Medco Health Solutions 8K Regulation FD Disclosure | MHS 10 Nov 05

Medco is a registered trademark of Medco Health Solutions, Inc.

Medco

Growing Strong

Analyst Day 2005

November 10, 2005

Union League Club

New York City

Exhibit 99.1

Medco is a registered trademark of Medco Health Solutions, Inc.

Welcome

Susan D. Cramer

Senior Director, Investor Relations

Forward looking statements

This presentation contains “forward-looking statements”

that

term is

defined in the Private Securities Litigation Reform Act of 1995.

These

statements involve risks and uncertainties that may cause results to

differ materially from those set forth in the statements. No forward-

looking statement can be guaranteed, and actual results may differ

materially from those projected.

We undertake no obligation to publicly

update any forward-looking statement, whether as a result of new

information, future events, or otherwise. Forward-looking

statements

in this presentation should be evaluated together with the many

uncertainties that affect our business, particularly those mentioned in

the risk factors section of the Company’s Annual Report on Form 10-K

filed with the Securities and Exchange Commission.

Medco Growing Strong

Analyst Day 2005 Agenda

7:30 –

8:00

8:00 –

8:10

8:10 –

9:00

9:00 –

9:30

9:30 –

10:00

10:00 –

10:20

10:20 –

11:00

11:00 –

11:30

11:30 –

12:30

12:30 –

2:00

2:00 –

7:00

Registration & Continental Breakfast

Welcome

S. Cramer

Medco Momentum & Growth in 2005 & 2006

D. Snow

Growing Specialty Pharmacy

D. Stevens

Growing in the Marketplace

G. Taylor

Break

Growing Value in Medicare Part D

J. Driscoll/M. Daschner

Update on the Regulatory and Legal Environments

D. Machlowitz

Working Lunch

Growing Opportunity in ’06 and Beyond: Generics & Mail J. Reed

Growing the Bottom Line: Closing Remarks and Q&A D. Snow

Optional Willingboro Tour

Medco is a registered trademark of Medco Health Solutions, Inc.

Medco

Momentum

& Growth

David B. Snow, Jr.

Chairman, President &

Chief Executive Officer

What you’ll hear from Medco today

Medco is on track to deliver in 2005

Earnings growth, quality of earnings, gross margin performance

Medco delivers the value proposition clients need

Value…

low cost therapy, Service…

highest satisfaction

Medco’s formula for success

Retain existing, win new, sell-in valued services, drive efficiency and

savings, deliver transparent offerings, leverage the power of information,

optimize formulary drug mix

Medco’s brandable

differences

Client-centric focus, operational excellence, innovation

Medco is positioned for growth in 2006 and beyond

Major renewals behind us, generics/ mail/ specialty/ Medicare ahead of

us, new client opportunities in all groups, further innovation

Medco

Drivers for growth and profitability

Maximize generic opportunity

$45B+ brand drugs scheduled to go off patent through 2010

Optimize mail penetration

37%

3Q05,

mine

opportunity

existing

and

new-name

accounts,

and

Medicare

Implement Medicare Part D

Over $100B in total retiree drug spend estimated for 2006

Medco more than 10 percent of the total market.

Expand specialty pharmacy

Accredo integration

Innovation

Technologies, tools and strategies for the future of pharmacy

Source: CMS and Medco Data

Financial perspective: 2005

Completed transaction on August 18, 2005

Creates specialty pharmacy business with $4.5 B

annual revenues

Successful implementation

of Accredo

$900 million for the nine months ended Sept.

2005, up $400 million

Strong operating cash

flows

Represents a 14 percent to 15 percent increase

over 2004

Expect to be at top end of

guidance excluding

Accredo dilution

Renewed $32 B over past two years

Won over $3 B in 2005 and $1.4 B in 2006 in

annualized new business

Strong client retention

and new sales growth

3Q’05 vs. 3Q’04

+ 17.0%

$0.53

$0.62

Diluted EPS Adjusted for Intangibles

+ 8.1%

274.2 MM

296.5 MM

Number of Diluted Shares

+ 8.8%*

$425.7 MM

4.9%

$463.1 MM

5.0%

Gross Margin

% of Net Revenues

+ 32.7%

$118.1 MM

1.4%

$156.7 MM

1.7%

Net Income

% of Net Revenues

+5.5%

$300.6

$317.1

EBITDA

-0.1 pts*

3.5%

3.4%

EBITDA Margin

$8.7 B

3Q ’04

+ 7.2%

$9.3 B

Net Revenues

Growth

3Q ’05

* Variance due to higher retail volume and approximately $10 MM in new client

implementation and installation costs.

3Q’05 vs. 2Q’05

+ 6.9%

$0.58

$0.62

Diluted EPS Adjusted for Intangibles

+ 4.5%

283.8 MM

296.5 MM

Number of Diluted Shares

+ 1.7%*

$455.3 MM

5.1%

$463.1 MM

5.0%

Gross Margin

% of Net Revenues

+ 14%

$137.4 MM

1.5%

$156.7 MM

1.7%

Net Income

% of Net Revenues

0.8%*

$319.5

$317.1

EBITDA

0.2 pts*

3.6%

3.4%

EBITDA Margin

$9.0 B

2Q ’05

+ 3.6%

$9.3 B

Net Revenues

Growth

3Q ’05

* Variance due to retail mix changes, seasonality, lower mail generic dispensing rate and

approximately $10 MM in new client implementation and installation costs.

2005 guidance

$2.38 –

$2.40

Adjusted EPS

$0.05

Accredo Dilution

$2.33 -

$ 2.42

Original 2005 Guidance (excluding Accredo)

$0.04

Higher Option Share Dilution

$0.05

Medicare Expense

($0.09)

Tax Benefit

$2.43 –

$2.45

Adjusted EPS Guidance excluding Accredo

$2.38 -

$2.40

Updated guidance on 3Q Earnings

2005

28%

30%

32%

34%

36%

38%

40%

42%

44%

Q1A

Q2A

Q3A

Q4E

New

Existing

Impact of significant number of midyear

client installations

Drug Spend

($MM)

Mail Penetration

$5,000

$10,000

$15,000

Q1A

Q2A

Q3A

Q4E

Existing

New

41.6%

53.2%

41.6%

41.8%

41.1%

39.1%

38.6%

50.0%

48.6%

53.5%

52.7%

52.5%

3Q04

4Q04

1Q05

2Q05

3Q05

4Q05E

Mail

Retail

Generic

dispensing rates

(% Rx’s)

Impact of less profitable

retail mix

($MM)

Impact of changes in retail script trends

500

1000

1500

3Q04

4Q04

1Q05

2Q05

3Q05

New Products

Patent Exp.

Generic Change

Seasonal Drugs

2002

2003

2004

2005

Renewals

New Business

Renewal and new drug spend

($’s in B)

Positive new and renewal business cycles

What to expect in the fourth quarter

Strong topline

growth

Full quarter of Accredo

Historical fourth quarter positive plan design impact

Positive impact of extra week

Coupled with rebound in gross margins

Positive impact of higher-margin Accredo business

Higher mail-order penetration

Offset by Medicare costs

Reaffirming 4Q guidance of $0.61 -

$0.63 per share, with

gross margins of 5.2% to 5.4%

4Q’05 Guidance

Guidance: $0.61 –

$0.63 per share

2%–3%

3 -

Revenues:

Extra Week

Plan design impact

Full Quarter of Accredo

Gross Margin:

Full Quarter of Accredo

Increase in Mail Penetration

Medicare implementation expense

13 -

15%+

Growth over 3Q

5.2% –

5.4%

4Q v. 3Q ’05

Gross Margin 4Q

2006 Projections

Guidance based on:

–

Net new business of $300 million with higher retail mix

–

$9 billion generic opportunity starting in 3Q

–

$50 million in synergies from Accredo acquisition

–

Incremental margin contribution from Medicare

–

Share repurchases of $250 million in 2006

Reaffirming GAAP EPS $2.18 -

$2.30

8.7

12.9

11.7

3.8

2006

2007

2008

2009

2010

Maximize generic opportunity

$45B+ brand drugs going off-patent over 5 years

Zocor

Zoloft

Norvasc

Ambien

Generic dispensing rates

Brand drug spend coming

off patent

($ B)

39%

36%

52%

46%

44%

41%

2000

2001

2002

2003

2004

3Q 05

Fosamax

Effexor

Zyrtec

Advair

Diskus

Source: IMS Health data and company estimates based on current patent expiration dates.

Changes may occur due to litigation, patent challenges, etc.

Prevacid

Lexapro

Aciphex

Singulair

100

2000

2001

2002

2003

2004

2005E

2006E

Mail Rx's (unadj)

Mail Rx's (FEHBP)

Mail Advantage Lives

Optimize mail penetration

Chronic Rx's at Retail

Mail Conversion Opportunity

Potential mail service

opportunity, Medco 2006E

(Rx’s)

Medco By Mail

(Unadjusted Rx’s & lives)

(millions)

135

(millions)

.05

1.1

2.2

5.2

Medicare Part D

•

Medco named one of ten national PDPs

•

Receiving auto-enrolled dual-eligible/low-income participants

in 19 out of 34 CMS regions nationwide

•

Expect 250,000 –

270,000 dual-eligible/low-income/individual

PDP lives in 2006

2006 Financial Impact

•

+$0.02 to $0.04 2006 EPS

A positive contributor to Medco’s bottom line

Leading specialty pharmacy

Sources: Company reports, Wall Street Equity Research, AIS, IMS Health estimates.

* Combined revenue excludes dual-counted scripts estimates.

Specialty pharmacy revenues

For the 12 months ended 12/2004

(millions)

~$3,500

~$1,500

$4,200

Medco + Accredo

Caremark

Express + Priority

Medco expects over $4.5B in annual

specialty pharmacy revenue

Specialty Top 15 Therapeutic Categories

Medco Specialty Pharmacy

Oncology & Adjunct Therapies

Specialty pharmacy market opportunity

2006E

Opportunity 1

Expansion in existing space

and through cross-selling

opportunities

Specialty Market 2006E $54B

11%

Opportunity 2

Expansion in oncology

Medco share of

non-oncology

specialty

market

Medco is a registered trademark of Medco Health Solutions, Inc.

Growing

Specialty Pharmacy

David Stevens

Chief Executive Officer, Accredo Health

Medco is shaping & expanding

the PBM industry

2015

1983

1993

1997

2004

Medicare

Part D

Medicare

Part D

Mail Order

Services

Mail Order

Services

Retail

Network

Mgmt.

Retail

Network

Mgmt.

Plan Design

& Utilization

Mgmt.

Plan Design

& Utilization

Mgmt.

Biotechnology

ecialty Pharmacy

Genomics

Nanomedicine

Rx-level management

Integrated Data

Patient-level management

Specialty pharmacy

Client Penetration and Channel Optimization

65%

35%

Specialty Clients

Total Opportunity

Channel Optimization Opportunity

Medco 2006 book of business*

$6.5B

Source: Medco data

Specialty Client Penetration

% of Covered Lives

23%

77%

Accredo/Medco Combined Penetration

Total Opportunity

57M Lives

*Estimated medical and prescription specialty

spend

Specialty drug spend is fastest

growing share of total U.S. drug spend

Source: Medco data. Atlantic Information Services, Inc. 2005 data. Jefferies & Company Research -

January 26, 2005;

$54 billion sector

+20% growth annually

24% of projected 2005 total pharmacy spending (including oncology

spend)

Specialty pharmacies provide therapies for chronic,

life-threatening disease states

Annual

costs

treatments:

$3,000

$400,000+

Over

300

new

biotech

drugs

development

–

expanding

overall market opportunity

Accredo net revenues

Understanding the Impact

of Synagis

and Aetna to Accredo

$433.5 million (B)

$516.5 million (A)

Total net revenues

September 2005 Quarter

March 2005 Quarter

(A)

Includes:

•

$65.6 million of Synagis

net revenues (seasonal product)

•

$54.2 million of Aetna net revenues

•

$72.4

million

Medco

intercompany

net

revenues

(B) Includes:

•

$0.9 million of Synagis

net revenues

•

$16.0 million of Aetna net revenues

•

$81.1

million

Medco

intercompany

net

revenues

Pharmacy mix & trend for specialty drugs

Medication class under the prescription benefit

6.8%

6.9%

6.2%

13.3%

18.0%

24.1%

24.7%

Others

Multiple

sclerosis

Rheumatoid

arthritis

Hepatitis C

Cancer

Human growth

hormone

Anemia

Source: Medco data. Does not include Accredo stand-alone company revenue.

Top contributing therapeutic classes

Mix

6 months ended 6/2005

Trend

6 months ended 6/2005

54.6%

13.4%

17.2%

8.1%

6.7%

Osteoporosis

Others

Rheumatoid

arthritis

Multiple sclerosis

Cancer

Accredo Health Group

Robust pipeline of new specialty products and additional

indications will continue to drive utilization

Specialty pharmaceuticals will continue to have significant financial

impact in the coming years

Specialty patients also use traditional medications

and benefit from integration

Accelerates Medco’s top line growth strategy and adds

higher-margin business

Extends Accredo’s scale, distribution platform, customer

service and client base

Strong financial profile. Expected to be accretive by $0.05 to

$0.08 in 2006

Accredo Health Group

One product line

Hybrid dispensing

HTC, DTC & MC

sales

Nurse/pharmacist

team

Differentiate with

service model

Seven product lines

Local dispensing

Physician & MC sales

Pharmacy mix

Hands on nursing

Differentiate with

service model,

restricted

access & clinical

outcomes

Fourteen product

lines

Centralized

dispensing

Manufacturer sales

Pharmacist team

Differentiate with

service

& restricted access

Pipeline

management

Benefit design

analysis &

consultation

Integrated medical

and pharmacy

data analysis

Utilization &

management

networks

Clinical treatment

protocols

Full service

specialty

pharmacies

Provides nursing

services to biotech

manufacturers

including:

Clinical trials

Clinical liaisons

Clinical hotlines

Patient training

Accredo Health Group Division

Specialty Care Services

Accredo Health Group Division

Expanding biotech opportunity

Historically, Accredo has added two to three new products per

year (via preferred manufacturers’

agreements) from the FDA

approval process.

With the expansion of the number of biotech products now

working their way through the FDA approval pipeline, we

believe we could add as many as six to eight in calendar year

2006.

Expanding opportunities for IV-infused specialty pharmacy

services requiring decentralized pharmacy/nursing support.

Expanding opportunities for restricted-access products.

Acquisition builds upon Medco’s

current specialty pharmacy offering

0.2

1.7

6.5

11.6

34.5

36.9

Over 170 drugs covering

23 therapeutic classes

Nearly all RFPs Medco

currently receives include

requests for Specialty

Pharmacy. The two spaces

are becoming linked

Source: Medco data

Feb

2003

Jul

2003

Jan

2004

2Q’04

2Q’05

Accredo Health Group

(MM of lives covered)

3Q’05

Medco’s formula for success

Complementary products and services

Builds on existing, highly successful relationship

Significant care coordination opportunity

–

Medco drugs to Accredo patients

–

Medco specialty drugs to Accredo clients

–

Accredo drugs to Medco clients (especially major medical)

Enhance critical reimbursement expertise

and clinical support

Early involvement with pipeline drugs enhances

manufacturer relationships and visibility on new products

Leverages existing Medco specialty and mail distribution

operations

Combination leverages strengths of

each entity

Traditional specialty drugs

Utilization management

Formulary management

Integrated data

Mail-order pharmacy

Automation

Purchasing power

Restricted or exclusive specialty drugs

Decentralized pharmacies

Employed nurses

Medicaid provider #’s

Therapeutic centers

Therapy management

Major medical billing

Accredo

Medco

Strong Leadership

What makes Medco unique:

Broadest coverage for restricted access drugs

23 products

Totals

Exclusive

Zemaira

Xolair

Ventavis

Tracleer

3 national

Synagis

Remodulin

Raptiva

Exclusive

Orfadin

Naglazyme

No pref

IVIG

No pref

Hemophilia

DNA –

2 pref

Growth Hormone

Flolan

Fabrazyme

Foundation

Enbrel

Cerezyme

Only pref

Botox

Only pref

Avonex

Apokyn

Aralast

Aldurazyme

Exclusive

Adagen

Actimmune

Other

Express / Priority

Caremark

Medco / Accredo

# Preferred

providers

Product

Specialty

Medication

•

Avonex

Traditional medications

•

NSAID

•

Vicodin

•

Baclofen

•

Cylert

•

Ditropan

•

SSRI

•

Clonazepam

•

Antibiotics

•

Viagra

•

Omeprazole

•

Atenolol

•

Lipitor

Example:

Multiple sclerosis patient

Coordinated care –

an end-to-end

solution for clients

On average, specialty pharmacy patients take 12 different

medications, where non-specialty patients take 5 different

medications in a given year.

Rare disease product selection criteria

FDA restrictions, clinical monitoring

Regulatory issues

Potential for long-term “Best in Class”

Products

Temperature control, reconstitution

Unstable

$8,000 to $400,000+ PPPY

Expensive

Potential side effects, ADRs

Complex

No cure, lifetime commitment to therapy

Chronic

Clinically challenging, potentially life

threatening and time consuming

Difficult to manage

Rare disease is more than theory

Real examples today

MPS VI

Naglazyme

$375,000

“Bubble Boy”

Syndrome (SCID)

Adagen

350,000

Gaucher’s Disease

Cerezyme 275,000

Fabry’s Disease

Fabrazyme

250,000

MPS I

Aldurazyme

200,000

Hemophilia

Clotting Factor

175,000

Pulmonary Arterial Hypertension Flolan, Remodulin

80,000

Ventavis

Alpha-1 Proteinase Inhibitor Deficiency

Aralast & Zemaira

70,000

Hereditary Tyrosinemia Orfadin

60,000

Specific Immune Deficiencies Actimmune 60,000

Cancer

Gleevec

40,000

Condition

Medicine

Drug Cost/

Patient/Year

Pharmacy Claims

30%–60%

Specialty

Pharmacy

Retail

Pharmacy

Medco

Special Care

Pharmacy

Pricing: Contracted discount rate

DUR: Real-time

Utilization Management: Real-time

Pricing: +/-

AWP

Unspecific codes

Limited DUR and UM capabilities

Potential for duplicate claims

Medical Claims

40%–70%

HHC

Infusion

DME

SpRx

Doctors

Managing specialty pharmacy –

Services and data are fragmented

Specialty pharmacy infrastructure

Accredo Local

Branch Pharmacies

Accredo National

Distribution Centers

Boston, MA

New York, NY

Detroit, MI

Louisville, KY

Chicago, IL

Totowa, NJ

Greensboro, NC (2)

St. Louis, MO

Iowa City, IA

Minneapolis, MN

Kansas City, MO (2)

Oklahoma City, OK

Denver, CO

Salt Lake City, UT

Phoenix, AZ

Las Vegas, NV

Seattle, WA

Memphis, TN

Omaha, NE

Albuquerque, NM

Nashville, TN

San Francisco, CA

Los Angeles, CA

Jacksonville, FL

Washington, DC

Ft. Lauderdale, FL

Birmingham, AL

Dallas/Ft. Worth, TX

Houston, TX

New Orleans, LA

Columbia, SC

Atlanta, GA

Pinebrook, NJ

Philadelphia, PA

Pittsburgh, PA (2)

Columbus, OH

Hemophilia Health Services

Specialty Care Services

Accredo integration update

Initiatives:

Improve current processes allowing for significant gains at either

or both operations

Review front-end processes and systems

Deliver on synergy savings initiatives for 2006

Rationalize current contracts and other infrastructure assets

Deliver SG&A savings

Emphasize dedicated clinical team structure

Pediatric Services of America, Inc.

Acquisition of selected assets

Cash transaction of ~$72 MM

Subject to regulatory approval and customary closing

conditions

Further solidifies our leading hemophilia market position

Strengthens our pediatric hemophilia presence

Future opportunities

Build up Medco’s specialty pharmacy offerings via new drugs

Expansion of oncology platform

Future expansion opportunities in infertility, organ transplant,

HIV medications, etc.

Medicare Part D opportunity

Pharmacy & nursing support for clinical trials

Acquisitions

Medco is a registered trademark of Medco Health Solutions, Inc.

Growing in the

Marketplace

Glenn C. Taylor

Group President

Key Accounts

Medco

2005E drug spend by client group

27%

Health Plans* = $65B

Key / Government & Labor

†

= $25B

National = $25B

Systemed = $17B

46%

24%

19%

Includes

UHG.

†Does

not

include

Medicaid.

Sources:

Wall

Street

research,

Company

data,

CMS

Medco

New 2005 business by client group

22%

15%

$3B+ Annualized

New Business Wins in 2005

Key Accounts

41%

National

55%

Health Plans

22%

Systemed

40%

Avg. Mail Penetration by

Client Group*

* Medco book of business

Medco is delivering what clients need

Value... low cost therapy

Single digit drug trend, generics, mail

Service... highest satisfaction

Client satisfaction, award-winning customer service

One-stop offering

Flexible and customizable PBM offering with scale; specialty pharmacy,

Medicare, integrated data, multiple technology tools and custom software

Innovation

EXPERxT

Advisor, Client Solution Centers, CDH tools

Clinical excellence

RationalMed, next generation clinical strategy, world-class call centers,

integrated data

2005

Results in the marketplace

New annualized business in 2005

New annualized business for 2006

Client retention rate

Average contract length 4.5 years

*Excludes loss of FEHBP on 12/04. Including FEHBP, 9 mos. 2005 retention would have been over 94%.

2005 renewals on top of $21B renewals in 2004

To-date, net-new sales for 2006

Projected new Medicare spend in 2006

Winning in the marketplace

Other

CalPERS

Mail Penetration

More Than 60%

Medco 2006 wins

Medco’s brandable

difference

Client Centric Focus

Client-facing organizational structure enhances our ability to meet the

needs of the individual client

Innovation

A long tradition of delivering ahead of the curve on value, service and

industry-leading products

Operational Excellence

Consistent record of award winning service quality, mail superiority,

technology tools and custom capabilities

Medco is the marketplace innovator

Value

Drug trend management

5.0

16.4

14.0

8.5

12.9

10.2

19.7

16.4

15.9

15.3

11.9

11.4

10.7

0.0

5.0

10.0

15.0

20.0

25.0

1999

2000

2001

2002

2003

2004

9M YTD

2005

Medco Book of Business

CMS Estimates

Medco clients have

consistently experienced

drug trend lower than

the national average,

falling into the single digits

for the first time in 2004

Service

Solidifying our leadership position

Debuts as No. 4 among healthcare

companies among Fortune’s “America’s

Most Admired Companies”

First PBM to win national award

for reducing medication errors

Ranked No. 1 in customer

service for five years

Wilson Rx

JCAHO

Ernest A.

Codman

Award

Medco.com -

Ranked No. 2 in Customer

Respect, and top 10 ranking for online

privacy

Client Satisfaction reaches new record

92%

in 2005

Innovation

First and best –

market-leading innovation

Mail order

Retail

networks

Retail

networks

Significant

patents for

robotics

(first of 35)

Significant

patents for

robotics

(first of 35)

First fully

automated

pharmacy,

Las Vegas

First fully

automated

pharmacy,

Las Vegas

Capture

efficiencies

and clinical

benefits of

split front/

back-end

pharmacies

Capture

efficiencies

and clinical

benefits of

split front/

back-end

pharmacies

Willingboro,

fully-

automated

pharmacy

Willingboro,

fully-

automated

pharmacy

First DUR

review tool

RationalMed

First DUR

review tool

RationalMed

Client tools

EXPERxT

Advisor®,

Client Solution

Centers

Client tools

EXPERxT

Advisor®,

Client Solution

Centers

generation

clinical

strategy

generation

clinical

strategy

2004

1983

1993

1996

2001

2006

Medco brand strength

An independent, blind survey of 341 pharmacy benefit

decision makers found that …

Medco

121

Product and Service Capabilities

Competitive

Operational Excellence

Medco

136

Positive Experience with Company

Competitive

100

Price/Value

Relative

PBM Ranking(s)

Importance Relative

to Price

Enhancing profitability

Product margin

•

Mail Advantage

•

Specialty

•

Generics

Service margin

•

Formulary coverage rules

•

Utilization controls

•

Integrated data

Margin improves through delivery of additional

value-added services to existing clients

Substantial opportunity exists to deliver

valued programs

An Example: Clinical and Trend management products

70%

30%

Current clinical and trend management

service penetration rate

Key services include:

Clinical/utilization management

RationalMed

Percentage of total revenue

opportunity captured

Medco’s formula for success

Retain existing

Retain business through optimal service and exceptional client experience

Sell new

Win new client business through Medco value-add proposition

Optimize

Deliver value-added service in generics, mail, specialty, Medicare

solutions, integrated data, formulary

Drive further efficiency and savings

Industry leading innovation and solutions

Medco is a registered trademark of Medco Health Solutions, Inc.

Growing Value in

Medicare Part D

John P. Driscoll

Senior Vice President

Product and Business Development

Mary T. Daschner, R.P.H.

Vice President & General Manager,

Medicare

October 4, 2005

If rock-bottom generic drug costs are important

Medco Health Solutions Inc., one of the country's biggest

pharmacy-benefit managers, offers the YOURx Plan in

all regions nationwide that offers a 90-day supply of a

generic drug for a $4 co-pay as long as the prescription is

filled in Medco's mail-order facility. The monthly

premium runs from $27 to $35, depending on where the

patient lives.

Mail order could be one of the easiest ways for seniors to

save money in most plans. Most plans will offer seniors a

three-month supply for only two co-pays instead of three,

saving 33% right off the bat.

Medco Medicare offering

As the retiree marketplace evolves,

new opportunities develop

Note: All estimates from Kaiser Family Foundation Medicare Chart Book, Summer 2005. 2005 Lives source: Trustees of

the Federal Hospital Insurance Trust Funds. 2006 Lives source:

HHS Office of the Actuary.

Medigap

Coverage

15.%

Employer

23%

MA-PD

16%

PDP 45%

Medco opportunity increases significantly in 2006

2005 (42.0MM Lives)

2006 (43.1MM Lives)

No Coverage

36%

Medicare

HMO 14%

Employer

27%

Medigap, 8%

Dual Eligible

15%

Medco Medicare Part D strategy

Group Marketplace

PBM Inside:

–

Employers

MA-PD

–

Government

Stand alone PDP

–

Labor Union/Coalitions

Medigap

Medco PDP: YOURx

PLAN™

Facilitates Medco group enrolled PDP product offerings

One of ten national PDPs

Competitive premiums and product design

–

Auto enrollment in 19 of 34 regions

We have laid the foundation for 2006 that positions us to win and

profit in the marketplace

Support current business and develop and market a

competitive product

97% of employer drug spend retained

Competitive product and premium in all 34 regions

Establish PDP distribution relationships

Dual eligibles/low income in 19 regions

Estimated PDP enrollment = 250K -270K lives

Medco

A moderate approach to Part D for 2006

Focus on maintaining retiree coverage in

employer clients and serving as the PBM inside

Aggressively market to individuals and/or employer

clients with full risk products

Conservative

Avoid Risk

Moderate

Manage Risk

Aggressive

Expand Risk

Medco 2006 drug spend

Employer

Retiree

Base

Medicare

Revenues

2006

Medicare

Drug Spend

$2B

$9.2B

$11.2B

Medicare 2006 Drug Spend

Includes $800 MM

PDP Revenue

Employer clients

Responding to the changing marketplace

Medco Response

Develop retiree drug subsidy

(RDS) services –

supporting

clients allows Medco to retain

existing retiree drug spend

Develop group-enrolled PDPs sold

primarily on a self-insured basis

or as employer PDP

Allow employers to coordinate

secondary coverage when PDP is

primary

Medco impact: Retention of 97% of existing retiree drug spend, experience in

group

PDP market, experience transitioning retirees to individual products

Market Opportunity

Support clients to obtain Federal

subsidy

Group enrollment into Medco PDP

(YOURx

Plan)

Supplement PDP benefits with

‘wrap-around’

coverage

Medco’s Medicare Transition Plan

Leverages existing B2B

relationships / client

brand to move retirees

from MHS Employer

Group to MHS PDP

product

“We know you”

message

to retirees

Member name

and address

Client logo

Health plan clients

United American Insurance Co.

Bankers Fidelity Life Insurance Co.

Highmark, Inc.

Blue Cross of Florida

Blue Cross of North Carolina

Preferred Care

WPS

MMO

Blue Cross/Blue Shield Michigan

Medco PDP

Responding to the changing marketplace

Market Opportunity

Dual eligible and low income

Group to individual enrollment

Medco impact: Estimated 2006 PDP enrollment: 250,000-270,000 enrollees

Medco Response

Competitive bid strategy resulting

in auto assignment of dual eligibles

in 19 of 34 regions

Developed customized group enroll

products

Unique YOURx

PLAN™

Benefit Design

Drive generics and mail utilization

Consumer directed plan design

Competitive member premiums

Broad formulary –

99 out of top 100 drugs

First dollar generic coverage

Rock-bottom generic prices

–

$4.00 at retail for 30 day supply

–

$4.00 at mail for up to 90 day supply

75% member cost share in non-preferred tier

Member always pays less at mail

Medco PDP

Approved nationally

$30.47

$35.54

$30.47

$32.27

$29.16

$30.92

$31.64

$31.23

$31.81

$32.82

$34.61

$32.09

$34.61

$33.12

$34.06

$30.69

$32.53

$34.32

$32.07

$30.11

$30.64

$33.49

$31.12

$30.99

$29.27

$31.28

$33.48

$30.78

$31.28

$32.34

$31.28

$32.07

$28.40

$33.87

$30.87

$33.87

$27.10

$35.54

VT $30.47

MA $30.47

$32.96

$32.07

$35.45

Auto-assigned membership from

19 of the 34 CMS defined regions

MHS average member premium $30.68

National average member premium $32.20

CMS

Risk Corridors

Protecting profitability

CMS programs mitigate risk for PDPs

Source: Medicare Prescription Drug, Improvement, and Modernization Act of 2003; Medco Health Government Affairs

100% to 102.5%

97.5% to 100%

Less than 95%

95% to 97.5%

102.5% to 105%

Greater than 105%

Actual

costs

lower

than

expected

Actual

costs

higher

than

expected

Additionally:

•

CMS will risk adjust payment to PDP based on

the risk-profile of enrollees

•

The employer clients of many group enrolled

PDP lives are fully reinsuring the benefit.

PDP share of gain or loss

Gov’t share of gain or loss

Medco has additional protection through its

pharmaceutical risk mitigation rebates

11.5%

71.1%

17.4%

% Projected Drug Spend

Excess drug spend on preferred brands

at retail and mail is protected through

pharmaceutical risk mitigation.

Medco retains risk on generic drug spend.

However, increase in generic utilization, all else

constant, improves underwriting margin.

Utilization

brands

w/o

risk

mitigation

lessened

through

member

cost

aggressive

rebates.

Medicare Part D

improving margin

Gross margin opportunity

on retiree drug spend

Base year

2006

$0.02 –

$0.04 incremental per share 2006 contribution

2010

Mail

Penetration

Generic

Utilization

Mail Penetration

Generic

Utilization

Underwriting

Margin

+ Increased Mail

Penetration

+ Increased

Generic

+/-

Underwriting

Margin

Medco is a registered trademark of Medco Health Solutions, Inc.

David Machlowitz

Senior Vice President, General Counsel

& Secretary

Update on the

Legal Environment

Medco litigation and investigations

No Contact

US Attorney in Boston

No Contact

Department of Labor

Settled

ERISA

Settled

Attorney General Task Force

Ongoing

Pharmacists’

suits

One

Other whistleblower litigation

Ongoing

US Attorney in Philadelphia

Federal Trade Commission

“A broad-based endorsement”

of the PBM model

Mail-order pharmacies owned by

large PBMs had lower average total

prices than mail-order pharmacies

not owned by a large PBM

For a common basket of drugs with

the same-size Rx’s during 12/03,

retail prices typically were higher

than mail at both large PBMs and

retailer-owned PBMs

Out of the 26 PBM plan sponsor

contracts reviewed, plan sponsors

often secured more favorable

pharmaceutical pricing for mail than

retail

Interchanges appropriate

* Banc of America, Sept 7 2005

Legislation

Maine decision

–

Law applies only to contracts entered into in the State of

Maine

–

Medco has no direct contracts in State of Maine

–

Decision contrary to D.C. Court opinion

–

Affirms that PBMs are Not

ERISA Fiduciaries

–

No Maine plan sponsor supported the state’s position

Other state legislation

–

FTC report strong counter-balance

–

Only D.C. has passed a Maine-style bill

–

Over a dozen such bills failed this year

Medco is a registered trademark of Medco Health Solutions, Inc.

Growing Opportunity

in ’06 and Beyond:

Generics & Mail

JoAnn Reed

Senior Vice President, Finance &

Chief Financial Officer

2006 Guidance

5%–11%

$2.52–$2.64

$2.38–$2.40

EPS (adj. for

intangible

amortization)

22%–30%

$2.18–$2.30

$1.77–$1.79

EPS with stock

option expense

in both years

8%–16%

$2.18–$2.30

$1.99–$2.01

EPS

(GAAP)

2005

guidance

growth

2006

guidance

2006 Guidance assumptions

Stock option expense

$0.12-$0.16 per share

Incremental restricted stock unit expense

$0.03 per share

Accredo accretion

$0.05-$0.08 per share

$37 MM incremental intangible amortization expense

Medicare accretion

$0.02-$0.04 per share

Number of shares

313 MM to 318 MM estimated fully diluted

Medco opportunity for growth

2006 & beyond

Sales Growth

Additions of $300MM in net new ’06 business

Generics impact

New generic opportunities in 2H ’06 for brand-name chronic drugs

Mail impact

6% increase in 2006 to over 91MM

Specialty/Accredo impact

$50MM in synergies from Accredo acquisition

Medicare Part D impact

Incremental growth

Productivity gains

Enhancing operational efficiency

Managing the balance sheet

Share repurchase above $250MM

Medco: Net positive sales in 2006

including Medicare adjustments

$1.4 B

Annualized new sales

$1.3 B

Growth in existing clients

$2.7 B

($0.6 B) Lost sales

($1.8 B)

Erosion from clients (includes commercial retirees)

($2.4 B)

$300 million net new

+$800 million revenue from Medco’s Medicare PDP

2006 generic pipeline

Of the $9 B in anticipated brand expirations in 2006,

$8 B present mail opportunity

Total

Acute

Subtotal

Chronic

$8,706 MM

2/06

1 MM

Aredia

8,000 MM

12/06

706 MM

Zofran

12/06

53 MM

Activella

7/06

131 MM

Copegus

7/06

2,676 MM

Zoloft

5/06

1,601 MM

Pravachol

8/06

81 MM

Xanax XR

5/06

33 MM

Metaglip

™

$3,424 MM

6/06

Zocor

Source: Medco and IMS data

2006 generic pipeline

$50 -

60 MM

Margin opportunity

$630 MM

Portion on Medco formulary

$4.2 B

Fiscal year impact

$840 MM

Medco’s average share ~ 20%

$8.0 B

Total annual branded drug

spend –

chronic

2006

2004A

2005

2006

35%

30%

27%

Mail Penetration Rate for New Business

Rx volume

(in millions)

Mail opportunity

88 MM

~86 MM

~91 MM

New Business

1.9 MM

3.6 MM

1.7 MM

Topline

growth opportunity of greater than 20%

Higher margin business

Expected to be accretive to Medco in 2006

Over $50 million in expected annual pre-tax synergies:

Accredo acquisition –

financial benefits

Operational ~ $24 MM

Cross-Selling ~ $26 MM

–

Infrastructure

–

SG&A consolidation

–

Front-end pharmacy

–

Back-end dispensing

–

Extracting specialty spending

from major medical claims

–

Access to incremental patients

–

Cross-selling of Medco

products to Accredo patients

Medicare Part D

. . . improved margin

Incremental Retiree

Net Income Contribution

2006 Assumptions for Medco PDP

<5% mail penetration rate

50% generic fill rate

$0.02–$0.04 Incremental Per Share Income Contribution ‘06

$60 –

85 MM gross margin

$50 –

60 MM SG&A

$6 –

13 MM net income

Productivity Trend

Enhanced productivity

-$5

$15

$35

$55

$75

$95

$115

$135

$155

$175

Pharmacy Operations

Customer Service

Claims & Card Ops

Managed Care

Special Care Pharmacies

Infrastructure

SG&A

$44

$38

$115

$104

$82

$128

$130

2000

2001

2002

2003

2004

2005E

2006E

Capitalization

S&P: BBB

(stable outlook)

Moody’s: Ba1

(positive outlook)

526

Current debt

$13,619

Total assets

5,148

Goodwill, net

2,773

Intangibles, net

3,646

Other assets

661

Property and equipment, net

$1,391

Cash and investments

7,745

Equity

5,874

Total liabilities

1,322

Other non-current liabilities

1,166

Long-term debt

$13,619

Total liabilities and equity

$2,860

Current liabilities

Balance sheet as of

9/24/05 ($MM)

Senior

unsecured ratings

EBITDA/interest

expense:

19.4x

Debt/EBITDA:

1.3x

Debt/total capital:

17.9%

Strong credit ratios

†

LTM = Last twelve months as of 9/24/05

115

337

235

999

614

825

125

235

322

251

2000

20011

2002

2003

2004

9 mos

2005

Strong cash flow generation

Cash flow from operations

($MM)

$366

$659

$470

$1,124

$712

Capital Expenditures

Free Cash Flow

Note: Free cash flow = cash from operations –

capital expenditures

Pro forma presentation assuming SFAS 142 was in effect for all periods. ² Excludes the intangible assets that existed when

Medco became a public company.

$902

Medco’s return on invested capital is 31% for the last

twelve months.

twelve months.²

This is the highest in the industry.

Uses of cash in 2005 and beyond

$500 million 2-year share repurchase program

Projected debt repayments of $400 million for 2005

Projected debt repayments of $200 million for 2006

Projected capital expenditures of less than $150 million for 2006

Potential acquisitions

Medicare investments

Regularly review the repurchase program, along with other

strategies such as dividends

Uses of cash

Future considerations

Share repurchase program

Board authorized program for up to $500 million over 2 years

Repurchases to date:

Utilizing 10(b)5-1 and discretionary trading in non-blackout

periods

Periodic review by Board of Directors for trading guidelines and

additional repurchase authorizations

4Q ’05 to-date

3Q ’05

$69.1 million

1.4 million

$79.0 million

1.5 million

Cost

* As of close of business 11/8/05

Medco is a registered trademark of Medco Health Solutions, Inc.

Medco

Momentum

& Growth

David B. Snow, Jr.

Chairman, President &

Chief Executive Officer

What you heard from Medco today

Medco is on track to deliver in 2005

Earnings growth, quality of earnings, gross margin performance

Medco delivers the value proposition clients need

Value…

low cost therapy, Service…

highest satisfaction

Medco’s formula for success

Retain existing, win new, sell-in valued services, drive efficiency and

savings, deliver transparent offerings, leverage the power of information,

optimize formulary drug mix

Medco’s brandable

differences

Client-centric focus, operational excellence, innovation

Medco is positioned for growth in 2006 and beyond

Major renewals behind us, generics/ mail/ specialty/ Medicare ahead of

us, new client opportunities in all groups, further innovation

Generics & Mail

Medicare

Specialty pharmacy

Organic growth fueled by rich biotech pipeline, new

science

Complementary expansion in the specialty industry

Organic growth fueled by:

Sell-in of value-add products to existing client base

Demographic shift to older population

Increasing marketplace demand for solutions to

unmanageable healthcare costs

Medco growth

Profitability prospects 2006 and beyond

Rx-level management

Patient-level management

Medco

Shaping & expanding the PBM industry

Biotechnology

Medicare

Part D

Medicare

Part D

Mail Order

Services

Mail Order

Services

Retail

Network

Mgmt.

Retail

Network

Mgmt.

Plan Design

& Utilization

Mgmt.

Plan Design

& Utilization

Mgmt.

Specialty Pharmacy

2015

1983

1993

1997

2004

Genomics Nanomedicine

Integrated Data

APPENDIX

Medco historical financials, year-to-date

+ 16.5%

+ 12.7%

$1.27

$1.57

$1.48

$1.77

GAAP Diluted EPS

Diluted EPS adj. for intangibles

5.4 pts

45.7%

51.1%

Generic Dispensing Rate

+ 7.2%

$1,274.1 MM

4.8%

$1,365.9 MM

5.0%

Gross Margin

% of Net Revenues

+ 21.9%

$348.9 MM

1.3%

$425.3 MM

1.6%

Net Income

% of Net Revenues

+ 2.3%

507.7 MM

519.6 MM

Total Adjusted Rxs

+ 76.8%

$509.8 MM

$901.5 MM

Cash from operations

*at nine months ended

$26.4 B

9 mos ’04

+ 2.4%

$27.1 B

Net Revenues

Growth

9 mos ’05

Medco historical financials –

full year

$885.6 MM

$1.24

$1,035.7 MM

$1.50

$1,243.7 MM

$1.83

EBITDA

EBITDA/Adjusted Rx

40.5%

43.8%

46.3%

Generic Dispensing Rate

$1,300.8 MM

3.9%

$1,522.1 MM

4.4%

$1,722.5 MM

4.9%

Gross Margin

% of Net Revenues

$361.6 MM

1.1%

$425.8 MM

1.2%

$481.6 MM

1.4%

Net Income

% of Net Revenues

711.6 MM

688.2 MM

678.3 MM

Total Adjusted Rxs

$470.3 MM

$1,123.9 MM

$711.5 MM

Cash from operations

$34.3 B

12/27/03

$33.0 B

$35.4 B

Net Revenues

12/28/02

12/25/04

3Q’05 vs. 3Q’04

Margin analysis

$28.7 MM

–

$28.7 MM

Accredo Margin Contribution

17.2 pts

(0.2 pts)

0.1 pts

60.4%

4.4%

4.9%

77.6%

4.2%

5.0%

Service Margin

Product Margin

Gross Margin

$0.02

($95 MM)

(3.1 pts)

3.0 pts

4.9 pts

4.7 pts

Change

$1.81

$1.83

EBITDA/Adjusted Rx

40.1%

37.0%

Mail Penetration

$305 MM

$210 MM

Rebates Retained

38.6%

48.6%

46.8%

3Q ’04

41.6%

53.5%

51.5%

Generic Rate at Mail

Generic rate at Retail

Overall Generic Rate

Impact to

Profitability

3Q ’05

100

3Q’05 vs. 2Q’05

Margin analysis

$28.7 MM

–

$28.7 MM

Accredo Margin Contribution

($0.01)

$1.84

$1.83

EBITDA/Adjusted Rx

4.2 pts

(0.2 pts)

(0.1 pts)

73.4%

4.4%

5.1%

77.6%

4.2%

5.0%

Service Margin

Product Margin

Gross Margin

($9 MM)

0.9 pts

(0.2 pts)

0.8 pts

0.5 pts

Change

36.1%

37.0%

Mail Penetration

$219 MM

$210 MM

Rebates Retained

41.8%

52.7%

51.0%

2Q ’05

41.6%

53.5%

51.5%

Generic Rate at Mail

Generic rate at Retail

Overall Generic Rate

Impact to

Profitability

3Q ’05

101

2003

2004

9 mos 2005

$9.00

$8.10

$7.40

Rebate per Branded Adjusted Rx

Improving formulary management

Total rebate dollars

($ MM except rebate per branded adj. Rx)

$2,970

Formulary Rebates

Market Share Rebates

$3,005

$2,387

102

2003

2004

9 mos 2005

4.4%

4.9%

5.0%

54%

44%

28%

% of Rebates Retained

Gross Margin %

Total rebate dollars

($ MM)

Improving formulary management

$2,970

$3,005

$2,387

103

Reconciliation tables

High End

Low End

$2.64

0.34

$2.30

High End

$2.52

0.34

$2.18

Low End

Twelve Months Ended

12/30/06

$2.01

$1.99

Estimated net income per diluted share

Twelve Months Ended

12/31/05

$2.40

0.39

$2.38

Estimated adjusted net income

per diluted share

0.39

Estimated adjustment for the

amortization of intangible assets

Earnings per Share

Guidance Reconciliation

$0.53

0.10

$0.43

9/25/04

$0.62

0.09

$0.53

9/24/05

Quarters Ended

$1.27

$1.48

Net income per diluted share

Nine Months Ended

$1.57

0.30

9/25/04

$1.77

Adjusted net income per diluted

0.29

Adjustment for the amortization of

intangible assets

9/24/05

Earnings per share

reconciliation

104

Reconciliation tables

$1.81

165.9

121.5

99.3

22.2

$300.6

45.0

45.7

79.2

12.6

$118.1

9/25/04

$1.83

173.4

130.6

109.2

21.4

$317.1

48.1

40.4

61.3

10.6

$156.7

9/24/05

Quarters ended

EBITDA reconciliation

$1.82

$1.83

EBITDA per adjusted

prescription

507.7

519.6

Adjusted

prescriptions

(3)

376.9

393.2

Total

311.5

330.0

Retail

65.4

63.2

Mail order

Prescriptions administered:

Claims detail

$925.0

$950.6

EBITDA

134.9

138.0

Amortization expense

157.5

121.5

Depreciation

expense

(2)

235.7

238.7

Provision for income taxes

48.0

27.1

Interest and other (income)

expense,

net

(1)

Add (deduct):

$348.9

$425.3

Net income

9/25/04

9/24/05

Nine months ended

For

2005,

this

includes

$1.7

million

write-off

the

third

quarter

associated

with

the

debt

refinancing

for

the

Accredo

acquisition

and

$0.7

million

the

first

quarter

associated

with

accelerated

term

loan

payments.

For

2004,

this

includes

write-off

deferred

debt

issuance

costs

amounting

$5.5

million

the

first

quarter

associated

with

the

debt

refinancing.

Includes

$25.7

million

non-recurring

tax

benefit

recorded

the

third

quarter

2005

adjustments

Medco's

net

deferred

tax

liabilities

associated

with

enacted

change

state

income

tax

law

and

the

receipt

favorable

state

income

tax

ruling.

Estimated

adjusted

prescription

volume

equals

the

majority

mail

order

prescriptions

multiplied

plus

retail

prescriptions.

These

mail

order

prescriptions

are

multiplied

adjust

for

the

fact

that

mail

order

prescriptions

include

approximately

times

the

amount

product

days

supplied

compared

with

retail

prescriptions.

105

Use of non-GAAP measures

Medco calculates and uses EBITDA and EBITDA per adjusted prescription as indicators of its ability to generate cash from

reported operating results. These measurements are used in concert with net income and cash flows from operations, which

measure actual cash generated in the period. In addition, the company believes that EBITDA and EBITDA per adjusted

prescription

are

supplemental

measurement

tools

used

analysts

and

investors

help

evaluate

overall

operating

performance and the ability to incur and service debt and make capital expenditures. EBITDA does not represent funds

available for the company's discretionary use and is not intended to represent or to be used as a substitute for net income or

cash

flows

from

operations

data

measured

under

U.S.

generally

accepted

accounting

principles

("GAAP").

The

items

excluded from EBITDA but included in the calculation of the company's reported net income are significant components of the

consolidated statements of income, and must be considered in performing a comprehensive assessment of overall financial

performance.

EBITDA,

and

the

associated

year-

to-year

trends,

should

not

considered

isolation.

Medco's

calculation

EBITDA

may

not

consistent

with

calculations

EBITDA

used

other

companies.

EBITDA per adjusted prescription is calculated by dividing EBITDA by the adjusted prescription volume for the period. This

measure

used

indicator

our

EBITDA

performance

per-unit

basis,

providing

insight

into

the

cash-generating

potential

each

prescription.

EBITDA

per

adjusted

prescription

reflects

the

level

efficiency

the

business

model

and

affected by changes in prescription volumes between retail and mail, as well as the relative representation of brand-name,

generic and specialty drugs.

Medco uses earnings per share excluding intangible asset amortization expense as a supplemental measure of operating

performance. The excluded amortization is associated with intangible assets that substantially arose in connection with the

acquisition of Medco by Merck & Co., Inc. in 1993 that were pushed down to Medco's balance sheet. The company believes

that earnings per share, excluding the amortization of these intangibles, is a useful measure because of the significance of

this

non-cash

item

and

enhance

comparability

with

its

peers.

The

intangible

asset

amortization

resulting

from

Medco's

acquisition of Accredo in August 2005 is not part of the excluded amortization in this calculation, as such stems from a Medco

investment decision.

Medco Health Solutions (MHS) Inactive 8-KRegulation FD Disclosure