UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 3, 20041, 2005

Commission file number 001-01011

CVS CORPORATION

(Exact name of Registrant as specified in its charter)

(401) 765-1500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Securities registered pursuant to Section 12(g) of the Exchange Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).    Yes  x    No  ¨

The aggregate market value of the registrant’s common stock held by non-affiliates was approximately $10,818,124,000$16,483,216,000 as of June 28, 2003,July 3, 2004, based on the closing price of the common stock on the New York Stock Exchange. For purposes of this calculation, only executive officers and directors are deemed to be the affiliates of the registrant.

As of March 8, 2004,11, 2005, the registrant had 396,398,000404,536,000 shares of common stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Filings made by companies with the Securities and Exchange Commission sometimes “incorporate information by reference.” This means that the company is referring you to information that was previously filed or is to be filed with the SEC, and this information is considered to be part of the filing you are reading. The following materials are incorporated by reference into this Form 10-K:

TABLE OF CONTENTS

PART I

Item 1. Business

OVERVIEW

CVS Corporation is a leader in the retail drugstore industry in the United States with net sales of $26.6$30.6 billion in 2003, making us the second largest retail drugstore chain based on sales.2004. As of January 3, 2004,1, 2005, we operated 4,1795,375 retail and specialty pharmacy stores in 3236 states and the District of Columbia.Columbia, more pharmacy stores than any other retailer. We currently operate in 6874 of the top 100 U.S. drugstore markets and hold the number one or number two market share in 3251 of these markets. Overall, we hold the number one or number two market share in 62%73% of the markets in which weour retail pharmacies operate. During fiscal 2003,2004, we filled over 334366 million prescriptions, or approximately 10%14% of the U.S. retail pharmacy market. Our current operations are grouped into two businesses: Retail Pharmacy and Pharmacy Benefit Management (“PBM”).

Retail Pharmacy ~ As of January 3, 2004,1, 2005, the Retail Pharmacy business included 4,1325,328 retail drugstores, of which 4,0165,261 operated a pharmacy, and the online retail website, CVS.com.CVS.com®. The retail drugstores are located in 2734 states and the District of Columbia operating under the CVS^®CVS® or CVS/pharmacy^®pharmacy® name. CVS/pharmacypharmacy® stores sell prescription drugs and a wide assortment of general merchandise, including over-the-counter drugs, greeting cards,beauty products and cosmetics, film and photo finishing services, beauty products and cosmetics, seasonal merchandise, greeting cards and convenience foods, which we refer to as “front store” products. Existing stores generally range in size from approximately 8,000 to 12,00013,000 square feet, although most new stores are based on either anrange in size from approximately, 10,000 or 12,000to 13,000 square foot prototype buildingfeet and typically include a drive-thru pharmacy. The Retail Pharmacy is our only reportable segment as it represented approximately 95%94% of consolidated net sales and 91% of consolidated operating profit in 2003.2004.

Pharmacy Benefit Management ~ The PBM business provides a full range of prescription benefit management services to managed care and other organizations. These services include mail order pharmacy services, specialty pharmacy services, plan design and administration, formulary management mail order pharmacy services,and claims processing and generic substitution.processing. The PBM business, which, as of January 3, 2004, managed1, 2005, covered approximately 1530 million lives, operates under the PharmaCare Management Services name, and ranks as one of the top tenfourth largest, full service PBMsPBM in the nation. The PBMOur PBM’s specialty pharmacy business also includes our Specialty Pharmacy operations, which representrepresents the largest integrated retail and mail provider of specialty pharmacy services in the nation. SpecialtyOur specialty pharmacy focuses on supporting individuals that require complex and expensive drug therapies to treat conditions such as organ transplants, HIV/AIDS and genetic conditions such as infertility, multiple sclerosis and certain cancers. As of January 3, 2004,1, 2005, we operated 47 specialty pharmacies, operating under the PharmaCare Pharmacy® name, located in 19 states and the District of Columbia, and twothree mail order facilities. Specialty pharmacy stores which operate under the CVS ProCare^® name, average 2,000 square feet in size and sell prescription drugs and a limited assortment of front store items such as alternative medications, homeopathic remedies and vitamins.

On July 31, 2004 we acquired certain assets and assumed certain liabilities from J.C. Penney Company, Inc. and certain of its subsidiaries, including from Eckerd Corporation (“Eckerd”). The assets acquired and the liabilities assumed included 1,268 Eckerd retail drugstores and Eckerd Health Services, which includes Eckerd’s mail order and pharmacy benefit management businesses (collectively, the “Acquired Businesses”). We believe that the acquisition of the Acquired Businesses is consistent with our long-term strategy of expanding our retail drugstore business in high-growth markets and increasing the size and product offerings of our pharmacy benefits management business.

CVS Corporation is a Delaware corporation. Our Store Support Center (corporate office) is located at One CVS Drive, Woonsocket, Rhode Island 02895, telephone (401) 765-1500. Our common stock is listed on the New York Stock Exchange under the trading symbol “CVS”. General information about CVS is available through our website athttp://www.cvs.com. Our financial press releases and filings with the Securities and Exchange Commission are available free of charge on the investor relations portion of our website athttp://investor.cvs.com.

RETAIL PHARMACY BUSINESS

Operating Strategy ~Our mission is to be the easiest pharmacy retailer for customers to use. We believe ease of use means convenience for the time-starved customer. As such, our operating strategy is to provide a broad assortment of quality merchandise at competitive prices using a retail format that emphasizes service, innovation and convenience (easy-to-access, clean, well-lit and well stocked). One of the keys to our strategy is technology, which allows us to focus on constantly improving service and exploring ways to provide more personalized product offerings and services. We believe that continuing to be the first to market with new and unique products and services, using innovative marketing and adjusting our mix of merchandise to match customer needs and preferences is very important to our ability to maintain customer satisfaction.

Products ~A typical CVS/pharmacy store sells prescription drugs and a wide assortment of high-quality, nationally advertised brand name and private label merchandise. General merchandiseFront store categories include over-the-counter drugs, greeting cards,beauty products and cosmetics, film and photo finishing services, beauty products and cosmetics, seasonal merchandise, greeting cards and convenience foods, which we refer to as “front store” products.foods. We purchase our merchandise from numerous manufacturers and distributors. We believe that competitive sources are readily available for substantially all of the products we carry and the loss of any one supplier would not have a material effect on the business. Consolidated net sales by major product group are as follows:

Pharmacy sales have been growing, and we believe will continue to grow, at a faster pace than front store sales. Pharmacy sales represented 68.8%70.0% of total sales in 2003,2004, compared to 68.8% in 2003 and 67.6% in 2002 and 66.1% in 2001.2002. We believe that our pharmacy operations will continue to represent a critical part of our business due to our ability to attract and retain managed care customers, favorable industry trends (an aging American population consuming a greater number of prescription drugs, pharmaceuticals being used more often as the first line of defense for managing illness, and the introduction and direct to consumer marketingproliferation of new drugs)pharmaceutical products, and a new federally funded prescription drug benefit to begin in 2006, promulgated as part of the Medicare Prescription Drug, Improvement and Modernization Act of 2003, which should increase utilization) and our on-going program of purchasing customer lists from independent pharmacies. We believe our pharmacy success results from our investment in people and technology. Given the nature of prescriptions, people want their prescriptions filled quicklyaccurately and accuratelyready when promised, by professional pharmacists using the latest tools and technology. During 2003, we introduced our Pharmacy Service Initiative (“PSI”). This initiative ensuresis designed to ensure that customers who bring in prescriptions, are greeted by a pharmacy technician who verifies insurance, medication availability and refill authorizations at the point of drop-off, resolving potential problems that could delay a prescription being filled. Further evidencing thisour belief in the importance of pharmacy service is our continual investment in technology such as our Excellence in Pharmacy Innovation and Care (“EPIC”) system, our touch-tone telephone reorder system, Rapid Refill^™TM and our online business, CVS.com.

Front store sales should continue to benefitbenefited from our strategy to be the first to market with new and unique products and services, using innovative marketing and adjusting our mix of merchandise to match customer needs and preferences. We were the first retail pharmacy to market with a digital photo solution throughout our chain, including being the first to offer printing from digital camera phones, the ability to upload digital photos to CVS.com and have them available for in store pickup the following day, and the first to offer a one-time-use digital camera. A key component of thisour strategy is our ExtraCare^®ExtraCare® card program, which is helping us to continue to build our loyal customer base. With 44over 50 million members as of January 3, 2004,1, 2005, ExtraCare is one of the largest and most successful retail loyalty programs in the United States. ExtraCare allows us to balance our marketing efforts so we can reward our best customers by providing them automatic sale prices, customized coupons, ExtraBucks^™TM rewards and more.other benefits. Another component of our front store strategy is our unique product offerings, which include a full range of high-quality private label products that are only available through CVS. We currently carry over 1,5001,700 CVS brand products, which accounted for approximately 11%12% of our front store sales during 2003.2004. In addition, CVS offers a unique front store focus on cosmetics, health and beauty by being a U.S. distributor of several European cosmetics and skin care lines, including Lumene^®Lumene®, Avene^®Avene® and Vichy^®Vichy®. In 2004, we added the exclusive Christophe® hair care line.

Store Development ~The addition of new stores has played, and will continue to play, a major role in our continued growth and success. Our store development program focuses on three areas: entering new markets, (i.e., market in which we did not have retail stores prior to 2000), adding stores within existing markets and relocating stores to more convenient, freestanding sites. During 2003,2004, we opened 150129 new stores, acquired 1,268 stores, relocated 12596 stores and closed 58 stores. Our new store development during 2003 included 84201 stores in new markets, including: Chicago, Illinois; Las Vegas, Nevada; Phoenix, Arizona; and several markets in Florida and Texas.(including 160 stores of the Acquired Businesses). During the last five years, we opened more than 1,6001,400 new and relocated stores. Approximately half of our store base was opened or significantly remodeled within the last five years. During 2004,2005, we expect to open approximately 225-250275-300 new or relocated stores, including approximately 100 in new markets.stores. We believe that continuing to grow our store base and locating stores in desirable geographic markets are essential components to competing effectively in the current managed care environment. As a result, we believe that our store development program is an integral part of our ability to maintain our leadership position in the retail drugstore industry.

Information Systems ~We have invested significantly in information systems to enable us to deliver a high level of customer service while lowering costs and increasing operating efficiency. We were one of the first in the industry to introduce Drug Utilization Review technology that checks for harmful interactions between prescription drugs, over-the-counter products, vitamins and herbal remedies. We were also one of the first in the industry to install a chain wide automatic prescription refill system, CVS Rapid Refill^™, which enables customers to order prescription refills 24 hours a day using a touch-tone telephone. In 2001, we completed the rollout of EPIC, a multiyear project that reengineered the way our pharmacists communicate and fill prescriptions. The project included integrated workflow improvements, proprietary systems technology and automated pill-counting machines in high volume stores. We expect EPIC will continue to improve quality assurance and customer service, while reducing labor costs. In 2002, we completed the rollout of our Assisted Inventory Management (“AIM”) system for non-promotional front store merchandise and expanded the system to include pharmacy items in 2003. This system willis designed to more effectively link our stores and distribution centers with suppliers to speed the delivery of merchandise to our stores in a manner that both reduces out-of-stock positions and lowers our investment in inventory. In 2003, we began the rollout of VIPER, a transaction monitoring application designed to mitigate inventory losses attributable to process deficiencies or fraudulent behavior by providing visability to all transactions processed through our POS systems. Since this initial rollout, we have continued to implement modules for the pharmacy dispensing system and an application designed for our inventory replenishment systems. These latter applications are the first in the retail chain drug sector. All the store systems of the Acquired Businesses were converted to the CVS store systems as of January 1, 2005.

Customers ~During 2003, we served an average Managed care and third party plans account for 94% of 2.5 million customers per day.our 2004 pharmacy sales. Since our sales are to numerous customers,payors, including employers and managed care organizations, the loss of any one customer wouldpayor should not have a material effect on the business. NoAccordingly, no single customer accounts for 10% or more of our total sales.

We fill prescriptions for many state Medicaid plans. Total sales from all such plans were approximately 9% of consolidated net sales, or 13%12% of total pharmacy sales, during 2003.2004.

Seasonality ~The majority of our sales, particularly pharmacy sales, are generally not seasonal in nature. However, front store sales tend to be higher during the December holiday season. For additional information, we refer you to the Note “Quarterly Financial Information” on page 45 in our Annual Report to Stockholders for the fiscal year ended January 3, 2004.1, 2005.

Working Capital Practices ~ We fund the growth of our business through a combination of cash flow from operations, sale-leaseback transactions, commercial paper and long-term borrowings. For additional information on our working capital practices, we refer you to the caption “Liquidity & Capital Resources” on pages 20 and 21 in our Annual Report to Stockholders for the fiscal year ended January 3, 2004,1, 2005, which is incorporated by reference herein. Due to the nature of the retail drugstore business, the majority of our non-pharmacy sales are in cash, while third party insurance programs, which typically settle in less than 30 days, represented 93.2%94% of our pharmacy sales in 2003.2004. Our customer returns are not significant.

Associate Development ~As of January 3, 2004,1, 2005, we employed approximately 110,000 associates,145,500 associates; about 54,00067,000 of whomthem are part-time employees working less than 30 hours per week. To deliver the highest levels of service to our customers and partners, we devote considerable time and attention to our people and service standards. We emphasize attracting and training friendly and helpful associates to work in our stores and throughout our organization.

Intellectual Property and Licenses ~We have registered or applied for registration of a variety of trade names, service marks, trademarks and business licenses for use in our business. We regard our intellectual property as having significant value and as being an important factor in the marketing of the Company and our stores. We are not aware of any facts that could negatively impact our continuing use of any of our intellectual property. Our pharmacies and pharmacists must be licensed by the appropriate state boards of pharmacy. Our pharmacies and distribution centers are also registered with the Federal Drug Enforcement Administration. Because of these licensing and registration requirements, we must comply with various statutes, rules and regulations, a violation of which could result in a suspension or revocation of these licenses or registrations.

Competition ~The retail drugstore business is highly competitive. We believe that we compete principally on the basis of: (i) store location and convenience, (ii) customer service and satisfaction, (iii) product selection and variety and (iv) price. In each of the markets we serve, we compete with independent and other retail drugstore chains, supermarkets, convenience stores, pharmacy benefit managers and other mail order prescription providers, discount merchandisers, membership clubs and internet pharmacies.

Item 2. Properties

We lease most of our stores under long-term leases that vary as to rental amounts, expiration dates, renewal options and other rental provisions. For additional information on the amount of our rental obligations for our leases, we refer you to the Note “Leases” on page 3437 in our Annual Report to Stockholders for the fiscal year ended January 3, 2004.1, 2005.

As of January 3, 2004,1, 2005, we owned approximately 4%3% of our 4,1795,375 retail and specialty pharmacy drugstores. Net selling space for our retail and specialty pharmacy drugstores increased 3.5%33.3% to 43.5 million square feet as of January 1, 2005 compared to 32.6 million square feet as of January 3, 2004. During 2004 compared to 31.5 million square feetwe acquired 1,268 retail locations for which approximately 300 remodels have been completed as of December 28, 2002.January 1, 2005, and we plan to complete the remainder by July of 2005. Approximately half of our store base was opened or significantly remodeled within the last five years.

We own fourfive distribution centers located in Alabama, Rhode Island, South Carolina, and Tennessee and Texas and lease fiveeight additional facilities located in Florida, Indiana, New Jersey, Michigan, Pennsylvania, Texas and Virginia. The ninethirteen distribution centers total approximately 5,600,0008,175,000 square feet as of January 3, 2004. A new1, 2005. During 2004, we began operating our newest distribution center is under construction in Ennis, Texas, which utilizes state of the art storage and retrieval systems and is currently projected to open during 2004.the first of its kind in North America.

We own our corporate headquarters building located in Woonsocket, Rhode Island, which contains approximately 568,000 square feet. We lease approximately 110,000 square feet of additional office space in Rhode Island. We also lease approximately 130,00097,000 square feet in two mail order service facilities located in Fairfield, OhioFlorida and Pittsburgh, Pennsylvania. In addition, we own one mail order facility located in Pennsylvania, which contains approximately 80,000 square feet.

In connection with certain business dispositions completed between 1991 and 1997, we continue to guarantee lease obligations for approximately 706525 former stores. We are indemnified for these guarantee obligations by the respective purchasers. These guarantees generally remain in effect for the initial lease term and any extension thereof pursuant to a renewal option provided for in the lease prior to the time of the disposition. For additional information, we refer you to the Note “Commitments & Contingencies” on page 4142 in our Annual Report to Stockholders for the fiscal year ended January 3, 2004.1, 2005.

Management believes that its owned and leased facilities are suitable and adequate to meet the Company’s anticipated needs. At the end of the existing lease terms, management believes the leases can be renewed or replaced by alternate space.

Following is a breakdown by state of our 4,1795,375 retail and specialty pharmacy store locations as of January 3, 2004:1, 2005:

Item 3. Legal Proceedings

Beginning in August 2001, a total of nine actions were filed against the Company in the United States District Court for the District of Massachusetts asserting claims under the federal securities laws. The actions were subsequently consolidated under the captionIn re CVS Corporation Securities Litigation, No. 01-CV-11464 (D.Mass.(JLT) (D. Mass.) and(the “Securities Action”). On April 8, 2002, a consolidated and amended complaint was filed on April 8, 2002.filed. The consolidated amended complaint names as defendants the Company, its chief executive officer and its chief financial officer, and asserts claims for alleged securities fraud under sections 10(b) and 20 (a)20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder on behalf of a purported class of persons who purchased shares of the Company’s common stock between February 6, 2001 and October 30, 2001.

On June 7, 2002, all defendants moved to dismiss the consolidated amended complaint. This motion was denied by the court on December 18, 2002. The parties are currently engaged2002, and on January 24, 2003, defendants accordingly filed an answer to the consolidated amended complaint. Discovery on merits issues concluded in discovery.September 2004 and expert discovery concluded in December 2004. On January 14, 2005, all defendants filed a motion for summary judgment. On March 8, 2005 this motion was denied and a trial date has been set for May 9, 2005. The Company believes the consolidatedSecurities Action is entirely without merit and intends to continue to defend the action vigorously.

On October 29, 2004, a class action lawsuit asserting claims under the Employee Retirement Income Security Act was filed under the captionFescina v. CVS Corp., et. al., No. 04-CV-12309 (JLT) (D. Mass.) (the “ERISA Action”). The purported class includes persons who were participants in or beneficiaries of the CVS 401(k) plan between December 1, 2000 and October 30, 2001. The suit was filed in the United States District Court for the District of Massachusetts and designated as related to the Securities Action. The complaint names as defendants the Company, its chief executive officer, certain members of the CVS Board of Directors, and certain unnamed fiduciaries. The Company believes the ERISA Action is entirely without merit and intends to defend against itthe action vigorously.

On December 17, 2004, Richard Krantz filed a shareholder derivative suit under the captionKrantz v. Ryan, et. al., No. 04-CV-12650 (REK) (D. Mass), based upon essentially the same allegations that underlie the Securities Action and the ERISA Action. The suit was filed in the United States District Court for the District of Massachusetts. The complaint names as defendants the Company (as nominal defendant), its chief executive officer, its chief financial officer, and certain members of its Board of Directors. The Company believes this action is entirely without merit and intends to defend the action vigorously.

As has been reported in the press, the Rhode Island State Police, in coordination withAttorney General’s office, the Rhode Island Attorney General’s officeEthics Commission, and the United States Attorney’s Office for the District of Rhode Island are investigating the business relationships between certain current and former members of the Rhode Island elected officialsGeneral Assembly and various Rhode Island companies, including CVS. CVS will continue to cooperate fully cooperate with these investigations. In addition,

The United States Department of Justice and several state attorneys general are investigating whether any civil or criminal violations resulted from certain practices engaged in by CVS has retained former Rhode Island Attorney General Jeffrey B. Pineand others in the pharmacy industry with regard to conductdispensing one of two different dosage forms of a complete review ofgeneric drug under circumstances in which some state Medicaid programs at various times reimbursed one dosage form at a different rate from the other. The Company is in discussions with various governmental agencies involved and believes its conduct was lawful and related policies.