UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
              For
      the quarterly period ended March 31, 2009.o
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
              For
      the transition period from ____________ to _____________.








Commission
File Number:  0-20199








EXPRESS
SCRIPTS, INC.


(Exact
name of registrant as specified in its charter)








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





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





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





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





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





Large
accelerated filer
[X]                                                                                               Accelerated
filer [   ]





Non-accelerated
filer [   ] (Do not check if a smaller reporting
company)                Smaller
reporting company [   ]





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





Common
      stock outstanding as of March 31, 2009:
                247,829,000
                
                Shares





1


EXPRESS
SCRIPTS, INC.





INDEX














Part
      I
            Financial
      InformationItem
      1.
            Financial
      Statements (unaudited)
            3a)
            Unaudited
      Consolidated Balance Sheet
            3b)
            Unaudited
      Consolidated Statement of Operations
            4c)
            Unaudited
      Consolidated Statement of Changes
            5in
      Stockholders’ Equityd)
            Unaudited
      Consolidated Statement of Cash Flows
            6e)
            Notes
      to Unaudited Consolidated Financial Statements
            7Item
      2.
            Management’s
      Discussion and Analysis of Financial
            15Condition
      and Results of OperationsItem
      3.
            Quantitative
      and Qualitative Disclosures About
            23Market
      RiskItem
      4.
            Controls
      and Procedures
            24Part
      II
            Other
      InformationItem
      1.
            Legal
      Proceedings
            25Item
      1A.
            Risk
      Factors
            26Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            29Item
      3.
            Defaults
      Upon Senior Securities – (Not Applicable)
            -Item
      4.
            Submission
      of Matters to a Vote of Security Holders (Not Applicable)
            -Item
      5.
            Other
      Information – (Not Applicable)
            -Item
      6.
            Exhibits
            31





Signatures





Index to
Exhibits








2


PART
      I. FINANCIAL
INFORMATION




Item
      1.
            Financial
      Statements


EXPRESS
      SCRIPTS, INC.Unaudited
      Consolidated Balance Sheet  March
      31,
                                                                                                                            
                                                                                                                            December
      31,(in
      millions, except share data)
                                                                                                                            
                                                                                                                            2009
                                                                                                                            
                                                                                                                            2008AssetsCurrent
      assets:Cash
      and cash equivalents
                                                                                                                            
                                                                                                                            $
                                                                                                                            725.0
                                                                                                                            
                                                                                                                            
                                                                                                                            $
                                                                                                                            530.7Restricted
      cash and investments
                                                                                                                            
                                                                                                                            
                                                                                                                            6.1
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            4.8Receivables,
      net
                                                                                                                            
                                                                                                                            
                                                                                                                            1,200.8
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            1,155.9Inventories
                                                                                                                            
                                                                                                                            
                                                                                                                            180.1
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            203.0Deferred
      taxes
                                                                                                                            
                                                                                                                            
                                                                                                                            120.3
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            118.2Prepaid
      expenses and other current assets
                                                                                                                            
                                                                                                                            
                                                                                                                            24.5
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            31.2Total
      current assets
                                                                                                                            
                                                                                                                            
                                                                                                                            2,256.8
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            2,043.8Property
      and equipment, net
                                                                                                                            
                                                                                                                            
                                                                                                                            219.6
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            222.2Goodwill
                                                                                                                            
                                                                                                                            
                                                                                                                            2,880.9
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            2,881.1Other
      intangible assets, net
                                                                                                                            
                                                                                                                            
                                                                                                                            323.0
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            332.6Other
      assets
                                                                                                                            
                                                                                                                            
                                                                                                                            28.4
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            29.5Total
      assets
                                                                                                                            
                                                                                                                            $
                                                                                                                            5,708.7
                                                                                                                            
                                                                                                                            
                                                                                                                            $
                                                                                                                            5,509.2Liabilities
      and Stockholders’ EquityCurrent
      liabilities:Claims
      and rebates payable
                                                                                                                            
                                                                                                                            $
                                                                                                                            1,365.4
                                                                                                                            
                                                                                                                            
                                                                                                                            $
                                                                                                                            1,380.7Accounts
      payable
                                                                                                                            
                                                                                                                            
                                                                                                                            490.9
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            496.4Accrued
      expenses
                                                                                                                            
                                                                                                                            
                                                                                                                            489.9
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            420.5Current
      maturities of long-term debt
                                                                                                                            
                                                                                                                            
                                                                                                                            520.1
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            420.0Current
      liabilities of discontinued operations
                                                                                                                            
                                                                                                                            
                                                                                                                            4.9
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            4.1Total
      current liabilities
                                                                                                                            
                                                                                                                            
                                                                                                                            2,871.2
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            2,721.7Long-term
      debt
                                                                                                                            
                                                                                                                            
                                                                                                                            1,160.3
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            1,340.3Other
      liabilities
                                                                                                                            
                                                                                                                            
                                                                                                                            377.2
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            369.0Total
      liabilities
                                                                                                                            
                                                                                                                            
                                                                                                                            4,408.7
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            4,431.0Stockholders’
      Equity:Preferred
      stock, 5,000,000 shares authorized, $0.01 par value per
share;
                                                                                                                              and
      no shares issued and outstanding
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -Common
      Stock, 1,000,000,000 authorized, $0.01 par value;
                                                                                                                              shares
      issued: 318,923,000 and 318,958,000 respectively;
                                                                                                                              shares
      outstanding: 247,829,000 and 247,649,000, respectively
                                                                                                                            
                                                                                                                            
                                                                                                                            3.2
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            3.2Additional
      paid-in capital
                                                                                                                            
                                                                                                                            
                                                                                                                            645.7
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            640.8Accumulated
      other comprehensive income
                                                                                                                            
                                                                                                                            
                                                                                                                            4.9
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            6.2Retained
      earnings
                                                                                                                            
                                                                                                                            
                                                                                                                            3,575.4
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            3,361.04,229.2
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            4,011.2Common
      stock in treasury at cost, 71,094,000 and 71,309,000
                                                                                                                              shares,
      respectively
                                                                                                                            
                                                                                                                            
                                                                                                                            (2,929.2
                                                                                                                            )
                                                                                                                            
                                                                                                                            
                                                                                                                            (2,933.0
                                                                                                                            )Total
      stockholders’ equity
                                                                                                                            
                                                                                                                            
                                                                                                                            1,300.0
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            1,078.2Total
      liabilities and stockholders’ equity
                                                                                                                            
                                                                                                                            $
                                                                                                                            5,708.7
                                                                                                                            
                                                                                                                            
                                                                                                                            $
                                                                                                                            5,509.2




See
accompanying Notes to Unaudited Consolidated Financial
Statements


3


EXPRESS
SCRIPTS, INC.


Unaudited
Consolidated Statement of Operations





Three
      Months EndedMarch
      31,(in
      millions, except per share data)
                                                                                                                                            
                                                                                                                                            2009
                                                                                                                                            
                                                                                                                                            2008Revenues
      1
                                                                                                                                            
                                                                                                                                            $
                                                                                                                                            5,422.8
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            $
                                                                                                                                            5,490.8Cost
      of revenues 1
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            4,888.7
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            5,024.7Gross profit
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            534.1
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            466.1Selling,
      general and administrative
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            178.6
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            171.5Operating
      income
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            355.5
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            294.6Other
      (expense) income:Undistributed loss from joint
      venture
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            -
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            (0.2
                                                                                                                                            )Interest income
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            0.9
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            5.3Interest expense
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            (17.1
                                                                                                                                            )
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            (23.3
                                                                                                                                            )(16.2
                                                                                                                                            )
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            (18.2
                                                                                                                                            )Income
      before income taxes
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            339.3
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            276.4Provision
      for income taxes
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            124.6
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            98.1Net
      income from continuing operations
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            214.7
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            178.3Net
      loss from discontinued operations, net of tax
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            (0.3
                                                                                                                                            )
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            (1.1
                                                                                                                                            )Net
      income
                                                                                                                                            
                                                                                                                                            $
                                                                                                                                            214.4
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            $
                                                                                                                                            177.2Weighted
      average number of common sharesoutstanding during the
      period:Basic:
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            247.6
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            252.3Diluted:
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            249.3
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            255.7Basic earnings per
      share:Continuing
      operations
                                                                                                                                            
                                                                                                                                            $
                                                                                                                                            0.87
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            $
                                                                                                                                            0.71Discontinued operations
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            -
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            -Net earnings
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            0.87
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            0.70Diluted earnings per
      share:Continuing
      operations
                                                                                                                                            
                                                                                                                                            $
                                                                                                                                            0.86
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            $
                                                                                                                                            0.70Discontinued
      operations
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            -
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            -Net earnings
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            0.86
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            
                                                                                                                                            0.69





1 Includes
retail pharmacy co-payments of $822.7 million and $887.7 million for the three
months ended March 31, 2009 and 2008,
respectively.


See
accompanying Notes to Unaudited Consolidated Financial Statements




4


EXPRESS
      SCRIPTS, INC.Unaudited
      Consolidated Statement of Changes in Stockholders’
  Equity  Number
                                                                                                                          of
      Shares
                                                                                                                        
                                                                                                                        Amount(in
      millions)
                                                                                                                        
                                                                                                                        Common
                                                                                                                          Stock
                                                                                                                        
                                                                                                                        Common
                                                                                                                          Stock
                                                                                                                        Additional
                                                                                                                          Paid-in
                                                                                                                          Capital
                                                                                                                        
                                                                                                                        Accumulated
                                                                                                                          Other
      Comprehensive Income
                                                                                                                        
                                                                                                                        Retained
                                                                                                                          Earnings
                                                                                                                        
                                                                                                                        Treasury
                                                                                                                          Stock
                                                                                                                        
                                                                                                                        TotalBalance
      at December 31, 2008
                                                                                                                        
                                                                                                                        318.9
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        3.2
                                                                                                                        
                                                                                                                        $
                                                                                                                        640.8
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        6.2
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        3,361.0
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        (2,933.0
                                                                                                                        )
                                                                                                                        
                                                                                                                        $
                                                                                                                        1,078.2Comprehensive
      income:Net
      income
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        214.4
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        214.4Other
      comprehensive (loss):Foreign
      currency
                                                                                                                          translationadjustment
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        (1.3
                                                                                                                        )
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        (1.3
                                                                                                                        )Comprehensive
      (loss)
                                                                                                                          income
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        (1.3
                                                                                                                        )
                                                                                                                        
                                                                                                                        
                                                                                                                        214.4
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        213.1Treasury
      stock acquired
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -Changes
      in stockholders’
                                                                                                                          equity
      related to
                                                                                                                          employeestock
      plans
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        4.9
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        3.8
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        8.7Balance
      at March 31, 2009
                                                                                                                        
                                                                                                                        318.9
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        3.2
                                                                                                                        
                                                                                                                        $
                                                                                                                        645.7
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        4.9
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        3,575.4
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        (2,929.2
                                                                                                                        )
                                                                                                                        
                                                                                                                        $
                                                                                                                        1,300.0





See
accompanying Notes to Unaudited Consolidated Financial Statements








5


EXPRESS
      SCRIPTS, INC.Unaudited
      Consolidated Statement of Cash Flows  Three
      Months EndedMarch
      31,(in
      millions)
                                                                                                                      
                                                                                                                      2009
                                                                                                                      
                                                                                                                      2008Cash
      flows from operating activities:Net
      income
                                                                                                                      
                                                                                                                      $
                                                                                                                      214.4
                                                                                                                      
                                                                                                                      
                                                                                                                      $
                                                                                                                      177.2Net
      loss from discontinued operations, net of tax
                                                                                                                      
                                                                                                                      
                                                                                                                      0.3
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      1.1Net
      income from continuing operations
                                                                                                                      
                                                                                                                      
                                                                                                                      214.7
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      178.3Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
                                                                                                                      
                                                                                                                      
                                                                                                                      24.6
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      24.5Non-cash
      adjustments to net income
                                                                                                                      
                                                                                                                      
                                                                                                                      21.1
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      21.3Changes
      in operating assets and liabilities:Claims
      and rebates payable
                                                                                                                      
                                                                                                                      
                                                                                                                      (15.3
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      28.0Other
      net changes in operating assets and liabilities
                                                                                                                      
                                                                                                                      
                                                                                                                      41.3
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      (3.8
                                                                                                                      )Net
      cash provided by operating activities—continuing
operations
                                                                                                                      
                                                                                                                      
                                                                                                                      286.4
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      248.3Net
      cash (used) provided by operating activities—discontinued
      operations
                                                                                                                      
                                                                                                                      
                                                                                                                      (0.1
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      4.7Net
      cash flows provided by operating activities
                                                                                                                      
                                                                                                                      
                                                                                                                      286.3
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      253.0Cash
      flows from investing activities:Purchases
      of property and equipment
                                                                                                                      
                                                                                                                      
                                                                                                                      (13.6
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (11.7
                                                                                                                      )Other
                                                                                                                      
                                                                                                                      
                                                                                                                      3.2
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      (0.4
                                                                                                                      )Net
      cash used in investing activities—continuing operations
                                                                                                                      
                                                                                                                      
                                                                                                                      (10.4
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (12.1
                                                                                                                      )Cash
      flows from financing activities:Repayment
      of long-term debt
                                                                                                                      
                                                                                                                      
                                                                                                                      (80.0
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (60.0
                                                                                                                      )Tax
      benefit relating to employee stock compensation
                                                                                                                      
                                                                                                                      
                                                                                                                      0.3
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      12.0Treasury
      stock acquired
                                                                                                                      
                                                                                                                      
                                                                                                                      -
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      (121.1
                                                                                                                      )Net
      (cash used) proceeds from employee stock plans
                                                                                                                      
                                                                                                                      
                                                                                                                      (1.4
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      6.7Net
      cash used in financing activities
                                                                                                                      
                                                                                                                      
                                                                                                                      (81.1
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (162.4
                                                                                                                      )Effect
      of foreign currency translation adjustment
                                                                                                                      
                                                                                                                      
                                                                                                                      (0.5
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (1.3
                                                                                                                      )Net
      increase in cash and cash equivalents
                                                                                                                      
                                                                                                                      
                                                                                                                      194.3
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      77.2Cash
      and cash equivalents at beginning of period
                                                                                                                      
                                                                                                                      
                                                                                                                      530.7
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      434.7Cash
      and cash equivalents at end of period
                                                                                                                      
                                                                                                                      $
                                                                                                                      725.0
                                                                                                                      
                                                                                                                      
                                                                                                                      $
                                                                                                                      511.9





See
accompanying Notes to Unaudited Consolidated Financial Statements








6


EXPRESS
SCRIPTS, INC.





NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





Note 1 – Summary of
significant accounting policies





Our
significant accounting policies normally included in financial statements
prepared in conformity with generally accepted accounting principles, have been
omitted from this Form 10-Q pursuant to the rules and regulations of the
Securities and Exchange Commission (“SEC”).  However, we believe the
disclosures contained in this Form 10-Q are adequate to make the information
presented not misleading when read in conjunction with the notes to the
consolidated financial statements included in our Annual Report on Form 10-K for
the year ended December 31, 2008 filed with the SEC on February 25,
2009.  We changed our reportable segments to Pharmacy Benefit
Management (“PBM”) and Emerging Markets (“EM”) during the first quarter of 2009
(see Note 8).  For a full description of our accounting policies,
refer to the Notes to Consolidated Financial Statements included in our Annual
Report on Form 10-K for the year ended December 31, 2008.





We
believe the accompanying unaudited consolidated financial statements reflect all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the Unaudited Consolidated Balance Sheet at March 31, 2009, the
Unaudited Consolidated Statements of Operations for the three months ended March 31,
2009 and 2008, the Unaudited Consolidated Statement of Changes in Stockholders’
Equity for the three
months ended March 31, 2009, and the Unaudited Consolidated Statements of Cash
Flows for the three months ended March 31, 2009 and 2008.  Operating
results for the three months ended March 31, 2009 are not necessarily indicative
of the results that may be expected for the year ending
December 31, 2009.




New Accounting
Guidance.  In December 2007, the FASB issued FAS 141R,
“Business Combinations” and FAS 160, “Business Combinations and Noncontrolling
Interests” (“FAS 141R” and “FAS 160”, respectively).  FAS 141R and FAS
160 are effective for fiscal years beginning after December 15,
2008.  FAS 141R changes the definitions of a business and a business
combination, and will result in more transactions recorded as business
combinations.  Certain acquired contingencies will be recorded
initially at fair value on the acquisition date, transaction and restructuring
costs generally will be expensed as incurred and in partial acquisitions,
companies generally will record 100 percent of the assets and liabilities at
fair value, including goodwill.  In April 2009, the FASB issued
Financial Staff Position (“FSP”) FAS 141R-1, “Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from Contingencies”which amends and
clarifies the accounting for assets acquired and liabilities assumed in a
business combination that arise from contingencies.  This FSP is
effective as of the start of the first quarter 2009.  We will account
for all future business combinations under the provisions of FAS
141R.
 
 In April
2008, the FASB issued FSP FAS 142-3, “Determination of the Useful Life of
Intangible Assets” which intends to improve the consistency between the useful
life of an intangible asset and the period of expected cash flows used to
measure the fair value of the asset.  This FSP is effective for fiscal
years beginning after December 15, 2008.  These provisions will be
applied to future intangible assets acquired.




7


Note 2 – Fair value
measurements




In
September 2006, the FASB issued FAS 157, “Fair Value Measurements” (“FAS
157”).  FAS 157 defines fair value, establishes guidelines for
measuring fair value and expands disclosures regarding fair value
measurements.  FAS 157 will apply whenever another standard requires
(or permits) assets or liabilities to be measured at fair value.  This
standard does not expand the use of fair value to any new
circumstances.  FAS 157 was effective for financial statements issued
for fiscal years beginning after November 15, 2007 and interim periods within
those fiscal years.  On February 6, 2008 the FASB approved the FSP
which deferred the effective date of FAS 157 until the first quarter 2009 for
nonfinancial assets and liabilities that are recognized or disclosed at fair
value in the financial statements on a nonrecurring basis.
 
 In April
2009, the FASB issued three FSPs: (1) FSP FAS 157-4. “Determining Fair Value
When the Volume and Level of Activity for the Asset and Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly” which
provides guidance on determining fair value when market activity has decreased,
(2) FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments” which  addresses
other-than-temporary impairments for debt securities; and (3) FSP FAS 107-1 and
APB 28-1, “Interim Disclosures About Fair Value of Financial Instruments” which
discusses fair value disclosures for financial instruments in interim
periods.  The FSPs are effective for interim and annual periods ending
after June 15, 2009.  We do not believe the adoption of these FSPs
will have a material impact on our financial statements.
  We
adopted FAS 157 as of January 1, 2008, and adopted the application of the
statement to nonrecurring nonfinancial assets and nonfinancial liabilities as of
January 1, 2009.  Our adoption of FAS 157 did not have a material
impact on our consolidated financial position, results of operations or cash
flows.





FAS 157
establishes a three-tier fair value hierarchy, which prioritizes the inputs used
in measuring fair value.  These tiers include: Level 1, defined as
observable inputs such as quoted prices in active markets for identical assets
or liabilities; Level 2, defined as inputs other than quoted prices for similar
assets and liabilities in active markets that are either directly or indirectly
observable; and Level 3, defined as unobservable inputs in which little or no
market data exists, therefore, requiring an entity to develop its own
assumptions.





Financial
assets accounted for at fair value on a recurring basis at March 31, 2009
include cash equivalents of $621.1 million, restricted cash and investments of
$6.1 million and trading securities of $12.2 million (included in other
assets).  These assets are carried at fair value based on quoted
market prices for identical securities (Level 1
inputs).




As of
March 31, 2009 short-term investments, included in prepaid expenses and other
current assets in the unaudited consolidated balance sheet, were carried at fair
value and consisted of our investment in the Reserve Primary Fund (the “Primary
Fund”), which is a money market fund.  The estimated fair value of our
investment in the Primary Fund was $5.1 million as of March 31,
2009.  The net asset value of the Primary Fund decreased below $1 per
share as a result of the Primary Fund’s valuing at zero its holdings of debt
securities by Lehman Brothers Holdings, Inc., which filed for bankruptcy on
September 15, 2008.  Accordingly, we recognized an unrealized loss of
$2.0 million in the third quarter of 2008 and we reclassified the Primary Fund
investment from cash and cash equivalents to prepaid expenses and other current
assets in the unaudited consolidated balance sheet.  We assessed the
fair value of the underlying collateral for the Primary Fund through evaluation
of the liquidation value of assets held by the Primary Fund, which is classified
within Level 3 of the fair value hierarchy.  There were no assets or
liabilities classified as Level 3 prior to third quarter of 2008.
 
 We
received cash distributions from the Primary Fund of $38.9 million during 2008,
$3.3 million in the three months ended March 31,
2009 and $2.2 million subsequent to March 31, 2009.  We expect to
receive future distributions as the Primary Funds’s assets mature or are
sold.  If the markets for short-term securities remain illiquid, there
may be further declines in the value of our remaining investments.  To
the extent we determine there is a further decline in fair value, we may
recognize additional losses in future periods up to the aggregate amount of
these investments of $5.1
million at March 31, 2009.
  8


Note 3 – Discontinued
operations




On June
30, 2008, we completed the sale of CuraScript Infusion Pharmacy, Inc. (“IP”),
our infusion pharmacy line of business, for $27.5 million which includes an
estimated pre-tax gain of approximately $7.4 million in 2008.  Rights
to certain working capital balances related to IP were not sold and are retained
on the balance sheet as of March 31, 2009.  For a period of time, we
will continue to generate cash flows and income statement activity on assets and
liabilities of discontinued operations as these working capital balances wind
down, which are not expected to be material.
 
 The
results of operations for IP are reported as discontinued operations for all
periods presented in the accompanying Unaudited Consolidated Statements of
Operations.  Additionally, for all periods presented, assets and
liabilities of the discontinued operations are segregated in the accompanying
Unaudited Consolidated Balance Sheets, and cash flows of our discontinued
operations are segregated in our accompanying Unaudited Consolidated Statement
of Cash Flows.
 
 On April
4, 2008, we completed the sale of Custom Medical Products, Inc. (“CMP”) and
recorded a pre-tax loss of approximately $1.3 million in the second quarter of
2008.
 
 Certain
information with respect to the discontinued operations for the three months
ended March 31, 2009 and 2008 is summarized as follows:




Three
      Months Ended
                                                            March
      31,(in
      millions)
                                                          2009
                                                          2008Revenues
                                                          $
                                                          -
                                                          
                                                          $
                                                          25.8Net
      loss from discontinued operations, net of tax
                                                          
                                                          (0.3
                                                          )
                                                          
                                                          (1.1
                                                          )Income
      tax benefit from discontinued operations
                                                          
                                                          0.2
                                                          
                                                          
                                                          0.4





9
 Note 4-
Acquisition
  On July
22, 2008, we completed the acquisition of the Pharmacy Services Division of MSC
– Medical Services Company (“MSC”), a privately held PBM, for a purchase price
of $251.0 million, which includes a purchase price adjustment for working
capital and transaction costs. MSC is a leader in providing PBM services to
clients providing workers’ compensation benefits.  The transaction was
accounted for under the provisions of FAS 141, “Business
Combinations.”  The purchase price was funded through internally
generated cash and temporary borrowings under the revolving credit
facility.  This acquisition is reported as part of our PBM
segment.
  The purchase price has been preliminarily allocated based upon the estimated
fair value of net assets acquired at the date of the acquisition.  A
portion of the excess of purchase price over tangible net assets acquired has
been allocated to intangible assets, consisting of customer relationships in the
amount of $28.9 million and internally developed software in the amount of $1.2
million, which are being amortized using a straight-line method over estimated
useful lives of fifteen years and five years, respectively.  The
acquired customer relationships and internally developed software are included
in other intangibles, net and property and equipment, net, respectively, in the
consolidated balance sheet.  In addition, the excess of purchase price
over tangible net assets and identified intangible assets acquired has been
allocated to goodwill in the amount of $208.5 million.  The amounts
preliminarily assigned to intangible assets and goodwill may be further adjusted
pending finalization of the purchase price and asset
valuation.  Goodwill is not deductible for tax
purposes.
 Note 5– Earnings per
share
 
 Basic
earnings per share (“EPS”) is computed using the weighted average number of
common shares outstanding during the period.  Diluted EPS is computed
in the same manner as basic earnings per share but adds the number of additional
common shares that would have been outstanding for the period if the dilutive
potential common shares had been issued.  The following is the
reconciliation between the number of weighted average shares used in the basic
and diluted EPS calculations for all periods:





Three
      Months Ended
                                                                  March
      31,(in
      millions)
                                                                2009
                                                                2008Weighted
      average number of common shares outstanding during the
                                                                  period
      –Basic
      EPS
                                                                247.6
                                                                
                                                                252.3Dilutive
      common stock equivalents:Outstanding
      stock options, “stock-settled” stock appreciation rights
                                                                  (“SSRs”),
      restricted stock units,and
      executive deferred
                                                                  compensation
      units(1)
                                                                1.7
                                                                
                                                                3.4Weighted
      average number of common shares outstanding during the
                                                                  period
      – Diluted EPS
                                                                249.3
                                                                
                                                                255.7





(1)
            Excludes
      awards of 4.4 million and 0.3 million for the three months ended March 31,
      2009 and 2008, respectively.These were
      excluded because their effect was
  anti-dilutive.





The above
shares are all calculated under the “treasury stock” method in accordance with
FAS 128, “Earnings per Share.”





10


Note 6 – Stock-based
compensation plans





Under our
stock-based compensation plans, we have issued stock options, SSRs, restricted
stock awards, restricted stock units, and performance share
awards.  Awards are typically settled using treasury
shares.  The maximum contractual term of stock options and SSRs
granted under the 2000 Long Term Incentive Plan (“LTIP”) is 10
years.  Due to the nature of the awards, we use the same valuation
methods and accounting treatments for SSRs and stock options.  During
the first three months of 2009, we granted 2,323,000 stock options with a
weighted average fair market value of $14.59.  The SSRs and stock
options have three-year graded vesting.





During
the first three months of 2009, we granted to certain officers and employees
approximately 270,000 restricted stock units and performance shares with a
weighted average fair market value of $45.74.  The restricted stock
units have three-year graded vesting and the performance shares cliff vest at
the end of the three years.  The number of performance shares that
ultimately vest is dependent upon achieving specific performance
targets.  Prior to vesting, these shares are subject to forfeiture to
us without consideration upon termination of employment under certain
circumstances.  The total number of non-vested restricted stock and
performance share awards was 622,000 at March 31, 2009 and 518,000 at December
31, 2008.





We
recognized stock-based compensation expense of $9.6 million and $9.0 million in
the three months ended March 31, 2009 and 2008,
respectively.  Unamortized stock-based compensation as of March 31,
2009 was $42.4 million for stock options and SSRs and $20.4 million for
restricted stock and performance shares.





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





Three
      Months Ended March 31,2009
                                                                              2008Expected
      life of option
                                                                              3-5
      years
                                                                              3-5
      yearsRisk-free
      interest rate
                                                                              1.3%-1.9%
                                                                              1.9%-2.9%Expected
      volatility of stock
                                                                              35-39%
                                                                              30%Expected
      dividend yield
                                                                              None
                                                                              None


11


Note 7 –
Contingencies





We accrue
self-insurance reserves based upon estimates of the aggregate liability of claim
costs in excess of our insurance coverage.  Reserves are estimated
using certain actuarial assumptions followed in the insurance industry and our
historical experience.  The majority of these claims are legal claims
and our liability estimate is primarily related to the cost to defend these
claims.  We do not accrue for settlements, judgments, monetary fines
or penalties until such amounts are probable and estimable, in compliance with
FAS 5, “Accounting for Contingencies.”  Under FAS 5, if the range of
possible loss is broad, the liability accrued should be based on the lower end
of the range.





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





Note 8 – Segment
information




During the first quarter of 2009, we changed our organizational structure with
new strategic business segments: PBM and EM.  Previously, we had
reported segments of PBM and SAAS. Our chief operating decision maker assessed
performance under this new structure during the first quarter of
2009.  The Specialty Pharmacy operations, which were previously in our
SAAS segment, have been operationally integrated with our PBM operations in
order to maximize its growth and improve efficiency.  Additionally,
the following services which were previously in SAAS were operationally
integrated into the PBM:




·
            bio-pharma
      services including reimbursement and customized logistics solutions
      and


·
            fulfillment
      of prescriptions to low-income patients through
pharmaceutical
              manufacturer-sponsored
      and company-sponsored generic patient assistance
  programs.




The EM
segment primarily consists of the following services:





·
            distribution
      of pharmaceuticals and medical supplies to providers and
      clinics,


·
            distribution
      of fertility pharmaceuticals requiring special handling or
      packaging,


·
            distribution
      of sample units to physicians and verification of practitioner licensure
      and


·
            healthcare
      account administration and implementation of consumer-directed healthcare
      solutions.




EM
services represent opportunity for growth and aligning them together under
strong leadership will benefit these key investments.





As noted
above, we report segments on the basis of services offered and have determined
we have two reportable segments: PBM and EM.  Our domestic and
Canadian PBM operating segments have similar characteristics and as such have
been aggregated into a single PBM reporting segment.





12
 Operating income is the measure used by our chief operating decision maker to
assess the performance of each of our operating segments.  The
following table presents information about our reportable segments for the three
months ended March 31, 2009 and 2008.  The 2008 segment disclosures have
been reclassified in the table below to reflect the new segment structure. 
The discontinued operations described in Note 3 have been excluded from the
table.





(in
      millions)
                                                                                                                                                PBM
                                                                                                                                                
                                                                                                                                                EM
                                                                                                                                                
                                                                                                                                                TotalFor
      the three months ended March 31, 2009Product
      revenue:Network
      revenues(1)
                                                                                                                                                $
                                                                                                                                                3,250.6
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                3,250.6Home
      delivery and specialty revenues
                                                                                                                                                
                                                                                                                                                1,781.4
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                1,781.4Other
      revenues
                                                                                                                                                
                                                                                                                                                16.4
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                300.0
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                316.4Service
      revenues
                                                                                                                                                
                                                                                                                                                64.1
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                10.3
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                74.4Total
      revenues
                                                                                                                                                
                                                                                                                                                5,112.5
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                310.3
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                5,422.8Depreciation
      and amortization expense
                                                                                                                                                
                                                                                                                                                21.4
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                3.2
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                24.6Operating
      income
                                                                                                                                                
                                                                                                                                                351.7
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                3.8
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                355.5Interest
      income
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                0.9Interest
      expense
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                (17.1
                                                                                                                                                )Income
      before income taxes
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                339.3Capital
      expenditures
                                                                                                                                                
                                                                                                                                                13.4
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                0.2
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                13.6For
      the three months ended March 31, 2008Product
      revenue:Network
      revenues(1)
                                                                                                                                                $
                                                                                                                                                3,278.5
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                3,278.5Home
      delivery and specialty revenues
                                                                                                                                                
                                                                                                                                                1,776.6
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                1,776.6Other
      revenues
                                                                                                                                                
                                                                                                                                                11.1
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                350.7
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                361.8Service
      revenues
                                                                                                                                                
                                                                                                                                                62.5
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                11.4
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                73.9Total
      revenues
                                                                                                                                                
                                                                                                                                                5,128.7
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                362.1
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                5,490.8Depreciation
      and amortization expense
                                                                                                                                                
                                                                                                                                                21.6
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                2.9
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                24.5Operating
      income (loss)
                                                                                                                                                
                                                                                                                                                294.4
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                0.2
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                294.6Non-operating
      gains, net
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                -Undistributed
      loss from joint venture
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                (0.2
                                                                                                                                                )Interest
      income
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                5.3Interest
      expense
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                (23.3
                                                                                                                                                )Income
      before income taxes
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                276.4Capital
      expenditures
                                                                                                                                                
                                                                                                                                                11.1
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                0.6
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                11.7





(1)
            Includes
      retail pharmacy co-payments of $822.7 million and $887.7 million for the
      three months ended March 31, 2009 and 2008,
              respectively.





The
following table presents balance sheet information about our reportable
segments.  The discontinued operations did not have any assets as of
March 31, 2009 and December 31, 2008.





(in
      millions)
                                                                            PBM
                                                                            EM
                                                                            TotalAs
      of March 31, 2009Total
      assets
                                                                            $
                                                                            5,212.8
                                                                            
                                                                            $
                                                                            495.9
                                                                            
                                                                            $
                                                                            5,708.7Investment
      in equity method investees
                                                                            
                                                                            4.1
                                                                            
                                                                            
                                                                            0.0
                                                                            
                                                                            
                                                                            4.1As
      of December 31, 2008Total
      assets
                                                                            $
                                                                            5,011.9
                                                                            
                                                                            $
                                                                            497.3
                                                                            
                                                                            $
                                                                            5,509.2Investment
      in equity method investees
                                                                            
                                                                            4.0
                                                                            
                                                                            
                                                                            0.0
                                                                            
                                                                            
                                                                            4.0




13


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




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





Revenues
earned by our Canadian PBM totaled $10.8 million and $12.0 million for the three
months ended March 31, 2009 and 2008, respectively. All other revenues were
earned in the United States.  Long-lived assets of our Canadian PBM
(consisting primarily of fixed assets) totaled $10.2 million and
$10.7 million as of March 31, 2009 and December 31, 2008,
respectively.  All other long-lived assets are domiciled in the United
States.





Note 9 – Subsequent
event





On April
9, 2009, we entered into a Stock and Interest Purchase Agreement (the
"Acquisition Agreement") with WellPoint, Inc., an Indiana corporation
("WellPoint").  The Acquisition Agreement provides that, upon the
terms and subject to the conditions set forth in the Acquisition Agreement, we
will purchase all of the shares and equity interests of three WellPoint
subsidiaries, NextRx, Inc., NextRx Services, Inc., and NextRx, LLC, that provide
pharmacy benefit management services, in exchange for total consideration of
$4.675 billion composed of $3.275 billion in cash and $1.4 billion in shares of
our common stock (valued based on average closing price over the 60 days
preceding the closing of the acquisition).  We may, in our discretion,
replace all or any portion of the common stock consideration with
cash.  Additionally, the parties have agreed to make an election under
Section 338(h)(10) of the Internal Revenue Code with respect to the
transaction.  We estimate the value of such election to us to be between
$800 million and $1.2 billion dependent upon the discount factor and tax rate
assumed.  At the closing of the acquisition, we will enter into a
10-year contract with WellPoint under which we will provide pharmacy benefits
management services to WellPoint and its designated affiliates. WellPoint’s
NextRx subsidiaries provide PBM services to approximately 25 million Americans
and manage more than 265 million adjusted prescriptions annually.  We
anticipate that the transaction will close in the second half of
2009.  The transaction will be accounted for under the provisions of
FAS 141R “Business Combinations.”




14


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





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





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





·
            uncertainties
      associated with our acquisitions, which include uncertainties as to the
      satisfaction or waiver of conditions to closing, integration risks and
      costs, uncertainties associated with client retention and repricing of
      client contracts, and uncertainties associated with the operations of
      acquired businesses


·
            results
      in regulatory matters, the adoption of new legislation or regulations
      (including increased costs associated with compliance with new laws and
      regulations), more aggressive enforcement of existing legislation or
      regulations, or a change in the interpretation of existing legislation or
      regulations·
            our
      leverage and debt service obligations, including the effect of certain
      covenants in our borrowing agreements, access to capital and increases in
      interest rates


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


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


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




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


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


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


·
            changes
      in industry pricing benchmarks such as average wholesale price (“AWP”) and
      average manufacturer price (“AMP”), which could have the effect of
      reducing prices and margins


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


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


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


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


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


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


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


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





See
the more comprehensive description of risk factors under the captions “Forward
Looking Statements and Associated Risks” contained in Item 1 – “Business” and
Item IA – “Risk Factors” of our Annual Report on Form 10-K for the year ended
December 31, 2008, filed with the SEC on February 25, 2009.








15


OVERVIEW





As one of
the largest full-service pharmacy benefit management companies, we provide
health care management and administration services on behalf of our clients,
which include health maintenance organizations, health insurers, third-party
administrators, employers, union-sponsored benefit plans, workers’ compensation
plans, and government health programs.  During the first quarter of
2009, we changed our reportable segments to Pharmacy Benefit Management (“ PBM”)
and Emerging Markets (“EM”).  Segment disclosures for 2008 have been
reclassified to reflect the new structure.  Under the new structure,
our integrated PBM services include network claims processing, home delivery
services, patient care and direct specialty home delivery to patients, benefit
design consultation, drug utilization review, formulary management, drug data
analysis services, distribution of injectable drugs to patient homes and
physicians offices, bio-pharma services, and fulfillment of prescriptions to
low-income patients through manufacturer-sponsored patient assistance programs
and company-sponsored generic patient assistance programs.





Through
our EM segment, we provide services including: distribution of pharmaceuticals
and medical supplies to providers and clinics; distribution of sample units to
physicians and verification of practitioner licensure; fertility services to
providers and patients; and healthcare account administration and implementation
of consumer-directed healthcare solutions.





Revenue
generated by our segments can be classified as either tangible product revenue
or service revenue.  We earn tangible product revenue from the sale of
prescription drugs by retail pharmacies in our retail pharmacy networks and from
dispensing prescription drugs from our home delivery and specialty
pharmacies.  Service revenue includes administrative fees associated
with the administration of retail pharmacy networks contracted by certain
clients, market research programs, medication counseling services, certain
specialty distribution services, and sample fulfillment and accountability
services.  Tangible product revenue generated by our PBM and EM
segments represented 98.6% of revenues for both the three months ended March 31,
2009 and for the same period of 2008.





During
2008, we established the Center for Cost-Effective Consumerism (the “Center”)
which assists us in the advancement of our understanding of consumers and the
way they use health care.  The Center combines our industry-leading
research capabilities with insights from a multidisciplinary advisory board of
national experts in science of human behavior and decision
making.  Using work done by the Center, we plan to better equip plan
sponsors to achieve: lowest cost drug mix (e.g., generics), maximum therapy
adherence (in key classes), greatest use of most cost-effective delivery
channel, uncompromising safety standards and increasing member engagement and
satisfaction.


PROPOSED ACQUISITION TRANSACTION
 
 On
April 9, 2009, we entered into a Stock and Interest Purchase Agreement (the
"Acquisition Agreement") with WellPoint, Inc., an Indiana corporation
("WellPoint").  The Acquisition Agreement provides that, upon the
terms and subject to the conditions set forth in the Acquisition Agreement, we
will purchase all of the shares and equity interests of three WellPoint
subsidiaries, NextRx, Inc., NextRx Services, Inc., and NextRx, LLC
(collectively, “NextRx”), that provide pharmacy benefit management services (the
"PBM Business"),in exchange for
total consideration of $4.675billion
composed of $3.275billion in cash and $1.4 billionin shares of our common stock (valued based on average
closing price over the 60 days preceding the closing of the
acquisition).We may, in our discretion, replace all or any portion of
the common stock consideration with cash.Additionally, the parties have agreed to make an
election under Section 338(h)(10) of the Internal Revenue Code with respect to
the transaction. We estimate the value of such election to us to be between $800
million and $1.2 billion dependent upon the discount factor and tax rate
assumed.At the closing of the
acquisition, we will enter into a 10-year contract with WellPoint under which we
will provide pharmacy benefits management services to WellPoint and its
designated affiliates (the "PBM Agreement").  At the closing, we will
also enter into a registration rights agreement with WellPoint with respect to
the shares of our common stock that may be issued as part of the consideration
for the acquisition and certain other ancillary agreements.
  We have
entered into a commitment letter with a syndicate of commercial banks for an
unsecured $2.5 billioncredit facility in
order to finance the acquisition.  We may reduce all or any portion of
thefacility commitment with the proceeds
of a public offering of common stock, debt securities or other securities
convertible or exchangeable for common stock.
  Consummation of the acquisition is subject to certain
conditions, including, among others, absence of certain legal impediments, the
expiration or termination of the applicable waiting period under U.S. antitrust
laws, the accuracy of the representations and warranties made by us and
WellPoint, compliance by both parties with their respective obligations under
the Acquisition Agreement and both parties having executed the PBM Agreement,
the registration rights agreement and the ancillary agreements at or prior to
the closing.  The Acquisition Agreement contains customary
representations and warranties by us and WellPoint.
 16
 Our obligation to consummate the
acquisition is subject to certain additional conditions, including (i) the
receipt of all necessary government approvals (except for those which would not
be material to NextRx as a whole) and the receipt of any state insurance law
approvals; (ii) the financial condition of NextRx not being materially worse
than the financial condition presented in the 2008 audited combined financial
statements; and (iii) the completion of certain transition and integration
projects to our reasonable satisfaction (this condition will be deemed to be
satisfied from and after December 31, 2009).  WellPoint's obligation
to consummate the acquisition is subject to certain other conditions, including
the receipt of all necessary government consents and approvals (except for those
which would not materially affect WellPoint's non-PBM business) without the
imposition of a burdensome term or condition on WellPoint's post-closing
operations.


Each party has agreed to use its reasonable best efforts
to obtain the necessary governmental approvals for consummation of the
acquisition and WellPoint has committed to take all actions necessary to obtain
certain state insurance law approvals.  We have agreed, if the
relevant antitrust authorities request or impose on us, to divest, hold separate
or take similar actions limiting our freedom to operate the assets of NextRx if
such action is conditioned upon the closing.  However, we are not
required to agree to (i) any divesture of any assets other than NextRx, (ii) any
divesture which would materially and adversely affect NextRx or materially
impair the benefits to us of the acquisition or (iii) any action in connection
with the receipt of any state insurance law approval which could adversely
affect us.
 
 The Acquisition Agreement contains specified termination
rights for the parties and may be terminated at any time prior to closing by
either party if (i) any law or final order prohibits the transaction; (ii) the
closing fails to occur by January 9, 2010 subject to a regulatory extension
until April 9, 2010; or (iii) the other party has breached any representation,
warranty or covenant, such that the conditions relating to the accuracy of the
other party's representations and warranties or performance of covenants would
fail to be satisfied and such breach is incapable of being cured or is not
cured.
  The Acquisition Agreement further provides that in the
event of termination by either party on January 9, 2010 due to the failure to
receive required approval under U.S. antitrust laws or at any time due to the
issuance of a law or final order prohibiting the acquisition pursuant to U.S.
antitrust laws, and all other conditions are satisfied at the time of such
termination, then we will pay WellPoint a termination fee of $50 million as
WellPoint's sole and exclusive remedy (absent our willful and material breach)
in connection with the failure of the acquisition.


EXECUTIVE
SUMMARY AND TREND FACTORS AFFECTING THE BUSINESS





Our
results in the first three months of 2009 reflect the successful execution of
our business model, which emphasizes the alignment of our financial interests
with those of our clients through greater use of generics, home delivery and
specialty pharmacy.  In the first three months of 2009 we benefited
from a higher generic fill rate (67.7% compared to 65.1% in the same period of
2008) and better management of ingredient costs through renegotiation of
supplier contracts, increased competition among generic manufacturers and other
actions which helped to reduce ingredient costs.  In addition, through
the research performed by the Center, as described above, we intend to provide
our clients with additional tools designed to generate higher generic fill
rates, and further increase the use of our home delivery and specialty pharmacy
services.





While we
believe we are well positioned from a business and financial perspective, we are
subject to the current adverse economic environment.  These conditions
could affect our business in a number of direct and indirect ways.  In
2009, claims volumes have decreased compared to prior year which we believe is
attributable to the expected loss of low margin clients and decreased
utilization due to the current economic environment.





We
believe the positive trends in gross profit we see the first three
months of 2009, including increased generic usage and lower drug purchasing
costs, should continue to offset the negative impact of various economic and
marketplace forces effecting pricing, plan structure and claim volumes, among
other factors, and thus continue to generate improvements in our results of
operations in the future.








17


CRITICAL
ACCOUNTING POLICIES





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions which affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Our estimates and assumptions are based
upon a combination of historical information and various other assumptions
believed to be reasonable under the particular circumstances. Actual results may
differ from our estimates.  We changed our reportable segments
to PBM and EM during the first quarter of 2009 (see Note
8).  For a full description of our accounting policies, please refer
to the notes to the consolidated financial statements included in our Annual
Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on
February 25, 2009.








PBM
OPERATING INCOME


Three
      Months Ended March 31,(in
      millions)
                                                                                                                                                                                                              2009(1)
                                                                                                                                                                                                              
                                                                                                                                                                                                              2008Product
      revenuesNetwork
      revenues(2)
                                                                                                                                                                                                              $
                                                                                                                                                                                                              3,250.6
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              $
                                                                                                                                                                                                              3,278.5Home
      delivery and speciality revenues
                                                                                                                                                                                                              
                                                                                                                                                                                                              1,781.4
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              1,776.6Other
      revenues
                                                                                                                                                                                                              
                                                                                                                                                                                                              16.4
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              11.1Service
      revenues
                                                                                                                                                                                                              
                                                                                                                                                                                                              64.1
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              62.5Total
      PBM revenues
                                                                                                                                                                                                              
                                                                                                                                                                                                              5,112.5
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              5,128.7Cost
      of PBM revenues(2)
                                                                                                                                                                                                              
                                                                                                                                                                                                              4,593.1
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              4,680.0PBM
      gross profit
                                                                                                                                                                                                              
                                                                                                                                                                                                              519.4
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              448.7PBM
      SG&A expenses
                                                                                                                                                                                                              
                                                                                                                                                                                                              167.7
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              154.3PBM
      operating income
                                                                                                                                                                                                              $
                                                                                                                                                                                                              351.7
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              $
                                                                                                                                                                                                              294.4Network
                                                                                                                                                                                                              
                                                                                                                                                                                                              94.2
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              98.2Home
      delivery and specialty
                                                                                                                                                                                                              
                                                                                                                                                                                                              9.9
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              10.4Other
                                                                                                                                                                                                              
                                                                                                                                                                                                              0.6
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              0.7Total
      PBM claims
                                                                                                                                                                                                              
                                                                                                                                                                                                              104.7
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              109.3Total
      adjusted PBM claims(3)
                                                                                                                                                                                                              
                                                                                                                                                                                                              124.0
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              129.5





(1)
            Includes
      the July 22, 2008 acquisition of
MSC.


(2)
            Includes
      retail pharmacy co-payments of $822.7 million and $887.7 million for the
      three months ended March 31, 2009 and 2008,
  respectively.


(3)
            Adjusted
      PBM claims represent network claims, speciality claims and home delivery
      claims, which are multiplied by 3, as home delivery claims are typically
      90 day claims and network and specialty claims are generally 30 day
      claims





18


Product Revenues for the three
months ended March 31, 2009:  Network pharmacy revenues
decreased by $27.9 million, or 0.9%, in the three months ended March 31, 2009
over the same period of 2008.  This is primarily due to lower claims
volume which was partially offset by increases in price.  Changes in
price are affected by inflation and the mix of prescriptions processed at
network pharmacies.  With the increase in our generic fill rate to
69.0% of total network claims in the first quarter of 2009 as compared to 66.4%
in the same period of 2008, our revenues correspondingly decreased as generic
drugs are generally less expensive than the corresponding brand
drug.


Home delivery revenues increased $4.8 million, or 0.3%, in the three months
ended March 31, 2009 from the same period in 2008.  The increase is
due to increases in price of specialty products offset by lower home delivery
claims volume from the loss of low margin clients and the impact of the higher
generic fill rate.  Our generic fill rate increased to 56.9% of home
delivery claims in the three months ended March 31, 2009 as compared to 53.9% in
the same period of 2008.


Cost of
PBM revenues decreased $86.9 million, or 1.9%, in the three months ended March
31, 2009 from the same period of 2008.  The decrease is primarily due
to improvements in the aggregate generic fill rate and better management of
ingredient costs, partially offset by inflation.





Our PBM
gross profit increased $70.7 million, or 15.8%, for the three months ended March
31, 2009 as compared to the same periods of 2008.  Client cost savings
from the increase in the aggregate generic fill rate and better management of
ingredient costs were partially offset by margin pressures arising from
ingredient cost inflation and the current competitive environment.





Selling,
general and administrative expense (“SG&A”) for our PBM segment for the
three months ended March 31, 2009 increased by $13.4 million, or
8.7%.  The increase is due to investments for productivity improvement
and growth.





PBM
operating income increased $57.3 million, or 19.5%, for the three months ended
March 31, 2009 as compared to the same period of 2008, based on the various
factors described above.





EM
OPERATING INCOME





Three
      Months Ended March 31,(in
      millions)
                                                                                2009
                                                                                
                                                                                2008Product
      revenues
                                                                                $
                                                                                300.0
                                                                                
                                                                                
                                                                                $
                                                                                350.7Service
      revenues
                                                                                
                                                                                10.3
                                                                                
                                                                                
                                                                                
                                                                                11.4Total
      EM revenues
                                                                                
                                                                                310.3
                                                                                
                                                                                
                                                                                
                                                                                362.1Cost
      of EM revenues
                                                                                
                                                                                295.6
                                                                                
                                                                                
                                                                                
                                                                                344.7EM
      gross profit
                                                                                
                                                                                14.7
                                                                                
                                                                                
                                                                                
                                                                                17.4EM
      SG&A expenses
                                                                                
                                                                                10.9
                                                                                
                                                                                
                                                                                
                                                                                17.2EM
      operating income
                                                                                $
                                                                                3.8
                                                                                
                                                                                
                                                                                $
                                                                                0.2





19


EM Continuing
Operations.EM revenues decreased $51.8 million, or
14.3%, in the three months ended March 31, 2009 over the same periods of 2008.
This is primarily due to decreased revenue in our Specialty Distribution line of
business due to a reduction in sales volume of a few specific
drugs.





EM cost of revenues decreased $49.1
million, or 14.2%, in the three months ended March 31, 2009 over the same
periods of 2008.  This resulted in a decrease in gross profit of
$2.7 million, or 15.5%, in the three months ended March 31, 2009 over the
same periods of 2008 partially due to a reduction in sales as discussed
above.





SG&A
for our EM segment for the three months ended March 31, 2009 decreased by $6.3
million, or 36.6%.  The decrease is primarily due to bad debt expense,
severance charges, and site closure costs incurred by the Specialty Distribution
line of business during the first quarter of 2008.





EM income
from continuing operations increased by $3.6 million for the three months ended
March 31, 2009 from the same periods of 2008 based on the factors described
above.





OTHER
(EXPENSE) INCOME





Net
interest expense decreased $1.8 million, or 10.0%,  in the three
months ended March 31, 2009, as compared to the same periods in 2008, which is
primarily due to decreases in interest rates and lower outstanding debt (see
“—Liquidity and Capital Resources—Bank Credit Facility”).





PROVISION
FOR INCOME TAXES





Our effective tax rate from continuing
operations increased to 36.7% for the three months ended March 31, 2009 from
35.5% for the same period of 2008.  The three months ended March 31,
2009 reflects an increase in certain state income tax rates due to enacted law
changes.  The three months ended March 31, 2009 included a
nonrecurring tax benefit of $2.6 million resulting from changes in our
unrecognized tax benefits, primarily attributable to a lapse in the applicable
statute of limitations.





NET
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX





Net loss from discontinued operations,
net of tax, decreased $0.8 million for the three months ended March 31,
2009 compared to the same period of 2008 (see Note 3).





NET
INCOME AND EARNINGS PER SHARE





Net
income for the three months ended March 31, 2009 increased $37.2 million, or
21.0%, over the same period of 2008 due to factors discussed
above.  Additionally, basic and diluted earnings per share increased
24.3% and 24.6%, respectively, for the three months ended March 31, 2009 over
the same period of 2008.  This increase is primarily due to improved
operating results.








LIQUIDITY
AND CAPITAL RESOURCES





OPERATING
CASH FLOW AND CAPITAL EXPENDITURES




For the
three months ended March 31, 2009, net cash provided by continuing operations
increased $38.1 million to $286.4 million. The increase was primarily impacted
by the $36.4 million increase in net income from continuing operations as
compared to the same period of 2008.  Additionally, there were net
cash inflows of $23.4 million related to a decrease in inventory due to large
purchases of inventory at discounted prices at the end of 2008 and net cash
inflows of $36.1 million due to an increase in accrued expenses due to timing of
income tax payments.  Offsetting these net cash inflows are net cash
outflows of $43.3 million from claims and rebates payables due the timing of
invoices and payments and other net cash outflows, none of which were
material.




Our
capital expenditures for the three months ended March 31, 2009 increased $1.9
million compared to the same period of 2008.  We intend to continue to
invest in infrastructure and technology that we believe will provide
efficiencies in operations and facilitate growth and enhance the service we
provide to our clients.  Anticipated capital expenditures will be
funded primarily from operating cash flow or, to the extent necessary, with
borrowings under our revolving credit facility, discussed below.





20


INVESTMENTS




As of
March 31, 2009 short-term investments, included in prepaid expenses and other
current assets in the unaudited consolidated balance sheet, were carried at fair
value and consisted of our investment in the Reserve Primary Fund (the “Primary
Fund”), which is a money market fund.  The estimated fair value of our
investment in the Primary Fund was $5.1 million as of March 31,
2009.  The net asset value of the Primary Fund decreased below $1 per
share as a result of the Primary Fund’s valuing at zero its holdings of debt
securities by Lehman Brothers Holdings, Inc., which filed for bankruptcy on
September 15, 2008.  Accordingly, we recognized an unrealized loss of
$2.0 million in the third quarter of 2008 and reclassified the Primary Fund
investment from cash and cash equivalents to prepaid expenses and other current
assets in the unaudited consolidated balance sheet.  We assessed the
fair value of the underlying collateral for the Primary Fund through evaluation
of the liquidation value of assets held by the Primary Fund, which is classified
within Level 3 of the fair value hierarchy.




We
received cash distributions from the Primary Fund of $38.9 million during 2008,
$3.3 million in the three months ended March 31,
2009 and $2.2 million subsequent to March 31, 2009.  We expect to
receive future distributions as the Primary Funds’s assets mature or are
sold.  If the markets for short term securities remain illiquid, there
may be further declines in the value of our remaining investments.  To
the extent we determine there is a further decline in fair value, we may
recognize additional losses in future periods up to the aggregate amount of
these investments of $5.1 million at March 31, 2009.




CHANGES
IN BUSINESS





On April 9, 2009, we entered into the Acquisition
Agreement with WellPoint pursuant to the terms of which we will purchase all of
the shares and equity interests of three WellPoint subsidiaries, NextRx, Inc.,
NextRx Services, Inc., and NextRx, LLC, that provide pharmacy benefit management
services,in exchange for total consideration of $4.675 billion composed of $3.275
billion in cash and $1.4 billionin shares
of our common stock (valued based on average closing price over the 60 days
preceding the closing of the acquisition).We may, in our discretion, replace all or any portion of
the common stock consideration with cash.  Additionally, the parties
have agreed to make an election under Section 338(h)(10) of the Internal Revenue
Code with respect to the transaction. We estimate the value of such election to
us to be between $800 million and $1.2 billion dependent upon the discount
factor and tax rate assumed.At
the closing of the acquisition, we will enter into a 10-year contract with
WellPoint under which we will provide pharmacy benefits management services to
WellPoint and its designated affiliates.WellPoint’s
NextRx subsidiaries provide PBM services to approximately 25 million Americans
and manage more than 265millionadjusted prescriptions
annually.Weanticipate that the transaction will close in
the second half of 2009. The transaction will be
accounted for under the provisions of FAS 141R “Business
Combinations.”


On July
22, 2008, we completed the acquisition of the Pharmacy Services Division of MSC
- Medical Services Company (“MSC”), a privately held PBM.  MSC is a
leader in providing PBM services to clients providing workers compensation
benefits.  The transaction was accounted for under the provisions of
Financial Accounting Standards (“FAS”) 141, “Business
Combinations.”  The purchase price was funded through internally
generated cash and temporary borrowings under the revolving credit
facility.  This acquisition is reported as part of our PBM
segment.
  On July
1, 2008, the merger of RxHub and SureScripts was announced.  We are
one of the founders of RxHub, an electronic exchange enabling physicians who use
electronic prescribing technology to link to pharmacies, PBM companies, and
health plans.  The new organization, named SureScripts, will
enable physicians to securely access health information when caring for their
patients through a fast and efficient health exchange.  We have
retained one-sixth ownership in the merged company.  Due to the
decreased ownership percentage, the investment is being recorded using the cost
method, under which dividends are the basis of recognition of earnings from an
investment.  This change did not have a material effect on our
consolidated financial statements.





On June
30, 2008, we completed the sale of CuraScript Infusion Pharmacy, Inc. (“IP”) for
$27.5 million and recorded a pre-tax gain of approximately $7.4 million in the
second quarter of 2008.  IP was identified as available for sale
during the fourth quarter of 2007 as we considered it non-core to our future
operations.  In connection with the classification of IP as a
discontinued operation, we recorded a charge in the fourth quarter of 2007
related to impairment losses.





We
regularly review potential acquisitions and affiliation
opportunities.  We believe available cash resources, bank financing or
the issuance of additional common stock could be used to finance future
acquisitions or affiliations.  There can be no assurance we will make
new acquisitions or establish new affiliations in 2009 or thereafter, other than
the agreement discussed above.




STOCK
REPURCHASE PROGRAM





We have a
stock repurchase program, originally announced on October 25,
1996.  Treasury shares are carried at first in, first out
cost.  There is no limit on the duration of the
program.  There were no treasury share repurchases during the three
months ended March 31, 2009. There are 21 million shares remaining under this
program.  Additional share repurchases, if any, will be made in such
amounts and at such times as we deem appropriate based upon prevailing market
and business conditions and other factors.


21


BANK
CREDIT FACILITY





At March
31, 2009, our credit facility includes $880.0 million of Term A loans, $800.0
million of Term-1 loans and a $600.0 million revolving credit
facility.  The revolving credit facility (none of which was
outstanding as of March 31, 2009) is available for general corporate
purposes.  During the first three months of 2009, we made a scheduled
payment of $80 million on our Term A loan.  The maturity date of our
credit facility is October 14, 2010.





Our
credit facility requires us to pay interest periodically on the London Interbank
Offered Rates (“LIBOR”) or base rate options, plus a margin.  The
margin over LIBOR will range from 0.50% to 1.125%, depending on our consolidated
leverage ratio or our credit rating.  Under our credit facility, we
are required to pay commitment fees on the unused portion of the
$600.0 million revolving credit facility.  The commitment fee
will range from 0.10% to 0.25% depending on our consolidated leverage ratio or
our credit rating.





At March
31, 2009, the weighted average interest rate on the facility was
2.9%.  Our credit facility contains covenants that limit the
indebtedness we may incur, the common shares we may repurchase, and dividends we
may pay.  The repurchase and dividend covenant applies if certain
leverage thresholds are exceeded.  The covenants also include a
minimum interest coverage ratio and a maximum leverage ratio.  At
March 31, 2009, we believe we are in compliance with all covenants associated
with our credit facility.




COMMITTED FINANCING
 
 We have entered into a commitment letter with a
syndicate of commercial banks for an unsecured, 364-day,$2.5
billionterm loan credit facility in order
to finance the NextRx acquisition.  We may reduce all or any portion
of thefacility commitment with the
proceeds of a public offering of common stock, debt securities or other
securities convertible or exchangeable for common stock.
 
 The closing ofthis
committed credit facilitywill occur, if at all, concurrently with the closing of
the acquisition, and is subject to the negotiation of definitive loan
documentation, the closing of the acquisition,and other customary closing conditions.We are
permitted to use the proceeds of the loans made underthis committed
credit facilityfor purposes of financing the acquisition and paying
fees and expenses incurred in connection with the
acquisition.


22




OTHER
MATTERS





In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
FAS 157, “Fair Value Measurements” (“FAS 157”).   FAS 157 defines
fair value, establishes guidelines for measuring fair value and expands
disclosures regarding fair value measurements.  FAS 157 will apply
whenever another standard requires (or permits) assets or liabilities to be
measured at fair value.  This standard does not expand the use of fair
value to any new circumstances.  FAS 157 was effective for financial
statements issued for fiscal years beginning after November 15, 2007 and interim
periods within those fiscal years.  On February 6, 2008 the FASB
approved the Financial Staff Position that will defer the effective date of FAS
157 by one year for nonfinancial assets and liabilities that are recognized or
disclosed at fair value in the financial statements on a nonrecurring
basis.  We adopted FAS 157 as of January 1, 2008, and adopted the
application of the statement to nonrecurring nonfinancial assets and
nonfinancial liabilities as of January 1, 2009.   Our adoption of
FAS 157 did not have a material impact on our consolidated financial
position, results of operations or cash flows (see Note 2).




In
December 2007, the FASB issued FAS 141R, “Business Combinations” and FAS
160, “Business Combinations and Noncontrolling Interests” (“FAS 141R” and “FAS
160”, respectively).  FAS 141R and FAS 160 are effective for fiscal
years beginning after December 15, 2008.  FAS 141R changes the
definitions of a business and a business combination, and will result in more
transactions recorded as business combinations.  Certain acquired
contingencies will be recorded initially at fair value on the acquisition date,
transaction and restructuring costs generally will be expensed as incurred and
in partial acquisitions companies generally will record 100 percent of the
assets and liabilities at fair value, including goodwill. In April 2009, the
FASB issued Financial Staff Position (“FSP”) FAS 141R-1, “Accounting for Assets
Acquired and Liabilities Assumed in a Business Combination That Arise from
Contingencies”which amends and clarifies the accounting for assets acquired and
liabilities assumed in a business combination that arise from
contingencies.  We will account for all future business combinations
under the provisions of FAS 141R.
 
 In April
2008, the FASB issued FSP FAS 142-3, “Determination of the Useful Life of
Intangible Assets” which intends to improve the consistency between the useful
life of an intangible asset and the period of expected cash flows used to
measure the fair value of the asset.  This FSP is effective for fiscal
years beginning after December 15, 2008.  These provisions will be
applied to future intangible assets acquired.




In April
2009, the FASB issued three FSPs; (1) FSP FAS 157-4. “Determining Fair Value
When the Volume and Level of Activity for the Asset and Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly” which
provides guidance on determining fair value when market activity has decreased,
(2) FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments” which  addresses
other-than-temporary impairments for debt securities; and (3) FSP FAS 107-1 and
APB 28-1, “Interim Disclosures About Fair Value of Financial Instruments” which
discusses fair value disclosures for financial instruments in interim
periods.  The FSPs are effective for interim and annual periods ending
after June 15, 2009.  We do not believe the adoption of these FSPs
will have a material impact on our financial statements.






IMPACT
OF INFLATION





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





Item
      3.
            Quantitative and
      Qualitative Disclosures About Market
Risk





We are
exposed to market risk from changes in interest rates related to debt
outstanding under our credit facility.  Our earnings are subject to
change as a result of movements in market interest rates.  At March
31, 2009, we had $955.4 million of obligations, net of cash, which were subject
to variable rates of interest under our credit facility.  A
hypothetical increase in interest rates of 1% would result in an increase in
annual interest expense of approximately $9.6 million (pre-tax), presuming that
obligations subject to variable interest rates remained constant.





23




Item
      4.
            Controls and
      Procedures





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





During
the first quarter ended March 31, 2009, there was no change in our internal
control over financial reporting that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.




24


PART
      II. OTHER INFORMATION




Item
      1.
            Legal
      Proceedings




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


The following developments
have occurred since the filing of our last Form 10-K.
  ·
              Inola
      Drug, Inc. v. Express Scripts, Inc. (Case No. 06-CV-117-TCK-SAJ, United
      States District Court for the Northern District of Oklahoma). On February
      22, 2006, a class action lawsuit was filed alleging that our reimbursement
      to pharmacies violates the Oklahoma Third Party Prescriptions Act. The
      complaint also alleges that we failed to properly reimburse pharmacies for
      filling prescriptions based on average wholesale price. The proposed class
      includes all pharmacies in the United States who contract with us and the
      proposed subclass includes all pharmacies in Oklahoma who contract with
      us. On March 25, 2009, the court granted our motion for partial summary
      judgment and dismissed the breach of contract claim and any claim for
      injunctive relief based upon the contract claim. Additionally, the court
      denied plaintiff’s motion for class certification. On April 8, 2009,
      plaintiff filed a motion to alter or amend the order on summary judgment
      and class certification. The only claims remaining are misrepresentation
      and unjust enrichment claims (and injunctive relief based upon those
      claims) and Express Scripts has filed a motion for summary judgment on
      those claims as well.
 In addition, in the
ordinary course of our business there have arisen various legal proceedings,
investigations or claims now pending against our subsidiaries and us.  The
effect of these actions on future financial results is not subject to reasonable
estimation because considerable uncertainty exists about the outcomes. 
Where insurance coverage is not available for such claims, or in our judgment,
is not cost-effective, we maintain self-insurance reserves to reduce our
exposure to future legal costs, settlements and judgments related to uninsured
claims.  Our self-insured reserves are based upon estimates of the
aggregate liability for the costs of uninsured claims incurred and the retained
portion of insured claims using certain actuarial assumptions followed in the
insurance industry and our historical experience.  It is not possible to
predict with certainty the outcome of these claims, and we can give no assurance
that any losses in excess of our insurance and any self-insurance reserves will
not be material.
  Additional information
regarding such matters is contained in Item 3 – Legal Proceedings in our Annual
Report on Form 10-K for the year ended December 31, 2008.
 
 25


Item
      1A.
            Risk
      Factors




The issuance and sale of common stock in connection with the pending
acquisition of NextRx may depress the market price of our common stock.





The Acquisition Agreement anticipates that we will pay $1.4 billion of the
consideration for NextRx in shares of our common stock, however we may, in our
discretion, pay all or any portion of that amount in cash in lieu of shares of
our common stock.  We may fund all or any portion of the acquisition
consideration from the cash proceeds of a public offering of common stock, debt
securities or other securities convertible or exchangeable for our common
stock.  Any such offering may be dilutive to our existing stockholders
and may reduce the market price of our common stock.  Additionally,
any issuance of common stock to finance a portion of the acquisition
consideration will cause holders of our common stock to experience a reduction
in their respective percentage ownership interests and effective voting power
relative to their respective percentage ownership interests in our common
stock prior to the acquisition.




If we
deliver shares of common stock as part of the acquisition consideration, the
shares of common stock that WellPoint receives will be restricted, but WellPoint
may sell these shares under certain circumstances, including pursuant to a
registered underwritten public offering under the Securities Act of 1933, or the
Securities Act, or in accordance with Rule 144 under the Securities Act. We have
agreed to enter into a registration rights agreement with WellPoint at the
closing of the acquisitionwhichwill governWellPoint’s rightswith respect to the sharesof common stock delivered to WellPoint, and obligateus
to register the resale of such shares and tofacilitateunderwritten publicofferings
andhedging transactionswithin certain agreed upon timeframes.If we deliver common stock to WellPoint in
lieu of cash, and WellPoint elects to sell, or engage in hedging transactions
with respect to, all or a significant number of such shares, the market price of
our common stock may decline.
 
 Consummation of the NextRx acquisition, the financing of the acquisition,andtheentry into the new PBM Agreement with WellPoint are
subject to certain conditions and we cannot predict when or if such conditions
will be satisfied or waived.
  Consummation of the NextRx acquisition and entry into the new PBM Agreement are
subject to certain conditions, including, among others:




·
            the
      absence of certain legal
impediments;


·
            the
      expiration or termination of the applicable waiting period under the
      Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
      amended;


·
            the
      accuracy of the representations and warranties and compliance with the
      respective covenants of the parties, subject to certain materiality
      qualifiers;


·
            execution
      of the PBM Agreement, the registration rights agreement and the ancillary
      agreements;


·
            the
      receipt of necessary governmental approvals, subject to certain
      limitations;


·
            the
      absence of a material negative difference between the financial condition
      of the PBM Business reflected in the 2008 unaudited financial statements
      reviewed by us prior to execution of the Acquisition Agreement and the
      audited statements to be delivered to us,
and


·
            the
      completion of certain transition and integration
  projects.




Obtaining necessary governmental approvals may delay or prevent completion of
the acquisition or reduce the benefits of the acquisition to us.


Entry into our committed
term loan credit facility is also subject to certain conditions.  If
these conditions are not ultimately satisfied or waived, we will not receive the
funds under the facility to finance the acquisition.  If we areunable to obtainreplacementthird-party financing for the acquisition at the time
when we would otherwise be obligated to consummate the acquisition, we may be in
breach of the terms of the Acquisition Agreement and be subject to certain
contractual remedies specified in the Acquisition Agreement, including, under
certain circumstances, being compelled to take certain actions to specifically
perform our obligation to consummate the acquisition.





We
cannot provide any assurance that the acquisition will be completed, that there
will not be a delay in the completion of the acquisition or that all or any of
the anticipated benefits of the acquisition will be obtained.  Any
delay could also, among other things, result in additional transaction costs,
loss of revenue or other negative effects associated with uncertainty about
completion of the acquisition.





In
the event the Acquisition Agreement is terminated or the acquisition is
materially delayed for any reason, the price of our common stock may
decline.  If the Acquisition Agreement is terminated, we may incur
substantial fees in connection with the termination of the acquisition and in
connection with our acquisition financing arrangements and we will not recognize
the anticipated benefits of the new PBM Agreement.




26


Our indebtedness following the completion of the NextRx acquisition will be
substantial and will effectively reduce the amount of funds available for other
business purposes.





We currently expect
to incur a substantial amount of indebtedness in connection with the
acquisition.  We have received a commitment from a group of
institutional lenders to provide up to $2.5 billion of loansto finance a portion of the acquisition consideration,
which amount will be reduced to the extent we receive cash proceeds from any
debt offeringorcash proceeds from equity offerings in excess of $1.4
billion prior to consummation of the acquisition.  Interest costs
related to this debt or other debt we may incur to finance the acquisition will
be substantial.  Our new indebtedness may contain negative or
financial covenants that would limit our operational flexibility beyond the
limits imposed under our existing credit agreement.  Our increased
level of indebtedness could reduce funds available for additional acquisitions
or other business purposes, restrict our financial and operating flexibility or
create competitive disadvantages compared to other companies with lower debt
levels.




The
anticipated benefits of the NextRx acquisition and new PBM Agreement may not be
realized fully and may take longer to realize than expected.





The
acquisition involves the integration of the PBM Business with our existing
platform.  We will be required to devote significant management
attention and resources to integrating the PBM Business. We may also experience
difficulties in combining corporate cultures. Delays in the integration process
could adversely affect our business, financial results and financial condition.
Even if we are able to integrate the PBM Business operations successfully, there
can be no assurance that this integration will result in the realization of the
full benefits of synergies, cost savings, innovation and operational
efficiencies that may be possible or that these benefits will be achieved within
a reasonable period of time.





We
will incur significant transaction and acquisition-related costs in connection
with the acquisition.





We
will incur significant costs in connection with the integration
process.  The substantial majority of these costs will be
non-recurring expenses related to the acquisition, facilities and systems
consolidation costs.  We may incur additional costs to maintain
employee morale and to retain key employees.  We will also incur
transaction fees and costs related to formulating integration
plans.  Additional unanticipated costs may be incurred in the
integration of the PBM Business.  Although we expect that the
elimination of duplicative costs, as well as the realization of other
efficiencies related to the integration of the businesses, should allow us to
more than offset incremental transaction and acquisition-related costs over
time, this net benefit may not be achieved in the near term, or at
all.





Failure
to complete the acquisition could negatively impact our stock price and our
future business and financial results.





If
the acquisition is not completed or our financing for the transaction becomes
unavailable, our ongoing business and financial results may be adversely
affected and we will be subject to a number of risks, including the
following:





·
            if
      the acquisition is not completed as a result of a failure to obtain
      certain, necessary approvals under antitrust laws, we will, under
      circumstances specified in the acquisition agreement, be required to pay a
      termination fee of $50 million to
WellPoint;


·
            we
      will be required to pay certain costs relating to the acquisition, whether
      or not the acquisition is
completed;


·
            matters
      relating to the acquisition (including integration planning) may require
      substantial commitments of time and resources by our management, whether
      or not the acquisition is completed, which could otherwise have been
      devoted to other opportunities that may have been beneficial to
      us.




We may also be
subject to litigation related to any failure to complete the acquisition. If the
acquisition is not completed, these risks may materialize and may adversely
affect our business, financial results and financial condition, as well as the
price of our common stock.




27


The
market price of our common stock may decline as a result of the NextRx
acquisition.





The
market price of our common stock may decline as a result of the NextRx
acquisition if, among other things, we are unable to achieve the expected growth
in earnings, or if the operational cost savings estimates in connection with the
integration of the PBM Business are not realized, or if the transaction costs
related to the acquisition are greater than expected, or if the financing
related to the transaction is on unfavorable terms, or if the value of the
election under Section 338(h)(10) of the Internal Revenue Code is less than
anticipated.  The market price also may decline if we do not achieve the
perceived benefits of the acquisition as rapidly or to the extent anticipated by
financial or industry analysts or if the effect of the acquisition on our
financial results is not consistent with the expectations of financial or
industry analysts.




Following
the completion of the NextRx acquisition, we will be dependent on WellPoint for
certain transitional services pursuant to a transition services agreement. The
failure of WellPoint to perform its obligations under the transition services
agreement could adversely affect our business, financial results and financial
condition.





Our
ability to effectively monitor and control the operations of the PBM Business
that we are acquiring depends to a large extent on the proper functioning of our
information technology and business support systems. Following the completion of
the acquisition, we will be initially dependent upon WellPoint to continue to
provide certain information technology services, human resources services,
existing procurement vendor services, finance services, real estate services and
print mail services for a period of time after the completion of the acquisition
to facilitate the transition of the PBM Business. The terms of these
arrangements will be governed by a transition services agreement to be entered
into as of the closing of the acquisition. If WellPoint fails to perform its
obligations under the transition services agreement, we may not be able to
perform such services ourselves or obtain such services from third parties at
all or on terms favorable to us. In addition, upon termination of the transition
services agreement, if we are unable to develop the necessary systems, resources
and controls necessary to allow us to provide the services currently being
provided by WellPoint or to obtain such services from third parties, it could
adversely affect our business, financial results and financial
condition.








28


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





The
following is a summary of our stock repurchasing activity during the three
months ended March 31, 2009 (share data in millions):





Period
                                                                                                                                                                Total
      number
                                                                                                                                                                  of
                                                                                                                                                                  shares
                                                                                                                                                                  purchased
                                                                                                                                                                
                                                                                                                                                                Average
                                                                                                                                                                  price
      paid
                                                                                                                                                                  per
      share
                                                                                                                                                                
                                                                                                                                                                Total
      number of
                                                                                                                                                                  shares
      purchased
                                                                                                                                                                  as
      part of a
                                                                                                                                                                  publicly
                                                                                                                                                                  announced
                                                                                                                                                                  program
                                                                                                                                                                Maximum
      number
                                                                                                                                                                  of
      shares
                                                                                                                                                                  that
      may yet be
                                                                                                                                                                  purchased
      under
                                                                                                                                                                  the
      program1/1/2009
      – 1/31/2009
                                                                                                                                                                -
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                -
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                -
                                                                                                                                                                
                                                                                                                                                                21.02/1/2009
      – 2/28/2009
                                                                                                                                                                -
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                -
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                -
                                                                                                                                                                
                                                                                                                                                                21.03/1/2009
      – 3/31/2009
                                                                                                                                                                -
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                -
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                -
                                                                                                                                                                
                                                                                                                                                                21.0First
      Quarter
                                                                                                                                                                  2009
      Total
                                                                                                                                                                -
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                -
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                -


We have a
stock repurchase program, originally announced on October 25,
1996.  Treasury shares are carried at first in, first out
cost.  There is no limit on the duration of the
program.  There were no share repurchases during the three months
ended March 31, 2009. There are 21 million shares remaining under this
program.  Additional share repurchases, if any, will be made in such
amounts and at such times as we deem appropriate based upon prevailing market
and business conditions and other factors.





Item
      6.
            Exhibits





(a)
            See
      Index to Exhibits below.





29


SIGNATURES





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






Express Scripts,
      Inc.(Registrant)Date: 
      April 29, 2009
                              By:
                              /s/
      George PazGeorge PazChairman,
      President and Chief Executive Officer









Date: 
      April 29, 2009
                    By:
                    /s/ Jeffrey
      HallJeffrey
      HallExecutive
      Vice President and Chief Financial Officer








30


INDEX TO
EXHIBITS


(Express
Scripts, Inc. – Commission File Number 0-20199)


Exhibit
                                                        Number
                                                      Exhibit2.1
                                                      Stock
      and Interest Purchase Agreement among the Company and WellPoint, Inc.,
      dated April 9, 2009, incorporated by reference to Exhibit 2.1 to the
      Company’s Current Report on Form 8-K filed April 14, 2009.3.1
                                                      Amended
      and Restated Certificate of Incorporation of the Company, incorporated by
      reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for
      the year ending December 31, 2008.3.2
                                                      Third
      Amended and Restated Bylaws, incorporated by reference to Exhibit No. 3.3
      to the Company’s Quarterly Report on Form 10-Q for the quarter ending June
      30, 2004.4.1
                                                      Form
      of Certificate for Common Stock, incorporated by reference to Exhibit No.
      4.1to the Company’s Registration Statement on Form S-1 filed June 9,
      1992 (No. 33-46974) (the “Registration Statement”).4.2
                                                      Stockholder
      and Registration Rights Agreement dated as of October 6, 2000 between the
      Company and New York Life Insurance Company, incorporated by reference to
      Exhibit No. 4.2 to the Company's Amendment No. 1 to the Registration
      Statement on Form S-3 filed October 17, 2000 (Registration Number
      333-47572).4.3
                                                      Amendment
      dated April 25, 2003 to the Stockholder and Registration Rights Agreement
      dated as of October 6, 2000 between the Company and New York Life
      Insurance Company, incorporated by reference to Exhibit No. 4.8 to the
      Company’s Quarterly Report on Form 10-Q for the period ending March 31,
      2003.4.4
                                                      Asset
      Acquisition Agreement dated October 17, 2000 between NYLIFE Healthcare
      Management, Inc., the Company, NYLIFE LLC and New York Life Insurance
      Company, incorporated by reference to Exhibit No. 4.3 to the Company's
      amendment No. 1 to the Registration Statement on Form S-3 filed October
      17, 2000 (Registration Number 333-47572).4.5
                                                      Rights
      Agreement dated as of July 25, 2001 between the Company and American Stock
      Transfer & Trust Company, as Rights Agent, which includes the
      Certificate of Designations for the Series A Junior Participating
      Preferred Stock as Exhibit A, the Form of Right Certificate as Exhibit B
      and the Summary of Rights to Purchase Preferred Shares as Exhibit C,
      incorporated by reference to Exhibit No. 4.1 to the Company's Current
      Report on Form 8-K filed July 31, 2001 (the “Rights
      Agreement”).4.6
                                                      Amendment
      No. 1 dated May 25, 2005 to the Rights Agreement, incorporated by
      reference to Exhibit No. 10.1 to the Company’s Current Report on Form 8-K
      filed May 31, 2005.11
                                                      Statement
      regarding computation of earnings per share. (See Note 5 to the
      unaudited consolidated financial statements.)31.11
                                                      Certification
      by George Paz, as Chairman, President and Chief Executive Officer of
      Express Scripts, Inc., pursuant to Exchange Act Rule
      13a-14(a).31.21
                                                      Certification
      by Jeffrey Hall, as Executive Vice President and Chief Financial Officer
      of Express Scripts, Inc., pursuant to Exchange Act Rule
      13a-14(a).32.11
                                                      Certification
      by George Paz, as Chairman, President and Chief Executive Officer of
      Express Scripts, Inc., pursuant to 18 U.S.C. § 1350 and Exchange Act Rule
      13a-14(b).32.21
                                                      Certification
      by Jeffrey Hall, as Executive Vice President and Chief Financial Officer
      of Express Scripts, Inc., pursuant to 18 U.S.C. § 1350 and Exchange Act
      Rule 13a-14(b).





1
            Filed
      herein.


31