<PAGE>
                       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 December 31, 2001

                                       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 No. 0-19842
                                               -------

                             POLYMEDICA CORPORATION
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)


            MASSACHUSETTS                                      04-3033368
   ------------------------------                          ------------------
   State or other jurisdiction of                           (I.R.S. Employer
   incorporation or organization                           Identification No.)

  11 STATE STREET, WOBURN, MASSACHUSETTS                         01801
------------------------------------------                    ----------
 (Address of principal executive offices)                     (Zip Code)

  Registrant's telephone number, including area code        (781) 933-2020
                                                            --------------


         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
                                                ---        ---

         As of February 13, 2002, there were 12,091,500 shares of the
registrant's Common Stock outstanding and an additional 1,208,977 shares held in
treasury.


<PAGE>
                             POLYMEDICA CORPORATION
                                TABLE OF CONTENTS

                                                                          PAGE
                                                                          ----
PART I  -  FINANCIAL INFORMATION

Item 1  -  Financial Statements

              Consolidated Balance Sheets as of
                       December 31 (unaudited) and March 31, 2001           3

              Unaudited Consolidated Statements of Operations
                       for the three and nine months ended
                       December 31, 2001 and 2000                           5

              Unaudited Consolidated Statements of Cash Flows
                       for the nine months ended
                       December 31, 2001 and 2000                           6

              Notes to Consolidated Financial Statements                    7

Item 2  -  Management's Discussion and Analysis of Financial
             Condition and Results of Operations                           14

Item 3  -  Quantitative and Qualitative Disclosures About Market
             Risk                                                          29

PART II -  OTHER INFORMATION

Item 1 -   Legal Proceedings                                               30

Item 6  -  Exhibits and Reports on Form 8-K                                31

Signatures                                                                 32

Exhibit Index                                                              33


                                       2


<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS


                             POLYMEDICA CORPORATION
                           CONSOLIDATED BALANCE SHEETS
               (In thousands, except share and per share amounts)


<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                                     2001            MARCH 31,
                                                                  (UNAUDITED)          2001
                                                                  ------------       ---------
<S>                                                             <C>                <C>
ASSETS

Current assets:
      Cash and cash equivalents                                    $ 28,253           $ 39,571
      Accounts receivable (net of allowances of
         $15,561 and $13,729 as of December 31 and
         March 31, 2001, respectively)                               38,793             31,969
      Inventories                                                    22,586             22,791
      Deferred tax asset                                              9,558              9,558
      Prepaid expenses and other
         current assets                                               2,118              1,073
                                                                   --------           --------

              Total current assets                                  101,308            104,962

Property, plant and equipment, net                                   30,048             22,199
Intangible assets, net                                               31,015             32,723
Direct response advertising, net                                     49,538             39,940
Other assets                                                          1,165              1,740
                                                                   --------           --------

              Total assets                                         $213,074           $201,564
                                                                   ========           ========
</TABLE>



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

                                       3

<PAGE>

                             POLYMEDICA CORPORATION
                           CONSOLIDATED BALANCE SHEETS
               (In thousands, except share and per share amounts)


<TABLE>
<CAPTION>
                                                                     DECEMBER 31,
                                                                        2001           MARCH 31,
                                                                     (UNAUDITED)         2001
                                                                     ------------      ---------

<S>                                                                    <C>              <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                                   $ 11,519         $ 13,118
    Amounts due to Medicare                                               4,900               --
    Accrued expenses                                                     12,496            8,277
    Current portion, capital lease obligations                              699              587
                                                                       --------         --------

              Total current liabilities                                  29,614           21,982

Long-term capital lease and other obligations                             1,299            2,576
Deferred income taxes                                                    17,551           17,551
                                                                       --------         --------

              Total liabilities                                          48,464           42,109

Minority interest                                                         1,217              805
Commitments and contingencies (Note 14)

Shareholders' equity:
      Preferred stock, $0.01 par value; 2,000,000 shares
        authorized, none issued or outstanding                               --               --
      Common stock, $0.01 par value; 50,000,000 shares
        authorized; 13,300,477 and 13,275,993 shares issued as of
        December 31 and March 31, 2001, respectively                        133              133
      Treasury stock, at cost (1,188,977 and 205,325 shares
        as of December 31 and March 31, 2001, respectively)             (23,013)          (5,526)
      Additional paid-in capital                                        119,088          118,710
      Retained earnings                                                  67,185           45,333
                                                                       --------         --------

              Total shareholders' equity                                163,393          158,650
                                                                       --------         --------

              Total liabilities and shareholders' equity               $213,074         $201,564
                                                                       ========         ========

</TABLE>


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

                                       4


<PAGE>

                             POLYMEDICA CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>

                                                          THREE MONTHS ENDED                   NINE MONTHS ENDED
                                                        DEC. 31,         DEC. 31,           DEC. 31,        DEC. 31,
                                                          2001             2000               2001            2000
                                                        --------         --------           -------         --------

<S>                                                     <C>              <C>               <C>              <C>
Net revenues                                            $72,696          $56,403           $204,568         $161,012

Cost of sales                                            25,507           19,121             70,327           57,597
                                                        -------          -------           --------         --------

Gross margin                                             47,189           37,282            134,241          103,415

Selling, general and administrative
  expenses                                               33,259           25,010             99,223           70,776
                                                        -------          -------           --------         --------

Income from operations                                   13,930           12,272             35,018           32,639

Other income and expense:
   Investment income, net                                   221              737                995            2,103
   Interest expense                                         (40)             (51)              (127)            (199)
   Other income and expense                                   1               61                 --               (1)
   Minority interest                                       (272)            (217)              (412)            (421)
                                                        -------          -------           --------         --------
                                                            (90)             530                456            1,482

Income before income taxes                               13,840           12,802             35,474           34,121
Income tax provision                                      5,315            4,775             13,622           12,727
                                                        -------          -------           --------         --------

Income before cumulative effect of change in
  accounting principle                                    8,525            8,027             21,852           21,394

Cumulative effect of change in accounting
  principle, net of taxes of $4,121                          --               --                 --           (6,926)
                                                        -------          -------           --------         --------

Net income                                              $ 8,525          $ 8,027            $21,852         $ 14,468
                                                        =======          =======            =======         ========

Net income per weighted average share before
  cumulative effect of change in accounting
  principle:

    Basic                                               $   .69          $   .61            $  1.73         $   1.63
    Diluted                                             $   .68          $   .59            $  1.69         $   1.57

Cumulative effect of change in accounting
  principle:

    Basic                                               $    --          $    --            $    --         $   (.53)
    Diluted                                             $    --          $    --            $    --         $   (.51)

Net income per weighted average share:

    Basic                                               $   .69          $   .61            $  1.73         $   1.10
    Diluted                                             $   .68          $   .59            $  1.69         $   1.06

    Weighted average shares, basic                       12,269           13,214             12,635           13,176

    Weighted average shares, diluted                     12,492           13,643             12,908           13,627

</TABLE>

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

                                       5
<PAGE>

                             POLYMEDICA CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                                 NINE MONTHS ENDED
                                                                                                    DECEMBER 31,
                                                                                              2001             2000
                                                                                            --------         --------
<S>                                                                                         <C>              <C>
Cash flows from operating activities:
    Net income                                                                              $ 21,852         $ 14,468
    Adjustments to reconcile net income to net cash flows:
        Depreciation and amortization excluding direct-response advertising
           amortization                                                                        4,156            3,839
        Amortization of direct-response advertising                                           21,979           13,737
        Direct-response advertising                                                          (31,577)         (23,203)
        Minority interest                                                                        412              350
        Provision for bad debts                                                               15,539           10,818
        Provision for sales allowances                                                         9,097            8,572
        Provision for inventory obsolescence                                                     443            1,740
        Loss on investments                                                                       --              357
        Changes in assets and liabilities:
           Accounts receivable                                                               (31,460)          (8,340)
           Inventories                                                                          (238)         (13,424)
           Prepaid expenses and other assets                                                  (1,250)             359
           Accounts payable                                                                   (1,599)          (1,795)
           Amounts due to Medicare                                                             4,900               --
           Accrued expenses and other long-term liabilities                                    5,097            2,910
                                                                                            --------         --------

                Total adjustments                                                             (4,501)          (4,080)
                                                                                            --------         --------

                Net cash flows from operating activities                                      17,351           10,388
                                                                                            --------         --------

Cash flows from investing activities:
    Purchase of marketable securities                                                         (5,499)         (20,300)
    Proceeds from sale of marketable securities                                                5,499           20,300
    Investment in other assets                                                                    --             (200)
    Proceeds from sale of certain assets                                                          22              400
    Purchase of property, plant and equipment                                                 (9,976)          (6,305)
                                                                                            --------         --------

                Net cash flows from investing activities                                      (9,954)          (6,105)
                                                                                            --------         --------

Cash flows from financing activities:
    Proceeds from issuance of common stock                                                       515            2,224
    Repurchase of common stock                                                               (17,625)          (3,831)
    Contributions to deferred compensation plans                                              (1,125)          (1,277)
    Payment of obligations under capital leases                                                 (480)            (391)
    Repayment of note payable                                                                     --           (1,382)
                                                                                            --------         --------

                Net cash flows from financing activities                                     (18,715)          (4,657)
                                                                                            --------         --------

                Net decrease in cash and cash equivalents                                    (11,318)            (374)

                Cash and cash equivalents at beginning of period                              39,571           40,687
                                                                                            --------         --------

                Cash and cash equivalents at end of period                                  $ 28,253         $ 40,313
                                                                                            ========         ========

Supplemental disclosure of cash flow information:
    Receipt of notes receivable from sale of certain assets                                 $     --         $  1,213
    Assets purchased under capital lease                                                         323              116

</TABLE>

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

                                       6
<PAGE>


                             POLYMEDICA CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.       The unaudited consolidated financial statements included herein have
been prepared by PolyMedica Corporation ("PolyMedica" or the "Company") pursuant
to the rules and regulations of the Securities and Exchange Commission (the
"SEC") and include, in the opinion of management, all adjustments, consisting of
normal, recurring adjustments, necessary for a fair presentation of interim
period results. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The results for the interim periods presented are not necessarily
indicative of results to be expected for the full fiscal year. It is suggested
that these interim consolidated financial statements be read in conjunction with
the audited consolidated financial statements included in the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 2001, and its unaudited
consolidated financial statements included in the Company's Quarterly Reports on
Form 10-Q for the periods ended June 30 and September 30, 2001.

        The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain 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 reported
period. Estimates and judgments are used for, but not limited to, determination
of appropriate Medicare reimbursement rates, the allowance for doubtful accounts
and sales returns, valuation of inventory, accrued expenses and depreciation and
amortization. Actual results could differ from those estimates. In addition,
certain amounts in the prior period financial statements have been reclassified
to conform with the current period presentation.

2.       In December 1999, the SEC issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements", subsequently updated by SAB 101A
and SAB 101B ("SAB 101"). SAB 101 summarizes certain areas of the Staff's views
in applying generally accepted accounting principles to revenue recognition in
financial statements. Prior to the implementation of SAB 101, the Company
recognized revenue upon receipt of a customer order and shipment of the related
product, provided that the required verbal authorizations had been received.
Under the new accounting method adopted retroactive to April 1, 2000, revenue
related to product shipments to customers who have placed orders is recognized
upon shipment, provided that risk of loss has passed to the customer and the
Company has received and verified the required written Authorization of Benefits
and Doctor's Order, to bill Medicare and other third-party payers. The Company
records revenue at amounts expected to be collected from Medicare, other
third-party payers, and directly from customers.

         The Company delays revenue recognition for product shipments for which
the Company has not yet received a written Authorization of Benefits and
Doctor's Order until the period in which those documents are collected and
verified. The cumulative effect of the change in accounting principle on prior
years resulted in a charge to income of $6.93 million (net of income taxes of
$4.12 million), or $0.51 per diluted common share, which was applied
retroactively as of April 1, 2000 and is included in net income for the nine
months ended December 31, 2000.


                                       7
<PAGE>
3.       Approximately $52.74 million and $40.91 million of net revenues for the
three months ended December 31, 2001 and 2000, were reimbursable by Medicare.
Approximately $143.34 million and $116.04 million of net revenues for the nine
months ended December 31, 2001 and 2000, respectively, were reimbursable by
Medicare.

4.       Sales allowances are recorded for estimated product returns using
historical return trends and are recorded as a reduction of revenues. These
allowances are adjusted to reflect actual returns and collection history. During
the three months ended December 31, 2001 and 2000, the Company provided for
sales allowances at a rate of approximately 4.3% and 4.6% of gross revenues,
respectively. During the nine months ended December 31, 2001 and 2000, the
Company provided for sales allowances at a rate of approximately 4.3% and 5.1%
of gross revenues, respectively.

5.       Inventories consist of the following:

         (In thousands)

                                                December 31,       March 31,
                                                   2001              2001
                                                ------------       ---------
Raw materials                                     $   409           $   685
Work in process                                       712               783
Finished goods                                     21,465            21,323
                                                  -------           -------
                                                  $22,586           $22,791
                                                  =======           =======

         Due to the medical nature of the products the Company provides,
customers sometimes request supplies before the Company has received the
required written forms to bill Medicare and other third-party payers. As a
result, included in inventories as of December 31 and March 31, 2001, is $4.57
million and $6.07 million, respectively, of inventory shipped to customers for
which the Company has received an order but has not yet received the required
written documents to bill Medicare and other third-party payers and recognize
revenue.

6.       Included in other assets are restricted investments of $867,000 and
$1.63 million as of December 31 and March 31, 2001, respectively, which
represent amounts set aside by the Company under executive deferred compensation
plans (the "Plans"). The related liability is included in long-term liabilities
("long-term capital lease and other obligations" as captioned on the balance
sheet). Changes in the fair value of investments held in the Plans are recorded
as investment income or loss ("investment income, net" as captioned on the
statement of operations) with a corresponding adjustment to compensation expense
and to other assets and long-term liabilities ("long-term capital lease and
other obligations" as captioned on the balance sheet). As of December 31, 2001,
the fair value of these investments was not materially different from cost. In
the nine months ended December 31, 2001, $1.88 million was paid directly to
certain beneficiaries from the plans. Amounts set aside for the Plans in the
nine months ended December 31, 2001 approximated $1.13 million.

         The investments held in the Plans, which are accounted for pursuant to
Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" have been classified as
trading, are included in other assets and are recorded at fair value.


                                       8
<PAGE>
7.       Amortization of goodwill for the nine months ended December 31, 2001
was $1.51 million. In July 2001, the Financial Accounting Standards Board
("FASB") issued SFAS No. 141, "Business Combinations" and SFAS No. 142,
"Goodwill and Other Intangible Assets." SFAS No. 141 requires that all business
combinations be accounted for under the purchase method only and that certain
acquired intangible assets in a business combination be recognized as assets
apart from goodwill. SFAS No. 142 requires that ratable amortization of goodwill
be replaced with tests of the goodwill's impairment at various periods,
specifically upon the adoption of SFAS No. 142, annually, and as a result of a
specific event or activity, and that intangible assets other than goodwill be
amortized over their useful lives. SFAS No. 141 is effective for all business
combinations initiated after June 30, 2001 and for all business combinations
accounted for by the purchase method for which the date of acquisition is after
June 30, 2001. The provisions of SFAS No. 142 will be effective for fiscal years
beginning after December 15, 2001, and will thus be adopted by the Company, as
required, on April 1, 2002. The adoption of SFAS No. 142 could have a material
impact on the Company's financial statements, as the Company will replace
ratable amortization of goodwill with periodic impairmant tests. Impairment
tests performed under SFAS No. 142 could indicate an impairment loss that would
need to be recorded as a cumulative effect of a change in accounting principle
in fiscal 2003. The Company has not yet determined what effect these impairment
tests will have on the Company's financial statements.

         In August 2001, the FASB issued SFAS No. 143 "Accounting for
Obligations Associated with the Retirement of Long-Lived Assets." The provisions
of SFAS No. 143 apply to all entities that incur obligations associated with the
retirement of tangible long-lived assets. SFAS No. 143 is effective for
financial statements issued for fiscal years beginning after June 15, 2002, and
will thus be adopted by the Company, as required, in fiscal 2004. The impact of
SFAS No. 143 on the Company's financial statements has not yet been determined.

         In October 2001 the FASB issued SFAS No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 provides guidance on
the accounting for the impairment on disposal of long-lived assets. The
objectives of SFAS No. 144 are to address significant issues relating to the
implementation of SFAS No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of", and to develop a single
model (based on the framework established in SFAS No. 121) for long-lived assets
to be disposed of by sale, whether previously held and used or newly acquired.
SFAS No. 144 is effective for financial statements issued for fiscal years
beginning after December 15, 2001 and thus will be adopted by the Company, as
required, in fiscal 2003. Generally, its provisions are to be applied
prospectively. The impact of SFAS No. 144 on the Company's financial statements
has not yet been determined.

8.       In accordance with Statement of Position 93-7 ("SOP 93-7"), the Company
incurred and capitalized direct-response advertising of $10.49 million and $6.88
million in the three months ended December 31, 2001 and 2000, respectively. The
Company expensed in the period all other advertising incurred. A total of $8.00
million and $5.23 million in direct-response advertising was amortized and
charged to selling, general and administrative expenses for the three months
ended December 31, 2001 and 2000, respectively. A total of $31.58 million and
$23.20 million of direct-response advertising was capitalized in the nine months
ended December 31, 2001 and 2000, respectively. A total of $21.98 million and
$13.74 million was amortized and charged to selling, general and administrative
expenses for the nine months ended December 31, 2001 and 2000, respectively.
Management assesses the realizability of the amounts of direct-response
advertising costs reported as assets at each balance sheet date by comparing the
carrying amounts of such assets to the probable remaining future net benefits
expected to result directly from such advertising.


                                       9
<PAGE>
         Any change in existing accounting rules or business change that reduces
revenues or earnings or that shortens or eliminates the amortization period of
our direct-response advertising costs, currently four years for our diabetes
products and two years for our respiratory products, could result in accelerated
charges against our earnings.

9.       In September 2000, the Company sold certain assets of its thermometry
and compliance products business which were included in the Consumer Healthcare
segment. Under the terms of the sale, the purchaser paid the Company $300,000 in
cash and issued to the Company a promissory note in the face amount of $1.12
million at an interest rate of 7%, maturing September 20, 2003. In March 2001,
the Company accepted $900,000 as final settlement of this note in consideration
of the financial position of the borrower.

10.      Amounts due to Medicare of $4.90 million as of December 31, 2001,
represent probable maximum amounts due to Medicare related to a change in
interpretation of the reimbursement formula for albuterol and ipratropium
combinations used in the Company's Professional Products segment. Beginning
September 6, 2001 through February 11, 2002, the Company received administrative
overpayment notices from one Durable Medical Equipment Regional Carrier
("DMERC") totaling approximately $953,000 relating to this reimbursement
formula. DMERCs are private insurance companies used by Medicare to administer
reimbursement payments. Since September 1999, PolyMedica has been reimbursed by
all four DMERCs based on its earlier interpretation of the reimbursement formula
and previously had received no administrative overpayment notices disputing that
formula. The liability of $4.90 million is the remaining difference between
reimbursement under the two interpretations of the reimbursement formula for all
relevant transactions and assumes that the other three DMERCs issue similar
administrative overpayment notices. The Company is processing administrative
overpayment notices as received and refunds are being issued. Since the Company
fully reserved for these items in the quarter ended September 30, 2001 there
were no additional charges to income during the quarter ended December 31, 2001.

11.      Minority interest on the Consolidated Balance Sheets of $1.22 million
and $805,000 as of December 31 and March 31, 2001, respectively, represents the
ownership interests in certain subsidiaries of the Company purchased and held by
certain Company executives. The minority interest amounts in the Consolidated
Statements of Operations of $272,000 and $217,000 for the three months ended
December 31, 2001 and 2000, respectively, and $412,000 and $421,000 for the nine
months ended December 31, 2001 and 2000, respectively, represent the percentage
of these subsidiaries' results allocated to these minority interests. These
minority interests were reacquired by the respective subsidiaries subsequent to
December 31, 2001 at no cost. As a result of these transactions, there were no
outstanding minority interests in any of the Company's subsidiaries as of
February 12, 2002.

12.      The Company has three reportable segments:

         Chronic Care - The Company sells diabetes supplies and related products
through its Chronic Care segment. The Company offers a wide array of diabetes
products from a full range of name-brand manufacturers, contacts the patient's
doctor to obtain the required prescription information and written
documentation, files the appropriate insurance forms and bills Medicare and
private insurers



                                       10
<PAGE>
directly. This service frees the patient from paying for his or her chronic
disease-related upfront expenses and offers the convenience of free home
delivery of supplies.

         Professional Products - The Company sells respiratory products to
Medicare-eligible seniors and develops, manufactures, and distributes
prescription urology and suppository products through its Professional Products
segment.

         Consumer Healthcare - The Company offers the AZO line of products which
includes over-the-counter female urinary tract discomfort products and home
medical diagnostic kits; and, until September 2000, was a distributor of
private-label and branded digital thermometers through its Consumer Healthcare
segment. In September 2000, the Company sold certain assets of its Consumer
Healthcare segment. See Note 9 for information on the sale.

         Depreciation and amortization expense attributable to the Company's
corporate headquarters is allocated to the operating segments according to the
segments' relative percentage of total revenues. However, segment assets
belonging to the Company's corporate headquarters are not allocated, as they are
considered separately for management evaluation purposes. As a result of these
allocations, the segment information may not be indicative of the financial
position or results of operations that would have been achieved had these
segments operated as unaffiliated entities. The depreciation and amortization
amounts below include amortization of direct-response advertising. The Company
does not organize its units geographically, as its products and services are
sold throughout the United States only. There are no intersegment sales for the
periods presented. Information concerning the operations in these reportable
segments is as follows:

<TABLE>
<CAPTION>
                                                                    Three months ended                      Nine months ended
                                                               Dec. 31,            Dec. 31,            Dec. 31,           Dec. 31,
(In thousands)                                                   2001                2000                2001               2000
                                                              ---------           ---------           ---------           ---------

<S>                                                           <C>                 <C>                 <C>                 <C>
NET REVENUES:
Chronic Care                                                  $  54,998           $  43,405           $ 155,155           $ 122,653
Professional Products                                            15,957              11,231              43,678              30,437
Consumer Healthcare                                               1,741               1,767               5,735               7,922
                                                              ---------           ---------           ---------           ---------
Total                                                         $  72,696           $  56,403           $ 204,568           $ 161,012
                                                              =========           =========           =========           =========

DEPRECIATION AND AMORTIZATION:
Chronic Care                                                  $   4,951           $   3,831           $  13,892           $  10,818
Professional Products                                             4,505               2,732              12,241               6,732
Consumer Healthcare                                                   1                --                     2                  26
                                                              ---------           ---------           ---------           ---------
Total                                                         $   9,457           $   6,563           $  26,135           $  17,576
                                                              =========           =========           =========           =========

INCOME BEFORE INCOME TAXES:
Chronic Care                                                  $   9,259           $   9,214           $  27,080           $  25,215
Professional Products                                             3,981               2,727               6,058               8,972
Consumer Healthcare                                                 600                 861               2,336                 (66)
                                                              ---------           ---------           ---------           ---------
Total                                                         $  13,840           $  12,802           $  35,474           $  34,121
                                                              =========           =========           =========           =========
</TABLE>


                                       11


<PAGE>

<TABLE>
<CAPTION>
                                                               Dec. 31,            March 31,
                                                                 2001                2001
                                                               --------           ----------
SEGMENT ASSETS:
<S>                                                            <C>                 <C>
Chronic Care                                                   $123,225            $ 97,559
Professional Products                                            58,002              56,158
Consumer Healthcare                                               1,812               1,611
Corporate Headquarters                                           30,035              46,236
                                                               --------            --------
Total                                                          $213,074            $201,564
                                                               ========            ========
</TABLE>


13.      In June 2000, the Company's Board of Directors authorized the
repurchase of up to 1,000,000 shares of the Company's common stock on the open
market, with any shares repurchased to be held in treasury. In August 2001, the
Company's Board of Directors authorized the repurchase of an additional
1,000,000 shares. In the quarter ended December 31, 2001, 225,000 shares were
repurchased under the August 2001 authorized share repurchase program for $4.27
million. As of December 31, 2001, 1,226,000 shares had been repurchased under
these programs for an aggregate of $24.26 million. From January 1, 2002 to
February 13, 2002, 20,000 shares were repurchased under the August 2001
authorized share repurchase program for $378,000. As of February 13, 2002,
1,246,000 shares had been repurchased under these programs for an aggregate of
$24.64 million. As of February 13, 2002, 754,000 shares remain authorized for
repurchase under the August 2001 authorized share repurchase program.

14.      The Company is subject to risks and uncertainties common to companies
in the healthcare industry, including but not limited to, receipt of third-party
healthcare reimbursement, and compliance with government regulations. The
regulations that govern Medicare reimbursement are complex and our compliance
with these regulations may be reviewed by federal agencies and third-party
reimbursement organizations. The U.S. Attorney's Office for the Southern
District of Florida, with the assistance of the Federal Bureau of Investigation
("FBI") and Department of Health & Human Services' Office of Inspector General
("OIG"), is conducting investigations of alleged healthcare fraud by Liberty
Medical Supply, Inc. ("Liberty Medical") and Liberty Home Pharmacy Corporation.
Both civil and criminal investigations are being conducted. The SEC is also
conducting a formal investigation of the Company. The Company is cooperating
fully with these investigations. The Company cannot accurately predict the
outcome of these investigations at this time.

         The Company and three of its officers are defendants in a lawsuit
alleging violations of certain sections and rules of the Securities Exchange Act
of 1934 (the "Exchange Act"). In addition, there is a derivative action against
the directors and two officers of the Company in Massachusetts state court
alleging certain breaches of fiduciary duty. The Company, the named officers,
and the Board of Directors believe that they have meritorious defenses to the
claims made against them in the actions in which they are defendants and intend
to contest the claims vigorously. Although the Company does not consider an
unfavorable outcome to the various claims probable, it cannot accurately predict
their ultimate disposition. Please see Item 1 of Part II, Legal Proceedings, for
a more complete description of these claims.

15.      The Company's total net income and comprehensive income were $8.53
million and $8.03 million for the three months ended December 31, 2001 and 2000,
respectively. For the nine months ended December 31, 2001 and 2000, total net
income and comprehensive income were $21.85 million and $14.47 million,
respectively.

                                       12
<PAGE>
16.      Calculations of earnings per share are as follows:

(In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                   Three Months Ended          Nine Months Ended
                                                                                 Dec. 31,      Dec. 31,      Dec. 31,       Dec. 31,
                                                                                   2001          2000          2001          2000
                                                                                 --------      --------      --------      --------

<S>                                                                               <C>           <C>           <C>           <C>
Net income                                                                        $ 8,525       $ 8,027       $21,852       $14,468

BASIC:
Weighted average common stock outstanding, net of treasury stock,
     end of period                                                                 12,269        13,214        12,635        13,176
Net income per weighted average share, basic                                      $   .69       $   .61       $  1.73       $  1.10
                                                                                  =======       =======       =======       =======

DILUTED:
Weighted average common stock outstanding, net of treasury stock,
     end of period                                                                 12,269        13,214        12,635        13,176
Weighted average dilutive common stock equivalents                                    223           429           273           451
                                                                                  -------       -------       -------       -------

Weighted average common stock and dilutive common stock equivalents
     outstanding, net of treasury stock                                            12,492        13,643        12,908        13,627
Net income per weighted average share, diluted                                    $   .68       $   .59       $  1.69       $  1.06
                                                                                  =======       =======       =======       =======
</TABLE>

         Options to purchase 1,380,714 and 652,500 shares of common stock were
outstanding during the three months ended December 31, 2001 and 2000,
respectively, but were not included in the computation of diluted earnings per
share, because the options' exercise prices were greater than the average market
price of the common shares. During the nine months ended December 31, 2001 and
2000, options to purchase 1,031,706 and 0 shares of common stock, respectively,
were outstanding, but were not included in the computation of diluted earnings
per share, because the options' exercise prices were greater than the average
market price of the common shares.



                                       13
<PAGE>

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

OVERVIEW

BUSINESS

         PolyMedica Corporation is a leading provider of direct-to-consumer
specialty medical products and services, conducting business in the Chronic
Care, Professional Products and Consumer Healthcare markets. We sell diabetes
supplies and related products through our Chronic Care segment. We also provide
direct-to-consumer prescription respiratory supplies and services to
Medicare-eligible seniors suffering from chronic obstructive pulmonary disease
("COPD") and market, manufacture and distribute a line of prescription urology
and suppository products through our Professional Products segment. Our AZO
brand holds a leading position in the over-the-counter ("OTC") urinary health
market. Our AZO products are distributed primarily to food and drug retailers
and mass merchandisers nationwide, through our Consumer Healthcare segment.

Chronic Care

         We are a national direct-mail provider of diabetes supplies and related
products through our Chronic Care segment. Since acquiring Liberty Medical
Supply, Inc. ("Liberty Medical") in September 1996, we have devoted a large part
of our resources to the growth of our Chronic Care segment, resulting in
substantial increases in revenues and earnings generated from the segment in
each of the years since 1996.

         We have a database of over 350,000 active Medicare-eligible diabetes
customers, many of whom suffer from other chronic diseases, to whom we sell
name-brand products. We deliver products to customers' homes and bill Medicare
and private insurance directly for those supplies that are reimbursable. We meet
the needs of seniors suffering from these diseases by:

         -        providing mail order delivery of supplies direct to our
                  customers' homes;

         -        billing Medicare and/or private insurance companies directly;

         -        providing 24-hour telephone support to customers; and

         -        using sophisticated software and advanced order fulfillment
                  systems to provide products and support quickly and
                  efficiently.

         In the United States, there are approximately 6.3 million seniors who
have diabetes. With our database of over 350,000 active Medicare-eligible
diabetes customers, we serve approximately 5.6% of the diabetes marketplace.
While many of the 6.3 million seniors with diabetes are covered by managed care
or reside in extended care facilities, we believe that the balance are potential
customers of ours.

                                       14
<PAGE>
Professional Products

         We are a national direct-mail provider of prescription respiratory
supplies and also market, manufacture, and distribute a broad line of
prescription urology and suppository products through our Professional Products
segment. Similar to the service we provide in our Chronic Care segment, we
deliver products to customers' homes and bill Medicare and private insurance
directly for those prescription respiratory supplies that are reimbursable. As a
participating Medicare provider and third-party insurance biller, we provide a
simple, reliable way for seniors to obtain their supplies for respiratory
disease treatment. As of December 31, 2001, we had over 33,000 active customers
for our respiratory disease supplies.

         We also own one of the broadest lines of branded prescription urology
products (excluding anti-infectives). Our urology products include urinary
analgesics, anti-spasmodics, local anesthetics and suppositories. URISED(R) and
CYSTOSPAZ(R) analgesics and anti-spasmodics provide effective symptomatic relief
for urinary pain, burning and spasms. Many urology offices, as well as
hospitals, purchase the local anesthetic ANESTACON(R) for use in diagnostic
procedures and the catheterization process. B&O(R) and AQUACHLORAL(R)
suppositories are used by patients unable to tolerate oral dosages of systemic
analgesics and sedatives. Our primary customers for these urology products are
large drug wholesalers in the United States.

Consumer Healthcare

         Our Consumer Healthcare products are focused on female urinary tract
discomfort products and, until September 2000, included private-label and
branded digital thermometers. In September 2000, we sold certain assets of our
Consumer Healthcare segment, including our thermometry products. See Note 9 in
the financial statements for information on the sale. Our female urinary tract
discomfort products include AZO-STANDARD(R), which provides relief from urinary
tract discomfort, AZO-CRANBERRY(R), a dietary supplement which helps maintain a
healthy urinary tract and AZO TEST STRIPS(R), an in-home urinary tract infection
testing kit which allows patients to call their doctors with testing results. We
also offer AZO MENOPAUSE(TM), a homeopathic botanical product which offers
relief from hot flashes and related menopausal symptoms, AZO YEAST(TM), designed
to provide relief from yeast infections, and AZO PMS(TM), designed to provide
relief from pre-menstrual syndrome.

Growth Strategy

         Our growth strategy includes the following elements:

         -        continue growth in our Chronic Care and Professional Products
                  segments by expanding our customer base and product offerings;

         -        expand non-Medicare initiatives;

         -        add complementary products and businesses.

         New business initiatives, in various stages of development, include
offering mail-order oral prescription drugs and other maintenance medications,
therapeutic footwear for diabetics deemed at risk for developing lower extremity
complications, and a new clinical


                                       15
<PAGE>

laboratory operation expected to offer among other products, an HbA1c diagnostic
test, aimed at improving our customers' health and quality of life.

         Our mail-order oral prescription drug and other maintenance medication
offerings are expected to include oral hypoglycemic agents and other medications
frequently used by diabetics such as allergy relief products, anti-convulsants,
anti-cancer drugs, hormones, cholesterol-lowering agents, osteoporosis
treatments, anti-depressants, thyroid preparation and urinary tract drugs.

Other

         We do not believe our net product sales, in the aggregate, are subject
to material seasonal fluctuations.

         We operate from manufacturing and distribution facilities located in
Massachusetts and Florida. Virtually all of our product sales are denominated in
U.S. dollars.

         Period to period comparisons of changes in net revenues are not
necessarily indicative of results to be expected for any future period.

         On February 12, 2002, all outstanding minority interests in our
subsidiaries previously held by certain Company executives were reacquired by
the respective subsidiaries at no cost. As a result of these transactions, there
were no outstanding minority interests in us or any of our subsidiaries as of
February 12, 2002.

Accounting Policies and Estimates

         The preparation of consolidated financial statements requires us to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates, including
those related to the allowance for sales returns, bad debts, inventories,
goodwill and intangible assets, income taxes, and contingencies and litigation.
We base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.

         In accordance with Statement of Position 93-7, direct response
advertising and associated costs for all periods presented are capitalized and
amortized to selling, general and administrative expenses on an accelerated
basis. Management assesses the realizability of the amounts of direct-response
advertising costs reported as assets at each balance sheet date by comparing the
carrying amounts of such assets to the probable remaining future net benefits
expected to result directly from such advertising.

         Other advertising, promotional, and marketing costs are charged to
earnings in the period in which they are incurred. Promotional and sample costs,
the benefit of which is expected to extend to future periods, are expensed as
the related materials are used.



                                       16
<PAGE>
         Under the change in accounting principle for revenue recognition as
described in Note 2 in the financial statements, we recognize revenue upon
shipment for product sales to customers who have placed orders, provided that
risk of loss has passed to the customer and we have received and verified the
required written authorizations to bill Medicare and other third-party payers.
We record revenue at amounts expected to be collected from Medicare, other
third-party payers, and directly from customers. Revenue recognition is delayed
for shipments for which we have not yet received a written Authorization of
Benefits and Doctor's Order, until the period in which those documents are
collected and verified. This policy represents a change as of April 1, 2000 from
our previous policy of recognizing revenue, when third-party payers were
involved, upon receipt of a customer order and shipment of the related product,
provided that the required verbal authorizations had been received. The
cumulative effect of this change in accounting principle resulted in a one-time
net charge of $6.93 million included in net income for the nine months ended
December 31, 2000.

         Expense items include cost of sales and selling, general and
administrative expenses.

         -        Cost of sales consists primarily of purchased finished goods
                  for sale in our markets and, to a lesser extent, materials and
                  overhead costs for products that we manufacture in our
                  facility and shipping and handling fees; and

         -        Selling, general and administrative expenses consist primarily
                  of expenditures for personnel and benefits, as well as
                  allowances for bad debts, rent, amortization of capitalized
                  direct-response advertising costs and other amortization and
                  depreciation.

Investigations

         The U.S. Attorney's Office for the Southern District of Florida, with
the assistance of the FBI and OIG, is conducting investigations of alleged
healthcare fraud by Liberty Medical and Liberty Home Pharmacy Corporation. Both
civil and criminal investigations are being conducted. The SEC is also
conducting a formal investigation of us. We are cooperating fully with these
investigations. We cannot accurately predict the outcome of these investigations
at this time.

Regulatory Affairs

         The wide-ranging responsibilities of our Regulatory Affairs Department
include monitoring, contract and licensing, quality improvement and development
and review of internal processing and documentation. The monitoring group
actively monitors sales, reorder, and customer service personnel to ensure that
they are complying with Medicare, federal and state regulations, and internal
policies and procedures. The contracts and licensing group is responsible for
obtaining and maintaining all Medicare supplier agreements, Medicare provider
agreements and all federal, state and local licenses, including pharmacy
licenses, necessary to conduct business. The quality improvements and
development group responds to information and documentation requests, and the
internal review group tests Company-wide performance as it pertains to
compliance by sampling, conducting internal audits and reporting findings when
necessary. Although each employee is ultimately responsible for his or her own
conduct, we are committed to maintaining a working environment that fosters
conduct consistent with Medicare and Company policy.


                                       17
<PAGE>
         In August 2001, our Board of Directors appointed an Oversight Committee
("the Committee") consisting of two outside members of the Board of Directors
for the purpose of establishing an independent party to oversee matters
pertaining to the investigations described above and related stockholder
litigation. The Committee is advised on legal matters by Hale and Dorr LLP of
Boston and Greenberg Traurig, LLP of Miami, along with other appropriate
independent advisors. The Committee will continue to play an active role as
these investigations proceed. The Committee's scope includes monitoring our
Regulatory Affairs Department and its compliance program to ensure compliance
with Medicare and internal Company policies.



                                       18
<PAGE>

RESULTS OF OPERATIONS

Three Months Ended December 31, 2001 Compared to Three Months Ended December 31,
2000

         Total net revenues increased 28.9% to $72.70 million in the three
months ended December 31, 2001, as compared with $56.40 million in the three
months ended December 31, 2000. This increase was primarily the result of the
growth in net revenues from our Chronic Care and Professional Products segments,
which increased 26.7% and 42.1%, respectively, in the three months ended
December 31, 2001, as compared with the three months ended December 31, 2000.
See Note 12 in the financial statements for segment information.

         Net revenues in the Chronic Care segment increased 26.7% to $55.00
million in the three months ended December 31, 2001, as compared with $43.40
million in the three months ended December 31, 2000. This growth was due
primarily to new customer sales as a result of our direct-response advertising
spending and recurring shipments to existing customers. We currently expect our
promotional and direct-response advertising spending to continue in order to
further the expansion of our Chronic Care segment. Revenue growth was aided by a
cost of living adjustment implemented by the government for certain durable
medical equipment products and services under the Medicare, Medicaid and SCHIP
Benefits Improvement and Protection Act of 2000, which added 3.7% to the revenue
of many of our Chronic Care segment products. In addition, due to the late
implementation by the government of the January 1, 2001 cost of living
adjustment, which went into effect July 1, 2001, an incremental 3.28% cost of
living adjustment was recorded in the quarter ended December 31, 2001. This
incremental 3.28% cost of living adjustment will not be in effect for future
quarters.

         Net revenues in the Professional Products segment increased 42.1% to
$15.96 million in the three months ended December 31, 2001, as compared with
$11.23 million in the three months ended December 31, 2000. This increase was
primarily due to new customer sales stimulated by direct-response advertising
spending as well as recurring shipments to existing customers. As with our
Chronic Care segment, we currently expect our promotional and direct-response
advertising spending to continue in order to further the expansion of our
Professional Products segment.

         Net revenues from Consumer Healthcare products remained fairly
consistent at $1.74 million in the three months ended December 31, 2001, as
compared with $1.77 million in the three months ended December 31, 2000.

         As a percentage of total net revenues, overall gross margins were 64.9%
in the three months ended December 31, 2001, down from 66.1% in the three months
ended December 31, 2000. This decrease was due primarily to increasing sales
from new business initiatives that have lower margins than the Company's average
and a change in the product mix for our Chronic Care and Professional Products
segments, partially offset by a cost of living adjustment described above, which
added 6.98% to the revenue of many of our Chronic Care segment products in the
quarter ended December 31, 2001 and increased sales in our higher margin
Professional Products segment.

         As a percentage of total net revenues, selling, general and
administrative expenses were 45.8% in the three months ended December 31, 2001,
as compared with 44.3% in the three months ended December 31, 2000. Selling,
general and administrative expenses increased 33.0% in the three months ended
December 31, 2001 to $33.26 million, as compared with $25.01 million in the
three

                                       19
<PAGE>
months ended December 31, 2000. This increase was primarily attributable to
unusual legal and related expenses incurred in the quarter ended December 31,
2001 pertaining to the previously reported ongoing investigations of our Liberty
Medical and Liberty Home Pharmacy subsidiaries. We expect that we will continue
to incur unusual legal and related expenses in the quarter ending March 31,
2002. Total legal and related expenses in the three months ended December 31,
2001 were $2.02 million, as compared with $601,000 in the three months ended
December 31, 2000. Selling, general and administrative expenses further
increased due to an increase in direct-response advertising amortization of
$2.77 million to $8.00 million in the quarter ended December 31, 2001, from
$5.23 million in the quarter ended December 31, 2000.

         Investment income, net decreased 70.0% to $221,000 in the three months
ended December 31, 2001, as compared with $737,000 in the three months ended
December 31, 2000, due primarily to a lower average cash balance and lower
interest rates, partially offset by gains on restricted investments held in the
executive deferred compensation plans. Interest expense decreased 21.7% to
$40,000 in the three months ended December 31, 2001, as compared with $51,000 in
the three months ended December 31, 2000, due primarily to the elimination of
interest expense on Liberty Medical's Port St. Lucie facility mortgage, as a
result of the $1.36 million repayment in December 2000. Changes in the fair
value of investments held in the executive deferred compensation plans are
recorded as investment income or loss ("investment income, net" as captioned on
the statement of operations) with a corresponding adjustment to compensation
expense and to other assets and long-term liabilities ("long-term capital lease
and other obligations" as captioned on the balance sheet).

         Net income increased 6.2% to $8.53 million, or $0.68 per diluted
weighted average share, for the quarter ended December 31, 2001, as compared
with $8.03 million, or $0.59 per diluted weighted average share, for the quarter
ended December 31, 2000. The increase in net income was primarily attributable
to new customer sales as a result of our direct-response advertising and
recurring shipments to existing customers, partially offset by unusual legal and
related expenses recorded during the quarter ended December 31, 2001.

Nine Months Ended December 31, 2001 Compared to Nine Months Ended December 31,
2000

         Total net revenues increased 27.1% to $204.57 million in the nine
months ended December 31, 2001, as compared with $161.01 million in the nine
months ended December 31, 2000. This increase was primarily the result of the
growth in net revenues from our Chronic Care and Professional Products segments,
which increased 26.5% and 43.5%, respectively, in the nine months ended December
31, 2001, as compared with the nine months ended December 31, 2000. See Note 12
in the financial statements for segment information.

         Net revenues in the Chronic Care segment increased 26.5% to $155.16
million in the nine months ended December 31, 2001, as compared with $122.65
million in the nine months ended December 31, 2000. This growth was due
primarily to new customer sales as a result of our direct-response advertising
spending and recurring shipments to existing customers. We currently expect our
promotional and direct-response advertising spending to continue in order to
further the expansion of our Chronic Care segment. Revenue growth was aided by a
cost of living adjustment implemented by the government for certain durable
medical equipment products and services under the Medicare, Medicaid and SCHIP
Benefits Improvement and Protection Act of 2000, which added 3.7% to the revenue
of many of our Chronic Care segment products. In addition, due to the late
implementation by the government of the January 1, 2001 cost of living
adjustment, which went into effect July 1, 2001, an incremental 3.28% cost of
living adjustment was recorded from July 1, 2001 to


                                       20
<PAGE>
December 31, 2001. This incremental 3.28% cost of living adjustment will not be
in effect for future quarters.

         Net revenues in the Professional Products segment increased 43.5% to
$43.68 million in the nine months ended December 31, 2001, as compared with
$30.44 million in the nine months ended December 31, 2000. This increase was
primarily due to new customer sales as a result of our direct-response
advertising spending, as well as recurring shipments to existing customers. As
with our Chronic Care segment, we currently expect our promotional and
direct-response advertising spending to continue in order to further the
expansion of our Professional Products segment.

         Net revenues from Consumer Healthcare products decreased 27.6% to $5.73
million in the nine months ended December 31, 2001, as compared with $7.92
million in the nine months ended December 31, 2000, due primarily to the
September 2000 sale of certain assets of our Consumer Healthcare segment.

         As a percentage of total net revenues, overall gross margins were 65.6%
in the nine months ended December 31, 2001, and 64.2% in the nine months ended
December 31, 2000. This increase was due primarily to a cost of living
adjustment which added 6.98% to the revenue of many of our Chronic Care segment
products from July 1, 2001 to December 31, 2001, and increased sales in our
higher margin Professional Products segment, partially offset by a change in the
reimbursement formula for albuterol and ipratropium combinations, increasing
sales from new business initiatives that have lower margins than the Company's
average and a change in the product mix for our Chronic Care and Professional
Products segments.

         As a percentage of total net revenues, selling, general and
administrative expenses were 48.5% in the nine months ended December 31, 2001,
as compared with 44.0% in the nine months ended December 31, 2000. Selling,
general and administrative expenses increased by 40.2% in the nine months ended
December 31, 2001 to $99.22 million, as compared with $70.78 million in the nine
months ended December 31, 2000. This increase was primarily attributable to
unusual legal and related expenses and a charge of $5.03 million for probable
maximum amounts due to Medicare which relates to a change in interpretation of
the reimbursement formula for albuterol and ipratropium combinations used in our
Professional Products segment, in the nine months ended December 31, 2001. We
do not expect any further charges to income as a result of this change. See Note
10 in the financial statements for information on this charge. The unusual legal
and related expenses incurred in the nine months ended December 31, 2001 are
primarily attributable to the previously reported ongoing investigations of our
Liberty Medical and Liberty Home Pharmacy subsidiaries. We expect that we will
continue to incur unusual legal and related expenses in the quarter ending
March 31, 2002. Total legal and related expenses in the nine months ended
December 31, 2001 were $5.16 million, as compared with $1.40 million in the nine
months ended December 31, 2000. Selling, general and administrative expenses
further increased due to an increase in direct-response advertising amortization
of $8.24 million to $21.98 million in the nine months ended December 31, 2001,
from $13.74 million in the nine months ended December 31, 2000.

         Investment income, net decreased 52.7% to $995,000 in the nine months
ended December 31, 2001, as compared with $2.10 million in the nine months ended
December 31, 2000, due to a lower average cash balance, lower interest rates,
and losses experienced on restricted investments held in the executive deferred
compensation plans. Interest expense decreased 36.2% to $127,000 in the nine
months ended December 31, 2001, as compared with $199,000 in the nine months
ended December 31, 2000, due primarily to the elimination of interest expense on
Liberty Medical's Port St. Lucie facility mortgage as a result of the $1.36
million repayment in December 2000. Changes in the fair value of investments
held in the executive deferred compensation plans are recorded as investment
income or loss ("investment income, net" as captioned on the statement of
operations) with a


                                       21
<PAGE>

corresponding adjustment to compensation expense and to other assets and
long-term liabilities ("long-term capital lease and other obligations" as
captioned on the balance sheet).

         Pretax income before the cumulative effect of a change in accounting
principle was $35.47 million in the nine months ended December 31, 2001, a 4.0%
increase as compared with $34.12 million in the nine months ended December 31,
2000. The marginal increase was primarily attributable to unusual legal and
related expenses and adjustments to earnings for probable maximum amounts due to
Medicare, recorded in the nine months ended December 31, 2001, without which the
increase in pretax income would have been greater.

         Our income before the cumulative effect of a change in accounting
principle, net of taxes, was $21.85 million, or $1.69 per diluted weighted
average share, for the nine months ended December 31, 2001, as compared with
$21.39 million, or $1.57 per diluted weighted average share, for the nine months
ended December 31, 2000. Net income was $21.85 million, or $1.69 per diluted
weighted average share, for the nine months ended December 31, 2001, as compared
with $14.47 million, or $1.06 per diluted weighted average share, for the nine
months ended December 31, 2000.

Liquidity and Capital Resources

         We have generated positive cash flows from operations and have reported
positive annual cash flows from operations in each of the last 3 fiscal years.
Our cash and cash equivalents balance decreased $11.32 million to $28.25 million
as of December 31, 2001, as compared with $39.57 million as of March 31, 2001,
due primarily to cash used for investing and financing activities, including the
repurchase of shares of our common stock and capital expenditures, offset by
cash flows generated from operations. Cash flows from operations of $17.35
million for the nine months ended December 31, 2001 were generated by net income
of $21.85 million, offset by cash used to fund certain areas of our operations,
such as increased spending for direct-response advertising of $8.38 million to
$31.58 million in the nine months ended December 31, 2001, as compared with
$23.20 million in the nine months ended December 31, 2000, to further expand our
customer base, both for diabetes testing and respiratory supplies. Accrued
expenses, payables, and other long-term liabilities increased $7.28 million to
$8.40 million in the nine months ended December 31, 2001, as compared with $1.12
million in the nine months ended December 31, 2000, primarily as a result of
amounts due to Medicare of $4.90 million recorded as a liability in the current
fiscal year (see Note 10 in the financial statements for more information).

         In the nine months ended December 31, 2001 and 2000, we used $9.95
million and $6.11 million of cash for investing activities, respectively. The
$3.84 million increase in total cash used for investing activities was primarily
due to a $3.67 million increase in capital expenditures in the nine months ended
December 31, 2001, as compared with the nine months ended December 31, 2000.
Property, plant and equipment purchases totaled $9.98 million and $6.31 million
for the nine months ended December 31, 2001 and 2000, respectively. Higher
spending in the current fiscal year for capital expenditures is related to the
ongoing construction of two new facilities in Port St. Lucie, Florida to meet
the expansion needs of our growing Company.

         In the nine months ended December 31, 2001, we used $18.72 million of
cash for financing activities, $17.63 million of which was used to repurchase
989,000 shares of our common stock, approximately equal to the cash flows
generated from operations in the nine months ended December 31, 2001 of $17.35
million. In June 2000, the Board of Directors authorized the repurchase of up to


                                       22
<PAGE>
1,000,000 shares of our common stock on the open market, with any shares
repurchased to be held in treasury. In August 2001, the Board of Directors
authorized the repurchase of an additional 1,000,000 shares. As of December 31,
2001, 1,226,000 shares had been repurchased under these programs for an
aggregate of $24.26 million. As of December 31, 2001, 774,000 shares remained
authorized for repurchase under the August 2001 authorized share repurchase
program. Other financing activities included the receipt of proceeds from the
issuance of common stock, repayments of capital lease obligations and the
setting aside of amounts for executive deferred compensation plans.

         In November 2000, we filed an amendment to a shelf registration
statement we had originally filed in April 2000, to enable us to offer from time
to time, shares of our common stock having an aggregate value of up to $100
million. The Securities and Exchange Commission declared the shelf registration
statement effective during the quarter ended December 31, 2000. No shares of
common stock had been sold under this shelf registration statement as of
December 31, 2001.

         We believe that our cash and cash equivalents balance as of December
31, 2001 of $28.25 million, including cash flows generated from operations, will
be sufficient to meet working capital, capital expenditure and financing needs
for future business operations for the foreseeable future. In the event that we
undertake to make acquisitions of complementary businesses, products or
technologies, we may require substantial additional funding beyond currently
available working capital and funds generated from operations. We are conducting
an active search for the strategic acquisition of complementary businesses,
products or technologies which leverage our marketing, sales and distribution
infrastructure. We currently have no commitments or agreements with respect to
any such acquisition. Other factors which could negatively impact our liquidity
include a reduction in the demand for our products or a reduction in Medicare
reimbursement for our products.

         We hold certain investments related to executive deferred compensation
plans, see Note 6 in the financial statements, which are accounted for pursuant
to Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." Investments related to the
executive deferred compensation plans, which have been classified as trading,
are included in other assets and are recorded at fair value. As of December 31,
2001, the fair value of these investments was not materially different from
cost.

Accounting Pronouncements

         Amortization of goodwill for the nine months ended December 31, 2001
was $1.51 million. In July 2001, the Financial Accounting Standards Board
("FASB") issued SFAS No. 141, "Business Combinations" and SFAS No. 142,
"Goodwill and Other Intangible Assets." SFAS No. 141 requires that all business
combinations be accounted for under the purchase method only and that certain
acquired intangible assets in a business combination be recognized as assets
apart from goodwill. SFAS No. 142 requires that ratable amortization of goodwill
be replaced with tests of the goodwill's impairment at various periods,
specifically upon adoption of SFAS No. 142, annually, and as a result of a
specific event or activity, and that intangible assets other than goodwill be
amortized over their useful lives. SFAS No. 141 is effective for all business
combinations initiated after June 30, 2001 and for all business combinations
accounted for by the purchase method for which the date of acquisition is after
June 30, 2001. The provisions of SFAS No. 142 will be effective for fiscal years
beginning after December 15, 2001, and will thus be adopted, as required, on
April 1, 2002. The adoption of SFAS No. 142 could have a material impact on our
financial statements, as we will replace ratable amortization of goodwill with
periodic impairment tests.

                                       23
<PAGE>

Impairment tests performed under SFAS No. 142 could indicate an impairment loss
that would need to be recorded as a cumulative effect of a change in accounting
principle in fiscal 2003. We have not yet determined what effect these
impairment tests will have on our financial statements.

         In August 2001, the FASB issued SFAS No. 143 "Accounting for
Obligations Associated with the Retirement of Long-Lived Assets." The provisions
of SFAS No. 143 apply to all entities that incur obligations associated with the
retirement of tangible long-lived assets. SFAS No. 143 is effective for
financial statements issued for fiscal years beginning after June 15, 2002, and
will thus be adopted, as required, in fiscal year 2004. The impact of SFAS No.
143 on our financial statements has not yet been determined.

         In October 2001 the FASB issued SFAS No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 provides guidance on
the accounting for the impairment on disposal of long-lived assets. The
objectives of SFAS No. 144 are to address significant issues relating to the
implementation of SFAS No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" and to develop a single
model (based on the framework established in SFAS No. 121) for long-lived assets
to be disposed of by sale, whether previously held and used or newly acquired.
SFAS No. 144 is effective for financial statements issued for fiscal years
beginning after December 15, 2001 and thus will be adopted, as required, in
fiscal 2003. Generally, its provisions are to be applied prospectively. The
impact of SFAS No. 144 on our financial statements has not yet been determined.


                                       24
<PAGE>
FACTORS AFFECTING FUTURE OPERATING RESULTS

         The statements contained in this Report that are not purely historical
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
including, but not limited to, statements regarding our expectations, hopes,
intentions or strategies regarding the future. Forward-looking statements
include, among others: statements regarding future benefits from our advertising
and promotional expenditures; statements regarding future net revenue levels;
statements regarding product development, introduction and marketing; and
statements regarding future acquisitions. All forward-looking statements
included in this Report are based on information available to us on the date
hereof, and we assume no obligation to update any such forward-looking
statements. It is important to note that our actual results could differ
materially from those in such forward-looking statements.

         Our future operating results remain difficult to predict. We continue
to face many risks and uncertainties which could affect our operating results,
including without limitation, those described below.

We could experience significantly reduced profits if Medicare changes, delays or
denies reimbursement

         Sales of a significant portion of our Chronic Care and Professional
Products supplies depend on the continued availability of reimbursement of our
customers by government and private insurance plans. Any reduction in Medicare
reimbursement currently available for our products would reduce our revenues.
Without a corresponding reduction in the cost of such products, the result would
be a reduction in our overall profit margin. Similarly, any increase in the cost
of such products would reduce our overall profit margin unless there was a
corresponding increase in Medicare reimbursement. Our profits could also be
affected by the imposition of more stringent regulatory requirements for
Medicare reimbursement. The regulations that govern Medicare reimbursement are
complex and our compliance with these regulations may be reviewed by federal
agencies, including the Department of Health and Human Services, the Department
of Justice, and the Food and Drug Administration. The U.S. Attorney's Office for
the Southern District of Florida, with the assistance of the Federal Bureau of
Investigation ("FBI") and Department of Health & Human Services' Office of
Inspector General ("OIG"), is conducting investigations of alleged healthcare
fraud by Liberty Medical Supply, Inc. ("Liberty Medical") and Liberty Home
Pharmacy Corporation. Both civil and criminal investigations are being
conducted. The SEC is also conducting a formal investigation of us. We are
cooperating fully with these investigations. If any of these investigations
results in a determination that we have failed to comply with the regulations
governing Medicare reimbursement or financial reporting or have otherwise
committed healthcare fraud or securities laws violations, we could be subject to
delays or loss of reimbursement, substantial fines or penalties, and other
sanctions.

We plan to continue our rapid expansion; if we do not manage our growth
successfully, our growth and profitability may slow or stop

         We have expanded our operations rapidly and plan to continue to expand.
This expansion has created significant demand on our administrative, operational
and financial personnel and other resources. Additional expansion in existing or
new markets could strain these resources and increase our need for capital. Our
personnel, systems, procedures, controls and existing space may not be adequate
to support further expansion.


                                       25
<PAGE>
The profitability of our Chronic Care and Professional Products segments will
decrease if we do not receive recurring orders from customers

         We generally incur losses and negative cash flow with respect to the
first order from a new customer for Chronic Care products and respiratory
products included in our Professional Products segment, due primarily to the
marketing and regulatory compliance costs associated with initial customer
qualification. Accordingly, the profitability of these segments depends, in
large part, on recurring and sustained reorders. Reorder rates are inherently
uncertain due to several factors, many of which are outside our control,
including changing customer preferences, competitive price pressures, customer
transition to extended care facilities, customer mortality and general economic
conditions.

We could experience significantly reduced profits from our Chronic Care segment
if improved technologies that eliminate the need for consumable testing supplies
are developed for glucose monitoring

         The majority of our Chronic Care net revenues are from consumable
testing supplies, used to draw and test small quantities of blood for the
purpose of measuring and monitoring glucose levels. Numerous research efforts
are underway to develop more convenient and less intrusive glucose measurement
techniques. The commercialization and widespread acceptance of new technologies
that eliminate or reduce the need for consumable testing supplies could
negatively affect our Chronic Care business.

We could be liable for harm caused by products that we sell

         The sale of medical products entails the risk that users will make
product liability claims. A product liability claim could be expensive. While
management believes that our insurance provides adequate coverage, no assurance
can be made that adequate coverage will exist for these claims.

We could lose customers and revenues to new or existing competitors who have
greater financial or operating resources

         Competition from other sellers of products offered through our Chronic
Care, Professional Products and Consumer Healthcare segments, manufacturers of
healthcare products, pharmaceutical companies and other competitors is intense
and expected to increase. Many of our competitors and potential competitors are
large companies with well-known names and substantial resources. These companies
may develop products and services that are more effective or less expensive than
any that we are developing or selling. They may also promote and market these
products more successfully than we promote and market our products.

Loss of use of manufacturing or data storage facilities would significantly
reduce revenues and profits from our businesses

         We manufacture substantially all of our prescription urology and
suppository products and many of our AZO products at our facility in Woburn,
Massachusetts. In addition, we process and store most of our customer data in
our facility in Port St. Lucie, Florida. If we were unable to use any of these
facilities as a result of the FDA, Occupational Safety and Health Administration
or other


                                       26
<PAGE>
regulatory action, fire, natural disaster or other event, our revenues
and profits would decrease significantly. We might also incur significant
expense in remedying the problem or securing an alternative manufacturing or
data storage source.

If we or our suppliers do not comply with applicable government regulations, we
may be prohibited from selling our products

         Many of the products that we sell are regulated by the FDA and other
regulatory agencies. If any of these agencies mandate a suspension of production
or sales of our products or mandate a recall, we may lose sales and incur
expenses until we are in compliance with the regulations or change to another
acceptable supplier.

We could have difficulty selling products in our Consumer Healthcare and
Professional Products segments if we cannot maintain and expand our sales to
distributors

         We rely on third-party distributors to market and sell our Consumer
Healthcare and prescription urology and suppository products. Our sales of these
products will therefore depend in part on our maintaining and expanding
marketing and distribution relationships with pharmaceutical, medical device,
personal care and other distributors and on the success of those distributors in
marketing and selling our products.

Shortening or eliminating amortization of our direct-response advertising costs
could adversely affect our operating results

         Any change in existing accounting rules or business change that reduces
revenues or earnings or that shortens or eliminates the amortization period of
our direct-response advertising costs, currently four years for our diabetes
products and two years for our respiratory products, could result in accelerated
charges against our earnings.

Our quarterly revenues or operating results could vary, which may cause the
market price of our securities to decline

         We have experienced fluctuations in our quarterly operating results and
anticipate that such fluctuations could continue. Results may vary significantly
depending on a number of factors, including:

         -        changes in reimbursement guidelines and amounts;

         -        changes in regulations affecting the healthcare industry;

         -        changes in the mix or cost of our products;

         -        the timing of customer orders;

         -        the timing and cost of our advertising campaigns; and

         -        the timing of the introduction or acceptance of new products
                  and services offered by us or our competitors.


                                       27
<PAGE>
We may make acquisitions that will strain our financial and operational
resources

         We regularly review potential acquisitions of businesses and products.
Acquisitions involve a number of risks that might adversely affect our financial
and operational resources, including:

         -        diversion of the attention of senior management from important
                  business matters;

         -        amortization of substantial intangible assets;

         -        difficulty in retaining key personnel of an acquired business;

         -        failure to assimilate operations of an acquired business;

         -        failure to retain the customers of an acquired business;

         -        possible operating losses and expenses of an acquired
                  business;

         -        exposure to legal claims for activities of an acquired
                  business prior to acquisition; and

         -        incurrence of debt and related interest expense.

Our stock price could be volatile, which could result in substantial changes in
share price

         The trading price of our common stock has been volatile and is likely
to continue to be volatile. The stock market in general, and the market for
healthcare-related companies in particular, has experienced extreme volatility.
This volatility has often been unrelated to the operating performance of
particular companies. Investors may not be able to sell their common stock at or
above the price at which they purchased the stock. Prices for the common stock
will be determined in the marketplace and may be influenced by many factors,
including variations in our financial results, changes in earnings estimates by
industry research analysts, investors' perceptions of us and general economic,
industry and market conditions.

We may issue preferred stock with rights senior to the common stock

         Our articles of organization authorize the issuance of up to 2,000,000
shares of preferred stock without stockholder approval. The shares may have
dividend, voting, liquidation and other rights and preferences that are senior
to the rights of the common stock. The rights and preferences of any such class
or series of preferred stock would be established by our Board of Directors in
its sole discretion.


                                       28

<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          We own certain money market funds and mutual funds that are sensitive
to market risks as part of our investment portfolio. The investment portfolio is
used to preserve our capital until it is required to fund operations. We do not
own derivative financial instruments in our investment portfolio. We do not
believe that the exposure to market risks in our investment portfolio is
material.


                                       29

<PAGE>
PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         The U.S. Attorney's Office for the Southern District of Florida, with
the assistance of the Federal Bureau of Investigation and Department of Health &
Human Services' Office of Inspector General, is conducting investigations of
alleged healthcare fraud by Liberty Medical Supply, Inc. ("Liberty Medical") and
Liberty Home Pharmacy Corporation. Both civil and criminal investigations are
being conducted. The Securities and Exchange Commission is also conducting a
formal investigation of the Company. The Company is cooperating fully with these
investigations. The Company cannot accurately predict the outcome of these
investigations at this time.

         On November 27, 2000, Richard Bowe SEP-IRA filed a purported class
action lawsuit in the United States District Court for the District of
Massachusetts (the "BOWE Complaint") against the Company and one of its
officers. The BOWE Complaint claims violations of Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5
promulgated thereunder and seeks unspecified damages, attorneys' fees and costs.
On December 19, 2000, Trust Advisors Equity Plus LLC filed a purported class
action lawsuit in the United States District Court for the District of
Massachusetts (the "TRUST ADVISORS Complaint") against the Company and one of
its officers. The TRUST ADVISORS Complaint asserts the same claims, makes the
same allegations and seeks the same relief as the BOWE Complaint. On January 26,
2001, the plaintiffs in the BOWE and TRUST ADVISORS Complaints moved to
consolidate the BOWE and TRUST ADVISORS Complaints and to be appointed as lead
plaintiffs in the consolidated action pursuant to the Section 21D(a)(3)(B) of
the Exchange Act. On July 30, 2001 the Court granted these motions and
consolidated the BOWE and TRUST ADVISOR Complaints under the caption IN RE:
POLYMEDICA CORP. SECURITIES LITIGATION, Civ. Act. No. 00-12426-REK.

         Plaintiffs filed a consolidated amended complaint on October 9, 2001.
The consolidated amended complaint extended the class period (the amended class
period is October 26, 1998 through August 21, 2001), and named an additional two
officers as defendants. The Company moved to dismiss the consolidated amended
complaint on December 10, 2001. The plaintiffs filed an opposition to the motion
on February 11, 2002 and the defendants have until March 11, 2002 to file a
reply brief. The Court has not rendered any decision with regard thereto. The
Company believes it has meritorious defenses to the claims made in the
consolidated Complaint and intends to contest these claims vigorously. Although
the Company does not consider an unfavorable outcome to the existing claims
probable, the Company cannot accurately predict their ultimate disposition.

         Between August 9, 2001 to August 24, 2001, four derivative actions were
filed in Massachusetts Superior Court for Middlesex County against PolyMedica's
Board of Directors: CASDEN V. BERNSTEIN ET AL., Civ. Act. No. 01-3446; VEZMAR V.
LOGERFO ET AL., Civ. Act. No. 01-3612; SULLIVAN V. BERNSTEIN ET AL., Civ. Act.
No. 01-3656; and MESSNER V. LEE ET AL. , Civ. Act. No. 01-3697. On August 31,
2001, plaintiff filed a motion to consolidate the first three actions and to
file an amended consolidated complaint within 60 days. The fourth derivative
action was added to the motion to consolidate on October 3, 2001. On October 11,
2001, the Court granted plaintiffs' motion to consolidate all four derivative
actions under the caption IN RE: POLYMEDICA CORP. SHAREHOLDER DERIVATIVE
LITIGATION, Civ. Act. No. 01-3446.


                                       30
<PAGE>
         On December 17, 2001, plaintiffs filed a consolidated derivative
complaint. The consolidated complaint names two additional officer defendants.
The Complaint alleges that the directors and officers breached their fiduciary
duties by, among other things, failing to exercise reasonable care in the
oversight of corporate affairs and management with respect to the operations of
Liberty Medical and by acquiescing in alleged misconduct by Liberty Medical. The
Complaint seeks unspecified damages, the return of compensation, and other
relief, including injunctive relief. The defendants filed a motion to dismiss
the consolidated complaint on January 31, 2002. Plaintiffs have not yet
responded and the Court has not rendered any decision with regard thereto. The
directors and named officers believe they have meritorious defenses to the
claims made in the consolidated complaint and intend to contest the claims
vigorously. Although the Company does not consider an unfavorable outcome to the
existing claims probable, the Company cannot accurately predict their ultimate
disposition.

         A shareholder derivative complaint, MINASIAN V. BERNSTEIN ET. AL., Civ.
Act. No. 01-11485REK, was filed against PolyMedica's Board of Directors in
United States District Court for the District of Massachusetts on August 17,
2001. The Complaint alleged that the directors breached their fiduciary duties
by, among other things, failing to exercise reasonable care in the oversight of
corporate affairs and management with respect to the operations of Liberty
Medical and by acquiescing in alleged misconduct by Liberty Medical and sought
unspecified damages, the return of director compensation, and other injunctive
relief. On November 16, 2001, plaintiff filed an assented-to motion to dismiss
the complaint without prejudice, and the case was closed on November 21, 2001.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

(a)      See Exhibit Index immediately following this report, which is
         incorporated herein by reference.
(b)      There were no reports on Form 8-K filed during the three months ended
         December 31, 2001.


                                       31
<PAGE>
                                   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.


                                      POLYMEDICA CORPORATION
                                      ------------------------------------------
                                      (registrant)


                                      /s/ Steven J. Lee
                                      ------------------------------------------
                                      Steven J. Lee
                                      Chairman and Chief Executive Officer
                                      (Principal Executive Officer)



                                      /s/ Eric G. Walters
                                      ------------------------------------------
                                      Eric G. Walters
                                      Executive Vice President and Clerk
                                      (Principal Financial Officer)



                                      /s/ Stephen C. Farrell
                                      ------------------------------------------
                                      Stephen C. Farrell
                                      Chief Financial Officer
                                      (Principal Accounting Officer)





Dated: February 14, 2002


                                       32
<PAGE>
                                  EXHIBIT INDEX


EXHIBIT                             DESCRIPTION
-------                             -----------
10.45    - Letter Agreement amendment to Employment Agreement by and between the
           Registrant and Warren K. Trowbridge dated January 31, 2002.