================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM 10-Q

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

(Mark One)

|X|   Quarterly report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

For the quarterly period ended March 31, 2004

                                       OR

|_|   Transition report pursuant to Section 13 or 15 (d) of the Securities
      Exchange Act of 1934

Commission File Number: 000-50371

                         Curative Health Services, Inc.
             (Exact name of registrant as specified in its charter)

               MINNESOTA                                51-0467366
    (State or other jurisdiction of                  (I.R.S. Employer
     incorporation or organization)                Identification Number)

                                150 Motor Parkway
                            Hauppauge, New York 11788
                                 (631) 232-7000

            (Address and phone number of principal executive offices)

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

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

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

      As of April 30, 2004, there were 12,919,294 shares of the Registrant's
Common Stock, $.01 par value, outstanding.

================================================================================


<PAGE>

                                      INDEX


Part I   Financial Information                                          Page No.
--------------------------------------------------------------------------------

Item 1   Financial Statements:

         Condensed Consolidated Income Statements
               Three Months ended March 31, 2004 and 2003                  3

         Condensed Consolidated Balance Sheets
               March 31, 2004 and December 31, 2003                        4

         Condensed Consolidated Statements of Cash Flows
               Three Months ended March 31, 2004 and 2003                  5

         Notes to Condensed Consolidated Financial Statements              6

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

Item 3   Quantitative and Qualitative Disclosures About Market Risk        18

Item 4   Controls and Procedures                                           18


Part II  Other Information                                              Page No.
--------------------------------------------------------------------------------

Item 1   Legal Proceedings                                                 19

Item 2   Changes in Securities and Use of Proceeds                         19

Item 5   Other Information                                                 19

Item 6   Exhibits and Reports on Form 8-K                                  20

         Signatures                                                        21


                                       2
<PAGE>

Part I Financial Information

Item 1. Financial Statements

                 Curative Health Services, Inc. and Subsidiaries
                    CONDENSED CONSOLIDATED INCOME STATEMENTS
                      (In thousands, except per share data)
                                   (Unaudited)

                                                        Three Months Ended
                                                             March 31
                                                       2004            2003
                                                     --------        --------
Revenues:
   Products                                          $ 59,085        $ 50,450
   Services                                             6,473           7,570
                                                     --------        --------
        Total revenues                                 65,558          58,020

Costs and operating expenses:
   Cost of product sales                               46,824          37,387
   Cost of services                                     2,927           3,478
   Selling, general and administrative                 10,018          11,058
                                                     --------        --------
     Total costs and operating expenses                59,769          51,923
                                                     --------        --------

Income from operations                                  5,789           6,097

Interest income                                             6               2

Interest expense                                         (616)           (487)
                                                     --------        --------

Income before income taxes                              5,179           5,612

Income taxes                                            2,046           2,217
                                                     --------        --------

Net income                                           $  3,133        $  3,395
                                                     ========        ========


Net income per common share, basic                   $    .24        $    .28
                                                     ========        ========


Net income per common share, diluted                 $    .23(i)     $    .25(i)
                                                     ========        ========

Weighted average common shares, basic                  12,925          12,206
                                                     ========        ========

Weighted average common shares, diluted                13,717          13,920
                                                     ========        ========

(i)   Calculated under the "as if converted" method. See Note 2.

                             See accompanying notes


                                       3
<PAGE>

                 Curative Health Services, Inc. and Subsidiaries
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                        March 31, 2004  December 31, 2003
                                                        --------------  -----------------
<S>                                                        <C>              <C>
ASSETS
Current assets:
Cash and cash equivalents                                  $   1,506        $   1,072
Accounts receivable, net                                      58,216           55,217
Inventories                                                    9,684           11,237
Prepaids and other current assets                              1,501            4,270
Deferred tax assets                                            2,984            2,984
                                                           ---------        ---------
   Total current assets                                       73,891           74,780

Property and equipment, net                                    7,651            7,890
Intangibles subject to amortization, net                       1,284            1,463
Intangibles not subject to amortization (trade names)            682              682
Goodwill                                                     148,030          147,895
Other assets                                                   1,359            1,228
                                                           ---------        ---------
   Total assets                                            $ 232,897        $ 233,938
                                                           =========        =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                                           $  30,586        $  28,892
Accrued expenses                                               9,494           11,502
Deferred taxes                                                 1,007            1,007
Current portion of long-term liabilities                       7,871            7,911
                                                           ---------        ---------
   Total current liabilities                                  48,958           49,312

Long-term liabilities                                         34,448           39,599
Deferred taxes                                                 1,307            1,307
                                                           ---------        ---------
   Total long-term liabilities                                35,755           40,906

Stockholders' equity:
Common stock                                                     128              127
Additional paid in capital                                   116,412          115,082
Retained earnings                                             33,251           30,118
Notes receivable - stockholders                               (1,607)          (1,607)
                                                           ---------        ---------
   Total stockholders' equity                                148,184          143,720
                                                           ---------        ---------

   Total liabilities and stockholders' equity              $ 232,897        $ 233,938
                                                           =========        =========
</TABLE>

                             See accompanying notes


                                       4
<PAGE>

                 Curative Health Services, Inc. and Subsidiaries
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                     Three Months Ended
                                                                          March 31,
                                                                      2004         2003
                                                                    --------     --------
<S>                                                                 <C>          <C>
OPERATING ACTIVITIES:
Net income                                                          $  3,133     $  3,395
Adjustments to reconcile net income to net cash
provided by operating activities:
    Depreciation and amortization                                        888          570
    Provision for doubtful accounts                                      602        1,025
    Amortization of deferred financing fees                               60           15
Changes in operating assets and liabilities, net of effects from
Specialty Pharmacy acquisitions:
    Accounts receivable                                               (3,548)      (3,928)
    Inventories                                                        1,553         (728)
    Prepaids and other                                                   392          517
    Accounts payable and accrued expenses                               (855)       5,242
                                                                    --------     --------

NET CASH PROVIDED BY OPERATING ACTIVITIES                              2,225        6,108

INVESTING ACTIVITIES:
Proceeds from Investment in Accordant Health Services, Inc.            2,327           --
Specialty Pharmacy acquisitions, net of cash acquired                   (547)      (4,656)
Purchases of property and equipment                                     (470)      (1,812)
                                                                    --------     --------

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                    1,310       (6,468)

FINANCING ACTIVITIES:
Shares repurchased and retired                                            --       (1,524)
Proceeds from exercise of stock options                                  162        1,777
Repayments of long-term liabilities                                   (3,263)        (538)
                                                                    --------     --------

NET CASH USED IN FINANCING ACTIVITIES                                 (3,101)        (285)
                                                                    --------     --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                     434         (645)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                       1,072        2,643
                                                                    --------     --------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                          $  1,506     $  1,998
                                                                    ========     ========

SUPPLEMENTAL INFORMATION
Interest paid                                                       $    531     $    428
                                                                    ========     ========
Income taxes paid                                                   $    143     $    115
                                                                    ========     ========
</TABLE>

                             See accompanying notes


                                       5
<PAGE>

                 Curative Health Services, Inc. and Subsidiaries

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

The condensed consolidated financial statements are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim periods. The condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements for the year ended December 31, 2003 and notes
thereto contained in the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission. The results of operations for the three
months ended March 31, 2004 are not necessarily indicative of the results to be
expected for the entire fiscal year ending December 31, 2004.

Stock Based Compensation Plans

The Company grants options for a fixed number of shares to employees and
directors with an exercise price equal to the fair value of the shares at the
date of grant. The Company accounts for stock option grants under the
recognition and measurement principles of Accounting Principles Board ("APB")
No. 25, "Accounting for Stock Issued to Employees," and related Interpretations
because the Company believes the alternate fair value accounting provided for
under Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation," requires the use of option valuation models that
were not developed for use in valuing employee stock options. Under APB No. 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recorded.

The following table illustrates the effect on net income and earnings per share
as if the Company had applied the fair value recognition provisions of SFAS No.
123 to stock-based compensation for the three months ended March 31, 2004 and
2003 (in thousands, except per share data):

                                                         Three Months Ended
                                                              March 31,
                                                         2004          2003
                                                       --------      --------
Net income                                             $  3,133      $  3,395
Deduct: Total stock-based employee compensation
    expense determined under fair value based
    method for all awards, net of related tax effects     1,175         1,132
                                                       --------      --------
Pro forma net income                                   $  1,958      $  2,263
                                                       ========      ========

Earnings per share:
    Basic - as reported                                $    .24      $    .28
    Basic - pro forma                                       .15           .19

    Diluted - as reported                              $    .23(i)   $    .25(i)
    Diluted - pro forma                                     .15(i)        .17(i)

(i)   Calculated under the "as if converted" method. See Note 2.


                                       6
<PAGE>

                 Curative Health Services, Inc. and Subsidiaries

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 2. Net Income per Common Share

Net income per common share, basic, is computed by dividing the net income by
the weighted average number of common shares outstanding. Net income per common
share, diluted, is computed by dividing adjusted net income (see below) by the
weighted average number of shares outstanding plus dilutive common share
equivalents. The following table sets forth the computation of weighted average
shares, basic and diluted, used in determining basic and diluted earnings per
share (in thousands):

                                                              Three Months Ended
                                                                   March 31,
                                                                2004      2003
                                                              --------  --------

  Weighted average shares, basic                               12,925    12,206
  Effect of dilutive stock options and convertible notes          792     1,714
                                                              -------   -------
  Weighted average shares, diluted                             13,717    13,920
                                                              =======   =======

Adjusted net income and net income per common share, diluted, for the three
months ended March 31 were computed as follows (in thousands, except per share
data):

                                                              Three Months Ended
                                                                   March 31,
                                                                2004      2003
                                                              --------  --------

  Net income, as reported                                     $  3,133  $  3,395
  Add back interest related to convertible notes, net of tax        32        65
                                                              --------  --------
  Adjusted net income                                         $  3,165  $  3,460
                                                              ========  ========

  Net income per common share, diluted                        $    .23  $    .25
                                                              ========  ========

  Weighted average shares, diluted                              13,717    13,920
                                                              ========  ========

In accordance with SFAS No. 128, "Earnings Per Share," net income per common
share, diluted, for the three months ended March 31, 2004 and 2003 was
calculated under the "as if converted" method, which requires adding shares
related to convertible notes that have no contingencies to the denominator for
diluted earnings per share and adding to net income, the numerator, tax effected
interest expense relating to those convertible notes.

Note 3. Specialty Pharmacy Acquisitions

On February 3, 2003, the Company acquired MedCare, Inc. ("MedCare"), a specialty
pharmacy with locations in Alabama, Mississippi and West Virginia. The purchase
price for MedCare was $6.3 million. A final purchase price allocation based on
fair market value of acquired assets and liabilities has been completed.


                                       7
<PAGE>

                 Curative Health Services, Inc. and Subsidiaries

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Specialty Pharmacy Acquisitions (continued)

On April 23, 2003, the Company acquired the assets and specialty pharmacy
business of All Care Medical, Inc. ("All Care"), a Louisiana-based Synagis(R)
pharmacy. The purchase price of All Care was $2.1 million. A final purchase
price allocation based on fair market value of acquired assets and liabilities
has been completed.

On June 9, 2003, the Company acquired certain assets of Prescription City, Inc.
("Prescription City"), a Spring Valley, New York, specialty pharmacy business
specializing in the provision of chemotherapy and cancer drugs. Prescription
City's service area includes southern New York and some areas of northeastern
Pennsylvania. Drug therapies provided by Prescription City include chemotherapy,
HIV/AIDS drugs, Synagis(R), IVIG, pain management and Remicade(R). The purchase
price for Prescription City was $17.5 million. Fair market valuations have not
yet been finalized and, as such, the allocation of the purchase price is
preliminary, pending receipt of a formal valuation and the outcome of the
Company's indemnification claim.

As previously disclosed, a search warrant issued by a U.S. Magistrate Judge,
Southern District of New York, relating to a criminal investigation was executed
on November 4, 2003 at the Company's Prescription City pharmacy in Spring
Valley, New York. The Government has informed the Company that it is not a
target of the investigation. The Company was served with the search warrant on
Tuesday, November 4, 2003 while it was conducting its own compliance review at
the Spring Valley pharmacy. The Company intends to cooperate fully with the U.S.
Attorney's Office in its investigation. Based on information known as of
November 5, 2003, the Company terminated Paul Frank, the former principal
shareholder of Prescription City. The Company also hired outside counsel in
connection with this investigation. Certain assets of Prescription City were
purchased by the Company in June 2003. The purchase was structured as an asset
purchase with the Company being provided indemnifications, representations and
warranties by the seller. The Company has filed a complaint in the Southern
District of New York against Paul Frank and Prescription City, and such
complaint has not yet been served on those parties.

The acquisitions described above (collectively the "Specialty Pharmacy
acquisitions") were consummated for purposes of expanding the Company's
Specialty Pharmacy Services business and were accounted for using the purchase
method of accounting. The accounts of the Specialty Pharmacy acquisitions and
related goodwill and intangibles are included in the accompanying condensed
consolidated balance sheets. The operating results of the Specialty Pharmacy
acquisitions are included in the accompanying condensed consolidated income
statements from the dates of acquisition.

Unaudited pro forma amounts for the three months ended March 31, 2003, assuming
the Specialty Pharmacy acquisitions had occurred on January 1, 2003 are as
follows (in thousands, except per share data):

          Revenues                               $ 67,378
          Net income                             $  4,553
          Net income per share, diluted          $    .33


                                       8
<PAGE>

                 Curative Health Services, Inc. and Subsidiaries

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Specialty Pharmacy Acquisitions (continued)

The pro forma operating results shown above are not necessarily indicative of
operations in the periods following acquisitions.

Note 4. Segment Information

The Company adheres to the provisions of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The Company has two
reportable segments: Specialty Pharmacy Services and Specialty Healthcare
Services. In its Specialty Pharmacy Services business unit, the Company
purchases various biopharmaceutical products from suppliers and then contracts
with insurance companies and other payors, as well as retail pharmacies, to
provide direct-to-patient distribution of, and other support services, including
education, reimbursement and the provision or coordination of injection or
infusion services related to, these biopharmaceutical products, including
Synagis(R) for the prevention of respiratory syncytial virus. Revenues from
Synagis(R) sales for the three months ended March 31, 2004 were approximately
$23.0 million. As respiratory syncytial virus occurs primarily during the winter
months, the major portion of the Company's Synagis(R) sales may be higher during
the first and fourth quarters of the calendar year which may result in
significant fluctuations in the Company's quarterly operating results.

In its Specialty Healthcare Services business unit, the Company contracts with
hospitals to manage outpatient Wound Care Center(R) programs. The Company
evaluates segment performance based on income from operations. For the three
months ended March 31, 2004, management estimated that corporate general and
administrative expenses allocated to the reportable segments were 59% for
Specialty Pharmacy Services and 41% for Specialty Healthcare Services.
Intercompany transactions are eliminated to arrive at consolidated totals.

The following tables present the results of operations and total assets of the
reportable segments of the Company at and for the three months ended March 31,
2004 and 2003 (in thousands):

                                At and for the three months ended March 31, 2004
                                ------------------------------------------------
                                 Specialty         Specialty
                                 Pharmacy          Healthcare          Total
                                -----------       ------------      ------------
Revenues                         $  59,085         $   6,473         $  65,558
Income from operations           $   5,440         $     349         $   5,789
Total assets                     $ 210,095         $  22,802         $ 232,897

                                At and for the three months ended March 31, 2003
                                ------------------------------------------------
                                 Specialty         Specialty
                                 Pharmacy          Healthcare          Total
                                -----------       ------------      ------------
Revenues                         $  50,450         $   7,570         $  58,020
Income from operations           $   5,580         $     517         $   6,097
Total assets                     $ 153,156         $  43,194         $ 196,350


                                       9
<PAGE>

                 Curative Health Services, Inc. and Subsidiaries

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 5. Employee and Facility Termination Costs

In July 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No.
146, "Accounting for Costs Associated with Exit or Disposal Activities," which
nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." SFAS No. 146 addresses
financial accounting and reporting for costs associated with exit or disposal
activities initiated after December 31, 2002. SFAS No. 146 establishes fair
value as the objective for initial measurement of liabilities related to exit or
disposal activities and requires that such liabilities be recognized when
incurred.

In the first quarter of 2003, the Company consolidated its pharmacy operations
in California which resulted in the termination of a total of 25 employees and
the vacating of a leased facility. The Company recorded a charge of $1.6 million
in the same period related to this activity.

The following provides a reconciliation of the related accrued costs associated
with the pharmacy consolidation at and for the three months ended March 31, 2004
(in thousands):

<TABLE>
<CAPTION>
                                        At and for the three months ended March 31, 2004
                                 ------------------------------------------------------------
                                 Beginning       Costs Charged    Costs Paid or       Ending
                                  Balance         To Expense    Otherwise Settled     Balance
                                  -------         ----------    -----------------     -------
<S>                                <C>              <C>              <C>              <C>
   Employee termination costs      $   39           $   --           $   --           $   39
   Facility termination costs         431               --               60              371
                                   ------           ------           ------           ------
                                   $  470           $   --           $   60           $  410
                                   ======           ======           ======           ======
</TABLE>

In 2004, the Company expects to pay out approximately $0.3 million of these
accrued costs and the reminder in subsequent years.

Note 6. Changes in Capital Structure

During the first three months of 2004, the Company had the following significant
changes in capital structure:

Notes Converted into Common Stock. In January 2004, certain selling shareholders
of Infinity Infusion Care, Ltd. ("Infinity") exercised their rights under
convertible notes and converted approximately $1.2 million of such notes into
72,715 shares of the Company's common stock.

Note 7. Subsequent Event

On April 23, 2004 the Company acquired Critical Care Systems, Inc. ("CCS") for a
total consideration of approximately $150 million in cash. CCS is a leading
national provider of specialty infusion pharmaceuticals and related
comprehensive clinical services. CCS focuses on delivering four principal
therapies: hemophilia clotting factor, IVIG, Total Parenteral Nutrition (TPN)
and anti-infective therapies. These core therapies represent the essential
components of Specialty Infusion and account for approximately 75% of CCS's
revenues.


                                       10
<PAGE>

                 Curative Health Services, Inc. and Subsidiaries

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 7. Subsequent Event (continued)

The purchase price was paid from the proceeds of an offering of $185 million
aggregate principal amount of 10.75% senior notes due 2011 offered in a private
placement to eligible purchasers pursuant to Rule 144A and Regulation S under
the Securities Act of 1933. Concurrent with the transaction closing, the Company
also completed the refinancing of its existing credit facility with GE
Healthcare Financial Services, a unit of GE Commercial Finance, as agent and
lender to a $40 million senior secured revolving credit facility to support
permitted acquisitions and future working capital and general corporate needs.


                                       11
<PAGE>

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

Overview

Curative Health Services, Inc. ("Curative" or the "Company"), through its two
business units, Specialty Pharmacy Services and Specialty Healthcare Services,
seeks to deliver high-quality care and clinical results that result in high
patient satisfaction for patients experiencing serious or chronic medical
conditions.

Curative's Specialty Pharmacy Services business unit provides biopharmaceutical
products to patients with chronic and critical disease states and related
clinical services to assist these patients with their intensive disease
management needs. The Company purchases various biopharmaceutical products from
suppliers and then contracts with insurance companies and other payors, as well
as retail pharmacies, to provide direct-to-patient distribution of these
products. In addition to distribution, the Company also provides other support
services, including education, reimbursement and provision or coordination of
injection or infusion services, related to these biopharmaceutical products. The
biopharmaceutical products distributed and the injection or infusion therapies
offered by the Company are used by patients with chronic or severe conditions
such as hemophilia, immune system disorders, respiratory syncytial virus,
cancer, rheumatoid arthritis, hepatitis C, multiple sclerosis or growth hormone
deficiency. Examples of biopharmaceuticals products used by the Company's
patients include hemophilia clotting factor, intravenous immune globulins (or
"IVIG"), MedImmune Inc.'s Synagis(R) and Centocor, Inc.'s Remicade(R). As of
March 31, 2004, the Company had 218 payor contracts and 23 retail pharmacy
contracts and provided services or products in at least 40 states. The Specialty
Pharmacy Services business unit provides services directly to patients and
caregivers and delivers its products via overnight mail or courier and through
its retail pharmacies.

The following provides approximate percentages of Specialty Pharmacy Services'
patient revenues for the three months ended March 31, 2004 and for the year
ended December 31, 2003:

                                    March 31,    December 31,
                                      2004           2003
                                    ---------    ------------

                Private Payors        41.4%          42.5%
                Medicaid              54.6%          51.0%
                Medicare               4.0%           6.5%

Curative's Specialty Healthcare Services business unit is a leading disease
management company in chronic wound care management. The Specialty Healthcare
Services business unit manages, on behalf of hospital clients, a nationwide
network of Wound Care Center(R) programs that offer a comprehensive range of
services for treatment of chronic wounds. The Company's Wound Management
Program(TM) consists of diagnostic and therapeutic treatment procedures that are
designed to meet each patient's specific wound care needs on a cost-effective
basis. The Company's treatment procedures are designed to achieve positive
results for wound healing based on significant experience in the field. The
Company maintains a proprietary database of patient results that it has
collected since 1988 containing over 450,000 patient cases. The Company's
treatment procedures, which are based on extensive patient data, have allowed
the Company to achieve an overall rate of healing of approximately 85% for
patients completing therapy. As of March 31, 2004, the Wound Care Center network
consisted of 92 outpatient clinics located on or near campuses of acute care
hospitals in 30 states.


                                       12
<PAGE>

Critical Accounting Policies and Estimates

Management's Discussion and Analysis of Financial Condition and Results of
Operations discusses the Company's condensed consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these condensed consolidated
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the condensed consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. On an on-going basis, management evaluates its estimates
and judgments, including those related to revenue recognition, bad debts,
inventories, income taxes and intangibles. Management bases its estimates and
judgments on historical experience and on various other factors 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. Management believes
the following critical accounting policies, among others, affect its more
significant judgments and estimates used in the preparation of its condensed
consolidated financial statements:

Revenue recognition. Specialty Pharmacy Services' revenues are recognized, net
of any contractual allowances, when the product is shipped to a patient, retail
pharmacy or a physician's office, or when the service is provided. Specialty
Healthcare Services' revenues are recognized after the management services are
rendered and are billed monthly in arrears.

Trade receivables: Considerable judgment is required in assessing the ultimate
realization of receivables, including the current financial condition of the
customer, age of the receivable and the relationship with the customer. The
Company estimates its allowances for doubtful accounts using these factors. If
the financial condition of the Company's customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances may be required. In circumstances where the Company is aware of a
specific customer's inability to meet its financial obligations (e.g.,
bankruptcy filings), a specific reserve for bad debts is recorded against
amounts due to reduce the receivable to the amount the Company reasonably
believes will be collected. For all other customers, the Company has reserves
for bad debt based upon the total accounts receivable balance. As of March 31,
2004, the Company's reserve for accounts receivable was approximately 7% of
total receivables.

Inventories: Inventories are carried at the lower of cost or market on a first
in, first out basis. Inventories consist of high cost biopharmaceutical and
pharmaceutical products that, in many cases, require refrigeration or other
special handling. As a result, inventories are subject to spoilage or shrinkage.
On a quarterly basis, the Company performs a physical inventory and determines
whether any shrinkage or spoilage adjustments are needed. Although the Company
believes its inventories balances at March 31, 2004 are reasonably accurate,
there can be no assurances that spoilage or shrinkage adjustments will not be
needed in the future. The recording of any such reserve may have a negative
impact on the Company's operating results.

Deferred tax assets: The Company has approximately $3 million in deferred tax
assets at March 31, 2004 to offset against future income and approximately $2.3
million in deferred tax liabilities. The Company does not have a valuation
allowance against its assets as it believes it is more likely than not that the
tax assets will be realized. The Company has considered future income
expectations and prudent tax strategies in assessing the need for a valuation
allowance. In the event the Company determines in the future that it needs to
record a valuation allowance, an adjustment to deferred tax assets would be
charged against income in the period of determination.


                                       13
<PAGE>

Goodwill and intangibles: Goodwill represents the excess of purchase price over
the fair value of net assets acquired. Intangibles consist of the separately
identifiable intangibles, such as pharmacy and customer relationships and
covenants not to compete. Effective January 1, 2002, the Company adopted SFAS
No. 142, "Goodwill and Other Intangible Assets," which requires goodwill and
intangible assets with indefinite lives no longer be amortized but rather be
reviewed annually, or more frequently if impairment indicators arise, for
impairment. Separable intangible assets that are not deemed to have an
indefinite life will continue to be amortized over their useful lives. In
assessing the recoverability of the Company's goodwill and intangibles, the
Company must make assumptions regarding estimated future cash flows and other
factors to determine the fair value of the respective assets. If these estimates
or assumptions change in the future, the Company may need to record an
impairment charge for these assets. An impairment charge would reduce operating
income in the period it was determined that the charge was needed.

Key Performance Indicators

The following provides a summary of some of the key performance indicators that
may be used to assess the Company's results of operations. These comparisons are
not necessarily indicative of future results (dollars in thousands).

<TABLE>
<CAPTION>
                                               For the three Months Ended March 31,
                                         -----------------------------------------------
                                           2004         2003       $ Change     % Change
                                         -----------------------------------------------
<S>                                      <C>          <C>          <C>             <C>
Specialty Pharmacy revenues              $ 59,085     $ 50,450     $  8,635         17%
Specialty Healthcare revenues               6,473        7,570       (1,097)       (14%)
                                         --------     --------     --------
Total revenues                           $ 65,558     $ 58,020     $  7,538         13%

Specialty Pharmacy revenues to total           90%          87%
Specialty Healthcare revenues to total         10%          13%
                                         --------     --------
Total                                         100%         100%

Specialty Pharmacy gross margin          $ 12,261     $ 13,063     $   (802)        (6%)
Specialty Healthcare gross margin           3,546        4,092         (546)       (13%)
                                         --------     --------     --------
Total gross margin                       $ 15,807     $ 17,155     $ (1,348)        (8%)

Specialty Pharmacy gross margin %              21%          26%
Specialty Healthcare gross margin %            55%          54%
Total gross margin %                           24%          30%

Specialty Pharmacy - SG&A                $  3,712     $  5,843     $ (2,131)       (36%)
Specialty Healthcare - SG&A                 1,036        2,120       (1,084)       (51%)
Corporate - SG&A                            5,270        3,095        2,175         70%
                                         --------     --------     --------
Total SG&A                               $ 10,018     $ 11,058     $ (1,040)        (9%)

Operating margin                         $  5,789     $  6,097     $   (308)        (5%)
Operating margin %                              9%          11%
</TABLE>


                                       14
<PAGE>

Results of Operations

Revenues. The Company's revenues for the first quarter of 2004 increased 13% to
$65.6 million compared to $58 million for the first quarter of the prior fiscal
year. The increase in revenues was the result of the Specialty Pharmacy
acquisitions the Company completed in 2003, as well as internal growth in
Synagis(R) revenues, offset by a reduction in service revenues in the Specialty
Healthcare business unit.

Product revenues, attributed entirely to the Specialty Pharmacy Services
business unit, increased $8.6 million, or 17%, to $59.1 million in the first
quarter of 2004 from $50.5 million in the first quarter of 2003. The increase in
revenues for the first three months of 2004 compared to the same period in 2003
was primarily attributable to the Specialty Pharmacy acquisitions completed in
2003 and organic growth of approximately 12.1% in IVIG, infusables and
injectables and 9.7% growth in pro forma Synagis(R) revenues, offset by a 1.2%
decline in hemophilia revenues. Product revenues for the first quarter of 2004
and 2003 included the following:

                                             Three Months Ended March 31,
                                     -------------------------------------------
                                             2004                   2003
                                     --------------------   --------------------
                                                  % of                   % of
                                                Specialty              Specialty
                                        In      Pharmacy       In      Pharmacy
                                     millions   Revenues    millions   Revenues
                                     --------   ---------   --------   ---------
Hemophilia                            $ 27.7         47%     $ 28.6         57%
IVIG, infusables and injectables(1)      4.8          8%        4.0          8%
Synagis(R)                              23.0         39%       16.8         33%
Oncology                                 1.6          3%         --          -%
Other(2)                                 2.0          3%        1.1          2%
                                      ------     ------      ------     ------
Total Specialty Pharmacy revenues     $ 59.1        100%     $ 50.5        100%
                                      ======     ======      ======     ======

(1)   Includes IVIG, Remicade(R) and growth hormone products

(2)   Other includes, but is not limited to, products such as oral medications,
      Avonex(R), Rebetron(R), Betaseron(R), Rebif(R) and Enbrel(R)

As respiratory syncytial virus occurs primarily during the winter months, the
major portion of the Company's Synagis(R) sales will be recorded in the first
and fourth quarters of the calendar year which may result in significant
fluctuations in the Company's quarterly operating results.

Service revenues, attributed entirely to the Specialty Healthcare Services
business unit, decreased 14% to $6.5 million in the first quarter of 2004 from
$7.6 million in the first quarter of 2003. The service revenues decrease of $1.1
million for the first quarter 2004 was attributed to contract renegotiations
resulting in lower average revenues per program and the conversion over the last
12 months of 4 under arrangement programs to management service programs where
revenues are lower. For the first quarter of 2004, the Company signed six new
Wound Care Management contracts and no contracts were terminated. The continued
termination, non-renewal or renegotiations of a material number of management
contracts or the inability to sign new contracts could result in a continued
decline in the Company's Specialty Healthcare Services business unit revenue.

Cost of Product Sales. Cost of product sales, attributed entirely to the
Specialty Pharmacy Services business unit, increased 25% to $46.8 million in the
first quarter 2004 from $37.4 million in the first quarter of 2003. The increase
of $9.4 million for the first quarter of 2004 was attributed to the internal
growth of Synagis(R) revenues and the inclusion of product revenues from the
Specialty Pharmacy acquisitions completed in 2003. As a percentage of product
sales, cost of product sales for the first


                                       15
<PAGE>

quarter of 2004 was 79% compared to 74% for the same period in 2003, primarily
the result of a higher percentage of Synagis(R) revenues in 2004 which typically
carry a lower gross margin than the Company's other products.

Cost of Services. Cost of services, attributed entirely to the Specialty
Healthcare Services business unit, decreased 16% to $2.9 million in the first
quarter of 2004 from $3.5 million in the first quarter of 2003. The decrease of
$0.6 million for the first quarter compared to the same period in 2003 was
attributed to the conversion over the last 12 months of 4 under arrangement
programs to management service programs where expenses are lower. As a
percentage of service revenues, cost of services for the first quarter of 2004
was 45% compared to 46% for the same period in 2003.

Selling, General and Administrative. Selling, general and administrative
expenses decreased $1 million, or 9%, to $10 million for the first quarter of
2004 from $11.1 million for the same period in 2003. For the first quarter of
2004, selling, general and administrative expenses consisted of $3.7 million
related to the Specialty Pharmacy Services business, $1 million related to the
Specialty Healthcare Services business and $5.3 million related to corporate
services, including $0.2 million in charges related to litigation costs of
Prescription City and integration costs of the CCS acquisition. The decrease of
$1 million was due to the inclusion of $0.2 million in charges in the first
three months of 2004 compared to $2.7 million in charges for the same period of
2003, offset by increases due to acquisitions completed in 2003 and growth in
corporate departments to support the acquisitions. The charges incurred in 2003
were related to costs of the Company's consolidation of its pharmacy operations
and severances related to executive departures. As a percentage of revenues,
selling, general and administrative expenses were 15% in the first quarter of
2004 compared to 19% percent for same period in 2003.

Net Income. Net income was $3.1 million, or $.23 per diluted share, in the first
quarter of 2004 compared to $3.4 million, or $.25 per diluted share, in the
first quarter of 2003.

Liquidity and Capital Resources

Working capital was $24.9 million at March 31, 2004 compared to $25.5 million at
December 31, 2003. Total cash and cash equivalents at March 31, 2004 was $1.5
million. The ratio of current assets to current liabilities was 1.5 to 1 at
March 31, 2004 and December 31, 2003.

Cash flows provided by operating activities for the three months ended March 31,
2004 totaled $2.2 million, primarily attributable to the $3.1 million in net
income, $0.9 million in depreciation and amortization and a decrease of $1.6
million in inventories, offset by an increase of $2.9 million in accounts
receivable, net, and a decrease of approximately $0.9 million in accounts
payable and accrued expenses.

Cash flows provided by investing activities totaled $1.3 million attributable to
proceeds of approximately $2.3 million from Accordant Health Services, offset by
$0.5 million cash used in acquisitions and $0.5 million used in fixed asset
purchases.

Cash flows used in financing activities totaled $3.1 million attributable to
$3.3 million used in repayments of debt obligations offset by approximately $0.2
million in proceeds from the exercise of stock options.

During the first three months of 2004, the Company experienced a net increase in
accounts receivable of $3 million attributed to the Specialty Pharmacy
acquisitions, growth in specialty pharmacy revenues and an increase in accounts
receivable days outstanding. Days sales outstanding were 84 days at March 31,
2004, as compared to 78 days at December 31, 2003. At March 31, 2004, days sales
outstanding for the


                                       16
<PAGE>

Specialty Pharmacy Services business unit was 84 days and for the Specialty
Healthcare Services business unit, days sales outstanding was 72 days.

As of March 31, 2004, the Company's current portion of long-term liabilities of
$7.9 million included $4 million representing the current portion of the
Company's borrowings from its commercial lender, $2 million representing the
current portion of the Department of Justice ("DOJ") obligation, $0.9 million
representing the current portion of a convertible note payable used in
connection with the purchase of Apex Therapeutic Care, Inc. ("Apex") in February
2002 and $1 million representing the note payable used in connection with the
purchase of certain assets of Prescription City in June 2003. At March 31, 2004,
the Company's long-term liabilities of $34.4 million included $1.5 million
related to the DOJ obligation, a $1.9 million promissory note representing the
long-term portion of the convertible note used in the purchase of Apex, $3
million in a convertible note payable related to the purchase of Home Care of
New York, Inc. in October 2002 and $28 million in borrowed funds from the
Company's commercial lender.

The Company's current portion of long-term liabilities and long-term liabilities
decreased $5.2 million to $42.3 million at March 31, 2004 compared to $47.5
million at December 31, 2003. The 11% decrease is due to the conversion of $1.2
million related to the Infinity note, principal payments and a lower revolver
balance.

The Company's longer term cash requirements include working capital for the
expansion of its Specialty Pharmacy Services business and for acquisitions.
Other cash requirements are anticipated for capital expenditures in the normal
course of business, including the acquisition of software, computers and
equipment related to the Company's management information systems. As of March
31, 2004, the Company had a $3.5 million obligation, payable over approximately
two years, to the DOJ related to the settlement of its litigation previously
disclosed, as well as bank debt and convertible and promissory notes totaling
$38.8 million payable over various periods through 2007. In April 2004, the
Company completed the acquisition of CCS for total consideration of
approximately $150 million in cash. The purchase price was paid with the
proceeds from an offering of $185 million aggregate principal amount of 10.75%
senior notes due 2011 offered in a private placement to eligible purchasers
pursuant to Rule 144A and Regulation S under the Securities Act of 1933.
Concurrent with the transaction closing, the Company also completed the
refinancing of its existing credit facility with GE Healthcare Financial
Services, a unit of GE Commercial Finance, as agent and lender to a $40 million
senior secured revolving credit facility to support permitted acquisitions, and
future working capital and general corporate needs. Upon completion of the CCS
transaction, the Company had approximately $24.5 million of availability under
its revolving credit facility. The Company expects that, based on its current
business plan, its expected operating cash flow and existing credit facilities
will be sufficient to meet working capital needs and a minimal number of
acquisitions. Any acquisitions of substantial size will require the Company to
either increase its credit facilities, issue equity or offer some combination of
both debt and equity.

Cautionary Statement

This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These statements include statements regarding
intent, belief or current expectations of the Company and its management. These
forward-looking statements are not guarantees of future performance and involve
a number of risks and uncertainties that may cause the Company's actual results
to differ materially from the results discussed in these statements. Factors
that might cause such differences include, but are not limited to, those
described under the heading, "Critical Accounting Policies and Estimates"
herein, or those described in Exhibit 99.1 to this Form 10-Q and other factors
described in the Company's future filings with the SEC.


                                       17
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company does not have operations subject to risks of material foreign
currency fluctuations, nor does it use derivative financial instruments in its
operations or investment portfolios. The Company places its investments in
instruments that meet high credit quality standards, as specified in the
Company's investment policy guidelines. The Company does not expect any material
loss with respect to its investment portfolio or exposure to market risks
associated with interest rates. The Company is subject to interest rate risk
under its current credit facilities.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the Company's management,
including its Chief Executive Officer and Chief Financial Officer, the Company
evaluated the effectiveness of the design and operation of its disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act).
Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that, as of the end of the period covered by this report, the
Company's disclosure controls and procedures were effective in timely alerting
them to the material information relating to the Company (or its consolidated
subsidiaries) required to be included in the reports the Company files or
submits under the Exchange Act.

Changes in Internal Controls

During the fiscal quarter ended March 31, 2004, there has been no change in the
Company's internal control over financial reporting (as defined in Rule 13
a-15(f) under the Exchange Act) that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting.


                                       18
<PAGE>

Curative Health Services, Inc. and Subsidiaries

Part II Other Information

Item 1. Legal Proceedings

In the normal course of its business, the Company may be involved in lawsuits,
claims, audits and investigations, including any arising out of services or
products provided by or to the Company's operations, personal injury claims and
employment disputes, the outcome of which, in the opinion of management, will
not have a material adverse effect on the Company's financial position or
results of operations.

As previously disclosed, a search warrant issued by a U.S. Magistrate Judge,
Southern District of New York, relating to a criminal investigation was executed
on November 4, 2003 at the Company's Prescription City pharmacy in Spring
Valley, New York. The Government has informed the Company that it is not a
target of the investigation. The Company was served with the search warrant on
Tuesday, November 4, 2003 while it was conducting its own compliance review at
the Spring Valley pharmacy. The Company intends to cooperate fully with the U.S.
Attorney's Office in its investigation. Based on information known as of
November 5, 2003, the Company terminated Paul Frank, the former principal
shareholder of Prescription City. The Company also hired outside counsel in
connection with this investigation. Certain assets of Prescription City were
purchased by the Company in June 2003. The purchase was structured as an asset
purchase with the Company being provided indemnifications, representations and
warranties by the seller. The Company has filed a complaint in the Southern
District of New York against Paul Frank and Prescription City, and such
complaint has not yet been served on those parties.

Item 2. Changes in Securities and Use of Proceeds

(c)(ii)     Conversion of Notes

            In January 2004, the Company issued an aggregate of 72,715 shares of
            common stock upon the conversion of $1.2 million of convertible
            notes held by certain former shareholders of Infinity Infusion Care,
            Ltd. which was acquired by the Company in June 2002. The issuance of
            the shares was affected without registration under the Securities
            Act in reliance on Section 3(9) of that Act as an exchange of
            securities by an issuer with its existing security holders where no
            commission or other remuneration was paid or given directly or
            indirectly for soliciting such exchange.

Item 5. Other Information

(b)         On February 12, 2004, the Company adopted Corporate Governance
            Guidelines which contains procedures by which security holders may
            recommend nominees to the Company's Board of Directors. Under these
            guidelines, shareholders desiring to recommend nominations to the
            Board are required to submit such recommendations by written notice
            to the secretary of the Company. Such notice must be received at the
            Company's principal executive offices at least 60 days before the
            date that is one year after the prior year's meeting. Such notice
            shall set forth (i) the name and record address of both the
            stockholder and of any beneficial owner on whose behalf the
            nomination is being made ("Beneficial Owner"); (ii) the class and
            number of shares of the Company owned by both the stockholder and by
            any Beneficial Owner; (iii) the name, age, business address,
            principal occupation or employment and residence address of each
            nominee; and (iv) the class and number of shares owned by each
            nominee. The Company's


                                       19
<PAGE>

            Governance Committee shall consider any recommendations made by the
            shareholders in the manner prescribed as it considers appropriate,
            and evaluate any nominees so recommended in accordance with the
            standards for director candidates set forth in the Company's
            Corporate Governance Guidelines.

Item 6. Exhibits and Reports on Form 8-K

(a)   Exhibits
      --------

      Exhibit 31.1      Certification of Chief Executive Officer pursuant to
                        Rule 13a-14(a) (Section 302 Certification), as adopted
                        pursuant to Section 302 of the Sarbanes-Oxley Act of
                        2002

      Exhibit 31.2      Certification of Chief Financial Officer pursuant to
                        Rule 13a-14(a) (Section 302 Certification), as adopted
                        pursuant to Section 302 of the Sarbanes-Oxley Act of
                        2002

      Exhibit 32.1      Certification of Chief Executive Officer pursuant to 18
                        U.S.C. ss.1350, as adopted pursuant to Section 906 of
                        the Sarbanes-Oxley Act of 2002

      Exhibit 32.2      Certification of Chief Financial Officer pursuant to 18
                        U.S.C. ss.1350, as adopted pursuant to Section 906 of
                        the Sarbanes-Oxley Act of 2002

      Exhibit 99.1      Risk Factors

      The Company has excluded from the exhibits filed with this report
      instruments defining the rights of holders of long-term convertible debt
      of the Company where the total amount of the securities authorized under
      such instruments does not exceed 10 % of its total assets. The Company
      hereby agrees to furnish a copy of any of these instruments to the SEC
      upon request.

(b)   Form 8-K
      --------

      Form 8-K filed February 25, 2004, furnishing under Item 12 a press release
      announcing the Company's results of operations and financial condition for
      the completed fiscal quarter and full-year ended December 31, 2003.

      Form 8-K filed March 9, 2004, reporting under Item 5 a press release
      announcing the Company's entering into a definitive agreement to acquire
      the capital stock of Critical Care Systems, Inc.


                                       20
<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.

Date: May 10, 2004

                                        Curative Health Services, Inc.
                                        (Registrant)

                                        /s/ Joseph Feshbach
                                        -------------------
                                            Joseph Feshbach
                                            Chief Executive Officer and Chairman
                                            (Principal Executive Officer)


                                        /s/ Thomas Axmacher
                                        -------------------
                                            Thomas Axmacher
                                            Chief Financial Officer
                                            (Principal Financial and Accounting
                                            Officer)







                                       21