CVS Caremark Corp (NYSE:CVS) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.
John Heinbockel – Guggenheim Securities: So Larry, two things I wanted to touch on. The first is the whole personalization effort. Where do you guys stand with that in terms of being fully functional? And then, what are you seeing with regard to redemption of your offers and vendor support for that program? And then finally, do you think that has a greater impact – or will have a greater impact on topline or gross margin?
Larry J. Merlo – President and CEO: Yeah, John, let me take the second half of your question, and then I’ll ask Mark to come back to your first points. John, I think consistent as we have talked many times, and as I’ve mentioned in my prepared remarks, we’ve continued to use ExtraCare to create value for customers and to gain a bigger share of wallet. We’re always experimenting and working to find that appropriate balance in terms of driving profitable sales, okay. So there is a sales margin equation there. We continue to finesse our strategy with the goal of – we’re not going to chase empty sales out in the marketplace. I will say in response to your second question that I think that the way we use ExtraCare benefits margin as much as sales, because you’re not going to target the cherry pickers in terms of your ExtraCare offering. I think that over time, the supplier community has grown to appreciate the value that ExtraCare brings them in terms of their ability to target specific customers based on whatever the product is, and whoever they define as the user for that product. So, they find ExtraCare as a very effective tool versus some of the other tools that are available in the marketplace, like the free standing, coupon inserts. As a result, I think that we’ve been able to demonstrate to them a higher return on their investment as a result of higher redemption rate. So, I will let Mark talk a little bit about where we’re at with personalization and some things that we have coming on line later this year.
Mark Cosby – EVP and President, CVS/pharmacy: Thanks, Larry. One of our founding truths really within the Retail world is personalization. Well, most of our initiatives are gearing around bringing that to life. The foundation of that is ExtraCare as Larry talked about earlier. We do have the biggest program by a long shot, but issuing cards really is the easiest part. The tough part is behavior change and that’s where the 15 years of history that we have in place has really helped us with improving the productivity of the program over time. We know it works, we know it doesn’t work and that helps us improve the sales and profits over time. I think the other thing you will note, we do track our ExtraCare program religiously versus our competition and all of our customer satisfaction scores from a loyalty perspective are higher. With that said, we’re not resting on our laurels. Earlier this year, we did rollout a Pharmacy and health rewards program, 3 million folks now enrolled in the program. It’s very distinct from what you will find out in the open market. It’s an opt-in program where we can motivate our highest value customers. Its individual based versus household based. So it’s powerful for encouraging adherence and retention; and all of our customers can participate in the program regardless of the payment structure. I think the biggest thing that we did earlier this year around personalization is a program we call, conversion. Its customer specific offers with two big goals in mind – these are what we call conversion offers, which encourage customers to shop broadly across the store. So, if they shop on a couple of categories, we try to work them across the entire store and then we have what’s called ‘share of wallet’ offers where we encourage our customers to spend more on the categories that they are already shopping in. Every customer receives both of these types of offers. This program is new this year, and has been very successful for us. Also, doing a lot to try and improve how we deliver the offers, our e-mail program is up 2x than where it was at this point last year. We also rolled out earlier this year a big program against our ExtraCare center, which is what our bloggers call, our ‘Magic Coupon Machine’. We have a lot of programs in place that have led to a 40% improvement in the usage of that program and it is one of our biggest conversion drivers because the coupons come out in advance of the transaction, not after the transaction, leading to a 15 times increase in redemption versus a standard coupon. And then later this year, probably the biggest thing we have coming out is what we are calling our personalized circular, which will take our traditional mass circular approach and do a circular for each individual customer, and we will deliver that mechanism both online and via mobile application. So, tremendous amount happening in the personalization front, it is one of our foundation principles and we’ll continue to take it to the next level.
Larry J. Merlo – President and CEO: John, just in terms of your other question around what do we think around redemption, we are seeing redemption on a per customer basis up year-over-year.
Selling Season Outlook
Lisa Gill – JPMorgan: I just had some questions around the selling season. Larry, or if Jon is there, can you just talk about your expectations for 2014, your ability to sell Maintenance Choice 1.0, 2.0? And I think Larry you talked about specialty specifically in the quarter. Can you talk about where you are on penetration for specialty and where you see the opportunity as we move into 2014?
Jonathan C. Roberts – EVP and President, CVS Caremark Pharmacy Services: Yeah. So, Lisa, as we look at the selling season, and if you disaggregate the overall healthcare spent, that a payer see, so they disaggregate inpatient spending, outpatient spending, Pharmacy spending; Pharmacy is now one of largest categories of cost and is a high priority for payers. When you look at Pharmacy, specialty is an increasing focus and is now one of the top priorities that we’re – and we’re seeing trends of around 20% and in some cases higher. So, our capabilities in specialty are resonating extremely well with both our existing clients as well as prospective clients and have led to some of our success to selling season. So, we have capabilities to manage the specialty spend not only in the Pharmacy benefit but also in the medical benefit. And as you’re aware about half of the specialty spend is covered in the Pharmacy benefit and the other half is covered in the medical benefit. And our new integrated specialty model also has appeal similar to Maintenance Choice and we rolled out across all of our CVS stores, beginning early next year. So you combine these capabilities with all of our integrated capabilities such as Maintenance Choice pharmacy and MinuteClinic, payers are seeing the value of our integrated model. So, specifically with Maintenance Choice, we’re at about 16.5 million members. We introduced Maintenance Choice 2.0 this year. We see a runway to grow that to 30 million members. So, we’re very excited about that. When we look at our penetration in specialty, when you look at our employer book of business, we have most of their specialty spend. We’re looking to expand our reach into the medical side that today we see is mostly unmanaged. When you look at our health plan space, they have multiple providers and we think with our capabilities we can get them to reduce the number of providers they have and grow our share. So, we’re very excited about both of those products and all of our capabilities. We’ve had a lot to do with our success in the selling season and also the retention of our existing clients…
Lisa Gill – JPMorgan: So Jon, when we think about the 2014 selling season in specialty, are you doing things around the formulary? I know you’ve been successful on the formulary side for just regular chemical compounds. But what are you seeing on the specialty side? Are you starting to see where you can have multiple manufacturers competing against each other for class, and therefore that’s something that you can bring to the table? I mean, clearly, prices keep going up on specialty, but what are some of the things that you’ve won business on that you’re a little bit differentiated in the marketplace. It sounds like one of the things is being able to pick up the prescription at a CVS store, but what are some of the other things?
Larry J. Merlo – President and CEO: Yeah Lisa, I think as it relates to formulary and specialty, we have begun that process. If you look at a category like growth hormone, we have brought a formulary process that exits in the traditional spend to specialty in that regard. I think the opportunities there will continue to grow over time as more products enter the marketplace that do not have clinical differentiation.
Lisa Gill – JPMorgan: Can that drive your profit – is that a profit drive over the next couple of years? Clearly it’s a saving driver for your customer, but is it also a profit driver for CVS?
Larry J. Merlo – President and CEO: Yeah, I think it’s – as you know, Lisa the client gets a disproportionate share of those rebates. Well that’s the case, and it’s definitely a cost savings for the client. There is enhanced profitability for the business as well.