Dollars and shares in thousands, except per share data.

This discussion and analysis should be read in conjunction with the accompanying Consolidated Financial Statements and related notes.

Executive Summary

OUR BUSINESS

IMS Health Incorporated ("we," "us" or "our") is the leading global provider of market intelligence to the pharmaceutical and healthcare industries. We offer leading-edge market intelligence products and services that are integral to our clients' day-to-day operations, including product and portfolio management capabilities; commercial effectiveness innovations; managed care and consumer health offerings; and consulting and services solutions that improve productivity and the delivery of quality healthcare worldwide. Our information products are developed to meet client needs by using data secured from a worldwide network of suppliers in more than 100 countries. Key information products include:

º •
º Sales Force Effectiveness to optimize sales force productivity and territory management;

º •
º Portfolio Optimization to provide clients with insights into market measurement and opportunity assessment; and

º •
º Launch, Brand Management and Other to support client needs relative to market segmentation and positioning, life cycle management for prescription and consumer health pharmaceutical products and health economics and outcomes research offerings.

Within these key information products, we provide consulting and services that use in-house capabilities and methodologies to assist pharmaceutical clients in analyzing and evaluating market trends, strategies and tactics, and to help in the development and implementation of customized software applications and data warehouse tools.

We operate in more than 100 countries.

We manage on a global business model with global leaders for the majority of our critical business processes and accordingly have one reportable segment.

We believe that important measures of our financial condition and results of operations include operating revenue, constant dollar revenue growth, operating income, constant dollar operating income growth, operating margin and cash flows.

PERFORMANCE OVERVIEW

Operating revenue grew 6.2% to $2,329,528 in 2008 compared to $2,192,571 in 2007. The increase in our operating revenue resulted from growth in revenue in all three of our business lines. Our operating income increased 26.7% to $498,305 in 2008 compared to $393,279 in 2007. The increase in operating income was a result of increased operating revenue and decreases in severance, impairment and other charges, offset by increases in operating costs, selling and administrative expenses and depreciation and amortization, as discussed below. Our net income was $311,250 in 2008 compared to $234,040 in 2007, due to the Non-Operating Loss, net items discussed below and certain tax items as discussed in Note 12 to the Consolidated Financial Statements. Our diluted earnings per share of Common Stock increased to $1.70 for 2008 as compared to $1.18 for 2007.

Results of Operations

RECLASSIFICATIONS. Certain prior-year amounts have been reclassified to conform to the 2008 presentation.

REFERENCES TO CONSTANT DOLLAR RESULTS AND RESULTS EXCLUDING THE EFFECT OF FOREIGN CURRENCY TRANSLATIONS. We report results in U.S. dollars but we do business on a global basis. Exchange rate fluctuations affect the rate at which we translate foreign revenues and expenses into U.S. dollars and may have significant effects on our results. In order to illustrate these effects, the discussion of our business in this report sometimes describes the magnitude of changes in constant dollar terms or results excluding the effect of foreign currency translations. We believe this information facilitates a comparative view of our business. In 2008, the U.S. dollar was generally weaker against other currencies as compared to 2007. As a result, growth at constant dollar exchange rates was generally lower than growth at actual currency exchange rates. See "How Exchange Rates Affect Our Results" below for a more complete discussion regarding the impact of foreign currency translation on our business.

                                   Years ended December 31,                 % Variance
                                                                         2008         2007
                               2008          2007          2006        vs. 2007     vs. 2006
Information and analytics
revenue (I&A)               $ 1,786,747   $ 1,700,244   $ 1,599,063          5.1 %        6.3 %
Consulting and services
revenue (C&S)                   542,781       492,327       359,525         10.2 %       36.9 %

Operating Revenue             2,329,528     2,192,571     1,958,588          6.2 %       11.9 %

Operating costs of I&A          756,597       713,168       659,841          6.1          8.1
Direct and incremental
costs of C&S                    275,513       244,289       188,939         12.8         29.3
External-use software
amortization                     49,728        48,609        43,297          2.3         12.3
Selling and
administrative expenses         650,341       626,888       542,524          3.7         15.6
Depreciation and other
amortization                     89,636        77,648        73,785         15.4          5.2
Severance, impairment and
other charges                     9,408        88,690             -        (89.4 )          -
Merger costs                          -             -         6,016            -            -

Operating Income            $   498,305   $   393,279   $   444,186         26.7 %      (11.5 )%

OPERATING INCOME

Our operating income for 2008 grew 26.7% to $498,305 from $393,279 in 2007. This was due to the increase in our operating revenue and decreases in severance, impairment and other charges, offset by increases in operating costs and selling and administrative expenses driven by increased cost of data, investments in consulting and services ("C&S") capabilities and expense associated with a charge related to our Government Solutions business (see Note 15 to our Consolidated Financial Statements). Our operating income increased 18.3% in constant dollar terms. Absent the impact of 2008 impairment charges associated with the write-off of certain capitalized software assets resulting from the discontinuation of certain products (See Note 6 to our Consolidated Financial Statements), the Government Solutions charge and 2007 severance, impairment and other charges, non-GAAP operating income would have increased by 6.1% at reported exchange rates and remained flat in constant dollar terms (see "Reconciliation of U.S. GAAP Measures to Non-GAAP Measures" at the end of this Item 7).

Our operating income for 2007 decreased 11.5% to $393,279 from $444,186 in 2006. This was due to the increase in our operating revenue, which were more than offset by increases in operating costs and selling and administrative expenses driven by increased costs of data, investments in C&S capabilities, severance, impairment and other charges, and the elimination of merger costs, as discussed below. Our operating income decreased 11.7% in constant dollar terms. Absent the impact of 2007

severance, impairment and other charges and 2006 merger costs, our non-GAAP operating income would have increased 7.1% on a reported basis and 5.9% in constant dollar terms (see "Reconciliation of U.S. GAAP Measures to Non-GAAP Measures" at the end of this Item 7).

OPERATING REVENUE

Our operating revenue for 2008 grew 6.2% to $2,329,528 from $2,192,571 in 2007 and grew 11.9% in 2007 to $2,192,571 from $1,958,588 in 2006. On a constant dollar basis our operating revenue growth was 3.1% in 2008 and 8.1% in 2007. Acquisitions completed in 2008 and 2007, on a constant dollar basis, contributed 1.9 percentage points of our operating revenue growth during 2008, while acquisitions completed in 2007 and 2006, on a constant dollar basis contributed 2.0 percentage points of our operating revenue growth during 2007. The increases in our operating revenue for both 2008 and 2007 resulted from growth in revenue due to higher purchases of products and C&S offerings from existing customers in all three of our business lines, together with the effect of approximately $70,000 of currency translation for 2008 as compared to 2007 and approximately $73,000 of currency translation for 2007 as compared to 2006. On a constant dollar basis, our Sales Force Effectiveness and Launch, Brand Management and Other business lines grew in 2008 as compared to 2007 and all our business lines grew in 2007 as compared to 2006.

SUMMARY OF OPERATING REVENUE

                                                                      % Variance                % Variance
                             Years ended December 31,               2008 vs. 2007             2007 vs. 2006
                                                                             Constant                   Constant
                         2008          2007          2006        Reported     Dollar      Reported       Dollar
Sales Force           $ 1,057,085   $ 1,004,351   $   927,218          5.3 %       1.8 %         8.3 %        4.9 %
Effectiveness
Portfolio                 653,567       634,566       522,070          3.0         0.0          21.5         17.7
Optimization
Launch, Brand and         618,876       553,654       509,300         11.8         9.3           8.7          3.8
Other

Operating Revenue     $ 2,329,528   $ 2,192,571   $ 1,958,588          6.2 %       3.1 %        11.9 %        8.1 %

º •
º Sales Force Effectiveness: The Americas contributed three-quarters and Asia Pacific contributed one-quarter to the constant dollar revenue growth in 2008. The Americas contributed more than one-half and Asia Pacific contributed more than one-quarter to the constant dollar revenue growth in 2007.

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º Portfolio Optimization: Asia Pacific was the primary contributor to the constant dollar revenue growth in 2008 completely offset by a revenue decline in Europe, the Middle East and Africa (EMEA). The Americas contributed more than one-half and EMEA contributed more than one-third to the constant dollar revenue growth in 2007.

º •
º Launch, Brand Management and Other: The Americas and EMEA each contributed about one-half to the constant dollar revenue growth in 2008. EMEA contributed more than one-half and the Americas contributed more than one-third toward the constant dollar revenue growth in 2007.

C&S revenue, as included in the business lines above, was $542,781 in 2008, up 10.2% from $492,327 in 2007 (up 7.8% on a constant dollar basis). Approximately two-thirds of the C&S revenue growth for 2008 was attributable to acquisitions completed in 2008 and 2007. C&S revenue was $492,327 in 2007, up 36.9% from $359,525 in 2006 (up 21.0% on a constant dollar basis). Approximately one-half of the 2007 C&S revenue growth was attributable to acquisitions completed in 2007 and 2006.

OPERATING COSTS OF INFORMATION AND ANALYTICS

Operating costs of information and analytics ("I&A") include costs of data, data collection and processing and costs attributable to personnel involved in production, data management and delivery of our I&A offerings.

Our operating costs of I&A grew 6.1% to $756,597 in 2008 from $713,168 in 2007. In 2007, our operating costs of I&A grew 8.1% to $713,168 from $659,841 in 2006.

º •
º Foreign Currency Translation: The effect of foreign currency translation increased our operating costs of I&A by approximately $22,000 in 2008 as compared to 2007 and by approximately $29,000 for 2007 as compared to 2006.

Excluding the effect of foreign currency translation, our operating costs of I&A grew 3.1% in 2008 compared to 2007 and grew 3.6% in 2007 as compared to 2006.

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º Data: Data costs increased by approximately $20,000 in 2008 as compared to 2007. Data costs increased by approximately $35,000 in 2007 as compared to 2006.

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º Production, Client Services and Other: Production, client services and other costs increased by approximately $2,000 in 2008 compared to 2007. Production, client services and other costs decreased by approximately $10,000 in 2007 compared to 2006.

DIRECT AND INCREMENTAL COSTS OF CONSULTING AND SERVICES

Direct and incremental costs of C&S include the costs of consulting staff directly involved with delivering revenue-generating engagements, related accommodations and the costs of primary market research data purchased specifically for certain individual C&S engagements. Direct and incremental costs of C&S do not include an allocation of direct costs of data that are included within I&A.

Our direct and incremental costs of C&S grew 12.8% to $275,513 in 2008 from $244,289 in 2007. Our direct and incremental costs of C&S grew 29.3% to $244,289 in 2007 from $188,939 in 2006.

º •
º Foreign Currency Translation: The effect of foreign currency translation increased our direct and incremental costs of C&S by approximately $7,000 in 2008 as compared to 2007 and by approximately $10,000 for 2007 as compared to 2006.

Excluding the effect of foreign currency translation, our direct and incremental costs of C&S grew 10.3% in 2008 compared to 2007 and grew 23.6% in 2007 as compared to 2006.

º •
º C&S costs increased by approximately $25,000 in 2008 as compared to 2007 and approximately $45,000 in 2007 as compared to 2006 due to increased labor, accommodations and primary market research data expense, all directly related to C&S revenue growth.

EXTERNAL-USE SOFTWARE AMORTIZATION

Our external-use software amortization charges represent the amortization associated with software we capitalized under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed." Our external-use software amortization charges grew 2.3% to $49,728 in 2008 from $48,609 in 2007 due to increased software amortization associated with new products. Our external-use software amortization charges grew 12.3% to $48,609 in 2007 from $43,297 in 2006 due to increased software amortization associated with new products.

SELLING AND ADMINISTRATIVE EXPENSES

Our selling and administrative expenses consist primarily of the expenses attributable to sales, marketing and administration, including human resources, legal, management and finance. Our selling

and administrative expenses grew 3.7% in 2008, to $650,341 from $626,888 in 2007. Absent the Government Solutions charge discussed above, our non-GAAP selling and administrative expenses would have grown 3.1% in 2008 compared to 2007 (see "Reconciliation of U.S. GAAP Measures to Non-GAAP Measures" at the end of this Item 7). Our selling and administrative expenses grew 15.6% in 2007, to $626,888 from $542,524 in 2006.

º •
º Foreign Currency Translation: The effect of foreign currency translation increased our selling and administrative expenses by approximately $9,000 for 2008 as compared to 2007 and by approximately $25,000 for 2007 as compared to 2006.

Excluding the effect of foreign currency translation and the Government Solutions charge, our non-GAAP selling and administrative expenses grew 1.7% in 2008 compared to 2007. Excluding the effect of foreign currency translation, our selling and administrative expenses grew 10.7% in 2007 as compared to 2006.

º •
º Sales and Marketing: Sales and marketing expense decreased by approximately $5,000 in 2008 as compared to 2007 and increased by approximately $15,000 in 2007 as compared to 2006.

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º Consulting and Services: C&S expenses increased by approximately $1,000 in 2008 as compared to 2007. Absent the Government Solutions charge, C&S expenses would have decreased by approximately $3,000 in 2008 as compared to 2007. C&S expenses increased by approximately $43,000 in 2007 as compared to 2006.

º •
º Administrative and Other: Administrative and other expenses increased by approximately $18,000 in 2008 as compared to 2007 and increased by approximately $1,000 in 2007 as compared to 2006.

DEPRECIATION AND OTHER AMORTIZATION

Our depreciation and other amortization charges increased 15.4% to $89,636 in 2008 from $77,648 in 2007, due to increased depreciation related to new facilities and technology to upgrade our financial and sales opportunity tracking systems and increased amortization related to internal-use software. Our depreciation and other amortization charges increased 5.2% to $77,648 in 2007 from $73,785 in 2006 due to internal-use software additions.

SEVERANCE, IMPAIRMENT AND OTHER CHARGES

During the fourth quarter of 2008, we recorded a $9,408 non-cash charge in severance, impairment and other charges related to the write-off of certain capitalized software assets resulting from the discontinuation of certain products in our EMEA and Asia Pacific regions at the end of 2008. During the fourth quarter of 2007, we recorded an $88,690 pretax charge for severance, impairment and other charges related to a plan to streamline the business. The charge consisted of termination benefits for approximately 1,070 employees worldwide as well as asset impairment charges and related contract payments to be incurred with no future economic benefit based on our decision to abandon certain products in our EMEA region. See Note 6 to our Consolidated Financial Statements.

MERGER COSTS

During 2006, we incurred merger costs of $6,016 for investment banker fees and expenses related to a payment received from The Nielsen Company ("Nielsen"), formerly known as VNU N.V., a Dutch company in accordance with the terms of the merger termination agreement (see Other Income (Expense), net below). See Note 16 to our Consolidated Financial Statements for a description of the events surrounding the terminated merger with Nielsen.

TRENDS IN OUR OPERATIONS

Our operating margin for 2008 was 21.4%, as compared to 17.9% in 2007. In 2008 and 2007 we incurred severance, impairment and other charges of $9,408 and $88,690, respectively, as discussed above. In addition, in 2008 we incurred a $3,700 charge related to our Government Solution business (see Note 15 to our Consolidated Financial Statements). Excluding these charges, our non-GAAP operating margin remained constant at 22.0% in 2008 compared to 2007 (see "Reconciliation of U.S. GAAP Measures to Non-GAAP Measures" at the end of this Item 7).

Our operating margin for 2007 was 17.9%, as compared to 22.7% in 2006. The decrease in our operating margin was partly due to the 2007 charge for severance, impairment and other. Excluding the 2006 merger costs and the 2007 charge for severance, impairment and other, our non-GAAP operating margin decreased from 23.0% in 2006 to 22.0% in 2007 (see "Reconciliation of U.S. GAAP Measures to Non-GAAP Measures" at the end of this Item 7). A decrease of approximately 0.2 percentage points in operating margin for 2007 was due to foreign exchange fluctuations. In addition, margins were negatively impacted by increased cost of data and our continuing investments in new products and C&S capabilities.

Recent acquisitions have also had an adverse effect on our operating margins due to the fact that some of the small businesses we acquired have historically experienced lower operating margins than ours, and the revenue and cost synergies that we incorporate into our business plans are not all immediately realized. We also experience higher amortization of acquired intangible assets in the first years after completing an acquisition and may incur additional costs in integrating the acquired operations into ours, both of which tend to increase our costs and thus decrease our operating margins in the initial years of each completed acquisition.

We have several offerings in the U.S. that utilize prescriber-identifiable information. Over the past several years, there have been a number of state legislative initiatives seeking to impose restrictions on the commercial use of such information. To date, three states, New Hampshire, Vermont and Maine, have passed laws placing certain restrictions on the license, use or transfer of prescriber-identifiable information for commercial purposes. Collectively, these three states represent approximately one percent of prescription activity in the U.S. and therefore the impact of these laws on our business, financial condition and results of operations is not expected to be material. However, as of February 24, 2009, eighteen states were considering similar legislation. For additional information regarding the status of the laws passed in the three states noted above and related developments in these other states, see "Risk Factors-Laws restricting the use of information may restrict our product and service offerings" and "Data protection and privacy laws may restrict our current and future activities."

NON-OPERATING (LOSS) INCOME, NET

Our non-operating loss, net increased to $83,216 in 2008 from a loss of $43,684 in 2007. Our non-operating loss, net increased to $43,684 in 2007 from a net gain of $4,559 in 2006. The annual changes were due to the following factors:

Interest Expense, net: Net interest expense was $34,451 in 2008, compared with $29,746 in 2007 due to higher debt levels. Net interest expense was $29,746 in 2007, compared with $34,972 in 2006 due to lower borrowing costs.

Gains from Investments, net: Gains from investments, net, totaled $379 in 2008 compared to $2,317 in 2007 and $2,250 in 2006. The net gain in 2008 was a result of the sale of marketable securities. The net gain in 2007 was a result of the final distribution from our Enterprise portfolio, offset by related management fees, and the sale of marketable securities and venture capital investments. The net gain in 2006 was a result of the sale of our investment in Allscripts Healthcare

Solutions, Inc., partially offset by management fees related to our Enterprise portfolio and write-downs related to other-than-temporary declines in the value of our venture capital investments.

Other (Expense) Income, net: Other expense, net, grew by $32,889 in 2008 to expense of $49,144 from expense of $16,255 in 2007. This growth is the result of a foreign exchange loss of $16,071 related to the liquidation of non-functional currency Venezuela Bolívars held at our Swiss operating subsidiary (see Note 9 to our Consolidated Financial Statements), partially offset by a $4,041 gain related to the sale of certain assets in our Latin America region (see Note 4 to our Consolidated Financial Statements) in 2008. In addition, this growth is a result of net foreign exchange losses of $29,260 and minority interest expense of $7,702 in 2008 compared with net foreign exchange losses of $9,565 and minority interest expense of $7,795 in 2007. Other expense, net, grew by $53,536 in 2007 to expense of $16,255 from income of $37,281 in 2006 due to the receipt of $45,000 in 2006 from Nielsen as result of the agreement to terminate the proposed merger (see Note 16 to our Consolidated Financial Statements). In addition, this growth is a result of net foreign exchange losses of $9,565 and minority interest expense of $7,795 in 2007, compared with net foreign exchange losses of $6,074 and minority interest expense of $4,517 in 2006.

TAXES

Our effective tax rate was 25.0% in 2008, compared with 33.1% in 2007 and 29.7% in 2006. Our effective tax rate for 2008 was favorably impacted by approximately $20,700 as a result of a non-U.S. reorganization involving several IMS subsidiaries, $11,000 due to audit settlements with taxing authorities, $9,700 as a result of the termination of a non-U.S. agreement, $9,700 in connection with the resolution of certain legacy tax matters (see Note 15 to our Consolidated Financial Statements) and $4,400 due to the expiration of certain statutes of limitation.

For the twelve months ended December 31, 2008 we recorded approximately $18,800 of tax expense related to unrecognized tax benefits that if recognized, would favorably affect the effective tax rate. Included in this amount is $9,200 of interest and penalties.

The IRS concluded its audit of our 2004 and 2005 federal income tax returns during the second quarter of 2008. The resolution of the audit resulted in a tax payment of approximately $5,300 for which a reserve had been previously established. We file numerous consolidated and separate income tax returns in the U.S. (federal and state) and non-U.S. jurisdictions. With one exception, we are no longer subject to U.S. federal income tax examination by tax authorities for years before 2004. With respect to that exception, we and the IRS have entered into an agreement to resolve the outstanding issues related thereto; however the statute of limitations with respect to that matter has not yet expired (see Note 15 to our Consolidated Financial Statements, D&B Legacy Related Tax Matters, The Partnership (Tax Year 1997)). We are no longer subject to state and local income tax examination by tax authorities for years before 1997. Further, with few exceptions, we are no longer subject to examination by tax authorities in our material non-U.S. jurisdictions prior to 2003. It is reasonably possible that within the next twelve months we could realize approximately $22,400 of unrecognized benefits as a result of the expiration of certain statutes of limitation.

The effective tax rate for 2007 was impacted by a tax reduction of approximately $16,500 arising from a favorable non-U.S. audit settlement for tax years 1998 through 2002, a tax charge of $7,500 to revalue net deferred tax assets arising from the enactment of the German 2008 Business Tax Reform Act which reduced the German federal tax rate from 25% to 15% and a tax reduction of $12,440 arising from a reorganization of certain non-U.S. subsidiaries.

On January 1, 2007 we adopted the provisions of Financial Accounting Standards Board ("FASB") Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48"). As a result of this adoption, we recognized an increase in liabilities for uncertain tax positions of approximately $51,800 and a corresponding reduction to the January 1, 2007 retained earnings balance. As of the adoption

date, we had $117,200 of gross unrecognized tax benefits and interest and penalties of $13,500. We recognize interest expense and penalties related to unrecognized tax benefits in income tax expense.

The effective tax rate for 2006 was favorably impacted by approximately $69,200 primarily due to a U.S. partnership audit settlement for the tax years 1998 through 2003 and a U.S. corporate audit settlement of $17,600 for the tax . . .