 versus your '08 numbers?

Dave Snow

I'll let Rich to give you some more granularity. But generally speaking, there is a cut nationally of 10% going across the diabetes supply space. Remember, our diabetes program is supplies plus the drugs. So this only applies to the supplies. It is well within the range we modeled when we first acquired PolyMedica. So this is kind of what we anticipated with the competitive bidding.

I will tell you that Laizer Kornwasser on my executive team has done a great job growing the business, thereby, mitigating the consequence of the 10% cut. As we indicated in our formal comments, we're pretty pleased with way it is contributing to the overall service we're able to provide our diabetes patients and it's going to make an increased contribution for us in a positive way in '09 despite the cut.

Rich Rubino

So with the cut, both our revenue and our operating income are growing next year in PolyMedica compared to 2008.

Glen Santangelo - Credit Suisse

If I could just ask one follow-up question on EBITDA per script, I mean you clearly have over 10% of revenue growth coming from new contract wins in addition to some generics, but your EBITDA per script is only growing modestly. Is that more of a function of your customer mix next year as opposed to something going on with pricing that we should be aware of?

David Snow

It's a function of the denominator and the denominator has a large number of retail scripts besides the newly won business. It's simply the math. The new business we won has a lot of retail scripts, which would bring your EBITDA per script down.

Glen Santangelo - Credit Suisse

Okay. Very good. Thanks.

Dave Snow

As I've said in my comments, we are finding that the pricing in the marketplace through the third quarter has been very rational, very disciplined.

Glen Santangelo - Credit Suisse

Okay. Very good. Thanks.

David Snow

Thank you.


Ladies and gentlemen, we have reached the allotted time for questions. I will now turn the call back to management for closing remarks.

David Snow

Thanks everybody for joining us. In closing, we are confident in our outlook for the remainder of the year and for 2009 and beyond.

One last thing, I want to remind you that our Analyst Day will be held on November 21 in New York City. Many members of our senior leadership team will be presenting to provide you with a comprehensive overview of our strategy, our position to continue to deliver results and execute against our plan.

For the first time, we will provide you with the early results from our Therapeutic Research Centers deployment, including the financial benefits to our clients and to Medco. Additionally, we will share early results from our pharmacogenomic collaboration, provide additional information regarding our international activities and other new initiatives such as e-Prescribing that will add to our profitability over the long-term. If you would like additional information about our Analyst Day, please contact Investor Relations.

Thanks again for joining us today.


This concludes today's third quarter 2008 Medco Health Solutions earnings conference call.

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