McKesson (MCK) 10-K risk factor changes: FY2020 vs FY2019

[removed: The] [added: Any of these] risks [removed: described below could] [added: might] have a material adverse impact on our [added: business operations and our] financial [removed: position,] [added: position or] results of [removed: operations, liquidity and cash flows.][added: operations.]

[removed: The reader should] [added: This is] not [removed: consider this list to be] a complete statement of all [added: potential] risks and uncertainties.

Many of our products and services are [added: designed and] intended to function within the structure of [removed: the] [added: current] healthcare financing and reimbursement [removed: system currently being used in the United States.][added: systems.]

[removed: In recent years, the] [added: The] healthcare industry [removed: in the United States has changed] [added: and related government programs are changing] significantly [removed: in an effort] [added: as they seek] to [removed: enhance] [added: increase] efficiencies, reduce costs and improve patient outcomes.

[removed: These changes] [added: Changes] have included cuts in Medicare and Medicaid reimbursement levels, changes in the basis for payments, shifting away from fee-for-service and towards value-based payments and risk-sharing models, [added: and] increases in the use of managed [removed: care and consolidation in the healthcare industry.][added: care.]

Changes in the healthcare industry’s or our [removed: pharmaceutical] suppliers’ pricing, selling, inventory, distribution or supply policies or practices could significantly reduce our revenues and net income.

[removed: The majority of] [added: We attempt to structure] our [removed: U.S.] pharmaceutical distribution [removed: business] agreements with manufacturers [removed: are structured] to ensure that we are appropriately and predictably compensated for the services we provide.

Certain distribution [removed: business] agreements with manufacturers [removed: continue to have] [added: include] pharmaceutical price inflation as a component of our [removed: compensation.][added: compensation, and we cannot control the frequency or magnitude of pharmaceutical price changes.]

[removed: Continued volatility] [added: These risks, as well as changes] in the availability, pricing [removed: trends or] [added: volatility,] reimbursement [removed: of these] [added: rates for] generic drugs, or significant [removed: fluctuations] [added: changes] in the nature, frequency [removed: and] [added: or] magnitude of generic pharmaceutical launches, [removed: could] [added: might] have a [removed: material] [added: materially] adverse impact on our [added: business operations and our financial position or] results of operations.

[removed: The healthcare] [added: Our] industry is highly regulated, and further regulation of our distribution businesses and technology products and services 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, or otherwise negatively impact our business and expose the Company to litigation and regulatory investigations.

[removed: McKESSON CORPORATION][added: McKESSON CORPORATION]

[removed: Healthcare Fraud: We] [added: We] are subject to extensive and frequently changing local, state and federal laws and regulations relating to healthcare fraud, waste and [removed: abuse.][added: abuse.]

Our relationships with pharmaceutical and [removed: medical-surgical] [added: medical surgical] product manufacturers and healthcare providers, as well as our provision of products and services to government entities, subject our business to laws and regulations on fraud and abuse, which among other things: (1) prohibit persons from soliciting, offering, receiving or paying any remuneration in order to induce the referral of a patient for treatment or to induce the ordering or purchasing of items or services that are in any way paid for by Medicare, Medicaid or other government-sponsored healthcare programs; (2) impose [removed: a number of] [added: many] restrictions upon referring physicians and providers of designated health services under Medicare and Medicaid programs; and (3) prohibit the knowing submission of a false or fraudulent claim for payment to, and knowing retention of an overpayment by, a federal healthcare program such as Medicare and Medicaid.

Many of [removed: the regulations applicable to us,] [added: these laws,] including those relating to marketing incentives, are vague or indefinite and have not been interpreted by the courts.

The [removed: regulations] [added: laws] may be interpreted or applied by a prosecutorial, regulatory, or judicial authority in a manner that could require us to make changes in our operations.

[removed: If we fail] [added: Failures] to comply with applicable laws [removed: and regulations, we could be] subject [added: us] to federal or state government investigations or qui tam actions, and [removed: could become liable] [added: to liability] for damages and [removed: suffer] civil and criminal penalties, including the loss of licenses or our ability to participate in Medicare, Medicaid and other federal and state healthcare programs.

[removed: Reimbursements: Our profit margins and the profit margins of our customers may be adversely affected by laws and regulations reducing] [added: For example,] reimbursement [removed: rates] [added: methodologies] (including government rates) for pharmaceuticals, medical treatments and related [removed: services, imposing additional] [added: services reduce profit margins for us and our customers and impose new legal] requirements on healthcare [removed: entities, or changing the methodology by which reimbursement levels are determined.][added: providers.]

[removed: If finalized, the proposal would create] [added: These proposals might result in] significant [removed: change] [added: changes] in the pharmaceutical value chain as manufacturers, PBM, managed care organizations and other industry stakeholders look to implement new transactional flows and adapt their business models.

[removed: Operating, Security and Licensure Standards:] We are subject to the operating and security standards of the Drug Enforcement Administration (“DEA”), the U.S. Food and Drug Administration (“FDA”), various state boards of pharmacy, state health departments, HHS, the Centers for Medicare & Medicaid Services (“CMS”) and other comparable agencies.

[removed: In] [added: For example, under a] January [removed: 2017, we reached an] [added: 2017] agreement with the DEA and Department of Justice [removed: pursuant to which] we paid $150 million to settle [removed: all] potential administrative and civil claims [removed: relating to investigations] about [removed: the Company’s suspicious order reporting] [added: our] practices for [added: reporting suspicious orders of] controlled [removed: substances.][added: substances and the DEA suspended, on a staggered basis for limited periods of time, our registrations to distribute certain controlled substances from four distribution centers.]

Any noncompliance by us with applicable laws [removed: and regulations] or the failure to maintain, renew or obtain necessary permits and licenses could lead to litigation and [added: might] have a [removed: material] [added: materially] adverse impact on our [added: business operations and our financial position or] results of operations.

[removed: Pedigree Tracking:] There have been increasing efforts by [removed: Congress and state and federal agencies, including state boards of pharmacy and departments of health and the FDA,] [added: governments] to regulate the pharmaceutical distribution system in order to prevent the introduction of counterfeit, adulterated and/or mislabeled drugs into the pharmaceutical distribution system, otherwise known as pedigree tracking.

[removed: In addition,] [added: For example,] the [added: U.S. Drug Quality and Security Act of 2013 (“DQSA”) requires us to participate in a federal prescription drug track and trace system that preempts state drug pedigree requirements, and the U.S.] Food and Drug Administration Amendments Act of 2007 requires the FDA to establish standards and identify and validate effective [removed: technologies for the purpose of securing] [added: technologies, such as track and trace or authentication technologies, to secure] the pharmaceutical supply chain against counterfeit drugs.

[removed: The DQSA and other pedigree] [added: Pedigree] tracking laws [removed: and regulations could] [added: such as these] increase [removed: the overall regulatory] [added: our compliance] burden and [removed: costs associated with] our pharmaceutical distribution [removed: business,] [added: costs,] and [removed: could] [added: they might] have a [removed: material] [added: materially] adverse impact on our [added: business operations and our financial position or] results of operations.

[removed: In particular, regulations promulgated pursuant to] [added: For example, under] the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) [removed: establish privacy and security standards that limit the use and disclosure of individually identifiable health information (known as “protected health information”) and require the implementation of] [added: we must maintain] administrative, physical and technological safeguards to protect [removed: the privacy of protected] [added: individually identifiable] health information [added: (“protected health information”)] and ensure the confidentiality, integrity and availability of electronic protected health information.

[removed: Healthcare Reform: The] [added: In the U.S., the Patient Protection and] Affordable Care Act (“ACA”) significantly expanded health insurance coverage to uninsured Americans and changed the way healthcare is financed by both governmental and private payers.

[removed: Our foreign operations subject us to a number] [added: Any] of [removed: operating, economic, political and regulatory] [added: these] risks [removed: that may] [added: might] have a [removed: material] [added: materially] adverse impact on our [added: business operations and our] financial position [removed: and] [added: or] results of operations.

[removed: In addition, foreign operations] [added: We] are [removed: also] subject to [removed: 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.

[removed: Failure] [added: Our failure] to comply with these laws [removed: could] [added: might] subject us to civil and criminal penalties that [removed: could] [added: might] have a [removed: material] [added: materially] adverse impact on our [added: business operations and our] financial position [removed: and] [added: or] results of operations.

[removed: For example, the] [added: The] FDA [removed: has conducted investigations and] banned certain [removed: generics] manufacturers from selling [removed: certain] raw materials and drug ingredients in the U.S. [removed: from overseas plants] due to quality issues.

Difficulties in [added: product] manufacturing or access to raw materials could result in [added: supplier] production shutdowns, product shortages and other [removed: similar delays in product manufacturing that could have a material adverse impact on our financial position and results of operations.][added: supply disruptions.]

Provincial governments in Canada [added: that] provide partial funding for the purchase of pharmaceuticals and independently regulate the sale and reimbursement of [removed: drugs.][added: drugs have sought to reduce the costs of publicly funded health programs.]

[removed: In addition, in many] [added: Many] European [removed: countries the government provides] [added: governments provide] or [removed: subsidizes] [added: subsidize] healthcare to consumers and [removed: regulates] [added: regulate] pharmaceutical prices, patient [removed: eligibility,] [added: eligibility] and reimbursement levels [added: in order] to control [removed: costs for the government-sponsored] [added: government] healthcare [removed: system.][added: system costs.]

These [removed: measures, which include efforts aimed at reforming healthcare coverage and reducing healthcare costs, continue to] [added: measures] exert pressure on the pricing [removed: of] and reimbursement timelines for pharmaceuticals and may cause our customers to purchase fewer of our products and services [removed: and reduce the prices they are willing] [added: or influence us] to [removed: pay.][added: reduce prices.]

[removed: In Europe, we] [added: We] are subject to [added: significant compliance obligations under privacy laws such as] the General Data Protection Regulation [removed: (“GDPR”) and] in [removed: Canada, we are subject to] the [added: European Union (“GDPR”), the] Personal Information Protection and Electronic Documents Act [removed: (“PIPEDA”).][added: (“PIPEDA”) in Canada, and the California Consumer Protection Act (“CCPA”).]

[removed: Our results of operations, which are stated in U.S. dollars, could] [added: We might] be adversely impacted by fluctuations in foreign currency exchange [removed: rates.][added: rates.]

We conduct our business [removed: worldwide] in [removed: U.S. dollars and the functional currencies of our foreign subsidiaries,] [added: various currencies,] including [removed: Euro,] [added: the U.S. dollar, euro,] British pound sterling and Canadian [removed: dollars.][added: dollar.]

Changes in foreign currency exchange rates could [removed: have a significant adverse impact on] [added: reduce] our [added: revenues, increase our costs or otherwise adversely affect our] financial results [removed: that are] reported in U.S. dollars.

We may from time to time enter into foreign currency [removed: contracts] [added: contracts, foreign currency borrowings] or other [removed: derivative instruments] [added: techniques] intended to hedge a portion of our foreign currency exchange rate risks.

[removed: An element of our] [added: Our growth] strategy [removed: is to identify, pursue and consummate] [added: includes consummating] acquisitions [added: or other business combinations] that either expand or complement our business.

The discussion below identifies certain representative risks that might cause our actual business results to materially differ from our estimates.

It is not practical to identify or describe all risks and uncertainties that might materially impact our business operations, reputation, financial position or results of operations.

Our business could be materially affected by risks that we have not yet identified or that we currently consider to be immaterial.

Litigation and Regulatory Risks

We experience costly and disruptive legal disputes.

We are routinely named as a defendant in litigation or regulatory proceedings and other legal disputes, which may include asserted class action litigation, such as those described in Financial Note 21, “Commitments and Contingent Liabilities,” to the consolidated financial statements in this report.

Regulatory proceedings might involve allegations such as false claims, healthcare fraud and abuse, and antitrust violations.

Civil litigation proceedings might involve commercial, employment, environmental, intellectual property, tort and other claims.

The outcome of legal disputes is difficult to predict.

Accordingly, any legal dispute might have a materially adverse impact on our reputation, our business operations and our financial position or results of operations.

Although we seek to maintain adequate insurance coverage, such as property insurance for inventory and professional and general liability insurance, coverages on acceptable terms might be unavailable, or coverages might not cover our losses.

We generally seek to limit our contractual exposure, but limitations of liability or indemnity provisions in our contracts may not be enforceable or adequately protect us from liability.

We experience costly legal disputes, government actions and adverse publicity regarding our role in distributing controlled substances such as opioids.

The Company is a defendant in over 3,000 cases alleging claims related to the distribution of controlled substances (opioids), as described in Financial Note 21, “Commitments and Contingent Liabilities,” to the consolidated financial statements in this report.

We regularly are named as a defendant in similar, new cases.

The plaintiffs in those cases include governmental entities (such as states, provinces, counties and municipalities) as well as businesses, groups and individuals.

The cases allege violations of controlled substance laws and other laws, and they make common law claims such as negligence and public nuisance.

Many of these cases raise novel theories of liability.

Any proceedings can have unexpected outcomes that are not justified by evidence or existing law.

All proceedings involve significant expense, management time and distraction, and risk of loss that can be difficult to predict or quantify.

It is not uncommon for claims to be resolved over many years.

Proceedings can result in monetary damages, penalties and fines, and injunctive or other relief.

Although the Company has valid defenses and is vigorously defending itself, some proceedings are resolved by negotiated outcome.

Our reputation is impacted by publicity regarding the impacts of opioid use.

We might experience increased costs to distribute controlled substances such as opioids.

Legislative, regulatory or industry measures related to the distribution of controlled substances such as prescription opioids could affect our business in ways that we may not be able to predict.

For example, some states have passed legislation that could require us to pay taxes or assessments on the distribution of opioid medications in those states and other states have considered similar legislation.

Liabilities for taxes or assessments or other costs of compliance under any such laws might have a materially adverse impact on our business operations and our financial position or results of operations.

[Table of Contents](#s8AE717A86E6C5AD0BF7B80E343BCFC51)

We are subject to extensive, complex and challenging healthcare and other laws.

For example, we are subject to many environmental and hazardous materials regulations, including those relating to radiation-emitting equipment operated at U.S. Oncology Network practices.

These sanctions might have a materially adverse impact on our business operations and our financial position or results of operations.

We might lose our ability to purchase, compound, store or distribute pharmaceuticals and controlled substances.

Noncompliance with these requirements has resulted in monetary penalties and/or licensing sanctions.

As of March 31, 2020, one DEA registration was in suspension, and three were expired.

If we are not able to obtain, maintain or renew permits, licenses or other regulatory approvals needed for the operation of our businesses, it might have a materially adverse impact on our business operations and our financial position or results of operations.

Pedigree tracking laws increase our compliance burden and our pharmaceutical distribution costs.

We also have record-keeping and other obligations under the E.U. Falsified Medicines Directive.

[Table of Contents](#s8AE717A86E6C5AD0BF7B80E343BCFC51)

McKESSON CORPORATION

Although it is not possible to predict or identify all such risks and uncertainties, they may include, but are not limited to, the factors discussed below.

Our business operations could also be affected by additional factors that are not presently known to us or that we currently consider not to be material.

Changes in the United States healthcare industry and regulatory environment could have a material adverse impact on our results of operations.

We expect the healthcare industry in the United States to continue to change and for healthcare delivery models to evolve in the future.

Additionally, if we experience disruptions in our supply of generic drugs, our margins could be adversely affected.

Due to the diverse range of healthcare supply management and healthcare information technology products and services that we offer, such changes could have a material adverse impact on our results of operations, while not affecting some of our competitors who offer a narrower range of products and services.

Failure to successfully renew these contracts in a timely and favorable manner could have a material adverse impact on our results of operations.

Consequently, our results of operations could be adversely affected if the frequency or magnitude of pharmaceutical price increases or decreases, which we do not control.

In addition, we distribute generic pharmaceuticals, which can be subject to both price deflation and price inflation.

Our generic pharmaceutical sourcing program has benefited from sourcing through our joint venture with Walmart, Inc., ClarusONE.

If ClarusONE does not continue to be successful, our margins could be adversely affected.

Our U.S. Pharmaceutical and Specialty Solutions segment experienced weaker pharmaceutical pricing trends over the last three years.

Additionally, any future changes in branded and generics drug pricing could be significantly different than our projections.

Generic drug manufacturers are increasingly challenging the validity or enforceability of patents on branded pharmaceutical products.

During the pendency of these legal challenges, a generics manufacturer may begin manufacturing and selling a generic version of the branded product prior to the final resolution of its legal challenge over the branded product’s patent.

To the extent we source, contract manufacture, and distribute such generic products, the brand-name company could assert infringement claims against us.

While we generally obtain indemnification against such claims from generic manufacturers as a condition of distributing their products, there can be no assurances that these rights will be adequate or sufficient to protect us.

For example, on October 25, 2018, the Department of Health & Human Services (“HHS”) announced its intent to propose an International Pricing Index (“IPI”) payment model to reduce government payments for Medicare Part B drugs to levels more closely aligned with prices paid in other countries.

If proposed and finalized, the far-reaching model could reduce Part B drug reimbursement by 30 percent between 2020 and 2025.

The model would eliminate the “buy and bill” model and reintroduce the Competitive Acquisition Program (“CAP”).

This could allow private vendors (including non-wholesaler entities) to procure and distribute drugs to physicians and hospitals, while Medicare would pay the vendor for the included drugs based on the target price driven by the IPI.

Also, on January 31, 2019, the HHS Office of Inspector General released the Removal of Safe Harbor Protection for Rebates to Plans or Pharmacy Benefit Managers (“PBM”) Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection Proposed Rule.

Additionally, federal and state lawmakers are increasingly exploring other policy proposals to reduce drug price, including price transparency measurers and drug reimportation.

There can be no assurance that the preceding changes would not have a material adverse impact on our results of operations.

As part of these operating, security and licensure standards, we regularly receive requests for information and occasionally subpoenas from government authorities.

In some instances, these can lead to monetary penalties and/or license revocation.

The DEA suspended, on a staggered basis for limited periods of time, McKesson’s DEA registrations to distribute certain controlled substances from four McKesson distribution centers.

As of March 31, 2019, staggered suspensions have expired for two DEA registrations and two remain applicable.

Although we have enhanced our procedures to ensure compliance, there can be no assurance that a regulatory agency or tribunal would conclude that our operations are compliant with applicable laws and regulations.

In addition, there can be no assurance that we will be able to maintain or renew existing permits, licenses or any other regulatory approvals or obtain without significant delay future permits, licenses or other approvals needed for the operation of our businesses.

In November 2013, Congress passed and the President signed into law the Drug Quality and Security Act (“DQSA”).

The DQSA establishes federal standards requiring supply-chain stakeholders to participate in a prescription drug track and trace system.

Track and trace began in 2015 at the lot-level and evolves to a serialized level electronic, interoperable system by November 2023.

The law also preempts state drug pedigree requirements.

The DSQA also establishes new requirements for drug wholesale distributors and third-party logistics providers, including licensing requirements in states that had not previously licensed such entities.

These standards may include track and trace or authentication technologies, such as radio frequency identification devices, 2D data matrix barcodes and other similar technologies.

On March 26, 2010, the FDA released the Serialized Numerical Identifier (“SNI”) guidance for manufacturers who serialize pharmaceutical packaging.

We expect to be able to accommodate these SNI regulations in our distribution operations.

Privacy: There are numerous federal and state laws and regulations related to the privacy and security of personal information.

We are directly subject to certain provisions of the regulations as a “Business Associate” through our relationships with customers.

[removed: GENERAL][added: GENERAL]

Management’s discussion and analysis of financial condition and results of operations, referred to as the [removed: Financial Review,] [added: “Financial Review,”] is intended to assist the reader in the understanding and assessment of significant changes and trends related to the results of operations and financial position of McKesson Corporation [removed: (“McKesson,”] [added: together with its subsidiaries (collectively,] the “Company,” [added: “we,” “our,”] or [removed: “we”] [added: “us”] and other similar [removed: pronouns) together with its subsidiaries.][added: pronouns).]

[removed: The Company’s] [added: Our] fiscal year begins on April 1 and ends on March 31.

Unless otherwise noted, all references to a particular year shall mean [removed: the Company’s] [added: our] fiscal year.

Refer to Financial Note [removed: 28,] [added: 24,] “Segments of Business,” to the [added: accompanying] consolidated financial statements [removed: appearing] [added: included] in this Annual Report on Form 10-K for a description of these segments.

[removed: McKESSON CORPORATION][added: McKESSON CORPORATION]

[removed: FINANCIAL] [added: FINANCIAL] REVIEW [removed: (Continued)][added: (Continued)]

[removed: RESULTS] [added: RESULTS] OF [removed: OPERATIONS][added: OPERATIONS]

| [removed: (Dollars] [added: *(Dollars] in millions, except per share data and [removed: ratios)] [added: ratios)*] | [removed: Years] [added: Years] Ended March [removed: 31, |] [added: 31,] | | | | | | | | | | | [removed: Change] | [added: Change] | | | | | |

| [removed: 2019 |] [added: 2020] | | | [removed: 2018] | [added: 2019] | | | [removed: 2017] | [added: 2018] | | | [removed: 2019] | [added: 2020] | | | [removed: 2018] [added: 2019] | | | |

| Revenues | $ | [removed: 214,319] [added: 231,051] | | | $ | [removed: 208,357] [added: 214,319] | | | $ | [removed: 198,533] [added: 208,357] | | | [removed: 3] [added: 8] | | % | [removed: | 5] [added: 3] | | % |

| Gross Profit | [removed: $ | 11,754] [added: 12,023] | | | [removed: $] | [removed: 11,184] [added: 11,754] | | | [removed: $] | [removed: 11,271] [added: 11,184] | | | [removed: 5] | [added: 2] | [removed: %] | | [removed: (1] [added: 5] | [removed: )] | [removed: %] |

| [removed: Gross] [added: *Gross] Profit [removed: Margin | 5.48] [added: Margin*] | [added: *5.20*] | | [removed: %] | [removed: 5.37] [added: *%*] | [added: *5.48*] | | [removed: %] | [removed: 5.68] [added: *%*] | [added: *5.37*] | | [removed: %] | [removed: 11] [added: *%*] | [added: *(28*] | [removed: bp] [added: *)*] | [added: *bp*] | [removed: (31] [added: *11*] | [removed: )] | [removed: bp] [added: *bp*] |

[removed: |] [added: Total] Operating [removed: Expenses: | | | | | | | | | | | | | | | | | | | |][added: Expenses]

| Goodwill [removed: Impairment Charges | (1,797] [added: impairment charges] | [added: 2] | [removed: )] | | [removed: (1,738] | [added: 1,797] | [removed: )] | | [removed: (290] | [added: 1,738] | [removed: )] | | [removed: 3] | [added: (100] | [added: )] | | [removed: 499] [added: 3] | | |

| [removed: Restructuring] [added: Restructuring, impairment] and [removed: Asset Impairment Charges | (597] [added: related charges] | [added: 268] | [removed: )] | | [removed: (567] | [added: 597] | [removed: )] | | [removed: (18] | [added: 567] | [removed: )] | | [removed: 5] | [added: (55] | [added: )] | | [removed: 3,050] [added: 5] | | |

| Gain from [removed: Sale] [added: sale] of [removed: Business] [added: business] | — | | | | [removed: 109 |] [added: —] | | | [removed: —] | [added: (109] | | [added: )] | [removed: (100] | [removed: )] [added: NM] | | | [removed: NM] [added: (100] | [added: )] | |

| Gain on [removed: Healthcare Technology Net Asset Exchange, Net] [added: healthcare technology net asset exchange, net] | — | | | | [removed: 37 |] [added: —] | | | [removed: 3,947] | [added: (37] | | [added: )] | [removed: (100] | [removed: )] [added: NM] | | | [removed: (99] [added: (100] | ) | |

| Total Operating Expenses | $ | [removed: (10,868] [added: (9,534] | ) | | $ | [removed: (10,422] [added: (10,868] | ) | | $ | [removed: (4,149] [added: (10,422] | ) | | [removed: 4] [added: (12] | [added: )] | % | [removed: | 151] [added: 4] | | % |

| [added: *Total] Operating Expenses as a Percentage of [removed: Revenues | 5.07] [added: Revenues*] | [added: *4.13*] | | [removed: %] | [removed: 5.00] [added: *%*] | [added: *5.07*] | | [removed: %] | [removed: 2.09] [added: *%*] | [added: *5.00*] | | [removed: %] | [removed: 7] [added: *%*] | [added: *(94*] | [removed: bp] [added: *)*] | [added: *bp*] | [removed: 291] [added: *7*] | | [removed: bp] [added: *bp*] |

| Other Income, Net | $ | [removed: 182] [added: 12] | | | $ | [removed: 130] [added: 182] | | | $ | [removed: 77] [added: 130] | | | [removed: 40] [added: (93] | [added: )] | % | [removed: | 69] [added: 40] | | % |

| [removed: Loss from] Equity [removed: Method] [added: Earnings and Charges from] Investment in Change Healthcare [added: Joint Venture] | [removed: (194] [added: (1,108] | | ) | | [removed: (248] [added: (194] | | ) | | [removed: — |] [added: (248] | | [added: )] | [removed: (22] | [removed: )] [added: 471] | | | [removed: NM] [added: (22] | [added: )] | |

| Loss on Debt Extinguishment | — | | | | [removed: (122 |] [added: —] | [removed: )] | | [removed: —] | [added: (122] | | [added: )] | [removed: (100] | [removed: )] [added: NM] | | | [removed: NM] [added: (100] | [added: )] | |

| Interest Expense | [removed: (264] [added: (249] | | ) | | [removed: (283] [added: (264] | | ) | | [removed: (308] [added: (283] | | ) | | [removed: (7] [added: (6] | ) | | [removed: | (8] [added: (7] | ) | |

| Income from Continuing Operations Before Income Taxes | [removed: 610 |] [added: 1,144] | | | [removed: 239] | [added: 610] | | | [removed: 6,891] | [added: 239] | | | [removed: 155] | [added: 88] | | | [removed: (97] [added: 155] | [removed: )] | |

| Income Tax (Expense) Benefit | [removed: (356] [added: (18] | | ) | | [removed: 53] [added: (356] | | [added: )] | | [removed: (1,614] [added: 53] | | [removed: )] | | [removed: (772] [added: (95] | ) | | [removed: | (103] [added: (772] | ) | |

| Income from Continuing Operations | [removed: 254 |] [added: 1,126] | | | [removed: 292] | [added: 254] | | | [removed: 5,277] | [added: 292] | | | [removed: (13] | [removed: )] [added: 343] | | | [removed: (94] [added: (13] | ) | |

[removed: | Income] [added: Income] (Loss) from Discontinued Operations, Net of [removed: Tax | 1 | | | | 5 | | | | (124 | | ) | | (80 | ) | | | (104 | ) | |][added: Tax]

| Net Income | [removed: 255 |] [added: 1,120] | | | [removed: 297] | [added: 255] | | | [removed: 5,153] | [added: 297] | | | [removed: (14] | [removed: )] [added: 339] | | | [removed: (94] [added: (14] | ) | |

| Net Income Attributable to Noncontrolling Interests | [removed: (221] [added: (220] | | ) | | [removed: (230] [added: (221] | | ) | | [removed: (83] [added: (230] | | ) | | [removed: (4 | )] [added: \-] | | | [removed: 177] [added: (4] | [added: )] | |

[removed: | Net] [added: Net] Income Attributable to McKesson [removed: Corporation | $ | 34 | | | $ | 67 | | | $ | 5,070 | | | (49 | ) | % | | (99 | ) | % |][added: Corporation]

| Diluted Earnings (Loss) Per Common Share Attributable to McKesson Corporation | | | | | | | | | | | | | | | | | | | [removed: |]

| Continuing [removed: Operations] [added: operations] | $ | [removed: 0.17] [added: 4.99] | | | $ | [removed: 0.30] [added: 0.17] | | | $ | [removed: 23.28 |] [added: 0.30] | | [removed: (43] | [removed: )] [added: NM] | [removed: %] | | [removed: (99] [added: (43] | ) | % |

| Discontinued [removed: Operations | —] [added: operations] | [added: (0.04] | | [added: )] | [removed: 0.02] | [added: —] | | | [removed: (0.55] | [added: 0.02] | [removed: )] | | [removed: (100] | [removed: )] [added: NM] | | | [removed: (104] [added: (100] | ) | |

| Total | $ | [removed: 0.17] [added: 4.95] | | | $ | [removed: 0.32] [added: 0.17] | | | $ | [removed: 22.73 |] [added: 0.32] | | [removed: (47] | [removed: )] [added: NM] | [removed: %] | | [removed: (99] [added: (47] | ) | % |

| Weighted Average Diluted Common Shares | [removed: 197] [added: 182] | | | | [removed: 209] [added: 197] | | | | [removed: 223] [added: 209] | | | | [removed: (6] [added: (8] | ) | % | [removed: |] (6 | ) | % |

[removed: Revenues:][added: Revenues]

[removed: Revenues increased in 2019] [added: U.S. Pharmaceutical] and [removed: 2018] [added: Specialty Solutions revenues for the year ended March 31, 2019 increased 3% compared to the prior year] primarily due to market growth, including expanded business with existing [removed: customers] [added: customers, growth of specialty pharmaceuticals] and our business acquisitions, partially offset by loss of [removed: customers within our U.S. Pharmaceutical and Specialty Solutions segment.][added: customers.]

[removed: Gross Profit:][added: Gross Profit]

Gross profit and gross profit margin increased [removed: in] [added: for the year ended March 31,] 2019 compared to [removed: 2018.][added: the prior year.]

Overview of Our Business:

We are a global leader in healthcare supply chain management solutions, retail pharmacy, community oncology and specialty care, and healthcare technology.

We partner with life sciences companies, manufacturers, providers, pharmacies, governments and other healthcare organizations to help provide the right medicines, medical products and healthcare services to the right patients at the right time, safely and cost-effectively.

All remaining operating segments and business activities that are not significant enough to require separate reportable segment disclosure are included in Other, which primarily consists of McKesson Canada, McKesson Prescription Technology Solutions (“MRxTS”) and our investment in Change Healthcare LLC (“Change Healthcare JV”), which was split-off from the Company in the fourth quarter of 2020 as further discussed in this Financial Review.

Our organizational structure also includes Corporate, which consists of income and expenses associated with administrative functions and projects, and the results of certain investments.

The factors for determining the reportable segments include the manner in which management evaluates the performance of the Company combined with the nature of the individual business activities.

We evaluate the performance of our operating segments on a number of measures, including revenues and operating profit before interest expense and income taxes.

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Executive Summary:

The following executive summary provides highlights and key factors that impacted our business, operating results and liquidity for the year ended March 31, 2020.

The coronavirus disease 2019 (“COVID-19”) did not significantly impact our financial condition, results of operations or liquidity in 2020.

For a more in-depth discussion of how COVID-19 impacted our business, operations, and outlook, see the COVID-19 section of "Trends and Uncertainties" included below.

| • | Revenues of $231.1 billion, reflecting an 8% increase from the prior year driven primarily by market growth in our U.S. Pharmaceutical and Specialty Solutions segment, including branded pharmaceutical price increases and higher volumes from retail national account customers; |

| • | Gross profit increased 2% from the prior year primarily driven by market growth in our Medical-Surgical Solutions segment; |

| • | On October 21, 2019, we disclosed an opioid-related litigation settlement with two Ohio counties and recorded a related charge of $82 million in total operating expenses; |

| • | On December 12, 2019, McKesson and Walgreens Boots Alliance announced an agreement to create a joint venture that is expected to combine their respective pharmaceutical wholesale businesses in Germany. As a result of this agreement, we recognized fair value remeasurement charges of $275 million in total operating expenses within our European Pharmaceutical Solutions segment; |

| • | On March 10, 2020, we completed the previously announced separation of our investment in Change Healthcare JV and recognized an estimated gain of $414 million related to this transaction. We no longer hold an interest in any securities of Change Healthcare JV or Change Healthcare, Inc. (“Change”) following the separation. During the second quarter of 2020, we recorded an other-than-temporary-impairment (“OTTI”) charge of $1.2 billion and a dilution loss of $246 million related to our investment in Change Healthcare JV; |

| • | Diluted earnings per common share from continuing operations attributable to McKesson Corporation in 2020 of $4.99 reflects the aforementioned items and a lower share count compared to the prior year driven largely by share repurchases; and |

| • | We returned $2.2 billion of cash to shareholders through $1.9 billion of common stock repurchases and $294 million of dividend payments. |

Trends and Uncertainties:

COVID-19

In December 2019, a novel strain of coronavirus, which causes the infectious disease known as COVID-19, was reported in Wuhan, China.

The World Health Organization declared COVID-19 a “Public Health Emergency of International Concern” on January 30, 2020 and a global pandemic on March 11, 2020.

We continue to evaluate the nature and extent COVID-19 may have to our business and operations.

The pandemic is developing rapidly and the full extent to which COVID-19 will impact us depends on future developments, including the duration and spread of the virus, as well as potential seasonality of new outbreaks.

In response to the COVID-19 pandemic, federal, state, and local government directives and policies have been put in place in the United States to enhance availability of medications and supplies to meet the increased demand, assist front-line healthcare providers, manage public health concerns by creating social distancing, and address the economic impacts, including sharply reduced business activity, increased unemployment, and overall uncertainty presented by this new healthcare challenge.

Similar governmental actions have occurred in Canada and Europe.

As a global leader in healthcare supply chain management solutions, retail pharmacy, community oncology and specialty care, and healthcare information technology, we are uniquely positioned to respond to the COVID-19 pandemic in the United States, Canada, and Europe.

We are working closely with national and local governments, agencies, and industry partners to ensure supplies, including personal protective equipment, and medicine reach our customers and patients when they need them.

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McKESSON CORPORATION

FINANCIAL REVIEW (Continued)

We have taken the necessary steps to ensure that we continue to supply our customers and protect the safety of our employees.

The various responses we put in place to mitigate the impact of COVID-19 on our business operations, including telecommuting and work-from-home policies, restricted travel requirements, employee support programs, and enhanced safety measures are intended to limit exposure to COVID-19.

These successful steps in our fourth quarter of 2020 have resulted in limited disruption of our normal business operations, productivity trends, and slightly compressed operating margins due to increased operating expenses.

The financial impact to the year ended March 31, 2020 is muted due to the timing of the COVID-19 pandemic late in our fourth quarter.

We experienced higher pharmaceutical distribution volumes in March, however, these increases were partially offset by decreases in specialty drug volumes and decreased demand within primary care medical-surgical supplies.

Specialty drug volumes were negatively impacted by lower demand for infusions, elective specialty drugs, oncology, and dermatology practice sales.

Demand for primary care medical-surgical supplies were negatively impacted by deferrals in elective procedures in hospitals and surgery centers as well as decreased traffic or closures in doctor’s offices.

These positive and negative COVID-19 impacts drove increased consolidated revenues by less than 1% in 2020.

All remaining operating segments and business activities that are not significant enough to require separate reportable segment disclosure are included in Other.

Overview:

| | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Operating Expenses | $ | (8,474 | ) | | $ | (8,263 | ) | | $ | (7,788 | ) | | 3 | | % | | 6 | | % |

The increase in revenue for 2018 was also offset by the 2017 contribution of the majority of our McKesson Technology Solutions businesses (“Core MTS Business”) to form the Change Healthcare joint venture.

Gross profit and gross profit margin decreased in 2018 compared to 2017.

The decrease was primarily due to the 2017 contribution of the Core MTS Business to the Change Healthcare joint venture, significant government reimbursement reductions in the U.K., the competitive sell-side environment and weaker pharmaceutical manufacturer pricing trends.

These decreases in 2018 were partially offset by market growth, procurement benefits realized through the joint sourcing entity, ClarusONE Sourcing Services LLP (“ClarusONE”), higher LIFO credits and our business acquisitions.

Gross profit for 2017 benefited from $144 million of cash receipts representing our share of antitrust legal settlements.

Operating Expenses:

Operating expenses, and operating expenses as a percentage of revenues increased in 2019 and 2018.

| • | Non-cash pre-tax long-lived asset impairment charges of $245 million ($207 million after-tax) primarily for our U.K. business (mainly pharmacy licenses) driven by additional government reimbursement reductions and competitive pressures in the U.K.; |

| • | Higher opioid-related costs of $151 million ($122 million after-tax) primarily related to litigation expenses. The Company is a defendant in many cases alleging claims related to the distribution of controlled substances to pharmacies, often together with other pharmaceutical wholesale distributors and pharmaceutical manufacturers and retail pharmacy chains named as defendants. In addition, the State of New York has recently adopted a tax on sales of opioids in the State, and other states are considering legislation that could require us to pay taxes, licensing fees, or assessments on the distribution of opioid medications in those states. Liabilities for taxes or assessments under any such laws will likely have an adverse impact on our results of operations, unless we are able to mitigate them through operational changes or commercial arrangements where permitted. Refer to Financial Note 24, “Commitments and Contingent Liabilities,” to the accompanying consolidated financial statements appearing in this Annual Report on Form 10-K for more information; |

| • | Pre-tax restructuring charges of $74 million ($67 million after-tax) primarily representing employee severance and lease exit costs related to the 2018 restructuring plan for our McKesson Europe business. Under this plan, we expect to record total pre-tax charges of approximately $90 million to $130 million, of which $92 million of pre-tax charges were recorded to date; |

| • | Higher expenses due to our business acquisitions; |

2017

| • | Pre-tax gain of $3,947 million ($3,018 million after-tax) related to the 2017 contribution of the Core MTS Business to the Change Healthcare joint venture; and |

| • | Non-cash pre-tax goodwill impairment charge of $290 million ($282 million after-tax) related to our EIS business within Other. This impairment charge was generally not deductible for income tax purposes. |

We expect to record total pre-tax charges of approximately $140 million to $180 million, of which we recorded pre-tax charges of $135 million ($122 million after-tax) in 2019.

This set of the initiatives will be substantially completed by the end of 2020.

We expect to incur total pre-tax charges of approximately $300 million to $350 million for these programs, which are expected to be completed by the end of 2021.

In 2019, pre-tax charges of $163 million ($127 million after-tax) were recorded, which primarily represent employee severance and accelerated depreciation expense.

Acquisition-Related Expenses and Adjustments

Acquisition-related expenses, which included transaction and integration expenses directly related to business acquisitions and the gain on the Healthcare Technology Net Asset Exchange were $228 million and $168 million in 2019 and 2018, and net credit of $3,797 million in 2017.

2019 and 2018 include our proportionate share of transaction and integration expenses incurred by Change Healthcare.

2018 includes a pre-tax gain of $37 million associated with the final net working capital and other adjustments from the Healthcare Technology Net Asset Exchange.

2017 includes a pre-tax gain of $3,947 million from the Healthcare Technology Net Asset Exchange.

Acquisition-related expenses and adjustments were recorded as follows:

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Operating Expenses | | | | | | | | | | | |

| Gain on Change Healthcare Net Asset Exchange, net | $ | — | | | $ | (37 | ) | | $ | (3,947 | ) |

| Transaction closing expenses | 3 | | | | 15 | | | | 30 | | |

| Restructuring, severance and relocation | 12 | | | | 36 | | | | 25 | | |

| Total | 118 | | | | 68 | | | | (3,807 | | ) |

| Other Expenses (2) | 110 | | | | 100 | | | | 10 | | |

| Total Acquisition-Related Expenses and Adjustments | $ | 228 | | | $ | 168 | | | $ | (3,797 | ) |

| (1) | These expenses primarily include outside service fees, costs associated with information technology and other integration activities. |

| (2) | Fiscal 2019 and 2018 includes our proportionate share of transaction and integration expenses incurred by Change Healthcare, excluding certain fair value adjustments, which were recorded within “Loss from Equity Method Investment in Change Healthcare”. |

[removed: Interest] [added: *Interest] rate [removed: risk:] [added: risk:*] Our long-term debt bears interest predominately at fixed rates, whereas our short-term borrowings are at variable interest rates.

At March 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] we had [removed: $3.0] [added: $4.0] billion and [removed: $2.7] [added: $3.0] billion and in cash and cash equivalents.

The effect of a hypothetical 50 bp increase in the underlying interest rate on our cash and cash equivalents, net of short-term borrowings and variable rate debt, would have resulted in a favorable impact to earnings in [removed: 2019] [added: 2020] and [removed: 2018] [added: 2019] of approximately [removed: $4] [added: $6.0] million and [removed: $10] [added: $4.0] million.

[removed: Foreign] [added: *Foreign] exchange [removed: risk:] [added: risk:*] We conduct our business worldwide in U.S. dollars and the functional currencies of our foreign subsidiaries, including Euro, British pound sterling and Canadian dollars.

As of March 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] the effect of a hypothetical adverse 10% change in the underlying foreign currency exchange rates would have impacted the fair value of our foreign exchange contracts by approximately [removed: $581] [added: $435] million and [removed: $458] [added: $581] million.

Refer to Financial Note [removed: 20,] [added: 18,] “Hedging Activities,” for more information on our foreign currency forward contracts and cross-currency swaps.

[removed: McKESSON CORPORATION][added: McKESSON CORPORATION]

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[removed: General][added: General]

McKesson Corporation (“McKesson,” the “Company,” or “we” and other similar pronouns), [removed: currently ranked 6th on the FORTUNE 500,] [added: originally founded in 1833,] is a global leader in healthcare supply chain management solutions, retail pharmacy, [removed: healthcare technology,] community oncology and specialty [removed: care.][added: care, and healthcare information technology.]

[removed: We partner] [added: McKesson partners] with life sciences companies, manufacturers, providers, pharmacies, governments and other healthcare organizations to help provide the right medicines, medical products and healthcare services to the right patients at the right time, safely and cost-effectively.

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act,”) are available free of charge on [removed: our] [added: the Company’s] website (www.mckesson.com under the “Investors — [removed: Financial Information] [added: Financials] — SEC Filings” caption) as soon as reasonably practicable after [removed: we electronically file] such material [added: is electronically filed] with, or [removed: furnish it] [added: furnished] to, the Securities and Exchange Commission (“SEC” or the “Commission”).

[removed: Business Segments][added: Business Segments]

[removed: Commencing in the first quarter of 2019, we changed our operating structure into] [added: The Company operates its business through] three reportable segments: U.S. Pharmaceutical and Specialty Solutions, European Pharmaceutical Solutions and Medical-Surgical Solutions.

All remaining operating segments and business activities that are not significant enough to require separate reportable segment disclosure are [added: referred to and] included in Other.

[removed: It also] [added: In addition, the segment] sells financial, operational and clinical solutions to pharmacies (retail, hospital, alternate site) and provides consulting, outsourcing and other services.

Our European Pharmaceutical Solutions segment provides distribution and services to wholesale, institutional and retail customers [removed: and serves patients and consumers] in 13 European countries [removed: through our own pharmacies and participating pharmacies that operate under brand partnership and] [added: where we own, partner or] franchise [removed: arrangements.][added: with retail pharmacies, as further described below.]

| • | McKesson Prescription Technology Solutions (“MRxTS”) which provides innovative [removed: technologies that support] [added: technological and connectivity solutions to pharmaceutical companies,] retail [removed: pharmacies;] [added: pharmacies, health systems, clinics] and [added: payers across the healthcare industry; and] |

[removed: | • |] [added: *Change Healthcare:*] Our [removed: 70%] equity ownership interest in [added: Change Healthcare LLC (“Change Healthcare JV”),] a joint venture, [removed: Change Healthcare, which is] [added: has been] accounted for [removed: by us] using the equity [removed: investment] method of accounting. [removed: |]

[removed: McKESSON CORPORATION][added: McKESSON CORPORATION]

[removed: U.S.] [added: U.S.] Pharmaceutical and Specialty Solutions [removed: Segment:][added: Segment:]

Our U.S. Pharmaceutical and Specialty Solutions segment provides distribution and logistics services for branded, generic, specialty, biosimilar and OTC pharmaceutical drugs [removed: and] [added: along with] other healthcare-related products to customers.

This business [removed: also] provides solutions and services to pharmacies, hospitals, pharmaceutical manufacturers, physicians, payers and patients throughout the United States and Puerto Rico.

Our U.S. Pharmaceutical and Specialty Solutions segment operates and serves [removed: customer] [added: customers] through a network of 30 distribution centers, as well as a primary redistribution [removed: center, one strategic redistribution] center and [removed: one repackaging facility.][added: a strategic redistribution center, along with four third-party logistics sites within our McKesson Life Sciences business.]

We invest in technology and other systems at all of our distribution centers to enhance [removed: safety and] [added: safety,] reliability and product availability.

We have three primary customer [added: pharmaceutical distribution] channels: (i) retail national accounts which include national and regional chains, food and drug combinations, mail order pharmacies and mass merchandisers, (ii) independent, small and medium chain retail pharmacies, and (iii) institutional healthcare providers such as hospitals, health systems, integrated delivery networks and long-term care providers.

[removed: Retail] [added: *Retail] National [removed: Accounts:] [added: Accounts:*] We provide business solutions that help retail national account customers increase revenues and profitability.

| • | Redistribution Centers - Two facilities totaling over [removed: 750,000] [added: 830,000] square feet that offer access to inventory for single source warehouse purchasing, including pharmaceuticals and biologics. These distribution centers also provide the foundation for a two-tiered distribution network that supports best-in-class direct store delivery. |

[removed: Independent,] [added: *Independent,] Small and Medium Chain Retail [removed: Pharmacies:] [added: Pharmacies:*] We provide managed care contracting, branding and advertising, merchandising, purchasing, operational efficiency and automation that help independent pharmacists focus on patient care while improving profitability.

| • | McKesson RxOwnership Program - Assist independent pharmacist owners [added: with] the opportunity to remain independent via succession planning and business operation loans. |

[removed: Institutional] [added: *Institutional] Healthcare [removed: Providers:] [added: Providers:*] We provide electronic ordering/purchasing and supply chain management systems that help customers improve financial performance, increase operational efficiencies and deliver better patient care.

[removed: Specialty] [added: *Specialty] Provider [removed: Organization:] [added: Organization:*] This business offers community specialists (oncologists, rheumatologists, ophthalmologists, urologists, neurologists and other specialists) an extensive set of customizable products and services designed to strengthen core practice operations, enhance value-based care delivery and expand their service offering to patients.

[removed: Tools and] [added: These] services include specialty drug [removed: distribution and] [added: distribution,] group purchasing [removed: organization] [added: organizations] (“GPO”) [removed: services,] [added: like Onmark®,] technology solutions, practice consulting [removed: services,] [added: services] and vaccine distribution, including our exclusive distributor relationship with the Centers for Disease Control and Prevention’s (“CDC”) Vaccines for Children program.

[removed: Our offerings to] [added: RxCrossroads provides a comprehensive suite of solutions for] life sciences companies [removed: include specialty] [added: including program] pharmacy services, third-party logistics (“3PL”), [removed: provider and patient engagement programs,] clinical trial support, patient assistance programs, [removed: reimbursement services, analytics,] [added: access] and [added: adherence solutions, and] other tailored [removed: services.][added: services for pharmaceutical manufacturers.]

[removed: European] [added: European] Pharmaceutical Solutions [removed: Segment:][added: Segment:]

Our [removed: Pharmacy Solutions] [added: Pharmaceutical Distribution] business delivers pharmaceutical and other healthcare-related products to pharmacies across Europe.

This business functions as a vital link connecting manufacturers to retail [added: pharmacies, supplying medicines and other products sold in] pharmacies.

Our [removed: Consumer Solutions] [added: Retail Pharmacy] business serves patients and consumers in European countries directly through approximately [removed: 2,000] [added: 2,200] of our own pharmacies and [removed: 6,900] [added: 7,900] participant pharmacies operating under brand partnership arrangements.

[removed: This] [added: In addition, this] business [added: includes outpatient dispensing and homecare arrangements mainly in the United Kingdom (“U.K.”) and] provides traditional prescription pharmaceuticals, non-prescription products and medical services and operates under the Lloyds Pharmacy brand in Belgium, Ireland, Italy, Sweden and the U.K. In addition, we partner with independent pharmacies under our franchise program.

[removed: Medical-Surgical] [added: Medical-Surgical] Solutions [removed: Segment:][added: Segment:]

We develop customized plans to address the product, operational and clinical support needs of our customers, including tackling [removed: reimbursements,] [added: inventory management,] reducing administrative burdens, and training and educating clinical staff.

[removed: Other:][added: Other:]

Other primarily consists of the following operating segments and business activities: McKesson Canada, MRxTS and our [removed: equity method] investment in [added: the] Change [removed: Healthcare.][added: Healthcare LLC joint venture.]

[removed: McKesson Canada:] [added: *McKesson Canada*:] This business is one of the largest pharmaceutical wholesale and retail distributors in Canada.

The retail business operates [removed: approximately 410] [added: more than 400] owned pharmacies under the Rexall Health brand in Canada where we provide patients with greater choice and access, integrated pharmacy care and industry-leading service levels.

[removed: MRxTS:] [added: *MRxTS:*] This business provides innovative technologies that support retail pharmacies and manufacturers that ultimately enable patients to fulfill their prescriptions.

Change Healthcare [added: LLC] provides software and analytics, network solutions and technology-enabled services that [removed: delivers] [added: deliver] wide-ranging financial, operational and clinical benefits to payers, providers and consumers.

[removed: Restructuring,] [added: Restructuring,] Business Combinations, [removed: Investments, Divestitures] [added: Investments] and [removed: Discontinued Operations][added: Divestitures]

The Company was incorporated on July 7, 1994 in the State of Delaware.

| • | McKesson Canada which provides better, safer care by delivering vital medicines, supplies and information technologies throughout Canada and operates Rexall Health retail pharmacies; |

| • | Our investment in the Change Healthcare joint venture, which was separated from the Company in the fourth quarter of 2020 as discussed in more detail below. |

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McKESSON CORPORATION

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McKESSON CORPORATION

*McKesson Life Sciences:* This business helps life sciences companies drive faster and greater market access, optimize patient experiences and deliver better business results with a comprehensive suite of solutions for biopharmaceutical products.

Biologics by McKesson specialty pharmacy solutions help pharmaceutical and biotech partners to effectively distribute oral and self-administered specialty products to patients across the country.

The segment consists of two businesses: Pharmaceutical Distribution and Retail Pharmacy.

To support the country’s efforts to fight the coronavirus disease 2019 (“COVID-19”) pandemic, in the fourth quarter of 2020 McKesson began working closely with government agencies such as the U.S. Federal Emergency Management Agency and the U.S. Department of Health and Human Services (“HHS”) to get critical supplies to healthcare providers who need them.

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McKESSON CORPORATION

On March 10, 2020, we completed the separation of our interest in the Change Healthcare JV through a split-off transaction.

This transaction reduced our investment in the Change Healthcare JV to zero.

Refer to Financial Note 2, “Investment in Change Healthcare Joint Venture,” to the consolidated financial statements appearing in this Annual Report on Form 10-K for additional information related to this transaction.

We face highly competitive global environments.

Additionally, in recent years the healthcare industry has been subject to increasing consolidation.

We consider our largest competitors in distribution, wholesaling and logistics to be AmerisourceBergen Corporation and Cardinal Health, Inc.

Our Medical-Surgical Solutions segment operates primarily in providing distribution and logistics services to physicians’ offices, surgery centers, post-acute care facilities, hospital reference labs, home health agencies, and occupational and alternative health sites and faces competition from a wide range of medical and surgical supply and equipment distributors throughout the United States.

Our MRxTS business experiences substantial competition from many companies, including other software services firms, consulting firms, shared service vendors and internet-based companies with technology applicable to the healthcare industry.

Competition in this business varies in size from small to large companies, in geographical coverage and in scope and breadth of products and services offered.

We believe that our scale and diversity of product and service offerings are our primary competitive advantages.

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McKESSON CORPORATION

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McKESSON CORPORATION

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McKESSON CORPORATION

The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

We have reported our financial results on a retrospective basis in this Annual Report on Form 10-K to reflect the new operating structure.

| | |

| --- | --- |

| • | McKesson Canada which distributes pharmaceutical and medical products and operates Rexall Health retail pharmacies; |

| • | RxPakSM - Bulk-to-bottle repackaging service that leverages our purchasing scale and supplier relationships to provide pharmaceuticals at competitive prices, help increase inventory turns and reduce working capital investment. |

McKesson Life Sciences: This business helps life sciences companies accelerate the approval and successful commercialization of branded, specialty, generic and biosimilar pharmaceuticals across the product life cycle.

Our recent acquisitions of RxCrossroads and Biologics help expand our capabilities to support life sciences companies.

The business consists of Pharmacy Solutions and Consumer Solutions.

This business supplies medicines and other products sold in pharmacies.

In addition, this business includes outpatient dispensing and homecare arrangements mainly in the United Kingdom (“U.K.”).

With 85% of patient visits occurring outside the hospital, each customer has unique needs and challenges.

Change Healthcare: Our 70% equity ownership interest in Change Healthcare is accounted for by us using the equity method of accounting.

Change Healthcare Inc., the entity that owns 30% of the joint venture, filed a registration statement with the Securities and Exchange Commission on March 15, 2019 and amended on April 5, 2019 regarding its intent to pursue an initial public offering.

We expect to continue to undertake such strategic initiatives in the future.

Accounts receivable from CVS were approximately 18.4% of total trade accounts receivable.

R&D costs were lower in 2018 due to the 2017 contribution of the majority of our McKesson Technology Solutions businesses (“Core MTS Business”) to the Change Healthcare joint venture.

Certain legal proceedings in which we are involved are discussed in Financial Note [removed: 24,] [added: 21,] “Commitments and Contingent Liabilities,” to the consolidated financial statements appearing in this Annual Report on Form 10-K.

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: FORM 10-K][added: FORM 10-K]

| [removed: x] [added: ☒] | [removed: ANNUAL] [added: ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: For] [added: For] the fiscal year [removed: ended March] [added: ended March] 31, [removed: 2019][added: 2020]

| [added: ☐] | [removed: TRANSITION] [added: TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: For] [added: For] the transition period [removed: from to][added: from to]

[removed: Commission] [added: Commission] File [removed: Number: 1-13252][added: Number: 1-13252]

[removed: McKESSON CORPORATION][added: McKESSON CORPORATION]

| [removed: Delaware] [added: Delaware] | | [removed: 94-3207296] [added: 94-3207296] |

| [removed: (State] [added: (State] or other jurisdiction of incorporation or [removed: organization)] [added: organization)] | | [removed: (I.R.S.] [added: (I.R.S.] Employer Identification [removed: No.)] [added: No.)] |

[removed: | 6555] [added: 6555] State Hwy [removed: 161, Irving, Texas | | 75039 |][added: 161,]

[removed: | (Address] [added: (Address] of principal executive [removed: offices) | | (Zip Code) |][added: offices, including zip code)]

[removed: (972) 446-4800][added: (972) 446-4800]

[removed: (Registrant’s] [added: (Registrant’s] telephone number, including area [removed: code)][added: code)]

[removed: Securities] [added: Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act:]

| [removed: (Title] [added: (Title] of each [removed: class)] [added: class)] | [removed: (Trading Symbol)] [added: (Trading Symbol)] | [removed: (Name] [added: (Name] of each exchange on which [removed: registered)] [added: registered)] |

[removed: Securities] [added: Securities] registered pursuant to Section 12(g) of the Act: [removed: None][added: None]

Yes [removed: x] [added: ☒] No [removed: ¨][added: ☐]

Yes [removed: ¨] [added: ☐] No [removed: x][added: ☒]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [removed: or] a smaller reporting [added: company, or an emerging growth] company.

| Large accelerated filer | | [removed: x] [added: ☒] | | Accelerated filer | | [removed: ¨] [added: ☐] |

| Non-accelerated filer | | [removed: ¨] [added: ☐] | | Smaller reporting company | | [removed: ¨] [added: ☐] |

| | | | | Emerging growth company | | [removed: ¨] [added: ☐] |

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, computed by reference to the closing price as of the last business day of the registrant’s most recently completed second fiscal quarter, September 30, [removed: 2018,] [added: 2019,] was approximately [removed: $26] [added: $25] billion.

Number of shares of common stock outstanding on April 30, [removed: 2019: 189,961,556][added: 2020: 161,853,218]

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of the registrant’s Proxy Statement for its [removed: 2019] [added: 2020] Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K.

[removed: TABLE] [added: TABLE] OF [removed: CONTENTS][added: CONTENTS]

| | [removed: Item] [added: Item] | [removed: Page] [added: Page] |

[removed: | | [PART I](#s80BAE25C233B5209A74A97338A74FA69) | |][added: PART I]

| 1A. | [Risk [removed: Factors](#sFA4FB6BF86ED51DE8A407695FC3E4B06)] [added: Factors](#s28bd2d72b6da49d8b474df17f7b1a90a)] | [removed: [10](#sFA4FB6BF86ED51DE8A407695FC3E4B06)] [added: [10](#s28bd2d72b6da49d8b474df17f7b1a90a)] |

| 1B. | [Unresolved Staff [removed: Comments](#s377B49FF21775502BDBAD1B65C2C973B)] [added: Comments](#s6F61D83B057757FAB0A05B50C2120F17)] | [removed: [23](#s377B49FF21775502BDBAD1B65C2C973B)] [added: [19](#s6F61D83B057757FAB0A05B50C2120F17)] |

| 3. | [Legal [removed: Proceedings](#s3F5D2E463F295B15B217FF7A6F2A0EFB)] [added: Proceedings](#s301CC2EE20D55EB7B9695AAAB871E599)] | [removed: [24](#s3F5D2E463F295B15B217FF7A6F2A0EFB)] [added: [19](#s301CC2EE20D55EB7B9695AAAB871E599)] |

| 4. | [Mine Safety [removed: Disclosures](#s8D07402E7152578883A61DAC8154457B)] [added: Disclosures](#sD30835C34CC85A018CCBAC986C5F3D80)] | [removed: [24](#s8D07402E7152578883A61DAC8154457B)] [added: [19](#sD30835C34CC85A018CCBAC986C5F3D80)] |

| | [Executive Officers of the [removed: Registrant](#s01344319A9A65C5A901101B9CB560B80)] [added: Registrant](#s22A289B5493355AD8FB6EFDA6E9716E7)] | [removed: [25](#s01344319A9A65C5A901101B9CB560B80)] [added: [20](#s22A289B5493355AD8FB6EFDA6E9716E7)] |

| 5. | [Market for the Registrant's Common Equity, Related Stockholder Matters [removed: and](#sB74A71CD2C7F566AA0FAB6EA9103710A)] [added: and](#s801F5F87AFF6560EA086BE778D3913A8)] [Issuer Purchases of Equity [removed: Securities](#sB74A71CD2C7F566AA0FAB6EA9103710A)] [added: Securities](#s801F5F87AFF6560EA086BE778D3913A8)] | [removed: [26](#sB74A71CD2C7F566AA0FAB6EA9103710A)] [added: [21](#s801F5F87AFF6560EA086BE778D3913A8)] |

| 6. | [Selected Financial [removed: Data](#s291C19A3AD4054878A0349E939272E75)] [added: Data](#s3D15CDF5E4145D9787F0748A055437EE)] | [removed: [29](#s291C19A3AD4054878A0349E939272E75)] [added: [23](#s3D15CDF5E4145D9787F0748A055437EE)] |

| 7. | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#sD034E05D2039565A83EB295D10A9F6FE)] [added: Operations](#s87A7D74FA7DB51E78A9369C394015F22)] | [removed: [31](#sD034E05D2039565A83EB295D10A9F6FE)] [added: [25](#s87A7D74FA7DB51E78A9369C394015F22)] |

[Table of Contents](#s8AE717A86E6C5AD0BF7B80E343BCFC51)

OR


Irving, TX 75039

| 0.625% Notes due 2021 | MCK21A | New York Stock Exchange |

| 1.500% Notes due 2025 | MCK25 | New York Stock Exchange |

| 1.625% Notes due 2026 | MCK26 | New York Stock Exchange |

| 3.125% Notes due 2029 | MCK29 | New York Stock Exchange |

Yes ☒ No ☐

Yes ☒ No ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Yes ☐ No ☒

[Table of Contents](#s8AE717A86E6C5AD0BF7B80E343BCFC51)

McKESSON CORPORATION

| 1. | [Business](#sDC73F5D6672E58DDB3DED84F8FC35661) | [3](#sDC73F5D6672E58DDB3DED84F8FC35661) |

| 2. | [Properties](#s6D063901D71D5C08A09741AD1E121F52) | [19](#s6D063901D71D5C08A09741AD1E121F52) |

| | [PART II](#s4CFD91D0BB745E1BAC0CB8BE68D3E868) | |

| | [PART IV](#s8BC6FC68F9155D348FDB5C9267D2543E) | |

| | [Signatures](#s61FC634BCCF85020BDE40E29B922193E) | [136](#s61FC634BCCF85020BDE40E29B922193E) |

[Table of Contents](#s8AE717A86E6C5AD0BF7B80E343BCFC51)

McKESSON CORPORATION

10-K 1 mck_10kx3312019.htm 10-K

[Table of Content](#s159EA64A1E005C8189144DB5D301DA2C)

OR

| | | |

| 1. | [Business](#s6C13B4553C5250BEBC81EFBE4774DCC0) | [3](#s6C13B4553C5250BEBC81EFBE4774DCC0) |

| 2. | [Properties](#s6DEA3028F1FE5F0B9C2B4AA5523241F8) | [23](#s6DEA3028F1FE5F0B9C2B4AA5523241F8) |

| | [PART II](#sD3B4B57F91B85511A0F365FD465A41A9) | |

| | [PART IV](#s9F465BC4E1545D45919B80590432FE6C) | |

| | [Signatures](#s381E7A99D1055356864447F8B8C9A29A) | [132](#s381E7A99D1055356864447F8B8C9A29A) |

Information as to material lease commitments is included in Financial Note [removed: 22, “Lease Obligations,”] [added: 13, “Leases,”] to the consolidated financial statements appearing in this Annual Report on Form 10-K.

McKESSON CORPORATION

[removed: McKESSON CORPORATION][added: McKESSON CORPORATION]

[removed: Information] [added: Information] about our Executive [removed: Officers][added: Officers]

| [removed: Name] [added: Name] | | [removed: Age] [added: Age] | | [removed: Position] [added: Position] with Registrant and Business [removed: Experience] [added: Experience] |

| Brian S. Tyler | | [removed: 52] [added: 53] | | Chief Executive Officer since April 2019; President and Chief Operating Officer from August 2018 to March 2019; Chairman of the Management Board of McKesson Europe AG from 2017 to 2018; President and Chief Operating Officer, McKesson Europe from 2016 to 2017; President of North America Distribution and Services from 2015 to 2016; Executive Vice President, Corporate Strategy and Business Development from 2012 to 2015; and a director since April 2019. Service with the Company - [removed: 22] [added: 23] years. |

| Britt J. Vitalone | | [removed: 50] [added: 51] | | Executive Vice President and Chief Financial Officer since January 2018; Senior Vice President and Chief Financial Officer, U.S. Pharmaceutical from July 2014 to December 2017; Senior Vice President and Chief Financial Officer, U.S. Pharmaceutical and Specialty Health from October 2017 to December 2017; Senior Vice President of Corporate Finance and M&A Finance from March 2012 to June 2014. Service with the Company - [removed: 13] [added: 14] years. |

| [removed: Jorge L. Figueredo] [added: Tracy Faber] | | [removed: 58] [added: 50] | | Executive Vice President and Chief Human Resources Officer since [removed: May 2008.] [added: October 2019. Previously, Senior Vice President of Human Resources.] Service with the Company - [removed: 11] [added: 9] years. |

| Lori A. Schechter | | [removed: 57] [added: 58] | | Executive Vice President, [removed: General Counsel and] Chief [removed: Compliance] [added: Legal] Officer [added: and General Counsel] since June 2014; Associate General Counsel from January 2012 to June 2014; Litigation Partner, Morrison & Foerster LLP from 1995 to December 2011. Service with the Company - [removed: 7] [added: 8] years. |

[removed: PART II][added: PART II]

[Table of Contents](#s8AE717A86E6C5AD0BF7B80E343BCFC51)

| Nancy Flores | | 53 | | Executive Vice President, Chief Information Officer and Chief Technology Officer since January 2020; Chief Information Officer, Johnson Controls from 2018 to July 2019. Corporate Officer and Vice President of Business and Technology Services, Abbott Laboratories from 1996 to 2018. Service with the Company - less than 1 year. |

[Table of Contents](#s8AE717A86E6C5AD0BF7B80E343BCFC51)

McKESSON CORPORATION

| | | | | |

| Kathleen D. McElligott | | 63 | | Executive Vice President, Chief Information Officer and Chief Technology Officer since July 2015; Chief Information Officer and Vice President, Information Technology, Emerson Electric from 2010 to July 2015. Service with the Company - 3 years. |

| Bansi Nagji | | 54 | | Executive Vice President and Chief Strategy and Business Development Officer since February 2015; Principal, Deloitte Consulting, LLP and Global Leader, Monitor Deloitte (which was formed by the global merger of Monitor Group with Deloitte) from January 2013 to February 2015; President, Monitor Group from July 2012 to January 2013; Partner, Monitor Group from 2001 to January 2013. Service with the Company - 4 years. |

| (a) | [removed: Market Information:] [added: *Market Information:*] The principal market on which [removed: the Company’s] [added: our] common stock is traded is the New York Stock Exchange (“NYSE”) under the trading symbol of “MCK”. |

| (b) | [removed: Holders:] [added: *Holders:*] The number of record holders of [removed: the Company’s] [added: our] common stock at March 31, [removed: 2019] [added: 2020] was approximately [removed: 5,333.] [added: 5,034.] |

| (c) | [removed: Dividends:] [added: *Dividends:*] In July [removed: 2018, the Company’s] [added: 2019, our] quarterly dividend was raised from [removed: $0.34 to] $0.39 [added: to $0.41] per common share for dividends declared on or after such date by the Board. [removed: The Company] [added: We] declared regular cash dividends of [removed: $1.51] [added: $1.62] and [removed: $1.30] [added: $1.51] per share in the years ended March 31, [removed: 2019] [added: 2020] and [removed: 2018.] [added: 2019.] |

[removed: The Company anticipates] [added: We anticipate] that [removed: it] [added: we] will continue to pay quarterly cash dividends in the future.

However, the payment and amount of future dividends remain within the discretion of the Board and will depend upon [removed: the Company’s] [added: our] future earnings, financial condition, capital requirements and other factors.

| (d) | [removed: Securities] [added: *Securities] Authorized for Issuance under Equity Compensation [removed: Plans:] [added: Plans:*] Information relating to this item is provided under Part III, Item 12, to this Annual Report on Form 10-K. |

| (e) | [removed: Share] [added: *Share] Repurchase [removed: Plans:] [added: Plans:*] Stock repurchases may be made from time to time in open market transactions, privately negotiated transactions, through accelerated share repurchase (“ASR”) programs, or by any combination of such methods. The timing of any repurchases and the actual number of shares repurchased will depend on a variety of factors, including our stock price, corporate and regulatory requirements, restrictions under our debt obligations and other market and economic conditions. |

In [removed: October 2016,] [added: May 2018,] the Board authorized the repurchase of up to $4.0 billion of [removed: the Company’s] [added: our] common stock.

In [removed: 2017,] [added: 2020,] we repurchased [removed: 14.1] [added: 9.2] million [removed: of the Company’s] shares for [removed: $2.0] [added: $1.3] billion through open market transactions at an average price per share of [removed: $140.96.][added: $144.68.]

In [removed: March 2017,] [added: December 2018,] we entered into an ASR program with a third-party financial institution to repurchase $250 million of [removed: the Company’s] [added: our] common stock.

The total number of shares repurchased under this ASR program was [removed: 1.7] [added: 4.7] million shares at an average price per share of [removed: $143.19.][added: $127.68.]

The total authorization outstanding for [removed: repurchases] [added: repurchase] of [removed: the Company’s] [added: our] common stock was [removed: $2.7] [added: $1.1] billion at March 31, [removed: 2017.][added: 2018.]

In 2018, we repurchased 3.5 million [removed: of the Company’s] shares for $500 million through open market transactions at an average price per share of $144.43.

In June 2017, August 2017 and March 2018, we entered into three separate ASR programs with third-party financial institutions to repurchase $250 million, $400 million and $500 million of [removed: the Company’s] [added: our] common stock.

The total authorization outstanding for repurchase of [removed: the Company’s] [added: our] common stock was [removed: $1.1] [added: $3.5] billion at March 31, [removed: 2018.][added: 2019.]

The total authorization outstanding for repurchases of [removed: the Company’s] [added: our] common stock was increased to $5.1 [removed: billion.][added: billion at that time.]

During 2019, we repurchased 10.4 million [removed: of the Company’s] shares for $1.4 billion through open market transactions at an average price per share of $132.14.

In [removed: December 2018,] [added: May 2019,] we entered into an ASR program with a third-party financial institution to repurchase [removed: $250] [added: $600] million of [removed: the Company’s] [added: our] common stock.

The total authorization outstanding for repurchase of [removed: the Company’s] [added: our] common stock was [removed: $3.5] [added: $1.5] billion at March 31, [removed: 2019.][added: 2020.]

[removed: McKESSON CORPORATION][added: McKESSON CORPORATION]

In 2019, we retired 5.0 million or $542 million of [removed: the Company’s] [added: our] treasury shares previously repurchased.

The following table provides information on [removed: the Company’s] [added: our] share repurchases during the fourth quarter of [removed: 2019:][added: 2020:]

| | [removed: Share Repurchases] [added: Share Repurchases] (1) | | | | | | | | | | | | |

| [removed: (In] [added: *(In] millions, except price per [removed: share)] [added: share)*] | [removed: Total Number] [added: Total Number] of [removed: Shares Purchased] [added: Shares Purchased (2)] | | | [removed: Average] [added: Average] Price Paid per [removed: Share] [added: Share] | | | | [removed: Total] [added: Total] Number of Shares Purchased as Part of Publicly Announced [removed: Programs] [added: Programs (2)] | | | [removed: Approximate] [added: Approximate] Dollar Value of Shares that May Yet Be Purchased Under the [removed: Programs] [added: Programs] | | |

| (f) | [removed: Stock] [added: *Stock] Price Performance [removed: Graph*:] [added: Graph:] The following graph compares the cumulative total stockholder return on [removed: the Company’s] [added: our] common stock for the periods indicated with the Standard & Poor’s 500 Index and the S&P 500 Health Care Index. The S&P 500 Health Care Index was selected as a comparator because it is generally available to investors and broadly used by other companies in the same industry. |

[removed: ][added: ]

| | [removed: March 31,] [added: March 31,] | | | | | | | | | | | | | | | | | | | | | | |

| | [removed: 2014] [added: 2015] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2018] [added: 2019] | | | | [removed: 2019] [added: 2020] | | |

[added: |] * Assumes $100 invested in McKesson Common Stock and in each index on March 31, [removed: 2014] [added: 2015] and that all dividends are reinvested. [added: | | | | | | | | | | | | | | | | | | | | | | | |]

[Table of Contents](#s8AE717A86E6C5AD0BF7B80E343BCFC51)

| January 1, 2020 - January 31, 2020 | — | | | $ | — | | | — | | | $ | 1,535 | |

| February 1, 2020 - February 29, 2020 | — | | | — | | | | — | | | 1,535 | | |

| March 1, 2020 - March 31, 2020 | 15.4 | | | — | | | | 15.4 | | | 1,535 | | |

| Total | 15.4 | | | | | | | 15.4 | | | | | |

| (2) | On March 9, 2020, we completed the previously announced separation (“Split-off”) of our interest in the Change Healthcare JV. In connection with the Split-off, we distributed all 176.0 million outstanding shares of common stock of our wholly owned subsidiary, PF2 SpinCo, Inc. (“SpinCo”), which held all of McKesson’s interests in the Change Healthcare JV, to participating holders of our common stock in exchange for 15.4 million shares of McKesson stock which now are held as treasury stock on our consolidated balance sheet. Refer to Financial Note 22, “Stockholders' Equity,” to the accompanying consolidated financial statements included in this Annual Report on Form 10-K for more information. |

| McKesson Corporation | $ | 100.00 | | | $ | 69.92 | | | $ | 66.37 | | | $ | 63.06 | | | $ | 52.40 | | | $ | 60.55 | |

| S&P 500 Index | $ | 100.00 | | | $ | 101.78 | | | $ | 119.26 | | | $ | 135.95 | | | $ | 148.86 | | | $ | 138.47 | |

| S&P 500 Health Care Index | $ | 100.00 | | | $ | 94.82 | | | $ | 105.81 | | | $ | 117.74 | | | $ | 135.27 | | | $ | 133.90 | |

[Table of Contents](#s8AE717A86E6C5AD0BF7B80E343BCFC51)

McKESSON CORPORATION

| | |

| --- | --- |

As of March 31, 2017, we had received 1.4 million shares under this program.

This ASR program was completed in April 2017 and we received 0.3 million additional shares.

During 2017, we completed the October 2015 share repurchase authorization.

In May 2018, the Board authorized the repurchase of up to $4.0 billion of the Company’s common stock.

| January 1, 2019 - January 31, 2019 | — | | | $ | — | | | — | | | $ | 3,719 | |

| February 1, 2019 - February 28, 2019 | 2.3 | | | 130.57 | | | | 2.3 | | | 3,469 | | |

| March 1, 2019 - March 31, 2019 | — | | | — | | | | — | | | 3,469 | | |

| Total | 2.3 | | | | | | | 2.3 | | | | | |

| McKesson Corporation | $ | 100.00 | | | $ | 128.71 | | | $ | 89.99 | | | $ | 85.43 | | | $ | 81.17 | | | $ | 67.45 | |

| S&P 500 Index | $ | 100.00 | | | $ | 112.73 | | | $ | 114.74 | | | $ | 134.45 | | | $ | 153.26 | | | $ | 167.81 | |

| S&P 500 Health Care Index | $ | 100.00 | | | $ | 126.19 | | | $ | 119.65 | | | $ | 133.52 | | | $ | 148.57 | | | $ | 170.70 | |

[removed: FIVE-YEAR HIGHLIGHTS][added: FIVE-YEAR HIGHLIGHTS]

| | [removed: As] [added: As] of and for the Years Ended March [removed: 31,] [added: 31,] | | | | | | | | | | | | | | | | | | | |

| [removed: (In] [added: *(In] millions, except per share data and [removed: ratios)] [added: ratios)*] | | [removed: 2019] [added: 2020] | | | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | |

| [removed: Operating Results] [added: Operating Results] | | | | | | | | | | | | | | | | | | | | |

| Revenues | | $ | [removed: 214,319] [added: 231,051] | | | $ | [removed: 208,357] [added: 214,319] | | | $ | [removed: 198,533] [added: 208,357] | | | $ | [removed: 190,884] [added: 198,533] | | | $ | [removed: 179,045] [added: 190,884] | |

| Percent change | | [removed: 2.9] [added: 7.8] | | % | | [removed: 4.9] [added: 2.9] | | % | | [removed: 4.0] [added: 4.9] | | % | | [removed: 6.6] [added: 4.0] | | % | | [removed: 30.3] [added: 6.6] | | % |

| Gross profit | | $ | [removed: 11,754] [added: 12,023] | | | $ | [removed: 11,184] [added: 11,754] | | | $ | [removed: 11,271] [added: 11,184] | | | $ | [removed: 11,416] [added: 11,271] | | | $ | [removed: 11,411] [added: 11,416] | |

| Income from continuing operations before income taxes (1) | | [removed: 610] [added: $] | [added: 1,144] | | | [removed: 239] [added: $] | [added: 610] | | | [removed: 6,891] [added: $] | [added: 239] | | | [removed: 3,250] [added: $] | [added: 6,861] | | | [removed: 2,657] [added: $] | [added: 3,250] | |

| Continuing operations (1) | | [removed: 254] [added: 1,126] | | | | [removed: 292] [added: 254] | | | | [removed: 5,277] [added: 292] | | | | [removed: 2,342] [added: 5,277] | | | | [removed: 1,842] [added: 2,342] | | |

| Discontinued operations | | [removed: 1] [added: (6] | | [added: )] | | [removed: 5] [added: 1] | | | | [removed: (124] [added: 5] | | [removed: )] | | [removed: (32] [added: (124] | | ) | | [removed: (299] [added: (32] | | ) |

| Net income | | [removed: 255] [added: 1,120] | | | | [removed: 297] [added: 255] | | | | [removed: 5,153] [added: 297] | | | | [removed: 2,310] [added: 5,153] | | | | [removed: 1,543] [added: 2,310] | | |

| Net income attributable to noncontrolling interests (2) | | [removed: (221] [added: (220] | | ) | | [removed: (230] [added: (221] | | ) | | [removed: (83] [added: (230] | | ) | | [removed: (52] [added: (83] | | ) | | [removed: (67] [added: (52] | | ) |

| Net income attributable to McKesson Corporation (1) | | [removed: 34] [added: 900] | | | | [removed: 67] [added: 34] | | | | [removed: 5,070] [added: 67] | | | | [removed: 2,258] [added: 5,070] | | | | [removed: 1,476] [added: 2,258] | | |

| [removed: Financial Position] [added: Financial Position] | | | | | | | | | | | | | | | | | | | | |

| Working capital | | $ | [removed: 839] [added: (402] | [added: )] | | $ | [removed: 451] [added: 839] | | | $ | [removed: 1,336] [added: 451] | | | $ | [removed: 3,366] [added: 1,336] | | | $ | [removed: 3,173] [added: 3,366] | |

| Customer receivables | | 26 | | | | [removed: 25] [added: 26] | | | | [removed: 27] [added: 25] | | | | [removed: 28] [added: 27] | | | | [removed: 26] [added: 28] | | |

| Inventories | | [removed: 31] [added: 27] | | | | [removed: 30] [added: 31] | | | | 30 | | | | [removed: 32] [added: 30] | | | | [removed: 31] [added: 32] | | |

| Drafts and accounts payable | | [removed: 62] [added: 61] | | | | [removed: 60] [added: 62] | | | | [removed: 61] [added: 60] | | | | [removed: 59] [added: 61] | | | | [removed: 54] [added: 59] | | |

| Total assets | | $ | [removed: 59,672] [added: 61,247] | | | $ | [removed: 60,381] [added: 59,672] | | | $ | [removed: 60,969] [added: 60,381] | | | $ | [removed: 56,523] [added: 60,969] | | | $ | [removed: 53,870] [added: 56,523] | |

| Total debt, including [removed: capital] [added: finance] lease obligations [added: (4)] | | [removed: 7,595] [added: 7,387] | | | | [removed: 7,880] [added: 7,595] | | | | [removed: 8,545] [added: 7,880] | | | | [removed: 8,114] [added: 8,545] | | | | [removed: 9,844] [added: 8,114] | | |

| Total McKesson stockholders’ equity [removed: (4)] [added: (5)] | | [removed: 8,094] [added: 5,092] | | | | [removed: 9,804] [added: 8,094] | | | | [removed: 11,095] [added: 9,804] | | | | [removed: 8,924] [added: 11,095] | | | | [removed: 8,001] [added: 8,924] | | |