McKesson 2013 Annual Report Download - page 104

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
II. Other Litigation and Claims
In connection with the Company's execution of an agreement to acquire PSS World Medical, on December 5, 2012, a
putative class action complaint was filed in Florida state court, Duval County, by an alleged public shareholder of PSS World
Medical against PSS World Medical, members of PSS World Medical's board of directors, The Goldman Sachs Group, Inc.,
Goldman, Sachs & Co, and the Company, Baltimore County Employees' Retirement System v. Gary A. Corless, et al., (No.16-
2012-CA-013015). The suit alleges that PSS World Medical and its board members breached their fiduciary duties by failing
to maximize shareholder value and by failing to disclose material information in the preliminary proxy statement, and that the
Company and others aided and abetted various fiduciary duty breaches in connection with the proposed merger. In addition to
monetary damages in an unspecified amount and other remedies, the suit seeks to enjoin consummation of the merger. On
February 8, 2013, the parties agreed in principle to settle the action as a non-opt out class action, subject to court approval,
with enhanced disclosures, a request for attorneys' fees, and no affect on the consideration to be received by PSS shareholders
as a result of the Company's agreement to acquire PSS. The agreement includes an express denial of any liability on the part
of the Company. The parties will seek to enter into a stipulation of settlement that will be presented to the court for final
approval.
III. Government Investigations
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 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. An example is an investigation by the
Regie de l'assurance maladie du Quebec (“RAMQ”), a provincial government agency with administrative authority over the
conduct of pharmaceutical businesses in the province of Quebec, Canada. Since 2009, the Company has cooperated with and
responded to this investigation which focused on certain discounts and payments offered to pharmacies in Quebec, as well as
payments received by the Company from certain manufacturers. In the third quarter of 2013, the Company engaged in
settlement discussions to resolve potential legal claims against the Company and its customers and suppliers arising from the
investigation. On April 19, 2013, the Company entered into a settlement agreement with the RAMQ, to settle all potential
claims of the RAMQ arising from the investigation. The agreement provides that the Company will pay $40 million to the
RAMQ, and provides for a full release of all potential claims by the RAMQ arising from the investigation. The agreement
includes an express denial of any liability on the part of the Company. The Company has fully reserved for the financial effect
of this agreement. In addition, in the third quarter 2013, the Company was informed of an investigation by the United States
Department of Justice through the United States Attorney's Office for the Middle District of Tennessee. The Company
believes that the investigation is focused on distribution procedures with respect to the Vaccine for Children's Program
administered by the Centers for Disease Control and Prevention. In connection with the investigation, the Company has
received and has responded to a subpoena seeking information and records from the Company's Specialty Health business.
IV. Environmental Matters
Primarily as a result of the operation of the Company's former chemical businesses, which were fully divested by 1987,
the Company is involved in various matters pursuant to environmental laws and regulations. The Company has received
claims and demands from governmental agencies relating to investigative and remedial actions purportedly required to
address environmental conditions alleged to exist at eight sites where it, or entities acquired by it, formerly conducted
operations and the Company, by administrative order or otherwise, has agreed to take certain actions at those sites, including
soil and groundwater remediation. In addition, the Company is one of multiple recipients of a New Jersey Department of
Environmental Protection Agency directive and a separate United States Environmental Protection Agency directive relating
to potential natural resources damages (“NRD”) associated with one of these eight sites. Although the Company's potential
allocation under either directive cannot be determined at this time, it has agreed to participate with a potentially responsible
party (“PRP”) group in the funding of an NRD assessment, the costs of which are reflected in the aggregate estimates set forth
below.
Based on a determination by the Company's environmental staff, in consultation with outside environmental specialists
and counsel, the current estimate of the Company's probable loss associated with the remediation costs for these eight sites is
$7 million, net of approximately $1 million that third parties have agreed to pay in settlement or is expected, based either on
agreements or nonrefundable contributions which are ongoing, to be contributed by third parties. The $7 million is expected
to be paid out between April 2013 and March 2033. The Company's estimated probable loss for these environmental matters
has been entirely accrued for in the accompanying consolidated balance sheets.