Equity Research. PBM: Changing Landscape The Focus For Q2. July 21, 2015

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1 July 21, 2015 Equity Research PBM: Changing Landscape The Focus For Q2 Sector Rating: Pharmacy/Ancillary Benefits, Market Weight Price FY EPS FY P/E Company Name Rating 07/17/ E 2016E Pharmacy/Ancillary Benefits Catamaran Corporation (CTRX) 2 $61.44 $2.62 $ x 21.3x CVS Health Corp. (CVS) x 18.8x Express Scripts Holding Company (ESRX) x 15.3x Source: Company data and Wells Fargo Securities, LLC estimates 1= Outperform, 2 = Market Perform, 3 = Underperform, V = Volatile, = Company is on the Priority Stock List NA = Not Available, NC = No Change, NE = No Estimate, NM = Not Meaningful The primary focus for the Q2 Pharmacy Benefit Management (PBM) earnings season will likely continue to be on the changing competitive landscape. Competitive positioning will likely remain at the forefront of investors minds given the anticipated closing of the Catamaran acquisition by UnitedHealth (imminent), and CVS recently announced acquisitions of Omnicare and Target s retail pharmacies and health clinics. Hence, investors will likely be interested in commentary on the PBMs positioning and opportunities to maintain/gain share given the changing competitive landscape. Also, investors will likely be interested in commentary around potential risks and opportunities from consolidation in managed care (with the recently announced acquisition plans of HUM by AET and HNT by CNC, and ANTM s publicly disclosed bid for CI). We do not see near-term risk to CVS from losing its AET contract as we believe it would be difficult to insource the AET business at this time, but at the same time we believe it would also be problematic for CVS to gain all the HUM business. Hence, we believe CVS would at best be able to obtain an additional mail order fulfillment or perhaps a rebate deal in the near term from the AET/HUM merger in the Medicare segment. While a merger agreement has not been announced, we expect investors to look for commentary from Express on its PBM contract with ANTM and the potential impact of an ANTM/CI transaction. Specialty pharmacy will likely remain an important topic given the high specialty drug trend in 2014 of 20-32% at CTRX, CVS, and ESRX, and expectations for trend to remain in the double digit range in coming years. We believe PBM clients are increasingly focused on managing these high cost, specialty drugs, particularly following last year s introduction of new hepatitis C drugs which weighed heavily on the 2014 trend. Formulary exclusions are a key factor in managing specialty costs, but other opportunities include infusion services, medical management, and controls around dispensing and dosing. Other key topics for Q2 include: the 2016 selling season, utilization trend, growth opportunities stemming from health care reform, generic pricing pressure, new generics, and mail order penetration rates. Q2 PBM earnings will likely be mostly in line with expectations with some upside potential from greater utilization stemming from health care reform, including the public exchanges and Medicaid expansion. Also, for CVS, a less negative than expected impact from the tobacco exit, particularly as the rollout of its healthy foods concept gains steam, could provide upside. While we expect CVS to update its 2015 EPS guidance to reflect dilution from its planned acquisitions, we do not expect it to be a surprise for investors. Also, better than expected performance in its core business, in our view, may provide some offset to the expected $0.08 dilution from Omnicare and $0.01 dilution from Target in Please see page 12 for rating definitions, important disclosures and required analyst certifications All estimates/forecasts are as of 07/21/15 unless otherwise stated. Peter Costa, Senior Analyst (617) peter.costa@wellsfargo.com Polly Sung, CFA, Associate Analyst (617) polly.sung@wellsfargo.com Brian Fitzgerald, CFA, Associate Analyst (617) brian.fitzgerald@wellsfargo.com Wells Fargo Securities, LLC does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of the report and investors should consider this report as only a single factor in making their investment decision.

2 Managed Care/Ancillary Benefits Exhibit 1. Q Reporting Summary Q2 2015E EPS First Call Reporting T im e First Call Range Date Call Inform ation (ET ) Wells Fargo Consensus Low - High ESRX 7 /28/ # :30 AM (7 /29) $1.41 $1.40 $ $1.42 CVS 8/4/2015 NA NA $1.20 $1.20 $ $1.22 CT RX NA NA NA $0.58 $0.64 $ $0.7 9 Source: Company reports, FactSet, and Wells Fargo Securities, LLC estimates * Reporting after the market close with a conference call the following morning. Q Preview Not unlike last quarter, we believe the primary focus for the Q2 Pharmacy Benefit Management (PBM) earnings season will continue to be on the changing competitive landscape. In our view, the competitive environment seems to be evolving rapidly. The acquisition of Catamaran by UnitedHealth is expected to close by the end of July, while CVS Health recently announced plans to acquire Omnicare as well as Target s retail pharmacies and health clinics. The Omnicare acquisition should expand CVS institution and specialty footprint, while the Target partnership should catapult CVS into the top position in terms of the number of retail pharmacies operated in the U.S. Aside from acquisitions in the PBM/retail pharmacy space, consolidation in the managed care industry could also have ramifications for the PBMs. Over the past few weeks, Aetna announced plans to acquire Humana, while Centene plans to acquire Health Net. Furthermore, while a formal merger announcement has not been made, Anthem has made a public bid for Cigna. Such transactions, upon completion, could represent both opportunities and risks for the PBMs that currently have contracts with the aforementioned managed care companies. Aetna and Health Net currently contract with CVS, while Anthem has a contract with Express Scripts and Cigna with Catamaran (which is being acquired by UnitedHealth and is intended to be merged with OptumRx). Humana and Centene, on the other hand, operate their own internal PBMs. It is unlikely that either CVS Health or Express Scripts would provide much commentary around their outlooks for their respective contracts or thoughts around consolidation in the managed care industry, although investors will likely look for hints as to what the potential impacts may be. Aetna s PBM contract with CVS has a term ending in December 2022, although there are certain termination rights beginning in January 2020, according to Aetna s 10-K. Despite the optionality noted by both AET and HUM, we do not see near-term risk to CVS from losing its Aetna contract to the insourced Humana PBM as we believe it would be problematic (capacity, retail systems, integration/migration risk, etc.) to insource the Aetna business at this point. However, some of the Coventry business (which is currently with ESRX and is expected to migrate to CVS in 2016/17) could perhaps shift to Humana s internal PBM sooner. Conversely, we believe Medicare Advantage plans prefer to maintain much of the PBM contact with subscribers and believe Humana s Walmart cobranded Part D product would also be problematic for CVS to gain from Humana, and therefore we believe CVS would at best be able to obtain an additional mail order fulfillment or rebate contract in the near term from the combination in the Medicare segment. The other managed care deal that we believe investors may be watching closely is Anthem s bid for Cigna as it could position Express well to gain the Cigna business if such a deal was to be completed. However, that business is, we believe, already a very low margin contract at CTRX and hence, we wonder if it could shift to a new PBM without its cost increasing to Cigna/Anthem. Therefore, at best it might be used as leverage to renegotiate the ANTM/ESRX contract lower ahead of time, so we doubt this would be a short-term win for ESRX. Aside from consolidation, specialty pharmacy will likely remain a key area of focus for investors. As we noted before, specialty pharmacy represents a significant area of growth for the PBMs, in our view, given double digit drug trends and an increasing prevalence of such drugs as the population ages with a higher number of chronic conditions. The specialty drug trend accelerated in 2014 to 20-32% at CTRX, CVS, and ESRX, up from 14-16% in 2013, partly reflecting the new hepatitis C drugs that boasted high cure rates (including Gilead s Sovaldi and Harvoni and AbbVie s Viekira Pak). Nevertheless, specialty drug trend will likely remain high in the double-digit range over the next few years, allowing specialty drugs to account for an even greater proportion of total drug spend. We believe the PBMs will likely continue to highlight their capabilities in managing specialty drug trend. While hepatitis C is likely less of an important topic now, it could continue to serve as an important indicator of key trends for the next class of high cost therapies, such as new PCSK9 inhibitor cholesterol drugs. Express Scripts will likely continue to highlight the strength of its Therapeutic Resource Centers and United Biosource Corporation (UBC) arm in providing clinical expertise to prepare for and manage new drugs. For CVS, we believe management would continue to emphasize Specialty Connect, formulary exclusions, Coram, and perhaps even the potential to offer specialty infusion services instore via MinuteClinics. Lastly, biosimilars are becoming a reality as the FDA approved the first biosimilar in the U.S. in early March However, we believe biosimilars would be treated more like therapeutic equivalents rather than generics, and therefore would require greater skill and market power to achieve strong savings. 2

3 PBM: Changing Landscape The Focus For Q2 Other topics of interest will likely include the 2016 selling season. We expect the companies may start quantifying new business wins for next year. At this time last year, CVS cited gross wins for 2015 of $5.4 billion and net new business of $2.6 billion. On the Q earnings call, Express Scripts had cited expectations for claims volume to be slightly down to down 1.5% in 2015 reflecting relatively lower retention rate of 92-93%. However, retention rate is expected to improve to 94-97%, excluding loss of the Coventry business (which we believe would lower the retention rate by about 3% if it was included), in 2016, according to management s commentary at the investor day earlier this year. Separately, the PBMs may provide an update on utilization trend as well as growth opportunities stemming from health care reform, reimbursement rate pressure, generic trends and mail order penetration rates. In early July, Express published a study on pharmacy utilization trends among the new public exchange members, noting that new enrollees in Q were generally healthier and spent less on medications compared to enrollees in Q However, specialty medications remain a relatively higher proportion of overall spend for the exchange plans compared to traditional health plans. Lastly, we believe the increase in total brand market sales of expected generic launches in 2015 (led by Abilify, Nexium, Copaxone, Gleevec, and Namenda) could provide a boost to margins in H and 2016 and we expect investors may look for commentary around this benefit as well as on timing. Exhibit 2. Hepatitis C Remains An Important Topic For Specialty (New Prescriptions Include Sovaldi, Harvoni, and Viekira Pak) 6.0K HCV New Rx Sovaldi, Harvoni, & Viekira Pak 5.0K 4.0K NRx Volume 3.0K 2.0K 1.0K 0.0K Week CHAIN STORES FOOD STORES INDEPENDENT LONG-TERM CARE MAIL SERVICE SPECIALTY MAIL SERVICE Source: IMS Health, RAPID MVP Solutions, IMS National Prescription Audit TM Disclaimer: IMS Health. Any analysis is independently arrived by Wells Fargo Securities, LLC, on the basis of the data and other information, and IMS is not responsible for any reliance by recipients on either the data or analyses thereof. 3

4 Managed Care/Ancillary Benefits Exhibit 3. Consumer Confidence Exhibit 4. Home Prices Consumer Confidence 20.0% 15.0% S&P/Case-Shiller Composite Home Price Index 20 City Index YoY Change 10.0% 5.0% 0.0% -5.0% -10.0% % -20.0% % Jun-2003 Feb-2004 Oct-2004 Jun-2005 Feb-2006 Oct-2006 Jun-2007 Feb-2008 Oct-2008 Jun-2009 Feb-2010 Oct-2010 Jun-2011 Feb-2012 Oct-2012 Jun-2013 Feb-2014 Oct-2014 Jun-2015 Apr-2003 Dec-2003 Aug-2004 Apr-2005 Dec-2005 Aug-2006 Apr-2007 Dec-2007 Aug-2008 Apr-2009 Dec-2009 Aug-2010 Apr-2011 Dec-2011 Aug-2012 Apr-2013 Dec-2013 Aug-2014 Apr-2015 Source: FactSet and Wells Fargo Securities, LLC Source: FactSet and Wells Fargo Securities, LLC Exhibit 5. CPI For Prescription Drugs Exhibit 6. Monthly Wholesale Trade Drugs CPI-U Seasonally Adjusted Monthly Wholesale Trade - Sales Drugs and Druggists' Sundries 7.0% 25.0% YoY Change 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% YoY Change (SA) 20.0% 15.0% 10.0% 5.0% 0.0% Jun-2003 Feb-2004 Oct-2004 Jun-2005 Feb-2006 Oct-2006 Jun-2007 Feb-2008 Oct-2008 Jun-2009 Feb-2010 Prescription Drugs Oct-2010 Jun-2011 Feb-2012 Oct-2012 Jun-2013 Feb-2014 Oct-2014 Jun % May-2002 Nov-2002 May-2003 Nov-2003 May-2004 Nov-2004 May-2005 Nov-2005 May-2006 Nov-2006 May-2007 Nov-2007 May-2008 Nov-2008 May-2009 Nov-2009 May-2010 Nov-2010 May-2011 Nov-2011 May-2012 Nov-2012 May-2013 Nov-2013 May-2014 Nov-2014 May-2015 Source: Bureau of Labor Statistics, FactSet, and Wells Fargo Securities, LLC Source: U.S. Census Bureau, and Wells Fargo Securities, LLC 4

5 PBM: Changing Landscape The Focus For Q2 Catamaran Corporation (CTRX) Exhibit 7. Quarterly Operating Metrics in millions, unless otherwise noted 1Q14A 2Q14A 3Q14A 4Q14A 1Q15A 2Q15E 1Q15A Qtr/Qtr Yr/Yr 2Q15E Qtr/Qtr Yr/Yr Operating Statistics Adjusted prescription claims % 2.7% 1.0% 2.5% Generic dispensing rate 85.0% 86.0% 86.0% 87.0% 86.6% 86.6% (40) bps 160 bps 0 bps 60 bps Revenue $4,914 $5,386 $5,542 $5,740 $5,979 $6, % 21.7% 1.7% 12.9% Gross Profit $315 $330 $352 $364 $379 $ % 20.4% 1.5% 16.5% EBITDA $171 $189 $206 $222 $215 $ % 25.8% -1.2% 12.7% Adjusted EPS ($) $0.50 $0.54 $0.58 $0.67 $0.59 $ % 18.0% -1.4% 8.8% Margin Analysis Gross profit per adjusted Rx $3.15 $3.26 $3.48 $3.57 $3.69 $3.71 $0.12 $0.54 $0.02 $0.45 EBITDA per adjusted Rx $1.71 $1.86 $2.04 $2.18 $2.09 $2.05 ($0.08) $0.38 ($0.05) $0.18 Gross profit margin 6.4% 6.1% 6.3% 6.3% 6.3% 6.3% 0 bps (10) bps 0 bps 20 bps EBITDA margin 3.5% 3.5% 3.7% 3.9% 3.6% 3.5% (30) bps 10 bps (10) bps 0 bps Source: Company reports and Wells Fargo Securities, LLC estimates Catamaran is not formally releasing Q2 earnings as its acquisition by UnitedHealth is expected to close imminently. Furthermore, Catamaran has not yet announced a date to release Q2 earnings. On March 30, UnitedHealth Group (UNH) announced plans to acquire Catamaran, which would be combined with OptumRx, in a cash deal valued at approximately $12.8 billion or $61.50 per CTRX share. The transaction was previously expected to close in Q4 2015, but seems to be ahead of plan as the transaction is now expected to be completed by the end of July 2015, according to UnitedHealth, as Catamaran shareholders approved the acquisition by UnitedHealth on July 14 and the Supreme Court of Yukon approved it on July 16. We estimate Q adjusted EPS (excluding intangible amortization) of $0.58, which is below the consensus estimate of $0.64. Our FY 2015 adjusted EPS estimate of $2.62, however, is in line with the consensus estimate. In conjunction with the Q4 earnings release, Catamaran provided its initial 2015 adjusted EPS outlook of $ , which included revenue outlook of $ billion and EBITDA outlook of $ million. On a GAAP basis, EPS was projected to be in the range of $ This guidance, however, does not include any impact from the acquisition of Healthcare Solutions, which closed in early April. The $405 million transaction was funded through existing cash balance and Healthcare Solutions was expected to generate approximately $35 million in annual EBITDA, excluding estimated annualized synergies of about $10 million once fully integrated (12-18 months post-closing). Not surprisingly, Catamaran did not update its 2015 EPS guidance in its Q earnings release. Earnings comparison in Q relative to the prior year quarter will likely remain favorable, benefiting from continued accretion from the acquisitions of both Catalyst (closed 7/2/12) and Restat (10/1/13) as well as new business wins ($1.2 billion for 2015), the recently closed acquisitions of Salveo Specialty Pharmacy (closed 1/2/15) and Healthcare Solutions (closed 4/8/15), and the ramp up of the Cigna expanded contract implementation that occurred throughout 2014, which, combined, should support adjusted claim volume growth of 2.5% and revenue growth of 13% in Q2, albeit slowing from Q1. We project the generic dispensing rate to continue to rise yr/yr, but to be flattish sequentially. We expect profitability per script will likely continue to rise yr/yr on a higher GDR (generic dispensing rate) and increased specialty pharmacy revenues, offset partly by one-time transaction/integration expenses related to Healthcare Solutions. We project gross profit per adjusted claim of $3.71, up $0.45 yr/yr and EBITDA per adjusted claim of $2.05, up $

6 6 Exhibit 8. Catamaran Quarterly Income Statement Catamaran Corporation (in millions, except per share data) 2014A 2014A 2015E 2015E 2016E 2016E FY Dec 31: 1QA 2QA 3QA 4QA Year 1QA 2Q 3Q 4Q Year 1Q 2Q 3Q 4Q Year Revenue $4,914.5 $5,385.8 $5,541.7 $5,739.9 $21,581.9 $5,979.3 $6,082.7 $6,123.8 $6,314.3 $24,500.1 $6,403.5 $6,330.0 $6,370.0 $6,663.3 $25,766.9 Cost of revenue 4, , , , , , , , , , , , , , ,059.1 Gross profit $314.7 $329.8 $351.5 $364.0 $1,360.1 $378.8 $384.3 $400.8 $443.1 $1,607.0 $408.0 $413.1 $425.6 $461.0 $1,707.7 Operating Expenses Selling, general and administrative Depreciation Amortization Total operating expenses $197.9 $194.7 $203.6 $194.9 $791.1 $219.8 $231.2 $226.8 $225.3 $903.1 $233.5 $225.0 $227.2 $239.5 $925.2 Operating income $116.8 $135.1 $148.0 $169.1 $569.0 $159.0 $153.1 $174.1 $217.9 $703.9 $174.5 $188.2 $198.4 $221.5 $782.6 Less: Amount attributable to non-controlling interest (14.3) (15.6) (15.0) (13.9) (58.8) (13.4) (12.9) (12.9) (12.9) (52.1) (10.1) (11.0) (11.6) (13.0) (45.7) Add back: D&A EBITDA $170.9 $188.5 $205.7 $221.8 $786.9 $215.0 $212.4 $232.7 $275.8 $935.8 $234.9 $247.4 $256.7 $278.0 $1,016.9 Interest and other (expense), net (11.3) (15.6) (17.9) (16.2) (61.1) (15.5) (15.6) (15.2) (14.7) (61.1) (15.3) (15.6) (15.9) (16.3) (63.1) Other one-time (charges)/gains Income before income taxes $105.5 $119.5 $130.1 $152.9 $507.9 $143.5 $137.4 $158.9 $203.1 $642.9 $159.2 $172.5 $182.5 $205.2 $719.5 Provisions for income taxes (28.1) (33.2) (33.8) (39.1) (134.2) (43.9) (41.2) (47.7) (60.9) (193.7) (47.8) (51.8) (54.7) (61.6) (215.8) Net earnings (loss) before extra Extraordinary gain/(loss) Net income after extra. gain Net (loss) for non-controlling interest Net income attributable to CTRX $63.4 $71.4 $82.0 $100.4 $317.3 $86.7 $83.3 $98.3 $129.3 $397.6 $101.3 $109.8 $116.2 $130.6 $457.9 Weighted avg. shares Adjusted EPS - cont ops $0.50 $0.54 $0.58 $0.67 $2.28 $0.59 $0.58 $0.65 $0.80 $2.62 $0.66 $0.70 $0.73 $0.79 $2.88 Yr/Yr Change 18.9% 10.0% 10.9% 17.8% 14.2% 18.0% 8.8% 12.4% 19.8% 15.0% 11.7% 19.8% 11.4% -0.5% 9.7% EPS - cont ops $0.31 $0.34 $0.39 $0.48 $1.53 $0.42 $0.40 $0.47 $0.62 $1.91 $0.48 $0.52 $0.55 $0.62 $2.19 EPS - gaap (incl all one time g/l) $0.31 $0.34 $0.39 $0.48 $1.53 $0.42 $0.40 $0.47 $0.62 $1.91 $0.48 $0.52 $0.55 $0.62 $2.19 Operating Statistics Adjusted claim volume Generic dispensing rate Gross profit per adj claim $3.15 $3.26 $3.48 $3.57 $3.37 $3.69 $3.71 $3.81 $3.99 $3.80 $3.79 $3.87 $3.95 $4.08 $3.92 EBITDA per adj claim $1.71 $1.86 $2.04 $2.18 $1.95 $2.09 $2.05 $2.21 $2.48 $2.21 $2.18 $2.32 $2.38 $2.46 $2.34 Effective tax rate 26.7% 27.8% 26.0% 25.6% 26.4% 30.6% 30.0% 30.0% 30.0% 30.1% 30.0% 30.0% 30.0% 30.0% 30.0% Margin Analysis Gross profit 6.4% 6.1% 6.3% 6.3% 6.3% 6.3% 6.3% 6.5% 7.0% 6.6% 6.4% 6.5% 6.7% 6.9% 6.6% Operating expenses 4.0% 3.6% 3.7% 3.4% 3.7% 3.7% 3.8% 3.7% 3.6% 3.7% 3.6% 3.6% 3.6% 3.6% 3.6% EBITDA 3.5% 3.5% 3.7% 3.9% 3.6% 3.6% 3.5% 3.8% 4.4% 3.8% 3.7% 3.9% 4.0% 4.2% 3.9% Operating profit 2.4% 2.5% 2.7% 2.9% 2.6% 2.7% 2.5% 2.8% 3.5% 2.9% 2.7% 3.0% 3.1% 3.3% 3.0% Net income 1.6% 1.6% 1.7% 2.0% 1.7% 1.7% 1.6% 1.8% 2.3% 1.8% 1.7% 1.9% 2.0% 2.2% 2.0% Yr/Yr Change Revenue 52.6% 57.6% 53.3% 26.7% 46.0% 21.7% 12.9% 10.5% 10.0% 13.5% 7.1% 4.1% 4.0% 5.5% 5.2% Total operating expenses 25.6% 23.3% 21.4% -1.9% 16.0% 11.1% 18.8% 11.4% 15.6% 14.2% 6.2% -2.7% 0.2% 6.3% 2.4% Operating income 28.6% 26.7% 23.2% 34.1% 28.2% 36.1% 13.3% 17.6% 28.8% 23.7% 9.8% 22.9% 14.0% 1.7% 11.2% EBITDA 19.0% 19.3% 22.8% 21.9% 20.9% 25.8% 12.7% 13.1% 24.3% 18.9% 9.3% 16.5% 10.3% 0.8% 8.7% Net income 36.2% 21.2% 15.9% 29.8% 25.1% 28.7% 11.5% 15.5% 24.9% 20.2% 11.9% 25.6% 14.9% 1.0% 12.1% Source: Wells Fargo Securities, LLC estimates and company reports Managed Care/Ancillary Benefits

7 PBM: Changing Landscape The Focus For Q2 CVS Health (CVS) Exhibit 9. Quarterly Operating Metrics in millions, unless otherwise noted 1Q14A 2Q14A 3Q14A 4Q14A 1Q15A 2Q15E 1Q15A Qtr/Qtr Yr/Yr 2Q15E Qtr/Qtr Yr/Yr Consolidated Statistics Revenue $32,689 $34,602 $35,021 $37,055 $36,332 $37, % 11.1% 2.9% 8.1% Gross Profit $5,942 $6,324 $6,468 $6,633 $6,164 $6, % 3.7% 3.3% 0.7% EBITDA $2,501 $2,696 $2,723 $2,810 $2,622 $2, % 4.8% 4.0% 1.1% Gross profit margin 18.2% 18.3% 18.5% 17.9% 17.0% 17.0% (90) bps (120) bps 0 bps (130) bps EBITDA margin 7.7% 7.8% 7.8% 7.6% 7.2% 7.3% (40) bps (50) bps 10 bps (50) bps Adjusted EPS ($) $1.02 $1.13 $1.15 $1.21 $1.14 $ % 12.7% 4.8% 6.1% Pharmacy Services Adjusted prescription claims % 9.1% 0.2% 7.5% Generic dispensing rate 82.0% 82.4% 82.5% 82.1% 83.5% 83.8% 140 bps 150 bps 30 bps 140 bps Gross profit per adjusted Rx $3.54 $4.46 $5.24 $4.40 $3.56 $4.22 ($0.83) $0.02 $0.65 ($0.24) EBITDA per adjusted Rx $3.02 $3.86 $4.64 $3.80 $3.11 $3.82 ($0.69) $0.09 $0.71 ($0.04) Retail Pharmacy Adj. Retail prescriptions filled % 6.3% 0.5% 5.3% Retail Generic Dispensing Rate 82.9% 83.5% 83.3% 82.4% 84.4% 84.8% 200 bps 150 bps 40 bps 130 bps Same Store Sales - Pharmacy 3.8% 5.0% 4.8% 5.5% 4.2% NA NA NA NA NA Same Store Sales - Front store -3.8% -0.4% -4.5% -7.2% -6.1% NA NA NA NA NA Gross margin 31.5% 31.4% 31.3% 31.4% 31.2% 31.0% (20) bps (30) bps (20) bps (40) bps Operating profit margin 10.6% 10.1% 9.1% 10.1% 10.2% 9.6% 10 bps (40) bps (60) bps (50) bps Source: Company reports and Wells Fargo Securities, LLC estimates CVS Health plans to release Q2 earnings on August 4. We estimate adjusted EPS (excluding intangible asset amortization) of $1.20 in Q2, which is in line with the consensus and is at the high end of CVS guidance of $ For FY 2015, we estimate adjusted EPS of $5.18 versus the consensus of $5.17. On the Q1 call, CVS improved the low end of its FY 2015 adjusted EPS guidance by $0.03 to a new range of $ versus $ previously, mostly to reflect stronger performance in the Pharmacy Services (PBM) segment. FY 2015 GAAP EPS was projected to be $ However, CVS has not formally updated its earnings guidance following the recently announced plans to acquire Omnicare and Target s retail pharmacies and health clinics. Our FY 2015 EPS estimate does not include the anticipated dilution of $0.08 from Omnicare ($0.04 in interest costs and $0.04 in transaction costs, according to CVS, assuming the transaction closes by the end of the year) as well as the $0.01 impact from lower than previously anticipated share repurchases related to the Target transaction. For Q2, we project operating profit in the PBM segment to rise about 7% yr/yr reflecting solid revenue growth of 13%, but continued margin compression. Revenue growth should benefit from new business wins ($4.1 billion net for 2015) and higher specialty pharmacy revenues. However, operating profit margin will likely compress further (down 20 bps yr/yr) due to higher mix of specialty and government business. We project the GDR to rise yr/yr to 83.8%, although the mail order penetration rate will likely continue to decline as Medicare/Medicaid plans tend to have lower mail order penetration rates and 90-day at retail scripts rise further. We project EBITDA/adjusted claim to decline $0.04 yr/yr to $3.82, but to rise $0.71 sequentially from a typically weak Q1 due to the seasonal Part D business. For the retail pharmacy, we project operating earnings to decline about 4% yr/yr, despite revenue growing 1-2%, as the margin will likely compress by an estimated 50 bps. The tobacco exit and Specialty Connect implementation (which transfers scripts from the retail pharmacy to the PBM) will likely continue to dampen SSS (same store sales) growth in Q2 although the negative impact from Specialty Connect should be much lower than the 190 bps impact in Q and 130 bps in Q as it was implemented in Q The tobacco exit negatively impacted front-end SSS by 800 bps in Q1 and a similar impact is likely in Q2. In light of these pressures, CVS projects SSS of down 1.25% to up 0.25% in Q2 despite same store adjusted scripts growth of %. Lastly, share buybacks should continue to benefit EPS as CVS expects to repurchase about $5 billion in shares in 2015 down from prior guidance of $6 billion, but up from $4 billion in The primary focus for investors on the Q2 earnings call will likely be on the progress of CVS two recently announced acquisitions, as well as additional commentary on the strategic rationales, anticipated growth of the combined entity, and longer-term competitive positioning. On May 21, CVS announced plans to acquire Omnicare, a leading provider of pharmacy services to long-term care facilities, for $98.00 per OCR share in a cash deal valued at $12.7 billion, including the assumption of $2.3 billion in debt. The transaction is expected to close near the end of 2015, and be roughly $0.20 accretive to adjusted EPS in 2016 (excluding integration costs), increasing to more than $0.30 in 2017 (but $0.08 dilutive in 2015 as noted earlier). On June 15, CVS announced plans to acquire Target s retail pharmacies and clinics for $1.9 billion. The transaction is also expected to close near the end of 2015, and is projected to be $0.06 dilutive 7

8 Managed Care/Ancillary Benefits to adjusted EPS in 2016 (including financing costs of $0.05 and impact of lower 2015 share repurchases of $0.04, but excluding integration and any transaction/one-time costs), and about $0.10 accretive in 2017 and at least $0.12 accretive in 2018 and beyond. Aside from the transactions, we believe specialty should remain a key topic of interest to investors, and CVS will likely continue to highlight growth opportunities, including its exclusive specialty and advanced formulary strategies. Other topics of interest include: update on the 2015/16 PBM selling season; update on CVS partnership with Aetna including the anticipated transition of the Coventry business to CVS from Express in 2016/17 (Medicare 1/1/16; and Medicaid/commercial 1/1/17) as well as Aetna s recently announced plans to acquire Humana (which currently has its own in-house PBM); impacts from its tobacco exit and CVS efforts to fill the void with healthy food options; potential impacts from public/private exchanges; changes to the competitive landscape given the change in management team at Walgreens and the recently announced mergers and related M&A speculation in the managed care space; and additional capital deployment opportunities. 8

9 9Exhibit 10. CVS Health Quarterly Income Statement CVS Health Quarterly Income Statement ($ Millions, except per share data) 2014A 2014A 2015E 2015E 2016E 2016E FY Dec 31: 1QA 2QA 3QA 4QA Year 1QA 2Q 3Q 4Q Year 1Q 2Q 3Q 4Q Year Net revenues $32,689 $34,602 $35,021 $37,055 $139,367 $36,332 $37,402 $36,949 $38,903 $149,586 $39,611 $39,430 $38,528 $40,866 $158,435 Cost of revenues 26,747 28,278 28,553 30, ,000 30,168 31,033 30,408 31, ,365 33,020 32,654 31,747 33, ,731 Gross profit 5,942 6,324 6,468 6,633 25,367 6,164 6,369 6,541 7,147 26,221 6,591 6,776 6,781 7,556 27,704 Operating expenses 3,918 4,116 4,222 4,312 16,568 4,032 4,140 4,107 4,363 16,642 4,234 4,230 4,200 4,594 17,258 Operating profit $2,024 $2,208 $2,246 $2,321 $8,799 $2,132 $2,229 $2,434 $2,784 $9,579 $2,357 $2,546 $2,581 $2,962 $10,446 Interest expense, net One-time charges Income before taxes 1,866 2,050 1,572 2,190 7,678 1,998 2,094 2,297 2,646 9,035 2,218 2,406 2,440 2,819 9,883 Income tax provision , ,043 3, ,108 3,884 Income from continuing operations $1,129 $1,246 $948 $1,322 $4,645 $1,221 $1,269 $1,392 $1,603 $5,485 $1,346 $1,460 $1,481 $1,711 $5,999 Loss from discontinued operations, net of taxes (1) (1) Net income 1,129 1, ,321 4,644 1,221 1,269 1,392 1,603 5,485 1,346 1,460 1,481 1,711 5,999 Net loss attributable to noncontrolling interest Preferred dividends Net income attributable to CVS $1,129 $1,246 $948 $1,321 $4,644 $1,221 $1,269 $1,392 $1,603 $5,485 $1,346 $1,460 $1,481 $1,711 $5,999 Weighted average shares 1,190 1,174 1,164 1,152 1,169 1,136 1,124 1,114 1,104 1,120 1,094 1,084 1,074 1,064 1,079 Adjusted EPS $1.02 $1.13 $1.15 $1.21 $4.50 $1.14 $1.20 $1.32 $1.52 $5.18 $1.30 $1.42 $1.45 $1.68 $5.85 EPS - Continuing Operations $0.95 $1.06 $0.81 $1.14 $3.96 $1.07 $1.13 $1.25 $1.45 $4.90 $1.23 $1.35 $1.38 $1.61 $5.56 EPS - GAAP $0.95 $1.06 $0.81 $1.14 $3.96 $1.07 $1.13 $1.25 $1.45 $4.90 $1.23 $1.35 $1.38 $1.61 $5.56 Operating Statistics EBITDA 2,501 2,696 2,723 2,810 10,730 2,622 2,727 2,938 3,295 11,582 2,872 3,066 3,105 3,491 12,534 FCF/Share $1.50 $0.34 $0.95 $2.36 $5.13 $1.38 $1.17 $1.09 $1.29 $4.93 $1.61 $1.43 $1.00 $1.19 $5.23 Effective Tax Rate 39.5% 39.2% 39.7% 39.6% 39.5% 38.9% 39.4% 39.4% 39.4% 39.3% 39.3% 39.3% 39.3% 39.3% 39.3% Pharmacy Services Segment: Adjusted claim volume , , ,212.5 Generic dispensing rate (%) EBITDA per adj claim $3.02 $3.86 $4.64 $3.80 $3.83 $3.11 $3.82 $4.38 $4.32 $3.91 $3.23 $3.93 $4.33 $4.82 $4.08 Operating profit , , , , , , , , ,264.3 Operating profit margin (%) Retail Pharmacy Segment: Adj. Retail prescriptions filled ,027.3 Generic dispensing rate (%) Operating profit 1, , , , , , , , , , , , , , ,708.4 Operating profit margin (%) Margin Analysis Gross profit 18.2% 18.3% 18.5% 17.9% 18.2% 17.0% 17.0% 17.7% 18.4% 17.5% 16.6% 17.2% 17.6% 18.5% 17.5% Operating expenses 12.0% 11.9% 12.1% 11.6% 11.9% 11.1% 11.1% 11.1% 11.2% 11.1% 10.7% 10.7% 10.9% 11.2% 10.9% EBITDA 7.7% 7.8% 7.8% 7.6% 7.7% 7.2% 7.3% 8.0% 8.5% 7.7% 7.3% 7.8% 8.1% 8.5% 7.9% Operating profit 6.2% 6.4% 6.4% 6.3% 6.3% 5.9% 6.0% 6.6% 7.2% 6.4% 6.0% 6.5% 6.7% 7.2% 6.6% Net income 3.5% 3.6% 2.7% 3.6% 3.3% 3.4% 3.4% 3.8% 4.1% 3.7% 3.4% 3.7% 3.8% 4.2% 3.8% Yr/Yr Change Net revenues 6.3% 10.7% 9.7% 12.9% 9.9% 11.1% 8.1% 5.5% 5.0% 7.3% 9.0% 5.4% 4.3% 5.0% 5.9% Gross Profit 6.5% 8.3% 7.3% 4.7% 6.7% 3.7% 0.7% 1.1% 7.7% 3.4% 6.9% 6.4% 3.7% 5.7% 5.7% Operating expenses 0.9% 6.4% 7.0% 4.6% 4.7% 2.9% 0.6% -2.7% 1.2% 0.4% 5.0% 2.2% 2.3% 5.3% 3.7% EBITDA 13.9% 11.4% 7.1% 5.0% 9.1% 4.8% 1.1% 7.9% 17.3% 7.9% 9.6% 12.4% 5.7% 5.9% 8.2% Net Income 18.3% 10.9% -24.1% 4.4% 1.1% 8.1% 1.8% 46.9% 21.4% 18.1% 10.3% 15.1% 6.4% 6.7% 9.4% Adjusted EPS 22.5% 16.5% 9.5% 8.8% 13.8% 12.7% 6.1% 14.9% 25.6% 15.1% 13.9% 18.4% 10.0% 10.4% 12.9% Source: Wells Fargo Securities, LLC estimates and company reports PBM: Changing Landscape The Focus For Q2

10 Managed Care/Ancillary Benefits Express Scripts Holding Company (ESRX) Exhibit 11. Quarterly Operating Metrics in millions, unless otherwise noted 1Q14A 2Q14A 3Q14A 4Q14A 1Q15A 2Q15E 1Q15A Qtr/Qtr Yr/Yr 2Q15E Qtr/Qtr Yr/Yr Operating Statistics Adjusted prescription claims % -3.9% 4.1% -1.3% Generic dispensing rate 82.4% 83.0% 83.1% 82.8% 84.3% 84.8% 150 bps 190 bps 50 bps 180 bps Mail order penetration rate 27.9% 28.8% 29.5% 28.6% 28.8% 28.9% 20 bps 90 bps 10 bps 10 bps Revenue $23,685 $25,111 $25,779 $26,313 $24,900 $26, % 5.1% 6.2% 5.3% Gross Profit $1,750 $2,008 $2,073 $2,094 $1,834 $2, % 4.8% 21.5% 11.0% EBITDA $1,471 $1,735 $1,739 $1,857 $1,512 $1, % 2.8% 21.9% 6.2% Adjusted EPS ($) $0.99 $1.23 $1.29 $1.39 $1.10 $ % 11.3% 27.5% 14.7% Margin Analysis Gross profit per adjusted Rx $5.90 $6.61 $6.60 $6.83 $6.22 $7.03 ($0.61) $0.32 $0.82 $0.42 EBITDA per adjusted Rx $4.60 $5.35 $5.30 $5.51 $4.92 $5.75 ($0.59) $0.32 $0.84 $0.41 Gross profit margin 7.4% 8.0% 8.0% 8.0% 7.4% 8.4% (60) bps 0 bps 100 bps 40 bps EBITDA margin 6.2% 6.9% 6.7% 7.1% 6.1% 7.0% (100) bps (10) bps 90 bps 10 bps Source: Company reports and Wells Fargo Securities, LLC estimates Note: Gross profit per adjusted claim adjusted to exclude amortization and one-time charges. Express Scripts plans to release Q2 earnings after the market close on July 28 with a call the following morning. We estimate adjusted EPS of $1.41 in Q2 and $5.45 in FY 2015, which are both roughly in line with consensus of $1.40 and $5.44, respectively, and compares to Express Q2 guidance of $ In conjunction with Q1 earnings, Express narrowed its adjusted FY 2015 EPS guidance to $ from $ previously, excluding intangible asset amortization and integration costs of about $250 million (about $0.22 in EPS). The mid-point of $5.42, however, was left unchanged. Consistent with 2014, ESRX expects Q2 EPS to be higher due to the structure of a large client contract. Also, Express announced last quarter a new credit agreement ($5.5 billion term loans/$2.0 billion revolver) and plans to use proceeds of about $5.5 billion for an accelerated share repurchase program, which was in line with its EPS guidance. Despite an anticipated decline in adjusted claim volume and higher GDR, we project revenue to increase yr/yr in Q2 by about 5%, partly on higher specialty pharmacy revenues and continued drug price inflation. We project EBITDA per adjusted claim to increase $0.41 yr/yr to $5.75 reflecting the rising benefit from formulary exclusions as well as a higher mix of specialty pharmacy revenues. We project Q2 adjusted EPS to rise yr/yr mostly from a higher GDR, formulary exclusions, continued realization of Medco synergies, and Express focus on upselling to its clients. Sequentially, adjusted EPS should rise due to the structure of a large client contract. Share repurchases should support EPS in Q2. As a result of exploring strategic transactions, Express did not repurchase any shares in Q1. The company announced plans at the end of April to use approximately $5.5 billion of proceeds from a new credit agreement for an accelerated share repurchase program. At the end of March, Express had remaining authorization of 83.7 million shares under its existing share repurchase program. On the Q2 call, a key topic for investors will likely continue to be Express longer term strategy and competitive positioning. The competitive landscape seems to be evolving rapidly as the acquisition of CTRX by UNH is expected to close soon and CVS is expanding its retail presence further with its recently announced plans to acquire Target s retail pharmacies/health clinics. Also, consolidation in the managed care space (with CNC acquiring HNT, AET buying HUM, and ANTM bidding for CI) could bring both risks and opportunities to PBMs. Separately, as Express is one of the largest specialty pharmacy providers, investors may focus on commentary around its positioning in specialty, particularly as other PBMs seem to be increasingly focused on this segment as a source of growth. However, we doubt management will deviate much from its previous commentary, hailing the merits of a stand-alone PBM model. We expect Express to highlight its ability to leverage its large size and scale and willingness to take a leadership role versus pharmaceutical manufacturers aggressive pricing, as well as how well Express is aligned with its clients interests given lack of conflicts of interest (such as in the retail model). Also, Express will likely emphasize its ability to manage specialty drugs through its Therapeutic Resource Centers. Express is unlikely to provide much commentary on Anthem s bid for Cigna and any related opportunities aside from noting that Anthem remains an important relationship. (ANTM is currently a large client of ESRX with a PBM contract running through the end of 2019, while CI has a PBM contract with CTRX). Other topics of interest would likely include the 2016 selling season (ESRX had previously cited at its investor day a retention rate target of 94-97%, excluding the expected loss of the Coventry business when it is expected to migrate to CVS, which we estimate represent 3% of scripts in 2016, 1% in 2017); an update on Express supply chain initiatives; potential impacts from private exchanges; M&A outlook; risks tied to the Anthem contract; and the CFO transition process. James M. Havel began serving as Interim CFO in January. 10

11 11 Exhibit 12. Express Scripts Quarterly Income Statement Express Scripts, Inc. Quarterly Income Statement ($ Millions, except per share data) 2014A 2014A 2015E 2015E 2016E 2016E FY Dec 31: Q1A Q2A Q3A Q4A Full Year Q1A Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q4 Full Year Total revenue $23,685.0 $25,111.0 $25,778.5 $26,312.6 $100,887.1 $24,899.6 $26,439.5 $26,359.2 $27,685.4 $105,383.7 $27,136.6 $27,468.8 $27,201.0 $28,118.0 $109,924.3 Cost of products sold 21, , , , , , , , , , , , , , ,681.6 Gross Profit 1, , , , , , , , , , , , , , ,242.7 Selling, general and admin 1, , , , , , , , , ,013.9 Income from operations $709.2 $966.0 $984.4 $942.8 $3,602.4 $826.6 $1,300.6 $1,294.6 $1,394.7 $4,816.5 $1,147.9 $1,285.5 $1,316.2 $1,479.1 $5,228.8 Depreciation & amortization , , ,112.3 One time charges/(gains) Minority interest adjustment (6.2) (7.5) (6.8) (6.9) (27.4) (6.0) (9.4) (9.4) (10.1) (35.0) (8.3) (9.3) (9.6) (10.7) (38.0) Adjusted EBITDA 1, , , , , , , , , , , , , , ,303.2 Interest (exp) inc, net (115.1) (129.1) (121.8) (117.4) (554.9) (111.1) (132.8) (142.9) (142.2) (529.0) (142.9) (143.6) (144.4) (145.1) (576.0) Equity income from JV Other (charges) gains (71.5) Pretax income , , , , , , , , , ,652.8 Income taxes (261.3) (318.9) (209.2) (241.8) (1,031.2) (268.4) (435.6) (429.6) (467.2) (1,600.7) (376.9) (428.2) (439.4) (500.3) (1,744.8) Net Income from continuing ops , , ,908.0 Net loss from discontinued ops Minority interest Net Income - after items , , ,870.0 Weighted avg. shares out EPS Continuing Ops $0.42 $0.67 $0.78 $0.79 $2.64 $0.60 $1.02 $1.04 $1.15 $3.79 $0.93 $1.07 $1.11 $1.28 $4.38 Yr/Yr Change -7.3% -1.8% 45.3% 23.1% 14.5% 43.7% 52.4% 33.2% 45.6% 43.2% 54.8% 4.2% 6.7% 11.5% 15.7% Continuing Ops EPS, adjusted $0.99 $1.23 $1.29 $1.39 $4.88 $1.10 $1.41 $1.43 $1.54 $5.45 $1.32 $1.46 $1.50 $1.67 $5.95 Yr/Yr Change (0%) 8% 19% 24% 13% 11% 15% 11% 11% 12% 20% 4% 5% 9% 9% EPS - gaap (incl all one time g/l) $0.42 $0.67 $0.78 $0.79 $2.64 $0.60 $1.02 $1.04 $1.15 $3.79 $0.93 $1.07 $1.11 $1.28 $4.38 Operating Statistics Adjusted claim volume (MM) , , ,297.4 Generic dispensing rate (%) Gross profit per adj claim $5.90 $6.61 $6.60 $6.83 $6.49 $6.22 $7.03 $6.98 $7.05 $6.83 $6.66 $7.09 $7.31 $7.72 $7.12 SG&A per adj claim $1.58 $1.55 $1.58 $1.60 $1.58 $1.81 $1.63 $1.63 $1.64 $1.68 $1.80 $1.86 $1.96 $1.99 $3.09 EBITDA per adj claim $4.60 $5.35 $5.30 $5.51 $5.19 $4.92 $5.75 $5.70 $5.74 $5.54 $5.20 $5.57 $5.69 $6.05 $5.63 FCF/Share $0.43 $0.84 $0.42 $3.81 $5.42 $0.32 $2.00 $1.75 $2.13 $6.10 $1.40 $1.84 $1.77 $2.18 $7.18 Effective Tax Rate 43.9% 37.9% 26.2% 29.1% 33.6% 37.5% 37.3% 37.3% 37.3% 37.3% 37.5% 37.5% 37.5% 37.5% 37.5% Margin Analysis Gross profit 7.4% 8.0% 8.0% 8.0% 7.9% 7.4% 8.4% 8.4% 8.5% 8.2% 7.8% 8.3% 8.6% 8.9% 8.4% Adjusted EBITDA 6.2% 6.9% 6.7% 7.1% 6.7% 6.1% 7.0% 6.9% 7.0% 6.7% 6.2% 6.6% 6.7% 7.1% 6.6% Operating income 3.0% 3.8% 3.8% 3.6% 3.6% 3.3% 4.9% 4.9% 5.0% 4.6% 4.2% 4.7% 4.8% 5.3% 4.8% Pretax income 2.5% 3.4% 3.1% 3.2% 3.0% 2.9% 4.4% 4.4% 4.5% 4.1% 3.7% 4.2% 4.3% 4.7% 4.2% Net income 1.4% 2.1% 2.3% 2.2% 2.0% 1.8% 2.8% 2.7% 2.8% 2.5% 2.3% 2.6% 2.7% 3.0% 2.6% Yr/Yr Change Adjusted claim volume (MM) (17.9%) (12.0%) (8.3%) (6.6%) (11.4%) (3.9%) (1.3%) (2.1%) (0.4%) (1.9%) 4.7% 1.3% 0.2% (2.0%) 1.0% Total revenue (9.0%) (4.8%) (0.5%) 2.1% (3.1%) 5.1% 5.3% 2.3% 5.2% 4.5% 9.0% 3.9% 3.2% 1.6% 4.3% Cost of products sold (8.8%) (4.8%) (0.9%) 2.1% (3.1%) 5.2% 4.8% 1.8% 4.6% 4.1% 8.5% 4.1% 3.0% 1.0% 4.1% Gross Profit (10.8%) (5.1%) 4.0% 1.6% (2.5%) 4.8% 11.0% 7.0% 11.8% 8.8% 15.6% 2.1% 5.1% 7.4% 7.2% Selling, general and admin (7.0%) (6.2%) (2.7%) (6.6%) (5.6%) (3.2%) (10.9%) (15.1%) (17.7%) (11.9%) (3.5%) 6.8% 9.8% 9.4% 5.4% Adjusted EBITDA (7.7%) (0.6%) 5.0% 11.3% 2.1% 2.8% 6.2% 5.3% 3.7% 4.5% 10.8% (1.9%) 0.0% 3.3% 2.7% Income from operations (15.9%) (3.8%) 12.4% 13.8% 1.4% 16.6% 34.6% 31.5% 47.9% 33.7% 38.9% (1.2%) 1.7% 6.1% 8.6% Pretax income (6.8%) (4.9%) 2.3% 14.3% 1.2% 20.1% 38.8% 44.3% 50.8% 39.8% 40.5% (2.2%) 1.8% 6.5% 8.5% Net Income from continuing ops (12.0%) (9.0%) 29.9% 13.6% 5.6% 33.7% 40.1% 22.6% 33.4% 32.0% 40.5% (2.5%) 1.4% 6.2% 8.2% Source: Wells Fargo Securities, LLC estimates and company reports Note: Gross profit per adj claim and SG&A per adj claim adjusted to exclude amortization and one-time charges. EBITDA per claim excludes one-time charges and all depreciation and amortization. Quarters may not add due to restatements. PBM: Changing Landscape The Focus For Q2

12 Managed Care/Ancillary Benefits Required Disclosures 12

13 PBM: Changing Landscape The Focus For Q2 13

14 Managed Care/Ancillary Benefits Additional Information Available Upon Request I certify that: 1) All views expressed in this research report accurately reflect my personal views about any and all of the subject securities or issuers discussed; and 2) No part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me in this research report. 14

15 PBM: Changing Landscape The Focus For Q2 Wells Fargo Securities, LLC maintains a market in the common stock of Catamaran Corporation, Express Scripts Holding Company, CVS Health Corp. Wells Fargo Securities, LLC or its affiliates managed or comanaged a public offering of securities for CVS Health Corp. within the past 12 months. Wells Fargo Securities, LLC or its affiliates intends to seek or expects to receive compensation for investment banking services in the next three months from CVS Health Corp., Express Scripts Holding Company. Wells Fargo Securities, LLC or its affiliates received compensation for investment banking services from Express Scripts Holding Company, CVS Health Corp. in the past 12 months. CVS Health Corp., Express Scripts Holding Company currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided investment banking services to CVS Health Corp., Express Scripts Holding Company. Express Scripts Holding Company, CVS Health Corp. currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided noninvestment banking securities-related services to Express Scripts Holding Company, CVS Health Corp. CVS Health Corp. currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided nonsecurities services to CVS Health Corp. Wells Fargo Securities, LLC received compensation for products or services other than investment banking services from CVS Health Corp., Express Scripts Holding Company in the past 12 months. Wells Fargo Securities, LLC or its affiliates has a significant financial interest in Express Scripts Holding Company, CVS Health Corp., Catamaran Corporation. CTRX: Key risks, in our view, include failure of the UnitedHealth's bid to be completed, margin pressure from inability to operate efficiently or obtain pharmaceuticals inexpensively, regulatory pressure, increasing price transparency, competition, waning acquisition opportunities, and client concentration, particularly with Cigna. CVS: Key risks include the continued need for capital spending to maintain stores and grow new businesses, competing with customers and suppliers, increasing pricing transparency, and changing sources of margin growth. ESRX: Key risks, in our view, include potential margin and volume pressure from competition, regulatory changes, persistent G&A costs, generic fill rates, mail order penetration, and private exchanges. Wells Fargo Securities, LLC does not compensate its research analysts based on specific investment banking transactions. Wells Fargo Securities, LLC s research analysts receive compensation that is based upon and impacted by the overall profitability and revenue of the firm, which includes, but is not limited to investment banking revenue. STOCK RATING 1=Outperform: The stock appears attractively valued, and we believe the stock's total return will exceed that of the market over the next 12 months. BUY 2=Market Perform: The stock appears appropriately valued, and we believe the stock's total return will be in line with the market over the next 12 months. HOLD 3=Underperform: The stock appears overvalued, and we believe the stock's total return will be below the market over the next 12 months. SELL SECTOR RATING O=Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. M=Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. U=Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months. VOLATILITY RATING V = A stock is defined as volatile if the stock price has fluctuated by +/-20% or greater in at least 8 of the past 24 months or if the analyst expects significant volatility. All IPO stocks are automatically rated volatile within the first 24 months of trading. 15

16 Managed Care/Ancillary Benefits As of: July 21, % of companies covered by Wells Fargo Securities, LLC Equity Research are rated Outperform. 54% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Market Perform. 1% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Underperform. Wells Fargo Securities, LLC has provided investment banking services for 44% of its Equity Research Outperform-rated companies. Wells Fargo Securities, LLC has provided investment banking services for 32% of its Equity Research Market Perform-rated companies. Wells Fargo Securities, LLC has provided investment banking services for 39% of its Equity Research Underperform-rated companies. Important Disclosure for International Clients EEA The securities and related financial instruments described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. For recipients in the EEA, this report is distributed by Wells Fargo Securities International Limited ( WFSIL ). WFSIL is a U.K. incorporated investment firm authorized and regulated by the Financial Conduct Authority. For the purposes of Section 21 of the UK Financial Services and Markets Act 2000 ( the Act ), the content of this report has been approved by WFSIL a regulated person under the Act. WFSIL does not deal with retail clients as defined in the Markets in Financial Instruments Directive The FCA rules made under the Financial Services and Markets Act 2000 for the protection of retail clients will therefore not apply, nor will the Financial Services Compensation Scheme be available. This report is not intended for, and should not be relied upon by, retail clients. Australia Wells Fargo Securities, LLC is exempt from the requirements to hold an Australian financial services license in respect of the financial services it provides to wholesale clients in Australia. 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About Wells Fargo Securities Wells Fargo Securities is the trade name for the capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including but not limited to Wells Fargo Securities, LLC, a U.S. broker-dealer registered with the U.S. Securities and Exchange Commission and a member of NYSE, FINRA, NFA and SIPC, Wells Fargo Institutional Securities, LLC, a member of FINRA and SIPC, Wells Fargo Prime Services, LLC, a member of FINRA, NFA and SIPC, Wells Fargo Securities Canada, Ltd., a member of IIROC and CIPF, Wells Fargo Bank, N.A. and Wells Fargo Securities International Limited, authorized and regulated by the Financial Conduct Authority. 16