<PAGE>   1

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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                             ---------------------

                                   FORM 10-Q

(MARK ONE)

    [X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
             EXCHANGE ACT OF 1934

               FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000

                                       OR

    [ ]      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 0-27276

                               CAREMARK RX, INC.
             (Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S>                                       <C>
                DELAWARE                      63-1151076
    (State or other jurisdiction of        (I.R.S. Employer
     incorporation or organization)       Identification No.)
</TABLE>

                        3000 GALLERIA TOWER, SUITE 1000
                           BIRMINGHAM, ALABAMA 35244
                    (Address of principal executive offices)

                                 (205) 733-8996
              (Registrant's telephone number, including area code)
                          (Formerly MedPartners, Inc.)

     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 [X]  No [ ]

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

<TABLE>
<CAPTION>
                 CLASS                    OUTSTANDING AT AUGUST 1, 2000
                 -----                    -----------------------------
<S>                                       <C>
Common Stock, Par Value $.001 Per Share           211,783,603*
</TABLE>

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* Includes 8,268,697 shares held in trust to be utilized in employee benefit
  plans.
<PAGE>   2

                           FORWARD LOOKING STATEMENTS

     In passing the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"), 15 U.S.C.A. Section 77z-2 and 78u-5 (Supp. 1996), Congress
encouraged public companies to make "forward-looking statements" by creating a
safe harbor to protect companies from securities law liability in connection
with forward-looking statements. Caremark Rx, Inc. ("Caremark Rx" or the
"Company") intends to qualify both its written and oral forward-looking
statements for protection under the Reform Act and any other similar safe harbor
provisions.

     "Forward-looking statements" are defined by the Reform Act. Generally,
forward-looking statements include expressed expectations of future events and
the assumptions on which the expressed expectations are based. All
forward-looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Due to those
uncertainties and risks, the investment community is urged not to place undue
reliance on written or oral forward-looking statements of Caremark Rx. Caremark
Rx undertakes no obligation to update or revise forward-looking statements to
reflect changed assumptions, the occurrence of unanticipated events or changes
to future operating results over time.

     The "forward-looking statements" contained in this document are made under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations". Moreover, the Company, through its senior management,
may from time to time make "forward-looking statements" about matters described
herein or other matters concerning the Company.

     There are several factors which could adversely affect the Company's
operations and financial results including, but not limited to, the following:

          Risks relating to the Company's divestiture of its discontinued
     operations; risks relating to the proposed settlement and transition plan
     for the MPN operations in the State of California; risks relating to the
     Company's compliance with or changes in government regulations, including
     pharmacy licensing requirements and healthcare reform legislation; risks
     relating to adverse resolution of lawsuits pending against the Company and
     its affiliates including litigation related to the TAPS; risks relating to
     declining reimbursement levels for products distributed; risks relating to
     identification of growth opportunities; risks relating to implementation of
     the Company's strategic plan; risks relating to liabilities in excess of
     the Company's insurance; and risks relating to the Company's liquidity and
     capital requirements.

                                        i
<PAGE>   3

                               CAREMARK RX, INC.

                         QUARTERLY REPORT ON FORM 10-Q

                                     INDEX

<TABLE>
<CAPTION>
                                                                       PAGE
                                                                       ----
<S>      <C>                                                           <C>
PART I -- FINANCIAL INFORMATION
Item 1.  Financial Statements
         Condensed Consolidated Balance Sheets -- June 30, 2000
           (Unaudited)
           and December 31, 1999.....................................    1
         Condensed Consolidated Statements of Operations
           (Unaudited) -- Three
           Months Ended June 30, 2000 and 1999.......................    2
         Condensed Consolidated Statements of Operations
           (Unaudited) -- Six
           Months Ended June 30, 2000 and 1999.......................    3
         Condensed Consolidated Statements of Cash Flows
           (Unaudited) -- Six
           Months Ended June 30, 2000 and 1999.......................    4
         Notes to Condensed Consolidated Financial Statements
           (Unaudited)...............................................    5
         Management's Discussion and Analysis of Financial Condition
Item 2.    and Results of Operations.................................   11
         Quantitative and Qualitative Disclosures About Market
Item 3.    Risk......................................................   16
PART II -- OTHER INFORMATION
Item 1.  Legal Proceedings...........................................   18
Item 2.  Changes in Securities and Use of Proceeds...................   20
Item 4.  Submission of Matters to a Vote of Security Holders.........   21
Item 6.  Exhibits and Reports on Form 8-K............................   21
</TABLE>

                                       ii
<PAGE>   4

                                     PART I

                             FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                               CAREMARK RX, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                               JUNE 30,     DECEMBER 31,
                                                                 2000           1999
                                                              -----------   ------------
                                                              (UNAUDITED)
                                                                    (IN THOUSANDS)
<S>                                                           <C>           <C>
                                         ASSETS
Current assets:
  Cash and cash equivalents.................................  $    11,119   $     6,797
  Accounts receivable, less allowances for bad debts of
     $13,835 and $14,146....................................      219,986       229,332
  Inventories...............................................      122,196       159,031
  Prepaid expenses and other current assets.................       16,216        14,880
  Current assets of discontinued operations.................       46,708       124,616
                                                              -----------   -----------
          Total current assets..............................      416,225       534,656
Property and equipment, net.................................      101,911       108,168
Intangible assets, net......................................       38,643        41,080
Other assets................................................       48,708        54,089
Non current assets of discontinued operations...............       20,326        32,853
                                                              -----------   -----------
          Total assets......................................  $   625,813   $   770,846
                                                              ===========   ===========
                         LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
  Accounts payable..........................................  $   323,928   $   275,119
  Other accrued expenses and liabilities....................      151,239       162,768
  Income tax payable........................................        3,099         6,978
  Current portion of long-term debt.........................      263,032        19,371
  Current liabilities of discontinued operations............      125,863        99,170
                                                              -----------   -----------
          Total current liabilities.........................      867,161       563,406
Long-term debt, net of current portion......................      762,119     1,230,025
Other long-term liabilities.................................       60,527        46,453
Long-term liabilities of discontinued operations............        8,576        12,437
                                                              -----------   -----------
          Total liabilities.................................    1,698,383     1,852,321
Contingencies (Note 8)......................................           --            --
Convertible preferred securities............................      200,000       200,000
Stockholders' deficit:
  Common stock, $.001 par value; 400,000 shares authorized;
     issued -- 211,663 in 2000 and 199,523 in 1999..........          212           200
  Additional paid-in capital................................    1,122,360       952,432
  Shares held in trust, 8,305 in 2000 and 8,383 in 1999.....     (133,884)     (135,141)
  Accumulated deficit.......................................   (2,261,258)   (2,098,966)
                                                              -----------   -----------
          Total stockholders' deficit.......................   (1,272,570)   (1,281,475)
                                                              -----------   -----------
          Total liabilities and stockholders' deficit.......  $   625,813   $   770,846
                                                              ===========   ===========
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

                                        1
<PAGE>   5

                               CAREMARK RX, INC.

          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED
                                                                     JUNE 30,
                                                              ----------------------
                                                                 2000        1999
                                                              ----------   ---------
                                                              (IN THOUSANDS, EXCEPT
                                                                PER SHARE AMOUNTS)
<S>                                                           <C>          <C>
Net revenue.................................................  $1,084,456   $ 796,207
Operating expenses:
  Cost of revenues..........................................   1,000,498     722,932
  Selling, general and administrative.......................      28,250      25,034
  Depreciation and amortization.............................       6,202       5,104
  Net interest expense......................................      25,432      30,502
                                                              ----------   ---------
Income from continuing operations before income taxes.......      24,074      12,635
Income tax expense..........................................       1,807         940
                                                              ----------   ---------
Income from continuing operations before preferred security
  dividends.................................................      22,267      11,695
Preferred security dividends................................       3,255          --
                                                              ----------   ---------
Income from continuing operations available to common
  stockholders..............................................      19,012      11,695
Loss from discontinued operations...........................          --    (199,310)
                                                              ----------   ---------
          Net income (loss) available to common
            stockholders....................................  $   19,012   $(187,615)
                                                              ==========   =========
Earnings (loss) per common share outstanding:
  Income from continuing operations available to common
     stockholders...........................................  $     0.09   $    0.06
  Loss from discontinued operations.........................          --       (1.05)
                                                              ----------   ---------
  Net income (loss) available to common stockholders........  $     0.09   $   (0.99)
                                                              ==========   =========
Weighted average common shares outstanding..................     201,202     190,650
Diluted earnings (loss) per common share outstanding:
  Income from continuing operations available to common
     stockholders...........................................  $     0.09   $    0.06
  Loss from discontinued operations.........................          --       (1.02)
                                                              ----------   ---------
          Net income (loss) available to common
            stockholders....................................  $     0.09   $   (0.96)
                                                              ==========   =========
Weighted average common and dilutive shares outstanding.....     207,616     195,285
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

                                        2
<PAGE>   6

                               CAREMARK RX, INC.

          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 SIX MONTHS ENDED
                                                                     JUNE 30,
                                                              -----------------------
                                                                 2000         1999
                                                              ----------   ----------
                                                               (IN THOUSANDS, EXCEPT
                                                                PER SHARE AMOUNTS)
<S>                                                           <C>          <C>
Net revenue.................................................  $2,137,004   $1,581,265
Operating expenses:
  Cost of revenues..........................................   1,969,173    1,438,798
  Selling, general and administrative.......................      55,347       49,807
  Depreciation and amortization.............................      12,483       10,662
  Net interest expense......................................      54,301       57,560
                                                              ----------   ----------
Income from continuing operations before income taxes.......      45,700       24,438
Income tax expense..........................................       3,428        1,908
                                                              ----------   ----------
Income from continuing operations before preferred security
  dividends.................................................      42,272       22,530
Preferred security dividends................................       6,475           --
                                                              ----------   ----------
Income from continuing operations available to common
  stockholders..............................................      35,797       22,530
Loss from discontinued operations...........................    (198,000)    (199,310)
                                                              ----------   ----------
          Net loss to common stockholders...................  $ (162,203)  $ (176,780)
                                                              ==========   ==========
Earnings (loss) per common share outstanding:
  Income from continuing operations available to common
     stockholders...........................................  $     0.18   $     0.12
  Loss from discontinued operations.........................       (1.01)       (1.05)
                                                              ----------   ----------
          Net loss to common stockholders...................  $    (0.83)  $    (0.93)
                                                              ==========   ==========
Weighted average common shares outstanding..................     196,226      190,490
Diluted earnings (loss) per common share outstanding:
  Income from continuing operations available to common
     stockholders...........................................  $     0.18   $     0.12
  Loss from discontinued operations.........................       (0.99)       (1.03)
                                                              ----------   ----------
          Net loss to common stockholders...................  $    (0.81)  $    (0.91)
                                                              ==========   ==========
Weighted average common and dilutive shares outstanding.....     200,658      193,988
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

                                        3
<PAGE>   7

                               CAREMARK RX, INC.

          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                SIX MONTHS ENDED
                                                                    JUNE 30,
                                                              ---------------------
                                                                2000        1999
                                                              ---------   ---------
                                                                 (IN THOUSANDS)
<S>                                                           <C>         <C>
Operating activities:
  Net loss to common stockholders...........................  $(162,203)  $(176,780)
  Adjustments for non-cash items:
     Loss from discontinued operations......................    198,000     199,310
     Non-cash interest expense..............................      3,399       2,711
     Preferred security dividends...........................      6,475          --
     Depreciation and amortization..........................     12,483      10,662
  Changes in operating assets and liabilities...............     87,505      12,655
                                                              ---------   ---------
          Net cash and cash equivalents provided by
            continuing operations...........................    145,659      48,558
Investing activities:
  Net purchase of property and equipment....................     (9,460)     (6,952)
                                                              ---------   ---------
          Net cash and cash equivalents used in investing
            activities......................................     (9,460)     (6,952)
Financing activities:
  Net repayments under credit facility......................   (224,245)   (363,199)
  Accounts receivable securitization........................         --      14,690
  Proceeds from issuance of common stock (see Note 8).......    167,817       1,273
  Dividend payments on preferred securities.................     (7,068)         --
  Other.....................................................       (304)       (470)
                                                              ---------   ---------
          Net cash and cash equivalents used in financing
            activities......................................    (63,800)   (347,706)
  Cash paid for special charges.............................     (3,509)     (2,807)
  Cash (used in) provided by discontinued operations........    (64,568)    294,446
                                                              ---------   ---------
  Net increase (decrease) in cash and cash equivalents......      4,322     (14,461)
  Cash and cash equivalents at beginning of period..........      6,797      23,100
                                                              ---------   ---------
  Cash and cash equivalents at end of period................  $  11,119   $   8,639
                                                              =========   =========
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

                                        4
<PAGE>   8

                               CAREMARK RX, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

NOTE 1.  BASIS OF PRESENTATION

     The Company's operations are conducted through Caremark Inc. ("Caremark"),
which provides pharmacy benefit management services and therapeutic
pharmaceutical services. These services are sold separately and together to
assist corporations, insurance companies, unions, government employee groups and
managed care organizations throughout the United States in delivering
prescription drugs to their members in a cost effective manner.

     The unaudited condensed consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries and have been prepared
in accordance with generally accepted accounting principles for interim
financial reporting and in accordance with Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements.

     In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of normal
recurring items) necessary for a fair presentation of results for the interim
periods presented. The results of operations for any interim period are not
necessarily indicative of results for the full year. The condensed consolidated
balance sheet of the Company at December 31, 1999, has been derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles. These financial statements and footnote
disclosures should be read in conjunction with the December 31, 1999 audited
consolidated financial statements and the notes thereto.

     The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the accompanying unaudited
condensed consolidated financial statements and notes thereto. Actual results,
including the Company's estimated costs to exit its Physician Practice
Management ("PPM") operations, as discussed in Notes 5 and 6, could differ from
those estimates.

     Certain prior period balances have been reclassified to conform to the
current period's presentation. Such reclassifications had no material effect on
the previously reported consolidated financial position, results of operations
or cash flows of the Company.

NOTE 2.  NEW ACCOUNTING PRONOUNCEMENTS

     In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements". SAB 101 summarizes the SEC's views in applying generally accepted
accounting principles to revenue recognition in financial statements. In March
2000, the SEC issued SAB No. 101A that delayed the implementation date of SAB
No. 101. In June 2000, the SEC issued SAB No. 101B that further delayed the
implementation date of SAB No. 101. The Company must adopt SAB No. 101 no later
than in the fourth quarter of fiscal 2001. The Company does not expect the
adoption of SAB No. 101 to have a material impact on its financial position or
results of operations.

     In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation -- an Interpretation of APB
No. 25" ("FIN No. 44"). FIN No. 44 clarifies the application of Opinion No. 25
for certain issues including: (a) the definition of employee for purposes of
applying Opinion No. 25, (b) the criteria for determining whether a plan
qualifies as noncompensatory plan, (c) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination. In general, FIN No. 44 is effective July 1, 2000. The Company does
not expect the adoption of FIN No. 44 to have a material impact on its financial
position or results of operations.

                                        5
<PAGE>   9
                               CAREMARK RX, INC.

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3.  INCOME TAXES

     Significant variations exist in the customary relationship between income
tax expense and pretax income because the Company has utilized net operating
loss carryforwards to offset its taxable federal income and certain taxable
state income. Consequently, the Company has recognized a tax rate of 7.5%, its
effective state income tax rate and alternative minimum taxes for federal income
tax purposes.

NOTE 4.  CREDIT FACILITY

     The Company has a credit facility with Bank of America, N.A. (formerly
NationsBank N.A.), as administrative agent. The Company has pledged the capital
stock of Caremark International Inc. ("CII"), which owns Caremark, as security
for amounts outstanding. The credit facility is guaranteed by the Company's
material subsidiaries and matures in June 2001. The credit facility consists of
the following:

     - An amortizing tranche A term loan with $34.0 million outstanding at June
       30, 2000. Quarterly principal payments on this term loan began in
       November 1999.

     - A non-amortizing tranche B term loan with $46.7 million outstanding at
       June 30, 2000.

     - A revolving credit facility in an aggregate principal amount of up to
       $400 million. At June 30, 2000, the Company had $74.4 million in
       borrowings, $63.2 million in letters of credit and $147.0 million
       reserved for the Senior Subordinated Notes under the revolving credit
       facility. Net of these amounts, the Company had $115.4 million available
       for borrowing under the credit facility as of June 30, 2000.

     The credit facility indebtedness currently bears interest at variable rates
based on LIBOR, plus varying margins. At the Company's option, or upon certain
defaults or other events, credit facility indebtedness may instead bear interest
based on the prime rate plus varying margins. The Company is also required to
repay the term loans ratably under the credit facility with 100% of the net cash
proceeds received from certain issuances of equity or debt or extraordinary
receipts, and with 50% of the excess cash flow (as defined) for each fiscal
year.

     The credit facility contains covenants that, among other things, restrict
the Company's ability to incur additional indebtedness or guarantee obligations,
engage in mergers or consolidation, dispose of assets, make investments, loans
or advances, engage in certain transactions with affiliates, conduct certain
corporate activities, create liens, make capital expenditures, prepay or modify
the terms of other indebtedness, pay dividends and other distributions, and
change its business. In addition, the Company is required to comply with
specified financial covenants, including a maximum leverage ratio, a minimum
fixed charge coverage ratio and a minimum interest expense coverage ratio. The
credit facility includes various customary and other events of default,
including cross default provisions, defaults for any material judgment or change
in control, and defaults relating to liabilities arising from the Company making
additional investments in its California physician practice management ("PPM")
business.

NOTE 5.  DISCONTINUED OPERATIONS

     During the first quarter of 2000 the Company recorded a charge of $198.0
million as a result of its progress in completing the exit from its PPM
operations. This charge includes a $153.3 million adjustment in the net assets
of the Company's remaining PPM operations and $44.7 million in adjustments to
reserves for potential future obligations such as rents and litigation. These
amounts are estimates. The actual results could differ from those outlined
above. During the six months ended June 30, 2000, the Company completed the
divestiture of three of its PPM practices. As of June 30, 2000, the Company is
operating one remaining PPM practice.

                                        6
<PAGE>   10
                               CAREMARK RX, INC.

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 6.  CALIFORNIA PPM DISCONTINUED OPERATIONS

     The Company's California PPM operations included MedPartners Provider
Network, Inc. ("MPN"), a wholly-owned subsidiary of the Company and a healthcare
service plan licensed by the State of California (the "State") under the
Knox-Keene Health Care Service Plan Act of 1975. In March 1999, the California
Department of Corporations (the "DOC") appointed a conservator and assumed
control of the business operations of MPN. The conservator, purportedly on
behalf of MPN, filed a voluntary petition under Chapter 11 of the United States
Bankruptcy Code. The Company judicially challenged the authority of both the DOC
and the conservator to take these actions in both the California Superior Court
and in the United States Bankruptcy Court for the Central District of California
(the "Bankruptcy Court").

     The Company, MPN, and representatives of the State subsequently executed an
agreement to settle the disputes relating to MPN (the "Settlement Agreement"),
which was approved by the Bankruptcy Court. The Company, various of its
subsidiaries, MPN, certain managed physician practices and various health plans
executed a supplemental agreement (the "Supplemental Plan Agreement"), pursuant
to which (1) the parties to the Supplemental Plan Agreement agreed to
subordinate, waive and/or release various claims against one another on the
terms and conditions set forth therein, and (2) the health plans agreed to
support the Chapter 11 plan of reorganization (the "Plan of Reorganization") to
be filed by MPN. The Supplemental Plan Agreement was approved by the Bankruptcy
Court following a hearing on February 7, 2000. The Supplemental Plan Agreement
has subsequently been amended numerous times, and such amendments have been
approved by the Bankruptcy Court. A revised Supplemental Plan Agreement has been
submitted to the Bankruptcy Court as an exhibit to the Second Amended Chapter 11
Plan of Reorganization, dated July 7, 2000 (the "Second Amended Plan"), and a
hearing to approve the revised Supplemental Plan Agreement will be held
contemporaneously with the hearing on confirmation of the Second Amended Plan.
MPN filed an initial draft of the Plan of Reorganization on November 5, 1999. An
amended Plan of Reorganization, accompanied by a revised disclosure statement to
accompany that plan, was filed with the Bankruptcy Court on February 3, 2000,
and the Second Amended Plan was filed with the Bankruptcy Court on July 7, 2000,
contemporaneously with an amended and restated disclosure statement. On July 19,
2000, the Bankruptcy Court entered an order which: (1) approved the disclosure
statement of MPN to accompany the Second Amended Plan; (2) set August 29, 2000
as the hearing date on confirmation of the Second Amended Plan; (3) set August
16, 2000 as the voting deadline for acceptance or rejection of the Second
Amended Plan; and (4) approved the form of ballots to be used in connection with
the vote on the Second Amended Plan.

NOTE 7.  CONVERTIBLE PREFERRED SECURITIES

     In September, 1999, the Company privately placed $200.0 million Guaranteed
Preferred Beneficial Interest in Caremark Rx Junior Subordinated Debt Securities
("Convertible Preferred Securities"). The issuer of the Convertible Preferred
Securities is a trust, which is a wholly owned finance subsidiary of the
Company, with no independent assets or operations. The sole assets of the trust
are the 7% Convertible Subordinated Debentures of the Company, maturing October
1, 2029, with principal amount equal to $206.2 million. (This is equal to the
amount of the Convertible Preferred Securities plus the amount of the common
equity issued by the Trust to the Company.) Considered together, (1) the
Company's guaranty, to the extent that the trust has funds available, of
distribution and liquidation payments on the Convertible Preferred Securities
and (2) the Company's obligations under (a) its Convertible Subordinated
Debentures and the related Indenture and (b) the trust's Trust Agreement,
provide a full and unconditional guarantee of amounts due on the Convertible
Preferred Securities issued by the trust.

NOTE 8.  CONTINGENCIES

     The Company is party to certain legal actions arising in the ordinary
course of business. The Company is named as a defendant in various legal actions
arising primarily out of services rendered by physicians and

                                        7
<PAGE>   11
                               CAREMARK RX, INC.

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

others employed by its managed medical groups, as well as personal injury and
employment disputes. In addition, certain of its managed medical groups are
named as defendants in numerous actions alleging medical negligence on the part
of their physicians. In certain of these actions, the Company and/or the medical
group's insurance carrier has either declined to provide coverage or has
provided a defense subject to a reservation of rights. Management does not view
any of these actions as likely to result in an uninsured award that would have a
material adverse effect on the operating results or financial condition of the
Company.

     In September 1997 the Company issued 6.50% Threshold Appreciation Price
Securities ("TAPS"). The TAPS were initially secured by $481.4 million in U.S.
Treasury Notes. The Company was to receive the proceeds of these U.S. Treasury
Notes on August 31, 2000, the date the TAPS were scheduled to be surrendered by
the TAPS holders.

     In 1999, two lawsuits were filed in the Supreme Court of the State of New
York, County of New York, claiming that a "Termination Event" had occurred with
respect to the TAPS. Both of these lawsuits have been dismissed with prejudice.
The Company settled one of these lawsuits, which involved plaintiffs holding
approximately 35 percent of the outstanding TAPS (the "Settling TAPS Holders"),
in April 2000 (the "New York Settlement").

     The New York Settlement provided, among other things, that the Settling
TAPS Holders would receive 1.55 shares of the Company's common stock for each
TAPS owned or controlled by them. Accordingly, on April 14, 2000, the Company
delivered 1.55 shares of the Company's common stock for each TAPS tendered by
the Settling TAPS Holders and paid to the Settling TAPS Holders accrued and
unpaid interest due on the U.S. Treasury Notes corresponding to the tendered
TAPS. The Company received approximately $168.0 million in cash from the
cancellation of the related TAPS, which was used to reduce indebtedness under
the credit facility. Approximately $147.0 million was applied to the revolving
credit facility, and will subsequently be used to retire a portion of the
Company's Senior Subordinated Notes in the principal amount of $420 million,
which become due in September 2000. The remaining $21.0 million was applied to
the term loans under the Company's credit facility. The New York Settlement will
not have a material adverse impact on the continuing operations of the Company.

     The New York Settlement provides that, in the event the Company settles
litigation with other holders of TAPS for a greater value per each TAPS, as
measured in accordance with the terms of the settlement agreement, than the
settlement value of the New York Settlement, the Company will pay each Settling
TAPS Holder the difference in value per each TAPS between the settlement value
of the New York Settlement and the settlement value of any settlement with other
holders of TAPS.

     In March 2000, a purported class action was filed in the Circuit Court of
Franklin County, Alabama, also claiming that a Termination Event had occurred.
This lawsuit was subsequently certified by the court as a "non-opt out" class
action, and therefore includes all TAPS holders other than those who were
parties to the New York Settlement. The Company reached a settlement in this
lawsuit (the "Alabama Settlement"), which has received final court approval
pursuant to a Final Approval Order and Judgment issued on June 9, 2000 (the
"Final Order") by the Circuit Court of Franklin County, Alabama. On June 19,
2000, certain TAPS holders filed a notice of appeal to the Supreme Court of
Alabama, questioning the Circuit Court's order denying their motion to intervene
and the adequacy of the settlement. On July 21, 2000, two other TAPS holders
filed notices of appeal to the Supreme Court of Alabama, purporting to appeal on
the same grounds as the June 19, 2000 appeal. The Company believes that the
appeals are without merit, and intends to vigorously contest each issue raised
in the appeals.

     The Alabama Settlement provides that on August 31, 2000, each class member
will be entitled to receive common stock for such class member's TAPS at the
rate provided for by the Purchase Contract Agreement related to the TAPS. Each
class member will also receive interest through this date and a yield
enhancement payment unless the class member decides to settle the Purchase
Contract Agreement earlier in accordance

                                        8
<PAGE>   12
                               CAREMARK RX, INC.

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

with the Alabama Settlement terms. Additionally, the Company will issue 0.22
additional shares of common stock for each TAPS, subject to the terms of the
Alabama Settlement. The Alabama Settlement will not have a material adverse
effect on the continuing operations of the Company.

     On April 11, 2000, certain TAPS holders filed a lawsuit entitled Aragon
Investments, Ltd. et al. v. Caremark Rx, Inc. in the Supreme Court of the State
of New York, County of New York, claiming that a "Termination Event" had
occurred with respect to the TAPS. The Supreme Court of the State of New York
previously postponed further action in the Aragon litigation pending action by
the Circuit Court of Franklin County, Alabama relating to the Alabama
Settlement. The Company does not know what future action, if any, the Supreme
Court of the State of New York will take with respect to this litigation.

     Any adverse developments in this litigation that would prevent the Company
from timely receiving the proceeds of the U.S. Treasury Notes securing the
remaining TAPS would materially adversely affect the Company's liquidity
position, including its ability to repay the Senior Subordinated Notes due in
September 2000.

     In June 1995, Caremark and CII agreed to settle an investigation with
certain agencies of the United States government (the "Government Settlement").
In the Government Settlement, Caremark and CII agreed to continue to maintain
certain compliance-related oversight procedures until June 15, 2000, at which
time the Government Settlement expired.

     In 1993, independent and retail chain pharmacies filed a group of antitrust
lawsuits, and a class action lawsuit, against brand name pharmaceutical
manufacturers, wholesalers and PBM companies. Caremark was named as a defendant
in these lawsuits in 1994, but was not named in the class action. The lawsuits,
filed in federal district courts in at least 38 states (including the United
States District Court for the Northern District of Illinois), allege that at
least 24 pharmaceutical manufacturers provided unlawful price and service
discounts to certain favored buyers and conspired among themselves to deny
similar discounts to the complaining retail pharmacies (approximately 3,900 in
number). The complaints charge that certain defendant prescription benefit
managers, including Caremark, were favored buyers who knowingly induced or
received discriminatory prices from the manufacturers in violation of the
Robinson-Patman Act. Each complaint seeks unspecified treble damages,
declaratory and equitable relief and attorney's fees and expenses.

     All of these actions have been transferred by the Judicial Panel for
Multi-District Litigation to the United States District Court for the Northern
District of Illinois for coordinated pretrial procedures. Caremark was not named
in the class action. In April 1995, the Court entered a stay of pretrial
proceedings as to certain Robinson-Patman Act claims in this litigation,
including the Robinson-Patman Act claims brought against Caremark, pending the
conclusion of a first trial of certain of such claims brought by a limited
number of plaintiffs against five defendants not including Caremark. On July 1,
1996, the district court directed entry of a partial final order in the class
action approving an amended settlement with certain of the pharmaceutical
manufacturers. The amended settlement provides for a cash payment by the
defendants in the class action (which does not include Caremark) of
approximately $351 million to class members in settlement of conspiracy claims
as well as a commitment from the settling manufacturers to abide by certain
injunctive provisions. All class action claims against non-settling
manufacturers as well as all opt out and other claims generally, including all
Robinson-Patman Act claims against Caremark, remain unaffected by this
settlement, although numerous additional settlements have been reached between a
number of parties to the class and individual manufacturers. The class action
conspiracy claims against the remaining defendants were tried in the fall of
1998, and resulted in a judgment by the court at the close of the plaintiffs'
case in favor of the remaining defendants. That judgment was affirmed in part
and reversed and remanded in part and is currently undergoing further
proceedings in the district court and the court of appeals, which may result in
a second trial of the class action or its dismissal on the merits. It is
expected that trials of the non-class action conspiracy claims brought by
opt-out individual plaintiffs under the Sherman Act, to the extent they have not
been settled

                                        9
<PAGE>   13
                               CAREMARK RX, INC.

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

or dismissed, will move forward in 2000 to a decision on summary judgment or to
trial and likely will also precede the trial of any Robinson-Patman Act claims.

     Pursuant to the Provider Self-Disclosure Protocol of the OIG, the Company
has conducted a voluntary investigation of the practices of an affiliate known
as Home Health Agency of Greater Miami, doing business as AmCare ("AmCare"). The
investigation uncovered several potentially inappropriate practices by certain
managers at AmCare, some of which may have resulted in overpayments from federal
programs for AmCare's home health services. The Company has since terminated
these managers, ceased AmCare's operations, and reported the matter to the OIG.
While the OIG has not yet responded to the Company's internal investigation
report, and therefore the resolution of this matter is as yet unknown, it is
likely that the government will determine that overpayments were made which
require repayment by the Company. The Company's estimates of the repayments due
have been accrued in the financial statements.

     Although the Company believes that it has meritorious defenses to the
claims of liability or for damages in the actions against it, there can be no
assurance that the lawsuits will not have a disruptive effect upon the
operations of the business, that the defense of the lawsuits will not consume
the time and attention of senior management of Caremark Rx and its subsidiaries,
or that the resolution of the lawsuits will not have a material adverse effect
on the operating results and financial condition of the Company. The Company
intends to vigorously defend each of these lawsuits. The Company believes that
these lawsuits will not have a material adverse effect on the operating results
and financial condition of the Company.

     The Company has assigned lease obligations related to its discontinued
operations of approximately $139.4 million to various parties. The Company
and/or one or more of its subsidiaries remain as guarantor or obligator on these
lease obligations. The leases have been assigned to numerous unrelated entities
and the Company believes there is no significant concentration of credit risk.

                                       10
<PAGE>   14

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

General

     The Company is one of the largest pharmaceutical services companies in the
United States. The Company's operations are comprised of pharmacy benefit
management services and therapeutic pharmaceutical services. These services are
sold both separately and together to assist corporations, insurance companies,
unions, government employee groups and managed care organizations throughout the
United States in delivering prescription drugs to their members in a
cost-effective manner.

     The Company's net revenues generally include payments by its customers
based on the price of pharmaceuticals dispensed to their members and
administrative fees. Pharmaceuticals are dispensed from retail pharmacies
included in one of the Company's networks and from its wholly-owned and operated
mail service pharmacies. The preponderance of the Company's revenue is earned on
a fee-for-service basis through contracts covering one to three-year periods.
Revenues for selected types of services are earned based on a percentage of
savings achieved or on a per-enrollee or per-member basis; however, these
revenues are not material to total revenues. Costs of net revenues are comprised
primarily of pharmaceutical acquisition costs and the cost of services
associated with dispensing drugs and operating systems.

     The Company has added two large managed care contracts since the second
quarter of 1999. While this resulted in higher revenues and higher average
revenue per account, the Company's gross margins -- that is, gross profit as a
percentage of net revenues -- have decreased. Managed care plans typically
involve a higher concentration of retail pharmacy services, which have a lower
margin than the Company's mail service pharmacy and specialty therapeutic
services. The Company anticipates its gross margin for the remaining quarters of
2000 to be lower than the corresponding prior year quarters as a result of the
large new managed care contracts noted above.

     The Company had tax net operating loss ("NOL") carryforwards of
approximately $2.3 billion as of December 31, 1999. Because of the uncertainty
of the ultimate realization of the net deferred tax asset, the Company has
established a valuation allowance for the amount of the net deferred tax asset
that is not otherwise expected to be used to offset deferred tax liabilities.
Additionally, its sales of discontinued operations have and will continue to
generate additional tax NOL carryforwards in 2000. If not utilized to offset
future taxable income, the net operating loss carryforwards will expire on
various dates through 2020. The Company's taxes payable in 2000 and, until such
time as its NOLs are utilized, will consist of state taxes in those states where
it does not have state NOL carryforwards and alternative minimum taxes for
federal income tax purposes. The Company expects its effective tax rate to be
approximately 7.5% until such time as the NOLs are utilized.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999

     For the three months ended June 30, 2000 and 1999, net revenue was $1,084.5
million and $796.2 million, representing an increase of $288.3 million (36.2%)
from 1999 to 2000. Key factors contributing to this growth include new customer
contracts, including two large managed care contracts, higher customer
retention, additional services provided to existing customers and drug cost
inflation.

     Cost of revenues increased to 92.3% of net revenue during the second
quarter of 2000 from 90.8% for the same period of 1999. This increase is due
primarily to the increased mix of retail revenue to total revenue due to the
addition of two large managed care contracts.

     Selling, general and administrative expense decreased to 2.6% of net
revenue during the second quarter of 2000 from 3.1% in the same period of 1999.
This decrease results from increased sales volumes which do not require
corresponding increases in administrative expenses.

     Operating income and margins were $49.5 million and 4.6% for the three
months ended June 30, 2000. Operating income and margins were $43.1 million and
5.4% for the three months ended June 30, 1999. (Operating income represents
earnings before interest and income taxes and excludes losses from discontinued
operations.) The 14.8% increase in operating income is primarily due to the
growth in revenue. The decrease

                                       11
<PAGE>   15

in operating margin was due primarily to the addition of two large managed care
plans since the second quarter of 1999. Managed care plan accounts produce lower
margins due to their higher retail product mix.

     Net interest expense was $25.4 million and $30.5 million for the three
months ended June 30, 2000 and 1999, respectively. The period over period
decrease in interest expense primarily resulted from reduced debt levels,
including the reduction in the revolver due to the receipt of a portion of the
TAPS proceeds in April 2000. The reduction in interest expense due to reduced
debt levels was offset by increases in interest rates on the Company's credit
facility which is subject to variable rates.

     The Company's effective tax rate was 7.5% for the second quarter of 2000.
This effective rate is the result of the tax NOL carryforwards discussed above
and tax planning strategies in certain states that allow consolidated return
filings that will allow the Company to utilize its consolidated NOL in these
states. This effective tax rate is expected to be achieved for the foreseeable
future.

     The Company recorded dividends on its Convertible Preferred Securities of
$3.3 million during the three months ended June 30, 2000. Dividends on the
Convertible Preferred Securities are payable at an annual rate of 7% of the
liquidation amount of $50 per Convertible Preferred Security, and are payable
quarterly in arrears on January 1, April 1, July 1 and October 1 each year. The
Convertible Preferred Securities were not outstanding in the second quarter of
1999.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999

     For the six months ended June 30, 2000 and 1999, net revenue was $2,137.0
million and $1,581.3 million, representing an increase of $555.7 million (35.1%)
from 1999 to 2000. Key factors contributing to this growth include new customer
contracts, including two large managed care contracts, higher customer
retention, additional services provided to existing customers and drug cost
inflation.

     Cost of revenues increased to 92.1% of net revenue during the first six
months of 2000 from 91.0% for the same period of 1999. This increase is due
primarily to the increased mix of retail revenue to total revenue due to the
addition of two large managed care contracts.

     Selling, general and administrative expense decreased to 2.6% of revenue
during the first six months of 2000 from 3.1% in the same period of 1999. This
decrease results from increased sales volumes which do not require corresponding
increases in administrative expenses.

     Operating income and margins were $100.0 million and 4.7% for the six
months ended June 30, 2000. Operating income and margins were $82.0 million and
5.2% for the six months ended June 30, 1999. (Operating income represents
earnings before interest and income taxes and excludes losses from discontinued
operations.) The 22.0% increase in operating income is primarily due to the
growth in revenue. The decrease in operating margin was due primarily to the
addition of two large managed care plans since the second quarter of 1999.
Managed care plan accounts produce lower margins due to their higher retail
product mix.

     Net interest expense was $54.3 million and $57.6 million for the six months
ended June 30, 2000 and 1999, respectively. The period over period decrease in
interest expense primarily resulted from decreased debt levels, including the
reduction in the revolver due to the receipt of a portion of the TAPS proceeds
in April 2000. The reduction in interest expense due to reduced debt levels was
offset by increases in interest rates on the Company's credit facility, which is
subject to variable rates.

     The Company's effective tax rate was 7.5% for the second quarter of 2000.
This effective rate is the result of the tax NOL carryforwards discussed above
and tax planning strategies in certain states that allow consolidated return
filings that will allow the Company to utilize its consolidated NOL in these
states. This effective tax rate is expected to be achieved for the foreseeable
future.

     The Company recorded dividends on its Convertible Preferred Securities of
$6.5 million during the six months ended June 30, 2000. Dividends on the
Convertible Preferred Securities are payable at an annual rate of 7% of the
liquidation amount of $50 per Convertible Preferred Security, and are payable
quarterly in arrears on January 1, April 1, July 1 and October 1 each year. The
Convertible Preferred Securities were not outstanding in the first six months of
1999.
                                       12
<PAGE>   16

     During the first quarter of 2000 the Company recorded a charge of $198.0
million as a result of its progress in completing the exit from its PPM
operations. This charge includes a $153.3 million adjustment in the net assets
of the Company's remaining PPM operations and $44.7 million in adjustments to
reserves for potential future obligations such as rents and litigation. These
amounts are estimates. The actual results could differ from those outlined
above. During the six months ended June 30, 2000, the Company completed the
divestiture of three of its PPM practices. Net proceeds from these divestitures
totaled $21.6 million.

     During the second quarter of 1999, the Company recorded a charge for $199.3
million related to the net loss on the disposal of its discontinued operations.
This charge consisted of $119.9 million for the impairment and write-offs of
intangibles and other PPM assets, adjustments to the estimated costs to exit the
PPM operations of approximately $73.6 million and an adjustment of approximately
$5.8 million related to the gain on the sale of the contract services business.

LIQUIDITY AND CAPITAL RESOURCES

     General.  The Company broadly defines liquidity as its ability to generate
sufficient cash flow from operating activities to meet its obligations and
commitments. In addition, liquidity includes the ability to obtain appropriate
financing and to convert into cash those assets that are no longer required to
meet existing strategic and financial objectives. Therefore, liquidity cannot be
considered separately from capital resources that consist of current or
potentially available funds for use in achieving business objectives and meeting
debt service commitments.

     Currently, the Company's liquidity needs arise primarily from debt service
on its indebtedness and the funding of its discontinued operations (including
the funding of any retained liabilities), as well as its working capital
requirements and capital expenditures. The Company believes that cash flow from
operations and amounts available under the revolving credit facility are
sufficient to meet its liquidity needs.

     Cash Flows.  The Company's cash flow from continuing operations for the six
months ended June 30, 2000 was $145.7 million. This positive cash flow was
offset by cash used in discontinued operations ($64.6 million), capital
expenditures ($9.5 million) and repayments of amounts under the company's credit
facility ($224.2 million). Among other things, the Company's cash flow from
operations was positively affected by improved inventory management and a
reduction of days outstanding in the therapeutic pharmaceutical services
accounts receivable.

     The Company's financing activities included the receipt of approximately
$168 million in cash from the cancellation of certain of the TAPS which was used
to reduce indebtedness under the credit facility. Approximately $147 million was
applied to the revolving credit facility, and will subsequently be used to
retire a portion of the Senior Subordinated Notes. The remaining $21 million was
applied to the term loans under the Company's credit facility. See "Liquidity
and Capital Resources -- Other Indebtedness" and "Note 8. Contingencies" for
further discussions.

     Credit Facility.  The Company has a credit facility with Bank of America,
N.A. (formerly NationsBank N.A.), as administrative agent. The Company has
pledged the capital stock of CII, which owns Caremark, the primary operating
subsidiary, as security for amounts outstanding. The credit facility is
guaranteed by the Company's material subsidiaries and matures in June 2001, with
all amounts then outstanding due at that time. The credit facility consists of
the following:

     - An amortizing tranche A term loan with $34.0 million outstanding at June
       30, 2000. Quarterly principal payments on this term loan began in
       November 1999.

     - A non-amortizing tranche B term loan with $46.7 million outstanding at
       June 30, 2000.

     - A revolving credit facility in an aggregate principal amount of up to
       $400 million. At June 30, 2000, the Company had $74.4 million in
       borrowings, $63.2 million in letters of credit and $147.0 million
       reserved for the Senior Subordinated Notes under the revolving credit
       facility. Net of these amounts, the Company had $115.4 million available
       for borrowing under the credit facility as of June 30, 2000.

                                       13
<PAGE>   17

     The credit facility indebtedness currently bears interest at variable rates
based on LIBOR (as defined), plus varying margins. At the Company's option, or
upon certain defaults or other events, credit facility indebtedness may instead
bear interest based on prime rate. The Company is also required to repay the
term loans ratably under the credit facility with 100% of the net cash proceeds
received from certain issuances of equity or debt or extraordinary receipts, and
with 50% of the excess cash flow (as defined) for each fiscal year.

     The credit facility contains covenants that, among other things, restrict
the Company's ability to incur additional indebtedness or guarantee obligations,
engage in mergers or consolidation, dispose of assets, make investments, loans
or advances, engage in certain transactions with affiliates, conduct certain
corporate activities, create liens, make capital expenditures, prepay or modify
the terms of other indebtedness, pay dividends and other distributions, and
change its business. In addition, the Company is required to comply with
specified financial covenants, including a maximum leverage ratio, a minimum
fixed charge coverage ratio and a minimum interest expense coverage ratio. The
credit facility includes various customary and other events of default,
including cross default provisions, defaults for any material judgment or change
in control, and defaults relating to liabilities arising from the Company making
additional investment in its California PPM business. The Company currently
anticipates it will amend and extend the term of its current credit facility,
execute a new credit facility and/or issue public equity/debt prior to June 2001
when the current credit facility matures.

     Convertible Preferred Securities.  In September 1999, the Company privately
placed $200 million of Convertible Preferred Securities. The Convertible
Preferred Securities mature in the year 2029, but are redeemable prior to
maturity at the option of the Company beginning October 15, 2002, at prices
ranging from $52.00 to $50.00 plus accumulated and unpaid interest per
Convertible Preferred Security. Each Convertible Preferred Security is
convertible at the option of the holder into shares of Common Stock at a
conversion rate of 6.7125 shares of Common Stock for each Convertible Preferred
Security (equivalent to a conversion price of $7.4488 per share of Common
Stock.) Dividends on the Convertible Preferred Securities are payable at an
annual rate of 7% of the liquidation amount of $50 per Convertible Preferred
Security, and are payable quarterly in arrears on January 1, April 1, July 1 and
October 1 each year, beginning January 1, 2000. Dividends on the Convertible
Preferred Securities may be deferred by the Company for up to 20 consecutive
quarters. The Company has no intention at the present time to defer the payment
of the dividends.

     Receivables Securitization.  The credit facility as amended permits up to
$125 million in accounts receivable securitization. The Company has securitized
certain of its accounts receivable pursuant to an accounts receivable
securitization facility with The Chase Manhattan Bank as funding agent. As of
June 30, 2000, the Company had securitized approximately $100.0 million in
accounts receivable.

     Discontinued Operations.  Cash used to fund exit costs, which are
classified in current liabilities as other accrued expenses and liabilities,
will be funded by the revolving credit facility, cash flow from continuing
operations and proceeds from the sales of the discontinued operations. The
Company believes that approximately $100.0 million in net cash funding,
including approximately $80.0 million in the last two quarters of 2000, will be
required for the next twelve months. The Company believes that amounts available
from the sales of discontinued operations, amounts available under the revolving
credit facility (including $40 million in letters of credit which will be used
to fund discontinued operations in California), and cash flow from continuing
operations will be sufficient to fund the cash requirements of the discontinued
operations. However, there can be no assurance that the cash generated from such
sources will be sufficient to meet these funding needs or that the Company's
estimate of discontinued operations funding requirements will not increase. If
the cash generated from these sources is not sufficient to meet these funding
needs, the Company would seek to enhance its liquidity position through further
modifications to the credit facility, incurrence of additional indebtedness,
asset sales, restructuring of debt, and/or the sale of securities. Although the
Company currently believes that one or more of such alternatives would be
available to enhance liquidity, each such alternative is dependent upon future
events, conditions and other matters outside the Company's control.

     Other Indebtedness.  The Company has outstanding two other series of debt
securities. Neither is guaranteed by any subsidiary. The Senior Notes are in an
aggregate principal amount of $450 million and bear interest at 7 3/8% annually,
with all principal amounts due in October 2006. The Senior Subordinated Notes
are

                                       14
<PAGE>   18

in an aggregate principal amount of $420 million and bear interest at 6 7/8%
annually, with all principal amounts due in September 2000. The indenture for
each series of notes contains, among other things, restrictions on subsidiary
indebtedness, sale and leaseback transactions, and consolidation, merger and
sale of assets.

     The Senior Notes indenture also contains restrictions on indebtedness
secured by liens. To comply with this covenant, the Company has secured the
Senior Notes with an equal and ratable pledge of all of the capital stock of the
subsidiary that owns its primary operating subsidiary. The two series of these
notes are otherwise unsecured.

     TAPS.  In September 1997, the Company issued 21.7 million 6.50% TAPS with a
stated amount of $22.1875 per security. Each TAPS consists of (i) a stock
purchase contract which obligates the holder to purchase Common Stock on the
final settlement date (August 31, 2000) and (ii) 6.25% U.S. Treasury Notes due
August 31, 2000. The Treasury Notes forming a part of the TAPS have been pledged
to secure the obligations of the TAPS holders under the purchase contracts.
Pursuant to the TAPS, TAPS holders receive payments equal to 6.50% of the stated
amount per annum consisting of interest on the Treasury Notes at the rate of
6.25% per annum and yield enhancement payments payable semi-annually by the
Company at the rate of 0.25% of the stated amount per annum. At June 30, 2000,
these securities are not included on the Company's balance sheet.

     In 1999, two lawsuits were filed in the Supreme Court of the State of New
York, County of New York, claiming that a "Termination Event" had occurred with
respect to the TAPS. Both of these lawsuits have been dismissed with prejudice.
One of these lawsuits, which involved plaintiffs holding approximately 35
percent of the outstanding TAPS, was settled by the Company in April 2000 (the
"New York Settlement"). As a result the Company has issued 11,741,250 shares of
common stock and paid accrued interest on the 7,575,000 related TAPS through
April 14, 2000. The Company received approximately $168.0 million in cash from
the cancellation of the related TAPS, which was used to reduce indebtedness
under the credit facility. Approximately $147.0 million was applied to the
revolving credit facility, and will subsequently be used to retire a portion of
the Senior Subordinated Notes. The remaining $21.0 million was applied to the
term loans under the Company's credit facility.

     In March 2000, a purported class action was filed in the Circuit Court of
Franklin County, Alabama, also claiming that a Termination Event had occurred.
This lawsuit was subsequently certified by the court as a "non-opt out" class
action, and therefore includes all TAPS holders other than those who were
parties to the New York Settlement. The Company reached a settlement in this
lawsuit (the "Alabama Settlement"), which received final court approval pursuant
to a Final Approval Order and Judgment issued on June 9, 2000 (the "Final
Order") by the Circuit Court of Franklin County, Alabama. On June 19, 2000,
certain TAPS holders filed a notice of appeal to the Supreme Court of Alabama,
questioning the Circuit Court's order denying their motion to intervene and the
adequacy of the settlement. On July 21, 2000, two other TAPS holders filed
notices of appeal to the Supreme Court of Alabama, purporting to appeal on the
same grounds as the June 19, 2000 appeal. The Company believes that the appeals
are without merit, and intends to vigorously contest each issue raised in the
appeals.

     The Alabama Settlement provides that on August 31, 2000, each class member
will be entitled to receive common stock for such class member's TAPS at the
rate provided for by the Purchase Contract Agreement related to the TAPS. Each
class member will also receive interest through this date and a yield
enhancement payment unless the class member decides to settle the Purchase
Contract Agreement earlier in accordance with the Alabama Settlement terms.
Additionally, the Company will issue 0.22 additional shares of common stock for
each TAPS, subject to the terms of the Alabama Settlement. Accordingly, the
Company will issue a total of 17,231,297 shares of common stock in exchange for
the 14,124,014 remaining TAPS pursuant to the Alabama Settlement. The Alabama
Settlement will not have a material adverse effect on the continuing operations
of the Company.

     The Company anticipates using proceeds of the U.S. Treasury Notes securing
the outstanding TAPS and amounts available under the credit facility to repay
the Company's Senior Subordinated Notes in September 2000.

                                       15
<PAGE>   19

     Any adverse developments in this litigation that would prevent the Company
from timely receiving the proceeds of the U.S. Treasury Notes securing the
remaining TAPS would materially adversely affect the Company's liquidity
position, including its ability to repay the Senior Subordinated Notes due in
September 2000. For more information see "Legal Proceedings."

OTHER MATTERS

     Impact of Year 2000.  The Year 2000 issue concerns the ability of computer
hardware and software to distinguish between the year 1900 and the year 2000. An
inability to make this distinction could result in computer application failure.

     During 1999, the Company completed a detailed assessment of all its
information technology and non-information technology hardware and software with
regard to the Year 2000 issue, with special emphasis on mission critical
systems. Information and non-information technology hardware and software were
inventoried and those not Year 2000 ready were identified, remediated (i.e.,
corrected or replaced) and tested to ensure that they would, in fact, operate as
desired according to Year 2000 requirements. The Company expensed approximately
$2.4 million during 1999 in connection with remediating its systems.

     As a result of its Year 2000 readiness efforts, the Company's mission
critical information technology and non-information technology systems
successfully distinguished between the year 1900 and the year 2000 on January 1,
2000, without any mission critical application failure. However, the Company
will continue to monitor its mission critical computer applications throughout
the year 2000 to ensure that any latent Year 2000 matters that may arise are
addressed promptly.

     It is possible that the Company may experience Year 2000 related problems
in the future, particularly with its non-mission critical systems, which may
result in failures or miscalculations resulting in inaccuracies in computer
output or disruptions of operations. However, the Company believes that the Year
2000 issue will not pose significant operations problems for its mission
critical computer systems and equipment.

     The financial impact of future remediation activities that may become
necessary, if any, cannot be known precisely at this time, but it is not
expected to be material.

FACTORS THAT MAY AFFECT FUTURE RESULTS

     The future operating results and financial condition of the Company are
dependent on the Company's ability to market its services profitably,
successfully increase market share and manage expense growth relative to revenue
growth. The future operating results and financial condition of the Company may
be affected by a number of additional factors, including: the Company's
divestiture strategy; competition for expansion opportunities; efforts to
control healthcare costs; exposure to professional liability; and pharmacy
licensing requirements; healthcare reform legislation; implementation of the
Company's settlement agreement with the State of California; adverse resolution
of lawsuits pending against the Company including litigation related to the
TAPS; implementation of the Company's strategic plan; and the Company's
liquidity and capital requirements. Changes in one or more of these factors
could have a material adverse effect on the future operating results and
financial condition of the Company.

     There are various legal matters which, if materially adversely determined,
could have a material adverse effect on the Company's operating results and
financial condition. See Item 3 of the Company's Annual Report filed on Form
10-K for the fiscal year ended December 31, 1999 and Notes 6 and 8 of the
unaudited condensed consolidated financial statements included herein.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company is exposed to market risk from changes in interest rates
related to its long-term debt. The impact on earnings and value of its current
and long-term debt is subject to change as a result of movements in market rates
and prices. As of June 30, 2000, the Company had $155.2 million in current and
long-term debt subject to variable interest rates. The remaining $870.0 million
in current and long-term debt is subject to fixed rates of interest. A
hypothetical increase in interest rates of 1% would result in potential
reductions in
                                       16
<PAGE>   20

future pre-tax earnings of approximately $1.6 million per year. The impact of
such a change on the carrying value of the current and long-term debt would not
be significant. These amounts are determined based on the impact of the
hypothetical interest rates on the Company's current and long-term debt balances
and do not consider the effects, if any, of the potential changes in the overall
level of economic activity that could exist in such an environment.

                                       17
<PAGE>   21

                                    PART II

                               OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     The Company is party to certain legal actions arising in the ordinary
course of business. The Company is named as a defendant in various legal actions
arising primarily out of services rendered by physicians and others employed by
its managed medical groups, as well as personal injury and employment disputes.
In addition, certain of its managed medical groups are named as defendants in
numerous actions alleging medical negligence on the part of their physicians. In
certain of these actions, the Company and/or the medical group's insurance
carrier has either declined to provide coverage or has provided a defense
subject to a reservation of rights. Management does not view any of these
actions as likely to result in an uninsured award that would have a material
adverse effect on the operating results and financial condition of the Company.

     In September 1997 the Company issued 6.50% Threshold Appreciation Price
Securities ("TAPS"). The TAPS were initially secured by $481.4 million in U.S.
Treasury Notes. The Company was to receive the proceeds of these U.S. Treasury
Notes on August 31, 2000, the date the TAPS were scheduled to be surrendered by
the TAPS holders.

     In 1999, two lawsuits were filed in the Supreme Court of the State of New
York, County of New York, claiming that a "Termination Event" had occurred with
respect to the TAPS. Both of these lawsuits have been dismissed with prejudice.
The Company settled one of these lawsuits, which involved plaintiffs holding
approximately 35 percent of the outstanding TAPS (the "Settling TAPS Holders"),
in April 2000 (the "New York Settlement").

     The New York Settlement provided, among other things, that the Settling
TAPS Holders would receive 1.55 shares of the Company's common stock for each
TAPS owned or controlled by them. Accordingly, on April 14, 2000, the Company
delivered 1.55 shares of the Company's common stock for each TAPS tendered by
the Settling TAPS Holders and paid to the Settling TAPS Holders accrued and
unpaid interest due on the U.S. Treasury Notes corresponding to the tendered
TAPS. The Company received approximately $168.0 million in cash from the
cancellation of the related TAPS, which was used to reduce indebtedness under
the credit facility. Approximately $147.0 million was applied to the revolving
credit facility, and will subsequently be used to retire a portion of the
Company's Senior Subordinated Notes in the principal amount of $420 million,
which become due in September 2000. The remaining $21.0 million was applied to
the term loans under the Company's credit facility. The New York Settlement will
not have a material adverse impact on the continuing operations of the Company.

     The New York Settlement provides that, in the event the Company settles
litigation with other holders of TAPS for a greater value per each TAPS, as
measured in accordance with the terms of the settlement agreement, than the
settlement value of the New York Settlement, the Company will pay each Settling
TAPS Holder the difference in value per each TAPS between the settlement value
of the New York Settlement and the settlement value of any settlement with other
holders of TAPS.

     In March 2000, a purported class action was filed in the Circuit Court of
Franklin County, Alabama, also claiming that a Termination Event had occurred.
This lawsuit was subsequently certified by the court as a "non-opt out" class
action, and therefore includes all TAPS holders other than those who were
parties to the New York Settlement. The Company reached a settlement in this
lawsuit (the "Alabama Settlement"), which has received final court approval
pursuant to a Final Approval Order and Judgment issued on June 9, 2000 (the
"Final Order") by the Circuit Court of Franklin County, Alabama. On June 19,
2000, certain TAPS holders filed a notice of appeal to the Supreme Court of
Alabama, questioning the Circuit Court's order denying their motion to intervene
and the adequacy of the settlement. On July 21, 2000, two other TAPS holders
filed notices of appeal to the Supreme Court of Alabama, purporting to appeal on
the same grounds as the June 19, 2000 appeal. The Company believes that the
appeals are without merit, and intends to vigorously contest each issue raised
in the appeals.

                                       18
<PAGE>   22

     The Alabama Settlement provides that on August 31, 2000, each class member
will be entitled to receive common stock for such class member's TAPS at the
rate provided for by the Purchase Contract Agreement related to the TAPS. Each
class member will also receive interest through this date and a yield
enhancement payment unless the class member decides to settle the Purchase
Contract Agreement earlier in accordance with the Alabama Settlement terms.
Additionally, the Company will issue 0.22 additional shares of common stock for
each TAPS, subject to the terms of the Alabama Settlement. The Alabama
Settlement will not have a material adverse effect on the continuing operations
of the Company.

     On April 11, 2000, certain TAPS holders filed a lawsuit entitled Aragon
Investments, Ltd. et al. v. Caremark Rx, Inc. in the Supreme Court of the State
of New York, County of New York, claiming that a "Termination Event" had
occurred with respect to the TAPS. The Supreme Court of the State of New York
previously postponed further action in the Aragon litigation pending action by
the Circuit Court of Franklin County, Alabama relating to the Alabama
settlement. The Company does not know what future action, if any, the Supreme
Court of the State of New York will take with respect to this litigation.

     In June 1995, Caremark and CII agreed to settle an investigation with
certain agencies of the United States government (the "Government Settlement").
In the Government Settlement, Caremark and CII agreed to continue to maintain
certain compliance-related oversight procedures until June 15, 2000, at which
time the Government Settlement expired.

     In 1993, independent and retail chain pharmacies filed a group of antitrust
lawsuits, and a class action lawsuit, against brand name pharmaceutical
manufacturers, wholesalers and PBM companies. Caremark was named as a defendant
in these lawsuits in 1994, but was not named in the class action. The lawsuits,
filed in federal district courts in at least 38 states (including the United
States District Court for the Northern District of Illinois), allege that at
least 24 pharmaceutical manufacturers provided unlawful price and service
discounts to certain favored buyers and conspired among themselves to deny
similar discounts to the complaining retail pharmacies (approximately 3,900 in
number). The complaints charge that certain defendant prescription benefit
managers, including Caremark, were favored buyers who knowingly induced or
received discriminatory prices from the manufacturers in violation of the
Robinson-Patman Act. Each complaint seeks unspecified treble damages,
declaratory and equitable relief and attorney's fees and expenses.

     All of these actions have been transferred by the Judicial Panel for
Multi-District Litigation to the United States District Court for the Northern
District of Illinois for coordinated pretrial procedures. Caremark was not named
in the class action. In April 1995, the Court entered a stay of pretrial
proceedings as to certain Robinson-Patman Act claims in this litigation,
including the Robinson-Patman Act claims brought against Caremark, pending the
conclusion of a first trial of certain of such claims brought by a limited
number of plaintiffs against five defendants not including Caremark. On July 1,
1996, the district court directed entry of a partial final order in the class
action approving an amended settlement with certain of the pharmaceutical
manufacturers. The amended settlement provides for a cash payment by the
defendants in the class action (which does not include Caremark) of
approximately $351 million to class members in settlement of conspiracy claims
as well as a commitment from the settling manufacturers to abide by certain
injunctive provisions. All class action claims against non-settling
manufacturers as well as all opt out and other claims generally, including all
Robinson-Patman Act claims against Caremark, remain unaffected by this
settlement, although numerous additional settlements have been reached between a
number of parties to the class and individual manufacturers. The class action
conspiracy claims against the remaining defendants were tried in the fall of
1998, and resulted in a judgment by the court at the close of the plaintiffs'
case in favor of the remaining defendants. That judgment was affirmed in part
and reversed and remanded in part and is currently undergoing further
proceedings in the district court and the court of appeals, which may result in
a second trial of the class action or its dismissal on the merits. It is
expected that trials of the non-class action conspiracy claims brought by
opt-out individual plaintiffs under the Sherman Act, to the extent they have not
been settled or dismissed, will move forward in 2000 to a decision on summary
judgment or to trial and likely will also precede the trial of any
Robinson-Patman Act claims.

     The Company's California PPM operations included MedPartners Provider
Network, Inc. ("MPN"), a wholly-owned subsidiary of the Company and a healthcare
service plan licensed by the State of California

                                       19
<PAGE>   23

(the "State") under the Knox-Keen Health Care Service Plan Act of 1975. In March
1999, the California Department of Corporations (the "DOC") appointed a
conservator and assumed control of the business operations of MPN. The
conservator, purportedly on behalf of MPN, filed a voluntary petition under
Chapter 11 of the United States Bankruptcy Code. The Company judicially
challenged the authority of both the DOC and the conservator to take these
actions in both the California Superior Court and in the United States
Bankruptcy Court for the Central District of California (the "Bankruptcy
Court").

     The Company, MPN, and representatives of the State subsequently executed an
agreement to settle the disputes relating to MPN (the "Settlement Agreement"),
which was approved by the Bankruptcy Court. The Company, various of its
subsidiaries, MPN, certain managed physician practices and various health plans
executed a supplemental agreement (the "Supplemental Plan Agreement"), pursuant
to which (1) the parties to the Supplemental Plan Agreement agreed to
subordinate, waive and/or release various claims against one another on the
terms and conditions set forth therein, and (2) the health plans agreed to
support the Chapter 11 plan of reorganization (the "Plan of Reorganization") to
be filed by MPN. The Supplemental Plan Agreement was approved by the Bankruptcy
Court following a hearing on February 7, 2000. The Supplemental Plan Agreement
has subsequently been amended numerous times, and such amendments have been
approved by the Bankruptcy Court. A revised Supplemental Plan Agreement has been
submitted to the Bankruptcy Court as an exhibit to the Second Amended Chapter 11
Plan of Reorganization, dated July 7, 2000 (the "Second Amended Plan"), and a
hearing to approve the revised Supplemental Plan Agreement will be held
contemporaneously with the hearing on confirmation of the Second Amended Plan.
MPN filed an initial draft of the Plan of Reorganization on November 5, 1999. An
amended Plan of Reorganization, accompanied by a revised disclosure statement to
accompany that plan, was filed with the Bankruptcy Court on February 3, 2000,
and the Second Amended Plan was filed with the Bankruptcy Court on July 7, 2000,
contemporaneously with an amended and restated disclosure statement. On July 19,
2000, the Bankruptcy Court entered an order which: (1) approved the disclosure
statement of MPN to accompany the Second Amended Plan; (2) set August 29, 2000
as the hearing date on confirmation of the Second Amended Plan; (3) set August
16, 2000 as the voting deadline for acceptance or rejection of the Second
Amended Plan; and (4) approved the form of ballots to be used in connection with
the vote on the Second Amended Plan.

     Pursuant to the Provider Self-Disclosure Protocol of the OIG, the Company
has conducted a voluntary investigation of the practices of an affiliate known
as Home Health Agency of Greater Miami, doing business as AmCare ("AmCare"). The
investigation uncovered several potentially inappropriate practices by certain
managers at AmCare, some of which may have resulted in overpayments from federal
programs for AmCare's home health services. The Company has since terminated
these managers, ceased AmCare's operations, and reported the matter to the OIG.
While the OIG has not yet responded to the Company's internal investigation
report, and therefore the resolution of this matter is as yet unknown, it is
likely that the government will determine that overpayments were made which
require repayment by the Company. The Company's estimates of the repayments due
have been accrued in the financial statements.

     Although the Company believes that it has meritorious defenses to the
claims of liability or for damages in the actions against it, there can be no
assurance that the lawsuits will not have a disruptive effect upon the
operations of the business, that the defense of the lawsuits will not consume
the time and attention of senior management of Caremark Rx and its subsidiaries,
or that the resolution of the lawsuits will not have a material adverse effect
on the operating results and financial condition of the Company. The Company
intends to vigorously defend each of these lawsuits. The Company believes that
these lawsuits will not have a material adverse effect on the operating results
and financial condition of the Company.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

     On March 1, 1995, the Company's Board of Directors declared a dividend of
one preferred purchase right (an "Original Right") for each outstanding share of
the Company's common stock. The Original Rights granted the holder of the right
to purchase from the Company one one-hundredth of a share of Series C Junior
Participating Preferred Stock of the Company, par value $.001 per share (the
"Preferred Shares"), at a price of $52.00 (the "Rights Purchase Price") per one
one-hundredth of a Preferred Share, subject to adjustment. The Original Rights
granted the holder the right to purchase the Preferred Shares commencing on the
tenth
                                       20
<PAGE>   24

day following the earlier of the acquisition by any person of the beneficial
ownership of 10% or more of the Company's outstanding common stock or the
announcement of a tender offer or exchange wherein any person would acquire
beneficial ownership of 10% or more of the Company's outstanding common stock.

     On February 1, 2000, the Company amended and restated its Rights Agreement.
The amendment did not change the number of Preferred Shares to be purchased upon
exercise of any right nor did it change the Rights Purchase Price. The amendment
did, however, change the terms under which holders may exercise the rights. As
amended, holders of rights may exercise the rights commencing on the tenth day
following the earlier of the acquisition by any person of the beneficial
ownership of 20% or more of the Company's outstanding common stock or the
announcement of a tender offer or exchange wherein any person would acquire
beneficial ownership of 20% or more of the Company's outstanding common stock.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     (a) The Company's Annual Meeting of Stockholders was held on May 31, 2000.

     (b) Not applicable.

     (c) The following proposals were adopted by the stockholders of the
Company;

        (i) The election of six Directors.

     The vote on the above was:

<TABLE>
<CAPTION>
                                                                  FOR        ABSTAIN
                                                              -----------   ---------
<S>                                                           <C>           <C>
C.A. Lance Piccolo..........................................  176,866,417   1,980,642
Ted H. McCourtney...........................................  176,819,251   2,027,808
Richard M. Scrushy..........................................  176,629,219   2,217,840
Edward L. Hardin, Jr........................................  176,703,657   2,143,402
Harris Diamond..............................................  176,814,427   2,032,632
Edwin M. Banks..............................................  176,823,303   2,023,757
</TABLE>

     (d) Not applicable.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits

     The exhibits required by Regulation S-K are set forth in the following
list:

<TABLE>
<C>    <S>  <C>
 2.1   --   Amendment No. 15 to the Amended and Restated Operations and
            Settlement Agreement, dated as of April 30, 2000, among the
            Commissioner of the Department of Corporations of the State
            of California acting for himself and the Department of
            Corporations of the State of California, J. Mark Abernathy
            as Special Monitor-Examiner, the Company and its successors
            and assigns and MedPartners Provider Network, Inc., a
            California corporation, as a debtor and debtor in
            possession.
 2.2   --   Amendment No. 16 to the Amended and Restated Operations and
            Settlement Agreement, dated as of May 31, 2000, among the
            Commissioner of the Department of Corporations of the State
            of California acting for himself and the Department of
            Corporations of the State of California, J. Mark Abernathy
            as Special Monitor-Examiner, the Company and its successors
            and assigns and MedPartners Provider Network, Inc., a
            California corporation, as a debtor and debtor in
            possession.
</TABLE>

                                       21
<PAGE>   25
<TABLE>
<C>    <S>  <C>
 2.3   --   Amendment No. 17 to the Amended and Restated Operations and
            Settlement Agreement, dated as of July 3, 2000, among the
            Commissioner of the Department of Corporations of the State
            of California acting for himself and the Department of
            Corporations of the State of California, J. Mark Abernathy
            as Special Monitor-Examiner, the Company and its successors
            and assigns and MedPartners Provider Network, Inc., a
            California corporation, as a debtor and debtor in
            possession.
 3.1   --   MedPartners, Inc. Third Restated Certificate of
            Incorporation, filed as Exhibit 3.1 to the Company's Annual
            Report on Form 10-K for the fiscal year ended December 31,
            1996, is hereby incorporated herein by reference.
 3.2   --   Certificate of Ownership and Merger, merging Caremark Rx,
            Inc. into MedPartners, Inc. filed as Exhibit 99.2 to the
            Company's Current Report on Form 8-K filed on September 14,
            1999, is hereby incorporated herein by reference.
 3.3   --   Caremark Rx, Inc. Fifth Amended and Restated Bylaws.
 4.1   --   Amended and Restated Rights Agreement, dated as of February
            1, 2000, between Caremark Rx, Inc. and First Chicago Trust
            Company, filed as Exhibit 4.1 to the Company's Current
            Report on Form 8-K filed on February 4, 2000, is hereby
            incorporated herein by reference.
 4.2   --   Purchase Contract Agreement, dated September 15, 1997,
            between MedPartners, Inc. and The First National Bank of
            Chicago, filed as Exhibit 4.4 to the Company's Registration
            Statement of Form S-3 (Registration No. 333-35665), is
            hereby incorporated herein by reference.
 4.3   --   Pledge Agreement, dated September 15, 1997, by and between
            MedPartners, Inc., PNC Bank, Kentucky, Inc. and The First
            National Bank of Chicago, filed as Exhibit 4.5 to the
            Company's Registration Statement of Form S-3 (Registration
            No. 333-35665), is hereby incorporated herein by reference.
 4.4   --   Form of Common Stock Certificate of the Company.
 4.5   --   Certificate of Trust of Caremark Rx Capital Trust I, filed
            as Exhibit 4.1 to Amendment No. 1 to the Company's Quarterly
            Report on Form 10-Q for the fiscal quarter ended September
            30, 1999, is hereby incorporated herein by reference.
 4.6   --   Trust Agreement of Caremark Rx Capital Trust I dated as of
            September 10, 1999, by and between the Company, the
            Wilmington Trust Company, and the Administrative Trustees
            named therein, filed as Exhibit 4.2 to Amendment No. 1 to
            the Company's Quarterly Report on Form 10-Q for the fiscal
            quarter ended September 30, 1999, is hereby incorporated
            herein by reference.
 4.7   --   Amended and Restated Trust Agreement dated as of September
            29, 1999, by and between the Company, the Wilmington Trust
            Company, and the Holders named therein, filed as Exhibit 4.3
            to Amendment No. 1 to the Company's Quarterly Report on Form
            10-Q for the first fiscal quarter ended September 30, 1999,
            is hereby incorporated herein by reference.
 4.8   --   Indenture for the Convertible Subordinated Debentures due
            2029 dated as of September 29, 1999 between the Company, and
            the Wilmington Trust Company, filed as Exhibit 4.4 to
            Amendment No. 1 to the Company's Quarterly Report on Form
            10-Q for the fiscal quarter ended September 30, 1999, is
            hereby incorporated herein by reference.
 4.9   --   Form of Common Securities, filed as Exhibit 4.5 to Amendment
            No. 1 of the Company's Quarterly Report on Form 10-Q for the
            fiscal quarter ended September 30, 1999 is hereby
            incorporated herein by reference.
 4.10  --   Form of SPURS, filed as Exhibit 4.6 to Amendment No. 1 to
            the Company's Quarterly Report on Form 10-Q for the fiscal
            quarter ended September 30, 1999, is hereby incorporated
            herein by reference.
 4.11  --   Form of Convertible Subordinated Debentures due 2029, filed
            as Exhibit 4.7 to Amendment No. 1 to the Company's Quarterly
            Report on Form 10-Q for the fiscal quarter ended September
            30, 1999, is hereby incorporated herein by reference.
</TABLE>

                                       22
<PAGE>   26

<TABLE>
<C>        <S>        <C>
     4.12  --         Guarantee Agreement dated as of September 29, 1999 by and between the Company and the Wilmington Trust
                      Company, filed as Exhibit 4.8 to Amendment No. 1 to the Company's Quarterly Report on Form 10-Q for the
                      fiscal quarter ended September 30, 1999, is hereby incorporated herein by reference.
    10.1   --         Amendment and Waiver No. 17 to the Third Amended and Restated Credit Agreement, dated April 10, 2000,
                      among the Company, Bank of America, N.A., Credit Lyonnais New York Branch, The First National Bank of
                      Chicago, Morgan Guaranty Trust Company of New York, Banc of America Securities LLC, and Bank of America,
                      N.A.
    10.2   --         Amendment and Waiver No. 18 to the Third Amended and Restated Credit Agreement, dated May 2, 2000, among
                      the Company, Bank of America, N.A., Credit Lyonnais New York Branch, The First National Bank of Chicago,
                      Morgan Guaranty Trust Company of New York, Banc of America Securities LLC, and Bank of America, N.A.
    10.3   --         Text of Final Order approving the class action settlement in the class action lawsuit entitled James Taff
                      et al. v. Caremark Rx, Inc. et al., Case No. 0072, filed as Exhibit 99.2 to the Company's Current Report
                      on Form 8-K filed on June 13, 2000, is hereby incorporated herein by reference.
    10.4   --         Amendment No. 3, dated March 8, 2000, to Employment Agreement, dated August 6, 1998, by and between the
                      Company and E. Mac Crawford.
    10.5   --         Nonqualified Stock Option Agreement, dated March 8, 2000, by and between the Company and E. Mac Crawford.
    10.6   --         Amended and Restated Employment Agreement, dated May 1, 2000, by and between the Company and James H.
                      Dickerson, Jr.
    10.7   --         Employment Agreement, dated as of June 1, 2000, by and between the Company and Bradley S. Karro.
    27     --         Financial Data Schedule (for SEC use only)
</TABLE>

     (b) Reports on Form 8-K

     The Company's Current Report on Form 8-K filed on April 19, 2000 (reporting
under Item 5 the settlement of the case styled AGR Halifax Ltd. et al. v.
MedPartners, Inc. et al., filed in the Supreme court of the State of New York).

     The Company's Current Report on Form 8-K filed on June 13, 2000 (reporting
under Item 5 the final approval of the settlement of the case styled Taff et al.
v. Caremark Rx, Inc., et al., filed in the Circuit Court of Franklin County,
Alabama).

     No other Items of Part II are applicable to the Company for the period
covered by this Quarterly Report on Form 10-Q.

     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.

                                          Caremark Rx, Inc.

                                          By:     /s/ HOWARD A. MCLURE
                                            ------------------------------------
                                                     Howard A. McLure
                                               Executive Vice President and
                                                 Chief Financial Officer

Date: August 7, 2000

                                       23