SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrant  x

Filed by a Party other than the Registrant  ¨

Check the appropriate box:

CVS CAREMARK CORPORATION

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing fee (Check the appropriate box):

CVS Caremark Corporation

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

MAY 10, 20129, 2013

9:00 A.M.

CVS Caremark Corporation

One CVS Drive

Woonsocket, Rhode Island 02895

To our stockholders:

We are pleased to invite you to attend our 20122013 annual meeting of stockholders to:

Stockholders of record at the close of business on March 13, 20122013 may vote at the meeting.

Your vote is important. Whether or not you plan to attend the meeting, please vote your shares. In addition to voting in person or by mail, stockholders of record have the option of voting by telephone or via the Internet. If your shares are held in the name of a bank, broker or other holder of record (i.e., in “street name”), please read your voting instructions to see which of these options are available to you. Even if you are attending the meeting in person, we encourage you to vote in advance by mail, phone or Internet.

By Order of the Board of Directors,

David W. Dorman

Chairman of the Board

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on May 10, 2012.9, 2013.

The proxy statement and annual report to security holders are available at

http://info.cvscaremark.com/investors.investors and at www.envisionreports.com/cvs.

PROXY STATEMENT TABLE OF CONTENTS

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INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

The Board of Directors of CVS Caremark Corporation (the “Company” or “CVS Caremark”) is soliciting your proxy to vote at our 20122013 annual meeting of stockholders (or at any adjournment of the meeting; the “Meeting” or “Annual Meeting”). This proxy statement summarizes the information you need to know to vote at the Meeting.

We began mailing this proxy statement and the enclosed proxy card on or about April 2, 20124, 2013 to all stockholders entitled to vote. The Company’s 20112012 Annual Report, which includes our financial statements, is being sent with this proxy statement.

Date, Time and Place of the Annual Meeting

Stockholders must present a form of personal photo identification in order to be admitted to the Annual Meeting. No cell phones, cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the Meeting.

Shares Entitled to Vote

Stockholders entitled to vote are those who owned CVS Caremark common stock at the close of business on the record date, March 13, 2012.2013. As of the record date, there were 1,306,580,8131,241,647,389 shares of common stock outstanding. Each share of CVS Caremark common stock that you own entitles you to one vote.

The Bank of New York Mellon presently holds shares of common stock as Trustee under the 401(k) Plan and the Employee Stock Ownership Plan of CVS Caremark Corporation and Affiliated Companies (the “ESOP”). Each participant in the ESOP instructs the Trustee of the ESOP how to vote his or her shares. As to shares with respect to which the Trustee receives no timely voting instructions, the Trustee, pursuant to the ESOP Trust Agreement, votes these shares in the same proportion as it votes all the shares as to which it has received timely voting instructions. The results of the voting will be held in strict confidence by the Trustee. Please note that the cut-off date by which participants of the ESOP must submit their vote to the tabulator in order to be counted is 5:00 P.M. Eastern Time on May 7, 2012.6, 2013.

Voting

Whether or not you plan to attend the Annual Meeting, we urge you to vote. You may vote by calling a toll-free telephone number, by using the Internet or by mailing your signed proxy card in the postage-paid envelope provided. If you vote by telephone or the Internet, you do NOT need to return your proxy card. Returning the proxy card by mail or voting by telephone or Internet will not affect your right to attend the Annual Meeting and change your vote, if desired.

If your shares are held in the name of a bank, broker or other holder of record (a “nominee”), you will receive instructions from the nominee that you must follow in order for your shares to be voted. Certain of these institutions offer telephone and Internet voting.

The enclosed proxy card indicates the number of shares that you own as of the record date.

Voting instructions are included on your proxy card. If you properly fill in your proxy card and send it to us in time to vote, or vote by telephone or the Internet, one of the individuals named on your proxy card

(your “proxy”) will vote your shares as you have directed. If you sign the proxy card but do not make specific choices, your proxy will follow the Board’s recommendations and vote your shares:

The Board of Directors and the Company’s management have not received notice of, and are not aware of, any business to come before the Meeting other than the agenda items referred to in this proxy statement.

Revoking your proxy card

You may revoke your proxy card by:

Voting in person

If you plan to attend the Annual Meeting and vote in person, we will give you a ballot when you arrive. However, if your shares are held in the name of a nominee, you must bring an account statement or letter from the nominee indicating that you were the beneficial owner of the shares on March 13, 2012,2013, the record date for voting.

Appointing your own proxy

If you want to give your proxy to someone other than the individuals named as proxies on the proxy card, you may cross out the names of those individuals and insert the name of the individual you are authorizing to vote. Either you or that authorized individual must present the proxy card at the Annual Meeting.Meeting to vote.

Proxy solicitation

We are soliciting this proxy on behalf of our Board of Directors and will bear the solicitation expenses. We are making this solicitation by mail but we may also solicit by telephone, e-mail or in person. We have hired Morrow & Co., LLC, 470 West Avenue, Stamford, CT 06902, for a fee of $25,000, plus out-of-pocket expenses, to provide customary assistance to us in the solicitation. We will reimburse banks, brokerage houses and other institutions, nominees and fiduciaries, if they so request, for their expenses in forwarding proxy materials to beneficial owners.

Householding

Under U.S. Securities and Exchange Commission (“SEC”) rules, a single set of annual reports and proxy statements may be sent to any household at which two or more Company stockholders reside if they appear to be members of the same family. Each stockholder continues to receive a separate proxy card. This

procedure, referred to as “householding,” reduces the volume of duplicate information stockholders receive and reduces mailing and printing expenses for the Company. Brokers with accountholders who are Company stockholders may be householding our proxy materials. As indicated in the notice previously provided by these brokers to our stockholders, a single annual report and proxy statement will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from an affected stockholder. Once you have received notice from your broker that it will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate annual report and proxy statement, please notify your broker so that separate copies may be delivered to you. Stockholders who currently receive multiple copies of the annual report and proxy statement at their address who would prefer that their communications be householded should contact their broker.

Quorum Requirement

A quorum of stockholders is necessary to hold a valid meeting. The presence in person or by proxy at the Annual Meeting of holders of shares representing a majority of shares entitled to vote constitutes a quorum. Abstentions and broker “non-votes” are counted as present for establishing a quorum. A broker non-vote occurs on an item when a broker is not permitted to vote on that item absent instruction from the beneficial owner of the shares and no instruction is given.

Vote Necessary to Approve Proposals

A “majority of votes cast” means that the number of votes “for” a director’s election must exceed 50% of the votes cast with respect to that director’s election. Votes “against” a director’s election will count as a vote cast, but “abstentions” and “broker non-votes” will not count as a vote cast with respect to that director’s election.election and will have no effect.

CORPORATE GOVERNANCE AND RELATED MATTERS

Corporate Governance Guidelines

The Company’s Board of Directors acts as the ultimate decision-making body of the Company and advises and oversees management, who are responsible for the day-to-day operations and management of the Company. In carrying out its responsibilities, the Board reviews and assesses the Company’s long-term strategy and its strategic, competitive and financial performance. The Board has adopted Corporate Governance Guidelines, which are available on our investor relations website at http://info.cvscaremark.com/investors and are also available to stockholders at no charge upon request to the Company’s Corporate Secretary. These Guidelines meet or exceed the listing standards adopted by the NYSE, on which the Company’s common stock is listed.

Meetings of the Board

During 2011,2012, there were eight meetings of the Board of Directors. Directors are expected to make every effort to attend the Annual Meeting, all Board meetings and the meetings of the Committees on which they serve. All but one of our directors at the time of the Company’s 20112012 annual meeting of stockholders attended that annual meeting. In 2011,2012, each director attended at least 75% of the meetings of the Board and of the Committees of which he or she was a member.

One Board meeting was our annual meeting of independent directors. The independent directors also regularly hold executive sessions during which the Company’s management does not participate.

The Board’s Leadership Structure

Until March 1, 2011, Mr. Thomas M. Ryan served as both the Company’s Chairman of the Board and its Chief Executive Officer (“CEO”) and Mr. Terrence Murray served as Lead Director. Mr. Larry J. Merlo, previously the Company’s President and Chief Operating Officer, became President and CEO on March 1, 2011. Mr. Ryan then served as the Company’s Non-Executive Chairman of the Board until his retirement at the time of our 2011 annual meeting of stockholders. At that time, Mr. David W. Dorman becameis our independent Chairman of the Board, and Mr. Murray ceased serving as Lead Director.

The Board believes that the Company and its stockholders are best served by having the flexibility to either have the same individual serve as Chairman and CEO, or two separate persons in those roles. This is demonstrated by our actions related to the Company’s change in management. While the Company benefitted from having Mr. Ryan act as both Chairman and CEO, since our 2011 annual meeting of stockholders, the Board has been led by an independent Chairman.

Board. The independent Chairman presides at all meetings of the Board, and works with the CEOCompany’s Chief Executive Officer (“CEO”) to set Board meeting agendas and the schedule of Board meetings. In addition, the independent Chairman has the following duties and responsibilities: the authority to call, and to lead, independent director sessions; the ability to retain independent legal, accounting or other advisors in connection with these sessions; facilitation of communication and service as a liaison between the CEO and the other independent directors; and the duty to advise the CEO of the informational needs of the Board.

The Board believes that Board independence and oversight of management will be effectively maintained through the independent Chairman, the Board’s composition and its Committee system. IfConsistent with past practice, if in the future the Board decides that a non-independent Chairman should lead, then it will appoint an independent Lead Director. The Board also believes that it is not necessary to adopt a rigid policy restricting its discretion in selecting the Chairman of the Board (as well as restricting the ability to combine the positions of Chairman and CEO if future circumstances warrant), because this would deprive the Board of the ability to select the most qualified and appropriate individual to lead the Board as Chairman at any particular point in time.

The Board’s Role in Risk Oversight

The Board of Directors’ role in risk oversight involves both the full Board of Directors and its Committees. The Audit Committee is charged with the primary role in carrying out risk oversight responsibilities on behalf of the Board. Pursuant to its charter, the Audit Committee annually reviews the Company’s policies and practices with respect to risk assessment and risk management, including discussing with management the Company’s major risk exposures and the steps that have been taken to monitor and mitigate such exposures. As part of CVS Caremark’s ongoing Enterprise Risk Management process, each of the Company’s major business units is responsible for identifying risks that could affect achievement of business goals and strategies, assessing the likelihood and potential impact of significant risks, prioritizing risks and actions to be taken in mitigation and/or response, and reporting to management’s Executive Risk Steering Committee on actions to monitor, manage and mitigate significant risks. Additionally, the Chief Financial Officer (“CFO”), Chief Compliance Officer (“CCO”) and Chief Legal OfficerGeneral

Counsel (“CLO”GC”) periodically report on the Company’s risk management policies and practices to relevant Board Committees and to the full Board. The Audit Committee reviews CVS Caremark’s major financial risk exposures as well as major operational, compliance, reputational and strategic risks, including steps to monitor, manage and mitigate those risks. In addition, each of the other Board Committees is responsible for oversight of risk management practices for categories of risks relevant to their functions. For example, the Management Planning and Development Committee has oversight responsibility for the Company’s overall compensation structure, including review of its compensation practices, with a view to assessing associated risk. See “Executive Compensation and Related Matters – Compensation Discussion and Analysis – Risk Assessment.” The Board as a group is regularly updated on specific risks in the course of its review of corporate strategy, business plans and reports to the Board by its respective Committees.

The Board considers its role in risk oversight when evaluating the Company’s Corporate Governance Guidelines and its leadership structure. Both the Corporate Governance Guidelines and the Board’s leadership structure facilitate the Board’s oversight of risk and communication with management. Our Chairman and our CEO are focused on the Company’s risk management efforts and ensure that risk matters are appropriately brought to the Board and/or its Committees for their review.

Director Nominations

Under the Company’s Corporate Governance Guidelines, the Nominating and Corporate Governance Committee recommends to the Board criteria for Board membership and recommends individuals for membership on the Company’s Board of Directors. Director Qualification Criteria used by the Committee in nominating directors are found in the Committee’s charter and are attached to this proxy statement asExhibit A. Although there is no specific policy on diversity, the Committee values diversity, which it broadly views in terms of, among other things, gender, race, background and experience, as a factor in selecting members to serve on the Board, and believes that the diversity of the Board’s current composition provides significant benefits to the Company. When considering current directors for re-nomination to the Board, the Committee takes into account the performance of each director. The Committee also reviews the composition of the Board in light of the current challenges and needs of the Board and the Company, and determines whether it may be appropriate to add or remove individuals after considering, among other things, the need for audit committee expertise and issues of independence, judgment, age, skills, background and experience. As desired, the Committee may confer with the Chairman and other directors as to the foregoing matters.

The Nominating and Corporate Governance Committee will consider any director candidates recommended by stockholders who submit a written request to the Corporate Secretary of the Company. The candidates should meet the Director Qualification Criteria noted above. The Committee evaluates all director candidates and nominees in the same manner regardless of the source. If a stockholder would like to nominate a person for election or re-election to the Board, he or she must provide notice to the Company as provided in our by-laws. Such notice must be addressed to the Corporate Secretary of the Company and must arrive at the Company in a timely manner, between 90 and 120 days prior to the anniversary of our last annual meeting of stockholders. The notice must include (i) the name and address, as they appear in the

Company’s books, of the stockholder giving the notice, (ii) the class and number of shares of the Company that are beneficially owned by the stockholder (including information concerning derivative ownership and other arrangements concerning our stock as described in our by-laws), (iii) a written consent indicating that the candidate is willing to be named in the proxy statement as a nominee and to serve as a director if elected, and (iv) any other information that the SEC would require to be included in a proxy statement when a stockholder submits a proposal. See “Other Matters – Stockholder Proposals and Other Business for our Annual Meeting in 2013”2014” for additional information related to our 20132014 annual meeting.

The retirement age for CVS Caremark directors is 72. The Company’s Corporate Governance Guidelines provide that no director who is or would be over the age of 72 at the expiration of his or her current term may be nominated to a new term, unless the Board waives the retirement age for a specific director in exceptional circumstances.

Independence Determinations for Directors

Under the Company’s Corporate Governance Guidelines, a majority of our Board must be comprised of directors who meet the director independence requirements set forth in the Corporate Governance Rules of the NYSE applicable to listed companies. Under the NYSE Corporate Governance Rules, no director qualifies as “independent” unless the Board affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company). The basis for a Board’s determination that a relationship is not material must be disclosed in the Company’s annual proxy statement. In this regard, the Board has adopted categorical standards to assist it in making determinations of independence, which are attached to this proxy statement asExhibit B.

The Nominating and Corporate Governance Committee of the Board undertook its annual review of director independence in March 2012,2013, and determined that each of C. David Brown II, David W. Dorman, Anne M. Finucane, Kristen Gibney Williams, Marian L. Heard, Jean-Pierre Millon, C.A. Lance Piccolo, Richard W. Swift and Tony L. White, is independent. Ms. Heard and Mr. Piccolo, each of whom is retiring at the time of the Annual Meeting, also were determined to be independent during their 2012-13 Board year service. Mr. Merlo is considered an inside director because of his current employment as President and CEO of the Company.

In March 2013, Mr. William C. Weldon, the retired Chairman and Chief Executive Officer of Johnson & Johnson, a global health care products company, was elected to the Company’s Board of Directors by the members of our Board. Consideration of Mr. Weldon as a candidate was in anticipation of the retirement of Ms. Heard and Mr. Piccolo. Mr. Dorman, the Company’s independent Chairman of the Board, initially identified Mr. Weldon to the Nominating and Corporate Governance Committee as a potential candidate for election, due to Mr. Weldon’s deep knowledge of the global health care market across multiple sectors. The Committee then reviewed Mr. Weldon’s qualifications against the criteria set forth above and inExhibit Ato this proxy statement and recommended Mr. Weldon’s election.

In the course of its review as to the independence of each director, the Committee considered transactions and relationships, if any, between each director or any member of his or her immediate family, on the one hand, and the Company and its subsidiaries, on the other. In that regard, the Committee in making its recommendation and the Board in making its determination as to Mr. Weldon’s independence considered that, consistent with the categorical standards, Mr. Weldon is a former executive officer of an entity with which the Company has had ordinary course, arm’s-length business dealings that do not implicate any of the NYSE bright-line tests, and with respect to which he was not directly involved in such entity’s business dealings with the Company. See “Certain Transactions with Directors and Officers”, below.

Contact with the Board, the Chairman and Other Independent Directors

Stockholders and other parties interested in communicating directly with the Board, the independent Chairman of the Board or with the independent directors as a group may do so by writing to them care of CVS Caremark Corporation, One CVS Drive, Woonsocket, RI 02895. The Nominating and Corporate Governance Committee has approved a process for handling letters received by the Company and addressed to the Board, the Chairman of the Board or to independent members of the Board. Under that process, the Corporate Secretary of the Company reviews all such correspondence and regularly forwards to the Board a summary of all such correspondence and copies of all correspondence that, in the opinion of the Corporate Secretary, deals with the functions of the Board or Committees thereof or that he otherwise determines requires their attention. Directors shall from time to time review a log of all correspondence received by the Company that is addressed to members of the Board and may request copies of any such correspondence. Concerns relating to accounting, internal accounting controls or auditing matters will be promptly brought to the attention of the Company’s internal audit department and handled in accordance with procedures established by the Audit Committee with respect to such matters.

Code of Conduct

The Company has adopted a Code of Conduct that applies to all of our directors, officers and employees, including our CEO, CFO and Chief Accounting Officer. The Company’s Code of Conduct is available on the Company’s website at http://info.cvscaremark.com/investors, and will be provided to

stockholders without charge upon request to the Company’s Corporate Secretary. The Company intends to post amendments to or waivers from its Code of Conduct (to the extent applicable to the Company’s executive officers or directors) at that location on its website within the timeframe required by SEC rules.

Committees of the Board

Audit Committee

Richard J. Swift, Chair

Edwin M. Banks

Kristen Gibney Williams

Jean-Pierre Millon

The Audit Committee met eightnine times during 2011.2012. Mr. Edwin M. Banks was a member of the Committee until his retirement from the Board and the Committee at the time of our 2012 Annual Meeting of Stockholders. Each member of the Committee is financially literate and independent of the Company and management under the standards set forth in applicable SEC rules and the Corporate Governance Rules of the NYSE. The Board has designated each of Mr. Swift and Mr. BanksMillon as an audit committee financial expert, as defined under applicable SEC rules. The Board has approved a charter for the Committee, a copy of which can be viewed on the Company’s website at http://info.cvscaremark.com/investors, and also is available to stockholders without charge upon request to the Company’s Corporate Secretary. Pursuant to its charter, the Committee assists the Board in its oversight of: (i) the integrity of the financial statements of the Company; (ii) the qualifications, independence and performance of the Company’s independent registered public accounting firm, for whose appointment the Committee bears principal responsibility; (iii) the performance of the Company’s internal audit function; (iv) the Company’s policies and practices with respect to risk assessment and risk management, including discussing with management the Company’s major financial risk exposures and the steps that have been taken to monitor and control such exposures; (v) compliance with the Company’s Code of Conduct; (vi) the review of the Company’s information governance framework, including its privacy and information security programs, as well as the cybersecurity aspects of the information security program; (vii) review and ratification of any related person transactions pursuant to the Company’s policy on such matters; and (vii)(viii) compliance by the Company with legal and regulatory requirements. The Committee also approved the Audit Committee Report that is found on page 1314 of this proxy statement.

Nominating and Corporate Governance Committee

David W. Dorman, Chair

C. David Brown II

Anne M. Finucane

Marian L. Heard

C.A. Lance Piccolo

The Nominating and Corporate Governance Committee met fourfive times during 2011. Mr. Banks rotated off of the Committee at the time of the 2011 Annual Meeting.2012. Each member of the Committee is independent of the Company and management under the standards set forth in the Corporate Governance Rules of the NYSE. The Board has approved a charter for the Committee, a copy of which can be viewed on the Company’s website at http://info.cvscaremark.com/investors, and also is available to stockholders without charge upon request to the Company’s Corporate Secretary. Pursuant to its charter, the Committee has responsibility for: (i) identifying individuals qualified to become Board members; (ii) recommending to the Board director nominees for election at the next annual or special meeting of stockholders at which directors are to be elected or to fill any vacancies or newly-created directorships that may occur between such meetings; (iii) recommending directors for appointment to Board

Committees; (iv) making recommendations to the Board as to determinations of director independence; (v) evaluating Board and Committee performance; and (vi) reviewing and assessing the Company’s Corporate Governance Guidelines and overseeing compliance with such Guidelines.

Management Planning and Development Committee

C. David Brown II, Chair

David W. Dorman

Marian L. Heard

Terrence Murray

Tony L. White

The Management Planning and Development Committee met eightfive times during 2011.2012. Mr. Brown became ChairTerrence Murray was a member of the Committee until his retirement from the Board and the Committee at the time of our 20112012 Annual Meeting upon Ms. Sheli Z. Rosenberg’s retirement. Mr. White was appointed to the Committee at the time of his election to the Board in March 2011.Stockholders. Each member of the Committee is independent of the Company and management under the standards set forth in the Corporate Governance Rules of the NYSE. No Committee member participates in any of the Company’s employee compensation programs and none is a current or former officer or employee of CVS Caremark or its subsidiaries. At its meetings, non-members, such as the CEO, the CFO, the Chief Human Resources Officer, the CLO,GC, other senior human resources and legal officers, or external consultants, may be invited to provide information, respond to questions and provide general staff support. However, no CVS Caremark executive officer is permitted to be present during any discussion of his or her compensation or performance, and the Committee may exercise its prerogative to meet in executive session without non-members.

The Committee’s responsibilities are specified in its charter. The charter, as approved by the Board, may be viewed on the Company’s website at http://info.cvscaremark.com/investors, and also is available to stockholders without charge upon request to the Company’s Corporate Secretary. These responsibilities fall into six broad categories. Pursuant to its charter, the Committee: (i) oversees the Company’s compensation and benefits policies and programs generally; (ii) evaluates the performance of designated senior executives, including the CEO, and reviews the Company’s management succession plan; (iii) in consultation with the other independent directors of the Company, oversees and sets compensation for the CEO; (iv) oversees and sets compensation for the Company’s designated senior executives; (v) reviews and recommends to the Board compensation (including cash and equity-based compensation) for the Company’s directors; and (vi) prepares and recommends to the full Board the inclusion of Management Planning and Development Committee Report found on page 4140 of this proxy statement. The Committee may delegate its authority relating to employees other than executive officers and directors as it deems appropriate and may also delegate its authority relating to ministerial matters.

In addition to the responsibilities defined above, the Committee is also responsible for reviewing and assessing any potential risk arising from the Company’s compensation policies and practices for its employees. During 2011,2012, the Committee oversaw a risk assessment of the Company’s compensation policies and practices with specific focus on incentive programs across the organization to ascertain any potential material risks that may be created by the compensation programs. The Committee considered the findings of the assessment and concluded that the Company’s compensation programs are designed and administered with the appropriate balance of risk and reward in relation to its overall business strategy, do not encourage employees or officers to take unnecessary or excessive risks and any level of risk is not reasonably likely to have a material adverse impact on the Company. For non-executives, incentives represent a small percentage of total compensation so participants would not be rewarded for excessive risk-taking. The exception would be in sales where commission income can represent a significant portion of total compensation. In that case, our assessment looked at the goal setting process. No sales plan participants establish sales goals; sales goals are established by members of management who do not participate in the sales commission plans. The assessment also looked at the cost of non-executive incentive plans across the organization and determined it is not material to the Company’s financial performance.

A discussion of risk assessment with respect to the executive compensation programs is included in the Compensation Discussion and Analysis section of this proxy statement, which begins on page 16.17.

As provided in its charter, the Committee has the sole authority to retain an external compensation consultant, determine the scope of the compensation consultant’s services and terminate the engagement at any time. The external compensation consultant reports to the Committee Chair. In 2011,Exequity LLP is the Committee retained Exequity, anCommittee’s independent compensation consultant. Pursuant to the Company’s policy, Exequity provides no other services to the Company other than consulting firm,services provided to assist the Committee with its responsibilities related to the Company’s executive compensation programs. Exequity’s fees for executive compensation consulting to the Committee infor fiscal year 20112012 were $168,661.$216,429. During fiscal 2011,2012, Exequity:

Exequity did not provide any other services to CVS Caremark during fiscal 2011.

Prior to engaging Exequity, the Committee had engaged Mercer, a wholly-owned subsidiary of Marsh & McLennan Companies, Inc. (“MMC”), to provide research, data analysis, survey information, and executive compensation design expertise. Mercer provided valuable advice and services to the Committee for several years and was not replaced for any reason related to the quality of its services. As previously disclosed, the Company has also used other MMC affiliates for services unrelated to executive compensation, including property and casualty insurance brokering and related consulting services, risk management services and bonding services. Although the services provided by Mercer met our independence standards, the decision was made by the Committee to engage a fully independent executive compensation consulting firm.

The Committee believes that the advice it receives from Exequity is objective and not influenced by any other business relationship. The Committee and Exequity have policies and procedures in place to preserve the objectivity and integrity of the executive compensation consulting advice, including:

The Committee conducts an annual review of the independence of its compensation consultant, taking into account the standards above and applicable rules and regulations, and has determined that its consultant’s work does not raise any conflicts.

Executive Committee

C. David Brown II

David W. Dorman

Larry J. Merlo

Terrence Murray

Richard W. Swift

The Executive Committee did not meet in 2011.2012. At all times when the Board is not in session, the Executive Committee may exercise most of the powers of the Board, as permitted by applicable law.

Director Compensation

The Company uses a fullCompany’s approach to compensating outside directors for Board service is to provide directors with an annual retainer approach, withmix comprised of a mandatory 75% paid in shares of Company common stock, and 25% paid in compensating its outside directors.cash (or 100% stock at the director’s election). The payment of a significant portion of annual retainers, and additional chairperson retainers as outlined below, in Company common stock (or fully in Company common stock at a director’s election) is consistent with our policy of using equity compensation to better align directors’ interests with stockholders and enhances the directors’ ability to meet and continue to comply with the stock ownership guidelines described below.

Each non-employee director receives an annual retainer worth $260,000, 75% (or $195,000) of which must be paid in shares of the Company’s stock valued at $195,000 (the mandatory annual stock retainer) and a cash payment of $65,000 (unless the remaining 25% (or $65,000)director elects to receive 100% of the annual retainer in shares of Company stock). The total annual retainer for outside directors is paid in either cash or stock, at the director’s election. $260,000 annually.

The Management Planning and Development Committee and the Board believe that the full retainerthis approach better reflects the ongoing accountability of directors. Service on the Board requires directors to commit significant amounts of time to Company matters year-round, not only at meetings. The full-retainerThis approach also facilitates administration of the directors’ compensation program, and aligns with the manner in which director compensation is paid in our peer group, where it is common to pay directors with an annual cash retainer and an annual equity award.

Additional annualchairperson retainers are paid as follows: Chairs of the Nominating and Corporate Governance and Management Planning and Development Committees, $10,000 each; Chair of the Audit Committee, $20,000; and independent Chairman of the Board, $190,000. Each of these additional chairperson retainers is paid semi-annually; at least 75% of each retainer must be paid in shares of Company common stock, and directors may elect to receive all of their retainerswith the remaining 25% paid in stock.either shares or cash at the directors’ election. Directors may elect to defer receipt of shares for the annual retainer and additional chairperson retainers; deferred shares will be credited with dividend equivalents.

Director Stock Ownership Requirements

All non-employee directors must own a minimum of 10,000 shares of CVS Caremark common stock.stock, which is worth approximately $480,000 based on the December 31, 2012 stock price of $48.35, or approximately seven times the amount of the annual cash retainer ($65,000). Directors must attain this minimum ownership level within five years of being elected to the Board and must retain this minimum ownership level for at least six months after leaving the Board. The current level of mandatory stock provided in the director’s mix of annual compensation enhances the director’s ability to meet the ownership level within this timeframe. Each of our directors has attained the minimum ownership level, except Ms. Finucane and Mr. White, each of whomWeldon, who has five years from theirthe date of his election to attain the minimum ownership level.

All Other Compensation and Benefits

Directors are eligible to receive stock options, but typically do not receive them and did not receive them in 2011.2012. They do not participate in a pension plan or nonqualified deferred compensation plan with above market earnings. Directors are eligible to participate in the employee discount program and are subject to the same terms of the program as Company employees. Directors are generally reimbursed for business expenses incurred directly in connection with their roles and duties on the CVS Caremark Board, such as services provided by an executive assistant, travel, meals and lodging. Historically, Caremark Rx, Inc. had provided medical, dental and prescription drug coverage to its directors and their eligible dependents while the director was serving on its board. Through 2010, Messrs. Banks and Piccolo were allowed to remain covered under the Company’s medical and dental programs, provided they pay the full cost of coverage. Until June 30, 2011, they were eligible to receive continuing medical and dental coverage through the Company under COBRA, provided they paid the full cost of coverage plus an administrative fee. They are no longer eligible for such coverage. The Company has extended to all directors including Mr. Ryan, who served as Company’s Chairman through the 2011 annual meeting of stockholders, the option to enroll themselves and their eligible dependents in the Company’s prescription drug benefit program, paying the same premium rates as employees. If a director retires from the Board with at least five years of service, the Company will allow continued participation in the prescription drug benefit plan, but the director must bear the full cost of the premium.

The following chart shows amounts paid to each of our non-employee directors in fiscal 2011.2012.

Non-Employee Director Compensation – Fiscal Year 20112012

Certain Transactions with Directors and Officers

In accordance with SEC rules, the Board has adopted a written Related Person Transaction Policy (the “Policy”). The Audit Committee of the Board has been designated as the Committee responsible for reviewing, approving or ratifying any related person transactions under the Policy.

Pursuant to the Policy, all executive officers, directors and director nominees are required to notify the Company’s CLOGC or Corporate Secretary of any financial transaction, arrangement or relationship, or series of similar transactions, arrangements or relationships, involving the Company in which an executive officer, director, director nominee, 5% beneficial owner or any immediate family member of such a person has a direct or indirect material interest. Such officers, directors, nominees, 5% beneficial owners and their immediate family members are considered “related persons” under the Policy.

For the above purposes, “immediate family member” includes a person’s spouse, parents, siblings, children, in-laws, step-relatives and any other person sharing the household (other than a tenant or household employee).

The CLOGC or the Corporate Secretary will present any reported new related person transactions, and proposed transactions involving related persons, to the Audit Committee at its next regular meeting, or earlier if appropriate. The Committee shall review transactions to determine whether the related person involved has a direct or indirect material interest in the transaction. The Committee may conclude, upon review of all relevant information, that the transaction does not constitute a related person transaction, and

thus that no further review is required under the Policy. On an annual basis, the Committee shall review previously approved related person transactions, under the standards described below, to determine whether such transactions should continue.

In reviewing the transaction or proposed transaction, the Committee shall consider all relevant facts and circumstances, including without limitation the commercial reasonableness of the terms, the benefit and perceived benefit, or lack thereof, to the Company, the availability and/or opportunity costs of alternate transactions, the materiality and character of the related person’s direct or indirect interest, and the actual or apparent conflict of interest of the related person. The Committee will not approve or ratify a related person transaction unless it shall have determined that, upon consideration of all relevant information, the transaction is in, or not inconsistent with, the best interests of the Company and its stockholders.

If after the review described above, the Committee determines not to approve or ratify a related person transaction (whether such transaction is being reviewed for the first time or has previously been approved and is being re-reviewed), the transaction will not be entered into or continued, as the Committee shall direct.

Notwithstanding the foregoing, the following types of transactions are deemed not to create or involve a material interest on the part of the related person and will not be reviewed, nor will they require approval or ratification, under the Policy:

The Board reviews the Policy on an annual basis and will make changes as appropriate.

Additionally, under the Company’s Corporate Governance Guidelines and its Code of Conduct, with respect to any transaction in which a director or executive officer has a personal interest, such that a potential conflict of interest could arise, the director or executive officer must report the matter immediately to the Company’s CLOGC or the CCO who will, where appropriate, report the matter to the Nominating and Corporate Governance Committee for evaluation and appropriate resolution.

If a director has a personal interest in a matter before the Board, the director must disclose the interest to the full Board, will recuse himself or herself from participation in the discussion and will not vote on the matter.

Furthermore, proposed charitable contributions by the Company within any given fiscal year in an aggregate amount exceeding $120,000, to an entity for which a director or a member of his or her immediate family serves as a director, officer, or member of such entity’s fund-raising organization or committee, will be subject to prior review and approval by the Audit Committee (with notification to the Nominating and Corporate Governance Committee).

In addition, under the Nominating and Corporate Governance Committee’s charter, such Committee shall evaluate the possibility that a director’s independence may be compromised or impaired for Board or Committee purposes if director compensation exceeds customary levels, if the Company makes substantial charitable contributions to an organization with which a director is affiliated, or if the Company enters into consulting contracts with (or provides other indirect forms of compensation to) a director (which consulting contracts or other indirect forms of compensation are expressly prohibited for Audit Committee members).

On August 31, 2007,As noted above, in March 2013, Mr. MurrayWilliam C. Weldon, the retired Chairman and his children acquiredChief Executive Officer of Johnson & Johnson, a 64.6% ownership interestglobal health care products company, was elected to the Company’s Board of Directors by the members of our Board. Mr. Weldon served as Chief Executive Officer of Johnson & Johnson until he retired from that role in an entity that owns a shopping center in Guilford, CT (the “Center”). A CVS/pharmacy store has been a tenantApril 2012, and served as Chairman of the Center since 1994 and is oneBoard of 11 existing tenantsJohnson & Johnson until he retired from the board in December 2012. At the Center. The store’s lease (the “Original Lease”), including the payments thereunder, was not changed in any way when the ownership interest in the Center was acquired by the Murrays. The amount paid by the CVS/pharmacy storetime of his election to the Center in rent and related fees underBoard of Directors of CVS Caremark, he no longer had any affiliation with Johnson & Johnson.

CVS Caremark directly purchased approximately $740 million of products from Johnson & Johnson during the Original Lease in 2011 was approximately $195,300. Additionally, during 2009 the Company entered into a lease for a larger store location to be built within the Center that would include a drive-thru. The store moved into the new location in March 2011, at which time the Original Lease was terminated. The new lease (the “New Lease”) was approved2012 calendar year. CVS Caremark also purchased Johnson & Johnson products through various third parties, such as drug wholesalers. All of such purchases were made in the ordinary course of business based on arm’s length negotiations between Johnson & Johnson or such third parties and CVS Caremark. In addition, during 2012 Johnson & Johnson paid CVS Caremark certain rebates for prescription drug dispenses made by the Company’s real estate committeeCVS Caremark. Such rebates are usual and its terms were reviewed and ratified by our Audit Committee under the Policy. The Murrays had no role or involvementcustomary in the lease discussionsindustry and were based on behalfarm’s length negotiations. The majority of such rebates were passed on to various clients of CVS Caremark’s prescription benefit management business. Mr. Weldon was not involved in the Center. Consequently, the Company believes thatnegotiation of the terms of this transaction were determined in an arm’s-length manner. The amount paid in 2011 byany purchases, sales, contracts or business arrangements between the CVS/pharmacy store to the Center in rent and related fees under the New Lease was approximately $519,000.two companies.

Audit Committee Report

The Audit Committee of the Board of Directors (for purposes of this report, the “Committee”) is composed of fourthree independent directors. Set forth below is the report of the Committee on its activities with respect to CVS Caremark’s audited financial statements for the fiscal year ended December 31, 20112012 (the “audited financial statements”).

Richard J. Swift, Chair

Edwin M. Banks

Kristen Gibney Williams

Jean-Pierre Millon

Share Ownership of Directors and Certain Executive Officers

The following table shows the share ownership, as of March 8, 2012,7, 2013, of each director, each executive officer appearing in the Summary Compensation Table found on page 4241 and all directors and executive officers as a group, based on information provided by these individuals. Each individual beneficially owns less than 1% of our common stock and, except as described in the footnotes to the table, each person has sole investment and voting power over the shares. None of the shares listed below has been pledged as collateral.

*Less than 1%.

(6)

Includes the following shares of common stock constituting deferred non-employee director compensation, which do not have current voting rights: Mr. Banks, 22,925; Mr. Brown, 30,566;31,029; Mr. Dorman, 14,999;15,226; Ms. Heard, 80,022;85,489; Mr. Swift, 35,274;40,390; and all non-employee directors as a group, 183,786.172,134.

Share Ownership of Principal Stockholders

We have been notified by the entity in the following table that it wasis the beneficial owner (as defined by the rules of the SEC) of 5% of a classmore than five percent (5%) of our voting securities as of March 8, 2012.common stock. According to the most recent Schedule 13G filed by the beneficial owner with the SEC, these shares were acquired in the ordinary course of business, and were not acquired for the purpose of, and do not have the effect of, changing or influencing control over us.

EXECUTIVE COMPENSATION AND RELATED MATTERS

COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

At CVS Caremark, our executive compensation philosophy and practice reflects our strong commitment to paying for performance – both short- and long-term. Performance is defined as the achievement of results against our challenging internal financial targets, which take into account relative financial measures of our external peer group as well as industry and market conditions. We believe that our multi-faceted executive compensation plans, with their integrated focus on short- and long-term metrics, provide an effective framework by which progress against our strategic goals may be appropriately measured and rewarded. Historically, total shareholder return has been positively correlated with the criteria used under our annual and long-term incentive plans over the relevant measurement periods for these plans. However, we have begun to explore and implement

2012 was a direct shareholder return element in our long-term incentive plan as described in greater detail below.

2011 reflected a turning pointvery strong performance year for the Company with record net revenues of $123.1 billion and hashealthy profitable growth in all of the businesses. The Company believes its efforts during the past three years set the stage to returnfor our 2012 results and continued strong performance in the pharmacy benefit management (“PBM”) business to healthy growth in 2012 and beyond, while continuing the solid growth trajectory of our retail business.future. CVS Caremark performed favorably against ourits peer group on several critical measures including revenue, operating income and EPS growth andalong with a total shareholder return.return of 20.3%. The positive results of 2012 are reflected in the 2012 Management Incentive Plan payouts to our named executive officers (“Named Executive Officers” or “NEOs”). However, somethe performance metrics, including those utilizedchallenges in our annual incentive, three-year2010 through 2011 are reflected in the three year long-term incentive plan and eighteen-month long-term incentive plan had mixedperformance results. The results of our annual incentive plan and eighteen-month long-term incentive plan were slightly below our targets and we did not meet our goals for the three-year long-term incentive plan. Accordingly, consistentConsistent with our pay-for-performance philosophy and the terms of our incentive plans, incentive compensation paid to our named executive officersNEOs under the three-year Long-Term Incentive Plan (“Named Executive Officers” or “NEOs”LTIP”) for 2011 reflects thisthe below-target performance for the annual and eighteen-month long-term incentive plans, and there were no payouts for the three-year long-term incentive plan.results.

Throughout this Compensation Discussion and Analysis, we refer to EPS, EBIT (or Operating Profit), free cash flow and RoNA (or return on net assets). When we use these terms, unless we specifically refer to them as “GAAP” (which stands for “U.S. Generally Accepted Accounting Principles”), we are referring to non-GAAP financial measures.Exhibit C to this proxy statement contains an explanation of how we calculate these measures.

In 2012 CVS Caremark had its second-non-binding stockholder vote on our executive pay programs for our Named Executive Officers (“say-on-pay”). The Company’svote was overwhelmingly positive, with 94.7% of the stockholders voting in support of our executive pay programs. Although the stockholder vote on our executive pay was very positive, the Management Planning and Development Committee of the Board (the “Committee”) continually assesses our programs and several significant 2011 actions include:changes were made in 2012 to our executive compensation programs and practices to increase alignment with stockholders. These changes discussed in greater detail in other sections of this report include the following:

Additionally, CVS Caremark had its first non-binding vote on the frequency of stockholder say-on-pay votes. Say-on-pay votes will be held annually, in response to the 85% stockholder vote in favor of the Company-recommended annual vote frequency.

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Added an additional measure – total shareholder return – to our three-year Long-Term Incentive Plan (“LTIP”)LTIP to complement the return on net assets measure.measure and to demonstrate our commitment to linking pay and performance. We continue to believe that return on net assets is an important and appropriate focus, as successful management of our working capital in the near to medium-term is expected to help drive sustained stockholder value. In addition, we believe addingincluding total shareholder return as a measure will result in executive awards that reflect the market’s view of our achievements and further align executive pay with satisfaction of stockholder objectives.

Business Highlights and Performance Success

We continue to believe that the combination of our industry-leading assets in retail pharmacy, pharmacy benefits management and retail health clinics is an optimal, unmatched and winning strategy.

Each of our best-in-class business units are positioned for continuedachieved healthy top and bottom line growth and the Company is capitalizing on the power of the combined entity and integrated offerings to drive superior long-term growth. We believe that 2011 built the foundation for significant growth, as demonstrated by the following accomplishments:

We believe that these successes are the result of the key initiatives of the last several years and have built the foundation for significant growth in the future.

Performance Challenges and Incentive Compensation

Even with all of the successes described above including record revenue and EBIT growth, we experienced severaldid experience a long term performance challengeschallenge ending in 20112012 that wereis reflected in the NEO incentive compensation payouts:

Key Corporate Governance and Compensation Practices

While well-designed incentive plans based on meaningful performance metrics are central to an effective executive compensation program, we believe there are additional policies and practices which establish and reinforce the key philosophies and guiding principles critical to creating and sustaining a well-governed corporate environment. RepresentativeOver the last couple of those policiesyears, the Committee has approved several significant changes to position and practices at CVS Caremark arereinforce an effective executive compensation program in the following:current operating environment to align more effectively with stockholders, including:

Introduction

This section of the proxy statement explains how our executive compensation programs are designed and operate with respect to our NEOs, who for 20112012 are:

Mr. Ryan served as Chairman and CEO for a partial year in 2011. He transitioned out of the role of CEO on March 1, 2011 and retired as an employee and as Chairman effective May 11, 2011. He was paid his base salary during his employment period and was not eligible for an annual incentive in 2011. Mr. Ryan was eligible to receive a pro-rata payout of the RoNA LTIP for the portion of his active employment during the performance cycle. Mr. Ryan received no severance pay and there were no other payments made to him beyond the compensation and benefits consistent with his outstanding agreements and the terms of the benefit plans in which he participated.

Pay for Performance

A primary component of the Company’s human resources strategy – to ensure that we have high caliber leadership – is the identification, recruitment, developmentsdevelopment and placement of key management and business talent. The CVS Caremark Board of Directors and the executive management team believe that a crucial aspect of successfully executing this strategy is a comprehensive, integrated and well defined executive compensation program, which provides competitive and differentiated levels of pay based on corporate and individual performance and reinforces the alignment of executive interests with those of stockholders. Pay for performance is emphasized in our approach to executive compensation and is measured based on the results of our programs against our financial targets and relative to the external market.

In 2011,As in previous years, the Management Planning and Development Committee (the “Committee”) requested and reviewed a historical assessment of the relationship between CVS Caremark’s performance and executive pay outcomes relative to our 2012 Peer Group (as defined below). The purpose of this assessment was to ensure pay was directionally aligned with performance and to validate the goal setting approach and overall assessment of our pay program effectiveness. The approach is one of several reviewed by the Committee to ensure alignment with stockholders. The following graphs illustrate the results of the Committee’s core assessment and showillustrate the relationship between our NEOCEO’s real compensation (defined as base salary earned; incentives earned; value of restricted shares or restricted stock units (“RSUs”) that vest during the period; value of stock options exercised during the period; and changes in value of unvested restricted shares/RSUs and unexercised options held during the period) and the Company’s performance as measured by total shareholder return (“TSR”) – over 1-year (2010)one-year (2011) and 4-yearfive-year (2007 – 2010)2011) periods. The same analysis was completed for other financial metrics as well, such as EBIT. The analysis was conducted using the most current data available for the periods ending on December 31, 2010.2011. Data points that are within the shaded area illustrate close alignment of pay and performance relative to our Peer Group. Data points below the shaded area illustrate pay that is below the amount estimated based on performance and those data points above the shaded area suggests the opposite.

As illustratedshown in the graph above, for fiscal 2010 CVS Caremark NEO realCaremark’s CEO realized compensation was atjust below the 4th percentile relative to the Peer Group, while total shareholder return ranked at the 4060^th percentile, showingwhile TSR ranked at the 79^th percentile, indicating that our pay programs are tied to company performance – low relative performance resulted in low relative real compensation.CEO realized compensation was less than that suggested by peer group practices/results, however closely aligned with Company performance.

ThisSimilarly, the graph below illustrates the relationship between NEOCEO pay rank and itsthe relative return to stockholders for CVS Caremark and the Peer Group over the 4-yeara 5-year period from fiscal year 2007 to fiscal year 2010. Compensation2011. Relative compensation earned and total shareholder returns are both aligned at approximately the 70^th percentile.similarly aligned.

The Committee has requested that this type of analysis be updated annually and include the relationship between other key financial metrics and pay to ensure alignment with our executive compensation philosophy and core principles.

The Committee’s annual assessment of the existing executive compensation plans includedincludes not only the pay-for-performance analysis described above, but also reviews of the annual incentive and LTI plan performance metrics and construct and the composition of the Peer Group. reviews:

As a result of the assessment, the Committee modified the Peer Group, determined thatperformance measures under the LTIP for 2011 would use return on net assets as the 2012-2014 performance metric and added total shareholder returncycle to include TSR as an additional LTIP performance measure (startingmetric and implemented the policy changes related to excise tax gross-ups, share recycling, and double trigger vesting of equity awards as described in 2012).theKey Corporate Governance and Compensation Practices section above.

Executive Compensation Philosophy and Core Principles

The Committee is charged with establishing and implementing CVS Caremark’s executive compensation philosophy as well as its strategies and practices. The Committee has identified five core principles that drive our executive compensation philosophy and which we and the Committee believe motivate our executive officers to continually improve the financial and operating position of the Company, encourage personal responsibility for the performance of the business and drive decisions that deliver long-term stockholder value. Our comprehensive executive compensation program flows from the five core principles and the overall CVS Caremark executive compensation philosophy. Our five core principles are:

1. Support, communicate and drive achievement of CVS Caremark’s business strategies and goals.

2. Attract and retain the highest caliber executive officers by providing compensation opportunities comparable to those offered by other companies with which CVS Caremark competes for business and talent.

3. Motivate high performance among executive officers in an incentive-driven culture by delivering greater rewards for superior performance and reduced awards for underperformance.

4. Closely align the interests of executive officers with stockholders’ interests and foster an equity ownership environment.

5. Reward achievement of short-term results as well as long-term stockholder value creation.

The Committee believes each of the components of our executive compensation program, which will be discussed later in this Compensation Discussion and Analysis,section, must contribute to the furtherance of one or more of our five core principles, as outlined in the following chart:

Compensation Element		Objective		Key Features
Long-Term Incentives		Reward multi-year financial success, which supports the Company’s long-term strategic objectives. Encourage stock ownership and reinforce an alignment of executives’ interests with those of stockholders.		Target awards are established at the start of the cycle based on competitive pay information, level of responsibility in the organization, and desired mix of long term incentive pay relative to other pay components. Generally paid equally in cash and Company common stock based on meeting pre-established performance goals during specified performance cycles. Minimum performance threshold (below which no payment will be made) and capped maximum payouts. The executive is prohibited from selling or trading shares for two years following the payment date.
Stock Options and RSUs		Align executive and stockholder interests through equity ownership and reward creation of long-term value by encouraging executives to focus on long- termlong-term financial progress with the dual objective of enhancing stockholder value and promoting executive retention.		Annual nonqualified stock option grants with seven-year terms that vest in four equal installments on each of the first, second, third and fourth anniversaries of the grant date and return actual value only to the extent that the Company’s stock price appreciates. Annual RSU awards that vest only upon continued employment with the Company. Annual RSU awards for NEOs vest in two equal installments: the first fifty percent of the grant vests on the third anniversary of the grant date; the second fifty percent of the grant vests on the fifth anniversary of the grant date. Target awards are established based on competitive pay information, level of responsibility in the organization and the emphasis on long term incentive pay as the key component of the executive pay program.
Supplemental Retirement Plan I For Select Senior Management (“SERP”)		Supplement the retirement benefits of a limited number long-standing officer of executive officers. the Company.		Unfunded SERP, no longer open to new participants. Messrs.Mr. Merlo and Sgarro areis the only remaining employee participantsparticipant in the SERP.
Deferred Compensation Plan (“DCP”) and Deferred Stock Compensation Plan (“DSP”)		Provide savings in a tax-efficient manner and enhance focus on stock ownership.		The DCP offers a variety of investment choices, none of which represents an above-market return, with up to a 5% match on eligible compensation deferred into the DCP, offset by any match provided under the qualified defined contribution plan. The DSP units fluctuate in value based on the performance of the Company’s common stock.

Competitive Positioning

In consultation with the Company’s executive compensation consultant, the Committee initiates an annual review of the peer group against which financial performance and competitive positioning of compensation programs are assessed. The principal criteria used to determine membership in the peer group include revenue size and industry segment, with consideration also given to geographic scope, diversification of operations and comparability of compensation practices. Our peer group is comprised of large, first-tier companies with national footprints in pharmacy, pharmacy benefit management, insurance, health care, food, general and specialty retailer segments. In

2012 Peer Group. At the end of 2011, the Committee reviewed the peer group for purposes of evaluating 2011making award recommendations and setting 2012 target compensation levels. Retail companies with revenues generally of $50 to $90$100 billion and health care companies with revenues of $30$35 to $115$125 billion for the most recently completed fiscal year were considered peer companies. CVS Caremark falls in the top quartile when this peer group is ranked by revenue.

As a result of the review, two changes were made to the Peer Group when compared to the Peer Group used in 2010 – Sears Holdings Corporation was removed and Express Scripts, Inc. was added. The resulting 20112012 peer group (the “Peer Group”) consistsconsisted of 1413 companies:

Given the Company’s large size relative to its peers, theThe Committee obtainsobtained further insight into market practices by reviewing data relating to 15 large U.S.-based general industry corporations, excluding companies in the financial services, oil and automobile industries, founder companies and companies with unusual ownership structures. Compensation paid to executive officers of the general industry companies is used as a general reference point by the Committee when considering compensation decisions for the Company’s executive officers, but is excluded from the quantitative analyses of compensation levels because the companies are either not in our specific industry segment or do not meet our selection criteria.levels. This additional reference group includes Archer Daniels Midland, AT&T, Boeing, Caterpillar, Dow Chemical, General Electric, Hewlett-Packard, IBM, Johnson & Johnson, Pfizer, Procter & Gamble, Safeway, Time Warner, United Technologies and Verizon.

2013 Peer Group. At the end of 2012, the Committee approved a new peer group used to make award recommendations and set target compensation levels for 2013. The new peer group was constructed to recognize that CVS Caremark competes for talent outside of its specific industry segments, and accounts for CVS Caremark’s size, industry affiliation, and operating and character image. The new peer group incorporates most of the current peer companies, as well as many of the companies currently used as an additional reference from the general industry, and consists of the following companies: AT&T Inc., The Boeing Company, Comcast Corporation, Costco Wholesale Corporation, Express Scripts Holding Company,

The Home Depot, Inc., Johnson & Johnson, Lowe’s Companies, Inc., McKesson Corporation, Merck & Co., Inc., PepsiCo, Inc., Pfizer Inc., The Procter & Gamble Company, Target Corporation, UnitedHealth Group Incorporated, Verizon Communications Inc., Walgreen Co., Wal-Mart Stores, Inc., and The Walt Disney Company.

Annual Executive Compensation Process

General Process. The decision making process cycle used to determine executive compensation target payreview of the current year performance and actual incentive awardsplanning for performance targets for the following year generally begins in the fourth quarter of each year. Preliminary financial performance, key financial metrics as compared to the Peer Group, and total compensation market data for the executives is reviewed in November, as well astogether with any stockholder comments stockholders may provide.received. This early review allows the Committee to be prepared in advance once the final performance year results are determined and provides the initial context for decision making. Updated preliminary financial results and associated incentive award payouts for the completecompleted fiscal year are reviewed by the Committee in January and final decisions on actual incentive awards for the prior year performance are made in February. Finally, financial targets for the current year incentive plans are established atby the Committee in March, meeting, along with any base salary changes and individual target incentive award levels. Starting in NovemberThe annual cycle of 2011,reviewing and developing the process incorporated the results of the first say-on-pay vote as another key factor in developing CVS Caremark’s 2012Company’s executive compensation programs. Given the strong support for our executive compensation program as evidenced by the say-on-pay vote (over 90% in favor), no significant changes to the program were implemented other than the addition of total shareholder return asprograms and pay levels is a measure for our three-year LTIP in 2012, to complement the return on net assets measure. A detailed explanation of themulti-step process follows.that incorporates peer group information, Say-on-Pay results, and both short and long-term Company objectives.

Following each fiscal year, CVS Caremark’s finance department provides the Committee an overview of the Company’s performance and the CEO and CFO provide context and background about management’s progress and achievements of business objectives and key strategic initiatives. The financial and business overview also includes an annual and multi-year comparison of CVS Caremark’s performance compared to that of the Peer Group. Key financial metrics, including total shareholder return, growth in revenue, GAAP operating profit growth, and diluted GAAP EPS growth, as well as return on net assets, are discussed with a focus on the Company’s ranking within the Peer Group. The Committee uses these discussions as a means to guide their decisions relative to the executive officers’ awards in the annual and various long-term incentive plans.

The CEO presents to the independent directors of the Board a self-assessment of his performance against his strategic, operational and financial goals of the Company which were approved by the Board at the beginning of the performance year. The Chairman of the Board and the Committee Chair facilitate a private meeting with all of the independent directors to discuss and assess the performance of the CEO. The Committee’s members consider the independent directors’ assessments in reviewing the CEO’s total compensation and determiningdetermine his annual incentive compensation award and equity compensation grants. The CEO also discusses with the Committee each executive officer’s performance and contribution, with specific attention to progress toward specific strategic, operational and financial goals assigned at the beginning of the year, as well as a review of each officer’s strengths and areas of opportunity, potential future assignments, development strategies and role in the Company’s management succession plan. The Committee and the Board also may meet with each executive officer during the year to assess performance.

Application of the Process in 2012. The process above was followed in 2012. At its January 20112012 meeting, the Committee reviewed competitive market information supplied by the compensation consultant, considered the Peer Group performance results to date, and reviewed preliminary CVS Caremark performance against the incentive targets.

In February 2012, CVS Caremark released its prior year earnings and financial statements; at that time, the Committee assessed the Company’s performance against short- and long-term goals. The CEO presented to the Committee his recommendations for annual cash incentive, stock option and RSU awards for the other executive officers, outlining his assessment of each officer’s performance, contribution and anticipated future role within the Company. The Committee members consulted with other independent directors to determine the appropriate annual cash incentive and equity awards for the CEO within the competitive range established earlier.

During its March 2011 meeting, the Committee considered total compensation survey data, including information on base salaries, annual bonus award targets and actual awards, long-term incentive pay, including stock option grants, RSU awards and other performance-based compensation, for the named

executive officers at companies within the Peer Group and general industry reference companies. This information is compiled by the compensation consultant and discussed with the Committee. In addition, compensation information from general industry surveys, as well as retail and health care surveys, for positions of other BPC members was presented to the Committee. The Committee considered this information when making current year base salary decisions and establishing relevant compensation targets.

Followingtook the relevant performance period,following actions at the Committee may also apply negative discretion (further described below), as appropriate, in determining the final annual incentive awards for the CEO and other executive officers.

In accordance with the process described above, at its meeting on February 15, 2011, the Committee took a number of actions:meeting:

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Approved the value of annual equity awards for each of the executive officers, including the CEO. Awards for each of the executive officers were at or above target levels, reflecting achievement of the Company’s short-term strategic and operational goals and significant progress toward long-term objectives through 2011.

The grant date full fair value of the stock options and RSUs granted to each named executive officer during fiscal 20112012 is shown in the Summary Compensation Table on page 42.41. Additional information about the 20112012 awards, including stock option exercise price and the number of shares subject to each award, is shown in the Grants of Plan-Based Awards Table on page 44.43.

During its March 2012 meeting, the Committee considered total compensation survey data, including information on base salaries, annual bonus award targets and actual awards, long-term incentive pay, including stock option grants, RSU awards and other performance-based compensation, for the named executive officers at companies within the Peer Group and general industry reference companies. This information is compiled by the compensation consultant and discussed with the Committee. The Committee considered this information when making current year base salary decisions and establishing relevant compensation targets. At the March meeting, the Committee approved the following:

Total Direct Compensation

The Company’s management recommends and the Committee and Board approve financial performance targets that are challenging and, if achieved, can deliver superior value to stockholders. Consistent with the setting of ambitious performance targets, and the relative value of their achievement as measured by return to stockholders, CVS Caremark positions its target total direct compensation for its executive officers, which is comprised of base(base salary plus annual and long-term incentives, generallyincentives) for its executive officers at the median for companies of comparable size, and in some cases at the 75^th percentile depending on the specific circumstances.individual performance, tenure, and level of responsibilities. Because of the ambitious goals set, the Committee believes that it is appropriate to reward the executive management team with compensation above the competitive median if the financial targets associated with the variable pay programs are delivered or exceeded. Conversely, if the financial targets are not met, awards are reduced.

Cash versus Non-Cash Compensation

The Committee recognizes the competitive need for an appropriate amount of current cash compensation, comprised of base salary, annual incentive and the cash portion of the LTI plans.a long-term target incentive award. As part of its annual review of the competitiveness and efficacy of the CVS Caremark compensation program, the Committee monitors the relative levels of cash and non-cash compensation to ensure that it places maximum focus on the mix includes an appropriate percentage of non-cash components.

Fixed versus Variable Compensation

The annual incentive program, LTIlong-term target incentive plans and service-based equity award program tie a significant amount of variable compensation to thean executive’s continued employment (subject to the vesting and forfeiture provisions of the stockholder-approved incentive plan and their equity grant

agreements) and the

performance of CVS Caremark common stock over the vesting and option exercise periods. The performance metrics for the annual incentive and LTIlong-term target incentive plans and the range of opportunity relative to target are consistent for all the NEOs, including the CEO. However, in determining individual awards the Committee considers the appropriate individual target incentive opportunity.

For fiscal year 2011,2012, the percentage of target total direct compensation represented by at-risk pay (short- and long-term incentives) for CVS Caremark’s NEOs was as follows:

Components of Executive Compensation Program

The Committee believes a well-balanced executive compensation program must motivate and reward participants for delivering annual financial results. It must also focus the executives’ attention on long-term goals that track financial progress and value creation. These long-term goals include profitability and total stockholder value, typically measured by returns on the Company’s common stock. The Committee recognizes that while stock prices are generally a good indicator of corporate performance over time, external factors that are beyond CVS Caremark’s influence may also have an impact on its stock price. Consequently, the Committee believes that in addition to stock price, other performance indicators including profitability and sound financial management of our working capital should also be measured and factored into payments under our executive compensation program. The Committee has designed its executive compensation program in a manner intended to achieve these objectives.

CVS Caremark’s executive compensation program currently consists of the following: base salary; an annual cash incentive; a three-pillar LTIlong-term incentive program; SERP (for only 2one executive participants)participant); and other benefits, including very limited perquisites.

The three-pillar LTIlong-term incentive program – consisting of long-term target performance incentives, stock options and time-vested RSUs and LTI plans generally settled in cash and stock – represents the majority of the compensation opportunity and actual rewards for the executive management team. The Committee believes that this approach, complemented by the annual incentive plan, provides an optimal pay mix to achieve the financial objectives of stockholders while extending to executive management competitive cash compensation and a wealth creation opportunity derived from value created through stock price growth.

Base Salary

A competitive base salary is designed to attract and retain high-caliber talent and provide a minimum, fixed level of cash compensation. The Committee annually reviews the base salaries of the NEOs and

considers adjustments based on position responsibility, individual qualifications and performance, and Company performance. This review includes a comparison of current salaries of those reported for comparable positions in CVS Caremark’s Peer Group, recognizing that CVS Caremark’s revenue is significantly higher than the majority of companies in its Peer Group and the make-up of the Company’s operations, given its retail/pharmacy/PBM combination, is more complex than most of its peer companies.Group.

The Committee also assesses internal salary levels within CVS Caremark, both with respect to the other executive officers and to other senior employees generally. Base salaries may be adjusted upward at the Committee’s discretion, which it generally chooses to exercise when competitive data indicate a significant market lag or in recognition of outstanding individual performance or an increase in the executive’s functional responsibilities, as iswas the case withfor Mr. Merlo,Roberts, who was promoted to CEO on March 1, 2011.assumed the role of EVP and President – CVS Caremark Pharmacy Services in 2012. Changes to the base salaries of the NEOs made in 20112012 are shown below. The increases to base salary in 20112012 for Messrs. DentonMerlo and MerloDenton reflect each executive’s outstanding contribution to the Company and the critical roles that we expect themthey continue to play in our future growth and success.

Annual Incentive Awards

CVS Caremark maintains an annual Management Incentive Plan (the “MIP”) for its executive officers under the provisions of the stockholder-approved 2010 Incentive Compensation Plan (the “2010 ICP”).ICP. The MIP rewards the NEOs based on performance relative to predetermined financial and operational targets established for the year. The Company’s MIP reflects the Company’s pay-for-performance philosophy in which a significant portion of executive compensation is linked to Company performance and is therefore at-risk.

NEO awards are based on CVS Caremark’s actual performance against operating profit, customer service and customer satisfaction targets established at the beginning of the year. The establishment of the targets, measurement of performance against the targets and subsequent determination of awards to participants are generally implemented in a manner consistent with the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “IRC”), to maximizewhich limits the deductibility of all compensation awarded under the MIP.that is not performance based.

In determining the 20112012 targets, the Committee reviewed CVS Caremark’s performance against the prior year annual operating profit and customer service and satisfaction targets, the Company’s strategic and operational goals for 2011,2012, current and projected external business conditions and the progress represented by the 20112012 annual goals against CVS Caremark’s long-term financial objectives. For fiscal 2011,2012, the

financial performance target for annual incentives was $6,284$6,856 million in Operating Profit. The Committee believes that Operating Profit is an appropriate performance metric for the annual incentive plan, as it measures management’s success in delivering short-term stockholder value while maintaining momentum toward the achievement of longer-term financial progress. Corporate performance against this metric carries an 80% weight in the determination of final award funding. Customer service and satisfaction account for the remaining 20% of award funding; 10% is based on the Retail Customer Service score, which measures customer service in the retail segment and 10% is based on an aggregation of customer satisfaction metrics

from the PBM segment, covering mail order, specialty pharmacy and account/client services. TheTypically, the financial impact of certain legal settlements and other one-time events, such as the Universal American Medicare Part Dan acquisition, waswould be excluded from the calculation of actual performance at year-end. However, no such adjustments were made for 2012.

The Committee establishes a target annual incentive opportunity for each executive officer. This opportunity is expressed as a percentage of base salary and is determined using a variety of relevant factors including but not limited to the competitive landscape reflected by CVS Caremark’s Peer Group, the Committee’s assessment of the aggressiveness of the 20112012 operating profit target and the desired ratios of cash to non-cash and fixed to variable compensation for each executive officer. While the Committee considered the appropriate target incentive opportunity separately for each officer, the performance targets, plan design and range of opportunity relative to target are consistent for all NEOs.

For all executive officers, the target annual incentive percentage represents the percentage of base salary that may be earned if CVS Caremark’s actual performance equals the operating profit and customer service and satisfaction targets established at the beginning of the year. Actual performance relative to the financial and operational targets determines the percentage of the target incentive. Once the Committee establishes the award potentially payable based on actual performance at year-end, it may then apply only negative discretion to the NEOs to adjust that potential award downward. Its consideration includes its assessment of the executive officer’s actual performance and contribution to the achievement of strategic, operational and financial goals, competitive considerations and any other factor it deems appropriate.

Annual Incentive Plan Funding

		Operating Profit (80% weighting)								Customer Service and Client Satisfaction (20% weighting)
		Level of Performance Achieved		Level of Payout of Target						Retail Customer Service (10%)				Client Satisfaction – PBM (10%)
Below Minimum		<96.9% of Target			0	%					0	%			0	%
Threshold		96.9% of Target			30	%					25	%			25	%
Target		$6,856.0 million			100	%					100	%			100	%
Maximum		³3% over Target			200	%					100	%			100	%
Actual		$7,228.0 million			200	%					98	%			94	%

The annual incentive opportunity established for fiscal 20112012 for performance at target and the actual award levels are expressed as a percentage of base salary for each NEO and set forth in the following table:

Annual Incentive Plan Opportunities and Awards

In keeping with prior year practices when assessing performance in 2011,2012, to determine if negative discretion should be applied, the Committee reviewed and took into account specific events includingsuch as progress in the entry into new markets, closings of strategic acquisitions to complement CVS Caremark’s existing businesses, such as the acquisition of the Medicare Part D business of Universal American, new MinuteClinic openings, as well as retail operating margins, inventory management and streamlining efforts in the PBM.PBM, the strengthening of the Company’s cash flow position, positioning for future growth and each executive officers individual contributions during the year.

The Operating Profit, Customer Service and Client Satisfaction performance resulted in a funding level of 89.6%192% of target. The maximum annual incentive award that each named executive officer is eligible to receive is not an expectation of the actual incentive amount that will be awarded to an executive, but is instead the highest amount that the Committee may award as performance-based compensation while preserving deductibility under IRC Section 162(m). In no event will the actual award exceed the designated salary percentage determined by the actual level of performance.

For 2011,After reviewing all of the relevant factors, the Committee did not applyapplied negative discretion to the individualcalculated awards for any executive officers beyond the funded result of less than target performance based on its consideration of 2011 results, taking into account the expected positive impacttwo of the strategic acquisitions which occurred during the year, the strong results of the retail business, the record selling season in the PBM, the strengthening of the Company’s cash flow position and our positioning for future growth. In addition, the Committee considered contributions to the results of the Company on an overall basis as well as performance in other dimensions pertinent to the specific duties and responsibilities of each executive officer. Accordingly, each of theNEOs. The remaining NEOs (other than Mr. Cosby and Mr. Ryan) received 20112012 MIP payouts at 89.6%192% of their annual incentive target.

n

Mr. Denton has continued to strengthen CVS Caremark’s balance sheet. Under Mr. Denton’s direction, However, his incentive was reduced as a result of regulatory issues in the Company generated substantial free cash flow, continues to improve its working capital position and expects the trend to continue. His 2011 annual cash incentive award reflects these successes and level of achievement of the performance metrics described above.Pharmacy Services segment.

The following chart further illustrates the relationship between company performance and executive pay. Shown below is the percentage of our Operating Profit goals achieved relative to target, and the corresponding annual incentive funding. As the chart shows, below target performance results in below target incentive funding, and correspondingly above target performance results in above target funding.

Long-Term Incentive Compensation

General Components of Long-Term Compensation. The Committee believes strongly in the use of long-term incentive compensation for executives to reinforce four strategic objectives:

The Committee has developed a multi-faceted integrated long-term incentive approach to achieve these strategic objectives. The key elements of this approach are an annual stock option and RSU grant, which only vest upon continued employment with the Company, and LTI planslong-term target performance incentive awards generally paid equally in cash and Company common stock, which reward multi-year financial success.success over periods greater than one year (the “LTI plans”). The Committee believes that this structure properly balances the incentive required to drive achievement of the four strategic objectives noted above with the amount and timing of the rewards delivered fordependent on the successful achievement of Company objectives. The structure also reinforces the alignment between executive and stockholder interests. All

three of these LTIlong-term compensation elements are delivered under the provisions of our 2010 ICP. To determine the overall opportunity and appropriate proportionsmix of the components,vehicles, the Committee consideredconsiders a variety of factors, including competitive market positioning against comparable executives in the Peer Group, potential economic value realized, timing of vesting and taxation. AllAlong with a review of these factors were considered within the context of the challenges presented by the strategic, financial and operating goals established for CVS Caremark by the full Board for both 2011 and the longer term. In the first quarter of 2011,Peer Group long-term incentive award practices, the Committee reviewed survey data on total compensation and the value of long-term incentive awards at organizations within the Peer Group which had been compiled and analyzed by Exequity, our compensation consultant. In addition, the Committee consideredconsiders the retentive value of the unvested equity awards held by each executive officer to determine whether additional awards to secure continued employment with the Company were warranted and determined that no special retention awards were needed in 2011.warranted. The Committee also considered,considers, except in the case of the award to the CEO, the recommendations of the CEO for each of the executive officers. Based on theAny permitted financial adjustments to actual results for purposes of the external market review and other factors considered by the Committee, the Committee determined to award the equity grants as shown in the Grants of Plan-Based Awards Table on page 44.

In 2011, we completed performance periods under three LTI plans: (1) our 2009 – 2011 LTIP; (2) our RoNA LTIP for the period July 1, 2010 through December 31, 2011; and (3) our PBMcalculating long-term incentive plan (“PBM LTIP”)results generally mirror those established for the annual incentive plan, but will also include any specific adjustments pertinent to the applicable performance metric and period, January 1, 2010 through December 31, 2011. These LTI plansas necessary. Should an event that qualifies as a permitted financial adjustment occur, the results are adjusted, either up or down, to reflect the impact of that event and documented accordingly at the payoutsconclusion of the performance cycle.

The long-term awards encourage executives to focus on long term financial progress with the ultimate objective of enhancing stockholder value, while simultaneously promoting retention by requiring an executive to forfeit his entire award if employment terminates under certain circumstances before the plans are described below.end of the period.

2012 Long-Term Incentive Awards

In March 2011,2012, the Committee reviewed all aspects of theseour LTI plans, and our RSU and optionsoption grant programs, including the competitiveness of the executive’s target award opportunities, the impact on shares outstanding and the timing and potential economic impact offered by the future vesting of RSU grants and the vesting and exercise of stock option grants. As part of this review, in 2011, the Committee considered all elements and performance metrics of the existing short- short—and long-term incentive plans. Based on this review, the Committee adopted the following mixes for the long-term incentives granted to the NEOs in 2012:

As a result,in the LTIPpast, each of our performance and equity based long-term incentives will continue to be earned independently, meaning that successful achievement of any of the financial goals established for any of the LTI plans will not trigger or accelerate vesting of the RSU or stock option grants; similarly, any awards payable under the LTI plans will be based solely on results as measured against the relevant performance metric and will not be affected by any value realized by the RSU or stock option grants.

2012 Option and RSU Grants. Since 2004, the contractual term of all CVS Caremark options has been fixed at seven years. Starting in 2011, options granted to executives typically vest in four equal installments on each of the first, second, third and fourth anniversaries of the grant date. The annual RSU grants made to the NEOs vest in two equal installments: the first fifty percent (50%) vests on the third anniversary of the grant date; the second fifty percent (50%) of the award vests on the fifth anniversary of the grant date.

The Committee has consistently approved annual equity grants, including stock options and RSUs, in the first quarter of each year and has made such awards without regard to the timing of the release of the Company’s financial results for the year or the timing of the release of any other material non-public information. For fiscal 2012, the grant date was set as the first business day of the Company’s second quarter, which was April 2, 2012.

The full grant date fair value of the stock options and RSUs granted to each NEO during fiscal 2012 is shown in the Summary Compensation Table on page 41. Additional information about the 2012 awards, including stock option exercise price and the number of shares subject to each award, is shown in the Grants of Plan-Based Awards Table on page 43.

2012-2014 LTI Plan Awards to NEOs other than Mr. Lofberg. For the NEOs other than Mr. Lofberg, the LTI plan for the three-year performance period from 2011-2013 will be2012-2014 is based on performance against our three-year return on net assets goal.

The LTIP for the three-year performance period from 2012 – 2014 will continue to utilize a return on net assets performance metric and further incorporate agoal modified by our total shareholder return component.return. Actual return on net assets performance vs. the goal will determine the initial award and relative total shareholder return vs. the S&P 500 over the three-year period will modify the award. If total shareholder return is in the top third for the performance period, the calculated awards will be adjusted upwards by 25%; if in the middle third, no change to the calculated awards; and if in the bottom third, the calculated awards will be adjusted downwards by 25%. The plan focuses on sustainable financial progress and optimal use of the Company’s assets which we expect will contribute to our strategic initiatives to improve CVS Caremark’s working capital and free cash flow, modified by the market’s view of the company’s achievements through total shareholder return.

As in the past, each of the three components of our long-term incentives will continue to be earned independently, meaning that successful achievement of any of the financial goals established for any of the LTI plans will not trigger or accelerate vesting of the RSU or stock option grants; similarly, any awards payable under the LTI plans will be based solely on results as measured against the relevant performance metric and will not be affected by any value realized by the RSU or stock option grants.

Generally, fifty percent (50%) of the awards earned under the LTI plans will continue to be paid in cash due to, among other reasons, the executives’ need for current cash to meet tax obligations occasioned on the settlement of the vesting of RSU awards. However, the target cash portion of the long-term incentive compensation component generally will not exceed 40%25% of the total target long-term compensation. The executive is prohibited from selling or trading awarded shares for two years following the payment date, which encourages stock ownership and further reinforces an alignment of executive’s interests with that of stockholders.

To determineMr. Lofberg participated in the target proportionsPBM LTI plan for the period of each long-term compensation component forJanuary 1, 2011 through December 31, 2012. The performance periods beginningmeasure and associated payout will be discussed in 2011, the Committee applied the principles described above, incorporated its assessment of competitive positioning and dilutive impact on shares outstanding and determined the following allocations:

section.

2010-2012 LTI Plans for Performance Periods Including our 2011 Fiscal YearPlan Awards

The following is an overview of each long-term incentive compensation component. The LTI plans encourage executives to focus on long-term financial progress with the ultimate objective of enhancing stockholder value, while simultaneously promoting retention by requiring an executive to forfeit his entire award if employment terminates under certain circumstances before the end of the performance period. CVS Caremark had three LTI plans: the LTIP and the RoNA LTIP, in which all BPC members participated, and the PBM LTIP, in which Mr. Lofberg was the only participant.

The process by which the Committee establishes the LTI plans’ financial goals is similar to that used to determine the annual incentive plan target. Any permitted financial adjustments to actual results for purposes of calculating long-term incentive plan results generally mirror those established for the annual incentive plan but will also include any specific adjustments pertinent to the applicable performance metric, as necessary. Should an event that qualifies as a permitted financial adjustment occur, results are adjusted, either up or down, to reflect the impact of that event and documented accordingly at the conclusion of the performance cycle.

LTIP

2009 – 2011 Performance Period. The LTIP consists of overlapping three-year performance cycles, with a new cycle commencing each year. The performance metric used in the 2009 – 2011 LTIP is EPS CAGR. The BPC members are directly accountable to the stockholders for influencing EPS. The award opportunity is denominated in dollars and represents the award that will be earned if actual results over the three-year performance period equal the financial goal established by the Committee at the commencement of the period. The actual award will vary based on performance.

Of the executive officers specified in the Summary Compensation Table, only Messrs. Merlo, Denton and Sgarro participatedRoberts received performance awards in 2012 for the full duration of the 2009 – 2011 LTIP performance period. Mr. Ryan participated in the2010-2012 LTI plan for a portion of the cycle, but like the other participants received no payout.performance. The target

performance goal was an EPS CAGR of 11.1%8.7%. The following table sets forth minimum, threshold and maximum goals, and the range of potential payouts as a percent of target:

Potential payouts at minimum, threshold, target and maximum award levels are shown in the chart below. After the application of permitted financial adjustments to the calculation of performance results (the same as those described above forexclusion of Universal American’s results, the annual incentive plan)impacts of the HealthNet acquisition and the debt restructuring), the actual result for the performance period was 34.7%96.0% of target. Therefore,target resulting in awards of 83.7% of the minimum performance threshold was not satisfied and no payouts were made for this LTIP performance cycle.target amounts.

20092010 – 20112012 LTIP Opportunities and Awards

2010 – 2012 and 2011 – 2013 Performance Periods: In 2010 and 2011, the Committee established2011-2012 PBM LTIP cycles with an EPS CAGR goal for the three-year period ending December 31, 2012 and a return on net assets goal for the three-year period ending December 31, 2013. In setting the EPS CAGR target for the 2010 – 2012 performance cycle, the Committee considered the current year’s EPS, the economic environment and expectations for future growth. The return on net assets goal for the 2011 – 2013 cycle was established based on the company’s working capital improvement goals. The Committee and management believe that disclosure of the EPS growth target and return on net assets goal over a three-year prospective period would result in competitive harm to the Company and, accordingly, will disclose the specific targets for these cycles at the end of their respective performance periods. The Committee believes that the specific performance targets for these cycles are at least as challenging as the performance targets established for prior LTIP cycles and the award opportunities established for these cycles have been calibrated accordingly. Each BPC member, with the exception ofEarned by Mr. Lofberg (who participates in the PBM LTIP), is participating in the 2010 – 2012 and 2011 – 2013 performance cycles, consistent with the Plan’s provisions.

Mr. Ryan did not receive any LTI plan awards for periods beginning in 2011 or later as he commenced a scheduled retirement in the first quarter of 2011. The LTIP granted to Mr. Ryan during his employment for the 2010 – 2012 performance cycle will be pro-rated based upon the number of months Mr. Ryan served in the three-year performance cycle prior to his retirement. Any award that Mr. Ryan earns based on actual Company performance will be paid in cash and will only be paid when the performance cycle has been completed and performance has been ascertained and certified by the Committee.

PBM LTIP

The PBM LTIP was approved by the Committee forgranted to Mr. Lofberg and includes two performance periods. Performancein 2011 for the firstperformance period was measured by reference tofrom January 1, 2011 through December 31, 2012 required the achievement of a compound annual growth rate for earnings before interest and taxes (“EBIT CAGR”) for the PBM business segment against a pre-established

target. The first performance period was January 1, 2010 through December 31, 2011, and the second performance period is from January 1, 2011 through December 31, 2012. The award opportunity, for each performance period, payable equally in cash and shares of CVS Caremark common stock, iswas $1.5 million. The shares are subject to restrictions against sale or transfer once earned, until the end of Mr. Lofberg’s employment term. The Committee and management believe that disclosure of the target with respect to the second performance period would result in competitive harm to the Company and, accordingly, will disclose the specific targets for this cycle at the end of the relevant performance period. The awards areaward was subject to adjustment based upon the actual performance, as shown in the chart below:

The EBIT CAGR target for the 20102011 – 20112012 performance cycle was -3.1%0.73% and the final result was -16.3%2.36%. The minimum performance threshold was not satisfied for the 2010 – 2011 performance period and, therefore, no payouts were made to Mr. Lofberg for the first PBM LTIP performance period.

RoNA LTIP

In 2010, management proposed and the Committee approved an eighteen-month incentive plan in which BPC members and a limited group of key executives participated to focus management on improving our working capital, cash flow and return on invested capital. The performance cycle was July 1, 2010 through December 31, 2011 and was designed to complement existing long-term incentive plans. The RoNA LTIP’s performance metric complements the existing earnings and EPS CAGR metrics used in our annual cash incentive plan and LTIP, respectively, to focus management on sustainable financial progress and optimal use of Company assets. Consistent with the objectives of the LTIP and the PBM LTIP, the RoNA LTIP encouraged our executives to focus on achieving strategic performance objectives that can add stockholder value and are critical to the overall success of CVS Caremark, while simultaneously promoting retention by requiring an executive to forfeit all of his or her award if employment terminates under certain circumstances before the end of the performance period.

The Committee had established the performance metric of a 23.5% return on net assets and the Company achieved 99.8% of the RoNA goal resultingresulted in a payout of 93.7% of the target award. The awards were generally paid out equally in cash and Company stock. The shares are subject200% to a two-year restriction from sale or transfer once they were earned.Mr. Lofberg.