McKesson 2009 Annual Report Download - page 115

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
109
III. Product Liability Litigation
The Company is a defendant in approximately 571 cases alleging that the plaintiffs were injured by Vioxx, an
anti-inflammatory drug manufactured by Merck & Company (“Merck”). The cases typically assert causes of action
for strict liability, negligence, breach of warranty and false advertising for improper design, testing, manufacturing
and warnings relating to the manufacture and distribution of Vioxx. None of the cases involving the Company is
scheduled for trial. The Company has tendered each of these cases to Merck and has reached an agreement with
Merck to defend and indemnify the Company.
We, through our former McKesson Chemical Company division, are named in approximately 475 cases
involving the alleged distribution of asbestos. These cases typically involve either single or multiple plaintiffs
claiming personal injuries and unspecified compensatory and punitive damages as a result of exposure to asbestos-
containing materials. Pursuant to an indemnification agreement signed at the time of the 1987 sale of McKesson
Chemical Company to what is now called Univar USA Inc. (“Univar,”) we have tendered each of these actions to
Univar. Univar has raised questions concerning the extent of its obligations under the indemnification agreement.
Univar continues to defend the Company in some of these cases, but since February 2005 has been rejecting tenders
and accordingly, the Company is incurring defense costs in connection with the more recently served actions. The
Company believes that Univar remains obligated under the terms of the indemnification agreement. The Company
has filed an arbitration demand against Univar pursuant to the indemnification agreement seeking a determination
that the liability for these cases is Univar’s responsibility. An arbitration date of August 31, 2009 has been agreed
upon for commencement of the arbitration of this dispute. In addition to its indemnification rights against Univar,
the Company believes that portions of these claims are covered by insurance and is pursuing that coverage.
IV. Other Litigation and Claims
On May 3, 2004, judgment was entered against us and one of our employees in the action captioned Roby v.
McKesson HBOC, Inc. et al., (Superior Court for Yolo County, California, Case No. CV01-573). Former employee
Charlene Roby (“Roby”) brought claims for wrongful termination, disability discrimination and disability-based
harassment against McKesson and a claim for disability-based harassment against her former supervisor. The jury
awarded Roby compensatory damages against McKesson and against her supervisor in the total amount of $4
million and punitive damages in the amount of $15 million against McKesson. Following post-trial motions, the
trial court reduced the amount of compensatory damages against McKesson to $3 million, the punitive damages
awarded against both defendants and the compensatory damages awarded against the individual employee defendant
were not reduced. We filed a Notice of Appeal, seeking reduction or reversal of the compensatory and punitive
damage awards and the award of attorneys’ fees. On December 26, 2006, the Court of Appeals for the Third
Appellate District of California issued its decision reversing the verdict for harassment against Roby’s supervisor,
reducing the compensatory damages against McKesson from $3 million to $1 million and reducing punitive
damages from $15 million to $2 million. Following the rejection of Roby’s petition for rehearing before the Court
of Appeals, plaintiff petitioned for review by the California Supreme Court, which was granted on April 18, 2007.
The briefing for the appeal has been completed and the parties await the court’s order scheduling the appeal for oral
argument.
On July 14, 2006, an action was filed in the United States District Court for the Eastern District of New York
against McKesson, two McKesson employees, several other drug wholesalers and numerous drug manufacturers,
RxUSA v. Alcon Laboratories et al., (Case No. 06-CV-3447-DRH). Plaintiff alleges that we, along with various
other defendants, unlawfully engaged in monopolization and attempted monopolization of the sale and distribution
of pharmaceutical products in violation of the federal antitrust laws, as well as in violation of New York State’s
Donnelly Act. We are also alleged to have violated the Sarbanes-Oxley Act of 2002; and our employees are alleged
to have violated the Donnelly Act, the Sarbanes-Oxley Act and Sections 1962 (c) and (d) of the civil RICO statute.
Plaintiff alleges generally that defendants have individually, and in concert with one another, taken actions to create
and maintain a monopoly and to exclude secondary wholesalers, such as the plaintiff, from the wholesale
pharmaceutical industry. The complaint seeks monetary damages of approximately $1.6 billion and also seeks
treble damages, attorneys’ fees and injunctive relief. All defendants have filed motions to dismiss all claims. The
motions were fully briefed and submitted to the trial court on March 13, 2007. The court has not yet decided any of
the motions and has not set a date to hear oral argument on the motions. Discovery has been stayed subject to
disposition of the motions to dismiss. No trial date has been set.