McKesson 2015 Annual Report Download - page 118

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
dismiss the claims pled against it and the hearing occurred on October 7, 2014. The court has not yet ruled on
USOS’s motion.
On May 21, 2014, four hedge funds managed by Magnetar Capital filed a complaint against McKesson
Deutschland GmbH & Co. KGaA (formerly known as “Dragonfly GmbH & Co. KGaA”) (“Dragonfly”), a
wholly-owned subsidiary of the Company, in a German court in Frankfurt, Germany, alleging that Dragonfly
violated German takeover law in connection with the Company’s acquisition of Celesio by paying more to some
holders of Celesio’s convertible bonds than it paid to the shareholders of Celesio’s stock, Magnetar Capital
Master Fund Ltd. et al. v. Dragonfly GmbH & Co KGaA, No. 3-05 O 44/14. On December 5, 2014, the court
fully dismissed Magnetar’s lawsuit in Dragonfly’s favor and ruled that the plaintiffs must bear the court costs and
Dragonfly’s taxable lawyers’ fees. Magnetar filed a notice of appeal on January 5, 2015.
II. Government Subpoenas and 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 the subpoena from the office of the Attorney General of West Virginia in the fourth
quarter of 2015 seeking information about the Company’s distribution of controlled substances in West Virginia.
The Company has provided the requested documents.
In addition, in the fourth quarter of 2015, the Company reached an agreement in principle with the Drug
Enforcement Administration (“DEA”), Department of Justice (“DOJ”) and various U.S. Attorney’s offices to
settle all potential administrative and civil claims relating to investigations about the Company’s suspicious order
reporting practices for controlled substances. The global settlement with the DEA and DOJ is subject to the
execution of final settlement agreements. Under the terms of the agreement in principle, the Company has agreed
to pay the sum of $150 million, implement certain remedial measures and have the following distribution
centers’ DEA registrations suspended for the specified products and time periods: Aurora, Colorado: all
controlled substances for three years; Livonia, Michigan: all controlled substances for two years; Washington
Courthouse, Ohio: all controlled substances for the two-year period following completion of the Livonia
suspension; and Lakeland, Florida: hydromorphone products for one year. Throughout the terms of these
suspensions, the Company will be permitted to continue to ship controlled substances from its Livonia,
Washington Courthouse and Lakeland distribution centers to customers that purchase products under its
pharmaceutical prime vendor contract with the Department of Veterans Affairs. The Company expects that the
suspensions will not result in a supply disruption to any customer. Customers located in the distribution center
service areas described above will receive controlled substances from a different distribution center during the
applicable suspension periods. As a result of our agreement in principle, during the fourth quarter of 2015, we
recorded a $150 million pre-tax and after-tax charge relating to these claims.
III. 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 six 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
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