McKesson 2011 Annual Report Download - page 24

McKESSON CORPORATION
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Our business exposes us to risks that are inherent in the distribution, manufacturing, dispensing of
pharmaceuticals and medical-surgical supplies, the provision of ancillary services, the conduct of our payer
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 and/or services, 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 our liability to customers by contract; however, the limitations of liability set forth
in the contracts may not be enforceable or may not otherwise protect us from liability for damages. Additionally, we
may be subject to claims that are not explicitly covered by contract, such as a claim directly by a patient. We also
maintain general liability coverage; however, this coverage may not continue to be available on acceptable terms,
may not be available in sufficient amounts to cover one or more large claims against us and may include larger self-
insured retentions or exclusions for certain products. 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 impact on our results of operations.
The failure of our healthcare technology businesses to attract and retain customers due to challenges in software
product integration or to keep pace with technological advances may significantly reduce our results of
operations.
Our healthcare technology businesses, the bulk of which resides in our Technology Solutions segment, deliver
enterprise-wide clinical, patient care, financial, supply chain, strategic management software solutions and
pharmacy automation to hospitals, physicians, homecare providers, retail and mail order pharmacies and payers.
Challenges integrating software products could impair our ability to attract and retain customers, and it could have a
material adverse impact on our consolidated results of operations and a disproportionate impact on the results of
operations of our Technology Solutions segment.
Future advances in the healthcare information systems industry could lead to new technologies, products or
services that are competitive with the technology products and services offered by our various businesses. Such
technological advances could also lower the cost of such products and services or otherwise result in competitive
pricing pressure or render our products obsolete.
The success of our technology businesses will depend, in part, on our ability to be responsive to technological
developments, pricing pressures and changing business models. To remain competitive in the evolving healthcare
information systems marketplace, our technology businesses must also 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 technology businesses to attract and retain customers, and thereby it could have a material adverse impact on our
results of operations.
Proprietary technology protections may not be adequate and products may be found to infringe the rights of third
parties.
We rely on a combination of trade secret, patent, copyright and trademark laws, nondisclosure and other
contractual provisions and technical measures to protect our proprietary rights in our products and solutions. There
can be no assurance that these protections will be adequate or that our competitors will not independently develop
technologies that are equivalent or superior to our technology. In addition, despite protective measures, we may be
subject to unauthorized use of our technology due to copying, reverse-engineering or other infringement. Although
we believe that our products do not infringe the proprietary rights of third parties, from time-to-time third parties
have asserted infringement claims against us and there can be no assurance that third parties will not assert
infringement claims against us in the future. If we were found to be infringing others’ rights, we may be required to
pay substantial damage awards and forced to develop non-infringing products or technology, obtain a license or
cease selling the products that contain the infringing technology. Additionally, we may find it necessary to initiate
litigation to protect our trade secrets, to enforce our patent, copyright and trademark rights and to determine the
scope and validity of the proprietary rights of others. These types of litigation can be costly and time consuming.
These litigation expenses, damage payments or costs of developing replacement products or technology could have
a material adverse impact on our results of operations.