Medco Health Solutions (MHS) 10-Q 3 Nov 09 2009 Q3 Quarterly report Financial data

Document Information

Document Information
	9 Months Ended Sep. 26, 2009 USD / shares
Document Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2009-09-26

Entity Information

Entity Information (USD $)
	9 Months Ended Sep. 26, 2009	Oct. 29, 2009	Jun. 28, 2008
Entity Information
Entity Registrant Name	MEDCO HEALTH SOLUTIONS INC
Entity Central Index Key	0001170650
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Current Fiscal Year End Date	--12-26
Entity Filer Category	Large Accelerated Filer
Entity Well-known Seasoned Issuer	Yes
Entity Common Stock, Shares Outstanding		476,764,395
Entity Public Float			$23,575,060,953

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Unaudited) (USD $)
In Millions	Sep. 26, 2009	Dec. 27, 2008
ASSETS
Cash and cash equivalents	2020.3	938.4
Short-term Investments	47.6	64
Manufacturer accounts receivable, net	1810.9	1858.9
Client accounts receivable, net	1,646	1680.5
Income taxes receivable	197.5	213.4
Inventories, net	1341.4	1856.5
Prepaid expenses and other current assets	59.6	326.6
Deferred tax assets	222.8	159.2
Total current assets	7346.1	7097.5
Property and equipment, net	869.1	854.1
Goodwill	6335.2	6331.4
Intangible assets, net	2500.6	2666.4
Other noncurrent assets	60.8	61.5
Total assets	17111.8	17010.9
LIABILITIES AND STOCKHOLDERS' EQUITY
Claims and other accounts payable	2768.8	2878.9
Client rebates and guarantees payable	2146.7	1658.7
Accrued expenses and other current liabilities	620.8	660.4
Short-term debt	211.7	600
Total current liabilities	5,748	5,798
Long-term debt, net	3999.2	4002.9
Deferred tax liabilities	995.8	1065.3
Other noncurrent liabilities	206.4	186.8
Total liabilities	10949.4	11,053
Stockholders' equity:
Preferred stock, par value $0.01-authorized: 10,000,000 shares; issued and outstanding: 0	0	0
Common stock, par value $0.01-authorized: 2,000,000,000 shares at September 26, 2009 and December 27, 2008; issued: 659,018,524 shares at September 26, 2009 and 652,386,763 shares at December 27, 2008	6.6	6.5
Accumulated other comprehensive loss	-55.7	-63.8
Additional paid-in capital	8053.6	7788.9
Retained earnings	4,868	3929.3
Stockholders' equity before treasury stock	12872.5	11660.9
Treasury stock, at cost: 182,642,440 shares at September 26, 2009 and 159,061,394 shares at December 27, 2008	-6710.1	(5,703)
Total stockholders' equity	6162.4	5957.9
Total liabilities and stockholders' equity	17111.8	17010.9

1_Condensed Consolidated Balanc

Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) (USD $)
	Sep. 26, 2009	Dec. 27, 2008
Condensed Consolidated Balance Sheets
Preferred stock, par value	0.01	0.01
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	0.01	0.01
Common stock, shares authorized	2,000,000,000	2,000,000,000
Common stock, shares issued	659,018,524	652,386,763
Treasury stock, shares	182,642,440	159,061,394

Condensed Consolidated Statemen

Condensed Consolidated Statements of Income (Unaudited) (USD $)
In Millions, except Per Share data	3 Months Ended Sep. 26, 2009	3 Months Ended Sep. 27, 2008	9 Months Ended Sep. 26, 2009	9 Months Ended Sep. 27, 2008
Product net revenues (Includes retail co-payments of $2,115 and $1,828 in the third quarters of 2009 and 2008, and $6,487 and $5,830 in the nine months of 2009 and 2008)	14590.8	12390.3	43936.6	37804.3
Service revenues	204	168.8	622.5	492.3
Total net revenues	14794.8	12559.1	44559.1	38296.6
Cost of operations:
Cost of product net revenues (Includes retail co-payments of $2,115 and $1,828 in the third quarters of 2009 and 2008, and $6,487 and $5,830 in the nine months of 2009 and 2008)	13696.5	11580.7	41384.7	35391.5
Cost of service revenues	58.3	53.6	174.6	146.7
Total cost of revenues	13754.8	11634.3	41559.3	35538.2
Selling, general and administrative expenses	369	347.2	1,080	1,044
Amortization of intangibles	78.4	71.1	230.1	211.2
Interest expense	43.3	61.5	131.8	173.6
Interest (income) and other (income) expense, net	-3.4	-3.3	-9.1	-3.7
Total costs and expenses	14242.1	12110.8	42992.1	36963.3
Income before provision for income taxes	552.7	448.3	1,567	1333.3
Provision for income taxes	217.1	152.6	628.3	504.7
Net income	335.6	295.7	938.7	828.6
Basic weighted average shares outstanding	475.4	503.3	482.4	512.7
Basic earnings per share	0.71	0.59	1.95	1.62
Diluted weighted average shares outstanding	484.7	513.4	491	523
Diluted earnings per share	0.69	0.58	1.91	1.58

2_Condensed Consolidated Statem

Condensed Consolidated Statements of Income (Parenthetical) (Unaudited) (USD $)
In Millions	3 Months Ended Sep. 26, 2009	3 Months Ended Sep. 27, 2008	9 Months Ended Sep. 26, 2009	9 Months Ended Sep. 27, 2008
Condensed Consolidated Statements of Income
Retail co-payment product net revenue	$2,115	$1,828	$6,487	$5,830
Retail co-payment cost of product net revenue	$2,115	$1,828	$6,487	$5,830

3_Condensed Consolidated Statem

Condensed Consolidated Statement of Stockholders' Equity (Unaudited) (USD $)
In Millions, except Share data in Thousands	Common Stock [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balances, value at Dec. 27, 2008	6.5	($5,703)	-63.8	7788.9	3929.3	5957.9
Shares balances at Dec. 27, 2008	652,387	159,061
Comprehensive income (loss):
Net income					938.7	938.7
Other comprehensive income (loss):
Unrealized gain on investments, net of tax of $(0.1)			0.2			0.2
Foreign currency translation gain			5.4			5.4
Amortization of unrealized loss on cash flow hedge, net of tax of $(1.0)			1.7			1.7
Defined benefit plans, net of tax:
Amortization of prior service credit included in net periodic benefit cost, net of tax of $1.2			-1.8			-1.8
Net gains included in net periodic benefit cost, net of tax of $(1.7)			2.6			2.6
Other comprehensive income			8.1			8.1
Total comprehensive income			8.1		938.7	946.8
Issuance of common stock under employee stock purchase plan, value				15.7		15.7
Issuance of common stock under employee stock purchase plan, shares	368
Stock option activity, including tax benefit, value	0.1			216.8		216.9
Stock option activity, including tax benefit, shares	5,285
Restricted stock unit activity, including tax benefit, value				32.2		32.2
Restricted stock unit activity, including tax benefit, shares	979
Treasury stock acquired, value		-1007.1				-1007.1
Treasury stock acquired, shares		23,581
Shares balances at Sep. 26, 2009	659,019	182,642
Balances, value at Sep. 26, 2009	6.6	-6710.1	-55.7	8053.6	$4,868	6162.4

4_Condensed Consolidated Statem

Condensed Consolidated Statement of Stockholders' Equity (Parenthetical) (Unaudited) (USD $)
In Millions	12/28/2008 - 9/26/2009
Condensed Consolidated Statement of Stockholders' Equity
Tax portion on unrealized gain on investments	-0.1
Tax portion on amortization of unrealized loss on cash flow hedge	(1)
Tax portion on amortization of prior service credit included in net periodic benefit cost	1.2
Tax portion on net gains included in net periodic benefit cost	-1.7

5_Condensed Consolidated Statem

Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Millions	9 Months Ended Sep. 26, 2009	9 Months Ended Sep. 27, 2008
Cash flows from operating activities:
Net income	938.7	828.6
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	135.8	117.7
Amortization of intangibles	230.1	211.2
Deferred income taxes	-162.9	-89.4
Stock-based compensation on employee stock plans	109.1	97.8
Tax benefit on employee stock plans	81.5	63.6
Excess tax benefits from stock-based compensation arrangements	-46.3	-39.3
Other	106.7	80.9
Net changes in assets and liabilities (net of acquisition effects, 2008 only):
Manufacturer accounts receivable, net	48	-306.8
Client accounts receivable, net	(69)	-203.9
Inventories, net	514.9	2.5
Prepaid expenses and other current assets	267.2	213.6
Income taxes receivable	15.9	4.5
Other noncurrent assets	9.9	10.5
Claims and other accounts payable	-110.5	-651.5
Client rebates and guarantees payable	487.9	555.6
Accrued expenses and other current and noncurrent liabilities	-13.4	-98.4
Net cash provided by operating activities	2543.6	797.2
Cash flows from investing activities:
Capital expenditures	-154.3	-156.5
Purchase of securities and other assets	-122.4	(73)
Cash paid for Europa Apotheek Venlo B.V., net of cash acquired	0	-126.5
Proceeds from sale of securities and other investments	59.6	69
Net cash used by investing activities	-217.1	(287)
Cash flows from financing activities:
Proceeds from long-term debt	0	3235.7
Repayments on long-term debt	0	(2,150)
Proceeds from short-term debt	11.7	0
Repayments under accounts receivable financing facility	(400)	0
Debt issuance costs	-0.3	-11.3
Settlement of cash flow hedge	0	-45.4
Purchases of treasury stock	-1007.1	-1956.3
Excess tax benefits from stock-based compensation arrangements	46.3	39.3
Net proceeds from employee stock plans	104.8	44.5
Net cash used by financing activities	-1244.6	-843.5
Net increase (decrease) in cash and cash equivalents	1081.9	-333.3
Cash and cash equivalents at beginning of period	938.4	774.1
Cash and cash equivalents at end of period	2020.3	440.8

Basis Of Presentation

Basis Of Presentation (Unaudited)
	9 Months Ended Sep. 26, 2009 USD / shares
Basis of Presentation [Abstract]
Basis of Presentation	1. Basis OF PRESENTATION The accompanying unaudited interim condensed consolidated financial statements of Medco Health Solutions, Inc. and its subsidiaries (Medco or the Company) have been prepared pursuant to the Securities and Exchange Commissions (SECs) rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements are not included herein. In the opinion of the Companys management, all adjustments, which include adjustments of a normal recurring nature necessary for a fair statement of the financial position, results of operations and cash flows at the dates and for the periods presented, have been included. The results of operations for any interim period are not necessarily indicative of the results of operations for the full year. The unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the fiscal year ended December 27, 2008. The Companys third fiscal quarters for 2009 and 2008 each consisted of 13 weeks and ended on September 26, 2009 and September 27, 2008, respectively.

Recently Adopted Financial Acco

Recently Adopted Financial Accounting Standards And Recently Issued Accounting Pronouncement (Unaudited)
	9 Months Ended Sep. 26, 2009 USD / shares
Recently Adopted Financial Accounting Standards And Recently Issued Accounting Pronouncement
Recently Adopted Financial Accounting Standards and Recently Issued Accounting Pronouncement	2. RECENTLY ADOPTED FINANCIAL ACCOUNTING STANDARDs and recently issued accounting pronouncement Recently Adopted Financial Accounting Standards Subsequent Events. In May 2009, the Financial Accounting Standards Board (FASB) issued a standard, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date; that is, whether that date represents the date the financial statements were issued or were available to be issued. The standard was effective for interim or annual financial periods ending after June15, 2009. The Company adopted the standard in the second quarter of 2009. The Company has evaluated subsequent events through November 3, 2009, the filing date of this Quarterly Report on Form 10-Q. The Companys adoption of the standard did not have a material impact on its unaudited interim condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Accounting for Defensive Intangible Assets. In November 2008, Authoritative Guidance was issued, which applies to all acquired intangible assets in situations in which the acquirer does not intend to actively use the asset but intends to hold the asset to prevent its competitors from obtaining access to the asset (a defensive intangible asset). The standard is effective prospectively for intangible assets acquired on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Earlier application is not permitted. The Companys adoption of the standard in 2009 did not have an impact on its unaudited interim condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Determination of the Useful Life of Intangible Assets. In April 2008, the FASB issued a standard, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset and requires additional disclosure. The standard applies to all intangible assets, whether acquired in a business combination or otherwise, and is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The guidance for determining the useful life of intangible assets is applied prospectively to intangible assets acquired after the effective date. The disclosure requirements apply prospectively to all intangible assets recognized as of, and subsequent to, the effective date. The Companys adoption of the standard in 2009 did not have a material impact on its unaudited interim condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. For additional disclosures required under the standard, see Note 6, Goodwill and Intangible Assets, Net, to the unaudited interim condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Disclosures about Derivative Instruments and Hed

Fair Value Disclosures

Fair Value Disclosures (Unaudited)
	9 Months Ended Sep. 26, 2009 USD / shares
Fair Value Disclosures [Abstract]
Fair Value Disclosures	3. fair vALUE Disclosures Fair Value Measurements On December 30, 2007, the Company adopted a FASB fair value measurements accounting standard except with respect to those nonrecurring measurements for nonfinancial assets and nonfinancial liabilities subject to the partial deferral in related guidance issued by the FASB. The adoption of the standard in fiscal 2008 for financial assets and liabilities, and in 2009 for nonfinancial assets and liabilities, did not have an impact on the Companys financial position or results of operations. Fair Value Hierarchy. The standard defines the inputs used to measure fair value into the following hierarchy: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs reflecting the reporting entitys own assumptions. The Company utilizes the best available information in measuring fair value. The following table sets forth, by level within the fair value hierarchy, the financial assets recorded at fair value on a recurring basis as of September 26, 2009 ($ in millions): Medco Fair Value Measurements at Reporting Date Description September 26, 2009 Level 1 Level 2 Level 3 Money market mutual funds........................................ $ 1,410.0(1) $ 1,410.0 $ $ Fair value of interest rate swap agreements.............. 13.5(2) 13.5 (1) Reported in cash and cash equivalents on the unaudited interim condensed consolidated balance sheet. (2) Reported in other noncurrent assets on the unaudited interim condensed consolidated balance sheet. The Companys money market mutual funds are invested in funds that seek to preserve principal, are highly liquid, and therefore are recorded on the consolidated balance sheets at the principal amounts deposited, which equals the asset values quoted by the money market fund custodians. The fair value of the Companys obligation under its interest rate swap agreements, which hedge interest costs on the senior notes, is based upon observable market-based inputs that reflect the present values of the difference between estimated future fixed rate payments and future variable rate receipts, and therefore are classified within Level 2. Historically, there have not been significant fluctuations in the fair value of the Companys financial assets. For more information, see Note 2, Summary of Significant Accounting PoliciesRecently Adopted Financial Accounting Standards, to the audited consolidated financial statements included in Part II, Item 8 of the Companys Annual Report on Form 10-K for the fiscal year ended December 27, 2008. Fair Value of Financial Instruments On the first day of its 2009 second fiscal quarter, the Company adopted a FASB standard which requires quarterly fair value disclosures for financial instruments. The carrying amount of the accounts receivable financing facility, the term loan and revolving credit obligations under the Companys senior unsecured bank credit facilities, short-te

Earnings Per Share

Earnings Per Share (Unaudited)
	9 Months Ended Sep. 26, 2009 USD / shares
Earnings Per Share [Abstract]
Earnings Per Share (EPS)	4. earnings per share (eps) The following is a reconciliation of the number of weighted average shares used in the basic and diluted EPS calculations (amounts in millions): Quarters Ended Nine Months Ended September 26, 2009 September 27, 2008 September 26, 2009 September 27, 2008 Basic weighted average shares outstanding............... 475.4 503.3 482.4 512.7 Dilutive common stock equivalents: Outstanding stock options, restricted stock units and restricted stock............ 9.3 10.1 8.6 10.3 Diluted weighted average shares outstanding ........... 484.7 513.4 491.0 523.0 The FASBs earnings per share standard requires that stock options and restricted stock units granted by the Company be treated as potential common shares outstanding in computing diluted earnings per share. Under the treasury stock method on a grant by grant basis, the amount the employee or director must pay for exercising the award, the amount of compensation cost for future service that the Company has not yet recognized, and the amount of tax benefit that would be recorded in additional paid-in capital when the award becomes deductible, are assumed to be used to repurchase shares at the average market price during the period. For the quarter and nine months ended September 26, 2009, there were outstanding options to purchase 4.7 million and 10.4 million shares of Medco stock, respectively, which were not dilutive to the EPS calculations when applying the treasury stock method. These outstanding options may be dilutive to future EPS calculations. For the quarter and nine months ended September 27, 2008, there were outstanding options to purchase 5.3million and 5.4 million shares of Medco stock, respectively, which were not dilutive to the EPS calculations. The decreases in the weighted average shares outstanding and diluted weighted average shares outstanding for the quarter and nine months ended September 26, 2009 compared to the same periods in 2008 result from the repurchase of approximately 182.6 million shares of stock in connection with the Companys share repurchase programs since inception in 2005 through the third quarter of 2009, compared to an equivalent amount of 153.2 million shares repurchased inception-to-date through the end of the third quarter of 2008. The Company did not repurchase shares of stock in the third quarter of 2009, and repurchased approximately 8.3 million shares in the third quarter of 2008. The Company repurchased approximately 23.6 million and 41.8 million shares in the nine months of 2009 and 2008, respectively. In accordance with the standard, weighted average treasury sharesare not considered part of the basic or diluted shares outstanding.

Accounts Receivable

Accounts Receivable (Unaudited)
	9 Months Ended Sep. 26, 2009 USD / shares
Accounts Receivable [Abstract]
Accounts Receivable	5. accounts receivable The Company separately reports accounts receivable due from manufacturers and accounts receivable due from clients. Client accounts receivable are presented net of allowance for doubtful accounts and include a reduction for rebates and guarantees payable to clients when these payables are settled on a net basis in the form of an invoice credit. As of September 26, 2009 and December 27, 2008, identified net Specialty Pharmacy accounts receivable, primarily due from payors and patients, amounted to $461.3 million and $476.4 million, respectively. The Companys allowance for doubtful accounts as of September 26, 2009 and December 27, 2008 of $136.8 million and $120.0 million, respectively, includes $82.5 million and $71.9 million, respectively, related to the Specialty Pharmacy segment. The relatively higher allowance for the Specialty Pharmacy segment reflects a different credit risk profile than the pharmacy benefit management (PBM) business, and is characterized by reimbursement through medical coverage, including government agencies, and higher patient co-payments. See Note 9, Segment Reporting, to the unaudited interim condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for more information on the Specialty Pharmacy segment. The Companys allowance for doubtful accounts as of September 26, 2009 and December 27, 2008 also includes $36.9 million and $34.6 million, respectively, related to PolyMedica Corporation (PolyMedica) for diabetes supplies, which are primarily reimbursed by insurance companies and government agencies. The increase in the reserve balance reflects increased coverage of aged balances. In addition, the Companys allowance for doubtful accounts reflects amounts associated with member premiums for the Companys Medicare Part D product offerings.

Goodwill And Intangible Assets,

Goodwill And Intangible Assets, Net (Unaudited)
	9 Months Ended Sep. 26, 2009 USD / shares
Goodwill And Intangible Assets, Net [Abstract]
Goodwill and Intangible Assets, Net	6. goodwill and INTANGIBLE ASSETS, net The following is a summary of the Companys goodwill and other intangible assets ($ in millions): September 26, 2009 December 27, 2008 Gross Carrying Value Accumulated Amortization Net Gross Carrying Value Accumulated Amortization Net Goodwill: PBM(1)............................................................. $ 5,232.6 $ 813.4 $ 4,419.2 $ 5,228.1 $ 813.4 $ 4,414.7 Specialty Pharmacy(2)...................................... 1,916.0 1,916.0 1,916.7 1,916.7 Total......................................................... $ 7,148.6 $ 813.4 $ 6,335.2 $ 7,144.8 $ 813.4 $ 6,331.4 Intangible assets: PBM(1) (3)......................................................... $ 3,821.6 $ 2,014.1 $ 1,807.5 $ 3,757.1 $ 1,820.4 $ 1,936.7 Specialty Pharmacy(2)...................................... 865.1 172.0 693.1 865.1 135.4 729.7 Total......................................................... $ 4,686.7 $ 2,186.1 $ 2,500.6 $ 4,622.2 $ 1,955.8 $ 2,666.4 (1) Principally comprised of the push-down of the excess of acquisition costs over the fair value of the Companys net assets from the acquisition of the Company by Merck Co., Inc. (Merck) in 1993, and the recorded value of Medcos client relationships at the time of acquisition and, to a lesser extent, the Companys acquisition of a majority interest in Europa Apotheek Venlo B.V. (Europa Apotheek) in 2008, and the Companys acquisitions of PolyMedica in 2007 and ProVantage Health Services, Inc. in 2000. (2) Represents the Specialty Pharmacy segment, primarily reflecting the portion of the excess of the purchase price paid by the Company to acquire Accredo Health, Incorporated (Accredo) in 2005 over the fair value of tangible net assets acquired, and to a significantly lesser extent, a portion of the excess of the purchase price paid by the Company to acquire Critical Care Systems, Inc. (Critical Care) in 2007, and Pediatric Services of America, Inc. in 2005. (3) The increase in the gross carrying value of intangible assets primarily represents the recorded value of a diabetes patient list acquired in the first quarter of 2009. For intangible assets existing as of September 26, 2009, aggregate intangible asset amortization expense in each of the five succeeding fiscal years is estimated as follows ($ in millions): Fiscal Years Ending December 2009 (remaining).................................................................................................. $ 75.6 2010....................................................................................................................... 277.0 2011....................................................................................................................... 258.7 2012.............................................................................

Pension And Other Postretiremen

Pension And Other Postretirement Benefits (Unaudited)
	9 Months Ended Sep. 26, 2009 USD / shares
Pension and other postretirement benefits
Pension and Other Postretirement Benefits	7. pension and other postretirement benefits Net Pension and Postretirement Benefit Cost. The Company has various plans covering the majority of its employees. The net cost for the Companys pension plans consisted of the following components ($ in millions): Quarters Ended Nine Months Ended September 26, 2009 September 27, 2008 September 26, 2009 September 27, 2008 Service cost....................................................................... $ 6.1 $ 5.9 $ 18.2 $ 18.5 Interest cost...................................................................... 3.3 2.4 9.9 7.2 Expected return on plan assets...................................... (2.5) (3.3) (7.4) (9.8) Amortization of prior service cost................................. 0.1 0.2 Net amortization of actuarial losses ............................. 1.3 0.1 4.0 0.2 Net pension cost.............................................................. $ 8.3 $ 5.1 $ 24.9 $ 16.1 The increase in the net pension cost for the quarter and nine months ended September 26, 2009 compared to the same periods in 2008 reflects increased amortization of actuarial losses and reduced expected return on plan assets, which resulted from reductions in pension plan assets from investment losses in 2008. The Company maintains an unfunded postretirement healthcare benefit plan covering the majority of its employees. The net credit for these postretirement benefits consisted of the following components ($ in millions): Quarters Ended Nine Months Ended September 26, 2009 September 27, 2008 September 26, 2009 September 27, 2008 Service cost....................................................................... $ 0.3 $ 0.2 $ 0.8 $ 0.6 Interest cost...................................................................... 0.2 0.3 0.6 0.6 Amortization of prior service credit............................... (1.1) (1.1) (3.1) (3.2) Net amortization of actuarial losses.............................. 0.2 0.1 0.4 0.4 Net postretirement benefit credit................................... $ (0.4) $ (0.5) $ (1.3) $ (1.6) The Company amended the postretirement healthcare benefit plan in 2003, which reduced and capped benefit obligations, the effect of which is reflected in the amortization of the prior service credit component of the net postretirement benefit credit.

Taxes on Income

Taxes on Income (Unaudited)
	9 Months Ended Sep. 26, 2009 USD / shares
Taxes on Income [Abstract]
Taxes on Income	8. taxes on income The Companys effective tax rate was 39.3% and 40.1% for the quarter and nine months ended September 26, 2009, respectively, compared to 34.0% and 37.9% for the same periods in 2008.The 2008 rates reflect a net nonrecurring state income tax benefit of $28 million recorded in the third quarter of 2008 resulting primarily from statute of limitations expirations in certain states, partially offset by state tax law changes. In the third quarter of 2006, the IRS commenced a routine examination of the Companys U.S. income tax returns for the period subsequent to the spin-off, from August 20, 2003 through December 31, 2005, which is currently anticipated to be completed in the first quarter of 2010. In the fourth quarter of 2008, the IRS commenced a routine examination of the Companys 2006 and 2007 U.S. income tax returns, which is estimated to be completed in 2010. The Company has agreed to extend the statute of limitations for the 2003 tax period and the 2004 and 2005 tax years to September 15, 2010. The IRS proposed and the Company had previously recorded certain adjustments to the Companys 2003 to 2005 tax returns, which did not have a material impact on the consolidated financial statements. The Company does not believe that the completion of the examination through the 2005 tax year will result in any additional significant tax adjustments.

Segment Reporting

Segment Reporting (Unaudited)
	9 Months Ended Sep. 26, 2009 USD / shares
Segment Reporting [Abstract]
Segment Reporting	9. SEGment Reporting Reportable Segments. The Company has two reportable segments, PBM and Specialty Pharmacy. The PBM segment involves sales of traditional prescription drugs and supplies to the Companys clients and members, either through the Companys networks of contractually affiliated retail pharmacies or the Companys mail-order pharmacies. The PBM segment also includes the operating results of PolyMedica, a provider of diabetes testing supplies and related products, as well as majority-owned Europa Apotheek, which provides mail-order pharmacy and clinical healthcare services in Germany and the Netherlands, commencing on the April 28, 2008 acquisition date. The Specialty Pharmacy segment, which was formed at the time of the Accredo acquisition in 2005, includes the sale of higher-margin specialty pharmacy products and services for the treatment of chronic and complex (potentially life-threatening) diseases. The Specialty Pharmacy segment also includes the operating results of Critical Care, a provider of specialty infusion services. The Company defines the Specialty Pharmacy segment based on a product set and associated services, broadly characterized to include drugs that are high-cost, usually developed by biotechnology companies and often injectable or infusible, and which require elevated levels of patient support. When dispensed, these products frequently require ancillary administration equipment, special packaging, and a higher degree of patient-oriented customer service than is required in the traditional PBM business model, including in-home nursing services and administration. In addition, specialty pharmacy products and services are often covered through medical benefit programs with the primary payors being insurance companies and government programs. Additionally, payors include patients, as well as PBM clients. Selected Segment Income and Asset Information. Total net revenues and operating income are measures used by the chief operating decision maker to assess the performance of each of the Companys operating segments. The following tables present selected financial information about the Companys reportable segments, including a reconciliation of operating income to income before provision for income taxes ($ in millions): Quarterly Results: Quarter Ended September 26, 2009 Quarter Ended September 27, 2008 PBM Specialty Pharmacy Total PBM Specialty Pharmacy Total Product net revenues.......................................................... $ 12,213.4 $ 2,377.4 $ 14,590.8 $ 10,393.4 $ 1,996.9 $ 12,390.3 Service revenues................................................................. 180.8 23.2 204.0 151.0 17.8 168.8 Total net revenues.............................................................. 12,394.2 2,400.6 14,794.8 10,544.4 2,014.7 12,559.1 Total cost of revenues........................................................ 11,531.7 2,223.1 13,754.8 9,782.8 1,851.5 11,634.3 Selling, general and administrative expenses

Commitments And Contingencies

Commitments And Contingencies (Unaudited)
	9 Months Ended Sep. 26, 2009 USD / shares
Commitments and Contingencies [Abstract]
Commitments and Contingencies	10. Commitments and contingencies Legal Proceedings In the ordinary course of business, the Company is involved in litigation, claims, government inquiries, investigations, charges and proceedings, including, but not limited to, those relating to regulatory, commercial, employment, employee benefits and securities matters. The significant matters are described below. There is uncertainty regarding the possible course and outcome of the proceedings discussed below. Although it is not feasible to predict or determine the final outcome of any proceedings with certainty, the Company believes there is no litigation pending against the Company that could have, individually or in the aggregate, a material adverse effect on the Companys business, financial condition, liquidity and operating results. However, there can be no assurances that an adverse outcome in any of the proceedings described below will not result in material fines, penalties and damages, changes to the Companys business practices, loss of (or litigation with) clients or a material adverse effect on the Companys business, financial condition, liquidity and operating results. It is also possible that future results of operations for any particular quarterly or annual period could be materially adversely affected by the ultimate resolution of one or more of these matters, or changes in the Companys assumptions or its strategies related to these proceedings. The Company continues to believe that its business practices comply in all material respects with applicable laws and regulations and is vigorously defending itself in the actions described below. The Company believes that most of the claims made in these proceedings would not likely be covered by insurance. In accordance with the FASBs standard on accounting for contingencies, the Company records accruals for contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. These assessments can involve a series of complex judgments about future events and may rely heavily on estimates and assumptions that have been deemed reasonable by management. Government Proceedings and Requests for Information. The Company is aware of the existence of three sealed qui tam matters. The first action is filed in the Eastern District of Pennsylvania and it appears to allege that the Company billed government payors using invalid or out-of-date national drug codes (NDCs). The second action is filed in the District of New Jersey and appears to allege that the Company charged government payors a different rate than it reimbursed pharmacies; engaged in duplicate billing; refilled prescriptions too soon; and billed government payors for prescriptions written by unlicensed physicians and physicians with invalid Drug Enforcement Agency authorizations. The Department of Justice has not yet made any decision as to whether it will intervene in either of these matters. The matters are under seal and U.S. District Court orders prohibit the Company from answering inquiries about the complaints. The Company was notified of the existence of these two qui tam matters during settlement negot