McKesson Company Brief

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Company Brief

by Faulkner Staff

Docid: 00018767

Publication Date: 2008

Report Type: VENDOR


McKesson, based in Texas, is a leading global provider of health care
technology and pharmaceutical supplies with over 78,000 employees. As of
2020, it is ranked 7th on the FORTUNE 500. McKesson operates a lucrative
pharmaceutical distribution chain across the US and Canada and maintains a
strong strategy of acquisitions and R&D. The company also provides
support to health providers and insurers, particularly in the US as the
healthcare industry continues to fluctuate and meet demand for increased
services while reducing the cost of care. McKesson also partners with
competing providers of electronic health records to encourage
interoperability and sharing of patient records. The company had been the
focus of scrutiny over the past year for its role in the opioid epidemic.
In August 2020, McKesson reported that it will be distributing a vaccine
for the novel coronavirus.

Report Contents:

Fast Facts

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Name: McKesson

One Post Street
San Francisco, CA 94104
Phone: (415) 983-8300
Toll-Free: (800) 482-3784
Fax: (415) 983-7160
Type of Vendor: Supply management and healthcare IT
Founded: 1833
Service Areas: Global
Stock Symbol: MCK (NYSE)


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McKesson, a Fortune 500 health product conglomerate based in San
Francisco, traces its roots back to 1833. Now the oldest and largest North
American pharmaceutical distributor, McKesson also runs business units in
the Asia-Pacific region, France, the Netherlands, and the UK. The company
provides the fourth largest pharmaceutical supply chain, and 24 of the top
25 health plans are McKesson customers.

In 1833, John McKesson and Charles Olcott opened a drug import and
wholesale shop in New York City’s financial district. Following Olcott’s
death in 1853, Daniel Robbins joined the business and the company was
rebranded as McKesson & Robbins. Over the next 100 years, McKesson
& Robins formed a network of national wholesale drug distributors.
McKesson Chemical Company, which represented over 100 businesses,
had transitioned into a diversified national distribution leader by the
end of the 1950s. In 1967, the company merged with nationwide dairy
distributor Foremost to become Foremost-McKesson.

During the 1980s, Foremost-McKesson divested the majority of its
peripheral operations, refocused on its core healthcare supply management
businesses, and began investing in R&D. By 1984, the company took on
the name McKesson. Also that same year, HBOC began increasing its product
lines through R&D expansion and acquisitions. In 1986, McKesson
sold its liquor and chemical distributors. Acquisitions fueled growth as
McKesson acquired half of Canadian drug distributor Medis in 1990, the
remaining half of Medis in 1991, and a 23 percent stake in Mexican drug
distributor Nadro in 1993. As it continued to hone its offerings, in 1994
McKesson sold PCS, the leading US prescription claims processor, to Eli
Lilly. In 1996, it sold its stake in Armor All (auto and home cleaning
products) to Clorox.

After extensive growth, McKesson emerged as the leader in many of its
fields, drawing the attention of investors and regulators alike. In 1997,
McKesson purchased medical surgical supply distributor General Medical for
approximately $775 million USD. The following year, McKesson agreed to
purchase one of its largest competitors – AmeriSource Health (now
AmerisourceBergen) – but withdrew the offer facing FTC opposition.
Instead, the company paid $14 billion for health care information systems
firm HBO & Company, forming McKesson HBOC. The deal for HBO took a
toll on the company: McKesson was forced to restate fourth-quarter results
for fiscal 1999 due to accounting inconsistencies from the acquisition.
McKesson fired five former ex-HBO executives for using improper accounting
methods, including McKesson HBOC chairman Charlie McCall (who was later
indicted for securities fraud). McKesson’s CEO Mark Pulido and CFO Richard
Hawkins were forced to resign over the fraud.

In 2001, the company changed its name to simply “McKesson” and named John
H. Hammergren as CEO, who also became the chairman in 2002. In 2004,
McKesson acquired Moore Medical. The same year, McKesson finalized $2.9
billion-per-year contract with the Veterans Administration. In 2005, the
company finally settled a class action shareholder suit over HBOC’s
financial fraud for $960 million, the third largest settlement of its kind
to that date. The company also acquired K & D Healthcare Resources and
Medcon. A string of acquisitions followed including Coloplast’s Sterling
Medical Services subsidiary in 2006; Per-Se, a provider of financial and
administrative systems for hospitals, physicians, and pharmacies in
2007; Oncology Therapeutics Network (OTN), a distributor of specialty
pharmaceuticals, McQueary Brothers Drug Company, Rosebud, and EN-Chart
Scanning Program in 2008; LMS Medical Systems’ intellectual property for
obstetrics surveillance and archiving in 2009; US Oncology for
approximately $2.16 billion USD in 2010; Portico Systems, a provider of
integrated provider management systems in 2011; and PSS World Medical in
2013. Separately in 2013, McKesson ended its IT and Hospital Automation
operations by divesting McKesson UK and subsidiaries; McKesson France;
McKesson Netherlands; and a 49 percent share of Nadro, a pharmaceutical
distributor in Mexico.

With its massive industry footprint, McKesson puts itself on the
front-lines of legal and regulatory responsibility. The company has faced,
and is vulnerable to, repercussions from actions such as selling drugs
that violate product codes, giving improper care recommendations, and
violating HIPAA, insurance, e-prescribing, and other healthcare
regulations. McKesson’s international sourcing for products also places it
under US government scrutiny. In addition, McKesson faces patent
challenges for its portfolio of generic drugs. Over the past 10
years, the company has continued to settle more than $1 billion in
lawsuits and regulatory fees. It has been a focus in the opioid epidemic.
Cases include:

  • In a scandal revisited, in 2009, “a federal jury found the former
    chairman of McKesson, [Charles McCall], guilty of fraud …, nearly 10
    years after he played a central role in a costly corporate accounting
    scandal. The jury convicted … McCall … on four counts of securities
    fraud, and a charge of evading corporate accounting controls.”1
  • In 2011, a lawsuit from Kentucky Attorney General Jack Conway asserted
    that McKesson and First DataBank worked together to inflate the average
    wholesale price for about 1,800 prescription drug products. The lawsuit
    claims that, as a result of this misconduct, Kentucky Medicaid overpaid
    for the drugs by tens of millions of dollars.2
  • In August 2014, McKesson agreed to pay $18 million USD to settle a US
    Department of Justice claim that it improperly set temperature monitors
    used in the shipping of vaccines that it received from the government
    and distributed to health care providers.3 It also acquired
    Celesio, moving its ranking to 11th on the FORTUNE 500 with more than
    $179 billion in annual revenue.
  • In 2017, numerous states and municipalities – including West
    Virginia, Kentucky, and more – sued McKesson for its lack of oversight
    into its drug distribution channels to pharmacies amid the deadly opioid
  • In 2018, it announced initiatives to fight the opioid epidemic,
    including starting a foundation dedicated to combating the crisis. Other
    initiatives include expediting the development of a national
    prescription safety-alert system, the facilitation of e-prescribing,
    support for limited-dose packaging, fast-tracking the distribution of
    new non-opioid pain medications, and complimentary pharmacist training
    on opioid overdose reversal medications.
  • In July 2019, the company was named in an Ohio lawsuit that
    consolidates lawsuits from across the United States alongside such
    pharmaceutical industry giants as Cardinal Health, Walgreens, CVS,
    Walmart, and Purdue Pharma. The legal filing accuses organizations of
    focusing solely on profits amid the current opioid epidemic.

Municipalities and community leaders across the country – in states from
West Virginia4 to Kentucky5 and more6 – have accused McKesson of not
providing adequate oversight of its drug distribution channels amid the
deadly national opioid crisis, including lack of monitoring of pharmacies
that order large quantities of opiod drugs. In March 2018, the company
announced initiatives to help fight the epidemic, including starting a
foundation dedicated to combating the crisis. This foundation, to which
McKesson has committed $100 million, focuses on education, key policy
issues, and increasing access to life-saving treatments. Other initiatives
include expediting the development of a national prescription safety-alert
system, the facilitation of e-prescribing, support for limited-dose
packaging, fast-tracking the distribution of new non-opioid pain
medications, and complimentary pharmacist training on opioid overdose
reversal medications.

In August 2020, McKesson reported that it will be distributing a vaccine
for the novel coronavirus. McKesson’s vaccine distribution contract with
the government began in 2017 and has the potential to amount to $300

Key Executives

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McKesson’s key executives include:

  • Brian Tyler – Chief Executive Officer
  • Britt Vitalone – Executive Vice President and Chief Financial Officer
  • Tracy Faber – Executive Vice President and Chief Human Resources
  • Lori Schechter – Executive Vice President, General Counsel, Chief
    Legal Officer
  • Nancy Flores – Executive Vice President, Chief Information Officer,
    Chief Technology Officer
  • Tom Rodgers – Executive Vice President, Chief Strategy and Business
    Development Officer

Major Products

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McKesson delivers pharmaceuticals, medical supplies, and health IT. In
2020, the company reorganized its reportable segments into four divisions.

  • U.S. Pharmaceutical (USP)–Focuses on wholesale drug
    distribution and technologies for retail pharmacies, health systems,
    payers and community providers.
  • Prescription Technology Solutions (RxTS)–Combines
    RelayHealth, CoverMyMeds, and RxCrossroads to serve biopharma and life
    sciences partners and patients.
  • International–Combines McKesson Canada and McKesson
  • Medical-Surgical Solutions–Distributes
    medical-surgical supplies and provides logistics and other services to
    healthcare providers in the United States.

McKesson’s distribution operations include production and distribution of
drugs, medical-surgical supplies and equipment, and health and beauty care
products throughout North America. The company supplies more than 40,000 US
pharmacy locations, from Wal-Mart to the Department of Veterans Affairs, to
community pharmacies and hospitals. The company’s healthcare technology
delivers enterprise-wide clinical, patient care, financial, supply chain,
and strategic management software, pharmacy automation for hospitals, as
well as support services for healthcare organizations. The company’s
software and hardware are used in more than 70 percent of the nation’s
hospitals with more than 200 beds.

Table 1 outlines McKesson’s Distribution and Healthcare Technology

Table 1. McKesson Pharmaceutical Distribution

Products and Services


Principal Competitors


McKesson Distribution delivers
pharmaceuticals to retail pharmacies and institutional providers
like hospitals and health systems. McKesson operates
pharmaceutical distribution centers across the US, serving
customers in all 50 states. The company also delivers
comprehensive health care products, technology, equipment and
related services to alternate sites including physician offices,
surgery centers, long-term care facilities, and home care
businesses. McKesson is currently the largest pharmaceutical
distributor in North America. McKesson also operates McKesson

  • McKesson Medical-Surgical

  • McKesson Patient Relationship

  • McKesson Pharmaceutical

  • McKesson Pharmacy Systems and

  • McKesson Specialty Health

  • Celisio

  • McKesson Canada

  • AmerisourceBergen

  • Cardinal Health

  • GE Healthcare

  • Owens & Minor

  • Siemens Healthcare


McKesson Technology provides software,
automation, services and consulting to hospitals, physician
offices, imaging centers, home health care agencies, and payers.
McKesson also provides interactive connectivity services that
streamline clinical, financial, and administrative communication
between patients, providers, payers (insurers), pharmacies, and
financial institutions. The company’s solutions are designed to
improve patient safety, reduce the cost and variability of care,
improve health care efficiency, and better manage revenue
streams and resources.

  • Enterprise Information Services
  • Imaging and Workflow Solutions
  • Connected Care and Analysis
  • McKesson Business Performance Services
  • McKesson Health Solutions
  • AmerisourceBergen

  • Cardinal Health

  • GE Healthcare

  • Owens & Minor

  • Siemens Healthcare

Major Competitors

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McKesson’s primary competitors in health products and pharmaceuticals

Recent Activity

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In January 2020, McKesson reached a $175 million settlement with
investors who claimed that directors failed to maintain adequate internal
systems for spotting suspicious opioid shipments. McKesson executives
agreed to enhance the company’s corporate-governance protections by
separating the role of the chief executive officer and board chairman. It
also agreed to tighten bonus claw-back policies for officials who don’t
perform properly.7 Also in August, McKesson appointed Rebecca
McKillican as CEO of McKesson Canada, succeeding Domenic Pilla, who has

In August 2020, McKesson Corp. reported that it will be distributing a
vaccine for the novel coronavirus. McKesson’s vaccine distribution
contract with the government began in 2017. It has the potential to amount
to $300 million.


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