For the Quarterly Period Ended June 30, 2015

For the transition period from __________ to _________.

Commission File Number 001-01011

(Exact name of registrant as specified in its charter)

One CVS Drive, Woonsocket, Rhode Island 02895

(Address of principal executive offices)

Registrant's telephone number, including area code:  (401) 765-1500

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes[X] No [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

Common Stock, $0.01 par value, issued and outstanding at July 29, 2015 :

1,114,486,195 shares

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

(Unaudited)

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of CVS Health Corporation and its subsidiaries (collectively "CVS Health" or the "Company") have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") regarding interim financial reporting. In accordance with such rules and regulations, certain information and accompanying note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted, although the Company believes the disclosures included herein are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, which are included in Exhibit 13 to the Company's Annual Report on Form 10-K for the year ended December 31, 2014 ("2014 Form 10-K").

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. Because of the influence of various factors on the Company's operations, including business combinations, certain holidays and other seasonal influences, net income for any interim period may not be comparable to the same interim period in previous years or necessarily indicative of income for the full year.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries and variable interest entities ("VIEs") for which the Company is the primary beneficiary. All material intercompany balances and transactions have been eliminated.

The Company continually evaluates its investments to determine if they represent variable interests in a VIE. If the Company determines that it has a variable interest in a VIE, the Company then evaluates if it is the primary beneficiary of the VIE. The evaluation is a qualitative assessment as to whether the Company has the ability to direct the activities of a VIE that most significantly impact the entity's economic performance. The Company consolidates a VIE if it is considered to be the primary beneficiary.

Assets and liabilities of VIEs for which the Company is the primary beneficiary were not significant to the Company's condensed consolidated financial statements. VIE creditors do not have recourse against the general credit of the Company.

Fair Value of Financial Instruments

The Company utilizes the three-level valuation hierarchy for the recognition and disclosure of fair value measurements. The categorization of assets and liabilities within this hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy consist of the following:

As of June 30, 2015, the carrying value of cash and cash equivalents, short-term investments, accounts receivable and accounts payable approximated their fair value due to the nature of these financial instruments. The Company invests in money market

funds, commercial paper and time deposits that are classified as cash and cash equivalents within the accompanying condensed consolidated balance sheets, as these funds are highly liquid and readily convertible to known amounts of cash. These investments are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The Company's short-term investments of $160 million at June 30, 2015, consist of certificates of deposit with initial maturities of greater than three months when purchased that mature within one year from the balance sheet date. These investments, which are classified within Level 1 of the fair value hierarchy, are carried at fair value, which approximated historical cost at June 30, 2015 . The carrying amount and estimated fair value of the Company's total long-term debt was $11.7 billion and $12.3 billion , respectively, as of June 30, 2015. The fair value of the Company's long-term debt was estimated based on quoted prices currently offered in active markets for the Company's debt, which is considered Level 1 of the fair value hierarchy.

Related Party Transactions

The Company has an equity method investment in SureScripts, LLC ("SureScripts"), which operates a clinical health information network. The Pharmacy Services and Retail Pharmacy segments utilize this clinical health information network in providing services to client plan members and retail customers. The Company recorded $3 million of income for the three months ended June 30, 2015 representing the net of rebates earned and expenses for services provided. The Company expensed fees of approximately $11 million in the three months ended June 30, 2014, and $7 million and $27 million in the six months ended June 30, 2015 and 2014, respectively, for the use of this network.

The Company's investment in and equity in earnings in SureScripts for all periods presented is immaterial.

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new guidance is expected to be effective for annual reporting periods (including interim reporting periods within those periods) beginning January 1, 2018; early adoption in 2017 is permitted. Companies have the option of using either a full retrospective or a modified retrospective approach to adopt the guidance. This update could impact the timing and amounts of revenue recognized. The Company is currently evaluating the effect that implementation of this update will have on its consolidated financial position and results of operations upon adoption, as well as the method of transition and required disclosures.

In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (Topic 835-30). ASU No. 2015-03 requires the presentation of debt issuance costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of such costs is reported as interest expense, which is consistent with the Company's current policy. This change conforms the presentation with that of debt discounts. The ASU is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2015; early adoption is permitted. The guidance is required to be applied retrospectively to all prior periods. The Company has early adopted this standard as of June 30, 2015. The effect of the adoption of ASU 2015-03 on the Company's condensed consolidated balance sheets is a reduction of noncurrent assets and long-term debt of $60 million and $65 million as of June 30, 2015 and December 31, 2014, respectively. The following is a reconciliation of the effect of this reclassification on the Company's condensed consolidated balance sheet as of December 31, 2014:

Effective January 1, 2015, the Company changed its methods of accounting for "front store" inventories in the Retail Pharmacy Segment. Prior to 2015, the Company valued front store inventories at the lower of cost or market on a first-in, first-out ("FIFO") basis in retail stores using the retail inventory method and in distribution centers using the FIFO cost method. Effective January 1, 2015, all front store inventories in the Retail Pharmacy Segment have been valued at the lower of cost or market using the weighted average cost method. These changes affected approximately 36% of consolidated inventories.

These changes were made primarily to provide the Company with better information to manage its retail front store operations and to bring all of the Company's inventories to a common inventory valuation methodology. The Company believes the weighted average cost method is preferable to the retail inventory method and the FIFO cost method because it results in greater precision in the determination of cost of revenues and inventories at the stock keeping unit ("SKU") level and results in a consistent inventory valuation method for all of the Company's inventories as all of the Company's remaining inventories, which consist of prescription drugs, were already being valued using the weighted average cost method.

The Company recorded the cumulative effect of these changes in accounting principle as of January 1, 2015. The Company determined that retrospective application for periods prior to 2015 is impracticable, as the period-specific information necessary to value front store inventories in the Retail Pharmacy Segment under the weighted average cost method is unavailable. The Company implemented a new perpetual inventory system to manage front store inventory at the SKU level and valued front store inventory as of January 1, 2015 and calculated the cumulative impact. The effect of these changes in accounting principle as of January 1, 2015, was a decrease in inventories of $7 million , an increase in current deferred income tax assets of $3 million and a decrease in retained earnings of $4 million .

Had the Company not made these changes in accounting principle, for the three and six months ended June 30, 2015, net income would have been $12 million and $8 million lower, respectively. Basic net income per share would have been $0.01 per share lower for the three months ended June 30, 2015 and the same as reported for the six months ended June 30, 2015. Diluted net income per share would have been $0.01 per share lower for both the three and six months ended June 30, 2015.

On May 20, 2015 , CVS Pharmacy, Inc. ("CVS Pharmacy"), a wholly owned subsidiary of CVS Health, entered into an Agreement and Plan of Merger (the "Merger Agreement") to acquire Omnicare, Inc. ("Omnicare"), a provider of pharmaceuticals and related pharmacy services to long-term care facilities and provider of specialty pharmacy and commercialization services for the bio-pharmaceutical industry (the "Omnicare Acquisition"). Upon the effective date of the Omnicare Acquisition, each share of common stock, par value $1.00 per share, of Omnicare will be converted into the right to receive $98.00 in cash, or approximately $10.6 billion in the aggregate. In addition, CVS Pharmacy will assume approximately $2.3 billion in debt of Omnicare. The Omnicare Acquisition is expected to close in 2015, subject to (i) approval by the stockholders of Omnicare, (ii) the receipt of applicable regulatory approvals and (iii) certain other customary closing conditions.

On June 12, 2015, CVS Pharmacy entered into an Asset Purchase Agreement with Target Corporation ("Target") pursuant to which Target agreed to sell its pharmacy and clinic businesses to CVS Pharmacy (the "Target Pharmacy Acquisition"). The purchase price is $1.887 billion , payable in cash at closing and is subject to certain adjustments. The timing of the closing is uncertain, and is subject to receipt of regulatory approval and other customary conditions.

On May 20, 2015, in connection with the proposed acquisition of Omnicare, the Company entered into a $13 billion unsecured bridge loan facility. The Company paid approximately $52 million in fees upon entering into the agreement. The fees were capitalized in other current assets and amortized as interest expense over the period the bridge facility was outstanding. The bridge loan facility expired on July 20, 2015 upon the Company's issuance of unsecured senior notes totaling a net $14.8 billion in proceeds as discussed below. The Company recorded $36 million of amortization of the bridge loan facility fees during the three and six months ended June 30, 2015.

On July 20, 2015, the Company issued an aggregate of $2.25 billion of 1.9% unsecured senior notes due 2018 ("2018 Notes"), an aggregate of $2.75 billion of 2.8% unsecured senior notes due 2020 ("2020 Notes"), an aggregate of $1.50 billion of 3.5% unsecured senior notes due 2022 ("2022 Notes"), an aggregate of $3.00 billion of 3.875% unsecured senior notes due 2025 ("2025 Notes"), an aggregate of $2.00 billion of 4.875% unsecured senior notes due 2035 ("2035 Notes"), and an aggregate of

$3.50 billion of 5.125% unsecured senior notes due 2045 ("2045 Notes" and, together with the 2018 Notes, 2020 Notes, 2022 Notes, 2025 Notes and 2035 Notes, the "Notes") for total proceeds of approximately $14.8 billion , net of discounts and underwriting fees. The Notes pay interest semi-annually and contain redemption terms which allow or require the Company to redeem the Notes at a defined redemption price plus accrued and unpaid interest at the redemption date. The 2018 Notes, 2020 Notes, 2022 Notes, 2035 Notes and 2045 Notes contain a special mandatory redemption clause which will require the Company to redeem such notes at a price equal to 101% of their principal amount plus accrued interest in the event the Omnicare Acquisition is not completed on or prior to May 20, 2016, which date will be extended automatically to August 20, 2016 if regulatory approval is the only closing condition under the Merger Agreement on May 20, 2016 that has not been fulfilled and all other closing conditions either have been fulfilled or are then capable of being fulfilled, or in the event that, on or prior to such date, the Merger Agreement is terminated other than as a result of consummating the Omnicare Acquisition. The 2025 Notes are not subject to the special mandatory redemption, and a termination of the Target Pharmacy Acquisition will not trigger the special mandatory redemption. The net proceeds of the Notes are to be used to fund the Omnicare Acquisition and the Target Pharmacy Acquisition. Any remaining proceeds will be used for general corporate purposes.

The Company leases most of its retail and mail order locations, ten of its distribution centers and certain corporate offices under noncancelable operating leases, typically with initial terms of 15 to 25 years and with options that permit renewals for additional periods. The Company also leases certain equipment and other assets under noncancelable operating leases, typically with initial terms of three to 10 years. Minimum rent is expensed on a straight-line basis over the term of the lease. In addition to minimum rental payments, certain leases require additional payments based on sales volume, as well as reimbursement for real estate taxes, common area maintenance and insurance, which are expensed as incurred.

The following table is a summary of the Company's net rental expense for operating leases:

The Company finances a portion of its store development program through sale-leaseback transactions. The properties are generally sold at net book value, which approximates fair value, and the resulting leases typically qualify and are accounted for as operating leases. The Company does not have any retained or contingent interests in the stores and does not provide any guarantees, other than a guarantee of lease payments, in connection with the sale-leaseback transactions. Proceeds from sale-leaseback transactions totaled $34 million and $5 million for the six months ended June 30, 2015 and 2014, respectively.

During the six months ended June 30, 2015, the Company had the following outstanding share repurchase programs that were authorized by the Company's Board of Directors:

The share repurchase programs, each of which was effective immediately, permit the Company to effect repurchases from time to time through a combination of open market repurchases, privately negotiated transactions, accelerated share repurchase transactions, and/or other derivative transactions. The repurchase programs may be modified or terminated by the Board of Directors at any time.

During the three months ended June 30, 2015, the Company repurchased an aggregate of approximately 12.1 million shares of common stock for approximately $0.9 billion pursuant to the 2014 and 2013 Repurchase Programs. During the six months ended June 30, 2015, the Company repurchased an aggregate of approximately 28.9 million shares of common stock for approximately $2.9 billion pursuant to the 2014 and 2013 Repurchase Programs. This activity includes the accelerated share repurchase agreement ("ASR") described below.

Pursuant to the authorization under the 2013 Repurchase Program, effective January 2, 2015, the Company entered into a $2.0 billion fixed dollar ASR with JPMorgan Chase Bank ("JPMorgan"). Upon payment of the $2.0 billion purchase price on January 5, 2015, the Company received a number of shares of its common stock equal to 80% of the $2.0 billion notional amount of the ASR or approximately 16.8 million shares, which were placed into treasury stock in January 2015. On May 1, 2015, the Company received approximately 3.1 million shares of common stock, representing the remaining 20% of the $2.0 billion notional amount of the ASR, thereby concluding the ASR. The remaining 3.1 million shares of common stock delivered to the Company by JPMorgan were placed into treasury stock in May 2015.

The ASR was accounted for as an initial treasury stock transaction for $1.6 billion and a forward contract for $0.4 billion . The forward contract was classified as an equity instrument and was recorded within capital surplus on the condensed consolidated balance sheet. The forward contract was reclassified to treasury stock upon the settlement of the ASR in May 2015. The initial and final receipt of shares resulted in an immediate reduction of the outstanding shares used to calculate the weighted average common shares outstanding for basic and diluted net income per share.

Accumulated other comprehensive income consists of foreign currency translation adjustments, unrealized losses on cash flow hedges executed in previous years associated with the issuance of long-term debt, and changes in the net actuarial gains and losses associated with pension and other postretirement benefit plans. The following table summarizes the activity within the components of accumulated other comprehensive income.

Changes in accumulated other comprehensive income (loss) by component are shown on the next page:

During the three months ended June 30, 2015, the Company granted 4 million stock options with a weighted average fair value of $13.88 and a weighted average fair value exercise price of $102.26 . The Company had 26 million stock options outstanding as of June 30, 2015 with a weighted average exercise price of $56.31 and a weighted average contractual term of 4.25 years. During the three months ended June 30, 2015, the Company granted 2 million restricted stock units with a weighted average fair value of $102.26 . The Company had 5 million restricted stock units unvested as of June 30, 2015 with a weighted average fair value of $58.81 .

The following are the components of net interest expense:

Earnings per share is computed using the two-class method. Options to purchase 3.6 million and 1.8 million shares of common stock were outstanding, but were not included in the calculation of diluted earnings per share for the three and six months ended June 30, 2015, respectively, because the options' exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive. For the same reason, options to purchase approximately 4.1 million and shares 2.2 million of common stock were outstanding, but were not included in the calculation of diluted earnings per share for the three and six months ended June 30, 2014, respectively.

The following is a reconciliation of basic and diluted net income per share for the respective periods:

The Company has three reportable segments: Pharmacy Services, Retail Pharmacy and Corporate. The Company's segments maintain separate financial information for which operating results are evaluated on a regular basis by the Company's chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company evaluates its Pharmacy Services and Retail Pharmacy segments' performance based on net revenue, gross profit and operating profit before the effect of nonrecurring charges and gains and certain intersegment activities. The Company evaluates the performance of its Corporate Segment based on operating expenses before the effect of nonrecurring charges and gains and certain intersegment activities.

The Pharmacy Services Segment provides a full range of pharmacy benefit management ("PBM") services including plan design and administration, formulary management, Medicare Part D services, mail order, specialty pharmacy and infusion services, retail pharmacy network management services, prescription management systems, clinical services, disease management services and medical spend management. The Company's clients are primarily employers, insurance companies, unions, government employee groups, health plans, Managed Medicaid plans and other sponsors of health benefit plans, and individuals throughout the United States. A portion of covered lives primarily within the Managed Medicaid, health plan and employer markets have access to our services through public and private exchanges. Through the Company's SilverScript Insurance Company subsidiary, the Company is a national provider of drug benefits to eligible beneficiaries under the federal government's Medicare Part D program. The Pharmacy Services Segment operates under the CVS/caremark TM Pharmacy Services, Caremark ® , CVS Caremark TM , CVS/caremark TM , CarePlus CVS/pharmacy ® , CVS/specialty TM , RxAmerica ® , Accordant ® , SilverScript ® , Novologix ® , Coram ® and Navarro ® Health Services names. As of June 30, 2015, the Pharmacy Services Segment operated 24 retail specialty pharmacy stores, 11 specialty mail order pharmacies, four mail service dispensing pharmacies, and 85 branches for infusion and enteral services, including approximately 72 ambulatory infusion suites and six centers of excellence, located in 40 states, Puerto Rico and the District of Columbia.

The Retail Pharmacy Segment sells prescription drugs and a wide assortment of general merchandise, including over-the-counter drugs, beauty products and cosmetics, personal care products, convenience foods, photo finishing, seasonal merchandise and greeting cards through the Company's CVS/pharmacy ® , CVS ® , Longs Drugs ® , Navarro Discount Pharmacy ® and Drogaria Onofre ® retail stores and online through CVS.com ® , Navarro.com TM and Onofre.com.br TM . As of June 30, 2015, the Retail Pharmacy Segment included 7,870 retail drugstores (of which 7,812 operated a pharmacy), 18 onsite pharmacies, 997 retail medical clinics, and the online retail websites, CVS.com, Navarro.com and Onofre.com.br. The retail drugstores are located in 44 states, the District of Columbia, Puerto Rico and Brazil. The retail health care clinics operate under the MinuteClinic ®  name, and 989 are located within CVS/pharmacy stores. MinuteClinics utilize nationally-recognized medical protocols to diagnose and treat minor health conditions, perform health screenings, monitor chronic conditions and deliver vaccinations. The clinics are staffed by board-certified nurse practitioners and physician assistants who provide access to affordable care without appointment.

The Corporate Segment provides management and administrative services to support the Company. The Corporate Segment consists of certain aspects of executive management, corporate relations, legal, compliance, human resources, corporate information technology and finance departments.

(1) Net revenues of the Pharmacy Services Segment include approximately $2.2 billion and $2.0 billion of retail co-payments for the three months ended June 30, 2015 and 2014, respectively, as well as $4.7 billion and $4.2 billion of retail co-payments for the six months ended June 30, 2015 and 2014, respectively.

(2)   Intersegment eliminations relate to two types of transactions: (i) Intersegment revenues that occur when Pharmacy Services Segment customers use Retail Pharmacy Segment stores to purchase covered products. When this occurs, both the Pharmacy Services and Retail Pharmacy segments record the revenue on a stand-alone basis, and (ii) Intersegment revenues, gross profit and operating profit that occur when Pharmacy Services Segment customers, through the Company's intersegment activities (such as the Maintenance Choice ® program), elect to pick-up their maintenance prescriptions at Retail Pharmacy Segment stores instead of receiving them through the mail. When this occurs, both the Pharmacy Services and Retail Pharmacy segments record the revenue, gross profit and operating profit on a standalone basis. The following amounts are eliminated in consolidation in connection with the intersegment activity described in item (ii) above: net revenues of $1.2 billion for both the three months ended June 30, 2015 and 2014, and $2.4 billion and $2.3 billion for the six months ended June 30, 2015 and 2014, respectively; gross profit of $161 million and $170 million for the three months ended June 30, 2015 and 2014, respectively, and $318 million and $346 million for the six months ended June 30, 2015 and 2014, respectively; and operating profit of $144 million and $170 million for the three months ended June 30, 2015 and 2014, respectively, and $285 million and $346 million for the six months ended June 30, 2015 and 2014, respectively.

Lease Guarantees

Between 1991 and 1997, the Company sold or spun off a number of subsidiaries, including Bob's Stores, Linens ‘n Things, Marshalls, Kay-Bee Toys, Wilsons, This End Up and Footstar. In many cases, when a former subsidiary leased a store, the Company provided a guarantee of the store's lease obligations. When the subsidiaries were disposed of, the Company's guarantees remained in place, although each initial purchaser has agreed to indemnify the Company for any lease obligations the Company was required to satisfy. If any of the purchasers or any of the former subsidiaries were to become insolvent and failed to make the required payments under a store lease, the Company could be required to satisfy these obligations.

As of June 30, 2015, the Company guaranteed approximately 72 such store leases (excluding the lease guarantees related to Linens ‘n Things, which have been recorded as a liability on the condensed consolidated balance sheet), with the maximum remaining lease term extending through 2026 . Management believes the ultimate disposition of any of the remaining guarantees

will not have a material adverse effect on the Company's consolidated financial condition, results of operations or future cash flows.

Legal Matters

The Company is a party to legal proceedings, investigations and claims in the ordinary course of its business, including the matters described below. The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be incurred and the amount can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal matters that could affect the amount of any accrual and developments that would make a loss contingency both probable and reasonably estimable. If a loss contingency is not both probable and estimable, the Company does not establish an accrued liability. None of the Company's accruals for outstanding legal matters are material individually or in the aggregate to the Company's financial position.

The Company's contingencies are subject to significant uncertainties, including, among other factors: (i) the procedural status of pending matters; (ii) whether class action status is sought and certified; (iii) whether asserted claims or allegations will survive dispositive motion practice; (iv) the extent of potential damages, fines or penalties, which are often unspecified or indeterminate; (v) the impact of discovery on the legal process; (vi) whether novel or unsettled legal theories are at issue; (vii) the settlement posture of the parties, and/or (viii) in the case of certain government agency investigations, whether a sealed qui tam lawsuit ("whistleblower" action) has been filed and whether the government agency makes a decision to intervene in the lawsuit following investigation.

Except as otherwise noted, the Company cannot predict with certainty the timing or outcome of the legal matters described below, and is unable to reasonably estimate a possible loss or range of possible loss in excess of amounts already accrued for these matters.

contract terms between the pharmacies and Caremark. The Bellevue arbitration was then stayed by the parties pending developments in the North Jackson Pharmacy court case.

In August 2006, the Bellevue case and the North Jackson Pharmacy case were both transferred to Pennsylvania federal court by the Judicial Panel on Multidistrict Litigation for coordinated and consolidated proceedings with other cases before the panel, including cases against other PBMs. Motions for class certification in the coordinated cases within the multidistrict litigation, including the North Jackson Pharmacy case, remain pending, and the court has permitted certain additional class discovery and briefing. The consolidated action is now known as the In Re Pharmacy Benefit Managers Antitrust Litigation.

The Company is also a party to other legal proceedings, government investigations, inquiries and audits arising in the normal course of its business, none of which is expected to be material to the Company. The Company can give no assurance, however, that its business, financial condition and results of operations will not be materially adversely affected, or that the Company will not be required to materially change its business practices, based on: (i) future enactment of new health care or other laws or regulations; (ii) the interpretation or application of existing laws or regulations as they may relate to the Company's business, the pharmacy services, retail pharmacy or retail clinic industries or to the health care industry generally; (iii) pending or future federal or state governmental investigations of the Company's business or the pharmacy services, retail pharmacy or retail clinic industry or of the health care industry generally; (iv) pending or future government enforcement actions against the Company; (v) adverse developments in any pending qui tam lawsuit against the Company, whether sealed or unsealed, or in any future qui tam lawsuit that may be filed against the Company; or (vi) adverse developments in pending or future legal proceedings against the Company or affecting the pharmacy services, retail pharmacy or retail clinic industry or the health care industry generally.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

CVS Health Corporation:

We have reviewed the condensed consolidated balance sheet of CVS Health Corporation (the Company) as of June 30, 2015, and the related condensed consolidated statements of income, comprehensive income for the three-month and six-month periods ended June 30, 2015 and 2014, and the condensed consolidated statements of cash flows for the six-month periods ended June 30, 2015 and 2014. These financial statements are the responsibility of the Company's management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

As discussed in Note 2 to the condensed consolidated financial statements, the Company has elected changes in its methods of accounting for front store inventories in the Retail Pharmacy Segment effective January 1, 2015.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of CVS Health Corporation as of December 31, 2014, and the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows for the year then ended not presented herein, and in our report dated February 10, 2015, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2014, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

CVS Health Corporation, together with its subsidiaries (collectively "CVS Health," the "Company," "we," "our" or "us"), is a pharmacy innovation company helping people on their path to better health. At the forefront of a changing health care landscape, the Company has an unmatched suite of capabilities and the expertise needed to drive innovations that will help shape the future of health.

We are currently the only integrated pharmacy health care company with the ability to impact consumers, payors, and providers with innovative, channel-agnostic solutions. We have a deep understanding of their diverse needs through our unique integrated model, and we are bringing them innovative solutions that help increase access to quality care, deliver better health outcomes, and lower overall health care costs.

Through our more than 7,800 retail drugstores, nearly 1,000 walk-in health care clinics, a leading pharmacy benefits manager with more than 70 million plan members, and expanding specialty pharmacy services, we enable people, businesses, and communities to manage health in more effective ways. We are delivering break-through products and services, from advising patients on their medications at our CVS/pharmacy ® locations, to introducing unique programs to help control costs for our clients at CVS/caremark TM , to innovating how care is delivered to our patients with complex conditions through CVS/specialty TM , or by expanding access to high-quality, low-cost care at CVS/minuteclinic TM .

We currently have three reportable segments: Pharmacy Services, Retail Pharmacy and Corporate.

Pharmacy Services Segment

Our Pharmacy Services Segment generates revenue from a full range of pharmacy benefit management ("PBM") services, including plan design and administration, formulary management, Medicare Part D services, mail order, specialty pharmacy and infusion services, retail pharmacy network management services, prescription management systems, clinical services, disease management services and medical spend management. Our clients are primarily employers, insurance companies, unions, government employee groups, health plans, Managed Medicaid plans and other sponsors of health benefit plans, and individuals throughout the United States. A portion of covered lives primarily within the Managed Medicaid, health plan and employer markets have access to our services through public and private exchanges. As a pharmacy benefits manager, we manage the dispensing of pharmaceuticals through our mail order pharmacies, specialty pharmacies and national network of more than 68,000 retail pharmacies, consisting of approximately 41,000 chain pharmacies (which includes our CVS/pharmacy stores) and 27,000 independent pharmacies, to eligible members in the benefit plans maintained by our clients and utilize our information systems to perform, among other things, safety checks, drug interaction screenings and brand to generic substitutions.

Our specialty pharmacies support individuals that require complex and expensive drug therapies. Our specialty pharmacy business includes mail order and retail specialty pharmacies that operate under the CVS Caremark TM , CarePlus CVS/pharmacy ®  and Navarro Health Services ® names. The Pharmacy Services Segment also provides health management programs, which include integrated disease management programs for 17 conditions, through our Accordant ®  rare disease management offering. In addition, through our SilverScript Insurance Company subsidiary, we are a national provider of drug benefits to eligible beneficiaries under the federal government's Medicare Part D program. The Pharmacy Services Segment operates under the CVS/caremark TM  Pharmacy Services, Caremark ® , CVS Caremark TM , CVS/caremark TM , CarePlus CVS/pharmacy ® , RxAmerica ® , Accordant ® , SilverScript ® , Coram ® , CVS/specialty TM , NovoLogix ® and Navarro ® Health Services names. As of June 30, 2015 , the Pharmacy Services Segment operated 24 retail specialty pharmacy stores, 11 specialty mail order pharmacies, four mail service dispensing pharmacies, and 85 branches for infusion and enteral services, including approximately 72 ambulatory infusion suites and six centers of excellence, located in 40 states, Puerto Rico and the District of Columbia.

Retail Pharmacy Segment

Our Retail Pharmacy Segment sells prescription drugs and a wide assortment of general merchandise, including over-the-counter drugs, beauty products and cosmetics, personal care products, convenience foods, photo finishing, seasonal merchandise and greeting cards through our CVS/pharmacy ® , CVS ® , Longs Drugs ® , Navarro Discount Pharmacy ® and Drogaria

Onofre TM retail stores and online through CVS.com ® , Navarro.com TM and Onofre.com.br TM . Our Retail Pharmacy Segment derives the majority of its revenues through the sale of prescription drugs, which are dispensed by our 23,000 retail pharmacists. Our Retail Pharmacy Segment also provides health care services through our CVS/minuteclinic offering. MinuteClinics are staffed by nurse practitioners and physician assistants who utilize nationally recognized protocols to diagnose and treat minor health conditions, perform health screenings, monitor chronic conditions, and deliver vaccinations. As of June 30, 2015 , our Retail Pharmacy Segment included 7,870 retail drugstores (of which 7,812 operated a pharmacy) located in 44 states, the District of Columbia, Puerto Rico and Brazil operating primarily under the CVS/pharmacy ® , CVS ® , Longs Drugs ® , Navarro Discount Pharmacy ® or Drogaria Onofre TM names, 18 onsite pharmacies, 997 retail health care clinics operating under the MinuteClinic ®  name (of which 989 were located in CVS/pharmacy stores), and our online retail websites, CVS.com, Navarro.com and Onofre.com.br.

Corporate Segment

The Corporate Segment provides management and administrative services to support the Company. The Corporate Segment consists of certain aspects of our executive management, corporate relations, legal, compliance, human resources, corporate information technology and finance departments.

On May 20, 2015, CVS Pharmacy, Inc. ("CVS Pharmacy"), a wholly owned subsidiary of CVS Health, entered into an Agreement and Plan of Merger (the "Merger Agreement") to acquire Omnicare, Inc. ("Omnicare"), a provider of pharmaceuticals and related pharmacy services to long-term care facilities and provider of specialty pharmacy and commercialization services for the bio-pharmaceutical industry (the "Omnicare Acquisition"). Upon the effective date of the Omnicare Acquisition, each share of common stock, par value $1.00 per share, of Omnicare will be converted into the right to receive $98.00 in cash, or approximately $10.6 billion in the aggregate. In addition, CVS Pharmacy will assume approximately $2.3 billion in debt of Omnicare. The Omnicare Acquisition is expected to close in 2015, subject to (i) approval by the stockholders of Omnicare, (ii) the receipt of applicable regulatory approvals and (iii) certain other customary closing conditions.

On June 12, 2015, CVS Pharmacy entered into an Asset Purchase Agreement with Target Corporation ("Target") pursuant to which Target agreed to sell its pharmacy and clinic businesses to CVS Pharmacy (the "Target Pharmacy Acquisition"). The purchase price is $1.887 billion, payable in cash at closing and is subject to certain adjustments. The timing of the closing is uncertain, and is subject to receipt of regulatory approval and other customary conditions.

We plan to use the net proceeds from the recent debt offering to fund the Omnicare Acquisition and the Target Pharmacy Acquisition. Any remaining proceeds from the offering will be used for general corporate purposes.

The following discussion explains the material changes in our results of operations for the three months and six months ended June 30, 2015 and 2014, and the significant developments affecting our financial condition since December 31, 2014. We strongly recommend that you read our audited consolidated financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations included as Exhibit 13 to our Annual Report on Form 10-K for the year ended December 31, 2014 ("2014 Form 10-K") along with this report.

Net Revenues

Net revenues increased approximately $2.6 billion, or 7.4%, and $6.2 billion, or 9.2%, in the three and six months ended June 30, 2015 , respectively, as compared to the prior year. The increase in the Pharmacy Services Segment was primarily driven by growth in specialty pharmacy and increased volume in pharmacy network claims. The increase in the Retail Pharmacy Segment was primarily due to an increase in pharmacy same store sales and revenue from new stores. Net revenues in both periods were negatively impacted by increased generic dispensing rates for both the Pharmacy Services and Retail Pharmacy segments. However, the year-over-year increase in generic dispensing rates was not as significant in the three and six months ended June 30, 2015 compared to the prior year. Generic prescription drugs typically have a lower selling price than brand name prescription drugs.

Please see the section entitled "Segment Analysis" below for additional information regarding net revenues.

Gross Profit

Gross profit dollars increased $78 million, or 1.2%, and $300 million, or 2.4%, in the three and six months ended June 30, 2015 , respectively, as compared to the prior year. Gross profit as a percentage of net revenues decreased approximately 100 basis points to 17.2% in the three months ended June 30, 2015, as compared to the prior year. Gross profit as a percentage of net revenues decreased approximately 110 basis points to 17.1% in the six months ended June 30, 2015, as compared to the prior year. The decrease in gross profit as a percentage of net revenues was driven by a change in the mix of business with the Pharmacy Services Segment growing faster than the Retail Pharmacy Segment, as well as moderate declines in gross margin in both segments. Gross profit dollars for the three and six months ended June 30, 2015 were positively impacted by an increase in generic dispensing rates compared to the prior year.

Please see the section entitled "Segment Analysis" below for additional information regarding gross profit.

Operating Expenses

Operating expenses increased $24 million, or 0.6%, and $138 million, or 1.7%, in the three and six months ended June 30, 2015 , respectively, as compared to the prior year. Operating expenses as a percentage of net revenues decreased approximately 80 basis points to 11.1% in both the three and six months ended June 30, 2015, as compared to 11.9% in both the three and six months ended June 30, 2014. The increase in operating expense dollars in the three and six months ended June 30, 2015, was primarily due to incremental store operating costs associated with operating more stores in our Retail Pharmacy Segment. The decrease in operating expenses as a percentage of net revenues for the three and six months ended June 30, 2015 was primarily due to expense leverage from sales growth in both operating segments.

Please see the section entitled "Segment Analysis" below for additional information regarding operating expenses.

Interest Expense, net

Interest expense, net, increased $8 million and decreased $16 million in the three and six months ended June 30, 2015 , respectively, as compared to the prior year. The increase in the three months ended June 30, 2015 was primarily due to the amortization of bridge facility fees for the unsecured bridge facility that was entered into on May 20, 2015 and is being amortized to interest expense over the period it was outstanding. See Note 4, "Borrowings" for additional information. This decrease in the six months ended June 30, 2015 is primarily due to lower average interest rates on our outstanding debt during the six month period.

For additional information on our financing activities, please see the "Liquidity and Capital Resources" section later in Management's Discussion and Analysis of Financial Condition and Results of Operations.

Income Tax Provision

Our effective income tax rate was 39.3% and 39.1% for the three and six months ended June 30, 2015 , compared to 39.2% and 39.3% for the three and six months ended June 30, 2014. The difference in the effective income tax rate for the three and six months ended June 30, 2015, was primarily due to certain permanent and discrete items.

We evaluate the performance of our Pharmacy Services and Retail Pharmacy segments based on net revenue, gross profit and operating profit before the effect of nonrecurring charges and gains and certain intersegment activities. We evaluate the performance of our Corporate Segment based on operating expenses before the effect of nonrecurring charges and gains and certain intersegment activities. The following is a reconciliation of our segments to the condensed consolidated financial statements:

The following table summarizes our Pharmacy Services Segment's performance for the respective periods:

(1) Pharmacy network net revenues, claims processed and generic dispensing rates do not include Maintenance Choice, which are included within the mail choice category.

(2) Mail choice is defined as claims filled at a Pharmacy Services mail facility, which includes specialty claims, as well as 90-day claims filled at retail pharmacies under the Maintenance Choice program.

(3) Pharmacy network is defined as claims filled at retail pharmacies, including our retail drugstores, but excluding Maintenance Choice activity.

Net Revenues

Net revenues in our Pharmacy Services Segment increased $2.6 billion, or 11.9%, to $24.4 billion in the three months ended June 30, 2015 , as compared to the prior year. The increase is primarily due to growth in specialty pharmacy, driven by increased volume from new products, new clients and the implementation of Specialty Connect ® , as well as inflation and increased pharmacy network claims. As you review our Pharmacy Services Segment's performance in this area, we believe you should consider the following important information that impacted the three months ended June 30, 2015 :

Net revenues increased $6.3 billion, or 15.0%, to $48.3 billion in the six months ended June 30, 2015 , as compared to the prior year. The increase is primarily due to growth in specialty pharmacy, driven by increased volume from new products, new clients and the implementation of Specialty Connect ® , as well as inflation and increased pharmacy network claims. As you review our Pharmacy Services Segment's performance in this area, we believe you should consider the following important information that impacted the six months ended June 30, 2015 :

Gross Profit

Gross profit in our Pharmacy Services Segment includes net revenues less cost of revenues. Cost of revenues includes (i) the cost of pharmaceuticals dispensed, either directly through our mail service, specialty mail and specialty retail pharmacies or indirectly through our retail pharmacy networks, (ii) shipping and handling costs and (iii) the operating costs of our mail service dispensing pharmacies, customer service operations and related information technology support.

Gross profit increased $46 million, or 3.8%, to approximately $1.2 billion in the three months ended June 30, 2015 , as compared to the prior year. Gross profit as a percentage of net revenues decreased to 5.1% in the three months ended June 30, 2015 , compared to 5.5% in the prior year. Gross profit increased $138 million, or 6.4%, to approximately $2.3 billion in the six months ended June 30, 2015 , as compared to the prior year. Gross profit as a percentage of net revenues decreased to 4.7% in the three months ended June 30, 2015 , compared to 5.1% in the prior year. The increase in gross profit dollars was primarily due to volume increases, higher generic dispensing, as well as favorable purchasing and rebate economics, partially offset by price compression. The decrease in gross profit as a percentage of net revenues was primarily due to price compression, partially offset by favorable generic dispensing, as well as favorable purchasing and rebate economics.

As you review our Pharmacy Services Segment's performance in this area, we believe you should consider the following important information that had an impact on the three and six months ended June 30, 2015 :

Operating Expenses

Operating expenses in our Pharmacy Services Segment include selling, general and administrative expenses; depreciation and amortization related to selling, general and administrative activities; and expenses related to specialty retail pharmacies, which includes store and administrative payroll, employee benefits and occupancy costs.

Operating expenses decreased $16 million to $301 million, or 1.2% as a percentage of net revenues, in the three months ended June 30, 2015 , compared to $317 million, or 1.5% as a percentage of net revenues, in the prior year. Operating expenses decreased $19 million to $592 million, or 1.2% as a percentage of net revenues, in the six months ended June 30, 2015 , compared to $611 million, or 1.5% as a percentage of net revenues, in the prior year. The improvement in operating expenses as a percentage of net revenues for the three and six months ended June 30, 2015 was primarily driven by expense leverage from our revenue growth. The decrease in operating expense dollars for the three and six months ended June 30, 2015 was primarily due to lower integration costs in the current year from the acquisition of Coram which occurred in January 2014 and lower other administration expenses.

The following table summarizes our Retail Pharmacy Segment's performance for the respective periods: