McKesson 2016 Annual Report Download - page 24

McKESSON CORPORATION
October 1, 2014 to October 1, 2015. Updating systems to Version 5010 for electronic healthcare transactions
(e.g., eligibility, claims submission and payment and electronic remittance) is required for use of the ICD-10
code set. Generally, claims submitted not using Version 5010 and ICD-10 will not be processed, and health plans
not accepting transactions using Version 5010 and ICD-10 may experience significant increases in customer
service inquiries. We may incur increased development costs and delays in delivering solutions and upgrading
our software and systems as the healthcare industry moves towards compliance with these rules. In addition,
these rules may lengthen our sales and implementation cycle and we may incur costs in periods prior to the
corresponding recognition of revenue. Delays in providing software and systems that are in compliance with
these rules may result in postponement or cancellation of our customers’ decisions to purchase our software and
systems.
Medical Billing and Coding: Medical billing, coding and collection activities are governed by numerous
federal and state civil and criminal laws. In connection with these laws, we may be subjected to federal or state
government investigations and possible penalties may be imposed upon us, false claims actions may have to be
defended, private payers may file claims against us and we may be excluded from Medicare, Medicaid or other
government-funded healthcare programs. Any such proceeding or investigation could have a material adverse
impact on our results of operations.
Our foreign operations subject us to a number of operating, economic, political and regulatory risks that may
have a material adverse impact on our financial position and results of operations.
We have operations based in, and we source and contract manufacture pharmaceutical and medical-surgical
products in, a number of foreign countries. The Company’s acquisition of Celesio AG (“Celesio”) significantly
increases the importance of our foreign operations to our future operations and growth.
Our foreign operations expose us to a number of risks including changes in trade protection laws, policies
and measures and other regulatory requirements affecting trade and investment; changes in licensing regimes for
pharmacies; unexpected regulatory, social, political, or economic changes in a specific country or region;
changes in intellectual property, privacy and data protection; import/export regulations and trade sanctions in
both the United States and foreign countries and difficulties in staffing and managing foreign operations. Political
changes, labor strikes, acts of war or terrorism and natural disasters, some of which may be disruptive, can
interfere with our supply chain, our customers and all of our activities in a particular location. We may also be
affected by potentially adverse tax consequences and difficulties associated with repatriating cash generated or
held abroad.
Foreign operations are also subject to risks of violations of laws prohibiting improper payments and bribery,
including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar regulations in foreign
jurisdictions. The U.K. Bribery Act, for example, prohibits both domestic and international bribery, as well as
bribery across both private and public sectors. An organization that fails to prevent bribery committed by anyone
associated with the organization can be charged under the U.K. Bribery Act unless the organization can establish
the defense of having implemented adequate procedures to prevent bribery. Failure to comply with these laws
could subject us to civil and criminal penalties that could have a material adverse impact on our financial position
and results of operations.
We also may experience difficulties and delays inherent in sourcing products and contract manufacturing
from foreign countries, including but not limited to: (1) difficulties in complying with the requirements of
applicable federal, state and local governmental authorities in the United States and of foreign regulatory
authorities; (2) inability to increase production capacity commensurate with demand or the failure to predict
market demand; (3) other manufacturing or distribution problems including changes in types of products
produced, limits to manufacturing capacity due to regulatory requirements, physical limitations, or scarce or
18