813562--9/13/2006--NATIONAL_MEDICAL_HEALTH_CARD_SYSTEMS

related topics

{regulation, government, change}

{product, liability, claim}

{customer, product, revenue}

{personnel, key, retain}

{system, service, information}

{acquisition, growth, future}

{cost, contract, operation}

{debt, indebtedness, cash}

{product, market, service}

We rely on third parties for our point of sale information system and transaction processing system, and any disruption in these services could materially disrupt our business and results of operations We are in the process of transitioning to new software provided by a third-party adjudication vendor and any severe interruption during the transition could materially disrupt our business and results of operations. We face intense competition in the pharmacy benefit management industry. Uncertainty regarding the implementation and impact of Medicare Part D may adversely impact our business and financial results. We have invested substantial amounts of time and resources to our Medicare drug benefit program which may impact our business and financial results. We rely on a limited number of key clients for a significant portion of our revenues. The loss of any of these key clients as a result of competitive bidding for contracts, consolidation of clients or otherwise, could adversely affect our business, profitability and growth prospects. We may be liable for damages and other expenses that are not covered by our insurance policies. Demands by our clients for enhanced service levels or possible loss or unfavorable modification of contracts with our clients could negatively affect our profitability. Due to the term of our contracts with clients, if we are unable to extend those contracts or replace any lost clients, our future business and results of operation would be adversely affected. Our results of operations could suffer if we lose our pharmacy network affiliations or if our specialty pharmacy is excluded from third party pharmacy networks. We may be adversely affected by the loss of our relationships with one or more key pharmaceutical manufacturers or if rebate payments we receive from pharmaceutical manufacturers decline. We may not be able to effectively manage our growth. Our success depends on our ability to retain our senior management and key personnel. Our success depends on our ability to manage potential problems and risks related to future acquisitions. Failure of our health plan clients to pay for prescription claims or a delay in payment of those claims could have a material adverse effect on our profitability. We could suffer civil and/or criminal penalties, lose clients, be required to pay substantial damages or make significant changes to our operations if we fail to comply with complex and rapidly evolving laws and regulations. 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 rebates from manufacturers. Failure to develop new products, services and delivery channels may adversely affect our business. Our leverage and debt service obligations could impede our operations and flexibility. 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 and specialty service business. Any disruption of or failure in our automated mail service pharmacy or our data center could significantly reduce our ability to process and dispense prescriptions and provide products and services to our clients. Product withdrawal from the market and utilization decreases based off of increased safety risk profiles of specific drugs may cause prescription volumes to decline and our net revenues and profitability may be negatively impacted. The launch of generic pharmaceuticals into the marketplace may impact our financial results.

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813562--9/13/2006--NATIONAL_MEDICAL_HEALTH_CARD_SYSTEMS_INC