Ralph Giacobbe - Credit Suisse Darren Lehrich - Deutsche Bank Securities Kevin Ellich - RBC Capital Markets Thomas Gallucci - Lazard Capital Markets William Quirk - Piper Jaffray Amanda Murphy - William Blair & Co. Paxton Scott - Unknown Firm Shelley Gnall - Goldman Sachs Anthony Vendetti - Maxim Group Unknown Analyst - Unknown Firm Adam Feinstein - Barclays Capital Charles Rhyee - Oppenheimer & Co. Gary Taylor - Citigroup

Welcome to the Quest Diagnostics third quarter 2009 conference call. At the request of the company, this call is being recorded. The entire contents of the call including the presentation and question-and-answer session that will follow are the copyrighted property of Quest Diagnostics with all rights reserved. Any redistribution, retransmission, or rebroadcast of this call in any form without the expressed written consent of Quest Diagnostics is strictly prohibited. Now, I would like to introduce, Laure Park, Vice President of Communications and Investor Relations for Quest Diagnostics.

Good morning. I'm here with Dr. Surya Mohapatra our Chairman and Chief Executive Officer, Bob Hagemann our Chief Financial Officer, and Kathleen Valentine our new Director of Investor Relations. Kathleen will review the Safe Harbor statement.

Some of our commentary and answers to questions may contain forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements which speak only as of the date that they are made and which reflect management’s current estimates, projections, expectations, or beliefs, and which involve risks and uncertainties that could cause actual results and outcomes to be materially different. Risks and uncertainties that may affect the future results of the company include but are not limited to adverse results from pending or future government investigation, lawsuits or private actions, the competitive environment, changes in government regulations, changing relationships with customers, payers, suppliers, and strategic partners, and other factors described in the Quest Diagnostics 2008 Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Additionally, today’s prepared remarks will reference non-GAAP measures which are reconciled to GAAP in the footnotes of the earnings release. A copy of our earnings press release is available and the text of our prepared remarks will be available later today in the quarterly updates section of our website at www.questdiagnostics.com. A Powerpoint presentation and spreadsheet with our results and supplemental analysis are also available on the website. Now, here is Dr. Surya Mohapatra.

Thank you and welcome Kathleen. Demand for diagnostic testing services remains strong and our business is performing well. We drove solid earnings in revenue growth in the third quarter. We also continue to improve the efficiency of our business. During the third quarter, earnings per share grew 26%, revenues grew 4%, and cash flow from operations grew 14%. Based on our strong performance, we have raised our full-year EPS guidance to a range of $3.80 to $3.85. While there has been recent progress in healthcare reform, the terms of the final outcome are still to be determined. We have always been supportive of the goals of healthcare reforms to expand access to quality care, to improve outcomes, and reduce cost. Diagnostics play an important role in achieving these objectives. We’re hopeful that the efforts in Washington will result in better outcomes for patients, which is central to our mission. I will discuss our growth drivers after we hear from Bob on our financial performance.

As you heard, our business continues to perform well. Revenue growth has accelerated. Our profitability has continued to improve and cash flow remains strong. Earnings per share in continuing operations for the quarter were $1.02, 26% above the prior year with the increase principally driven by strong operating performance. $0.05 of the EPS growth is due to two items included in the last year’s third quarter which helped this year’s comparison. A $0.03 shortage associated with an asset write-down and a $0.02 impact from last year’s hurricanes. Consolidated revenues were $1.9 billion, 3.9% above the prior year and our net of 0.4% reduction associated with foreign exchange. Our clinical testing business which accounts for over 90% of our total revenues grew 4.3% above the prior year and over 5% before the impact of our pre-employment drug testing business. Volume was equal to the prior year level. Despite a 23% decline in pre-employment drug testing which reduced consolidated volume by 1.7%, the third quarter volume comparison for the prior year was aided by about 0.5% associated with the impact of last year’s hurricanes. After giving consideration to these factors, underlying volume grew just over 1%, about 1% slower than the second quarter. The increase is principally due to a general softness in our business during the month of August. August volumes tend to be highly variable and are impacted by vacation patterns and the timing of the start of the school year. Nothing that we saw in our August volumes pointed to a reversal of the progress we are making in growing our business. In fact, we saw volume growth rebound in September, placing underlying volume growth for September and July in line with the year-to-date level. Revenue per requisition increased 4.3% with the increase continuing to be primarily driven by…

We continue to execute our plan and drive growth. Our strategy is bifocal. We are managing the business of both the short and long term. I will discuss the drivers of growth in the quarter and also the investments we continue to make for the future. Third quarter profitability was driven by top-line growth and ongoing improvements in quality and efficiency. Our cost reduction program continues to improve our productivity and enhance quality and service. Revenue growth in the quarter was driven by continued strong demand for gene-based and esoteric testing including cancer diagnostics. Revenues from this test continue to grow faster than the overall revenues. Gene-based, esoteric, and anatomic pathology testing accounts for approximately 35% of all revenues. Anatomic pathology accounts for the majority of our cancer testing revenues. Interestingly, anatomic pathology testing is being supplemented with molecular test such as HPV. HPV cervical cancer testing increased approximately 10% compared to the prior year. In addition, we continue to extend our cancer diagnostics portfolio with the launch of new tests such as EGFR pathway test for metastatic colorectal cancer and our proprietary Leumeta family of plasma-based leukemia and lymphoma test which has grown more than 45% year-over-year. We have seen more than 50% increase in vitamin D testing which is increasingly used for a range of conditions from osteoporosis to cancer to diabetes to heart disease, and testing using ImmunoCAP grew more than 15% reflecting continued addition for this broad-based allergy testing method. Our continued focus on innovation is driving growth today and preparing us for the future. I would like to highlight a few exciting innovations we have recently announced in infectious disease, diagnostics for predicting therapy response, cancer diagnostics and healthcare IT. For example, we recently introduced the first commercial test for the H1N1 flu virus authorized…

(Operator Instructions). The first question is from Ralph Giacobbe - Credit Suisse.

Just a couple questions on the volume side; Bob, I know you mentioned sort of normalizing, looks like the number was up 1.1% last quarter, was up sort of mid 2%, could you just go through, I missed some of the comments, you said August was softer simply because of seasonality through the summer months and that’s kind of unpredictable, and September picked up again, is that what you said?

That’s right, Ralph. As I mentioned, August is a pretty variable month, sometimes it’s affected by the timing of vacations in schools and the like; and while there’s not a direct correlation, we also saw a similar pattern with scripts that were written in the month August, they were down, but as I said earlier, our volumes did rebound in the month of September, and when we look at September and the month of July, those volumes were pretty consistent with what we’ve seen year-to-date. So, we don’t think that there is any thing in the underlying performance that affected August.

So, in terms of your opinion, what’s the underlying growth rate in the volume number sort of excluding some of the one-timers?

Again, as you look at the table that we have in the footnote 7, you’ll see that adjusted is 1.1% for the quarter, but we’re not attempting to adjust for the month of August in there.

And then on the volume, can you talk about if there is typically any difficulties you may face on the volume side in the face of everything you’re doing on the cost side of the business. I’m assuming some of the cost savings is coming from down-sizing to some degree, so, should we think of that as once that stabilizes you would expect it to be easier to may be accelerate volume trends?

I wouldn’t say that there was any connection at all; in fact, what we’re doing on the cost side we believe is also improving service levels. we’re making things more efficient, we’re actually improving service levels, and if anything, I think it’s going to help us grow faster in the future.

My last one, can you talk about any potential flu impact in the quarter and maybe comment on whether you’ve seen any meaningful uptake this month just given all the news out there on swine flu?

We have seen a meaningful uptake in our testing for H1N1, but it’s still a very small piece of our business, and it’s really not having any noticeable impact on the results at this point, and really don’t expect it to have any significant impact for the fourth quarter either.

When we really look at the H1N1, it’s really a support of our innovative capabilities and the speed in which we brought the test to market is we think an important factor for people to look at.

The next question is from Darren Lehrich - Deutsche Bank Securities.

A few things here, just to look back here on the volume question, could you just characterize the growth rates that you’re seeing between routine and esoteric in the quarter, just may be some broad characterization there would be helpful.

As in the past, the esoteric business is growing much faster than the routine, and we expect that will continue. A lot of this is driven by new tests that are introduced, and certainly some of the things that Surya talked about in his prepared remarks are driving volume and revenue growth and we would expect that sort of pattern will continue as we go forward.

And the magnitude of that in the third quarter was what would you say roughly the spread is in terms of the growth rates?

Gene-based and esoteric tends to grow close to double digits while you can see the rest of the business volume-wise was a little over 1% or so.

And, if you could just may be talk a little bit more, I know Surya you mentioned some of these new test launches that you’ve had, maybe if you could give us some indication of how important some of these recent ones might be financially, particularly OVA1, how big do you think that test could becomes, how many tests do you think are out there, and then, I believe you’ve got the Septin test coming in the fourth quarter, could you talk a little bit about the launch and the timing of that?

First of all, we continue to drive our strategy towards diversification of higher growth and higher margin business, so, whether it is H1N1, whether it is test for Plavix or whether is Septin 9, or whether it is OVA1, they are all using a pipeline of products. Let me just answer some question about OVA1, we walked very closely with Vermillion, this is really a great story, how a small company got involved with a relatively large company and brought in innovations and never give up. In the 22,000 women diagnosed with ovarian cancer, half of them unfortunately died, but the 290,000 people go to the hospital with a pelvic mass. This is the first test at least to my knowledge where the physician can really triage what kind of surgeons they’re going to send. For example, if the pelvic mass is malignant, then it has to go to an oncological gynecologist rather than just go to a gynecologist or a surgeon. So, it is changing the standard of care. Now, testings are used to find out what kind of doctor is enough. It’s going to take some time to pick up, but it’s going to change the standard of care and we’re very excited. We’re now actually working with the marketing plan and we’re going to launch that test in the fourth quarter. Now, let me tell you a little bit about the Plavix, again, this is a test which is done from saliva, not from blood test, and again, so many people are on Plavix. For 30% of people it doesn’t work because they cannot metabolize this thing. So, now the fact that we work with Scripps Clinic and they have made it a standard of care, people can really do this test at home or in the office and we expect that also our test for Plavix is going to be useful, and again, we don’t have the numbers yet, but within the next 3 or 4 quarters we are going to provide you how this is growing. But, just remember, no one test is going to really move the needle. So, it’s a question of creating a portfolio test.

On the Septin 9 test that you questioned about, if you recall, we licensed the right to develop a molecular-based lab test that can help physicians detect colorectal cancer using a patient’s blood specimen instead of a stool specimen; so, that’s a great innovation. So, we’re in test development currently, we’re working diligently to make the test commercially available. We’re also participating in a clinical study to see the effects of this test in detecting as a screening for colorectal cancer. So, we’re making really nice progress on Septin 9 and we’re excited about bringing that test to market.

My last question here, just an update please on the India strategy as well as any financial outlook you have with regard to that market; and while you’re on top of India, can you just comment on any other significant developments that we should be looking out for in the other international markets?

As I have said, internationally, the core strategy for our company and we made an announcement that 10% of our revenue is going to come from international, and we are investing in India, it has taken a little longer than I would have liked, but I’m very pleased to say that the laboratory is completed, we have got CAP, we have got NABL approval, we have made some management changes and now we’re in the process of setting up sales and marketing. The India market is $1 billion, but that’s actually emerging market and evolving market. If you think about jus the potential of 300 million middle class, it’s the same population in United States, we are expecting to have significant growth in India, we’re going to be there for long and it’s going to take some time as you know in international; so, the first thing is we’re going to be in India, we’re going to invest in India, but with that also, we are exploring for example or work in Ireland; that model is a little different and it’s been very successful; we don’t have bricks and motors there yet, but we are helping the Irish Department of Health how to reduce the time taken for cervical cancer screening, and I’m really so excited that the Irish women don’t have to wait for 9 months to get their Pap smear study done, now it’s 10 days. So, again, we will be selective in international market, but we are going to make sure that we are successful where we are whether it is Mexico or whether it is UK or whether it is Ireland and India, but it is really part of our man strategy to grow international business.

Bob, is there a financial update on India and the impact?

Nothing significant at this point; we continue to invest there and I think it’s going to be a net investment for a while, but that investment is still pretty small, probably in the range of a penny impact EPS a quarter right now.

The next question is from Kevin Ellich - RBC Capital Markets.

Just kind of wanted to follow up on the volume question you guys have had, have you seen any changes in the trends as you exited the third quarter and what’s you expectations going forward, have there been any changes?

Kevin, as I said earlier, in September we saw volume rebound pretty nicely and we’re very comfortable with our full-year guidance which implies that Q4 revenue growth is going to be in line with Q2 and Q3.

And then, can you remind me, does the drugs of abuse testing, the drag that it creates, does that annualize next quarter?

It will probably not annualize until we get into December, that’s really when we saw a drop-off last year; so, coming out of this year is when we’ll see the full impact annualize.

And then, going back to August, you guys acquired a lab business from a hospital system in Boston, can you talk about how that business is looking with the integration process, what does the landscape look like for other hospital acquisitions?

Let me make a comment about the landscape and then Bob can talk about the number; what you are seeing now is what we expected, whether it is the recession or whether it is the lack of capital, but the number of hospitals is now realizing how to monetize their outreach business. Once the outreach business grows a little bigger, it doesn’t become efficient, because you have to put money in logistics and billing; so, here we have an opportunity the hospital system decided to monetize their outreach business, but most importantly picked us as a partner to help them to implement information technology, healthcare IT whether it is with their physicians or with the hospital; so, it’s a win-win situation where we can bring the reference studies and they have access to our esoteric laboratories to monetize their inefficient asset and at the same time, we’ve become partners in providing medical information when they want and where they want. So, I will see this trend is going to grow and certainly we really like that because we can bring our laboratory testing to the hospital and they can practice medicine.

Kevin, relative to the integration, it’s proceeding as we do with all integrations; we moved with what I’ll call deliberate speed, and I would expect that towards the end of this year most of that integration will be done. It’s a relatively small transaction; so, it’s not an overly complex integration, but as Surya referred to, the connectivity is an important piece of this and we want to make sure that we get that right.

Could you guys provide us an update on the landscape and your views on reimbursement as we exit 2009?

One of the things that’s important to understand is that all of our largest contracts are locked in into 2010 or beyond, so the pricing is really set by the terms of those contracts, and there is very little business that we have with third party payers that floats with Medicare rates, so, the fact that we’re having a Medicare rate change is January 1st is going to have very little impact on our managed care.

Diagnostic testing, did you say?

Yes.

Let’s just talk about cancer diagnostics. You have 1.5 million people diagnosed with cancer and almost 560,000 people will die, and our goal is to make Quest Diagnostics as the destination for cancer patients, and that’s why we acquired AmeriPath and that’s why we’re integrating anatomic pathology with molecular pathology and with digital pathology. So, when you put all those three things eventually you will see we will do more and more become the destination for cancer diagnostics for all cancer patients and oncologists; that’s number one. Number two, in the short term, obviously the growth is going to come from esoteric and gene-based testing, but in the medium and long term, we’re not only looking for international but we’re also looking for how the point of care devices can be integrated with IT and take diagnostics to the patient bedside in the hospital. So, we’re pretty excited about the industry, we’re pretty excited about Quest Diagnostics because we could invest in appropriate product portfolio to grow this company short term and long term.

Your next question is from Thomas Gallucci - Lazard Capital Markets.

Good morning everybody and thank you for the color so far. Just on looking at the margins, I think Bob, you mentioned that the improvement is due to mix and cost cutting. Your margin expectations have been coming up throughout the course of the year. So, is one side or the other ahead of what you’re expecting?

Certainly I feel as though we’re firmly on track with respect to our cost reduction program and the good news about that is that the cost reductions that we’re achieving are going to be sustainable because as you’ve heard me say before these are a result of taking work out of the system rather than just trying to do more with less, and a byproduct of this as well is you’re building in a culture of continuous improvement. In that regard I feel very good about it. We’re tracking exactly where we thought we’d be, maybe a little bit ahead at this point, and we feel as though the progress that we’ve made with this program is going to put us in very good shape going forward to continue reducing our cost and becoming more efficient.

On that note, how do we think about the longer term; obviously the $500 million has gone very well; the long-term goals, is it still 20% EBIT margins eventually or…?

It absolutely is; it is going to be a combination of us continuing to get more efficient but also driving top line growth. At the end of the day we can continue improving efficiencies, but we do need to drive top line growth in order to get to margin expansion that we’ve been talking about and certainly the things that Surya has been discussing, the focus on innovation, the investments we’re making today, I think, has put us in very good shape for the future and put us in a position to actually grow faster than the market over time.

Any timeframe for getting to that 20%?

Next several years.

One more on the cash flow, you ranged your expectations there pretty nicely; can you just remind us how you’re thinking about the priorities there and what the acquisition landscape looks like over and above the hospital billing units?

First, let me step back and say our practice continues to be deploy all of the cash that was got and utilize to leverage capabilities that we have in a very prudent way to drive shareholder returns, and yes, the first priority there is to make sure that we preserve our credit ratings. It is important to maintain investment-grade credit rating especially in this environment. It gives us good access to capital and attractive rates and it also gives us the flexibility to be opportunistic as it relates to growth opportunities. With that said, while we’re continuing to operate within the parameters that preserve that investment-grade rating, the first priority has been and will continue to be to invest in growth, whether that being acquisitions, licenses, other opportunities to develop new tests and the like, that’s always the first priority because it creates sustainable shareholder returns. Secondly, to the degree that we don’t have growth opportunities in a particular quarter and we got the capacity, you’ll see us do share repurchases and that’s what we’ve historically done; at this point, we still have about $150 million left under our current share repurchase program, and for the most part we’re going to be in the market in more quarters. As you know, we’re purchasing at least 3 million shares a year to offset the dilution associated with the equity programs that we have here, but to the degree we can do more, we will.

The acquisition landscape generally speaking?

Surya talked about care costs and the fact that hospitals are looking to monetize assets, I think that’s going to continue. I also think as you think about regional laboratories that in the past may have been owned by private equity and are going to have to do some refinancing over the next several years or so; that refinance is going to be more difficult, so I think that’s probably going to create some opportunities also. Then you have the other areas that we talked about as elements of our growth, whether it be point of care business and maybe down the road international as well.

Your next question is from William Quirk - Piper Jaffray.

Two questions here; we’ve successfully stayed off the lab packs; Surya you kind of addressed little bit in your prepared comments, but how do we think about; one, the prospects for reform at this point, and then two, the pass-through if any that we might see from the potential device tax being floated?

As the healthcare reform continues to evolve down in Washington, we continue to believe in the goals of healthcare reform and we think for Quest Diagnostics and the industry we think it will be a net positive; expanding access and coverage for patients who are currently today uninsured is a good thing. The emphasis on prevention and wellness will certainly create a demand for more testing which will certainly benefit us, and then also the focus and incentives that they’re looking at relative to healthcare IT; we have as you’ve heard today and previously, we bring to the table a lot of very helpful healthcare IT solutions that we think will go very well for us and position us very well. We’re not going to speculate on the final outcome of healthcare reform, but net-net we think it will be a good thing when you offset that with whatever comes from the price reduction perspective and as it relates to the notion of the tax on the devices, we’re not going to comment on that, I am not going to speculate there.

What I would say with respect to tax on devices at least were a significant portion of the items that we purchased. We have fixed price contracts in place and certainly as we think about working with our suppliers we look for ways to help them reduce their costs so that they can help then manage the cost that they will charge to us. I don’t know how that’s ultimately going to shake out, I think that will have some opportunities to mitigate some of that impact.

Bob, just to follow up there, I assume these are roughly five-year rolling contracts; so we’re looking at something like 20% of vendor contracts coming up each year?

It varies; five years is a long time, but we do have multi-year agreements in place with many suppliers.

To tough on a couple of the balance sheet metrics; continue to see very low carrying of inventory, looks like about 6-1/2 days, down substantially a couple of days or so year over year; how should we think about that going forward; are we bottoming here, how should we think about this moving forward?

First of all, I wouldn’t spend a lot of time focusing on inventory, it’s a relatively small asset for us in the scheme of things. Certainly DSOs are the much bigger opportunity for us, but as you’ve seen, we made good progress with both inventories and DSOs. I don’t know if it has to do with the fact that this year, I think I talked about this on the second quarter call; we’ve implemented a program whereby we’re measuring each of our business units and naturally incenting individuals to manage capital deployed in their business which includes both inventories, DSOs, and/or capital spending. As you may have noted, our capital spending is actually a little bit below where we were last year and we’ve actually just reduced our estimate for full-year capital spending by about $20 million as a result of this program.

Your next question is from Amanda Murphy - William Blair & Co. Amanda Murphy - William Blair & Co.: Just a couple of questions here; first, just a followup on volumes; it seems like the concern that rising unemployment rates might have a delayed impact on volume in the back half of the year hasn’t really played out. I am just curious, are you concerned about the end of COBRA subsidy going forward having an impact?

As unemployment has ramped up we’ve seen our volume continue to grow. So, while there may be some correlation, there is not a significant direct correlation, and I think that we’ll be able to mitigate much of any potential impact from COBRA dropping off. We haven’t seen a significant change in physician office visits, and certainly what’s driving a lot of our testing is the fact that there are new tests, there is increased demand for testing, and certainly demographics are going to continue to drive it; as people get older, they need more testing. I think that’s some of what we’re seeing in the underlying results. Amanda Murphy - William Blair & Co.: On the esoteric side of the business, it seems that the anatomic pathology market has become a little more competitive over the past few years as independent labs get under the market, etc.; would you agree with that, and could you just run through how you view Quest in that market and what your specific advantages are?

I wouldn’t say that it has become more competitive because independents have entered the market. I think it’s more of a case where we’ve seen some of customers start to internalize work, the technical component, the professional component, and that’s an industry-wide phenomenon. What I would tell you though is as you think about AP, think about it as an important element of the broader market for cancer diagnostics, and increasingly, we’re seeing molecular tests ordered in connection with the tissues and the other AP work, and that’s where when we step back and look at the market that way, we feel very very good about the way we’re positioned. Certainly, we’ve got the most extensive pathologist network and we believe we’ve got the most extensive molecular test menu. So, we feel very well positioned to grow in cancer diagnostics and AP being a very important piece of it.

Your next question is from Paxton Scott - Unknown Firm.

My first question is on the guidance; I know, Q4 last year was particularly weaker due to the economy and you had some non-recurring costs in there related to workforce reductions, but can you remind us if there was anything else that we need to be thinking about in terms of Q4 particularly given that you’ve done about $2.91 in EPS year-to-date and your full-year guidance implies $0.94, the high end; just wanted to know if there is anything else we need to be thinking about there as we model that out?

There is nothing specific that you should think about in our Q4 this year. I would this statement though relative to last year in that last year’s fourth quarter was actually very strong overall. The volumes were impacted by the drugs of abuse testing business, but the underlying business performed extremely well last year from an earnings standpoint and a cash flow standpoint.

My other question was on the Medicare clinical lab fee schedule; first, am I correct in saying that about 12% of your revenue is derived from that fee schedule, and secondly, based on the CPIU update and the 0.5% additional reduction, is it correct to say that you’re facing about a 1.9% reduction for 2010?

The expected reduction that we’re seeing for 2010 on the Medicare fee schedule is 1.9%; so we are looking at that and based on what’s currently proposed, that’s what we’re expecting to see.

The other thing to note too is that our Medicare revenues are about billion dollars or so; it’s about 85% of them reimbursed onto the lab fee schedule and about 15% or so reimbursed onto the physician fee schedule.

Your percentages are about right.

Your next question is from Shelley Gnall - Goldman Sachs.

Back to H1N1 just for a quick second; I know it sounds like it wasn’t a material impact on volumes, but was there an upside from pricing or I should say revenue per requisition?

Very modest because again the impact on volumes were so small that it’s not going to move the needle there.

So your revenue per requisition run rate, if you take out the one-time items, has actually been getting stronger each quarter this year; what is driving that, is it just a matter of esoteric testing becoming a bigger part of mix or is there something else that’s driving that?

It’s not just esoteric testing but it’s the continued utilization across the board of various tests. We’re continuing to see an increased number of tests ordered per encounter and a lot of it has to do with new tests that are getting introduced, but also increased demands for things like vitamin D, etc.; so if you were to look at our revenue per requisition adjusted for the things that we have in the footnote, you would see that it has been ramping up slightly, but again, it’s pretty much test mix driven.

If you look at our revenue per requisition in each of the first three quarters, it’s actually almost exactly flat quarter to quarter; it’s relatively flat. So, we’ve been consistently strong growth for each of the quarters.

I am wondering if you share the number of managed care contracts you’ve negotiated to 2010?

We have not, but again, reiterate that majority of our contracts, particularly all the large one are negotiated through 2010 or beyond.

Just one quick housekeeping; understanding that you did share repurchase during the quarter, it doesn’t seem to be reflected in your share count for the quarter end; is there something else that was going on in issuance during the quarter?

No, I think you have to look to the timing of those share repurchases and the like, but it certainly is reflected in the share count.

Basically there is a footnote which talks about the increase of the share count.

Your next question is from Anthony Vendetti - Maxim Group.

Just a quick question on Vermillion, I know that’s the first test FDA approved for ovarian cancer; from what I understand these five specific biomarkers and you have an exclusive for multiple years, but can that test be used or that technology be used to come up with other specific cancer tests?

First of all, they know these are multi-analyzed tests and we use algorithms. So, it takes a longer time. Will the process be useful for other tests, I think yes, and that’s why actually they’re working on a number of other tests, but this is the one which is the most promising and has gone through the FDA approval and we’re very excited about it.

On the OVA1 test, the FDA clearance we are going to use and promote this test based on the FDA cleared labeling. The OVA1 test that we’re bringing to market, it will use those five biomarkers coupled with the proprietary algorithm, it will give the numeric indication indicating whether the woman’s pelvic mass is malignant or not. So, that’s how we’re going to market with this test, but to your point and to echo Surya’s comment, we’ll continue to work with Vermillion to see what other uses for those biomarkers that we may be able to use or beyond that, but specific on OVA1 we will promote the test based on the FDA labeling.

So you do have rights to other potential tests or is it exclusive right now just for ovarian?

We have some right to other tests.

Lastly, can you talk about the pricing on this type of test; obviously it’s a high-end test, I would assume it would expensive?

We’re working with the marketing plan and the reimbursement; it’s too early to really make any comment on that.

Your next question is from Unknown Analyst - Unknown Firm.

I just had a question on cancer diagnostics just generally. You’re seeing a lot of growth in that area and is the growth primarily volume or is it pricing or a combination; can you quantify what is pricing and what is volume, and can you just give me a range of prices for cancer diagnostics, what is the low end and the high end.

What I would tell you is think of it as volume driven; again these are principally new tests that are getting introduced and in many cases those tests carry higher reimbursement than the average that we’ve got. So, it is helping the revenue per requisition as well, but in terms of pricing for cancer diagnostics; it runs from a routine Pap smear which is around $20 odd to some very high-end tests that could be in the hundreds, maybe close to $1000.

Your next question is from Adam Feinstein - Barclays Capital.

I know it’s late in the call here; just a couple of minor questions. First, how do you guys think about, I guess in the fourth quarter you had the easier volume comps; so will we indeed see positive volume growth in the fourth quarter; I know you don’t give guidance, and I am not asking for number, but just in terms of the absolute trends.

You should expect that you’ll see positive volume.

As we think about the industry, how would you guys think about the industry growth rate these days; we’ve seen the impact on volumes and obviously we have the long-term historical trends, but in terms of, as you guys think about your market share and what’s going on more generally speaking for the industry, how would you think about the industry growth rate and how would you compare your growth rate to that as we think about your market share?

As we’ve told you in the past, it’s very difficult to get a good handle on how the market is growing, but we do participate in all aspects of the market including the drugs of abuse testing business which is significantly down versus the prior year, but when you look at our total revenue growth in the 3% to 4% range, we think that we’re growing pretty close to what the market is doing right now.

Just one final question; you guys have done an absolutely phenomenal job to reassess the efficiencies in the business and just bringing down costs for the last couple of years or so; are we at the full run rate now, I know you would say by the end of another year what was on the goal, the $500 million that you talked about a while back; is that fully in the numbers now or will it not be until the end of the year?

What we have committed to is we’re going to have $500 million as we exit this year, that’s exactly what we’re tracking towards, and we feel very very comfortable, maybe a little bit better than that, but I am trying not to give quarterly numbers on that.

Your next question is from Charles Rhyee - Oppenheimer & Co. Charles Rhyee - Oppenheimer & Co.: I just had a quick followup; Bob, I think you touched on it briefly a little bit earlier regarding the insourcing of some of the anatomic pathology work by these larger physician groups; just wanted to get your thoughts on that, and maybe Surya as well; how should we think about this trend going forward and how much of the impact have you already seen in the market; my understanding is that it is being done largely by some of these large urology practices, but what’s the ability of this penetrating and shifting maybe over to different specialties as well and maybe what do you think can be done about this. I know that it’s a function how the reimbursement works and clearly that is an issue that needs to be perhaps fixed over time, but at least over the near term, how do you look at this trend and how should we think about it?

I think you have evaluated the situation pretty well and as physicians, especially the urologists and the GI specialists want to internalize the TC and PC, it is a competitive change and we’re dealing with it, but we believe that it is a short-term trend rather than a long term. When you look at cancer diagnostics and look at long term what is really happening and that’s one of the reasons why we acquired AmeriPath that it is just not the tissue; anatomic pathology which is morphology and histology is now combined with esoteric testing which is the molecular pathology, and then the question, how do you really get this information to various people knowing there is also shortage of number of specialists. So, we consider the TC/PC challenge is short-term, we have to deal with it. We see our outpatient AP is growing better than inpatient because of the hospitals, but we’re here for the long term, and as I told you that we are investing money to make Quest Diagnostics the destination for cancer patients.

The other thing Charles that I’ll add is self-referral, which is what you’ve got in this case, can sometimes lead to over-utilization and we’re doing what we can to try and educate legislators and the like around that. As you saw a number of years ago with the Stark Legislation, there were some loopholes that were closed there and I think over time we might be able to address the same thing here. Charles Rhyee - Oppenheimer & Co.: Any impact that we’ve seen so far; do you think that the impact could increase over time or do you think any impact you’ve seen in the market is largely the run rate going forward?

That’s pretty hard to assess at this point. There might be some additional pressure to do some more insourcing, but as Surya said, over time we don’t see this necessarily as something that we think we’ll continue and could possibly end up reversing it sometime down the line.

Think of it a little bit like hospitals doing outreach, just like clinical pathologists; so this is like internalization and this is nothing new to our industry. When hospital internalizes esoteric testing we have to deal with these things and now we have some specialists trying to internalize it and we have to rise above that and that’s what we’re doing.

The last question comes from Gary Taylor - Citigroup.

Two or three question; the first is, I don’t think we explicitly talked about this; I just wanted to come back to it; there is a lot of debate in the market on the commercial contracts heading into next year, how much of those are based on fixed escalators versus CPI-based escalators, and I think you’ve been asked before and have said it is a lower number that’s based on CPI, but could you comment or talk around maybe, if we can’t have that explicit number, what type of difference you might expect in terms of overall commercial pricing, 2010 versus ’09 or what sort of drag the CPI-based component might have?

Gary, here is what I would tell you. As we’ve said in the past, very little of our business which is the third-party payers floats with Medicare rates, and while we may have some CPI adjustments in there, in most cases the adjustments that we have are generally fixed-rate adjustments, and in some cases we don’t have adjustments at all. So, I don’t think that the inflation going into 2010 outside of what it does to our Medicare reimbursement is going to have a significant impact on our overall revenue per requisition or our pricing. If you look back over the years, frankly what’s driven our improvements in revenue per requisition has not been pure price increases. It has been test mix and the number of tests ordered per requisition, and that I think is going to continue to be a positive impact for us.

Good, that’s helpful. Second question; wanting to talk about labor costs a little bit and maybe get a sense of the environment helping you, but first a question on the roughly $1.1 billion in cost of services; what percentage of that is labor?

Labor makes up about half of our total cost and it is probably not all that different in cost of services.

Are you seeing anything different; I guess what might strike me based on what other companies have told us is maybe the economic environment might be driving say lower turnover in the types of employees that might be drivers and that might be a labor benefit and then maybe actually a deflationary type environment or certain clinical personnel and maybe tech; so could you talk about those two groups and are you seeing any of that?

What I would tell you Gary is over the last two years and as I expect going forward, most of the efficiency gains that we achieve are going to be as a result of taking work out of our business and using voluntary attrition to adjust the size of our work force. We continue to make as we did last year, provide merit increases to our employees; it’s important to make sure that we compensate them appropriately, provide appropriate benefits because we want to make sure that we’re tracking and retaining the best that there is. So, we will continue to do that, that’s been our philosophy and I don’t see that changing.

Finally, on the G&A number which has been of sorts being able to take some cost out; what’s the largest total component of G&A expense, would that be where the sales reps are, that labor would be in that line or?

You have the selling costs in there, you have bad debt, and you have the billing organization. Those are probably the biggest within there. In addition, you have the overhead and the like that sits in there, but the sales force, the billing organization, and bad debt.

That’s really labor again that is probably the biggest single component.

Absolutely.

Thank you for participating in the Quest Diagnostics third quarter conference call. A transcript of prepared remarks on this call will be posted later today on Quest Diagnostics’ website at www.questdiagnostics.com. A replay of the call may be accessed online at www.questdiagnostics.com/investor or by phone at (866) 428-3803 for domestic callers or (203) 369-0904 for international callers. No access code will be required. Telephone replays will be available 24 hours a day beginning at 10:30 am Eastern Time today until midnight Eastern Time on November 20, 2009.