McKesson 2009 Annual Report Download - page 5

•Leveraged our solid base of stable and recurring rev-
enues in Technology Solutions to mitigate the effects of
the slowing economy. The steady subscription revenues
we receive from our payor customers, our RelayHealth®
connectivity business, and our revenue cycle outsourcing
business helped mitigate the impact of the economic
slowdown on this business. Additionally, with our large
customer base, we were able to generate stable rev-
enues from maintenance on our installed solutions.
• Continued to create new growth opportunities through
innovation. We filed patent applications for 75 inventions
in fiscal year 2009. Each of these innovations is designed
to advance the success of our customers, while creating
new revenue opportunities for McKesson.
Navigating Short-Term Challenges
While we clearly saw many highlights in fiscal year
2009, we began to feel the effects of the worsening
economy last fall, as did most companies in healthcare
and other industries. These effects included delayed
technology purchases by some customers and a general
easing of growth rates across the industry as the year
progressed. We responded to these developments by
managing expenses in disciplined and innovative ways,
including cost containment initiatives and our Global
Sourcing program, where we coordinate and optimize
purchasing across our various businesses and geogra-
phic locations.
Over the past fiscal year, we also addressed a challenge
unrelated to the economic climate. Last November, we
agreed to settle all private-party claims relating to First
DataBank’s published drug reimbursement benchmarks,
commonly referred to as Average Wholesale Prices
(AWP). While we firmly believe we did nothing wrong in
this matter, we felt that given the inherent uncertainty
of litigation, entering into the settlement agreement was
in the best interests of our stockholders, customers,
suppliers, and employees.
Excluding the impact of the AWP litigation, McKesson
recorded diluted earnings per share (EPS) of $4.07 in fis-
cal year 2009, an increase of 23% from the prior year,
and the first time we have ever reported EPS from contin-
uing operations above $4.00. Reaching this milestone in a
challenging economic climate is particularly significant.
Seizing the Long-Term Opportunities
I continue to be extremely optimistic about the future of
our business. There are many trends favoring healthcare
today, none more significant than the movement toward
healthcare reform in the United States. While many
decisions are still to come, the current debate is focused
on expanding access, while improving the quality and
lowering the cost of healthcare. All of these trends create
great opportunities for McKesson.
For starters, the stimulus bill proposed by President
Obama’s administration and passed by the U.S. Congress
contains $19 billion in incentives for the adoption of
healthcare information technology (HIT) solutions. The
government and industry leaders have advocated a wider
use of HIT for years, and it is exciting to see meaningful
funding pledged to this effort. McKesson not only has
the technology solutions our customers need to improve
the quality and efficiency of care, we also stand ready to
help them navigate the process of qualifying to receive
stimulus funds.
Another tenet of President Obama’s healthcare plan aims
to provide care to the estimated 47 million uninsured
Americans. This is a much tougher problem to solve, but
the direction of change clearly points toward a larger
healthcare marketplace. As a leading provider of health-
care services and information technology, we are well
positioned to benefit from an increased focus on health
and wellness in the United States, and across the globe.