McKesson 2006 Annual Report Download - page 52

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
We could become subject to liability claims that are not adequately covered by our insurance, and may have to pay damages and other
expenses which could have a material adverse effect on us.
Our business exposes us to risks that are inherent in the distribution and dispensing of pharmaceuticals, the provision of ancillary services
(such as our pharmacy management business) and the conduct of our medical management businesses (which include disease management
programs and our nurse triage services) and the provision of products that assist clinical decision-making and relate to patient medical histories
and treatment plans. If customers assert liability claims against our products, any ensuing litigation, regardless of outcome, could result in a
substantial cost to us, divert management’s attention from operations and decrease market acceptance of our products. We attempt to limit, by
contract, our liability to customers; however, the limitations of liability set forth in the contracts may not be enforceable or may not otherwise
protect us from liability for damages. We also maintain general liability coverage; however, this coverage may not continue to be available on
acceptable terms or may not be available in sufficient amounts to cover one or more large claims against us. In addition, the insurer might
disclaim coverage as to any future claim. A successful product or professional liability claim not fully covered by our insurance could have a
material adverse effect on our business, financial condition or results of operations.
The ability of our Provider Technologies business to attract and retain customers due to challenges in software product integration,
and technological advances may significantly reduce our revenues or increase our expenses.
Our Provider Technologies business delivers enterprise-wide patient care, clinical, financial, managed care, payor and strategic management
software solutions, as well as networking technologies, electronic commerce, outsourcing and other services to healthcare organizations
throughout the United States and certain foreign countries. Challenges in integrating Provider Technologies software products could impair our
ability to attract and retain customers and may reduce our revenues or increase our expenses.
Future advances in the healthcare information systems industry could lead to new technologies, products or services that are competitive
with the products and services offered by our Provider Technologies business. Such technological advances could also lower the cost of such
products and services or otherwise result in competitive pricing pressure. The success of our Provider Technologies business will depend, in
part, on its ability to be responsive to technological developments, pricing pressures and changing business models. To remain competitive in
the evolving healthcare information systems marketplace, our Provider Technologies business must develop new products on a timely basis.
The failure to develop competitive products and to introduce new products on a timely basis could curtail the ability of our Provider
Technologies business to attract and retain customers and thereby significantly reduce our net income.
The loss of third party licenses utilized by our Provider Technologies segment may adversely impact our operating results.
We license the rights to use certain technologies from third-party vendors to incorporate in or complement our Provider Technologies
segment products and solutions. These licenses are generally nonexclusive, must be renewed periodically by mutual consent, and may be
terminated if we breach the terms of the license. As a result, we may have to discontinue, delay or reduce product shipments until we obtain
equivalent technology, which could hurt our business. Our competitors may obtain the right to use any of the technology covered by these
licenses and use the technology to compete directly with us. In addition, if our vendors choose to discontinue support of the licensed
technology in the future, we may not be able to modify or adapt our own products.
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