Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes

Income Taxes

Note 9 - Income Taxes:

	Three months ended						Six months ended
	June 30,			June 30,			June 30,			June 30,
($ in thousands)	2011			2010			2011			2010
(Benefit) provision for income taxes	$	8,859		$	5,468		$	(20,587	)	$	21,798
Effective tax rate		49	%		23	%		17	%		33	%

The effective tax rate for the three months ended June 30, 2011 was increased by a charge for a change in valuation of our net deferred tax asset resulting from favorable state law changes enacted during the quarter.  The effective tax rate for the six months ended June 30, 2011 is reduced by our estimate of the portion of legal settlements and loss contingencies provided for in the quarter which may not be tax deductible and by non-deductibility of our portion of the annual pharmaceutical manufacturer fee.  For purpose of determining our tax benefit for the six months ended June 30, 2011, certain Average Wholesale Prices litigation matters had been  treated as a discreet event in the three months ended March 31, 2011 under the provisions of ASC 740, Income Taxes.  Current deferred income tax assets at June 30, 2011 and December 31, 2010 consisted of temporary differences primarily related to accounts receivable reserves.  Non-current deferred income tax assets at June 30, 2011 and December 31, 2010 consisted of timing differences primarily related to intangible assets, stock options, severance, and depreciation.

Tax periods prior to 2004 are no longer subject to IRS audit.  We are currently under audit in two state jurisdictions for the years 2003-2008.  In most other state jurisdictions, we are no longer subject to examination by tax authorities for years prior to 2006.

We reflect interest and penalties attributable to income taxes, to the extent they arise, as a component of income tax provision or benefit.

The difference between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to FASB ASC 740-10 Income Taxes represents an unrecognized tax benefit.  An unrecognized tax benefit is a liability that represents a potential future obligation to the taxing authorities.  As of June 30, 2011, we had $41.9 million included in "Long-term liabilities" on the condensed consolidated balance sheet that represented unrecognized tax benefits, interest and penalties based on evaluation of tax positions.  We believe that it is reasonably possible that approximately $22.0 million of our current unrecognized tax positions may be recognized within the next twelve months as a result of settlements or a lapse of the statute of limitations.