UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 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: May 31, 2005 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: 0-11411

                                   QMed, Inc.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                              22-2468665
-------------------------------                              -------------------
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

25 Christopher Way, Eatontown, New Jersey                          07724
-----------------------------------------                        ----------
  (Address of principal executive offices)                       (Zip Code)

                                 (732) 544-5544
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

                                       N/A
               --------------------------------------------------
               Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report


Indicate by check mark 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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]

The number of shares of the registrant's common stock outstanding on June 29,
2005: 16,672,126.

<PAGE>

                           QMED, INC. AND SUBSIDIARIES
                                    FORM 10-Q

                       For the Quarter Ended May 31, 2005

                                      INDEX

                                                                           Page
Part I. Financial Information

        Item 1.  Financial Statements

                 Condensed Consolidated Balance Sheets as of May 31,
                 2005 and November 30, 2004................................. 1

                 Condensed Consolidated Statements of Operations for
                 the Three and Six Months Ended May 31, 2005 and 2004....... 2

                 Condensed Consolidated Statements of Comprehensive
                 Income for the Three and Six Months Ended May 31,
                 2005 and 2004.............................................. 3

                 Condensed Consolidated Statements of Stockholders'
                 Equity for the Six Months Ended May 31, 2005............... 4

                 Condensed Consolidated Statements of Cash Flows for
                 the Six Months Ended May 31, 2005 and 2004................. 5

                 Notes to Financial Statements.............................. 6

        Item 2.  Management's Discussion and Analysis of Financial
                 Condition and Results of Operations........................12

        Item 3.  Quantitative and Qualitative Disclosures About Market Risk.16

        Item 4.  Controls and Procedures....................................16

Part II Other Information

        Item 1.  Legal Proceedings..........................................18

        Item 6.  Exhibits...................................................18

Signature ..................................................................19

Certifications .............................................................20

<PAGE>
<TABLE>
<CAPTION>
Part I.
Item 1. Financial Statements

                                           QMED, INC. AND SUBSIDIARIES
                                      CONDENSED CONSOLIDATED BALANCE SHEETS


                                                                                                    November 30,
                                                                               May 31, 2005             2004
                                                                             ---------------      ---------------
ASSETS                                                                          (unaudited)
Current assets
<S>                                                                          <C>                  <C>
Cash and cash equivalents                                                    $     2,985,872      $     3,292,571
Investments                                                                       18,935,230            2,097,362
Accounts receivable, net of allowances of  $71,312
  and $52,690, respectively                                                        3,326,323            2,750,507
Inventory, net of reserve                                                             41,693               38,355
Prepaid expenses and other current assets                                            349,939              440,620
                                                                             ---------------      ---------------
                                                                                  25,639,057            8,619,415

Property and equipment, net of accumulated depreciation                            1,110,149            1,180,050
Product software development costs, net                                              924,091              858,022
Non-current accounts receivable                                                      199,254                    -
Other assets                                                                         644,881              132,136
Investment in joint ventures                                                          45,458               47,854
                                                                             ---------------      ---------------
                                                                             $    28,562,890      $    10,837,477
                                                                             ===============      ===============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses                                        $     1,367,127      $       817,234
Leases payable, current portion                                                      135,683              119,757
Accrued salaries and commissions                                                     518,042              416,382
Fees reimbursable to health plans                                                     23,640              161,178
Contract billings in excess of revenues                                            2,124,825            1,245,862
Deferred warranty revenue                                                             22,026               23,652
Income taxes payable                                                                       -               16,000
                                                                             ---------------      ---------------
                                                                                   4,191,343            2,800,065

Leases payable - long term                                                           155,374              146,742
                                                                             ---------------      ---------------
                                                                                   4,346,717            2,946,807

Commitments and Contingencies
Stockholders' equity
  Common stock $.001 par value; 40,000,000 shares authorized;
    16,673,626 and 15,150,054 shares issued and 16,651,626 and
    15,128,054 outstanding, respectively                                              16,674               15,150
Paid-in capital                                                                   50,547,188           35,961,800
Accumulated deficit                                                              (26,258,223)         (28,004,017)
Accumulated other comprehensive income
  Unrealized loss on securities available for sale                                   (13,841)              (6,638)
                                                                             ---------------      ---------------
                                                                                  24,291,798            7,966,295

Less treasury stock at cost, 22,000 common shares                                    (75,625)             (75,625)
                                                                             ---------------      ---------------
Total stockholders' equity                                                        24,216,173            7,890,670
                                                                             ---------------      ---------------
                                                                             $    28,562,890      $    10,837,477
                                                                             ===============      ===============

                   See Accompanying Notes to Condensed Consolidated Financial Statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                   QMED, INC. AND SUBSIDIARIES
                                         CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                           (Unaudited)


                                                   For the Three      For the Three       For the Six       For the Six
                                                   Months Ended       Months Ended       Months Ended       Months Ended
                                                   May 31, 2005       May 31, 2004       May 31, 2005       May 31, 2004
                                                  --------------     --------------     --------------    --------------
<S>                                               <C>                <C>                <C>               <C>
Revenue
   Disease management services                    $    5,417,825     $    3,667,570     $   10,124,892    $    7,406,791
   Medical equipment                                      45,072             57,311             93,491           110,910
                                                  --------------     --------------     --------------    --------------
                                                       5,462,897          3,724,881         10,218,383         7,517,701
                                                  --------------     --------------     --------------    --------------

Cost of revenue
   Disease management services                         1,810,278          2,649,454          3,593,852         4,613,439
   Medical equipment                                      40,243             41,491             78,155            78,704
                                                  --------------     --------------     --------------    --------------
                                                       1,850,521          2,690,945          3,672,007         4,692,143
                                                  --------------     --------------     --------------    --------------

Gross profit                                           3,612,376          1,033,936          6,546,376         2,825,558
                                                  --------------     --------------     --------------    --------------

Selling, general and
  administrative expenses                              2,092,306          2,104,908          3,791,098         3,851,063

Research and development expenses                        308,826            243,871            576,852           498,290
                                                  --------------     --------------     --------------    --------------

Income (loss) from operations                          1,211,244         (1,314,843)         2,178,426        (1,523,795)

Interest expense                                          (7,083)            (9,026)           (14,085)          (15,724)
Interest income                                           80,122             25,350            121,282            48,883
Loss in operations of joint ventures                    (386,393)          (129,750)          (457,278)         (204,750)
Other income                                               1,101                  -              2,849             8,703
                                                  --------------     --------------     --------------    --------------
Income (loss) before income tax Provision                898,991         (1,428,269)         1,831,194        (1,686,683)

Provision for state income taxes                         (28,000)            (4,000)           (85,400)           (8,000)
                                                  --------------     --------------     --------------    --------------

Net income (loss)                                 $      870,991     $   (1,432,269)    $    1,745,794    $   (1,694,683)
                                                  ==============     ==============     ==============    ==============

Basic earnings (loss) per share
   Weighted average shares outstanding                16,578,310         14,737,312         16,212,014        14,695,582
                                                  --------------     --------------     --------------    --------------
   Basic earnings (loss) per share                $          .05     $         (.10)    $          .11    $         (.12)
                                                  ==============     ==============     ==============    ==============


Diluted earnings income (loss) per share
  Weighted average shares outstanding                 18,454,850         14,737,312         18,291,267        14,695,582
                                                  --------------     --------------     --------------    --------------
  Diluted earnings (loss) per share               $          .05     $         (.10)    $          .10    $         (.12)
                                                  ==============     ==============     ==============    ==============



                           See Accompanying Notes to Condensed Consolidated Financial Statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                           QMED, INC. AND SUBSIDIARIES
                            CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                                   (Unaudited)




                                                   For the Three      For the Three       For the Six       For the Six
                                                   Months Ended       Months Ended       Months Ended       Months Ended
                                                   May 31, 2005       May 31, 2004       May 31, 2005       May 31, 2004
                                                  --------------     --------------     --------------    --------------
<S>                                               <C>                <C>                <C>               <C>
Net income (loss)                                 $      870,991     $   (1,432,269)    $    1,745,794    $   (1,694,683)

Other comprehensive income
   Unrealized loss on securities
   available for sale                                    (13,399)            (7,674)           (13,787)           (3,908)

Less:  reclassification adjustment for
  (gains) losses included in net income (loss)             6,584             (2,672)             6,584            (3,081)
                                                  --------------     --------------     --------------    --------------

Comprehensive income (loss)                       $      864,176     $   (1,442,615)    $    1,738,591    $   (1,701,672)
                                                  ==============     ==============     ==============    ==============


                           See Accompanying Notes to Condensed Consolidated Financial Statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                   QMED, INC. AND SUBSIDIARIES
                                    CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                              For the Six Months Ended May 31, 2005
                                                           (Unaudited)

                                                                                                   Common Stock
                                                                                  Accumulated         Held in
                                   Common Stock                                      Other            Treasury
                               --------------------     Paid-in     Accumulated  Comprehensive   --------------------
                                 Shares     Amount      Capital       Deficit        Income       Shares     Amount      Total
                               ----------  --------  ------------  -------------   ----------     ------   ----------  -----------
<S>                            <C>         <C>       <C>           <C>             <C>            <C>      <C>         <C>
Balance - November 30, 2004    15,150,054  $ 15,150  $ 35,961,800  $ (28,004,017)  $   (6,638)    22,000   $ (75,625)  $ 7,890,670

Exercise of stock options and
  warrants                        136,607       137       428,672                                                          428,809

Issuance in connection with
  Directors Equity Plan               701         1         8,002                                                            8,003

Amortization of non-employee
  stock options                                            31,250                                                           31,250

Issuance of common stock and
  investment rights through
  private placement for cash
  (net of expense)              1,349,839     1,350    13,817,500                                                       13,818,850

Issuance of common stock in
  connection with acquisition      36,425        36       299,964                                                          300,000

Net income for the six months
  ended May 31, 2005                                                   1,745,794                                         1,745,794

Change in unrealized holding
  losses on securities
  available for sale                                                                   (7,203)                              (7,203)
                               ----------  --------  ------------  -------------   ----------     ------   ----------  -----------
Balance - May 31, 2005         16,673,626  $ 16,674  $ 50,547,188  $ (26,258,223)  $  (13,841)    22,000   $  (75,625) $24,216,173
                               ==========  ========  ============  =============   ==========     ======   ==========  ===========


                                     See Accompanying Notes to Condensed Consolidated Financial Statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                           QMED, INC. AND SUBSIDIARIES
                                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                   (Unaudited)


                                                                            For the Six Months    For the Six Months
                                                                            Ended May 31, 2005    Ended May 31, 2004
                                                                            ------------------    ------------------
<S>                                                                           <C>                   <C>
Cash flows from operating activities:
     Net income (loss)                                                        $    1,745,794        $   (1,694,683)

Adjustments to reconcile net income (loss) to net cash used
  by operating activities:
     (Gain) loss on sale of investments                                                6,584                (3,081)
     Loss in operations of joint ventures                                            457,278               204,750
     Depreciation and amortization                                                   276,996               230,488
     Provision for loss on accounts receivable                                        18,800                     -
     Stock compensation expense                                                        8,003                     -
     Amortization of non-employee stock options                                       31,250                26,017
     Amortization of bond discounts and premiums                                     (16,625)               82,248
     (Increase) decrease in
          Accounts receivable                                                       (793,870)               (4,106)
          Inventory                                                                  (3,338)                 9,371
          Prepaid expenses and other current assets                                   90,681               147,797
     Increase (decrease) in
          Accounts payable and accrued liabilities                                   321,263             1,169,752
          Contract billings in excess of revenues and deferred revenue               877,337              (802,651)
     Other, net                                                                      (46,695)               14,354
                                                                              --------------        --------------
     Total adjustments                                                             1,227,664             1,074,939
                                                                              --------------        --------------
     Net cash provided by (used in) operating activities                           2,973,458              (619,744)
                                                                              --------------        --------------

Cash flows from investing activities:
     Proceeds from sale of securities available for sale                           4,626,012             5,424,648
     Purchases of securities available for sale                                  (21,461,042)           (5,055,038)
     Capital expenditures                                                           (162,143)             (345,521)
     Cash paid for acquisition                                                      (200,000)                    -
     Investment in joint venture                                                    (262,130)             (336,145)
                                                                              --------------        --------------
     Net cash used in investing activities                                       (17,459,303)             (312,056)
                                                                              --------------        --------------

Cash flows from financing activities:
     Payments for capital leases                                                     (68,513)              (55,662)
     Proceeds from issuance of common stock and investment rights                 13,818,850                     -
     Proceeds from issuance of common stock                                          428,809               392,712
                                                                              --------------        --------------
     Net cash provided by financing activities                                    14,179,146               337,050
                                                                              --------------        --------------

Net decrease in cash and cash equivalents                                           (306,699)             (594,750)
Cash and cash equivalents at beginning of period                                   3,292,571             1,638,271
                                                                              --------------        --------------

Cash and cash equivalents at end of period                                    $    2,985,872        $    1,043,521
                                                                              ==============        ==============


Supplemental disclosure of cash flow information:
  Cash paid during the period for:
     Interest                                                                 $       14,085        $       15,724
     Income taxes                                                                    113,965                 8,300

Non-cash investing activities:
  Issuance of  36,425 shares of common stock in connection
    with acquisition                                                          $      300,000        $            -


                     See Accompanying Notes to Condensed Consolidated Financial Statements

</TABLE>
<PAGE>

                           QMED, INC. AND SUBSIDIARIES
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note 1 - Interim Financial Reporting

The accompanying unaudited condensed consolidated financial statements of QMed,
Inc. and its subsidiaries (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, these financial statements do not include all of the information
and footnotes required by generally accepted accounting principles. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and six month periods ended May 31, 2005 are not
necessarily indicative of the results that may be expected for the year ending
November 30, 2005. These condensed consolidated financials statements include
the accounts of QMed, Inc., its wholly owned subsidiaries, Interactive Heart
Management Corp. ("IHMC"), QMEDCare, Inc. and Health E Monitoring Inc., and
QMed, Inc.'s majority owned (83%) inactive subsidiary HeartMap, Inc. These
condensed consolidated financial statements should be read in conjunction with
the financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended November 30, 2004.

Note 2 - Revenue Recognition- Disease Management

The Company enters into contractual arrangements with health plans to provide
disease management services. Fees under the Company's health plan contracts are
generally determined by multiplying a contractually negotiated rate per health
plan member per month ("PMPM") by the number of health plan members covered by
the Company's services during the month. The PMPM rates usually differ between
contracts due to the various types of health plan product groups (e.g. PPO, HMO,
Medicare Advantage). These contracts are generally for terms of one to three
years with provisions for subsequent renewal, and typically provide that all or
a portion of the Company's fees may be "performance-based". Performance-based
contracts have varying degrees of risk associated with the Company's ability to
deliver the guaranteed financial cost savings. In most cases, the Company
guarantees a percentage reduction of disease costs compared to a prior baseline
year determined by actuarial analysis and other estimates used as a basis to
measure performance objectives. The measurement of the Company's performance
against the base year information is a data intensive and time-consuming process
that is typically not completed until six to eight months after the end of the
contract year. The Company bills its customers each month for the entire amount
of the fees contractually due based on previous months membership, which always
includes the amount, if any that may be subject to refund for member
retroactivity and a shortfall in performance. The Company adjusts or defers
revenue for contracts where it believes performance is short of contractual
obligations, possibly resulting in a refund of fees or where fees generated may
be subject to further retroactive adjustment associated with a contract or
plan's decision to completely terminate its coverage in a geographic market as
well as general membership changes. For example, general terminations can be due
to death, member change of health plan, etc. Adjustments for shortfalls in
performance targets under the terms of the contract or other factors affecting
revenue recognition are accrued on an estimated basis in the period the services
are provided and are adjusted in future periods when final settlement is
determined. The Company reviews these estimates periodically and makes
adjustments, as interim information is available.

The Company determines its level of performance at interim periods based on
medical claims data, achievement of enrollment targets or other data supplied by
the health plan. In the event these interim performance measures indicate that
performance targets are not being met or sufficient data is unavailable, fees
subject to refund are not recorded as revenues but rather are recorded as a
current liability entitled "contract billings in excess of revenues." Under
performance based arrangements, the ability to make estimates at interim periods
can be challenging due to the inherent nature of the medical claims process and
the claims lag time associated with it. In most cases, paid claims data is not
available until up to six months after claims are incurred. Although interim
data measurement is indicative of performance objectives, actual results could
differ from those estimates. As of May 31, 2005, based on information and data
available, the Company has deferred approximately $2,125,000 of revenue, which
may be subject to refund. This deferral has been reflected as contract billings
in excess of revenues on the balance sheet.

The majority of contract billings in excess of revenues on the balance sheet are
subject to reconciliation at future periods. If future reconciliations provide
positive results, revenue will be recorded at that time. The Company believes
these estimates adequately provide for any potential adjustments that may be
applied to revenues from these contracts. During the three and six months ended
May 31, 2005, approximately 66% and 65% of disease management services,
respectively, were derived from three customers that each comprised more than
10% of the Company's revenues.

<PAGE>

                           QMED, INC. AND SUBSIDIARIES
   NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Note 3 - Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of deferral, contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Note 4 - Investments in Securities

Investment in securities available-for-sale as of May 31, 2005 were as follows:

                                                          Market    Unrealized
                                           Cost           Value     Gain (Loss)
                                         -----------   -----------  ----------

Corporate debt securities                $13,135,090   $13,133,441  $   (1,649)
Certificate of deposits                      100,000        99,873        (127)
U.S. Government short term obligations     5,713,981     5,701,916     (12,065)
                                         -----------   -----------  ----------
                                         $18,949,071   $18,935,230  $  (13,841)
                                         ===========   ===========  ==========

Note 5 - Accounts Receivable

Accounts receivable primarily represent fees that are contractually due in the
ordinary course of providing a service, net of contractual adjustments.

Note 6 - Inventory

Inventories, consisting of finished units and raw materials, are stated at the
lower of cost (determined on a moving weighted average method) or market.
Inventories consist of the following:

                                              May 31, 2005     November 30,
                                              (Unaudited)          2004
                                              -----------      -----------
        Raw materials (component parts)       $   118,368      $   120,533
        Finished units                             24,753           19,250
                                              -----------      -----------
             Total inventory                  $   143,121      $   139,783
        Reserve for slow moving inventory     $   101,428      $   101,428
                                              -----------      -----------
        Net inventory                         $    41,693      $    38,355
                                              ===========      ===========

Note 7 - Product Software Development Costs

During the three and six months ended May 31, 2005, the Company capitalized
approximately $105,000 and $146,000, respectively, in product software
development costs. These costs are being amortized over a five-year useful life.

During the three months ended May 31, 2005 and 2004 amortization expense related
to product software development costs were approximately $43,000 and $29,000,
respectively. During the six months ended May 31, 2005 and 2004 amortization
expense related to product software development costs were approximately $79,000
and $59,000, respectively.

<PAGE>

                           QMED, INC. AND SUBSIDIARIES
   NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 8 - Investment in Joint Ventures

The Company has a 50% interest in HeartMasters, L.L.C. ("HM"). The management
agreement provides for profits and losses to be allocated based on the Company's
50% interest. As of May 31, 2005, the Company has recorded losses to date of
approximately $1,441,000 bringing the investment in the joint venture to zero.
This joint venture is not a variable interest entity and therefore is not
required to be consolidated under the provisions of FIN 46.

The Company has a 33.33% interest in Healthsuite Partners, LLC ("HSP"). The
management agreement provides for profits and losses to be allocated based on
the Company's 33.33% interest. As of May 31, 2005, the Company has recorded
losses to date of approximately $118,000 bringing its investment in this joint
venture to approximately $45,000. This joint venture is not a variable interest
entity and therefore is not required to be consolidated under the provisions of
FIN 46. Included in accounts receivable as of May 31, 2005 is approximately
$917,000 due from this joint venture.

Note 9 - Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses include the following:

                                                  May 31, 2005      November 30,
                                                  (Unaudited)          2004
                                                 --------------    -------------

        Account payable trade                     $    456,574     $    278,319
        Insurance premiums payable                      32,465           71,720
        Professional fees payable                      398,540          209,503
        Other accrued expenses - none in
          excess of 5% of current liabilities          479,548          257,692
                                                  ------------     ------------
                                                  $  1,367,127     $    817,234
                                                  ============     ============

Note 10 - Fees Reimbursable to Health Plans

Health plans utilizing the disease management program of the Company pay
participating physicians fees for their services related to use of the program.
Such fees are additional costs to the health plan, which in some cases are
deducted from fees paid to the Company. As of May 31, 2005 and November 30, 2004
there were $23,640 and $161,178 outstanding under these provisions,
respectively.

Note 11 - Business Segment Information

The Company presents segment information in accordance with SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information", which
established reporting and disclosure standards for an enterprise's operating
segments. Operating segments are defined as components of an enterprise for
which separate financial information is available and regularly reviewed by the
Company's senior management.

The Company segments are organized into two business units, disease-management
services and medical equipment sales, which are considered reportable segments.
The segments are managed separately and the Company evaluates performance on
operating profits of the respective segments. The Company supports both segments
with shared human resources, clinical, marketing and information technology
resources. The accounting policies of the operating segments are the same as
those described in the summary of significant accounting policies in Note 1.
Income (loss) before income taxes by operating segment excludes interest income,
interest expense and general corporate expenses.

<PAGE>

                           QMED, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Note 11 - Business Segment Information - (continued)

Summarized financial information by operating segment for three and six months
ended May 31, 2005 and 2004, is as follows:

                                                  Three Months Ended May 31,
                                             ---------------------------------
                                                  2005                2004
                                             -------------       -------------
        Revenue
           Disease management services       $   5,417,825       $   3,667,570
           Medical equipment sales                  45,072              57,311
                                             -------------       -------------
                                             $   5,462,897       $   3,724,881
                                             =============       =============

        Income (loss) before income taxes:
           Disease management services       $   1,603,559       $    (622,223)
           Medical equipment sales                   4,829              15,820
                                             -------------       -------------
        Total segments                           1,608,388            (606,403)
        General corporate expenses - net          (709,397)           (821,866)
                                             -------------       -------------
                                             $     898,991       $  (1,428,269)
                                             =============       =============


                                                   Six Months Ended May 31,
                                             ---------------------------------
                                                  2005                2004
                                             -------------       -------------
        Revenue
           Disease management services       $  10,124,892       $   7,406,791
           Medical equipment sales                  93,491             110,910
                                             -------------       -------------
                                             $  10,218,383       $   7,517,701
                                             =============       =============
        Income (loss) before income taxes:
           Disease management services       $   3,148,701       $    (409,756)
           Medical equipment sales                  15,336              32,235
                                             -------------       -------------
        Total segments                           3,164,037            (377,521)
        General corporate expenses - net        (1,332,843)         (1,309,162)
                                             -------------       -------------
                                             $   1,831,194       $  (1,686,683)
                                             =============       =============

Note 12 - Stock-Based Compensation

The Company accounts for its stock options issued to employees and outside
directors pursuant to Accounting Principles Board Opinion ("APB") No. 25,
"Accounting for Stock Issued to Employees" and has adopted the disclosure
requirements of SFAS No. 123, "Accounting for Stock-Based Compensation", and
SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure - an Amendment of FASB Statement No. 123". Accordingly, no
compensation expense has been recognized in connection with the issuance of
stock options.

<PAGE>

                           QMED, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Note 12 - Stock-Based Compensation - (continued)

The following table illustrates the effect on net income and earnings per share
if the Company had applied the fair value recognition provisions of SFAS No. 123
to stock-based employee compensation.
<TABLE>
<CAPTION>
                                           Three Months Ended                             Six Months Ended
                                ------------------------------------------    ------------------------------------------
                                   May 31, 2005           May 31, 2004           May 31, 2005           May 31, 2004
                                -------------------    -------------------    -------------------    -------------------
                                    (unaudited)             (unaudited)           (unaudited)             (unaudited)
    <S>                           <C>                   <C>                    <C>                   <C>
    Net income (loss), as
      reported                    $       870,991       $    (1,432,269)       $      1,745,794      $    (1,694,683)

    Deduct: Total stock-based
      employee compensation
      expense determined under
      fair value based method
      for all awards, net of
      related tax
      effects                             318,546               297,403                 524,432              568,789
                                  ---------------       ---------------        ----------------      ---------------

    Pro forma net income
      (loss)                      $       552,445       $    (1,729,672)       $      1,221,362      $    (2,263,472)
                                  ===============       ===============        ================      ===============

    Weighted average common
      shares outstanding               16,578,310            14,737,312              16,212,014           14,695,582

    Dilutive effect of stock
      options and warrants              1,876,540                     -               2,079,253                    -
                                  ---------------       ---------------        ----------------      ---------------

    Diluted shares outstanding         18,454,850            14,737,312              18,291,267           14,695,582
                                  ===============       ===============        ================      ===============

    Income (loss) per share:

    Basic, as reported            $           .05       $          (.10)       $            .11      $          (.12)
                                  ===============       ===============        ================      ===============

    Diluted, as reported          $           .05       $          (.12)       $            .10      $          (.15)
                                  ===============       ===============        ================      ===============

    Basic, pro forma              $           .03       $          (.10)       $            .08      $          (.12)
                                  ===============       ===============        ================      ===============

    Diluted, pro forma            $           .03       $          (.12)       $            .07      $          (.15)
                                  ===============       ===============        ================      ===============
</TABLE>


Potentially dilutive options and warrants to purchase 2,136,496 and 2,245,755
shares of the common stock were outstanding for the three and six months ending
May 31, 2004, respectively, but were not included in the computation of diluted
loss per share because the effect of their inclusion would have been
anti-dilutive. Additionally, options to purchase 7,344 and 19,686 shares of
common stock were outstanding as of May 31, 2005 and 2004, respectively, but
were also not included in the computation of diluted earnings (loss) per share
for the three months ended May 31, 2005 and 2004 and options to purchase 99,009
shares of common stock were outstanding as of May 31, 2005 but were also not
included in the computation of diluted earnings per share for the six months
ended May 31, 2005 because the options exercise price was greater than the
average market price of the common shares.

<PAGE>

                           QMED, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Note 12 - Stock-Based Compensation - (continued)

The Company accounts for stock issued to non-employees in accordance with the
provisions of SFAS 123 and the Emerging Issues Task Force ("EITF") Issue No.
96-18, "Accounting for Equity Instruments that are Issued to other than
Employees for Acquiring, or in Conjunction with Selling Goods or Services."
Under SFAS 123, the cost is measured at the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is more
reliably measured.

Note 13 - Line of Credit

In September 2001, the Company entered into a loan agreement with First Union
National Bank for a $1 million line of credit. The annual interest rate is the
lower of the bank's reference rate minus 1% or the LIBOR Market Index Rate plus
1.5%. The line is collateralized by securities owned by the Company and expires
on September 1, 2005. Borrowings under this line of credit were $-0- at May 31,
2005 and November 30, 2004.

Note 14 - Stockholders' Equity

Private Placement Equity Transactions
-------------------------------------
On December 6, 2004, the Company issued to institutional investors 571,428
shares of the Company's common stock, together with additional investment rights
to acquire up to an additional 142,856 shares of common stock at a price of $11
per share, for $6,000,000. The fair value of these investment rights was
estimated at $207,000 and was included in additional paid-in capital. These
investment rights were exercised on February 14, 2005 for $1,572,000.

On February 14, 2005, the Company issued to institutional investors 635,555
shares of the Company's common stock, together with additional investment rights
to acquire up to an additional 158,888 shares of common stock at a price of
$11.75 per share, for $7,150,000. The fair value of these investment rights was
estimated at $174,000 and was included in additional paid-in capital. These
investment rights expired on June 1, 2005, thirty days after the registration
statement was declared effective by the US Securities and Exchange Commission.

Note 15 - Acquisition

In April 2005 the Company acquired all of the outstanding common stock of Health
E Monitoring, Inc. ("HEM"). HEM has developed a comprehensive weight management
program. The aggregate purchase price was $500,000, which consisted of $200,000
in cash and $300,000 of common stock. In addition, transaction costs were
approximately $30,000. As additional consideration under the purchase agreement,
the company would be obligated to release an additional 60,709 shares of common
stock upon certain targets being achieved in fiscal 2006. Pursuant to FAS No.
141 the direct costs to acquire HEM have been allocated to the assets acquired
based upon an independent appraisal and the contingent consideration will be
recorded if and when it becomes due and payable. The following table summarizes
the estimated fair value of the assets acquired:

                                                          May 31, 2005
                                                       ---------------

          Covenant not to compete                      $       483,363
          Acquired technology                                   46,307
                                                       ---------------
          Total purchase price                         $       529,670
                                                       ===============

The costs of both the covenant not to compete and the acquired technology are
being amortized over their useful life of 5 years. During the three months ended
May 31, 2005 amortization expense related to the covenant not to compete and
developed technology were approximately $13,000.

<PAGE>

                           QMED, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Note 16 - Commitments and Contingencies

Litigation
----------
On June 15, 2004, the Company entered into an agreement to settle its dispute
with The Regence Group, including all issues surrounding HeartMasters LLC's
arbitration. The settlement agreement provides QMed, Inc. and IHMC with releases
from any and all claims related to Regence and the Regence contract in exchange
for a financial guarantee of certain payments due from HeartMasters LLC to
Regence. The amount of the financial guarantee can range between $0 and
$2,300,000 and is contingent upon the outcome of a separate arbitration being
pursued by Regence and HeartMasters LLC against the Centre Insurance. The
Company made an advance payment on this guarantee of $1,150,001on June 15, 2004.
The advance payment could be subject to refund based upon certain recovery
targets under the Centre Insurance arbitration, if successful.

The dispute with Centre over the insurance coverage on all of the relevant
Regence disease management plans, for which coverage was purchased, is now the
subject of an arbitration proceeding. Initially, the Company sued Centre over
the nonpayment of the policies; the court determined that this must be resolved
in the arbitration with Centre. At this stage, management is unable to predict
the outcome of these matters.

The settlement with Regence was in response to the following: HeartMasters LLC,
a limited liability company 50% owned by our IHMC subsidiary, had received a
Demand for Arbitration before the American Arbitration Association for claims
under certain terminated disease management agreements. Regence had also
asserted, informally, that the Company was or could have been liable for certain
of these obligations, a claim the Company denied.

HeartMasters LLC had received a notice from an insurer, Centre, denying coverage
for the Regence of Oregon HMO first year coverage period, which had asserted
that the outside actuarial report concerning Regence's claims history and other
information, which were considered by the reinsurer prior to issuance of
coverage, contained "grossly incorrect data." HeartMasters has demanded payment
of the insurance coverage. The dispute with Centre over the insurance coverage,
is now the subject of an arbitration proceeding in which HeartMasters seeks
payment of all policies.

The Company is subject to claims and legal proceedings covering a wide range of
matters that arise in the ordinary course of business. Although management of
the Company cannot predict the ultimate outcome of these legal proceedings with
certainty, it believes that their ultimate resolution, including any additional
amounts we may be required to pay will not have a material effect on the
financial statements.

Sales Guarantees
----------------
Typically, the Company's fees or incentives are higher in contracts with
increased financial risk such as those contracts with performance-based fees or
guarantees against cost increases. The failure to achieve targeted cost
reductions could, in certain cases, render a contract unprofitable and could
have a material negative impact on the Company's results of operations.

Purchase Commitments
--------------------
The Company is obligated to purchase heart-monitoring equipment under various
orders from one supplier, all of which are expected to be fulfilled with no
adverse consequences material to the companies operations or financial
condition. As of May 31, 2005 total open commitments under these purchase orders
are approximately $299,000.

<PAGE>

                           QMED, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Note 17 - Recently Issued Accounting Standards

Share-Based Payment
-------------------
In December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment," which
is a revision of SFAS No. 123, "Accounting for Stock-Based Compensation". SFAS
123(R) requires that the compensation cost relating to share-based payment
transactions be recognized in financial statements. The compensation cost will
be measured based on the fair value of the equity or liability instruments
issued. The Statement is effective as of the beginning of the next fiscal period
beginning after June 15, 2005. We will adopt SFAS No. 123(R) on December 1, 2005
using the modified prospective method. We have disclosed the pro forma impact of
adopting SFAS No. 123(R) on net income and earnings per share for the three and
six months ended May 31, 2005 and 2004 in Note 12, which includes all
share-based payment transactions to date. We do not yet know the impact that any
future share-based payment transactions will have on our financial position or
results of operations.

<PAGE>

            Item 2. Management's Discussion and Analysis of Financial
                       Condition and Results of Operations

Overview

QMed(R), Inc. was incorporated in New Jersey in 1983 and reincorporated in
Delaware in 1987. Interactive Heart Management Corp. ("IHMC(R)") is a wholly
owned subsidiary of QMed, which was incorporated in 1995. IHMC developed and
often co-markets with QMed health care information and communication services to
health plans, governments and private companies. The services of QMed include
"ohms|cvd(R)"(Online Health Management System for Cardiovascular Disease) which
is an integrated cardiovascular disease management system. ohms|cvd includes
related systems to assist health plans, government organizations and employer
groups in managing the care, and cost of diabetes, cardiovascular conditions,
including coronary artery disease ("CAD"), stroke, heart failure ("CHF"),
hypertension, hyperlipidemia and the cardiovascular complications of diabetes.
These systems are designed to aid health care physicians in the optimal use of
"evidence based" medical management for patients with these conditions including
co-morbidities, as well as those at high risk of developing these conditions.
The net impact of this approach is the improvement in health and the associated
reduction in mortality, morbidity and cost. As of May 31, 2005, we had 2
contracts to provide these services to two Medicare demonstration projects and
12 licensed health plans in 11 states covering approximately 1.1 million health
plan members.

Our disease management program is for members identified with chronic disease
conditions as well as being at high risk for significant and costly episodes of
care. The program is supported by technology that is designed to deliver the
best clinical and financial outcomes to our customers.

Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements, which are based upon current
expectations and involve a number of risks and uncertainties. In order for us to
utilize the "safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995, investors are hereby cautioned that these statements may be
affected by the important factors, among others, set forth below, and
consequently, actual operations and results may differ materially from those
expressed in these forward-looking statements. The important factors include:

         o        our ability to renew and/or maintain contracts with our
                  customers under existing terms or restructure these contracts
                  on terms that would not have a material negative impact on our
                  results of operations;
         o        our ability to execute new contracts for health plan disease
                  management services;
         o        the risks associated with a significant concentration of our
                  revenues with a limited number of health plan customers;
         o        the timing and costs of implementation, and the effect, of
                  regulatory rules and interpretations relating to the Medicare
                  Prescription Drug, Improvement, and Modernization Act 2003;
         o        our ability to effect estimated cost savings and clinical
                  outcome improvements under health plan disease management
                  contracts and reach mutual agreement with customers with
                  respect to cost savings, or to effect such savings and
                  improvements within the timeframes contemplated by us;
         o        the ability of our health plan customers to provide timely,
                  complete and accurate data that is essential to the operation
                  and measurement of our performance under the terms of our
                  health plan contracts and our accurate analysis of such data;
         o        our ability to resolve favorably contract billing and
                  interpretation issues with our health plan customers;
         o        our ability to effectively integrate new technologies into our
                  care management information technology platform;
         o        our ability to obtain adequate financing to provide the
                  capital that may be needed to support the growth of our health
                  plan operations and financing or insurance to support our
                  performance under new health plan contracts;
         o        unusual and unforeseen patterns of healthcare utilization by
                  individuals within the health plans with chronic conditions,
                  including coronary artery disease ("CAD"), stroke, heart
                  failure ("HF"), hypertension, hyperlipidemia and the
                  cardiovascular complications of diabetes with which we have
                  executed disease management contracts;
         o        the impact of the introduction of new technologies;
         o        the ability of the health plans to maintain the number of
                  covered lives enrolled in the plans during the terms of the
                  agreements between the health plans and us;
         o        our ability to attract and/or retain and effectively manage
                  the employees required to implement our agreements with health
                  plan organizations;

<PAGE>

         o        the impact of future state and federal healthcare legislation
                  and regulations on our ability to deliver services;
         o        the financial health of our customers and their willingness to
                  purchase our services;
         o        the impact of litigation or arbitration;
         o        our ability to accurately estimate our performance and revenue
                  recognition under the terms of our contracts;
         o        our ability to develop new products and deliver outcomes on
                  those products;
         o        our ability to implement our strategy within expected cost
                  estimates;
         o        general economic conditions

We undertake no obligation to update or revise any such forward-looking
statements.

Critical Accounting Policies

Our accounting policies are described in Note 2 of the condensed consolidated
financial statements included in this Report on Form 10-Q for the quarter ended
May 31, 2005. The consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United States of America,
which requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.

We consider the following policy to be the most critical in understanding the
judgments involved in preparing the financial statements and the uncertainties
that could impact our results of operations, financial condition and cash flows.

Revenue Recognition

We enter into contractual arrangements with health plans and government agencies
to provide disease management services. Fees under our health plan contracts are
generally determined by multiplying a contractually negotiated rate per health
plan member per month ("PMPM") by the number of health plan members covered by
our services during the month. The PMPM rates usually differ between contracts
due to the various types of health plan product groups (e.g. PPO, HMO, Medicare
Advantage). These contracts are generally for terms of one to three years with
provisions for subsequent renewal, and typically provide that all or a portion
of our fees may be "performance-based". Performance-based contracts have varying
degrees of risk associated with our ability to deliver the guaranteed financial
cost savings. In most cases we guarantee a percentage reduction of disease costs
compared to a prior baseline year determined by actuarial analysis and other
estimates used as a basis to measure performance objectives. The measurement of
our performance against the base year information is a data intensive and
time-consuming process that is typically not completed until six to eight months
after the end of the contract year. We bill our customers each month for the
entire amount of the fees contractually due based on previous months membership,
which always includes the amount, if any, that may be subject to refund for
retroactive member terminations and a shortfall in performance. We adjust or
defer revenue for contracts where we believe performance is short of contractual
obligations, possibly resulting in a refund of fees or where fees generated may
be subject to further retroactive adjustment associated with a contract or
plan's decision to completely terminate its coverage in a geographic market as
well as general membership changes. For example, general terminations can be due
to death, member change of health plan, etc. We recognize revenue, in accordance
with SEC Staff Accounting Bulletins No. 101 and No. 104, as follows: 1.) we
recognize the fixed portion of our monthly fee as revenue during the period we
perform the services; 2.) we recognize the performance - based portion of the
monthly fees based on indicators of performance to date in the contract year;
and 3.) we recognize previously recorded deferred revenue upon final settlement
of the contract measurement year. Adjustments for shortfalls in performance
targets under the terms of the contract or other factors affecting revenue
recognition are accrued on an estimated basis in the period the services are
provided and are adjusted in future periods when final settlement is determined.
We assess our estimates by analyzing various information including but not
limited to, medical claims data, prior performance under the contract and review
of physician and patient participation levels. We review these estimates
periodically and make adjustments, as interim information is available.

We determine our level of performance at interim periods based on medical claims
data, achievement of physician and patients participation levels or other data
supplied by the health plan. In the event these interim performance measures
indicate that performance targets are not being met or sufficient data is
unavailable, fees, which could be subject to refund, are not recorded as revenue
but rather are recorded as a current liability entitled "contract billings in
excess of revenues." Under performance based arrangements, the ability to make
estimates at interim periods can be challenging due to the inherent nature of

<PAGE>

the medical claims process and the lag time associated with it. In most cases,
complete paid claims data is not available until up to six months after claims
are incurred. Although interim data measurements are indicative of performance
objectives, actual results could differ from our estimates.

The settlement process under a contract, which includes the settlement of any
performance-based fees and involves reconciliation of health-care claims and
clinical data, is generally not completed until sometime after the end of the
contract year. Data reconciliation differences between the Company and the
customer can arise due to health plan data deficiencies, omissions and/or data
discrepancies, for which the Company negotiates with the plan until agreement is
reached with respect to identified issues.

During the three and six months ended May 31, 2005, approximately 66% and 65% of
disease management services, respectively, were derived from three customers
that each comprised more than 10% of the Company's revenues.

Results of Operations

The following table presents the percentage of total revenues for the periods
indicated and changes from period to period of certain items included in our
Condensed Consolidated Statements of Operations.
<TABLE>
<CAPTION>
                                                                                               For the
                                                                                                Three           For the
                                                                                                Months        Six Months
                              For the Three Months Ended         For the Six Months           Ended May        Ended May
                                        May 31,                     Ended May 31,                31,              31,
                              --------------------------     --------------------------     -------------    ------------
                                                                                               2005 vs.        2005 vs.
                                 2005            2004           2005           2004             2004            2004
                              ---------       ----------     -----------    -----------     -------------    ------------
<S>                             <C>              <C>             <C>            <C>              <C>              <C>
Revenue                         100.0     %      100.0    %      100.0   %      100.0   %         46.7    %        35.9   %
Cost of revenue                  33.9             72.2            35.9           62.4            (31.2)           (21.7)
                              -------          -------        --------       --------
Gross Profit                     66.1             27.8            64.1           37.6            249.4            131.7
Selling general and
 administrative                  38.3             56.5            37.1           51.2             (0.6)            (1.6)
Research and development          5.7              6.5             5.6            6.6             26.6             15.8
                              -------          -------        --------       --------
Income (loss) from operations    22.1            (35.3)           21.4          (20.3)              *                *

Interest expense                 (0.1)            (0.2)           (0.1)          (0.2)           (21.5)           (10.4)
Interest income, net              1.5              0.7             1.2            0.7            216.1            148.1
Loss on operations of joint
 venture                         (7.1)            (3.5)           (4.6)          (2.7)           197.8           (123.3)
Other income                       *                -               *             0.1               *             (67.3)
                              -------          -------        --------       --------
Income (loss) before tax
 (provision) benefit             16.4            (38.3)           17.9          (22.4)              *                *
Income tax (provision)
 benefit                         (0.5)            (0.1)           (0.8)          (0.1)              -             667.5
                              -------          -------        --------       --------
Net income (loss)                15.9            (38.5)           17.1          (22.5)              *                *
                              =======          =======        ========       ========
</TABLE>
* Not meaningful

<PAGE>

Three Months Ended May 31, 2005 Compared to Three Months Ended May 31, 2004

Revenue for the three months ended May 31, 2005 increased approximately $1.7
million or 46.7% over the three months ended May 31, 2004. This increase
consists of approximately $1.8 million of additional revenue related to the ramp
up of enrollment in four contracts entered into during the first six months of
2004 and one new contract entered into since May 31, 2004 and the recognition of
approximately $235,000 of revenue related to a bonus earned and the recognition
of previously deferred revenue under a contract with a customer in Ohio. This
increase was offset by a reduction in revenue of approximately $0.6 million
related to market exits and reductions in membership under existing disease
management programs and the termination of one disease management program. In
addition, in 2004 a reduction in revenue of approximately $353,000 was taken
representing an increase in management's deferred revenue estimate in connection
with its settlement with the Regence Group.

Gross profit margins for the three months ended May 31, 2005 increased to 66.1%
from 27.8% for the three months ended May 31, 2004. This increase is related to
(i) an increase in revenue attributable to an increase in enrollment in
contracts entered into in 2004 (while direct costs associated with the initial
implementation costs on theses contracts were incurred in 2004), the incremental
costs associated with the increased enrollment in 2005 were not as significant
as the initial implementation costs incurred in 2004); (ii) revenue in 2004 was
decreased by approximately $353,000, without a corresponding decrease in costs,
which represented an increase in management's deferred revenue estimate in
connection with its settlement with The Regence Group; (iii) the recognition of
approximately $235,000 of revenue, without a corresponding increase in costs,
related to a bonus earned and the recognition of previously deferred revenue
under a contract with a customer in Ohio and (iv) cost reductions associated
with efficiencies related to enhancements in our programs.

Selling, general and administrative expenses for the three months ended May 31,
2005 decreased by approximately $13,000 over the three months ended May 31,
2004. This decrease was primarily due to approximately $150,000 of commissions
related to new contracts with health plans entered into in 2004, a decrease of
$130,000 of legal fees related to general corporate matters and a decrease in
insurance costs of $23,000. Offsetting these decreases were approximately
$261,000 of costs incurred as implementation costs of QMedCare Inc. relating to
the SNP project in South Dakota. We anticipate enrollment of the first SNP
patient in early 2006. Additionally, approximately $48,000 of costs incurred as
implementation costs of Health E Monitoring Inc., which expects to record
revenue in the third quarter of 2005. We expect to continue to incur
implementation costs for both QMed Care Inc. and Health E Monitoring Inc. the
remainder of 2005 and into early 2006 and anticipate these costs to increase
during this time period.

Research and development expenses for the three months ended May 31, 2005
increased approximately $65,000 or 26.6% over the three months ended May 31,
2004. Our accounting policies are to capitalize certain costs during development
and amortize them upon implementation. Subsequent to implementation any further
costs (ie. Maintenance costs) are expenses as incurred. During the first quarter
of 2005, we completed the primary development of one of our new systems and
therefore all subsequent costs are being expensed, which accounts for the
increase during he three month ended May 31, 2005. We continue to focus our
efforts on the development of new, advanced software programs to assist in the
identification and evaluation of patients who are at risk for developing various
disease conditions. These programs incorporate state of the art
telecommunications, data management, and security and information technology.
Certain costs associated with the development of new product software to be
incorporated into our disease management programs are capitalized and amortized
over a 5-year useful life. We intend to continue to improve and expand the
capabilities of the ohms|cvd system.

Loss on operations of joint ventures for the three months ended May 31, 2005
increased approximately $257,000 over the three months ended May 31, 2004. The
expense for the three months ended May 31, 2005 primarily represents legal fees
for the arbitration with the Centre Insurance and costs related to a joint
venture entered into with two partners to provide services under a disease
management contract in Minnesota. Loss on operations of joint venture for the
three months ended May 31, 2004 primarily represents legal fees associated the
arbitration with the Regence Group.

Six Months Ended May 31, 2005 Compared to Six Months Ended May 31, 2004

Revenue for the six months ended May 31, 2005 increased approximately $2.7
million or 35.9% over the six months ended May 31, 2004. This increase consists
of approximately $4.2 million of additional revenue related to the ramp-up of
enrollment in four contracts entered into during the first six months of 2004
and one new contract entered into since May 31, 2004 and the recognition of

<PAGE>

approximately $235,000 of revenue related to a bonus earned and the recognition
of previously deferred revenue under a contract with a customer in Ohio. This
increase was offset by a reduction in revenue of approximately $1.9 million
related to market exits and reductions in membership under existing disease
management programs and the termination of one disease management program. In
addition, in 2004 a reduction in revenue of approximately $353,000 was taken
representing an increase in management's deferred revenue estimate in connection
with its settlement with the Regence Group.

Gross profit margins for the six months ended May 31, 2005 increased to 64.1%
from 37.6% for the six months ended May 31, 2004. This increase is related to
(i) an increase in revenue attributable to an increase in enrollment in
contracts entered into in 2004 (while direct costs associated with the initial
implementation costs on theses contracts were incurred in 2004), the incremental
costs associated with the increased enrollment in 2005 were not as significant
as the initial implementation costs incurred in 2004); (ii) revenue in 2004 was
decreased by approximately $353,000, without a corresponding decrease in costs,
which represented an increase in management's deferred revenue estimate in
connection with its settlement with The Regence Group; (iii) the recognition of
approximately $235,000 of revenue, without a corresponding increase in costs,
related to a bonus earned and the recognition of previously deferred revenue
under a contract with a customer in Ohio and (iv) cost reductions associated
with efficiencies related to enhancements in our programs.

Selling, general and administrative expenses for the six months ended May 31,
2005 decreased by approximately $60,000 over the six months ended May 31, 2004.
This decrease was primarily due to approximately $150,000 commissions related to
new contracts with health plans entered into in 2004, approximately a decrease
of $130,000 of legal fees related to general corporate matters and a decrease in
insurance costs of $53,000. . Offsetting these decreases were approximately
$261,000 of costs incurred as implementation costs of QMedCare Inc. relating to
the SNP project in South Dakota. We anticipate enrollment of the first SNP
patient in early 2006. Additionally, approximately $48,000 of costs incurred as
implementation costs of Health E Monitoring Inc., which expects to record
revenue in the third quarter of 2005. We expect to continue to incur
implementation costs for both QMed Care Inc. and Health E Monitoring Inc. the
remainder of 2005 and into early 2006 and anticipate these costs to increase
during this time period.

Research and development expenses for the six months ended May 31, 2005
increased approximately $78,000 or 15.8% over the six months ended May 31, 2004.
Our accounting policies are to capitalize certain costs during development and
amortize them upon implementation. Subsequent to implementation any further
costs (ie. Maintenance costs) are expenses as incurred. During the first quarter
of 2005, we completed the primary development of one of our new systems and
therefore all subsequent costs are being expensed, which accounts for the
increase. We continue to focus our efforts on the development of new, advanced
software programs to assist in the identification and evaluation of patients who
are at risk for developing various disease conditions. These programs
incorporate state of the art telecommunications, data management, and security
and information technology. Certain costs associated with the development of new
product software to be incorporated into our disease management programs are
capitalized and amortized over a 5-year useful life. We intend to continue to
improve and expand the capabilities of the ohms|cvd system.

Loss on operations of joint ventures for the six months ended May 31, 2005
increased approximately $252,000 over the six months ended May 31, 2004. The
expense for the six months ended May 31, 2005 primarily represents legal fees
for the arbitration with the Centre Insurance and costs related to a joint
venture entered into with two partners to provide services under a disease
management contract in Minnesota. Loss on operations of joint venture for the
six months ended May 31, 2004 primarily represents legal fees associated the
arbitration with the Regence Group.

Liquidity and Capital Resources

To date, our principal sources of working capital have been the proceeds from
public and private placements of securities. Since our inception, sales of
securities, including the proceeds from the exercise of outstanding options and
warrants, have generated approximately $47,000,000 less applicable expenses.

We had working capital of approximately $21.4 million at May 31, 2005 compared
to approximately $5.8 million at November 30, 2004 and ratios of current assets
to current liabilities of 6.1:1 as of May 31, 2005 and 3.1:1 as of November 30,
2004. The working capital increase of approximately $15.3 million was due to two
private placement equity transaction during the quarter, whereby the company
sold common stock for approximately $13.8 million, net of expenses, proceeds
from the sale of common stock through the exercise of outstanding options and
warrants of approximately $0.4 million and cash flow from operations of
approximately $3.0 million. These increases were offset by an increase in the
deferred revenue of approximately $0.9 million, cash payment on purchase of
Health E Monitoring Inc. of $0.2 million, funding of joint ventures of
approximately $0.3 million, payments under capital leases of $0.1 million and

<PAGE>

other capital expenditures of $0.2 million. In September 2001 we entered into a
$1,000,000 line of credit agreement with Wachovia Bank, National Association.
The line is collateralized by securities owned by the Company and expires on
September 1, 2005. Outstanding balances under the loan bear interest at an
annual rate equal to the lower of the bank's reference rate minus 1% or LIBOR
plus 1.5%. As of May 31, 2005 no debt was outstanding and the entire $1,000,000
was available under this credit line.

We anticipate that funds generated from operations, together with cash and
investments, and availability under our credit line will be sufficient to fund
our current level of growth and our existing commitments. However, to the extent
the expansion of our operations requires significant additional resources or
certain forms of financial guarantees to assure our performance under the terms
of new health plan contracts, we may be required to seek additional financing.
No assurance can be given that such financing would be available on terms that
would be acceptable to us.

Material Commitments

The following schedule summarizes our contractual cost obligation as of May 31,
2005 in the periods indicated.
<TABLE>
<CAPTION>

                                                                    Payments Due by Period
              Contractual                -----------------------------------------------------------------------------
              Obligations                    Total      Less than 1 year    1-3 years      4-5 years    After 5 years
---------------------------------------- -------------- ----------------- --------------- ------------- --------------
<S>                                        <C>             <C>               <C>           <C>           <C>
Long-Term Debt                             $         -     $         -       $         -   $         -   $         -
Capital Lease Obligations                      320,000         154,000           163,000         3,000             -
Operating Leases                             1,009,000         494,000           504,000        11,000             -
Unconditional Purchase Obligations             299,000         299,000                 -             -             -
Other Long-Term Obligations                    684,000         684,000                 -             -             -
---------------------------------------- -------------- ----------------- --------------- ------------- --------------
Total Contractual Cash Obligations         $ 2,313,000     $ 1,631,000       $   667,000   $    14,000   $         -
======================================== ============== ================= =============== ============= ==============
</TABLE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk for changes in interest rates relates primarily to
the increase or decrease in the amount of interest income we can earn on our
available funds for investment. We ensure the safety and preservation of our
invested principal funds by limiting default risk, market risk and reinvestment
risk. We mitigate default risk by investing in short term high-credit quality
securities.

Item 4. Evaluation of Disclosure Controls and Procedure

We have established disclosure controls and procedures to ensure that material
information relating to the Company, including its consolidated subsidiaries, is
made known to the officers who certify the Company's financial reports and to
other members of senior management and the Board of Directors.

Based on their evaluation as of May 31, 2005, the principal executive officer
and principal financial officer of the Company have concluded that the Company's
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934) are effective to ensure that the
information required to be disclosed by the Company in the reports that it files
or submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in SEC rules and
forms.

<PAGE>

Part II. Other Information

     Item 1.      Legal Proceedings

                  On March 28, 2003, HeartMasters LLC, a limited liability
                  company 50% owned by our IHMC subsidiary, received a Demand
                  for Arbitration before the American Arbitration Association
                  for claims under certain terminated disease management
                  agreements. . The claims alleged breach of disease management
                  agreements between Regence of Washington and Oregon and
                  HeartMasters LLC. HeartMasters LLC also received a notice from
                  a reinsurer, Centre, denying coverage for the Regence of
                  Oregon HMO first year coverage period asserting that an
                  outside actuarial report concerning Regence's claims history
                  and other information, which were considered by the reinsurer
                  prior to issuance of coverage, contained "grossly incorrect
                  data." HeartMasters LLC denied the claims of Regence and
                  asserted counter claims. In addition, Heartmasters demanded
                  payment of the insurance coverage.

                  On June 15, 2004, the Company entered into an agreement to
                  settle its dispute with The Regence Group, including all
                  issues surrounding the HeartMasters LLC's arbitration. The
                  settlement agreement provided QMed, Inc. and IHMC with
                  releases from any and all claims related to Regence and the
                  Regence contract in exchange for a financial guarantee of
                  certain payments from HeartMasters LLC to Regence. The amount
                  of the financial guarantee can range between $0 and $2,300,000
                  and is contingent upon the outcome of a separate arbitration
                  being pursued by Regence and HeartMasters LLC against the
                  reinsurer, Centre Insurance. . The Company made an advance
                  payment on this guarantee of $1,150,001on June 15, 2004. The
                  advance payment, and any subsequent payment, could be subject
                  to refund based upon certain recovery targets under the Centre
                  Insurance arbitration, if successful.

                  The dispute with Centre over the insurance coverage on all of
                  the relevant Regence disease management plans, for which
                  coverage was purchased, is now the subject of an arbitration
                  proceeding. Initially, the Company sued Centre over the
                  nonpayment of the policies; the court determined that this
                  must be resolved in the arbitration with Centre. At this
                  stage, management is unable to predict the outcome of these
                  matters.

                  The Company is subject to claims and legal proceedings
                  covering a wide range of matters that arise in the ordinary
                  course of business. Although management of the Company cannot
                  predict the ultimate outcome of these legal proceedings with
                  certainty, it believes that their ultimate resolution,
                  including any other amounts we may be required to pay will not
                  have a material effect on the financial statements.


     Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds
                  (a) Non applicable
                  (b) Non applicable
                  (c) None

     Item 3.      Defaults upon Senior Securities

                  None.

     Item 4.      Submission of Matters to a Vote of Security Holders
                  ---------------------------------------------------

                  None

     Item 5.      Other Information

                  (a) None
                  (b) There have been no material changes to the procedures by
                      which security holders may recommend nominees to the
                      Company's Board of Directors.


     Item 6.      Exhibits

                  (a) The following exhibits are filed as part of this report:

                  31.1     Certification of Chief Executive Officer of Periodic
                           Report pursuant to Rule 13a-14a and Rule 15d-14(a).

                  31.2     Certification of Chief Financial Officer of Periodic
                           Report pursuant to Rule 13a-14a and Rule 15d-14(a).

                  32.1     Certification of Chief Executive Officer and Chief
                           Financial Officer pursuant to 18 U.S.C. - Section
                           1350.


                                   SIGNATURES


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

                                      QMed, Inc.




                                      By:  /s/ Michael W. Cox
                                          --------------------------------------
                                          Michael W. Cox
                                          President and Chief Executive Officer


                                      By:  /s/ William T. Schmitt, Jr.
                                         ---------------------------------------
                                          William T. Schmitt, Jr.
                                          Senior Vice President, Chief Financial
                                          Officer and Treasurer

July 05, 2005