U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

 (Mark One)
[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended         March 31, 2003
                               ----------------------------------------

                                       OR

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.

For the transition period from                   to
                               -----------------    ------------------------

                        Commission file number 000-26749

                   NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
             (Exact Name of Registrant as Specified in Its Charter)

   Delaware                                              11-2581812
-------------------------------------------------------------------------------
(State or Other Jurisdiction                   (IRS Employer Identification No.)
of Incorporation or Organization)


 26 Harbor Park Drive, Port Washington, NY                         11050
-------------------------------------------------------------------------------
(Address of Principal Executive Offices)                          (Zip Code)

Registrant's Telephone Number, Including Area Code         (516) 626-0007
                                                   ----------------------------



Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

     Indicate  by check  whether  the  registrant:  (1) has  filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.
Yes   X                        No
----------                     -------------

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

         Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes                        No
     -------------             -------------

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

         The number of shares outstanding of the issuer's Common Stock, as of
May 9, 2003 was 7,610,907 shares.


<PAGE>

           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES  2

<TABLE>
<S>                                                                             <C>    <C>    <C>    <C>    <C>    <C>

                                                     INDEX                                            Page
                                                                                                      ----
                        FORWARD-LOOKING STATEMENTS                                                      3

PART I        -   FINANCIAL INFORMATION                                                                 4

ITEM 1        -   CONDENSED FINANCIAL STATEMENTS:                                                       4

                  CONSOLIDATED BALANCE SHEET as of June 30, 2002                                        4
                  and March 31, 2003 (unaudited)

                  CONSOLIDATED STATEMENT OF INCOME (unaudited)                                          5
                  for the three months and nine months ended March 31, 2002 and 2003

                  CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)                                      6
                  for the nine months ended March 31, 2002 and 2003

                  CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                  7

ITEM 2        -   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL                                    18
                  CONDITION AND RESULTS OF OPERATIONS

ITEM 3        -   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT                                       28
                  MARKET RISK

ITEM 4    -       CONTROLS AND PROCEDURES                                                              28

PART II       -   OTHER INFORMATION                                                                    29

ITEM 1        -   LEGAL PROCEEDINGS                                                                    29

ITEM 2        -   CHANGES IN SECURITIES AND USE OF PROCEEDS                                            29

ITEM 3        -   DEFAULTS UPON SENIOR SECURITIES                                                      29

ITEM 4        -   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  29

ITEM 5        -   OTHER INFORMATION                                                                    29

ITEM 6        -   EXHIBITS AND REPORTS ON FORM 8-K                                                     30

</TABLE>

<PAGE>


           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES        3


Forward Looking Statements

     When  used  herein,  the  words  "may,"  "could,"  "estimate,"   "believe,"
"anticipate,"  "think,"  "intend,"  "expect"  and similar  expressions  identify
forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation  Reform Act of 1995.  Such  statements  are not  guarantees of future
performance  and involve  known and unknown risks and  uncertainties,  and other
factors, which could cause actual results to differ materially from those in the
forward-looking statements. Readers are cautioned not to place undue reliance on
such  statements,  which speak only as of the date hereof.  For a discussion  of
such risks and uncertainties,  including risks relating to pricing,  competition
in the  bidding  and  proposal  process,  our  ability  to  consummate  contract
negotiations with prospective clients,  dependence on key members of management,
government  regulation,  acquisitions  and  affiliations,  the  market  for  PBM
services, and other factors,  readers are urged to carefully review and consider
various disclosures made by National Medical Health Card Systems,  Inc. ("Health
Card" or the  "Company")  which  attempt  to advise  interested  parties  of the
factors which affect Health Card's business,  including, without limitation, the
disclosures  made  under  the  caption  "Business"  in Item 1 and  "Management's
Discussion  and Analysis of Financial  Condition and Results of  Operations"  in
Item 7 of the Company's  Annual Report on Form 10-K, as amended,  for the fiscal
year ended June 30, 2002, filed with the SEC on December 26, 2002.



<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1 - CONDENSED FINANCIAL STATEMENTS
           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                                ($ in thousands)


<TABLE>
<S>                                                                               <C>    <C>    <C>    <C>    <C>    <C>

                                                                                      June 30,                March 31,
Assets                                                                                 2002                    2003
                                                                                       ----                    ----
Current:                                                                                                    (Unaudited)

  Cash and cash equivalents (including cash equivalent investments of $1,187        $  1,768                  $ 4,939
            and $1,186, respectively)
  Restricted cash                                                                      2,653                    2,500
  Accounts receivable, less allowance for doubtful accounts of $2,248
             and $2,505, respectively                                                 59,285                   52,811
  Rebates receivable                                                                  15,775                   20,201
  Due from affiliates                                                                    504                    4,187
  Deferred tax asset                                                                   1,542                    1,542
  Other current assets                                                                   610                    1,714
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
      Total current assets                                                            82,137                   87,894

  Property, equipment and software development costs, net                              9,031                    8,083
  Due from affiliates                                                                  3,620                      -
  Intangible assets, net of accumulated amortization of $406 and $993,                 2,523                    2,508
      respectively
  Goodwill                                                                            52,035                   52,936
  Other assets                                                                           549                      432
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
      Total Assets                                                                $  149,895               $  151,853
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current Liabilities:

  Accounts payable and accrued expenses                                           $  100,525                $  98,252
  Revolving credit facility and loans payable-current                                 13,835                   21,531
  Convertible notes payable                                                            8,000                     -
  Current portion of capital lease obligations                                           556                      466
  Due to officer/stockholder                                                             696                      714
  Income taxes payable                                                                     -                      374
  Other current liabilities                                                            1,178                      180
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
     Total current liabilities                                                       124,790                  121,517

  Capital lease obligations, less current portion                                        809                      457
  Long term loans payable and other liabilities                                          865                    1,043
  Deferred tax liability                                                               2,154                    2,154
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
     Total liabilities                                                               128,618                  125,171
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
Commitments and Contingencies
Stockholders' Equity:

  Preferred stock $.10 par value; 10,000,000 shares authorized, none outstanding         -                        -
  Common Stock, $.001 par value, 25,000,000 shares authorized,  7,550,239 and
    7,801,907 shares issued, 7,359,239 and 7,610,907 outstanding, respectively             8                       8
  Additional paid-in-capital                                                          14,292                  14,959
  Retained earnings                                                                    7,721                  12,459
  Treasury stock at cost, 191,000 shares                                                (744)                   (744)
---------------------------------------------------------------------------------------------------------------------------
     Total stockholders' equity                                                       21,277                  26,682
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
     Total Liabilities and Stockholders' Equity                                   $  149,895              $  151,853
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
         See accompanying condensed notes to consolidated financial statements

                                       4
<PAGE>


           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES
-------------------------------------------------------------------------------

                        CONSOLIDATED STATEMENT OF INCOME
                (Amounts in thousands, except per share amounts)
                                   (Unaudited)

<TABLE>
<S>                                                                            <C>    <C>    <C>    <C>          <C>     <C>


                                                                 Three months ended                           Nine months ended
                                                                      March 31,                                    March 31,

                                                                  2002             2003                  2002              2003
                                                                  ----             ----                  ----              ----

Revenues                                                 $     145,683         $ 126,538             $ 313,837           $424,869
Cost of claims                                                 136,251           114,713               289,412            390,509
------------------------------------------------------------------------------------------------------------------------------------

Gross Profit                                                     9,432            11,825                24,425             34,360


Selling, general and administrative expenses*                    7,295             8,672                19,336             25,690
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------

Operating income                                                 2,137             3,153                 5,089              8,670

Other income (expense):
Interest expense                                                  (431)             (310)                 (541)              (941)
Interest income                                                     95                60                   433                187
Other income, net                                                   38                38                    63                115
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
                                                                  (298)             (212)                  (45)              (639)

Income before provision for income taxes                         1,839             2,941                 5,044              8,031
Provision for income taxes                                         736             1,206                 1,904              3,293
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------

Net Income                                                 $     1,103         $   1,735              $  3,140          $   4,738
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------

Earnings per common share:
    Basic                                                  $      0.15         $    0.23              $   0.44        $      0.62
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
    Diluted                                                $      0.14         $    0.22              $   0.41        $      0.59
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------

Weighted average number of common shares outstanding:
    Basic                                                       7,209              7,611                 7,179              7,582
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
    Diluted                                                     8,023              8,067                 7,750              8,024

* Includes amounts charged by affiliates aggregating:     $       244          $     269              $  1,642           $    784
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

      See accompanying condensed notes to consolidated financial statements

                                       5





<PAGE>


           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                ($ in thousands)
                                   (Unaudited)


<TABLE>
<S>                                                                                   <C>    <C>           <C>    <C>    <C>    <C>

                                                                                               Nine months ended
                                                                                                   March 31,

                                                                                             2002                        2003
                                                                                             ----                        ----
Cash flows from operating activities:
           Net income                                                                    $   3,140                   $  4,738
             Adjustments to reconcile net income to net cash
              provided by operating activities:

                Depreciation and amortization                                                2,281                      3,258
                Amortization of deferred gain                                                 (63)                       (102)
                Net gain on disposal of capital assets                                       (370)                        (13)
                Provision for doubtful accounts                                               675                         257
                Compensation expense accrued to officer/stockholder                            13                         418
                Deferred income taxes                                                        (343)                          -
                Interest accrued on stockholders'/affiliate's loans                             -                         (84)
             Changes in assets and liabilities, net of effect from acquisitions:
                Restricted cash                                                            (1,528)                        153
                Accounts receivable                                                       (31,289)                      6,258
                Rebates receivable                                                         (3,281)                     (4,426)
                Other current assets                                                           68                      (1,028)
                Due to/from affiliates                                                        483                        (380)
                Other assets                                                                  (54)                        (19)
                Accounts payable and accrued expenses                                      43,032                      (1,579)
                Income taxes payable and other current liabilities                           (595)                       (377)
                Other long term liabilities                                                   380                         279
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                                  12,549                       7,353
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
             Capital expenditures                                                          (2,376)                    (1,349)
             Acquisition of Integrail, net of cash acquired                                     -                     (1,472)
             Acquisition of PAI, net of cash acquired                                           -                     (1,000)
             Acquisition of Centrus, net of cash acquired                                 (40,284)                        -
             Repayment of note by stockholder                                                 300                         -
             Proceeds from disposal of capital assets                                       1,321                         22
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities                                                     (41,039)                    (3,799)
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
             Proceeds from exercise of stock options                                           380                       418
             Proceeds from convertible note offering                                        11,600                         -
             Repayment of convertible note offering                                              -                    (8,000)
             Proceeds from revolving credit facility                                        28,700                   512,150
             Repayment of revolving credit facility                                        (19,506)                 (504,459)
             Deferred financing costs                                                         (532)                      136
             Repayment of debt and capital lease obligations                                  (539)                     (628)
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities                                         20,103                      (383)
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------

Net (decrease) increase in cash and cash equivalents                                        (8,387)                    3,171
Cash and cash equivalents at beginning of period                                            10,877                     1,768
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                                               $   2,490                 $   4,939
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

     See accompanying condensed notes to consolidated financial statements

                                       6
<PAGE>


           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES

              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (All $ in thousands, except per share amounts)
                                   (Unaudited)



1. BASIS OF PRESENTATION

     The unaudited  consolidated  financial  statements  include the accounts of
National Medical Health Card Systems,  Inc. (the "Company" or "Health Card") and
its wholly owned subsidiaries,  Pharmacy Associates,  Inc. ("PAI"),  Interchange
PMP, Inc. ("PMP"), Centrus Corporation,  formerly known as HSL Acquisition Corp.
(see Note 2)  ("Centrus"),  National  Medical  Health  Card IPA,  Inc.  ("IPA"),
formerly known as PSCNY IPA, Inc., Specialty Pharmacy Care, Inc.  ("Specialty"),
Integrail,  Inc.  ("Integrail"),  NMHCRX Mail Order, Inc. ("Mail Order"), NMHCRX
Contracts,  Inc.  ("Contracts"),  and PBM  Technology  Inc.  ("PBM Tech").  Also
included  on a  consolidated  basis  are  the  accounts  of  NMHC  Funding,  LLC
("Funding"),   a  limited  liability  company  of  which  the  Company  and  its
subsidiaries  are the  owners of all of the  membership  interests.  Unless  the
context otherwise requires,  references herein to the "Company" or "Health Card"
refer to the Company and its subsidiaries, on a consolidated basis. All material
inter-company   balances  and   transactions   have  been   eliminated   in  the
consolidation.

     The unaudited  consolidated  financial statements have been prepared by the
Company in  accordance  with  accounting  principles  generally  accepted in the
United States for interim  financial  information and  substantially in the form
prescribed by the Securities  and Exchange  Commission in  instructions  to Form
10-Q and in Article 10 of Regulation S-X.  Accordingly,  they do not include all
of the  information  and footnotes  required by such  accounting  principles for
complete financial statements.  In the opinion of the Company's management,  the
March 31,  2003 and 2002  unaudited  interim  financial  statements  include all
adjustments,  consisting of normal recurring  adjustments,  necessary for a fair
presentation  of  results  for these  interim  periods.  In the  opinion  of the
Company's  management,  the disclosures contained in this Form 10-Q are adequate
to make the information  presented not misleading when read in conjunction  with
the Notes to Consolidated  Financial  Statements  included in the Company's Form
10-K,  as amended,  for the year ended June 30, 2002.  The results of operations
for the three and nine month  periods  ended March 31, 2003 are not  necessarily
indicative of the operating results to be expected for the full year.

     Certain  amounts in the prior period have been  reclassified  to conform to
the current  period  presentation.  For  information  concerning  the  Company's
significant  accounting  policies,  reference  is made to the  Company's  Annual
Report on Form 10-K,  as amended,  for the year ended June 30, 2002 (the "Annual
Report").

2. BUSINESS ACQUISITIONS

     As of  November  1, 2002,  the  Company  and its wholly  owned  subsidiary,
Integrail  Acquisition  Corp.,  entered into an Asset  Purchase  Agreement  with
Health Solutions,  Ltd.  ("HSL"),  and certain of its security holders (together
with HSL,  the  "Sellers").  Pursuant to the  Agreement,  Health  Card  acquired
substantially  all of the assets of the Integrail  division of HSL's operations,
for a purchase price of $1,400. Integrail provides software and analytical tools
in the area of informatics which allows for the blending of medical and pharmacy
data to predict future outcomes.

     Half of the $1,400  purchase price was paid at the closing  directly to the
Sellers,  and half was deposited into escrow as security for the  performance of
certain  indemnification  obligations  of  the  Sellers.  The  Company  acquired
approximately  $500  of  HSL's  assets  which  included  $158  of  property  and
equipment,  $225 of  software,  $76 of  prepaid  expenses,  and $41 of  accounts
receivable.  The Company also agreed to assume approximately $500 of liabilities
related to Integrail  which included $166 of debt under capital  leases,  $78 of
miscellaneous  payables,  and $259 due to HSL for prior  equipment  and services
provided to  Integrail  by HSL.  The  acquisition  was  accounted  for under the
purchase  method of accounting  and the results of Integrail's  operations  were
included  in  the  consolidated   financial   statements   commencing  with  the
acquisition  date.  The excess of the  acquisition  costs over the fair value of
identifiable  net assets  acquired was $1,472,  which  consists of the following
components:  (i)  software  and company  know how valued at $575,  which will be
amortized  over three (3) years;  and (ii)  goodwill of $897,  which will not be
amortized  for book  purposes per SFAS 142 (see Note 8). The  allocation  of the
purchase price is preliminary subject to final valuation.  For tax purposes, the
goodwill and other  intangibles will be amortized over fifteen years.  Funds for
this  transaction  were supplied by the revolving  credit  facility that was put
into place in January 2002. (See below).  The Agreement provides that if certain
operational  milestones  are achieved over the next 12 months,  certain  amounts
will be released from the escrow to the Sellers.

     The Company  entered into an Asset Purchase  Agreement (the "Asset Purchase
Agreement"),  dated as of January 29, 2002, with Health  Solutions,  Ltd., a New
York corporation  ("HSL"),  HSL Acquisition Corp., a Delaware  corporation and a
wholly-owned  subsidiary of the Company ("Sub"), and the security holders of HSL
named therein, pursuant to which the Company agreed to acquire certain assets of
HSL relating to the pharmacy benefit management  business (PBM) conducted by HSL
under the name  "Centrus"  (the  "Acquisition").  Centrus  provides PBM services
primarily to managed care organizations in the northeast. The Company intends to
continue to use the Centrus assets to provide PBM services. The Centrus business
complements  the  Company's  business  while  significantly   strengthening  the
Company's presence in the managed care market.

     The aggregate  purchase  price of the  Acquisition  was $40,000 in cash, of
which $3,000 was held in escrow to secure  certain  indemnification  obligations
(the escrow dollars have been released as of January 2003). The Company acquired
approximately  $1,400  of HSL's  assets  which  included  $900 of  property  and
equipment and $500 of software.  The Company also agreed to assume approximately
$1,400 of HSL's  liabilities  relating to the Centrus  business  which  included
$1,100  of  rebates  due to  sponsors,  $100  of  capital  leases,  and  $200 of
miscellaneous  payables.  The  acquisition  was accounted for under the purchase
method of accounting and the results of Centrus' operations were included in the
consolidated  financial  statements  commencing with the  acquisition  date. The
excess of the acquisition  costs over the fair value of identifiable  net assets
acquired was $40,672,  which consists of the following components:  (i) customer
relationships  valued at $2,415,  which will be  amortized  over five (5) years;
(ii) an employment agreement valued at $83, which will be amortized over two (2)
years:  (iii) non-compete  contracts valued at $76, which will be amortized over
four (4) years,  and (iv)  goodwill of $38,098  which will not be amortized  for
book  purposes  per SFAS 142 (see Note 8). For tax  purposes,  the  goodwill and
other intangibles will be amortized over fifteen years. In addition, the Company
has agreed to pay HSL as additional purchase price up to $4,000 over a period of
three (3) years if the acquired  Centrus  business  achieves  certain  financial
performance  targets during the two-year period  following the Closing.  HSL may
also be entitled  to an  additional  incentive  payment  based on the  financial
performance of the Centrus  business  during the one-year  period  following the
Closing.  The financial  performance targets were achieved during the first year
and $2,000 has been earned.  Of this amount,  $1,000 will be paid in each of May
2003 and May 2004. The additional incentive payment target was not achieved, and
thus there will be no pay out of this item.

     Simultaneously  with  the  consummation  of the  Acquisition,  the  Company
entered  into an  Employment  Agreement  and a Stock Option  Agreement  with the
former  president of Centrus,  pursuant to which he will serve as Executive Vice
President  of Managed  Care for the Company.  Additionally,  several  members of
Centrus'  management  team have joined the Company as  employees,  and have been
granted  stock  options to purchase  an  aggregate  of 300,000  shares of Common
Stock, under the Company's 1999 Stock Option Plan, as amended.

     On January 29, 2002,  the Company and certain of its  subsidiaries  entered
into a $40,000  secured  revolving  credit  facility (the  "Facility")  with HFG
Healthco-4 LLC, a specialty  finance  company.  In connection with the Facility,
the Company  and certain of its  subsidiaries  have  agreed to  transfer,  on an
on-going basis,  their accounts  receivable to Funding.  Funding  utilizes those
receivables as collateral to secure borrowings under the facility.  The Facility
has a three  year  term,  provides  for  borrowing  up to  $40,000 at the London
InterBank  Offered  Rate  (LIBOR)  plus  2.40%  (3.7% at March 31,  2003) and is
secured  by  receivables  and other  assets of the  Company  and  certain of its
subsidiaries. Borrowings of $28,700 under the Facility were used to finance part
of the purchase  price of the  Acquisition  and will also be used by the Company
and  certain  of its  subsidiaries  for  working  capital  purposes  and  future
acquisitions  in support of its business  plan.  The  outstanding  balance as of
March 31, 2003 was  approximately  $21,500,  which was all  classified  as short
term. The Facility  requires the Company to maintain certain financial and other
covenants. The Company was in compliance with all covenants at March 31, 2003.

     The  summarized  unaudited pro forma results of operations  set forth below
for the three and nine months  ended March 31, 2002 and 2003 assumes the Centrus
and Integrail acquisitions had occurred as of the beginning of these periods.
<TABLE>
<S>                                                                <C>    <C>    <C>    <C>    <C>    <C>

                                                                 Three Months Ended                Three Months Ended
                                                                   March 31, 2002                    March 31, 2003
                                                                   --------------                    --------------
     Revenues                                                $          168,679                 $           126,538
     Net income                                              $              122                 $             1,735
     Net income per common share:
       Basic                                                 $             0.02                 $              0.23
       Diluted                                               $             0.02                 $              0.22
     Pro forma weighted average number of
        common shares outstanding:
       Basic                                                          7,209,052                           7,610,907
       Diluted                                                        8,022,652                           8,066,582


                                                                  Nine Months Ended                Nine Months Ended
                                                                   March 31, 2002                    March 31, 2003
                                                                   --------------                    --------------
     Revenues                                                $         473,362                  $           425,088
     Net income                                              $             730                  $             3,151
     Net income per common share:
       Basic                                                 $            0.10                  $              0.42
       Diluted                                               $            0.09                  $              0.39
     Pro forma weighted average number of
        common shares outstanding:
       Basic                                                         7,178,539                            7,581,874
       Diluted                                                       7,749,738                            8,024,340
</TABLE>

     Pro forma adjusted net income per common share, including acquisitions, may
not be  indicative  of actual  results,  primarily  because  pro forma  earnings
include  historical  results of  operations  of the  acquired  entity and do not
reflect any cost  savings or  potential  sales  erosion that may result from the
Company's integration efforts. In particular,  Integrail experienced significant
losses,  which included the write-off of assets, prior to the acquisition by the
Company.


3. STOCK OPTIONS

     During the nine months ended March 31, 2003,  the Company  granted  308,373
stock  options and 132,712  stock  options were  cancelled  for a net of 175,661
stock options under the 1999 Stock Option Plan (the "Plan"). The options granted
during this period are  exercisable  at prices  ranging  from $7.19 to $9.98 and
terminate five to seven years from the grant date. The total number of shares of
common stock  reserved by the Company for  issuance  under the Plan is 2,850,000
plus an indeterminable number of shares of common stock issuable pursuant to the
anti-dilution  provisions of the Plan or upon the exercise of "reload  options."
There are no options  outstanding  that contain the "reload"  provision.  Shares
issuable  pursuant to options  granted under the Plan as of March 31, 2003 equal
1,903,012, net of 385,243 options exercised to date.

4. EARNINGS PER SHARE

A reconciliation of shares used in calculating basic and diluted earnings per
share follows:
<TABLE>
<S>                                                                              <C>    <C>    <C>    <C>    <C>    <C>

                                                                                 Three Months Ended March 31,
                                                                             -------------------------------------
                                                                                      2002                 2003
                                                                                      ----                 ----
   Basic                                                                           7,209,052          7,610,907
   Effect of assumed exercise of employee stock options                              771,933            455,675
   Contingently issuable shares related to an acquisition                             41,667                  -
                                                                                   ---------          ---------
   Diluted weighted average number of shares outstanding                           8,022,652          8,066,582
                                                                                   =========          =========


                                                                                 Nine Months Ended March 31,
                                                                             -------------------------------------
                                                                                      2002                 2003
                                                                                      ----                 ----
   Basic                                                                           7,178,539          7,581,874
   Effect of assumed exercise of employee stock options                              539,062            442,466
   Contingently issuable shares related to an acquisition                             32,137                  -
                                                                                  ----------          ---------
   Diluted weighted average number of shares outstanding                           7,749,738          8,024,340
                                                                                   =========          =========

</TABLE>

5. NON-GAAP FINANCIAL MEASURES

     The  Company  has  acquired  four  companies  in the last three  years.  In
addition, the Company has made in prior years significant information technology
infrastructure  investments  in  terms  of  purchased  hardware  and  internally
developed software.  Consequently, there is a significant amount of depreciation
and amortization that flows through the Company's  current financial  statements
related to these  investments.  Therefore,  the Company  believes  that Earnings
Before Interest,  Taxes,  Depreciation and Amortization (EBITDA) is an important
measure of its current financial  performance.  EBITDA is presented as operating
income excluding depreciation and amortization. While EBITDA is not a measure of
financial  performance under generally  accepted  accounting  principles,  it is
provided as  information  for certain  investors  for analysis  purposes for two
reasons:  1) it excludes the impact of depreciation and amortization  related to
prior investments and 2) these items are not controllable in the current period.
EBITDA is calculated as follows:

 <TABLE>
<S>                                                                         <C>    <C>    <C>    <C>    <C>    <C>
                                                                                Three Months Ended
                                                                                       March 31,
                                                                         --------------------------------------
                                                                         ------------------- ------------------
                                                                                    2002             2003
                                                                                    ----             ----
           Operating Income                                                     $  2,137         $  3,153
           Depreciation                                                              268              349
           Amortization                                                              585              777
                                                                                --------         --------
           EBITDA                                                               $  2,990         $  4,279
                                                                                ========         ========

<PAGE>

                                                                                   Nine Months Ended
                                                                                       March 31,
                                                                         --------------------------------------
                                                                         ------------------ -------------------
                                                                                  2002               2003
                                                                                  ----               ----
           Operating Income                                                    $  5,089         $   8,670
           Depreciation                                                             754             1,024
           Amortization                                                           1,527             2,234
                                                                               --------        ----------
           EBITDA                                                              $  7,370        $   11,928
                                                                               ========        ==========
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:
                                                                               June 30,         March 31,
                                                                                 2002              2003
                                                                                 ----              ----
           Claims Payable                                                $       74,195      $    69,335
           Rebates Payable to Sponsors                                           16,921           23,521
           Trade Payables                                                         6,693            2,312
           Other Payables                                                         2,716            3,084
                                                                                -------           ------
                                                                         $      100,525      $    98,252
                                                                                =======           ======

</TABLE>

7. RELATED PARTY TRANSACTIONS

     As of January 1, 2002,  the  Company  has  eliminated  the  majority of its
historical related party service  transactions with the exception being rent and
some  administrative  services as described  below.  For the periods  presented,
certain general,  administrative  and other expenses  reflected in the financial
statements  include  allocations of certain  corporate  expenses from affiliates
which take into consideration personnel,  estimates of the time spent to provide
services or other allocation  methodologies.  These allocations include services
and expenses for employee benefits  administration,  legal,  communications  and
other miscellaneous services.

     Management  believes the  foregoing  allocations  were made on a reasonable
basis.  Although these allocations do not necessarily  represent the costs which
would  have been or may be  incurred  by the  Company  on a  stand-alone  basis,
management believes that any variance in costs would not be material.

General and administrative expenses related to transactions with affiliates
included in the statement of income are:
<TABLE>
<S>                                                                     <C>    <C>    <C>    <C>    <C>    <C>

                                                                             Three Months Ended
                                                                                 March 31,
                                                                         ------------------------------
                                                                         ------------------------------
                                                                               2002            2003
                                                                               ----            ----
Software maintenance and related services                                   $   14           $   47
Management and consulting fees                                                  57               12
Administrative, accounting services and supplies                                72               49
Rent and utilities                                                             101              161
                                                                               ---              ---
                                                                           $   244          $   269
                                                                               ===              ===


                                                                             Nine Months Ended
                                                                                 March 31,
                                                                       -------------------------------
                                                                               2002            2003
                                                                               ----            ----
Software maintenance and related services                                   $   495         $    47
Management and consulting fees                                                  256              65
Administrative, accounting services and supplies                                502             158
Rent and utilities                                                              389             514
                                                                              -----             ---

                                                                            $ 1,642        $    784
                                                                              =====             ===

</TABLE>

     Due from  affiliates  includes a note from another  company  affiliated  by
common  ownership.  As of March 31, 2003,  the balance due from this  affiliate,
including accrued interest, was $3,742.6.  Such amount bore interest at 8.5% per
annum,  payable  quarterly.  The note was  collateralized by 1,022,758 shares of
$.001  par  value  common  stock of the  Company  registered  in the name of the
Company's Chairman of the Board and was secured by his personal  guarantee.  The
original note was replaced by a new non-recourse  promissory note dated July 31,
2000,  payable to the Company in the amount of $3,890.9.  The note is payable in
annual installments of $400, consisting of principal and interest at the rate of
8.5% per annum on each of the first and second anniversary dates, with the total
remaining  balance of  principal  and interest due and payable on July 31, 2003.
The note is  collateralized  by 1,000,000 shares of $.001 par value common stock
of the Company registered in the name of the Company's Chairman of the Board and
is secured by his personal guarantee.  The first two $400 payments due under the
note as of July 31, 2001 and 2002 were  satisfied by  offsetting an equal amount
owed by the Company to the Chairman of the Board.  Effective  July 31, 2001, the
interest  rate on the note was  changed to the prime rate in effect from time to
time (4.25% at March 31, 2003).

     On February 8, 2001, the President gave to the Company his Promissory  Note
in the amount of $34 as evidence of the loan by the Company to the President. On
April 12, 2002, the  Promissory  Note was amended and Company agreed to increase
the loan to $100.  The loan bears  interest at 8%, and is due on April 25, 2003.
The interest  rate was lowered  effective  July 1, 2002 to the rate at which the
Company  borrows  money  (3.7% at March 31,  2003).  The  President's  repayment
obligation  under the  Promissory  Note has been  absolved by the  Company.  The
Company will  set-off from the bonus to be paid to the  President as part of his
annual  compensation,  the  amount  that  was  otherwise  to be  payable  by the
President under the Promissory Note.

     In  connection  with  a  potential  bonus,  to  be  earned  pursuant  to an
employment  agreement  dated  September  30, 2002,  between the President of the
Company's mail order operations and the Company, the Company has loaned him $250
as an advance against the potential bonus. The loan is evidenced by a promissory
note  executed by the Mail Order  President  in favor of the  Company.  The loan
bears an interest rate of 9% and is due and payable on September 30, 2003 in the
event the bonus is not earned.

     The Company currently occupies  approximately  26,500 square feet of office
space at 26 Harbor  Park Drive,  Port  Washington,  New York 11050 (the  "Leased
Premises").  The Company subleases the Leased Premises from BFS Realty,  LLC, an
affiliate of the Chairman of the Board (the  "Affiliate").  The Affiliate leases
the  Leased  Premises  from the Nassau  County  Industrial  Development  Agency,
pursuant to a lease which was entered  into by the agency and the  Affiliate  in
July 1994,  and which  expires in March  2005.  The  Affiliate  has the right to
become the owner of the Leased  Premises  upon  expiration  of this  lease.  The
Affiliate  subleases  a portion  of the  Leased  Premises  to the  Company  (the
"Lease").  As of November 1, 2001,  the  Company and the  Affiliate  amended the
Lease.  The Lease provides that,  effective  August 1, 2001, the rent payable by
the Company  shall be an  aggregate  annual  rent of $308.  While  formerly  the
Company  made  estimated  monthly  real estate tax,  utilities  and  maintenance
expense payments to the Affiliate,  the Lease now provides that the Company will
pay its pro-rata share of such expenses directly to the entities to whom payment
must be made. The Company  estimates that such monthly expenses will approximate
an  aggregate  of $336 per year.  The annual  rent will  increase by 5% per year
during the term of the Lease. The annual expenses are also expected to increase,
although the Company  cannot  estimate by how much.  The Lease  expires in July,
2010.  The Company  believes  that the Leased  Premises are adequate for current
purposes.

8. MAJOR CUSTOMERS AND PHARMACIES

     For the  three  months  ended  March  31,  2002,  approximately  37% of the
consolidated  revenues of the Company were from two plan sponsors  administering
multiple plans. For the three months ended March 31, 2003  approximately  32% of
the   consolidated   revenues  of  the  Company   were  from  one  plan  sponsor
administering  multiple  plans.  For the  nine  months  ended  March  31,  2002,
approximately 22% of the consolidated revenues of the Company were from two plan
sponsors administering multiple plans. For the nine months ended March 31, 2003,
approximately 39% of revenues were from two plan sponsors administering multiple
plans.  Amounts due from these sponsors as of March 31, 2003  approximated  $7.3
million.

     For the three months ended March 31, 2002 and March 31, 2003, approximately
19% and 18%,  respectively,  of the cost of claims were from one pharmacy chain.
For the nine months ended March 31, 2002 and March 31, 2003,  approximately  20%
and 21%,  respectively,  of the cost of  claims  were from one  pharmacy  chain.
Amounts  payable to this  pharmacy  chain at March 31,  2003 were  approximately
$15.7 million.

9. RECENTLY ISSUED ACCOUNTING STANDARDS

     In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
Nos. 141 and 142,  Business  Combinations  and  Goodwill and Other  Intangibles,
respectively.  SFAS 141 requires all business combinations  initiated after June
30, 2001 to be accounted for using the purchase method. Under SFAS 142, goodwill
is no longer subject to  amortization  over its estimated  useful life.  Rather,
goodwill is subject to at least an annual  assessment for impairment by applying
a fair-value based test.  Additionally,  an acquired  intangible asset should be
separately recognized if the benefit of the intangible asset is obtained through
contractual  or other  legal  rights,  or if the  intangible  asset can be sold,
transferred,  licensed, rented or exchanged, regardless of the acquirer's intent
to do so.  The  Company  has  adopted  these  SFAS's  as of July 1, 2001 and has
performed  the  requisite  impairment  testing.  As of June 30, 2002 there is no
impairment to the goodwill recorded on the accompanying balance sheet.

     SFAS 142  requires  the  disclosure  of net income and  earnings  per share
computed on a pro forma basis by reversing the goodwill amortized in the periods
presented. Such pro forma disclosures are required in the period of adoption and
thereafter  until  all  periods  presented  reflect  goodwill  accounted  for in
accordance with SFAS 142. No pro forma is required as all periods presented have
now been accounted for in accordance with SFAS 142.

     In  October  2001,  the FASB  issued  SFAS  No..  144,  Accounting  for the
Impairment  or Disposal of  Long-Lived  Assets,  that is applicable to financial
statements  issued for fiscal years  beginning  after  December  15, 2001,  with
transition provisions for certain matters.  FASB's new rules on asset impairment
supersede SFAS No. 121,  Accounting for the Impairment of Long-Lived  Assets and
for Long-Lived  Assets to be Disposed of, and provide a single  accounting model
for  long-lived  assets  to be  disposed  of.  Although  retaining  many  of the
fundamental  recognition  and  measurement  provisions  of SFAS No. 121, the new
rules significantly change the criteria that would have to be met to classify an
asset as  held-for-sale.  The new rules  supersede the  provisions of Accounting
Principals  Board  Opinion No. 30 ("APB No. 30") with  regard to  reporting  the
effects of a disposal of a segment of a business,  and require  expected  future
operating  losses from  discontinued  operations to be displayed in discontinued
operations in the period in which the losses are incurred  rather than as of the
measurement  date  as  presently  required  by APB No.  30.  In  addition,  more
dispositions  will qualify for discontinued  operations  treatment in the income
statement.  The Company does not believe that the implementation of SFAS No. 144
will have any impact on its  financial  statements as of and for the year ending
June 30, 2003.

     On December 31, 2002, the Financial  Accounting Standards Board issued FASB
Statement No. 148,  Accounting  for  Stock-Based  Compensation  - Transition and
Disclosure.  Statement  148  amends  FASB  Statement  No.  123,  Accounting  for
Stock-Based  Compensation,  to provide  alternative methods of transition to the
fair value  method of  accounting  for  stock-based  employee  compensation.  In
addition,  Statement  148 amends the  disclosure  provisions of Statement 123 to
require  disclosure  in the summary of  significant  accounting  policies of the
effects of an entity's  accounting  policy with respect to stock-based  employee
compensation on reported net income and earnings per share in annual and interim
financial  statements.  Statement  148 does not amend  Statement  123 to require
companies to account for their employee  stock-based awards using the fair value
method.  However, the disclosure  provisions are required for all companies with
stock-based employee  compensation,  regardless of whether they utilize the fair
method of accounting  described in Statement  123 or the intrinsic  value method
described in APB Opinion No. 25,  Accounting for Stock Issued to Employees.  The
Company is required to comply  with the  requirements  of FASB No. 148 for their
quarter ended March 31, 2003 interim financial statements. See Note 10.

10. STOCK-BASED COMPENSATION

     The Company has adopted  Statement of Financial  Accounting  Standards  No.
123,  "Accounting for Stock Based Compensation"  ("SFAS 123"). The provisions of
SFAS 123 allow  companies to either expense the estimated value of stock options
or to  continue to follow the  intrinsic  value  method set forth in  Accounting
Principles  Bulletin  Opinion No. 25,  "Accounting for Stock Issued to Employee"
("APB 25"), but disclose the pro forma effects on net income (loss) had the fair
value of the options been expensed. The Company has elected to continue to apply
APB 25 in accounting for its employee stock option  incentive  plans.  Under APB
25, where the exercise price of the Company's  employee stock options equals the
market price of the underlying  stock on the date of grant,  no  compensation is
recognized.

     If compensation  expense for the Company's  stock-based  compensation plans
had been determined consistent with SFAS 123, the Company's net income per share
including pro forma results would have been the amounts indicated below:
<TABLE>
<S>                                                              <C>    <C>    <C>    <C>    <C>    <C>

                                                                         Three Months Ended March 31,
                                                                         ----------------------------
                                                                        2002                   2003
                                                                        ----                   ----
   Net Income:
     As reported                                                    $  1,103              $   1,735
     Total stock based employee compensation
     expense determined under fair value
     based method for all awards, net of related
     tax effects                                                        (195)                  (284)
                                                                        -----                 ------
       Pro forma                                                    $    908             $    1,451
</TABLE>

<PAGE>


           NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. AND SUBSIDIARIES

              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (All $ in thousands, except per share amounts)
                                   (Unaudited)

<TABLE>
<S>                                                                        <C>    <C>    <C>    <C>    <C>    <C>

  Net Income per share:
      As reported:
         Basic                                                $        0.15           $            0.23
         Diluted                                              $        0.14           $            0.22
     Pro forma:
         Basic                                                $        0.13           $            0.19
         Diluted                                              $        0.11           $            0.18


                                                                         Nine Months Ended March 31,
                                                                         ---------------------------
                                                                       2002                        2003
                                                                       ----                        ----
  Net Income:
    As reported                                                $      3,140           $           4,738
    Total stock based employee compensation
    expense determined under fair value
    based method for all awards, net of related
    tax effects                                                        (405)                       (853)
                                                                      ------                      ------
      Pro forma                                                $      2,735           $           3,885

  Net Income per share:
      As reported:
         Basic                                                 $       0.44           $            0.62
         Diluted                                               $       0.41           $            0.59
     Pro forma:
         Basic                                                 $       0.38           $            0.51
         Diluted                                               $       0.35           $            0.48

</TABLE>


11. SUPPLEMENTAL CASH FLOW INFORMATION

     During the nine months ended March 31, 2002 and March 31, 2003, the Company
paid  $541  and  $887 in  interest  and  $2,072  and  $2,611  in  income  taxes,
respectively.  In non-cash  transactions,  the Company  issued 62,500 shares and
41,668  shares of its common  stock,  each issue valued at $250,  as  additional
compensation  to the  shareholders  of PAI  in  August  2001  and  August  2002,
respectively.


12.      LITIGATION

See Item 1 of Part II of this Quarterly Report on Form 10-Q.

<PAGE>



       ITEM 2 -  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002

     Revenues decreased $19.1 million, or approximately 13%, from $145.7 million
for the three  months  ended  March 31,  2002,  to $126.6  million for the three
months ended March 31, 2003.  There were two factors which  primarily led to the
decrease in revenues:  1) two major  sponsors  terminated  their  contracts with
Health Card,  one effective  June 30, 2002 and one  effective  December 31, 2002
leading to a reduction in revenue of  approximately  $32  million,  and 2) there
were certain  contracts during the quarter ended March 31, 2003 that the Company
recognized  on a net revenue  basis versus no contracts  during the three months
ended March 31, 2002 that the Company  recognized  on a net revenue  basis.  The
impact of recognizing  these contracts on a net revenue basis was a reduction of
revenue of approximately  $26 million.  The specific terms of the contracts that
Health Card enters into with its sponsors  will  determine  whether  Health Card
recognizes the gross revenue  related to the cost of the  prescriptions  filled.
For those contracts that Health Card recognizes net revenue,  there is no impact
on  gross  profit  since  neither  the  revenue  nor the  related  costs  of the
prescriptions  is  recorded.  These  decreases  were  partially  offset by $26.7
million of revenues  related to new sponsors or new services  offered during the
three  months  ended  March 31,  2003.  In  addition,  there was an  increase of
approximately  $12  million  due  primarily  to  increased  revenues  from other
existing  sponsors  as a result of  several  factors  including  higher  charges
relating to  increased  cost of  pharmaceuticals,  new drugs,  plan  participant
growth and an increase in the average number of claims per plan participant.

     Cost of claims decreased $21.5 million,  or approximately  16%, from $136.2
million for the three  months ended March 31,  2002,  to $114.7  million for the
three months ended March 31, 2003. The primary reasons for the decrease were the
two factors described in the previous  paragraph,  namely, the loss of two major
sponsors and the  recognizing of certain  contracts on a net revenue basis. As a
percentage  of revenues,  cost of claims  decreased  from 93.5% to 90.7% for the
three months ended March 31, 2002 and March 31, 2003,  respectively.  These same
two factors  contributed to the declining costs as a percentage of revenue.  The
two major sponsors are managed care organizations.  Industry-wide,  managed care
clients have a greater cost of claims,  and  consequently  a lower gross margin,
than other types of business in the PBM  industry.  While not all of the revenue
associated  with  these two  sponsors  was  replaced  by new  business,  the new
business,  for the most part was not managed care, so  consequently  the cost of
claims on the new  business  was lower  than on the  business  it  replaced.  In
addition,  the contracts  recognized on a net revenue basis decrease the overall
Company costs as a percentage of revenue due to the cost not being recognized on
the contracts recorded on the net revenue basis.

     Gross profit  increased  from $9.4 million for the three months ended March
31, 2002 to $11.8  million for the three  months  ended March 31,  2003;  a $2.4
million,  or 25%,  increase.  For the reasons described above, the impact on the
Company of these two factors was to have lower  revenues year over year,  but to
have greater gross profits,  due to the fact that the cost of claims declined by
more than the revenue. Gross profit, as a percentage of revenue,  increased from
6.5% to 9.3% for the  three  months  ended  March 31,  2002 and March 31,  2003,
respectively.  This  increase  is net of the fact that the Company has seen some
decline in profit margins due to competitive pressures.

     Selling,  general,  and  administrative  expenses,  which  include  amounts
charged by affiliates,  increased $1.4 million,  or approximately 19%, from $7.3
million for the three  months ended March 31, 2002 to $8.7 million for the three
months  ended  March  31,  2003.  This  increase  is  primarily  related  to the
acquisition of Centrus on January 29, 2002.  Centrus  expenses were $1.1 million
greater in the three  months  ended March 31, 2003 as compared to the two months
after the Company  acquired  Centrus,  in the quarter  ended March 31, 2002.  In
addition,  selling,  general, and administrative  expenses also increased in the
quarter  ended  March 31,  2003 due to the  start-up  during the  quarter  ended
December 31, 2002 of two new activities.  The Company  acquired  Integrail as of
November 1, 2002 (See Note 2 of Item 1). Approximately $491,000 of expenses were
incurred   primarily  related  to  salary  and  benefits  and  depreciation  and
amortization during the quarter ended March 31, 2003. The other activity was the
start-up  of  the  build  out of a  mail  order  facility  in  Miramar  Florida.
Currently,  the Company out sources the actual fulfillment of prescriptions that
are ordered by mail.  By bringing  these  services in- house the Company will be
better able to control service and cost for its customers. For the quarter ended
March 31,  2003,  approximately  $116,000  of  expenses  were  incurred  on this
endeavor.  It is the  Company's  expectation  that the  facility  will be up and
running as of July 1, 2003.

     General  and  administrative   expenses  charged  by  affiliates  increased
approximately  $25,000, or 10%,  year-over-year  from approximately  $244,000 to
approximately  $269,000  for the three months ended March 31, 2002 and March 31,
2003,  respectively.  The  majority  of  the  increase  relates  to  contractual
escalations for real estate rented from affiliates.

     For the three months  ended March 31, 2002 and March 31, 2003,  the Company
recognized  other  expense,   net,  of  approximately   $298,000  and  $212,000,
respectively.  The components of the approximate $86,000 decrease in net expense
were an approximate  $121,000 decrease in interest expense,  partially offset by
an approximate  $35,000  decrease in interest  income.  The decrease in interest
expense is primarily due to the retirement in June 2002 of the convertible notes
put in place to partially  finance the  acquisition of Centrus and the fact that
interest  rates on the Company's  revolving  credit  facility have declined year
over year.

     Income before the provision for income taxes increased  approximately  $1.1
million,  or 60%, from approximately  $1.8 million,  for the quarter ended March
31, 2002,  to  approximately  $2.9 million for the quarter ended March 31, 2003.
The primary  factors  leading to the  increase  were the gross  profit  increase
described above and the reduction in interest expense.

     EBITDA  (earnings before interest,  taxes,  depreciation and  amortization)
increased by approximately  $1.3 million or 43%, from $3.0 million for the three
months ended March 31, 2002 to $4.3 million for the three months ended March 31,
2003. The primary factor for the increase was the approximate  $1.0 million,  or
48%,  increase in operating income  described  above. In addition,  there was an
approximate   $181,000  increase  in  depreciation  and  amortization,   and  an
approximate  $93,000 increase in other intangibles  amortization.  The effective
tax rate  increased from 40.0% for the quarter ended March 31, 2002 to 41.0% for
the quarter ended March 31, 2003.  The tax rate of 41%  represents the Company's
estimated tax rate for the full fiscal year.

     Net income for the  quarter  ended March 31,  2003 was  approximately  $1.7
million as compared to  approximately  $1.1 million for the quarter  ended March
31, 2002; a 57%  increase.  Earnings per diluted  share  increased by $0.08,  to
$0.22 for the quarter ended March 31, 2003.


Nine Months Ended March 31, 2003 Compared to Nine Months Ended March 31, 2002

     Revenues  increased  $111.0  million,  or  approximately  35%,  from $313.8
million for the nine months ended March 31, 2002, to $424.8 million for the nine
months  ended March 31, 2003.  Of the  increase,  $159.2  million was due to the
inclusion of revenues from  Centrus,  which was included in the revenues for the
nine months ended March 31,  2003,  but only two months in the nine months ended
March 31,  2002.  Another  $33.6  million of the  increase  was due to  revenues
related to new  sponsors or new  services  offered  during the nine months ended
March 31, 2003. These increases were partially offset by a $110 million decrease
related to two factors:  1) two major sponsors  terminated  their contracts with
Health Card,  one effective  June 30, 2002 and one  effective  December 31, 2002
leading to a reduction in revenue of  approximately  $55  million,  and 2) there
were  certain  contracts  during the nine  months  ended March 31, 2003 that the
Company  recognized on a net revenue  basis versus no contracts  during the nine
months ended March 31, 2002 that the Company  recognized on a net revenue basis.
The impact of recognizing these contracts on a net revenue basis was a reduction
of revenue of  approximately  $55 million.  The specific  terms of the contracts
that Health Card enters into with its sponsors  will  determine  whether  Health
Card  recognizes  the gross  revenue  related  to the cost of the  prescriptions
filled. For those contracts that Health Card recognizes net revenue, there is no
impact on gross  profit since  neither the revenue nor the related  costs of the
prescriptions  is  recorded.  The  majority of the balance of the  increase,  or
approximately  $28 million,  was due primarily to increased  revenues from other
existing  sponsors  as a result of  several  factors  including  higher  charges
relating to  increased  cost of  pharmaceuticals,  new drugs,  plan  participant
growth and an increase in the average number of claims per plan participant.

     Cost of claims increased $101.1 million,  or approximately 35%, from $289.4
million for the nine months ended March 31, 2002, to $390.5 million for the nine
months  ended  March 31,  2003.  Centrus  accounted  for  $155.1  million of the
increase. This increase was partially offset by the two factors described in the
previous  paragraph,  namely, the loss of two major sponsors and the recognizing
of certain  contracts on a net revenue basis. As a percentage of revenues,  cost
of claims decreased from 92.2% to 91.9% for the nine months ended March 31, 2002
and March 31,  2003,  respectively.  These same two factors  contributed  to the
declining  costs as a percentage of revenue.  The two major sponsors are managed
care organizations.  Industry-wide,  managed care clients have a greater cost of
claims,  and consequently a lower gross margin,  than other types of business in
the PBM  industry.  While  not all of the  revenue  associated  with  these  two
sponsors was replaced by new business,  the new business,  for the most part was
not managed  care,  so  consequently  the cost of claims on the new business was
lower than on the business it replaced. In addition, the contracts recognized on
a net revenue  basis  decrease  the overall  Company  costs as a  percentage  of
revenue due to the cost not being  recognized on the  contracts  recorded on the
net revenue basis.

     Gross profit  increased  from $24.4 million for the nine months ended March
31,  2002 to $34.3  million for the nine months  ended  March 31,  2003;  a $9.9
million,  or 41%, increase.  Centrus accounted for $4.1 million,  or 41%, of the
gross profit increase. Gross profit, as a percentage of revenue,  increased from
7.8% to 8.1% for the nine  months  ended  March 31,  2002 and  March  31,  2003,
respectively.  The contracts the Company  recognizes on a net revenue basis have
the effect of  improving  the gross  margin as a percent  of revenue  due to the
lower revenue base. The Company has also seen some decline in profit margins due
to competitive pressures.

     Selling,  general,  and  administrative  expenses,  which  include  amounts
charged by affiliates,  increased $6.4 million, or approximately 33%, from $19.3
million for the nine months  ended March 31, 2002 to $25.7  million for the nine
months  ended  March  31,  2003.  This  increase  is  primarily  related  to the
acquisition of Centrus.  While the expenses specifically related to Centrus were
$7.2 million  greater in the nine months ended March 31, 2003 as compared to the
two months since the  acquisition in the nine months ended March 31, 2002,  this
was partially  offset by reductions in other areas of the Company related to the
full  integration  of Centrus.  The Company  analyzed  every  department  in the
Company  and  made  decisions  concerning  the  most  efficient  way to  operate
regardless of location.  This evaluation has led to synergies across the Company
and has allowed the Company to maximize the utilization of its resources.  It is
anticipated that this kind of analysis and deployment of resources will continue
as the Company grows.

     Selling,  general,  and administrative  expenses also increased in the nine
months  ended March 31, 2003 due to the  start-up of two new  activities  in the
quarter ended December 31, 2002. The Company  acquired  Integrail as of November
1,  2002  (See  Note 2 of Item 1). In the  months  since  the  Company  acquired
Integrail, approximately $827,000 of expenses were incurred primarily related to
salary and benefits and  depreciation and  amortization.  The other activity was
the  start-up  of the build out of a mail order  facility  in  Miramar  Florida.
Currently,  the Company out sources the actual fulfillment of prescriptions that
are ordered by mail.  By bringing  these  services  in-house the Company will be
better able to control  service and cost for its customers.  For the nine months
ended March 31, 2003,  approximately  $228,000 of expenses were incurred on this
endeavor.  It is the  Company's  expectation  that the  facility  will be up and
running by July 1, 2003.

     In addition,  there were three one-time  expenses that the Company incurred
in the nine months  ended  March 31,  2003.  These  included;  1)  approximately
$400,000 of expenses incurred related to two acquisitions  which the company did
not complete,  2)  approximately  $127,000 related to a settlement of a New York
State sales tax audit,  and 3) the payment of $100,000  related to a  terminated
consulting agreement.

     General  and  administrative   expenses  charged  by  affiliates  decreased
approximately $858,000, or 52%, year-over-year from approximately  $1,642,000 to
approximately  $784,000  for the nine months  ended March 31, 2002 and March 31,
2003,  respectively.  The  majority  of the  decrease  related  to the hiring of
employees  which allowed the Company to bring  in-house  certain  services which
historically had been obtained from related parties.

     Selling,  general,  and  administrative  expenses  as a percent  of revenue
improved from 6.2% for the nine months ended March 31, 2002 to 6.0% for the nine
months ended March 31, 2003. This improvement stems from the continued growth of
the Company due to improving efficiencies with scale.

     For the nine  months  ended March 31,  2002,  the  Company  incurred  other
expense,  net, of  approximately  $45,000.  For the nine months  ended March 31,
2003, the Company incurred other expense,  net, of approximately  $639,000.  The
components  of the  approximate  $594,000  increase  in  net  expense,  were  an
approximate  $400,000 increase in interest expense,  and an approximate $246,000
decrease in interest  income,  and an approximate  $52,000 increase in amortized
gain on assets  sold  during the fiscal  year ended June 30,  2002.  The primary
reasons for the net increase in expense were the  interest  expense  incurred on
the Company's  revolving  credit facility and convertible  notes during the nine
months ended March 31, 2003 to finance the  acquisition of Centrus and Integrail
(see Note 2 of Item 1), and the reduction in interest  income since all balances
go towards paying off the revolving  credit facility.  Partially  offsetting the
increase in interest  expense was an  approximate  $52,000  increase in deferred
gain on the sale of assets related to a sale/leaseback  transaction,  which gain
of  approximately  $459,000  was  recorded  as  deferred  revenue  and is  being
recognized over the life of the lease, which is thirty-six (36) months.

     Income before the provision for income taxes increased  approximately  $3.0
million,  or 59%, from  approximately  $5.0  million,  for the nine months ended
March 31, 2002,  to  approximately  $8.0 million for the nine months ended March
31, 2003.  The primary  reason for the increase was the  improving  efficiencies
that come with  scale  arising  from the  integration  of the  acquisitions  the
Company has completed. As mentioned previously, the acquisition of Integrail and
the start-up of the mail order facility had the impact of reducing profitability
in the nine months ended March 31, 2003.

     EBITDA  increased by  approximately  $4.6 million or 62%, from $7.4 million
for the nine months  ended  March 31, 2002 to $11.9  million for the nine months
ended March 31, 2003.  The primary  factor for the increase was the  approximate
$3.6 million, or 70%, increase in operating income described above. In addition,
there was an approximate $586,000 increase in depreciation and amortization, and
an approximate $391,000 increase in other intangibles amortization.

     The effective tax rate increased from 37.7% for the nine months ended March
31, 2002 to 41.0% for the nine months ended March 31, 2003.  The tax rate of 41%
represents the Company's estimated tax rate for the full fiscal year.

     Net income for the nine months ended March 31, 2003 was approximately  $4.7
million as  compared to  approximately  $3.1  million for the nine months  ended
March 31, 2002; a 51% increase.  Earnings per diluted share  increased by $0.19,
to $0.59 for the nine months ended March 31, 2003.

Liquidity and Capital Resources

     The Company's  primary cash  requirements are for capital  expenditures and
operating  expenses,  including cost of  pharmaceuticals,  software and hardware
upgrades and the funding of accounts receivable.  The Company also requires cash
for  potential  acquisitions  of other PBM  companies or of companies  providing
related  services.  As of March 31,  2003,  the  Company  had a working  capital
deficit  of $33.6  million as  compared  to a working  capital  deficit of $42.7
million as of June 30, 2002. The primary  reason for the  improvement in working
capital was the  profitability  generated by the Company  during the nine months
ended March 31, 2003. In addition,  there was a $3.7 million reclassification of
a long-term  loan  receivable to short term since it is now due within one year,
(See  Note 7 -  Related  Party  Transactions  of Item 1).  The  Company  has now
acquired four companies  since July 2000 utilizing  primarily cash. This has had
the effect of increasing the Company's working capital deficits until sufficient
profitability is generated to pay back the cost of the acquisitions

     Net cash  provided by operating  activities  was $12.5 million for the nine
months ended March 31, 2002. Net cash provided by operating  activities was $7.4
million for the nine months ended March 31, 2003. The acquisition of Centrus had
a significant  impact on the cash  provided by operating  activities in the nine
months  ended March 31, 2002,  as accounts  payable  increased by $43.0  million
while  receivables  increased by $34.6 million,  providing $8.4 million of cash.
For the nine months ended March 31,  2003,  accounts  payable  decreased by $1.6
million while receivables decreased by $1.8 million generating only $0.2 million
of cash.

     Historically,  the timing of the Company's accounts receivable and accounts
payable has generally been a net source of cash from operating activities.  This
is the result of the terms of trade in place with plan sponsors on the one hand,
and the Company's pharmacy network on the other hand. These terms generally lead
to the  Company's  payments to  participating  pharmacies  being slower than its
corresponding  collections  from plan sponsors.  The Company  believes that this
situation is not unusual in the pharmacy benefit management industry and expects
to operate on similar terms for the foreseeable future. However, there can be no
assurance that such terms of trade will continue in the future and, if they were
to change  materially,  the Company could  require  additional  working  capital
financing. Furthermore, if such terms of trade were to change materially, and/or
if the Company were unable to obtain additional working capital financing, there
could  be a  material  adverse  effect  on  the  Company's  business,  financial
condition, or results of operations.

     Net cash used in investing  activities was $3.8 million for the nine months
ended March 31,  2003,  as compared to $41.0  million for the nine months  ended
March 31, 2002. The primary  differences in the two periods were the acquisition
of  Centrus  for $40  million  in the  period  ended  March  31,  2002,  and the
acquisition  of Integrail in the nine months ended March 31, 2003.  The net cash
outlay  for  Integrail  was  $1,472,425,  representing  the  initial  payment of
$1,400,000  plus  $72,425  of  related  expenses.  No cash  was  assumed  in the
acquisition.

     During the nine months  ended March 31, 2003 the Company  borrowed a net of
approximately $7.7 million under its revolving credit facility. These funds were
primarily  utilized to repay the  principal  balance of the  Convertible  Notes,
which had been put in place to  acquire  Centrus,  which  has had the  effect of
significantly reducing the interest expense that the Company incurs.

     The  Company  has entered  into  various  capital  lease  transactions  for
hardware and  software.  The Company has also  assumed  various  capital  leases
through its  acquisitions.  The  principal  balance of all capital  leases as of
March 31, 2003 was approximately $923,000.

     The Company has entered into various real estate operating leases with both
related and unrelated  parties.  The Company has entered into various  operating
leases with  unrelated  third  parties for office  equipment.  These leases have
different  payment terms and expiration  dates.  The Company also entered into a
sale-leaseback  operating  lease of certain fixed assets  (principally  computer
hardware and externally  developed  software) with an affiliate of the Company's
Vice Chairman.  See Note 9 to the Consolidated  Financial Statements  comprising
Item 8 of Form 10 -K, as amended, for the year ended June 30, 2002 for a further
description of these various leases.

     On January 29,  2002,  the  Company  entered  into a $40 million  revolving
credit  facility (the  "Facility"),  details of which are set forth in Note 2 to
the  financial  statements  in Part 1.  Borrowings  of $28.7  million  under the
Facility  were  used to  finance  part of the  purchase  price of the  Company's
acquisition of Centrus.  The Facility  contains  various  covenants that,  among
other things,  require the Company to maintain certain  financial  ratios. As of
May 5, 2003 approximately $25.0 million was outstanding under the Facility,  and
the Company was in compliance with its financial ratios covenants.

     The total future payments under these  contractual  obligations as of March
31, 2003, is as follows:

Contractual Obligations                     Payments Due by Period
                                                ($ in thousands)
<TABLE>
<S>                                                                       <C>    <C>    <C>    <C>    <C>    <C>

                                          Total           Less than         1-3 Years          4-5            After
                                                           1 Year                             Years          5 Years
                                        -----------     --------------      ----------      ----------      ----------
                                        -----------     --------------      ----------      ----------      ----------
Long Term Debt                       $      21,532      $      21,531    $          1    $          -      $        -
Capital Lease Obligations                      923                466             457               -               -
Operating Leases                            10,914              2,189           4,355             963           3,407
Sale-leaseback                               1,227                635             592               -               -
                                        -----------     --------------      ----------      ----------      ----------
                                        -----------     --------------      ----------      ----------      ----------
   Total Contractual Cash            $      34,596      $      24,821    $      5,405    $        963      $    3,407
        Obligations

</TABLE>

     PAI  stockholders  were  eligible to receive up to $2,000,000 in additional
consideration  payable  in  combination  of cash and  common  stock  if  certain
financial  targets of PAI were met for the fiscal  years ended June 30, 2001 and
2002.  These  targets have been  achieved and the $2 million has been earned and
paid. At the end of August 2001, $750,000 in cash was paid, and 62,500 shares of
the  Company's  Common  Stock  valued at $4.00 per share were  issued to the PAI
stockholders.

     At the end of August 2002,  $750,000 in cash was paid, and 41,668 shares of
the  Company's  Common  Stock  valued at $6.00 per share were  issued to the PAI
stockholders.

     The members of PMP are eligible to receive  additional  consideration of up
to  $1,000,000  if certain PMP clients are  retained  over the first three years
after acquisition. These targets were not met in the first year so no additional
consideration  was due and payable.  It is the Company's  expectation that these
amounts  will  not be  earned  in the  second  and  third  years  either  as the
identified  clients were not  generally  retained  directly,  although they were
replaced.

     The   shareholders   of  Centrus  are   eligible   to  receive   additional
consideration  of up  to  $4,000,000,  payable  over  three  years,  if  certain
financial  targets are met over the first two years.  The financial  performance
targets were achieved  during the first year and $2 million has been earned.  Of
this amount, $1 million will be paid in each of May 2003 and May 2004.

     The Sellers of Integrail  are eligible to receive from monies put in escrow
up to $700,000 if certain  operational  milestones  are achieved  over the first
twelve months.

     In  February  1998,   the  Company   entered  into  an  agreement  with  an
unaffiliated party for computer software products and professional services. The
agreement  required the Company to pay an initial  license fee. In addition,  if
certain  milestones are met based on the number of processed  claims, as defined
in the agreement, the initial license fee increases in specified increments.  To
date, four such  milestones  have been met,  resulting in a 100% increase in the
license fee. The  agreement  also  provides for the annual  payment of a fee for
maintenance  and updating  services equal to 18% of the initial  license fee, as
defined.   It  is  anticipated,   based  on  internal  growth  and  the  Centrus
acquisition,  that the last milestone will be met. If the remaining milestone is
reached, the cash outlay by the Company would be $100,000.

     The  Company  anticipates  that  current  cash  positions,  after  its four
acquisitions  and the  repayment  of certain  affiliate  and  shareholder  debt,
together  with  anticipated  cash flow from  operations,  will be  sufficient to
satisfy the Company's  contemplated  cash  requirements  for at least 24 months.
This is based  upon  current  levels of  capital  expenditures  and  anticipated
operating  results for the next 24 months.  However,  it is one of the Company's
stated  goals  to  acquire  other  pharmacy  benefit  management  companies  and
companies providing related services,  evidenced by the four acquired since July
2000. This will require cash and depending on the Company's evaluation of future
acquisitions,  additional  cash may be  required.  In  addition,  the Company is
building a mail order  facility in Florida  which will require cash to build out
the facility and acquire inventory. In the event that the Company's plans change
or its  assumptions  prove to be  inaccurate,  or the proceeds from the Facility
prove to be insufficient to fund operations and acquisitions,  the Company could
be required to seek additional  financing sooner than anticipated.  There can be
no  assurance  that  such  financing  could  be  obtained  at  rates or on terms
acceptable to the Company, if at all.

Other Matters

Inflation

     Management  does not  believe  that  inflation  has had a material  adverse
impact on Health Card's net income.


Critical Accounting Policies and Estimates

General

     Health  Card's  discussion  and  analysis of its  financial  condition  and
results  of  operations  are based upon  Health  Card's  unaudited  consolidated
financial  statements,  which have been prepared in accordance  with  accounting
principles  generally  accepted in the United States.  The  preparation of these
financial  statements  requires Health Card to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses; these
estimates and judgments also effect related disclosures of contingent assets and
liabilities.  On an on-going  basis,  Health Card  evaluates  its  estimates and
judgments,  including those related to revenue recognition, bad debt, intangible
assets, income taxes, and financing operations.  Health Card bases its estimates
on  experience  and  on  various  other  assumptions  that  are  believed  to be
reasonable  under the  circumstances,  the  results  of which form the basis for
making  judgments about the carrying  values of assets and liabilities  that are
not readily  apparent from other  sources.  Actual results may differ from these
estimates under different assumptions or conditions.

     The Company believes that of its significant  accounting policies (See Note
1 to the Consolidated  Financial  Statements  comprising Item 8 of Form 10-K, as
amended,  for the year ended June 30, 2002),  the following may involve a higher
degree of judgment and complexity than others:

Revenue Recognition

     (a) The Company has historically entered into two types of arrangements for
the payment of  administrative  fees:  fee for service  (per claim  charges) and
capitation  (per  member  per  month   charges).   Under  the  fee  for  service
arrangement, the Company is paid by its sponsors for the Company's contractually
agreed upon rates based upon actual claims adjudicated, plus a fixed transaction
fee.  Under  the  capitation  arrangement,  the fee is  based on the  number  of
participants per month;  the Company pays for the cost of  prescriptions  filled
and thus shares the risk of  operating  profit or loss with these  plans.  Since
January 1, 2000,  all  services  have been  provided on a fee for service  basis
only.

     Revenue under the fee for service arrangement is recognized when the claims
are adjudicated.  Included as revenue are the Company's  administrative fees and
charges  relating  to  pharmaceuticals  dispensed  by the  Company's  network of
pharmacies.  Revenues are reduced by the amount of rebates paid to the Company's
sponsors.

     (b) The specific  terms of the contracts  that Health Card enters into with
its sponsors will  determine  whether  Health Card  recognizes the gross revenue
related to the cost of the  prescriptions  filled. In certain limited cases, the
Company has not  recognized  the gross revenue or cost related to  prescriptions
filled for a specific sponsor.  This has no impact on the Company's gross profit
since neither the revenue nor the related cost of the prescriptions is recorded.

     (c)  Rebates  are  recognized  when  the  Company  is  entitled  to them in
accordance with the terms of its  arrangements  with drug  manufacturers,  third
party rebate administrators, and sponsors, and when the amount of the rebates is
determinable.   The  Company  records  the  gross  rebate   receivable  and  the
appropriate  payable to the sponsors  based on  estimates,  which are subject to
final  settlement.  The  estimates  are based upon the claims  submitted and the
Company's rebate experience,  and are adjusted as additional information becomes
available.

Bad Debt

     Health Card maintains allowances for doubtful accounts for estimated losses
resulting from the liability of its sponsors to make required  payments.  If the
financial condition of Health Card's sponsors were to deteriorate,  resulting in
an impairment of their ability to make  payments,  additional  allowances may be
required.

Goodwill and Intangible Asset Impairment

     In  assessing  the  recoverability  of the  Company's  goodwill  and  other
intangibles,  the Company must make assumptions  regarding estimated future cash
flows and other factors to determine the fair value of the respective assets. If
these estimates or their related  assumptions  change in the future, the Company
may be required to record  impairment  charges for these  assets not  previously
recorded.  On July 1, 2001 the Company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible  Assets," and will be required
to analyze its goodwill for impairment issues on a periodic basis thereafter. To
date, the Company has not recorded any impairment losses related to goodwill and
other intangible assets.

Deferred Taxes

     Health  Card  periodically  considers  whether  or not it  should  record a
valuation allowance to reduce its deferred tax assets to the amount that is more
likely than not to be realized.  While Health Card has considered future taxable
income  and  ongoing  tax  planning  strategies  in  assessing  the need for the
valuation allowance, in the event Health Card were to determine that it would be
able to  realize  its  deferred  tax  assets in the  future in excess of its net
recorded  amount,  an adjustment to the deferred tax asset would increase income
in the  period  such  determination  was  made.  Likewise,  should  Health  Card
determine  that it would not be able to realize all or part of its net  deferred
tax asset in the  future,  an  adjustment  to the  deferred  tax asset  would be
charged to income in the period such determination was made.

Capitalized Software

     The costs of  software  developed  for  internal  use  incurred  during the
preliminary project stage are expensed as incurred. Direct costs incurred during
the application  development  stage are  capitalized.  Costs incurred during the
post-implementation/operation   stage  are  expensed  as  incurred.  Capitalized
software  development  costs are amortized on a  straight-line  basis over their
estimated useful lives,  commencing on the date the software is placed into use,
primarily three years.


ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 4 - CONTROLS AND PROCEDURES

     Disclosure controls and procedures are the controls and procedures designed
to ensure  that  information  that the  Company is  required  to disclose in its
reports under the Exchange Act is recorded,  processed,  summarized and reported
within the time periods required. They include, without limitation, controls and
procedures  designed to ensure that  information is accumulated and communicated
to our  management  in  order  to  allow  timely  decisions  regarding  required
disclosure.

     Under the supervision and with the participation of management, chiefly our
principal  executive officer and our principal  financial  officer,  Health Card
evaluated  the  effectiveness  of the design  and  operation  of its  disclosure
controls  and  procedures  within 90 days of the filing  date of this  quarterly
report.  Based on that  evaluation,  our  principal  executive  officer  and our
principal  financial  officer have  concluded that these controls and procedures
are effective.  There have been no significant changes in our internal controls,
or in other factors that could significantly  affect these controls,  subsequent
to the date of the evaluation.



<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

     An action was  commenced  against  the Company on April 30, 2002 by Midwest
Health Plans Inc.  ("MHP") in the United States  District  Court for the Eastern
District of  Michigan.  The  complaint  alleges,  among other  things,  that the
parties entered into a contract dated July 1999 (the  "Agreement"),  and further
alleges  that  the  Company  has  overcharged  MHP  for  the  administration  of
prescription  benefit  services in  contravention to the terms of the Agreement.
MHP is seeking $3 million  dollars in damages.  The Company  filed an answer and
counterclaim on June 12, 2002. In the counterclaim,  the Company claimed damages
in excess of $2.8  million  based on MHP's  failure to pay under a contract.  In
late June 2002,  MHP agreed to make two payments in the amount of $1.34  million
and $1.36  million to partially  settle the Company's  claims  against MHP. As a
part of that payment, MHP dropped one of its two claims against the Company that
had sought to setoff or recoup alleged  overcharges by the Company.  The Company
continues  to have  counterclaims  totaling  over  $500,000  against MHP for its
failure  to pay the  amounts  it had  agreed  to pay  Health  Card for goods and
services.  MHP has informed  the Company that its expert is reviewing  its claim
and that the amount of such claim may be modified.


ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS

     For  information  concerning  the Company's 1999 Stock Option Plan, and the
options currently issued and outstanding thereunder, see Note 3 to the Financial
Statements comprising Item 1 of Part I of this Form 10-Q.

     Pursuant to the terms of the PAI Agreement, in August 2001 and August 2002,
the Company issued 62,500 and 41,668 shares respectively, of unregistered Common
Stock of the Company to the PAI stockholders as additional consideration.  These
issuances  were  valued at $250,000  each.  The Company was advised in each case
that the  issuance  of such  shares  was  exempt  from  registration  under  the
Securities Act by virtue of Section 4(2) thereof.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.


ITEM 5 - OTHER INFORMATION

None.


 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits
<TABLE>
<S>                                                      <C>    <C>    <C>    <C>    <C>    <C>

Exhibit
Number       Description of Exhibit


3.1          Certificate of Incorporation of Health Card (7)
3.4          By-Laws of Health Card (7)
4.1          Form of Specimen Common Stock Certificate (9)
4.2          Form of Warrant Agreement, including form of Representatives' Warrants (1)
10.1         Mail Service Provider Agreement, dated July 1, 1996, between Health Card and
              Thrift Drug, Inc. d/b/a Express Pharmacy Services (1)
10.2         Amendment to Mail Service Provider Agreement, dated January 1, 1997, between
              Health Card and Thrift Drug, Inc. d/b/a Express Pharmacy Services (1)
10.3         Software License Agreement and Professional Service Agreement, dated
              February 18, 1998, between Health Card and Prospective Health, Inc. (1)
10.4         1999 Stock Option Plan (1)
10.5         Employee Covenant Agreement, dated June 15, 1998, between Health Card and
              Mary Casale (1)
10.6         Employee Covenant Agreement, dated June 16, 1998, between Health Card and
              Ken Hammond (1)
10.7         Stock Option Agreement, dated August 3, 1999, between Health Card and
              Ken Hammond (4)
10.8         Employment Agreement, dated March 27, 2000, between Health Card and
              David Gershen (4)
10.9         Stock Option Agreement, dated May 1, 2000, between Health Card and
              David Gershen (4)
10.10        Employment Agreement, dated May 3, 2000, between Health Card
              and James Bigl (4)
10.11        Stock Option Agreement, dated June 12, 2000, between Health Card
              and James Bigl (4)
10.12        Stock Option Agreement, dated August 3, 1999, between Health Card and
              Kenneth J. Daley (4)
10.13        Stock Option Agreement, dated August 3, 1999, between Health Card and
              Gerald Angowitz (4)
10.14        Assignment, dated November 1, 1996, from Sandata, Inc., to BFS Realty, LLC (1)
10.15        Lease, dated August 10, 1998, between 61 Manorhaven Boulevard, LLC and
              Health Card (1)
10.16        Letter, dated June 3, 1999, from Bert Brodsky to Health Card (1)
10.17        Letter, dated June 3, 1999, from Gerald Shapiro to Health Card (1)
10.18        Agreement of Guaranty, dated June 1, 1998, by Bert E. Brodsky in favor of
              Health Card (1)
10.19        Promissory Note, dated July 31, 2000, made payable by P.W. Capital, LLC to the order of
              Health Card, in the amount of $3,890,940 (4)
10.20        Letter, dated  June 8, 1999, from P.W. Capital Corp. to Health Card (1)
10.21        Letter, dated June 9, 1999, from Bert E. Brodsky to Health Card (1)
10.22        Letter, dated June 8, 1999, from the Bert E. Brodsky Revocable Trust to Health Card (1)
10.23        Letter Agreement, dated June 30, 1999, between the Bert E. Brodsky Revocable Trust
              and Health Card (1)
10.24        Employment Agreement, dated July 1, 1999, between Health Card and Bert E. Brodsky (1)
10.25        Letter, dated June 8, 1999, from Bert E. Brodsky to Health Card (1)
10.26        Form of Lock-Up Agreement (1)
10.27        Acquisition and Merger Agreement, dated as of June 27, 2000, between Health Card
              and Pharmacy Associates, Inc. (3)
10.28        Lease Agreement, dated March 4, 1996, between Pharmacy Associates, Inc. and
              Executive Park Partnership (4)
10.29        Amendment to Lease, dated November 2, 1998, between Pharmacy Associates, Inc. and
              Executive Park Partnership (4)
10.30        Amendment to Lease, dated November 19, 1998, between Pharmacy Associates, Inc.
              and Executive Park Partnership (4)
10.31        Lease Agreement, dated July 8, 1999, between Pharmacy Associates, Inc. and
              Executive Park Partnership (4)
10.32        Asset Purchase Agreement dated as of March 5, 2001 among National Medical Health
              Card Systems, Inc., PMP Acquisition Corp., Provider Medical Pharmaceutical, LLC and
              members of PMP (3)
10.33        Employment Agreement, dated June 4, 2001, between National Medical Health Card
              Systems, Inc. and Tery Baskin (6)
10.34        Stock Option Agreement, dated June 4, 2001, between National Medical Health
              Card Systems, Inc.  and Terry Baskin (6)
10.35        Stock Option Agreement, dated June 12, 2001, between National Medical Health Card
              Systems, Inc. and James Bigl (6)
10.36        Asset Purchase Agreement dated January 29, 2002 by and among the Company, Health
              Solutions Limited ("HSL"), HSL Acquisition Corp., a wholly-owned subsidiary of the
              Company, and the security holders of HSL (8)
10.37        Receivables Purchase and Transfer Agreement dated January 29, 2002 by and among the
              Company and certain of its subsidiaries and NMHC Funding, LLC (8)
10.38        Loan and Security Agreement dated January 29, 2002, by and between NMHC Funding,
              LLC and HFC Healthco-4, LLC, an affiliate of Healthcare Finance Group, Inc. (8)
10.39        Lease Agreement dated as of August 1, 2001, between National Medical Health Card
              Systems, Inc. and BFS Realty, LLC (6)
10.40        Amended Lease Agreement dated as of August 1, 2001, between National Medical Health
              Card   Systems, Inc. and BFS Realty, LLC
10.41        2003 Employee Stock Purchase Plan (11)
10.42        Asset Purchase Agreement dated as of November 1, 2002, by and between the Company,
              Integrail Acquisition Corp., Health Solutions, Ltd., and certain security holders of Health
              Solutions, Ltd.
10.43        Assignment Agreement dated as of November 1, 2002, by and between the Company,
              Integrail Acquisition Corp., and Health Solutions, Ltd.
23.1         Consent of Ernst & Young LLP to the incorporation by reference in the Registration
             Statement on Form S-8 (File No. 333-8224) of  its report dated September 30, 2002 (10)
23.2         Consent of Goldstein Golub Kessler LLP to the incorporation by reference in the Registration
              Statement on Form S-8 (File No. 333-82224) of its report dated August 31, 2001 (10)
23.3          Consent of BDO Seidman LLP to the incorporation by reference in the Registration Statement on
              Form S-8 (File No. 333-82224) of its report dated September 19, 2000 (10)
99.1          Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act
99.2          Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act

            --------------------

(1)         Denotes document filed as an Exhibit to Health Card's Registration Statement on Form S-1
            (Registration Number:333-72209) and incorporated herein by reference.
(2)         Denotes  documentation filed as an Exhibit to Health Card's Report on Form 10-K for the fiscal
                     year ended June 30, 1999.
(3)         Denotes  document filed as an Exhibit to Health Card's Form 8-K for an event dated July 20, 2000
                     and incorporated herein by reference.
(4)         Denotes documentation filed as an Exhibit to Health Card's Report on Form 10-K for the year
                    ended June 30, 2000.
(5)         Denotes document filed as an Exhibit to Health Card's Form 8-K for an event dated March 5, 2001.
(6)         Denotes documentfiled as an Exhibit to Health Card's Report on Form 10-K for the year ended
                    June 30, 2001.
(7)         Denotes document filed as an Exhibit to Health Card's Definitive Proxy Statement on Schedule
                    14-A filed on December 21, 2001 and incorporated herein by reference.
(8)         Denotes  document  filed as an Exhibit to Health  Card's  Report on Form 8-K for events dated
                    January 29, 2002 and incorporated herein by reference.
(9)         Denotes document filed as an Exhibit to Health Card's Amendment No. 1 on Form 8-K/A filed
                    with the Securities and Exchange Commission on May 21, 2002 and incorporated herein
                    by reference.
(10)        Denotes document filed as an Exhibit to Health Card's Form 10-K for the fiscal year ended June
                    30, 2002.
(11)        Denotes document filed as an Exhibit to Health Card's Definitive Proxy Statement on Schedule
                    14-A on October 25, 2002, and incorporated herein by reference.
     (b) Reports on Form 8-K
         None

</TABLE>


<PAGE>

                                   SIGNATURES

     Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, as
amended,  the  Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.



                   NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
                                  (Registrant)



Date:    May 14, 2003               By:     /s/ James J. Bigl
                                        ---------------------------------------
                                                James J. Bigl,
                                                Chief Executive Officer




                                     By:      /s/David J. Gershen
                                        ---------------------------------------
                                                 David J. Gershen,
                                                 Chief Financial Officer
                                                   and Treasurer



<PAGE>
                                                                    EXHIBIT 99.1

                                  CERTIFICATION

I, James J. Bigl, Chief Executive Officer, certify that:

         1.       I have reviewed this quarterly report on Form 10-Q of National
                  Medical Health Card Systems, Inc. and its Subsidiaries;

         2.       Based on my knowledge, this quarterly report does not contain
                  any untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  quarterly report; and

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this quarterly report,
                  fairly present in all material respects the financial
                  condition, results of operations and cash flows of registrant
                  as of, and for, the periods presented in this quarterly
                  report.

         4.       The registrant's other certifying officers and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the registrant, and we have:

                  a) designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this quarterly report is being prepared;

                  b) evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this quarterly report (the "Evaluation
                  Date"); and

                  c) presented in this quarterly report our conclusions about
                  the effectiveness of the disclosure controls and procedures
                  based on our evaluation as of the Evaluation Date;

         5.       The registrant's other certifying officers and I have
                  disclosed, based on our most recent evaluation, to the
                  registrant's auditors and the audit committee of the
                  registrant's board of directors (or persons performing the
                  equivalent function):

                  a) all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data, and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

                  b) any fraud, whether or not material, that involves
                  management or other employees who have a significant role in
                  the registrant's internal controls; and

         6.       The registrant's other certifying officers and I have
                  indicated in this quarterly report whether or not there were
                  significant changes in internal controls or in other factors
                  that could significantly affect internal controls subsequent
                  to the date of our most recent evaluation, including any
                  corrective actions with regard to significant deficiencies and
                  material weaknesses.

          Date: May 14, 2003                    /s/ James J. Bigl
                                               --------------------------------
                                                    James J. Bigl,
                                                    Chief Executive Officer



<PAGE>


                               CERTIFICATION

I, David Gershen, Chief Financial Officer, certify that:

         1.       I have reviewed this quarterly report on Form 10-Q of National
                  Medical Health Card Systems, Inc. and its Subsidiaries;

         2.       Based on my knowledge, this quarterly report does not contain
                  any untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  quarterly report; and

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this quarterly report,
                  fairly present in all material respects the financial
                  condition, results of operations and cash flows of registrant
                  as of, and for, the periods presented in this quarterly
                  report.

         4.       The registrant's other certifying officers and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the registrant, and we have:

                  a) designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this quarterly report is being prepared;

                  b) evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this quarterly report (the "Evaluation
                  Date"); and

                  c) presented in this quarterly report our conclusions about
                  the effectiveness of the disclosure controls and procedures
                  based on our evaluation as of the Evaluation Date;

         5.       The registrant's other certifying officers and I have
                  disclosed, based on our most recent evaluation, to the
                  registrant's auditors and the audit committee of the
                  registrant's board of directors (or persons performing the
                  equivalent function):

                  a) all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data, and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

                  b) any fraud, whether or not material, that involves
                  management or other employees who have a significant role in
                  the registrant's internal controls; and

         6.       The registrant's other certifying officers and I have
                  indicated in this quarterly report whether or not there were
                  significant changes in internal controls or in other factors
                  that could significantly affect internal controls subsequent
                  to the date of our most recent evaluation, including any
                  corrective actions with regard to significant deficiencies and
                  material weaknesses.


         Date:  May 14, 2003                         /s/ David Gershen
                                                       ----------------------
                                                         David Gershen
                                                         Chief Financial Officer

<PAGE>


                                                                    EXHIBIT 99.1
                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


     In connection  with the Quarterly  Report of National  Medical  Health Card
Systems,  Inc. (the "Company") on Form 10-Q for the period ending March 31, 2003
as filed with the  Securities  and Exchange  Commission  on the date hereof (the
"Report"),  I, James J. Bigl, Chief Executive  Officer of the Company,  certify,
pursuant  to 18  U.S.C.  ss.  1350,  as  adopted  pursuant  to  ss.  906  of the
Sarbanes-Oxley Act of 2002, that:

          (1) The Report fully complies with the  requirements  of section 13(a)
     or 15(d) of the Securities Exchange Act of 1934; and

          (2) The information  contained in the Report fairly  presents,  in all
     material respects,  the financial condition and result of operations of the
     Company.

/s/ James J. Bigl

James J. Bigl
Chief Executive Officer
May 14, 2003

<PAGE>

                                                                    EXHIBIT 99.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


     In connection  with the Quarterly  Report of National  Medical  Health Card
Systems, Inc. (the "Company") on Form 10-Q for the period ending March 31, 2003,
as filed with the  Securities  and Exchange  Commission  on the date hereof (the
"Report"),  I, David Gershen,  Chief Financial Officer of the Company,  certify,
pursuant  to 18  U.S.C.  ss.  1350,  as  adopted  pursuant  to  ss.  906  of the
Sarbanes-Oxley  Act of  2002,  that:

          (1) The Report fully complies with the  requirements  of section 13(a)
     or 15(d) of the Securities Exchange Act of 1934; and

          (2) The information  contained in the Report fairly  presents,  in all
     material respects,  the financial condition and result of operations of the
     Company.

/s/ David Gershen

David Gershen
Chief Financial Officer
May 14, 2003