McKesson 2009 Annual Report Download - page 58

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
52
Litigation is costly, time-consuming and disruptive to normal business operations. The defense of these matters
could also result in continued diversion of our management’s time and attention away from business operations,
which could also harm our business. Even if these matters are not resolved against us, the uncertainty and expense
associated with unresolved legal proceedings could harm our business and reputation. For additional information
regarding certain of the legal proceedings in which we are involved, see Financial Note 18, “Other Commitments
and Contingent Liabilities,” to the accompanying consolidated financial statements.
Changes in the United States healthcare environment could have a material negative impact on our revenues
and net income.
Our products and services are primarily intended to function within the structure of the healthcare financing and
reimbursement system currently being used in the United States. In recent years, the healthcare industry has
changed significantly in an effort to reduce costs. These changes include increased use of managed care, cuts in
Medicare and Medicaid reimbursement levels, consolidation of pharmaceutical and medical-surgical supply
distributors and the development of large, sophisticated purchasing groups.
We expect the healthcare industry to continue to change significantly in the future. Some of these changes,
such as adverse changes in government funding of healthcare services, legislation or regulations governing the
privacy of patient information or the delivery or pricing of pharmaceuticals and healthcare services or mandated
benefits, may cause healthcare industry participants to greatly reduce the amount of our products and services they
purchase or the price they are willing to pay for our products and services.
Changes in the healthcare industry’s or our pharmaceutical suppliers’ pricing, selling, inventory, distribution or
supply policies or practices, or changes in our customer mix could also significantly reduce our revenues and net
income. Due to the diverse range of healthcare supply management and healthcare information technology products
and services that we offer, such changes could have an adverse impact on our results of operations, while not
affecting some of our competitors who offer a narrower range of products and services.
The majority of our U.S. pharmaceutical distribution business’ agreements with manufacturers are structured to
ensure that we are appropriately and predictably compensated for the services we provide; however, failure to
successfully renew these contracts in a timely and favorable manner could have an adverse impact on our results of
operations.
Healthcare and public policy trends indicate that the number of generic drugs will increase over the next few
years as a result of the expiration of certain drug patents. In recent years, our financial results have improved from
our generic drug offering programs. An increase or a decrease in the availability or changes in pricing or
reimbursement of these generic drugs could have an adverse impact on our results of operations.
“At-Risk” Launches: Generic drug manufacturers are increasingly challenging the validity or enforceability of
patents on branded pharmaceutical products. During the pendency of these legal challenges, a generics
manufacturer may begin manufacturing and selling a generic version of the branded product prior to the final
resolution to its legal challenge over the branded product’s patent. To the extent we source and distribute such
generic products launched “at risk,” the brand-name company could assert infringement claims against us. While
we generally obtain indemnification against such claims from generic manufacturers as a condition of distributing
their products, there can be no assurances that these rights will be adequate or sufficient to protect us.