|   |
|--------|

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**FORM      10-Q**

| x       | QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934For                the quarterly period ended September 30, 2007.              |
|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  o | TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934For                the transition period from ____________ to _____________.  |

**EXPRESS      SCRIPTS, INC.**

| **Delaware**(State                of Incorporation)                                                       | **43-1420563**(I.R.S.                employer identification no.) |
|----------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------|
| **One                Express Way, St. Louis, MO**(Address                of principal executive offices)  | **63121**(Zip                Code)                                |

| Common                stock outstanding as of September 30, 2007: | 252,044,000 |                   Shares |
|-------------------------------------------------------------------|-------------|------------------------------------|

|   |
|--------|

----

| PART                  I. FINANCIAL INFORMATION |
|------------------------------------------------|

| **Item                1.** | **Financial                Statements** |
|----------------------------|-----------------------------------------|

| **EXPRESS                SCRIPTS, INC.**                                                                |
|---------------------------------------------------------------------------------------------------------|
| **Unaudited                Consolidated Balance Sheet**                                                 |
|                                                                                                    |
|                                                                                                    |   |   |    |
|                                                                                                    | **September                30,**  |   | **December                31,**  |
| * (in                millions, except share data)*                                                 | **2007**  |   | **2006**  |
|  Assets                                                                                            |   |   |   |   |   |   |
|  Current                assets:                                                                    |   |   |   |   |   |   |
| Cash                and cash                equivalents                                                 | $ | 96.0 |   |   | $ | 131.0 |   |   |
| Receivables,                net                                                                         |   | 1,308.4 |   |   |   | 1,334.4 |   |   |
| Inventories                                                                                             |   | 158.8 |   |   |   | 194.6 |   |   |
| Deferred                taxes                                                                           |   | 113.3 |   |   |   | 90.9 |   |   |
| Prepaid                expenses and other current                assets                                 |   | 19.6 |   |   |   | 21.2 |   |   |
| Total                current                assets                                                      |   | 1,696.1 |   |   |   | 1,772.1 |   |   |
|  Property                and equipment, net                                                        |   | 203.9 |   |   |   | 201.4 |   |   |
|  Goodwill                                                                                          |   | 2,689.5 |   |   |   | 2,686.0 |   |   |
|  Other                intangible assets, net                                                       |   | 350.9 |   |   |   | 378.4 |   |   |
|  Other                assets                                                                       |   | 43.6 |   |   |   | 70.2 |   |   |
| Total                assets                                                                             | $ | 4,984.0 |   |   | $ | 5,108.1 |   |   |
|                                                                                                    |   |   |   |   |   |   |   |   |
|  Liabilities                and Stockholders’ Equity                                         |   |   |   |   |   |   |   |   |
|  Current                liabilities:                                                               |   |   |   |   |   |   |   |   |
| Claims                and rebates                payable                                                | $ | 1,203.8 |   |   | $ | 1,275.7 |   |   |
| Accounts                payable                                                                         |   | 547.2 |   |   |   | 583.4 |   |   |
| Accrued                expenses                                                                         |   | 401.2 |   |   |   | 390.2 |   |   |
| Current                maturities of long-term                debt                                      |   | 240.1 |   |   |   | 180.1 |   |   |
| Total                current                liabilities                                                 |   | 2,392.3 |   |   |   | 2,429.4 |   |   |
|  Long-term                debt                                                                     |   | 1,740.3 |   |   |   | 1,270.4 |   |   |
|  Other                liabilities                                                                  |   | 314.0 |   |   |   | 283.4 |   |   |
| Total                liabilities                                                                        |   | 4,446.6 |   |   |   | 3,983.2 |   |   |
|                                                                                                    |   |   |   |   |   |   |   |   |
|  Stockholders’                Equity:                                                        |   |   |   |   |   |   |   |   |
| Preferred                stock, 5,000,000 shares                authorized, $0.01 par value per share;  |   |   |   |   |   |   |   |   |
| and                no shares issued and                outstanding                                      |   | - |   |   |   | - |   |   |
| Common                stock, 1,300,000,000 shares                authorized, $0.01 par value per share; |   |   |   |   |   |   |   |   |
| shares                issued:  318,875,000 and 159,442,000,                respectively;      |   |   |   |   |   |   |   |   |
| shares                outstanding:  252,044,000 and 135,650,000,                respectively  |   | 3.2 |   |   |   | 1.6 |   |   |
| Additional                paid-in                capital                                                |   | 550.4 |   |   |   | 495.3 |   |   |
| Accumulated                other comprehensive                income                                    |   | 19.4 |   |   |   | 11.9 |   |   |
| Retained                earnings                                                                        |   | 2,446.4 |   |   |   | 2,017.3 |   |   |
|                                                                                                    |   | 3,019.4 |   |   |   | 2,526.1 |   |   |
| Common                stock in treasury at cost,                66,831,000 and 23,792,000               |   |   |   |   |   |   |   |   |
| shares,                respectively                                                                     |   | (2,482.0 | ) |   |   | (1,401.2 | ) |   |
| Total                stockholders’                equity                                          |   | 537.4 |   |   |   | 1,124.9 |   |   |
| Total                liabilities and                stockholders’ equity                          | $ | 4,984.0 |   |   | $ | 5,108.1 |   |   |
|                                                                                                    |   |   |   |   |   |   |   |   |

*See      accompanying Notes to Unaudited Consolidated Financial      Statements*

----

**EXPRESS      SCRIPTS, INC.**

**Unaudited      Consolidated Statement of Operations**

|                                                                      | **Three                Months Ended**  |    | **Nine                Months Ended**  |
|---------------------------------------------------------------------------|---------------------------------------------|---------|--------------------------------------------|
|                                                                      | **September                30,**       |    | **September                30,**      |
| * (in                millions, except per share data)*               | **2007**                               |    | **2006**                              |   | **2007**  |   | **2006**  |
|                                                                      |                                        |    |                                       |   |   |   |   |   |   |   |   |   |
|  Revenues                1                                           | $                                           | 4,519.0 |                                       |   | $ | 4,330.2 |   |   | $ | 13,658.9 |   |   | $ | 13,131.3 |   |   |
|  Cost                of revenues 1                                   |                                        | 4,074.5 |                                       |   |   | 3,955.9 |   |   |   | 12,344.9 |   |   |   | 12,048.8 |   |   |
| Gross                profit                                               |                                        | 444.5   |                                       |   |   | 374.3 |   |   |   | 1,314.0 |   |   |   | 1,082.5 |   |   |
|  Selling,                general and administrative                  |                                        | 183.9   |                                       |   |   | 168.6 |   |   |   | 539.7 |   |   |   | 500.8 |   |   |
|  Operating                income                                     |                                        | 260.6   |                                       |   |   | 205.7 |   |   |   | 774.3 |   |   |   | 581.7 |   |   |
|  Other                (expense) income:                              |                                        |    |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-operating                gains (charges),                net          |                                        | 0.2     |                                       |   |   | - |   |   |   | (18.6 | ) |   |   | - |   |   |
| Undistributed                loss from joint                venture       |                                        | (0.3    | )                                          |   |   | (0.4 | ) |   |   | (1.1 | ) |   |   | (1.2 | ) |   |
| Interest                income                                            |                                        | 2.7     |                                       |   |   | 2.3 |   |   |   | 8.1 |   |   |   | 11.3 |   |   |
| Interest                expense                                           |                                        | (31.3   | )                                          |   |   | (26.4 | ) |   |   | (79.1 | ) |   |   | (70.6 | ) |   |
|                                                                      |                                        | (28.7   | )                                          |   |   | (24.5 | ) |   |   | (90.7 | ) |   |   | (60.5 | ) |   |
|  Income                before income taxes                           |                                        | 231.9   |                                       |   |   | 181.2 |   |   |   | 683.6 |   |   |   | 521.2 |   |   |
|  Provision                for income taxes                           |                                        | 89.0    |                                       |   |   | 66.5 |   |   |   | 254.3 |   |   |   | 194.0 |   |   |
|  Net                income                                           | $                                           | 142.9   |                                       |   | $ | 114.7 |   |   | $ | 429.3 |   |   | $ | 327.2 |   |   |
|                                                                      |                                        |    |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Basic                earnings per share (“EPS”):        | $                                           | 0.56    |                                       |   | $ | 0.42 |   |   | $ | 1.63 |   |   | $ | 1.16 |   |   |
|                                                                      |                                        |    |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Weighted                average number of common shares             |                                        |    |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| outstanding                during the period -                Basic EPS   |                                        | 254.2   |                                       |   |   | 272.2 |   |   |   | 263.1 |   |   |   | 282.4 |   |   |
|                                                                      |                                        |    |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Diluted                earnings per share:                          | $                                           | 0.56    |                                       |   | $ | 0.42 |   |   | $ | 1.61 |   |   | $ | 1.14 |   |   |
|                                                                      |                                        |    |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Weighted                average number of common shares             |                                        |    |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| outstanding                during the period -                Diluted EPS |                                        | 257.3   |                                       |   |   | 276.4 |   |   |   | 266.3 |   |   |   | 287.0 |   |   |
|                                                                      |                                        |    |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |

*1      Excludes estimated retail pharmacy co-payments of  $909.4 million and      $942.8 million for the three months ended September 30, 2007 and 2006,      respectively, and $2,841.5 million  and $3,209.2      million  for the nine months ended September 30, 2007 and 2006,      respectively.  These are amounts we instructed retail pharmacies to      collect from members.  We have no information regarding actual      co-payments collected.*

*See      accompanying Notes to Unaudited Consolidated Financial      Statements*

----

| **EXPRESS                SCRIPTS, INC.**                                                                    |   |
|-------------------------------------------------------------------------------------------------------------|--------|
| **Unaudited                Consolidated Statement of Changes in Stockholders’                Equity** |   |

|                                                                               | Number                of Shares  |    | Amount                       |
|------------------------------------------------------------------------------------|---------------------------------------|---------|-----------------------------------|
|     * (in                millions)*                       | CommonStock                      |    | Common                Stock  |   | AdditionalPaid-inCapital  |   | Accumulated                Other Comprehensive Income  |   | Retained                Earnings  |   | TreasuryStock  |   | Total  |
|  Balance                at December 31, 2006                                  |                                  | 159.4   |                              |   | $ | 1.6 |   |   | $ | 495.3 |   |   | $ | 11.9 |   |   | $ | 2,017.3 |   |   | $ | (1,401.2 | ) |   | $ | 1,124.9 |   |   |
| Comprehensive                income:                                               |                                  |    |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                income                                                          |                                  | -       |                              |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 429.3 |   |   |   | - |   |   |   | 429.3 |   |   |
| Other                comprehensive                income:                          |                                  |    |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreign                currency                                                    |                                  |    |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| translation                adjustment                                              |                                  | -       |                              |   |   | - |   |   |   | - |   |   |   | 9.5 |   |   |   | - |   |   |   | - |   |   |   | 9.5 |   |   |
| Realized                gains on                available-                         |                                  |    |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| for-sale                securities; net of                taxes                    |                                  |  - |                              |   |   |  - |   |   |   |  - |   |   |   | (2.0 | ) |   |   |  - |   |   |   |  - |   |   |   | (2.0 | ) |   |
| Comprehensive                income                                                |                                  | -       |                              |   |   | - |   |   |   | - |   |   |   | 7.5 |   |   |   | 429.3 |   |   |   | - |   |   |   | 436.8 |   |   |
| Stock                split in form of stock                dividend                |                                  | 159.4   |                              |   |   | 1.6 |   |   |   | (1.6 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |
| Treasury                stock                acquired                              |                                  | -       |                              |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,140.3 | ) |   |   | (1,140.3 | ) |   |
| Changes                in stockholders’                equity                |                                  |    |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       related                to employee stock plans |                                  | 0.1     |                              |   |   | - |   |   |   | 56.7 |   |   |   | - |   |   |   | - |   |   |   | 59.5 |   |   |   | 116.2 |   |   |
|     Cumulative                effect of adoption of FIN 48     |                                  | -       |                              |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (0.2 | ) |   |   | - |   |   |   | (0.2 | ) |   |
|  Balance                at September 30, 2007                                 |                                  | 318.9   |                              |   | $ | 3.2 |   |   | $ | 550.4 |   |   | $ | 19.4 |   |   | $ | 2,446.4 |   |   | $ | (2,482.0 | ) |   | $ | 537.4 |   |   |
|                                                                               |                                  |    |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

*See      accompanying Notes to Unaudited Consolidated Financial      Statements*

----

| **EXPRESS                SCRIPTS, INC.**                          |
|-------------------------------------------------------------------|
| **Unaudited                Consolidated Statement of Cash Flows** |
|                                                              |

|                                                                                  | **Nine                Months Ended**  |
|---------------------------------------------------------------------------------------|--------------------------------------------|
|                                                                                  | **September                30,**      |
|  *(in              millions)*                                                    |              |
|  Cash                flows from operating activities:                            | **  2007**                       | ** ** | **  2006** |   |
| Net                income                                                             | $                                          | 429.3 |   |   | $ | 327.2 |   |   |
| Adjustments                to reconcile net                income to net cash         |                                       |   |   |   |   |   |   |   |
| provided                by operating                activities:                       |                                       |   |   |   |   |   |   |   |
| Depreciation                and                amortization                           |                                       | 75.3 |   |   |   | 75.7 |   |   |
| Non-cash                adjustments to net                income                      |                                       | 52.3 |   |   |   | 44.4 |   |   |
| Changes                in operating assets and                liabilities:            |                                       |   |   |   |   |   |   |   |
| Claims                and rebates                payable                              |                                       | (72.0 | ) |   |   | (178.8 | ) |   |
| Other                net changes in operating                assets and liabilities   |                                       | 13.4 |   |   |   | 84.1 |   |   |
|  Net                cash provided by operating activities                        |                                       | 498.3 |   |   |   | 352.6 |   |   |
|                                                                                  |                                       |   |   |   |   |   |   |   |
|  Cash                flows from investing activities:                            |                                       |   |   |   |   |   |   |   |
| Purchases                of property and                equipment                     |                                       | (49.5 | ) |   |   | (38.2 | ) |   |
| Sale                of marketable                securities                           |                                       | 34.2 |   |   |   | - |   |   |
| Other                                                                                 |                                       | (0.6 | ) |   |   | 0.1 |   |   |
|  Net                cash used in investing activities                            |                                       | (15.9 | ) |   |   | (38.1 | ) |   |
|                                                                                  |                                       |   |   |   |   |   |   |   |
|  Cash                flows from financing activities:                            |                                       |   |   |   |   |   |   |   |
| Proceeds                from long-term                debt                            |                                       | 700.0 |   |   |   | - |   |   |
| Repayment                of long-term                debt                             |                                       | (120.1 | ) |   |   | (80.1 | ) |   |
| (Repayment                of) proceeds from                revolving credit line, net |                                       | (50.0 | ) |   |   | 200.0 |   |   |
| Tax                benefit relating to employee                stock compensation     |                                       | 43.7 |   |   |   | 33.0 |   |   |
| Treasury                stock                acquired                                 |                                       | (1,140.3 | ) |   |   | (906.8 | ) |   |
| Net                proceeds from employee stock                plans                  |                                       | 47.1 |   |   |   | 28.8 |   |   |
| Deferred                financing                fees                                 |                                       | (1.3 | ) |   |   | (0.3 | ) |   |
|  Net                cash used in financing activities                            |                                       | (520.9 | ) |   |   | (725.4 | ) |   |
|                                                                                  |                                       |   |   |   |   |   |   |   |
|  Effect                of foreign currency translation adjustment                |                                       | 3.5 |   |   |   | 1.1 |   |   |
|                                                                                  |                                       |   |   |   |   |   |   |   |
|  Net                decrease in cash and cash equivalents                        |                                       | (35.0 | ) |   |   | (409.8 | ) |   |
|  Cash                and cash equivalents at beginning of period                 |                                       | 131.0 |   |   |   | 477.9 |   |   |
|  Cash                and cash equivalents at end of period                       | $                                          | 96.0 |   |   | $ | 68.1 |   |   |
|                                                                                  |                                       |   |   |   |   |   |   |   |

*See      accompanying Notes to Unaudited Consolidated Financial      Statements*

----

**EXPRESS      SCRIPTS, INC.**

**NOTES      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**Note      1 – Summary of significant accounting policies**

**Note      2 – Non-operating gains (charges), net**

----

**Note        3 – Goodwill and other intangibles**

|                                               | **September                30, 2007**  |    | **December                31, 2006**  |
|----------------------------------------------------|---------------------------------------------|---------|--------------------------------------------|
|                                               | **Gross****Carrying****Amount**        |    | **Accumulated****Amortization**       |   | **Gross****Carrying****Amount**  |   | **Accumulated****Amortization**  |
|  Goodwill                                     |                                        |    |                                       |   |   |   |   |   |   |   |   |   |
| PBM(1)                                             | $                                           | 1,513.0 |                                       |   | $ | 107.4 |   |   | $ | 1,509.2 |   |   | $ | 107.1 |   |   |
| SAAS(1)                                            |                                        | 1,283.9 |                                       |   |   | - |   |   |   | 1,283.9 |   |   |   | - |   |   |
|                                               | $                                           | 2,796.9 |                                       |   | $ | 107.4 |   |   | $ | 2,793.1 |   |   | $ | 107.1 |   |   |
|                                               |                                        |    |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Other                intangible assets       |                                        |    |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| PBM                                                |                                        |    |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Customer                contracts                  | $                                           | 245.2   |                                       |   | $ | 94.7 |   |   | $ | 244.2 |   |   | $ | 85.3 |   |   |
| Other(2)                                           |                                        | 60.7    |                                       |   |   | 51.5 |   |   |   | 61.6 |   |   |   | 49.3 |   |   |
|                                               |                                        | 305.9   |                                       |   |   | 146.2 |   |   |   | 305.8 |   |   |   | 134.6 |   |   |
|                                               |                                        |    |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SAAS                                               |                                        |    |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Customer                relationships              |                                        | 231.5   |                                       |   |   | 46.5 |   |   |   | 231.5 |   |   |   | 31.0 |   |   |
| Other(2)                                           |                                        | 9.2     |                                       |   |   | 3.0 |   |   |   | 9.9 |   |   |   | 3.2 |   |   |
|                                               |                                        | 240.7   |                                       |   |   | 49.5 |   |   |   | 241.4 |   |   |   | 34.2 |   |   |
|  Total                other intangible assets | $                                           | 546.6   |                                       |   | $ | 195.7 |   |   | $ | 547.2 |   |   | $ | 168.8 |   |   |
|                                               |                                        |    |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                  (1)    | We                have two reportable segments: Pharmacy Benefit Management (“PBM”) and                Specialty and Ancillary Services                (“SAAS”). |
|---------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)                   | Changes                in other intangible assets are a result of the write-off of                fully-amortized contractual assets, consisting of non-compete agreements                that are no longer in effect. |
|---------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Note      4 – Common Stock**

**Note      5 – Financing**

| *·  * | Delayed                draw feature (through December 31, 2007) allowing for interim borrowings                up to $800.0 million. |
|----------------------|--------------------------------------------------------------------------------------------------------------------------------------|

| *·  * | No                scheduled payments until the maturity of the                loan. |
|----------------------|-------------------------------------------------------------------------------------|

----

|                                        Year Ended December 31, |   |    |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------|--------|
|  2007                                                                                                                                                                        | $      | 60.0    |   |   |
|  2008                                                                                                                                                                        |   | 260.1   |   |   |
|  2009                                                                                                                                                                        |   | 420.0   |   |   |
|  2010                                                                                                                                                                        |   | 1,240.0 |   |   |
|  2011                                                                                                                                                                        |   | 0.1     |   |   |
|  Thereafter                                                                                                                                                                  |   | 0.2     |   |   |
|                                                                                                                                                                              | $      | 1,980.4 |   |   |
|                                                                                                                                                                              |   |    |   |   |

**Note      6 – Income Taxes**

----

**Note      7 – Earnings per share (reflecting the two-for-one stock split effective June      22, 2007)**

|                                                                                                                                                              |                **Three                Months Ended****September                30,**   |       |                **Nine                Months Ended****September                30,**   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------|
| *** (**in                millions)*                                                                                                                          | **2007**                                                                                              | ** ** | ** 2006**                                                                                       | ** ** | ** 2007** | ** ** | **2006** |
|  Weighted                average number of common shares                                                                                                     |                                                                                                  |       |                                                                                                 |   |   |   |   |   |
| outstanding                during the period – Basic EPS                                                                                                    |                                                                                                  | 254.2      |                                                                                                 |   | 272.2 |   |   | 263.1 |   |   | 282.4 |   |   |
|  Dilutive                common stock equivalents:                                                                                                           |                                                                                                  |       |                                                                                                 |   |   |   |   |   |   |   |   |   |   |
| Outstanding                stock options, SSRs,                restricted stock units, and executive                   deferred compensation units |                                                                                                  | 3.1        |                                                                                                 |   | 4.2 |   |   | 3.2 |   |   | 4.6 |   |   |
|  Weighted                average number of common shares                                                                                                     |                                                                                                  |       |                                                                                                 |   |   |   |   |   |   |   |   |   |   |
| outstanding                during the period – Diluted EPS(1)                                                                                               |                                                                                                  | 257.3      |                                                                                                 |   | 276.4 |   |   | 266.3 |   |   | 287.0 |   |   |
|                                                                                                                                                              |                                                                                                  |       |                                                                                                 |   |   |   |   |   |   |   |   |   |   |

| (1)   | Excludes                “stock-settled” stock appreciation rights (“SSRs”) of 0.1 million for the                nine months ended September 30, 2007.  These were excluded                because their effect was                anti-dilutive. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Note      8 – Stock-based compensation plans (reflecting the two-for-one stock split      effective June 22, 2007)**

----

|                                              | **Three                Months Ended September 30,** |                 **Nine                Months Ended September 30,** |
|---------------------------------------------------|-----------------------------------------------------|------------------------------------------------------------------------------|
|                                              | **2007**                                            | **2006**                                                                     | **2007** | **2006** |
|  Expected                life of option      | 3-5                years                            | 3-5                years                                                     | 3-5                years | 3-5                years |
|  Risk-free                interest rate      | 4.2%-4.3%                                      |  5.0%-5.3%                                                              |  4.2%-5.2% |  4.6%-5.3% |
|  Expected                volatility of stock |  31%                                           |  32%-34%                                                                |  31% |  32%-34% |
|  Expected                dividend yield      | None                                                | None                                                                         | None | None |

**Note      9 – Contingencies**

**Note      10 – Segment reporting**

----

| *** (in                  millions)***                       | **PBM**  |     | **SAAS**  |   | **Total**  |
|------------------------------------------------------------------|---------------|----------|----------------|--------|-----------------|
| ** Three                  months ended September 30, 2007** |          |     |           |   |            |   |   |   |   |
|  Product                  revenues                          |          |     |           |   |            |   |   |   |   |
| Network                  revenues                                | $             | 2,320.0  |           |   | $               | - |   |   | $ | 2,320.0 |   |   |
| Home                  delivery                  revenues         |          | 1,251.2  |           |   |            | - |   |   |   | 1,251.2 |   |   |
| Other                  revenues                                  |          | -        |           |   |            | 874.5 |   |   |   | 874.5 |   |   |
|  Service                  revenues                          |          | 41.2     |           |   |            | 32.1 |   |   |   | 73.3 |   |   |
| Total                  revenues                                  |          | 3,612.4  |           |   |            | 906.6 |   |   |   | 4,519.0 |   |   |
|                                                             |          |     |           |   |            |   |   |   |   |   |   |   |
|  Depreciation                  and amortization expense     |          | 13.8     |           |   |            | 9.4 |   |   |   | 23.2 |   |   |
|                                                             |          |     |           |   |            |   |   |   |   |   |   |   |
|  Operating                  income (loss)(1)                |          | 269.9    |           |   |            | (9.3 | ) |   |   | 260.6 |   |   |
|  Non-operating                  gains                       |          |     |           |   |            |   |   |   |   | 0.2 |   |   |
|  Undistributed                  loss from joint venture     |          |     |           |   |            |   |   |   |   | (0.3 | ) |   |
|  Interest                  income                           |          |     |           |   |            |   |   |   |   | 2.7 |   |   |
|  Interest                  expense                          |          |     |           |   |            |   |   |   |   | (31.3 | ) |   |
|  Income                  before income taxes                |          |     |           |   |            |   |   |   |   | 231.9 |   |   |
|  Capital                  expenditures                      |          | 14.9     |           |   |            | 4.7 |   |   |   | 19.6 |   |   |
|                                                             |          |     |           |   |            |   |   |   |   |   |   |   |
| ** Three                  months ended September 30, 2006** |          |     |           |   |            |   |   |   |   |   |   |   |
|  Product                  revenues                          |          |     |           |   |            |   |   |   |   |   |   |   |
| Network                  revenues                                | $             | 2,159.3  |           |   | $               | - |   |   | $ | 2,159.3 |   |   |
| Home                  delivery                  revenues         |          | 1,265.3  |           |   |            | - |   |   |   | 1,265.3 |   |   |
| Other                  revenues                                  |          | -        |           |   |            | 834.0 |   |   |   | 834.0 |   |   |
|  Service                  revenues                          |          | 40.5     |           |   |            | 31.1 |   |   |   | 71.6 |   |   |
| Total                  revenues                                  |          | 3,465.1  |           |   |            | 865.1 |   |   |   | 4,330.2 |   |   |
|                                                             |          |     |           |   |            |   |   |   |   |   |   |   |
|  Depreciation                  and amortization expense     |          | 14.7     |           |   |            | 9.1 |   |   |   | 23.8 |   |   |
|                                                             |          |     |           |   |            |   |   |   |   |   |   |   |
|  Operating                  income                          |          | 194.0    |           |   |            | 11.7 |   |   |   | 205.7 |   |   |
|  Undistributed                  loss from joint venture     |          |     |           |   |            |   |   |   |   | (0.4 | ) |   |
|  Interest                  income                           |          |     |           |   |            |   |   |   |   | 2.3 |   |   |
|  Interest                  expense                          |          |     |           |   |            |   |   |   |   | (26.4 | ) |   |
|  Income                  before income taxes                |          |     |           |   |            |   |   |   |   | 181.2 |   |   |
|  Capital                  expenditures                      |          | 12.9     |           |   |            | 4.6 |   |   |   | 17.5 |   |   |
|                                                             |          |     |           |   |            |   |   |   |   |   |   |   |
| ** Nine                  months ended September 30, 2007**  |          |     |           |   |            |   |   |   |   |   |   |   |
|  Product                  revenues                          |          |     |           |   |            |   |   |   |   |   |   |   |
| Network                  revenues                                | $             | 7,028.9  |           |   | $               | - |   |   | $ | 7,028.9 |   |   |
| Home                  delivery                  revenues         |          | 3,737.6  |           |   |            | - |   |   |   | 3,737.6 |   |   |
| Other                  revenues                                  |          | -        |           |   |            | 2,674.0 |   |   |   | 2,674.0 |   |   |
|  Service                  revenues                          |          | 124.1    |           |   |            | 94.3 |   |   |   | 218.4 |   |   |
| Total                  revenues                                  |          | 10,890.6 |           |   |            | 2,768.3 |   |   |   | 13,658.9 |   |   |
|                                                             |          |     |           |   |            |   |   |   |   |   |   |   |
|  Depreciation                  and amortization expense     |          | 47.1     |           |   |            | 28.2 |   |   |   | 75.3 |   |   |
|                                                             |          |     |           |   |            |   |   |   |   |   |   |   |
|  Operating                  income(1)                       |          | 756.7    |           |   |            | 17.6 |   |   |   | 774.3 |   |   |
|  Non-operating                  charges, net                |          |     |           |   |            |   |   |   |   | (18.6 | ) |   |
|  Undistributed                  loss from joint venture     |          |     |           |   |            |   |   |   |   | (1.1 | ) |   |
|  Interest                  income                           |          |     |           |   |            |   |   |   |   | 8.1 |   |   |
|  Interest                  expense                          |          |     |           |   |            |   |   |   |   | (79.1 | ) |   |
|  Income                  before income taxes                |          |     |           |   |            |   |   |   |   | 683.6 |   |   |
|  Capital                  expenditures                      |          | 37.1     |           |   |            | 12.4 |   |   |   | 49.5 |   |   |

----

| * (in                millions)*                            |  **PBM  ** | ** ** | ** SAAS  ** | ** ** | ** ****Total**   |
|-----------------------------------------------------------------|---------------------------|------------|----------------------------|------------|---------------------------------|
| ** Nine                  months ended September 30, 2006** |                      |       |                       |       |                            |   |   |   |   |   |   |   |
|  Product                  revenues                         |                      |       |                       |       |                            |   |   |   |   |   |   |   |
| Network                  revenues                               | $                         | 6,484.3    |                       |       | $                               | - |   |   | $ | 6,484.3 |   |   |
| Home                  delivery                  revenues        |                      | 3,894.2    |                       |       |                            | - |   |   |   | 3,894.2 |   |   |
| Other                  revenues                                 |                      | -          |                       |       |                            | 2,530.5 |   |   |   | 2,530.5 |   |   |
|  Service                  revenues                         |                      | 121.6      |                       |       |                            | 100.7 |   |   |   | 222.3 |   |   |
| Total                  revenues                                 |                      | 10,500.1   |                       |       |                            | 2,631.2 |   |   |   | 13,131.3 |   |   |
|                                                            |                      |       |                       |       |                            |   |   |   |   |   |   |   |
|  Depreciation                  and amortization expense    |                      | 47.8       |                       |       |                            | 27.9 |   |   |   | 75.7 |   |   |
|                                                            |                      |       |                       |       |                            |   |   |   |   |   |   |   |
|  Operating                  income                         |                      | 522.1      |                       |       |                            | 59.6 |   |   |   | 581.7 |   |   |
|  Undistributed                  loss from joint venture    |                      |       |                       |       |                            |   |   |   |   | (1.2 | ) |   |
|  Interest                  income                          |                      |       |                       |       |                            |   |   |   |   | 11.3 |   |   |
|  Interest                  expense                         |                      |       |                       |       |                            |   |   |   |   | (70.6 | ) |   |
|  Income                  before income taxes               |                      |       |                       |       |                            |   |   |   |   | 521.2 |   |   |
|  Capital                  expenditures                     |                      | 27.6       |                       |       |                            | 10.6 |   |   |   | 38.2 |   |   |

| (1)   | SAAS                  operating (loss) income in the three and nine months ended September                  30, 2007 includes one-time charges of $18.5 million, of which $5.0                  million relates to a reduction of revenues and $13.5 million relates                  to an                  increase in SG&A. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  *(in                millions)*                         | ** PBM  ** | ** ** | ** SAAS  ** | ** ** | ** ****Total**   |    |
|--------------------------------------------------------------|---------------------------|------------|----------------------------|------------|---------------------------------|---------|
| ** As                  of September 30, 2007**          |            |       |             |       |                  |    |
|  Total                  assets                          | $                         | 2,592.4    |                       |       | $                               | 2,391.6 |   |   | $ | 4,984.0 |   |   |
|  Investment                  in equity method investees |                      | 0.3        |                       |       |                            | 3.2     |   |   |   | 3.5 |   |   |
|                                                         |                      |       |                       |       |                            |    |   |   |   |   |   |   |
| ** As                  of December 31, 2006**           |                      |       |                       |       |                            |    |   |   |   |   |   |   |
|  Total                  assets                          | $                         | 2,681.5    |                       |       | $                               | 2,426.6 |   |   | $ | 5,108.1 |   |   |
|  Investment                  in equity method investees |                      | 0.2        |                       |       |                            | 2.7     |   |   |   | 2.9 |   |   |

**Note      11 – Subsequent Events**

----

| **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 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 integration risks                    and                    costs, uncertainties associated with client retention and repricing                    of                    client contracts, and uncertainties associated with the operations                    of                    acquired businesses* |
|----------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| *·  * | *investigations                    of certain PBM practices and pharmaceutical pricing, marketing                    and                    distribution practices currently being conducted by various regulatory                    agencies  and state attorneys                    general* |
|----------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *·  * | *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 DoD TRICARE                    Management Activity and various state governments and                    agencies* |
|----------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *·  * | *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* |
|----------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *·  * | *uncertainties                    regarding the Medicare Part D prescription drug benefit, including                    the                    financial impact  to us to the extent that we participate in the                    program on a risk-bearing basis, uncertainties of client or member                    losses                    to other providers under Medicare Part D, and increased regulatory                    risk* |
|----------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| *·  * | *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* |
|----------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *·  * | *our                    ability to continue to develop new products, services and delivery                    channels* |
|----------------------|-------------------------------------------------------------------------------------------------------------------------|

| *·  * | *our                    ability to maintain growth rates, or to control operating or                    capital                    costs* |
|----------------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| *·  * | *uncertainties                    associated with U.S. Centers for Medicare & Medicaid’s (“CMS”)                    implementation of the Medicare Part B Competitive Acquisition                    Program                    (“CAP”), including the potential loss of clients/revenues to providers                    choosing to participate in the                    CAP* |
|----------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *·  * | *continued                    pressure on margins resulting from client demands for lower prices,                    enhanced service offerings and/or higher service levels, and                    the possible                    termination of, or unfavorable modification to, contracts with                    key clients                    or providers* |
|----------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *·  * | *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* |
|----------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *·  * | *the                    use and protection of the intellectual property we use in our                    business* |
|----------------------|--------------------------------------------------------------------------------------------------------------------|

| *·  * | *our                    leverage and debt service obligations, including the effect of                    certain                    covenants in our borrowing                    agreements* |
|----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *·  * | *general                    developments in the health care industry, including the impact                    of                    increases in 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* |
|----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *·  * | *our                    ability to attract and retain qualified                    employees* |
|----------------------|-----------------------------------------------------------------------------------------------|

| *·  * | *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” of our          Annual Report on Form 10-K for the year ended December 31, 2006, filed          with the          SEC on February 8, 2007.*

----

**OVERVIEW**

**EXECUTIVE      SUMMARY AND TREND FACTORS AFFECTING OUR BUSINESS**

**CRITICAL      ACCOUNTING POLICIES**

----

**RESULTS      OF OPERATIONS**

*PBM      OPERATING INCOME*

|                                               | **Three                Months Ended September 30,**  |    | **Nine                Months Ended September 30,**  |
|----------------------------------------------------|-----------------------------------------------------------|---------|----------------------------------------------------------|
| *** (in                millions)***           | **2007**                                             |    | **2006**                                            |   | **2007**  |   | **2006**  |
|                                               |                                                      |    |                                                     |   |   |   |   |   |   |   |   |   |
|  Product                revenues              |                                                      |    |                                                     |   |   |   |   |   |   |   |   |   |
| Network                revenues                    | $                                                         | 2,320.0 |                                                     |   | $ | 2,159.3 |   |   | $ | 7,028.9 |   |   | $ | 6,484.3 |   |   |
| Home                delivery revenues              |                                                      | 1,251.2 |                                                     |   |   | 1,265.3 |   |   |   | 3,737.6 |   |   |   | 3,894.2 |   |   |
|  Service                revenues              |                                                      | 41.2    |                                                     |   |   | 40.5 |   |   |   | 124.1 |   |   |   | 121.6 |   |   |
| Total                PBM revenues                  |                                                      | 3,612.4 |                                                     |   |   | 3,465.1 |   |   |   | 10,890.6 |   |   |   | 10,500.1 |   |   |
|  Cost                of PBM revenues          |                                                      | 3,213.2 |                                                     |   |   | 3,145.7 |   |   |   | 9,735.2 |   |   |   | 9,600.7 |   |   |
| PBM                gross                profit     |                                                      | 399.2   |                                                     |   |   | 319.4 |   |   |   | 1,155.4 |   |   |   | 899.4 |   |   |
|  PBM                SG&A expenses         |                                                      | 129.3   |                                                     |   |   | 125.4 |   |   |   | 398.7 |   |   |   | 377.3 |   |   |
| PBM                operating                income | $                                                         | 269.9   |                                                     |   | $ | 194.0 |   |   | $ | 756.7 |   |   | $ | 522.1 |   |   |
|                                               |                                                      |    |                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Total                adjusted PBM Claims(1)  |                                                      | 122.7   |                                                     |   |   | 123.8 |   |   |   | 374.3 |   |   |   | 385.1 |   |   |
|                                               |                                                      |    |                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (1)   | PBM                adjusted claims represent network claims plus home delivery claims,                which                are multiplied by 3, as home delivery claims are typically 90 day                claims                and network claims are typically 30 day                claims. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Product      Revenues for the three months ended September 30, 2007:  *

----

*Product      Revenues for the nine months ended September 30, 2007:  *

| *·  *  | We                experienced an increase of 3.1% in the cost of revenue per adjusted                claim                in the three months ended September 30, 2007 as compared to the same                period of 2006, primarily from ingredient cost inflation and a significant                reduction of 100% co-payment claims as discussed                above. |
|----------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *·  *   | This                increase was partially offset by the 0.9% decrease in adjusted claims                volume, as well as better management of ingredient costs resulting                from                renegotiation of certain supplier contracts and the increase in the                aggregate generic fill rate, as discussed                above. |
|----------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *·  *   | We                experienced an increase of 4.3% in the cost of revenue per adjusted                claim                in the first nine months of September 30, 2007 as compared to the                same                period of 2006, primarily from ingredient cost inflation and a significant                reduction of 100% co-payment claims as discussed                above. |
|----------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *·  *   | This                increase was partially offset by the 2.8% decrease in adjusted claims                volume, as well as better management of ingredient costs resulting                from                renegotiation of certain supplier contracts and the increase in the                aggregate generic fill rate, as discussed                above. |
|----------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| *·  *  | Increased                spending of $25.4 million partially consisting of increased management                incentive compensation in addition to the effect of                inflation. |
|----------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *·  *   | This                increase was offset by a $13.5 million decrease in professional fees,                primarily due to a reduction of IT contractors and                consultants. |
|----------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*SAAS      OPERATING (LOSS) INCOME*

|                                                       | **Three                Months Ended September 30,**  |   | **Nine                Months Ended September 30,**  |
|------------------------------------------------------------|-----------------------------------------------------------|--------|----------------------------------------------------------|
| * (in                millions)*                       |  **2007(1)**** **                               |   | ** 2006 **                                     |   | ** 2007(1) ** |   | ** 2006 ** |
|  Product                revenues                      | $                                                         | 874.5  |                                                     |   | $ | 834.0 |   |   | $ | 2,674.0 |   |   | $ | 2,530.5 |   |   |
|  Service                revenues                      |                                                      | 32.1   |                                                     |   |   | 31.1 |   |   |   | 94.3 |   |   |   | 100.7 |   |   |
| Total                SAAS                revenues          |                                                      | 906.6  |                                                     |   |   | 865.1 |   |   |   | 2,768.3 |   |   |   | 2,631.2 |   |   |
|  Cost                of SAAS revenues                 |                                                      | 861.3  |                                                     |   |   | 810.2 |   |   |   | 2,609.7 |   |   |   | 2,448.1 |   |   |
| SAAS                gross                profit            |                                                      | 45.3   |                                                     |   |   | 54.9 |   |   |   | 158.6 |   |   |   | 183.1 |   |   |
|  SAAS                SG&A expenses                |                                                      | 54.6   |                                                     |   |   | 43.2 |   |   |   | 141.0 |   |   |   | 123.5 |   |   |
| SAAS                operating (loss)                income | $                                                         | (9.3   | )                                                        |   | $ | 11.7 |   |   | $ | 17.6 |   |   | $ | 59.6 |   |   |
|                                                       |                                                      |   |                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (1)   | SAAS                operating (loss) income in the three and nine months ended September                30, 2007 includes one-time charges of $18.5 million, of which $5.0                million relates to a reduction of revenues and $13.5 million relates                to an                increase in SG&A, as discussed                below. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*OTHER        (EXPENSE) INCOME*

*PROVISION      FOR INCOME TAXES*

*NET      INCOME AND EARNINGS PER SHARE*

**LIQUIDITY      AND CAPITAL RESOURCES**

*OPERATING      CASH FLOW AND CAPITAL EXPENDITURES*

| *· *  | Net                income increased $102.1 million in the nine months ended September                30,                2007 as compared to the same period of                2006. |
|----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *· *  | Inventory                balances decreased by approximately $35.8 million primarily due to                a large                purchase of generic inventory at a discounted rate made in 2006,                as well                as improved inventory management. |
|----------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *· * | Bad                debt expense increased $22.3 million in the nine months ended September                30, 2007 as compared to the same period of 2006 primarily due to                a charge                to bad debt expense in the third quarter of 2007 in our Specialty                Distribution business related to the insolvency of a                client. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *· *  | Smaller                payouts of management incentive bonuses in the first nine months                of 2007                as compared to the same period of                2006. |
|----------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*CHANGES      IN BUSINESS*

*STOCK      REPURCHASE PROGRAM (reflecting the two-for-one stock split effective June 22,      2007**)***

*BANK      CREDIT FACILITY*

| *· *  | Delayed                draw feature (through December 31, 2007) allowing for interim borrowings                up to $800.0 million. |
|----------------------|--------------------------------------------------------------------------------------------------------------------------------------|

| *· *  | No                scheduled payments, until the maturity of the                loan. |
|----------------------|--------------------------------------------------------------------------------------|

----

*CONTRACTUAL      OBLIGATIONS*

|                                                   | **Payments                Due by Period as of September 30,**  |
|--------------------------------------------------------|---------------------------------------------------------------------|
| ** Contractual                obligations**       | **Total**                                                      |   | **2007**  |   | ** ****2008                – 2009**  |   | ** ****2010                – 2011**  |   | **After                2011**  |
|                                                   |                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Long-term                debt                    | $                                                                   | 1,980.4 |   |   | $ | 60.0 |   |   | $ | 680.1 |   |   | $ | 1,240.1 |   |   | $ | 0.2 |   |   |
|  Future                minimum leasepayments(1)   |                                                                | 178.4 |   |   |   | 7.1 |   |   |   | 53.4 |   |   |   | 42.7 |   |   |   | 75.2 |   |   |
|                                                   |                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Total                contractual cashobligations | $                                                                   | 2,158.8 |   |   | $ | 67.1 |   |   | $ | 733.5 |   |   | $ | 1,282.8 |   |   | $ | 75.4 |   |   |
|                                                   |                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

**OTHER      MATTERS**

**IMPACT      OF INFLATION**

| **Item                3.** | **Quantitative                and Qualitative Disclosures About Market                Risk** |
|----------------------------|----------------------------------------------------------------------------------------------|

----

| **Item                4.** | **Controls                and Procedures** |
|----------------------------|--------------------------------------------|

----

| PART                II.  OTHER  INFORMATION |
|-------------------------------------------------------|

| **Item                1.** | **Legal                Proceedings** |
|----------------------------|--------------------------------------|

| *· *  | Ronald                  A. Katz Technology Licensing, L.P. v. Ahold USA, Inc., et al (Case No.                  C6-545, United States District Court for the District of                  Delaware).  On September 1, 2006,  Ronald A. Katz                  Technology Licensing, L.P. filed a complaint against us alleging                  infringement of 16 patents relating to interactive phone call                  processing.  We entered into a confidential settlement with the                  plaintiffs.  We consider this matter                  closed. |
|----------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *· *   | On                    September 14, 2007, Specialty Distributions Services, a subsidiary                    of                    Express Scripts, entered into an agreement with the U.S. Attorney's                    Office                    for the District of Massachusetts regarding the filling of five                    human                    growth hormone prescriptions for anti-aging, cosmetic, or athletic                    performance enhancement uses for four individuals.  SDS agreed                    to pay $10.5 million and to engage in certain training and compliance                    activities for a period of three years.  The U.S. Attorney’s                    Office agreed, conditioned upon Express Scripts’ compliance with terms of                    the agreement, not to prosecute ESI for the distribution of the                    human                    growth hormone prescriptions or for any other interactions with                    pharmaceutical manufacturers investigated or known by the U.S.                    Attorney’s                    Office during the course of an investigation that commenced in                    2002.  As a result of this Agreement, we consider this matter,                    and all open issues with this office, to be                    closed. |
|----------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| **Item                2.** | **Unregistered                Sales of Equity Securities and Use of                Proceeds** |
|----------------------------|-----------------------------------------------------------------------------------------------|

|     Period            | Total                number of                 sharespurchased |   | Averageprice                paidper                share |   | Total                number of shares                purchased as                part of apubliclyannouncedprogram |   | Maximum                number of                shares that                may yet be purchased                underthe                program |   |
|-------------------------------------------|--------------------------------------------------------------------------|--------|----------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                      |                                                                     |   |                                                     |   |                                                                                                                    |   |                                                                                                                                                |   |
| 7/1/2007                – 7/31/2007 |                                                                     | -      |                                                     | $      | -                                                                                                                       |   |                                                                                                                                                | -      |   |   | 19.3 |   |
| 8/1/2007                – 8/31/2007 |                                                                     | 5.6    |                                                     |   | 51.16                                                                                                                   |   |                                                                                                                                                | 5.6    |   |   | 13.7 |   |
| 9/1/2007                – 9/30/2007 |                                                                     | 0.5    |                                                     |   | 54.83                                                                                                                   |   |                                                                                                                                                | 0.5    |   |   | 13.2 |   |
| 2007                Total                 |                                                                     | 6.1    |                                                     | $      | 51.46                                                                                                                   |   |                                                                                                                                                | 6.1    |   |   |   |   |
|                                      |                                                                     |   |                                                     |   |                                                                                                                    |   |                                                                                                                                                |   |   |   |   |   |

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| **Item                6.** | **Exhibits** |
|----------------------------|--------------|

|   |   | See                Index to Exhibits below. |
|--------|--------|---------------------------------------------|

|   | **SIGNATURES** |
|--------|----------------|

|                                        | EXPRESS              SCRIPTS, INC. |                                                               |
|---------------------------------------------|------------------------------------|--------------------------------------------------------------------|
|                                        | (Registrant)                  |                                                               |
|                                        |                               |                                                               |
|                                        |                               |                                                               |
| Date:                 October 24, 2007 | By:                                | /s/ George              Paz                                   |   |
|                                        |                               | George                Paz                                          |   |
|                                        |                               | President,              Chief Executive Officer and Chairman  |
|                                        |                               |                                                               |   |

| Date:                 October 24, 2007 | By:    | /s/ Edward              Stiften                                         |   |
|---------------------------------------------|--------|------------------------------------------------------------------------------|--------|
|                                        |   | Edward                Stiften                                                |   |
|                                        |   | Executive Vice              President and Chief Financial Officer  |
|                                        |

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| Exhibit                Number |  Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|-------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 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, 2001.                                                                                                                                                                                                                                                                                                                                                                                |
| 3.2                           | Certificate                of Amendment to the Certificate of Incorporation of the Company dated                June                2, 2004, incorporated by reference to Exhibit No. 3.2 to the Company’s                Quarterly Report on Form 10-Q for the quarter ending June 30,                2004.                                                                                                                                                                                                                                                                                                                             |
| 3.3                           | Certificate                of Amendment to the Certificate of Incorporation of the Company dated                May                24, 2006, incorporated by reference to Exhibit No. 3.3 to the Company’s                Quarterly Report on Form 10-Q for the quarter ending June 30,                2006.                                                                                                                                                                                                                                                                                                                             |
| 3.4                           | 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.                4.1 to 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 Registration                Statement                on Form S-3 filed October 17, 2000 (Registration Number                333-47572).                                                                                                                                                                                                         |
| 4.3                           | 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).                                                                                                                                                                                                                        |
| 4.4                           | Rights                Agreement, dated as of July 25, 2001, between the Corporation 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.  |
| 4.5                           | 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.                                                                                                                                                                                                                                     |
| 4.6                           | Amendment                No. 1 to the Rights Agreement between the Corporation and American                Stock                Transfer & Trust Company, as Rights Agent, dated May 25, 2005,                incorporated by reference to Exhibit No. 10.1 to the Company’s Current                Report on Form 8-K filed May 31, 2005.                                                                                                                                                                                                                                                                                           |
| 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 Edward Stiften, 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 Edward Stiften, 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. |   |
|---------|----------------------------------|--------|

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