1170650--2/23/2010--MEDCO_HEALTH_SOLUTIONS

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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 in continued execution of our retiree strategy, including the potential loss of Medicare Part D-eligible members, could adversely impact our business and financial results. If we fail to comply with complex and evolving laws and regulations domestically and internationally, we could suffer penalties, be required to pay substantial damages and/or make significant changes to our operations. If we do not continue to earn and retain purchase discounts, rebates and service fees from manufacturers at current levels, our gross margins may decline. From time to time we engage in transactions to acquire other companies or businesses 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. New legislative or regulatory initiatives that restrict or prohibit the PBM industry s ability to use patient identifiable information could limit our ability to use information critical to the operation of our business. Our Specialty Pharmacy business is highly dependent on our relationships with a limited number of suppliers and the loss of any of these relationships, or limitations on our ability to provide services to these suppliers, could significantly impact our ability to sustain and/or improve our financial performance. 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, certain revenues from diabetes testing supplies and our Medicare Part D offerings expose us to increased credit risk. Additionally, current economic conditions may expose us to increased credit risk. Changes in reimbursement rates, including competitive bidding for durable medical equipment suppliers, could negatively affect our revenues and profits. Prescription volumes may decline, and our net revenues and profitability may be negatively impacted, if the safety risk profiles of drugs increase or if drugs are withdrawn from the market, including as a result of manufacturing issues, or if prescription drugs transition to over-the-counter products. 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. Changes in industry pricing benchmarks could adversely affect our financial performance. We are subject to a corporate integrity agreement and noncompliance may impede our ability to conduct business with the federal government. The terms and covenants relating to our existing indebtedness could adversely impact our financial performance and liquidity. We may be subject to liability claims for damages and other expenses not covered by insurance. The success of our business depends on maintaining a well-secured pharmacy operation and technology infrastructure. Additionally, significant disruptions to our infrastructure or any of our facilities due to failure to execute security measures or failure to execute business continuity plans in the event of an epidemic or pandemic or some other catastrophic event could adversely impact our business. We may 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. Anti-takeover provisions of the Delaware General Corporation Law ( DGCL ), our certificate of incorporation and our bylaws could delay or deter a change in control and make it more difficult to remove incumbent officers and directors.

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1170650--2/23/2010--MEDCO_HEALTH_SOLUTIONS_INC