Lehman Brothers

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Lehman Brothers 9th Annual Global Healthcare
Conference March 8, 2006
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Forward-Looking Statements

• Statements included in this presentation or in
  the oral comments made as part of this
  presentation may contain forward-looking
  statements, including but not limited to
  statements of the Companys plans, objectives,
  expectations or intentions, that involve risk and
  uncertainties.
• The Companys actual results may differ
  significantly from those projected or suggested
  in any forward-looking statement due to a variety
  of factors, which are discussed in detail in the
  Companys filings with the Securities and
  Exchange Commission.

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Todays Challenging Environment

• Maintaining Access to Safe and Affordable Drugs

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Unmanaged Prescription Drug Trend
Source 2004 Drug Trend Report
Plan Sponsors Will Likely Increase the Use of PBM
Tools to Manage Drug Spend
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Our Value Proposition Complete
Alignment

• To reduce pharmacy costs, without
  compromising health outcomes, while maximizing
  patient satisfaction

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The Art of Trend Management -- Alignment
Ability to manage trend
Plan sponsor appetite for innovative clinical
tools
As Plan Sponsors Take Advantage of Our Tools to
Better Mange Trend, The Better We Perform
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Alignment - Building a Formulary

• Evaluate relative clinical value

Drug A
Drug B
Relative clinical value
Drug C
Cost per prescription
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Alignment - Building a Formulary

• Evaluate relative clinical value
• Determine net cost

Drug A
Drug B
Relative clinical value
Drug C
Cost per prescription
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Alignment - Building a Formulary

• Evaluate relative clinical value
• Determine net cost
• Account for market share

A
B
Relative clinical value
C
50
60
70
80
Cost per prescription
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Alignment - Building a Formulary

• Evaluate relative clinical value
• Determine net cost
• Account for market share
• Account for rebates

Relative clinical value
C
50
60
70
80
Cost per prescription
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Alignment - Building a Formulary

• Evaluate relative clinical value
• Determine net cost
• Account for market share
• Account for rebates
• Select formulary products

A
B
Exceptions Market dynamics can trump net
cost High Performance Formulary
C
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Alignment Formulary Management
Therapy Class
We Provide Flexible
Formulary Management 1. Select number of
drugs in therapy class 2. Determine formulary
control 3. Drive towards lowest overall cost
of drugs
of drugs
of drugs
Open
Differential Co-pay
Lowest Overall Cost
Closed
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Alignment Generic Utilization
Express Scripts Leads in
Generic Utilization
Source From public filings
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Alignment Growing Generic Opportunity
ESI Analysis
Our Clients and Members Will Benefit From a
Growing Generic Opportunity
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Alignment Clinical Programs
Plan Designs Encourage Greater Use of Generics
and Preferred Low-cost Brands
Clients using step therapy realize on average a
2 percentage point increase in generic
utilization
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Alignment Specialty Pharmacy
Traditional Spend 210 Billion
Specialty Spend 35 Billion
2004 Total Outpatient Pharmacy Spend 190 Billion
Specialty Spend 73 Billion
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2008 Projected Outpatient Pharmacy Spend 283
Billion
Traditional Spend 155 Billion
Sources IMS Data through November 2004 Wall
Street Equity Research, 2004 CMS National
Healthcare Expenditure Projection 2003
2013 Data on file CuraScript.
Clients are Seeking Solutions for High-cost
Specialty Drugs
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CuraScript Penetration intoExpress Scripts
Percentage of Plan Costs
Source Express Scripts Analysis.
Express Scripts Specialty Penetration Has
Increased from 2 to 36 in the First 2 Years of
the CuraScript Acquisition.
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Alignment Home Delivery
We Offer Highly Efficient, Cost-effective Home
Delivery
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Alignment Growing Demand for Home Delivery
Increased home delivery penetration
Excludes UHC claims
Represents network claims plus 3 times home
delivery claims home delivery claims are 90 days
vs. 30 days in the network.
Home Delivery Helps Manage the Cost of
Maintenance Drugs
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What Are the Savings?
Retail, Clinical. Formulary And Rebate Savings 24
Paid by Cash Customer at Pharmacy
Retail Pharmacy Cash Price
Home Delivery Savings 6
Express Scripts Client Savings
Express Scripts Client Costs
C O S T
Paid by Express Scripts Clients Total Savings 30
Availability of Proven PBM Cost Management Tools
Will Produce 2025 Savings (CBO)
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Alignment A Win-Win-Win Proposition
We Make Money by Saving Clients and Members Money
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We Deliver Against Client and Patient
Expectations

• To make the use of prescription drugs safer and
  more affordable

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Client/Patient Focus

• Why Express Scripts?
• Alignment With Clients
• Trend management tools
• Generics
• Specialty

By membership
Health Plan Sponsors Recognize Express Scripts
Single Focus on Making Prescription Drugs More
Affordable
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Client Satisfaction continues to improve..
Increases Were Recognized in All Categories
With Likelihood to Renew Showing the Largest
Increase
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Our Financial Results

• Express Scripts has demonstrated a proven track
  record

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Q4 2005 Highlights

• Adjusted EPS of 0.77, up 45 from 0.53 last
  year
• For 2005, adjusted EPS of 2.60, up 34 from
  2004
• Cash flow from operations of 262 M vs. 193 M
  last year
• For 2005, cash flow of 793 M vs. 496M in 2004
• Gross profit of 364 million, up 38
• Gross profit per adjusted claim was 2.54, up 34
• EBITDA of 220 M, up 42
• EBITDA per adjusted claim was 1.53, up 37

Reconciliation of reported EPS to adjusted EPS
is included in Table 4 of the 4Q 2005
earnings release
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Quality of Earnings
(5)
(1)
(4)
(4)
(3)
(2)

• Reflects a 70-75 million reduction in Q2 2003
  due to one-time impact of implementing a new
  wholesale purchase agreement
• Excludes a 0.04 per share charge for the early
  retirement of debt
• Excludes a 0.10 charge to increase legal
  reserves for the cost of defense.
• Excludes an 0.08 and 0.02 prior year tax
  benefit in Q2 and Q3, respectively
• Excludes a 0.02 charge for the early retirement
  of debt

• Reflects a 12-month moving average of free cash
  flow (cash from operations less CapX)

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Components Of EPS Growth
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Major PBM Prescription Growth
Note Rx growth for Medco, Caremark reflect as
configured today
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Claims Volume Vs. EPS Growth
Expanding Margins Supports Strong EPS Growth on
More Modest Claims Growth
(5)
(3)
(2)
(1)
(4)

• Excludes a 0.10 charge to increase legal
  reserves (4) Reflects the June 1st
  anniversary of the DoD retail contract
• Excludes an 0.08 prior year tax benefit
  (5) Excludes a 0.02 charge for early retirement
  of debt
• Excludes a 0.02 prior year tax benefit

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Profits Per Claim Growth
EBITDA per adjusted claim

10 CAGR
Pricing can be lowered as clients tighten
formulary compliance, increase home delivery,
utilize generics and restrict retail networks.
These changes result in lower prices to our
clients and greater profits to Express Scripts.
A reconciliation of EBITDA to net income and
to net cash provided by operating activities can
be found in the Investor Relations section
of Express Scripts Web site, www.express-scripts.
com under Presentations. Excluding 25
million charge to increase legal reserves for the
cost of defense and 5.5 million termination
payment received. Based on 2005 average
EBITDA per adjusted Rx of 1.29
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Gross Profit / SGA / EBITDA per Adj. Rx

Before depreciation and amortization
Excluding 25 million charge to increase legal
reserves for the cost of defense and 5.5 million
termination payment received. Source Express
Scripts Analysis.
Future EBITDA per Adj. Rx Must Come From Gross
Profit per Adj. Rx
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Focus on Return on Invested Capital (ROIC)
Reflects operating income less tax divided by
average invested capital, which consists of
stockholders equity, plus interest bearing
liabilities plus long-term deferred income taxes,
net. Excludes 25 million charge to increase
legal reserves for the cost of defense and 5.5
million termination payment received
ROIC is our Preferred Performance Metric
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Peer Group Total Return - 2005
Peer group avg. 32.4
ESIs 119 Return Was More than 3.5 Times Our
Peer Group
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SP Total Return 2005
Only 2 Companies in the SP 500 Exceeded
ESIs Total Return to Stockholders of 119 in 2005
Note Returns reflect stock price increase plus
dividend yield
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Our Value Proposition Will Continue to Drive
Growth

• Making the use of drugs safer and more
  affordable is more
• important than ever
• Plan sponsors will increasingly deploy our tools
• Express Scripts is well-positioned for
  sustainable growth
• Strong market fundamentals/new business
  opportunities
• Increased use of home delivery and generic drugs
• Growth in management of specialty pharmacy
• Productivity and capital structure improvements
• We have taken a different approach
• Alignment -- we make money by saving our clients
  money
• Strategic acquisitions have enhanced our value
  proposition

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