performance-based contract rebates due to the expiration of our contract with Express Scripts Inc. in December 2005.

Performance-based contracts are with managed care customers, including health maintenance organizations and pharmacy benefit managers, who receive rebates based on the achievement of contracted performance terms for products. Rebates are product- specific and, therefore, for any given year are impacted by the mix of products sold. Chargebacks (primarily reimbursements to wholesalers for honoring contracted prices to third parties) reduced revenues by $1.4 billion in 2006 and $1.3 billion in both 2005 and 2004. In addition, chargebacks were impacted by the launch of certain generic products in 2006, 2005 and 2004 by our Greenstone subsidiary.

Our accruals for Medicaid rebates, Medicare rebates, performance- based contract rebates and chargebacks totaled $1.5 billion as of December 31, 2006.

Revenues by Business Segment

We operate in the following business segments: • Pharmaceutical

— The Pharmaceutical segment includes products that prevent and treat cardiovascular and metabolic diseases, central nervous system disorders, arthritis and pain, infectious and respiratory diseases, urogenital conditions, cancer, eye disease, endocrine disorders and allergies.

• Animal Health

— The Animal Health segment includes products that prevent

and treat diseases in livestock and companion animals.

    Our pharmaceutical business is the largest in the world. Revenues from this segment contributed 93% of our total revenues in 2006, 93% in 2005 and 94% in 2004. As of October 2006, seven of our pharmaceutical products were number one in their respective therapeutic categories based on revenues.

We recorded product sales of more than $1 billion for each of nine products in 2006, each of eight products in 2005 and each of ten products in 2004. These products represented 64% of our Pharmaceutical revenues in 2006 and 2005 and 69% in 2004.

Worldwide Pharmaceutical revenues increased 2% in 2006, compared to 2005, primarily due to:

• the solid aggregate performance of our broad portfolio of patent-protected medicines, including an aggregate increase in revenues from new products launched in 2004, 2005 and 2006 of approximately $1.5 billion;

• the one-time reversal of a sales deduction accrual related to a favorable development in a pricing dispute in the U.S. of about $170 million; and

• the favorable impact of pricing changes in the U.S.,

partially offset by:

• a decrease in revenues of $1.4 billion in 2006 from the loss of U.S. exclusivity on Zithromax in November 2005;

• a decrease by $1.1 billion in revenues for Zoloft in 2006, primarily due to the launch of generic competition in mid- July 2006 after Zoloft lost exclusivity in the U.S. in June 2006 and also due to the earlier loss of exclusivity in many European markets; and

• the strengthening of the U.S. dollar relative to many foreign currencies, primarily the Japanese yen and the euro, which decreased revenues by $277 million for 2006.

Geographically:

• in the U.S., Pharmaceutical revenues increased 4% in 2006, compared to 2005, primarily due to revenues from new products,