1170650--3/3/2006--MEDCO_HEALTH_SOLUTIONS

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Risks Relating to Our Business We may fail to realize the anticipated synergies, cost savings and other benefits expected from our 2005 acquisition of Accredo. Medco is a defendant in two qui tam cases in which the federal government has intervened, and a separate qui tam case that remains under seal, as well as antitrust and other suits, any of which could limit its business practices and have a material adverse effect on its business, financial condition, liquidity and operating results. Pending and threatened litigation challenging some of Medco s important business practices could significantly affect Medco s ability to obtain rebates and could materially limit Medco s business practices. Competition in our industry is intense and could impair our ability to attract and retain clients. If we do not continue to earn and retain purchase discounts and rebates from manufacturers at current levels, our gross margins may decline. Failure to retain key clients could result in significantly decreased revenues and could harm our profitability. Failure to satisfy contractual obligations to clients could require us to pay performance penalties and could result in the termination of their contracts If we fail to comply with complex and rapidly evolving laws and regulations or increasingly sophisticated contractual obligations, we could suffer penalties, lose clients or be required to pay substantial damages or make significant changes to our operations. 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 grow our revenues. The ability of our Specialty Pharmacy segment to grow our specialty pharmacy business could be limited if we do not expand our existing base of drugs or if we lose patients. The terms and covenants relating to our existing indebtedness could adversely impact our economic performance. Prescription volumes may decline, and our net revenues and profitability may be negatively impacted, when products are withdrawn from the market or when increased safety risk profiles of specific drugs result in utilization decreases. Risks related to bioterrorism and mail tampering, and mail irradiation and other procedures the government may implement to manage these risks, could adversely affect and limit the growth of our mail order business. 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 business and technology infrastructure. Changes in technology could cause our products and services to become obsolete and, as a result, we may lose clients and members. Any disruption of, or failure in, either of our two automated pharmacies or our data centers could significantly reduce our ability to process and dispense prescriptions and provide products and services to our clients. We could be required to record a material non-cash charge to income if our recorded intangible assets are impaired, or if we shorten intangible asset useful lives. The 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. Risks Relating to Our Industry PBMs could be subject to claims under ERISA if they are found to be a fiduciary of a health benefit plan governed by ERISA. 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. Government efforts to reduce healthcare costs and alter healthcare financing practices could lead to a decreased demand for our services or to reduced rebates from manufacturers. Risks and uncertainties regarding the implementation and effects of the Medicare Part D prescription drug benefit.

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1170650--3/3/2006--MEDCO_HEALTH_SOLUTIONS_INC