McKesson Corporation

Legal and litigation · Employment and labor law compliance

We are subject to extensive and frequently changing laws relating to healthcare fraud, waste, and abuse. Federal, state, and local governmental entities in the U.S. and elsewhere continue to strengthen their position on, and scrutiny of, practices that may indicate fraud, waste, and abuse affecting government healthcare programs such as Medicare and Medicaid.

Legal and litigation · Product liability and warranty claims

Our business exposes us to risks that are inherent in the distribution, manufacturing, dispensing, and administration of pharmaceuticals and medical-surgical supplies. For example, pharmacy operations are exposed to risks such as improper filling of prescriptions, mislabeling of prescriptions, inadequacy of warnings, unintentional distribution of counterfeit drugs, and expiration of drugs.

Legal and litigation · Litigation and legal proceedings

We are routinely named as a defendant in litigation or regulatory proceedings and other legal disputes, which may include asserted class action litigation. Regulatory proceedings involve allegations such as false claims, healthcare fraud and abuse, and violations of competition laws. Civil litigation proceedings involve commercial, employment, environmental, intellectual property, tort, and other claims.

Tax and financial reporting · Tax compliance and changes in tax law

We might be adversely impacted by tax legislation or challenges to our tax positions. We are subject to the tax laws in the U.S. at the federal, state, and local government levels and to the tax laws of other jurisdictions in which we operate or sell products or services. Tax laws might change in ways that adversely affect our tax positions, effective tax rate, and cash flow.

Industry regulation · Regulatory compliance and changes

We are subject to extensive, complex, challenging, and frequently changing healthcare, environmental, and other laws. Further regulation of our distribution operations, technology, products, or services, or other aspects of our business, could impose increased costs, negatively impact our profit margins and the profit margins of our customers, delay the introduction or implementation of our new products.

Market and investment · Asset valuation and impairment

We are required under U.S. Generally Accepted Accounting Principles to test our goodwill for impairment annually, or more frequently if indicators for potential impairment exist. Any material changes in key assumptions, including failure to meet business plans, negative changes in government reimbursement rates, a deterioration in the U.S. and global financial markets, an increase in interest rates, an increase in inflation, or an increase in the cost of equity financing by market participants within the industry, may decrease the projected cash flows or increase the discount rates and could potentially result in an impairment charge.

International and currency · Foreign exchange and currency exposure

We are adversely impacted by changes in the economic environments in which we operate, including from inflation, an economic slowdown, a recession, or fluctuations in foreign currency exchange rates. Our non-U.S. operations, import and export of products sold in currencies other than U.S. dollar (non-USD), non-USD intercompany loans, and our substantial international net assets also expose us to foreign currency exchange rate risk.

Credit and liquidity · Credit risk and customer defaults

We are impacted by customer purchase reductions, contract non-renewals, payment defaults, and bankruptcies. Some of our customers from time to time reduce the amounts they purchase from us, do not renew their purchase contracts with us, renew their purchase contracts at less favorable terms, delay or default on their payments to us, or avoid payments to us through bankruptcy proceedings.

Credit and liquidity · Access to capital and financing

Changes affecting capital and credit markets might impede access to credit, increase borrowing costs, and disrupt banking services for us and our customers and suppliers. Volatility and disruption in global capital and credit markets might adversely affect the borrowing ability and cost of borrowing for us and our customers and suppliers.

Cybersecurity and data protection · Data breaches and cyber attacks

We, our external service providers, vendors, and other third parties with which we do business, use technology and systems to perform our business operations. Despite our physical, technical, and administrative security measures, technology systems and operations of the Company and third parties have experienced cybersecurity incidents and are subject to future cyberattacks and cybersecurity incidents. A cybersecurity incident might involve a material data breach or other material impact to the confidentiality, integrity, availability, or operations of our technology systems or data.

Cybersecurity and data protection · Insider threats and access controls

The use of AI solutions by our employees or third parties on which we rely could also lead to the misuse of data or public disclosure of confidential information (including personal data or proprietary information) in contravention of our internal policies and safeguards, applicable laws, contractual requirements, or third-party intellectual property rights.

Strategic execution · Merger acquisition and divestiture risks

Our growth strategy includes consummating acquisitions, investments, or other strategic transactions that either expand or complement our business. Achieving the desired outcomes of these strategic transactions involves significant risks including: diverting management's attention from other business operations or priorities; challenges with assimilating the acquired businesses, such as integration of operations, systems, and technologies; failure or delay in realizing operating synergies; difficulty retaining key acquired company personnel.

Customer and revenue · Reimbursement and pricing pressure healthcare or insurance

We might be adversely impacted by healthcare reform such as changes in pricing and reimbursement models. Certain changes in reimbursement methodologies (including government rates) for pharmaceuticals, medical treatments, and related services reduce profit margins for us and our customers and impose new legal requirements on healthcare providers.

Market position and competition · Industry consolidation and market concentration

We are adversely impacted by competition and industry consolidation. Due to consolidation, a few large suppliers control a significant share of the pharmaceuticals market. This concentration reduces our ability to negotiate favorable terms with suppliers and causes us to depend on a smaller number of suppliers.

Supply chain and procurement · Raw material availability and cost volatility

Supply disruptions arise from other factors beyond our control, such as product rationalization; government actions or policies (including trade sanctions, tariffs and other trade restrictions, as well as the requisition, diversion, or allocation of inventory); shifts in customer or societal demand for products; labor disputes or shortages; ethical sourcing issues; supplier financial distress; natural disasters and weather-related events; civil unrest; military conflicts; and epidemics or pandemics.

Human capital and workforce · Talent acquisition and retention

We might be unable to successfully recruit and retain qualified employees. Our ability to attract, engage, develop, and retain qualified and experienced employees, including key executives and other talent, is essential for us to meet our objectives. We compete with many other businesses to attract and retain employees.

Core operations · Quality control and product defects

Pharmaceutical and medical products that we distribute might not conform to specifications or perform as intended. Issues affecting product safety or efficacy can arise from manufacturing, storing, distributing, dispensing, or using products, and can result in adverse consequences such as safety alerts, seizures, bans, recalls, withdrawals or other market action, suspensions, and other regulatory actions and sanctions.

Economic and market conditions · Economic recession and downturns

An economic slowdown or a recession could also reduce the prices our customers are able or willing to pay for our products and services and reduce the volume of their purchases. In addition to rising inflation, rising interest rates, the impact of banking failures or perceived failures and related contagion, consumer sentiment, political circumstances, military conflicts, and civil unrest may contribute to recessionary pressure.

Economic and market conditions · Market volatility and financial crises

Changes affecting capital and credit markets might impede access to credit, increase borrowing costs, and disrupt banking services for us and our customers and suppliers. Volatility and disruption in global capital and credit markets, including the bankruptcy or restructuring of certain financial institutions, reduced lending activity by financial institutions, reduced creditworthiness of our customers or suppliers, or decreased liquidity and increased costs in the commercial paper market, might adversely affect the borrowing ability and cost of borrowing.

Natural and catastrophic events · Pandemic and public health crises

Conditions and events outside of our control, such as widespread public health issues, natural disasters, and geopolitical factors adversely impact our business operations. From time to time we are adversely affected by conditions and events outside of our control, including: widespread public health issues such as epidemic or pandemic infectious diseases.