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#Good morning, and thank you for joining Magellan Health's First Quarter 2017 Earnings Call.
With me today are Magellan's Chairman and CEO, <UNK> <UNK>; and our CFO, Jon <UNK>.
The press release announcing our first quarter earnings was distributed this morning.
A replay of this call will be available shortly after the conclusion of the call through May 26.
The numbers to access the replay are in the earnings release.
For those who listen to the rebroadcast of the presentation, we remind you that the remarks made herein are as of today, Wednesday, April 26, 2017, and have not been updated subsequent to the initial earnings call.
During our call, we will make forward-looking statements, including statements related to our growth prospects and our 2017 outlook.
Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond our control.
These risks and uncertainties can cause actual results to differ materially from our current expectations, and we advise listeners to review the risk factors discussed in our press release this morning and documents we filed with or furnished to the SEC.
In addition, please note that Magellan uses certain non-GAAP financial measures when describing our financial results.
Specifically, we refer to segment profit, adjusted net income and adjusted EPS, which are defined in our SEC filings and in today's press release.
Segment profit is equal to net revenues less the sum of cost of care, cost of goods sold, direct service costs and other operating expenses and includes income from unconsolidated subsidiaries but excludes segment profit from noncontrolling interests held by other parties, stock compensation expense, special charges or benefits as well as changes in the fair value of contingent consideration recorded in relation to acquisitions.
Adjusted net income and adjusted EPS reflect certain adjustments made for acquisitions completed after January 1, 2013, to exclude noncash stock compensation expense resulting from restricted stock purchases by sellers, changes in the fair value of contingent consideration, amortization of identified acquisition intangibles as well as impairment of identified acquisition intangibles.
Please refer to the tables included in this morning's press release, which is available on our website, for a reconciliation of these non-GAAP financial measures to the corresponding GAAP measures.
I will now turn the call over to our Chairman and CEO, <UNK> <UNK>.
Thank you, <UNK>.
Good morning, and thank you all for joining us today.
During the past several years, we have repositioned our company and laid the foundation for growth ahead.
Our value proposition, integrated approach and decades of expertise working with special populations have all converged to position Magellan as a leader in providing solutions for managing complex populations and conditions across the healthcare continuum.
I'm pleased to report that we continue to see solid results in the first quarter.
We reported net revenue of $1.3 billion, net income of $17.7 million and EPS of $0.74 per share.
Our adjusted net income was $26.1 million or $1.09 per share, and we achieved segment profit of $69.8 million.
We are reiterating the 2017 guidance provided during our year-end earnings call in February.
Jon will provide more details later in the call.
I will now discuss highlights for our healthcare business, beginning with an update on the commercial market.
We recently extended the behavioral health contract with our largest commercial customer through 2021.
It was originally expected to run through 2019, but we were able to extend it as a result of our strong performance.
In addition, effective January 1, 2017, this customer implemented our musculoskeletal product, which helps to manage spine surgeries and interventional pain procedures.
It's an example of our efforts to add new product sales to existing customers.
We continue to see interest in expanding services that control healthcare costs and increase the quality of care for our members.
In the government market, we are working closely with Virginia to implement their Managed Long Term Services and Supports program, also known as the Commonwealth Coordinated Care Plus program, and we are on track for a go live in the first region on August 1, 2017.
As you will recall, the program is scheduled to be phased in through January 1, 2018.
Our Florida health plan for individuals with serious mental illness continued to perform well, and we are preparing for the state's expected rebid this summer with an effective date of January 2019.
We feel very good about our current success in Florida, but, of course, there are no guarantees with any reprocurement.
I am pleased to share that Magellan Behavioral Health of Pennsylvania, our business serving health choices members in the Commonwealth, has received full managed care ---+ managed behavioral health organization accreditation from NCQA.
We're honored to receive this recognition, which sets rigorous and important accreditation standards.
Achieving full accreditation demonstrates our continued commitment to delivering high-quality care to help the individuals we serve.
Turning to our pharmacy business.
Sale execution has been strong, and we've seen solid growth in our membership base.
We ended the first quarter with 1.9 million commercial PBM members and 13.7 million medical pharmacy members.
In our Medicare Part D plan, we are working to ensure strong service levels to handle our rapid growth in membership, which currently stands at approximately 96,000 lives.
Earlier this month, we released our seventh annual Medical Pharmacy Trend Report, a leading source for payers and other industry stakeholders to analyze high-cost injectable drugs paid under the medical benefit.
Among the report's findings, we noted that commercial medical pharmacy spend increased by 55% from 2011 through 2015, or an average of 12% annually.
Importantly, of the commercial health plans surveyed, 90% have not implemented any advanced medical pharmacy program beyond standard utilization management, and 20% of plans surveyed are not managing this spend at all.
These findings underscore the tremendous opportunity we have to sell our industry-leading specialty capabilities, which strengthen our value proposition as a full-service PB<UNK>
If you would like to read the full report, you can access it by going to www.magellanrx.com.
Lastly, I'm pleased to share that we were recently reaccredited by URAC for pharmacy benefits management for our commercial and managed care lines of business.
As you know, URAC is the independent leader in promoting healthcare quality through accreditation, certification and measurement.
This demonstrates our comprehensive commitment to quality of care, improved processes and better patient outcomes.
Across the healthcare industry, there's a great deal of focus on enhanced innovation and consumerism, bringing healthcare to individuals where they are and when they need it.
When you look at what you can do with apps on your cell phone and consider how little of that is healthcare focused, you begin to see how far the industry needs to move to catch up.
At Magellan, our innovation labs accelerate innovation on behalf of our customers and members.
We are collaborating with Click Therapeutics to create a suite of FDA-approved mobile apps for people challenged by conditions such as insomnia, substance abuse, depression and anxiety.
This collaboration is a great example of how we're working with other innovative companies to bring healthcare solutions to people in a convenient and very personalized way.
Several studies published in peer-reviewed journals have demonstrated through randomized controlled trials that digital therapy may have outcomes that are as effective or as or better than other options.
Magellan has been the leader in the use of digitally based therapy tools for several years.
This includes having some of our software included in the Substance Abuse and Mental Health Administration's, or SAMHSA's, National Registry of Evidence-based Programs and Practices.
Our program is the only one of its kind to achieve the highest rating under SAMHSA's new stringent guidelines.
In pharmacy, we are exploring breakthrough digital healthcare tools to improve the member and patient experience and overall clinical outcomes.
With nearly 50% of patients not taking their medications as prescribed, addressing nonadherence is a critical focus for us.
Along the lines of personalized medicine, we are launching a new genetic testing pilot to learn more about one's ability to metabolize medications and the impact it has on drug effectiveness, health outcomes and costs.
Now I'd like to provide context around some of the legislative and regulatory changes being discussed in Washington.
While the initial repeal and replace legislation was withdrawn by Republican leadership last month, healthcare reform discussions continue in Washington as senior administration and congressional leaders have revived efforts.
This is partly due to the connection between changes in spending contemplated with healthcare reform as a way to fund tax reform.
We believe there is potential for movement in the near future.
Across the country, many states are wrapping up their annual legislative sessions, and they continue to look for ways to improve the quality of care and reduce costs for their Medicaid populations.
CMS has expressed a willingness to consider waivers and is encouraging states to include personal responsibility and member copayments in expansion plans.
States like Florida, Texas and Virginia are planning to expand or enhance their managed care programs.
Magellan has demonstrated meaningful ways to bend the cost curve and improve the member experience for specialty populations, and we are using this experience to help states shape their programs.
Leading humanity to healthy, vibrant lives is a pursuit that guides our growth and inspires us.
We will continue to provide innovative solutions for the fastest-growing, most complex areas of healthcare.
At this point, I'd like to turn the call over to our Chief Financial Officer, Jon <UNK>.
Jon.
Thanks, <UNK>, and good morning, everyone.
For the quarter, revenue was $1.3 billion, which represents an increase of 16.9% over the same period in 2016.
This increase was mainly driven by business growth and the annualization of revenue from prior year acquisitions, partially offset by the impact of contract terminations.
Net income was $17.7 million, and EPS was $0.74 in the current quarter.
This compares to net income and EPS of $13.2 million and $0.54 per share, respectively, for the first quarter of 2016.
Adjusted net income was $26.1 million, and adjusted EPS was $1.09 for the first quarter.
The adjusted net income increase of 34.5% from the first quarter of 2016 was mainly due to higher segment profit and a lower effective income tax rate.
Segment profit was $69.8 million for the first quarter, an increase of 16.5% from the prior year quarter.
For our healthcare business, segment profit for the first quarter of 2017 was $47.2 million.
Results included $13 million of favorable prior period items, comprising approximately $8 million of revenue retroactivity and $5 million of care development.
Segment profit increased 27% over the first quarter of 2016, mainly due to improved results in our government markets and net favorable out-of-period items, partially offset by the impact of the Health Insurer Fee moratorium in 2017.
Now turning to our pharmacy management segment.
We reported segment profit of $29 million for the quarter ended March 31, 2017, which was an increase of 1.6% from the first quarter of 2016.
This year-over-year increase was primarily due to new business sales and earnings from the Veridicus acquisition, offset by contract terminations and higher administrative costs to support growth initiatives.
Regarding other financial results, corporate costs inclusive of eliminations but excluding stock compensation expense totaled $6.4 million, which represents a $600,000 increase as a result of onetime expenses to support acquisitions.
Excluding stock compensation expense and changes in fair value of contingent consideration, total direct service and operating expenses as a percentage of revenue was 16.2% in the current quarter, which is comparable to the 16.5% ratio in the prior year quarter.
Stock compensation expense for the quarter ended March 31, 2017, was $10.1 million, an increase of $1.3 million from the prior year quarter.
This change is primarily due to the timing of equity award vesting and higher annual grants in 2017.
The effective income tax rate for the quarter ended March 31, 2017, was 40.3% compared to 47.3% for the prior year quarter.
This decrease is primarily due to the Health Insurer Fee moratorium in 2017.
Our cash flow from operations for the quarter ended March 31, 2017, was a net use of $31.1 million.
As a reminder, cash flow from operations in the first quarter includes the impact of the timing of variable compensation payments.
As of March 31, 2017, the company's unrestricted cash and investments totaled $288 million, which represents a decrease of $5.9 million from the balance at December 31, 2016.
Approximately $121.5 million of the unrestricted cash and investments at March 31, 2017, is related to excess capital and undistributed earnings held at regulated entities.
Restricted cash and investments at March 31, 2017, of $299.3 million reflects a decrease of $16.6 million from the balance at December 31, 2016.
This decrease is primarily attributable to the use of restricted cash and investments for the payment of claim and other liabilities associated with terminated contracts.
We are reiterating the 2017 guidance provided during our year-end earnings call in February.
Specifically, we expect revenue in the range of $5.8 billion to $6.1 billion and segment profit in the range of $329 million to $349 million.
In addition, we expect net income in the range of $90 million to $114 million, adjusted net income in the range of $123 million to $145 million, EPS in the range of $3.72 to $4.71, adjusted EPS in the range of $5.08 to $5.99 and cash flow from operations in the range of $150 million to $182 million.
Compared to the first quarter of 2017, we expect the segment profit run rate to increase for the remainder of the year due to the following factors: timing of new business implementations, timing of rate changes, normal earnings seasonality in our Part D plan and timing of customer settlements across our businesses.
In summary, I'm pleased with the solid results we recorded this quarter and our continued success in executing on our growth strategy.
With that, I'll now turn the call back over to the operator for questions.
Operator.
Josh, on Virginia, we're going through, through the month of May, basically, the readiness reviews, as everybody is, and then the state will then allocate or go through the algorithms and assign plans as we understand it based on their readiness.
And so we don't yet have that understanding of how they'll be allocated and the flow goes across the months between the implementation on August 1 through the 1st of January, 2018.
So that's not known.
And it probably won't be known until we get much closer to the implementation date.
Yes, Josh, it's a great question.
I would say it's a little bit of both.
As a general rule, we've not ---+ we would not forecast any IBNR development since, any point in time, we're recording our best estimates for IBNR.
But there are other things that lead to prior period adjustments such as some customer settlements and revenue adjustments that we might project in our guidance or in our outlook as we go through the year.
And I would say, this quarter, it's probably about 50-50.
We had both customer settlements, revenue-related items and IBNR in the $13 million.
Yes, I mean, again, probably closer to 50-50, but you have the general idea.
Yes, it's coming out near the end of the year.
So you never know about these things, sometimes they take a little longer.
But we wouldn't be surprised to hear later this year or in the first quarter of next year, dependent upon their decision process.
You bet, <UNK>.
Let me address the issue of kind of the contract terminations.
We have, on any given basis, we win contracts.
There are a few contracts that leave due to a number of issues.
Typically we don't have contracts that leave due to service issues.
We really differentiate ourselves.
We have the top Net Promoter Scores, how our clients perceive us in terms of quality, of service, and we take great pride in that.
So typically, there are circumstances which ---+ where they have other contractual relationships or it might simply be a price issue as well on occasion.
But generally speaking, you'll have some low level of contract terminations.
You'll have, on occasion, a larger one.
We talked about one, I think it was last summer.
It didn't have much of an impact on our bottom line, but it certainly was a larger top line revenue impact.
So that ---+ it's just kind of a normal but really a de minimis churn in the contract base.
Now relative to the differentiation, when I mentioned before about the Net Promoter Scores, we're thought of as very high performers in the industry.
We take great pride in our service levels, our execution, both in the implementation.
We're also very focused on being highly ---+ we're very happy to be able to customize and be very flexible with the customers we work with in terms of their plan design and implementation.
We could typically react far more quickly than the larger PBMs, and so people see us as very flexible, again, just excellent execution of implementation and the plan designs.
The other thing that's very different about us and how we differentiate ourselves, particularly relative to larger players, is that as you know, we've really focused on the specialty component of it.
About 50% of the spend, we're about there now, and some of our customers are already there, but it will get there for virtually everybody within the next year or so, is specialty, and that's really where we've cut our teeth and where we're well known.
We mentioned in the earnings call, we have nearly 14 million covered lives on the medical pharmacy benefit.
Most of that spend is specialty, and that's where the action is.
And so as larger health plans, employers look at trying to control that segment of the spend, the specialty spend, they more and more are focused on guys like us and specifically us, I think, because of our expertise in that space.
And so we're very different.
The way we go about managing those costs is dramatically different, and hence, the reason why you see us having nearly 14 million lives versus just a very small, a percentage of that held by others, even the big guys.
So those are the large ---+ I would say, those are the headlines.
<UNK>, you make a very interesting point in that we try to be very selective as to the types of contracts we take, so that they truly are profitable and sustainable for us over the long term.
At a certain point in time, particularly with very large MCOs, the contracts are literally at no margin and sometimes, subterranean margin, less than 0 with the hope that, that volume will buy you something in the future.
We think that, that actually just traps a PBM because it's very difficult to make that up with ---+ the larger player, certainly, won't be able to make that up because the market's too competitive.
And then the midsized employers, there are not enough of them, and certainly the smaller ones, there are not enough of them to make up that differential.
So we try to be very selective about the generic PBM kind of a business.
That said, if you ---+ as we take a look at our client base, we have quite a few substantial MCOs in our client base.
But instead of taking the bread-and-butter pharmacy claims administration business and plan design business, we focus on the specialty because that's where the money is.
And so we will continue to do that and not really take contracts that compromise rapidly our overall margin but really focus on the high-margin specialty subset of the pharmacy business.
In terms of our approach to the marketplace, we're likely to continue that.
We think that we'll see great growth.
We've said over the last several years, certainly, I think in mid-2013 that our margins, ultimately, as we move upscale into the midsized employers with a few larger employers, a few larger health plans, not the mega health plans, but a few of the larger ones, the margin would likely compress and get into the range of what the larger PBMs are.
Historically, they have been 3 to 5, they're 3 to 6.
You probably, no doubt, have noted, with the recent large ---+ who lost a significant contract, I think everybody knows what I'm talking about here, we always feel sorry when that happens, but it underscores the importance of not having so much of your business tied up with one account, one customer, and secondly, the impact on margins that has on a business.
So we don't have that kind of exposure here at Magellan, and we're likely not to have that kind of exposure, but you will see those margins, I think, over time be in that 3 to 5 to 6 kind of normalized range, very similar to what you see with the other larger PBMs.
Let me take the first part of the question, which is relating to the loss ratios for the quarter.
I would say that the way I'd depict it is the majority of the improvement we're seeing year-over-year, if you look at it versus last quarter, is coming from the public business.
It's just primarily the Magellan Complete Care business and, to a lesser extent, some of the remaining Public Sector behavioral business, where again we're seeing the continued benefit of many of the care management initiatives we've put in place over the last year as well as continued good operational execution.
And then, <UNK>, on your good question about how the state perceives the plan.
ACA is just an outstanding job, and the governor, Governor Scott, in leading the country in terms of these very innovative plan designs that allow them both to control the cost but increase quality and provide services to those who ordinarily wouldn't receive services.
Nationally, they're seen as a thought leader and, indeed, within the state, we have a great partnership, and they've been highly complementary to the work that we've done in advancing and refining the approach there in the state.
So we think that we're in good stead.
Again, there are no guarantees, but the work that we've done with them, we've advanced the cause, and created the first of its kind in the country.
I think ACA takes pride, as they should, in having sponsored that, envisioned that and created that, and we feel very fortunate to be their partner.
Even states like Virginia, as they were going through the decision process, they look to Florida, and there were significant conversations with the leadership in Florida.
And as you know, we were awarded the business also in Virginia, along with others.
But again, it's a clear indicator of how the state thinks about us.
We do think that states will follow their lead.
Just as a quick commentary on healthcare policy, I had this conversation with Governor Scott and other governors as well, one of the governors specifically, regarding how they think about the Medicaid population and the ---+ trying to control the costs, having the federal government basically give states greater flexibility and be far more open about creative plan designs.
So I think what you're going to see are more states will do what Florida is doing, what Virginia's doing, and you'll see the states have more control over their future.
The reality is, in these states where we have these populations, where 5% of the population spent 45% of the premium dollars, you simply have to focus on that most ill part of the population which have more seriously mentally ill, intellectually development disabled ABD population, you have to have specialists to focus on those.
That's what we do, and that's our great strength.
So we think what Florida's done is not only ---+ not only plays well in Florida, but plays well fairly in Virginia, and we'll play that out as we implement there.
But we think we will see that trend, where states are getting being far more creative and being allowed to do so by CMS.
Okay, Dave, I'll try to ---+ this is Jon.
I'll try to capture all your questions here.
First, in terms of revenue on the pharmacy side, I would really kind of depict it in 3 pieces.
One, this is new business, and we have seen strong sales results, both as we went through 2016, which we're now getting the full annualized benefit of, and in 2017.
That's really across employer health plan in specialty specifically on medical pharmacy, we've had some good results.
It's also ---+ also, Medicare Part D, we've continued to see growth as we've come into this year.
I think <UNK>, on the script, talked about the membership growth there and then the Veridicus acquisition, those are really the 3 primary drivers.
Now if you look at revenue versus segment profit, there's always a little bit of noise in comparing one quarter to another because there's puts and takes and always some volatility and nonfundamental items.
But largely, the general trend you're noting is really a shift in business mix, where we're seeing more growth in both Part D and the traditional PB<UNK>
And as <UNK> mentioned in his comment in response to an earlier question, that's the trend that we've expected, meaning that as we get more into the PBM business and continue to further our strong growth there, we will see some reduction in margins as a percentage of revenue.
But of course, the revenue there is higher because we're counting the cost of drugs versus some of the fee-based revenue in our traditional specialty pharmacy business.
So those are the main drivers.
Part D, in general, you'd asked about that.
We had, in our guidance, and continue to have something close to breakeven for full year for Part D.
As expected, we had a slight negative margin in the first quarter.
As I'm sure you're aware, the seasonality of Part D, because of the benefit structures, is such that the earnings improve as you go through the year as a percentage of revenue.
So that's not material, but small negative contribution in the quarter.
Yes, it's really a combination of things.
So it is both staffing up to support new capabilities and new customers, really for those growth initiatives, including Part D, where we've seen, where we've obviously seen growth over the course of the last year, but as well on the managed care and the employer side to support that growth.
And then we are continuing to build out our clinical capabilities and other capabilities in the specialty arena as well.
Let me again kind of take those questions sequentially.
First, in terms of new business, we continue to make good progress in new business.
So we're above 50% now, call it in the 60% range.
Importantly, though, our pipeline continues to be very strong, and our sales results continue to be strong.
I think in terms of exactly how this year plays out, it will depend on timing of implementation, both of business we've sold already and business that we're well along with in the pipeline.
But we feel very good about both the results to date and the prospects as we go forward.
In terms of parsing the out-of-period adjustments, look, there's ---+ we have a guidance range.
There's always going to be puts and takes within that range.
I think we're probably being a little bit overly precise to kind of think about is $5 million or so of prior period items going to push us up or towards the upper end of the range or where exactly we'll be in that range.
But obviously, it's good news to have that momentum coming into the year.
But I wouldn't read in that it's conservative or aggressive at this point.
We have the range, and we're comfortable with that at this point.
Yes, Dave, it's really both.
Indeed, internally, we have rebuilt the ---+ we've rebuilt the product line and kind of modernized the entire product line.
We've expanded the product line.
There are new services, for example, musculoskeletal, that didn't exist, I want to say 2 years ago, and now we cover 7.5 million covered lives.
And it also creates additional stickiness and introduction into new clients as well.
And so that's good example of kind of an enhanced product and a new product.
But even our core products of the company have been substantially modernized over the last 2, 3 years.
And then in addition to that, we have built a sales force.
Three years ago, we had virtually no sales force.
And we have great people out there serving our clients in a client service capacity.
But I think nationally, we had 2 people.
So that just is not enough of a sales force to be able to tell the Magellan story.
So it's been basically a rebuilding of the company's capabilities, both by getting modernizing existing product, increasing product and the quality reporting, kind of moving to the new world in terms of the types of risk deals.
We continue to take and expand risk deals with our clients.
They like that, and so ---+ and we can tell the story far more effectively.
The second part of it is the part that you point out.
Unlike virtually any of the time we've seen in the last several years, given the pressures exchanges have caused on the part of regional health plans particularly, even national and regional ones, they're looking for solutions, and they realize that in order to come up with the kind of expertise and sophistication of product that we've been able to develop over years, that's very difficult to do on your own internally.
Plus the fact that they, like others, they like to delegate risk, they like us to take the risk for accomplishing the goal, to have them meet their financial goals for the year, for this year and for the next few years.
And so that drive, that initiative has been very, very different.
As you recall 2 years ago, particularly, it went the opposite direction because people thought that with exchanges, they were so focused on coming up with the exchange product, they really didn't pay attention to doing these ---+ focusing on these services, which really are part of the costs, and that's really changed.
Today, they see that they have this real need of greater expertise.
And the last point that I would make, over the last 1.5 years, 2 years, we've seen a real emergence of a recognition of a linkage between behavioral health and physical medicine.
We're seeing it in the public markets and hence, the Florida, Virginia, we'll see others that will implement as well we believe over the next while.
But you're also now seeing it in the commercial marketplace.
Again payers realize that unless there's expertise and linkage between the behavioral health product and the physical medicine, they can't achieve the results they want to achieve, certainly not on BH side and certainly not on physical medicine side.
So the products are far more integrated and kind of digitally driven and consumer oriented than they were 2, 3 years ago.
It's a very different marketplace.
So it's a very interesting topic, which we'll talk more about during our Investor Day coming up in June.
All right.
Now <UNK>, good to have you on with us this morning.
Is this question more focused on the PBM side.
Yes, absolutely, <UNK>.
Let me kind of take them one at a time.
We do have a focus on regional health plans, and many of the national players.
Either contracts are so large that it would dwarf us and/or the pricing is so challenging it just isn't that appealing to us.
It's not that we wouldn't do specialty things with those players, and we do, but we would focus more on specialty rather than general PB<UNK>
Because of that, you see us have a very significant presence within the Blues world.
Interestingly, for ---+ well, the last many, many years, we've had a strong presence in the Blues world and continue to have that presence.
What's happened is that with over the last again 3 or 4 years, with building the sales force, we've seen a lot of linkage, increasing linkage between, at least relationship-wise and also product-wise, between the healthcare services offerings as well as the PBM offerings.
And so while they have different CEOs, we talk to the same players, the same leadership in the plan.
And if a healthcare services client is thrilled with our service, they'll be more amenable to listening to our story on the PBM side and vice versa as well.
So we see a lot of cross marketing going on increasingly over the last several years.
Again, Blues versus non-Blues, we have a major footprint in the Blues world, but we also have broken out over the last, I would say, 6 months, 1 year, 1.5 years to increasing our sales focus on non-Blue accounts as well.
So it's kind of a mix, probably more dense Blues but also other regional MCOs that we focused on as well.
Now relative to Prime, Prime is a great provider.
We know, I know Jim DuCharme well.
He's the CEO up there in Minnesota, good quality outfit.
As you know, they're owned by several Blues partners, and so those partners typically use Prime for their services.
And that's fine, I think Prime does fine job.
What we do that's a little bit different than Prime, including with the relationship with Walgreens, is again, as I said earlier, we're so focused on the specialty piece and on medical pharmacy.
That's fundamentally not what Prime does or what ---+ they're not known for that.
Again, good quality leadership and great services.
So we fundamentally have kind of a different way of going about things in terms of our offerings and, indeed, with several Prime customers, we offer the specialty medical pharmacy benefit.
So that's a, not an atypical way for us to work side-by-side with Prime.
Relative to their agreement with Walgreens, as you know, both Walgreens and CVS are duking it out for market share, and it's a very competitive world.
And with the acquisition ---+ who knows what's going to happen, obviously in the Right-Aid deal with Walgreens.
But again, those 2 players, you almost have to have one or the other in your network.
And so as Walgreens formed a relationship with Prime, it helps Prime in terms of some economics, but fundamentally, we compete very effectively the same because we have relationships with Walgreens and CVS as well.
And so it hasn't really changed the dynamics in the marketplace to have Prime have that relationship with Walgreens.
At least we haven't seen it yet.
So I don't know if I ---+ did I cover the landscape on your questions, <UNK>.
Excellent.
Well, we again are thrilled to have you with us here today.
Just one moment.
I'd like to remind everybody that our 2017 Investor Day will be held on June 22 in New York City.
We all hope to see you there.
Thanks for calling in today and joining us.
Bye-bye.
