A Prescription for Healthcare Reform David B. Snow, Jr. Chairman and Chief Executive Officer...

A Prescription forHealthcare Reform

David B. Snow, Jr.David B. Snow, Jr.Chairman and Chief Executive OfficerChairman and Chief Executive Officer

Presentation to Citi Private Client GroupPresentation to Citi Private Client Group

April 17, 2008April 17, 2008

2© 2008 Medco Health Solutions, Inc. All rights reserved.

Forward-Looking StatementsForward-Looking Statements

This presentation contains “forward-looking statements” as that term is defined in the Private This presentation contains “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that may cause results to differ materially from those set forth in the statements. No forward-may cause results to differ materially from those set forth in the statements. No forward-looking statement can be guaranteed, and actual results may differ materially from those looking statement can be guaranteed, and actual results may differ materially from those projected. We undertake no obligation to publicly update any forward-looking statement, projected. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. The forward-looking whether as a result of new information, future events or otherwise. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about the business and future financial results of the pharmacy assumptions and projections about the business and future financial results of the pharmacy benefit management (“PBM”) and specialty pharmacy industries, and other legal, regulatory benefit management (“PBM”) and specialty pharmacy industries, and other legal, regulatory and economic developments. We use words such as “anticipates,” “believes,” “plans,” and economic developments. We use words such as “anticipates,” “believes,” “plans,” “expects,” “projects,” “future,” “intends,” “may,” “will,” “should,” “could,” “estimates,” “predicts,” “expects,” “projects,” “future,” “intends,” “may,” “will,” “should,” “could,” “estimates,” “predicts,” “potential,” “continue,” “guidance” and similar expressions to identify these forward-looking “potential,” “continue,” “guidance” and similar expressions to identify these forward-looking statements. Medco’s actual results could differ materially from the results contemplated by statements. Medco’s actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors.these forward-looking statements due to a number of factors.

Forward-looking statements in this presentation should be evaluated together with the risks Forward-looking statements in this presentation should be evaluated together with the risks and uncertainties that affect our business, particularly those mentioned in the Risk Factors and uncertainties that affect our business, particularly those mentioned in the Risk Factors section of the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and section of the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other documents filed from time to time with the Securities and Exchange Commission. other documents filed from time to time with the Securities and Exchange Commission.


A Prescription for Healthcare ReformA Prescription for Healthcare Reform

The Urgent Imperative The Urgent Imperative

A Roadmap to ReformA Roadmap to Reform

Medco’s Contribution to Healthcare ReformMedco’s Contribution to Healthcare Reform


U.S. Healthcare Costs are Highest U.S. Healthcare Costs are Highest “Paying More Doesn’t Deliver More”“Paying More Doesn’t Deliver More”

0

1000

2000

3000

4000

5000

6000

7000

0 20 40 60 80 100

Perceived Health Status Scale (1-100)

Pe

r C

ap

ita

He

alt

h S

pe

nd

ing

($

)

U.S.U.S.

JapanJapan ItalyItaly CanadaCanada

SwitzerlandSwitzerland

FranceFrance

SwedenSwedenU.K.U.K.

GermanyGermany

Source: Organization for Economic Cooperation and Development (OECD) Health Data, 2007 *Graph shows per capita health spending and perceived health status for 2005


U.S. Life Expectancy is Lowest Among U.S. Life Expectancy is Lowest Among Most Industrialized NationsMost Industrialized Nations

82.0

80.6

80.6

80.6

80.3

79.9

79.0

78.7

78.0

Japan

Switzerland

Sweden

France

Canada

Italy

Germany

United Kingdom

United States

Life Expectancy at BirthLife Expectancy at BirthLife Expectancy at BirthLife Expectancy at Birth

Source: Central Intelligence Agency World Factbook 2007


Worldwide Healthcare Inflation:Worldwide Healthcare Inflation:A Shared ConcernA Shared Concern

Healthcare Spending Per Capita 1995-2005Healthcare Spending Per Capita 1995-2005Healthcare Spending Per Capita 1995-2005Healthcare Spending Per Capita 1995-2005

19951995 20052005Annualized Annualized Growth RateGrowth Rate

United KingdomUnited Kingdom $1,384$1,384 $2,724$2,724 7.01%7.01%

GermanyGermany $2,225$2,225 $3,287$3,287 3.98%3.98%

ItalyItaly $1,562$1,562 $2,532$2,532 4.95%4.95%

CanadaCanada $2,057$2,057 $3,326$3,326 4.92%4.92%

FranceFrance $2,065$2,065 $3,374$3,374 5.03%5.03%

SwedenSweden $1,733$1,733 $2,918$2,918 5.35%5.35%

SwitzerlandSwitzerland $2,571$2,571 $4,177$4,177 4.97%4.97%

JapanJapan $1,546$1,546 $2,348$2,348 4.31%4.31%

AverageAverage $1,893$1,893 $3,087$3,087 5.07%5.07%

United States $3,656 $6,401 5.76%

Source: Organization for Economic Cooperation and Development (OECD) Health Data, 2007


The ChallengeThe Challenge

Baseline U.S healthcare spending must Baseline U.S healthcare spending must be reduced by $1 trillion annually to be reduced by $1 trillion annually to move toward achieving per capita cost move toward achieving per capita cost parity versus other developed nationsparity versus other developed nations

Unchecked U.S. healthcare costs will rise from Unchecked U.S. healthcare costs will rise from 16 percent of GDP today to 49 percent of GDP in 16 percent of GDP today to 49 percent of GDP in 20822082

““Current financial incentives encourage expensive Current financial incentives encourage expensive treatments and procedures even if evidence about their treatments and procedures even if evidence about their effectiveness is limited.”effectiveness is limited.”

-- Congressional Budget Office-- Congressional Budget Office


Snow’s Principles for ReformSnow’s Principles for Reform

Keep It SimpleKeep It Simple

Think Evolutionary, Not RevolutionaryThink Evolutionary, Not Revolutionary

Clearly Define Government / Private Sector RolesClearly Define Government / Private Sector Roles

~Government: Promulgates and RegulatesGovernment: Promulgates and Regulates

~Private Sector: Operates and InnovatesPrivate Sector: Operates and Innovates


Radical Healthcare Reform is Not a Radical Healthcare Reform is Not a Government StrengthGovernment Strength

““HillaryCare 1994”HillaryCare 1994”““HillaryCare 1994”HillaryCare 1994”


HMO’s Effectively Reduced Costs;HMO’s Effectively Reduced Costs; But Were Demonized, Scapegoated But Were Demonized, Scapegoated

US NewswireHMO Denies Cancer

Patient Treatment That Doctors Say Would

Have Saved Him, Says Law Firm

HMO Denies Teen Critical

Surgery

In America;Torture

by H.M.O.

SOME WILL WAIT, SOME WILL DIE, WITH HEALTH-

CARE RATIONING

Plan Could Turn Health

Care Into Federal Crime

THE HMO HORROR SHOW

From 1994 to 1999, annual growth in healthcare costs never exceeded 2.8%From 1994 to 1999, annual growth in healthcare costs never exceeded 2.8%

Managed care plan enrollment / excess capacity amplified negotiating leverageManaged care plan enrollment / excess capacity amplified negotiating leverage

Politicians caved to populist pressuresPoliticians caved to populist pressures

From 1994 to 1999, annual growth in healthcare costs never exceeded 2.8%From 1994 to 1999, annual growth in healthcare costs never exceeded 2.8%

Managed care plan enrollment / excess capacity amplified negotiating leverageManaged care plan enrollment / excess capacity amplified negotiating leverage

Politicians caved to populist pressuresPoliticians caved to populist pressures


The Government Can Make a DifferenceThe Government Can Make a Difference

““Brain on Drugs”Brain on Drugs”CampaignCampaign

““Brain on Drugs”Brain on Drugs”CampaignCampaign

““Smokey Bear” Smokey Bear” Wildfire CampaignWildfire Campaign““Smokey Bear” Smokey Bear”

Wildfire CampaignWildfire Campaign

““Crying Native American”Crying Native American”Littering CampaignLittering Campaign

““Crying Native American”Crying Native American”Littering CampaignLittering Campaign



The Urgent Imperative The Urgent Imperative




Government Must Lead ‘Wired’ HealthcareGovernment Must Lead ‘Wired’ Healthcare

Wiring Healthcare Wiring Healthcare Potential Cost Potential Cost

SavingsSavings

$162 Billion/year$162 Billion/year

Wiring Healthcare Wiring Healthcare Potential Cost Potential Cost

SavingsSavings

$162 Billion/year$162 Billion/year

ElectronicElectronicHealth RecordsHealth Records

(EHRs)(EHRs)

Payors

Hospitals

Laboratories

Pharmacy

Ambulatory CentersPhysician Office

Consumers

ROI: 20X / year ROI: 20X / year for each dollar investedfor each dollar invested

Source: RAND Corporation study, 2005


Medicare Financials in ‘Critical’ ConditionMedicare Financials in ‘Critical’ Condition

0

5

10

15

1980 1990 2000 2010 2020 2030 2040 2050Projection

41.9

5.13.4 2.1

1945 1960 2000 2040

Workers per RetireeWorkers per RetireeWorkers per RetireeWorkers per RetireeMedicare Spend as % of GDPMedicare Spend as % of GDPMedicare Spend as % of GDPMedicare Spend as % of GDP

Source: Congressional Budget Office/ Dow Jones Source: Social Security Trustees Report

Medicare’s Hospital Insurance Trust Fund Expected to Be Bankrupt in 2019Medicare’s Hospital Insurance Trust Fund Expected to Be Bankrupt in 2019Medicare’s Hospital Insurance Trust Fund Expected to Be Bankrupt in 2019Medicare’s Hospital Insurance Trust Fund Expected to Be Bankrupt in 2019


Medicare’s Actuarial Reality Has ChangedMedicare’s Actuarial Reality Has Changed

Today, 40,000 Today, 40,000 U.S. citizens are U.S. citizens are over 100 years over 100 years old; by 2050 old; by 2050 there could bethere could be1 million1 million

Source: National Institute of AgingCDC National Center for Health Statistics

““If I’d known I was gonna live this long, I’d have taken better care of myself.” – If I’d known I was gonna live this long, I’d have taken better care of myself.” – Eubie Blake at age 100Eubie Blake at age 100

““If I’d known I was gonna live this long, I’d have taken better care of myself.” – If I’d known I was gonna live this long, I’d have taken better care of myself.” – Eubie Blake at age 100Eubie Blake at age 100

46 48

74

88

1900 2000

MaleFemale

“Retirement Age”

Problems Will Continue to CompoundProblems Will Continue to CompoundProblems Will Continue to CompoundProblems Will Continue to Compound


Final Year of Life Expenditures Account Final Year of Life Expenditures Account for Nearly 30% of Medicare Spendfor Nearly 30% of Medicare Spend

~$130 B~$130 B

Spent on Spent on Last Year Last Year

of Lifeof Life

~30%~30%

Medicare Expenditures Total $432 BillionMedicare Expenditures Total $432 BillionMedicare Expenditures Total $432 BillionMedicare Expenditures Total $432 Billion

$25,358$25,358National average to treat chronically ill National average to treat chronically ill Medicare patients during the final six Medicare patients during the final six months of lifemonths of life

1414Number of medical specialists seen in Number of medical specialists seen in the final six months of lifethe final six months of life

40 Percent40 PercentNumber of New Jersey Medicare Number of New Jersey Medicare patients who died or spent time in ICU patients who died or spent time in ICU during the final months of life during the final months of life

Source: Centers for Medicare and Medicaid Services (CMS), Office of the ActuaryDepartment of Health and Human Services (HHS)

Source: The Dartmouth Atlas of Healthcare Study 2008


The $200 Billion Cost of The $200 Billion Cost of Defensive MedicineDefensive Medicine

Sources: Adapted from Centers for Medicare & Medicaid Services, National Health Accounts, 2005 and Midwest Business Group on Health, April 2003.

Prescription Drugs

Other Medical

Cost of Liability Cost of Liability & Defensive & Defensive MedicineMedicine

$200 billion$200 billion

Consumer Services, Provider Support & Marketing

Insurance Industry Profit

Government Payments, Compliance, Claims Processing & Other Administration

Physician Services

Hospital Inpatient

Outpatient (Free-standing

& Hospital)

15%15%

5%

10%

5%5%

3%3%6%

21%21%

17%17%

18%

1%

1%1%

4%

1%1%

3%3%

Prescription Drugs

Other Medical

Outpatient

Hospital Inpatient

Physician Services

Estimated Breakdown of Insurance Premiums withEstimated Breakdown of Insurance Premiums with Medical Liability and Defensive Medicine Extracted, 2005Medical Liability and Defensive Medicine Extracted, 2005

Estimated Breakdown of Insurance Premiums withEstimated Breakdown of Insurance Premiums with Medical Liability and Defensive Medicine Extracted, 2005Medical Liability and Defensive Medicine Extracted, 2005


2008 2009 2010 2011 2012 2013 2014 2015

Strong Pipeline of Off-Patent Branded Strong Pipeline of Off-Patent Branded Drugs Provides Some Relief Drugs Provides Some Relief

RisperdalRisperdal®®

LamictalLamictal®®

FosamaxFosamax®®

ImitrexImitrex®®

PrevacidPrevacid®®

TopamaxTopamax®®

ValtrexValtrex®®

AciphexAciphex®®

FlomaxFlomax®®

LipitorLipitor®®

Effexor XREffexor XR®®

ActosActos®®

ProtonixProtonix®(2)®(2)

ZyprexaZyprexa®®

LevaquinLevaquin®®

AriceptAricept®®

PlavixPlavix®®

SingulairSingulair®®

SeroquelSeroquel®®

LexaproLexapro®®

DiovanDiovan®®

CrestorCrestor®®

AvandiaAvandia®®

$91.9 Billion in Brand Drugs Off-Patent $91.9 Billion in Brand Drugs Off-Patent from 2008–2015from 2008–2015


(1) Limited supply of Protonix is not included in 2008 spend(2) 2011 reflects the off patent date for Protonix; limited product released in 2008Source: U.S. Drug spend estimates are based on IMS Health data for 2007. Brand drug expirations based on expected patent expiration dates current as of February 2008. Changes may occur due to litigation, patent

challenges, etc.

$9.7(1)$10.5

$3.6

$20.9$21.7

$6.1

$15.6

$3.8CymbaltaCymbalta®®

CelebrexCelebrex®®

NexiumNexium®®

VytorinVytorin®®

ZetiaZetia®®

LyricaLyrica®®

NasonexNasonex®®

AbilifyAbilify®®

Off-Patent Compounding EffectOff-Patent Compounding Effect($ Billions, prorated)($ Billions, prorated)


Source: U.S. Drug spend estimates are based on IMS Health data for 2007 and 2006, compounded amounts prorated for mid-term expirations. Brand drug expirations based on expected patent expiration dates current as of February 2008. Changes may occur due to litigation,patent challenges, etc.

2007 2008 2009 2010 2011 2012 2013 2014 2015

$6.5$6.5

$16.7$16.7

$25.7$25.7

$35.1$35.1

$46.9$46.9

$69.1$69.1

$80.1$80.1

$95.0$95.0

$103.1$103.1

Approx. $35 Billion in Total Savings from GenericsApprox. $35 Billion in Total Savings from GenericsApprox. $35 Billion in Total Savings from GenericsApprox. $35 Billion in Total Savings from Generics


53

47

54

47

53

47

52

48

50

51

47

53

43

57

39

61

37

63

1999 2000 2001 2002 2003 2004 2005 2006 MAT2006/2007

88

12

89

11

90

10

89

11

88

12

88

12

87

13

85

15

84

16

1999 2000 2001 2002 2003 2004 2005 2006 MAT2006/2007

Source: New England Journal of Medicine, November 15, 2007MAT denotes moving annual total; MAT 06/07 represents the 12 months ending in June 2007. Data are from IMS Health,National Prescription Audit Plans, National Sales Perspective, June 2007.

Brand Name Generic

Total Prescriptions Dispensed (%)Total Prescriptions Dispensed (%)Total Prescriptions Dispensed (%)Total Prescriptions Dispensed (%) Total Expenditures on Prescription Drugs (%)Total Expenditures on Prescription Drugs (%)Total Expenditures on Prescription Drugs (%)Total Expenditures on Prescription Drugs (%)

37% of Prescriptions Dispensed are Brand 37% of Prescriptions Dispensed are Brand Name Drugs, Accounting for 84% of SpendName Drugs, Accounting for 84% of Spend

Drug Mix Trend (%)Drug Mix Trend (%)Drug Mix Trend (%)Drug Mix Trend (%) Drug Spend Mix Trend (%)Drug Spend Mix Trend (%)Drug Spend Mix Trend (%)Drug Spend Mix Trend (%)


Government Must Government Must Increase Access To GenericsIncrease Access To Generics

generic drug applications generic drug applications are backloggedare backlogged

Source: Office of Generic Drugs

1,2001,200More thanMore than

Cost SavingsCost SavingsCost SavingsCost Savings

IncreaseIncreaseCompetitionCompetition

IncreaseIncreaseCompetitionCompetition

Clear Clear BacklogBacklog

Clear Clear BacklogBacklog

ImproveImproveResourcesResources

ImproveImproveResourcesResources

IncreaseIncreaseFundingFundingIncreaseIncreaseFundingFunding


Government Action Required toGovernment Action Required toProvide a Pathway for BiogenericsProvide a Pathway for Biogenerics

418418418418 Biologic products in the pipelineBiologic products in the pipeline

$10B$10B$10B$10B Off-patent products by 2010Off-patent products by 201022

$12B$12B$12B$12B Specialty drug spend with expired patentsSpecialty drug spend with expired patents11

Sources: 1. Associated Press. “FDA cites challenges of generic biotech.” March 26, 2007 2. Coalition for a Competitive Marketplace


The Cost of Non-Compliance and The Cost of Non-Compliance and Medication Errors is HighMedication Errors is High

in total U.S. annual direct medical and indirect in total U.S. annual direct medical and indirect productivity costs from non-complianceproductivity costs from non-compliance11$177 B$177 B$177 B$177 B

worldwide compliance by patients withworldwide compliance by patients withchronic illnesschronic illness2250%50%50%50%

U.S. deaths each year due to medication U.S. deaths each year due to medication errorserrors3,43,47,0007,0007,0007,000

of U.S. hospitalizations are caused by adverse of U.S. hospitalizations are caused by adverse drug eventsdrug events553-7%3-7%3-7%3-7%

Sources: 1. Institute for Health and Productivity Management (IHPM) 4. To Err is Human, Wash. DC, 19992. World Health Organization 5. Lundkvist. Fundamental and clinical Pharmacology 20043. Alliance for Aging Research. Wash. DC, 1998


Costly Knowledge Gaps/Delays Costly Knowledge Gaps/Delays In Medical PracticeIn Medical Practice

Clinical ProcedureClinical Procedure Landmark TrialLandmark Trial Current Rate of UseCurrent Rate of Use

Flu vaccineFlu vaccine 19681968 55.0%55.0%

Thrombolytic therapyThrombolytic therapy 19711971 20.0%20.0%

Pneumococcal therapyPneumococcal therapy 19771977 35.6%35.6%

Diabetic eye examDiabetic eye exam 19811981 38.4%38.4%

Beta blockers after MIBeta blockers after MI 19821982 61.9%61.9%

MammographyMammography 19821982 70.4%70.4%

Cholesterol screeningCholesterol screening 19841984 65.0%65.0%

Fecal occult blood testFecal occult blood test 19861986 17.0%17.0%

Diabetes foot careDiabetes foot care 19931993 20.0%20.0%

Adoption in Clinical Practice Lags Behind Adoption in Clinical Practice Lags Behind Evidence by Many YearsEvidence by Many Years

Adoption in Clinical Practice Lags Behind Adoption in Clinical Practice Lags Behind Evidence by Many YearsEvidence by Many Years

Source: Balas EA, Boren SA: Managing clinical knowledge for health care Improvement. Yearbook of Medical Informatics 2000, pp65-70


Wellness is Not a Top Priority TodayWellness is Not a Top Priority Today

9.1% of total U.S. medical expenditures are attributed to being 9.1% of total U.S. medical expenditures are attributed to being overweight and obesityoverweight and obesity11

$75.5 billion in healthcare costs directly related to smoking$75.5 billion in healthcare costs directly related to smoking11

~ Healthcare costs for smokers are 40% higher than costs for non-Healthcare costs for smokers are 40% higher than costs for non-smokerssmokers

Annual healthcare expenditures for drug and alcohol related Annual healthcare expenditures for drug and alcohol related problems amount to $38.3 billionproblems amount to $38.3 billion2,32,3

$314 Billion of Healthcare Costs $314 Billion of Healthcare Costs Are a Result of Unhealthy LifestylesAre a Result of Unhealthy Lifestyles

$314 Billion of Healthcare Costs $314 Billion of Healthcare Costs Are a Result of Unhealthy LifestylesAre a Result of Unhealthy Lifestyles

““The major cause of chronic disease is behavior.”The major cause of chronic disease is behavior.”

– – Dr. James Prochaska, Director of Cancer Prevention Research Center, who Dr. James Prochaska, Director of Cancer Prevention Research Center, who estimates changing behaviors can reduce healthcare costs by as much as 60%estimates changing behaviors can reduce healthcare costs by as much as 60%

““The major cause of chronic disease is behavior.”The major cause of chronic disease is behavior.”

– – Dr. James Prochaska, Director of Cancer Prevention Research Center, who Dr. James Prochaska, Director of Cancer Prevention Research Center, who estimates changing behaviors can reduce healthcare costs by as much as 60%estimates changing behaviors can reduce healthcare costs by as much as 60%

Sources: 1. Centers for Disease Control and Prevention (CDC)2. Office of National Drug Control Policy3. Association of American Physicians, 1999


The Estimated Savings from The Estimated Savings from Foundational ReformFoundational Reform

$1.033 Trillion$1.033 Trillion$1.033 Trillion$1.033 Trillion

Wiring HealthcareWiring Healthcare11 $162 Billion$162 Billion

Medicare:Medicare: Last Year of LifeLast Year of Life2,32,3 $130 Billion$130 Billion

Eliminating Medical Liability and Defensive MedicineEliminating Medical Liability and Defensive Medicine4,54,5 $200 Billion$200 Billion

Generics OpportunityGenerics Opportunity66 $35 Billion$35 Billion

Creating a Biogeneric PathwayCreating a Biogeneric Pathway7,87,8 $15 Billion*$15 Billion*

Increasing Compliance EffortsIncreasing Compliance Efforts99 $177 Billion$177 Billion

Uninsured Uninsured $0$0

Promoting Healthy LifestylesPromoting Healthy Lifestyles10,11,1210,11,12

(Overweight & Obesity, Smoking, Drugs & Alcohol)(Overweight & Obesity, Smoking, Drugs & Alcohol) $314 Billion$314 Billion

Sources: 1. RAND Corporation study, 2005; 2. CMS, Office of the Actuary; 3. Department of Health and Human Services; 4. CMS, National Health Accounts, 2005; 5. Midwest Business Group on Health, April 2003; 6. Medco data; 7. Associated Press. “FDA cites challenges of generic biotech.” March 26, 2007; 8. Coalition for a Competitive Marketplace; 9. Institute for Health and Productivity Management; 10. Centers for Disease Control and Prevention (CDC); 11. Office of the National Drug Policy; 12. Association of American Physicians

*Medco estimate of savings from products with already expired patents and approaching off-patent products


““The biggest problem with the American healthcare system isThe biggest problem with the American healthcare system isthat it costs too much. …Businesses and families pay more and that it costs too much. …Businesses and families pay more and more every year to get what they consider inadequate attentionmore every year to get what they consider inadequate attentionor poor care.”or poor care.”

““Senator Clinton believes the only way to achieve universal Senator Clinton believes the only way to achieve universal healthcare is to force everybody to purchase it. And my belief is, healthcare is to force everybody to purchase it. And my belief is, the reason people don’t have it is not because they don’t want it, the reason people don’t have it is not because they don’t want it, but because they can’t afford it. And so I emphasize reducing but because they can’t afford it. And so I emphasize reducing costs.”costs.”

““While I will require all Americans to have healthcare, I will beWhile I will require all Americans to have healthcare, I will becalling on employers to do their part as well. …The government calling on employers to do their part as well. …The government will provide tax credits to insure that every single American can will provide tax credits to insure that every single American can afford health insurance.”afford health insurance.”

U.S. Government Leadership Void U.S. Government Leadership Void Keeps an Inefficient System HealthyKeeps an Inefficient System Healthy



The Urgent ImperativeThe Urgent Imperative



~ Efforts toward wiring healthcareEfforts toward wiring healthcare

~ An efficient provider of genericsAn efficient provider of generics

~ Advancing new scienceAdvancing new science

~ Focus on complianceFocus on compliance


Medco Health Solutions: Medco Health Solutions: Leading Pharmacy Benefit Manager Leading Pharmacy Benefit Manager

Fortune 100 Company with 2007 Revenues of $44.5 BillionFortune 100 Company with 2007 Revenues of $44.5 BillionFortune 100 Company with 2007 Revenues of $44.5 BillionFortune 100 Company with 2007 Revenues of $44.5 Billion

Industry Leading Drug Trend ManagementIndustry Leading Drug Trend Management

Leader in Clinical InnovationLeader in Clinical Innovation

Most Sophisticated Specialty PharmacyMost Sophisticated Specialty Pharmacy

Largest Mail-Order PharmacyLargest Mail-Order Pharmacy

Largest Independent PBM Drug Spend Under ManagementLargest Independent PBM Drug Spend Under Management


* Excludes first-quarter 2006 legal settlements charge; see reconciliation to GAAP financial tables in the appendix.

Strong EBITDA Per Adjusted Script TrendStrong EBITDA Per Adjusted Script Trend

CAGR 15.5%CAGR 15.5%

$1.50

$1.83 $1.89

$2.24

$2.67

2003 2004 2005 2006* 2007


2003 2004 2005 2006* 2007

CAGR 19.9%CAGR 19.9%

Strong Earnings Per Share GrowthStrong Earnings Per Share Growth

$0.79$0.88

$1.03

$1.63

$1.21

* Excludes first-quarter 2006 legal settlements charge; see reconciliation to GAAP financial tables in the appendix.

35%35%


Record Low Drug TrendRecord Low Drug Trend

6.9%

11.6%

13.8%14.9%15.9%

11.4%

20.6% 20.0%

16.9%

14.4%

12.9%

10.2%8.5%

5.4%

2.8% 2.0%

0%

5%

10%

15%

20%

25%

2002 2003 2004 2005 2006 2007

PBMs Health Insurers Medco

Sources: Buck Consultants National Healthcare Trend Survey, 14th Edition

Tre

nd


2008 2009 2010 2011 2012 2013 2014 2015

Strong Pipeline of Off-Patent Branded Strong Pipeline of Off-Patent Branded Drugs Provides Some Relief Drugs Provides Some Relief

RisperdalRisperdal®®

LamictalLamictal®®

FosamaxFosamax®®

ImitrexImitrex®®

PrevacidPrevacid®®

TopamaxTopamax®®

ValtrexValtrex®®

AciphexAciphex®®

FlomaxFlomax®®

LipitorLipitor®®

Effexor XREffexor XR®®

ActosActos®®

ProtonixProtonix®(2)®(2)

ZyprexaZyprexa®®

LevaquinLevaquin®®

AriceptAricept®®

PlavixPlavix®®

SingulairSingulair®®

SeroquelSeroquel®®

LexaproLexapro®®

DiovanDiovan®®

CrestorCrestor®®

AvandiaAvandia®®



(1) Limited supply of Protonix is not included in 2008 spend(2) 2011 reflects the off patent date for Protonix; limited product released in 2008Source: U.S. Drug spend estimates are based on IMS Health data for 2007. Brand drug expirations based on expected patent expiration dates current as of February 2008. Changes may occur due to litigation, patent

challenges, etc.

$9.7(1)$10.5

$3.6

$20.9$21.7

$6.1

$15.6

$3.8CymbaltaCymbalta®®

CelebrexCelebrex®®

NexiumNexium®®

VytorinVytorin®®

ZetiaZetia®®

LyricaLyrica®®

NasonexNasonex®®

AbilifyAbilify®®



Source: U.S. Drug spend estimates are based on IMS Health data for 2007 and 2006, compounded amounts prorated for mid-term expirations. Brand drug expirations based on expected patent expiration dates current as of February 2008. Changes may occur due to litigation,patent challenges, etc.

2007 2008 2009 2010 2011 2012 2013 2014 2015

$6.5$6.5

$16.7$16.7

$25.7$25.7

$35.1$35.1

$46.9$46.9

$69.1$69.1

$80.1$80.1

$95.0$95.0

$103.1$103.1


2003 2004 2005 2006 2007 2008E

CAGR 6.1%CAGR 6.1%

Medco Mail-Order Volume GrowthMedco Mail-Order Volume Growth

~105

95

10.5%10.5%

89878878

Vol

ume

in m

illio

nsV

olum

e in

mill

ions


Video Clip of Technology Innovations Video Clip of Technology Innovations with Our Back-End Pharmacy with Our Back-End Pharmacy


Specialty Pharmacy Spend on the Rise Specialty Pharmacy Spend on the Rise

Source: HealthStrategiesGroupSource: HealthStrategiesGroup*Source: PhRMA *Source: PhRMA 2005 Survey: Medicines in Development2005 Survey: Medicines in Development, Oct. 2006, Oct. 2006Some medicines are listed in more than one category.Some medicines are listed in more than one category.

18

4

4

6

7

910

13

14

15

17

22

22

44

50

210Cancer/Related ConditionsInfectious Diseases

Autoimmune DisordersAIDS/HIV

Cardiovascular DiseaseNeurologic Disorders

Diabetes/Related Digestive Disorders

Respiratory DisordersBlood Disorders

Genetic DisordersSkin DisordersEye Conditions

Growth DisordersTransplantation

Other

$62

$111

2006 2010E

CAGR 16%CAGR 16%

Specialty Pharmacy Drug SpendSpecialty Pharmacy Drug Spend($ in billions)($ in billions)

Specialty Pharmacy Drug SpendSpecialty Pharmacy Drug Spend($ in billions)($ in billions)

More Than 400 DrugsMore Than 400 Drugsin Development Pipeline*in Development Pipeline*

More Than 400 DrugsMore Than 400 Drugsin Development Pipeline*in Development Pipeline*


Medco: Forging The Future of PharmacyMedco: Forging The Future of Pharmacy

Medco Therapeutic Resource Centers™ (TRCs)Medco Therapeutic Resource Centers™ (TRCs)

~ Full-service platform with specialized pharmacists to deliver superior clinical and Full-service platform with specialized pharmacists to deliver superior clinical and financial outcomes for clients and membersfinancial outcomes for clients and members

~ Focuses on chronic and complex conditions accounting for over 96 percent of Focuses on chronic and complex conditions accounting for over 96 percent of prescription and 75 percent of healthcare spending prescription and 75 percent of healthcare spending

~ Complements the retail acute-care model, which addresses less than 4 percent of Complements the retail acute-care model, which addresses less than 4 percent of overall drug spendingoverall drug spending

Pharmacogenomics (“Personalized Medicine”)Pharmacogenomics (“Personalized Medicine”)

~ Leveraging the TRC platform, Medco launched two pilots using genetic tests to Leveraging the TRC platform, Medco launched two pilots using genetic tests to personalize with precision drug selection/delivery/dosingpersonalize with precision drug selection/delivery/dosing• Collaboration with The Mayo Clinic for CoumadinCollaboration with The Mayo Clinic for Coumadin• Collaboration with LabCorp for TamoxifenCollaboration with LabCorp for Tamoxifen

~ New Indiana automated dispensing facility includes a world-class research center for New Indiana automated dispensing facility includes a world-class research center for personalized medicinepersonalized medicine


1%3%

80%

16%

% Rx Cost

96% Rx Cost

34%

17%

46%

~3%

% Members

50% of Members with Chronic & Complex 50% of Members with Chronic & Complex Conditions Account for 96% of Rx CostsConditions Account for 96% of Rx Costs

~ 50% Members

WellWell

Acute Acute

ChronicChronic

ComplexComplexComplexComplex


Medco Therapeutic Resource CentersMedco Therapeutic Resource Centers™™

Hematology/Hematology/OncologyOncology

CardiovascularCardiovascularHypertensionHypertension

ColumbusColumbus

DiabetesDiabetesHigh RiskHigh Risk

FairfieldFairfield

Neurology/Neurology/PsychiatryPsychiatry

DiabetesDiabetes

GastrointestinalGastrointestinal

TexasTexas

PulmonaryPulmonary

SpokaneSpokaneCardiovascularCardiovascularHigh CholesterolHigh Cholesterol

TampaTampaCardiovascularCardiovascular

High RiskHigh Risk

N. VersaillesN. Versailles

Specially Trained PharmacistsSpecially Trained Pharmacists

PatientsPatientsPhysiciansPhysiciansHealth Care Health Care

Value Value MapMap

Best Practice RulesBest Practice RulesBest Practice RulesBest Practice RulesAppropriate CoverageAppropriate CoverageFormulary ManagementFormulary ManagementRationalMedRationalMed®®

Appropriate UtilizationAppropriate UtilizationAppropriate CoverageAppropriate Coverage

Disease Management

Models & AnalyticsModels & AnalyticsModels & AnalyticsModels & AnalyticsClinical Appropriateness – DrugClinical Appropriateness – DrugEpisode GroupersEpisode GroupersPatient Stratification AlgorithmsPatient Stratification Algorithms

Patient & Patient & Physician ProfilingPhysician Profiling

Financial OpportunitiesFinancial Opportunities

Integrated DataIntegrated DataIntegrated DataIntegrated DataPatient eligibility | Patient self-reported data | Pharmacy claims | Medical claims | Lab resultsPatient eligibility | Patient self-reported data | Pharmacy claims | Medical claims | Lab results

Case Management

AccredoAccredo

Autoimmune diseasesAutoimmune diseases~ Primary Primary

Immunodeficiency Immunodeficiency SyndromeSyndrome

~ Autoimmune Autoimmune disordersdisorders

Nursing servicesNursing services

31 Branches31 Branches(ATX/HHS)(ATX/HHS)

Pulmonary hypertensionPulmonary hypertensionAlpha 1 deficiencyAlpha 1 deficiencyAutoimmune diseasesAutoimmune diseases

~ Primary Primary Immunodeficiency Immunodeficiency SyndromeSyndrome

Autoimmune disordersAutoimmune disorders

Warrendale, PAWarrendale, PA(Accredo Therapeutics)(Accredo Therapeutics)

Enzyme deficienciesEnzyme deficienciesMultiple SclerosisMultiple SclerosisRSVRSVGrowth Hormone Growth Hormone

defectsdefects

Memphis, TNMemphis, TN(Nova Factor)(Nova Factor)

Rheumatoid ArthritisRheumatoid ArthritisOsteoarthritisOsteoarthritisPsoriasisPsoriasis

Irving, TXIrving, TXHepatitis CHepatitis CMultiple SclerosisMultiple SclerosisOncologyOncologyInfertilityInfertilityAnemia/NeutropeniaAnemia/Neutropenia

Columbus, OHColumbus, OH

HemophiliaHemophilia

Nashville, TNNashville, TN(Hemophilia Health Services)(Hemophilia Health Services)


Quality Care is Delivered Through a Quality Care is Delivered Through a Unique Specialist Pharmacy ModelUnique Specialist Pharmacy Model

Cardio-Cardio-vascularvascularHigh RiskHigh Risk

HIV

Cardio-Cardio-vascularvascular

HypertensionHypertension


High CholesterolHigh CholesterolGastro-

intestinal

Pulmonary Neurology& Psychiatry

OncologyOncology& Immunology& Immunology

DiabetesDiabetes

Rare &Specialty

Medco Therapeutic Resource Centers™



HIV





intestinal



Rare &Specialty

DiabetesDiabetes


Liberty (PolyMedica)Liberty (PolyMedica)~ With Medco members, creates the largest diabetes With Medco members, creates the largest diabetes

center serving nearly 4 million livescenter serving nearly 4 million lives~ Opportunity to cross-sell pharmaceuticals and Opportunity to cross-sell pharmaceuticals and

suppliessupplies~ Ability to leverage well-known Liberty consumer brandAbility to leverage well-known Liberty consumer brand~ Lab CLIA certified in 49 statesLab CLIA certified in 49 states~ Opens Medicare Part B marketOpens Medicare Part B market

Optimal HealthOptimal Health

Specialist Pharmacists for peopleSpecialist Pharmacists for peoplewith diabeteswith diabetes

Specialized PracticeSpecialized Practiceof Pharmacyof Pharmacy

End-to-End End-to-End ServiceService

PersonalizedPersonalizedMedicineMedicine

CYP2C9 – oral hypoglycemicsCYP2C9 – oral hypoglycemics

Diabetes is a Leading Chronic Disease; Diabetes is a Leading Chronic Disease; Cases Growing at a Rate of 15% a YearCases Growing at a Rate of 15% a Year


Janet Woodcock InterviewJanet Woodcock Interview



HIV





intestinal



Rare &Specialty

DiabetesDiabetes

Mayo ClinicMayo Clinic~ Collaborative research study for Warfarin (CoumadinCollaborative research study for Warfarin (Coumadin®®) to ) to

demonstrate that genetic testing improves dosing accuracy, demonstrate that genetic testing improves dosing accuracy, thereby reducing hospitalization rates thereby reducing hospitalization rates

~ Genetic testing for Warfarin alone has been estimated to save Genetic testing for Warfarin alone has been estimated to save $1.15 billion per year in total healthcare costs$1.15 billion per year in total healthcare costs

Specialist Pharmacists for people with high risk Specialist Pharmacists for people with high risk cardiovascular conditions, using anticoagulants cardiovascular conditions, using anticoagulants and anti-platelet drugsand anti-platelet drugs




Anticoagulation CenterAnticoagulation Centerfor Cardiovascular High Risk Membersfor Cardiovascular High Risk Members





HIV





intestinal


Rare &Specialty

DiabetesDiabetes

LabCorpLabCorp~ A collaboration to study the drug Tamoxifen A collaboration to study the drug Tamoxifen

which was developed to reduce the recurrence which was developed to reduce the recurrence of breast cancerof breast cancer

~ It may not be effective for 10% of the women who are poor It may not be effective for 10% of the women who are poor metabolizers or non-metabolizersmetabolizers or non-metabolizers

~ A genetic test is available to determine if another therapy A genetic test is available to determine if another therapy would be better, yet very few doctors prescribe this life saving would be better, yet very few doctors prescribe this life saving testtest

Patient-centric platform ensures adherence to Patient-centric platform ensures adherence to evidence-based guidelines for erythropoietinsevidence-based guidelines for erythropoietins(i.e., Aranesp(i.e., Aranesp®®/Procrit/Procrit®®))

Specialist Pharmacists for patients with cancer Specialist Pharmacists for patients with cancer and disorders involving immune systemand disorders involving immune system




Oncology & Immunology CenterOncology & Immunology Center



Medco’s New Business & RetentionMedco’s New Business & Retention

$4.9B$4.9B$4.9B$4.9B 2008 annualized new2008 annualized newnamed drug spend named drug spend

$4.0B$4.0B$4.0B$4.0B 2008 net new business

98%98%98%98% 2008 client retention rate

*As of fourth-quarter 2007 earnings call


Innovation

1. Apple2. Nike3. Medco Health Solutions, Inc.

Long-Term Investment

1. Berkshire-Hathaway2. Medco Health Solutions, Inc.

People Management

1. Medco Health Solutions, Inc.

Medco Tops Fortune’s ListMedco Tops Fortune’s List

Most Admired in Health Care: Pharmacy and Other Services

1. Medco Health Solutions, Inc.


®


Reconciliation TablesReconciliation Tables

1) Includes PolyMedica’s and Critical Care System Inc.’s operating results commencing October 31, 2007 and November 14, 2007, the dates of acquisition, respectively2) 53-week fiscal year. All other fiscal years are comprised of 52 weeks. 3) Includes Accredo's operating results commencing August 18, 2005, the date of acquisition and for the subsequent periods. 4) 2003 excludes a one-time gain of $11 million from the sale of a minority equity investment in a nonpublic company. 5) 2006 includes a $20.0 million nonrecurring tax benefit reflected for the full year. 6) 2005 includes a $25.7 million non-recurring tax benefit reflected for the full year. 7) 2004 and 2003 include accelerated depreciation of $24.5 million and $13.3 million, respectively, associated with facility closures that took place in 2004. 8) This represents the pre-tax legal settlements charge of $162.6 million recorded in the first quarter of 2006. This charge reflected an agreement with the U.S. Attorney's Office for the Eastern District of Pennsylvania to settle three previously disclosed federal legal matters. 9) Adjusted prescription volume equals the majority of mail-order prescriptions multiplied by 3, plus retail prescriptions. These mail-order prescriptions are multiplied by 3 to adjust for the fact that they include approximately 3 times the amount of product days supplied compared

with retail prescriptions.

Medco Health Solutions, Inc.Medco Health Solutions, Inc.Selected Information (Unaudited)Selected Information (Unaudited)

(In millions, except for EBITDA per adjusted prescription data)(In millions, except for EBITDA per adjusted prescription data)


(In millions, except for EBITDA per adjusted prescription data)(In millions, except for EBITDA per adjusted prescription data)

Full Years Ended Full Years Ended

EBITDA Reconciliation:EBITDA Reconciliation:December 29, December 29,

2007200711December 30, December 30,

2006 2006 December 31,December 31,

200520052, 32, 3December 25,December 25,

20042004December 27,December 27,

20032003

Net incomeNet income $912.0$912.0 $ 630.2 $ 630.2 $ 602.0 $ 602.0 $ 481.6 $ 481.6 $425.8 $425.8

Add:Add:

Interest and other (income) expense, netInterest and other (income) expense, net 99.899.8 65.965.9 39.9 39.9 59.9 59.9 23.723.744

Provision for income taxesProvision for income taxes 591.3591.3 381.6381.655 350.9350.96 6 324.7 324.7 302.9 302.9

Depreciation expenseDepreciation expense 168.9168.9 173.6 173.6 165.0 165.0 197.6197.677 189.0189.077

Amortization expenseAmortization expense 228.1 228.1 218.5 218.5 192.5 192.5 179.9 179.9 94.3 94.3

EBITDAEBITDA $2,000.1$2,000.1 $1,469.8 $1,469.8 $1,350.3 $1,350.3 $ 1,243.7 $ 1,243.7 $1,035.7 $1,035.7

Legal settlements charge Legal settlements charge 88 - - 162.6 162.6 - - - - - -

EBITDA, excluding the legal settlements charge $2,000.1 $1,632.4 $1,350.3 $ 1,243.7 $ 1,035.7

Adjusted prescriptions Adjusted prescriptions 99 748.3748.3 729.9729.9 714.1714.1 678.3678.3 688.2688.2

EBITDA per adjusted prescription $2.67 $2.01 $1.89 $1.83 $1.50

EBITDA per adjusted prescription, excluding the legal settlements charge $2.67 $2.24 $1.89 $1.83 $1.50


Reconciliation TablesReconciliation Tables



Full Years EndedFull Years Ended

Earnings Per Share ReconciliationEarnings Per Share ReconciliationDecember 29,December 29,

20072007December 30, December 30,

20062006

GAAP diluted earnings per shareGAAP diluted earnings per share $1.63$1.63 $1.04$1.04

Adjustment for the 2006 legal settlements chargeAdjustment for the 2006 legal settlements charge11 -- $0.17$0.17

Diluted earnings per share, excluding the legal charge $1.63 $1.21

1) This represents the pre-tax legal settlements charge of $162.6 million recorded in the first quarter of 2006. This charge reflected an agreement with the U.S. Attorney's Office for the Eastern District of Pennsylvania to settle three previously disclosed federal legal matters.

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