1170650--2/19/2008--MEDCO_HEALTH_SOLUTIONS

related topics

{regulation, government, change}

{customer, product, revenue}

{debt, indebtedness, cash}

{product, liability, claim}

{system, service, information}

{acquisition, growth, future}

{cost, contract, operation}

{financial, litigation, operation}

{tax, income, asset}

{product, market, service}

{personnel, key, retain}

Competition in the PBM, specialty pharmacy and the broader healthcare industry is intense and could impair our ability to attract and retain clients. Failure to retain key clients could result in significantly decreased revenues and could harm our profitability. If we do not continue to earn and retain purchase discounts and rebates from manufacturers at current levels, our gross margins may decline. Our acquisition activity has increased recently and if we are unable to effectively integrate acquired businesses into ours, our operating results may be adversely affected. Even if we are successful, the integration of these businesses has required, and will likely continue to require, significant resources and management attention. If we fail to comply with complex and rapidly evolving laws and regulations, we could suffer penalties, or be required to pay substantial damages or make significant changes to our operations. Government efforts to reduce healthcare costs and alter healthcare financing practices could lead to a decreased demand for our services or to reduced profitability. Failure to execute our Medicare Part D prescription drug benefits strategy could adversely impact our business and financial results. PBMs could be subject to claims under ERISA if they are found to be a fiduciary of a health benefit plan governed by ERISA. Pending litigation could adversely impact our business practices and have a material adverse effect on our business, financial condition, liquidity and operating results. We are subject to corporate integrity agreements and noncompliance may impede our ability to conduct business with the federal government. Legislative or regulatory initiatives that restrict or prohibit the PBM industry s ability to use patient identifiable medical information could limit our ability to use information that is critical to the operation of our business. Our specialty pharmacy business is highly dependent on our relationships with a limited number of biopharmaceutical suppliers and the loss of any of these relationships could significantly impact our ability to sustain or increase our revenues. Our ability to grow our specialty pharmacy business could be limited if we do not expand our existing base of drugs or if we lose patients Our specialty pharmacy business, Medicare Part D offerings and certain revenues from diabetes testing supplies expose us to increased credit risk. Changes in industry pricing benchmarks could adversely affect our financial performance. The terms and covenants relating to our existing indebtedness could adversely impact our financial performance. Prescription volumes may decline, and our net revenues and profitability may be negatively impacted, if products are withdrawn from the market, if prescription drugs transition to over-the-counter products, or if increased safety risk profiles of specific drugs result in utilization decreases. We may be subject to liability claims for damages and other expenses that are not covered by insurance. The success of our business depends on maintaining a well-secured pharmacy operation and technology infrastructure and failure to execute could adversely impact our business. We could be required to record a material non-cash charge to income if our recorded intangible assets or goodwill are impaired, or if we shorten intangible asset useful lives. Changes in reimbursement rates, including competitive bidding for durable medical equipment suppliers, could negatively affect our PolyMedica diabetes testing supplies revenues and profits under our Liberty brand.

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1170650--2/19/2008--MEDCO_HEALTH_SOLUTIONS_INC