(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 5.7% to $540,771 in the third quarter of 2009 as compared to $573,715 in the third quarter of 2008 and declined 9.0% to $1,590,555 in the nine months ended September 30, 2009 as compared to $1,748,604 in the nine months ended September 30, 2008 as a result of revenue declines in all three of our business lines. Our operating income declined $129,520 to an operating loss of $5,544 in the third quarter of 2009 as compared to $123,976 of operating income in the third quarter of 2008 due to $104,301 of severance, impairment and other charges and the related $2,024 non-cash charge for accelerated depreciation and amortization, the decrease in our operating revenue and an increase in our selling and administrative expenses, partially offset by decreases in our operating costs, as discussed below.

Our operating income declined $207,127 to $164,608 in the nine months ended September 30, 2009 as compared to $371,735 in the nine months ended September 30, 2008 due to the decrease in our operating revenue, $129,729 of severance, impairment and other charges and the related $2,024 non-cash charge for accelerated depreciation and amortization, partially offset by decreases in our operating costs and selling and administrative expenses, as discussed below. Our net income attributable to IMS declined $85,212 to a net loss of $9,300 for the third quarter of 2009 as compared to net income of $75,912 for the third quarter of 2008 due to the decrease in operating income and an increase in the non-operating loss, net items discussed below, partially offset by certain tax items as discussed in Note 11 of the Condensed Consolidated Financial Statements (Unaudited). Our net income attributable to IMS declined $25,865 to $186,917 for the nine months ended September 30, 2009 as compared to $212,782 for the nine months ended September 30, 2008 due to the decrease in operating income, partially offset by a decrease in 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 a loss of $0.05 for the third quarter of 2009 as compared to income of $0.41 for the third quarter of 2008 and decreased to income of $1.02 for the nine months ended September 30, 2009 as compared to $1.16 for the nine months ended September 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 nine months of 2009, the U.S. dollar was generally stronger against the other currencies in which we transact business as compared to the first nine 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 selling and administrative expenses, operating income and operating margin excluding severance, impairment and other charges, the non-cash charge for accelerated depreciation and amortization and the 2008 Government Solutions charge. We discuss below what our selling and administrative expenses, operating income and operating margin for the three and nine months ended September 30, 2009 and 2008 would have been had we not recorded severance, impairment and other charges, the non-cash charge for accelerated depreciation and amortization and the 2008 Government Solutions charge. 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



                                                                                     % Variance
                                              Three Months Ended September 30,          2009
                                                 2009                 2008            vs 2008
Information and analytics revenue (I&A)    $         425,197    $         445,654          (4.6 )%
Consulting and services revenue (C&S)                115,574              128,061          (9.8 )%
Operating Revenue                                    540,771              573,715          (5.7 )%

Operating costs of I&A                               181,974              190,139           4.3 %
Direct and incremental costs of C&S                   58,774               62,185           5.5 %
External-use software amortization                     9,823               12,291          20.1 %
Selling and administrative expenses                  166,885              161,878          (3.1 )%
Depreciation and other amortization                   24,558               23,246          (5.6 )%
Severance, impairment and other charges              104,301                    -             -
Operating Income                           $          (5,544 )  $         123,976        (104.5 )%




                                                                                     % Variance
                                              Nine Months Ended September 30,           2009
                                                 2009                 2008            vs 2008
Information and analytics revenue (I&A)    $       1,253,885    $       1,355,281          (7.5 )%
Consulting and services revenue (C&S)                336,670              393,323         (14.4 )%
Operating Revenue                                  1,590,555            1,748,604          (9.0 )%

Operating costs of I&A                               528,213              576,514           8.4 %
Direct and incremental costs of C&S                  176,931              202,641          12.7 %
External-use software amortization                    30,464               38,048          19.9 %
Selling and administrative expenses                  490,211              493,010           0.6 %
Depreciation and other amortization                   70,399               66,656          (5.6 )%
Severance, impairment and other charges              129,729                    -             -
Operating Income                           $         164,608    $         371,735         (55.7 )%

Operating Income

Our operating income for the third quarter of 2009 declined $129,520 to an operating loss of $5,544 from $123,976 of operating income in the third quarter of 2008. This was due to $104,301 of severance, impairment and other charges and the related $2,024 non-cash charge for accelerated depreciation and amortization (see Note 15 to our Condensed Consolidated Financial Statements (Unaudited)), the decrease in our operating revenue and an increase in our selling and administrative expenses, partially offset by decreases in our operating costs driven by decreased cost of data and tight controls on hiring. Our operating income decreased $133,643 or 115.3% in constant dollar terms. Absent the impact of severance, impairment and other charges and the related non-cash charge for accelerated depreciation and amortization and the 2008 Government Solutions charge of $3,748 (see Note 7 to our Condensed Consolidated Financial Statements (Unaudited)), non-GAAP operating income would have decreased 21.1% at reported rates and 27.8% in constant dollar terms (see "Reconciliation of U.S. GAAP Measures to Non-GAAP Measures" at the end of this Item 2). Our operating income for the first nine months of 2009 declined $207,127 to $164,608 from $371,735 in the first nine months of 2008. This was due to the decrease in our operating

revenue, $129,729 of severance, impairment and other charges and the related $2,024 non-cash charge for accelerated depreciation and amortization, 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 $218,021 or 63.7% in constant dollar terms. Absent the impact of severance, impairment and other charges and the related non-cash charge for accelerated depreciation and amortization and the 2008 Government Solutions charge of $3,748, non-GAAP operating income would have decreased 21.1% at reported rates and 27.0% in constant dollar terms (see "Reconciliation of U.S. GAAP Measures to Non-GAAP Measures" at the end of this Item 2).

Operating Revenue

Our operating revenue for the third quarter of 2009 declined 5.7% to $540,771 from $573,715 in the third quarter of 2008. On a constant dollar basis, operating revenue declined 4.1%. Operating revenue for the first nine months of 2009 declined 9.0% to $1,590,555 from $1,748,604 in the first nine months of 2008. On a constant dollar basis, operating revenue declined 4.7%. On a constant dollar basis, acquisitions completed within the prior twelve months contributed approximately 0.4 percentage points and 0.6 percentage points of revenue growth for the third quarter and first nine months of 2009, respectively, 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 $11,000 and $82,000 of currency translation for the third quarter and first nine months of 2009, respectively, as compared to the third quarter and first nine months of 2008.

                          Summary of Operating Revenue



                                                                              % Variance
                                                                             2009 vs 2008
                               Three Months Ended September 30,        Reported       Constant
                                  2009                 2008              Rates         Dollar
Commercial Effectiveness    $         269,996    $         279,816           (3.5 )%        (2.6 )%
Product & Portfolio
Management                            168,842              174,640           (3.3 )%        (1.6 )%
New Business Areas                    101,933              119,259          (14.5 )%       (11.2 )%
Operating Revenue           $         540,771    $         573,715           (5.7 )%        (4.1 )%




                                                                              % Variance
                                                                             2009 vs 2008
                               Nine Months Ended September 30,         Reported       Constant
                                  2009                 2008              Rates         Dollar
Commercial Effectiveness    $         793,019    $         866,598           (8.5 )%        (4.7 )%
Product & Portfolio
Management                            502,846              544,861           (7.7 )%        (3.2 )%
New Business Areas                    294,690              337,145          (12.6 )%        (6.9 )%
Operating Revenue           $       1,590,555    $       1,748,604           (9.0 )%        (4.7 )%

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

slightly offset by revenue growth in Asia Pacific.

† Product & Portfolio Management: The Americas contributed more than two-thirds and EMEA contributed more than one-quarter to the constant dollar revenue decline for the third quarter of 2009, slightly offset by revenue growth in Asia Pacific. Each of EMEA and the Americas contributed approximately one-half to the constant dollar revenue decline for the first nine months of 2009.

† New Business Areas: EMEA contributed approximately three-quarters and the Americas contributed approximately one-quarter to the constant dollar revenue decline for the third quarter of 2009, slightly offset by revenue growth in Asia Pacific. Each of EMEA and the Americas contributed approximately one-half to the constant dollar revenue decline for the first nine months of 2009.

Consulting and services ("C&S") revenue, as included in the business lines above, was $115,574 in the third quarter of 2009, down 9.8% from $128,061 in the third quarter of 2008 (down 7.5% on a constant dollar basis). C&S revenue was $336,670 in the first nine months of 2009, down 14.4% from $393,323 in the first nine months of 2008 (down 9.8% 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 our I&A offerings.

Our operating costs of I&A declined 4.3% to $181,974 in the third quarter of 2009 from $190,139 in the third quarter of 2008 and declined 8.4% to $528,213 in the first nine months of 2009 from $576,514 in the first nine months of 2008.

† Foreign Currency Translation: The effect of foreign currency translation decreased our operating costs of I&A by approximately $6,000 and $36,000 for the third quarter and first nine months of 2009, respectively, as compared to the third quarter and first nine months of 2008.

Excluding the effect of foreign currency translation, our operating costs of I&A declined 1.2% and 2.3% in the third quarter and first nine months of 2009, respectively, as compared to the third quarter and first nine months of 2008.

† Data: Data costs decreased by approximately $2,000 and $12,000 in the third quarter and first nine months of 2009, respectively, as compared to the third quarter and first nine 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 5.5% to $58,774 in the third quarter of 2009 from $62,185 in the third quarter of 2008 and declined 12.7% to $176,931 in the first nine months of 2009 from

$202,641 in the first nine months of 2008.

† Foreign Currency Translation: The effect of foreign currency translation decreased our direct and incremental costs of C&S by approximately $4,000 and $16,000 for the third quarter and first nine months of 2009, respectively, as compared to the third quarter and first nine months of 2008.

Excluding the effect of foreign currency translation, our direct and incremental costs of C&S increased 0.5% in the third quarter of 2009 as compared to the third quarter of 2008 and declined 5.2% in the first nine months of 2009 as compared to the first nine months of 2008.

C&S costs in the third quarter of 2009 were comparable to the third quarter of 2008. C&S costs decreased by approximately $10,000 in the first nine months of 2009 as compared to the first nine months of 2008, due to decreased labor cost.

External-Use Software Amortization

Our external-use software amortization charges represent the amortization associated with capitalized software to be sold, leased, or otherwise marketed. Our external-use software amortization charges declined 20.1% to $9,823 in the third quarter of 2009 from $12,291 in the third quarter of 2008 and declined 19.9% to $30,464 in the first nine months of 2009 from $38,048 in the first nine 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 increased 3.1% to $166,885 in the third quarter of 2009 from $161,878 in the third quarter of 2008 and declined 0.6% to $490,211 in the first nine months of 2009 from $493,010 in the first nine months of 2008. Absent the 2008 Government Solutions charge of $3,748 (see Note 7 to our Condensed Consolidated Financial Statements (Unaudited)), our non-GAAP selling and administrative expenses would have grown 5.5% and 0.2% in the third quarter and first nine months of 2009 as compared to the third quarter and first nine months of 2008 (see "Reconciliation of U.S. GAAP Measures to Non-GAAP Measures" at the end of this Item 2).

† Foreign Currency Translation: The effect of foreign currency translation decreased our selling and administrative expenses by approximately $7,000 and $41,000 for the third quarter and first nine months of 2009, respectively, as compared to the third quarter and first nine months of 2008.

Excluding the effect of foreign currency translation and the Government Solutions charge, our non-GAAP selling and administrative expenses grew 10.4% and 9.1% in third quarter and first nine months of 2009, respectively, as compared to the third quarter and first nine months of 2008.

† Sales and Marketing: Sales and marketing expenses decreased $2,000 and $4,000 in the third quarter and first nine months of 2009 as compared to the third quarter and first nine months of 2008.

† Consulting and Services: C&S expenses remained relatively flat in the third quarter of 2009 as compared to the third quarter of 2008. C&S expenses increased $16,000 in the first nine months of

2009 as compared to the first nine months of 2008. Absent the 2008 Government Solutions charge, C&S expenses would have increased by approximately $4,000 in the third quarter of 2009 as compared to the third quarter of 2008 and increased by approximately $20,000 in the first nine months of 2009 as compared to the first nine months of 2008.

† Administrative and Other: Other expenses increased $13,000 in the third quarter of 2009 as compared to the third quarter of 2008 and increased $26,000 in the first nine months of 2009 as compared to the first nine months of 2008.

Depreciation and Other Amortization

Our depreciation and other amortization charges increased 5.6% to $24,558 in the third quarter of 2009 from $23,246 in the third quarter of 2008, and 5.6% to $70,399 in the first nine months of 2009 from $66,656 in the first nine months of 2008, due to $2,024 of accelerated depreciation and amortization recorded in the three months ended September 30, 2009 primarily related to exited facilities as part of the streamlining program noted under Severance, impairment and other charges below.

Severance, impairment and other charges

During the third quarter of 2009, we recorded $104,301 in charges as a component of operating income for employee termination benefits and facility exit costs as a result of the streamlining program announced by the Company in July 2009 in response to accelerating healthcare marketplace dynamics compounded by a sustained economic downturn. During the second quarter of 2009, we recorded $25,428 in charges as a component of operating income 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 and for supplier contract-related charges 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 third quarter of 2009 was (1.0)% as compared to 21.6% in the third quarter of 2008. Our operating margin for the first nine months of 2009 was 10.3% as compared to 21.3% in the first nine months of 2008. Margins were negatively impacted by revenue declines and the severance, impairment and other charges and related accelerated depreciation and amortization noted above, partially offset by decreased costs of panel and decreased sales and marketing costs. Excluding the severance, impairment and other charges and related accelerated depreciation and amortization noted above, our non-GAAP operating margin for both the three and nine months ended September 30, 2009 would have been 18.6% (see "Reconciliation of U.S. GAAP Measures to Non-GAAP Measures" at the end of this Item 2).

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, increased to $17,189 in the third quarter of 2009 from $11,614 in the third quarter of 2008 and decreased to $24,818 in the first nine months of 2009 from $54,053 in the first nine months of 2008. This was due to the following factors:

† Interest Expense, net: Net interest expense was $8,778 and $25,825 for the third quarter and first nine months of 2009, respectively, as compared to $9,012 and $26,670 for the third quarter and first nine months of 2008. This improvement was due to lower debt levels and lower borrowing costs in the third quarter and first nine months of 2009 as compared to the third quarter and first nine months of 2008.

† Gains (Losses) from Investments, net: In the third quarter of 2009, we incurred a loss of $618 related to the write down for other-than-temporary declines in the value of certain investments. In the third quarter of 2008, gains from investments of $379 were the result of the sale of marketable securities.

† Other Income (Expense), net: Other income, net, declined by $4,812 in the third quarter of 2009 as compared to the third quarter of 2008. This was a result of net foreign exchange losses of $7,694 in the third quarter of 2009 as compared to net foreign exchange losses of $2,934 in the third quarter of 2008. Other income, net, grew by $29,350 in the first nine months of 2009 as compared to the first nine months of 2008. This was a result of net foreign exchange gains of $1,727 in the first nine months of 2009 as compared to net foreign exchange losses of $27,662 in the first nine 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 September 30, 2009, our effective tax rate was reduced by the expiration of certain statutes of limitation (tax benefits of $14,100). For the nine months ended September 30, 2009, our effective tax rate was reduced as a result of the expiration of certain statutes of limitation (tax . . .