Renie Shapiro Silver - Senior Vice President, Corporate Finance Barry Smith - Chairman and Chief Executive Officer Jon Rubin - Chief Financial Officer.

Josh Raskin - Barclays Dave Styblo - Jefferies Michael Baker - Raymond James Chris Benassi - Goldman Sachs Ana Gupte - Leerink Partners.

Welcome and thank you for standing by for the Third Quarter 2016 Earnings Call. [Operator Instructions] Today’s conference is being recorded. If you have any objections, you may disconnect at this time. Now, I will turn the meeting over to Renie Shapiro. You may go ahead..

Good morning. Thank you for joining us today for Magellan Health’s third quarter 2016 earnings call. This is Renie Shapiro Silver, Senior Vice President of Corporate Finance. With me today are Magellan’s Chairman and CEO, Barry Smith; and our CFO, Jon Rubin.

This conference call will include forward-looking statements contemplated under the Private Securities Litigation Reform Act of 1995. These statements are subject to known and unknown uncertainties and risks, which could cause actual results to differ materially from those discussed.

Please refer to the complete discussion of risks in our most recent reports filed with the SEC and in the cautionary note in today’s press release. 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 non-controlling interest 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 reflects certain adjustments made for acquisitions completed after January 1, 2013 to exclude non-cash stock compensation expense resulting from restricted stock purchase 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 with 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, Barry Smith..

Thank you, Renie. Good morning and thanks for joining us. As you read in our press release this morning, for the third quarter of 2016, we produced net income of $25.5 million, earnings per share of $1.06 and segment profit of $82.8 million. Third quarter adjusted net income was $33.3 million and adjusted EPS was $1.39.

For the 9-month period year-to-date, we produced net income of $42.7 million, EPS of $1.75 and segment profit of $199.6 million. Adjusted net income for the 9-month period was $67.1 million and adjusted EPS was $2.76.

Year-to-date through Monday, November 7, we repurchased approximately 1.8 million shares for a total cost of $106.8 million at an average price of $58.40. To-date, we have completed approximately 63% of our current $200 million share repurchase authorization. We ended the year with $233.8 million of unrestricted cash and investments.

I would like to say how pleased I am with this quarter’s results. Over the last several years, we have built an exceptionally capable senior leadership team and our results reflect strong execution across all of our businesses.

Before I move to highlights of the individual segments, I would like to take a moment to share my thoughts on how Magellan is not only a successful business, but even more importantly, how we make a real difference in people’s lives.

There are great challenges in healthcare today with an alarming increase of opioid addiction, autism, mental health concerns, suicide and host of other suicidal challenges. These issues further complicate the delivery of physical care with the cost and quality of care directly influenced by the mental state of the individual being treated.

Simply put integrated physical and behavioral healthcare along with sophisticated pharmaceutical clinical management is what is required to improve the lives of those who suffer from advanced illness. Bottom line, high-quality effective care at a lower cost.

Our massive transformational purpose of Magellan leading humanity to healthy vibrant lives also reminds me one of my favorite proverbs one could do well by doing good.

We remain focused on delivering strong shareholder value today and in the future through both the results we deliver and the positive impact we have on the lives of individuals we serve.

Turning to our segment highlights, our pharmacy business posted strong financial and operational results consistent with that – with what we have seen throughout the year. During the third quarter, we experienced strong sales results across the number of markets.

In the employer market, we had a net growth of 20,000 lives during the quarter bringing the year-to-date growth to 110,000 lives.

In addition, we have expanded our previously announced alliance with Mercer, where we are a preferred PBM vendor and where we are recently selected as one of the two companies to provide specialty pharmacy solutions to Mercers’ employer customers.

In the managed care business, our newest PBM health plan customer went live on October 1 with the second new health plan scheduled for January 1, 2017.

In addition, we reached an agreement to continue providing specialty pharmacy services and expanded medical pharmacy management with the previously disclosed health plan, which transitioned away core PBM services on September 1, 2016.

In the specialty market, we are currently implementing a new medical pharmacy health plan customer with over 2 million members that will go live at two phases late in the fourth quarter of 2016 and early 2017. We have also continued to expand our distribution and formulary management services across a variety of customers and drug categories.

In addition, we are leveraging our clinical expertise to implement innovative clinical programs across several health plan customers, including our intensive diabetes, hemophilia, clinical utilization and our enhanced opioid utilization management programs.

These include critical interventions and support to ensure appropriate utilization, improve outcomes and in the case of opioids, minimize the risks of abuse. Our Medicare Part D prescription plan, PDP continues to grow and currently serves 59,000 members. For 2017, we will continue to operate the PDP in 32 states.

In 4 of the 5 regions where we received auto-assignment in 2016, we have the opportunity to retain or grow our auto enrollees in the coming year. The annual enrollment period runs from October 15 to December 7 after which we will have a preliminary view of our anticipated January 2017 membership.

We have gained significant experience in this area and will leverage that expertise as we seek to help health plans manage this critical area spend. We continue to see a strong pipeline of opportunities across all our markets with a keen interest in our clinically focused, value-based approach to PBM and comprehensive specialty drug management.

In our healthcare business, third quarter results were strong and we continue to execute on our strategic initiatives. We made important progress in several key areas this quarter.

Regarding our SMI specialty plan in Florida, we have seen further improvement in results due to the continued progress on our medical action plans with our current membership totaling approximately 58,000 lives. We are also focusing on investments in quality initiatives in improving the overall system of care.

Jon will discuss the Florida financial results in detail later in the call, including the recently released rates for the 2016 through 2017 year. As we discussed in our last call, we expanded our federal presence with the acquisition of Armed Forces Services Corporation or AFSC on July 1. We are pleased with the integration and results to-date.

We received 3-year extensions on two of Pennsylvania’s currently behavioral health contracts. Momentum is building in the commercial behavioral health as specialty solutions businesses, where we had sales of our behavioral sales, autism and radiology products this quarter.

And lastly, as health plans are looking for solutions to opioid and drug abuse issues, we have launched several programs that have resonated well in the marketplace. The pipeline of healthcare opportunities is quite robust.

In the commercial and specialty solutions areas, health plans continue to be challenged by their exchange of Medicaid business, particularly in the management of complex, high cost populations.

As a result, plans are increasingly interested in our cost management solutions and we are seeing more opportunities from behavioral health carve-outs and increased demand for capitative programs.

In addition, as health plans partner more frequently with providers, there is growing interest in our behavioral health models, which promote collaboration between health plans and delivery systems to improve outcomes.

In the government space, we expected to see several RFPs, we expect to see several RFPs between now and the end of 2017 with the management of special populations, such as managed long-term services and support MLTSS, SMIs and adults with physical or developmental disabilities.

We estimate that these programs with effective dates in 2018 and 2019 may provide a total market opportunity in excess of $15 billion. Finally, from Medicaid, Magellan Complete Care of Virginia was one of seven plans invited to negotiate for all six regions of Virginia’s MLTSS initiative also known as the Commonwealth Coordinated Care Plus Program.

This program is expected to serve approximately 213,000 individuals with complex care needs across the state through an integrated care model, beginning in July of 2017. The negotiation phase includes contract elements, network development, what industry views and training and education.

The state expects to make a final decision on its intent to award contracts in December. As a reminder, it’s important to note that there is no guarantee that plans are put for negotiations but this phase of the process will ultimately receive a contract.

In both our pharmacy and healthcare businesses, we have an improved line of site into expanded opportunities in the future.

The depth and breadth of experience we provide, including our core behavioral health capabilities, integrated care programs and full service PBM capabilities, unique specialty expertise give us a competitive edge as we continue to serve existing customers and win future business.

I am very pleased with our strong results this quarter and our improved full year guidance. I will now turn this call over to Jon, who will provide you with more details on our third quarter results, 2016 guidance and directional comments on 2017.

Jon?.

the seasonality and timing of care results and customer settlements mainly in our healthcare business; normal earnings seasonality in our pharmacy business; the impact of new business growth across our businesses; the improved results in MCC of Florida; and the impact of the AFSC and TMG acquisitions.

Now, we are working on finalizing our business plan for 2017 and we will provide detailed guidance later this month. In advance of that, I will now provide some initial commentary.

As compared to our updated segment profit guidance range for 2016 of $295 million to $305 million, we currently expect that we will have solid segment profit growth in 2017.

This expectation primarily reflects expected new business effective in 2017 in both our healthcare and pharmacy segments, the annualization of new business sold during calendar year 2016, same-store growth, improved profitability in our existing MCC markets, and the annualization of results from the AFSC and TMG acquisitions.

These favorable variances are expected to be partially offset by the elimination of the ACA, the Affordable Care Act health insurer fees for 2017, which negatively impacts segment profit by approximately $17 million, but has no impact on net income.

Approximately $7 million of net favorable out-of-period adjustments in 2017 primarily pertaining to prior year care development, previously discussed contract terminations and additional investments anticipated in our pharmacy and MCC businesses. In closing, I am very pleased with the results in both our pharmacy and healthcare segments.

Our positive update for 2016 guidance reflects the strong operating performance as well as successful execution of our growth strategy. This positions us well for next year and I look forward to further discussing our 2017 guidance and sharing the details of our plan for solid earnings growth during our call later this month.

With that, I will now turn the call back over to the operator for questions.

Operator?.

Thank you. [Operator Instructions] And our first question is from the line of Josh Raskin from Barclays. Your line is now open..

Hi, thanks. Good morning.

Just on the guidance boost specifically looking at segment profit, how much of that is from M&A? And then just to confirm the $13 million of good guy in the quarter, does that relate to prior quarters in 2016 or is that actually favorable development related to prior years?.

Hi, Josh. First on the M&A, the boosted guidance that we just announced, actually doesn’t have anything to do with M&A, because actually if you look back at the two acquisitions we did this year we had previously adjusted guidance first in February and then in July for those acquisitions. So, this is unrelated to that. So, that’s one piece of it.

In terms of your second question – I am sorry, can you restate your second question please. So I make sure I have it..

Yes, so the $13 million was that related to prior years or just prior quarters?.

Yes, Josh, the vast majority was prior quarters. So it was in here. There was a very small piece that was prior year, but the vast majority is in here..

Okay.

And then just on the MCC segment, I am curious how much of that improvement is just Florida? And then I think you mentioned that, that was specifically inpatient and emergency rooms, but any color on what’s gotten better, is it just your old reserves or did you see an actual change in that fundamental cost trend?.

Yes. I mean, first, to answer your question, it is mainly Florida. We have seen some improvement in our New York business as well, but Florida is obviously larger, the larger piece of that.

So, in addition to the rates I mentioned we are seeing a good improvement as I mentioned both in inpatient and emergency room visits and those were things that we had been working on for some time. So, it really is sort of the continued progress that we are making there, which again should position us well as we go into next year.

So, those are really the key items. Now, there was a piece of the prior period development that we spoke about that was related to Florida as well. Well, it was probably about 50% of the prior period development again primarily in here..

Okay. Okay, that makes sense. Okay, perfect. Thanks..

Thank you. And our next question is from the line of Dave Styblo from Jefferies. Your line is now open..

Good morning. Thanks for the questions and congrats on the quarter. Let me come back to the ‘17 comments there. I am wondering if Jon maybe you can put a little bit more of a finer point on what you mean when you guys talked about solid segment growth for next year, when I hear that I typically think of mid single-digit type growth.

And also on free cash flow, can you give us a sense of does that return to normalized levels next year given some of the moving parts of the contingent payments and the Part D referral of capturing that revenue payment from CMS?.

Yes. Dave, let me kind of take the questions. We will provide a lot more detail on the 2017 guidance as we go into our call later this month on the 22. I will say in terms of the commentary obviously using the terminology solid, we are obviously very pleased with the outlook right now for 2017.

It was in the low single-digit or even low to mid single-digit range. We wouldn’t have obviously used a term like that, but we will provide more details as we go forward. In terms of free cash flow again, I want to differ the details of that so we give the full guidance.

I would say on the items you mentioned, the contingent consideration and also Part D, the impacts will certainly be less as we go forward given some of the activity we have had over the last year or 2 years. However, there are still other things that we are in the process of assessing.

So, for example, we have talked about the fact that we are in negotiations with Virginia on a potential contract, but that could have certain capital considerations as we go into next year. And we just don’t know enough of that yet to be able to give a complete picture.

But again, we will circle back and tell you in more detail what we know later this month..

Sure. That’s fair. And then just with the election obviously going on here and when we went through the ACA implementation. I don’t think you guys really call that much of a tailwind, I suspect there must have been just from increased membership and services that needed to be needed.

But with Trump winning, I am wondering how you might think about any potential unwinding of benefits or services that that could happen, if there was some sort of repeal and replaced, especially if it’s on the exchange as I am wondering what sort of exposure you might have to providing services for those who have exchange benefits?.

Yes, Dave, Barry here. Again, great to have you on this morning, particularly this morning after the election, these are obviously very interesting and critical times. It seems like with every election there are always some pretty significant changes to business generally. And of course, this has more impact in healthcare than usual.

Now, both of the Presidential candidates promised significant changes to Obamacare and oversight of pharmaceutical pricing. President Elect Trump has about to repeal Obamacare and it also supports expanding tax credits to encourage health savings again. So, we think it will have an impact clearly in our business here.

Now, we don’t have any details of his proposals and the process by which they will be enacted, but we will hopefully know more in the coming weeks and months here. We have an very expanded government relations team that will be very connected to the next administration. So, we think that we will have good line of sight as to what will happen.

We can also say that even prior to the ACA we had direct-to-states contracts, which were very strong relationships. We did very well in that environment. And so we have always done a lot of public sector business and we are very successful at it.

The reality is and it’s our view and feel that the skills that we have as a company dealing with these complex populations will not go away. These are the most costly and complex individuals that healthcare deals with. And we think that our unique set of capabilities will allow us to increase the quality of care, but also reduce cost.

And so we don’t think that – you don’t quite know of what the impact will be over time, but we do think that we will do quite well in the future irrespective of the changes that might come down the path..

The other thing, I would just add to that, Dave, just little bit more specifically is while we do have some exchange business through health plans. I would say compared to maybe others on the managed care side, our exposure is relatively immaterial both in terms of revenue, but more importantly in terms of segment profit.

Now, Medicaid obviously is a big source of business for us. But as Barry said, that isn’t likely to be disrupted over the intermediate term. It may change in terms of some of the funding, but we are not feeling at least out of the gate like there is tremendous amount of exposure..

Okay, helpful. And then just two more on contracts, one existing one maybe new win here, on the Florida SMIs, it sounds like the rate increase has really helped you guys possibly move into the black. What’s assumed in guidance now for Florida? Are you near the 3% pre-tax margin now? And what do you think that can get to over time.

And then lastly, on the Virginia MLTSS, that’s obviously an encouraging sign not final, but what have you baked into 2017 guidance, if anything for perhaps startup costs related to that?.

Yes. So in terms of Florida, we didn’t give a specific margin. We don’t generally talk about margins at the customer level, but I didn’t say is we are now expecting the MLR for the full year to be in the mid-80s, which is typical to what we target for mature account of this type. And obviously, every plan is different, but in that range.

Relative to Virginia, right now again, we are really in the process of both negotiating and trying to fully understand the program going forward, including how membership is going to be assigned, if we are successful in finalizing the contract, etcetera.

So right now again, we will give more details in a couple of weeks, but right now, we do have a range built-in for our plan is we are finalizing it for next year in terms of investment, but it is a range and we will be finalizing that as we complete the negotiations and hopefully successfully..

Got it. Thanks. I will step back for others..

Thank you. And our next question is from the line of Michael Baker from Raymond James. Your line is now open..

Yes. Thanks a lot.

I was wondering in terms of the Mercer addition in terms of the relationship, if you can give us a sense of what you think the carve-out opportunity is on the medical side and on the pharmacy side?.

Well, let me – thanks so much Michael for the good question. Medical pharmacy just for everybody’s benefit is the part of benefit typically specialty, which passes through the medical claims system and benefit rather than through the pharmacy benefit. We have expanded our business quite dramatically over the last several years.

And today, I want to say we cover 13 million lives or so under medical pharmacy benefit business. And we are the largest of our kind than anybody in the country. So we have unique and long experience in this space.

It is most important because as you know the cost – the escalation particularly of pharmacy across the board, but particularly with specialty with the new introductions is focused in this space of medical pharmacy benefit.

So while and certainly the Mercer relationship helps us, it actually is a great tailwind across all of our business segments in pharmacy, because customers realize the need to manage much more thoughtfully the quality and cost of care for the special benefit.

For health plans this is a particularly important area, because so much of their HEDIS and Star scores are based upon the quality of care and a large part of that is based upon this tightly manage to the high quality way that care for our specialty pharmacy. So we think that the Mercer relationship is positive.

It will – can either help us particularly important market, but the medical pharmacy capability really spreads across all segments..

And then on the medical pharmacy piece of the Mercer relationship, I mean I understand the selling season as it relates to the PBMs side of it, can you give us a sense for how quickly opportunities might arise there and are they tied to any particular timeframe?.

Really, it’s more of a flow and the relationship, it continues to build. So we would expect to see increased volume over time. It’s producing well for us today. And we continue to see it be a real opportunity for us in terms of pipeline for the future.

So I just think it’s another distribution channel for our services and we think its Mercer’s recognition of the kind of a high quality unique approach we take with the Magellan RX. It’s again very much more clinically oriented and sophisticated rather than just simply a discount. And so we think it will have great impact.

We haven’t given any guidance and we expect to see the relationship to continue to expand and the pipeline opportunities to expand with Mercer..

Okay. Thanks.

And then Jon, I was just wondering if there were any one-timers that were worth calling out related to the PBM transition?.

I am sorry….

With the contract loss, normally there are kind of fees to transition and I was just wondering if that was even meaningful?.

No, nothing material..

Okay. Thank you..

Thank you. And our next question is from the line of Matthew Borsch from Goldman Sachs. Your line is now open..

Hi. This is Chris Benassi on for Matthew Borsch.

I was wondering, if you have had any benefit from Florida catch up payments, several of your peers have touched on this and I was wondering if that’s affected you at all?.

Yes. Chris, we actually talked about that in July for the second quarter. So there was no impact in the current quarter. We had recognized in round numbers, it was $2 million in the second quarter. And again, that had been previously accrued and announced..

Great, that’s helpful for this quarter.

And it sounds like you have addressed the issues around the September PBM contract loss and even taking out a step further by taking up a couple of new contracts, how do you confront the situation and remediate the lost contract and to backpedal a little bit, what drove the initial contract loss and are there any notable re-bids that we should be watching for the near future?.

Yes. Number one, as we announced that contract, it had significant top line impact, but really the bottom line wasn’t material. And so it was we always – we never like to lose business that’s for sure. But we also, as we announced today, retained specialty and other relationships with the same account.

So it was a more of a relationship and the industry issue, where the MCO had another partnership that prevailed in terms of the contracts they had. It wasn’t anything to do with the performance or service or anything of the like. We are very well thought of by both the industry and that particular client.

So again, we never like to lose any dollar revenue and we certainly want to maintain the relationship with our clients. In this particular case, we are. And so we view that as very positive..

Okay, great, that’s helpful.

And one more, if I could squeeze it in, could you provide an update on AFSC integration, I know you had originally, you guided to $90 million of revenue over the last six months of the year, is this progressing as expected and could you give any directional color if that’s coming in above or below?.

Yes. Chris, it’s very early. So obviously, in the first quarter of operations I would say things are going very well. In terms of revenue, we are on track. And again to-date, we are pleased and it’s performing at or better than expected..

Okay. Thank you again..

You bet..

Thank you. And our next question is from the line of Ana Gupte from Leerink Partners. Your line is now open..

Yes. Thanks. Good morning.

Following up on the Florida SMI, so I think I heard you say those mid-80s loss ratio, which is very, very strong, I think you had guided to high 80s, and at 1 point in 2013, then you were talking about SMI as a big opportunity, is there any read across to other states with the total market size, what’s going on in other states as far as SMI, are they pulling that with the rest of the long-term care population or is there any intent to do the kind of carve-out work that you are doing?.

It’s a very interesting question, Ana. Clearly, the need is there in virtually all of the states. We have these complex populations, the SMI population, the intellectually and developmentally disabled population, the ABD population, so all states really have the issue. The issue becomes then how do they approach it.

Some states like Florida have carved it out and have awarded to us. We think that’s a smart approach because we are specialists. And again, if you had cancer, you would go to an oncologist, because the oncologist is a specialist, not a general practitioner.

While the general Medicaid and health plans are good quality providers, again they don’t necessarily have the same tool set – toolkit that we have to address then needs of these individuals. And so Florida for us did a complete carve-out SMI plan. And various states are deploying they care for this population in different ways.

What seems to be happening, we talked a little bit about in the script today is the long-term support services or managed long-term care services, much like our plan in New York with AlphaCare. Virginia is just segmenting the population in the [indiscernible] development we don’t know precisely how that will ultimately develop.

But most states are coming out with managed long-term care in one form or another, where they give complete responsibility for integrating care for those that otherwise would likely be in an institutional setting, but by providing this care and having contrary with guys like us, we are able to stay in their homes which they prefer to do, which is the lowest cost option.

So we see states developing these kinds of plans. We think that’s likely the trend for the future. We have mentioned during our call today that there is a – during the additional comments here that there is $50 billion market in the space for these kinds of programs.

They are all a little bit different, but they are very similar and that they focus with those individual – on those with individuals with complex needs. And so we think that’s how it’s going to play out..

Okay. Then on Virginia, is this the same for you as it is for any other player like Aetna or Anthem or are they kind of doing different more customized approach for you? The long-term care initially, there has been a lot of losses I think in states like Iowa very nice and is complaining that they are really bleeding money.

They are all taking PDRs on it.

So Florida, a smaller player like yourself, are you customizing it, what type of actuarially sound negotiations that you are going through with the state and that kind of thing?.

Well, certainly the states go through a process and there is certain oversight and regulatory, there is a rule set that drives those rates which are to be actuarially sound. And so hopefully that will continue to be so. We typically end up not negotiating the rates that are presented to us.

We examine them and look at – look to see if we can live with those rates. If we can, we then contract with the state. They provide the data, we analyze the data and we go through a very thoughtful process with the states.

And the states also understand that they can’t create a plan that is not actuarially sound, because you are not going to have longer term relationships and care for those individuals in their states.

And so there is a good – I think there is a positive feeling between states and providers like ourselves to come up with rates that we can live with, that allow for a sustainable program long-term. In terms of our competitive edge or stance in these markets, it really depends on the circumstances.

In the case of, for example, Iowa, there was a very aggressive managed care factor that was applied to those rates in the State of Iowa and the state decided to go more go to generalists and then just simply have them handle the issues of these complex populations and that’s certainly one approach.

But more and more we see states being more interested longer term and solutions, which involved guys like us that have unique capabilities to manage these populations and demonstration of our skills from the past and our behavioral health systems and our pharmacy capabilities that allow us we take a leg up on the competition.

We do think it will be kind of a bimodal approach, you will see flavors of both. But given our size and the opportunity and our unique expertise, remember that we are the only SMI specialty plan in the country.

And so as we apply the states, particularly with acquisitions like TMG, it gives us unique capabilities to address the needs of the long-term support services market. So, we think that we are quite well positioned. We are going to demonstrate. We said in the past that we would be in between 5 and 7 states within 5 years.

Will it take us a year or two longer? Who knows. But we are on track to do precisely, but we said we were going to do several years ago and feel very good about our progress..

Got it.

So, TMG is helping you with your [indiscernible]?.

Absolutely, absolutely. Probably, one of the top consultants on long-term support services in the country having had a direct relationship with the state of Wisconsin, but also their expertise and their guidance was embedded in a large number of the proposals to states nationally.

So, they are the experts and we are very fortunate to have them be part of the Magellan family. They bring us a lot of expertise and hence the importance of an acquisition. And I might just add relative to our thoughts about M&A, we don’t just acquire entities to rollup revenue and accountability.

We acquire entities to give us capabilities that turbo-charge our organic growth and TMG is a good example of that. They have unique capabilities. They are recognized nationally is an expert in the field and their experience combined with our capabilities makes for a very important competitor in the marketplace..

Okay. One final question on the drug supply chain and the PBMs and so on, we have been facing headwinds for a while. McKesson has highlighted big headwinds. CBS is now seeing pressure with the competition against maintenance choice now.

Would you consider kind of your PBM functionality rather niche and insulated from all of this or are there any other read across headwinds?.

Well, we are certainly not completely insulated, but we are very, very different than the high volume PBMs that rely upon more commoditized services. It’s really more in their business model it’s a matter of volume. The volume is important. So I don’t discount that whatsoever.

But we have really focused our capabilities on really having high clinical content, being smart not just about applying discount. Now, we can get down to discounts and they compete with almost the best of them nationally, but most importantly, it’s not what you buy the drug at, that really differentiates.

It’s the guidance of utilization being clinically smart about when that medication should be used and taking down the waste and increasing the quality of care through making sure that the utilization is appropriate, that could be not more true when it comes to specialty drugs, for example, that as you know incredibly expensive on a monthly basis.

When you use that drug, how you use that and how efficacious it is means everything. A fraction of a point in a drug discount means relatively little. With the kinds of things we do really move market share for manufacturers who have drugs that work, we take great pride and be able to guide our clients in a more clinically sophisticated way..

Got it. Alright. Well, thank you. Appreciate the color..

Well, thank you all for joining us today. We look forward to speaking with you later this month when we provide details of our 2017 guidance. Good day..

Thank you. And that concludes today’s conference call. Thank you all for joining and you may now all disconnect..