Corporates www.fitchratings.com April 6, 2011 2010 Review and 2011 Outlook in Brief The U.S. healthcare sector experienced an eventful but stable 2010, as the Affordable Care Act (ACA) was signed into law and as certain provisions of the bill are being implemented amidst continued weak macroeconomic conditions. Overall, Fitch expects 2011 credit metrics to trend near 2010 levels as the industry exhibits continued strong liquidity and financial flexibility. Volume and Pricing Pressures Persist: Barring an accelerated macroeconomic recovery, Fitch does not forsee improvement in organic volume and pricing trends in 2011. Concerning trends indicating higher levels of structural unemployment, as well as growth in the consumer share of healthcare costs, support an expectation of continued weak organic trends over the longer term. The Largest Pharmaceutical Patent Cliff in the Industry’s History Has Begun: Although the bulk of 2011 patent expiries do not occur until the fourth quarter, several branded drugmakers are set to lose large chunks of revenues and profits. Conversely, the patent cliff affords much of the rest of the channel, especially drug distributors and PBMs, the potential for improved profitability. Strong Liquidity Is Maintained: Fitch expects liquidity to remain strong as many issuers took advantage of favorable rates to refinance existing debt in 2010, have ample cash balances, and generate solid levels of FCF. Acquisition activity is expected to be robust in 2011 as issuers seek to bolster weak organic growth in light of attractive asset valuations and flush liquidity profiles. Healthcare Reform-Related Uncertainties Remain: Fitch does not expect healthcare reform to directly impact ratings in 2011; however, regulatory risk related to the ACA will likely remain at the forefront throughout the year. Healthcare U.S. and Canada Special Report U.S. Healthcare Stats Quarterly — Fourth-Quarter 2010 Analysts Michael Zbinovec +1 312 368-3164 michael.zbinovec@fitchratings.com Robert Kirby, CFA +1 312 368-3147 robert.kirby@fitchratings.com Megan Neuburger +1 212 908-0501 megan.neuburger@fitchratings.com Jacob Bostwick, CPA +1 312 368-3169 jacob.bostwick@fitchratings.com Related Research  Fitch’s For-Profit Hospital Industry Quarterly Diagnosis: Fourth-Quarter 2010, April 4, 2011  2011 Outlook: Global Pharma-ceuticals, Jan. 18, 2011  2011 Outlook: U.S. Healthcare, Jan. 12, 2011  U.S. Quarterly Prescription Tracker: Third-Quarter 2010, Dec. 17, 2010  Global Pharmaceutical R&D Pipeline: Third-Quarter 2010, Dec. 15, 2010  U.S. Healthcare Sector Legislative and Regulatory Register  Fall 2010, Dec. 7, 2010  Pharmaceutical Companies  Sector Credit Factor Compendium, Nov. 3, 2010 U.S. Healthcare Ratings Company Name IDR Outlook/Watch Page Company Name IDR Outlook/Watch Page Company Name IDR Outlook/Watch Page Diagnostics and Life Sciences Distributors Pharmaceuticals Beckman Coulter, Inc. BBB Watch Positive 11 AmerisourceBergen Corp. BBB+ Positive Outlook 10 Abbott Laboratories A+ Stable 10 Bio-Rad Laboratories, Inc. BBB Stable 12 Cardinal Health, Inc. BBB+ Positive Outlook 13 Allergan, Inc. A Stable 10 Laboratory Corporation McKesson Corp. A Stable 18 Amgen Inc. A Stable 11 of America Holdings NR  17 Owens & Minor, Inc. BBB Stable 19 Bristol-Myers Squibb Company A+ Negative Outlook 12 Life Technologies Corporation BBB Stable 17 Eli Lilly & Co. A+ Negative Outlook 14 Quest Diagnostics Inc. BBB+ Negative Outlook 20 For-Profit Hospitals and Providers Johnson & Johnson AAA Stable 16 Thermo Fisher Scientific Inc. A Stable 21 Community Health Systems, Inc. B Watch Negative 13 Merck & Co., Inc. A+ Stable 19 DaVita Inc. BB Stable 14 Mylan Inc. NR  19 Medical Devices and Supplies HCA Inc. B+ Stable 15 Pfizer AA Negative Outlook 20 Baxter International Inc. A Stable 11 Health Management Associates, Inc. B+ Positive Outlook 15 Warner Chilcott plc NR  22 Boston Scientific Corporation BB+ Positive Outlook 12 HealthSouth Corp. NR  16 Watson Pharmaceuticals, Inc. BBB Stable 22 CareFusion Corporation BBB Stable 13 IASIS Healthcare LLC NR  16 Covidien plc A Stable 14 LifePoint Hospitals, Inc. BB Positive Outlook 17 Pharmacy Benefit Managers Medtronic Corp. NR  18 Tenet Healthcare Corp. B Watch Positive 21 Express Scripts, Inc. BBB Stable 15 St. Jude Medical, Inc. A Stable 20 Universal Health Services, Inc. BB Stable 21 Medco Health Solutions, Inc. BBB Stable 18 Source: Fitch Ratings. Corporates 2 U.S. Healthcare Stats Quarterly — Fourth-Quarter 2010 April 6, 2011 Summary