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 September 30, 2002 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 000-49785

                        PHARMACY BUYING ASSOCIATION, INC.
                        ---------------------------------
             (Exact name of registrant as specified in its charter)

                      MISSOURI                                   43-1482785
                      ---------                                  -----------
          (State or other jurisdiction of                     (I.R.S. Employer
           incorporation or organization)                    Identification No.)

1575 N. UNIVERSAL AVE., SUITE 100, KANSAS CITY, MISSOURI            64120
--------------------------------------------------------           -------
 (Address of principal executive offices)                        (Zip Code)

(816) 245-5700
--------------
Registrant's telephone number, including area code

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|_|


At September 30, 2002,  11,380 shares of common stock,  $1.00 par value,  of the
registrant were outstanding.


Total number of pages 22.

<PAGE>
                        PHARMACY BUYING ASSOCIATION, INC.
                                 INDEX FORM 10-Q

                                                                        Page No.
                                                                        --------

PART I - FINANCIAL INFORMATION

       ITEM 1 - FINANCIAL STATEMENTS

           Consolidated Balance Sheets as of September 30, 2002 (unaudited)
           and December 31, 2001                                               2

           Consolidated Statements of Operations for the three and nine
           months ended September 30, 2002 and 2001(unaudited)                 3

           Consolidated Statements of Cash Flows for the nine
           months ended September 30, 2002 and 2001 (unaudited)            4 - 5

           Notes to Consolidated Financial Statements (unaudited)          6 - 8

       ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
       OF OPERATIONS AND FINANCIAL CONDITION                              9 - 13

       ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
       MARKET RISK                                                            14

       ITEM 4 - CONTROLS AND PROCEDURES                                       14

PART II - OTHER INFORMATION

       ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY
       HOLDERS                                                                15

       ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K                         16 - 17

SIGNATURES                                                                    18

CERTIFICATIONS                                                           19 - 22

                                       1
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS.

                PHARMACY BUYING ASSOCIATION, INC. AND SUBSIDIARY
                             D/B/A TRUECARE PHARMACY

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>
                                                            September 30,
                                                                2002          December 31,
                                                             (Unaudited)          2001
                                                             -----------          ----
<S>                                                          <C>             <C>
Current assets:
   Cash                                                      $    293,781    $    614,519
   Accounts receivable                                          8,611,845       6,380,342
   Inventories                                                  5,860,948       4,672,273
   Prepaid expenses                                                64,607         133,284
                                                             ------------    ------------
                  Total current assets                         14,831,181      11,800,418

Property and equipment                                            481,823         597,722
Goodwill                                                          229,144         229,144
Other assets                                                       38,744          16,430
                                                             ------------    ------------
                                                             $ 15,580,892    $ 12,643,714
                                                             ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Current portion of long-term debt                                         $      7,417
   Accounts payable                                          $  8,459,121       6,196,385
   Accrued payroll                                                 99,686         186,822
   Deferred revenue                                                63,777         201,600
   Income taxes payable                                           388,706         532,005
   Deferred income taxes                                           18,000          18,000
                                                             ------------    ------------
                  Total current liabilities                     9,029,290       7,142,229
                                                             ------------    ------------

Long-term debt, less current portion                                               18,336
                                                                             ------------
Deferred income taxes                                              94,000         182,000
                                                             ------------    ------------

Commitments and contingencies

Stockholders' equity:
   Common stock, $1 par; authorized 30,000
    shares; issued 11,380 and 5,690 shares as of
    September 30, 2002 and December 31, 2001,
    respectively                                                   11,380           5,690
   Capital in excess of par value                               1,468,255       1,468,255
   Retained earnings                                            5,095,690       3,827,204
                                                             ------------    ------------
                                                                6,575,325       5,301,149
   Treasury stock                                                (117,723)
                                                             ------------    ------------
                                                                6,457,602       5,301,149
                                                             ------------    ------------
                                                             $ 15,580,892    $ 12,643,714
                                                             ============    ============
</TABLE>
The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       2
<PAGE>
                PHARMACY BUYING ASSOCIATION, INC. AND SUBSIDIARY
                             D/B/A TRUECARE PHARMACY

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                            Three months ended                       Nine months ended
                                                                September 30,                          September 30,
                                                                -------------                          -------------
                                                          2002                2001               2002                2001
                                                          ----                ----               ----                ----
Revenues:
<S>                                                 <C>                 <C>                <C>                 <C>
   Distribution center(1)                           $   36,820,388      $   26,262,805     $    92,853,169     $    57,506,971

   Participation programs and fees                         275,749             741,399             653,879           2,165,003
   Activity rebates and charges                          1,828,417           1,382,736           5,505,333           3,640,865
   Third party                                              55,497               7,559              67,455               6,748
                                                    --------------      --------------     ---------------     ---------------
                                                        38,980,051          28,394,499          99,079,836          63,319,587
                                                    --------------      --------------     ---------------     ---------------

Cost of revenues:
   Distribution center                                  35,365,087          25,615,515          88,909,308          55,866,529
   Participation programs and fees                         208,918             194,270             520,327             530,458
   Activity rebates                                      1,322,519             841,993           3,461,059           1,673,674
                                                    --------------      --------------     ---------------     ---------------
                                                        36,896,524          26,651,778          92,890,694          58,070,661
                                                    --------------      --------------     ---------------     ---------------

Gross profit                                             2,083,527           1,742,721           6,189,142           5,248,926
General and administrative expenses                      1,347,481           1,343,508           3,956,661           3,499,100
                                                    --------------      --------------     ---------------     ---------------

Income from operations                                     736,046             399,213           2,232,481           1,749,826
                                                    --------------      --------------     ---------------     ---------------
Other income (expense):
   Investment income                                         3,779              10,048              14,421              48,075
   Interest expense                                (         7,686)    (         2,616)   (         14,196)   (         11,889)
   Gain on sale of property and equipment                                                            4,786
                                                    --------------      --------------     ---------------     ---------------
                                                   (         3,907)              7,432               5,011              36,186
                                                    --------------      --------------     ---------------     ---------------

Income before income taxes                                 732,139             406,645           2,237,492           1,786,012
Income taxes                                               427,327             226,638             963,316             677,918
                                                    --------------      --------------     ---------------     ---------------

Net income                                          $      304,812      $      180,007     $     1,274,176     $     1,108,094
                                                    ==============      ==============     ===============     ===============
Earnings per common share:
   Income available to common
    stockholders                                    $      304,812      $      180,007     $     1,274,176     $     1,108,094
   Weighted average shares outstanding,
    basic and diluted                                       11,268              11,380              11,337              11,380
                                                    --------------      --------------     ---------------     ---------------

   Basic and diluted earnings per share             $        27.05      $        15.82     $        112.39     $         97.37
                                                    ==============      ==============     ===============     ===============
</TABLE>
(1)  including  revenues generated from businesses owned by members of the Board
     of  Directors  of  $4,535,272  and  $3,258,606  for the three  months ended
     September 30, 2002 and 2001,  respectively,  and $12,881,128 and $7,985,352
     for the nine months ended September 30, 2002 and 2001, respectively

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       3
<PAGE>
                PHARMACY BUYING ASSOCIATION, INC. AND SUBSIDIARY
                             D/B/A TRUECARE PHARMACY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                   Nine months ended September 30,
                                                                       2002                2001
                                                                       ----                ----
<S>                                                            <C>                 <C>
Cash flows from operating activities:
   Net income                                                   $      1,274,176    $    1,108,094
   Adjustments to reconcile net income to net
    cash used by operating activities:
     Depreciation                                                        175,677           158,111
     Deferred income taxes                                     (          88,000)
     Gain on sale of property and equipment                    (           4,786)
     Changes in operating assets and liabilities:
       Accounts receivable                                     (       2,231,503)  (     3,379,100)
       Inventories                                             (       1,188,675)  (     1,294,035)
       Prepaid expenses                                                   68,677            21,694
       Other assets                                            (          22,314)  (           380)
       Accounts payable                                                2,262,736         2,804,212
       Accrued payroll                                         (          87,136)  (        14,768)
       Deferred revenue                                        (         137,823)  (         2,250)
       Income taxes payable                                    (         143,299)  (       643,894)
                                                                ----------------    --------------

                  Net cash used by operating activities        (         122,270)  (     1,242,316)
                                                                ----------------    --------------

Cash flows from investing activities:
   Purchase of property and equipment                          (          65,292)  (       110,923)
   Proceeds from sale of property and equipment                           10,300
   Investments in and advances to affiliate                                                100,000
                                                                ----------------    --------------

                  Net cash used by investing activities        (          54,992)  (        10,923)
                                                                ----------------    --------------

Cash flows from financing activities:
   Acquisition of common stock                                 (         117,723)
   Offering costs                                                                  (        14,448)
   Principal payments on long-term debt                        (          25,753)  (        18,794)
                                                                -----------------   --------------

                  Net cash used by financing activities        (         143,476)  (        33,242)
                                                                ----------------    --------------
</TABLE>
                                   (continued)

                                       4
<PAGE>
                PHARMACY BUYING ASSOCIATION, INC. AND SUBSIDIARY
                             D/B/A TRUECARE PHARMACY

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                   (Unaudited)


                                                 Nine months ended September 30,
                                                        2002            2001
                                                        ----            ----

Net decrease in cash                               (    320,738)  (  1,286,481)

Cash, beginning of period                               614,519      1,738,818
                                                    -----------    -----------

Cash, end of period                                 $   293,781    $   452,337
                                                    ===========    ===========

Supplemental disclosures of cash flow information:
   Cash transactions during the period for:
     Interest paid                                  $    14,196    $    11,889
                                                    ===========    ===========

     Income taxes paid                              $ 1,194,615    $ 1,287,812
                                                    ===========    ===========

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       5
<PAGE>
                PHARMACY BUYING ASSOCIATION, INC. AND SUBSIDIARY
                             D/B/A TRUECARE PHARMACY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1.   BASIS OF PRESENTATION:

     The  accompanying  interim  financial  statements  have  been  prepared  in
     accordance  with the rules and  regulations  of the Securities and Exchange
     Commission  for interim  reporting and do not include  certain  disclosures
     required by accounting  principles  generally accepted in the United States
     of America.  Accordingly, the statements should be read in conjunction with
     the  Pharmacy  Buying  Association,  Inc.,  d/b/a  TrueCare  Pharmacy  (the
     Company)  financial  statements and notes thereto included in the Company's
     Annual Report and Form 10 filed with the Securities and Exchange Commission
     under File No. 000-49785.  Accounting  policies utilized in the preparation
     of financial  information herein presented are the same as set forth in our
     annual financial  statements.  Certain disclosures and information normally
     included in financial  statements  have been  condensed or omitted.  In the
     opinion  of the  management  of the  Company,  these  financial  statements
     contain all adjustments  (consisting only of normal recurring  adjustments)
     necessary  for a fair  presentation  of the interim  financial  statements.
     Interim results of operations are not necessarily indicative of the results
     of operations for the full year.

     Certain  reclassifications  have  been  made  to  the  September  30,  2001
     unaudited   interim   financial   statements  to  be  consistent  with  the
     presentation at September 30, 2002. These  reclassifications  had no impact
     on net income or retained earnings.

2.   NEW ACCOUNTING STANDARDS:

     Property and equipment:

          In August  2001,  the FASB  issued SFAS No.  144,  Accounting  for the
          Impairment  or Disposal of  Long-Lived  Assets.  SFAS No. 144 requires
          that long-lived  assets be measured at the lower of carrying amount or
          fair  value for  long-lived  assets to be held and used or fair  value
          less cost to sell for  long-lived  assets to be disposed  of,  whether
          reported in continuing operations or in discontinued  operations.  The
          standard  became  effective  for the Company's  fiscal year  beginning
          January 1, 2002. The adoption of this standard did not have a material
          effect on the Company's financial position or results of operations.

                                       6
<PAGE>
                PHARMACY BUYING ASSOCIATION, INC. AND SUBSIDIARY
                             D/B/A TRUECARE PHARMACY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (Unaudited)


2.   NEW ACCOUNTING STANDARDS (CONTINUED):

     Goodwill:

          In June 2001, the Financial Accounting Standards Board issued SFAS No.
          141,  Business  Combinations,  and SFAS No.  142,  Goodwill  and Other
          Intangibles.  SFAS No. 141 requires the purchase  method of accounting
          for business  combinations  initiated  after  September 30, 2001,  for
          which the date of acquisition is July 1, 2001 or later, eliminates the
          pooling-of-interests   method,   and   identifies   criteria  for  the
          establishment of identifiable intangible assets separate from goodwill
          resulting from a business combination. SFAS No. 142 requires companies
          to cease  amortizing  goodwill.  SFAS No. 142 also  establishes  a new
          method of testing goodwill and other  intangibles for impairment on an
          annual   basis  or  on  an  interim   basis  if  an  event  occurs  or
          circumstances  change that would  reduce the fair value of a reporting
          unit below its carrying value.  The standard became  effective for the
          Company's fiscal year beginning January 1, 2002. The adoption of these
          standards did not have a material  effect on the  Company's  financial
          position or results of operations.

Costs associated with exit or disposal activities:

          In July 2002, the FASB issued SFAS No. 146, Costs Associated with Exit
          or  Disposal  Activities  (effective  January 1,  2003).  SFAS No. 146
          replaces current accounting literature and requires the recognition of
          costs  associated  with  exit or  disposal  activities  when  they are
          incurred  rather  than  at the  date  of a  commitment  to an  exit or
          disposal plan.  The Company does not  anticipate  that the adoption of
          this statement will have a material effect on the Company's  financial
          statements.

3.   ACCOUNTS RECEIVABLE:
                                               September 30,       December 31,
                                                   2002                2001
                                                   ----                ----

     Membership                                $     832,975    $     637,519
     Distribution center                           7,968,915        5,934,364
     Program and third-party administration            3,955            2,459
                                               -------------    -------------
                                                   8,805,845        6,574,342
     Allowance for doubtful accounts          (      194,000)  (      194,000)
                                               -------------    -------------

                                               $   8,611,845    $   6,380,342
                                               =============    =============
     Allowance for doubtful accounts:
       Balance at beginning of period          $     194,000    $      43,632
       Charges to costs and expenses                  15,342          327,713
       Bad debts written off                  (       15,342)  (      177,345)
                                               -------------    -------------

       Balance at end of period                $     194,000    $     194,000
                                               =============    =============

                                       7
<PAGE>
                PHARMACY BUYING ASSOCIATION, INC. AND SUBSIDIARY
                             D/B/A TRUECARE PHARMACY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (Unaudited)


4.   PROPERTY AND EQUIPMENT:
                                            September 30,       December 31,
                                                2002                2001
                                                ----                ----

     Furniture and fixtures               $       288,659     $      299,708
     Equipment                                    697,587            642,662
     Software                                     389,514            386,001
                                          ---------------     --------------
                                                1,375,760          1,328,371
     Accumulated depreciation            (        893,937)   (       730,649)
                                          ---------------     --------------

                                          $       481,823     $      597,722
                                          ===============     ==============

     Depreciation expense,  included in general and administrative expenses, was
$175,677 and $158,111 for the  nine-month  periods ended  September 30, 2002 and
2001, respectively.

                                       8

<PAGE>

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

The following  discussion  of our financial  condition and results of operations
should be read in  conjunction  with the financial  statements and notes thereto
included elsewhere in this filing.

This  discussion and analysis  should be read in conjunction  with  management's
discussion  and analysis  included in the  Company's  Form 10 for the year ended
December 31, 2001 and for the second  quarter ended June 30, 2002 also contained
therein.

OVERVIEW

We derive revenues from the following four sources:

DISTRIBUTION  CENTER.  We sell  pharmaceutical-related  products  to our members
through our own distribution facility located in Riverside, Missouri.

ACTIVITY   REBATES  AND  CHARGES.   We  receive   rebates  from   pharmaceutical
manufacturers  based on member purchases of the manufacturer's  product from our
distribution  center.  In  addition,  each of our  wholesaler-partner  contracts
provides that the wholesaler-partner will pay us a rebate based on a percentage,
which varies by wholesaler-partner, of the dollar value of products purchased by
our members from the  wholesaler-partner.  We also receive rebates and fees from
other vendors and manufacturers  through various company  programs,  such as our
cash card and drug formularies.  These rebates and fees are typically paid to us
on either a quarterly or monthly basis.

PARTICIPATION  PROGRAMS AND FEES. Our members pay us a monthly membership fee in
accordance with our membership agreement. In addition, we receive administration
fees from manufacturers and wholesaler-partners for maintenance and facilitation
of contracts  with us and with our  members.  Our vendors and members also pay a
fee to attend our annual conference each summer.

THIRD  PARTY  REVENUES.  Revenues  from our third  party  segment,  shown net of
expenses for all reporting  periods,  are generated  from claims costs of goods,
claims  processing  fees per paid  claim  charged to plan  sponsors,  and rebate
administration fees. A major portion of the revenue includes the claims costs of
goods  that  are  collected   from  the  plan  sponsors  in  order  to  pay  the
participating  network provider.  After payout of claims and expenses,  there is
usually little or no net income generated from this revenue.

Our expenses are categorized as follows:

DISTRIBUTION  CENTER.   Operating  expenses  associated  with  distribution  are
primarily composed of direct cost of goods sold.

ACTIVITY REBATES.  Rebates are composed of monies paid to members on a quarterly
basis for  purchases  through  the  distribution  center,  purchases  made under
contract with wholesaler-partners, cash card claims, and rebates attributable to
fluctuations in the market share of certain pharmaceuticals.

PARTICIPATION  PROGRAM  AND FEES.  Program  costs  and  expenses  are  primarily
composed of expenses  associated with the programs and services that we offer to
our members,  including the costs of developing and marketing those services. In
addition, costs associated with our annual shareholders conference are included.

GENERAL AND ADMINISTRATIVE  EXPENSES.  General and  administrative  expenses are
typical  operating  expenses  primarily  composed of such items as salaries  and
wages,   insurance,   freight  and  postage,  office  rent,  travel,  and  other
miscellaneous expenses.

                                       9
<PAGE>

RESULTS OF OPERATION

The following  discussion is based on our  historical  results of operations for
the nine months ending September 30, 2002 and 2001.

COMPARISON OF NINE MONTHS ENDING SEPTEMBER 30, 2002 AND 2001

REVENUES

Total  Revenues.  Total  revenues for the nine months ending  September 30, 2002
increased to $99.1 million from $63.3  million over the same period  revenues in
2001. The increase of $35.8 million is directly  attributable to a corresponding
increase in the amount of sales through the distribution center.

Distribution.  Revenue  from  distribution  grew  from  $57.5  million  to $92.8
million,  representing  a 61% increase over the same period in 2001. An increase
in product offering  combined with a rising usage of the distribution  center by
member pharmacies led to the increase in distribution sales.

Activity Rebates and Charges. Revenues due to rebates and charges grew from $3.6
million for the nine months  ending  September  30, 2001 to $5.5 million for the
same  period in 2002.  The 53%  growth in rebate  revenue is from  increases  in
purchases through the distribution center,  reflected in distribution sales, and
from an increase in enrollees and monies paid under our Cash Card program.

Participation  Programs and Fees. For the nine months ending September 30, 2002,
revenues from  participation  programs and fees  decreased by $1.51 million from
the corresponding  period in 2001. A continued changing and restructuring of our
programs  following  the  Legend  acquisition  precipitated  a  portion  of  the
decrease.  Also  contributing  to the  decrease was the gradual  termination  of
several programs that were not deemed to be effective uses of funds.

Third  Party.  Revenues  from  third  party  operations,  which are shown net of
expenses,  increased  by  approximately  $61,000  for  the  nine  months  ending
September  30,  2002 from the same  period in 2001.  The  increase  arose from a
decrease in expenses in third party programs and from increased  revenues from a
renewed effort in the Managed Care market.

COST OF REVENUES

Distribution  Center.  Costs of  goods  sold  through  the  distribution  center
increased  from $55.9 million for the nine months  ending  September 30, 2001 to
$88.9 million in 2002. The 60% increase is directly attributable to the increase
in sales through the distribution center.

Activity Rebates.  Rebates increased from $1.67 million in the first nine months
of 2001 to $3.5 million in the  corresponding  period of 2002. The 107% increase
in rebates stems from an increase in purchases  through our distribution  center
and the  corresponding  rebates.  In addition,  slightly more aggressive  rebate
incentives offered to our pharmacies resulted in higher rebate expense.

Participation  Programs and Fees.  Expenses  associated  with our programs  held
steady for the nine months ending September 30, 2002 compared to the same period
in 2001.  The lack of a change in expenses while we experience a decrease in the
corresponding   revenues   is  because  we  have  to  maintain   the   necessary
infrastructure to support the programs during the transitional time frame.

GENERAL AND  ADMINISTRATIVE.  General and administrative  expenses rose by $0.45
million  for the nine months  ending  September  30,  2002  compared to the same
period in 2001.  The  increase  of 21% from $3.5  million  to $3.95  million  is
attributable  to a normal  increase in expenses  associated  with an increase in
revenues,  including an increase in

                                       10
<PAGE>

warehouse  costs,  salaries  and  wages,  and other  employee-related  expenses.
Expenses  associated  with  our  public  registration  also  contributed  to the
increase.

INCOME FROM OPERATIONS.  Net income from operations  increased by $0.482 million
from $1.75 million for the nine months ending September 30, 2001 to $2.2 million
for the same period in 2002. This 27% increase is attributable to an increase in
the overall  revenue  streams of the company.  As a percent of revenues,  income
from operations fell from 2.76% of revenues for the first nine months of 2001 to
2.25% for the same period in 2002. This  percentage  decrease was a result of an
increasing portion of revenues being derived from lower margin sources,  such as
distribution sales.

INCOME TAXES.  Income tax expense for the nine months ending  September 30, 2002
increased to $0.963 million from $0.678 million for the same period in 2001. The
$285,000  increase  follows  directly from an increase in our taxable income and
higher profitability.

COMPARISON OF THREE MONTHS ENDING SEPTEMBER 30, 2002 AND 2001

REVENUES

Total  Revenues.  3rd Quarter 2002 saw total revenues  increase to $39.0 million
from $28.4 million over the same period  revenues in 2001. The increase of $10.6
million  is  attributable  to a  corresponding  increase  in the amount of sales
through the distribution center.

Distribution.  For 3rd Quarter  2002,  revenues grew to $36.8 million from $26.3
million in the 3rd Quarter 2001,  representing  a 40%  increase.  An increase in
product  offering  combined  with a rising usage of the  distribution  center by
member pharmacies led to the increase in distribution sales.

Activity Rebates and Charges. Revenues due to rebates and charges grew from $1.4
million in the 3rd Quarter of 2001 to $1.8 million in the 3rd Quarter 2002.  The
32% growth in rebate revenue is directly correspondent to increases in purchases
through the  distribution  center and to additional  revenues from our Cash Card
program, which showed significant improvement in the 3rd Quarter.

Participation   Programs  and  Fees.   For  3rd  Quarter  2002,   revenues  from
participation   programs  and  fees   decreased   by  $0.46   million  from  the
corresponding  period in 2001.  An ongoing  changing  and  restructuring  of our
programs following the Legend  acquisition has precipitated this decrease.  Also
contributing  to the decrease was the continued  phase-out of several  programs.
This was partially offset by a 3rd Quarter increase in fees collected due to our
annual conference.

Third  Party.  Revenues  from  third  party  operations,  which are shown net of
expenses,  increased by  approximately  $48,000 from the 3rd Quarter 2001 to the
3rd Quarter 2002. The increase arises primarily from an increase in Managed Care
activity.

COST OF REVENUES

Distribution  Center.  Costs of  goods  sold  through  the  distribution  center
increased  from $25.6 million in the 3rd Quarter of 2001 to $35.4 million in the
3rd Quarter of 2002. The 38% increase is directly  attributable  to the increase
in sales through the distribution center.

Activity  Rebates.  Rebates  increased  from $0.84 million in the 3rd Quarter of
2001 to $1.3 million in the  corresponding  period of 2002.  The 57% increase in
rebates stems from an increase in purchases through our distribution center.

                                       11
<PAGE>

Participation Programs and Fees. Expenses associated with our programs increased
by $15,000 in the 3rd Quarter of 2002  compared to the 3rd Quarter of 2001.  The
8%  increase  in  expenses  is  due  to  a  combination   of  savings  from  the
discontinuance of certain programs countered by significant  expenses associated
with our annual conference in August.

GENERAL AND ADMINISTRATIVE.  General and administrative  expenses held steady at
$1.3 million in the 3rd Quarter of 2002 compared to the 3rd Quarter of 2001. The
expenses  held steady  despite a  substantial  increase in revenues  due to mild
cost-saving measures in various areas.

INCOME FROM OPERATIONS.  Income from operations  increased by $0.34 million from
3rd Quarter 2001 to 3rd Quarter 2002.  This 84.5% increase is attributable to an
increase in  distribution  sales and other  profit  centers,  while  general and
administrative expenses held relatively steady.

INCOME  TAXES.  3rd Quarter 2002 income tax expense  increased by $0.20  million
compared to 3rd Quarter  2001.  The  increase  is  directly  attributable  to an
increase in taxable income of  approximately  $0.33 million for the  comparative
periods.

LIQUIDITY AND CAPITAL RESOURCES

Our capital  requirements  relate  primarily to working  capital for  day-to-day
operations,  including  general  and  administrative  expenses,  maintenance  of
product inventory levels to fulfill our operating  commitment to our members and
membership rebates, which are paid quarterly. Historically, we have financed our
cash requirements from three primary sources: on-going operations,  sales of our
common stock, and borrowings under our line of credit.

For the nine months ending September 30, 2002:

     *Net cash provided by (used by) operations was ($0.12 million), compared to
          ($1.24  million) for the same period in 2001. The decrease in 2002 was
          primarily  due to a  substantial  increase in  inventories,  partially
          offset by an  increase in  accounts  payable.  An increase in accounts
          receivable and income taxes also contributed to the net consumption of
          cash by operations. The decrease for the first nine months of 2001 was
          attributable   to  significant   increases  in  accounts   receivable,
          inventories,  and income taxes.  A net inflow of cash from  decreasing
          accounts receivable through incentives plans offset a large portion of
          the outflow.  We  anticipate  that these trends will continue as sales
          continue to increase.

     *Net cash  (used  by)  investing  activities  was  ($55,000),  compared  to
          ($11,000) in the same period in 2001,  primarily  attributable  to the
          purchase of property and equipment.

     *Net cash  provided  by (used  by)  financing  activities  was  ($143,000),
          compared to ($33,000)  for the same period in 2001.  The usage of cash
          was primarily for the purchase of common stock.  Also  contributing to
          the usage of cash were payments on long-term  debt. We anticipate  the
          selling of stock sometime in the 4th Quarter of 2002.

We have a $3  million  line of  credit  (the  "Credit  Agreement")  with Bank of
America,  N.A.  that  expires  on June 30,  2003.  Borrowings  under the  Credit
Agreement  bear  interest  at the  lender's  prime  rate,  which was 4.75% as of
September 30, 2002. The Credit  Agreement  imposes  certain  requirements on us,
including the maintenance of a minimum  tangible net worth. We accessed our line
of credit from time to time during the first nine months of 2002, but no amounts
were  outstanding  under the Credit  Agreement as of September  30, 2002. We are
renegotiating  our line of credit with the same  institution and anticipate that
the line  will be  increased  to $5  million  with a  seasonal  extension  of an
additional  $2 million  that can be borrowed  between  November 1st and February
1st.

                                       12
<PAGE>

Cash and cash  equivalents  as of September  30, 2002 were down by $0.32 million
from the  beginning  of the year to $0.29  million.  This is also lower than the
cash and cash  equivalents  balance as of September  30,  2001,  which was $0.45
million.  We believe that our cash equivalents as of September 30, 2002, amounts
available  under the Credit  Agreement,  amounts  raised through the sale of our
common stock and operating cash flows will be sufficient to meet our anticipated
capital  expenditure  requirements  and operating  expenses at least through the
next 12 months.  Currently, our anticipated expenditures are composed of ongoing
day-to-day  operations,  including normal general and  administrative  expenses,
maintenance  of adequate  inventory  levels to satisfy  our  product  orders and
income taxes. If sales through our distribution center continue to grow, we will
be using  significant  portions  of our  capital  going  forward to support  the
product  inventory  levels  required for the higher sales volume.  Except as set
forth above,  we do not currently  anticipate  incurring any expenses or capital
expenditures outside the ordinary course of business.

Because we are registered under the Securities Exchange Act of 1934, our ability
to issue additional shares is more limited because certain securities exemptions
previously  relied on by us are not  available to issuers  registered  under the
Exchange  Act.  Accordingly,  any further  issuances of common stock may require
registration  under the Securities  Act of 1933,  making it more costly and time
consuming  to issue  shares.  To the extent we are unable to renew our  existing
Credit  Agreement or obtain a new bank line of credit or raise funds through the
sale of common  stock,  our ability to increase or maintain our current level of
operations,  including product inventory levels, may be diminished. In addition,
we may  not be  able  to  obtain  additional  capital  in  adequate  amounts  or
acceptable  terms to meet the demands of our business in the future.  This would
have an adverse effect on our operations and financial condition.

FORWARD LOOKING STATEMENTS

This  report   contains   forward-looking   statements   based  on  our  current
expectations  and  assumptions  regarding our business and our industry.  Actual
results  may differ  materially  from those  described  in the  forward  looking
statements  and will be  affected  by a  variety  of known  and  unknown  risks,
uncertainties and other factors.

                                       13
<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are exposed to market risks primarily from changes in U.S. interest rates. We
do not engage in financial transactions for trading or speculative purposes.

The interest payable on our Credit Agreement is based on variable interest rates
and is  therefore  affected  by changes in market  interest  rates.  While as of
September 30, 2002, no amounts were outstanding under the Credit  Agreement,  to
the  extent  interest  rates  rise when we do  borrow  money  under  the  Credit
Agreement, our interest expense will increase.

ITEM 4.  CONTROLS AND PROCEDURES.

(a)   Evaluation of Disclosure Controls and Procedures
      ------------------------------------------------

          The term  "disclosure  controls  and  procedures"  is defined in Rules
     13a-14(c) and 15d-14(c) of the  Securities  Exchange Act of 1934  (Exchange
     Act).  These rules refer to the controls and other  procedures of a company
     that are designed to ensure that information  required to be disclosed by a
     company in the reports  that it files under the  Exchange  Act is recorded,
     processed,  summarized and reported within required time periods. Our Chief
     Executive  Officer  and our Chief  Financial  Officer  have  evaluated  the
     effectiveness of our disclosure controls and procedures as of a date within
     90 days before the filing of this quarterly  report (the Evaluation  Date),
     and they have concluded that, as of the Evaluation  Date, such controls and
     procedures  were  effective at ensuring that required  information  will be
     disclosed on a timely basis in our reports filed under the Exchange Act.

(b)   Changes in Internal Controls
      ----------------------------

          We maintain a system of internal accounting controls that are designed
     to  provide  reasonable  assurance  that our books and  records  accurately
     reflect our transactions  and that our established  policies and procedures
     are  followed.  For the quarter  ended  September  30, 2002,  there were no
     significant changes to our internal controls or in other factors that could
     significantly affect our internal controls.

                                       14
<PAGE>
                           PART II - OTHER INFORMATION

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

The regular  meeting of the  Shareholders  of the Company was held on August 17,
2002. The following two items were voted on by the shareholders.

     1)   The  individuals  named below were elected at the meeting as directors
          of the Company.



                                       Votes         Term of       Class of
       Director          Votes        Against       Years(s)       Director
       --------          -----        -------       --------       --------
                          For         Abstain*
                          ---         --------
Charles M. Miller         423            0          Two years         II
                                        25*
John Raniero              423            0          Two years         II
                                        25*
Gary Foster               423            0          Two years         II
                                        25*
Steve Stephenson          423            0         Three years        III
                                        25*
Carlos Solis              423            0         Three years        III
                                        25*
David Dubose              423            0         Three years        III
                                        25*


     2)   House Park & Dobratz,  P.C. was ratified as our  independent  auditors
          for the fiscal year beginning January 1, 2003. There were 423 votes in
          favor of said resolution, 0 votes against it, and 27 abstentions.

                                       15
<PAGE>

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

         (a)  Exhibits

         The following exhibits are filed as part of this report.

               1.  Quarterly  Certification  Pursuant  to  Section  302  of  the
               Sarbanes-Oxley  Act  of  2002,  signed  by  the  Chief  Executive
               Officer.

               2.  Quarterly  Certification  Pursuant  to  Section  302  of  the
               Sarbanes-Oxley  Act  of  2002,  signed  by  the  Chief  Financial
               Officer.

          Exhibit  numbers  refer to the  paragraph  numbers  under  Item 601 of
          Regulation S-K:

               2.1.  Agreement and Plan of Reorganization  among the registrant,
               Texas Pharmacy Co-op, Inc. and Pharmacy Consolidation Corp. dated
               November  3,  2000   (incorporated   by   reference  to  Form  10
               Registration  Statement  filed April 30, 2002 with the Securities
               and Exchange  Commission  by Pharmacy  Buying  Association,  Inc.
               (Commission File No. 000-49785)).

               3.1. Articles of Incorporation of the registrant (incorporated by
               reference to Form 10 Registration  Statement filed April 30, 2002
               with the  Securities and Exchange  Commission by Pharmacy  Buying
               Association, Inc. (Commission File No. 000-49785)).

               3.2.  Amendment to Articles of  Incorporation  of the  registrant
               (incorporated  by  reference  to Form 10  Registration  Statement
               filed April 30, 2002 with the Securities and Exchange  Commission
               by  Pharmacy  Buying  Association,   Inc.  (Commission  File  No.
               000-49785)).

               3.3.  Second  Amended  and  Restated  Bylaws  of  the  registrant
               (incorporated  by  reference  to Form 10  Registration  Statement
               filed April 30, 2002 with the Securities and Exchange  Commission
               by  Pharmacy  Buying  Association,   Inc.  (Commission  File  No.
               000-49785)).

               4.1.   Specimen  Common  Stock   Certificate  of  the  registrant
               (incorporated  by  reference  to Form 10  Registration  Statement
               filed April 30, 2002 with the Securities and Exchange  Commission
               by  Pharmacy  Buying  Association,   Inc.  (Commission  File  No.
               000-49785)).

               4.2.  Article VIII of the Second  Amended and Restated  Bylaws of
               the  registrant,  which  defines  the  rights of  holders  of the
               securities being registered (included in Exhibit 3.3 above).

               10.1.  Employment Agreement between the registrant and Nick Smock
               dated  November  29, 2000  (incorporated  by reference to Form 10
               Registration  Statement  filed April 30, 2002 with the Securities
               and Exchange  Commission  by Pharmacy  Buying  Association,  Inc.
               (Commission File No. 000-49785)).

               10.2. Net Lease dated May 18, 2001 between the registrant and Bob
               Campbell  d/b/a Shady  Properties  (incorporated  by reference to
               Form 10  Registration  Statement  filed  April 30,  2002 with the
               Securities   and   Exchange   Commission   by   Pharmacy   Buying
               Association, Inc. (Commission File No. 000-49785)).

               10.3.  Lease  Agreement dated July 7, 1999 between the registrant
               and Enterprise Properties,  L.L.C.  (incorporated by reference to
               Form 10  Registration  Statement  filed  April 30,  2002 with

                                       16
<PAGE>

               the  Securities  and  Exchange   Commission  by  Pharmacy  Buying
               Association, Inc. (Commission File No. 000-49785)).

               10.4.  First  Amendment  to Lease  dated  April 4,  2000  between
               registrant and Enterprise  Properties,  L.L.C.  (incorporated  by
               reference to Form 10 Registration  Statement filed April 30, 2002
               with the  Securities and Exchange  Commission by Pharmacy  Buying
               Association, Inc. (Commission File No. 000-49785)).

               10.5.  Improved  Property  Commercial  Lease dated August 1, 2000
               between   Texas   Pharmacy   Co-op,   Inc.  and  Carl  A.  Parker
               (incorporated  by  reference  to Form 10  Registration  Statement
               filed April 30, 2002 with the Securities and Exchange  Commission
               by  Pharmacy  Buying  Association,   Inc.  (Commission  File  No.
               000-49785)).

         (b)  Reports on Form 8-K

               The  Company did not file a report on Form 8-K during the quarter
               for which this report is filed.

                                       17
<PAGE>
                                   SIGNATURES

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



                                              PHARMACY BUYING ASSOCIATION, INC.


Date:  November 14, 2002                      By:   /s/  Nick Smock
                                                   -----------------------------
                                                   Nick Smock, President, Chief
                                                   Executive Officer

                                       18
<PAGE>
                                                                       EXHIBIT 1

                             QUARTERLY CERTIFICATION
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Nickolas R. Smock, certify that:

1. I have  reviewed  this  quarterly  report  on Form  10-Q of  Pharmacy  Buying
Association, Inc;

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;

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 the
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
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

19
<PAGE>

internal  controls  subsequent  to the  date  of  our  most  recent  evaluation,
including any  corrective  actions with regard to significant  deficiencies  and
material weaknesses.

Date:  November 14, 2002


      /s/ Nick Smock
      -------------------------------------
      Nickolas R. Smock
      Chief Executive Officer

                                       20
<PAGE>
                                                                       EXHIBIT 2

                             QUARTERLY CERTIFICATION
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Donald E. Raby II, certify that:

1. I have  reviewed  this  quarterly  report  on Form  10-Q of  Pharmacy  Buying
Association, Inc.;

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;

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 the
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
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

                                       21
<PAGE>

internal  controls  subsequent  to the  date  of  our  most  recent  evaluation,
including any  corrective  actions with regard to significant  deficiencies  and
material weaknesses.


Date:  November 14, 2002


      /s/ Don Raby
      ---------------------------------
      Donald E. Raby II
      Chief Financial Officer


                                       22