CVS Health Corp (CVS) 2009 Q4 法說會逐字稿

Good morning.

my name is Celeste, and I will be your conference operator today.

At this time I would like to welcome everyone to the CVS Caremark Corporation, fourth quarter, 2009 earnings conference call.

(Operator Instructions) At this time, I would like to turn the call over to Ms.

Nancy Christal, Senior Vice President of Investor Relations.

Please go ahead, ma'am.

Thank you, Celeste.

Good morning, everyone, and thanks for joining us today for our fourth quarter earnings call.

I'm here with Tom Ryan, Chairman, President and CEO of CVS Caremark, who will provide a business update, and Dave Denton, Executive Vice President and CFO who will provide a financial review of the fourth quarter and guidance for the first quarter and full year 2010.

Larry Merlo, President of our retail business, and Per Lofberg, President of our PBM business are also here with us today.

Both of them will participate in the question and answer session that follows our prepared remarks.

During the Q&A session, we ask that you limit yourself to one to two questions, including follow-ups, so we can get to as many analysts and investors as possible.

This morning we'll discuss some non-GAAP financial measures in talking about our Company's performance, namely free cash flow, EBITDA, and adjusted EPS.

In accordance with SEC regulations you can find the definition of the non-GAAP items I mentioned, as well as the reconciliations to comparable GAAP measures on the Investor Relations portion of our website at info.cvscaremark.com/investors.

As always, today's call is being simulcast on our IR website and will also be archived there for one month period following the call to make it easy for all investors to access it.

I want to quickly let you know about an important upcoming event.

Please see the date for our 2010 Analyst Day, which will be held in the fall this year as opposed to the Spring.

We think that will be a better time of year to provide a more meaningful update on our progress in the PBM selling season.

Our analyst day will be held on the morning of Friday, October 8, in New York City.

We'll provide more specific details in coming months, but please mark your calendars.

Again, that's the morning of October 8.

Also, please note that we expect to file our annual report on Form 10-K by February 26, and it will be available to our website.

Now, before we continue, our attorneys have asked me to read the following Safe Harbor statements.

During this presentation, we'll make certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially.

Accordingly, for these forward-looking statements, we claim the protection of the Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

We strongly recommend that you become familiar with its specific risks and uncertainties that it describes in the risk factor section of our most recently filed annual report on Form 10-K and that you review the section entitled cautionary statement concerning forward-looking statements in our most recently filed quarterly report on Form 10-Q.

Now I'll turn this over to our CEO, Tom Ryan.

Thanks, Nancy, and good morning, everyone.

Well, we reported another solid quarter this morning, rounding out 2009 ahead of our initial plan.

We did accomplish a lot last year and while we were not happy with our overall PBM selling season, our enterprise-wide financial performance was very good.

For the full year, net revenues increased 13% to a record $98.7 billion.

Adjusted EPS from continuing operations, excluding the tax benefit, increased 7.3%, and we generated more than $3 billion in free cash flow.

Lastly, we completed a -- we completed one $2 billion share repurchase program and then also began another.

Throughout 2009, we continued to enhance our position as the largest pharmacy healthcare provider in the nation.

Highlights of our progress include improved performance on key PBM metrics, our mail choice penetration was up 290 basis points.

Our generic dispensing rate is up 200 basis points and sizable growth within our specialty pharmacy, which was up 14%.

We had a successful repositioning of our sales message to focus on our leading PBM capabilities first and we're seeing a positive response from the consultant community, as well as clients as we head into the 2011 selling season.

We made investments in technology that will position us well, in the evolving healthcare environment.

We began the rollout of our new pharmacy retail system, RxConnect, which will be the enabler to roll out the consumer engagement engine in our stores.

We achieved industry-leading results again in our retail business, with total comps for the year up 5% and pharmacy comps up 6.9%.

The integration of Longs was successfully completed and will drive improved profitability in 2010 and the years ahead.

We opened up one retail call center that will eliminate 85% of the call volume in our busiest stores.

We announced a strategic alliance with Inverness Medical Innovations through its Alere Management business.

This alliance with Alere further enhances our industry-leading accordant disease management capabilities, strengthening the clinical options we have for our PBM clients.

As you know, we also increased our investment in generation health.

That accelerates our commitment to personalized medicine and will make genomic benefit management an integral part of our PBM offering.

We also strengthened our senior management team, bringing in Dr.

Andy Sussman to head up MinuteClinic.

We hired Len Greer as a new Senior VP and head of PBM marketing, and of course as you all know, we hired Per Lofberg as President of our PBM.

Let me talk a little bit about the trends in our business and I'll in fact start with our PBM.

Here are some of the highlights.

We have net revenues up 14.5%.

Our pharmacy revenues are up 19.1%, and mail choice revenue is up 6.3%.

Our generic dispensing rate, as I said, is up 220 basis points versus last year to a record 68.9%, and our EBITDA per claim, per adjusted claim is up 7%, which is, which was up $4.89, and this is on an apples to apples basis, excluding RxAmerica.

Here's a brief wrap-up on last year's selling season for 2010.

Last quarter I said we had about 1.5 billion remaining to be renewed in 2010.

As you know, we successfully renewed the Texas Retirement System contract, as well as some others.

So now we have about 500 million and 550 million remaining for renewal in 2010.

These contracts start at various points through 2010, but mostly in the last quarter, so they won't be decided for a while.

We are obviously well under way working on opportunities in 2011.

There are significant large number of prospects out to bid.

I'm optimistic about the selling season.

And I can tell you at our national sales meeting last week, our sales force was equally excited and energized about the selling season.

We're talking to clients now about how we can lower their costs and improve the member experience.

We have had a long history of top notch customer service at Caremark, and our latest surveys show service metrics are better than ever and that last year's isolated service issues are definitely behind us.

We also have data that show we have the best in class generic dispensing rate, the best specialty trend, the best clinical outcomes, as evidenced by our industry-leading adherence stats.

They also show that we can achieve channel optimization and savings for our clients, because we have more effective ways to drive 90-day utilization, especially with Maintenance Choice.

Let me give you an update on Maintenance Choice.

We have 412 clients, represent about 5.1 million lives already implemented on Maintenance Choice, with an additional 70 clients and over 400,000 lives in the process of being implemented.

So now we'll have over 470 clients and almost 5.5 million lives on Maintenance Choice.

That's up from 130 clients at the beginning of 2009.

We expect that number to grow even more.

You should know that 10% of our clients on Maintenance Choice are new to CVS Caremark.

Clients switching from voluntary mail to Maintenance Choice see a significant increase in 90-day utilization with a substantial savings for the client and their members.

It's important to note that our GDR and adherence measures also improve with Maintenance Choice.

So it's really a win-win.

While 17% of the lives adopting Maintenance Choice in 2009 came from voluntary mail plans about 41% of the lives adopting it in 2010 came from these voluntary mail plans, so clients will see some significant savings.

We're also seeing increased adoption of our high performance formulary and step therapy plans, as clients continue to look for creative ways to save money.

Clients are increasingly concerned about controlling specialty spend.

We have long been the clinical leader in specialty, providing programs that improve patient engagement and better manage costs and health.

Our care team approach leverages the expertise of our clinical pharmacy staff that specializes in managing the needs of patients taking specialty medications.

Through proactive outreach and communications to patients at mail-in retail, we identify potential clinical and compliance issues before they become a problem.

Both prior to treatment initiation and throughout the treatment.

Our latest data shows that on an annual basis, our specialty guideline management program has saved clients over $200 million and avoided drug costs.

We currently have about a 60% penetration in our PBM book, so we see an opportunity to increase PBM client pull-through.

We are also seeing an increased interest in the marketplace in our high performance specialty formulary, which includes step edits and obviously our specialty guideline management program.

Clients are slowly beginning to discuss genetic testing.

Both pharmacogenetics, genomics which is the right drug, the right patient, and medical genomics, which is patients with genetic predispositions to certain diseases, such as breast cancer.

We believe our investment in generation health positions us to take a leadership role in the utilization management of genomic testing.

Another tool that will help broaden our clinical capabilities across our asset base is what we are calling consumer engagement engine, or CEE; which provides us with a single view of the patient.

The CEE started rolling out in the fourth quarter of last year, where we implemented it first in our PBM customer care center.

When members call in, we are able to message them on some important opportunities for health improvement for cost savings, whether it's preferred formulary -- preferred-- savings from preferred formularies, generic savings, or gaps in care.

The CCE will be across all our channels.

That is, it will be live at retail in mid-2010.

Moving on to the retail side of our business, I'm very happy to report that we continue to lead the industry, our retail team continues to do a terrific job in merchandising, marketing, and of course store level execution.

This quarter, our retail business delivered significant margin improvement, driven by pharmacy and front store margin increases and disciplined expense control.

We continued to gain pharmacy share.

Our retail share excluding Longs grew 68 basis points nationally versus last year's fourth quarter.

And our retail share in markets in which we operate grew 85.

Recall that Longs stores are included in our comps for the first time this quarter, beginning in November.

As we expected, the inclusion of Longs had a slightly dilutive impact on our fourth quarter comp performance.

We expect that to continue through the first half of 2010 and it should turn positive in the second half.

Note the impact on our comps for Longs for the full year 2010 should be neutral to slightly negative.

Keep in mind that we don't expect Longs to provide a major boost in comps in the back half.

The Longs story, like the Save-on/Osco acquisition is more about driving improvements in margin and profitability than it is about driving dramatic top line improvements.

For the fourth quarter, total same-store sales increased 4.9% and the Longs stores had a 66-basis point negative impact on comps in the quarter.

Pharmacy comps increased a solid 7.3%, and that was despite 34-basis point impact from the inclusion of Longs.

Our pharmacy comps saw 290-basis point negative impact from generic introductions.

Our generic dispensing rate rose to an all-time high of 70.6 in the fourth quarter.

Our pharmacy comps saw positive impact of 270 basis points from Maintenance Choice.

That's up from 250 in the third quarter, 190 in the second, and 120 in the first, so we continue to drive Maintenance Choice throughout the Company.

Comp scripts increased 5.4% in the quarter.

We saw a significant growth in flu-related prescriptions in October and November, and which then fell off significantly in December.

And flu indications have dropped even more sharply throughout the country in January, which you should keep in mind as you model the quarter.

Now, having said that, our comps have led the industry for the past couple of years and January was no exception.

Turning back to the fourth quarter, front store comps increased 0.3%, but note the inclusion of Longs had 104 basis points negative impact on comps.

We had good growth in most of our core categories across the chain, in light of the high incidence of H1N1 virus we had especially strong growth in the cough and cold category in October and November.

We had a very successful Christmas selling season, with sales margin and sell-throughs up versus last year.

Our merchants really did a great job, placing a heavier emphasis on the value of traditional gift-giving products with less emphasis on light sets and gift wrap.

Like last quarter, our average front store transactions on a comp basis grew slightly in the fourth quarter despite the fact that customers are seeking to buy more on promotion.

And like the third quarter, we saw comp traffic up slightly again.

Private label accounted for 17.6% of front store sales in the quarter.

We introduced 108 private label items in the fourth quarter and added 913 items throughout 2009.

In the Longs mainland stores, private label increased to nearly 16% of front end sales.

That's up over 1000 basis points from last year's quarter.

Let me update you a little bit on Longs.

We introduced the newly renovated and remerchandised stores in the marketplace in November and the response has been excellent.

We're basically changing the way customers are using our stores.

We're focusing more on healthcare and core offerings and store brands and less on low margin consumables.

Front store traffic and average ring improved 178 basis points and 137 basis points respectively compared to the fourth quarter.

We've already exceeding our profitability targets of Longs driven by strong margin performance, as well as solid expense management.

As I mentioned the introduction of private label products has been very successful and will help drive margin improvement at Longs.

Our extra care program continues to increase, or usage continues to increase in the Longs stores and we're basically almost at the same levels as core CVS stores.

So Longs acquisitions added over 4 million extra care holders and our active card base is now 64 million people.

I'm extremely pleased with our progress at Longs and I fully expect the acquisition -- the acquisition to benefit us in 2010 and beyond.

Let me update you on some real estate.

We opened 31 new or relocated stores in the quarter, closed six, resulting in 17 net new.

For the full year, we opened up 287 stores, resulting in 102 net new stores, or 3% square footage growth.

That equates to about 2% retail footage growth when you include the Longs and the store base.

So this once again is consistent with our past plan to steady and profitable growth.

We completed 200 file buys for 2009, expect to do the same number in 2010.

We'll open about 250 to 300 new stores.

100 of these will be relocations in 2010.

Once again -- 2% square footage growth.

We entered some new markets, St.

Louis in January, Memphis in late January.

We'll open up four stores in Puerto Rico, or our first stores in mid-February.

Let me provide a quick review of MinuteClinic, which has now surpassed 6.2 million patients since its inception.

We opened seven clinics during the fourth quarter and now have 570 clinics in 56 markets.

Traffic was up 50% versus last year's quarter for acute visits.

We continue to expand our third party coverage, adding about 9.9 million lives, and now over 80% of the visits in the quarter are third party paid.

The team, Andy Sussman and our team continue to add new products and services.

For example, we rolled out asthma monitoring and screening on a national basis in the fourth quarter.

Piloted a diabetes monitoring service for patients already diagnosed with diabetes.

In 2010, a key focus will be adding protocol-driven monitoring services for common, chronic illnesses such as hypertension and high cholesterol.

This will be done in coordination with a patient's medical home and is designed to improve adherence and outcomes.

So we remain enthusiastic about the long-term prospects of MInuteClinic.

As you know, we invested $0.05 to $0.06 in MinuteClinic last year and this year we expect to invest a little less, should dilute about $0.04 to $0.05 a share, including the $0.01 per share that we related to the move for MinuteClinic's offices in Minneapolis to Rhode Island.

We believe the move will facilitate sharing and will improve the speed to market for our new products.

We still expect MinuteClinic to break even by the end of 2011 on all-in basis.

Now let me turn it over to Dave Denton, our new CFO, who I'm pleased to have with me today.

This is Dave's first earnings call.

So go easy on him.

David?

Thank you, Tom, and good morning, everyone.

While I've had the pleasure of meeting some of you, I look forward to working with all of you in the coming weeks.

I'm happy to be here today to provide a detailed review of our fourth quarter financial results.

I'll also provide guidance for 2010 on a full-year and first quarter basis.

Before I begin to review our financial performance, I thought I might touch upon our approach to capital allocation.

As Tom stated at a conference last month, we have modest financial leverage and we're comfortable with our current credit ratios.

We expect to generate significantly more free cash flow over the next five years than we generated in the past five years.

And we expect to use the majority of our free cash flow in the near-term to enhance shareholder returns.

As you know, in January, we announced a 15% increase in our dividend.

It's the seventh consecutive year of dividend increases and it's been growing at a compounded annual growth rate of 18%.

We intend to continue to review the dividend annually and to do share repurchases that are value-enhancing.

During the quarter, we began our new $2 billion share repurchase program, which our Board authorized in November and we repurchased about $500 million worth of our stock.

While this authorization extends through 2011, given our current share price, we think it's a great investment to complete the remaining $1.5 billion of our current authorization in the first half of this year, and we plan to do so.

Turning to the income statement, adjusted earnings per share was $0.79, an increase of 14%.

Excluding the tax benefit, which amounted to about $0.01, it was $0.78, an increase of 13%.

GAAP diluted EPS came in at $0.74 for the quarter.

Keep in mind that the fourth quarter of 2009 had three fewer days in the fourth quarter of 2008, which I'll refer to throughout my financial review, as the calendar impact.

On a consolidated basis, revenues in the fourth quarter increased 7% to $25.8 billion.

Revenue growth was muted by the calendar impact, but it benefited from a full quarter of sales in 2009 for both Longs and RxAmerica versus a partial quarter last year.

These two factors more or less offset each other.

In our PBS segment, fourth quarter net revenues increased 14.5% to $13.5 billion.

RxAmerica contributed approximately $1 billion of that growth, largely due to the change in revenue recognition method from net to gross, a change that began in the second quarter of 2009.

Adjusting for the calendar impact and RxAmerica, our underlying revenue growth in our core PBM was 8.6%.

Drilling down a little deeper, PBM pharmacy network revenues in the quarter rose 19.1% to $9.1 billion.

Pharmacy network claims were down 5.6%.

This decline was driven again by the calendar impact, the net impact of new business and terminations, and importantly, the increase in mail choice penetration, as we saw claims move from network to mail.

Offsetting these, of course, was the additional RxAmerica.

Total mail choice revenues grew by 6.3% to $4.3 billion.

Our overall mail choice penetration rate of 23.6% was up 190 basis points from the rate in the fourth quarter of 2008 on a reported basis.

However, RxAmerica's claims mix, which as you know, is heavily weighted towards retail network claims, diluted the mail choice penetration rate.

So without RxAmerica, our core PBM mail choice penetration rate grew from 23.2% to 26.1%.

In our retail business, we saw revenues increase 4.5% to $14.5 billion in the quarter.

A full quarter of Longs versus a partial quarter last year was responsible for about one-third of that growth.

By excluding Longs and adjusting for the calendar impact, the underlying growth rate of the core retail business was 7.4%.

Turning to gross profit, the overall dollars for the Company improved by 7%, despite percentage margin dropping by 8 basis points.

Within the PBM segment, gross profit margin was down 69 basis points.

That was expected due to the change in the revenue recognition method for RxAmerica, as well as pricing decisions we made during the 2009 selling season.

These were offset to some degree by an increase in GDR, as well as growth in the Medicare Part D business year-over-year.

The gross profit margin in the retail segment improved by 81 basis points in the quarter to 31.2%.

This largely reflects the positive impact of new generics, as well as increased private label penetration, especially in the Longs stores, offset by continued pressure on pharmacy reimbursement rates, especially those associated with state Medicaid programs.

Our overall operating expenses as a percentage of revenue improved by 24 basis points.

The PBM segment's percentage was flat at 1.8%, despite the impact of the elimination of the Universal/American joint venture and the additional expenses incurred for the RxAmerica integration network.

So the PBM turned in some excellent expense control.

The retail segment held steady with last year's fourth quarter, even though we invested in name change events associated with the Longs acquisition.

So we saw good spending discipline at the store level as well.

Within the corporate segment, expenses were $140 million, less than 1% of consolidated sales.

So with improvements in SG&A as a percent of sales outpacing the slight decline in gross margin, operating margins for the total enterprise improved as expected.

It was up 17 basis points to 7.3%.

Moving to the consolidated income statement, we saw net interest expense for the quarter decline by $18 million to $133 million, largely reflecting lower interest rates on our floating rate notes, as well as the retirement of the bridge loan associated with the Longs acquisition.

Our effective income tax rate was 40.3% in the fourth quarter.

As we did in the third quarter, we again recorded previously unrecognized tax benefits related to the expiration of various statutes of limitation with tax authorities.

The benefit this quarter was approximately $7 million, significantly smaller than the previous quarter.

Turning to the balance sheet and cash flows, we generated over $1.8 billion in free cash flow in the fourth quarter.

That compares to $1.1 billion in the prior year period.

That was, of course, driven by the large increase in proceeds from sale leasebacks year-over-year.

We successfully executed $814 million worth of properties in the fourth quarter of 2009 versus only $7 million in the prior year period.

Given this, we saw an inflow of net capital expenditures during the quarter of $18 million.

This was the result of offsetting $796 million of gross capital expenditures with the sale leaseback proceeds.

For the full year, we generated free cash flows in excess of $3 billion, lower than we had forecasted.

We missed our working capital targets, specifically within inventory and accounts payable.

This reflected in part from pharmacy prebuy, as well as our decision to build up inventory for the flu and cough cold category.

The severity of the flu has been lower than anyone had predicted.

Having said that, we view working capital management as an area of opportunity for us going forward.

Let me now turn to our guidance for 2010.

We expect -- we expect to deliver adjusted EPS from continuing operations in the range of $2.74 to $2.84, and GAAP diluted EPS of $2.56 to $2.65.

That includes our expectations that we complete the remaining $1.5 billion in authorized share repurchases by the end of the second quarter.

It also includes our expectations that Longs will add about $0.10 per share versus last year.

For the PBM segment, we expect operating profits to decline by 10 to 12%, while we expect operating profit to grow by 13 to 16% in the retail segment.

We expect operating margins for the total Company to be modestly up from 2009 levels.

For the PBM segment, we expect revenue to decline 4 to 6% for the year, with our retail segment we expect revenue to increase 5.5 to 7.5% and same-store sales to increase 4 to 6% for the year.

For the total enterprise, we expect revenue to be roughly flat to 2% up from 2009 levels.

That is after inter Company eliminations, which are projected to equal about 7 to 7.5% of combined segment revenues.

For the total Company, gross profit margins are expected to moderately improve relative to 2009 levels, with the PBM segment modestly down and retail flat to down.

To be clear, total Company margin will moderately improve due to segment mix.

We forecast the total Company operating spend as a percent of revenue will moderately decline with retail moderately improving, the PBM modestly declining.

The corporate segment will grow more or less in line with the blended rate of the other two segments.

We forecast net interest of about $590 million to $620 million, a tax rate of 40%, and approximately 1.39 billion weighted average shares for the year.

We expect total consolidated amortization for 2010 to be roughly equivalent to the levels in 2009.

Combined with estimated depreciation, we project approximately $1.4 billion in D&A.

We expect gross capital expenditures to be in the range of $2.4 billion to $2.7 billion, essentially flat to 2009.

However, our net capital expenditures are expected to be higher than 2009 due to our expectations for lower proceeds from sale leasebacks in 2010.

As you know, during 2009, we completed nearly $1.6 billion in sale lease back transactions.

That was significantly higher than a typical year, given that we carried some over from 2008's pipeline, as we waited for the financial markets to improve.

For 2010, we estimate that we return to a more normal pre-acquisition level of sale lease back transactions, which is about $500 million to $600 million annually.

In light of the lower amount of sale leasebacks, we expect free cash flow to be in the range of $2 billion to $2.5 billion in 2010.

I expect free cash flow to accelerate in 2011 and beyond.

Turning to the first quarter, we expect revenue growth for the total Company to be in the range of 3 to 4%.

In the retail segment, we expect total same-store sales growth to be between 3 and 5%.

We expect adjusted EPS from continuing operations to be between $0.57 and $0.59 per diluted share compared to last year's $0.55 per share.

GAAP EPS is expected to be in the range of $0.53 to $0.55 per diluted share.

We project that retail operating profit will be up mid to high single digits in the first quarter, but that will quickly improve as we move through the year and easier comparisons occur and our initiatives kick in.

More specifically, there are a few things you need to keep in mind when modeling our quarterly results for the retail segment.

First, most of the integration costs associated with Longs occurred in the second half of 2009.

The comparison this year to last year then, is more difficult in the first half.

Second, we expect the Longs stores so see an improving profitability weighted towards the second half of 2010.

As Tom said, Longs will likely cause a drag on total comps in the first half of 2010.

Finally, the timing and mix of new generics is also a factor in the first quarter.

Note that full year generics are less helpful in 2010 versus last year due to the timing of the generic pipeline.

From an earnings growth perspective, all the other quarters this year will show good progress versus last year.

I also want to note that PBM operating profit is expected to be about flat to slightly down in the first quarter, as we have an easy comparison to last year's first quarter due to the litigation reserve we quoted in 2009.

I hope that helps you with your models and provides a comprehensive picture of our forecasted performance.

With that, let me turn it back to Tom.

Thanks, Dave.

As Nancy said, we have Larry Merlo, and Per Lofberg with us today.

And we will ask them to participate in the Q&A discussion on each of the earnings calls going forward.

I thought, though, however, given the fact that Per has just joined the team, I would like to ask him just to say a few words on his early days at CVS Caremark before we open it up for questions.

Per?

Thanks, Tom, and good morning, everyone.

I'm very glad to be here at CVS Caremark and I look forward to talking with all of you in the investment community from time to time throughout the year.

I will focus my brief comments here on some introductory remarks about the upcoming 2011 selling season since that seems to be a topic of great interest to many of you out there.

The bottom line is that I'm very encouraged and confident about everything I have seen so far in the month since I joined the Company.

I don't see any important barriers to our ability to participate proactively and successfully in the competitive bidding process that we have ahead of us.

As I think many of you are aware, the season is just getting started, with a large number of plans expected to go through an RFP process this year.

This will play out over the next six to nine months and I look forward to giving all of you an in-depth briefing on our business later on in the year, including a summary of progress on both renewals and new business.

Since I started the job a month ago, I have looked carefully around the Company for any signs of serious client dissatisfaction or service problems which could hold us back in the upcoming selling season.

So far, I'm glad to say I have not come up with anything of concern and the customers I've met personally have not expressed anything but satisfaction with the work done by the Company.

Also, the January installation process, which is also a sensitive time in this industry, when new clients are installed beginning on January 1, has gone very well for them.

If you stumble in this process as can happen from time to time, it certainly can cloud the outlook for the upcoming season.

I view the problems which clearly caused some setbacks for the Company last year as isolated issues which have been corrected and I don't see any systemic issues that could hold the Company back this coming year.

As I've traveled around the Company this past month, I continue to be impressed by the breadth and depth of talent in the organization and the number of innovative programs under way, which can offer new, improved solutions to customers.

This includes, among other things, programs which integrate both benefit design and member and physician interaction across Caremark's main service platform and CVS retail stores, and Tom alluded to some of them in his presentation a few minutes ago.

They can deliver greater savings to customers and better experience for consumers.

The early results here are extremely intriguing and encouraging.

When scaled up across the enterprise, they could offer competitive advantages, which cannot easily be replicated by others.

I plan to be personally heavily engaged with our organization in the business development activities this year, and as I said earlier, I look forward to giving all of you an update on our progress later on in the season.

Thank you very much.

Thanks, Per Okay.

Now I'll open it up for questions.

(Operator Instructions) Your first question comes from the line of Debra Weinswig with Citi.

Debra, your line is open.

Thank you, and congratulations on a great quarter and also I want to thank you, Dave, for the very detailed comments on your 2010 outlook.

Tom, wanted to get your take on what's happening out there in the front end stage.

Wanted to start there since there seems to be a lot of confusion.

Your traffic and ticket were up in the fourth quarter, yet the same cannot be said for your play drug store competitors.

Also sounds like CVS has an interesting approach to holiday.

What do you think is really setting you apart.

Your Extra Care loyalty card is often pointed out as one of the best and in retail do you think it's extra care do you think it's some maintenance choice, can you maybe just go through some of the details for us today?

Retail is a lot detail and it's a lot of different initiatives in the marketplace and we've spent a lot of time in the last few years changing our front end stores, looking at different layouts in our stores, as you pointed out, using the Extra Care loyalty card to - maybe direct our promotional spend a little better and I think the merchants and our operators have just done a great job.

It's about execution in the stores and people come into our stores, find what they need, find it at the right value.

When you think that the average person in our stores, are buying three or four items, so they are in and out.

And I think we've done a great job.

I think the merchants got ahead of it during the holiday season and they saw what was happening with the economy and how people were thinking about their spending pattern and we bought differently.

We lowered expectations on some of the gift-giving items, as I mentioned earlier.

So I think it's really a combination of things.

Lastly would be Maintenance Choice.

Maintenance Choice has certainly helped our overall comps and increased our traffic.

If you bring people in the store and you don't have the right product and the right merchandise at the right price, doesn't matter what you do.

So I think it's really, a really a combination of things and I couldn't be happier.

Okay, and then my follow-up question, you have spoken with several different consultants and the overall themes used to be that RxConnect is a real differentiator for CVS.

Can you potentially elaborate on that?

Well, the RxConnect is really the new retail pharmacy system.

We've rolled out, we've rolled out a system six years ago and now we've rolled out the latest development of our new pharmacy retail system, RxConnect that we're still in the process of rolling that out.

As I mentioned earlier, we started with the Longs rollout and then -- because we didn't want to put the old system in and put a new one in, as you can imagine.

The Longs system is in place and we continue to roll out our existing stores.

But the real-- the lynch pin after that will be consumer engagement engine, which really allows us to essentially leverage our clinical capabilities across our asset base.

All right.

We can do all that we can do in the mail center, in our call centers around -- gaps in care and improved generic dispensing and preferred formularies.

This will allow us to leverage it across the retail base easier, right, and the pharmacist will have messaging that's easier and direct.

It will be included in the work process flow, and, people always ask, how can you do this in the stores and how pharmacists are busy, how can they possibly do these clinical interventions?

This is in some cases, 10, 20, 30 people a day in the store.

It takes two or three minutes.

So it's not like we have to pull some people into a consultant booth and talk to them for a half hour.

This is about making it easy and simple in our stores to address what the clinical opportunities we had for patients, whether it's diabetic patients or hypertensive patients or asthma patients.

So that's the real win for us, to be able to leverage our clinical capabilities across our asset base.

So the bottom line here will be the opportunity to provide counseling, plus driving adherence?

Yes, counseling, gaps in care, adherence.

It's just -- it's all about saving clients, and our clients money and improving healthcare in the member experience.

Thanks a lot.

Your next question comes from the line of [Tom Gallucci with Lazard.]

Good morning.

First just want to make sure, where do we stand on the selling season?

You have about 7 billion up for renewal this year.

Did you get the two accounts now down that you had said previously were certain at the finish line?

Are you talking for '10 or '11?

For this year, for this coming selling season.

You said you had about 7 billion up that included two contracts that were sort of quote, unquote near the finish line.

Let's have the question again, because there's some confusion here.

Are you talking about '10 or '11?

'11.

Okay.

We have 7.5 billion out there.

7.5, okay, good.

And if Per could follow up on his opening remarks there, you said you hadn't detected any service issues or other major areas of dissatisfaction among customers.

What kind of feedback are you getting from customers, more concrete, maybe from a positive standpoint, and what kinds of things are they asking about as you think about the upcoming year, benefits and design changes, et cetera?

I think for the most part, everyone who is a payer of health benefits is under pressure to maintain the funding for that program, to maintain programs within financial constraints.

So I say customers are very much focused on how they can kind of control the cost of their benefit programs going forward.

They are looking for new benefit designs and sort of innovative programs that can help maintain our control over those kinds of costs.

They are also obviously looking for flawless execution in the way we and other PBMs are, are, interacting with their organizations.

There are a couple of areas that are very important topic in this upcoming season is the growth in specialty pharmacy.

As you guys know, that's probably the fastest growing part of the drug expense today for payors, maybe 15, 20% year-over-year growth rates.

So some of the same techniques and principles that have helped PBMs control cost for regular medication, we play an increasingly important role in the growth in the specialty and that's an important focus for -- (inaudible) for our customers.

Finally, I can sort of comment briefly on Medicare D.

As I think many of you know, many health trends out there are actively engaged in the Medicare D program and the ability to support them in that field is also an important factor in what they are looking for in this upcoming season.

Thanks.

As a reminder, please dial nine to ask a question.

Your next question comes from the line of Ed Kelly with Credit Suisse.

Hi, good morning.

Dave, could you provide a little bit more colour on your retail guidance for EBIT?

If you're looking at EBIT up 13 to 16%, how much of that is the core business, so excluding what Longs will contribute?

Well, as I said, if you look at the impact of the Longs business TY to LY to '10 versus '09, there's about a $0.10 swing, so you really need to factor that into your model and think about it from that perspective.

But is most of that $0.10 swing in retail, Dave, there is a PBM component, right?

Yes, most of that is in retail.

All right, and then, the gross margin has been fairly choppy the last couple of quarters It was great this quarter, it was disappointing in Q3.

Can you help us understand the volatility of that?

And then how do we think about that as we go through 2010?

I mean the inventory build up in cough, cold and flu does that impact you on the first half of the year.

Some colour there would be great.

Certainly inventory buildup.

I don't know that will help or hurt us, but we're positioned well to the extent that if a flu season did materialize in any substance, we're in great position there.

Secondly, as far as gross profit margin and the spread of that, a lot of that's based on introductions and timing of generics throughout the year.

So when those generics are available and as we overlap those generics year-over-year, it does have implication on our margin rate.

All right, and then just last question here, as we think about the performance of Longs, how does Longs so far compare to Eckerd and Save-on?

It sounds like the front end negative.

Is that a surprise, is it not a surprise?

Would you help us understand that?

I'll let Larry Merlo answer that question.

Yes, it's not a surprise that our comps right now are negative and, I'm very pleased with where we are.

If you look at some of our internal metrics, and keep in mind we finished the integration activities in November.

So it's only been a couple of months where we're coming out of disruptive phase, but when you look at things like private label penetration, as Tom mentioned earlier, our service performance around how we're doing in the pharmacy and the front end recognizing system conversion, you go back and bounce that up against where we were at a similar point in time against Osco, Save-on or Eckert, we are well ahead of the performance curve.

So we're entering Phase II.

We are -- think about that as the marketing phase, where we're reintroducing the former Longs stores to new customers and changing the way customers view and shop those stores.

So I feel pretty good where we're at.

And just to add to that, remember that Eckerd's was really a revenue click.

Their productivity, sales productivity per store was significantly lower than core CVS stores.

The Osco Save-On and Longs is more of a profitability play, because they had the revenue.

So it's around shrink around Larry's point, around P&L et cetera.

So, it's more of a margin play.

Your next question comes from Lisa Gill from JPMorgan

Thanks very much.

Tom or Per, can you quantify the opportunity around plan design changes for 2010?

Are there a bunch of midyear opportunities to be able to drive Maintenance Choice?

And then secondly, on 2011 are there new market opportunities maybe can you talk about are you seeing opportunities for (inaudible) that we haven't seen in the past?

I can take a shot at it and Per can jump in.

There are opportunities for us.

Clients, our existing clients keep looking for ways that we can obviously continue to save them money.

And I think clients that were maybe not as receptive to some planned design changes, whether it was preferred formularies or generics first or even Maintenance Choice, are more open to those plan designs.

Right.

It's just -- to Per's point, it's just a fact of life.

People are under pressure.

They are looking for not only ways to save, save their drug costs, but they are looking for ways to save healthcare costs, which is really the ultimate win here for us.

And we're doing it through our client value campaign.

We're driving generics driving mail channel optimization, so there are opportunities and we can see it across big and small accounts.

I think--

We're thinking about the PBM down 10, 12% in 2010, is there opportunities for you to go out to existing clients, and say,okay, let's put Maintenance Choice in place and then if they do it for July 1, the margin could actually look better in 2010 than what you're currently expecting?

And is there any way to quantify some of the people you've had conversations with, they weren't ready for January 1, but perhaps there's going to be an opportunity midyear?

I think the way we work through our account management organization is very much focused on opportunities like the ones you described, where the, the dialogue between our account management people and the plants will continuously introduce new programs that can help them save money and that can be beneficial to us.

One example that I think will be new this year is that we will be introducing the pharmacogenomic programs that have evolved out of the partnership with Generation Health.

So through the second half of this year, we will be introducing to certain customers, that program as an additional feature to the benefit programs.

And Lisa, to your point, I mean listen, we always look to beat and improve, right?

These are the expectations that we have.

This is what we roll up.

But we're always trying -- our people are out there, whether the retail side or the PBM side, always looking to drive improved profitability and savings for our customers and clients.

So -- to Per's point, we're out there working it in the first and second half.

And then just my other question, when we look at 2011, you quantified that you have $7.5 billion up for renewal.

Beyond just your other two large competitors, are there new market opportunities that you're seeing?

Are we seeing more carveouts in 2011 than we've seen in the past?

I don't know, Per--

There are some plans that I think are continuously kind of evaluating whether it makes sense for them to have in-house PBM functionality, whether it's mail service pharmacy or whether it's claims processing and, or formulary programs.

So, in some of the health plans, there are occasionally opportunities to talk about different types of arrangements than just the straight outsourcing arrangement.

That's kind of an ongoing part of the discussion with those types of accounts.

Great, thank you.

Your next question comes from the line of John Heinbockel with Goldman Sachs.

Couple things.

Tom, when you think about the selling season, and obviously there's a lot of new business potentially out there for you guys.

How much do you think you have to be a competitor buy on price, to get someone to take the risk of converting over, and has that changed during this downturn, economic downturn?

No, there's no scientific number for that, John.

It's -- they look at the total value offering, right price.

Certainly has to be competitive.

Then they will look for a three-year contract.

We want to partner up with this, with this PBM because we have more opportunities on a go-forward basis, right?

We're aligned around, around members, improving the member experience.

We're aligned around clinical outcomes.

We're aligned around lowering the healthcare costs.

So it's more than just, than just price.

I mean you have to have price to be in the game, but you need to have the whole complete offering.

And you think the pricing environment this year, you said consistently really not that much different than last year and it won't be.

Is that still your thought?

Yes, I don't think -- I'll let Per comment, but I don't think the pricing environment's that much different.

I think it's more about unique plan designs and clinical capabilities.

Obviously you read what's out in the literature, what people are publishing, but we're going to go out and we have the opportunity to go out and do some pricing investments and we're not going to do any more of that than we normally have.

But there are a significant number of new opportunities out there, more this year than in the past.

And -- has always been very competitive and to just sort of emphasize what Tom was saying, I think a lot of it has to do with the ultimate value that are generated through a combination of commercial terms and plan design and innovative programs.

So, that's really the totality of what people are interested in.

We certainly have no plans or no interest in being kind of sort of buying business at a loss or anything like that.

We can expect to have a very rational approach to the way we participate in the marketplace.

All right.

Then finally, Tom, two quick things on the environment.

What do you think the outlook is for Medicaid changes in 2010, particularly given the pressure the states are under?

Is that going to be a constant battle?

I guess it seems to be a manageable one.

And secondly, what about the fallout of independents?

You would think that might, for the same reason, that might accelerate and you could do more than 200 file buys.

What's your thoughts there?

Well, the states will obviously continue to be under pressure.

They have always been under pressure.

I think it's going to get worse now with some of the federal sharing arrangements.

So we've obviously had discussions with various states, not only around reimbursement rates, but around payment terms, around timing, around receivables, so it's not just a pure rate.

There are opportunities.

The second piece is, we believe we can bring some oil to the squeak, right?

We believe that we can actually save states money.

And we're going to the states and talking about that, I mean because you can imagine, these guys are up -- whether California, New York, Texas, wherever, and everyone's trying to reach in and say we need more money.

So we're trying to be a solution for the states.

And given our assets, right, PBM, our MinuteClinic, our retail stores, our disease management programs, we think we have opportunity, our specialty business.

We think we have an opportunity to save them some money.

The independents-- the stronger ones are left.

They are more focused on the specialty medications.

So could there be more?

That's a possibility, John, but when we look at what our plans are, we plan for a similar amount.

I will tell you they are getting more expensive because there's fewer left, but having said that, it's probably one of the best returns from a capital investment standpoint.

So we have a team on it and if there's more out there, we'll be getting it.

Your next question comes from the line of Bob Willoughby with Bank of America Merrill Lynch.

Per, if I could touch on your prior experience at Medco, I would just say as an independent entity, it has to fare better than an independent captive.

What do you see as the challenges or differences here with the CVS Caremark model today?

Well, I mean first of all, I'm not sure I completely agree with your premise, that it's -- that Medco fared better as independent than as a captive.

During the my time we grew from 3 billion to almost $30 billion when it was owned by Merck, so I don't think that's necessarily a given.

I do think that the, the assets that CVS Caremark has, offer some really interesting potential features in the marketplace that, if they really scale up on the enterprise basis, they will, they will have the potential to drive some competitive advantage in this business.

And we limit to some of them before, but the main service model that I've been involved in for almost 30 years now, that model has basically sort of grown, largely in the past decade by putting in benefit designs that are quite disruptive to the members, where they literally cease to have coverage if they stay at the retail stores.

So, that type of plan design has been necessary to get the significant portion of the drug span to migrate over to mainland.

Obviously it's worst to a significant degree.

I think the model that's introduced by-- by CVS Caremark, by basically including the mail service financial plan features and the benefit design through the retail stores in the Maintenance Choice program it's sort of a way to expand the concept, but in a gentler way for the members so that the plan can continue to save money, expand the savings without the same disruption to the members.

That's an example of the, the value of integration that could really offer some significant additional mileage for us.

And then the ability to communicate with members both through centralized call centers and through face-to-face interaction with the retail pharmacist, I think that's a feature that also shows some really interesting early evidence here that, when scaled up, could really be unique feature in the industry that offers new, improved benefits to the marketplace.

Thanks.

How would you characterize the competitive landscape today versus, back when you were a Medco person?

Well, obviously the business has consolidated somewhat in the past decade, so we're now, three major PBMs or, making out the greater portion of the marketplace than it did a decade, 15 years ago.

But, it's always been a very competitive industry.

That's part of the fun with it.

And you continue based on innovation to a very large extent and I don't see that really changing.

We have a whole new frontier of clinical opportunities that can be built on top of the PBM platform, that can offer significant benefits both to members in terms of their health outcomes, but also in terms of the payors through more efficient use of healthcare resources.

I do think this continues to be very, very dynamic, very competitive and very exciting industry.

Your next question comes from the line of Scott Mushkin from Jefferies.

Hi, guys.

Thanks for taking my questions.

Per, I want to get your opinions.

I know there's been a lot said about the marketing message went a little off last year.

Seems to me your old customers or current customers don't leave because of a marketing message.

I was wondering if you look forward into next year, how do you get that attrition rate down to a more normalized level?

And then kind of off your comments about maintenance choice, where do you see that program going into the future?

I know we're about 5.5 million.

Is that a program that could have 10 to 15 million people in it?

I think to the first point, as I mentioned in my introductory comment, and really what -- after the first month is that the, the problems that caused some account defections last year, they really were quite isolated issues that at this point have been corrected and are not really factor.

I don't think there's any issue that customers have with the integrated model per se.

I think customers are first and foremost interested in how can they save money on their benefit programs?

How can they get good service for their members and they don't really care that much if we are also retail pharmacy chain in addition to being a PBM.

Obviously if we can add value, if we can save the money for improved member experience through the combination, that sort of gravy or that's icing on the cake, if you will.

First and foremost, very interested in the core PBM functionality and that's certainly where the company is centered at this point.

I would just add to it that it's important to remember those were concentrated in four or five clients and then (inaudible) you look at our retention rate across the employer base, it is very high.

We had some issues with the health plan, which was a service issue we corrected and we had some acquisitions and we had some carve-ins.

So it wasn't a service issue throughout the whole company as Per said.

And is there any speculation on how big Maintenance Choice could get over time?

And then I had one for Larry, if I'm allowed.

I can't really -- I mean we're in the early stage of rolling out that program to our customer base and so far, it's been very nicely adopted.

I haven't, I haven't yet had a chance to really model out what the longer term potential might be, but I can imagine it's quite a bit beyond where we are today.

And Larry, this is for you, we've got a big chunk of people that are going to mandatory comply April 1 into Maintenance Choice.

I'm just wondering if you could give us some thoughts about staffing levels at the stores.

We have seen from time to time last year some lines building up at the pharmacies.

Do you think that's been an issue and what are you going to do come April 1 to handle the probably a spike in volume?

Scott, the volume, when you think about are base of 7000 stores.

It's scattered across the country.

So there are, handful of stores that see a tremendous spike that we know that in advance we're able to plan for that accordingly.

But, it's fairly invisible when you look across our base and actually when you look at our service metrics for the Maintenance Choice customers, they are absolutely in line with the rest of our customer base.

So we're pleased that we have great processes in place to make sure that they have a very good retail experience.

And our service metrics around waiting time and in-stock in the pharmacies is best it's ever been.

Okay, thanks.

Your next question comes from the line of Helene Wolk with Sanford Bernstein.

Good morning.

First a question on retail.

You had provided guidance for four to six same store sales in 2010.

I wonder if you can give us any perspective on the breakdown between pharmacy and front end.

And then also comment on the January report from your peer and what that suggests around pharmacy numbers.

We, we don't break that out, but obviously pharmacy's a big driver on the mix.

And I would just point out, and people have asked this and we've said it consistently that we can hit our earnings targets and projections, even if we have a 1% front end comp.

So it's not -- obviously it's not that big a base for us, but we continue to focus on it and improve the profitability and merchants are doing a great job around that, around some of the private label and some of the categories.

But from a pure comp standpoint, we can hit our numbers at 1% front end..

Great, and then on the PBM side, I'm just curious around PBM operating expenses for 2010, can you just give us a flavor for whether the revenue impact has any deleverage or if there's any opportunity to actually change the profile here, or alternatively, are you actually making operating assessments in the business in 2010?

No, a couple things.

One is, as you know, in the PBM business specifically in some of the operational function areas of the business, is highly variable.

So when volume comes out, SG&A comes out, correspondingly.

So we have factored that into our plans for next year and we aggressively manage our operating performance based on those metrics.

And as always, we do make investments in certain areas of our business over time.

but nothing of big significance for 2010.

There is a number of kind of ongoing system development programs that you can sort of put under the operational excellence a rubric and they are all very important and they are beginning to make our internal processes, faster, more efficient on many, many different fronts.

But it's an ongoing program that's, likely to continue for quite sometime.

Okay.

We'll take two more questions.

Okay.

Your next question comes from the line of Mark Wiltamuth with Morgan Stanley.

Hi, good morning.

Per raised the question of benefits accruing to members versus what would accrue to the employer.

The feedback we were getting from a lot of the consultants was that if you look at Maintenance Choice, pharmacists counseling and front end discounts, those things are all aimed at the individual consumer, but are viewed as more neutral to the employer.

Do you have anything that really shifts that to make, make the economics look better for the employer, for example, would Maintenance Choice really be more effective than mail in terms of saving costs?

If you look at Maintenance Choice-- if you break that down a bit, if it is a mandatory choice program where you add the 90-day option at retail, then basically, a significant portion of the change is basically for the benefit of the members.

The pricing kind of stays the same for the plan.

There are -- there is a portion of the growth in Maintenance Choice that clearly is the migration from, network pharmacies into the CVS retail stores or the mail service pharmacies.

That's obviously kind of a -- it's a win-win.

I mean both benefit the plan because they now have a greater percentage of the drug spend, but they benefit from the lower pricing.

And it's a benefit to us because we get-- we make a margin on the prescriptions.

Just to add to that, one of the issues that had come up was that very factor.

It's mostly mandatory mail and it wasn't savings for the clients.

To Per's point, we're seeing clients that are voluntary mail.

When they switch to Maintenance Choice, they go from anywhere from 20 to 40 to 50% mail penetration, which saves them money.

Secondly, we're seeing better GDRs, so it's a win-win on both sides of the equation.

We're having better compliance, better performance around generic dispensing.

So we get the mail pricing, plus the generic dispensing.

And, the clinical programs, first bill counseling adherence, that's all about lowering healthcare costs.

And clients, believe me, the sophisticated clients get that in the long-term.

That's who we're focused on.

And that component, the counseling part, we really have to wait until middle of 2010 when the single view of the patient comes in.

What we're doing now with some pilot programs, but, yes, when you get second half in '10 and out to '11, that's what we're talking about with clients in the selling season and would just be easier to do.

It's more quote, unquote automated, if you will.

Okay, and also just want to get a thought on how far through the longest margin recovery you are.

When they started, they only had about a 2.7% margin.

How far are you getting that closer to the CVS core margin rate?

We're in the fifth inning of a nine-inning game.

Okay.

Your final question comes from the line of Meredith Adler with Barclays Capital.

Oh, thanks for letting me squeeze in.

I would like to go back to, Tom, something you said about working with states on helping them become more efficient.

Are they responsive?

State's a big bureaucracy.

Do they get it?

And are they making changes?

Some get it.

We're working through individually and then collectively be as associations.

We go to the states and they do get it, but you can imagine, some are more receptive than others.

Any change is difficult, and this notion that I think the bigger issue is philosophically does the Medicaid patient have to have, quote, unquote, to use the phrase bouncing around, the Cadillac plan or can the plans be more similar to the private sector?

That's, that's where it's headed, right?

That's a little bit of a paradigm shift in their eyes that says, listen, most of the private and public companies in your state are looking at these type of benefit designs.

You should be looking at that for your Medicaid population.

And there's some receptively to it.

At least it gives us a way to say we're trying to provide a solution and you can imagine the uptakes differently from different viewpoints..

And then maybe you could just comment on some of the things that -- I think it was AT&T and maybe IBM who signed up to test some of the counseling programs.

And you haven't really updated that.

Maybe that was what Per was referring to a few minutes ago, but would you say that that has in fact proven to be a success?

And how hard is it to sell those early results to other customers?

Yes, I think,one of the changes that we made in the, in the selling season this year and the marketing message is not only more focused marketing message around PBM capabilities, but we're able to talk about some results, right?

We have pilots in program.

We have large clients.

AT&T is a client of ours.

IBM is not a client of ours, but we do have some programs with large employer groups, small employers, and working on some health plans that show the improvement around the gaps in care, around adherence, around compliance, around generic depending, around formulary, preferred formulary.

So we can actually go into clients now and show them results, where before it was more, this is what we're planning, this is what we expect to see.

Now we can show them actual results.

Great.

One more quick question.

In total generics for 2010, how did that compare with 2009 and what you expect for 2011?

2010 is significantly below 2009.

It's maybe 60% or something, it's significantly less, it's more weighted to the back half of what we're going to get.

2011 is obviously a huge pop in the back end of 2011-- and then into 2012.

So it's obviously a big opportunity for us.

But if you look at the aggregate number of branded drugs going off forgetting about the timing in the year, is it similar in 2010?

No, it's less.

Than '09?

Yes.

Yes, it's less than '09.

Yes, it's less than '09.

And then '11 is, 2.5 to 3 times more than '10.

Okay, great.

Thank you very much.

Okay, thanks a lot.

And as usual, if you have any questions, you can call Nancy Christal.

Thanks.

Ladies and gentlemen, this concludes today's CVS Caremark Corporation fourth quarter 2009 earnings conference call.

You may now dial one to disconnect.