McKesson 2009 Annual Report Download - page 116

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
110
On October 3, 2008, the United States filed a complaint in intervention in the United States District Court for
the Northern District of Mississippi, naming as defendants, among others, the Company and its former indirect
subsidiary, McKesson Medical-Surgical MediNet Inc., now merged into and doing business as McKesson Medical-
Surgical MediMart Inc., United States v. McKesson Corporation, et al., (Civil Action No. 2:08-CV-00214-SA). On
December 3, 2008, the Company filed motions to dismiss the complaint on grounds that its allegations lack the
particularity required by the Federal Rules of Procedure and on grounds that the complaint fails to state a claim
under the False Claims Act, 31 U.S.C. Sections 3729-33. Briefing of the Company’s motions has been completed
and the parties are awaiting the court’s order setting a date for oral argument.
Between 1976 and 1987, our former McKesson Chemical Company division operated a repackaging facility in
Santa Fe Springs, California. We have been actively remediating the contamination at this site since 1994. Angeles
Chemical Company (“Angeles”) conducted similar repackaging activities at its property adjacent to the Company’s
site between 1976 and 2000. In late 2001, Angeles filed an action against McKesson, Angeles Chemical Company
v. McKesson Corporation, et al., (United States District Court for the Central District of California Case No. 01-
10532-TJH) claiming that McKesson’s contamination migrated to Angeles’ property. The causes of action in the
current complaint purport to state claims based on the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (as amended, the “Superfund” law or its state law equivalent) and the
Resource Conservation and Recovery Act, as well as allege various state law claims, such as nuisance, trespass,
negligence, defamation, interference with prospective advantage, unfair business practices and for declaratory relief,
among others. Angeles seeks injunctive relief, as well as compensatory and punitive damages, attorneys’ fees and
costs in an unspecified amount. We have answered the complaint, denying liability and asserting affirmative
defenses. Fact and expert discovery are closed and trial has been set for October 13, 2009.
V. Government Investigations and Subpoenas
From time to time, the Company receives subpoenas or requests for information from various government
agencies. The Company generally responds to such subpoenas and requests in a cooperative, thorough and timely
manner. These responses sometimes require considerable time and effort and can result in considerable costs being
incurred by the Company. Such subpoenas and requests also can lead to the assertion of claims or the
commencement of civil or criminal legal proceedings against the Company and other members of the health care
industry, as well as to settlements. Examples of such requests and subpoenas include the following: (1) we have
responded to a request from the Federal Trade Commission for certain documents as part of a non-public
investigation to determine whether the Company may have engaged in anti-competitive practices with other
wholesale pharmaceutical distributors in order to limit competition for provider customers seeking distribution
services; (2) we have received and responded to a Civil Investigative Demand from the Attorney General’s Office of
the State of Tennessee apparently in connection with an investigation into possible violations of the Tennessee
Medicaid False Claims Act in connection with repackaged pharmaceuticals; (3) we have responded to a subpoena
from the office of the Attorney General of the State of New York requesting documents and other information
concerning our participation in the secondary or “alternative source” market for pharmaceutical products; (4) we
have received and have responded, or are in the process of responding to subpoenas and requests for information
from a number of Offices of state Attorney Generals or other state agencies, relating to the pricing, including FDB’s
AWPs, for branded and generic drugs; and (5) we are responding to a subpoena, issued by the United States
Attorney’s Office (“USAO”) in Houston, which seeks documents relating to billing and collection services
performed by our subsidiary, Per-Se for certain healthcare operations associated with the University of Texas from
2004 to the present.
On May 2, 2008, we entered into two agreements which resolved previously disclosed claims by the Drug
Enforcement Administration (“DEA”) and six USAOs that between 2005 and 2007, certain of our pharmaceutical
distribution centers fulfilled customer orders for select controlled substances, which orders were not adequately
reported to the DEA. The settlements were achieved consistent with the previously disclosed $13 million reserve
established for these matters. These settlements resolve all administrative and civil claims arising out of the
investigations.