McKesson 2016 Annual Report Download - page 25

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McKESSON CORPORATION
inadequate resources that could impact continuous supply; and (4) damage to our reputation due to real or
perceived quality issues. For example, the FDA has conducted investigations and banned certain generics
manufacturers from selling certain raw materials and drug ingredients in the U.S. from overseas plants due to
quality issues. Difficulties in manufacturing or access to raw materials could result in production shutdowns,
product shortages and other similar delays in product manufacturing that could have a material adverse impact on
our financial position and results of operations.
Changes in the Canadian healthcare industry and regulatory environment could have a material adverse
impact on our results of operations.
Provincial governments in Canada provide partial funding for the purchase of pharmaceuticals and
independently regulate the sale and reimbursement of drugs. Provincial governments in Canada have introduced
significant changes in recent years in an effort to reduce the costs of publicly funded health programs. For
instance, to reduce the cost for taxpayers, provincial governments have taken steps to reform the rules regarding
the sale of generic drugs. These changes include the significant lowering of prices for generic pharmaceuticals
and, in some provinces, changes to the allowable amounts of professional allowances paid to pharmacists by
generic manufacturers. These reforms may adversely affect the distribution of drugs as well as the pricing for
prescription drugs for the Company’s operations in Canada. Other provinces have implemented or are
considering similar changes, which would also lower pharmaceutical pricing and service fees. Individually or in
combination, such changes in the Canadian healthcare environment may significantly reduce our Canadian
revenue and operating profit.
General European economic conditions, together with austerity measures being taken by certain European
governments, could have a material adverse impact on our results of operations.
The Company’s acquisition of Celesio increased our assets and operations within Europe and, accordingly,
our exposure to economic conditions in Europe. A slowdown within the European economy could affect our
business in Europe by reducing the prices our customers may be able or willing to pay for our products and
services. A slowdown may also reduce the demand for our products. Either of these could result in a material
adverse impact on our results of operations.
In addition, in many European countries the government provides or subsidizes healthcare to consumers and
regulates pharmaceutical prices, patient eligibility, and reimbursement levels to control costs for the government-
sponsored healthcare system. In recent years, in response to the recessionary environment and financial crisis in
Europe, a number of European governments have announced or implemented austerity measures to reduce
healthcare spending and constrain overall government expenditures. These measures, which include efforts
aimed at reforming healthcare coverage and reducing healthcare costs, continue to exert pressure on the pricing
of and reimbursement timelines for pharmaceuticals and may cause our customers to purchase fewer of our
products and services and reduce the prices they are willing to pay.
Countries with existing healthcare-related austerity measures may impose additional laws, regulations, or
requirements on the healthcare industry. In addition, European governments that have not yet imposed
healthcare-related austerity measures may impose them in the future. New austerity measures may be similar to
or vary from existing austerity measures and could have a material adverse impact on our results of operations.
Changes in the European regulatory environment regarding privacy and data protection regulations could
have a material adverse impact on our results of operations.
In Europe, we are subject to the 1995 European Union (“EU”) Directive on Data Protection (“1995 Data
Protection Directive”), which requires EU member states to impose minimum restrictions on the collection and
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