CHOICE DRUG SYSTEMS ANNOUNCES THIRD QUARTER AND NINE MONTH RESULTS.

TEANECK, N.J.--(BUSINESS WIRE)--January 17, 1995--Choice Drug Systems, Inc. (NASDAQ:DOSE (common stock), DOSEW (warrants)) today announced unaudited results for the third quarter and nine months ended November 30, 1994.

Net sales in the quarter decreased 17% to $11,322,907 from $13,658,311 in the corresponding period last year, which was attributable to a decrease in sales of approximately $1,002,000 resulting from the Company entering into an agreement with an unrelated third party to provide operations, billing and support services for substantially all of its Medicare Part "B" products and services. Additionally, sales decreased by approximately $704,000 in medical surgical supplies primarily because the Company discontinued certain sales. The Company terminated unprofitable contracts in a prior period which has decreased sales in this period by approximately $712,000. Mail order sales decreased by approximately $190,000 and price competition in the New York market also caused pharmacy sales to decline by approximately $100,000. These sales decreases were partially offset by increased sales in other operations.

The net loss for the period was $3,187,115 or $.51 per share. Included in the loss was $971,638 of costs incurred in connection with claims and litigation, which was primarily comprised of $600,000 for the proposed settlement of the class action suit and $305,000 in proxy costs; a write down of $778,000 in inventory; an increase in the allowance for doubtful accounts of $415,000; $265,000 in a write off of certain Medicare receivables currently in litigation; and a writedown of prepaid expenses of $70,000. Contributing to the loss for the period was the fact that the Company incurred increased costs from making purchases from higher cost sources and the loss of purchase discounts as a result of severe cash flow problems which had a negative impact on gross profit margins. Interest expense also increased approximately $50,000 in the period.

As a result of this loss the Company is not in compliance with the recently revised financial ratio covenants with its lead bank. The Company will request a waiver of the non-compliance. The current indebtedness to the bank of its demand loan is $2,135,000.

Net sales for the nine month period decreased 16.3% to $35,057,810 from $41,866,308 in the corresponding period last year. Sales decreased by approximately $3,195,000 as a result of the Company entering into an agreement with an unrelated third party to provide operations, billing and support services for substantially all of its Medicare Part "B" products and services. Additionally sales decreased by approximately $1,881,000 in medical surgical supplies primarily because the Company discontinued certain sales. Price competition in the New York pharmacy market caused sales to decline by approximately $400,000 and mail order sales decreased by approximately $550,000. The Company also had lower sales because it terminated unprofitable contracts in this period of approximately $2,000,000. These sales decreases were partially offset by increased sales in other operations.

The negative impact of the Company's past well-documented Med "B" problems contributed to the loss of sales until the announcement of the settlement with the United States on November 10, 1994.

The net loss for the period was $6,911,040 or $1.11 per share. Included in this period were all the costs described in the quarter plus an additional $3,400,000 which is included in costs in connection with claims and litigation for the settlement with the United States of claims arising from the Company's Med "B" business. Severe cash flow problems also impacted the Company as described in the quarter. Interest expense increased by approximately $170,000 in this period.

Choice Drug Systems, Inc. and its wholly-owned subsidiaries provide pharmaceuticals, durable medical equipment and disposables, Medicare B reimbursable products and services to health care facilities, correctional institutions, HMOs and mail order customers. In addition, the Company manages hospital pharmacies. Choice Drug services accounts throughout the United States. -0-

                                         UNAUDITED
                        Three Months Ended         Nine Months Ended
                           November 30,               November 30,

                         1994       1993           1994         1993

Net sales           $ 11,332,907  $13,658,311   $35,057,810  $41,866,308

Loss before
 income taxes        (3,202,295)A    (149,384)  (6,933,159)A    (372,742)
 Income tax expense
 (benefit)              (15,180)       63,210      (22,119)      136,440
Net loss           $ (3,187,115)   $ (212,594) $(6,911,040)   $ (509,182)

Loss per share            $(.51)       $(.03)       $(1.11)        $(.08)

Weighted average
 number of shares
 outstanding          6,213,372    6,226,650     6,207,329     6,225,726

A    Includes costs in connection with claims and litigation totalling
$971,638 for the three months ended November 30, 1994 and $4,389,163
for the nine months ended November 30, 1994.

CONTACT: Choice Drug Systems, Inc.

Frank Mandelbaum, Co-Chairman

[phone]

-or-

INVESTOR RELATIONS COUNSEL:

The Equity Group Inc.

Eileen Shell [phone]

Robert Goldstein [phone]