813562--9/13/2007--NATIONAL_MEDICAL_HEALTH_CARD_SYSTEMS

related topics

{regulation, government, change}

{customer, product, revenue}

{system, service, information}

{personnel, key, retain}

{debt, indebtedness, cash}

{product, liability, claim}

{acquisition, growth, future}

{product, market, service}

{loss, insurance, financial}

We rely on a limited number of key customers for a significant portion of our revenues. The loss of any of these key customers as a result of competitive bidding for contracts, consolidation of customers or otherwise, could adversely affect our business, profitability and growth prospects. Due to complex calculations within our customer contracts, we may be required to issue significant credit memos to our customers that could adversely affect our business, profitability and growth prospects. Due to the complex laws and regulations governing the Medicare program in which we participate, our recorded estimates may materially change in the future, and our failure to fully comply with such laws and regulations may adversely impact our business and financial results. Changes in industry pricing benchmarks could adversely affect our financial performance. We rely on third parties for our point of sale information system and transaction processing system, and any disruption in these services would materially disrupt our business and results of operations We are in the process of consolidating all customers to a single third party adjudication vendor, one of two that we are currently operating. Any severe interruption during this consolidation process could materially disrupt our business and results of operations. Uncertainty regarding the 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. It is uncertain if we will achieve an acceptable return on these investments. We may be liable for damages and other expenses that are not covered by our insurance policies. Demands by our customers for enhanced service levels or possible loss or unfavorable modification of contracts with our customers could negatively affect our profitability. Due to the term of our contracts with customers, if we are unable to renew those contracts or replace any lost customers, 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 Service 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 with our rebate administrator, or if rebate payments we receive from pharmaceutical manufacturers or our rebate administrator decline. Failure of our health plan customers 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 customers, 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 customers.

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813562--9/13/2007--NATIONAL_MEDICAL_HEALTH_CARD_SYSTEMS_INC