What changed in this filing

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Item 1. Business

2023-02-28 compared with 2022-02-25 · 303 added, 293 removed, 617 unchanged (49% of the section changed)

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Through its Labcorp Diagnostics (Dx) and Labcorp Drug Development (DD) segments, the Company provides diagnostic, drug development, and technology-enabled solutions for more than 160 million patient encounters per year, or more than 3 million per week.

In addition, the Company's world-class central laboratory, preclinical, and clinical development businesses support clinical trial activity in approximately 100 countries.

The Company's capabilities enable it to play a leading role in advancing healthcare across the globe, and to provide crucial, ongoing support for the response to the COVID-19 pandemic.

The significant reach, breadth, and advancement of the Company's offerings have resulted in revenue growth of 39.5%, and operating income growth of 145.0%, from 2019 through 2021.

The Company believes that its diversified offerings across DD and Dx help to balance the impact of changes in the global economic and healthcare systems, as well as the continued impact of the COVID-19 pandemic.

In addition, the Company supports clinical trial activity through its world-class central laboratory, preclinical, and clinical development businesses.

The Company's capabilities enable it to play a leading role in advancing healthcare across the globe.

The significant reach, breadth, and advancement of the Company's offerings have resulted in Base Business revenue growth of 2.8% from 2021 through 2022 and 5.9% versus 2019 CAGR.

Base Business includes the Company's business operations except for COVID-19 Testing.

The Company believes that its diversified offerings help to balance the impact of changes in the global economic and healthcare systems and due to global geopolitical events.

For the period ended December 31, 2022, the Company generated revenues of $14,876.8 million, diluted earnings per share of $13.97, and had a total operating cash flow of $1,955.9 million.

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Strategic Review of Company Structure and Capital Allocation Strategy

In March 2021, the Company announced the undertaking of a comprehensive review by its board of directors (the Board) and management team of Labcorp's structure and capital allocation strategy.

The review reflected the Board's and management team's view that the Company's value was not appropriately reflected in its stock price.

As a part of this review, the Board and management worked with outside advisors, held extensive discussions with third parties, and considered a wide range of options, including significant acquisitions, divestitures, spinning off businesses, as well as spinning and merging those businesses with strategic partners.

Ultimately, the Board unanimously concluded that the Company's existing structure is in the best interest of all stakeholders at this time and represents compelling opportunities to grow and create significant shareholder value.

In December 2021, the Company announced the Board's conclusion, as well as actions that the management team and the Board are taking to enhance shareholder returns.

These actions include:

• initiating a dividend in the second quarter of 2022, with a target dividend payout ratio of between 15 to 20% of adjusted earnings;

In March 2021, the Company announced the undertaking of a comprehensive review by its board of directors (the Board) and management team of the Company's structure and capital allocation strategy.

In December 2021, the Company announced the Board's conclusion, as well as actions that the management team and the Board would take to enhance shareholder returns.

These actions have included:

• initiating a dividend in the second quarter of 2022, as well as subsequent dividends paid in the third and fourth quarters of 2022, with total dividend payments for 2022 in the amount of $195.2 million;

• authorizing a $2.50 billion share repurchase program.

As part of this program, $1.0 billion is being repurchased under an accelerated share repurchase plan that is expected to be complete by the end of April 2022;

• implementing a new LaunchPad business process improvement initiative, targeting savings of $350.0 million over the next three years;

As part of this program, $1.0 billion was repurchased under an accelerated share repurchase plan in 2021, and a total of $1.1 billion of stock was repurchased in 2022, representing approximately 4.7 million shares;

• implementing a new LaunchPad business process improvement initiative, targeting savings of $350.0 million through 2025;

• providing a longer-term outlook in connection with the announcement of the Company's 2021 year-end results in addition to the Company's annual guidance;

• providing additional business insights through enhanced disclosures beginning with Labcorp's results for the first quarter of 2022;

• providing additional business insights through enhanced disclosures beginning with the Company's results for the first quarter of 2022;

• continuing a commitment to profitable growth through investments in science, innovation, and new technologies;

On July 28, 2022, the Company announced that it would pursue a planned spin-off of its Clinical Development and Commercialization Services (CDCS) business, as further discussed below.

Management and the Board are committed to continuing to evaluate all avenues for enhancing shareholder value.

The updated capital allocation plan enables the Company to continue investment in key growth areas, including oncology, Alzheimer's disease, autoimmune disorders, and women's health.

This plan is expected to fuel growth through innovation by using Labcorp's unparalleled data and insights to bring scientific advancements—both Labcorp-developed and those of other scientists—to market at scale.

The updated capital allocation plan is designed to enable the Company to continue investment in key growth areas.

This plan is expected to fuel growth through innovation by using the Company's unique data and insights to bring scientific advancements—both those developed internally and those developed by outside companies and scientists—to market at scale.

It reflects the Board's confidence in the Company's strong balance sheet and cash flow generation profile, as well as the Board's commitment to deploying capital to enhance value for shareholders, patients, providers, and pharmaceutical customers worldwide.

Spin-Off of the Company's CDCS Business

On July 28, 2022, the Company announced that the Board authorized the Company to pursue a spin-off of the Company’s wholly owned CDCS business to its shareholders through a tax-free transaction.

The planned spin-off will result in two independent companies, each poised for strong, sustainable growth.

On January 9, 2023, Thomas (Tom) Pike joined the Company as president and chief executive officer of its DD Clinical Development business unit, and when the planned spin-off is complete, Mr.

Pike will become the chief executive officer and chairman of the board of directors of the independent,

publicly listed company.

On February 9, 2023, the Company announced that the name of the CDCS business will become Fortrea in connection with the planned spin-off.

The Company is targeting completion of the planned spin-off in mid-2023.

The planned spin-off will be subject to the satisfaction of certain customary conditions, including, among others, the receipt of final approval by the Company's Board, the receipt of appropriate assurances regarding the tax-free nature of the separation and effectiveness of any required filings with the U.S.

Securities and Exchange Commission (SEC).

There can be no assurances regarding the ultimate timing of the transaction or that the spin-off will be completed.

When the transaction is complete, the resulting companies will be Labcorp, comprising the Company’s routine and esoteric labs, central labs and early development research labs, and Fortrea, a global contract research organization (CRO) providing Phase I-IV clinical trial management, market access and technology solutions to pharmaceutical and biotechnology organizations.

The planned spin-off is expected to provide each company with:

• strengthened strategic flexibility and operational focus to pursue specific market opportunities and better meet customer needs;

• focused capital structures and capital allocation strategies to drive innovation and growth;

• a more targeted investment opportunity for different investor bases;

• the ability to align its particular incentive compensation with its financial performance.

Following the planned spin-off, the Company believes that Labcorp will be positioned to:

• invest in R&D and innovation to develop and launch diagnostic advancements globally in key clinical areas including oncology, Alzheimer's, and autoimmune and liver disease through organic and inorganic opportunities;

• bring together its global health and patient data and provide insights to enable customers to innovate;

• utilize its worldwide laboratory network to serve a broad, growing and global customer base including pharmaceutical and biotechnology companies, physicians, health systems, consumers, and other start-ups and laboratories that require lab services or diagnostic testing;

• launch innovative tests globally, providing patients, physicians, health systems and pharmaceutical companies with access to its advanced science, technology and diagnostic capabilities.

Following the planned spin-off, the Company believes that Fortrea will be positioned to:

• capitalize on growth opportunities across Phases I-IV clinical trials and extend its leadership in oncology, cell and gene therapy, rare disease, and other emerging therapeutic areas;

• increase agility with large pharmaceutical and biotechnology clients to better serve customers and advance life-saving therapies;

• access to unique data sets and insights through an arrangement with the Company for a defined period of time which will enable Fortrea to provide enhanced trial execution and a differentiated value proposition;

• invest in capabilities, technologies, diverse talent and innovation to enhance trial execution and better serve all of its customers;

• implement a capital structure that is tailored to support its growth strategy and enhance stakeholder value.

The planned spin-off is intended to qualify as a tax-free transaction for U.S.

federal income tax purposes.

See “Risk Factors - Risks Related to the Planned Spin-off of the Company’s Clinical Development and Commercialization Services Business.”

Enterprise Strategy

Labcorp delivers world-class diagnostics solutions, brings innovative medicines to patients faster, and uses technology to improve the delivery of care.

The Company is expanding its important role in the rapidly evolving healthcare market by strengthening its market-leading positions across its portfolio of capabilities, growing strategic opportunities that drive new business, and differentiating its unique offerings, capabilities, and financial performance.

To do so, Labcorp is focusing these efforts across the following strategic priorities:

Leveraging the Company's Diagnostic and Drug Development Capabilities

Together, Dx’s and DD’s core capabilities and scientific and technological expertise empower the Company to create compelling solutions for clients and patients.

The Company’s collective strength allows it to help pharmaceutical, biotechnology, and medical device partners design better clinical studies, execute those studies faster through enhanced patient recruitment, take greater advantage of virtual and hybrid study options, and satisfy post-market surveillance requirements.

For example, insights gained through diagnostics support drug development operations by assisting in the identification of patterns in disease progression, as well as individuals who would benefit from enrollment in certain clinical trials.

Further, the Company's connections with a broad and diverse range of patients and healthcare providers allow it to both expand clinical trial participation opportunities to typically underrepresented communities, and to make clinical trials a viable treatment option for patients whose current treatment options may be limited or inadequate.

In addition, the Company can advance companion and complementary diagnostics and other precision medicine innovations that match patients with targeted treatments based on genomics and other individual characteristics due to the experience, resources and data harnessed by both Dx and DD.

Through comprehensive integration of those capabilities, the Company has a unique opportunity to extend its position as a market leader in the development and commercialization of new therapies and tests by providing data, insights, and answers for doctors, drug developers, and the public.

Embedding Data and Digitalization Throughout the Company's Business

The Company provides vital information to help its customers make clear and confident health decisions.

Through its science, data, and global laboratory network, the Company accelerates and advances innovations in testing and treatments to improve patient care.

The Company is expanding its role in the rapidly evolving healthcare market by strengthening its positions across its portfolio of capabilities, growing strategic opportunities that drive new business, and differentiating its unique offerings, capabilities, and financial performance.

To do so, the Company is focusing on executing the following strategic priorities, which have evolved to reflect its operations and strategic vision:

Build on the Company's Leadership in Oncology

The field of oncology receives significant investment in research, development, and treatment, yet it remains an area of great unmet medical need.

The Company believes the diagnosis and treatment of cancer will be the fastest-growing therapeutic area in the near future.

With the increased adoption of precision medicine, health and cancer care providers are relying on advanced testing to identify patients who will benefit from new, targeted treatments and therapies that are more effective and often have fewer side effects than chemotherapy and other traditional treatments.

Since forming an oncology business unit and launching an enterprise oncology platform in 2021, the Company has become an oncology leader.

By focusing its diagnostic and drug development services on the fight against cancer, the Company is delivering targeted solutions that power better decision and improved patient outcomes.

The Company believes it maintains the broadest portfolio and capabilities in oncology diagnostics today.

The Company intends to accelerate its leadership and enhance its offerings, particularly in genomic testing, personalized medicine and liquid biopsy.

The Company is also leveraging its oncological capabilities and platforms to progress its work in other areas, including neurodegenerative disease, autoimmune and liver diseases, and cell and gene therapy.

In 2022, the Company completed its acquisition of Personal Genome Diagnostics (PGDx), a provider of comprehensive liquid biopsy and tissue-based genomic products and services.

The acquisition of PGDx enhances the Company's precision diagnostic portfolio and its ability to increase access to oncology care globally.

In addition, the Company continues to realize benefits from its portfolio of OmniSeq products such as OmniSeq INSIGHT, a comprehensive genomic and immune profiling, tissue-based test that integrates next-generation sequencing (NGS) technology.

Differentiate Through Digital and Data

The healthcare and life sciences industries remain among the most significantly impacted by technological advancements.

By maximizing the use of advances in artificial intelligence, data, digitalization, and analytics, the Company strives to improve operating efficiency and create new, differentiated products and services that the Company believes will help its customers and deliver better care to patients.

The Company is using artificial intelligence to better identify and predict trends such as the timing and location of demand shifts for certain tests.

By maximizing the use of advances in artificial intelligence (AI), data, digitalization, and analytics in compliance with applicable regulations, the Company strives to improve operating efficiency and business performance, and to create new, differentiated products and services that the Company believes will help its customers and deliver better care to patients.

The Company is using AI to better identify and predict trends such as the timing and location of demand shifts for certain tests.

In doing so, the Company is supporting an efficient use of supplies, staffing, and the Company’s advanced logistics used to route testing to the most appropriate laboratories and quickly deliver results.

Artificial intelligence capabilities and advanced logistics continue to play an important role in the Company’s response to periods of heightened demand for COVID-19 polymerase chain reaction (PCR) testing.

AI capabilities and advanced logistics have played, and are expected to continuing playing, an important role in the Company’s response to periods of heightened demand for COVID-19 polymerase chain reaction (PCR) testing.

The Company creates, and has access to, significant volumes of data.

By applying advanced analytics, the Company can help its customers improve their processes and reach better outcomes.

By applying advanced analytics to its data in compliance with data privacy regulations, the Company can help its customers improve their processes and reach better outcomes.

The Company’s repository of test results help study sponsors assess patients' eligibility for clinical trials more quickly and accurately, enroll those patients faster, shorten the time needed for regulatory submission, and accelerate the availability of new medicines.

Data is also being used by the Company to advance science and the public's understanding of certain treatments and illnesses, including chronic kidney disease.

Data is also being used by the Company to advance science and the public's understanding of certain treatments and illnesses.

Digitalization continues to be an area of focus for the Company as it responds to the use of technology-enabled tools and services by healthcare providers, patients and pharmaceutical companies for absorbing, handling, and disseminating information.

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Decentralized clinical trials can also make trial participation an option for more people, including individuals from underrepresented populations.

Digitalization enabled many of the Company's employees to transition to remote work in the early stages of the COVID-19 pandemic and maintain their remote work environment in 2021 with no discernible loss of productivity.

Digitalization is also helping to reduce physical, study-related paperwork, which generates positive emissions impacts.

In the U.S., the Company continues to improve its patients' experience in patient service centers (PSCs) by creating a seamless digital journey from appointment scheduling to results delivery.

With an average of 3 million patients served in a given week, the Company strives to enhance their experience using its digital channels.

In addition, the Company enhanced its digital capabilities through the acquisition of Ovia Health, a leading digital platform trusted by millions of individuals for family planning, pregnancy, and parenting support.

Intensify Customer Focus

Labcorp serves a broad range of customers, including managed care organizations (MCOs), pharmaceutical, biotechnology, medical device and diagnostics companies, governmental agencies, physicians and other healthcare providers, hospitals and health systems, employers, patients and consumers, contract research organizations (CROs), and independent clinical laboratories.

Drive Customer Centricity

The Company serves a broad range of customers, including managed care organizations (MCOs), pharmaceutical, biotechnology, medical device and diagnostics companies, governmental agencies, physicians and other healthcare providers, hospitals and health systems, employers, patients and consumers, CROs, and independent clinical laboratories.

The Company continues to focus on its customers, anticipate their needs, and deliver valuable solutions that help them achieve their goals.

The Company prioritizes a consistent, coordinated focus across all aspects of its operations, placing the customer at the center of its services, with the objective of becoming the customer's primary partner for solutions to their needs.

effort to provide a leading customer experience, the Company seeks customer feedback, communicates best practices and lessons learned, and provides robust employee training with respect to the needs of its customers.

Labcorp routinely introduces new products and services that benefit its customers.

For example, in 2021, the Company began deploying the Labcorp Diagnostic Assistant, which delivers comprehensive lab results and clinical insights directly to the point of care.

In April 2021, the Company opened an automated clinical trial kit production line in Belgium, doubling the automated production capacity of its industry leading central laboratory services business.

The Company announced the opening of a new, integrated bioanalytical laboratory in Singapore during the fourth quarter of 2021, expanding customer access in the Asia-Pacific region.

The Company also continued improving the patient experience in its U.S.

PSCs, focusing its efforts to create a seamless digital journey from appointment scheduling to easier access to results.

The Company will continue to explore and implement further actions to improve the experience for its customers.

Fortify the Company's Position as an Oncology Leader

The field of oncology receives significant investment in research, development, and treatment.

However, it remains an area of great unmet medical need.

The Company believes the diagnosis and treatment of cancer will be the fastest-growing therapeutic area in the near future.

To harness the breadth of the Company's unique capabilities and further address this need, the Company formed an oncology business unit and launched an enterprise oncology platform in 2021.

By focusing its diagnostic and drug development services on the fight against cancer, the Company is delivering targeted solutions that power better decisions and improved patient outcomes.

The Company is expanding its leadership in oncology through the introduction of new tests, strategic partnerships, acquisitions, and customer wins in clinical trials.

In 2021, the Company launched OmniSeq INSIGHT, a comprehensive genomic and immune profiling, tissue-based test that integrates next-generation sequencing (NGS) technology.

The Company capitalized on a previous investment in OmniSeq, announcing in July 2021 that it exercised its option to acquire the remaining ownership interest.

In addition, the Company enhanced its precision diagnostic portfolio and its ability to increase access to oncology care globally by agreeing in late 2021 to acquire Personal Genome Diagnostics (PGDx), a provider of comprehensive liquid biopsy and tissue-based genomic products and services.

PGDx offers the only diagnostic kit cleared by the FDA for pan-solid cancer comprehensive tumor profiling using a 500+ gene panel.

The acquisition of PGDx closed in February 2022.

The Company’s work in oncology has created meaningful business relationships across the healthcare ecosystem that it plans to enhance and grow.

Pursue Opportunities with Short- and Long-Term and High-Growth Potential

The Company has a long history of disciplined use of capital to invest in the growth of the business.

The Company has made significant investments in the deployment of new technologies through both licensing and internal research and development, as well as strategic and tuck-in acquisitions in oncology, women's health, autoimmune disorders, diagnostic testing, and other important areas.

Labcorp has also invested in establishing collaborative partnerships with other leading companies and organizations that share the Company’s goals and expectations.

In an effort to provide a leading customer experience, the Company seeks customer feedback, communicates best practices and lessons learned, and provides robust employee training with respect to the needs of its customers.

The Company routinely introduces new products, services, and initiatives that benefit its customers.

For example, the Company launched a new test in mid-2022 to assist in the identification and confirmation of neurodegenerative disease and neuronal injury.

The Company also expanded access to its services in the Midwestern U.S.

with the opening of a new laboratory, and it announced plans to expand its laboratory footprint in Japan.

In addition, the Company continues to experience

growing demand for its consumer-initiated wellness testing available through Labcorp OnDemand, and it believes its pipeline of innovative, consumer-focused offerings is strong.

Expand Globally

The Company has a long history of disciplined use of capital to invest in the growth of the business and intends to grow its business globally by leveraging its advanced laboratory network, scientific capabilities, health data and insights, and its results-oriented culture to achieve better health for all people.

The Company has made significant investments in the deployment of new technologies through both licensing and internal research and development, as well as strategic and tuck-in acquisitions.

The Company has also invested in establishing collaborative partnerships with other leading companies and organizations that share the Company’s goals and expectations.

The Company continually evaluates its business and the broader healthcare and life sciences markets to proactively identify and assess:

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• a balanced formula for capital allocation.

Through a continued focus on these priorities, reinforced through the Company's review of its structure and capital allocation strategy that concluded in December 2021, Labcorp expects to be in an optimal position to make disciplined choices that maximize shareholder value, better protect the Company from market fluctuations and outside impacts, and fuel significant and profitable short- and long-term revenue growth.

Through a continued focus on these strategic priorities, reinforced through the Company's capital allocation plan, the Company expects to be in an optimal position to make disciplined choices that maximize shareholder value, better protect the Company from market fluctuations and outside impacts, and fuel significant and profitable short- and long-term revenue growth.

COVID-19 Pandemic Response

The Company has been intensely focused on supporting the fight against COVID-19 since the earliest stages of the pandemic, and it continues to play a substantial role in ongoing response efforts.

Diagnostic Testing and Clinical Trial Leadership

In 2021, the Company further expanded access to testing for COVID-19 and aided pharmaceutical companies in the development of critical COVID-19 vaccines and therapies by harnessing its diagnostic and drug development capabilities.

The Company received FDA Emergency Use Authorization (EUA) for multiple innovations during the year, including the use of its Pixel by Labcorp ® COVID-19 test home collection kit for children ages 2-17.

The Company was granted FDA EUA for a combined home collection kit enabling individuals as young as 2 years of age to simultaneously be tested for COVID-19 and influenza A/B.

It also received FDA EUA for observed self-collection of COVID-19 PCR tests in its PSCs, providing flexibility and convenience for individuals who want the certainty of a PCR test or need PCR test results for work, travel, or other purposes.

These achievements built on the Company's first COVID-19-related FDA EUA, which was received on March 16, 2020, for COVID-19 PCR testing.

Labcorp was the first commercial laboratory in the U.S.

to launch and receive an EUA for such testing.

The Company also received FDA EUA in April 2020 for the Pixel by Labcorp ® COVID-19 test home collection kit, and in December 2020 for over-the-counter purchase of these home collection kits.

Labcorp's additional contributions to the pandemic response in 2021 included:

• assisting in the identification and monitoring of COVID-19 variants and spikes in confirmed cases;

• facilitating mass vaccination programs and expanding access to at-home test collections for underserved populations through partnerships at the state and local level;

• partnering with the U.S.

Department of Health and Human Services (HHS) to raise awareness of monoclonal antibody therapies;

• facilitating access to at-home COVID-19 test collection kits in retail stores such as Walgreens, and through on-demand delivery services;

• introducing new test options and building on the Company's portfolio of antibody testing.

The Company has supported the fight against COVID-19 since the earliest stages of the pandemic, and it continues to play an important role in ongoing response efforts.

In 2022, the Company further expanded access to COVID-19 testing and continued to support the development of COVID-19 vaccines and therapies.

The Company received FDA Emergency Use Authorization (EUA) for multiple innovations during the year.

In June, the Company was granted FDA EUA for its next-generation sequencing test used to identify specific SARS-CoV-2 lineages.

This was the first test authorized for the identification and differentiation of SARS-CoV-2 Phylogenetic Assignment of Named Global Outbreak (PANGO) lineages, which are genetic variations in circulating virus strains.

The Company also received FDA EUA for the first non-prescription, at-home collection kit for combined COVID-19, flu and respiratory syncytial virus (RSV) detection.

These achievements built on the Company's first COVID-19-related FDA EUA, which was received on March 16, 2020, for COVID-19 PCR testing, the FDA EUA in April 2020 for the Pixel by Labcorp ® COVID-19 test home collection kit, and in December 2020 for over-the-counter purchase of these home collection kits.

The Company's additional contributions to the pandemic response in 2022 included assisting in the identification and monitoring of COVID-19 variants and spikes in confirmed cases, as well as expanding no-cost access to at-home test collections for individuals who met clinical guidelines.

The Company maintained its ability to quickly scale up COVID-19 PCR testing capacity throughout the year, even during periods of reduced demand.

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The Company performed approximately 13 million COVID-19 PCR tests and 1 million antibody tests in 2022, and since the start of the pandemic has performed approximately 74 million COVID-19 PCR tests and 9 million antibody tests.

In addition, the Company's expertise and understanding of COVID-19, developed through its diagnostic offerings, has allowed it to become a leader in supporting clinical trials of COVID-19 treatments and vaccines.

By the end of 2021, the Company won approximately 700 COVID-19 trial and study opportunities, ranging from small, nonclinical programs to late-stage clinical trials.

Base Business

The Company's non-COVID-19 testing business (Base Business) continued its recovery in 2021.

Base Business was negatively impacted in the first and second quarters of 2020, began to recover in the third quarter of 2020 and experienced a flattening in Base Business recovery in the fourth quarter of 2020.

Patients continued their return to pre-pandemic healthcare routines in 2021, and the Company's pharmaceutical and biotechnology customers resumed their important research and development work.

Throughout 2021, the Company's Base Business recovery helped to more than offset a decrease in PCR and antibody COVID-19 testing (COVID-19 Testing).

COVID-19 Outlook

COVID-19 has had, and continues to have, an extensive impact on the global health and economic environments.

COVID-19 has had, and continues to have, a substantial impact on the global health and economic environments.

The Company continues to closely monitor the impact of the COVID-19 pandemic on all aspects of its business, given continued unpredictability, corresponding state, local and federal government restrictions and policies, the continued emergence of new variants that may cause increases in cases that may impact the Company, and the potential for shifts in customer behavior.

While the Company anticipates that COVID-19 will continue to impact its business in 2022 and potentially beyond, the Company expects that increases in vaccination rates and booster shots, the development of new therapeutics and greater availability of rapid COVID-19 tests should result in a continued, significant decline in demand for COVID-19 Testing, with the potential for increases in demand at different times and across different geographies.

As a result, COVID-19 Testing demand is not predicted to match 2021 levels.

While the Company anticipates that COVID-19 will continue impacting its business in 2023 and potentially beyond, the Company expects a continued decline in demand for COVID-19 Testing, with the potential for increases in demand at different times and across different geographies.

As a result, COVID-19 Testing demand in 2023 is not predicted to match 2022 levels.

Capital Allocation

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The Company continues to evaluate acquisition opportunities that leverage the Company’s core competencies, complement existing scientific and technological capabilities, increase the Company’s presence in key geographic, therapeutic and strategic areas, and meet or exceed the Company’s financial criteria.

During 2021, the Company repurchased 5.2 million shares of its common stock at an average price of $282.05 for a total cost of $1,668.5 million, which included $1,000.0 million paid in respect of an Accelerated Share Repurchase (ASR) program for which the Company received 80% of the shares calculated at the price at the inception of the ASR Agreements.

During 2022, the Company repurchased 5.6 million shares of its common stock at an average price of $233.48 for a total cost of $1,100.0 million.

This included 0.9 million shares which were repurchased in 2022 but were part of the $1,000.0 million Accelerated Share Repurchase (ASR) Program paid for in 2021.

At the end of 2022, the Company had outstanding authorization from the Board to purchase $531.5 of Company common stock.

On February 7, 2023, the board of directors adopted a new share repurchase plan authorizing up to $1,000.0 of the Company's shares in addition to the remaining amount outstanding under the previous plan.

The repurchase authorization has no expiration.

The repurchase authorization has no expiration date.

During 2022, capital expenditures were $481.9 million.

The Company also repaid $1,000.0 million of its Senior Notes along with $375.0 million of the outstanding 2019 Term Loan, and also issued $1,000.0 million of new Senior Notes.

The Company expects capital expenditures in 2022 to be approximately 4.0% of revenues, primarily in connection with projects to support growth in the Company's core businesses, facility expansion and updates, projects related to its new LaunchPad initiative, and further acquisition integration initiatives.

The Company will continue to evaluate all opportunities for strategic deployment of capital in light of market conditions.

The Company expects capital expenditures in 2023 to be approximately 3.5% of revenues, primarily in connection with projects to support growth in the Company's core businesses, facility expansion and updates, projects related to its LaunchPad initiative, and further acquisition integration initiatives.

The Company will continue to evaluate opportunities for strategic deployment of capital in light of market conditions.

Seasonality and External Factors

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Company Reporting

The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports are made available free of charge through the Investor Relations section of the Company’s website at www.labcorp.com as soon as reasonably practicable after such material is electronically filed with, or furnished to, the U.S.

Securities and Exchange Commission (SEC).

Additionally, the SEC maintains a website at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers, including the Company, that file electronically with the SEC.

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The Company's Business

The Company experienced growth across all key financial metrics in 2021.

Due primarily to a decrease in COVID-19 testing, the Company experienced a reduction in revenues and other key financial metrics in 2022.

However, by the end of the year, the Company saw accelerated revenue growth in Dx, continued strong underlying fundamentals in DD and margin expansion.

In Millions, Except Per Share Data Years Ended December 31,

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Total revenues 80 % 13 % 7 % 100 % 81 % 13 % 6 % 100 % 82 % 11 % 7 % 100 %

During 2021, the Dx segment generated $ 10,363.6 million in total revenues and $ 2,988.5 million in operating income, resulting in an operating margin of 28.8%.

During the fourth quarter of 2022, the Company modified the segment performance measure to exclude the amortization of intangibles and other assets, restructuring and other charges, goodwill and other asset impairments, and certain corporate charges for items such as transaction costs, COVID-19 costs, and other special items.

These changes align with how the CODM now evaluates segment performance and allocates resources.

Prior periods have been conformed for comparability.

During 2022, the Dx segment generated $ 9,203.5 million in total revenues and $ 2,025.5 million in segment operating income, resulting in an operating margin of 22.0%.

In Millions Year Ended December 31,

Revenues $ 9,203.5 $ 10,363.6

Operating income $ 2,988.5 $ 2,634.9

Dx segment operating income $ 2,025.5 $ 3,205.6

Dx is an independent clinical laboratory business.

It offers a comprehensive menu of frequently requested core testing and specialty testing through an integrated network of primary and specialty laboratories across the U.S.

This network is supported by a sophisticated information technology system, with more than 80,000 electronic interfaces to deliver test results, nimble and efficient logistics, and local labs offering rapid response testing.

Dx also provides patient access points that are strategically and conveniently located throughout the U.S., including nearly 2,000 PSCs and more than 6,000 in-office phlebotomists located in customer offices and facilities.

Although testing for healthcare purposes and customers who provide healthcare services represents the most significant portion of the clinical laboratory industry, clinical laboratories also perform testing for other purposes and customers, including employment and occupational testing, DNA testing to determine parentage and to assist in immigration eligibility determinations, environmental

testing, wellness testing, toxicology testing, pain management testing, and medical drug monitoring.

This network is supported by a sophisticated information technology system, with more than 80,000 electronic interfaces to deliver test

results, nimble and efficient logistics, and local labs offering rapid response testing.

Dx also provides patient access points that are strategically and conveniently located throughout the U.S., including more than 2,000 PSCs and more than 6,000 in-office phlebotomists located in customer offices and facilities.

Dx offers an expansive test menu that includes a wide range of clinical, anatomic pathology, genetic and genomic tests, and regularly adds new tests and improves the methodology of existing tests to enhance patient care.

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Dx typically processes tests for more than 3 million patient encounters each week.

As part of an ongoing commitment to be an efficient and high-value provider of laboratory services, beginning in 2015, Dx implemented a comprehensive business process improvement initiative known as LaunchPad.

As part of an ongoing commitment to be an efficient and high-value provider of laboratory services, Dx implemented a comprehensive business process improvement initiative known as LaunchPad.

The initiative was designed to reengineer the Company's systems and processes to create a sustainable and more efficient business model, and to improve the experience of all stakeholders.

Dx achieved its goals for the initial phase of LaunchPad of delivering both short- and long-term savings, and of implementing system and process improvements that are expected to continue generating benefits for the foreseeable future.

Dx subsequently extended LaunchPad, adding new enterprise-wide projects and establishing the initiative as an ongoing continuous improvement program.

Dx’s LaunchPad initiative delivered approximately $200 million in net savings for the period of late 2018 through the end of 2021.

As mentioned above in Part I of this Annual Report, the Company is implementing a new, enterprise-wide LaunchPad initiative, targeting savings of $350 million beginning in 2022 and ending in 2024.

The Dx business can be categorized into the following components:

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• 1-2 day turnaround time for most test results, with the vast majority of results delivered electronically to healthcare providers and to patients who have a Labcorp Patient™ account

• Rigorous standard of quality - 22 regional/specialty labs hold ISO 15189 certification

• Rigorous standard of quality - 24 regional/specialty labs hold ISO 15189 certification, 3 labs hold ISO 13485 certification, and one lab holds both

Testing and Related Services • Standard Testing Services - frequently-ordered tests used in regular patient care include blood chemistry analyses, urinalyses, blood cell counts, thyroid tests, PAP tests, hemoglobin A1C, prostate-specific antigen (PSA), tests for sexually transmitted diseases (e.g.

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• Dx offers a range of health and wellness services to employers and MCOs, including health fairs, on-site and at-home testing, vaccinations and health screenings

Development of New Tests • Approxima tely 50 new tests launched in 2021

Development of New Tests • More than 130 new tests launched in 2022

• Active diagnostics and therapeutics research division:

more than 700 studies, articles, and presentations produced in 2021

approximately 650 studies, articles, and presentations produced in 2022

• Continuous investing, internally and externally, in new testing technologies and advanced testing capabilities

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Market Changes on the Clinical Laboratory Business

The delivery of, and reimbursement for, healthcare continues to change in the U.S., impacting all stakeholders, including the clinical laboratory business.

T he delivery of, and reimbursement for, healthcare continues to change in the U.S., impacting all stakeholders, including the clinical laboratory business.

Medicare (which principally serves patients who are 65 and older), Medicaid (which principally serves low-income patients) and insurers have increased their efforts to control the cost, utilization and delivery of healthcare services.

Measures to regulate healthcare delivery in general and clinical laboratories in particular have resulted in reduced prices, added costs and decreased test utilization for the clinical laboratory industry by imposing new, increasingly complex regulatory and administrative requirements.

Measures to regulate healthcare delivery in general and clinical laboratories in particular have resulted in reduced prices, added costs, increased coverage denials and claims edits, and decreased test utilization for the clinical laboratory industry by imposing new, increasingly complex regulatory and administrative requirements.

The government also has continued to adjust the Medicare and Medicaid fee schedules at the national and local level, and the Company believes that pressure to reduce government reimbursement will continue.

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During 2022, approximately 8.9% of Dx’s revenue was reimbursed under the CLFS (8.5% in 2021), and approximately 0.4% was reimbursed under the PFS (0.4% in 2021).

Over the past several years, Dx has experienced governmental reimbursement reductions as a direct result of several Congressional acts and regulatory initiatives.

Dx has experienced governmental reimbursement reductions as a direct result of several Congressional acts and regulatory initiatives.

These laws include provisions designed to control healthcare expenses reimbursed by government programs through a combination of reductions to fee schedules, incentives to physicians to participate in alternative payment models such as risk-sharing, and new methods to establish and adjust fees.

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CMS used that private market data to calculate weighted median prices for each test (based on applicable current procedural technology (CPT) codes) to represent the new CLFS rates beginning in 2018, subject to certain phase-in limits.

For 2018-2020, a test price could not be reduced by more than 10.0% per year.

For 2018 through 2020, a test price could not be reduced by more than 10.0% per year.

PAMA resulted in a net reduction in reimbursement revenue of approximately $245.0 million between 2018-2020 from all payers affected by the CLFS.

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In 2021, Dx realized an additional increase of approximately $5.8 million in aggregate Medicare reimbursement associated with the suspension of sequestration through December of 2021, as a result of provisions included in the Omnibus Appropriations and Coronavirus Relief Package that were extended as a result of an Act to Prevent Across-the-Board Direct Spending Cuts.

On December 10, 2021, President Biden signed into law S.

610, the Protecting Medicare and American Farmers from Sequester Cuts Act, which delayed by one additional year the data reporting requirements and Medicare reimbursement cuts that would have occurred under PAMA in 2022.

In 2022, Dx anticipates that it will realize a decrease of approximately $0.4 million in PFS revenue, driven by reductions in reimbursement for flow cytometry procedures and a decrease of approximately $10.0 million in aggregate Medicare reimbursement associated with the phased in reinstitution of sequestration as a result of provisions included in the Protecting Medicare and American Farmers from Sequester Cuts Act.

On December 10, 2021, President Biden signed into law the Protecting Medicare and American Farmers from Sequester Cuts Act, which delayed by one additional year the data reporting requirements and Medicare reimbursement cuts that would have occurred under PAMA in 2022, resulting in a 0% update to the CLFS in 2022.

In 2022, Dx realized a decrease of approximately $0.4 million in PFS revenue driven by reductions in reimbursement for flow cytometry procedures and a decrease of approximately $10.0 million in aggregate Medicare reimbursement associated with the phased in reinstitution of sequestration as a result of provisions included in the Protecting Medicare and American Farmers from Sequester Cuts Act.

The Protecting Medicare and American Farmers from Sequester Cuts Act also included mitigations to several other non-PAMA Medicare cuts in addition to delaying Medicare reimbursement cuts under PAMA.

It delayed the 4% Medicare cuts that would otherwise have occurred in 2022 under statutory “pay-as-you-go,” or PAYGO, rules to offset the cost of the American Rescue Plan Act by one year.

In addition, it delayed the resumption of the 2% Medicare sequestration until April 1, 2022, and reduces to 0.75% the previous 3.75% reduction to PFS reimbursement that was scheduled for 2022.

To offset the cost, the Medicare sequestration is increased to 2.25% for January-June of 2030, and to 3.0% for July-December 2030.

Pursuant to PAMA, for 2023-2025, a test price cannot be reduced by more than 15.0% per year.

In addition, it delayed the resumption of the 2% Medicare sequestration until April 1, 2022, and reduced to 0.75% the previous 3.75% reduction to PFS reimbursement that was scheduled for 2022.

To offset the cost, the Medicare sequestration was increased to 2.25% for January through June of 2030, and to 3.0% for July through December 2030.

On December 29, 2022, President Biden signed into law H.R.

2617, the Consolidated Appropriations Act, 2023, which delayed by one additional year the data reporting requirements and Medicare reimbursement cuts that would have occurred under PAMA in 2023, resulting in a 0% update to the CLFS for 2023.

The Consolidated Appropriations Act, 2023 also included mitigations to several other non-PAMA Medicare cuts in addition to delaying Medicare reimbursement cuts under PAMA.

It delayed until October 1, 2024 the 4% Medicare cuts that would otherwise have been effective January 1, 2023 under PAYGO rules.

In addition, it mitigated PFS cuts in 2023 and 2024 to by 2.5% and 1.25%, respectively, that would otherwise have been (4.47%) in 2023 based on the conversation factor put forward in the 2023 Medicare PFS Final Rule.

To offset the

cost, it extended the 2% Medicare sequestration through the first six months of 2032 and set the sequestration percentage at 2% in fiscal years 2030 and 2031.

In 2023, Dx anticipates a net PFS revenue increase of 0.8% ($0.3 million) from the 2023 PFS Final Rule, driven by a (2.0%) change to the PFS conversion factor that is offset by net positive changes in relative value units (RVUs) for flow cytometry and changes to RVUs for other PFS procedures.

The 2023 PFS Final Rule also included an increase in the CLFS fee for specimen collection by venipuncture from $3.00 to $8.57, which is estimated to increase Dx CLFS revenue for specimen collection by $38.6 million in 2023.

Pursuant to PAMA as amended, for 2024 through 2026, a CLFS test price cannot be reduced by more than 15.0% per year (excluding non-PAMA reimbursement changes).

CLFS rates for 2027 and subsequent periods will not be subject to phase-in limits.

The phase-in of rates for Clinical Diagnostic Laboratory Tests (CDLTs) established in 2018 will continue in 2023.

The phase-in of rates for Clinical Diagnostic Laboratory Tests (CDLTs) established in 2018 will resume in 2024.

New CLFS rates will be established in 2025 based on data from 2019 to be reported in 2024.

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CLFS rates for Advanced Diagnostic Laboratory Tests will be updated annually.

The American Clinical Laboratory Association (ACLA) has filed a federal civil action challenging the legal basis for the data collection methodology CMS used to derive the data from which the median prices were calculated.

Since the initial data

collection, CMS has revised its PAMA regulations to increase the number of hospital outreach labs that will be required to report private market data in future collections.

The American Clinical Laboratory Association (ACLA) filed a federal civil action in 2017 challenging the legal basis for the data collection methodology CMS used to derive the data from which the median prices were calculated.

On July 15, 2022, the U.S.

Court of Appeals for the D.C.

Circuit ruled in favor of ACLA on the merits, finding that CMS harmed laboratories by collecting data in an arbitrary and capricious manner, but refused to grant relief due to PAMA’s statutory bar on judicial review of establishment of the rates.

Since the initial data collection, CMS has revised its PAMA regulations to increase the number of hospital outreach labs that will be required to report private market data in future collections.

Reports by the U.S.

Government Accountability Office (GAO), the HHS Office of Inspector General (OIG), and the Medicare Payment Advisory Commission (MedPAC) on PAMA implementation have identified certain instances of actual or potential increased Medicare expenditures under PAMA, as well as potential alternative methodologies for data collection under PAMA, which could result in further efforts to amend PAMA by Congress.

ACLA continues to work with Congress on potential legislative reform of PAMA, which if adopted could reduce the negative impact of PAMA as currently implemented by CMS.

ACLA has continued to work with Congress on potential legislative reform of PAMA, which if adopted could reduce the negative impact of PAMA as currently implemented by CMS.

Under the Laboratory Access for Beneficiaries (LAB) Act, MedPAC was required to conduct a study and make recommendations to Congress on ways to improve data collection, reporting, and rate setting under PAMA to achieve, in a less burdensome manner, CLFS rates that accurately and fairly reflect private market rates.

MedPAC's June 2021 report to Congress included an analysis of potential statistical sampling methodologies that could accomplish that objective, and ACLA has incorporated the concept in PAMA reform proposals to Congress.

The Company supports the ongoing efforts to prevent or lessen the negative impact of the changes to the CLFS pursuant to PAMA, and the full impact of those efforts, and what the long-term effect will be on the CLFS rates is not yet known.

MedPAC's June 2021 report to Congress included an analysis of potential statistical sampling methodologies that could accomplish that objective, and ACLA incorporated the concept in PAMA reform proposals to Congress.

On June 22, 2022, the Saving Access to Laboratory Services Act (S.

8188) was introduced in both the U.S.

Senate and the U.S.

House of Representatives to provide for permanent reform of PAMA incorporating many of ACLA’s proposals.

The Company supports the ongoing efforts to prevent or lessen the negative impact of the changes to the CLFS pursuant to PAMA, and the full impact of those efforts, but what the long-term effect will be on the CLFS rates is not yet known.

Further healthcare reform could occur in 2023, including changes to the Patient Protection and Affordable Care Act (ACA) and Medicare reform, as well as administrative requirements that may continue to affect coverage, reimbursement, and utilization of laboratory services in ways that are currently unpredictable.

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In addition, some MCOs use capitation rates to fix the cost of laboratory testing services for their enrollees.

Under a capitated reimbursement arrangement, the clinical laboratory receives a per-member, per-month payment for an agreed upon menu of laboratory tests, or based upon the proportionate share earned by Dx from a capitation pool.

When the agreed upon reimbursement is based solely on an established rate per member, revenue is not impacted by the volume of testing performed.

When the agreed upon reimbursement is based solely on an established rate per member, revenue is not impacted by the volume of

testing performed.

Under a capitation pool arrangement, the aggregate value of an established rate per member is distributed based on the volume and complexity of the procedures performed by laboratories participating in the agreement.

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In addition to reductions in test reimbursement, the Company also anticipates potential declines in test volumes as a result of increased controls over the utilization of laboratory services by Medicare, Medicaid, and other third-party payers, particularly MCOs.

MCOs are implementing, directly or through third parties, various types of laboratory benefit management programs, which may include lab networks, utilization management tools (such as prior authorization and/or prior notification), and claims edits, which impact coverage and reimbursement of clinical laboratory tests.

MCOs are implementing, directly or through third parties, various types of laboratory benefit management programs, which may include laboratory networks, utilization management tools (such as prior authorization and/or prior notification), and claims edits, which impact coverage and reimbursement of clinical laboratory tests.

Some of these programs address clinical laboratory testing broadly, while others are focused on certain types of testing, including molecular, genetic and toxicology testing.

In addition, continued movement by patients into consumer-driven health plans may have an impact on the utilization of laboratory testing.

Test volumes in 2022 could also decline compared to 2021 and 2020 if demand for SARS-CoV-2 testing declines.

Despite the overall negative market changes regarding reimbursement discussed above, the Company believes that the volume of clinical laboratory testing is positively influenced by several factors, including the expansion of Medicaid, managed care, and private insurance exchanges.

In addition, the Company believes that increased knowledge of the human genome and continued innovation in laboratory medicine will continue to foster greater appreciation of the value of gene-based diagnostic assays.

Additional factors that may lead to future volume growth include an increase in the number and types of tests that are readily available (due to advances in technology and increased cost efficiencies) for the diagnosis of disease, and the general aging of the U.S.

Periodic infectious disease outbreaks such as the SARS-CoV-2 virus also have the potential to generate additional testing volume in the future.

The Company also believes that it and other large, independent clinical laboratory testing companies will be able to increase their share of the overall clinical laboratory testing market due to a number of market factors, primarily related to a continued drive to improve outcomes and reduce costs across the healthcare system, including but not limited to greater price transparency required under new “surprise billing” laws and regulations requiring

disclosure of hospital charges.

Dx believes that its enhanced and growing esoteric menu of tests, leading position with companion diagnostics, broad geographic footprint, and operating efficiency provide a strong platform for growth.

During 2021, the DD segment generated $ 5,845.5 million in total revenue and $ 547.7 million in operating income, resulting in an operating margin of 9.4%.

Test volumes in 2023 could also change compared to 2022 and 2021 if demand for SARS-CoV-2 testing changes.

Helping to balance the overall negative market changes regarding reimbursement discussed above, the Company believes that the volume of clinical laboratory testing is positively influenced by several factors, including an increase in the number and types of tests that are readily available (due to advances in technology and increased cost efficiencies) for the diagnosis of disease, and the general aging of the U.S.

Periodic infectious disease outbreaks such as the SARS-CoV-2 virus also have the potential to generate additional testing volume in the future, and enhance stakeholders’ appreciation for the value of laboratory testing in combating future potential outbreaks.

Dx believes that its enhanced and growing esoteric menu of tests, leading position with companion diagnostics, broad geographic footprint, and operating efficiency make it well positioned for growth due to a number of market factors, primarily related to a continued drive to improve outcomes and reduce costs across the healthcare system, including but not limited to greater price transparency required under “surprise billing” laws and regulations requiring disclosure of hospital charges.

During 2022, the DD segment generated $ 5,710.2 million in total revenue and $ 801.1 million in segment operating income, resulting in an operating margin of 14.0%.

In Millions Year Ended December 31,

Revenues $ 5,710.2 $ 5,845.5

Operating income $ 547.7 $ 37.3

DD segment operating income $ 801.1 $ 887.1

DD provides end-to-end drug development, medical device and companion diagnostic development solutions from early-stage research to clinical development and commercial market access.

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With a global network of operations, DD offers deep expertise in early development and clinical trials in each therapeutic area.

DD collaborated on 82% of the novel drugs and therapeutic products approved in 2021 by the U.S.

FDA, including 63% of those specific to oncology and 95% of those specific to rare and orphan diseases.

DD had provided support for 90% of the new drugs and therapeutic products approved in 2022 by the U.S.

FDA, including 100% of those specific to oncology and 87% of those submitted by biotechnology companies.

Through its industry-leading central laboratory business, it supports clinical trial activity in approximately 100 countries.

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• Six ISO 15189-certified laboratories

• Collaborated with more than 65 clients on more than 265 companion diagnostic projects in 2021

Clinical Development and Commercialization Services • Comprehensive range of services including the full-service delivery of Phase I through IV clinical studies, along with a wide offering of functional service provider solutions

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• Patient randomization and Clinical Supply Management

In December 2020, the Company announced the evolution of its brand to signify the pivotal role the Company's capabilities play in society as a source of health answers.

It underscores the Company's commitment to science and data, moving with urgency, empowering better health outcomes, and breakthrough and transformative approaches to patient care using the Company's diverse and global expertise.

As part of the rebranding, the Company introduced a new company logo and associated its business unit brands with the Labcorp name.

The Company’s drug development segment, formerly referred to as Covance Drug Development, became Labcorp Drug Development in June 2021.

The Company's diagnostics segment, formerly referred to as LabCorp Diagnostics, transitioned to Labcorp Diagnostics and a new logo in 2021.

Human Capital

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They are essential to the Company’s ability to innovate and advance science and technology to empower patients, providers, and pharmaceutical companies to make clear and confident decisions.

Labcorp’s employees are also critical to its ongoing support of the COVID-19 pandemic response through diagnostic testing and its work to aid pharmaceutical companies in the development of vaccines and treatments.

Engaging the collective expertise and passion of its employees is vital to achieving the Company’s mission, which permeates its performance-driven, collaborative, inclusive, customer-centered, and inquisitive culture.

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The Company’s success depends on its sustained ability to attract, develop, and retain a highly specialized and skilled global workforce.

Management believes that the Company has good working relationships with its employees.

Employees are globally dispersed, with 77% in the U.S.

and Canada, 12% in Asia, 13% in Europe, the Middle East, and Africa, and less than 1% in Latin America.

and Canada, 11% in Asia, 11% in Europe, the Middle East, and Africa, and 1% in Latin America.

Of the Company’s global workforce, 88% of employees are full time, and 12% are part time.

Four percent of Labcorp’s global workforce is employed under a collective bargaining agreement.

3.3% of Labcorp’s global workforce is employed under a collective bargaining agreement.

Depending on business demand and the talent-hiring environment, Labcorp supplements up to 8% of its workforce with contingent workers.

The challenges of 2022, felt globally, also presented the Company with significant challenges in acquiring and retaining talent.

Despite these obstacles, Labcorp’s global workforce increased by more than 4%.

The majority of Labcorp's hires are sourced through an internal talent acquisition team.

In addition, the Company continues to grow its workforce through mergers and acquisitions.

The Company implemented significant investments to retain talent and enable the organization to meet the business needs for growth, which are discussed further in the section below on “Compensation and Benefits.”

Throughout the pandemic, a significant portion of Labcorp’s employees have been working diligently to serve patients and customers.

To ensure the safety and welfare of our employees, the majority of employees who do not work with patients, animals, in labs, or in logistics, continue to work remotely.

Despite these obstacles, Labcorp’s global workforce increased by more than 10% from a combination of organic growth and adding employees through acquisitions.

The majority of Labcorp's hires are sourced through an internal talent acquisition

The Company made significant investments to retain talent and enable the organization to meet the business needs for growth, which are discussed further in the section below on “Compensation and Benefits.”

Throughout the COVID-19 pandemic, the majority of employees who do not work with patients, animals, in labs, or in logistics, worked remotely.

This includes call center employees, customer service teams, sales teams, and corporate and functional teams.

Going forward, the Company expects that a significant number of employees will continue working remotely, or through hybrid, in-office and remote work arrangements.

While some employees returned to on-site work in 2022, the Company expects that a significant number of employees will continue working remotely, or through hybrid, in-office and remote work arrangements.

The Company believes that flexibility in work location and arrangements expands the pool from which it can source experienced and valuable talent.

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Highlights of actions supporting the Company’s D&I framework that it believes will foster a more inclusive environment and strengthen its culture include:

• the launch of an unconscious bias training program designed to improve self-awareness of personal biases.

The program was rolled out globally to all of the Company's people leaders, with over 6,000 completing the training in 2021;

• a formal mentoring initiative that includes a Reverse Diverse Mentoring program that received the Gold Award in the category of Best Advance in Mentoring to Develop Diverse Leaders from the Brandon Hall Group;

• a first-ever virtual women's summit for executive women leaders.

This event, called the Power of Women, is part of the Company's leadership development programs for women that include specific offerings for mid-level and senior leaders;

• the introduction of additional Employee Resource Groups (ERGs).

• the continuation of an unconscious bias training program designed to improve self-awareness of personal biases.

The program was rolled out globally in 2021 to all of the Company's people leaders, and more than 6,000 have completed the training through 2022.

Labcorp also deployed Global Harassment training to over 70,000 employees;

• diversity metrics shared quarterly with senior leaders, and establishment of D&I plans at the segment level;

• monthly meeting of the Company's D&I advisory council, consisting of a cross section of leaders to learn about, and be advocates for, our initiatives;

• continued offerings of leadership development programs for women in senior management through the vice president level, and the second annual virtual women's summit for executive women leaders;

• continued global expansion of Employee Resource Groups (ERGs).

ERGs are led by employee volunteers and are important resources to foster cross-company connections, encourage belonging, support career development, and champion employee voices.

The Company now has eight unique ERGs with more than 70 chapters in 11 countries.

The Company now has eight unique ERGs with 106 chapters in 15 countries, growing by more than 30 local chapters from 2021.

Each ERG has executive sponsorship from senior leadership;

• celebration of different cultures, constituencies, and observances throughout the year, including a “Days of Understanding” series in partnership with ERGs and in alignment with CEO Action, a business-led initiative to advance diversity, equity and inclusion in the workplace.

The Company was named to FORTUNE ® magazine's 2022 List of World's Most Admired Companies, making the annual list for the fourth time.

Labcorp also made the Forbes 2021 list of World's Best Employers for the second consecutive year.

In addition, the Company was named to Fast Company's list of the World's Most Innovative Companies for 2021.

In 2021 and 2022, the Company was recognized for the fourth and fifth consecutive years as a Best Place to Work for LGBTQ+ Equality, with a perfect score on the Human Rights Campaign Foundation's Corporate Equality Index.

Labcorp also made the Forbes 2022 list of World's Best Employers for the third consecutive year, as well as the Forbes 2022 List of Best Employers for New Graduates.

In 2022, the Company was recognized for the fifth consecutive year as a Best Place to Work for LGBTQ+ Equality, with a score of 100% on the Human Rights Campaign Foundation's Corporate Equality Index.

The Index is the nation's foremost benchmarking survey and report on corporate policies and practices related to LGBTQ+ workplace equality.

The Company has also implemented opportunities for greater engagement between employees and management, including quarterly town halls that are held virtually and open to all employees, interaction with front-line employees on visits to the Company facilities, and town halls with employees in business units.

The Company was also named as a Best Place to Work for Disability Inclusion by the Disability Equality Index and one of Newsweek's 2022 America's Most Responsible Companies.

The Company has also implemented opportunities for greater engagement between employees and management.

These include quarterly global town halls that are held virtually and are open to all employees, interactions with front-line employees on visits to the Company's facilities, and in-person town halls with employees in select business units.

In early 2022, the Company initiated a Voice of the Employee Survey.

As the Company’s business becomes increasingly complex, global, and dynamic, the Company believes that its compensation and benefits programs must be competitive and flexible to attract and retain the caliber of talent needed to continue to move the business forward.

In 2021, the Company faced unique challenges to growing and maintaining its global workforce.

The Company believes that its ability to expand the workforce in 2021 evidences that the Company's compensation and benefit strategies are market competitive and support the business needs to attract and retain talent.

The Company continually monitors market activity and employee movement within and outside of the core life sciences industry to maintain competitiveness, given the dynamic business environment and labor market challenges it faces.

Labcorp’s employees met the unique challenges faced by patients and clients as the COVID-19 pandemic continued in 2021.

The Company invested more than $120 million to recognize and reward our global workforce, with particular focus placed on frontline workers.

These investments included:

• $51 million in market-based pay adjustments, including an increase in the minimum wage for all non-union employees in the U.S.

to $15 per hour;

• $21 million to increase base wages up to an additional 1.5% to encourage participation in the 401(k) retirement savings plan for 37,000 U.S.

employees earning less than $75,000 per year;

• $35 million in two separate, global “gratitude” bonuses for more than 61,500 employees;

• $14 million in retention payments to employees in key global positions to encourage continued career development with the Company.

Responses were received from nearly 50% of Company employees across 64 countries.

The insights provided by employees are being used to make improvements in the virtual onboarding experience for new employees, introduction of a modern global human resources portal, and a reimagined U.S.

benefits portal to help employees to better evaluate their benefits options.

The Company operates in a complex, global, and dynamic life sciences industry and believes that its compensation and benefits programs must continue to be competitive and flexible to attract and retain the caliber of talent needed to sustainably grow the business.

In 2022, the Company’s workforce grew by over 10%.

The Company believes that its ability to expand the workforce in 2022 provides support that the Company's compensation and benefit strategies are competitive and support the Company's ability to attract and retain talent.

In 2022, the Company invested more than $39 million in pay adjustments in addition to annual pay increases, to increase pay competitiveness in the markets in which we compete for talent.

Employee Wellness

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• no annual cost increase for the payroll contributions in its U.S.

Healthy Value medical, dental and vision insurance plans, impacting approximately 36,000 covered employees and more than 30,000 dependents.

Healthy medical, dental and vision insurance plans, impacting approximately 35,000 covered employees and more than 30,000 dependents.

For approximately 19,000 employees in the U.S.

earning less than $50,000 per year, the Company further reduced the cost of monthly medical insurance contributions by $240 per year;

• adding company-paid disability insurance coverage for short- and long-term disability for all U.S.

• providing up to $4,560 in annual medical plan contribution discounts for over 36,000 employees and their spouses for committing to and maintaining a healthy and tobacco-free lifestyle;

• providing up to $4,560 in annual medical plan contribution discounts for over 35,000 employees and their spouses and domestic partners for committing to and maintaining a healthy and tobacco-free lifestyle;

• encouraging health and wellness education and activities by providing up to $1,000 in Health Reimbursement Account contributions to approximately 35,000 employees and their spouses or partners;

This included $100 for COVID-19 vaccines and $50 for Flu vaccines;

• reimbursing up to $300 in fitness-related costs for approximately 13,000 employees.

The Company continually educates its workforce on health issues of importance.

For example, the Company provided a series of videos throughout 2021 from its medical experts covering the facts, safety, and effectiveness of the COVID-19 vaccines.

Further, the Company has also prioritized continuous education on the importance of mental well-being, through communications and resources made available to all employees.

The Company believes that its investments in compensation and wellness are crucial to maintaining competitive positioning and a productive and engaged workforce.

The Company routinely continually educates its workforce on health issues of importance and has prioritized continuous education on the importance of mental well-being by providing communications and resources to all employees.

believes that its investments in compensation and wellness are crucial to maintaining competitive positioning and a productive and engaged workforce.

Development and Training

To meet the needs of patients and clients in the evolving and competitive diagnostics and drug development markets, the Company is committed to creating a work environment that supports a focus on the continuous development and training of its

With this focus, t he Company believes it is well-positioned in the long term to meet the demands of the regulatory environment and accelerate its ability to innovate and develop talent in a highly skilled and competitive talent market.

Labcorp's curriculum has three primary focus areas:

regulatory training, technical training, and professional development.

regulatory training;

technical training;

and professional development.

Regulatory training is required by laws and regulations for the Company to operate in certain areas within the life sciences industry and in certain jurisdictions.

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In 2022, Labcorp employees completed over 2.7 million hours of training, primarily consisting of regulatory and technical training.

In addition, due to the Company’s access to sensitive and personally identifiable information, employees completed over 1.3 million IT security training courses, representing more than 300,000 total hours, with the goal of maintaining IT system safety and security for clients and patients.

Labcorp also invests in the professional development of its talent, and in retaining our best employees for future internal opportunities.

In addition, due to the Company’s access to sensitive and personally identifiable information, employees completed over 720,000 IT security training courses, representing more than 150,000 total hours, with the goal of maintaining IT system safety and security for clients and patients.

Labcorp also invests in the professional development of its talent, and in retaining its best employees for future internal opportunities.

In 2022, employees completed more than 50,000 hours of professional development.

In addition, 343 employees completed the Labcorp UK Apprenticeship program that the Company plans to expand in 2023 to include US employees.

Challenges in the talent labor market have reinforced the need to offer new and engaging learning resources.

In 2021, the Company expanded its approach to tuition assistance, helping an additional 500 employees complete college degrees in the life science and healthcare fields.

In addition, Labcorp added new relationships with leading learning partners that provide open, online courses.

In 2021, the Company expanded its approach to tuition assistance.

Through 2022, the Labcorp Education Advantage program has fully sponsored 742 employees in their pursuit of higher education in the sciences, with 13 employees completing their bachelor’s degree with this benefit.

Employees enrolled in the Labcorp Education Advantage program have an 11 point lower attrition rate than the global population, evidencing a strong social and human capital impact.

In addition, Labcorp added new relationships with leading academic institutions and learning partners that provide open, online courses.

These partners provide video courses, job aides, and short, self-paced learning taught by industry experts.

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As the health and safety of employees is a primary concern, the Company has established numerous employee health and safety protocols, including engineering and administrative controls, policies, procedures, processes, and training to minimize the potential for, and the severity of, work-related injuries and illnesses.

In 2021, the Company reorganized its Environment, Health and Safety (EHS) function, combining Dx and DD programs to enable consistency and common policies, procedures, and areas of focus.

The Company was able to maintain its work-related injury rate per 100 employees at a low 1.6, and to reduce its work-related lost work injury rate per 100 employees by 40%, from 0.5 to 0.3.

The Company also implemented a common Corporate EHS Audit process, allowing it to assess locations against common expectations and performance criteria.

In response to COVID-19, the Company modified the audit format so that it could be effectively performed virtually.

While COVID-19 presented continued challenges, the Company minimized the impact on staff and operations through careful planning and consistent global implementation of precautionary measures.

These measures included additional cleaning and sanitization, social distancing, the use of protective equipment such as facemasks, face shields and respirators, the increased utilization of work from home, and leveraging video and communications technology.

Employee Giving

The Labcorp Charitable Foundation, a private, charitable 501(c)(3) organization established by the Company, invested in more than 70 programs in 2021 that align with the Company’s strategic mission to improve health and improve lives.

The Foundation’s funding supports the focus areas of health, education, and community across the globe.

In addition, the Company's employees took advantage of many opportunities to support charitable causes and make a positive impact in their communities.

Annually, U.S.

colleagues have the opportunity to automatically direct a portion of each paycheck to one or more of six selected charities through the Employee Giving Campaign:

the American Cancer Society, American Heart Association, American Diabetes Association, American Red Cross (Disaster Relief), United Way, and the National Urban League.

Employee contributions support these charities to provide needed services in their local communities and across the nation.

In 2022, the Company was able to reduce its work-related injury rate per 100 employees to 1.5%, a reduction of 6.3% over 2021.

The Company maintained its work-related lost work injury rate per 100 employees at 0.3%.

The Company completed a Corporate EHS Audit on 15 significant laboratory facilities, allowing it to assess locations against common expectations and performance criteria.

In response to COVID-19, the Company modified the audit format so that it could be effectively performed virtually, with the added benefit of reducing audit travel-related greenhouse gas emissions.

In 2022, the Company faced extraordinary challenges in assisting the nearly 400 employees, and in many cases their families, who were adversely affected by the Ukraine/Russia crisis.

In response, the Company supported employees with emergency, short- and long-term housing, transportation and relocation assistance, and provided help with communications, food, and other necessary supplies and services.

Community Engagement

The Labcorp Charitable Foundation, a private, charitable 501(c)(3) organization established by the Company, invested in more than 120 programs in 2022 that align with the Company’s strategic mission to improve health and improve lives in the areas of health, education, and community across the globe.

The Foundation supports efforts to increase access to health services and create equitable opportunities for underserved populations across the globe.

Colleagues around the globe are invited to participate in the company’s annual Employee Giving Campaign.

Through the campaign, colleagues had the opportunity to donate to one or more of seven selected charities:

the American Cancer Society, American Heart Association, American Diabetes Association, American Red Cross (Disaster Relief), United Way, the National Urban League and new for 2022, Project HOPE.

Employee contributions support these charities to provide needed services in

their local communities and around the globe.

The Labcorp Charitable Foundation offers a match opportunity for contributions made through the campaign.

In addition, the Company's employees took advantage of opportunities to support charitable causes and make a positive impact in their communities.

For example, in honor of the life and legacy of Dr.

Martin Luther King Jr., colleagues participated in the “Cards of Encouragement” campaign, a global initiative to lift the spirits of hospitalized children and their families.

With the help of Cards for Hospitalized Kids, close to 8,000 cards were distributed to children and their families staying at Ronald McDonald Houses or receiving treatment at nonprofit children’s hospitals.

The Labcorp Charitable Foundation made a financial donation to the 39 supported charities.

The Company's global colleagues also support the local communities where they live and work.

For example, as India endured a second, severe wave of positive COVID-19 cases, Labcorp’s India Crisis Management Team helped 2,398 employees and their families get vaccinated.

Additionally, in celebration of Earth Day, Labcorp colleagues in China took an active part in the American Chamber of Commerce Shanghai Annual E-waste Drive, in which employees donated personal electronics that they no longer use.

The donated equipment was distributed to schools throughout rural communities in China to improve access to technology.

In observation of Childhood Cancer Awareness Month, Company colleagues in Geneva, Switzerland supported ARFEC (Association Romande des Familles d’Enfants atteints d’un Cancer) to benefit hospitalized children and their families through toy drives, the creation and sale of a calendar and participation in the Geneva 20 kilometer race.

Dynacare, a Labcorp company based in Canada, teamed up with Diabetes Canada to organize the #Dyncare4Diabetes campaign for the second consecutive year.

The campaign raises awareness of diabetes and provides accessible and free testing for at risk individuals.

In addition to offering free hemoglobin A1C testing at all Dynacare laboratory locations across the Greater Toronto Area and at mobile community clinics, Dynacare donated 50 cents to Diabetes Canada for every individual that participated in the campaign, up to a total of $25,000.

The Company provides its services to a broad range of customers across Dx and DD.

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As part of the Company's ongoing strategic priority to maximize the value of its unique leadership in both diagnostics and drug development, sales representatives from each business segment work together on outreach to potential customers of each business, including hospitals and health systems that may purchase testing and participate in clinical trials, or pharmaceutical, biotechnology or medical device companies whose studies may benefit from use of Dx’s specialty testing or network of PSCs.

In mid-2021, Labcorp launched its “In Pursuit of Answers” campaign to emphasize the Company's commitment to its customers and the dedication of its employees.

This campaign also highlights the Company's impact on public health, its new, unified brand, and its critical role in the fight against COVID-19.

Market Opportunity

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hospital-based laboratories, physician-office laboratories, and independent clinical and anatomical pathology laboratories, such as those operated by Dx.

The clinical laboratory business is intensely competitive.

CMS has estimated that, as of January 2022, there were 9,254 hospital-based laboratories, 131,238 physician-office laboratories, and 8,430 independent clinical and anatomic pathology laboratories in the U.S.

The clinical laboratory business is intensely competitive, and the Company believes that both competition and consolidation in the clinical laboratory business will continue.

CMS has estimated that, as of February 2023, there were 9,165 hospital-based laboratories, 123,511 physician-office laboratories, and 9,411 independent clinical and anatomic pathology laboratories in the U.S.

Dx competes with all of those laboratories.

In addition, an increasing number of health system laboratories have been expanding their operations and business, resulting in greater competition for testing from physicians within those systems and from unaffiliated physicians in the health system laboratories’ service areas.

Dx believes that the selection of a laboratory is primarily based on the following factors, all of which the Company believes it competes favorably in:

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• pricing of the laboratory’s services.

Dx believes that consolidation in the clinical laboratory testing business will continue.

In addition, Dx believes that it and other large, independent clinical laboratory testing companies will be able to increase their share of the overall clinical laboratory testing market due to a number of factors, including cost efficiencies afforded by large-scale automated testing, mergers and acquisitions of complementary businesses, changes in payment models to performance and value-based reimbursement to deliver better outcomes at lower cost, and the increasing importance of large, integrated service networks.

In addition, legal restrictions on physician referrals and physician ownership of laboratories, as well as ongoing regulation of laboratories, are expected to continue to contribute to the ongoing consolidation of the industry.

In addition to the factors listed above, the Company believes that the operational and economic efficiencies provided by its integrated service and logistics network, large-scale automated testing, and regular introduction of new technologies will allow the Company to compete effectively with other providers of laboratory services.

Drug development services companies like DD are also referred to as CROs and typically derive substantially all of their revenue from research and development (R&D), as well as marketing expenditures, of the pharmaceutical, biotechnology and medical device industries.

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The Company has procedures for monitoring its internal performance, as well as that of its vendors, suppliers, and other key stakeholders.

In addition, various groups and departments within the Company provide oversight to monitor and control

vendor products and performance, and play an essential role in the Company’s approach to quality through improvements in processes and automation.

Virtually all facets of the Company’s services are subject to quality programs and procedures, including accuracy and reproducibility of tests;

turnaround time;

customer service;

data integrity;

patient satisfaction;

In addition, various groups and departments within the Company provide oversight to monitor and control vendor products and performance, and play an essential role in the Company’s approach to quality through improvements in processes and automation.

Virtually all facets of the Company’s services are subject to quality programs and procedures, including accuracy and reproducibility of tests, turnaround time, customer service, data integrity, patient satisfaction, and billing.

The Company’s quality programs include measures that compare current performance against desired performance goals to monitor critical aspects of service to its customers and patients.

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and inspections and audits by customers.

Twenty eight of the Company's laboratories have received ISO-15189 accreditation, demonstrating that they meet international standards for quality and technical competence.

Thirty-three of the Company's laboratories have received ISO 15189 and/or ISO 13485 accreditation, demonstrating that they meet international standards for quality and technical competence.

Information Systems

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The Company's centralized information systems are responsible for operational efficiencies, enabling the Company to achieve consistent, structured, and standardized operating results and effective patient care.

In addition, the information systems used by Dx and DD are discussed in more detail in the sections dedicated to each of those segments.

The information systems used by Dx and DD are discussed in more detail in the sections dedicated to each of those segments.

Intellectual Property Rights

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As result of such disputes, the Company may have to develop costly non-infringing technology or enter into licensing agreements.

These agreements, if necessary, may require financial or other terms that could have an adverse effect on the Company's business and financial condition.

These agreements, if necessary, may require financial or other terms that could have an adverse effect on

the Company's business and financial condition.

Regulation and Reimbursement

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In most cases, that certification is regulated by CMS through CLIA, which requires that applicable clinical laboratories meet quality assurance, quality control, and personnel standards.

Laboratories also must undergo

proficiency testing and are subject to inspections.

Laboratories also must undergo proficiency testing and are subject to inspections.

Clinical laboratories in locations other than the U.S.

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Since 2014, there have been ongoing discussions and advocacy between stakeholders, including the clinical laboratory industry, the FDA, and Congress, about potential FDA regulation of laboratory-developed tests (LDTs), which are assays developed and performed in-house by clinical laboratories and can be made available to the public without pre-market review by the FDA (although COVID-19 diagnostic PCR LDTs have been subject to FDA pre-market requirements as a consequence of the national health emergency).

Various regulatory and legislative proposals are under consideration, including some that could increase general FDA oversight of clinical laboratories and LDTs.

Various regulatory and legislative proposals are under consideration, including some that

could increase general FDA oversight of clinical laboratories and LDTs.

The outcome and ultimate impact of such proposals on the Company is difficult to predict at this time.

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in which the Company operates.

For example, the European Union In Vitro Diagnostics Regulation (Regulation (EU) 2017/746 (EU IVDR)), scheduled to become applicable May 26, 2022, establishes a new legislative framework for in vitro diagnostic devices including a rule-based classification and quality and safety standards.

The Company continues to assess and prepare for compliance with the EU IVDR, where applicable.

For example, the European Union In Vitro Diagnostics Regulation (Regulation (EU) 2017/746 (EU IVDR)), which became applicable May 26, 2022, established a new legislative framework for in vitro diagnostic devices including a rule-based classification and quality and safety standards.

In addition, both Switzerland and the United Kingdom are implementing new legislative frameworks similar to the EU IVDR.

DD’s laboratory facilities and Dx's clinical laboratory facilities that perform testing in support of clinical trials, must conform to a range of standards and regulations, including good laboratory practice (GLP) and good clinical practice (GCP), good manufacturing practice (cGMP), human subject protection and investigational product exemption regulations, and quality system regulation (QSR) requirements, as applicable.

The preclinical and clinical studies that the Company conducts are subject to periodic inspections by the FDA as well as other regulatory agencies in the jurisdictions outside the U.S.

in which the Company operates, which may include, without limitation, the Medicines and Healthcare products Regulatory Agency (MHRA) in the U.K., the European Medicines Agency, the National Medical Products Administration in China, and the Pharmaceuticals and Medical Devices Agency in Japan, to determine compliance with GLP and GCP as well as other

applicable standards and regulations.

If a regulatory agency determines during an inspection that the Company’s equipment, facilities, laboratories, operations, or processes do not comply with applicable regulations and GLP and/or GCP standards, the regulatory agency may issue a formal notice, which may be followed by a warning letter if observations are not addressed satisfactorily.

If a regulatory agency determines during an inspection that the Company’s equipment, facilities, laboratories, operations, or processes do not comply with applicable regulations and GLP and/or GCP standards, the regulatory agency may issue a formal notice (FDA Form 483), which may be followed by a warning letter if observations are not addressed satisfactorily.

Noncompliance may result in, among other things, unanticipated compliance expenditures, or the regulatory agency seeking civil, criminal or administrative sanctions and/or remedies against the Company, including suspension of its operations.

The FDA Modernization Act 2.0 was enacted in December 2022 as Section 3209 of the Consolidated Appropriations Act, 2023.

This Act amended Section 505 of the Federal Food, Drug and Cosmetic Act (21 U.S.C.

355) to clarify the methods manufacturers and sponsors can use to investigate the safety and efficacy of a drug or the toxicity of a bioisimilar biologic product to include tests on animals as well as certain tests that are not performed on animals.

Specifically, the Act replaces a statutory reference to “tests on animals” as a viable option for pre-clinical testing with a reference to “nonclinical tests”, which includes animal testing, cell-based assays, microphysiological systems, or bioprinted or computer models.

The Act does not eliminate animal testing or require the use of non-animal models.

FDA previously had the authority to allow non-animal data to be considered during safety and efficacy reviews of new drugs and had previously issued related guidance.

However, many procedures intended to reduce animal tests are still in various stages of development.

Since such alternative methodologies must first be validated before FDA will approve of their use instead of validated animal models, the practical impact of the Act is likely to be limited for some time.

Additionally, certain DD services and activities, such as chemistry, manufacturing, and controls (CMC) services and manufacturing of investigational medicinal products for use in certain Phase I studies managed by DD, must conform to cGMP.

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Failure to maintain compliance with cGMP regulations and other applicable requirements of various regulatory agencies could result in, among other things, fines, warnings or untitled letters, unanticipated compliance expenditures, suspension of manufacturing, enforcement actions, product seizures or recalls, injunctions, or criminal prosecution.

Some Dx products are regulated by the FDA as medical devices.

Some Dx products are regulated by the FDA and other similar national regulatory agencies as medical devices.

The FDA defines a medical device in part as an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article which is intended for the diagnosis of disease or other conditions or in the cure, mitigation, treatment, or prevention of disease in man.

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To ensure compliance with regulatory requirements, medical device manufacturers are subject to market surveillance and periodic, pre-scheduled and unannounced inspections by the FDA.

Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include sanctions, operating restrictions, partial suspension or total shutdown of production;

Failure to comply with applicable regulatory requirements

can result in enforcement action by the FDA, which may include sanctions, operating restrictions, partial suspension or total shutdown of production;

refusal to grant clearance or approvals of new devices;

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Reimbursement under the Medicare PFS is capped at different rates in each Medicare Administrative Contractor's jurisdiction.

Pursuant to PAMA, reimbursement under the CLFS is set at a national rate that is updated every three years for most tests.

Pursuant to PAMA, unless modified by Congress, reimbursement under the CLFS is set at a national rate that is updated every three years for most tests.

State Medicaid programs are prohibited from paying more than the Medicare fee schedule limit for clinical laboratory services furnished to Medicaid recipients.

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The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) permanently replaced the SGR formula and transitioned PFS reimbursement to a value-based payment system.

MACRA retroactively avoided a 21.2% reduction in PFS reimbursement that had been scheduled for April 1, 2015, and provided for PFS conversion factor increases of 0.5% from July 1, 2015 to December 31, 2015, and 0.5% in each of years 2016-2019, followed by no updates for 2020-2025, and updates that vary based on participation in alternative payment models in subsequent years.

MACRA retroactively avoided a 21.2% reduction in PFS reimbursement that had been scheduled for April 1, 2015, and provided for PFS conversion factor increases of 0.5% from July 1, 2015 to December 31, 2015, and 0.5% in each of years 2016-2019, followed by no updates for 2020 through 2025, and updates that vary based on participation in alternative payment models in subsequent years.

These changes to the conversion factor may be offset by reductions to the relative value units, as was the case with the 2016 PFS reductions.

For 2022, Congress increased the conversion factor by 3.0% over the amount announced in the final rule, instead of allowing a 3.75% reduction to take effect.

In the Consolidated Appropriations Act of 2023, Congress mitigated PFS cuts in 2023 and 2024 by 2.5% and 1.25%, respectively, that would otherwise have been (4.47%) in 2023 based on the conversation factor put forward in the 2023 Medicare Physician Fee Schedule final rule.

Approximately 0.4% of Dx's revenue is reimbursed under the PFS.

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and (vi) the Health Plan Identifier Rule.

The Company believes that it is in compliance in all material respects with each of the HIPAA Rules identified above.

The Company, which may act as a HIPAA covered entity in certain circumstances, believes that it is in compliance in all material respects with each of the HIPAA Rules identified above.

The Privacy Rule regulates the use and disclosure of protected health information (PHI) by covered entities.

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On December 12, 2018, HHS issued a request for information (RFI) seeking input from the public on how the HIPAA regulations and the Privacy Rule, in particular, could be modified to amend existing, or impose additional, obligations relating to the processing of PHI.

Subsequent to the RFI, on January 21, 2021, HHS published a notice of proposed rulemaking (NPRM) containing potential modifications to the Privacy Rule addressing standards that may impede the transition to value-based

healthcare and strengthen individuals' rights to access their health information.

The public comment period for the NPRM was closed on May 6, 2021.

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NPI replaces the unique provider identification number and other provider numbers previously assigned by payers and other entities for the purpose of identifying healthcare providers in standard electronic transactions.

The Health Plan Identifier (HPID) was a unique identifier designed to furnish a standard way to identify health plans in electronic transactions.

CMS published the final rule adopting the HPID for health plans required by HIPAA on September 12, 2012.

Effective October 31, 2014, CMS announced a delay, until further notice, in enforcement of regulations pertaining to health plan enumeration and use of the HPID in HIPAA transactions adopted in the HPID final rule.

On October 28, 2019, CMS published a final rule rescinding the adopted standard unique HPID and implementation specifications and requirements for its use and other entity identifier and implementation specifications for its use, effective December 27, 2019.

This delay remains in effect.

The Company will continue to monitor future developments related to the HPID and respond accordingly.

Violations of the HIPAA provisions could result in civil and/or criminal penalties, including significant fines and up to 10 years in prison.

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However, future regulations and interpretations of HIPAA and HITECH could impose significant costs on the Company.

On May 1, 2020, HHS published a final rule making the information blocking provisions (Information Blocking Rules) of the 21 st Century Cures Act effective on November 2, 2020.

On November 4, 2020, HHS extended the effective date of the Information Blocking Rules to April 5, 2021.

The information blocking provisions (Information Blocking Rules) of the 21 st Century Cures Act became effective on April

The Information Blocking Rules prohibit covered actors, including healthcare providers, from engaging in activity that is likely to interfere with the access, exchanges, or use of electronic health information (EHI) unless such activity falls into one of eight exceptions.

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The Company believes that it is in compliance in all material respects with the requirements of the Information Blocking Rules.

In addition to the regulations described above, numerous other data protection, privacy and similar laws govern the confidentiality, security, use, and disclosure of personal information.

In addition to the regulations described above, numerous other data protection, privacy and similar laws govern the confidentiality, security, use, and disclosure of personal information, as well as breach notification responsibilities.

These laws vary by jurisdiction, but they most commonly regulate or restrict the collection, use, and disclosure of medical and financial information and other personal information.

In the U.S., some state laws are more restrictive and, therefore, are not preempted by HIPAA.

In the U.S., the Federal Trade Commission (FTC) has authority to regulate unfair or deceptive acts or practices, including with respect to data privacy and security.

If the Company’s public statements about collection, use or disclosure of personal information are perceived to be inconsistent with the Company’s actual practices, the Company may face accusations of unfairness or deception under the FTC Act or state law equivalents.

In addition, some state laws are more restrictive and, therefore, are not preempted by HIPAA.

Penalties for violation of these laws may include sanctions against a laboratory's licensure, as well as civil and/or criminal penalties.

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In addition, in November 2020, California voters approved the California Privacy Rights Act (CPRA) ballot initiative, which introduced significant amendments to the CCPA and established and funded a dedicated California privacy regulator, the California Privacy Protection Agency (CPPA).

The amendments introduced by the CPRA go into effect on January 1, 2023, and new implementing regulations are expected to be introduced by the CPPA.

Failure to comply with the CCPA may result in, among other things, significant civil penalties and injunctive relief, or potential

statutory or actual damages.

The amendments introduced by the CPRA went into effect on January 1, 2023, and new implementing regulations are expected to be introduced by the CPPA.

Failure to comply with the CCPA may result in, among other things, significant civil penalties and injunctive relief, or potential statutory or actual damages.

In addition, California residents have the right to bring a private right of action in connection with certain types of incidents.

These claims may result in significant liability and potential damages.

Other states have passed legislation similar to the CCPA, including the Virginia Consumer Data Protection Act (VCDPA), effective January 1, 2023, and the Colorado Privacy Act (CPA), effective July 1, 2023.

Both the VCDPA and CPA heavily mirror the principles and requirements of the CCPA;

however, neither provides for a private right of action.

The Company implemented processes to manage compliance with the CCPA and continues to assess the impact of the CPRA, VCDPA, and CPA on the Company’s business as additional information and guidance becomes available.

Other states have passed legislation similar to the CCPA, including the Virginia Consumer Data Protection Act (VCDPA), which became effective January 1, 2023, the Colorado Privacy Act (CPA) and the Connecticut Data Privacy Act (CTDPA), both effective July 1, 2023, and the Utah Consumer Privacy Act (UCPA), effective December 31, 2023.

The VCDPA, CPA, CTDPA, and UCPA heavily mirror the principles and requirements of the CCPA;

however, these laws do not provide for a private right of action.

The Company continues to assess the impact of these laws on the Company’s business, and the Company is implementing and will prepare to implement appropriate processes to manage compliance with these laws as they become effective and more guidance is provided.

Effective August 14, 2020, the Substance Abuse and Mental Health Services Administration of HHS (SAMHSA) announced the finalization of proposed changes to the Confidentiality of Substance Use Disorder Patient Records regulation, 42 Code of Federal Regulations Part 2.

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The GDPR established requirements applicable to the use and transfer of personal data and imposes penalties for noncompliance of up to the greater of €20 million or 4% of worldwide revenue.

The GDPR requires transparency with regard to the means and purposes of processing of personal data;

The GDPR, as well as the U.K.'s implementation - the U.K.

General Data Protection Regulation - requires transparency with regard to the means and purposes of processing of personal data;

collection of consent to process personal data in certain circumstances;

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Facebook Ireland Limited, Maximillian Schrems (Schrems II) , which invalidated the EU-U.S.

Privacy Shield as a legal framework for the transfer of personal data outside of the European Union, and suggesting additional safeguards for the use of Standard Contractual Clauses (SCCs) as a legal framework for the transfer of personal data outside of the European Union.

Privacy Shield as a legal framework for the transfer of personal data outside of the European Union, and suggesting additional safeguards for the use of Standard Contractual Clauses

(SCCs) as a legal framework for the transfer of personal data outside of the European Union.

On June 4, 2021, the European Commission release updated SCCs, which, in part, adopted many of the additional safeguards highlighted in the Schrems II decision.

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Historically, the clinical laboratory industry has been the focus of major governmental enforcement initiatives.

government's enforcement efforts have been conducted under regulations such as HIPAA, which includes several provisions related to fraud and abuse enforcement, including the establishment of a program to coordinate and fund U.S., state and local law enforcement efforts, and the Deficit Reduction Act of 2005, which includes requirements directed at Medicaid fraud, including increased spending on enforcement and financial incentives for states to adopt false claims act provisions similar to the U.S.

government's enforcement efforts have been conducted under statutory authorities such as those contained in HIPAA, which includes several provisions related to fraud and abuse enforcement, including the establishment of a program to coordinate and fund U.S., state and local law enforcement efforts, and in the Deficit Reduction Act of 2005, which included requirements directed at Medicaid fraud, including increased spending on enforcement and financial incentives for states to adopt false claims act provisions similar to the U.S.

False Claims Act.

Amendments to the False Claims Act, and other enhancements to the U.S.

fraud and abuse laws enacted as part of the ACA, have further increased fraud and abuse enforcement

efforts and compliance risks.

fraud and abuse laws enacted as part of the ACA, have further increased fraud and abuse enforcement efforts and compliance risks.

For example, the ACA established an obligation to report and refund overpayments from Medicare or Medicaid within 60 days of identification (whether or not paid through any fault of the recipient);

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(vii) rental of space in physician offices by equipment suppliers or other healthcare entities to which the physicians make referrals;

(viii) compensation paid by laboratories to physicians for blood specimen processing and for submitting patient data to registries;

(viii) compensation paid by laboratories to physicians and hospitals for blood specimen processing and for submitting patient data to registries;

and (ix) remuneration provided to physicians and other health care professionals by pharmaceutical and medical device companies in connection with company-sponsored speaker programs.

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enacted the Eliminating Kickbacks in Recovery Act of 2018 (EKRA), as part of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (SUPPORT Act).

EKRA is an all-payer anti-kickback law that makes it a criminal offense to pay any remuneration to induce referrals to, or in exchange for, patients using the services of a recovery home, a substance use clinical treatment facility, or laboratory.

treatment facility, or laboratory.

Although it appears that EKRA was intended to reach patient brokering and similar arrangements to induce patronage of substance use recovery and treatment, the language in EKRA is broadly written.

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Under another U.S.

statute, known as the Stark Law or “physician self-referral” prohibition, physicians who have a financial or a compensation relationship with a commercial laboratory may not, unless an exception applies, refer Medicare or Medicaid patients for testing to the laboratory, regardless of the intent of the parties.

statute, known as the Stark Law or “physician self-referral” prohibition, physicians who have a financial or a compensation relationship with a clinical laboratory may not, unless an exception applies, refer Medicare or Medicaid patients for testing to the laboratory, regardless of the intent of the parties.

Similarly, laboratories may not bill Medicare or Medicaid for services furnished pursuant to a prohibited self-referral.

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(i) fair market value compensation for the provision of items or services;

ii) payments by physicians to a laboratory for commercial laboratory services;

(ii) payments by physicians to a laboratory for clinical laboratory services;

(iii) ancillary services (including laboratory services) provided within the referring physician's own office, if certain criteria are satisfied;

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Many states have their own self-referral laws as well, which in some cases apply to all patient referrals, not just government reimbursement programs.

In December 2020, the OIG and CMS published final rules to amend the regulations implementing the Anti-Kickback Statute and the Stark Law, respectively.

In December 2020, the OIG and CMS published final rules to amend certain regulations implementing the Anti-Kickback Statute and the Stark Law, respectively.

The amendments were primarily intended to alleviate perceived impediments to coordinated care and value-based compensation arrangements through new safe harbors to the Anti-Kickback Statute and new exceptions to the Stark Law, and have varying degrees of applicability to laboratories.

The CMS final rule incorporates laboratories and permits support for value-based arrangements, under certain conditions for purposes of the Stark Law.

However, the OIG final rule generally excludes laboratories from protection under the Anti-Kickback Statute safe harbors for

value-based arrangements.

However, the OIG final rule generally excludes laboratories from protection under the Anti-Kickback Statute safe harbors for value-based arrangements.

There are a variety of other types of U.S.

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healthcare programs, including Medicare and Medicaid, are subject to certain program integrity requirements intended to protect the programs from fraud, waste, and abuse.

In September 2019, CMS published a final rule implementing program integrity enhancements to provider enrollment requiring Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) providers and suppliers to disclose on an enrollment application or a revalidation application any current or previous direct or indirect affiliation with a provider or supplier that (1) has uncollected debt;

(2) has been or is subject to a payment suspension under a federal health care program;

(3) has been or is excluded by the OIG from Medicare, Medicaid, or CHIP;

or (4) has had its Medicare, Medicaid, or CHIP billing privileges denied or revoked.

(ii) has been or is subject to a payment suspension under a federal health care program;

(iii) has been or is excluded by the OIG from Medicare, Medicaid, or CHIP, or (iv) has had its Medicare, Medicaid, or CHIP billing privileges denied or revoked.

This rule permits CMS to deny enrollment based on such an affiliation when CMS determines that the affiliation poses an undue risk of fraud, waste, or abuse.

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In addition, CMS defined factors it would use to determine whether revocation or suspension of billing privileges is appropriate due to a pattern or practice of non-compliant billing, which would be:

(a) the percentage of submitted claims that were denied during the period under consideration;

(b) whether the provider or supplier has any history of final adverse actions and the nature of any such actions;

(c) the type of billing non-compliance and the specific facts surrounding said non-compliance (to the extent this can be determined);

and (d) any other information regarding the provider's or supplier's specific circumstances that CMS deems relevant to the determination.

(i) the percentage of submitted claims that were denied during the period under consideration;

(ii) whether the provider or supplier has any history of final adverse actions and the nature of any such actions;

(iii) the type of billing non-compliance and the specific facts surrounding said non-compliance (to the extent this can be determined);

and (iv) any other information regarding the provider's

or supplier's specific circumstances that CMS deems relevant to the determination.

This is a reduction in the number of factors that were previously considered and a revision of some previous factors.

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The Company is committed to reducing its carbon footprint.

Labcorp participates in the Carbon Disclosure Project (CDP) and the EcoVadis sustainable procurement rating processes and has committed to submitting a Science Based Target by the end of 2022.

The Company participates in the Carbon Disclosure Project (CDP) and the EcoVadis sustainable procurement rating processes.

In December 2022, the Company submitted science-based targets to the Science Based Target Institute.

Energy-saving measures at Company facilities include for example, installation of more efficient boilers, chillers, ventilation systems and LED lighting, engaging in waste-to-energy disposition, and reducing waste going to landfills.

Funding for these and similar projects continued through 2021 and are continuing in 2022.

Funding for these and similar projects continued through 2022 and is expected to continue through 2023.

The Company seeks to comply with all relevant environment, employee health and safety laws and regulations.

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The use of controlled substances in testing for drugs of abuse is regulated by the U.S.

Drug Enforcement Administration.

The Company seeks to conduct its business in compliance with these regulations as applicable.

Drug Enforcement Administration under the Controlled Substances Act (CSA) and its implementing regulations.

The CSA establishes, among other things, certain registration, security, recordkeeping, reporting, import, export and other requirements for controlled substances.

The Company seeks to conduct its business in compliance with these requirements as applicable.

Violations of these rules may result in criminal and civil fines and penalties.

Compliance Program

The Company maintains a comprehensive, global compliance program that includes ongoing evaluation and monitoring of its compliance with the laws and regulations of the U.S.

The Company maintains a global compliance program that includes ongoing evaluation and monitoring of its compliance with the laws and regulations of the U.S.

and the other countries in which it has operations.

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The Company uses state-of-the art tools and advanced analytics to proactively identify and protect against potential information system disruptions and breaches;

to monitor, test and secure key networks and services;

and to facilitate prompt resumption of operations if a system disruption or interruption should occur.

to monitor, test and secure key networks and services, and to facilitate prompt resumption of operations if a system disruption or interruption should occur.

The Company has implemented policies and procedures designed to comply with global laws and regulations related to the privacy and security of personal and health information.

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The Company is exposed to risks related to information security arising from the information technology systems and operations of third parties, including the Company's vendors and partners.

Therefore, a stringent process is followed for evaluating the cybersecurity status of vendors or third parties that will have access to the Company's data or information technology systems.

Therefore, the Company follows a process to evaluate the cybersecurity status of vendors or third parties that will have access to the Company's data or information technology systems.

The Company also carries cybersecurity and business interruption insurance.

7 unchanged sentences

The Company is involved in pending and threatened litigation related to the AMCA Incident, as well as various government and regulatory inquiries and processes.

For additional information about the AMCA Incident, see Note 14 Commitments and Contingencies to the Consolidated Financial Statements.

For additional information about the AMCA Incident, see Note 14 Commitments and Contingencies to the Consolidated Financial Statements and “Risk Factors - Risks Related to Technology and Cybersecurity”.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business