1170650--2/24/2009--MEDCO_HEALTH_SOLUTIONS

related topics

{regulation, government, change}

{cost, contract, operation}

{debt, indebtedness, cash}

{customer, product, revenue}

{product, liability, claim}

{system, service, information}

{acquisition, growth, future}

{financial, litigation, operation}

{tax, income, asset}

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 evolving laws and regulations in the U.S. and internationally, we could suffer penalties, or be required to pay substantial damages or make significant changes to our operations. Government efforts to reduce health care costs and alter health care financing practices could lead to a decreased demand for our services or to reduced profitability. Failure in continued execution of our Medicare Part D prescription drug program, and the integration of that program into a more comprehensive retiree 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. New 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 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. 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 and our liquidity. 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. 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 Accredo and PolyMedica revenues and profits.

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1170650--2/24/2009--MEDCO_HEALTH_SOLUTIONS_INC