Express Scripts Holding (ESRX) George Paz on Q4 2015 Results - Earnings Call Transcript

| About: Express Scripts, (ESRX)

Express Scripts Holding Co. (NASDAQ:ESRX)

Q4 2015 Earnings Call

February 17, 2016 8:30 am ET

Executives

Benjamin Bier - Vice President-Investor Relations

George Paz - Chairman & Chief Executive Officer

Eric R. Slusser - Chief Financial Officer & Executive Vice President

Timothy C. Wentworth - President & Director

Steven B. Miller - Chief Medical Officer & Senior Vice President

Analysts

Lisa Christine Gill - JPMorgan Securities LLC

Eric Percher - Barclays Capital, Inc.

Robert Patrick Jones - Goldman Sachs & Co.

Robert McEwen Willoughby - Bank of America

Garen Sarafian - Citigroup Global Markets, Inc. (Broker)

John C. Kreger - William Blair & Co. LLC

George R. Hill - Deutsche Bank Securities, Inc.

Ricky Goldwasser - Morgan Stanley & Co. LLC

Charles Rhyee - Cowen & Co. LLC

Steven J. Valiquette - UBS Securities LLC

Jason Plagman - Jefferies LLC

Anthony V. Vendetti - Maxim Group LLC

David M. Larsen - Leerink Partners LLC

Eric W. Coldwell - Robert W. Baird & Co., Inc. (Broker)

Michael J. Baker - Raymond James & Associates, Inc.

Operator

Welcome to the Express Scripts' Fourth Quarter 2015 Earnings Conference Call. All lines have been placed in listen-only mode until the question-and-answer session. Today's call is being recorded. If anyone has any objections, you may disconnect.

I would now like to turn the call over to Ben Bier, Vice President of Investor Relations. Sir, you may begin.

Benjamin Bier - Vice President-Investor Relations

Good morning. Before we begin, I need to read the following Safe Harbor statement. Statements or comments made on this conference call may be forward-looking statements and may include financial projections or other statements of the company's plans, objectives, expectations or intentions. These matters involve certain risks and uncertainties. The company's actual results may differ materially from those projected or suggested in any forward-looking statement due to a variety of factors, which are discussed in detail in the company's most recent Form 10-K filed with the Securities and Exchange Commission. We do not undertake any obligation to update or otherwise release publicly any revisions to our forward-looking statements.

For clarity purposes, all financial numbers, except where indicated, that we talk about today will be on an adjusted basis and are attributable to Express Scripts' excluding non-controlling interest representing the share allocated to members of consolidated affiliates. This presentation will be posted on our website and includes an appendix with footnotes of the reconciliations of GAAP to adjusted numbers. Please also refer to tables included in our earnings press release for a reconciliation of GAAP to the adjusted numbers that we will be discussing. The press release is posted on the Investor Relations section of our website at www.express-scripts.com.

At this point, I will turn the call over George to review the agenda for this morning.

George Paz - Chairman & Chief Executive Officer

Thank you, Ben, and good morning everyone. We are proud of our 2015 performance and we are confident in our 2016 guidance. This morning, Eric will discuss our financial results and future outlook, Tim will give highlights from our strong operational performance, and I will follow with my perspective on why Express Scripts is the best choice for patients, clients and shareholders.

I'll now turn over to Eric to discuss the strong results that our business model delivered in 2015 and what we expect to achieve in 2016.

Eric R. Slusser - Chief Financial Officer & Executive Vice President

Thanks, George, and good morning everyone. This morning, I'm happy to report strong fourth quarter earnings and an overall financial performance that delivered adjusted earnings per share of $1.56, representing growth of 12% over last year. We adjudicated 341.5 million adjusted claims generating adjusted EBITDA of $1.9 billion, up 4%, which results in adjusted EBITDA per claim of $5.66. As expected, we generated $2.9 billion of cash flow during the quarter.

We also delivered solid financial results for the full year 2015, generating $5.53 of adjusted earnings per share, which represents growth of 13%. We adjudicated approximately 1.3 billion of adjusted claims. We delivered adjusted EBITDA of $7.05 billion, matching the midpoint of our guidance range. Our adjusted EBITDA per claim was at $5.43, which represents 5% growth.

Full-year cash flow from operations was $4.85 billion. We deployed $8.9 billion of cash during 2015, $5.5 billion to repurchase common stock under the 2015 accelerated share repurchase agreement and $3.4 billion to retire debt. As anticipated when we provided our 2016 guidance in December, we settled the 2015 accelerated share repurchase agreement in January and received 9.1 million additional shares, resulting in a total of 64.2 million shares received under the agreement.

Due to our strong outlook for the year, we are raising the lower end of our 2016 guidance from $6.08 to $6.10 and now expect adjusted earnings per share to be in the range of $6.10 to $6.28, representing growth of 10% to 14%.

Despite the effects of the Coventry and Catamaran business rolling off, which represent approximately 3% of claims, we expect EBITDA for 2016 to be in the range of $7.2 billion to $7.4 billion, or an increase of 3% to 5%. We also expect to generate $4.6 billion to $5.1 billion of cash flow from operations.

As a management team, we are focused on improving healthcare outcomes for our patients while reducing costs. We are driven to create efficiencies across the organization. For example, working hand in hand with Chris Houston, who leads our core operations, we are simplifying operating complexities, eliminating redundancies and reducing our cost to fill. We are focused on a common goal to reduce costs within the organization while enhancing the service we provide to our patients and clients.

From an investment perspective, our priorities remain the same: invest in our core business, pursue strategic opportunities, and return value to shareholders. Our capital structure strategy for 2016 remains consistent with prior years. We expect to maintain a long-term leverage target of 2 times debt-to-EBITDA. Once our strategic investment priorities are met, we expect to return the majority of our free cash flow to shareholders through share repurchases.

With respect to the first quarter 2016, we expect adjusted earnings per diluted share to be in the range of $1.18 to $1.22. Consistent with historical trends, our first quarter earnings are expected to decline sequentially from the fourth quarter but represent year-over-year growth from the first quarter 2015 of 7% to 11%.

I will now turn the call over to Tim.

Timothy C. Wentworth - President & Director

Thanks, Eric. As George mentioned and as Eric reinforced, Express Scripts is built to deliver strong results, better care to patients, greater cost savings to clients and sustained growth for our shareholders.

2016 is our 30th anniversary as a company. Since we started in 1986, our goal has been the same: ensure patients and clients get the most value for the money they spend. As we look to the future, we see many more ways for us to improve healthcare. When we deliver on the two things our clients need most, controlling costs and achieving better patient outcomes, it is both a growth opportunity for us and a testament to our business model of alignment. We have a strong financial and operational foundation to build upon and we are differentiated with unique solutions that are in high demand and we will always lead, even if it means taking actions others cannot or will not.

While our clients face a challenging environment with rising drug prices and increasingly complex regulations, we stand with them, working together to find innovative ways to strengthen the pharmacy benefit while improving care. It is this alignment that resulted in our 97% retention in 2015 and gives us confidence going forward.

Our excellent operational performance, highlighted by our outstanding 1/1/2016 rollout, ensures patients and clients get the most from our unique collection of bold actions, specialized care, data insights, and innovative solutions. 1/1/2016 was without question the best 1/1 in our history. Our relentless focus ensures every solution we put in place for clients creates maximum value for each member we care for. It opens the door to more forward-looking conversations with clients, which delivers better results for them and future growth for us.

You've heard us talk about the strength of our specialty, home delivery, core PBM and pharma services assets, and when we put them together, we provide a pharmacy offering that is unique and unmatched. A great example of our holistic strategy is SafeGuardRx, a unique collection of solutions that includes enhancements to our Hepatitis Cure Value program, our Cholesterol Care Value program and two industry firsts, an indication-based formulary and an Inflation Protection Program. These programs ensure clients' costs are minimized as we expand access to needed therapies and achieve better patient outcomes.

SafeGuardRx launched on 1/1/2016 to clients, and enrollment uptake has been immediate and unprecedented across our commercial and health plan clients. Our complex business is rooted in a simple premise: always act in alignment with client needs. Standing with clients, we take the bold actions that drive down their costs, eliminate pharmacy waste and serve patients better. As we have for the past 30 years and we expect to do well into the future, when we execute our strategy, clients and patients win and we grow.

Now I'll turn it over to George for some closing slots.

George Paz - Chairman & Chief Executive Officer

Thank you, Tim. I am confident in our business model, which is focused on achieving better health outcomes that in turn deliver strong financial performance and solid returns for our shareholders. Our core PBM business, specialty pharmacy, home delivery pharmacy, and pharma services business provide numerous levers to drive sustainable value for our patients, clients and shareholders.

With a record retention year and our best 1/1 performance ever, we have momentum and are confident in our guidance and growth prospects. We are well-positioned for the short- and long-term for two important reasons: first, the value we provide clients has never been greater, and second, there is a growing appreciation for our unique business model of alignment.

All that said, we understand the uncertainty that exists related to Anthem's public comments. We also understand the certainty of our business. We are performing at a high level financially and operationally. We have a long-standing policy of keeping all client discussions strictly private. However, we know you have questions about what has changed with Anthem and here's what I'll say.

Our team is delivering great service to Anthem and its members. That has not changed. We are committed to helping Anthem control costs and win business. In fact, a significant amount of value is available to Anthem and its clients if Anthem were to adopt more of the cost-saving solutions already implemented by many of our other clients. That has not changed.

As we said on our 2016 Guidance Call in December, we remain fully committed to good faith negotiations in hopes of reaching a mutually beneficial agreement within the framework of our 2009 contract. That has not changed. That said, although I will not speak to specifics, Anthem is certainly not entitled to $3 billion and that has not changed.

We have an unwavering commitment to improve healthcare outcomes and lower drug costs with the best cost saving, clinically-sound solutions in the industry. We will continue to take bold actions to reshape healthcare by improving patient outcomes, controlling costs, and driving out waste. By doing our job well, we will continue to deliver strong financial performance and strong returns for our shareholders over the long term. I'm extremely proud of what we've been doing for the last 30 years and have never been more excited about our future.

Thank you for your time this morning. Now, we'll take your questions. Operator?

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. Our first question comes from the line of Lisa Gill from JPMorgan. You may ask your question.

Lisa Christine Gill - JPMorgan Securities LLC

Thank you. Thanks for all the detail. George, is there any way to maybe just frame the size of Anthem? I know you talk about drug spend, but maybe talk about scripts or any profitability metrics or anything else to give us any color around that.

George Paz - Chairman & Chief Executive Officer

As I said in my remarks, we've been in this business for 30 years and we've grown significantly over that time period. And one of the keys to that, of course, is our business model, but really is the trust goes with that hand-in-hand of our clients trusting us to safeguard their data and to protect their information. And we just don't get into client-specific data. Again, we're on the middle of our – we're starting to kick off our selling season, we have our retention goals again for this year that we have to go achieve, and if you want to do business with us, the last thing we want to be seen doing is talking about our clients and putting out a bunch of information that they haven't disclosed because it's really not our place to disclose their information; it's their place.

And so it would be a heck of a lot easier for all of us if I could sit here and tell you exactly how much we make and how many scripts there are and whatever information you want, but two things. One, that door never closes; there'll be more and more information. And second, they haven't given us the permission or the right to disclose that and that's not a precedent we want to start. So I'm sorry to be vague about that, but we take our work very seriously and we take our client confidences personally. So I'm sorry, but that's all I can say.

Lisa Christine Gill - JPMorgan Securities LLC

Yeah. And so just to that point, as we start the selling season, can you or maybe Tim just comment on two things? One, has there been any commentary from your existing clients around the Anthem dispute or do you expect it will have any impact on the selling season? And then secondly, can you just talk about this year's renewal? Is it a normalized year for renewal this year and, specifically, what do you think people are looking for in the 2017 selling season?

Timothy C. Wentworth - President & Director

Yeah. So, first, thanks for the questions, Lisa. First, as it relates to the sort of any hangover from an Anthem perspective in the broader selling season or retention season, I would actually tell you zero in terms of that. I mean, that's back to George's comments. We have been very, very thoughtful about not putting anything out there in terms of public comments and so forth because we respect Anthem and we respect that the book of our business really needs us focus on them. So we have this very walled off as it relates to inside of our company, and our sales and account management teams are incredibly engaged.

You heard me speak about SafeGuardRx, and I can tell you, the uptake in that has been unlike anything I've seen in my 18 years in the business and it's just as testimony to the fact that our clients are focused on their challenges, they're focused on how we can solve their problems collaborating with them, and we've produced the kind of results that enable a really trusted conversation. And that really takes you into the 2016 renewal and 2017 selling season, which is early as George said, but what we see right now is a lot of interest in anything having to do with helping clients manage spend while creating access.

And obviously, we've taken some very specific positions on some things and then taking the actions behind those positions which have produced results and those are the conversations that we're having. And right now, at least, what I would tell you is it's kind of a normal renewal year for us so there's nothing extraordinary you'd see in our numbers. And because we've had a strong year last year, we're really leaning into the selling season very confidently this year.

Lisa Christine Gill - JPMorgan Securities LLC

Okay. Thank you.

George Paz - Chairman & Chief Executive Officer

I'll just add a little color. The only other thing I would add to that is that although these conversations do not take place with respect to renewals or sales, obviously I know a lot of CEOs around this country and a lot of them are our clients, and people are a little dismayed that this is actually taking place in the public markets. You never heard Express Scripts or most companies have these conversations. So there is conversations about that, but not with respect to impacting our business or our ability to sell. But obviously a lot of CEOs are interested in watching us because that's quite a new experience for all of us.

Timothy C. Wentworth - President & Director

I mean, the only other color I can give you, Lisa, is just a data point that is anecdotal but it's – is nonetheless interesting is just last week we were very fortunate to extend for three more years to the end of 2019 a very large health plan relationship. Obviously they're well aware of what's going on and it didn't color or impact those conversations at all. The conversations were all around how we can help them grow their business which is what we're relentlessly focused on.

Operator

Okay. Thank you very much. Our next question comes from line of Eric Percher of Barclays. Your line is now open.

Eric Percher - Barclays Capital, Inc.

Thank you. So as we think about it, and I'll ask more one more question on Anthem here, but maybe with a retrospective view. So I think the stepping off point in considering profitability or what we've started with has often been, George, your comment in 2009 about $1 billion in synergy in 2011, and so I guess thinking back seven years there, when you provided that commentary, that was for synergy across the entire company at a point where Express Scripts was smaller than CVS and Medco. Is that a fair characterization?

George Paz - Chairman & Chief Executive Officer

Yeah, that's exactly right. When we did this transaction, one of the benefits we had was we were going to be able to take the business and fold it in on top of our existing business. There was – we shut down the systems that they ran to adjudicate claims. There was a lot – we had built some high-volume filling capacity and they were not being fully utilized. So this was a great opportunity to put more scripts on top of what – the infrastructure we already had and just to leverage our total cost base against more scripts. So the $1 billion was never meant to imply that that was just coming out of the Anthem book of business. It was really across the entire book as you stated.

Eric Percher - Barclays Capital, Inc.

Thank you for that. And on the fundamentals, gross margin was strong throughout the year. I know that there was a role played by Econdisc in sourcing benefit. Will that benefit continue on, are you seeing a constant benefit there and maybe also to pass this to Tim as well, when you look at the SafeGuardRx – or SafeGuard programs, are those programs that are designed to impact trend and see a volume benefit, or do you actually generate incremental profit in those programs?

Timothy C. Wentworth - President & Director

Sure. Thanks for both questions. First of all, I'll take the Econdisc question which is, we continue to be very pleased with the performance of Econdisc and continue to both expand its footprint in terms of what it's doing and in terms of looking at other potential members as well. So it will continue to perform, is the short answer to your question, and be a gross margin contributor. Really a great example of us leveraging not only scale but I think a unique approach to the marketplace. As it relates to SafeGuardRx, what I will do is actually, and Dr. Steve Miller is here, who's been out along with Dr. Stettin speaking with a lot of clients about it, and I'm going to let Steve just for a moment, sort of touch on it, because the short answer is it's a classic case of alignment that drives both outcomes for our clients and for ourselves. But I'll let Steve speak about that.

Steven B. Miller - Chief Medical Officer & Senior Vice President

Hey, Eric. So this started actually with our Hepatitis Cure Value Program, and now a year into it we have some unbelievable proof points. Remember that we took risk on adherence with this drug because it was twice a day versus once a day, and now a year into it we can say that adherence has been over 95%. Our cure rate for those patients has been over 96%, and for our book of business, it saved our members and our clients $1 billion. And on top of that, for our shareholders, because these scripts are all going to Accredo, we actually make more money that way while providing superior service to patients. So the proof points have been extraordinarily strong. We've now extended that to Cholesterol. We're now looking into Oncology and bringing unique solutions to the marketplace and on top of that we've provided inflation protection for our members. So this is really a phenomenal win for both our patients, our clients, and for our Express Scripts shareholders.

Eric Percher - Barclays Capital, Inc.

Thank you.

Operator

Thank you very much. Our next question comes from the line of Robert Jones of Goldman Sachs. Your line is now open.

Robert Patrick Jones - Goldman Sachs & Co.

Hi. Great. Thanks for the questions. George, I appreciate that you can't share too much on the Anthem contracts specifically but I think based on the quarterly filings and your comments this morning, clearly these discussions continue with Anthem regarding this periodic pricing review. I guess just from a high-level, can you share with us how those discussions have been progressing? Do you feel you're making progress towards a mutually beneficial solution? And are there specific areas that are sticking points within the contract right now?

George Paz - Chairman & Chief Executive Officer

As I've said on numerous occasions, I really just do not want to get into the detail here. I understand as a shareholder there is a thirst for knowledge, but also, as a business leader, we have to safeguard our relationships and whatever we say here is clearly going to, it can come back and, it just doesn't do us any good to get into any kind of detail with this. And I know that's not very satisfying, but it really is the right thing to do. I couldn't imagine if I was having a challenge with one of my vendors that they would appreciate it if I was trying to air all their dirty laundry out and try to force a negotiation through a conference call with shareholders. That just doesn't seem appropriate to me. So that's just not the way we're going to do it. So again, I'm sorry about being vague, but I really do believe it's the right answer.

Robert Patrick Jones - Goldman Sachs & Co.

Okay. No, that's fair. And I guess just moving to the 1Q guidance, EPS was a little light of where I think consensus was, again, but it came against probably better-than-expected claims guidance. Can you maybe just help us understand if there are any callouts or moving pieces in 1Q specifically? Were there some specifically large new starts that might have weighed on profitability per claim or anything else as far as maybe timing on SG&A reductions? Just trying to get a better idea of the EPS cadence for the year.

George Paz - Chairman & Chief Executive Officer

I'll certainly let Eric chime in here in a second, but I'll tell you there's a couple of things. One is, if you recall, we renewed our Department of Defense contract in May of last year, and with that was some additions to the business, so those started up through the course of the year and so as we lap ourself, we get those scripts kind of for the entire year this year. So that adds some to the volume. When you look at the quarterly run of earnings, if you look at historically the pattern, we're pretty much in line with that pattern of first quarter being down and then a replenishing throughout the year. So we're very comfortable with our first quarter guidance. And obviously our full-year guidance we believe is quite achievable and in line. Eric, I don't know if you want to add.

Eric R. Slusser - Chief Financial Officer & Executive Vice President

Yeah, I would just add to that, I mean, the trends will be similar to last year where it's roughly a 45/55 split between the first half and the second half on our earnings generation. There is back-loading as we talked about on our guidance call earlier in December, we have significant efficiency initiatives, some SG&A cutting initiatives and some of our launches and timing of new generics will impact this. So if you look at the year-over-year, our first quarter projection is up significantly from first quarter last year, and I think if you look at historical trends over quarters, we'd expect to follow that this year.

Robert Patrick Jones - Goldman Sachs & Co.

Okay. Great. Thanks so much.

Operator

Thank you very much. Our next question comes from the line of Robert Willoughby of Credit Suisse. Your line is now open.

Robert McEwen Willoughby - Bank of America

Thank you. I see you've got, George, $1.5 billion in debt due in May. But what's the likelihood of you making it through 2016 without finding an acquisition? We're kind of in that time zone every couple of years where we see something from Express. Any possible comments on the pipeline there?

George Paz - Chairman & Chief Executive Officer

You've known me for a long time, Robert. No. We can't speak to M&A activities. So obviously we have a team and we are looking for opportunities and we would definitely – as Eric said in his prepared comments, our first priority is to always fully invest in ourself to make sure that we have the best systems, the best operational approach and the best service for our patients and clients, and then our second priority is to look for M&A activity. So without getting into specifics, that's an ongoing process for us. And then of course, whatever money isn't deployed properly or, you know, through those two avenues, we will return to our shareholders. We want to be good stewards of the capital being entrusted to us.

Robert McEwen Willoughby - Bank of America

Are there new areas, though, George? Has the business model evolved to the extent that there are new pieces that do fit? I don't know how to ask the question really, but what fits now that might not have fit 10 years ago?

George Paz - Chairman & Chief Executive Officer

Yeah, well, I think as I have said in the past, healthcare is evolving, and one thing we know for sure is the machine is not well-oiled and running smoothly. So at Express Scripts, we constantly look at what are our core capabilities and our assets and figure out how do we branch those out to continue to grow them. And I think there's an awful lot we've done. We've done a lot with growing not only in our Specialty segment but the distribution of Specialty products direct to the doctors and clinics. We've taken some niche areas and really focused on those with our CRCs and really built out a Specialty service in those areas. A lot of these businesses are smaller today but they're growing, and we'll continue to look for opportunities to bolt-on. I should actually let Tim talk more about this.

Timothy C. Wentworth - President & Director

Yeah, good morning, Robert. I think George nailed it. What I would just say is if you look 10 years ago, we probably now are – would be more interested in something that we could bolt on to UBC from a pharma services perspective if it was attractive and made sense for the overarching model. I think HCIT, there's a lot of fragmentation there. We obviously have a lot of internal capabilities that we can invest in, but as we look out both from a payer and a provider standpoint, there may be some interest there.

As George said, Specialty continues to be an area of focused growth and interest for us to bring efficiency and improve patient care across a broad spectrum and service those patients in a unique way. So, those things are all interesting to us, and there are some other areas as well. As we look at building more direct relationship with our members through both a digital relationship and, excuse me, being a pharmacy provider, be it specialty or mail, we see opportunities there. Again, a lot of that is able to be built out internally, but we also do have a very active amount of work going on looking out in the market. Recognizing you would expect, our hurdle rates, while there's something strategic, we're very interested, are still high. We're going to set the bar high. We're not going to go out and just be on a spending spree because we've got the cash.

Robert McEwen Willoughby - Bank of America

That's great. Thank you.

Operator

Thank you very much. Our next question from the line of Garen Sarafian of Citigroup. Your line is now open.

Garen Sarafian - Citigroup Global Markets, Inc. (Broker)

Good morning, everyone. Thanks for the color and trying to at least address Anthem head-on. But maybe following up on some of your comments, George, what types of programs could they add on that are commonly used by other clients, I guess other than getting on your formulary, I suppose, and how much of a cost savings does that typically achieve with other clients?

George Paz - Chairman & Chief Executive Officer

Well, the one you hit on really is the big one, managing formularies. Dr. Miller talked extensively or talked about our SafeGuardRx program, and the savings in that are significant for our clients. So, one of the biggest things you can do to manage your cost is by really focusing your buying on the most efficacious, best-priced products and driving into those areas. I think it's there that the savings are quite substantial. And there's other things such as driving mail order, doing Specialty Management properly, and doing it in the best regards, all the different component – I mean, we can go on for a long time here, but there's a – we have a whole bunch of different options that could certainly be utilized here. And...

Timothy C. Wentworth - President & Director

Yeah, no, I think George hit the list. I mean, their whole retail networks, what you've seen obviously is a great deal of uptake there across our health plan book of business and certain lines of business, and there still remains significant opportunity for clients who are interested in narrowing their retail network and take advantage of the fact that there are over 70,000 retail pharmacies in the U.S.

Garen Sarafian - Citigroup Global Markets, Inc. (Broker)

Could you put that in perspective, though? So that if a – any large client gets onto your formulary that wasn't on it before, what types of savings? Is it 5% savings, is the narrow network another 1% to 3% savings? Is there any context you can put around those comments?

George Paz - Chairman & Chief Executive Officer

I don't really want to get into specifics with Anthem. I don't think that's appropriate. It's really is – they have to know their business, they have to know what markets they're selling in, and one size does not fit all. So you have to have a spectrum of products that you're offering up to the marketplace but you need to optimize your pricing on every one of those. And so I really don't want to get into it. Typically if we win a new client, so forgetting Anthem for minute, but any client, it really depends on where they are at.

If they have – because there's still some two-tier systems out there, believe it or not, and so if you're on a two-tier drug system and you come in, obviously the first big thing you do is put in a three-tier, then you start doing exclusions, you manage the formulary, you control the network. You drive mail. As you do each of those steps, the savings can be significant. Somebody that's already sophisticated and already down a path, and it's about how do you tweak it to take advantage of the trends that are existing in the current marketplace? So there really isn't a one-size-fits-all, but we do believe there's significant value to be had by better managing the product line.

Garen Sarafian - Citigroup Global Markets, Inc. (Broker)

Okay. Fair enough. And second question, again, I realize the sensitivity of the client discussions, but since it was already brought up, the $3 billion in annual savings figure that you stated as being inaccurate, I might have – you might have used another term, but that's the sense I got. So, as you're in discussions with clients through the various processes, just broadly speaking, do you usually have the opportunity to review client claims or the savings figures that they're anticipating? Just trying to better understand where the basis for such figures can come from and just wondering if you can just shed some light on that if you could.

George Paz - Chairman & Chief Executive Officer

Well, just two different points here. I'll answer your question, just a second, but I have no clue where the $3 billion came from. I have no concept, the number doesn't make any sense to me. So if you really want to get into that, you got to talk to Anthem about that. As far as the – our client situation, if it's an existing client, depending on the size and their willingness or their desire to meet with us and control their costs, we could either meet quarterly or annually with them, some more often than even that. And the idea is to sit down because we process every claim, we see the trends, we know what's happening, our goal is to sit down and say, okay, if the drug trends are doing a certain amount, how is that client, let's say they're in the – pick a business, they're in the paint business, making paint or whatever, manufacturing, the idea is to line them up against other manufacturers because they're going to have similar demographics in their employment bases and compare the trends of their drug spend versus the trends of the industry.

You don't show them individual other clients but you can show aggregate values and show whether or not they're in the – below the midpoint, above the midpoint or at the midpoint for controlling costs and then what are the bigger drivers of our costs? Our clinicians and account management team spend hours monthly, quarterly, annually with our clients going through that process so that they constantly stay on top, tweak the benefits as they go, and then especially before they roll out their enrollment for the upcoming year, they can tweak their benefits and really get them in line to better control costs in the next year as well.

If it's a new client opportunity where we have a real – when it's a – all RFPs are different, but if we have the opportunity, we'd love to get historical claims data and do the same analysis so we walk in and bid the business, we can speak to exactly what our programs are going to save them, and also how much disruption. By disruption we mean how many people are affected. So sometimes some of the highest cost trends have very little usage on a per capita basis, so you can take a big change in the cost trend by only touching a handful of people, and so you can go after different savings opportunities. And that's how we win in the marketplace.

Timothy C. Wentworth - President & Director

Yeah, and all I would add, Garen, is that – yesterday is a great example. We had a gigantic industrial company that's been a long-term client in our lab, they were here for a day and a half, we modeled out a number of things that they could do. We visually showed them the impact on populations, we did different scenarios and so forth. Dr. Stettin was hosting them there and so probably 200 times a year we have clients that actually come to St. Louis and take one additional step which is to really engage in developing very unique solutions, collaborating with us in our labs. So it is a very dynamic process.

Garen Sarafian - Citigroup Global Markets, Inc. (Broker)

That's useful. Thank you very much.

Operator

Thank you very much. Our next question comes from the line of John Kreger of William Blair. Your line is now open.

John C. Kreger - William Blair & Co. LLC

Hi. Thanks very much. As you guys look across your book in the fourth quarter, maybe even early days here in 2016, can you just comment on any of the trends you're seeing such as any trend in utilization per capita or perhaps inflation across the brand and generic book?

George Paz - Chairman & Chief Executive Officer

Sure. What I'd say from a utilization standpoint is we're seeing very, very low increases in pure utilization, and I think that that tracks with what we kind of expected and what we said back when we did guidance. So we're not seeing anything as an uptick, let's call it that. And some of that's because we're doing our job well but also just generally out in the market we're not seeing a dramatic increases in utilization. So that remains a potential tailwind that has not happened at this point.

As it relates to generic inflation, what we've seen is what you probably read about, which is not an issue. Our GPO does a great job, first of all, so we have always on a net basis been able to sort of handle that issue even when others were struggling with it. But this year, we continue to see what I would say is fairly low to no inflation there and it's arguably a little bit less than last year, which again tracks with what others have reported.

John C. Kreger - William Blair & Co. LLC

Thanks. Can I have it on the brand side?

George Paz - Chairman & Chief Executive Officer

On the brand side, I mean, you've seen sort of – it's definitely been a little bit moderated from last year and it's still early. We've certainly seen some brand manufacturers take some price increases, largely in line with our expectations at this point, I'd say within a point or so of our expectations. But it's still early. So, it's really difficult to declare kind of how the year is going to play out.

John C. Kreger - William Blair & Co. LLC

Thanks. And then one last one, can you just talk a bit more about SafeGuardRx? As the uptick of that ramps, how does that alter the economics to you if at all in terms of when profit might be realized through the year? Is there's any sort of risk assumption on your part? If you could just expand a little bit more about how that model would work, it would be helpful.

George Paz - Chairman & Chief Executive Officer

Sure. What I'd say is, obviously, and I won't break it down into pieces because of course the Hepatitis Care Value Program, or Cure Program, it's opportunity down the road as new entrants into the marketplace and the ability to go back and essentially recast yet again the cost of treating those patients. So – and that continues to be an opportunity for us to dynamically manage and deliver for our clients. I think the big piece is as you look at inflation, we don't know how the year is going to come out. So we're putting something sort of in place now but we won't be able to ascertain. If we do our job really well there, we will do a little bit better at the back half of the year and you would expect it to be more in the back half of the year as inflation mounts and as we hold our clients harmless to the numbers we give them and as pharma then remits to the commitments that they've made to us contractually.

And so it really – from our perspective, the program itself is terrific for clients and for us. I think the bigger story, though, is the relationship we have with pharma and how that increases the conversations and the leverage that we have. I think if you go back a couple of years ago, the thought was from a pharma standpoint, narrow formularies, how long can that run rate last? And I think what we've demonstrated with SafeGuardRx and in dozens of conversations we're continuing to have with pharma is that it is a lot more than just a narrow formulary that we can create when we bring innovation to working with pharma to create access for patients and the right cost profile for payers.

John C. Kreger - William Blair & Co. LLC

Great. Thank you.

Operator

Thank you very much. Our next question comes from the line of George Hill of Deutsche Bank. Your line is now open.

George R. Hill - Deutsche Bank Securities, Inc.

Hey. Good morning, guys. And I'm going to ask you to forgive me already for belaboring the point of Anthem because saying that Anthem is not entitled to $3 billion is not necessarily the same as saying that they don't – you guys don't make $3 billion on the contract. The question that I want to ask, is there anything – are there any goalposts that you can put around the earnings risk as it relates to the Anthem contract to make investors more comfortable?

George Paz - Chairman & Chief Executive Officer

Again, I don't want to belabor the point either but we really can't get into the details here and it's just once we start opening these doors, it's really, there's no way to stop it. So I really do believe we need to stay silent and not have these negotiations done on this phone call but with them.

George R. Hill - Deutsche Bank Securities, Inc.

Okay. And, I guess, Eric, one kind of follow-up question, just kind of a smaller point. The transaction costs kind of jumped up a little bit this quarter. I guess a few years after the Medco transaction we thought these costs would be winding down to almost nothing I guess. Can you tell us the outlook for transaction costs, the portion that are cash and what we should expect in 2016?

Eric R. Slusser - Chief Financial Officer & Executive Vice President

Well, as we said on our guidance call, there will be no more carving out transaction costs. All that integration activity is completed so the answer is, it is zero for 2016.

George R. Hill - Deutsche Bank Securities, Inc.

Okay. All right. I appreciate the color there. Thank you.

Operator

Thank you very much. Our next question comes from the line of Ricky Goldwasser of Morgan Stanley. Your line is now open.

Ricky Goldwasser - Morgan Stanley & Co. LLC

Yeah. Hi. Good morning. So, George, I have to ask one Anthem question. So back in the December call, you did say that you were hoping that the negotiation could potentially include an extension beyond the 2019 contract term. So that sounds like a door you opened for us. So where you stand today does the current negotiation still contemplate a potential extension or is it really just focused on the current contract term?

George Paz - Chairman & Chief Executive Officer

Well, again, I'm sorry, but I really do not want to get into the details of our negotiation. I really do think that's between Anthem and us. And obviously we would love to have an extension as part of this agreement. And I think it's up to us to negotiate with them and find out what's tolerable and works for them and what's good for us and our shareholders.

Ricky Goldwasser - Morgan Stanley & Co. LLC

Okay. And then, Eric, I think in the prepared remarks you mentioned the guiding range with just kind of like, better results, more confidence, it seems that you have not changed the underlying metric. So should we think about it as potential more upside as the year progresses, or is the increase kind of at the midpoint more reflection of below the line changes?

Eric R. Slusser - Chief Financial Officer & Executive Vice President

Well, I would characterize it as I did in my remarks that every day, every week we get better visibility. We're now almost 2 months since we gave our initial guidance, and what we do in our supply chain and everything in generics and timing those launches, we just continue to get better and better visibility each day, and as we progressed the first month and a half of this year, we feel more comfortable with the outlook and some of the things we're seeing, so we decided initially we went wide with our GAAP on EPS, and as we progress through the year, we'd expect to continue to narrow that. And we'll adjust it accordingly but right now, we like what we see in the first half of the month, so we felt good about increasing the lower end and obviously pushing the midpoint up.

Ricky Goldwasser - Morgan Stanley & Co. LLC

So should we think about it also because you guided to EBITDA 3% to 5% year-over-year growth, so should we think of that also as kind of like pushing that more towards the 4%-plus range?

Eric R. Slusser - Chief Financial Officer & Executive Vice President

At this point in the year, I wouldn't push that. Again, if you think about your EBITDA range, that's in billions, and we meet move a penny of EPS, we're talking millions. So I would, as you see here, we didn't adjust EBITDA, but we're very comfortable with our guidance in that space and I would just expect to update you next quarter on any continued progress.

Ricky Goldwasser - Morgan Stanley & Co. LLC

Okay. Thank you.

Operator

Thank you very much. Our next question comes from the line of Charles Rhyee of Cowen &Co. Your line is now open.

Charles Rhyee - Cowen & Co. LLC

Yeah, thanks for taking the question. I wanted to ask a question actually about drug pricing and you kind of talked us through SafeGuardRx, so I want to ask is sort of two ways and I know you touched on it, but can you talk also specifically how the Inflation Protection Program works, sorry if I missed that earlier. And then secondly, you guys have taken some strong positions in the past trying to work on behalf of your clients, and internally, if we think about the issue around drug pricing, it's really an adversarial relationship between payers and manufacturers. As we move forward, though, if we're trying to balance sort of cost versus innovation, are there ways you think that actually payers can work with manufacturers to be more cooperative? And I guess an example of that, do you see sort of more outcomes-based methods of formulary placement coming to greater usage? Thanks.

Timothy C. Wentworth - President & Director

Sure. I'll take both questions. First of all, just at a macro level, the way Inflation Protection works is that we're able to go out, we contract with the pharma manufacturers who make commitments around sort of the maximum pricing that they will take above which they will, through us, create value that we can then build back into the programs for our clients. So in essence, we go out, we don't reinsure because we're not taking true risk in an insurance sense. What we're doing is we're sort of out there contracting with pharma and then passing that back through the program that we've got. So it's a very – it holds pharma accountable, and at the same time, it puts our clients in a great position to the extent that inflation is higher than what we were able to cap it in these contracts.

And what I would say as it relates to the adversarial piece is there is no question that there are opportunities for us and payers generally to work with manufacturers who want to take a responsible view. In effect, we provide an excellent way for those manufacturers to get to market in a way that is responsible, that creates maximum access for their innovative products, that ensures that there isn't wasteful behaviors taking place, and so – and we have a great example of that in our PCSK9 approach. You saw what we did in Hep C. That was a – we're not a one-trick pony. To the contrary. We really believe that in the long run, we can work very collaboratively with manufacturers to create access at a fair price to our payers. And there's a lot of room for negotiation and sort of argument about what fair price is, and we work very, very relentlessly on behalf of our clients to drive for that.

So yes is the short answer. And as we look at the pipeline, we see – I was at a conference last week with a large number of pharma manufacturers, and several of them cornered me with specific ideas about outcomes-based or indication-based pricing and wanting to do it. And their challenge is not having the data, which we have. And so we actually think we're in a perfect spot to help bring those things to life.

Charles Rhyee - Cowen & Co. LLC

That's helpful. And just a clarification on the Inflation Protection Program. How many pharma companies do you have sort of signing up for this? Is it a large swath yet, or is it – would you say it's still sort of infancy? And maybe in what area, like what disease categories are you currently kind of working in?

Timothy C. Wentworth - President & Director

That's – it's a great question. What I would say is the vast majority of pharma companies are working with us to support Inflation Protection right now, and it's across all therapeutic chapters.

Charles Rhyee - Cowen & Co. LLC

Great. Thanks a lot, guys.

Operator

Thank you very much. Our next question comes from the line of Steven Valiquette of UBS. Your line is now open.

Steven J. Valiquette - UBS Securities LLC

Thanks for taking the question. George, I do appreciate and respect you not wanting to get in the weeds on Anthem, so I'm hoping this is a fairly general question. I think on your 2016 guidance call back in December when you voluntarily brought up that 2012 Anthem price review, and I think the point you were trying to make is that these reviews are somewhat routine and eventually get resolved, and that investors shouldn't get too worked up about this. I'm wondering if, first, you could confirm that was kind of the message back then, but also I think just secondarily, is there any color on why you think that review back in 2012 seemed to reach a mutually beneficial conclusion without much fanfare but this one just seems to be more contentious? I guess what's changed so much since then in your view, just generally speaking? Thanks.

George Paz - Chairman & Chief Executive Officer

Yeah, well, I'll try to add a little color, but again, I don't want to cross any lines here. Back in 2012, we did reach a mutually agreed-upon outcome. And I think part of it is if you look at our total book of business, a lot of our clients do have what we call price checks. And in those price checks, they have the right to look at pricing and make sure that we are doing the right things for them, and those are pretty routine. And we go through a bunch of those every year.

There's a difference in this one, though, and it's contractual, and it's all of the data that's out on, you know, that's been disclosed. But here, you know what, it's not your traditional price check because of the very large upfront money that was paid out in this deal. So I can't really speak to why we haven't reached an agreement yet, but we are focused on reaching an agreement. I do think that there's a lot to be gained by reaching an agreement, especially if it's in lockstep with them modernizing their benefit, because if they do that, then the economics to their plans is significant.

And again, we work together hand-in-glove to get that economics out of the supply chain and better focus their buy. It's better economics for them, it's good for us, and it's really good for their clients and their members and their patients. So we're very hopeful that we can reach an agreement, but I can't give you any assurances or talk to – nor will I talk to the process or how we're going about it.

Steven J. Valiquette - UBS Securities LLC

Okay. All right. That's helpful for the extra color. Thanks.

Operator

Thank you very much. Our next question comes from the line of Brian Tanquilut of Jefferies. Your line is now open.

Jason Plagman - Jefferies LLC

Hey, guys. It's Jason Plagman on for Brian. Just wondering, can you share any color on how your rebate discussions with clients have kind of evolved over the last few years? And what's your view on your ability to drive incremental gross margin expansion over the next few years?

Timothy C. Wentworth - President & Director

Yeah. I mean, obviously, since launching our National Preferred Formulary, for those clients on that formulary, those conversations have been basically a continued demonstration of value and demonstration that we can care for patients in a way that can significantly move share in ways that produce either value or punishment the pharma companies that are either participating to help our clients get their costs and wastes at appropriate level or not. And I would say that's gone beyond, though, the National Preferred Formulary.

While that's the cornerstone to our leverage, we work with any number of clients who are not on that formulary to help them at a drug level or therapeutic chapter level also go deep and create additional value by virtue of modeling and understanding those dynamics. And so from that standpoint, it's been very powerful over the last several years. As we've become more innovative in our contracting, we've been able to do things such as inflation caps and so forth. We've been able to actually expand access to the formulary rather than narrow it in some spots by virtue of actually creating a financial model where it was better than – the PCSK9s being the most recent example, but certainly not the only example.

I think that the last piece I'd say is as we've been able to get significant value there, clients are more than willing to share that value with us because of the fact it aligns us so well to keep taking the bold actions that are in both of our interests.

Jason Plagman - Jefferies LLC

Thanks. It's helpful. And, Eric, you mentioned some efficiency initiative and SG&A initiative this year. How should we think about your ability to leverage your SG&A spend as a percentage of revenue over the next few years?

Eric R. Slusser - Chief Financial Officer & Executive Vice President

Well, as we did this year, when we sit down and do our budget, we look at SG&A very closely and take a bottoms-up approach. And as I talked about, there's a lot of reduction initiatives in place. I think if you look at our actual spend for 2015 and our 2016 guidance, you'll see those numbers are pretty similar despite all the normal increases you have to deal with, vendor built-in increases. We continue to do things here to take all that increase out and continue to improve efficiency particularly around our operations, our fulfillment process as I talked about. We will be very, very attentive to those costs over the next few years. We believe we've got a really good base to support growth.

Certainly, if we were to add a large client, you've got to add the support staff to take care of that client. But from a true back office SG&A perspective, we're very comfortable with where we're at and I certainly would not expect to see any big increases in that as we move through the next couple of years.

Jason Plagman - Jefferies LLC

Thanks, guys.

Operator

Thank you very much. Our next question comes from the line of Anthony Vendetti of Maxim Group. Your line is now open.

Anthony V. Vendetti - Maxim Group LLC

Thank you. Yes. I was just wondering if you could talk about what the total gross or net client wins were for 2016. CVS gave that number out in their call; I think it was $14.8 billion. Just wondering if you could just talk about the number. And you said retention rate was 97% just as we look forward for this year. And obviously, the focus is on Anthem. Are there any other major contracts that we should be focused on?

Timothy C. Wentworth - President & Director

So I'm not – I can't comment on the other guy's number. What I'd say is the 97%, you take the 97% plus the fact that you know that we had some Coventry roll-off and you look at our claims year-over-year being close to flat.

What you can therefore see is that we had a good selling season as well as a good retention season. And therefore, if you backed out that, it would've been a net growth story. And we're very, very pleased with our selling season last year as well as obviously our 97%. So from that standpoint, I think that's probably the best way to think about it.

And I'm sorry, the other part of your question was?

Anthony V. Vendetti - Maxim Group LLC

Just if you could give us the net gross client wins in terms of dollar amounts for 2016?

Timothy C. Wentworth - President & Director

Yeah, I don't have that at hand and we – that's not the way we think about it or look at it. We really do look at claims and so forth and internally look at a lot of other dimensions but – so I'm not prepared to give you that today.

Anthony V. Vendetti - Maxim Group LLC

Okay. Great. Thank you.

Operator

Thank you very much. Our next question comes from the line of David Larsen of Leerink Partners. Your line is now open.

David M. Larsen - Leerink Partners LLC

Hey. Tim, do you have any incremental thoughts on what your longer-term retail strategy might look like? And specifically, do you have any developing plans to counter CVS' Maintenance Choice? Any details around any potential joint ventures or partnerships that you're considering would be helpful. Thanks.

Timothy C. Wentworth - President & Director

Sure. So, obviously, you would expect me to say I don't have any big announcements today as it relates to any of that. What I would say is the reason we like our independent model so well is that we have very constructive conversations across the retail supply chain.

As it relates specifically to the Maintenance Choice program, we actually have two offerings in the marketplace which are directly responsive to clients who are interested in that: one of them with Walgreens and then one which is a non-Walgreens option. I wouldn't say the uptake has been dramatic, but I would say that for clients or prospects who are either in or interested in a retail 90 mail combination program, we have a very strong offering.

As it relates to the broader retail context, though, as I said, with over 70,000 retail chains out there and with clients very willing to work with us and take advantage of what we've proven we can do in terms of helping patients find the most efficient – whether it's drug choice or a channel choice, we continue to have very interesting conversations with retail. We have a very collaborative relationship with the major retailers, but we also will do our job as it relates to creating narrow networks that produce value; but for clients who want broader networks, also being sure that we've got something that meets their needs.

David M. Larsen - Leerink Partners LLC

That's great. Thanks very much. And for those retail 90 programs that you do have in place, is the price of the mail scripts the same as the price of the retail scripts for 90-day supplies? Thanks.

Timothy C. Wentworth - President & Director

It really depends on a particular client and sort of how they want value to be shared. So it's a piece that we can do, but a lot of it depends on where the client's volume is, where they're trying to move their volume. We're able to be very, very flexible as relates to how we, at an individual client level, create value.

David M. Larsen - Leerink Partners LLC

Great. Thanks very much.

Operator

Thank you very much. Our next question comes from the line of Eric Coldwell of Robert W. Baird. Your line is now open.

Eric W. Coldwell - Robert W. Baird & Co., Inc. (Broker)

Okay. Thank you. My question was hit on just a few callers ago, but I want to go into it a different way.

First off, your head count according to the 10-K is down about 3,600 employees, which is over 12% year-on-year. Your SG&A dollars are flat. Your SG&A to revenue has only improved 2 basis points. I guess the question is where did you find almost 4,000 heads to let go? What's the head count target for ending 2016?

And why didn't the magnitude of that adjustment to head count do more to improve your expense line here? It seems like there's much more growth in underlying SG&A than is really showing up in the model. And I'm not sure how you can continue to let 3,500, 4,000 people go each year to maintain flat SG&A.

George Paz - Chairman & Chief Executive Officer

Well, it's not really – as you might suspect, it doesn't really work that way. So, first of all, where we have a lot of redundancies to the acquisition is in our operations which goes to DPC and gross profit. So as we shut down facilities and we consolidate operations to get better efficiency that reduces head count.

In addition to that, we also, over the last couple of years, have made some very big investments in our infrastructure in order to make sure that we can continue to drive cost. I echo what Eric said earlier and that is we've always had a big focus on taking out costs.

When we bought Medco, if you go back and look year-over-year at SG&A and SG&A per script, we had a pretty good spike that drove up the cost because of the redundancies in the businesses. And there's one thing to consolidate the technology platforms, but it's a whole another thing to start consolidating all of the – or integrating all of the processes. And that's what they're in the midst of doing as we speak.

We still have an awful lot of inefficiencies in our mail order service that we can still go after and we think that there's still a significant room to run there, so I do believe that this is going to be an annual exercise for us. It always has been and it will remain an exercise to focus on costs. What's adding value to our patients and whatever isn't, get rid of it. And that will stay our goal.

Eric W. Coldwell - Robert W. Baird & Co., Inc. (Broker)

Do you have a goal for head count in 2016 that you could share with us?

George Paz - Chairman & Chief Executive Officer

Not that we're going to share because we have our employees listening in on this as well, so we don't need to cause any issues in our company.

Eric W. Coldwell - Robert W. Baird & Co., Inc. (Broker)

Okay. Thanks very much.

George Paz - Chairman & Chief Executive Officer

Thank you. Why don't we do one more call?

Operator

Thank you. Our last question comes from the line of Michael Baker of Raymond James. Your line is now open.

Michael J. Baker - Raymond James & Associates, Inc.

Yeah. Thanks a lot, George and Tim, for taking the questions. I was wondering outside of Anthem, you deal with a number of Blues. By my count, at least 8 to 10. I was wondering if you could comment – in general, obviously, at high-level retention, I believe one of them you kind of publicly announced a renewal of the general state of relations with them and how they leverage you differently than, say, Anthem. Or is the main difference just the upfront payment that was made to Anthem as part of buying the assets?

George Paz - Chairman & Chief Executive Officer

I said this earlier and I can certainly have Tim jump in, but very seldom in a client contractual situation you make a big upfront payment. So this is a far different situation that exists with Anthem.

And I would say that at least from my perspective, and I know the CEOs of all these companies, we have very good relationships. We work very collaboratively together. We look at the markets in which they're operating and design programs that meet their needs, whether it'd be a Medicare, Medicaid, or the commercial line of business. We tailor our products to meet the needs of those clients and I think we have very strong, very good relationships. And quite frankly, we renewed quite a few of those Blues plans while all of this has been going on. So this doesn't really cause an overhang for our clients.

Again, internally, this isn't the best thing in the world, doing these calls and talking purely about Anthem instead of all the great stuff that our company is doing when controlling drug cost, driving trends and doing what's – help to try to take out the cost of. Inefficient cost of healthcare is really what we're focused on. And so as a management team, a handful of us deal with the Anthem situations, but 99.9% of our employees are dealing with making the business work and running in the fashion that we're proud of.

So that's probably as far as I really want to go with that, unless, Tim, you got anything you want to add.

Timothy C. Wentworth - President & Director

I mean, the only thing I would add is we work shoulder-to-shoulder with our Blues to build their brands and whether it's executing our digital strategy through their brand and their digital assets, whether it's selling side-by-side with them in the marketplaces. Just yesterday, we had one of our gigantic Blues plans renewed their largest account where we were offered the opportunity to bid directly or work with a Blues plan. We helped them win it.

You saw the announcement from the one Blue plan, we actually – that was a co-announcement. We normally don't announce our wins, but that particular plan wanted to do that announcement. Yeah, I think what was of note wasn't this that they announced it and that it was a long-term renewal, but that it spoke to our solutions that they were taking to help them manage their marketplaces and win and drive down costs of their clients. And that's what we're driven to do, Michael, and it's something that's in the fabric of our company.

Michael J. Baker - Raymond James & Associates, Inc.

Yeah, just one follow-up, George. In the past, I know you talked to some Blues that are non-client Blues today, and you kind of mentioned prime from time to time, is there any color in some of the conversations you're having there? I mean not specific to any transaction or anything like that, but just more general flavor of some of the changing dynamics and challenges of some of the other Blues that are non-customers.

George Paz - Chairman & Chief Executive Officer

Well, the Blues that aren't customers, without giving any specifics, are all opportunities. And so we stay very much involved. We make sure that we call on them, we talk to them and we understand what their needs are. So when it is time for them to go out for bids, we're well-positioned in order to compete effectively for the business. And again, like you would expect, the Anthem question would come up, but again, this is – it's really we don't go out and structure deals like the one we have with Anthem. So that's a one-off, and that doesn't really get in the way of our ability to grow and win new business.

Timothy C. Wentworth - President & Director

No, the only other thing I'd add color-wise, Michael, is when you look at the roster of leaders that we've got here at Express Scripts and I'll just call out a couple of things, we have purposely built ourselves to understand more broadly healthcare and health plans in their uniqueness.

So whether it's Phyllis Anderson who had a deep health plan background that joined us from a very large well-managed plan; Eric Slusser who came with significant health plan, understanding and experience at high, very challenging reimbursement levels in the business he was in, so he understands those sorts of challenges; Dave Queller, who came out of a very large health plan and again, understands that business well; Everett Neville, who we promoted to Supply Chain who actually used to run our Health Plan Division; the table that I sit at has deep understanding of health plans and the conversations that we have are all about how do we win and make ourselves more valuable to our existing clients, which will create natural opportunities across those that we don't have today to bring our scale to bear so that they can compete with these giants that are being created through the M&A that is going on more broadly in healthcare.

Michael J. Baker - Raymond James & Associates, Inc.

Thanks for the color.

George Paz - Chairman & Chief Executive Officer

Thank you. And we appreciate everybody's time this morning. We hope you all have a great weekend and just have a great day. Thank you.

Operator

And that concludes today's conference. Thank you all for participating. You may now disconnect.

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