847935--3/9/2009--ALLION_HEALTHCARE

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If we do not continue to qualify for preferred reimbursement programs in California and New York, our net sales could decline. The denial of our Medi-Cal change of ownership application could have a material adverse impact on our financial condition. Downturns in the general economy and restrictions in the credit markets may result in reduced reimbursement rates and negatively impact our access to financing sources. 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 drugs or combination therapies are developed and prescribed to our patients that have a reimbursement rate less than that of the current drug therapies our patients receive. We have an ongoing informal inquiry by the SEC 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. We have granted CIT Healthcare LLC a security interest in substantially all of our assets, and if we default under our Credit Agreement, CIT may foreclose on our assets. Our debt may limit our operating flexibility. We may be unable to integrate successfully the Specialty Infusion business of Biomed and realize the anticipated benefits of the merger. We do not have a contractual relationship with private third-party payors for a significant portion of our Biomed business. As a result, we have no continuing right to receive reimbursement and we are subject to reductions in reimbursement rates, which could have a material adverse effect on revenues. We rely on a limited number of suppliers for the prescriptions dispensed by our pharmacies, and we could have difficulty obtaining sufficient supply of the drugs to fill those prescriptions. If our credit terms with AmerisourceBergen become unfavorable or our relationship with AmerisourceBergen is terminated, our business could be adversely affected. We have a history of losses and may not be able to sustain profitability. 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. Our success in identifying and integrating acquisitions may impact our business and our ability to have effective disclosure controls. 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. Failure to attract and retain experienced and qualified personnel 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. Our investment portfolio may be adversely affected by volatile and illiquid market conditions. 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, or exclusion from the Medicaid and Medicare programs. Our industry is subject to extensive government regulation, and noncompliance by us or our suppliers could harm our business. Changes in industry pricing benchmarks 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 revenues may continue to be adversely affected in connection with reduced reimbursement rates for patients who are dual-eligible under the Medicare Part D program. 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--3/9/2009--ALLION_HEALTHCARE_INC