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Executive Summary

CAREMARK MAIL-SERVICE PHARMACY IS PREFERRED PLAN FOR PRUDENTIAL under a three-year agreement that took effect at the beginning of July. Prudential will market the Caremark mail- service option to its client customers for maintenance drug prescriptions. Caremark estimates that Prudential's health care business covers a total of more than 24 mil. lives under its indemnity and managed care plans. Prudential manages its own network for retail pharmacy dispensing. Caremark derived revenues of over $500 mil. in calendar 1992 from its prescription program management and mail-order businesses. The company reports that the prescription services part of its business grew at an annual compound rate of more than 80% during the years 1988-1992, with a growth rate of over 40% in the most recent year. Prudential's selection of a preferred mail-service supplier was publicly announced by Caremark eight weeks after the insurance company began contacting its regions about the contract. The contract was apparently signed well before the announced merger of Merck and Medco Containment Services and does not appear to be a sign of concern at Prudential about the future sourcing for Medco mail-service business. Prudential also has a contract with another division of Caremark to provide home health services in the Northeast. In its inaugural 1992 annual report, Caremark, a spinoff business from Baxter, says it has more than 700 corporate customers with 30 mil. people using its pharmacy management services. The firm claimed the number two position in the pharmacy benefits business.

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