10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010.

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

Commission File Number: 0-20199

EXPRESS SCRIPTS, INC.

(Exact name of registrant as specified in its charter)

Delaware	43-1420563
(State or other jurisdiction of incorporation or	(I.R.S. Employer Identification No.)
organization)
One Express Way, St. Louis, MO	63121
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (314) 996-0900

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

          Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

          Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Common stock outstanding as of September 30, 2010: 526,211,000 Shares

EXPRESS SCRIPTS, INC.

INDEX

Part I	Financial Information
	Item 1.	Financial Statements (unaudited)	3
		a) Unaudited Consolidated Balance Sheet	3
		b) Unaudited Consolidated Statement of Operations	4
		c) Unaudited Consolidated Statement of Changes in Stockholders’ Equity	5
		d) Unaudited Consolidated Statement of Cash Flows	6
		e) Notes to Unaudited Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
	Item 4.	Controls and Procedures	31
Part II	Other Information
	Item 1.	Legal Proceedings	32
	Item 1A.	Risk Factors — (Not Applicable)	—
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
	Item 3.	Defaults Upon Senior Securities — (Not Applicable)	—
	Item 4.	Removed and Reserved	—
	Item 5.	Other Information — (Not Applicable)	—
	Item 6.	Exhibits	33
Signatures			34
Index to Exhibits			35
EX-10.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EXPRESS SCRIPTS, INC.

Unaudited Consolidated Balance Sheet

	September 30,			December 31,
(in millions, except share data)	2010			2009
Assets
Current assets:
Cash and cash equivalents	$	267.5		$	1,070.4
Restricted cash and investments		10.9			9.1
Receivables, net		1,795.5			2,516.4
Inventories		315.8			313.0
Deferred taxes		119.2			135.0
Prepaid expenses and other current assets		45.1			94.2
Current assets of discontinued operations		—			5.4
Total current assets		2,554.0			4,143.5
Property and equipment, net		353.7			347.1
Goodwill		5,490.7			5,497.1
Other intangible assets, net		1,764.5			1,880.8
Other assets		31.8			31.7
Noncurrent assets of discontinued operations		—			31.0
Total assets	$	10,194.7		$	11,931.2
Liabilities and Stockholders’ Equity
Current liabilities:
Claims and rebates payable	$	2,597.5		$	2,850.7
Accounts payable		686.1			706.4
Accrued expenses		682.9			549.2
Current maturities of long-term debt		0.1			1,340.1
Current liabilities of discontinued operations		—			10.4
Total current liabilities		3,966.6			5,456.8
Long-term debt		2,493.4			2,492.5
Other liabilities		514.7			430.1
Total liabilities		6,974.7			8,379.4
Stockholders’ Equity:
Preferred stock, 5,000,000 shares authorized, $0.01 par value per share; and no shares issued and outstanding		—			—
Common stock, 1,000,000,000 shares authorized, $0.01 par value per share; shares issued: 690,243,000 and 345,279,000, respectively; shares outstanding: 526,211,000 and 275,007,000, respectively		6.9			3.5
Additional paid-in capital		2,314.3			2,260.0
Accumulated other comprehensive income		17.4			14.1
Retained earnings		5,040.2			4,188.6
		7,378.8			6,466.2
Common stock in treasury at cost, 164,032,000 and 70,272,000 shares, respectively		(4,158.8	)		(2,914.4	)
Total stockholders’ equity		3,220.0			3,551.8
Total liabilities and stockholders’ equity	$	10,194.7		$	11,931.2

See accompanying Notes to Unaudited Consolidated Financial Statements

3

EXPRESS SCRIPTS, INC.

Unaudited Consolidated Statement of Operations

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in millions, except per share data)	2010			2009			2010			2009
Revenues 1	$	11,251.8		$	5,613.0		$	33,679.0		$	16,525.3
Cost of revenues 1		10,487.7			5,001.9			31,494.2			14,789.0
Gross profit		764.1			611.1			2,184.8			1,736.3
Selling, general and administrative		236.1			252.7			671.8			642.4
Operating income		528.0			358.4			1,513.0			1,093.9
Other (expense) income:
Interest income		2.2			2.0			4.4			4.1
Interest expense		(42.2	)		(48.0	)		(127.0	)		(142.7	)
		(40.0	)		(46.0	)		(122.6	)		(138.6	)
Income before income taxes		488.0			312.4			1,390.4			955.3
Provision for income taxes		180.9			115.6			515.4			351.8
Net income from continuing operations		307.1			196.8			875.0			603.5
Net (loss) income from discontinued operations, net of tax		(5.6	)		0.8			(23.4	)		0.8
Net income	$	301.5		$	197.6		$	851.6		$	604.3
Weighted average number of common shares outstanding during the period:
Basic		531.7			549.0			541.9			519.4
Diluted		537.0			554.4			547.5			524.2
Basic earnings per share:
Continuing operations	$	0.58		$	0.36		$	1.61		$	1.16
Discontinued operations		(0.01	)		—			(0.04	)		—
Net earnings		0.57			0.36			1.57			1.16
Diluted earnings per share:
Continuing operations	$	0.57		$	0.35		$	1.60		$	1.15
Discontinued operations		(0.01	)		—			(0.04	)		—
Net earnings		0.56			0.36			1.56			1.15

¹ Includes retail pharmacy co-payments of $1,478.5 million and $708.4 million for the three months ended September 30, 2010 and 2009, respectively and $4,688.4 million and $2,252.2 million for the nine months ended September 30, 2010 and 2009, respectively.

See accompanying Notes to Unaudited Consolidated Financial Statements

4

EXPRESS SCRIPTS, INC.

Unaudited Consolidated Statement of Changes in Stockholders’ Equity

	Number
	of Shares			Amount
									Accumulated
						Additional			Other
	Common			Common		Paid-in			Comprehensive		Retained		Treasury
(in millions)	Stock			Stock		Capital			Income		Earnings		Stock			Total
Balance at December 31, 2009		345.3		$	3.5	$	2,260.0		$	14.1	$	4,188.6	$	(2,914.4	)	$	3,551.8
Comprehensive income:
Net income		—			—		—			—		851.6		—			851.6
Other comprehensive income:
Foreign currency translation adjustment		—			—		—			3.3		—		—			3.3
Comprehensive income		—			—		—			3.3		851.6		—			854.9
Stock split in form of dividend		345.1			3.4		(3.4	)		—		—		—			—
Treasury stock acquired		—			—		—			—		—		(1,276.2	)		(1,276.2	)
Changes in stockholders’ equity related to employee stock plans		(0.2	)		—		57.7			—		—		31.8			89.5
Balance at September 30, 2010		690.2		$	6.9	$	2,314.3		$	17.4	$	5,040.2	$	(4,158.8	)	$	3,220.0

See accompanying Notes to Unaudited Consolidated Financial Statements

5

EXPRESS SCRIPTS, INC.

Unaudited Consolidated Statement of Cash Flows

	Nine Months Ended
	September 30,
(in millions)	2010			2009
Cash flows from operating activities:
Net income	$	851.6		$	604.3
Net loss (income) from discontinued operations, net of tax		23.4			(0.8	)
Net income from continuing operations		875.0			603.5
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		180.9			70.9
Non-cash adjustments to net income		140.7			77.1
Deferred financing fees		4.1			59.0
Changes in operating assets and liabilities:
Accounts receivable		706.6			(108.3	)
Claims and rebates payable		(253.2	)		20.2
Other net changes in operating assets and liabilities		175.6			186.2
Net cash provided by operating activities—continuing operations		1,829.7			908.6
Net cash provided by operating activities—discontinued operations		12.3			17.9
Net cash flows provided by operating activities		1,842.0			926.5
Cash flows from investing activities:
Purchases of property and equipment		(84.6	)		(89.5	)
Purchase of short-term investments		(10.0	)		(1,198.9	)
Other		15.8			5.4
Net cash used in investing activities — continuing operations		(78.8	)		(1,283.0	)
Net cash used in investing activities — discontinued operations		(0.8	)		(1.0	)
Net cash used in investing activities		(79.6	)		(1,284.0	)
Cash flows from financing activities:
Repayment of long-term debt		(1,340.1	)		(240.1	)
Treasury stock acquired		(1,276.2	)		—
Tax benefit relating to employee stock compensation		32.9			7.7
Net proceeds from employee stock plans		19.3			7.1
Deferred financing fees		(3.9	)		(69.5	)
Proceeds on long-term debt, net of discounts		—			2,491.6
Net proceeds from stock issuance		—			1,569.1
Net cash (used in) provided by financing activities		(2,568.0	)		3,765.9
Effect of foreign currency translation adjustment		2.7			3.3
Net (decrease) increase in cash and cash equivalents		(802.9	)		3,411.7
Cash and cash equivalents at beginning of period		1,070.4			530.7
Cash and cash equivalents at end of period	$	267.5		$	3,942.4

See accompanying Notes to Unaudited Consolidated Financial Statements

6

R

EXPRESS SCRIPTS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Summary of significant accounting policies

          Our significant accounting policies, normally included in financial statements prepared in conformity with generally accepted accounting principles, have been omitted from this Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). However, we believe the disclosures contained in this Form 10-Q are adequate to fairly state the information when read in conjunction with the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2009. For a full description of our accounting policies, refer to the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2009.

          We believe the accompanying unaudited consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) necessary to state fairly the Unaudited Consolidated Balance Sheet at September 30, 2010, the Unaudited Consolidated Statement of Operations for the three months and nine months ended September 30, 2010 and 2009, the Unaudited Consolidated Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2010, and the Unaudited Consolidated Statement of Cash Flows for the nine months ended September 30, 2010 and 2009. Operating results for the three months and nine months ended September 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.

Note 2 — Fair value measurements

          Financial Accounting Standards Board (“FASB”) guidance regarding fair value measurement establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted prices for similar assets and liabilities in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

          Financial assets accounted for at fair value on a recurring basis include cash equivalents of $174.6 million and $909.8 million, restricted cash and investments of $10.9 million and $9.1 million, and trading securities (included in other assets) of $12.5 million and $11.4 million at September 30, 2010 and December 31, 2009, respectively. These assets are carried at fair value based on quoted market prices for identical securities (Level 1 inputs). Cash equivalents include investments in AAA-rated money market mutual funds with maturities of less than 90 days.

          The carrying value of cash and cash equivalents, accounts receivable, claims and rebates payable, and accounts payable approximated fair values due to the short-term maturities of these instruments. The fair value, which approximates the carrying value, of our bank credit facility was estimated using either quoted market prices or the current rates offered to us for debt with similar maturity. The carrying values and the fair values of our senior notes are shown in the following table:

	September 30, 2010				December 31, 2009
	Carrying		Fair		Carrying		Fair
(in millions)	Amount		Value		Amount		Value
5.25% senior notes due 2012, net of unamortized discount	$	999.6	$	1,067.5	$	999.4	$	1,068.6
6.25% senior notes due 2014, net of unamortized discount		996.7		1,148.4		996.1		1,095.7
7.25% senior notes due 2019, net of unamortized discount		497.0		628.9		496.8		591.6
Total	$	2,493.3	$	2,844.8	$	2,492.3	$	2,755.9

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          The fair values of our senior notes were estimated based on quoted prices in active markets for identical securities (Level 1 inputs). In determining the fair value of liabilities, we took into consideration the risk of nonperformance. Nonperformance risk refers to the risk that the obligation will not be fulfilled and affects the value at which the liability would be transferred to a market participant. This risk did not have a material impact on the fair value of our liabilities.

Note 3 — Acquisition (reflecting the two-for-one stock split effective June 8, 2010)

          On December 1, 2009, we completed the purchase of 100% of the shares and equity interests of certain subsidiaries of WellPoint, Inc. (“WellPoint”) that provide pharmacy benefit management services (“NextRx” or the “NextRx PBM Business”), in exchange for total consideration of $4.675 billion paid in cash. The working capital adjustment was finalized during the second quarter of 2010 and reduced the purchase price by $8.3 million, resulting in a final purchase price of $4.667 billion. The NextRx PBM Business is a national provider of PBM services, and we believe the acquisition will enhance our ability to achieve cost savings, innovations, and operational efficiencies which will benefit our customers and stockholders. The purchase price was primarily funded through a $2.5 billion underwritten public offering of senior notes completed on June 9, 2009, resulting in net proceeds of $2,478.3 million, and a public offering of 52.9 million shares of common stock completed June 10, 2009, resulting in net proceeds of $1,569.1 million. This acquisition is reported as part of our pharmacy benefit management (“PBM”) segment.

          The parties have agreed to make an election under Section 338(h)(10) of the Internal Revenue Code with respect to the transaction which results in the goodwill and other intangibles generated being tax deductible over 15 years. We estimate the value of such election to us to be between $800 million and $1.2 billion dependent upon the discount factor and tax rate assumed. This benefit will be realized over the 15 year period as the goodwill and other intangibles are amortized and deducted for tax purposes. There was no separate asset related to this tax benefit recorded in our consolidated financial statements upon close of the acquisition as the tax basis of these assets was equal to their book basis. Additionally, at the closing of the acquisition, we entered into a 10-year contract with WellPoint (the “PBM agreement”) under which we will provide pharmacy benefits management services to WellPoint and its designated affiliates which were previously provided by NextRx. The services provided under the PBM agreement include retail network pharmacy management, home delivery and specialty pharmacy services, drug formulary management, claims adjudication and other services consistent with those provided to other PBM clients. These services are provided to HMOs, health insurers, third-party administrators, employers, union-sponsored benefit plans, workers’ compensation plans and government health programs, which is consistent with our current customer base.

          The following unaudited pro forma information presents a summary of our combined results of operations and those of the NextRx PBM Business for the three and nine months ended September 30, 2009 as if the acquisition and financing transactions had occurred at January 1, 2009, along with certain pro forma adjustments to give effect to amortization of other intangible assets, interest expense on acquisition debt and other adjustments. This information is presented with actual results from the three and nine months ended September 30, 2010 for comparative purposes. The following pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transactions been effected on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including but not limited to, differences between the assumptions used to prepare the pro forma information, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the NextRx PBM Business:

8

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions, except per share data)	2010		2009		2010		2009
Total revenues	$	11,251.8	$	9,457.1	$	33,679.0	$	28,264.6
Net income from continuing operations		307.1		256.5		875.0		745.3
Basic earnings per share from continuing operations		0.58		0.47		1.61		1.36
Diluted earnings per share from continuing operations	$	0.57	$	0.47	$	1.60	$	1.35

          The purchase price has been preliminarily allocated based upon the estimated fair value of net assets acquired and liabilities assumed at the date of the acquisition. Because information may become available within the measurement period (one year from the date of acquisition) that indicates a potential change to these valuations, the purchase price allocation is subject to change. The Company expects to finalize the allocation of the purchase price during the fourth quarter of 2010. The components of the preliminary purchase price allocation for NextRx are as follows:

Allocation of Purchase Price (in millions):
Current assets	$	937.0
Property and equipment		42.7
Acquired intangible assets		1,585.0
Goodwill		2,679.9
Liabilities assumed		(577.9	)
Total	$	4,666.7

          The values of the tangible net assets in the above table are representative of the fair values of those assets and liabilities. The current assets of $937.0 million are primarily comprised of pharmaceutical manufacturer rebate receivables, which have historically experienced better collection rates than other customer trade receivables. As a result, the allowance for doubtful accounts related to these receivables is lower than our book of business average. The liabilities assumed of $577.9 million are primarily comprised of rebates payable to clients.

          A portion of the excess of purchase price over tangible net assets acquired has been preliminarily allocated to intangible assets consisting of customer contracts in the amount of $1,585.0 million. These assets are included in other intangible assets, net on the unaudited consolidated balance sheet. The excess of purchase price over tangible net assets and identified intangible assets acquired has been preliminarily allocated to goodwill in the amount of $2,679.9 million. The goodwill is the residual value after identified assets are separately valued and represents the result of expected buyer-specific synergies derived from our ability to drive growth in generic and mail order utilization, supply chain savings from both drug manufacturers and the retail network, and the tax benefits derived from the Section 338(h)(10) election under the Internal Revenue Code.

          During the second quarter of 2010, we recorded a pre-tax benefit of $30.0 million related to the amendment of a client contract which relieved us of certain contractual guarantees. This amount was originally accrued in the NextRx opening balance sheet. In accordance with business combination accounting guidance, the reversal of the accrual was recorded in revenue, since it relates to client guarantees, upon amendment of the contract during the second quarter of 2010.

Note 4 — Discontinued Operations

          In the third quarter of 2010, we completed the sale of our Phoenix Marketing Group (“PMG”) line of business. The loss on the sale as well as other charges related to discontinued operations during the third quarter of 2010 totaled $8.3 million. These charges are included in the “Net (loss) income from discontinued operations, net of tax” line item in the accompanying unaudited consolidated statement of operations for the three and nine months

9

ended September 30, 2010. The purchase price is subject to a working capital adjustment, which is expected to be finalized in the fourth quarter of 2010 and is not expected to be material.

          During the second quarter of 2010, we concluded that PMG was no longer core to our future operations and committed to a plan to dispose of the business. As a result, PMG was classified as a discontinued operation beginning in the second quarter of 2010, and an impairment charge of $28.2 million was recorded to reflect goodwill and intangible asset impairment and the subsequent write-down of PMG assets to fair market value. The impairment charge is included in the “Net (loss) income from discontinued operations, net of tax” line item in the accompanying unaudited consolidated statement of operations for the nine months ended September 30, 2010.

          Prior to being classified as a discontinued operation, PMG was included in our Emerging Markets (“EM”) segment. PMG is headquartered in Lincoln Park, New Jersey and provides outsourced distribution and verification services to pharmaceutical manufacturers. The results of operations for PMG are reported as discontinued operations for all periods presented in the accompanying unaudited consolidated statements of operations in accordance with applicable accounting guidance. Additionally, for all periods presented, assets and liabilities of the discontinued operations are segregated in the accompanying unaudited consolidated balance sheets, and cash flows of our discontinued operations are segregated in our accompanying unaudited consolidated statement of cash flows.

          Certain information with respect to the discontinued operations for the three and nine months ended September 30, 2010 and 2009 is summarized below. Certain activity related to the winding down of working capital balances of our infusion pharmacy line of business (“IP”), which was sold in 2008, is included in the information for the three months and nine months ended September 30, 2009.

	Three Months Ended,					Nine Months Ended,
	September 30,					September 30,
(in millions)	2010			2009		2010			2009
Revenues	$	5.2		$	6.4	$	16.5		$	20.2
Net (loss) income from discontinued operations, net of tax		(5.6	)		0.8		(23.4	)		0.8
Income tax (benefit) expense from discontinued operations	$	(2.5	)	$	0.4	$	(12.9	)	$	0.4

Note 5 — Goodwill and other intangible assets

          The following is a summary of our goodwill and other intangible assets for our two reportable segments PBM and EM (excludes discontinued operations of PMG):

	September 30, 2010							December 31, 2009
	Gross					Net		Gross					Net
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
(in millions)	Amount		Amortization			Amount		Amount		Amortization			Amount
Goodwill
PBM	$	5,465.8	$	(107.4	)	$	5,358.4	$	5,472.1	$	(107.3	)	$	5,364.8
EM		132.3		—			132.3		132.3		—			132.3
	$	5,598.1	$	(107.4	)	$	5,490.7	$	5,604.4	$	(107.3	)	$	5,497.1
Other intangible assets
PBM
Customer contracts	$	2,018.4	$	(309.2	)	$	1,709.2	$	2,018.3	$	(197.8	)	$	1,820.5
Other		20.8		(3.9	)		16.9		27.9		(10.9	)		17.0
		2,039.2		(313.1	)		1,726.1		2,046.2		(208.7	)		1,837.5
EM
Customer relationships		68.4		(30.7	)		37.7		68.4		(25.8	)		42.6
Other		0.7		—			0.7		0.7		—			0.7
		69.1		(30.7	)		38.4		69.1		(25.8	)		43.3
Total other intangible assets	$	2,108.3	$	(343.8	)	$	1,764.5	$	2,115.3	$	(234.5	)	$	1,880.8

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          The aggregate amount of amortization expense of other intangible assets for our continuing operations was $40.1 million and $10.2 million for the three months ended September 30, 2010 and 2009, respectively and $120.1 million and $28.5 million for the nine months ended September 30, 2010 and 2009, respectively. In accordance with applicable accounting guidance, amortization for customer contracts related to the PBM agreement has been included as an offset to revenues in the amount of $28.5 million and $85.5 million for the three and nine months ended September 30, 2010, respectively. The future aggregate amount of amortization expense of other intangible assets for our continuing operations is expected to be approximately $159.9 million for 2010, $158.8 million for 2011, $158.1 million for 2012, $156.9 million for 2013, and $151.3 million for 2014. The weighted average amortization period of intangible assets subject to amortization is 15 years in total, and by major intangible class is 5 to 20 years for customer-related intangibles and 3 to 10 years for other intangible assets.

          The change in the gross carrying amount and accumulated amortization for PBM other intangible assets is the result of the write-off of $11.0 million of deferred financing fees related to the credit facility terminated during the quarter and the capitalization of $3.9 million of deferred financing fees related to the new credit facility (see Note 7).

          A summary of the change in the net carrying value of goodwill by business segment is shown in the following table:

(in millions)	PBM			EM(1)		Total
Balance at December 31, 2009	$	5,364.8		$	132.3	$	5,497.1
Adjustment to purchase price allocation(2)		(6.8	)		—		(6.8	)
Foreign currency translation and other		0.4			—		0.4
Balance at September 30, 2010	$	5,358.4		$	132.3	$	5,490.7

(1)	Excludes discontinued operations of PMG.
(2)	Represents adjustments to preliminary purchase price upon settlement of working capital adjustment.

          See Note 3 for further information on goodwill related to recent acquisitions.

          As discussed in Note 4, our PMG line of business was classified as a discontinued operation during the second quarter of 2010 and we completed the sale of the business during the third quarter of 2010. In connection with the classification of PMG as a discontinued operation, we revised our impairment model based on the intent to dispose of the business. The revised change in model indicated impairment in the total amount of $28.2 million during the second quarter of 2010, the majority of which reflects the PMG goodwill and intangible asset impairment and the subsequent write-down of PMG assets to fair market value. The impairment charge is included in the “Net (loss) income from discontinued operations, net of tax” line item in the accompanying unaudited consolidated statement of operations.

Note 6 — Earnings per share (reflecting the two-for-one stock split effective June 8, 2010)

          Basic earnings per share (“EPS”) is computed using the weighted average number of common shares outstanding during the period. Diluted EPS is computed in the same manner as basic earnings per share but adds the number of additional common shares that would have been outstanding for the period if the dilutive potential common shares had been issued. The following is the reconciliation between the number of weighted average shares used in the basic and diluted EPS calculations for all periods:

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	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)	2010(1)		2009		2010(2)		2009
Weighted average number of common shares outstanding during the period — Basic EPS(3)		531.7		549.0		541.9		519.4
Dilutive common stock equivalents:
Outstanding stock options, “stock-settled” stock appreciation rights (“SSRs”), restricted stock units, and executive deferred compensation units(3)		5.3		5.4		5.6		4.8
Weighted average number of common shares outstanding during the period — Diluted EPS(3)		537.0		554.4		547.5		524.2

(1)	The decrease in weighted average number of common shares outstanding for the three months ended September 30, 2010 for Basic and Diluted EPS resulted from the repurchase of 26.9 million treasury shares in the nine months ended September 30, 2010.
(2)	The increase in weighted average number of common shares outstanding for the nine months ended September 30, 2010 for Basic and Diluted EPS resulted from the 52.9 million shares issued in the common stock offering on June 10, 2009 (see Note 8). The increase was partially offset by the 26.9 million treasury shares repurchased in the nine months ended September 30, 2010.
(3)	Excludes awards of 2.6 million and 1.0 million for the three months ended September 30, 2010 and 2009, respectively and 3.0 million and 4.2 million for the nine months ended September 30, 2010 and 2009, respectively. These were excluded because their effect was anti-dilutive.

          The above shares are all calculated under the “treasury stock” method.

Note 7 — Financing

          Long-term debt consists of:

	September 30,		December 31,
(in millions)	2010		2009
5.25% senior notes due 2012, net of unamortized discount	$	999.6	$	999.4
6.25% senior notes due 2014, net of unamortized discount		996.7		996.1
7.25% senior notes due 2019, net of unamortized discount		497.0		496.8
Term A loans due October 14, 2010		—		540.0
Term-1 loans due October 14, 2010		—		800.0
Revolving credit facility due August 13, 2013		—		—
Other		0.2		0.3
Total debt		2,493.5		3,832.6
Less current maturities		0.1		1,340.1
Long-term debt	$	2,493.4	$	2,492.5

          On August 13, 2010, we entered into a credit agreement with a commercial bank syndicate providing for a three-year revolving credit facility of $750.0 million. In connection with entering into the credit agreement, we terminated in full the revolving facility under our prior credit agreement, entered into October 14, 2005 and due October 14, 2010. There was no outstanding balance in our prior revolving credit facility upon termination.

          During the third quarter of 2010, we repaid the Term A and Term-1 loans in full. We made total Term loan payments of $1,340.0 million during the nine months ended September 30, 2010. At September 30, 2010, our credit agreement consists of a $750.0 million revolving credit facility (none of which was outstanding as of September 30, 2010) available for general corporate purposes.

12

          The new credit agreement requires us to pay interest periodically on the London Interbank Offered Rates (“LIBOR”) or base rate options, plus a margin. The margin over LIBOR will range from 1.55% to 1.95%, depending on our consolidated leverage ratio. Under the credit agreement we are required to pay commitment fees on the unused portion of the $750.0 million revolving credit facility. The commitment fee will range from 0.20% to 0.30% depending on our consolidated leverage ratio. Financing costs of $3.9 million related to the new credit facility are being amortized over three years and are reflected in other intangible assets, net in the accompanying unaudited consolidated balance sheet.

          The credit agreement contains covenants which limit our ability to incur additional indebtedness, create or permit liens on assets, and engage in mergers, consolidations, or disposals. The covenants also include a minimum interest coverage ratio and a maximum leverage ratio. At September 30, 2010, we believe we were in compliance in all material respects with all covenants associated with our new credit agreement.

Note 8 — Common stock (reflecting the two-for-one stock split effective June 8, 2010)

          On May 5, 2010, we announced a two-for-one stock split for stockholders of record on May 21, 2010 effective June 8, 2010. The split was effected in the form of a dividend by issuance of one additional share of common stock for each share of common stock outstanding. The earnings per share and the weighted average number of shares outstanding for basic and diluted earnings per share for each period have been adjusted for the stock split.

          On June 10, 2009, we completed a public offering of 52.9 million shares of common stock, which includes 6.9 million shares sold as a result of the underwriters’ exercise of their overallotment option in full at closing, at a price of $30.50 per share. The sale resulted in net proceeds of $1,569.1 million after giving effect to the underwriting discount and issuance costs of $44.4 million. We used the net proceeds for the acquisition of WellPoint’s NextRx PBM Business (see Note 3).

Note 9 — Stock-based compensation plans (reflecting the two-for-one stock split effective June 8, 2010)

          Under our stock-based compensation plans, we have issued stock options, SSRs, restricted stock awards, restricted stock units, and performance share awards. Awards are typically settled using treasury shares. The maximum contractual term of stock options and SSRs granted under the 2000 Long Term Incentive Plan (“LTIP”) is 10 years. Due to the nature of the awards, we use the same valuation methods and accounting treatments for SSRs and stock options. During the first nine months of 2010, we granted 2,480,000 stock options with a weighted average fair market value of $15.96. The SSRs and stock options have three-year graded vesting.

          During the first nine months of 2010, we granted to certain officers and employees approximately 276,000 restricted stock units and performance shares with a weighted average fair market value of $49.59. The restricted stock units have three-year graded vesting and the performance shares cliff vest at the end of the three years. The number of performance shares that ultimately vest is dependent upon achieving specific performance targets. Prior to vesting, these shares are subject to forfeiture to us without consideration upon termination of employment under certain circumstances. The original value of the performance share grants is subject to a multiplier of 2.5 based on certain performance metrics. During the first nine months of 2010, approximately 213,000 additional performance shares were granted to certain officers for exceeding certain performance metrics. The total number of non-vested restricted stock and performance share awards was 995,000 at September 30, 2010 and 1,200,000 at December 31, 2009.

          We recognized stock-based compensation expense of $13.1 million and $11.2 million in the three months ended September 30, 2010 and 2009, respectively and $37.2 million and $33.5 million in the nine months ended September 30, 2010 and 2009, respectively. Unamortized stock-based compensation as of September 30, 2010 was $31.9 million for stock options and SSRs and $20.7 million for restricted stock and performance shares.

13

          The fair value of options and SSRs granted is estimated on the date of grant using a Black-Scholes multiple option-pricing model with the following weighted average assumptions:

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2010	2009(1)	2010	2009
Expected life of option	3-5 years	—	3-5 years	3-5 years
Risk-free interest rate	0.8%-1.4%	—	0.8%-2.4%	1.3%-2.4%
Expected volatility of stock	37%-41%	—	36%-41%	35%-39%
Expected dividend yield	None	—	None	None

(1) No options or SSRs were granted during the three months ended September 30, 2009.

Note 10 — Contingencies

          We accrue self-insurance reserves based upon estimates of the aggregate liability of claim costs in excess of our insurance coverage. Reserves are estimated using certain actuarial assumptions followed in the insurance industry and our historical experience. The majority of these claims are legal claims and our liability estimate is primarily related to the cost to defend these claims. We do not accrue for settlements, judgments, monetary fines or penalties until such amounts are probable and estimable. Under authoritative FASB guidance, if the range of possible loss is broad, the liability accrued should be based on the lower end of the range. We received a $15 million insurance recovery in the second quarter of 2009, included in selling, general and administrative expense (“SG&A”), for previously incurred litigation costs. We accrued $35.0 million in the third quarter of 2009 related to the settlement of a lawsuit brought against us and one of our subsidiaries by Aetna, Inc., which settlement resulted in the dismissal of the case by the court on October 22, 2009.

          In the ordinary course of business there have arisen various legal proceedings, investigations or claims now pending against us or our subsidiaries. The effect of these actions on future financial results is not subject to reasonable estimation because considerable uncertainty exists about the outcomes.

          While we believe our services and business practices are in compliance with applicable laws, rules and regulations in all material respects, we cannot predict the outcome of any such legal proceedings, investigations or claims at this time. An unfavorable outcome in one or more of these matters could result in the imposition of judgments, monetary fines or penalties, or injunctive or administrative remedies. We can give no assurance that such judgments, fines and remedies, and future costs associated with any such matters, would not have a material adverse effect on our financial condition, our consolidated results of operations or our consolidated cash flows.

14

Note 11 — Segment information

          We report segments on the basis of services offered and have determined we have two reportable segments: PBM and EM. Our domestic and Canadian PBM operating segments have similar characteristics and as such have been aggregated into a single PBM reporting segment. As described in Note 4, our PMG line of business was classified as a discontinued operation in the second quarter of 2010. The results of operations for PMG are reported as discontinued operations for all periods presented in the accompanying unaudited consolidated statements of operations in accordance with applicable accounting guidance. PMG was previously included in our EM segment.

          Operating income is the measure used by our chief operating decision maker to assess the performance of each of our operating segments. The following table presents information about our reportable segments for the three months and nine months ended September 30, 2010 and 2009.

(in millions)	PBM		EM		Total
For the three months ended September 30, 2010
Product revenue:
Network revenues(1)	$	7,490.9	$	—	$	7,490.9
Home delivery and specialty revenues(2)		3,316.1		—		3,316.1
Other revenues		—		379.2		379.2
Service revenues		62.6		3.0		65.6
Total revenues		10,869.6		382.2		11,251.8
Depreciation and amortization expense		59.7		2.0		61.7
Operating income		523.8		4.2		528.0
Interest income						2.2
Interest expense						(42.2	)
Income before income taxes						488.0
Capital expenditures		32.5		1.0		33.5
For the three months ended September 30, 2009
Product revenue:
Network revenues(1)	$	3,288.8	$	—	$	3,288.8
Home delivery and specialty revenues(2)		1,915.1		—		1,915.1
Other revenues		—		339.3		339.3
Service revenues		67.1		2.7		69.8
Total revenues		5,271.0		342.0		5,613.0
Depreciation and amortization expense		20.9		2.2		23.1
Operating income		354.8		3.6		358.4
Interest income						2.0
Interest expense						(48.0	)
Income before income taxes						312.4
Capital expenditures		57.3		0.6		57.9
For the nine months ended September 30, 2010
Product revenue:
Network revenues(1)	$	22,596.4	$	—	$	22,596.4
Home delivery and specialty revenues(2)		9,841.9		—		9,841.9
Other revenues		—		1,037.4		1,037.4
Service revenues		194.3		9.0		203.3
Total revenues		32,632.6		1,046.4		33,679.0
Depreciation and amortization expense		174.9		6.0		180.9
Operating income		1,499.8		13.2		1,513.0
Interest income						4.4
Interest expense						(127.0	)
Income before income taxes						1,390.4
Capital expenditures		82.3		2.3		84.6

15

(in millions)	PBM		EM		Total
For the nine months ended September 30, 2009
Product revenue:
Network revenues(1)	$	9,772.3	$	—	$	9,772.3
Home delivery and specialty revenues(2)		5,599.8		—		5,599.8
Other revenues		—		942.9		942.9
Service revenues		200.8		9.5		210.3
Total revenues		15,572.9		952.4		16,525.3
Depreciation and amortization expense		64.3		6.6		70.9
Operating income		1,083.5		10.4		1,093.9
Interest income						4.1
Interest expense						(142.7	)
Income before income taxes						955.3
Capital expenditures		88.3		1.2		89.5

(1)	Includes retail pharmacy co-payments of $1,478.5 million and $708.4 million for the three months ended September 30, 2010 and 2009, respectively and $4,688.4 million and $2,252.2 million for the nine months ended September 30, 2010 and 2009, respectively.
(2)	Includes home delivery, specialty and other including: (a) drugs distributed through patient assistance programs and (b) drugs we distribute to other PBMs’ clients under limited distribution contracts with pharmaceutical manufacturers.

          The following table presents balance sheet information about our reportable segments:

(in millions)	PBM		EM		DISC OP		Total
As of September 30, 2010
Total assets	$	9,659.7	$	535.0	$	—	$	10,194.7
Investment in equity method investees		4.3		—		—		4.3
As of December 31, 2009
Total assets	$	11,560.3	$	334.5	$	36.4	$	11,931.2
Investment in equity method investees		4.1		—		—		4.1

          PBM product revenue consists of revenues from the sale of prescription drugs by retail pharmacies in our retail pharmacy networks and revenues from the dispensing of prescription drugs from our home delivery and specialty pharmacies. EM product revenues consist of distribution of certain fertility drugs and revenues from drug distribution services.

          PBM service revenue includes administrative fees associated with the administration of retail pharmacy networks contracted by certain clients, market research programs, informed decision counseling services, and specialty distribution services. EM service revenue includes revenues from accountability services and healthcare account administration.

          For the three and nine months ended September 30, 2010, our top five clients collectively represented 55.5% and 54.3% of revenues, respectively. For the three months ended September 30, 2010, our two largest clients, WellPoint and the Department of Defense (“DoD”), represented 29.4% and 19.8% of revenues, respectively. Additionally, for the nine months ended September 30, 2010, WellPoint and the DoD represented 28.7% and 19.2% of revenues, respectively. None of our other clients accounted for 10% or more of our consolidated revenues during the three and nine months ended September 30, 2010. No clients accounted for 10% or more of our consolidated revenues over the same periods of 2009.

16

          Revenues earned by our Canadian PBM totaled $12.9 million and $11.6 million for the three months ended September 30, 2010 and 2009, respectively, and $37.9 million and $34.7 million for the nine months ended September 30, 2010 and 2009, respectively. All other revenues were earned in the United States. Long-lived assets of our Canadian PBM (consisting primarily of fixed assets) totaled $15.8 million and $15.2 million as of September 30, 2010 and December 31, 2009, respectively. All other long-lived assets are domiciled in the United States.

Note 12 — Condensed consolidating financial information

          Our senior notes are jointly and severally and fully and unconditionally guaranteed by our 100% owned domestic subsidiaries, other than certain regulated subsidiaries including Express Scripts Insurance Company. The following condensed consolidating financial information has been prepared in accordance with the requirements for presentation of such information. Effective June 30, 2008, IP was sold, and effective September 17, 2010, PMG was sold. The assets, liabilities, and operations from IP and PMG are included as discontinued operations in those of the non-guarantors. Subsequent to the acquisition of NextRx on December 1, 2009, the assets, liabilities and operations of the 100% owned domestic subsidiaries have been included in those of the guarantors. Certain amounts from prior periods have been reclassified to conform to current period presentation. The following presents the condensed consolidating financial information separately for:

(i)	Express Scripts, Inc. (the Parent Company), the issuer of the guaranteed obligations;
(ii)	Guarantor subsidiaries, on a combined basis, as specified in the indentures related to Express Scripts’ obligations under the notes;
(iii)	Non-guarantor subsidiaries, on a combined basis;
(iv)	Consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions between or among the Parent Company, the guarantor subsidiaries and the non-guarantor subsidiaries, (b) eliminate the investments in our subsidiaries and (c) record consolidating entries; and
(v)	Express Scripts, Inc. and subsidiaries on a consolidated basis.

Condensed Consolidating Balance Sheet

	Express				Non-
(in millions)	Scripts, Inc.		Guarantors		Guarantors		Eliminations			Consolidated
As of September 30, 2010
Cash and cash equivalents	$	194.2	$	8.1	$	65.2	$	—		$	267.5
Restricted cash and investments		—		9.3		1.6		—			10.9
Receivables, net		1,252.6		534.3		8.6		—			1,795.5
Other current assets		66.1		400.7		13.3		—			480.1
Total current assets		1,512.9		952.4		88.7		—			2,554.0
Property and equipment, net		247.4		94.8		11.5		—			353.7
Investments in subsidiaries		6,191.1		—		—		(6,191.1	)		—
Intercompany		—		3,185.2		—		(3,185.2	)		—
Goodwill		2,932.4		2,533.1		25.2		—			5,490.7
Other intangible assets, net		1,456.4		304.1		4.0		—			1,764.5
Other assets		24.6		5.3		1.9		—			31.8
Total assets	$	12,364.8	$	7,074.9	$	131.3	$	(9,376.3	)	$	10,194.7
Claims and rebates payable	$	2,582.5	$	15.0	$	—	$	—		$	2,597.5
Accounts payable		659.6		23.1		3.4		—			686.1
Accrued expenses		239.0		433.4		10.5		—			682.9
Current maturities of long-term debt		0.1		—		—		—			0.1
Total current liabilities		3,481.2		471.5		13.9		—			3,966.6
Long-term debt		2,493.4		—		—		—			2,493.4
Intercompany		3,081.5		—		103.7		(3,185.2	)		—
Other liabilities		88.7		421.4		4.6		—			514.7
Stockholders’ equity		3,220.0		6,182.0		9.1		(6,191.1	)		3,220.0
Total liabilities and stockholders’ equity	$	12,364.8	$	7,074.9	$	131.3	$	(9,376.3	)	$	10,194.7

17

Condensed Consolidating Balance Sheet

	Express				Non-
(in millions)	Scripts, Inc.		Guarantors		Guarantors		Eliminations			Consolidated
As of December 31, 2009
Cash and cash equivalents	$	1,005.0	$	10.0	$	55.4	$	—		$	1,070.4
Restricted cash and investments		—		7.5		1.6		—			9.1
Receivables, net		1,179.8		1,326.7		9.9		—			2,516.4
Other current assets		196.0		340.6		5.6		—			542.2
Current assets of discontinued operations		—		—		5.4		—			5.4
Total current assets		2,380.8		1,684.8		77.9		—			4,143.5
Property and equipment, net		239.6		96.5		11.0		—			347.1
Investments in subsidiaries		5,970.2		—		—		(5,970.2	)		—
Intercompany		—		2,500.2		—		(2,500.2	)		—
Goodwill		2,939.2		2,533.1		24.8		—			5,497.1
Other intangible assets, net		1,543.9		332.6		4.3		—			1,880.8
Other assets		21.3		8.5		1.9		—			31.7
Non-current assets of discontinued operations		—		—		31.0		—			31.0
Total assets	$	13,095.0	$	7,155.7	$	150.9	$	(8,470.4	)	$	11,931.2
Claims and rebates payable	$	2,264.3	$	586.4	$	—	$	—		$	2,850.7
Accounts payable		674.4		29.0		3.0		—			706.4
Accrued expenses		312.7		225.2		11.3		—			549.2
Current maturities of long-term debt		1,340.0		0.1		—		—			1,340.1
Current liabilities of discontinued operations		—		—		10.4		—			10.4
Total current liabilities		4,591.4		840.7		24.7		—			5,456.8
Long-term debt		2,492.5		—		—		—			2,492.5
Intercompany		2,387.2		—		113.0		(2,500.2	)		—
Other liabilities		72.1		356.3		1.7		—			430.1
Stockholders’ equity		3,551.8		5,958.7		11.5		(5,970.2	)		3,551.8
Total liabilities and stockholders’ equity	$	13,095.0	$	7,155.7	$	150.9	$	(8,470.4	)	$	11,931.2

18

Condensed Consolidating Statement of Operations

	Express						Non-
(in millions)	Scripts, Inc.			Guarantors			Guarantors			Eliminations			Consolidated
For the three months ended September 30, 2010
Revenues	$	7,387.7		$	3,840.8		$	23.3		$	—		$	11,251.8
Operating expenses		7,027.3			3,675.3			21.2			—			10,723.8
Operating income		360.4			165.5			2.1			—			528.0
Interest expense, net		(38.2	)		(1.8	)		—			—			(40.0	)
Income before income taxes		322.2			163.7			2.1			—			488.0
Provision for income taxes		117.5			62.0			1.4			—			180.9
Net income from continuing operations		204.7			101.7			0.7			—			307.1
Net loss from discontinued operations, net of tax		—			—			(5.6	)		—			(5.6	)
Equity in earnings of subsidiaries		96.8			—			—			(96.8	)		—
Net income (loss)	$	301.5		$	101.7		$	(4.9	)	$	(96.8	)	$	301.5
For the three months ended September 30, 2009
Revenues	$	3,197.1		$	2,397.6		$	18.3		$	—		$	5,613.0
Operating expenses		2,931.1			2,308.4			15.1			—			5,254.6
Operating income		266.0			89.2			3.2			—			358.4
Interest expense, net		(43.4	)		(1.8	)		(0.8	)		—			(46.0	)
Income before income taxes		222.6			87.4			2.4			—			312.4
Provision for income taxes		82.8			31.6			1.2			—			115.6
Net income from continuing operations		139.8			55.8			1.2			—			196.8
Net income from discontinued operations, net of tax		—			—			0.8			—			0.8
Equity in earnings of subsidiaries		57.8			—			—			(57.8	)		—
Net income (loss)	$	197.6		$	55.8		$	2.0		$	(57.8	)	$	197.6
For the nine months ended September 30, 2010
Revenues	$	22,249.4		$	11,363.6		$	66.0		$	—		$	33,679.0
Operating expenses		21,129.9			10,968.5			67.6			—			32,166.0
Operating income (loss)		1,119.5			395.1			(1.6	)		—			1,513.0
Interest (expense) income, net		(117.9	)		(4.8	)		0.1			—			(122.6	)
Income (loss) before income taxes		1,001.6			390.3			(1.5	)		—			1,390.4
Provision for income taxes		369.2			145.1			1.1			—			515.4
Net income (loss) from continuing operations		632.4			245.2			(2.6	)		—			875.0
Net loss from discontinued operations, net of tax		—			—			(23.4	)		—			(23.4	)
Equity in earnings of subsidiaries		219.2			—			—			(219.2	)		—
Net income (loss)	$	851.6		$	245.2		$	(26.0	)	$	(219.2	)	$	851.6

19

Condensed Consolidating Statement of Operations

	Express						Non-
(in millions)	Scripts, Inc.			Guarantors			Guarantors			Eliminations			Consolidated
For the nine months ended September 30, 2009
Revenues	$	9,514.6		$	6,956.7		$	54.0		$	—		$	16,525.3
Operating expenses		8,792.2			6,592.7			46.5			—			15,431.4
Operating income		722.4			364.0			7.5			—			1,093.9
Interest expense, net		(130.8	)		(5.6	)		(2.2	)		—			(138.6	)
Income before income taxes		591.6			358.4			5.3			—			955.3
Provision for income taxes		218.2			131.0			2.6			—			351.8
Net income from continuing operations		373.4			227.4			2.7			—			603.5
Net income from discontinued operations, net of tax		—			—			0.8			—			0.8
Equity in earnings of subsidiaries		230.9			—			—			(230.9	)		—
Net income (loss)	$	604.3		$	227.4		$	3.5		$	(230.9	)	$	604.3

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Condensed Consolidating Statement of Cash Flows

	Express						Non-
	Scripts, Inc.			Guarantors			Guarantors			Eliminations			Consolidated
For the nine months ended September 30, 2010
Net cash flows provided by (used in) operating activities	$	1,323.5		$	733.9		$	3.8		$	(219.2	)	$	1,842.0
Cash flows from investing activities:
Purchase of property and equipment		(55.4	)		(27.1	)		(2.1	)		—			(84.6	)
Purchase of short-term investments		—			—			(10.0	)		—			(10.0	)
Other		12.7			(2.0	)		5.1			—			15.8
Net cash used in investing activities — continuing operations		(42.7	)		(29.1	)		(7.0	)		—			(78.8	)
Net cash used in investing activities — discontinued operations		—			—			(0.8	)		—			(0.8	)
Net cash used in investing activities		(42.7	)		(29.1	)		(7.8	)		—			(79.6	)
Cash flows from financing activities:
Repayment of long-term debt		(1,340.1	)		—			—			—			(1,340.1	)
Treasury stock acquired		(1,276.2	)		—			—			—			(1,276.2	)
Tax benefit relating to employee stock compensation		32.9			—			—			—			32.9
Net proceeds from employee stock plans		19.3			—			—			—			19.3
Deferred financing fees		(3.9	)		—			—			—			(3.9	)
Net transactions with parent		476.4			(706.7	)		11.1			219.2			—
Net cash (used in) provided by financing activities		(2,091.6	)		(706.7	)		11.1			219.2			(2,568.0	)
Effect of foreign currency translation adjustment		—			—			2.7			—			2.7
Net (decrease) increase in cash and cash equivalents		(810.8	)		(1.9	)		9.8			—			(802.9	)
Cash and cash equivalents at beginning of period		1,005.0			10.0			55.4			—			1,070.4
Cash and cash equivalents at end of period	$	194.2		$	8.1		$	65.2		$	—		$	267.5

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Condensed Consolidating Statement of Cash Flows

	Express						Non-
	Scripts, Inc.			Guarantors			Guarantors			Eliminations			Consolidated
For the nine months ended September 30, 2009
Net cash flows provided by (used in) operating activities	$	790.5		$	358.0		$	8.9		$	(230.9	)	$	926.5
Cash flows from investing activities:
Purchase of short-term investments		(1,198.9	)		—			—			—			(1,198.9	)
Purchase of property and equipment		(78.8	)		(7.7	)		(3.0	)		—			(89.5	)
Other		5.4			—			—			—			5.4
Net cash used in investing activities — continuing operations		(1,272.3	)		(7.7	)		(3.0	)		—			(1,283.0	)
Net cash used in investing activities — discontinued operations		—			—			(1.0	)		—			(1.0	)
Net cash used in investing activities		(1,272.3	)		(7.7	)		(4.0	)		—			(1,284.0	)
Cash flows from financing activities:
Proceeds on long-term debt, net of discounts		2,491.6			—			—			—			2,491.6
Net proceeds from stock issuance		1,569.1			—			—			—			1,569.1
Repayment of long-term debt		(240.1	)		—			—			—			(240.1	)
Deferred financing fees		(69.5	)		—			—			—			(69.5	)
Tax benefit relating to employee stock compensation		7.7			—			—			—			7.7
Net proceeds from employee stock plans		7.1			—			—			—			7.1
Net transactions with parent		117.2			(349.8	)		1.7			230.9			—
Net cash provided by (used in) financing activities		3,883.1			(349.8	)		1.7			230.9			3,765.9
Effect of foreign currency translation adjustment		—			—			3.3			—			3.3
Net increase in cash and cash equivalents		3,401.3			0.5			9.9			—			3,411.7
Cash and cash equivalents at beginning of period		488.1			8.9			33.7			—			530.7
Cash and cash equivalents at end of period	$	3,889.4		$	9.4		$	43.6		$	—		$	3,942.4

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

          Information we have included or incorporated by reference in this Quarterly Report on Form 10-Q, and information which may be contained in our other filings with the Securities and Exchange Commission (the “SEC”) and our press releases or other public statements, contain or may contain forward-looking statements. These forward-looking statements include, among others, statements of our plans, objectives, expectations (financial or otherwise) or intentions.

          Our forward-looking statements involve risks and uncertainties. Our actual results may differ significantly from those projected or suggested in any forward-looking statements. We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Factors which might cause such a difference to occur include, but are not limited to:

• uncertainties associated with our acquisitions, which include integration risks and costs, uncertainties associated with client retention and repricing of client contracts, uncertainties associated with the operations of acquired businesses, and rationalization of our footprint

• results in regulatory matters, the adoption of new legislation or regulations (including new healthcare reform proposals and increased costs associated with compliance with new laws and regulations), more aggressive enforcement of existing legislation or regulations, or a change in the interpretation of existing legislation or regulations

• continued pressure on margins resulting from client demands for lower prices or different pricing approaches, enhanced service offerings and/or higher service levels

• competition in the PBM industry, and our ability to consummate contract negotiations with prospective clients, as well as competition from new competitors offering services that may in whole or in part replace services that we now provide to our customers

• the possible loss, or adverse modification of the terms, of contracts with pharmacies in our retail pharmacy network

• the possible termination or nonrenewal of, or unfavorable modification to, contracts with key clients or providers, some of which could have a material impact on our financial results

• costs and uncertainties of adverse results in litigation, including a number of pending class action cases that challenge certain of our business practices

• our leverage and debt service obligations, including the effect of certain covenants in our borrowing agreements, access to capital and increases in interest rates

• our ability to maintain growth rates, or to control operating or capital costs, including the impact of declines in prescription drug utilization resulting from the current economic environment

• changes and other uncertainties related to industry pricing benchmarks, which could have the effect of reducing prices and margins, or which could otherwise create turbulence within the industry

• increased compliance risk relating to our contracts with the Department of Defense (“DoD”) TRICARE Management Activity and various state governments and agencies

• uncertainties and risks regarding the Medicare Part D prescription drug benefit, including the financial impact to us to the extent we participate in the program on a risk-bearing basis, uncertainties of client or member losses to other providers under Medicare Part D, implementation of regulations that adversely affect our profitability or cash flow, and increased regulatory risk

• the possible loss, or adverse modification of the terms, of relationships with pharmaceutical manufacturers or distributors, or changes in pricing, discount or other practices of pharmaceutical manufacturers or interruption of the supply of any pharmaceutical products

• in connection with our specialty pharmacy business, the possible loss, or adverse modification of the terms of our contracts with a limited number of biopharmaceutical companies from whom we acquire specialty pharmaceuticals

• the use and protection of the intellectual property, data, and tangible assets that we use in our business, the misuse of our data by others, or infringement or alleged infringement by us of intellectual property claimed by others

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• general developments in the health care industry, including the impact of increases in health care costs, government programs to control health care costs, changes in drug utilization and cost patterns and introductions of new drugs

• increase in credit risk relative to our clients due to adverse economic trends or other factors

• other risks described from time to time in our filings with the SEC

          See the more comprehensive description of risk factors under the captions “Forward Looking Statements and Associated Risks” contained in Item 1 — “Business” and Item 1A — “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2009, filed with the SEC on February 24, 2010.

OVERVIEW

          As one of the largest full-service pharmacy benefit management (“PBM”) companies in North America, we provide healthcare management and administration services on behalf of our clients, which include health maintenance organizations, health insurers, third-party administrators, employers, union-sponsored benefit plans, workers’ compensation plans, and government health programs. Our integrated PBM services include network claims processing, home delivery services, patient care and direct specialty home delivery to patients, benefit design consultation, drug utilization review, formulary management, drug data analysis services, distribution of injectable drugs to patient homes and physicians’ offices, bio-pharma services, and fulfillment of prescriptions to low-income patients through manufacturer-sponsored patient assistance programs.

          Through our Emerging Markets (“EM”) segment, we provide services including: distribution of pharmaceuticals and medical supplies to providers and clinics, fertility services to providers and patients, and healthcare account administration and implementation of consumer-directed healthcare solutions.

          Revenue generated by our segments can be classified as either tangible product revenue or service revenue. We earn tangible product revenue from the sale of prescription drugs by retail pharmacies in our retail pharmacy networks and from dispensing prescription drugs from our home delivery and specialty pharmacies. Service revenue includes administrative fees associated with the administration of retail pharmacy networks contracted by certain clients, medication counseling services, certain specialty distribution services and accountability services. Tangible product revenue generated by our PBM and EM segments represented 99.4% of revenues for the three and nine months ended September 30, 2010, and 98.8% and 98.7% for the three and nine months ending September 30, 2009, respectively.

EXECUTIVE SUMMARY AND TREND FACTORS AFFECTING THE BUSINESS

          Our results in the first nine months of 2010 reflect the successful execution of our business model, which emphasizes the alignment of our financial interests with those of our clients through greater use of generics and low-cost brands, home delivery and specialty pharmacy. In the first nine months of 2010, we benefited from better management of ingredient costs through renegotiation of supplier contracts, increased competition among generic manufacturers, higher generic fill rate (71.2% compared to 67.9% in the same period of 2009) and other actions which helped to reduce ingredient costs. In addition, through the research performed by us and guided by our Consumerology^® Advisory Board, we are providing our clients with additional tools designed to generate higher generic fill rates and further increase the use of our home delivery and specialty pharmacy services and drive greater adherence.

          While we believe we are well positioned from a business and financial perspective, we are subject to the current adverse economic environment. These conditions could affect our business in a number of direct and indirect ways.

          We believe the purchase of the shares and equity interests of certain subsidiaries of WellPoint that provide pharmacy benefit management services (“NextRx”, or the “NextRx PBM Business”), as well as the positive trends in gross profit we saw in the first nine months of 2010 should continue to generate improvements in our results of operations in the future. We benefited from lower drug purchasing costs and increased generic usage which we believe should continue to offset the negative impact of various economic and marketplace forces affecting pricing and plan structure.

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CRITICAL ACCOUNTING POLICIES

          The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our estimates and assumptions are based upon a combination of historical information and various other assumptions believed to be reasonable under the particular circumstances. Actual results may differ from our estimates. For a full description of our critical accounting policies, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” included in our Annual Report on Form 10-K for the year ended December 31, 2009, filed with the SEC on February 24, 2010.

GOODWILL AND INTANGIBLES

          During 2009, the valuations of two reporting units in our EM segment yielded fair values which were less than 20% in excess of their carrying value. We concluded that no impairment existed since the fair value of these reporting units exceeded their carrying value. As of September 30, 2010, the total assets, which include goodwill and the intangible assets, of these two reporting units were approximately $428.6 million and $29.7 million, respectively. Through the third quarter of 2010, there have been no events or circumstances relative to these reporting units that would require a re-evaluation of the fair value of the EM segment assets as compared to the carrying values. The fair value of both reporting units was determined using the income approach whereby estimated future discounted cash flows are used to develop fair value.

CLIENTS

          We entered into new long-term contracts with WellPoint and the DoD in the fourth quarter of 2009. As a result, we have a higher concentration of revenues among these clients in the first nine months of 2010. For the three and nine months ended September 30, 2010, our top five clients collectively represented 55.5% and 54.3% of revenues, respectively. For the three months ended September 30, 2010, our two largest clients, WellPoint and the DoD, represented approximately $3,303.5 million and $2,233.0 million, or 29.4% and 19.8% of revenues, respectively. Additionally, for the nine months ended September 30, 2010, WellPoint and the DoD represented $9,664.9 million and $6,480.2 million, or 28.7% and 19.2% of revenues, respectively. None of our other clients accounted for 10% or more of our consolidated revenues during the three and nine months ended September 30, 2010. No clients accounted for 10% or more of our consolidated revenues over the same periods of 2009.

RESULTS OF OPERATIONS

PBM OPERATING INCOME

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)	2010		2009		2010		2009
Product revenues
Network revenues(1)	$	7,490.9	$	3,288.8	$	22,596.4	$	9,772.3
Home delivery and specialty revenues(2)		3,316.1		1,915.1		9,841.9		5,599.8
Service revenues		62.6		67.1		194.3		200.8
Total PBM revenues		10,869.6		5,271.0		32,632.6		15,572.9
Cost of PBM revenues(1)		10,118.5		4,672.8		30,487.0		13,875.2
PBM gross profit		751.1		598.2		2,145.6		1,697.7
PBM SG&A expenses		227.3		243.4		645.8		614.2
PBM operating income	$	523.8	$	354.8	$	1,499.8	$	1,083.5

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	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)	2010		2009		2010		2009
Network		148.9		95.2		448.9		284.1
Home delivery and specialty(2)		13.5		11.1		40.2		32.5
Total PBM Claims		162.4		106.3		489.1		316.6
Total adjusted PBM Claims(3)		186.8		126.3		562.3		375.8

(1)	Includes retail pharmacy co-payments of $1,478.5 million and $708.4 million for the three months ended September 30, 2010 and 2009, respectively, and $4,688.4 million and $2,252.2 million for the nine months ended September 30, 2010 and 2009, respectively.
(2)	Includes home delivery, specialty and other including: (a) drugs distributed through patient assistance programs and (b) drugs we distribute to other PBMs’ clients under limited distribution contracts with pharmaceutical manufacturers.
(3)	Total adjusted claims reflect home delivery claims multiplied by 3, as home delivery claims are typically 90 day claims.

          Product Revenues for the three months ended September 30, 2010: Network pharmacy revenues increased by $4,202.1 million, or 127.8%, in the three months ended September 30, 2010 over the same period of 2009. Home delivery and specialty revenues increased $1,401.0 million, or 73.2%, in the three months ended September 30, 2010 from the same period in 2009. Approximately $5,844.6 million of the total product revenue increase is due to the increase in volume resulting from the acquisition of NextRx and the new contract with the DoD. The new contract with the DoD results in utilization of the gross basis of accounting, under which the ingredient cost and member co-payments are included in revenues and cost of revenues. These increases were partially offset by the impact of higher generic penetration. Our network generic fill rate increased to 73.3% of total network claims in the third quarter of 2010 as compared to 69.6% in the same period of 2009. Additionally, our home delivery generic fill rate increased to 60.5% of home delivery claims in the three months ended September 30, 2010 as compared to 58.3% in the same period of 2009.

          Product Revenues for the nine months ended September 30, 2010: Network pharmacy revenues increased by $12,824.1 million, or 131.2%, in the nine months ended September 30, 2010 over the same period of 2009. Home delivery and specialty revenues increased $4,242.1 million, or 75.8%, in the nine months ended September 30, 2010 from the same period in 2009. Approximately $16,895.0 million of the total product revenue increase is due to the increase in volume mostly due to the acquisition of NextRx and the new contract with the DoD. The new contract with the DoD results in utilization of the gross basis of accounting, under which the ingredient cost and member co-payments are included in revenues and cost of revenues. Additionally included as revenue is $30.0 million recorded in the second quarter of 2010 related to the amendment of a client contract which relieved us of certain contractual guarantees. These increases were partially offset by the impact of higher generic penetration. Our network generic fill rate increased to 72.4% of total network claims in the first nine months of 2010 as compared to 69.2% in the same period of 2009. Additionally, our home delivery generic fill rate increased to 60.0% of home delivery claims in the nine months ended September 30, 2010 as compared to 57.5% in the same period of 2009.

          Cost of PBM revenues increased $5,445.7 million, or 116.5%, and $16,611.8 million, or 119.7%, in the three and nine months ended September 30, 2010, respectively, from the same periods of 2009 due primarily to the acquisition of NextRx and the new contract with the DoD, as previously discussed.

          Our PBM gross profit increased $152.9 million, or 25.6%, and $447.9 million or 26.4%, for the three and nine months ended September 30, 2010, respectively, as compared to the same periods of 2009. The acquisition of NextRx as well as better management of ingredient costs and client cost savings from the increase in the aggregate generic fill rate were partially offset by margin pressures arising from ingredient cost inflation and the current competitive environment. Gross profit margin decreased to 6.9% from 11.3% and to 6.6% from 10.9% in the three and nine months ended September 30, 2010 over the same periods of 2009, respectively. This is primarily due to the new contract with the DoD which is accounted for on a gross basis as well as the acquisition of NextRx. However, we expect margins to improve as we continue to integrate NextRx into our core business and achieve synergies.

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          Selling, general and administrative expense (“SG&A”) for our PBM segment for the three months ended September 30, 2010 decreased by $16.1 million, or 6.6%, as compared to the same period of 2009 primarily as a result of the following factors:

• Expenses of $35.0 million relating to an accrual for the settlement of a legal matter recorded in the third quarter of 2009 (see Note 10 — Contingencies for further discussion), and

• Transaction costs of $9.6 million incurred in the third quarter of 2009 related to the NextRx acquisition.

• These decreases were offset by integration costs of $12.3 million incurred in the third quarter of 2010 related to the acquisition of NextRx, and

• Increases in employee compensation due to growth mostly as a result of the acquisition of NextRx.

          SG&A for our PBM segment for the nine months ended September 30, 2010 increased by $31.6 million, or 5.1%, as compared to the same period of 2009 primarily as a result of the following factors:

• Integration costs of $22.7 million incurred in the first nine months of 2010 related to the acquisition of NextRx,

• A benefit of $15.0 million in the second quarter of 2009 related to an insurance recovery for previously incurred litigation costs, and

• Increases in employee compensation due to growth mostly as a result of the acquisition of NextRx.

• These increases were partially offset by a decrease due to expenses of $35.0 million relating to an accrual for the settlement of a legal matter recorded in the third quarter of 2009, and

• Transaction costs of $21.3 million incurred in the second and third quarters of 2009 related to the NextRx acquisition.

          PBM operating income increased $169.0 million, or 47.6%, and $416.3 million, or 38.4%, for the three and nine months ended September 30, 2010, respectively, as compared to the same periods of 2009, based on the various factors described above.

EM OPERATING INCOME

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)	2010		2009		2010		2009
Product revenues	$	379.2	$	339.3	$	1,037.4	$	942.9
Service revenues		3.0		2.7		9.0		9.5
Total EM revenues		382.2		342.0		1,046.4		952.4
Cost of EM revenues		369.2		329.1		1,007.2		913.8
EM gross profit		13.0		12.9		39.2		38.6
EM SG&A expenses		8.8		9.3		26.0		28.2
EM operating income	$	4.2	$	3.6	$	13.2	$	10.4

          Our EM results for the three and nine months ended September 30, 2010 and 2009 have been adjusted for the discontinued operations of PMG, which was formerly part of our EM segment.

          EM Continuing Operations: EM operating income increased by $0.6 million, or 16.7%, and $2.8 million, or 26.9%, for the three and nine months ended September 30, 2010, respectively, from the same periods of 2009. The increase in operating income is due to an increase in volume in certain segments of our distribution line of business. This was partially offset by increases in EM cost of revenues primarily due to increases in volume and cost inflation in our distribution line of business. Additionally, efforts to control cost within our EM segment resulted in a decrease in SG&A.

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OTHER (EXPENSE) INCOME

          Net interest expense decreased $6.0 million and $16.0 million in the three and nine months ended September 30, 2010 as compared to the same periods in 2009. The decrease for the three months ended September 30, 2010 is primarily due to lower weighted average interest rate on our credit facility during the quarter as well as lower debt outstanding on our credit facility (see Note 7 — Financing). The decrease for the nine months ended September 30, 2010 is primarily due to fees of $58.4 million we incurred in the second quarter of 2009 related to the termination of the bridge loan for the financing of the NextRx acquisition, lower weighted average interest rate and lower debt outstanding on our credit facility, partially offset by interest expense on the Senior Notes (see “Liquidity and Capital Resources”).

PROVISION FOR INCOME TAXES

          Our effective tax rate from continuing operations was 37.1% for the three and nine months ended September 30, 2010, as compared to 37.0% and 36.8% for the same periods of 2009 primarily due to increased state income tax liability from the acquisition of NextRx.

NET LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX

          Net loss from discontinued operations, net of tax, increased $6.4 million for the three months ended September 30, 2010 compared to the same period of 2009. This increase is primarily due to charges recorded upon sale of our PMG line of business in the third quarter of 2010. Net loss from discontinued operations, net of tax, increased $24.2 million for the nine months ended September 30, 2010 compared to the same period of 2009. This is primarily attributable to the impairment charge of $28.2 million recorded in the second quarter of 2010, as discussed in Note 4, in addition to the charges recorded upon the sale of PMG in the third quarter of 2010.

NET INCOME AND EARNINGS PER SHARE

          Net income for the three and nine months ended September 30, 2010 increased $103.9 million, or 52.6%, and $247.3 million, or 40.9%, respectively, over the same periods of 2009 due to factors discussed above.

          On May 5, 2010, we announced a two-for-one stock split for stockholders of record on May 21, 2010 effective June 8, 2010. The split was effected in the form of a dividend by issuance of one additional share of common stock for each share of common stock outstanding. The earnings per share and the weighted average number of shares outstanding for basic and diluted earnings per share for each period have been adjusted for the stock split.

          Basic and diluted earnings per share increased 58.3% and 55.6%, respectively, for the three months ended September 30, 2010 over the same period of 2009. For the nine months ended September 30, 2010, basic and diluted earnings per share increased 35.3% and 35.7%, respectively, over the same period of 2009. The increase is primarily due to operating results, partially offset by an increase in shares outstanding as a result of the public offering in June 2009 (see Note 8). This increase in shares outstanding is partially offset by treasury share repurchases of 16.4 million and 26.9 million shares during the three and nine months ended September 30, 2010, respectively.

LIQUIDITY AND CAPITAL RESOURCES

OPERATING CASH FLOW, CAPITAL EXPENDITURES AND FINANCING (reflecting the two-for-one stock split effective June 8, 2010)

          For the nine months ended September 30, 2010, net cash provided by continuing operations increased $921.1 million to $1,829.7 million compared to the same period of 2009. Changes in operating cash flows were positively impacted by the following factors:

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• Changes in working capital resulted in cash inflow of $629.0 million in the nine months ended September 30, 2010 compared to a cash inflow of $98.1 million over the same period of 2009. The cash flow increase was primarily related to the collection of receivables from pharmaceutical manufacturers and clients due to the acquisition of NextRx. Offsetting these net cash inflows are net cash outflows for claims and rebates payable due to the timing of invoices and payments.

• Net income from continuing operations increased $271.5 million in the nine months ended September 30, 2010 compared to the same period of 2009.

• Depreciation and amortization included in net income in the nine months ended September 30, 2010 is $110.0 million higher than the same period of 2009 due primarily to amortization of the customer contracts related to the PBM agreement with WellPoint.

• The deferred tax provision increased $55.0 million in the nine months ended September 30, 2010 compared to the same period of 2009 reflecting a net change in taxable temporary differences primarily attributable to tax deductible goodwill associated with the NextRx acquisition.

          Net cash used in investing activities decreased $1,204.4 million for the nine months ended September 30, 2010 over the same period of 2009 primarily due to the 2009 purchase of short-term investments with certain proceeds from the issuance of common stock and Senior Notes described below. Our capital expenditures for the nine months ended September 30, 2010 decreased $4.9 million compared to the same period of 2009. Capital expenditures for the nine months ended September 30, 2010 include $30.4 million related to our Technology & Innovation Center, which opened in the second quarter of 2010. This increase is offset by expenditures related to technology infrastructure during the nine months ended September 30, 2009. We intend to continue to invest in infrastructure and technology that we believe will provide efficiencies in operations and facilitate growth and enhance the service we provide to our clients. Anticipated capital expenditures will be funded primarily from operating cash flow or, to the extent necessary, with borrowings under our revolving credit facility, discussed below.

          Net cash used in financing activities was $2,568.0 million for the nine months ended September 30, 2010 compared to net cash provided of $3,765.9 million in the same period of 2009. During the nine months ended September 30, 2010, we repurchased 26.9 million treasury shares for $1,276.2 million. Additionally, we repaid in full our Term 1 and Term A loans, resulting in total repayments on long term debt of $1,340.1 million during the nine months ended September 30, 2010 as compared to $240.1 million for the same period of 2009. On June 9, 2009, we issued Senior Notes resulting in net proceeds of $2,478.3 million which includes original issue discount of $8.4 million and financing costs of $13.3 million. In addition, on June 10, 2009, we completed a public offering of 52.9 million shares of common stock which resulted in net proceeds of $1,569.1 million after giving effect to the underwriting discount and issuance costs of $44.4 million. We used the net proceeds to finance a portion of the purchase price for the acquisition of NextRx. Offsetting these proceeds were financing fees of $56.3 million for the committed credit facility.

          We anticipate that our current cash balances, cash flows from operations and our revolving credit facility will be sufficient to meet our cash needs and make scheduled payments for our contractual obligations and current capital commitments. However, if needs arise, we may decide to secure external capital to provide additional liquidity. New sources of liquidity may include additional lines of credit, term loans, or issuance of notes or common stock, all of which are allowable, with certain limitations, under our existing credit agreement.

ACQUISITIONS (reflecting the two-for-one stock split effective June 8, 2010)

          On December 1, 2009, we completed the purchase of the NextRx PBM Business, in exchange for total consideration of $4.675 billion paid in cash. The working capital adjustment was finalized during the second quarter of 2010 and reduced the purchase price by $8.3 million, resulting in a final purchase price of $4.667 billion. The NextRx PBM Business is a national provider of PBM services, and we believe the acquisition will enhance our ability to achieve cost savings, innovations, and operational efficiencies which will benefit our customers and stockholders. The purchase price was primarily funded through a $2.5 billion underwritten public offering of senior notes completed on June 9, 2009 resulting in net proceeds of $2,478.3 million, and a public offering of 52.9 million shares of common stock completed June 10, 2009 resulting in net proceeds of $1,569.1 million. This acquisition is reported as part of our PBM segment (see Note 3).

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          We regularly review potential acquisitions and affiliation opportunities. We believe available cash resources, bank financing or the issuance of additional common stock could be used to finance future acquisitions or affiliations. There can be no assurance we will make new acquisitions or establish new affiliations in 2010 or thereafter.

STOCK REPURCHASE PROGRAM

          We have a stock repurchase program, originally announced on October 25, 1996. Treasury shares are carried at first in, first out cost. There is no limit on the duration of the program. During the three months ended September 30, 2010, we repurchased 16.4 million treasury shares for $747.5 million. During the nine months ended September 30, 2010, we repurchased 26.9 million treasury shares for $1,276.2 million. Current year repurchases were funded through internally generated cash. At September 30, 2010, there are 15.1 million shares remaining under this program. Additional share repurchases, if any, will be made in such amounts and at such times as we deem appropriate based upon prevailing market and business conditions and other factors.

BANK CREDIT FACILITY

          On August 13, 2010, we entered into a credit agreement with a commercial bank syndicate providing for a three-year revolving credit facility of $750.0 million. In connection with entering into the credit agreement, we terminated in full the revolving facility under our prior credit agreement, entered into October 14, 2005 and due October 14, 2010. There was no outstanding balance in our prior revolving credit facility upon termination.

          During the third quarter of 2010, we repaid the Term A and Term-1 loans in full. We made total Term loan payments of $1,340.0 million during the nine months ended September 30, 2010. At September 30, 2010, our credit agreement consists of a $750.0 million revolving credit facility (none of which was outstanding as of September 30, 2010) available for general corporate purposes.

          The new credit agreement requires us to pay interest periodically on the London Interbank Offered Rates (“LIBOR”) or base rate options, plus a margin. The margin over LIBOR will range from 1.55% to 1.95%, depending on our consolidated leverage ratio. Under the credit agreement we are required to pay commitment fees on the unused portion of the $750.0 million revolving credit facility. The commitment fee will range from 0.20% to 0.30% depending on our consolidated leverage ratio. Financing costs of $3.9 million related to the new credit agreement are being amortized over three years and are reflected in other intangible assets, net in the unaudited consolidated balance sheet.

          The credit agreement contains covenants which limit our ability to incur additional indebtedness, create or permit liens on assets, and engage in mergers, consolidations, or disposals. The covenants also include a minimum interest coverage ratio and a maximum leverage ratio. At September 30, 2010, we believe we were in compliance in all material respects with all covenants associated with our new credit agreement.

SENIOR NOTES

          On June 9, 2009, we issued $2.5 billion of senior notes, including $1.0 billion aggregate principal amount of 5.25% senior notes due 2012; $1.0 billion aggregate principal amount of 6.25% senior notes due 2014 and $500 million aggregate principal amount of 7.25% senior notes due 2019. The senior notes require interest to be paid semi-annually on June 15 and December 15. We may redeem some or all of each series of senior notes prior to maturity at a price equal to the greater of (1) 100% of the aggregate principal amount of any notes being redeemed, plus accrued and unpaid interest; or (2) the sum of the present values of the remaining scheduled payments of principal and interest on the notes being redeemed, not including unpaid interest accrued to the redemption date, discounted to the redemption date on a semiannual basis at the treasury rate plus 50 basis points with respect to any 2012 notes, 2014 notes and 2019 notes being redeemed, plus in each case, unpaid interest on the notes being redeemed accrued to the redemption date. The senior notes are jointly and severally and fully and unconditionally guaranteed on a senior basis by most of our current and future 100% owned domestic subsidiaries.

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          Financing costs of $13.3 million are being amortized over an average weighted period of 5.2 years and are reflected in other intangible assets, net in the unaudited consolidated balance sheet. We used the net proceeds for the acquisition of WellPoint’s NextRx PBM Business.

COMMON STOCK (reflecting the two-for-one stock split effective June 8, 2010)

          One May 5, 2010, we announced a two-for-one stock split for stockholders of record on May 21, 2010 effective June 8, 2010. The split was effected in the form of a dividend by issuance of one additional share of common stock for each share of common stock outstanding. The earnings per share and the weighted average number of shares outstanding for basic and diluted earnings per share for each period have been adjusted for the stock split.

          On June 10, 2009, we completed a public offering of 52.9 million shares of common stock, which includes 6.9 million shares sold as a result of the underwriters’ exercise of their overallotment option in full at closing, at a price of $30.50 per share. The sale resulted in net proceeds of $1,569.1 million after giving effect to the underwriting discount and issuance costs of $44.4 million. We used the net proceeds for the acquisition of WellPoint’s NextRx PBM Business.

IMPACT OF INFLATION

          Changes in prices charged by manufacturers and wholesalers for pharmaceuticals affect our revenues and cost of revenues. Most of our contracts provide that we bill clients based on a generally recognized price index for pharmaceuticals.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

          We are exposed to market risk from changes in interest rates related to debt outstanding under our credit agreement. Our earnings are subject to change as a result of movements in market interest rates. At September 30, 2010, we had no obligations, net of cash, which were subject to variable rates of interest under our credit agreement.

Item 4. Controls and Procedures

          We maintain a comprehensive set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) designed to provide reasonable assurance that information required to be disclosed in our filings under the Exchange Act is recorded, processed, summarized and reported accurately and within the time periods specified in the SEC’s rules and forms. Under the supervision and with the participation of our management, including our Chairman, President and Chief Executive Officer and our Executive Vice President and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon this evaluation, the Chairman, President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures are effective in providing reasonable assurance of the achievement of the objectives described above.

          During the third quarter ended September 30, 2010, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

          We and/or our subsidiaries are defendants in a number of lawsuits. Each case seeks damages in an unspecified amount. We cannot ascertain with any certainty at this time the monetary damages or injunctive relief that any of the plaintiffs may seek to recover. We also cannot provide any assurance that the outcome of any of these matters, or some number of them in the aggregate, will not be materially adverse to our financial condition, consolidated results of operations, cash flows or business prospects. In addition, the expenses of defending these cases may have a material adverse effect on our financial results.

The following developments have occurred since the filing of our last Form 10-Q.

• Multi-District Litigation — As previously disclosed, on April 29, 2005, the Judicial Panel on Multi-District Litigation transferred a number of cases to the Eastern District of Missouri for coordinated or consolidated pretrial proceedings. On July 2, 2010, ESI filed a motion for partial summary judgment as to certain non-ERISA claims being made in various cases. Another case, Fidelity Insurance Company, et al. v. Express Scripts, Inc., et al. (Case No. 4:03-CV-1521-HEA, United States District Court for the Eastern District of Missouri) (filed March 20, 2003), was recently set for trial on July 11, 2011.

• In re Express Scripts Securities Litigation (Case No. 4:04-CV-1009, United States District Court for the Eastern District of Missouri). On September 13, 2005, plaintiffs filed an amended complaint alleging that Express Scripts and certain of our officers (collectively, the “Defendants”) violated federal securities laws. On June 30, 2010, the Court granted Defendants’ motion to dismiss and dismissed the action. Plaintiffs filed a notice of appeal on July 29, 2010, then filed a stipulation for dismissal with prejudice on August 26, 2010.

• Inola Drug, Inc. v. Express Scripts, Inc. (Case No. 06-CV-117-TCK-SAJ, United States District Court for the Northern District of Oklahoma; Case No. 09-5094, United States Court of Appeals for the Tenth Circuit) (filed February 22, 2006). On August 4, 2010, the Tenth Circuit granted ESI’s motion to dismiss the appeal.

     Additional information regarding such matters is contained in Item 3 — Legal Proceedings in our Annual Report on Form 10-K for the year ended December 31, 2009, and in Item 1 — Legal Proceedings in our Quarterly Report on Form 10-Q for the quarterly period ending
June 30, 2010.

     In addition, in the ordinary course of our business there have arisen various legal proceedings, investigations or claims now pending against our subsidiaries and us. The effect of these actions on future financial results is not subject to reasonable estimation because considerable uncertainty exists about the outcomes. Where insurance coverage is not available for such claims, or in our judgment, is not cost-effective, we maintain self-insurance reserves to reduce our exposure to future legal costs, settlements and judgments related to uninsured claims. Our self-insured reserves are based upon estimates of the aggregate liability for the costs of uninsured claims incurred and the retained portion of insured claims using certain actuarial assumptions followed in the insurance industry and our historical experience. It is not possible to predict with certainty the outcome of these claims, and we can give no assurance that any losses in excess of our insurance and any self-insurance reserves will not be material.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

          The following is a summary of our stock repurchasing activity during the three months ended September 30, 2010 (share data in millions):

						Total number of
						shares purchased		Maximum number
		Total number				as part of a		of shares
		of		Average		publicly		that may yet be
		shares		price paid		announced		purchased under
Period		purchased		per share		program		the program
	7/1/2010 -- 7/31/2010		—	$	—		—		31.5
	8/1/2010 -- 8/31/2010		16.4		45.65		16.4		15.1
	9/1/2010 -- 9/30/2010		—		—		—		15.1
Third Quarter 2010 Total			16.4	$	45.65		16.4

          We have a stock repurchase program, originally announced on October 25, 1996. Treasury shares are carried at first in, first out cost. There is no limit on the duration of the program. During the three months ended September 30, 2010, we repurchased 16.4 million treasury shares for $747.5 million. Current year repurchases were funded through internally generated cash. As of September 30, 2010, there are 15.1 million shares remaining under this program. Additional share repurchases, if any, will be made in such amounts and at such times as we deem appropriate based upon prevailing market and business conditions and other factors.

Item 6. Exhibits

          (a) See Index to Exhibits below.

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SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	EXPRESS SCRIPTS, INC. (Registrant)
Date: October 27, 2010	By:	/s/ George Paz
		George Paz, Chairman, President and Chief Executive Officer
Date: October 27, 2010	By:	/s/ Jeffrey Hall
		Jeffrey Hall, Executive Vice President and
		Chief Financial Officer

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INDEX TO EXHIBITS
(Express Scripts, Inc. — Commission File Number 0-20199)

Exhibit
Number	Exhibit
2.1	Stock and Interest Purchase Agreement dated April 9, 2009 between the Company and WellPoint, Inc., incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed April 14, 2009.
3.1	Amended and Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year ending December 31, 2009 filed February 24, 2010.
3.2	Third Amended and Restated Bylaws, as amended, incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010 filed April 28, 2010.
4.1	Form of Certificate for Common Stock, incorporated by reference to Exhibit No. 4.1 to the Company’s Registration Statement on Form S-1 filed June 9, 1992 (No. 33-46974) (the “Registration Statement”).
4.2	Rights Agreement dated as of July 25, 2001 between the Company and American Stock Transfer & Trust Company, as Rights Agent, which includes the Certificate of Designations for the Series A Junior Participating Preferred Stock as Exhibit A, the Form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C, incorporated by reference to Exhibit No. 4.1 to the Company’s Current Report on Form 8-K filed July 31, 2001 (the “Rights Agreement”).
4.3	Amendment No. 1 to the Rights Agreement between the Company and American Stock Transfer & Trust Company, as Rights Agent, dated May 25, 2005, incorporated by reference to Exhibit No. 10.1 to the Company’s Current Report on Form 8-K filed May 31, 2005.
4.4	Amendment No. 2 to the Rights Agreement between the Company and American Stock Transfer & Trust Company, as Rights Agent, dated December 18, 2009, incorporated by reference to Exhibit No. 10.1 to the Company’s Current Report on Form 8-K filed December 18, 2009.
10.1	Credit Agreement, dated as of August 13, 2010, among Express Scripts, Inc., Credit Suisse AG, Cayman Islands Branch, as administrative agent, The Bank of Tokyo-Mitsubishi UFJ, Ltd. and Morgan Stanley Senior Funding, Inc., as co-syndication agents, Citibank, N.A., JPMorgan Chase Bank, N.A. and Wells Fargo Bank, N.A., as co-documentation agents and the lenders named therein, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed August 19, 2010.
10.21	Amendment No. 1 to the Pharmacy Benefits Management Services Agreement dated August 20, 2010 (effective as of January 1, 2010) between the Company, on behalf of itself and its subsidiaries, and WellPoint, Inc., on behalf of itself and certain designated affiliates.
11.1	Statement regarding computation of earnings per share. (See Note 6 to the unaudited consolidated financial statements.)
31.11	Certification by George Paz, as Chairman, President and Chief Executive Officer of Express Scripts, Inc., pursuant to Exchange Act Rule 13a-14(a).
31.21	Certification by Jeffrey Hall, as Executive Vice President and Chief Financial Officer of Express Scripts, Inc., pursuant to Exchange Act Rule 13a-14(a).
32.11	Certification by George Paz, as Chairman, President and Chief Executive Officer of Express Scripts, Inc., pursuant to 18 U.S.C. § 1350 and Exchange Act Rule 13a-14(b).

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Exhibit
Number	Exhibit
32.21	Certification by Jeffrey Hall, as Executive Vice President and Chief Financial Officer of Express Scripts, Inc., pursuant to 18 U.S.C. § 1350 and Exchange Act Rule 13a-14(b).
101.12	XBRL Taxonomy Instance Document.
101.22	XBRL Taxonomy Extension Schema Document.
101.32	XBRL Taxonomy Extension Calculation Linkbase Document.
101.42	XBRL Taxonomy Extension Definition Linkbase Document.
101.52	XBRL Taxonomy Extension Label Linkbase Document.
101.62	XBRL Taxonomy Extension Presentation Linkbase Document.

1	Filed herein.
2	Furnished, not filed.

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EX-10.2

Exhibit 10.2

AMENDMENT NO. 1
TO THE
PHARMACY BENEFIT MANAGEMENT SERVICES AGREEMENT

     This Amendment No. 1 to the Pharmacy Benefit Management Services Agreement (“Amendment”) is entered into as of August 20, 2010, and shall be effective as of January 1, 2010, and amends the Pharmacy Benefit Management Services Agreement (“Agreement”) entered into by WellPoint, Inc., on behalf of itself and its Designated Affiliates (hereinafter referred to collectively as “WellPoint”), and Express Scripts, Inc. on behalf of itself and its subsidiaries (“PBM”) (collectively, WellPoint and PBM are referred to as the “Parties,” and each separately as a “Party”).

     WHEREAS, the Parties desire to modify the terms of the Agreement;

     NOW, THEREFORE, the Parties agree to amend the Agreement as follows:

     1. Exhibit H. The Exhibit H contained in the Agreement is hereby deleted in its entirety and replaced by the new Exhibit H attached hereto.

     The parties acknowledge and agree that the Agreement, except as expressly modified by this Amendment, and any other amendments entered into by the parties, shall otherwise remain in full force and effect.

     IN WITNESS WHEREOF, the Parties’ authorized representatives hereby execute this Amendment.

WELLPOINT, INC.		EXPRESS SCRIPTS, INC.
On behalf of itself and its Designated		On behalf of itself and its subsidiaries
Affiliates
By:	/s/ Tracy Nolan	By:	/s/ Jeff Hall
Printed Name: Tracy Nolan		Printed Name: Jeff Hall
Title: Vice President		Title: Exec. VP & CFO

EXHIBIT H

FEHB SERVICES ADMINISTRATION

This Exhibit sets forth the duties and obligations of PBM with respect to WellPoint’s FEHBP operations.

I. FEDERAL SUBCONTRACT PROVISIONS

Federal Acquisition Regulation Clauses (FAR)

This Agreement is a subcontract under a federal procurement contract of the United States Government (The Office of Personnel Management) with WellPoint. This Agreement is subject to certain federal procurement clauses pursuant to 48 C.F.R. Chapter 16.

This Agreement incorporates by reference the clauses set forth herein with the same force and effect as if they were given in full text. Upon request, FEP will make their full text available to PBM.

The clauses are applicable to this Agreement and to its lower tier contracts if the cost of this Agreement or lower tier agreements are equal to or greater than the amount required by the listed clause, unless specifically exempted by applicable rules, regulations, or Executive Agreements. References in the Federal Acquisition Regulation clauses to the “Government” shall be deemed to be references to WellPoint, as appropriate, and references to the “contractor” shall be deemed to be references to PBM, as appropriate

In the event of a conflict between the terms of this Exhibit and other terms in the Agreement, the terms of this Exhibit shall control.

II. FAR CLAUSES APPLICABLE TO THIS AGREEMENT

The clauses in FAR Subpart 52.2 referenced in subparagraph (a), the clauses applicable at the dollar thresholds in subparagraphs (b) and (c), those clauses referenced and checked in subparagraph (d), and those clauses in subparagraph (e) for Underwriting Agreements, in effect on the date of this Agreement, are incorporated herein and made a part of this Agreement. Certain clauses in the above-identified subparagraphs will not be incorporated if the Agreement does not meet the threshold characteristic set forth in parentheses after the name and date of the clause. To the extent that an earlier version of any such clause is included in the Prime Contract or agreement under which this Agreement is issued, the date of the clause as it appears in such Prime Contract or agreement shall be controlling and said version shall be incorporated herein. PBM agrees to abide by the provisions of the FEHB and FAR regulations applicable to subcontractors.

     (a) The following clauses are applicable to this Agreement regardless of dollar amount:

FAR Reference	Title of Clause
52.202-1	Definitions (Jul 2004)
52.209-6	Protecting the Government’s Interest when Subcontracting With Contractors Debarred, Suspended, or Proposed for Debarment (Sept 2006) (only applicable if agreement exceeds $30,000)
52.222-4	Contract Work Hours And Safety Standards Act-Overtime Compensation (Jul 2005)
52.222-21	Prohibition Of Segregated Facilities (Feb 1999)
52.222-26	Equal Opportunity (Mar 2007)

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FAR Reference	Title of Clause
52.222-36	Affirmative Action for Workers with Disabilities (Jun 1998) (only applicable if agreement exceeds $10,000)
52.222-50	Combating Trafficking in Persons (August 2007)
52.247-63	Preference for U.S. Flag Air Carriers (June 2003)
52-247-64	Preference for Privately owned U.S. Flag Commercial Vessels (February 2006)

FEHBAR CLAUSES APPLICABLE TO THIS AGREEMENT:

1652.203-70	Misleading, Deceptive or Unfair Advertising (Jan 1991)
1652.204-70	Contractor Records Retention (July 2005)
1652.204-74	Large Provider Agreements (Oct 2005)
1652.222-70	Notice of Significant Events (July 2005)
1652.232-72	Non-Commingling of FEHBP Funds (Jan 1991) (applicable only to agreements in excess of $25,000) (substitute “contractor and/or subcontractor” for “Carrier and/or its Underwriter”)
1652.246-70	FEHB Inspection (July 2005)
1652.249-71	FEHBP Termination for Convenience of the Government — Negotiated Benefits Contracts (Jan 1998)
1652.249-72	FEBHP Termination for Default-Negotiated Benefits Contracts (Jan 1998)

     (b) The following FAR clauses are applicable to this Agreement if it exceeds $100,000:

FAR Reference	Title of Clause
52.203-7	Anti-Kickback Procedures (Jul 1995)
52.203-12	Limitation on Payments to Influence Certain Federal Transactions (Sept 2007)
52.222-35	Equal Opportunity for Special Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans (Sept 2006) (only applicable to agreements of $100,000 or more)
52.222-37	Employment Reports on Special Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans (Sept 2006) (only applicable to agreements of $100,000 or more)
52.222-39	Notification of Employee Rights Concerning Payment of Union Dues or Fees (Dec 2004)
52.227-1	Authorization and Consent (Dec 2007)
52.227-2	Notice And Assistance Regarding Patent and Copyright Infringement (Dec 2007)

     (c) The following FAR clauses are applicable to this Agreement if it exceeds $650,000:

FAR Reference	Title of Clause
52.215-10	Price Reduction for Defective Cost or Pricing Data (Oct 1997)
52.215-12	Subcontractor Cost or Pricing Data (Oct 1997)
52.215-13	Subcontractor Cost or Pricing Data-Modifications (Oct 1997)
52.219-8	Utilization of Small Business Concerns (May 2004)
52-219-9	Small Business Subcontracting Plan (July 2005)
52.215-15	Pension Adjustments and Asset Reversions (Oct 2004)
52.215-18	Reversion or Adjustment of Plans For Postretirement Benefits (PRB) Other than Pensions (Jul 2005)

     (d) The following FEHBAR clauses are applicable to all underwriting agreements:

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FAR Reference	Title of Clause
1652.203-70	Misleading, Deceptive, or Unfair Advertising (Jan 1991) (All Underwriting) (substitute “Underwriter” wherever “Carrier” is utilized in the clause)
1652.215-71	Investment Income (Jan 1998) (All Underwriting) (substitute “Underwriter” wherever “Carrier” is utilized in the clause)
1652.232-72	Non-commingling of FEHBP Funds (Jan 1991) (only applies to agreements in excess of $25,000) (substitute “Underwriter” wherever “Carrier” is utilized in the clause)
1652.246-70	FEHB Inspection (Jan 2005) (All Underwriting and Administrative Services) (substitute “Underwriter” wherever “Carrier” is utilized in the clause)

(e) Business Ethics and Conduct. This clause will only apply if the aggregate value of this Agreement exceeds $5 million and lasts for more than 120 days.

1. Definitions. As used in this clause—

a.	“Agent” means any individual, including a director, an officer, an employee, or an independent contractor, authorized to act on behalf of the organization.
b.	“Full cooperation” means disclosure to the Government of the information sufficient for law enforcement to identify the nature and extent of the offense and the individuals responsible for the conduct. It includes providing timely and complete response to Government auditors’ and investigators’ request for documents and access to employees with information. Full cooperation does not foreclose any subcontractor rights arising in law, the FAR, or the terms of the contract. It does not require the subcontractor to waive its attorney-client privilege or the protections afforded by the attorney work product doctrine. It does not require any officer, director, owner, or employee of the subcontractor, including a sole proprietor, to waive his or her attorney client privilege or Fifth Amendment rights. It does not restrict a subcontractor from conducting an internal investigation or defending a proceeding or dispute arising under the contract or related to a potential or disclosed violation.
c.	“Principal” means an officer, director, owner, partner, or a person having primary management or supervisory responsibilities within a business entity (e.g., general manager; plant manager; head of a subsidiary, division, or business segment; and similar positions).

2. Code of business ethics and conduct. Within 30 days after contract award, unless WellPoint establishes a longer time period, PBM shall—

a.	Have a written code of business ethics and conduct; and
b.	Make a copy of the code available to each employee engaged in performance of this Agreement.

3. PBM shall—

a.	Exercise due diligence to prevent and detect criminal conduct; and
b.	Otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law.
c.	Timely disclose, in writing, to the agency Office of Inspector General (OIG), with a copy to the agency Contracting Officer, whenever, in connection with the award, performance, or closeout of this Agreement or any subcontract thereunder, PBM has credible evidence that a principal, employee, agent, or subcontractor of PBM has committed—

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(i)	A violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 of the United States Code; or
(ii)	A violation of the civil False Claims Act (31 U.S.C. 3729-3733).

4.

The Government and WellPoint shall, to the extent permitted by law and regulation, safeguard and treat information obtained pursuant to the PBM’s disclosure as confidential where the information has been marked “confidential” or “proprietary” by PBM. To the extent permitted by law and regulation, such information will not be disclosed to the public pursuant to a Freedom of Information Act request, 5 U.S.C. Section 552, without prior notification to PBM. WellPoint may transfer documents provided by PBM to any department or agency within the Executive Branch of the United States Government if the information relates to matters within the organization’s jurisdiction.

5.

PBM shall establish the following within 90 days after the effective date of this Agreement, unless WellPoint establishes a longer time period:

a. An ongoing business ethics awareness and compliance program.

(i)	This program shall include reasonable steps to communicate periodically and in a practical manner PBM’s standards and procedures and other aspects of PBM’s business ethics awareness and compliance program and internal control system, by conducting effective training programs and otherwise disseminating information appropriate to an individual’s respective roles and responsibilities.
(ii)	The training conducted under this program shall be provided to PBM’s principals and employees, and as appropriate, PBM’s agents and subcontractors.

b. An internal control system.

(i)	PBM’s internal control system shall establish standards and procedures to facilitate timely discovery of improper conduct in connection with this Agreement; and ensure corrective measures are promptly instituted and carried out.
(ii)	At a minimum, PBM’s internal control system shall provide for the following:

A.	Assignment of responsibility at a sufficiently high level and adequate resources to ensure effectiveness of the business ethics awareness and compliance program and internal control system.
B.	Reasonable efforts not to include an individual as a principal, whom due diligence would have exposed as having engaged in conduct that is in conflict with PBM’s code of business ethics and conduct.
C.	Periodic reviews of company business practices, procedures, policies, and internal controls for compliance with PBM’s code of business ethics and conduct and the special requirements of Government contracting, including—

(i)	Monitoring and auditing to detect criminal conduct;
(ii)	Periodic evaluation of the effectiveness of the business ethics awareness and compliance program and internal control system, especially if criminal conduct has been detected; and
(iii)	Periodic assessment of the risk of criminal conduct, with appropriate steps to design, implement, or modify the business ethics awareness and compliance program and the internal control system as necessary to reduce the risk of criminal conduct identified through this process.

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D.	An internal reporting mechanism, such as a hotline, which allows for anonymity or confidentiality, by which employees may report suspected instances of improper conduct, and instructions that encourage employees to make such reports.
E.	Disciplinary action for improper conduct or for failing to take reasonable steps to prevent or detect improper conduct.

6. Subcontracts. PBM shall include the substance of this clause, including this paragraph (d), in subcontracts that have a value in excess of $5,000,000 and a performance period of more than 120 days.

(f) AUDIT AND RECORDS-NEGOTIATION (JUN 2009) (FAR 52.215-2).

1.	As used in this clause, “records” includes books, documents, accounting procedures and practices, and other data, regardless of type and regardless of whether such items are in written form, in the form of computer data, or in any other form.
2.	Examination of costs. If this is a cost- reimbursement, incentive, time-and-materials, labor-hour, or price redeterminable contract, or any combination of these, the PBM shall maintain and the authorized representative of the United States Office of Personnel Management (“OPM Representative”), shall have the right to examine and audit all records and other evidence sufficient to reflect properly all costs claimed to have been incurred or anticipated to be incurred directly or indirectly in performance of this contract. This right of examination shall include inspection at all reasonable times of the PBM’s plants, or parts of them, engaged in performing the contract.
3.	Cost or pricing data. If the PBM has been required to submit cost or pricing data in connection with any pricing action relating to this contract, the OPM Representative, in order to evaluate the accuracy, completeness, and currency of the cost or pricing data, shall have the right to examine and audit all of the PBM’s records, including computations and projections, related to—

a.	The proposal for the contract, subcontract, or modification;
b.	The discussions conducted on the proposal(s), including those related to negotiating;
c.	Pricing of the contract, subcontract, or modification; or
d.	Performance of the contract, subcontract or modification.

4.	Comptroller General — (1) The Comptroller General of the United States, or an authorized representative, shall have access to and the right to examine any of the PBM’s directly pertinent records involving transactions related to this contract or a subcontract hereunder and to interview any current employee regarding such transactions. (2) This paragraph may not be construed to require the PBM to create or maintain any record that the PBM or subcontractor does not maintain in the ordinary course of business or pursuant to a provision of law.
5.	Reports. If the PBM is required to furnish cost, funding, or performance reports, the OPM Representative, in lieu of WellPoint, shall have the right to examine and audit the supporting records and materials, for the purpose of evaluating— (1) The effectiveness of the PBM’s policies and procedures to produce data compatible with the objectives of these reports and (2) The data reported.
6.	Availability. The PBM shall make available at its office at all reasonable times the records, materials, and other evidence described in paragraphs (a), (b), (c), (d), and (e) of this clause, for examination, audit, or reproduction, until 3 years after final payment under this contract or for any shorter period specified in Subpart 4.7, PBM Records Retention, of the Federal Acquisition Regulation (FAR), or for any longer period required by statute or by other clauses of this contract. In addition—(1) If this contract is completely or partially terminated, the PBM shall make available the records relating to the work terminated until 3 years after any resulting final termination settlement; and (2) The PBM shall make available records relating to appeals under

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	the Disputes clause or to litigation or the settlement of claims arising under or relating to this contract until such appeals, litigation, or claims are finally resolved.
7.	The PBM shall insert a clause containing all the terms of this clause, including this paragraph (g), in all subcontracts under this contract that exceed the simplified acquisition threshold and—

a.	That are cost-reimbursement, incentive, time-and-materials, labor-hour, or price-redeterminable type or any combination of these;
b.	For which cost or pricing data are required; or
c.	That require the subcontractor to furnish reports as discussed in paragraph (e) of this clause.

The clause may be altered only as necessary to identify properly the contracting parties and the OPM Representative under the Government prime contract.

(g) SUBCONTRACTS FOR COMMERCIAL ITEMS (DEC 2009) (FAR 52.244-6).

1.	Definitions. As used in this clause—
	“Commercial item” has the meaning contained in Federal Acquisition Regulation 2.101, Definitions.
	“Subcontract” includes a transfer of commercial items between divisions, subsidiaries, or affiliates of PBM or subcontractor at any tier.
2.	To the maximum extent practicable, PBM shall incorporate, and require its subcontractors at all tiers to incorporate, commercial items or nondevelopmental items as components of items to be supplied under this contract.
3.	a. The following provisions are hereby incorporated by reference and PBM shall insert them in any subcontracts for commercial items:

(i)	52.203-13, Contractor Code of Business Ethics and Conduct (Dec 2008)
(ii)	52.203-15, Whistleblower protections Under the American Recovery and Reinvestment Act of 2009 (Section 1553 of Pub. L. 111-5), if the subcontract is funded under the Recovery Act.
(iii)	52.219-8, Utilization of Small Business Concerns (May 2004) (15 U.S.C. 637(d)(2) and (3)), in all subcontracts that offer further subcontracting opportunities. If the subcontract (except subcontracts to small business concerns) exceeds $550,000 ($1,000,000 for construction of any public facility), the subcontractor must include 52.219-8 in lower tier subcontracts that offer subcontracting opportunities.
(iv)	52.222-26, Equal Opportunity (Mar 2007) (E.O. 11246).
(v)	52.222-35, Equal Opportunity for Special Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans (Sep 2006) (38 U.S.C. 4212(a));
(vi)	52.222-36, Affirmative Action for Workers with Disabilities (June 1998) (29 U.S.C. 793).
(vii)	52.222-39, Notification of Employee Rights Concerning Payment of Union Dues or Fees (Dec 2004) (E.O. 13201). Flow down as required in accordance with paragraph (g) of FAR clause 52.222-39).
(viii)	52.222-50, Combating Trafficking in Persons (Feb 2009) (22 U.S.C. 7104(g))
(ix)	52.247-64, Preference for Privately Owned U.S.-Flag Commercial Vessels (Feb 2006) (46 U.S.C. App. 1241 and 10 U.S.C. 2631) (flow down required in accordance with paragraph (d) of FAR clause 52.247-64).

b. While not required, PBM may flow down to subcontracts for commercial items a minimal number of additional clauses necessary to satisfy its contractual obligations

(h) EMPLOYMENT ELIGIBILITY VERIFICATION (JAN 2009) (FAR 52.222-54).

1. Definitions. As used in this clause—

a. Commercially available off-the-shelf (COTS) item—

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(i) Means any item of supply that is—

(a)	A commercial item (as defined in paragraph (1) of the definition at 2.101);
(b)	Sold in substantial quantities in the commercial marketplace; and
(c)	Offered to the Government, without modification, in the same form in which it is sold in the commercial marketplace; and

(ii) Does not include bulk cargo, as defined in section 3 of the Shipping Act of 1984 (46 U.S.C. App. 1702), such as agricultural products and petroleum products. Per 46 CFR 525.1(c)(2), ``bulk cargo’’ means cargo that is loaded and carried in bulk onboard ship without mark or count, in a loose unpackaged form, having homogenous characteristics. Bulk cargo loaded into intermodal equipment, except LASH or Seabee barges, is subject to mark and count and, therefore, ceases to be bulk cargo.

b. Employee assigned to the contract means an employee who was hired after November 6, 1986, who is directly performing work, in the United States, under a contract that is required to include the clause prescribed at 22.1803. An employee is not considered to be directly performing work under a contract if the employee—

(i)	Normally performs support work, such as indirect or overhead functions; and
(ii)	Does not perform any substantial duties applicable to the contract.

c.	Subcontract means any contract, as defined in 2.101, entered into by a subcontractor to furnish supplies or services for performance of a prime contract or a subcontract. It includes but is not limited to purchase orders, and changes and modifications to purchase orders.
d.	Subcontractor means any supplier, distributor, vendor, or firm that furnishes supplies or services to or for a prime PBM or another subcontractor.
e.	United States, as defined in 8 U.S.C. 1101(a)(38), means the 50 States, the District of Columbia, Puerto Rico, Guam, and the U.S. Virgin Islands.

2. Enrollment and verification requirements.

a. If the PBM is not enrolled as a Federal PBM in E-Verify at time of contract award, the PBM shall—

(i)	Enroll. Enroll as a Federal PBM in the E-Verify program within 30 calendar days of contract award;
(ii)	Verify all new employees. Within 90 calendar days of enrollment in the E-Verify program, begin to use E-Verify to initiate verification of employment eligibility of all new hires of the PBM, who are working in the United States, whether or not assigned to the contract, within 3 business days after the date of hire (but see paragraph (b)(3) of this section); and
(iii)	Verify employees assigned to the contract. For each employee assigned to the contract, initiate verification within 90 calendar days after date of enrollment or within 30 calendar days of the employee’s assignment to the contract, whichever date is later (but see paragraph (b)(4) of this section).

b. If the PBM is enrolled as a Federal PBM in E-Verify at time of contract award, the PBM shall use E-Verify to initiate verification of employment eligibility of—

(i) All new employees.

(a)	Enrolled 90 calendar days or more. The PBM shall initiate verification of all new hires of the PBM, who are working in the United States, whether or not assigned to the contract, within 3 business days after the date of hire (but see paragraph (b)(3) of this section); or
(b)	Enrolled less than 90 calendar days. Within 90 calendar days after enrollment as a Federal PBM in E-Verify, the PBM shall initiate verification of all new hires of the PBM, who are working in the United States, whether or not assigned to the contract, within 3 business days after the date of hire (but see paragraph (b)(3) of this section); or

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(ii) Employees assigned to the contract. For each employee assigned to the contract, the PBM shall initiate verification within 90 calendar days after date of contract award or within 30 days after assignment to the contract, whichever date is later (but see paragraph (b)(4) of this section).

c.

If the PBM is an institution of higher education (as defined at 20 U.S.C. 1001(a)); a State or local government or the government of a Federally recognized Indian tribe; or a surety performing under a takeover agreement entered into with a Federal agency pursuant to a performance bond, the PBM may choose to verify only employees assigned to the contract, whether existing employees or new hires. The PBM shall follow the applicable verification requirements at (b)(1) or (b)(2), respectively, except that any requirement for verification of new employees applies only to new employees assigned to the contract.

d.

Option to verify employment eligibility of all employees. The PBM may elect to verify all existing employees hired after November 6, 1986, rather than just those employees assigned to the contract. The PBM shall initiate verification for each existing employee working in the United States who was hired after November 6, 1986, within 180 calendar days of—

(i)	Enrollment in the E-Verify program; or
(ii)	Notification to E-Verify Operations of the PBM’s decision to exercise this option, using the contact information provided in the E-Verify program Memorandum of Understanding (MOU).

e. The PBM shall comply, for the period of performance of this contract, with the requirements of the E-Verify program MOU.

(i)	The Department of Homeland Security (DHS) or the Social Security Administration (SSA) may terminate the PBM’s MOU and deny access to the E-Verify system in accordance with the terms of the MOU. In such case, the PBM will be referred to a suspension or debarment official.
(ii)	During the period between termination of the MOU and a decision by the suspension or debarment official whether to suspend or debar, the PBM is excused from its obligations under paragraph (b) of this clause. If the suspension or debarment official determines not to suspend or debar the PBM, then the PBM must reenroll in E-Verify.

3.	Web site. Information on registration for and use of the E-Verify program can be obtained via the Internet at the Department of Homeland Security Web site: http://www.dhs.gov/E-Verify.
4.	Individuals previously verified. The PBM is not required by this clause to perform additional employment verification using E-Verify for any employee—

a.	Whose employment eligibility was previously verified by the PBM through the E-Verify program;
b.	Who has been granted and holds an active U.S. Government security clearance for access to confidential, secret, or top secret information in accordance with the National Industrial Security Program Operating Manual; or
c.	Who has undergone a completed background investigation and been issued credentials pursuant to Homeland Security Presidential Directive (HSPD)-12, Policy for a Common Identification Standard for Federal Employees and PBMs.

5. Subcontracts. The PBM shall include the requirements of this clause, including this paragraph (e) (appropriately modified for identification of the parties), in each subcontract that-

a. Is for—

(i)	Commercial or noncommercial services (except for commercial services that are part of the purchase of a COTS item (or an item that would be a COTS item, but for minor modifications), performed by the COTS provider, and are normally provided for that COTS item); or
(ii)	Construction;

b.	Has a value of more than $3,000; and
c.	Includes work performed in the United States.

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III. ADDITIONAL TERMS AND CONDITIONS

(a)	PBM certifies that it is not majority-owned or majority-controlled by a pharmaceutical manufacturing company.
(b)	PBM agrees to credit WellPoint either as a price reduction, a credit, or by cash refund all Manufacturer Payments to the extent negotiated and received by WellPoint from PBM solely with respect to the FEHBP plans. For purposes of this section, Manufacturer Payments are any and all compensation or remuneration PBM receives from a pharmaceutical manufacturer, including but not limited to, discounts; credits; rebates, regardless of how categorized; market share incentives, commissions, and administrative or management fees. The term also includes any fees received for sales of utilization data to a pharmaceutical manufacturer. This term does not include purchase discounts based upon invoiced purchase terms.
(c)	To the extent WellPoint has negotiated with PBM to receive all or a portion of Manufacturer Payments as described in (b) above, PBM will provide WellPoint with quarterly and annual Manufacturer Payment Reports identifying the following information solely with respect to the FEHBP plan. This information shall be presented for both the total of all prescription drugs dispensed through PBM, acting as a mail order pharmacy, and its retail network and [in the aggregate for the 25 brand name drugs that represent the greatest cost to the FEHBP plan or such number of brand name drugs that together represent 75% of the total cost to the FEHBP plan, whichever is the greater number]

1.	the dollar amount of Total Product Revenue for the reporting period, with respect to the FEHBP plan. Total Product Revenue is the PBM’s net revenue with respect to the FEHBP plan which consists of sales of prescription drugs to clients, either through retail networks or PBM-owned or controlled mail order pharmacies. Net revenue is recognized at the prescription price negotiated with clients and associated administrative fees;
2.	the dollar amount of total drug expenditures for the FEHBP plan;
3.	the dollar amount of all Manufacturer Payments earned by the PBM with respect to the FEHBP plan for the reporting period;
4.	the percentage of all Manufacturer Payments earned by the PBM with respect to the FEHBP plan for the reporting period that were Manufacturer Formulary Payments, which are payments the PBM receives from a manufacturer in return for formulary placement and/or access, or payments that are characterized as “formulary” or “base” rebates or payments pursuant to the PBM’s agreements with pharmaceutical manufacturers; and
5.	the percentage of all Manufacturer Payments received by the PBM during the reporting period that were Manufacturer Additional Payments, which are all Manufacturer Payments other than Manufacturer Formulary Payments.

(d)	PBM agrees to provide WellPoint, at least annually, with all financial and utilization information requested by WellPoint relating to the provision of benefits to eligible enrollees solely with respect to the FEHBP plan through the PBM and all financial and utilization information relating to services provided to Carrier solely with respect to the FEHBP plan.
(e)	PBM agrees that WellPoint may provide any information it receives from PBM, including a copy of its contract with the PBM, to OPM. PBM providing information to WellPoint under this subsection may designate that information as confidential commercial information. PBM, by contracting with WellPoint, consents to the disclosure of this information to OPM. PBM acknowledges and agrees that, although its information may be marked as confidential commercial information, the information may be subject to FOIA disclosure under 5 U.S.C. Section 552. PBM agrees that WellPoint is not liable for any release of information under FOIA.
(f)	Integrity Standard. PBM agrees to adopt and adhere to a code of ethics promulgated by a national professional association, such as the Code of Ethics of the American Pharmacists Association (dated October 27, 1994), for their employed pharmacists.
(g)	Performance Standards. PBM shall develop and apply a quality assurance program specifying

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procedures for ensuring contract quality on the following standards at a minimum and submit reports to WellPoint on their performance. PBM must meet, at minimum, the member inquiry, telephone customer service, paper claims processing, and other applicable standards set for WellPoint under its applicable contracts with OPM. All other standards discussed below will have specific target goals PBM is expected to achieve. WellPoint may permit PBM to measure compliance using statistically valid samples for PBM’s book of business.

(h)

Retail Pharmacy Standards

1.	Point of Service (POS) system response time. PBM’s network electronic transaction system provides rapid response to network pharmacies.
2.	POS system availability. PBM’s network electronic transaction system generally is available to, and accessible by, network pharmacies.
3.	Licensing — PBM verifies the appropriate licensing of its network pharmacies.

(i) Mail Service Pharmacy Standards

1.	Dispensing accuracy — PBM dispenses its prescriptions to the correct patient and for the correct drug, drug strength and dosage in accordance with the physician’s prescription not less than 99.9% of the time.
2.	Turnaround time — PBM promptly dispenses and ships at least 98% on average of all prescriptions not requiring intervention or clarification within 3 business days or meets an equivalent measure approved by OPM.

(j)	Prior Approval — if applicable — PBM promptly reviews and responds to requests for prior approval for specific drugs following receipt of all required information.
(k)	Alternative Drug Options. PBM shall, at a minimum, utilize the following protocols for PBM initiated drug interchanges (any change from the original prescription) other than generic substitutions:

1.	PBM must treat the prescribing physician, and not itself, as the ultimate decision-maker. Furthermore, to the extent appropriate under the circumstances, the PBM must allow the patient input into that decision-making process. At a minimum, PBM must provide the patient with a written notice in the package sent to the patient that the drug interchange has occurred with the approval of the Prescriber.
2.	PBM will obtain authorization for a drug interchange only with the express, verifiable authorization from the Prescriber as communicated directly by the Prescriber, in writing or verbally, or by a licensed medical professional or other physician’s office staff member as authorized by the Prescriber.
3.	PBM must memorialize in appropriate detail all conversations with patients and physicians in connection with drug interchanging requests, including the identity of the contact person at the physician’s office and the basis for his or her authority.
4.	PBM will only interchange a patient’s drug from a lower priced drug to a higher priced drug to patient or Plan when authorized by WellPoint or the Plan.
5.	PBM will permit pharmacists to express their professional judgment to both PBM and physicians on the impact of drug interchanges and to answer physicians’ questions about dosing. PBM will not require pharmacists to, and will not penalize pharmacists for refusing to, initiate calls to physicians for drug interchanges that in their professional judgment should not be made.
6.	PBM will offer to disclose, and if requested, will disclose to physicians, WellPoint, and patients (i) the reason(s) why it is suggesting a drug interchange and (ii) how the interchange will affect the patients financially.

(l) PBM understands that any information it provides to WellPoint under this Exhibit, including a copy of this Agreement, may be provided to OPM. PBM has the sole obligation to designate any

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	information provided under this Exhibit as confidential. PBM consents to the disclosure of this information to OPM. PBM acknowledges and agrees that, although its information may be marked as confidential commercial information, the information may be subject to FOIA disclosure under 5 U.S.C. Section 552. PBM agrees that WellPoint is not liable for any release of information under FOIA.
(m)	Quality of Drug Therapy — The quality assurance program implemented by PBM contractor must include a process to measure the quality of its drug therapy provided to FEP enrollees. Specific areas to be addressed include achievement of quality targets measured by both internal and external metrics; identification and appropriate use of best practices; and application of evidence-based medicine, as appropriate.
(n)	Patient Safety Standard — PBM shall establish drug utilization management, formulary process and procedures that have distinct systems for identifying and rectifying consumer safety issues including:

(i)	A system for identifying and communicating drug and consumer safety issues at point-of-service; and
(ii)	A system of drug utilization management tools, such as prospective and concurrent drug utilization management that identifies situations which may compromise the safety of the consumer.

(o) Safety and Accessibility for Consumers — PBM shall meet the following standards related to pharmacy network management and consumer access to medications:

(1) PBM shall define the scope of its services with respect to:

(a)	The distribution channels offered (e.g. pharmacy network, mail order pharmacies, or specialty pharmacies);
(b)	The types of pharmacy services offered within each distribution channel; and
(c)	The geographic area served by each distribution channel.

(2) For each distribution channel provided by PBM, PBM shall:

(a)	Establishes criteria and measures actual performance in comparison to those criteria: and
(b)	Makes improvements where necessary to maintain the pharmacy network and meet contractual requirements.

(3) PBM shall establish a quality and safety mechanism for each distribution channel in order to identify and address concerns related to:

(a)	Quality and safety of drug distribution; and
(b)	Quality of service.

(p) Additional Costs. If, in complying with the requirements of this Exhibit H, PBM should incur significant additional costs that are not otherwise covered by Section 3.20 of the Agreement, WellPoint agrees to work with PBM in good faith to recover those costs from the United States Office of Personnel Management (“OPM”) in accordance with the applicable federal laws and regulations. The parties agree that any such funding request will be in the form of an administrative payment request and/or a request for equitable adjustment. The parties agree that the decision of OPM to reimburse PBM for such costs shall be final and that in no event shall WellPoint have any liability to PBM for such costs.

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EX-31.1

Exhibit 31.1

I, George Paz, certify that:

1)	I have reviewed this quarterly report on Form 10-Q of Express Scripts, Inc.;
2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4)	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 27, 2010	/s/ George Paz
	George Paz, Chairman, President and
	Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Jeffrey Hall, certify that:

1)	I have reviewed this quarterly report on Form 10-Q of Express Scripts, Inc.;
2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4)	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 27, 2010	/s/ Jeffrey Hall
	Jeffrey Hall, Executive Vice President and
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AND EXCHANGE ACT RULE 13a-14(b)

     In connection with the accompanying Form 10-Q (the “Report”) of Express Scripts, Inc. (the “Company”) for the period ended September 30, 2010, I, George Paz, Chairman, President and Chief Executive Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, and Exchange Act Rule 13a-14(b) that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

BY:	/s/ George Paz
	George Paz
	Chairman, President and Chief Executive Officer Express Scripts, Inc.

Date: October 27, 2010

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AND EXCHANGE ACT RULE 13a-14(b)

     In connection with the accompanying Form 10-Q (the “Report”) of Express Scripts, Inc. (the “Company”) for the period ended September 30, 2010, I, Jeffrey Hall, Executive Vice President and Chief Financial Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, and Exchange Act Rule 13a-14(b) that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

BY:	/s/ Jeffrey Hall
	Jeffrey Hall
	Executive Vice President and Chief Financial Officer Express Scripts, Inc.

Date: October 27, 2010