Correction: Fitch Affirms & Removes Medco Health from Rating Watch Negative.

CHICAGO -- (This is an amended version of a release issued earlier today, containing revised information on the liquidity amount in cash and short-term investments for Medco.)

Fitch Ratings has affirmed and removed Medco Health Solutions (NYSE:MHS) ratings from Rating Watch Negative (where it was placed on Aug. 28, 2007). The Rating Outlook is Stable. Fitch's ratings for Medco Health are as follows:

--Issuer Default Rating (IDR) 'BBB';

--Senior unsecured credit facility 'BBB';

--Senior unsecured debt 'BBB'.

This action reflects the decreased uncertainty regarding the credit impact of MHS' acquisition of PolyMedica Corp. for approximately $1.5 billion. While the transaction is expected to increase leverage (total debt/EBITDA) to approximately 1.6 times (x) - 1.7x during the next 12 months, Fitch believes the company's financial and operational profile will remain supportive of a 'BBB' rating. However, the increase in leverage reduces the company's flexibility within the rating category.

Fitch believes the acquisition is strategically sound, as PolyMedica's presence in the diabetes market will broaden MHS' service and product offering for these patients. Medco already has a strong focus on disease (including diabetes) management through its Therapeutic Resource Centers. Nevertheless, differences between the two markets regarding payers and products present some integration risk.

MHS' core business is expected to perform well. Client retention, new client wins and increased prescription demand should drive revenue. A continued shift to higher margin segments, including mail-order services, generics and specialty pharmaceuticals are expected to provide support for margins. Manageable capital expenditure needs provides for solid free cash flow generation.

Key rating concerns for the credit include potential margin pressure within the prescription drug channel and MHS' share repurchase and acquisition activity that have led to increased leverage. Given the increased leverage, margin stability becomes more important to MHS' credit profile.

At Sept. 30, 2007 MHS had approximately $2.1 billion in debt with approximately $1.0 billion of a term loan maturing in 2012, $500 million in notes maturing in 2013 and $600 million in borrowings under its receivables facility. On Oct. 31, 2007, MHS drew down $1.0 billion under its revolving credit facility (expiring on April 30, 2012) to partly fund the PolyMedica acquisition, leaving approximately $1.0 billion in availability. At Sept. 30, 2007, the company also had liquidity of approximately $700 million in cash and short-term investments and around $1.5 billion of free cash flow (cash flow from operations minus capital expenditures) for latest 12 months ending Sept. 30 2007.

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