847935--3/16/2007--ALLION_HEALTHCARE

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{system, service, information}

{personnel, key, retain}

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{competitive, industry, competition}

{financial, litigation, operation}

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Risks Related to Our Company Changes in reimbursement by third-party payors could harm our business. If demand for our products and services is reduced, our business and ability to grow would be harmed. Our revenues could be adversely affected if new HIV/AIDS drugs or combination therapies are developed and prescribed to our patients and the reimbursement rate is less than that of the current drug therapies our patients receive. We have an ongoing informal inquiry by the Security and Exchange Commission s Enforcement Division, and depending on the length, scope and results of the informal inquiry, our business, financial condition and results of operations could experience a material adverse impact. Our revenues could be adversely affected if our patients who are dual-eligible under the Medicare Modernization Act cease to use our services or if prescription drug plans, or PDPs, reduce reimbursement rates. We have a history of losses and may not be able to sustain profitability. If we do not continue to qualify for preferred reimbursement programs in California and New York, our net sales could decline. If we are not able to market our services effectively to HIV/AIDS clinics, their affiliated healthcare providers and PDPs, we may not be able to grow our patient base as rapidly as we have anticipated. If we fail to manage our growth or implement changes to our reporting systems effectively, our business could be harmed. If our credit terms with AmerisourceBergen become unfavorable or our relationship with AmerisourceBergen is terminated, our business could be adversely affected. If we do not meet our minimum purchase requirements under our prime vendor agreement with AmerisourceBergen, we will be required to make an additional payment based on the unpurchased volume. Our success in identifying and integrating acquisitions may impact our business and our ability to have effective disclosure controls. We may not be able to integrate successfully the software into our business or subscribers may choose not to use our services. We rely on third-party delivery services to deliver our products to the patients we serve. Price increases or service interruptions in our delivery services could adversely affect our results of operations and our ability to make deliveries on a timely basis. We rely on a few key employees whose absence or loss could adversely affect our business. A prolonged malfunction of our MOMSPak automated packaging system could hurt our relationships with the patients we serve and our ability to grow. Our financial results may suffer if we have to write off intangible assets or goodwill. We do not have patent or trademark protection for our MOMSPak, our automated prescription packaging system or for our trade name, MOMS Pharmacy. A disruption in our telephone system or our computer system could harm our business. Risks Related to the Specialty Pharmacy Industry There is substantial competition in our industry, and we may not be able to compete successfully. If we are found to be in violation of Medicaid and Medicare reimbursement regulations, we could become subject to retroactive adjustments and recoupments. Our industry is subject to extensive government regulation, and noncompliance by us or our suppliers could harm our business. Changes in industry pricing benchmarks, including changes in reimbursement by Medicaid and other governmental payors, could adversely affect the reimbursement we receive for drugs we dispense and as a result, negatively impact our financial condition and results of operations. Our business could be affected by reforms in the healthcare industry. We may not be able to obtain insurance that is sufficient to protect our business from liability.

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847935--3/16/2007--ALLION_HEALTHCARE_INC