Good morning. My name is Cynthia and I will be yourconference operator today. At this time, I would like to welcome everyone tothe CVS Caremark Corporation third quarter 2007 earnings conference call.(Operator Instructions) I would now like to turn today’s call over to NancyChristal, Senior Vice President, Investor Relations. Please go ahead, Madam.

Thanks, Cynthia. Good morning, everyone, and thanks forjoining us today for our third quarter earnings call. I am here with Tom Ryan,President and CEO of CVS Caremark, and Dave Rickard, Executive Vice Presidentand CFO of CVS Caremark. This is the second full quarter of results for thecombined CVS Caremark and we are happy to have the opportunity to update you onour progress. For your information, our 10-Q is expected to be filed latetoday but we’ll provide details of our performance by business segment duringthis call. Today we’ll discuss some non-GAAP financial measures intalking about our company’s performance, namely free cash flow, EBITDA, cashEPS, and adjusted EPS. Free cash flow is defined as earnings after taxes plusnon-cash charges plus changes in working capital less net capital expenditures.So free cash flow excludes acquisitions and dividends. EBITDA is defined as operating profit plus depreciation plusamortization. Based upon requests from the investment community on our firstquarter call, we began to provide earnings guidance for GAAP EPS as well ascash EPS, which is defined as diluted EPS eliminating the effect of bothdepreciation and amortization. So in a sense, cash EPS adjusts for non-cashinvestments on both the retail and PBM sides of our business. Some of our shareholders have asked us to adjust diluted EPSonly for acquisition-related amortization, which primarily relates to the PBMside of our business. So we’ve decided to also provide guidance for thatmetric, which we will all adjusted EPS. Adjusted EPS is defined as diluted EPSeliminating the effect of amortization only. While our financial leadership, namely our CFO, considershimself a GAAP guy, we’ll provide these metrics for your use as you see fit inorder to improve our comparability with various competitors that you monitor.Of course, we’ll continue to provide guidance on a GAAP basis. In accordance with SEC regulations, you can find thereconciliation of the non-GAAP items I mentioned to comparable GAAP measures onthe investor relations portion of our website at investor.cvs.com. As always, today’s call is being simulcast on our IRwebsite. It will also be archived there for a one-month period following thecall to make it easy for all investors to access the call. In addition, throughout our remarks this morning, we’llattempt to address head-on the key questions we’ve been receiving from theinvestment community. Following our remarks, we’ll be happy to take anyquestions you may have. During the Q&A session, we ask that you limityourself to one to two questions, including follow-ups, as we have a largeconstituency of healthcare and retail analysts and investors to accommodate. Let me quickly provide one other important note; we expectthe date for our annual analyst and investor meeting to be held this spring. Itwill take place on the morning of Wednesday, May 21st at the Mandarin OrientalHotel in New York City. More details will be forthcoming on future quarterlycalls but please save the date. This is the one time per year that we providebroad access to an extended group of our senior management team, so we hope youcan be there. Before we continue, our attorneys have asked me to read theSafe Harbor statement. During this presentation, we will make certainforward-looking statements that are subject to risks and uncertainties thatcould cause actual results to differ materially. These risks and uncertaintiesrelate to, among other things, general industry conditions, such as thecompetitive environment for retail pharmacy and pharmacy benefit managementcompanies, regulatory and litigation matters, legislative developments, changesin tax laws and the effective changes in general economic conditions.Accordingly, for these forward-looking statements, we claim the protection ofthe safe harbor for forward-looking statements contained in the PrivateSecurities Litigation Reform Act of 1995. We strongly recommend that you becomefamiliar with the specific risks and uncertainties that we’ve outlined for youunder the caption Risk Factors and Cautionary Statement ConcerningForward-looking Statements in our Annual Report on Form 10-K for the 2006fiscal year ending December 30, 2006, and under the caption CautionaryStatement Concerning Forward-looking Statements in our quarterly report on Form10-Q for the quarter ended June 30, 2007. Now, let me review October same-store sales for CVS Pharmacywhich were also announced this morning in a separate press release. Totalsame-store sales were up 4.6%, with pharmacy comps up 4.5% despite beingnegatively impacted by approximately 420 basis points due to recent genericintroductions. Front-store comps were up 4.8%. On a two-year stack basis, totalsame-store sales were 13.9%, with pharmacy comps 15.2% and front-store comps10.6%. On the pharmacy side, keep in mind that we are comparingagainst last year’s ramp-up of the Medicare Part D business, and we also saw adecline in flu related scripts. On the front-store side, comps were solid but less thanwe’ve experienced recently. The primary reason is the sharp decline inover-the-counter cough and cold remedies, perhaps due to the unusually mildweather in October and the low instance of flu. Other than that, we experiencedsolid growth across our core front-store categories in October, especiallybeauty, personal care, general merchandise, and digital photo. This was thefourth month that the Save-On and Osco stores we acquired from Albertson’s lastyear are included in our comps and I’m happy to say that the trends there aremarching nicely in the right direction. We estimate the inclusion of the 2006 acquired stores had a95 basis point positive impact on our overall front-store comps in October andan 8 basis point positive impact on our overall pharmacy comps in October, anda 35 basis point positive impact on our overall comp. Customers continue to respond very favorably on thetransition of these stores to include elements like improved product offering,store layout and environment, and most importantly, service. And now I will turn this over to our President and CEO, TomRyan. Thomas M. Ryan: Thanks, Nancy and good morning, everyone. Obviously I amvery pleased with our solid third quarter results. Our performance once againreflects healthy results across both our retail and PBM segments of ourbusiness. As you know, Dave will review the financials in detail butjust let me give you some of the highlights of the quarter. Our strong saleswere coupled with significant improvements in gross margins across the company,with generics continuing to be the major profitability driver. Gross marginsshowed healthy improvement across all our pharmacy business. In addition, weexperienced improvement in front-store retail margins. Operating margins expanded by 140 basis points. Diluted EPSon a GAAP basis for the company increased 37%, exceeding the high-end of ourguidance. Our free cash flow was positive and dramatically improved from lastyear’s third quarter, so I couldn’t be happier with the continued executionacross all lines of business. Let me give you an update on the merger and then providesome color on the PBM and the retail side of our businesses. As I said in thelast call, we are operating as one company, aligned with a single vision,mission, and set of values. I am pleased that we’ve completed the integrationof both the organization and our back-end systems quickly and successfully, andwe continued to expect at least $660 million of synergies in ’08. People always ask me if there are any surprises since themerger. I guess there are two, and there are two positive ones. First, and themost pleasant, is the fact that the people throughout the Caremark organizationare even of higher quality than I anticipated. Second, we have retainedbasically all the key executives across the Caremark organization -- in oursales teams, our account teams, our call centers, specialty pharmacy, mail-ops,marketing and underwriting. One thing our clients have told me that’s really not asurprise is that even during the first few months of the merger and all theintegration activity, our PBM has maintained the high level of service thatthey’ve come to expect. Now, I’ve been spending a lot of time with clients to listenand understand what new capabilities and products they are looking for. Clientsto me we continue to be the service leader and they like what they are hearingfrom our sales and account teams. Of course, first and foremost, clients want the best inpricing. As the largest purchaser of pharmaceuticals in this country, we areclearly well-positioned to provide that. But beyond that, clients are searchingfor solutions that will recognize and involve the consumer in healthcaredecisions. We have the ability to broadly influence consumer healthcarebehaviors that will improve outcomes, lower costs, because we can touch theconsumer by mail, by phone, by the Internet, and most importantly byface-to-face contact. Just take this, for instance; when you consider 30% of thepeople with a chronic condition are not even aware of their condition andtherefore not necessarily on medications at all. They are not on the necessarymedications to control it. Another 50% stop taking their maintenance medicationwithin the first year of treatment. Clients know if they don’t manage healthypeople to prevent the progression of common disease states, as well as thosewith chronic ailments, their healthcare costs will spiral out of control overtime. Appropriate pharmaceutical care is the safest, mosteffective and lowest cost line of defense against rising healthcare costs. As Isaid, we are well-positioned given our broad offering, multiple consumer touchpoints to help clients lower cost complexity and improve outcomes. Our PBM clients also have a great deal of interest in minuteclinics. We are working with clients to design tailored programs for theirmembers and we are piloting programs that use minute clinic to monitor healthassessment and screen for illnesses that would otherwise go untreated. We are growing minute clinic as fast as we can. We startedthe year with just over 140 clinics in about 18 states, and our clinic countnow stands at 350 clinics in 24 states. All but 23 clinics are located in CVSstores. We have five times the number of clinics than our nextlargest competitor and I believe we have a significant competitive advantage inthis space for two reasons: one, we’re the market leader and we are first tomarket; and two, there’s a significant opportunity to use minute clinic withour Caremark clients. So let me just say we are actively engaged with clients indeveloping new products and services, integrating our PBM capabilities with ourstrong consumer connections through our retail business, and as I stated on thecall, there are obvious competitive sensitivities around disclosing specificplans, so we won’t be discussing more specifics until we have had several monthsso that we can have a good read on the progress and the effectiveness, but knowfor now we have several pilots underway with existing clients. So please don’t look for a grand announcement or a puff ofwhite smoke regarding these new offerings. This will be an evolutionary,measured process that we will continue to pick up steam in ’08 and beyond. ButI will say that we are extremely enthusiastic about our new capabilities and Ican tell you they are resonating with clients and prospective clients. As you know, given all the headlines on the high profilecontract changes, last quarter we tried to give you a preliminary update on the2008 selling season. You’ll remember we said we had already won $1 billion ofnew business and since our last call, we did win an additional $600 million ofnew business, bringing total new business for 2008 to $1.6 billion. Thisincludes obviously new PBM contracts as well as some new Medicare Part Dbusiness. Many discussions with clients include our new valueproposition. I believe our new model is playing into some of the success of ourselling season, even at this early period. As for Med D, our proprietary PDP, SilverScript and theUniversal American product, w have had successful bid processes where SilverScripthas qualified for five additional regions and Prescription Pathways hasqualified for two additional regions. Given this success, we anticipate growth in covered lives ofabout 20% in ’08. We’ll be serving over a million enrollees in over 30 regionsin both SilverScript as well as our Universal American joint venture. Since our last update, we have completed the vast majorityof renewal activity and our retention rate excluding the government losses wetalked about was 96%. We achieved 100% retention rate for our nationalemployers. We do expect some reduction in 2008 revenues from existing healthplans that either lost some clients, lost share, or were acquired. In additionto that, we also termed some small low profit clients that no longer meet thehurdles for returns. So in 2008, with the loss of three government contractsoffset by additional new accounts, net revenues are projected to drop by closeto $2 billion. However, we still expect solid earnings growth in the PBM lineof our business that will be driven by increased use of generics, increased useof mail penetration, growth in our specialty business, as well as theappropriate SG&A adjustments based on those sales losses, and themerger-related synergies. Looking ahead, about a third of our business will be up forrenewal in 2009 and I believe we are in great shape and I feel confident, basedon many client discussions, that our new value offering, along with our uniqueoffering, are resonating with these clients. We are also looking forward to the potential for newbusiness in 2009. This is clearly a big opportunity for our company. In fact,there will be significantly more opportunity than in recent years and we areconfident that we will get our fair share. Now, I know most of you are interested in the merger and thePBM side of things but I do want to spend some time on 55% of our business,namely retail. We had an extremely good quarter. We kept our eye on the ball,we’ve maintained focus on our customer service, as well as expense control. Pharmacy comps for the quarter were up 4.3%, even though wewere cycling against 10.2, which we achieved in last year’s quarter because ofthe benefit of Med D. In addition, while pharmacy revenue growth rate isincreasingly restrained by the increase of new generic products, ourprofitability per script is higher than ever before. Since the rollout of Med D last year, we continue to gainshare in the 65-plus population. Our script growth for people 65 and oldercontinues to outpace all others. September year-to-date scripts 65 and olderincreased 8.1%, while scripts for people under 65 grew 4.6%. So while the pharmacy comp has been pressured slightly fromthe comparison with last year’s ramp-up, we still have a nice growth overall. Now let me take this opportunity to address the pharmacyreimbursement issue around generics. We’ve obviously got a lot of questionslately and it’s been a big topic of discussion. There has been little change inthe recent reimbursement change for generic drugs. For well over a year, we’vebeen talking about the fact that while new generics and increased penetrationof old generics will help drive profits, there will be some pressure on genericreimbursement, and these are from a number of factors that we’ve talked about,including the government, AMP, additional generic manufacturers that drive downthe price, some [macking] earlier than in previous years, but the growingpenetration of generics still drives incremental profitability. I would also note that the reimbursement on generic Zocorhasn’t changed since January, so we’ve had ample time to build this into ourfinancial plans. While some generic drugs are ending up on [mack] lists alittle earlier than they would have historically, we are not surprised by thattrend given the popularity of these drugs and the interest on the part ofmultiple generic manufacturers to compete, thereby driving down acquisitioncost. The cost savings to payers derived from generics and theresulting profitability to retailers, to PBMs, and to customers will continueto benefit all participants. We continue to expect benefit from the growth ofgeneric introductions and increased penetration. As for the pending changes in reimbursement on Medicaid forgenerics, as you know, the implementation was pushed to January of ’08.Congress, they don’t do everything right but they’ve recognized the fact thatthese ANP as published doesn’t really reflect the true costs, especially in theretail channel. We’ve had a lot of discussions, CVS alone and ACDS, our tradeassociation on the retail side of the business has spent time with Senator MaxBaucus as the Chairman of the Senate Finance Committee, and representative andCongressmen Frank Pallone as Chairman of the House and Energy Sub-committee towork closely with them to redefine ANP to more closely reflect the costs toretailers. We also continue to have dialog with states arounddispensing fees, and while some states have indicated they will make somemovement, I think most states are waiting to see what actually happens out ofthe federal government. Keep in mind that this is largely a retail issue and on theretail side of our business, Medicaid only represents 7% of our total pharmacybusiness. Now let me shift gears to the front store. Our front-end business,as Nancy said, continues to lead the industry. Front comps increased 6.5 in the quarter, that’s against 6.4last year. We continue to grow share in our categories of OTC, health, beauty,private label, digital photo. Customer traffic on a comp basis continues to runup in the a 2 to 4 range, while ouraverage ticket continues to increase. Our private label business remains a strong area of focus.It represents about 14% of our core business, which now includes the Eckerdstores, and we’ve increased the penetration of Save-On Osco stores to about13%. So across the company, we’re about 13.7%. We remain comfortable with thegoal of 18% to 20% of our front-store sales coming from private label andproprietary brands in the next three to five years. We talked a little bit about Osco Save-On in the last calland as Nancy said, it has had a positive impact on our comps in October in bothfront and pharmacy. As many of you know, we eliminated some low returnfront-store SKUs and categories. As a result, our front-store margins in thesestores are improving significantly and in fact, they are at near core CVSlevels. And pharmacy margins continue to improve, also approaching core CVS,resulting from improved execution around generic dispensing in particular. I said on our last call I was confident that these storeswill both be a sales and margin driver in the second half. We’ve already begunto see the benefit. I am pleased with the progress and I believe that we’ll seea continued benefit to sales and margins from these acquisitions for theforeseeable future. Let me touch briefly on our real estate program. In thethird quarter, we opened up 78 stores, 37 new, 40 relos and closed sevenothers, so we have 29 net new. Our plan, as you know, is to open up approximately275 stores, 140 of which will be new, 135 relos, and we expect net growth ofabout 100 stores, which is about 3%. So in summary, overall we had really a solid quarter acrossall business lines on sales, margin and expense control. I couldn’t be happier.I think the company is on pace to have a great year and also a great ’08 andbeyond. So now I’ll turn it over to Dave for the financial review. David B. Rickard: Thank you, Tom and good morning, everyone. Let me walk youthrough the financial results with an emphasis on the segment details. On a consolidated basis, revenues increased 83% over theprior year to $20.5 billion. This includes $1.1 billion of inter-segmenteliminations produced as a result of Caremark clients filling their prescriptionson CVS pharmacy stores. In our PBM segment, progress is best measured if you assumeCaremark and PharmaCare were combined in both years. On that basis, netrevenues were up 5.7%, hitting $10.7 billion. Adjusting that for the impact ofour improved generic dispensing rate, net revenues would have grown 10.7% forthe PBM. If you further adjust for the change in PharmaCare’s revenuerecognition method, net revenues would have grown 8.3% for the PBM. As I mentioned on our last call, and as more fully describedin our SEC filings, we changed to the gross method from the net method forrecognizing service revenue at PharmaCare. That was due to the conversion ofthe PharmaCare retail contracts to the Caremark contracts structure effectiveSeptember 1st. The impact on the third quarter was the addition ofapproximately $240 million in reported revenues before inter-companyeliminations, or about $190 million after eliminations. We expect the 2007 full year impact on reported revenues tobe $960 million before eliminations and $760 million net of eliminations. Itwill equate to about $2.9 billion in revenues on an annualized basis beforeinter-company eliminations, or about $2.3 billion after eliminations. However, given a parallel increase in annual cost of goodssold during each period, there is no impact on operating profit. Growth of PBM revenues on a comparable basis was driven byan increase in mail sales, including specialty mail. Our overall mailpenetration rate decreased 10 basis points from last year’s third quarter to28.4%, primarily due to client mix. Mail revenues were $4.2 billion, representing an increase of7.9%. Within our total mail revenues, PBM mail revenues excluding specialtygrew 3.2% with mail claims growth of 1% in the quarter. This was primarilydriven by the net impact of client additions and terminations, as well assignificant add-on business with existing clients year over year. The mail generic dispensing rate rose to 49.0% from 44.8% ayear ago, and our specialty pharmacy mail revenues increased a healthy 18.5%compared to the third quarter of 2006. PBM retail revenues were $6.4 billion, up 4.2% from lastyear. The retail generic dispensing rate increased to 61.6% compared to 58.0%last year. Retail claims grew 1.1% compared to the same period lastyear. That was primarily driven by utilization as well as an increase in livesin 2007. So how did we do on gross profit? We did well. On acomparable basis, gross profit margins for the PBM segment were up over 130basis points despite the 20 basis point drag from the conversion of PharmaCare’scontracts. The primary drivers of this were the margin expansion we experiencedfrom the increased utilization of generics, as well as purchasing synergies. Gross profit margin in the retail segment expanded about 160basis points over last year’s third quarter to 29.8%. Like the PBM segment, ourretail pharmacy margin continued to benefit from a substantial increase in thesale of generic drugs, as well as cost synergies derived from the merger. In addition, front-store margins improved. This reflected animproved product mix in our acquired stores, as well as the continued benefitsof the Extra Care card. And as I noted earlier, higher margin front-store salesincreased as a percentage of total sales by 60 basis points to 31.6% of totalretail sales. These gains were offset somewhat by continued pressure ongeneric reimbursement rates in light of the significantly increased utilizationof generic drugs that Tom mentioned. There was also an increase in thepercentage of pharmacy sales handled by third-party insurance. Okay, what about expenses? Right on track. In the PBMsegment, comparable operating expense as a percentage of sales improved byseven basis points to 2.5%. In the retail segment, operating expenses werewithin expectations, despite the increase as a percent of sales from 23.9% to24.1%. Generic conversions were largely responsible for the increase. If notfor new generics, the rate would have improved by approximately 70 basispoints. Given all of the above, highlighted by healthy top linegrowth, the continued benefits of generics, and solid expense control, wecontinued to make excellent progress on operating margins across the board. The PBM segment’s operating profit margin improved by nearly140 basis points over last year’s comparable results. Our PBM’sindustry-leading EBITDA per adjusted claim increased to $4.22, excluding mergercosts in the third quarter, or 28.7% over year’s $3.28, and the retailsegment’s operating profit margin grew by more than 130 basis points over lastyear to 5.6%. Net interest expense in the quarter of $128 million reflectsadditional net interest associated with our increased debt position.Furthermore, this year’s third quarter experienced a 130 basis point rise inthe effective income tax rate to 39.7%, as expected. This is due to theaddition of several higher rate states in which Caremark operated but CVS didnot. Our weighted average diluted share count was 1.52 billionshares. GAAP diluted EPS rose 37% to $0.45 for the quarter. Thiscompares to $0.33 in 2006 and is $0.01 above the high-end of our guidance. Cashdiluted EPS rose to $0.57. This compares to $0.47 last year. So even with thefinancing costs and slightly higher tax provisions, our earnings were strongyear over year. Looking at free cash flow, year-to-date through September wegenerated $678 million in free cash flow as compared to an outflow of $123million for the same period last year. We are on track to deliver about $2billion in free cash flow for the year. This is after the $1.3 billion in netcapital we plan to spend this year. We ended the third quarter with net debt of $8.4 billion, upabout $4 billion from the end of 2006. Contributing to the increase was $2.9billion in share repurchases, as well as regular dividend payments and theone-time dividend paid by Caremark to complete the merger. These increases wereoffset in part by the net free cash flow of $678 million. Net capital expenditures amounted to $441 million in thethird quarter. The PBM segment spent $28 million of capital in the thirdquarter. As most of you know, in May we entered into a $2.5 billionaccelerated share repurchase agreement with one of our banks. Through the endof the second quarter, we had paid $2.5 billion to them in exchange for thedelivery of 61.7 million shares of common stock to us. I can report today thatthe ASR program concluded on October 5th and resulted in us receiving anadditional 5.8 million shares of common stock. At an average share price ofapproximately $37, I consider this piece of our buy-back quite successful. The aggregate 67.5 million shares of common stock theydelivered to us are now reflected in our books as treasury shares. However,note that the additional shares received in October were not delivered to usuntil the fourth quarter, so you will see these reflected in our year-endstatements. As you know, we have in place board authorization torepurchase an additional $2.5 billion worth of stock as part of the balancesheet restructuring we announced during the merger process. We are currentlyexecuting an open market repurchase program. We will update you on the programagain in the fourth quarter call. Our goal remains to do this quickly andrealistically. That means completion in the first quarter of 2008, given thelength of time the initial ASR took. So where will earnings come out this year? As you’ve heard,both segments of the company have produced strong results, so today we areincreasing our full year guidance to reflect that. For the PBM segment on a comparable basis, we expect revenuegrowth of between 1% and 3% for the full year. For the retail segment, weexpect revenue growth of between 11% and 13% for the full year. Same-storesales are expected to be in the range of 5% to 7% for the retail segment forthe full year. For both segments, generics will play a role in dampening topline growth. For the total company, we expect revenue growth of roughly70% to 75% for the full year. Also for the total company, gross profit marginsare expected to decline due to the mix of our business by approximately 550 to600 basis points. The improvement over our prior guidance is due mainly togeneric conversions. Gross margin will increase for both the PBM and retailsegments, however. At the same time, we forecast that total company operatingexpenses as a percent of revenues will improve by 600 to 650 basis points, alsodue to mix. In combination, we continue to expect solid, full-year operatingmargin expansion for the total company. With net interest of about $425 million to $450 million, andthe tax rate a bit below 40%, we now anticipate GAAP earnings per diluted sharefor the full year to be between $1.89 and $1.92. For calculating cash EPS, theexpected impact of D&A, which should be added back to your GAAP forecast,is about $0.49 per diluted share for the year. For calculating adjusted EPS, the expected impact ofamortization that should be added back to your GAAP EPS forecast, is about$0.17 per diluted share for the year. Our 2007 guidance reflects the over-performance we posted inthe third quarter as well as our expected steady execution during the remainderof this year. It also reflects the impact from our share repurchase program, ofcourse. Many people have asked when we will be providing 2008guidance. Our practice has been to provide guidance for the upcoming year onour fourth quarter earnings call and this year, that will be no different. Ourfourth quarter call will take place on January 31st. But while it is still too early to provide guidance for2008, I am reiterating the accretion guidance we confirmed in the last call forthe merger of CVS and Caremark. We continue to expect accretion to diluted EPSin 2008 of $0.08 to $0.10 on a GAAP basis. So in summary, in the third quarter we saw healthy salesgrowth, expanding gross margins, excellent expense control, improving operatingmargins, very significant earnings growth, and outstanding free cash flow. I amvery satisfied with our financial performance in the quarter. With that, I will now turn this back over to Tom. Thomas M. Ryan: Thanks, Dave. I’ll open it up for questions, but before Ido, I asked Howard McLure to join us for the Q&A part of the segment. Asyou know, Howard McLure is the President of our Caremark business and givenwhere we are in the integration and the merger, I thought it might be helpfulfor him to be on this call to answer some of your questions directly. I will say this though -- going forward in ’08, we’ll goback to the standard CVS model that we’ve used in the past, where Nancy andDave will do the earnings calls and I will come on for the yearly earningscall. With that, I will open it up for Q&A.

(Operator Instructions) Your first question comes from EdKelly with Credit Suisse. Edward J. Kelly -Credit Suisse: Good morning. Congratulations on another very solid quarter.My first question relates to your go-to-market strategy for next year and I washoping you could potentially provide some more color on that, I guessparticularly since Howard is here as well. You are clearly achievingsignificant synergies from the Caremark deal, so to what extent will you usethese synergies to price business more aggressively? And then, on the otherside of that, the differentiated services that you plan on offering as acombined entity, how much of that will you actually be able to roll out nextyear versus the year after? And is it enough to make a difference, in your mind? Thomas M. Ryan: Well, listen, we’re not going to get into particulars on howwe are going to go and price each particular client, but I will say that we arereally optimistic on our existing client base because of the discussions thatwe’ve been having with them. And to my point earlier about not waiting for thepuff of smoke or some grand silver bullet to come down, these programs aregoing to be evolutionary. So to your point, some of the programs will beimplemented in ’08, some are more near-term, some are easier to do across ourbook of business, some require less technology investment, and others will belonger term in the end of ’08 or into ’09. So these contracts, as you know, are three and four years.We have discussions with the client around them and we’ve made commitments thatwe are going to get some of these done. These are not just wish lists that weare going to talk about with the clients, and we have some performance clausesthat we talk about that we are going to hit in the upcoming year. So without getting into particulars, but you’ve heard ustalk about a lot of these in the past around flex bill and bridge supplies andhealth promotions and screenings and the use of minute clinic, and making iteasier for the customer to get their medication when they want it and how theywant it and still lower costs for the payer. And it really does vary. It varies depending on the healthplan, depending on the size of the employer, but on a go-forward basis, webelieve that we’ll be selling that obviously in ’08 and then implementing it in’08 and ’09. Edward J. Kelly -Credit Suisse: Last question for you, Wal-Mart indicated at their analystmeeting that they plan to get even more aggressive about adding new generics totheir list as they are launched. Is there a point that we need to get concernedabout that program at all, or do we just consider it a non-event, no matter howbig the list gets? Thomas M. Ryan: Well, the list is pretty large now and it’s a relativelynon-event for us. I think you have to keep in mind that their customer base isdifferent. I mean, they have -- a fair amount of their customers are cashcustomers. If you look at our business, 95% of our business is third-party. Afair amount of the prescriptions, certainly around the seniors, are less thanthe $5 or less than $6, so there is not that much savings around it. Listen, we are always -- to say you don’t -- you are deafand blind on a competitor I think is a bad thing to say. We are always lookingat competition and what they are doing, whether it’s Wal-Mart or whether it’sinsurers or other PBMs and we’re in the healthcare business. I don’t want to downplay it but I don’t think we should beoverly alarmed about it because it hasn’t gained that much traction from wherewe are today. Edward J. Kelly -Credit Suisse: I agree. Thank you.

Your next question comes from Lisa Gill with J.P. Morgan.

Thanks and good morning. I’m going to take the opportunityto ask Howard a question here, since he is on the call. Howard, I’m justwondering if you could just give us some indication as to what’s going on inthe specialty pharmacy side. You continue to grow faster than where the peersare. And maybe you can just talk about what expectations are around clients,especially as it pertains to specialty pharmacy. And maybe Tom then you can jump in and talk about maybe someof the combined opportunities over the next couple of years as it pertains tospecialty. If someone walks into the pharmacy, they have a specialty script, isthis an opportunity to convert them over to Caremark? And opportunities to thenenhance that relationship, maybe you could talk a little bit about that. And then just lastly, I know in the past Caremark has talkedabout clinics in the corporate setting. Is this still an opportunity withinminute clinic to put some of these in corporate settings for Caremarkcustomers? Thank you. Howard A. McLure: The specialty pharmacy continues to grow as we number one,continue to bring in new product offerings, new products that come along butalso in new therapy groups. For example, we began a fertility program about 14months ago that we’ve gotten very good traction in. Customers continue to look at the value of the serviceoffering and the clinical things that we are able to do that don’t happenwithout some sort of expertise. Additionally, the fact that we are able tobring our offering to market at a little better price, as well as provide abroad offering, not only are those things [in the drug benefit] but also to inparticular our health plan customers. Those things are in the major medicalbenefit and help the look at and control those costs as well. Additionally, the oral oncology marketplace has grownsignificantly over the last year and that’s been a big driver also of ourgrowth in specialty products. So I think it’s beyond -- it’s new productofferings from us, it’s new products coming into the marketplace, it’s theclinical expertise that we bring to this and the recognition by a lot of ourclients that the clinical expertise is there. This has been where Caremark gotits start. We’ve been doing this longer than anyone else. We do it better thananyone else, we believe, and provide a higher level of customer service andthat gets recognized in the market.

Do you think that people are recognizing that for theselling season going into next year, Howard? Howard A. McLure: I do. In addition, the merger brought us retail apothecarystances that the PharmaCare had. The pro care pharmacy adds a completelydifferent, two different pipelines, HIV and transplant therapy into the mix, aswell as just a different service model that we are able to allow and bring tomarket. We will be able to offer our customers the ability to walk in one ofthe apothecaries and have face-to-face hands-on injection treatment for newinterest into this market, or new users, [inaudible] users apart. We are going to be able to offer them a retail componentthat we believe will provide some of the ability to get that special care thatthey are used to seeing from the specialty pharmacy, as well as still havingthe ability to access the mail order component. Thomas M. Ryan: Lisa, to your point, there’s a fair amount of leakage in thespecialty business just across the industry. In our stores alone it’s probably,I don’t know, $2.5 billion roughly plus, where a patient comes into the store,we may fill it once and then they go elsewhere, or we can’t fill it in thestore because obviously we can’t stock it across our entire 6,000 plus stores. So we have the opportunity to tie them in now with ourspecialty business because one, we have a more robust product offering than wedid as PharmaCare. We have the full mail service, a full therapeutic range andwe have what we call retail pull-through to our specialty business. So toHoward’s point, to have the retail and the mail together is resonating withclients. As far as the clinics in corporate settings, people arereally -- they are reaching out for it and everybody wants it but there aresome economics around it and it has to be an appropriate size client. We arelooking at perhaps working with clients to put clinics near or in closeproximity to some of their facilities where one, the client would get some kindof special attention in addition to the general public being able to use it. Sowe are looking at all the opportunities as we go forward but they aredefinitely reaching out for minute clinic because quite simply, it just works.

Just as a follow-up to that, are you seeing minute clinicbeing included as part of the PBM offering, or this is a completely separateoffering that you are having discussions with the planned sponsors, just so Ican understand that? Thomas M. Ryan: It’s both, actually. We are using minute clinic in our PBMoffering where we may be doing some, using the clinic for health assessmentsfor a client. We may be using the clinic for different screenings for theclient. So without getting into all the details, it’s going toperform more than what it does with just treating everyday illnesses for thegeneral public, so it’s direct to the client in most cases.

Great. Thank you for all the comments.

Your next question comes from Meredith Adler with LehmanBrothers. Meredith Adler -Lehman Brothers: Thanks very much. I was wondering if you could talk a littlebit more about what some of the systems requirements will be to accomplishthese goals. Is there a lot of systems work that needs to be done and do youanticipate that your capital spending on systems will go up significantly inthe next couple of years? Thomas M. Ryan: No, there is not a lot. I mean, we are going to do obviouslysome platform consolidation around the PBM side of our business with PharmaCareand Caremark, and that’s being worked on now. That’s kind of almost a separatetrack from these new offerings. No, there is not a lot to do but you want to make it as easyas possible for all providers to perform the service, and by providers, I’mtalking about our pharmacists, I’m talking about our call centers, I’m talkingabout our clinical pharmacists, our retail pharmacists, our nursepractitioners. We want to get it so that it’s easy as possible and some of itrequires some changes in software and some changes in program, but it’s notthis monumental Y2K effort or anything like that. Meredith Adler -Lehman Brothers: Okay, great and then another question; when you look at thecontracts at the new business that you brought in and compare it on the PBMside and then compare that to the big government contracts that were lost, howwould you say the profitability compares? Howard A. McLure: Well, the profitability of the contracts that were lost,whenever you lose a contract, you are losing it in the third or so year of itsinception. As a PBM contract moves through year one, year two, year three,profitability increases. So trying to compare a third year of a contract to theprofitability of a new contract is a little difficult. They will, by theirnature, the contracts are more profitable in their third year than they are inthe first. Thomas M. Ryan: Having said that, a fair amount of the -- excluding FEP,which is obviously the mail side of the business, some of the other contractswe lost, they were more retail side, retail live and retail book of business,which is less profitable than the mail side for the PBMs. So that’s offset alittle to Howard’s point. David B. Rickard: And you have to remember that we retain about 90% of thecontracts, so you don’t have a lot of that switching. Meredith Adler -Lehman Brothers: Just a final question about that, is there much governmentbusiness left? And is that at risk? Thomas M. Ryan: What’s our mix of government business now, is -- Meredith Adler -Lehman Brothers: Yes. Thomas M. Ryan: If you take out FEP, it’s probably 17% or so, backing outFEP. And there will be different government contracts that come up. The FEPbusiness changed over the years from a few PBMs, so it goes back and forth andthen obviously there are other government contracts out there, but right nowit’s about 18% of our business and we think that’s fairly stable. Meredith Adler -Lehman Brothers: Great. Thank you very much.

Your next question comes from Matthew Perry with WachoviaCapital Markets. Matthew Perry -Wachovia Securities: Good morning. Maybe a question for Howard; I know it’s tooearly to talk about ’09 or how much new business the PBM side might win nextyear for ’09, but wondering if, based on your years at Caremark standalone,whether you’ve seen any kind of increase in interest from prospective clients,increased activity or earlier activity now that you can talk to them about acombined offering? Howard A. McLure: Well, we’ve seen a lot of activity and a lot of interest inthis new offering that we have. We’ve seen a number of people coming andtalking to us, both existing clients as well as prospects, asking questionsabout the model and how we see it. We see this as a lot of enthusiasm for thismodel and we see that there is a lot of interest in what power this combinationcan do. I think we are starting to see -- we see this year a numberof prospects that are coming up from our competitors that have taken aninterest in what we can do and what they think the power of this combinationis. I’m very excited about the prospects going forward for theupcoming sales season. That being said, we are still going to have to be atough competitor and our competitors are also very good in their own right, sowe will not be handed over business but we will earn business and I feelconfident that we have the ability and the tools and the people on both sides,the PBM side and the retail side, to be a very, very different and uniquecompetitor in this business. Matthew Perry -Wachovia Securities: Thanks. Secondly, you talked a little bit about the Medicaredrug benefit in the prepared remarks. Can you just talk about maybe the -- itseems like you are going to pick up a fair number of members for ’08, so shouldthat make a larger contribution to the bottom line, or are those new membersmaybe offset a little bit by lower revenue? Howard A. McLure: You’re right. I think that as you go through this processand you continue the bid process and as this rationalizes itself, premiums geta little bit more rational. People understand a little bit more about what’sgoing on, but obviously it will be a good contributor for us. It’s been a goodline of business and it will be a good piece of business for us next year. Matthew Perry -Wachovia Securities: If I could just squeeze one last thing in, have you talkedabout how much incremental SG&A you can remove from an ongoing basis fromthe FEP? Because as I understand it, it had a separate mail facility. Howard A. McLure: It did have a dedicated facility and a dedicated group ofabout 700 employees and obviously, we lost that one piece of business but wegained some other pieces of business and what has to happen is an assessmenthas to take place where we don’t release all the dedicated people and go outand try to hire them again for another contract. So at year-end, we’ll make an assessment and we’ll make afinal determination but there will be an adjustment to the staffing related tothe size of business. There has to be. Matthew Perry -Wachovia Securities: Great. Thanks a lot.

Your next question comes from Deborah Weinswig withCitigroup. Deborah Weinswig -Citigroup: Good morning. Tom, you provided some details on minuteclinic. Can you talk about what you are seeing in terms of traffic and ticketdifferences between stores that have them and stores that don’t? And then also, as you continue to increase the penetrationof these in a market, what happens to the break even time? And then lastly, we recently heard some concerns, which Iwas shocked to hear, over saturation. Can you also maybe discuss that as well? Thomas M. Ryan: We don’t see saturation at all. In fact, we are trying toroll out quicker in markets. Our biggest challenge is some state regulatoryhurdles that are being put in our path but we are working through those, sosaturation is the least of our problems. We don’t get into specifics on each clinic and what ishappening but I can tell you there is a significant growth and the longerobviously the clinic is open, the more exposure it has on the market, the morebrand recognition it has on the market, the more business we get. We know thatwhen we dense up the clinics in a market, we have better penetration and betterutilization by the consumer. So we continue to see growth. Our challenge around theclinic obviously is one, making sure that we get them open as quick as we can;two, we make sure that there’s fixed cost in these clinics and they are greatfor our brand, they are great for overall go-to-market strategy around retailand PBM. The challenge is, which is what we are working on, is the so-calledslow season of June, July and August that we need to make sure that we areusing these nurse practitioners in the right way and that’s what our teams areworking on now. And there is so much opportunity now with clients, and wekind of alluded to that a little earlier, that we wouldn’t have had beforewithout the broad base of clients that we have now that we can do some thingswith the clinics. We continue to be very enthusiastic about the clinic and wecontinue to roll it out as fast as we can. Deborah Weinswig -Citigroup: Do you think that eventually the clinics will be able to beutilized for infusion type services? Thomas M. Ryan: We are going to utilize the clinics for some otheropportunities. The infusion business is a tough business. It takes a hugeinfrastructure to home infusion business, which is why we’re really not in --it takes a huge investment in infrastructure, it’s labor intensive with nursesgoing to the home. We think there is something in between where we couldpossibly use some of our assets, I’ll say, to do something in the clinics andmaybe help the chronic infused patient. Deborah Weinswig -Citigroup: Okay, and then just one quick question for Dave; you hadalluded to the cost synergies as being a significant driver of gross margins inthe quarter. Can you provide some additional color around that? David B. Rickard: We don’t actually break out the pieces of gross margin, so-- we told you that in ’08 we expect it to exceed $660 million. We areobviously ramping up now and getting toward that run-rate, but we are not allthe way there, obviously.

If you could provide any additional color -- is anythingcoming in faster than you would have expected or are you getting it fromdifferent buckets than you had originally expected? David B. Rickard: Yeah, I think we’ve said before that both on the overheadside and on the purchase cost side, we are getting a little bit more and alittle bit faster than we expected. We found that the two companies worktogether extremely well, have communicated extremely well, and things justhappen faster than we otherwise would have reasonably expected. On the purchase side, we have told you before that theapproach that we took to quantification really just took lower list cost andobviously there is some ability to negotiate beyond that and we’ve started to dothat. Deborah Weinswig -Citigroup: Well, congratulations again on a great quarter.

Your next question comes from John Ransom with Raymond James& Associates.

Good morning. Your retail gross margin numbers were certainlya lot stronger than your big competitor in Chicago. I wondered if you mighthelp us think about how much the early purchasing synergies might havecontributed to that number in addition to all the other stuff that youmentioned. Thanks. David B. Rickard: Are you talking about our retail gross margins?

Yes, retail gross margin numbers were year over year up alot more than what we are seeing from some of your competitors and we’re justtrying to figure out how much of that is coming from some of the earlypurchasing synergies from the merger. David B. Rickard: Well, once again, we don’t break out the pieces. There issynergy in there. That’s an important component. There is also genericconversions that are higher and I would say of the two, generics are the moreimportant piece. Thomas M. Ryan: Generics and front -- we’re talking about total retail,right? You’ve got front-store also here. Our front-store margins continue toexpand and I don’t think you should discount that. We’ve worked hard to do thataround private label, proprietary, extra care programs. I mean, we’re notbuying sales here on the front-end of our business and people are working hardaround that, around product mix to David’s point and promotional mix. So thatcombined with generics, obviously on the retail side and just overall betterbuying in general. But we don’t break out the pieces on the synergy.

My other quick question is looking at your total mail order,combining the two PBMs and looking at your total mail order infrastructure, aswe look out two or three years, not just next year, is there an opportunity todo any kind of big bang? I guess there’s some thought out there that maybe oneof your bigger competitors has a more consolidated back-end processingarrangement, has some cost advantages on some of these very cost sensitivecontracts. Is there something we could look for on a big bang basis? Or is itgoing to continue to be run as three pieces from a technology and processingstandpoint? Thomas M. Ryan: I understand the question. We won’t be looking at any bigbang here. We have a situation and we are going to continue to look torationalize and look at our overall cost structure in the company, whether it’sretail distribution or whether it’s mail order distribution, whether it’s callcenters. We continue to look at how we can get more productive in the company. But it’s not clear to me -- everybody touts what they havebecause they have it and it’s not clear to me to have two big centers is betterthan having multiple centers. You could make a case around either emergencysituations or -- so we can spread out some of our flexibility, laborscheduling. I mean, you think about FEP, what we’re able to do and consolidatethat into one plan, to someone’s earlier question, one particular facilityessentially, you can carve it out easier. And then all the clinical work we do. So we are comfortable. We are never satisfied where we are.Obviously there’s some opportunities like there are whenever you put twocompanies together but we won’t have any big bang here.

Okay. Thanks a lot.

Your next question comes from Neil Currie with UBS.

Good morning and thank you for taking my questions. Thefirst one is about the synergies. You announced $160 million synergies thismorning but you haven’t raised your accretion guidance for ’08. Is there areason behind that? David B. Rickard: The offset, and actually we announced it on the last call,is in the amortization of good will, which came in higher due to a highervaluation of amortizable pieces of our intangibles, principally the value ofthe contracts.

That’s when I was away. Thank you. The other question isthat we saw a very interesting deal between Alliance and Cardinal Health, whichlooks to combine some buying power on generic drugs. It seems to be becomingmore of a global business, the buying of generic drugs, as well as themanufacturing of generic drugs. Do you see CVS Caremark going that way in thefuture, either in an informal or a more formal way? Thomas M. Ryan: We are always looking for those opportunities aroundpurchasing opportunities, especially in generics. I will say this, that CVSstandalone was looking at those opportunities, Caremark standalone was lookingat those opportunities, so I can assure you that together, we are exploringboth of the opportunities, either ones that we had originally talked aboutindividually or ones we are talking about new collectively. So it is intriguing. There is obviously a lot of challengesaround it, making sure the source of supply, the quality of supply is good. Butwe are doing a lot of work around that and we think there are some opportunitiesfor us.

And in terms of the retail gaps that you still haveremaining in Northern California and Pacific Northwest, are you happy just toget in there in a piecemeal, on an organic basis? Or would you consider furtheracquisitions? Thomas M. Ryan: Well, if you look at our history, we’ve grown bothorganically and through acquisitions, so we will continue to do both. And ifthere are appropriate acquisitions, then we’ll look at them. If not, we’ll groworganically in the market and we think obviously we have the wherewithal to doit now. Given the fact that we have a fair amount of coveragenationally and it’s really to your point, Northern Californiaand the Pacific Northwest, and it’s two states up there,so I think we can probably handle that organically, if in fact there’s noacquisition activity.

Thank you.

Your next question comes from Mark Husson with HSBC.

Good morning. I would just like to ask about the revenue synergiesthat you had talked about at the time of the bid for Caremark. If I rememberrightly, $800 to $1 billion of revenue synergies over a period of time. Couldyou refresh that number for us? And then secondly, talk a little bit about progress. I knowit’s a bit early for that but if we look at the inter-segment sales line, willthat give us some kind of clue as to how those revenue synergies are comingalong? David B. Rickard: Yes, $800 to $1 billion is what we talked about. What we areexperiencing at the moment is that we are talking to customers and prospectivecustomers about things that we can do for them that no one else can do, andthat is resonating and so there is no question that’s positively influencingthose discussion. We are going to have to make an assessment once the seasonis underway and we see some actual results and we’ll come back to you on that.But there is no question that we are starting to see some positive movement onthose things. I don’t think the inter-company eliminations are going to bevery related one way or the other to this kind of thing. I mean, it took aquestion of winning a contract that we otherwise wouldn’t have won on the PBM side.Some piece of that will get serviced in CVS stores and there will be some reflectionin the inter-company elimination but I don’t think analyzing the inter-companyelimination is going to lead you to a better understanding of how much of thiswe are achieving.

So you wouldn’t be expecting to drive more Caremark businessthrough CVS doors? Wasn’t that really part of the revenue opportunity, or wasit never? Thomas M. Ryan: Look at this way; we talked about it as a 50-50 split andthe idea was that we would obviously pick up some new PBM contracts, and itshouldn’t be discounted that we were going to enhance our ability to retainsome contracts. I mean, the fact that the offering that we have, I can tellyou has been the positive in retaining and renewing some contracts in theselling season. So yeah, there will be some, obviously, if the consumer --if we have the offering that we have and that we plan on having and some of thethings I talked to earlier, we believe the consumer will react to that and weshould see it in some store movement, absolutely.

And then finally, two scary things; first thing, there’sbeen recent talk about the pharmacist shortage and cost. For those who havebeen covering CVS for a long time, that’s a scary thought. And then secondly,how was Halloween? Thomas M. Ryan: Great transition. I don’t know if they go together, but we--

It wasn’t 2001. Thomas M. Ryan: No, I know. I got the message. We are not seeing a graveshortage at all. I mean, we are still seeing the normal pockets of problems inthe normal areas. Actually, when you look at it, we think we have a betteroffering and people are actually coming to us. When we go to collegerecruiting, people see the opportunities that they have professionally around CVSand Caremark and the opportunities across both books of our business. And weare excited about it but it’s the normal -- it’s the normal fight that you havewith pharmacists. I will say this, that we are opening up -- and when I sawwe, I mean industry as a collective and the profession -- opening up a numberof new pharmacy schools, so the number of graduates are increasing. So it’scontinued normal pressure but it’s nothing like reliving that in ’01 at all. As far as Halloween goes, we’re up almost 8% to LY for themonth and it’s pretty strong. I was talking to someone last night and they wentinto our stores and they said we couldn’t get any Halloween candy and I saidperfect. The last thing you want to have is Halloween candy on November 1st. SoI think the sell-through has been good. I think the warm weather actually inthe Northeast helped a little bit with Halloween because kids go out more.

Thanks so much. The candy’s all at my house, by the way. Thomas M. Ryan: That’s good. That’s where it should be.

Your next question comes from John Heinbockel with GoldmanSachs. John Heinbockel -Goldman Sachs: A couple of things; Tom, talk about the [macking] process abit in terms of the pace of that. It sounds like the pace has not picked upappreciably in the last year. Do you think there comes a point when it does,and when would that be? And does retail I assume gets [macked] a lot quickerthan mail does, or is that not right? Thomas M. Ryan: That’strue. Retail is [macked] quicker and there is obviously discussions one haswith all our networks around that. Some of it is in contracts, some of it isnot. I guess the[macking] really people talked about Zocor, that was the big one that kind ofgot [macked] relatively quickly, just because of -- just the substitution andpenetration that that had when that came out generically. The trendhasn’t been that dramatic in the change in [macks]. People are obviouslylooking to control costs and when costs go down, the pay earnings to benefit --at the end of the day, this is all about helping the payer lower costs andimprove healthcare, so we are going to obviously look at that and apply itequally across all books of our business. But we don’t see anything dramaticallychanging on that. John Heinbockel -Goldman Sachs: Do youthink the payer begins to focus on either retail or mail generic profitabilitywhen we get to 80%, 75% generic penetration? It won’t happen until then, andthen it happens? Or not even then? Thomas M. Ryan: Well, likeI said, I think the payer looks at the whole offering. I mean, you have to lookat administrative fees. You have to look about pass-throughs. You have to lookat appropriate use of medication, about compliance programs, about clinicalprograms or people using some psychotropic drugs too often, so are wemonitoring the diabetic patients -- so it’s not just generics. Obviouslygenerics are a big piece of the business but generics are profitable and thelast thing a client wants to do is take our incentives away to drive generics. I don’tthink it’s going to be that big a problem and it’s obviously at launch atsingle source versus the multi-source generics at launch. They may have somechallenges but I don’t see a dramatic shift, John, if that’s your question. John Heinbockel -Goldman Sachs: And thenfinally, the $1.6 billion that you picked up this year, the new business, nextyear with the top line synergy, does that number by definition, should it behigher than the 1.6 or is there less business out there because Medco brought alot of contracts forward? Howard A. McLure: There is we think a stronger pipeline this year than therehas been in recent years out there. We would like to see -- we believe, we arevery enthusiastic and we believe our performance is going to be a lot betternext year than it was this year. John Heinbockel -Goldman Sachs: The 1.6, you’ll exceed that next year is your hope? Howard A. McLure: We’re not giving any guidance right now, so -- John, if youare talking about ’09 wins, we would expect them to be at least as strong asthis year. John Heinbockel -Goldman Sachs: And when you talk about the $800 million to $1 billion, sayhalf of that is Caremark, do you think that is more new contracts or moreselling new products to existing contracts? Howard A. McLure: A combination of both. It’s getting more specialty spendacross the business, it’s getting more healthcare and disease management acrossthe lives. It’s a combination of both, in addition to new lives. I mean, we areobviously going to be aggressive but it doesn’t go unnoticed that two of ourcompetitors did a fair amount of early pricing and aggressive gross marginpricing and investment for ’09 business, so we’ll fight that. John Heinbockel -Goldman Sachs: Okay, thanks. Thomas M. Ryan: Two more questions.

Your next question comes from Scott Mushkin with Banc ofAmerica.

That last answer kind of dovetails into what I wanted to askyou about; so the concern we are hearing more about lately is how a price wareis avoided in the PBM business for the ’09 selling season. CVS Caremark clearlyhas to show outsized PBM wins to prove I guess to some people in the marketthat the acquisition makes strategic sense, and to get rid of the conglomeratediscount. Clearly, as Howard was mentioning, some competitors obviously don’twant this to happen and have been somewhat irrational already. So how do you dothis? How do you win more contracts while avoiding a price war? Thomas M. Ryan: I’ll start and then Howard can jump in, but I mentioned thisearlier. It’s obvious prices is a key component of any contract win, but thenit’s also service and it’s not just -- you know, when you think about it, whenwe talk to clients, and especially the sophisticated ones and the larger ones,they are looking at us to help lower their healthcare costs. It is theirmedical costs that are going up. It’s not -- the use of generic drugs is notdriving up the cost of healthcare in this country. And CVS Caremark is 190,000 people, so we are a big payer ofhealthcare and it’s the medical side of the business that is driving cost andthe specialty component in particular. So while price is always an issue -- I mean, it’s an issuewhether it’s in retail or in PBM, and it’s the entrance to the door and ourgoal is to lower the cost of healthcare for the payer. So we look at it a little differently, and did some peopletake what I would call some billboard clients that go aggressively at it? Yeah,probably. Competitors for their own reasons, and you’d have to ask them, but Idon’t see a price war here. I think it’s more who has the better offeringaround lowering overall healthcare costs in the long-term and providing theappropriate service and involving the consumer in the plan. This is the keyhere. I mean, the key is to involve the consumer because we pushed a lot ofbuttons and a lot of levers in healthcare. We’ve got to get the consumerinvolved in this and that’s why we think we have an advantage, and we areseeing that advantage. Howard A. McLure: I think Tom, you summarized it very well. The unit cost tobuyer, quite frankly, there’s a lot of unit cost buyers in years past, andthose unit cost buyers are starting to come back to the value buyer. I canthink of the one account that started for us in 2007, the health plan account--

Your next question comes -- Thomas M. Ryan: No, we’re not done answering yet. Hold on. Howard A. McLure: A unit cost buyer that has come back to a value, thisbusiness we picked back up in 2007. I think Tom stated it well. The valueplayer is not necessarily concerned about the unit price. He's concerned abouthis overall costs and the investment that he is making with his pharmaceuticalspend and how that’s going to impact positively his major medical costs. Thomas M. Ryan: Okay, we have one more question.

Your final question comes from Eric Bosshard with ClevelandResearch Company. Eric Bosshard -Cleveland Research: Good morning. Two questions for you; first of all, Howard,as you look at the opportunity in rolling out this new plan, do you think thatyou get more of a benefit or pay back from your existing book of business, ordo you think you get more of a benefit from winning business in the early yearsof this? Howard A. McLure: I think we get benefit from both sides [of the coin]. Ourexisting customers, many of them who are the value buyers, look at it and seethe value behind the offering. New accounts or prospective customers look atthe value that we can bring together as a combined entity and they like whatthey see, and they have the ability to see that this is a better model. So wethink this is going to help us from a retention prospect. We certainly believeand our sales force is very excited about what’s going to happen from a newbusiness front with this combined offering. As Tom said in his remarks, this offering is resonating withclients, both prospective and existing. Eric Bosshard -Cleveland Research: Do you think within retaining business that the newofferings, that you’ll be able to benefit from the savings, a component of thesavings that are generated from the new offering with retained business? Or doyou think you have to take those savings and give those to the customer inorder to retain the business? Thomas M. Ryan: It’s going to be a mix. I mean, we are in the business ofsaving customers money. We have to save clients money. There is no mistakeabout that in this company and we have obviously a number of customers. We are in the business of working with our clients, whetherthey are managed care players or the government or large corporations, to savethem money on their healthcare costs and it starts with prescriptions and thenit expands from there. So we have the opportunity to do it in a number of waysand one of the ways is the way you mentioned. Eric Bosshard -Cleveland Research: Secondly, for 2008, it was helpful for you to give someguidance about how to think about the PBM business with the FEP loss. But interms of the profitability next year, if you do not have additional synergiesfrom the combination of the companies, do you think that the SG&Areductions and the improvement in the underlying business would allow you tohave flat profits, considering the losses of the business? Thomas M. Ryan: We are not going to give that but I wouldn’t go down thatroad. I mean, we are working hard at a lot of things in this company and flatprofits is not one of them. So we’ll give you guidance later on on it. David B. Rickard: You understand that profits are expected to be up, and thatincludes the benefit of synergies and it includes the benefit of SG&Amanagement and everything else? Eric Bosshard -Cleveland Research: Yes, all I’m trying to get an understanding of is how muchof the loss of FEP you have the ability to mitigate by taking SG&A out ofthe business. That’s what I was trying to -- Thomas M. Ryan: Fair enough. It’s a fair question and to Howard’s pointearlier, the FEP business was the most -- it’s obviously towards the end of it,which is the most profitable. But variable cost performance just isautomatically removed and then, to the point I made earlier, because we have alot of facilities and we allocated most of the FEP into one or two facilities,we can carve it out. So that’s going on as we speak and then it will be offsetby some others. I want to be clear on that, because it’s a good question,Eric. Our PBM business is going to be profitable. It’s not a situation wherebecause we have lost this business, we are not going to be profitable. Ourprofitability will increase in the PBM business for a variety of reasons, which I mentionedearlier, and when David goes over the guidance on the next call, you’ll see thebreakdown. Eric Bosshard -Cleveland Research: That’s helpful. Thank you. Thomas M. Ryan: Okay, thanks a lot and as usual, if you have any calls, callNancy. Thanks.

Ladies and gentlemen, this concludes today’s CVS Caremarkconference call. You may now disconnect.