McKesson 2014 Annual Report Download - page 107

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
104
I. Litigation and Claims
On April 16, 2013, the Company’s wholly-owned subsidiary, U.S. Oncology, Inc. (“USON”), was served with a third amended
qui tam complaint filed in the United States District Court for the Eastern District of New York by two relators, purportedly on
behalf of the United States, twenty-one states and the District of Columbia, against USON and five other defendants, alleging that
USON solicited and received illegal “kickbacks” from Amgen in violation of the Anti-Kickback Statute, the False Claims Act,
and various state false claims statutes, and seeking damages, treble damages, civil penalties, attorneys’ fees and costs of suit, all
in unspecified amounts, United States ex rel. Piacentile v. Amgen Inc., et al., (CV 04-3983 (SJ)). Previously, the United States
declined to intervene in the case as to all allegations and defendants except for Amgen. On February 5, 2013, the United States
filed a motion to dismiss the claims pled against Amgen. On September 30, 2013, the court granted the United States’ motion to
dismiss. On April 4, 2014, USON filed a motion to dismiss the claims pled against it. The court has not yet ruled on USON’s
motion.
II. Average Wholesale Price (“AWP”) Litigation
On May 1, 2013, an action was filed in the United States District Court for the Northern District of California by several Ohio
health benefit programs against the Company asserting claims under the federal and Ohio RICO statutes, and seeking damages,
treble damages, attorneys’ fees, and costs of suit, all in unspecified amounts, based on the same allegations as the Company’s
previously disclosed AWP litigation, Ohio v. McKesson Corporation, et al., (CV-13-2000-SI). The plaintiffs allege that in late
2001, the Company and First DataBank, Inc., a publisher of pharmaceutical pricing information, conspired to improperly raise the
published AWP for certain prescription drugs, and that this alleged conduct resulted in higher drug reimbursement payments. On
July 12, 2013, the parties filed a stipulation dismissing with prejudice the claims asserted against the Company under the Ohio
RICO statutes. On February 28, 2014, the Company entered into a settlement agreement with the plaintiffs. On March 12, 2014,
pursuant to a stipulation between the parties and the terms of the parties’ settlement agreement, the court entered an order dismissing
this action with prejudice.
The Company has a reserve relating to AWP public entity claims, which is reviewed at least quarterly and whenever events
or circumstances indicate changes, including consideration of the pace and progress of discussions relating to potentially resolving
other public entity claims. Pre-tax charges relating to changes in the Company’s AWP litigation reserve, including accrued interest,
are recorded in the Distribution Solutions segment. The Company’s AWP litigation reserve is included in other current liabilities
in the consolidated balance sheets.
The following is the activity related to the AWP litigation reserve for the years ended March 31, 2014, 2013 and 2012:
Years Ended March 31,
(In millions) 2014 2013 2012
AWP litigation reserve at beginning of period $ 42 $ 453 $ 330
Charges incurred 68 72 149
Payments made (105)(483)(26)
AWP litigation reserve at end of period $ 5 $ 42 $ 453
The charges for 2014 and 2013 primarily related to state Medicaid and other claims. The charges for 2012 primarily related
to the Douglas County, Kansas Action settlement and the state and federal Medicaid claims.