Barrett Toan, president and chief executive officer of Express Scripts, was featured on CNBC in an interview to discuss the rising cost of prescription drugs prior to a press conference by President Clinton on proposed revisions to Medicare legislation. Barrett Toan on Medicare legislation.

EARNINGS GROWTH: The fourth quarter of 1999 was our 32nd consecutive quarter of growth in earnings per share, boosting the year’s total net income to $43.7 million or $1.30 per diluted share on a pro forma basis. This represents a 39.4 percent growth in earnings per share over the prior year.

Welcome from Barrett Toan..

In 1999, we produced our best results ever. We delivered strong financial performance - including a 36.2 percent increase in pro forma diluted earnings per share. We positioned Express Scripts for continued earnings growth and reinforced our leadership as North America's largest pharmacy benefit manager independent of drug manufacturer or drugstore ownership.

Express Scripts ended the year with its 32nd consecutive quarter of growth in pro forma earnings per share. Our 1999 pro forma net income was $67.3 million, or $1.77 per diluted share. Economic profit reached $33.0 million for the year, representing a 55 percent increase over 1998. Not included in the pro forma earnings are non-recurring gain and charges relating to our sale of the YourPharmacy.com, Inc. e-commerce assets to PlanetRx.com, Inc., certain integration initiatives and recapitalization related to our acquisition of Diversified Pharmaceutical Services (DPS).

Barrett Toan on cash management.

Revenues in 1999 increased 52 percent to $4.3 billion from $2.8 billion in the prior year, and gross profit increased 92 percent to $461.2 million from $239.9 million. EBITDA, on a pro forma basis, increased 104 percent to $238.9 million from $117.3 million. Our robust cash flow initially allowed us to fund $48 million of the $715 million purchase price for DPS and subsequently pay down more than $114 million of the approximately $1 billion of debt incurred to finance the DPS acquisition in 1999. This repayment, plus the proceeds from our equity offering, lowered our debt to $635.9 million and strengthened our balance sheet.

Barrett Toan on integration of ValueRx and DPS.

Given these achievements and our record-breaking performance, I'm proud to say that we enter the new millennium having assembled the best and most talented pharmacy benefit management team in the industry. Together, we will continue to unlock the synergies from the combination of Express Scripts, ValueRx and DPS, which has provided both economic and strategic benefits. These acquisitions contributed to the breadth of our capabilities and added competitive strength in the large employer and HMO markets. These acquisitions, as well as internal growth achieved over the past 24 months, significantly expanded the scope of our business. As of January 1, 2000, we served 38.5 million members, excluding UnitedHealth Group Incorporated (UHG), and more than 9,000 clients/plan sponsors. In 1999, we managed more than $8 billion in drug spending, handling more than 200 million pharmacy network claims and more than 10 million mail pharmacy claims (not including UHG), which made Express Scripts one of the nation's largest prescription drug mail distributors. 

The combination of growth through acquisitions, sales to new clients/plan sponsors and selling additional services to current clients/plan sponsors has increased our size and revenue volume. In the future, effective cross-selling, increased operating efficiencies, continued progress toward integration and implementation of our Internet strategy are aimed toward increasing the value we deliver to our clients/plan sponsors and further improving our profitability. 

The growth opportunity associated with cross-selling is outstanding. Ultimately, we should be able to expand services to as many as 30 million members over the next several years. For example, clients/plan sponsors who represent approximately 12 million members currently do not use our mail pharmacy services, where- as another group of clients/plan sponsors, representing 25 million members, are in plans that do not use advanced formulary management, such as three-tier copays or closed formularies.

We believe that cross-selling of these expanded services will drive increased volume, revenue and profitability. An early sign this strategy is working has been the expansion of services to 4.5 million current members during the second half of 1999. Successful cross-sales included adding advanced formulary management, clinical programs, mail pharmacy, or network contract management, where only one service had been used previously.

Express Scripts already is well-positioned at the center of the pharmacy industry since it provides clinical expertise and information management services. We handle both high-transaction volumes for consumers and deliver high-level analysis and counsel to our clients/plan sponsors. The Internet will enhance our capabilities and opportunities for adding value to all participants in the system - consumers, physicians, pharmacists, clients/plan sponsors and manufacturers.

	ECONOMIC PROFIT: Economic profit in 1999 was $33 million, increasing by 55 percent over $21.3 in 1998. Economic profit, an effective indicator of long-term value, measures how much our returns exceed our cost of capital.

		MANAGEMENT TEAM: We've entered the new millennium with a very talented and dedicated management team, representing the synergies among Express Scripts, ValueRx and Diversified.
Pictured from left: Stuart Bascomb, executive vice president and director of sales, Mark Johnson, senior vice president of integration and administration, David Lowenberg, senior vice president and chief operating officer, Thomas Boudreau, senior vice president, general counsel and corporate secretary, George Paz, senior vice president and chief financial officer, Linda Logsdon, executive vice president of health management services, Robert Davis, senior vice president and chief information systems officer, Mabel Chen, senior vice president of site operations and Terry Arndt, senior vice president of marketing

We've placed high strategic priority on enhancing this pivotal position as the Internet transforms the delivery of healthcare information and health benefits. Pharmacy benefits naturally are well-supported through the Internet because of the need for specific, complex information exchanges. We're focused on better connectivity and communications with our main constituencies for pharmaceutical information and products - our members, our clients/plan sponsors, retail pharmacists and physicians - with the goal of more effectively managing the pharmacy benefit through better communication, greater efficiency and higher quality service.

Barrett Toan on the Internet.

We will continue to develop Internet services through express-scripts.com, which will support our members' use of their pharmacy benefit, in coordination with our exclusive Internet pharmacy provider, PlanetRx.com, the premier Internet drugstore. Through the Internet, we can more easily and conveniently provide benefit and eligibility information, account history, new and refill orders capabilities, interactive customer service, locator maps showing network pharmacies in our members' areas and other health-related information. Our strategy extends well beyond prescriptions being dispensed via the Internet to include being a trusted source of healthcare information, educating our members about how to best use their drug benefit and interacting with our clients/plan sponsors, pharmacists and physicians.

Consumers increasingly will turn to the Internet as both an information resource and a commerce conduit. Consequently, we believe that the mail pharmacy option of the pharmacy benefit also will increase. Last year, our mail order prescription volume grew more than 40 percent, and we expect further increases that will allow us to leverage Express Scripts' and PlanetRx.com's fulfillment centers.

In addition to our 19.9 percent ownership of PlanetRx.com, our economic arrangement with them provides cash payments in excess of $14 million annually. Our strategy is to invest these proceeds to further develop our Internet business capabilities.

During 2000, we will use Internet technology to create opportunities for us both to connect with our members directly and work simultaneously with our client/plan sponsors and members. As part of our Internet strategy, we will be "Web-enabling" our pharmacy benefit management services, such as eligibility management and reporting. Our strategy will be to create more sophisticated interaction opportunities with our clients/plan sponsors, so they can better manage the benefits their members are receiving.

Physician connectivity is an important emerging issue in the healthcare industry. Physicians increasingly will be able to obtain information that is relevant to their patients at the exact time they need it through electronic, hand-held, physician prescribing devices. As a key intermediary in the management of today's pharmacy, Express Scripts will help shape the evolution of this new capability. We intend to draw heavily on our information technology expertise in adverse drug interaction reporting and the patient benefit coverage information that physicians require. We also will help support physician usage by making that important information available when they need it.

Physician connectivity will place physicians in a better position to make optimal prescription drug choices and to eliminate handwritten prescriptions, which will reduce the risk of pharmacy misfills that can result from misinterpretation. We believe that better and more timely information supplied to doctors will mean more effective use of healthcare dollars.

These are just a few examples of how Express Scripts' organizing role enhances our growth opportunity in the industry. The expansion of our Canadian operation, which is Canada's second largest pharmacy benefit manager, also will play a role in our growth. In addition, we have restructured Practice Patterns Science to leverage our expertise with pharmaceutical manufacturers and clients/plan sponsors to more effectively analyze and manage pharmaceutical use. Express Scripts Specialty Distribution Services Subsidiary has grown by providing complex management services for pharmaceuticals that require special handling.

	CASH FLOW FROM OPERATIONS: Express Scripts is a strong generator of cash. Based on strong cash flow from operations, we used $160 million to make acquisitions and reduce our debt. Going forward, we'll continue to look for the best opportunities for the use of cash to enhance economic profit.

PHARMACY CLAIMS VOLUME: Pharmacy network claims processed in 1999 exceeded 270 million and 10.6 million mail order prescriptions were filled.

Important trends support our belief that the pharmacy benefit manager will continue to become more critical in organizing and balancing the demands of quality, access and cost. These trends include our aging population and our longer life expectancy; the proliferation and rising use of drugs effective in treating disease and enhancing lifestyle; the patient's growing demand to understand and control his or her treatment options; and changes in where and how drug therapy is provided.

Express Scripts has the scope, skill, integrity and independence to compete successfully in the pharmacy benefit management industry and the evolving healthcare market place.

Our track record shows this management team has proven its ability to take complicated healthcare and business issues, make sense of them and produce stockholder value in the form of profits and cash flow. We'll continue our strategy of investing profits judiciously to enhance economic profit - recognizing the many opportunities we have to invest in more efficient and innovative business processes and strategic acquisitions.

In early 2000, Fortune ranked Express Scripts 371st on their Fortune 500 list based on revenues. Also, Forbes recognized Express Scripts as a Platinum 400 company and included us among only 25 companies featured in the magazine's "Platinum Profiles." Companies were included in the list based on a combination of return on total capital, cash flow per share, and revenue and net income growth. Express Scripts registered the second highest return on total capital of any company included in the Business Services category, averaging 27.4 percent during the last five years. Express Scripts also has averaged 56.5 percent growth in revenue and 39.2 percent growth in net income during the same period. We consider the ranking to be significant but secondary to our success in delivering value to our clients/plan sponsors and our goal of employing our capital to maximize economic profit.

Enhancing economic profit is becoming a key management metric for our company. Economic profit is our adjusted after-tax net operating profit less the cost of capital. It measures whether, and by how much, our returns exceed our cost of capital. The Shareholder Value Management System, which rewards managers for the generation of economic profit, offers a framework for allocating resources and capital to maximize economic profit, with the goal of creating stockholder value.

Our stockholders are well aware that Express Scripts' market price declined significantly in late 1999 and early 2000, despite our outstanding performance, including a 55 percent increase in economic profit. Although we believe that industry and trading dynamics outside our control seem to be factors in the decline, we're stepping up our effort to educate the market and communicate with investors who recognize our proven operating track record and value our strong fundamentals. In addition, we have reinvigorated our stock repurchase program to take advantage of the recent low market value of our stock. But more importantly, Express Scripts will aggressively capitalize on opportunities presented by the Internet and our independence from pharmaceutical manufacturer ownership to achieve better results for our clients and their members. As we execute our plans, we believe the market will reward our efforts.

Our outlook is very positive for continued growth in earnings per share consistent with our more than 30 percent historical pro forma growth trend. We're seeing exceptional demand for existing services, including conversion to Express Scripts' pharmacy network contracts, the use of advanced formulary management services and the addition of clinical management programs. For the first time in 1999, our mail pharmacy service volumes are producing higher profit per claim due to economies of scale. Our strategic focus on building critical mass through acquisitions and top-line volume growth has positioned us for an exceptional opportunity in the years ahead to increase profitability inside this larger base of business through an improved cost structure and cross-selling. During 2000, we also will focus on executing the plans that we have developed during the last year to manage the gradual transition of the UHG contract.

As a result, we believe that a prosperous, opportunity-filled future awaits Express Scripts. Our independence, size, highly skilled employees and successful track record of forging links and making connections position us to leverage the greatest value for our clients/plan sponsors and their members.

I thank and congratulate every member of the Express Scripts team for the vision and hard work that created such outstanding results in 1999. We thank you, our stockholders, for your interest and investment. Together, we look forward to a new millennium of opportunity.


Barrett Toan
President and Chief Executive Officer
Express Scripts, Inc.