(Dollars and shares in thousands, except per share data)

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

Executive Summary

Our Business

IMS Health Incorporated ("IMS," "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. Our business lines are:

† Commercial Effectiveness to increase clients' productivity across end-to-end sales, marketing, promotional and performance management processes;

† Product and Portfolio Management to provide clients with insights into market measurement so they can optimize their product portfolio and strategies; and

† New Business Areas that support pharmaceutical client business initiatives in managed markets, consumer health, and pricing and market access, and that also serve payer and government audiences.

Within these business lines, we provide consulting and services that use in-house capabilities and methodologies to assist 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 declined 13.0% to $522,839 in the second quarter of 2009 as compared to $600,709 in the second quarter of 2008. Our operating revenue declined 10.6% to $1,049,783 in the six months ended June 30, 2009 as compared to $1,174,889 in the six months ended June 30, 2008. The three and six month operating revenue decreases were a result of revenue declines in all three of our business lines. Our operating income declined $62,091 to $69,286 in the second quarter of 2009 as compared to $131,377 in the second quarter of 2008. Our operating income declined $77,608 to $170,151 in the six months ended June 30, 2009 as compared to $247,759 in the six months ended June 30, 2008. Both the three and six

month operating income declines were due to the decrease in our operating revenue and $25,428 of asset impairments and supplier contract-related charges, partially offset by decreases in our operating costs and selling and administrative expenses, as discussed below. Our net income attributable to IMS was $62,883 for the second quarter of 2009, a decrease of $14,812 as compared to $77,695 for the second quarter of 2008, and $196,215 for the six months ended June 30, 2009, an increase of $59,345 as compared to $136,870 for the six months ended June 30, 2008, due to the Non-Operating Loss, net items discussed below and certain tax items as discussed in Note 11 of the Condensed Consolidated Financial Statements (Unaudited). Our diluted earnings per share of Common Stock decreased to $0.34 for the second quarter of 2009 as compared to $0.42 for the second quarter of 2008 and increased to $1.08 for the six months ended June 30, 2009 as compared to $0.74 for the six months ended June 30, 2008.

Results of Operations

Reclassifications. Certain prior-year amounts have been reclassified to conform to the 2009 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 the first six months of 2009, the U.S. dollar was generally stronger against the other currencies in which we transact business as compared to the first six months of 2008. The revenue decline at actual currency rates was greater than the decline at constant dollar exchange rates. See "How Exchange Rates Affect Our Results" below and the discussion of "Market Risk" in the Management's Discussion and Analysis of Financial Condition and Results of Operations section of our annual report on Form 10-K for the year ended December 31, 2008 for a more complete discussion regarding the impact of foreign currency translation on our business.

References to operating income and operating margin excluding asset impairments and supplier contract-related charges. We discuss below what our operating income and operating margin for the three and six months ended June 30, 2009 would have been had we not recorded asset impairments and supplier contract-related charges. Because we did not record similar charges in the prior periods, we believe providing these non-GAAP measures is useful to investors as it facilitates comparisons across the periods presented and more clearly indicates trends. Management uses these non-GAAP measures in its global decision-making, including developing budgets and managing expenditures.

                          Summary of Operating Results



                                                  Three Months Ended June 30,        % Variance
                                                                                        2009
                                                    2009               2008           vs 2008
Information and analytics revenue (I&A)        $       408,611    $       453,440          (9.9 )%
Consulting and services revenue (C&S)                  114,228            147,269         (22.4 )%
Operating Revenue                                      522,839            600,709         (13.0 )%

Operating costs of I&A                                 175,401            193,607           9.4 %
Direct and incremental costs of C&S                     57,012             71,951          20.8 %
External-use software amortization                      10,117             13,043          22.4 %
Selling and administrative expenses                    162,919            168,365           3.2 %
Depreciation and other amortization                     22,676             22,366          (1.4 )%
Severance, impairment and other charges                 25,428                  -             -
Operating Income                               $        69,286    $       131,377         (47.3 )%




                                                 Six Months Ended June 30,       % Variance
                                                                                    2009
                                                   2009              2008         vs 2008
Information and analytics revenue (I&A)       $      828,688    $      909,627         (8.9 )%
Consulting and services revenue (C&S)                221,095           265,262        (16.7 )%
Operating Revenue                                  1,049,783         1,174,889        (10.6 )%

Operating costs of I&A                               346,240           386,374         10.4 %
Direct and incremental costs of C&S                  118,157           140,456         15.9 %
External-use software amortization                    20,641            25,757         19.9 %
Selling and administrative expenses                  323,325           331,133          2.4 %
Depreciation and other amortization                   45,841            43,410         (5.6 )%
Severance, impairment and other charges               25,428                 -            -
Operating Income                              $      170,151    $      247,759        (31.3 )%

Operating Income

Our operating income for the second quarter of 2009 declined $62,091 to $69,286 from $131,377 in the second quarter of 2008. This was due to the decrease in our operating revenue and $25,428 of asset impairments and supplier contract-related charges, partially offset by decreases in our operating costs and selling and administrative expenses driven by decreased cost of data and tight controls on hiring. Our operating income decreased $62,394 or 52.5% in constant dollar terms. Our operating income for the first six months of 2009 declined $77,608 to $170,151 from $247,759 in the first six months of 2008. This was due to the decrease in our operating revenue and $25,428 of asset impairments and supplier contract-related charges, partially offset by decreases in our operating costs and selling and administrative expenses driven by decreased cost of data and tight controls on hiring. Our operating income decreased $84,378 or 37.3% in constant dollar terms. Excluding the $25,428 of asset impairments and supplier contract-related charges, our operating income for the three and six months ended June 30, 2009 would have been $94,714 and $195,579, respectively, representing a decline of 27.9% and 21.1%, respectively, on a reported basis and

32.1% and 26.6%, respectively, in constant dollar terms.

Operating Revenue

Our operating revenue for the second quarter of 2009 declined 13.0% to $522,839 from $600,709 in the second quarter of 2008. On a constant dollar basis, operating revenue declined 7.1%. Operating revenue for the first six months of 2009 declined 10.6% to $1,049,783 from $1,174,889 in the first six months of 2008. On a constant dollar basis, operating revenue declined 4.9%. On a constant dollar basis, acquisitions completed within the prior twelve months contributed approximately 1 percentage point of revenue growth for both the second quarter and first six months of 2009, partially offsetting our operating revenue decline for these same periods. The decrease in our operating revenue resulted from revenue declines in all three of our business lines, together with the effect of approximately $39,000 and $71,000 of currency translation for the second quarter and first six months of 2009, respectively, as compared to the second quarter and first six months of 2008.

                          Summary of Operating Revenue



                                                                               % Variance
                                      Three Months Ended June 30,             2009 vs 2008
                                                                         Reported     Constant
                                        2009               2008           Rates        Dollar
Commercial Effectiveness           $       263,382    $       300,735       (12.4 )%       (7.1 )%
Product & Portfolio Management             162,316            187,130       (13.3 )%       (7.1 )%
New Business Areas                          97,141            112,844       (13.9 )%       (7.0 )%
Operating Revenue                  $       522,839    $       600,709       (13.0 )%       (7.1 )%




                                                                      % Variance
                                   Six Months Ended June 30,         2009 vs 2008
                                                                 Reported    Constant
                                      2009            2008        Rates       Dollar
Commercial Effectiveness         $      523,023    $   586,783      (10.9 )%     (5.8 )%
Product & Portfolio Management          334,004        370,221       (9.8 )%     (3.9 )%
New Business Areas                      192,756        217,885      (11.5 )%     (4.5 )%
Operating Revenue                $    1,049,783    $ 1,174,889      (10.6 )%     (4.9 )%

† Commercial Effectiveness: EMEA contributed approximately one-third and the Americas contributed more than one-half to the constant dollar revenue decline for the second quarter of 2009. Each of EMEA and the Americas contributed approximately one-half to the constant dollar revenue decline for the first six months of 2009, slightly offset by revenue growth in Asia Pacific.

† Product & Portfolio Management: EMEA contributed more than two-thirds to the constant dollar revenue decline for the second quarter of 2009. EMEA contributed approximately one-half and the Americas contributed more than one-third to the constant dollar revenue decline for the first six months of 2009.

† New Business Areas: The Americas contributed approximately two-thirds and EMEA contributed approximately one-third to the constant dollar revenue decline for the second quarter of 2009. The

Americas contributed more than three-quarters to the constant dollar revenue decline for the first six months of 2009.

Consulting and services ("C&S") revenue, as included in the business lines above, was $114,228 in the second quarter of 2009, down 22.4% from $147,269 in the second quarter of 2008 (down 16.8% on a constant dollar basis). C&S revenue was $221,095 in the first six months of 2009, down 16.7% from $265,262 in the first six months of 2008 (down 10.9% on a constant dollar basis).

Operating Costs of Information and Analytics

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

Our operating costs of I&A declined 9.4% to $175,401 in the second quarter of 2009 from $193,607 in the second quarter of 2008 and declined 10.4% to $346,240 in the first six months of 2009 from $386,374 in the first six months of 2008.

† Foreign Currency Translation: The effect of foreign currency translation decreased our operating costs of I&A by approximately $16,000 and $30,000 for the second quarter and first six months of 2009, respectively, as compared to the second quarter and first six months of 2008.

Excluding the effect of foreign currency translation, our operating costs of I&A declined 1.5% and 2.8% in the second quarter and first six months of 2009, respectively, as compared to the second quarter and first six months of 2008.

† Data: Data costs decreased by approximately $3,000 and $9,000 in the second quarter and first six months of 2009, respectively, as compared to the second quarter and first six months of 2008.

† Production, Client Services and Other: Production, client services and other costs increased by approximately $1,000 in the second quarter of 2009 as compared to the second quarter of 2008 and decreased by approximately $1,000 in the first six months of 2009 as compared to the first six months of 2008.

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 declined 20.8% to $57,012 in the second quarter of 2009 from $71,951 in the second quarter of 2008 and declined 15.9% to $118,157 in the first six months of 2009 from $140,456 in the first six months of 2008.

† Foreign Currency Translation: The effect of foreign currency translation decreased our direct and incremental costs of C&S by approximately $7,000 and $12,000 for the second quarter and first six months of 2009, respectively, as compared to the second quarter and first six months of 2008.

Excluding the effect of foreign currency translation, our direct and incremental costs of C&S declined 12.6% and 7.8% in the second quarter and first six months of 2009, respectively, as compared to the second quarter and first six months of 2008.

† C&S costs decreased by approximately $8,000 and $10,000 in the second quarter and first six months of 2009, respectively, as compared to the second quarter and first six months of 2008, due to decreased labor cost and primary market research data expense, all directly related to the C&S revenue decline.

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 declined 22.4% to $10,117 in the second quarter of 2009 from $13,043 in the second quarter of 2008 and declined 19.9% to $20,641 in the first six months of 2009 from $25,757 in the first six months of 2008. This was due to decreased software amortization associated with assets that were fully amortized or written-down to their net realizable values.

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 declined 3.2% to $162,919 in the second quarter of 2009 from $168,365 in the second quarter of 2008 and declined 2.4% to $323,325 in the first six months of 2009 from $331,133 in the first six months of 2008.

† Foreign Currency Translation: The effect of foreign currency translation decreased our selling and administrative expenses by approximately $17,000 and $34,000 for the second quarter and first six months of 2009, respectively, as compared to the second quarter and first six months of 2008.

Excluding the effect of foreign currency translation, our selling and administrative expenses grew 7.1% and 8.4% in second quarter and first six months of 2009, respectively, as compared to the second quarter and first six months of 2008.

† Sales and Marketing: Sales and marketing expenses remained constant in the second quarter of 2009 as compared to the second quarter of 2008 and decreased by approximately $3,000 in the first six months of 2009 as compared to the first six months of 2008.

† Consulting and Services: C&S expenses increased by approximately $11,000 and $15,000 in the second quarter and first six months of 2009, respectively, as compared to the second quarter and first six months of 2008.

† Administrative and Other: Other expenses remained constant in the second quarter of 2009 as compared to the second quarter of 2008 and increased by approximately $13,000 in the first six months of 2009 as compared to the first six months of 2008.

Depreciation and Other Amortization

Our depreciation and other amortization charges increased 1.4% to $22,676 in the second quarter of 2009 from $22,366 in the second quarter of 2008, and 5.6% to $45,841 in the first six months of 2009 from $43,410 in the first six months of 2008, due to increased depreciation related to new facilities and technology to upgrade our financial systems and increased amortization related to internal-use software additions.

Severance, impairment and other charges

During the second quarter of 2009, we recorded $25,428 in charges as a component of operating income. Of this amount, $17,210 related to non-cash impairment charges for the write-down of certain capitalized software assets to their net realizable values in our Americas and EMEA regions. The write-downs were the result of the regular review of our capitalized software assets. The remaining $8,218 was for supplier contract-related charges based on a SFAS No. 5, "Accounting for Contingencies," assessment for which we will not realize any future economic benefit (see Note 15 to our Condensed Consolidated Financial Statements (Unaudited).

Trends in our Operations

Our operating margin for the second quarter of 2009 was 13.3% as compared to 21.9% in the second quarter of 2008. Our operating margin for the first six months of 2009 was 16.2% as compared to 21.1% in the first six months of 2008. Margins were negatively impacted by revenue declines and the $25,428 asset impairments and supplier contract-related charges noted above, partially offset by decreased costs of panel and decreased sales and marketing costs. Excluding the $25,428 of asset impairments and supplier contract-related charges, our operating margin for the three and six months ended June 30, 2009 would have been 18.1% and 18.6%, respectively.

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. For additional information regarding the status of the laws passed in the three states noted above and related legislative developments in other jurisdictions, see Part II. Item 1A. Risk Factors.

Non-Operating Loss, net

Our non-operating loss, net, decreased to a loss of $4,056 in the second quarter of 2009 from a loss of $15,146 in the second quarter of 2008 and decreased to a loss of $7,630 in the first six months of 2009 from a loss of $42,439 in the first six months of 2008. This was due to the following factors:

† Interest Expense, net: Net interest expense was $8,579 and $17,048 for the second quarter and first six months of 2009, respectively, as compared to $8,987 and $17,658 for the second quarter and first six months of 2008. This improvement was due to lower debt levels and lower borrowing costs in the second quarter and first six months of 2009 as compared to the second quarter and first six

months of 2008.

† Other Income (Expense), net: Other income, net, grew by $10,682 in the second quarter of 2009 as compared to the second quarter of 2008. This was a result of net foreign exchange gains of $4,537 in the second quarter of 2009 as compared to net foreign exchange losses of $6,130 in the second quarter of 2008. Other income, net, grew by $34,199 in the first six months of 2009 as compared to the first six months of 2008. This was a result of net foreign exchange gains of $9,421 in the first six months of 2009 as compared to net foreign exchange losses of $24,728 in the first six months of 2008.

Taxes

We operate in more than 100 countries around the world and our earnings are taxed at the applicable income tax rate in each of these countries.

For the three months ended June 30, 2009, our effective tax rate was reduced by the settlement of a certain state tax matter (tax benefit of $16,300) and the resolution of certain legacy tax matters (tax benefit of $9,500) (see Note 7 to our Condensed Consolidated Financial Statements (Unaudited), "Sharing Disputes."). For the three months ended March 31, 2009, our effective tax rate was reduced as a result of the reorganization of certain subsidiaries which resulted in a foreign exchange loss recognized for tax purposes (tax benefit of $63,200), the repayment of a certain intercompany loan which resulted in a foreign exchange loss recognized for tax purposes (tax benefit of $6,100) and the expiration of certain statutes of limitation (tax benefits of $4,000). For the three months ended June 30, 2008, our effective tax rate was reduced as a result of audit settlements with taxing authorities (tax benefit of $10,300). Also during this period, we recorded tax expense for tax positions related to non-US transactions offset by a benefit related to the expiration of certain statutes of limitation (net tax expense of $5,300). Further, for the three months ended March 31, 2008 our effective tax rate was reduced as a result of the filing of an advance pricing agreement ("APA") between two taxing jurisdictions (tax benefit of $4,900). The APA ensures conformity between the jurisdictions' taxing authorities regarding the treatment of certain intercompany transactions, thereby allowing us to record a corresponding tax benefit.

For the three and six months ended June 30, 2009, we recorded approximately $1,900 and $5,700, respectively, of tax expense related to unrecognized tax benefits that if recognized, would favorably affect the effective tax rate. Interest and penalties of $800 and $2,500, respectively, are included in these amounts. For the three and six months ended June 30, 2008, we recorded $5,200 and $10,000, respectively, of tax expense related to unrecognized tax benefits including $2,600 and $5,300, respectively, of interest and penalties.

We file numerous consolidated and separate income tax returns in U.S. (federal and state) and non-U.S. jurisdictions. We are no longer subject to U.S. federal income tax examination by tax authorities for years before 2004. 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 material non-U.S. jurisdictions prior to 2004. It is reasonably possible that within the next twelve months we could realize $28,900 of unrecognized tax benefits as a result of the expiration of certain statutes of limitation.

While we intend to continue to seek global tax planning initiatives, there can be no assurance that we will be able to successfully identify and implement such initiatives to reduce or maintain our overall tax rate and therefore rates may go up in the future.

Net Income Attributable to Noncontrolling Interests

. . .