Medco Health Solutions (MHS) 10-K 23 Feb 10 2009 FY Annual report Financial data

Document Information

Document Information
	12 Months Ended Dec. 26, 2009 USD / shares
Document Information
Document Type	10-K
Amendment Flag	false
Document Period End Date	2009-12-26

Entity Information

Entity Information (USD $)
	12 Months Ended Dec. 26, 2009	Feb. 17, 2010	Jun. 27, 2009
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		464,060,676
Entity Public Float			$21,559,406,368

Consolidated Balance Sheets

Consolidated Balance Sheets (USD $)
In Millions	Dec. 26, 2009	Dec. 27, 2008
ASSETS
Cash and cash equivalents	2528.2	938.4
Short-term Investments	20.1	64
Manufacturer accounts receivable, net	1765.5	1858.9
Client accounts receivable, net	2063.3	1680.5
Income taxes receivable	198.3	213.4
Inventories, net	1285.3	1856.5
Prepaid expenses and other current assets	67.1	326.6
Deferred tax assets	230.8	159.2
Total current assets	8158.6	7097.5
Property and equipment, net	912.5	854.1
Goodwill	6,333	6331.4
Intangible assets, net	2428.8	2666.4
Other noncurrent assets	82.6	61.5
Total assets	17915.5	17010.9
LIABILITIES AND STOCKHOLDERS' EQUITY
Claims and other accounts payable	3506.4	2878.9
Client rebates and guarantees payable	2106.9	1658.7
Accrued expenses and other current liabilities	718.6	660.4
Short-term debt	15.8	600
Total current liabilities	6347.7	5,798
Long-term debt, net	4000.1	4002.9
Deferred tax liabilities	958.8	1065.3
Other noncurrent liabilities	221.7	186.8
Total liabilities	11528.3	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; issued: 660,846,867 shares at December 26, 2009 and 652,386,763 shares at December 27, 2008	6.6	6.5
Accumulated other comprehensive loss	-44.2	-63.8
Additional paid-in capital	8156.7	7788.9
Retained earnings	5209.6	3929.3
Stockholders' equity before treasury stock	13328.7	11660.9
Treasury stock, at cost: 186,353,868 shares at December 26, 2009 and 159,061,394 shares at December 27, 2008	-6941.5	(5,703)
Total stockholders' equity	6387.2	5957.9
Total liabilities and stockholders' equity	17915.5	17010.9

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) (USD $)
	Dec. 26, 2009	Dec. 27, 2008
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	660,846,867	652,386,763
Treasury stock, shares	186,353,868	159,061,394

Consolidated Statements of Inco

Consolidated Statements of Income (USD $)
In Millions, except Per Share data	12 Months Ended Dec. 26, 2009		12 Months Ended Dec. 27, 2008		12 Months Ended Dec. 29, 2007
Consolidated Statements of Income
Product net revenues (Includes retail co-payments of $8,661 for 2009, $7,666 for 2008, and $7,553 for 2007)	58961.4		50576.2		43961.9
Service revenues	842.8		681.8		544.3
Total net revenues	59804.2		51,258		44506.2
Cost of operations:
Cost of product net revenues (Includes retail co-payments of $8,661 for 2009, $7,666 for 2008, and $7,553 for 2007)	55523.1		47308.2		41402.6
Cost of service revenues	254.1		221.4		158.3
Total cost of revenues	55777.2		47529.6		41560.9
Selling, general and administrative expenses	1455.5		1,425		1114.1
Amortization of intangibles	305.6		285.1		228.1
Interest expense	172.5		233.7		134.2
Interest (income) and other (income) expense, net	-9.9		-6.2		-34.4
Total costs and expenses	57700.9		49467.2		43002.9
Income before provision for income taxes	2103.3		1790.8		1503.3
Provision for income taxes	823		687.9		591.3
Net income	1280.3		1102.9		$912
Basic weighted average shares outstanding	481.1	[1]	508.6	[1]	550.2	[1]
Basic earnings per share	2.66	[1]	2.17	[1]	1.66	[1]
Diluted weighted average shares outstanding	490	[1]	518.6	[1]	560.9	[1]
Diluted earnings per share	2.61	[1]	2.13	[1]	1.63	[1]
[1]Common share and per share amounts have been retrospectively adjusted to reflect the January 24, 2008 two-for-one stock split. See Note 1, "Background and Basis of Presentation" for additional information.

1_Consolidated Statements of In

Consolidated Statements of Income (Parenthetical) (USD $)
In Millions	12 Months Ended Dec. 26, 2009	12 Months Ended Dec. 27, 2008	12 Months Ended Dec. 29, 2007
Consolidated Statements of Income
Retail co-payment product net revenue	$8,661	$7,666	$7,553
Retail co-payment cost of product net revenue	$8,661	$7,666	$7,553

Consolidated Statements of Stoc

Consolidated Statements of Stockholders' Equity (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. 30, 2006	6.3	[3]	-1556.3		15.3		7153.1	[3]	1885.1		7503.5
Shares balances at Dec. 30, 2006	635,019	[3]	58,122	[3]
Comprehensive income:
Net income									912		912
Other comprehensive income (loss):
Unrealized loss on cash flow hedge, net of tax					4.8	[2]					4.8	[2]
Defined benefit plans, net of tax:
Net prior service cost					-4.5	[2]					-4.5	[2]
Net gain (loss)					0.4	[2]					0.4	[2]
Other comprehensive income (loss)					-8.9						-8.9
Total comprehensive income					-8.9				912		903.1
Adoption of FASB standard on accounting for uncertainty in income taxes									29.3	[1]	29.3	[1]
Stock option activity, including tax benefit, value	0.1	[3]					334.7	[3]			334.8
Stock option activity, including tax benefit, shares	11,876	[3]
Issuance of common stock under employee stock purchase plan, value							13	[3]			13
Issuance of common stock under employee stock purchase plan, shares	365	[3]
Restricted stock and restricted stock unit activity, including tax benefit, value							52.2	[3]			52.2
Restricted stock and restricted stock unit activity, including tax benefit, shares	125	[3]
Treasury stock acquired, value			-1960.6								-1960.6
Treasury stock acquired, shares			53,323	[3]
Shares balances at Dec. 29, 2007	647,385	[3]	111,445	[3]
Balances, value at Dec. 29, 2007	6.4	[3]	-3516.9		6.4		7,553	[3]	2826.4		6875.3
Comprehensive income:
Net income									1102.9		1102.9
Other comprehensive income (loss):
Unrealized loss on investments, net of tax					-0.2	[2]					-0.2	[2]
Foreign currency translation gain (loss)					-15.5	[2]					-15.5	[2]
Unrealized loss on cash flow hedge, net of amortization, net of tax					-15.2	[2]					-15.2	[2]
Defined benefit plans, net of tax:
Net prior service cost					(3)	[2]					(3)	[2]
Net gain (loss)					-36.3	[2]					-36.3	[2]
Other comprehensive income (loss)					-70.2						-70.2
Total comprehensive income					-70.2				1102.9		1032.7
Stock option activity, including tax benefit, value	0.1	[3]					167.6	[3]			167.7
Stock option activity, including tax benefit, shares	3,444	[3]
Issuance of common stock under employee stock purchase plan, value							18.7	[3]			18.7
Issuance of common stock under employee stock purchase plan, shares	400	[3]
Restricted stock and restricted stock unit activity, including tax benefit, value							49.6	[3]			49.6
Restricted stock and restricted stock unit activity, including tax benefit, shares	1,158	[3]
Treasury stock acquired, value			-2186.1								-2186.1
Treasury stock acquired, shares			47,616	[3]
Shares balances at Dec. 27, 2008	652,387	[3]	159,061	[3]
Balances, value at Dec. 27, 2008	6.5	[3]	(5,703)		-63.8		7788.9	[3]	3929.3		5957.9
Comprehensive income:
Net income									1280.3		1280.3
Other comprehensive income (loss):
Unrealized loss on investments, net of tax					-0.1	[2]					-0.1	[2]
Foreign currency translation gain (loss)					2.9	[2]					2.9	[2]
Amortization of unrealized loss on cash flow hedge, net of tax					1.9	[2]					1.9	[2]
Defined benefit plans, net of tax:
Net prior service cost					-2.4	[2]					-2.4	[2]
Net gain (loss)					17.3	[2]					17.3	[2]
Other comprehensive income (loss)					19.6						19.6
Total comprehensive income					19.6				1280.3		1299.9
Stock option activity, including tax benefit, value	0.1	[3]					298.4	[3]			298.5
Stock option activity, including tax benefit, shares	6,997	[3]
Issuance of common stock under employee stock purchase plan, value							20.8	[3]			20.8
Issuance of common stock under employee stock purchase plan, shares	461	[3]
Restricted stock unit activity, including tax benefit, value							48.6	[3]			48.6
Restricted stock unit activity, including tax benefit, shares	1,002	[3]
Treasury stock acquired, value			-1238.5								-1238.5
Treasury stock acquired, shares			27,293	[3]
Shares balances at Dec. 26, 2009	660,847	[3]	186,354	[3]
Balances, value at Dec. 26, 2009	6.6	[3]	-6941.5		-44.2		8156.7	[3]	5209.6		6387.2
[1]See Note 2, "Summary of Significant Accounting Policies-Income Taxes," for more information.
[2]See Note 2, "Summary of Significant Accounting Policies-Other Comprehensive Income and Accumulated Other Comprehensive Income," for more information.
[3]Share data, common stock and additional paid-in-capital have been retrospectively adjusted to reflect the January 24, 2008 two-for-one stock split. See Note 1, "Background and Basis of Presentation," for more information.

Consolidated Statements of Cash

Consolidated Statements of Cash Flows (USD $)
In Millions	12 Months Ended Dec. 26, 2009	12 Months Ended Dec. 27, 2008	12 Months Ended Dec. 29, 2007
Cash flows from operating activities:
Net income	1280.3	1102.9	$912
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	179	157.7	168.9
Amortization of intangibles	305.6	285.1	228.1
Deferred income taxes	-222.1	-99.6	-134.1
Stock-based compensation on employee stock plans	146	131.7	102.5
Tax benefit on employee stock plans	106.2	67.9	102.2
Excess tax benefits from stock-based compensation arrangements	-64.3	-41.8	-69.9
Other	138.3	110.7	65
Net changes in assets and liabilities (net of acquisition effects, 2008 and 2007 only):
Manufacturer accounts receivable, net	93.4	-341.2	25.9
Client accounts receivable, net	-515.4	-418.5	65
Inventories, net	571.4	93	-218.1
Prepaid expenses and other current assets	259.6	-39.7	-4.9
Income taxes receivable	15.1	2.6	-3.1
Other noncurrent assets	12.8	17.2	2.1
Claims and other accounts payable	627.2	54.3	-119.2
Client rebates and guarantees payable	448.2	566.5	206.1
Accrued expenses and other current and noncurrent liabilities	120.1	-13.7	38.5
Net cash provided by operating activities	3501.4	1635.1	1,367
Cash flows from investing activities:
Capital expenditures	-238.8	-286.9	-177.7
Purchase of securities and other assets	-153.4	-124.8	-181.7
Acquisitions of businesses, net of cash acquired	0	-126.5	-1530.6
Proceeds from sale of securities and other investments	87.2	122	176.2
Net cash used by investing activities	(305)	-416.2	-1713.8
Cash flows from financing activities:
Proceeds from long-term debt	0	3295.7	2,400
Repayments on long-term debt	0	(2,210)	-688.4
Proceeds from short-term debt	15.8	0	275
Repayments under accounts receivable financing facility	(600)	0	0
Debt issuance costs	-0.4	-11.2	-1.8
Settlement of cash flow hedge	0	-45.4	0
Purchases of treasury stock	-1238.5	-2186.1	-1960.6
Excess tax benefits from stock-based compensation arrangements	64.3	41.8	69.9
Net proceeds from employee stock plans	152.2	60.6	208.3
Net cash (used by) provided by financing activities	-1606.6	-1054.6	302.4
Net increase (decrease) in cash and cash equivalents	1589.8	164.3	-44.4
Cash and cash equivalents at beginning of year	938.4	774.1	818.5
Cash and cash equivalents at end of year	2528.2	938.4	774.1
Supplemental disclosures of cash flow information:
Cash paid during the year for interest	168.2	207.1	123.4
Cash paid during the year for income taxes	913.9	748.9	668.5

Background and Basis of Present

Background and Basis of Presentation
	12 Months Ended Dec. 26, 2009 USD / shares
Background and Basis of Presentation [Abstract]
Background and Basis of Presentation	1. BACKGROUND AND BASIS OF PRESENTATION Medco Health Solutions, Inc., (Medco or the Company) is a leading healthcare company that is pioneering the worlds most advanced pharmacy and its clinical research and innovations are part of Medco making medicine smarter for approximately 65 million members. Medco provides clinically-driven pharmacy services designed to improve the quality of care and lower total healthcare costs for private and public employers, health plans, labor unions and government agencies of all sizes, and for individuals served by Medicare Part D Prescription Drug Plans. The Companys unique Medco Therapeutic Resource Centers, which conduct therapy management programs using Medco specialist pharmacists who have expertise in the medications used to treat certain chronic conditions, and Accredo Health Group, Medcos Specialty Pharmacy, represent innovative models for the care of patients with chronic and complex conditions. The Companys business model requires collaboration with retail pharmacies, physicians, the Centers for Medicare Medicaid Services (CMS) for Medicare, pharmaceutical manufacturers, and particularly in Specialty Pharmacy, collaboration with state Medicaid agencies, and other third-party payors such as health insurers. The Companys programs and services help control the cost and enhance the quality of prescription drug benefits. The Company accomplishes this by providing pharmacy benefit management (PBM) services through its national networks of retail pharmacies and its own mail-order pharmacies, as well as throughAccredo Health Group, which the Company believes is the nations largest specialty pharmacy based on revenues. Medcos Therapeutic Resource Center focused on diabetes was augmented with the 2007 acquisition of PolyMedica Corporation (PolyMedica), through which the Company believes it became the largest diabetes pharmacy care practice based on covered patients. In 2008, the Company also extended its capabilities abroad when it acquired a majority interest in Europa Apotheek Venlo B.V. (Europa Apotheek), a privately held company based in the Netherlands that primarily provides mail-order pharmacy services in Germany. See Note 3, Acquisitions of Businesses, for more information. In 2009, Medco advanced its European healthcare initiatives through a joint venture with United Drug plc, a pan-European healthcare leader, to provide home-based pharmacy care services in the United Kingdom for patients covered by the countrys National Health Service. Additionally, the Companys commitment to advancing the science of personalized medicine is further demonstrated by its January 2010 acquisition of DNA Direct, Inc., a leader in providing guidance and decision support to payors, physicians and patients, on a range of complex issues related to genomic medicine. When the term mail order is used, Medco means inventory dispensed through Medcos mail-order pharmacy operations. On November29, 2007, the Company announced that its Board of Directors approved a two-for-one stock split, which was effected in the form of a 100% stock dividend and distributed on January24, 2008, to shareholders of record at the close of b

Summary of Significant Accounti

Summary of Significant Accounting Policies
	12 Months Ended Dec. 26, 2009 USD / shares
Summary of Significant Accounting Policies [Abstract]
Summary of Significant Accounting Policies	2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 February 23, 2010, the filing date of this Annual Report on Form 10-K. The Companys adoption of the standard did not have a material impact on its audited consolidated financial statements included in this Annual Report on Form 10-K. 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 audited consolidated financial statements included in this Annual Report on Form 10-K. 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 this standard in 2009 did not have a material impact on its audited consolidated financial statements included in this Annual Report on Form 10-K. For additional disclosures required under this standard, see Note 7, Goodwill and Intangible Assets. Disclosures about Derivative Instruments and Hedging Activities. In March 2008, the FASB issued a standard, which requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative in

Acquisitions of Businesses

Acquisitions of Businesses
	12 Months Ended Dec. 26, 2009 USD / shares
Acquisitions of Businesses [Abstract]
Acquisitions of Businesses	3. ACQUISITIONS OF BUSINESSES Europa Apotheek Venlo B.V. On April 28, 2008, the Company acquired a majority interest in Europa Apotheek, a privately held company based in the Netherlands that primarily provides mail-order pharmacy services in Germany. The cost of the acquisition was approximately $126.8 million in cash and a $24.1 million purchase obligation, with additional potential future consideration for achieving performance targets. The Company believes this acquisition leverages its proven proprietary technologies and ability to deliver customized solutions to meet the challenges of managing healthcare costs and improving clinical care abroad. The transaction was accounted for under the provisions of FASBs business combinations standard. The purchase price was allocated based upon the fair value of net assets acquired at the date of the acquisition. A portion of the excess of the purchase price over tangible net assets acquired, amounting to $112.8 million, has been allocated to goodwill, and $43.9 million has been allocated to intangible assets, which are being amortized using the straight-line method over an estimated weighted average useful life of 9.1 years. Additionally, there is a deferred tax liability of $11.1 million associated with the fair value amounts allocated to intangible assets. Europa Apotheeks operating results from the date of acquisition of April 28, 2008 through December 26, 2009 are included in the accompanying audited consolidated financial statements. Pro forma financial statement results including the results of Europa Apotheek would not differ materially from the Companys historically reported financial statement results. PolyMedica Corporation. On October 31, 2007, the Company acquired all of the outstanding common stock of PolyMedica for $1.3 billion in cash. PolyMedica is a leading provider of diabetes care through its Liberty brand, including blood glucose testing supplies, prescriptions and related services. Previously in 2006, Medco formed a multi-pronged alliance with PolyMedica, enabling Medco to become the direct mail dispensing pharmacy for their members, and provide PolyMedicas Medicare Part B solution to Medco clients. This acquisition supports the Companys ability to deliver advanced, specialized pharmacy services by treating patients at the disease level. Under the terms of the Agreement and Plan of Merger dated August 27, 2007, PolyMedica shareholders received $53 in cash for each outstanding share of PolyMedica common stock. The Company funded the transaction on October 31, 2007 through a combination of bank borrowings from its existing $2 billion revolving credit facility and cash on hand. The transaction was accounted for under the provisions of FASBs business combinations standard. The purchase price was allocated based upon the fair value of net assets acquired at the date of the acquisition. A portion of the excess of the purchase price over tangible net assets acquired was allocated to intangible assets, consisting of the Liberty trade name of $392.0 million with an estimated 35-year life, customer relationships of $119.9 million with an estimated 8-year life, non-compete agr

Fair Value Disclosures

Fair Value Disclosures
	12 Months Ended Dec. 26, 2009 USD / shares
Fair Value Disclosures [Abstract]
Fair Value Disclosures	4. 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. Additionally in fiscal 2009, there are disclosure requirements associated with nonfinancial assets and liabilities that 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 tables set forth, by level within the fair value hierarchy, the financial assets recorded at fair value on a recurring basis ($ in millions): Medco Fair Value Measurements at Reporting Date Description December 26, 2009 Level 1 Level 2 Level 3 Money market mutual funds.................................... $ 1,959.0(1) $ 1,959.0 $ $ Fair value of interest rate swap agreements............ 14.0(2) 14.0 (1) Reported in cash and cash equivalents on the consolidated balance sheet. (2) Reported in other noncurrent assets on the consolidated balance sheet. Medco Fair Value Measurements at Reporting Date Description December 27, 2008 Level 1 Level 2 Level 3 Money market mutual funds..................................... $ 906.0(1) $ 906.0 $ $ Fair value of interest rate swap agreements ........... 18.4(2) 18.4 (1) Reported in cash and cash equivalents on the consolidated balance sheet. (2) Reported in other noncurrent assets on the 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. Fair Value of 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-term and long-term investments a

Property and Equipment

Property and Equipment
	12 Months Ended Dec. 26, 2009 USD / shares
Property and Equipment [Abstract]
Property and Equipment	5. PROPERTY AND EQUIPMENT Property and equipment, at cost, consist of the following ($ in millions): December 26, 2009 December 27, 2008 Land and buildings............................................................................................ $ 242.8 $ 240.8 Machinery, equipment and office furnishings.............................................. 704.7 686.8 Computer software............................................................................................ 1,116.9 1,042.5 Leasehold improvements................................................................................. 137.4 126.4 Construction in progress ................................................................................... 200.5(1) 120.6(1) 2,402.3 2,217.1 Less accumulated depreciation....................................................................... (1,489.8) (1,363.0) Property and equipment, net............................................................................ $ 912.5 $ 854.1 (1) Primarily represents construction in progress on the Companys third automated dispensing pharmacy, which is located in Whitestown, Indiana. Depreciation expense for property and equipment totaled $179.0 million, $157.7 million and $168.9 million in fiscal years 2009, 2008 and 2007, respectively.

Leases

Leases
	12 Months Ended Dec. 26, 2009 USD / shares
Leases [Abstract]
Leases	6. LEASES The Company leases mail-order pharmacy and call center pharmacy facilities, offices and warehouse space under various operating leases. In addition, the Company leases pill dispensing and counting devices and other operating equipment for use in its mail-order pharmacies, as well as computer equipment for use in its data centers and corporate headquarters. Rental expense was $75.3 million, $74.3 million and $61.8 million for fiscal years 2009, 2008 and 2007, respectively. The minimum aggregate rental commitments under noncancelable leases, excluding renewal options, are as follows ($ in millions): Fiscal Years Ending December 2010...................................................................................................................... $ 50.9 2011...................................................................................................................... 49.9 2012...................................................................................................................... 23.6 2013...................................................................................................................... 12.8 2014...................................................................................................................... 7.4 Thereafter............................................................................................................ 14.7 Total..................................................................................................................... $ 159.3 In the normal course of business, operating leases are generally renewed or replaced by new leases.

Goodwill and Intangible Assets

Goodwill and Intangible Assets
	12 Months Ended Dec. 26, 2009 USD / shares
Goodwill and Intangible Assets [Abstract]
Goodwill and Intangible Assets	7. GOODWILL AND INTANGIBLE ASSETS The changes in the Companys carrying amount of goodwill for the years ended December 27, 2008 and December 26, 2009 are as follows ($ in millions): PBM Specialty Pharmacy Total Balances as of December 29, 2007.............. $ 4,318.2 $ 1,912.0 $ 6,230.2 Goodwill acquired............................................. 108.0(1) 5.2(2) 113.2 Translation adjustment and other................. (11.5) (0.5) (12.0) Balances as of December 27, 2008.............. $ 4,414.7 $ 1,916.7 $ 6,331.4 Translation adjustment and other................. 2.4 (0.8) 1.6 Balances as of December 26, 2009.............. $ 4,417.1 $ 1,915.9 $ 6,333.0 (1) Primarily represents the portion of the excess of the purchase price paid by the Company to acquire a majority interest in Europa Apotheek. See Note 3, Acquisitions of Businesses. (2) Represents $5.2 million of the $121.4 million allocated to Goodwill in November 2007, which is a portion of the excess of the purchase price paid by the Company to acquire Critical Care. See Note 3, Acquisitions of Businesses. The following is a summary of the Companys intangible assets ($ in millions): December 26, 2009 December 27, 2008 Gross Carrying Value Accumulated Amortization Net Gross Carrying Value Accumulated Amortization Net Client relationships................................................. $ 3,446.1 $ 1,977.2 $ 1,468.9 $ 3,446.1 $ 1,784.9 $ 1,661.2 Trade name............................................................. 569.3 47.6 521.7 568.8 27.5 541.3 Manufacturer relationships..................................... 357.5 77.5 280.0 357.5 59.6 297.9 Patient relationships................................................ 280.1 127.8 152.3 212.5 67.0 145.5 Other intangible assets............................................ 33.7 27.8 5.9 37.3 16.8 20.5 Total................................................................. $ 4,686.7 $ 2,257.9 $ 2,428.8 $ 4,622.2 $ 1,955.8 $ 2,666.4 For intangible assets existing as of December 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 2010...................................................................................................................... $ 278.5 2011...................................................................................................................... 259.8 2012...................................................................................................................... 251.2 2013...................................................................................................................... 246.7

Debt

Debt
	12 Months Ended Dec. 26, 2009 USD / shares
Debt [Abstract]
Debt	8. debt The Companys debt consists of the following ($ in millions): December 26, 2009 December 27, 2008 Short-term debt: Accounts receivable financing facility....................................................... $ $ 600.0 Other................................................................................................................. 15.8 Total short-term debt................................................................................. 15.8 600.0 Long-term debt: Senior unsecured revolving credit facility.................................................. 1,000.0 1,000.0 Senior unsecured term loan.......................................................................... 1,000.0 1,000.0 7.25% senior notes due 2013, net of unamortized discount.................. 498.2 497.8 6.125% senior notes due 2013, net of unamortized discount................ 298.8 298.5 7.125% senior notes due 2018, net of unamortized discount................ 1,189.1 1,188.2 Fair value of interest rate swap agreements.............................................. 14.0 18.4 Total long-term debt.................................................................................. 4,000.1 4,002.9 Total debt............................................................................................................ $ 4,015.9 $ 4,602.9 6.125% and 7.125% Senior Notes. On March 18, 2008, the Company completed an underwritten public offering of $300 million aggregate principal amount of 5-year senior notes at a price to the public of 99.425 percent of par value, and $1.2 billion aggregate principal amount of 10-year senior notes at a price to the public of 98.956 percent. The 5-year senior notes bear interest at a rate of 6.125% per annum, with an effective interest rate of 6.261%, and mature on March 15, 2013. The 10-year senior notes bear interest at a rate of 7.125% per annum, with an effective interest rate of 7.274%, and mature on March 15, 2018. Medco may redeem all or part of these notes at any time or from time to time at its option at a redemption price equal to the greater of (i)100% of the principal amount of the notes being redeemed plus accrued and unpaid interest to the redemption date or (ii)a make-whole amount based on the yield of a comparable U.S. Treasury security plus 50 basis points. The Company pays interest on both series of senior notes semi-annually on March15 and September15 of each year. The Company used the net proceeds from the sale of these senior notes to repay borrowings under its revolving credit facility used to fund the acquisitions in 2007, which are described in Note 3, Acquisitions of Businesses. On December 12, 2007, the Company entered into forward-starting interest rate swap agreements in contemplation of the issuance of long-term fixed-rate financing described above. The Company entered into these cash flow hedges to manage the Companys exposure to changes in benchmark interest rates and to mitigate the impact of fluctuations in the interest rate

Pension and Other Postretiremen

Pension and Other Postretirement Benefits
	12 Months Ended Dec. 26, 2009 USD / shares
Pension and Other Postretirement Benefits [Abstract]
Pension and Other Postretirement Benefits	9. 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): Fiscal Years 2009 2008 2007 Service cost....................................................................... $ 24.3 $ 24.6 $ 18.0 Interest cost...................................................................... 13.2 9.6 7.9 Expected return on plan assets..................................... (9.9) (13.0) (11.0) Amortization of prior service cost................................ 0.2 0.3 Net amortization of actuarial losses............................ 5.4 Net pension cost............................................................... $ 33.2 $ 21.5 $ 14.9 The increase in the net pension cost for fiscal year 2009 compared to fiscal year 2008 primarily resulted from lower than expected return on plan assets during 2008. The increase in the net pension cost for fiscal year 2008 compared to fiscal year 2007 is primarily due to additional employees participating in the cash balance retirement plan, as well as a plan amendment from graduated seven-year vesting to three-year cliff vesting, which became effective January 1, 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): Fiscal Years 2009 2008 2007 Service cost....................................................................... $ 1.2 $ 1.0 $ 0.9 Interest cost...................................................................... 0.8 0.8 0.7 Amortization of prior service credit.............................. (4.2) (4.2) (4.3) Net amortization of actuarial losses............................ 0.5 0.5 0.6 Net postretirement benefit credit.................................. $ (1.7) $ (1.9) $ (2.1) 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. Changes in Plan Assets, Benefit Obligation and Funded Status. Summarized information about the funded status and the changes in plan assets and benefit obligation is as follows ($ in millions): Pension Benefits Other Postretirement Benefits Fiscal Years 2009 2008 2009 2008 Fair value of plan assets at beginning of year............. $ 119.2 $ 152.0 $ $ Actual return on plan assets............................................ 23.2 (44.9) Company contributions................................................... 11.5 17.2 0.7 1.0 Employee contributions............

Taxes on Income

Taxes on Income
	12 Months Ended Dec. 26, 2009 USD / shares
Taxes on Income [Abstract]
Taxes on Income	10. TAXES ON INCOME Provision for Income Taxes. The components of the provision for income taxes are as follows ($ in millions): Fiscal Years 2009 2008 2007 Current provision: Federal......................................................................... $ 844.9 $ 664.1 $ 594.7 State............................................................................. 170.1 102.3 122.6 Foreign......................................................................... (2.6) (1.2) Total....................................................................... 1,012.4 765.2 717.3 Deferred provision (benefit): Federal......................................................................... (145.9) (63.8) (114.0) State.............................................................................. Foreign.. (42.3) (1.2) (13.5) (12.0) Total....................................................................... (189.4) (77.3) (126.0) Total provision for income taxes $ 823.0 $ 687.9 $ 591.3 A reconciliation of the Companys effective tax rate and the U.S. statutory rate is as follows: Fiscal Years 2009 2008 2007 U.S. statutory rate applied to pretax income 35.0 % 35.0 % 35.0 % Differential arising from: State taxes 3.9 3.2 4.8 Other 0.2 0.2 (0.5 ) Effective tax rate 39.1 % 38.4 % 39.3 % The Companys 2009 effective tax rate reflects a fourth-quarter 2009 income tax benefit of $22 million,primarily reflecting state-related tax items. The Companys 2008 effective tax rate reflects a net state income tax benefit of $28 million recorded in the third quarter of 2008 resulting primarily from statute of limitations expirations in certain states, partially offset by state tax law changes. The Company may achieve additional state income tax savings in future quarters. To the extent that these state tax savings are realized, they will be recorded as a reduction to the provision for income taxes at the time the audit by the respective state taxing jurisdiction is complete or when the applicable statute of limitations has expired. Deferred Income Taxes. Deferred income taxes at year-end consisted of ($ in millions): December 26, 2009 December 27, 2008 Assets Liabilities Assets Liabilities Intangible assets................................................................. $ $ 865.1 $ $ 991.6 Accelerated depreciation.................................................. 199.0 173.9 Accrued expenses.............................................................. 55.6 63.7 Accrued rebates.................................................................. 101.3 57.9 Stock-based compensation.............................................. 123.4 99.1 Other..................................................................................

Stock-Based Compensation

Stock-Based Compensation
	12 Months Ended Dec. 26, 2009 USD / shares
Stock-Based Compensation [Abstract]
Stock-Based Compensation	11. STOCK-BASED COMPENSATION Overview. The Compensation Committee of the Companys Board of Directors regularly reviews the Companys compensation structure and practices, including the timing of its stock-based awards. The Audit Committee of the Companys Board of Directors also reviews the Companys option-granting practices from time to time. The Company grants options to employees and directors to purchase shares of Medco common stock at the fair market value on the date of grant. The options generally vest over three years (director options vest in one year) and expire within 10 years from the date of the grant. Vested options held by employees may expire earlier following termination of employment. The post-termination exercise period varies from 90 days for a voluntary termination to the full remaining term for termination of employment following a change in control. Directors always have the full term to exercise vested options. All option exercises are subject to restrictions on insider trading, and directors, officers and certain other employees with regular access to material information are subject to quarterly restrictions on trading. Under the terms of the Medco Health Solutions, Inc. 2002 Stock Incentive Plan, as of December 26, 2009, 18.2 million shares of the Companys common stock are available for awards. As of December 26, 2009, under the terms of the Accredo Health, Incorporated 2002 Long-Term Incentive Plan as amended and restated on August 18, 2005, there are 0.5 million shares of the Companys common stock available for awards. The fair value of options granted is estimated on the date of grant using the Black-Scholes option-pricing model. The Medco volatility assumption is based on the Companys stock price volatility, and for the initial years as a publicly traded company was blended with a PBM industry volatility average. The Company uses historical data to estimate the expected option life. The expected option life represents the period of time that options granted are expected to be outstanding. Groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The weighted average fair value of options granted for fiscal years 2009, 2008 and 2007 was $11.40, $14.60 and $11.86, respectively. The weighted average assumptions utilized for options granted during the periods presented are as follows: Fiscal Years 2009 2008 2007 Medco stock options Black-Scholes assumptions (weighted average): Expected dividend yield......................................... Risk-free interest rate.............................................. 2.0% 2.8% 4.7% Expected volatility.................................................. 27.0% 27.0% 29.0% Expected life (years)............................................... 5.0 5.0 5.0 Stock Option Plans. Summarized information related to stock options held by the Companys employees and directors is as follows: Number of Shares (in thousands) Weighted Average

Share Repurchase Programs

Share Repurchase Programs
	12 Months Ended Dec. 26, 2009 USD / shares
Share Repurchase Program [Abstract]
Share Repurchase Program	12. Share Repurchase programs Since 2005, the Company has executed share repurchases of 186.3 million shares at a cost of $6.9 billion through its share repurchase programs. The Company is currently authorized to repurchase its shares under a $3 billion share repurchase program (the 2008 Program), which was announced in November 2008 and expires in November 2010, with $1.6 billion remaining under its current authorization as of December 26, 2009. During fiscal year 2009 under the 2008 Program, the Company repurchased 27.3 million shares at a total cost of $1.24 billion with an average per-share cost of $45.38. In the fourth quarter 2008, the Company repurchased 5.2 million shares at a cost of $200 million under the 2008 Program. Since the inception of the 2008 Program, the Company has repurchased 32.4 million shares for a total cost of $1.44 billion with an average per-share cost of $44.34. The Companys $5.5 billion share repurchase program, which was approved in August 2005 (the 2005 Program), originally authorized share repurchases of $500 million and was increased at various times. The Company completed the 2005 Program in October 2008. During fiscal year 2008, the Company repurchased 42.4 million shares at a cost of $1.98 billion under the 2005 Program. From time to time, the Company may make additional share repurchases, which it intends to fund with the Companys free cash flow (cash flow from operations less capital expenditures). The Companys Board of Directors periodically reviews the Companys share repurchase programs and approves the associated trading parameters.

Segment and Geographic Data

Segment and Geographic Data
	12 Months Ended Dec. 26, 2009 USD / shares
Segment and Geographic Data [Abstract]
Segment and Geographic Data	13. Segment and geographic data 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 primarily provides mail-order pharmacy services in Germany, 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. Factors Used to Identify Reportable Segments. The Specialty Pharmacy segment was formed as a result of the 2005 acquisition of Accredo in response to a management desire to manage the acquired business together with Medcos pre-existing specialty pharmacy activity as a separate business from Medcos PBM operations. This acquisition complemented the pre-existing Medco specialty pharmacy operation, which was evolving in 2005. 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): For Fiscal Years Ended: December 26, 2009 December 27, 2008 December 29, 2007 PBM Specialty Pharmacy Total PBM(1) Specialty Pharmacy Total(1) PBM(2) Specialty Pharmacy(3) Total(2) (3) Product net revenues $ 49,526.2 $ 9,435.2 $ 58,961.4 $ 42,678.5 $ 7,897.7 $ 50,576.2 $ 37,981.4 $ 5,980.5 $ 43,961.9 Total service revenues 750.5 92.

Commitments and Contingencies

Commitments and Contingencies
	12 Months Ended Dec. 26, 2009 USD / shares
Commitments and Contingencies [Abstract]
Commitments and Contingencies	14. 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 negotia

Schedule II - Valuation and Qua

Schedule II - Valuation and Qualifying Accounts
	12 Months Ended Dec. 26, 2009 USD / shares
Schedule II - Valuation and Qualifying Accounts [Abstract]
Schedule II - Valuation and Qualifying Accounts	SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS ($ inmillions) Allowance for Doubtful Accounts Receivable: Balance at Beginning ofPeriod Other Provision Write-offs(1) Balance at End of Period Fiscal Year Ended December 26, 2009 $ 120.0 $0.2 $133.1 $ (120.0) $133.3 Fiscal Year Ended December 27, 2008 $ 130.0 $1.0 $91.8 $ (102.8) $120.0 Fiscal Year Ended December 29, 2007 $ 81.8 $41.2(2) $61.9 $ (54.9) $130.0 (1) Uncollectible accounts, net of recoveries. (2) Primarily represents balances acquired as a result of the PolyMedica and Critical Care acquisitions.