McKesson (MCK) 10-K risk factor changes: FY2021 vs FY2020

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 [removed: 21,] [added: 19,] “Commitments and Contingent Liabilities,” to the consolidated financial statements in this report.

The Company is a defendant in [removed: over 3,000] [added: approximately 3,200] cases alleging claims related to the distribution of controlled substances (opioids), as described in Financial Note [removed: 21,] [added: 19,] “Commitments and Contingent Liabilities,” to the consolidated financial statements in this report.

Although the Company has valid defenses and is vigorously defending itself, some proceedings [removed: are] [added: have been and others may be] resolved by negotiated outcome.

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

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Local, state and federal governments continue to strengthen their position and scrutiny over practices involving [added: or allegedly involving] fraud, waste and abuse affecting Medicare, Medicaid and other government healthcare programs.

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

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

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

We and our external service providers use [removed: sophisticated computer] [added: technology and] systems to perform our business operations, such as the secure electronic transmission, processing, storage and hosting of sensitive information, including protected health information and other types of personal information, confidential financial information, proprietary information, and other sensitive information relating to our customers, company and workforce.

[removed: Cyber] [added: Cybersecurity] incidents include actual or attempted unauthorized access, tampering, malware insertion, ransomware attacks or other system integrity events.

A cybersecurity incident might involve a material data breach or other material impact to the integrity and operations of [removed: these computer] [added: our technology] systems, which might result in litigation or regulatory action, loss of customers or revenue, [added: and] increased expense, any of which might have a materially adverse impact on our business operations, [removed: reputation] [added: reputation,] and our financial position or results of operations.

If those information systems [removed: are unsuccessfully implemented, fail,] suffer [removed: errors or] [added: errors,] interruptions, or become unavailable, [removed: it] [added: there] might [removed: have] [added: be] a materially adverse impact on our business [removed: operations] [added: operations, reputation,] and our financial position or results of operations.

If our software and technology services are alleged to have contributed to faulty clinical decisions or injury to patients, we might be subject to claims or litigation by users of [removed: or] [added: our] software or services or their patients.

Any of these types of errors or failures might have a materially adverse impact on our [added: reputation,] business operations and our financial position or results of operations.

At March 31, [removed: 2020,] [added: 2021,] sales to our largest customer represented approximately [removed: 20%] [added: 21%] of our consolidated revenues and approximately [removed: 20%] [added: 19%] of our trade receivables, and those of our ten largest customers combined accounted for approximately 51% of our consolidated revenues and approximately [removed: 37%] [added: 32%] of our trade receivables.

Our contracts with government entities are subject to risks such as lack of funding and [removed: legal compliance.][added: compliance with unique requirements.]

For example, government contract purchase obligations are typically subject to the availability of funding, which may be [removed: eliminated.][added: eliminated or reduced.]

For example, our contracts with the U.S. government generally require us to comply with the Federal Acquisition Regulations, [removed: U.S. False Claims Act,] Procurement Integrity Act, Buy American [removed: Act and] [added: Act,] Trade Agreements [removed: Act.][added: Act, and other laws and regulations.]

The healthcare industry and related government programs are [removed: changing significantly as they seek to increase efficiencies, reduce costs and improve patient outcomes.][added: changing.]

[removed: These] [added: Some of these] changes increase our risks and create uncertainties for our business.

For example, [added: some 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.

[removed: Changes] [added: Those 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, and increases in the use of managed care.

We are subject to the tax laws in the [removed: United States] [added: U.S.] at the federal, state and local government levels and to the tax laws of many other jurisdictions in which we operate or sell products or services.

Our tax reporting positions might be challenged by relevant tax authorities, we might incur significant expense in our efforts to defend those challenges, and we might be unsuccessful [added: in] those efforts.

Any of these risks might have a materially adverse impact on our business operations, our cash flows and our financial position or results of [removed: operations][added: operations.]

We have operations in the U.K. and the European Union (“E.U.”) and face risks associated with the uncertainty and potential disruptions that might follow the [removed: United Kingdom] [added: U.K.] withdrawing from the European Union (“Brexit”).

We might be adversely affected by events outside of our control, including: widespread public health issues, such as epidemic or pandemic infectious diseases; natural disasters such as earthquakes, [removed: hurricanes] [added: floods] or [removed: floods;] [added: severe weather;] political events such as terrorism, military conflicts and trade wars; and other catastrophic events.

These events [removed: might] [added: can] disrupt operations for us, our [removed: suppliers] [added: suppliers, our vendors,] and our customers.

The pandemic might impact our business operation, financial position and results of operation in unpredictable ways that depend on [removed: highly-uncertain] [added: highly uncertain] future developments, such as determining the effectiveness of current or future government actions to address the public health or economic impacts of the pandemic.

Our reputation has been and may continue to be impacted by publicity regarding the litigation and related allegations.

Additionally, we are subject to various routine agency (e.g., Drug Enforcement Administration (“DEA”), the U.S. Food and Drug Administration (“FDA”)) inspections to determine compliance with various federal regulations.

As of March 31, 2021, suspensions at the four distribution centers had all expired by their own terms.

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We experience cybersecurity incidents that might significantly compromise our technology systems or might result in material data breaches.

Despite physical, technical, and administrative security measures, our technology systems and operations have been, and likely will continue to be, subject to cyberattacks from sources beyond our control.

The risk of cyberattacks may be increased due to a variety of factors, both internal and external.

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Exclusive forum provisions in our Bylaws could limit our stockholders’ ability to choose their preferred judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated bylaws provide that, unless the Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for specified legal actions is the Court of Chancery of the State of Delaware or the United States District Court for the District of Delaware if the Court of Chancery does not have or declines to accept jurisdiction (collectively, “Delaware Courts”).

Current and former stockholders are deemed to have consented to the personal jurisdiction of the Delaware Courts in connection with any action to enforce that exclusive forum provision and to service of process in any such action.

These provisions of the bylaws are not a waiver of, and do not relieve anyone of duties to comply with, federal securities laws including those specifying the exclusive jurisdiction of federal courts under the Exchange Act and concurrent jurisdiction of federal and state courts under the Securities Act.

To the extent that these provisions of the bylaws limit a current or former stockholder’s ability to select a judicial forum other than the Delaware Courts, they might discourage the specified legal actions, might cause current or former stockholders to incur additional litigation-related expenses and might result in outcomes unfavorable to current or former stockholders.

A court might determine that these provisions of the bylaws are inapplicable or unenforceable in any particular action, in which case we may incur additional litigation related expenses in such action, and the action may result in outcomes unfavorable to us, which could have a materially adverse impact on our reputation, our business operations and our financial position or results of operations.

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In addition, the future volume of products or services purchased by a government customer is uncertain.

Our participation in vaccination distribution programs may materially affect our operating results, reputation, and business.

We participate as a distributor in government-sponsored vaccination programs, such as the U.S. government’s COVID-19 distribution program (“Federal COVID-19 Response”).

We also provide supplies used for vaccine administration in the Federal COVID-19 Response.

Our participation in such programs exposes us to various uncertainties.

For example, the novel nature of the SARS-CoV‑2 virus and the broad scope of the ongoing COVID-19 vaccine distribution program introduce uncertainty about what volumes of products may become available for distribution by us, the effectiveness of vaccines, and the cost of distribution.

Because of such uncertainties, our operating results may be subject to variability.

Our participation in such programs also exposes us to various risks, including regulatory compliance, government oversight, dependence on government funding, contractual performance, litigation, security risks, and supply chain challenges.

Any significant problems with our participation in such programs might have a materially adverse impact on our reputation and our business.

Because of these risks and uncertainties our operating results may be materially higher or lower than our projections.

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McKESSON CORPORATION

General Risk Factors

For example, in February 2021, a severe winter storm affecting the United States temporarily impacted our distribution business operations, primarily in Texas.

We may be adversely affected by global climate change or by legal, regulatory or market responses to such change.

The long-term effects of climate change are difficult to predict and may be widespread.

The impacts may include physical risks (such as rising sea levels or frequency and severity of extreme weather conditions), social and human effects (such as population dislocations or harm to health and well-being), compliance costs and transition risks (such as regulatory or technology changes) and other adverse effects.

The effects could impair, for example, the availability and cost of certain products, commodities and energy (including utilities), which in turn may impact our ability to procure goods or services required for the operation of our business at the quantities and levels we require.

We bear losses incurred as a result of, for example, physical damage to or destruction of our facilities (such as distribution or fulfillment centers), loss or spoilage of inventory, and business interruption due to weather events that may be attributable to climate change.

These events and impacts could materially adversely affect our business operations, financial position or results of operation.

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

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

We experience cybersecurity incidents and might experience significant computer system compromises or data breaches.

Many of these systems have experienced and are subject to cybersecurity incidents, despite physical, technical and administrative security measures.

The risk of cyber incidents may be increased while many of our personnel are working remotely due to the COVID-19 pandemic.

Our dependence on network availability is increased while many of our personnel are working remotely due to the COVID-19 pandemic.

For example, interest rate costs on types of borrowings that have historically been linked to the London Inter-Bank Offered Rate (“LIBOR”) may increase when LIBOR is replaced by reference rates such as the Secured Overnight Financing Rate (“SOFR”).

Other Risks

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Management’s discussion and analysis of financial condition and results of operations, referred to as the “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 together with its subsidiaries (collectively, the “Company,” [added: “McKesson,”] “we,” “our,” or “us” and other similar pronouns).

See Item 1 - Business - Forward-Looking Statements in Part I of this Annual Report on Form 10-K for additional factors relating to these [removed: statements; also see] [added: statements and] Item 1A - Risk Factors in Part I of this Annual Report on Form 10-K for a list of certain risk factors applicable to our business, financial [removed: condition] [added: condition,] and results of operations.

We are a global leader in healthcare supply chain management solutions, retail pharmacy, community oncology and specialty care, and healthcare [removed: technology.][added: information solutions.]

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

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

Refer to Financial Note [removed: 24,] [added: 22,] “Segments of Business,” to the accompanying consolidated financial statements included in this Annual Report on Form 10-K for [removed: a description of these] [added: further information regarding our reportable] segments.

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The following [removed: executive] summary provides highlights and key factors that impacted our business, operating [removed: results] [added: results, financial condition,] and liquidity for the year ended March 31, [removed: 2020.][added: 2021.]

[removed: The coronavirus disease 2019 (“COVID-19”) did not significantly impact] [added: *Impact to] our [removed: financial condition, results] [added: Results] of [removed: operations or liquidity in 2020.][added: Operations, Financial Condition, and Liquidity*]

For a more in-depth discussion of how COVID-19 impacted our business, operations, and outlook, [removed: see] [added: refer to] the COVID-19 section of [removed: "Trends] [added: *"Trends] and [removed: Uncertainties"] [added: Uncertainties"*] included [removed: below.][added: below;]

[removed: | • | Revenues of $231.1 billion, reflecting an 8% increase from] [added: U.S. Pharmaceutical revenues for] the [added: year ended March 31, 2021 increased 4% compared to the] prior year [removed: driven] primarily [removed: by] [added: due to] market [removed: growth in our U.S. Pharmaceutical and Specialty Solutions segment,] [added: growth,] including branded pharmaceutical price [removed: increases] [added: increases, growth in specialty pharmaceuticals,] and higher volumes from retail national account [removed: customers; |][added: customers, partially offset by branded to generic drug conversions.]

[removed: | • |] [added: -] Gross profit increased [removed: 2%] [added: 1%] from the prior year primarily [removed: driven by market growth] in our Medical-Surgical Solutions [removed: segment; |][added: segment driven by sales of COVID-19 tests;]

[removed: | • | On October 21, 2019, we disclosed an opioid-related litigation settlement with two Ohio counties] [added: - Claims] and [removed: recorded] [added: litigation charges, net includes] a [removed: related] [added: settlement] charge of $82 million [added: recorded] in [removed: total operating expenses; |][added: connection with an agreement to settle all opioid-related claims filed by two Ohio counties;]

[removed: | • | On March 10, 2020, we completed] [added: (6)Operating loss for Other for] the [removed: previously announced separation] [added: year ended March 31, 2020 includes an OTTI charge] of [added: $1.2 billion and a dilution loss of $246 million related to] our investment in Change Healthcare [removed: JV and recognized an estimated] [added: JV, partially offset by a net] gain of $414 million related to [removed: this transaction. We no longer hold an] [added: the completed separation of our] interest in [removed: any securities of] Change Healthcare JV [removed: or Change Healthcare, Inc. (“Change”) following the separation. During] [added: during] the [removed: second] [added: fourth] quarter of [removed: 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; |][added: 2020.]

[removed: | • |] [added: -] Diluted [removed: earnings] [added: loss] per common share from continuing operations attributable to McKesson Corporation in [removed: 2020] [added: 2021] of [removed: $4.99] [added: $28.26] reflects the aforementioned [removed: items] [added: items, net of any respective tax impacts,] and a lower share count compared to the prior year driven largely by [removed: share repurchases; and |][added: the separation of our investment in Change Healthcare JV on March 10, 2020;]

The [removed: World Health Organization] [added: WHO] 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 [added: of the impacts] COVID-19 [removed: may have to] [added: has on] our business and operations.

In response to the COVID-19 pandemic, federal, state, and local government directives and policies have been put in place in the [removed: United States] [added: U.S.] 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 [removed: new] healthcare [removed: challenge.][added: emergency.]

Similar [removed: governmental actions] [added: COVID-19 vaccine authorizations] 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 [removed: technology,] [added: solutions,] we are [removed: uniquely] [added: well] positioned to respond to the COVID-19 pandemic in the [removed: United States,] [added: U.S.,] Canada, and Europe.

We [removed: are working] [added: have worked and continue to work] closely with national and local governments, agencies, and industry partners to ensure [added: that available] supplies, including personal protective [removed: equipment,] [added: equipment (“PPE”),] and medicine reach our customers and [removed: patients when they need them.][added: patients.]

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 [removed: travel requirements,] [added: travel,] employee support programs, and enhanced safety [removed: measures] [added: measures,] are intended to limit [added: employee] exposure to [added: the virus that causes] COVID-19.

These [removed: successful] steps [removed: in our fourth quarter of 2020] [added: to protect employee safety] have resulted in limited disruption [removed: of] [added: from COVID-19 to] our normal business operations, productivity trends, and [removed: slightly compressed] [added: have not materially impacted our] operating [removed: margins due to increased] [added: expenses or] operating [removed: expenses.][added: margins.]

Specialty drug volumes [added: increased, but] were negatively impacted by lower demand for [removed: infusions,] elective specialty drugs, [removed: oncology, and dermatology practice sales.][added: as compared to the same prior year period.]

[removed: Demand] [added: We also experienced decreased demand] for primary care medical-surgical supplies [removed: were negatively impacted by] [added: due to] deferrals in elective procedures in hospitals and surgery centers as well as decreased traffic [removed: or] [added: and] closures [removed: in doctor’s offices.][added: of doctors’ offices, which was partially offset by demand for PPE and COVID-19 tests.]

We have experienced no material impacts to our liquidity or net working [removed: capital.][added: capital due to the COVID-19 pandemic.]

[removed: With many of our customers anticipating extended declines in their businesses due to the COVID-19 pandemic, we] [added: We] are monitoring [added: our customers] closely for [removed: trends that may impact] [added: changes to] their timing [added: of payments] or ability to pay amounts owed to [removed: us.][added: us as a result of COVID-19 pandemic impacts to their businesses.]

We remain well-capitalized with access to liquidity from our [added: $4.0 billion] revolving credit facility.

Long-term debt markets and commercial paper markets, our primary sources of capital after cash flow from operations, have remained open [added: and accessible to us] during the COVID-19 pandemic.

We have seen [removed: some] [added: continued] improvement in conditions in the debt markets and commercial paper markets as the Federal Reserve has taken steps to stabilize the markets.

We [added: also] continue to monitor the COVID-19 pandemic [removed: impact] [added: impacts] on our supply chain.

Our inventory levels have fluctuated in response to [removed: these] supply [removed: dynamics] [added: availability] and [removed: increased concentrated] customer [removed: orders] [added: demand patterns] for certain products, with varying inventory level impacts depending on the specific product within our [removed: portfolio of offerings.][added: portfolio.]

Although the availability of various products is dependent on our suppliers, their [removed: location] [added: locations,] and the extent to which they are impacted by the COVID-19 pandemic, we are proactively working with manufacturers, industry partners, and government agencies to meet the needs of our customers during the pandemic.

We have assembled a Critical Care Drug Task Force, made up of our procurement specialists, clinical health systems pharmacists, and supply chain professionals, [added: that is] focused on securing additional product where available, sourcing back-up products, [removed: adjusting allocations to ensure equitable distribution] and [removed: to protect] [added: protecting] our operations across all locations and facilities.

[removed: We] [added: Additionally, we] have a robust Business Continuity and Disaster Recovery Program (“BCRP”) and we have proactively enhanced our BCRP in response to the COVID-19 [removed: pandemic.][added: pandemic to protect the supply chain to minimize disruption in healthcare, protect our customers, ensure the safety and security of our employees and workplaces, and ensure the continuity of critical business processes.]

[removed: Although the financial impact on our overall 2020 results is limited due to the timing of the outbreak, we] [added: We] face numerous uncertainties in estimating the direct and indirect effects [added: of COVID-19] on our future business operations, financial condition, results of operations, and liquidity.

Due to several rapidly changing variables related to the COVID-19 pandemic, [removed: we cannot reasonably estimate] [added: estimations of] future economic trends and the timing of when stability will [removed: return.][added: return remains challenging.]

We are a defendant in [removed: over 3,000] [added: approximately 3,200] legal proceedings asserting claims related to [added: the] distribution of controlled substances (opioids) in federal and state courts throughout the [removed: United States,] [added: U.S.,] and in Puerto Rico and Canada.

Refer to Financial Note [removed: 21,] [added: 19,] “Commitments and Contingent Liabilities,” to the accompanying consolidated financial statements included in this Annual Report on Form 10‑K for more information.

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

We implemented a new segment reporting structure commencing with the second quarter of 2021, which resulted in four reportable segments: U.S. Pharmaceutical, International, Medical-Surgical Solutions, and Prescription Technology Solutions (“RxTS”).

Other, for retrospective periods presented, consists of our equity method investment in Change Healthcare LLC (“Change Healthcare JV”), which was split-off from McKesson in the fourth quarter of 2020.

All prior segment information has been recast to reflect our new segment structure and current period presentation.

The following summarizes our four reportable segments and the changes made to our reporting structure commencing in the second quarter of 2021.

- U.S. Pharmaceutical, previously the U.S. Pharmaceutical and Specialty Solutions reportable segment, continues to distribute branded, generic, specialty, biosimilar, and over-the-counter pharmaceutical drugs and other healthcare-related products.

This segment also provides practice management, technology, clinical support, and business solutions to community-based oncology and other specialty practices.

In addition, the segment sells financial, operational, and clinical solutions to pharmacies (retail, hospital, alternate site) and provides consulting, outsourcing, technological, and other services.

- International is a new reportable segment that includes our operations in Europe and Canada, bringing together non-U.S.-based drug distribution services, specialty pharmacy, retail, and infusion care services.

McKesson Europe was previously reflected as the European Pharmaceutical Solutions reportable segment and McKesson Canada was previously included in Other.

- Medical-Surgical Solutions provides medical-surgical supply distribution, logistics, and other services to healthcare providers in the United States (“U.S.”) and was unaffected by the segment realignment.

- RxTS is a new reportable segment that brings together existing businesses, including CoverMyMeds, RelayHealth, RxCrossroads, and McKesson Prescription Automation, including Multi-Client Central Fill as a Service, to serve our biopharma and life sciences partners and patients.

RxCrossroads was previously included in our former U.S. Pharmaceutical and Specialty Solutions reportable segment and CoverMyMeds, RelayHealth, and McKesson Prescription Automation were previously included in Other.

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- Coronavirus disease 2019 (“COVID-19”) impacted our results of operations for the year ended March 31, 2021.

Following the declaration of COVID-19 as a global pandemic by the World Health Organization (“WHO”) on March 11, 2020, there was a temporary increase in demand for pharmaceuticals across our businesses.

Subsequently, pharmaceutical distribution volumes decreased during the first quarter as a result of the weakened and uncertain global economic environment and COVID-19 restrictions, including government shutdowns and shelter-in-place orders.

The recovery from the COVID-19 pandemic continued to fluctuate throughout our fiscal year.

We benefited from demand for COVID-19 tests, favorable contributions from our vaccine and related ancillary supply kit distribution programs as discussed further below, and savings from reduced travel and meetings throughout 2021;

- We expanded our existing contractual relationship with the Centers for Disease Control and Prevention (“CDC”) through an amendment to our existing Vaccines for Children Program contract to support the U.S. government as a centralized distributor of COVID-19 vaccines and ancillary supplies needed to administer vaccines.

We have also partnered with the Department of Health and Human Services (“HHS”) and Pfizer to manage the assembly and distribution of the ancillary supplies needed to administer COVID-19 vaccines;

- In December 2020, we began distributing certain COVID-19 vaccines under the direction of the CDC.

Through the end of the fiscal year, we had distributed approximately 100 million of COVID-19 vaccine doses.

- Revenues of $238.2 billion, reflects a 3% increase from the prior year primarily in our U.S. Pharmaceutical segment driven by market growth;

- Total operating expenses in 2021 includes the following:

◦a charge of $8.1 billion related to our estimated liability for opioid-related claims as further described in the Opioid-Related Litigation and Claims section of *“Trends and Uncertainties”* included below; and

◦charges of $115 million to impair certain long-lived assets within our International segment; partially offset by

◦a net gain of $131 million recorded in connection with insurance proceeds received from the settlement of the shareholder derivative action related to our controlled substances monitoring program;

- Other income, net in 2021 includes net gains of $133 million related to our equity investments;

- On November 1, 2020, we completed the contribution of our German pharmaceutical wholesale business to a newly formed joint venture with Walgreens Boots Alliance (“WBA”) in which we have a 30% ownership interest;

- On December 3, 2020, we completed a public offering of 0.90% Notes due December 3, 2025 (the “2025 Notes”) in a principal amount of $500 million and repaid $1.0 billion of long-term debt in 2021.

Refer to Financial Note 13, “Debt and Financing Activities,” to the accompanying consolidated financial statements included in this Annual Report on Form 10-K for more information;

- We returned $1.0 billion of cash to shareholders through $770 million of common stock repurchases, including the value of equity awards surrendered for tax withholding, and $276 million of dividend payments during 2021.

On July 29, 2020, we raised our quarterly dividend from $0.41 to $0.42 per common share; and

- In January 2021, our Board of Directors (the “Board”) approved an increase of $2.0 billion for the authorized share repurchase of McKesson’s common stock.

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The pandemic developed rapidly during our fourth quarter of 2020 and continued to evolve throughout 2021.

Infection rates varied throughout our fiscal year, peaking in January 2021.

A significant number of new COVID-19 cases continue to be reported, particularly in the U.S. These also include cases from new and emerging COVID-19 variants, which could have the potential to be more severe, spread more easily, require different treatments, or change the effectiveness of current vaccines.

However, vaccines which have met the U.S. Food and Drug Administration’s (“FDA’s”) standards for safety, effectiveness, and manufacturing quality needed to support Emergency Use Authorization (“EUA”), are currently being administered across the country, as further discussed below.

As of March 31, 2021, nearly 154 million doses of COVID-19 vaccines have been administered in the U.S. according to the CDC.

We conduct our 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 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.

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| • | 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; |

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

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.

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

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.

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

The increased volumes and revenue due to COVID-19 favorably impacted income from continuing operations before income taxes, but were mostly offset by increased variable labor costs, enhanced sterilization procedures to sanitize operating facilities, costs of personal protection equipment for our employees, and increased costs of transport as well as increased other operating expenses.

Additionally, as previously mentioned, decreased specialty drug volumes and demand challenges for primary care medical-surgical supplies weighed negatively on income from continuing operations before income taxes.

We also expanded temporary employee benefits and incentives targeted for our front-line employees to not only protect their safety, but to provide further support including additional medical benefits, emergency leave as well as added compensation.

The overall impact to income from continuing operations before income taxes from the favorable and unfavorable items mentioned above largely offset each other, however, impacts to future periods due to COVID-19 may differ based on future developments, including the duration and spread of the virus as well as potential seasonality of new outbreaks.

Overall operating margins were compressed due to higher pharmaceutical distribution volumes, shifts in product mix, higher demand by retail national accounts and increased operating expenses.

While there are signs of stress in both markets, we do not have an immediate need to access these markets and could use our revolving credit facility to meet any near-term liquidity needs.

We believe we have the ability to meet the covenants of our credit agreements.

We were able to maintain appropriate labor and overall vendor supply levels under the circumstances in the fourth quarter, despite challenges including higher sickness rates and service level issues with suppliers.

Supplier shortages and stock-outs for certain products have occurred in specific instances as demand in excess of supply escalated for certain items tied to the COVID-19 pandemic response, such as personal protective equipment and other preventive products.

The COVID-19 pandemic impacted our business operations and financial results beginning in the fourth quarter of 2020.

Additionally, responses from authorities and regulators at all levels of government may materially impact us in future periods.

We are vigorously defending ourselves against such claims and proceedings and are a party to discussions with the objective of achieving broad resolution of the remaining claims.

Because of the large number of parties involved, together with the novelty and complexity of the issues, for which there may be different considerations among the parties, we cannot predict the successful resolution through a negotiated settlement.

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| Loss on Debt Extinguishment | — | | | | — | | | | (122 | | ) | | NM | | | (100 | ) | |

The increase in revenues for 2019 was also due to our 2019 first quarter acquisition of Medical Specialties Distributors LLC (“MSD”), partially offset by loss of customers within our U.S. Pharmaceutical and Specialty Solutions segment.

The impact from COVID-19 increased revenues by less than 1% for the year ended March 31, 2020 and was primarily attributable to our U.S. Pharmaceutical and Specialty Solutions and European Pharmaceutical Solutions segments.

Gross profit increased due to market growth, partially offset by loss of customers.

These increases in 2019 were partially offset by the incremental government reimbursement reductions in the United Kingdom (“U.K.”), government imposed generic price cuts in Canada and the 2018 third quarter sale of our Enterprise Information Solutions (“EIS”) business.

| Research and development | 96 | | | | 71 | | | | 125 | | | | 35 | | | (43 | ) | |

| Gain from sale of business | — | | | | — | | | | (109 | | ) | | NM | | | (100 | ) | |

| Gain on healthcare technology net asset exchange, net | — | | | | — | | | | (37 | | ) | | NM | | | (100 | ) | |

2020

| • | SD&A includes opioid-related expenses of $232 million, primarily litigation and related expenses, including the second quarter settlement charge of $82 million recorded in connection with an agreement executed in December 2019 to settle all opioid-related claims filed by two Ohio counties; |

2019

| • | Goodwill impairment charges of $1.8 billion in our Retail Pharmacy (“RP”, formerly “Consumer Solutions”) and Pharmaceutical Distribution (“PD”, formerly “Pharmacy Solutions”) reporting units within the European Pharmaceutical Solutions segment. Of these impairment charges, $238 million was recognized upon the 2019 first quarter segment changes, which resulted in two new reporting units. The remaining charges primarily were due to declines in the reporting units’ estimated future cash flows and the selection of higher discount rates. These impairment charges generally were not deductible for income tax purposes. The declines in estimated future cash flows primarily were attributed to additional government reimbursement reductions and competitive pressures within the U.K. The risk of successfully achieving certain business initiatives was the primary factor in the use of a higher discount rate. At March 31, 2019, both RP and PD reporting units had no remaining goodwill balances; |

2018

| • | Goodwill impairment charges of $1.3 billion for the European Pharmaceutical Solutions segment and $455 million for Rexall Health. There were no tax benefits associated with these goodwill impairment charges. The impairments for Europe were triggered primarily by government reimbursement reductions in our retail business in the U.K. and a more competitive environment in France. The impairments for Rexall Health were primarily driven by significant generics reimbursement reductions across Canada and minimum wage increases in multiple provinces. At March 31, 2018, Rexall Health had no remaining goodwill related to our acquisition of Rexall Health; |

At March 31, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] we had [removed: $4.0 billion and $3.0] [added: $6.3] billion and [added: $4.0 billion, respectively,] 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: 2020] [added: 2021] and [removed: 2019] [added: 2020] of approximately [removed: $6.0] [added: $17] million and [removed: $4.0 million.][added: $6 million, respectively.]

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

The forward contracts and cross-currency swaps are [removed: designated] [added: intended] to reduce the income statement effects from fluctuations in foreign exchange rates and have been designated as cash flow hedges.

As of March 31, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] 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: $435] [added: $267] million and [removed: $581 million.][added: $435 million, respectively.]

Refer to Financial Note [removed: 18,] [added: 16,] “Hedging Activities,” for more information on our foreign currency forward contracts and cross-currency swaps.

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FINANCIAL REVIEW (Concluded)

[Table of Contents](#i08f9baf810c0412e93ea6effc6d22995_7)

McKESSON CORPORATION

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

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

[removed: The] [added: Commencing with the second quarter of 2021, the] Company operates its business [removed: through three] [added: in four] reportable segments: U.S. [removed: Pharmaceutical and Specialty] [added: Pharmaceutical, International, Medical-Surgical] Solutions, [removed: European Pharmaceutical Solutions] and [removed: Medical-Surgical Solutions.][added: Prescription Technology Solutions (“RxTS”).]

Our U.S. Pharmaceutical [removed: and Specialty Solutions] segment distributes branded, generic, specialty, biosimilar and over-the-counter (“OTC”) pharmaceutical [removed: drugs] [added: drugs,] and other healthcare-related products.

This segment provides practice management, technology, clinical [removed: support] [added: support,] and business solutions to community-based oncology and other specialty practices.

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

Our [removed: European Pharmaceutical Solutions] [added: International] segment provides distribution and services to wholesale, [removed: institutional] [added: institutional,] and retail customers in 13 European countries where we own, [removed: partner] [added: partner,] or franchise with retail [removed: pharmacies, as further described below.][added: pharmacies and operate through two businesses: Pharmaceutical Distribution and Retail Pharmacy.]

Our Medical-Surgical Solutions segment [removed: distributes medical-surgical supplies and provides logistics] [added: delivers medical-supply distribution, logistics, biomedical maintenance,] and other services to healthcare providers [removed: in] [added: across] the [removed: United States.][added: alternate-site spectrum.]

[removed: | • | McKesson Canada which provides] [added: Our operations in Canada, including Rexall retail pharmacies, support] better, safer [added: patient] care by delivering vital medicines, [removed: supplies] [added: supplies,] and information [removed: technologies] [added: technology solutions] throughout [removed: Canada and operates Rexall Health retail pharmacies; |][added: Canada.]

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

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

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

Our U.S. Pharmaceutical [removed: and Specialty Solutions] segment operates and serves customers through a network of [removed: 30] [added: 33] distribution centers, as well as a [removed: primary] [added: strategic] redistribution [removed: center] [added: center, a primary] and a [removed: strategic] [added: secondary] redistribution [removed: center, along with four third-party logistics sites within our McKesson Life Sciences business.][added: center.]

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

For example, we offer McKesson ConnectSM, an internet-based ordering system that provides item look-up and real-time inventory availability as well as ordering, purchasing, third-party [removed: reconciliation] [added: reconciliation,] and account management functionality.

To maximize distribution efficiency and effectiveness, we follow the Six Sigma methodology, which is an analytical approach that emphasizes setting high-quality objectives, collecting [removed: data] [added: data,] and analyzing results to a fine degree in order to improve processes, reduce [removed: costs] [added: costs,] and enhance service accuracy and safety.

We provide solutions to our customers including supply management technology, world-class marketing programs, managed care, repackaging [removed: products] [added: products,] and services to help them meet their business and quality goals.

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

[removed: | • |] [added: -] Central FillSM - Prescription refill service that enables pharmacies to more quickly refill prescriptions remotely, more [removed: accurately] [added: accurately,] and at a lower cost, while reducing inventory levels and improving customer service. [removed: |]

[removed: | • |] [added: -] Redistribution Centers - [removed: Two] [added: Three] facilities totaling over [removed: 830,000] [added: 930,000] square feet that offer access to inventory for single source warehouse purchasing, including pharmaceuticals and biologics. [removed: These distribution centers also provide the foundation for a two-tiered distribution network that supports best-in-class direct store delivery. |]

[removed: | • |] [added: -] McKesson SynerGx® - Generic pharmaceutical purchasing program and inventory management that helps pharmacies maximize their cost savings with a broad selection of generic drugs, competitive [removed: pricing] [added: pricing,] and one-stop shopping. [removed: |]

[removed: | • |] [added: -] Inventory Management - An integrated solution comprising forecasting software and automated replenishment technologies that reduce inventory-carrying costs. [removed: |]

[removed: | • |] [added: -] ExpressRx Track™ - Pharmacy automation solution featuring state-of-the-art robotics, upgraded [removed: imaging] [added: imaging,] and expanded vial capabilities, and industry-leading speed and accuracy in a small footprint. [removed: |]

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

[removed: | • |] Health Mart® [removed: - Health Mart® is a national network of more than 5,000 independently-owned pharmacies and is one of the industry’s most comprehensive pharmacy franchise programs. Health Mart®] provides franchisees support for managed care contracting, branding and local marketing solutions, the Health Mart private label line of products, merchandising [removed: solutions] [added: solutions,] and programs for enhanced patient support. [removed: |]

[removed: | • |] [added: -] Health Mart Atlas® - Comprehensive managed care and reconciliation assistance services that help independent pharmacies save time, access competitive reimbursement [removed: rates] [added: rates,] and improve cash flow. [removed: |]

[removed: | • |] [added: -] McKesson Reimbursement AdvantageSM (“MRA”) - MRA is one of the industry’s most comprehensive reimbursement optimization packages, comprising financial services (automated claim resubmission), analytic [removed: services] [added: services,] and customer care. [removed: |]

[removed: | • |] [added: -] McKesson OneStop Generics® - Generic pharmaceutical purchasing program that helps pharmacies maximize their cost savings with a broad selection of generic drugs, competitive [removed: pricing] [added: pricing,] and one-stop shopping. [removed: |]

[removed: | • |] [added: -] Sunmark® - Complete line of [removed: more than 600] products that provide retail independent pharmacies with value-priced alternatives to national brands. [removed: |]

[removed: | • |] [added: -] FrontEdge™ - Strategic planning, [removed: merchandising] [added: merchandising,] and price maintenance program that helps independent pharmacies maximize store profitability. [removed: |]

[removed: | • |] [added: -] McKesson Sponsored Clinical Services [removed: (SCS)] [added: (“SCS”)] Network - Access to patient-support services that allow pharmacists to earn service fees and to develop stronger patient relationships. [removed: |]

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

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

[removed: | • |] [added: -] Fulfill-RxSM - Ordering and inventory management system that empowers hospitals to optimize the often complicated processes related to unit-based cabinet replenishment and inventory management. [removed: |]

[removed: | • |] [added: -] Asset Management - Award-winning inventory optimization and purchasing management program that helps institutional providers lower costs while ensuring product availability. [removed: |]

[removed: | • |] [added: -] SKY Packaging - Blister, Unit of [removed: Use] [added: Use,] and Unit dose packaging containing the most widely prescribed dosages and strengths in generic oral-solid [removed: medications. SKY Packaging enables acute care, long-term care] and [removed: institutional pharmacies to provide cost-effective, uniform packaging. |][added: liquid medications.]

[removed: | • |] [added: -] McKesson Plasma and Biologics - A full portfolio of plasma-derivatives and biologic products. [removed: |]

[removed: | • |] [added: -] McKesson OneStop Generics® - Described above. [removed: |]

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

The Company’s equity method investment in Change Healthcare LLC (“Change Healthcare JV”), which was split-off from McKesson in the fourth quarter of 2020, has been included in Other for retrospective periods presented.

Our International segment provides distribution and services to wholesale, institutional, and retail customers in 13 European countries and Canada where we own, partner or franchise with retail pharmacies, and support better, safer patient care by delivering vital medicines, supplies, and information technology solutions.

Our Medical-Surgical Solutions segment provides medical-surgical supply distribution, logistics, and other services to healthcare providers, including physician offices, surgery centers, nursing homes, hospital reference labs, and home health care agencies.

We offer more than 275,000 national brand medical-surgical products as well as McKesson’s own line of high-quality products through a network of distribution centers within the United States (“U.S.”).

Our RxTS segment brings together CoverMyMeds, RelayHealth, RxCrossroads, and McKesson Prescription Automation, including Multi-Client Central Fill as a Service, to serve our biopharma and life sciences partners and patients.

Together, we work across the healthcare delivery system to connect pharmacies, providers, payers, and biopharma for next-generation patient access and adherence solutions that help people get the medicine they need to live healthier lives.

These distribution centers also provide the foundation for a two-tiered distribution network that supports best-in-class direct store delivery.

- Health Mart® - Health Mart® is a national network of approximately 5,000 independently-owned pharmacies and is one of the industry’s most comprehensive pharmacy franchise programs.

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SKY Packaging enables acute care, long-term care, and institutional pharmacies to provide cost-effective, uniform packaging.

*Provider Solutions:*

Additionally, to support the U.S. efforts to fight the coronavirus disease 2019 (“COVID-19”) pandemic, this segment is distributing the COVID-19 vaccines manufactured by ModernaTX, Inc. and Janssen Biotech Inc., a Janssen pharmaceutical company of Johnson & Johnson, at the direction of the U.S. government.

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This segment includes our Ontada business, providing software to support the clinical, financial, and operational needs of our oncology practice partners.

Ontada also partners with oncology providers and biopharma partners to perform real-world evidence studies, retrospective research, and to provide clinical data insights, advisory solutions and education opportunities.

This segment also offers solutions which enable its customers to drive greater efficiencies in their day to day operations, effectively managing their inventories and complying with complex government regulations.

Solutions include McKesson Pharmacy Systems, MacroHelix and Supply Logix, all of which provide innovative software technology and services that support retail pharmacies and hospitals.

International Segment:

Additionally, McKesson Canada provides comprehensive specialty health services to Canadians, including a national network of specialty pharmacies, personalized patient care and support programs, and INVIVA, Canada’s first and largest accredited network of private infusion clinics.

McKesson Canada also owns and operates Well.ca, a leading Canadian online health and wellness retailer.

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Additionally, under a contract with the Department of Health and Human Services (“HHS”), McKesson’s Medical-Surgical business leverages its expertise to manage the assembly of supply kits needed to administer COVID-19 vaccines, as well as some of the sourcing of those supplies.

The kits are being produced and distributed at the direction of HHS to support the administration of all vaccines approved in the U.S.

Prescription Technology Solutions Segment:

Our Prescription Technology Solutions segment works across the healthcare delivery system to connect pharmacies, providers, payers, and biopharma for next generation patient access and adherence solutions and operates primarily through the following businesses:

- CoverMyMeds – Provides solutions to help patients get the medications they need to live healthy lives by seamlessly connecting the healthcare network to improve medication access; thereby increasing speed to therapy and reducing prescription abandonment.

By facilitating appropriate access to medications, the company can help its customers avoid millions of dollars each year in administrative waste and avoidable medical spending caused by prescription abandonment.

- RelayHealth Pharmacy Solutions – Provides workflow solutions to connect key healthcare stakeholders with more than 50,000 U.S. retail pharmacies and processes more than 18 billion pharmacy transactions annually.

- RxCrossroads – Uses deep insights and innovative technology to help biopharma manufacturers thrive throughout the product lifecycle and create flexible, connected solutions that increase access, adherence, and safe use conditions for therapies and interventions.

- McKesson Prescription Automation (“MPA”) – Provides customized pharmacy automation technology that allows our partners to control costs, work faster, offer higher-quality products, and better serve patients.

- Multi-Client Central Fill as a Service – McKesson-owned pharmacy that utilizes MPA dispensing automation to enable low-cost fulfillment of up to 50,000 prescriptions daily for retail and independent pharmacy customers, new digital pharmacies, and manufacturers.

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Human Capital

Our vision for a healthier world begins with our employees, who strive to bring our mission to life every day.

As a company, we deliver programs that focus on improving employee health and wellness, creating opportunities for growth and development, and providing an inclusive workplace where our employees can reach their full potential.

*Diversity, Equity, and Inclusion (“DEI”):* At McKesson, we are committed to making DEI integral to everything we do, because we believe building a healthier future is everyone’s business.

We build successful teams by recruiting, developing, and retaining diverse talent and we recognize our culture of inclusion as an important element that drives long-term shareholder value.

During 2021, we appointed the newly created role of chief impact officer, who will drive our strategy and execution related to DEI as well as sustainability, environmental, social, and governance (“ESG”), and philanthropy.

At March 31, 2021, women and people of color represented the following:

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

This segment also provides solutions for life sciences companies including offering multiple distribution channels and clinical trial access to specific patient populations through our network of oncology physicians.

Other primarily consists of the following:

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

| • | 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. |

This segment also provides a range of solutions to oncology and other specialty practices operating in communities across the country, to pharmaceutical and biotechnology suppliers who manufacture specialty drugs and vaccines, and to payers and hospitals.

We have two core specialty business lines: Specialty Provider Organization and McKesson Life Sciences.

*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.

RxCrossroads provides a comprehensive suite of solutions for life sciences companies including program pharmacy services, third-party logistics (“3PL”), clinical trial support, patient assistance programs, access and adherence solutions, and other tailored services for pharmaceutical manufacturers.

In addition, we help life sciences companies minimize reimbursement challenges while offering affordable, safe access to therapies through Risk Evaluation and Mitigation Strategies (“REMS”) programs.

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.

European Pharmaceutical Solutions Segment:

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

Pharmaceutical and other healthcare-related products are stored at regional wholesale branches using technology-enabled management systems.

Our European business leverages its scale and provides innovative and effective medical care services to create enhanced customer value.

Our Medical-Surgical Solutions segment delivers medical-supply distribution, logistics, biomedical and other services to healthcare providers across the alternate-site spectrum.

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.

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

McKesson Canada also provides health information exchange solutions that streamline clinical and administrative communication.

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

This business supports our customers, with a comprehensive, expanded portfolio of solutions designed to help them drive business growth, realize greater business efficiencies, deliver high-quality care, enhance medication adherence and safety, and more effectively connect with other players in the pharmaceutical supply chain.

R&D costs were higher in 2018 prior to the sale of our Enterprise Information Solutions (“EIS”) business.

These and other risks and uncertainties are described herein and in other information contained in our publicly available SEC filings and press releases.

Certain legal proceedings in which we are involved are discussed in Financial Note [removed: 21,] [added: 19,] “Commitments and Contingent Liabilities,” to the consolidated financial statements appearing in this Annual Report on Form 10-K.

Disclosure of an environmental proceeding where a governmental agency is a party generally is included only if we expect monetary sanctions in the proceeding to exceed $1 million, unless otherwise material.

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

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

For the fiscal year [removed: ended March] [added: ended March] 31, [removed: 2020][added: 2021]

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

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

[removed: ][added: ]

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

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

6555 State Hwy [removed: 161,][added: 161,]

[removed: Irving, TX 75039][added: Irving, TX 75039]

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

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

| Common stock, $0.01 par value | [added: | |] MCK | [added: | |] New York Stock Exchange | [added: | |]

| 0.625% Notes due 2021 | [added: | |] MCK21A | [added: | |] New York Stock Exchange | [added: | |]

| 1.500% Notes due 2025 | [added: | |] MCK25 | [added: | |] New York Stock Exchange | [added: | |]

| 1.625% Notes due 2026 | [added: | |] MCK26 | [added: | |] New York Stock Exchange | [added: | |]

| 3.125% Notes due 2029 | [added: | |] MCK29 | [added: | |] New York Stock Exchange | [added: | |]

| Large accelerated filer | | [added: | | | |] ☒ | | [added: | | | |] Accelerated filer | | [added: | | | |] ☐ | [added: | |]

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

| | | | | [added: | | | | | | | |] Emerging growth company | | [added: | | | |] ☐ | [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: 2019,] [added: 2020,] was approximately [removed: $25] [added: $23.9] billion.

Number of shares of common stock outstanding on April 30, [removed: 2020: 161,853,218][added: 2021: 158,186,277]

Portions of the registrant’s Proxy Statement for its [removed: 2020] [added: 2021] Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K.

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| 1B. | [added: | |] [Unresolved Staff [removed: Comments](#s6F61D83B057757FAB0A05B50C2120F17)] [added: Comments](#i08f9baf810c0412e93ea6effc6d22995_19)] | [removed: [19](#s6F61D83B057757FAB0A05B50C2120F17)] | [added: | [24](#i08f9baf810c0412e93ea6effc6d22995_19) | | |]

| [removed: 3.] [added: 3] | [added: | |] [Legal [removed: Proceedings](#s301CC2EE20D55EB7B9695AAAB871E599)] [added: Proceedings](#i08f9baf810c0412e93ea6effc6d22995_25)] | [removed: [19](#s301CC2EE20D55EB7B9695AAAB871E599)] | [added: | [25](#i08f9baf810c0412e93ea6effc6d22995_25) | | |]

| [removed: 4.] [added: 4] | [added: | |] [Mine Safety [removed: Disclosures](#sD30835C34CC85A018CCBAC986C5F3D80)] [added: Disclosures](#i08f9baf810c0412e93ea6effc6d22995_28)] | [removed: [19](#sD30835C34CC85A018CCBAC986C5F3D80)] | [added: | [25](#i08f9baf810c0412e93ea6effc6d22995_28) | | |]

| | [added: | |] [Executive Officers of the [removed: Registrant](#s22A289B5493355AD8FB6EFDA6E9716E7)] [added: Registrant](#i08f9baf810c0412e93ea6effc6d22995_31)] | [removed: [20](#s22A289B5493355AD8FB6EFDA6E9716E7)] | [added: | [26](#i08f9baf810c0412e93ea6effc6d22995_31) | | |]

| [removed: 5.] [added: 5] | [added: | |] [Market for the Registrant's Common Equity, Related Stockholder Matters [removed: and](#s801F5F87AFF6560EA086BE778D3913A8)] [added: and](#i08f9baf810c0412e93ea6effc6d22995_37)] [Issuer Purchases of Equity [removed: Securities](#s801F5F87AFF6560EA086BE778D3913A8)] [added: Securities](#i08f9baf810c0412e93ea6effc6d22995_37)] | [removed: [21](#s801F5F87AFF6560EA086BE778D3913A8)] | [added: | [27](#i08f9baf810c0412e93ea6effc6d22995_37) | | |]

| 7. | [added: | |] [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s87A7D74FA7DB51E78A9369C394015F22)] [added: Operations](#i08f9baf810c0412e93ea6effc6d22995_43)] | [removed: [25](#s87A7D74FA7DB51E78A9369C394015F22)] | [added: | [29](#i08f9baf810c0412e93ea6effc6d22995_43) | | |]

| 7A. | [added: | |] [Quantitative and Qualitative Disclosures About Market [removed: Risk](#s3C8831496CEC5719B10AB976BC12B178)] [added: Risk](#i08f9baf810c0412e93ea6effc6d22995_73)] | [removed: [49](#s3C8831496CEC5719B10AB976BC12B178)] | [added: | [61](#i08f9baf810c0412e93ea6effc6d22995_73) | | |]

| [removed: 8.] [added: 8] | [added: | |] [Financial Statements and Supplementary [removed: Data](#s09BBC21C6931591880852C5E352AFC65)] [added: Data](#i08f9baf810c0412e93ea6effc6d22995_76)] | [removed: [50](#s09BBC21C6931591880852C5E352AFC65)] | [added: | [63](#i08f9baf810c0412e93ea6effc6d22995_76) | | |]

| [removed: 9.] [added: 9] | [added: | |] [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#sFD49E1DDE6595B619591A0A3B9B7B1B2)] [added: Disclosure](#i08f9baf810c0412e93ea6effc6d22995_241)] | [removed: [126](#sFD49E1DDE6595B619591A0A3B9B7B1B2)] | [added: | [139](#i08f9baf810c0412e93ea6effc6d22995_241) | | |]

| 9A. | [added: | |] [Controls and [removed: Procedures](#s9365B042DD24545A8E87C3D6DE0B6C04)] [added: Procedures](#i08f9baf810c0412e93ea6effc6d22995_244)] | [removed: [126](#s9365B042DD24545A8E87C3D6DE0B6C04)] | [added: | [139](#i08f9baf810c0412e93ea6effc6d22995_244) | | |]

| | [removed: [PART III](#sF330981C5B9651F3B2CFB4837D159F1E)] | | [added: [PART III](#i08f9baf810c0412e93ea6effc6d22995_250) | | | | | |]

| 10. | [added: | |] [Directors, Executive Officers and Corporate [removed: Governance](#s9EFAC1B7ED3952D3ABE58030EDD43BD5)] [added: Governance](#i08f9baf810c0412e93ea6effc6d22995_253)] | [removed: [127](#s9EFAC1B7ED3952D3ABE58030EDD43BD5)] | [added: | [139](#i08f9baf810c0412e93ea6effc6d22995_253) | | |]

| 12. | [added: | |] [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s615CD25BB7755DCB9467BF23DE4E421F)] [added: Matters](#i08f9baf810c0412e93ea6effc6d22995_259)] | [removed: [127](#s615CD25BB7755DCB9467BF23DE4E421F)] | [added: | [140](#i08f9baf810c0412e93ea6effc6d22995_259) | | |]

| 13. | [added: | |] [Certain Relationships and Related Transactions and Director [removed: Independence](#s41816C3C474B5EC0A7C801EC2DBAD304)] [added: Independence](#i08f9baf810c0412e93ea6effc6d22995_262)] | [removed: [129](#s41816C3C474B5EC0A7C801EC2DBAD304)] | [added: | [141](#i08f9baf810c0412e93ea6effc6d22995_262) | | |]

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[Table of Contents](#i08f9baf810c0412e93ea6effc6d22995_7)

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| | | | [PART I](#i08f9baf810c0412e93ea6effc6d22995_10) | | | | | |

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| 1 | | | [Business](#i08f9baf810c0412e93ea6effc6d22995_13) | | | [3](#i08f9baf810c0412e93ea6effc6d22995_13) | | |

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| 2 | | | [Properties](#i08f9baf810c0412e93ea6effc6d22995_22) | | | [25](#i08f9baf810c0412e93ea6effc6d22995_22) | | |

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| | | | [PART II](#i08f9baf810c0412e93ea6effc6d22995_34) | | | | | |

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| 6. | | | [Reserved](#i08f9baf810c0412e93ea6effc6d22995_2579) | | | [29](#i08f9baf810c0412e93ea6effc6d22995_2579) | | |

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| 9B. | | | [Other Information](#i08f9baf810c0412e93ea6effc6d22995_247) | | | [139](#i08f9baf810c0412e93ea6effc6d22995_247) | | |

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| | [PART I](#s164CFD62F9565399A5127771229BB13D) | |

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

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

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

| 6. | [Selected Financial Data](#s3D15CDF5E4145D9787F0748A055437EE) | [23](#s3D15CDF5E4145D9787F0748A055437EE) |

| 9B. | [Other Information](#sE66A926F05FA5C629D97D1F9F949DD22) | [126](#sE66A926F05FA5C629D97D1F9F949DD22) |

| 11. | [Executive Compensation](#sFCD7BAAAD3B0544EA2A0A5385F6E56A0) | [127](#sFCD7BAAAD3B0544EA2A0A5385F6E56A0) |

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

| 16. | [Form 10-K Summary](#s5BD56059887F5AAC9C9D4FB67524DCA5) | [130](#s5BD56059887F5AAC9C9D4FB67524DCA5) |

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

[Table of Contents](#i08f9baf810c0412e93ea6effc6d22995_7)

McKESSON CORPORATION

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[removed: The warehouses and retail] [added: Retail] pharmacies [added: and most warehouses] are typically owned or leased on a long-term basis.

Information as to material lease commitments is included in Financial Note [removed: 13,] [added: 11,] “Leases,” to the consolidated financial statements appearing in this Annual Report on Form 10-K.

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[removed: [Table] [added: [Table] of [removed: Contents](#s8AE717A86E6C5AD0BF7B80E343BCFC51)][added: Contents](#i08f9baf810c0412e93ea6effc6d22995_7)]

The executive officers are elected on an annual basis generally and their term expires at the first meeting of the Board of Directors (“Board”) following the annual meeting of stockholders, or until their successors are elected and have qualified, or until death, [removed: resignation] [added: resignation,] or removal, whichever is sooner.

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

| Brian S. Tyler | | [removed: 53] | | [added: | | 54 | | | | | |] 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: 23] [added: 24] years. | [added: | |]

| Britt J. Vitalone | | [removed: 51] | | [added: | | 52 | | | | | |] 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: 14] [added: 15] years. | [added: | |]

| Tracy Faber | | [removed: 50] | | [added: | | 51 | | | | | |] Executive Vice President and Chief Human Resources Officer since October 2019. Previously, Senior Vice President of Human Resources. Service with the Company - [removed: 9] [added: 10] years. | [added: | |]

| Nancy Flores | | [removed: 53] | | [added: | | 54 | | | | | |] 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 - [removed: less than] 1 year. | [added: | |]

| Lori A. Schechter | | [removed: 58] | | [added: | | 59 | | | | | |] Executive Vice President, Chief Legal Officer 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: 8] [added: 9] years. | [added: | |]

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| Tom Rodgers | | | | | | 50 | | | | | | Executive Vice President, Chief Strategy Officer since June 2020. Previously Senior Vice President and Managing Director of McKesson Ventures from 2014-2020. Service with the Company - 7 years. | | |

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[Table of Contents](#i08f9baf810c0412e93ea6effc6d22995_7)

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

[removed: | (b) |] *Holders:* The number of record holders of our common stock at March 31, [removed: 2020] [added: 2021] was approximately [removed: 5,034. |][added: 4,841.]

[removed: | (c) |] *Dividends:* In July [removed: 2019,] [added: 2020,] our quarterly dividend was raised from [removed: $0.39 to] $0.41 [added: to $0.42] per common share for dividends declared on or after such date by the Board. [removed: We declared regular cash dividends of $1.62 and $1.51 per share in the years ended March 31, 2020 and 2019. |]

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

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

[removed: | (e) | *Share Repurchase 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 [removed: our] [added: the Company’s] stock price, corporate and regulatory requirements, restrictions under [removed: our] [added: the Company’s] debt [removed: obligations] [added: obligations,] and other market and economic conditions. [removed: |]

Accordingly, our retained earnings and additional paid-in capital were reduced by $472 million and $70 [removed: million] [added: million, respectively,] during 2019.

[removed: [Table] [added: [Table] of [removed: Contents](#s8AE717A86E6C5AD0BF7B80E343BCFC51)][added: Contents](#i08f9baf810c0412e93ea6effc6d22995_7)]

The following table provides information on our share repurchases during the fourth quarter of [removed: 2020:][added: 2021:]

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

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

| [removed: January 1, 2020 - January] [added: Balance, March] 31, [removed: 2020] [added: 2020] | [removed: —] | | | [removed: $] | [removed: —] | | | [removed: —] | | | [removed: $] | [added: | | | | | |] 1,535 | | [added: |]

[removed: | (f) |] *Stock Price Performance Graph: The following graph compares the cumulative total stockholder return on our common stock for the periods indicated with the Standard & Poor’s 500 Index and the S&P 500 Health Care Index. [removed: 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: ]

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

| | [removed: 2015] | | [added: 2016] | | [removed: 2016] | | | | 2017 | | | | [added: | |] 2018 | | | | [added: | |] 2019 | | | | [added: | |] 2020 | | | [added: | | | 2021 | | |]

| * Assumes $100 invested in McKesson Common Stock and in each index on March 31, [removed: 2015] [added: 2016] and that all dividends are reinvested. | | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | |]

We declared regular cash dividends of $1.67 and $1.62 per share in the years ended March 31, 2021 and 2020, respectively.

*Share Repurchase 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 combinations of such methods, any of which may use pre-arranged trading plans that are designed to meet the requirements of Rule 10b5-1(c) of the Securities Exchange Act of 1934.

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| *(In millions, except price per share data)* | | | | | | Total Number of Shares Purchased (2) | | | | | | Average Price Paid Per Share | | | | | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs | | |

| Balance, March 31, 2018 | | | | | | | | | | | | | | | | | | $ | 1,096 | |

| Shares repurchase plans authorized in May 2018 | | | | | | | | | | | | | | | | | | 4,000 | | |

| Shares repurchased - Open market | | | | | | 10.4 | | | | | | $ | 132.14 | | | | | (1,377) | | |

| Shares repurchased - ASR | | | | | | 2.1 | | | | | | $ | 117.98 | | | | | (250) | | |

| Balance, March 31, 2019 | | | | | | | | | | | | | | | | | | 3,469 | | |

| Shares repurchased - Open market | | | | | | 9.2 | | | | | | $ | 144.68 | | | | | (1,334) | | |

| Shares repurchased - ASR | | | | | | 4.7 | | | | | | $ | 127.68 | | | | | (600) | | |

| Shares repurchase plans authorized in January 2021 | | | | | | | | | | | | | | | | | | 2,000 | | |

| Shares repurchased - Open market (3) | | | | | | 4.7 | | | | | | $ | 160.33 | | | | | (750) | | |

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| Balance, March 31, 2021 | | | | | | | | | | | | | | | | | | $ | 2,785 | |

(1)This table does not include the value of equity awards surrendered to satisfy tax withholding obligations.

It also excludes shares related to our Split-off of the Change Healthcare JV as described in Financial Note 20, “Stockholders' Equity” to the accompanying consolidated financial statements included in this Annual Report on Form 10-K.

(2)The number of shares purchased reflects rounding adjustments.

(3)$8 million was accrued within “Other accrued liabilities” on our Consolidated Balance Sheet as of March 31, 2021 for share repurchases that were executed in late March and settled in early April.

| | | | Share Repurchases (1) | | | | | | | | | | | | | | | | | | | | |

| January 1, 2021 - January 31, 2021 | | | 0.4 | | | | | | $ | 181.50 | | | | | 0.4 | | | | | | $ | 2,958 | |

| February 1, 2021 - February 28, 2021 | | | 0.4 | | | | | | 180.56 | | | | | | 0.4 | | | | | | 2,880 | | |

| March 1, 2021 - March 31, 2021 | | | 0.5 | | | | | | 184.68 | | | | | | 0.5 | | | | | | 2,785 | | |

| Total | | | 1.3 | | | | | | | | | | | | 1.3 | | | | | | | | |

(1)This table does not include the value of equity awards surrendered to satisfy tax withholding obligations.

[Table of Contents](#i08f9baf810c0412e93ea6effc6d22995_7)

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.

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| McKesson Corporation | | | $ | 100.00 | | | | | $ | 95.30 | | | | | $ | 91.37 | | | | | $ | 75.92 | | | | | $ | 89.37 | | | | | $ | 131.03 | |

| S&P 500 Index | | | $ | 100.00 | | | | | $ | 117.17 | | | | | $ | 133.57 | | | | | $ | 146.25 | | | | | $ | 136.05 | | | | | $ | 212.71 | |

| S&P 500 Health Care Index | | | $ | 100.00 | | | | | $ | 111.59 | | | | | $ | 124.17 | | | | | $ | 142.66 | | | | | $ | 141.21 | | | | | $ | 189.28 | |

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In 2018, we repurchased 3.5 million 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 our common stock.

As of March 31, 2018, we completed and received a total of 1.5 million shares under the June 2017 ASR program and a total of 2.7 million shares under the August 2017 ASR program.

In addition, we received 2.5 million shares representing the initial number of shares due in March 2018 and an additional 1.0 million shares in the first quarter of 2019.

The March 2018 ASR program was completed at an average price per share of $143.66 during the first quarter of 2019.

The total authorization outstanding for repurchase of our common stock was $1.1 billion at March 31, 2018.

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

The total authorization outstanding for repurchases of our common stock was increased to $5.1 billion at that time.

During 2019, we repurchased 10.4 million shares for $1.4 billion through open market transactions at an average price per share of $132.14.

In December 2018, we entered into an ASR program with a third-party financial institution to repurchase $250 million of our common stock.

The total number of shares repurchased under this ASR program was 2.1 million shares at an average price per share of $117.98.

The total authorization outstanding for repurchase of our common stock was $3.5 billion at March 31, 2019.

In 2020, we repurchased 9.2 million shares for $1.3 billion through open market transactions at an average price per share of $144.68.

In May 2019, we entered into an ASR program with a third-party financial institution to repurchase $600 million of our common stock.

The total number of shares repurchased under this ASR program was 4.7 million shares at an average price per share of $127.68.

The total authorization outstanding for repurchase of our common stock was $1.5 billion at March 31, 2020.

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| 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 | | | | | |

| (1) | This table does not include shares tendered to satisfy the exercise price in connection with cashless exercises of employee stock options or shares tendered to satisfy tax-withholding obligations in connection with employee equity awards. |

| (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 | |

FIVE-YEAR HIGHLIGHTS

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

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

| | As of and for the Years Ended March 31, | | | | | | | | | | | | | | | | | | | |

| *(In millions, except per share data and ratios)* | | 2020 | | | | 2019 | | | | 2018 | | | | 2017 | | | | 2016 | | |

| Operating Results | | | | | | | | | | | | | | | | | | | | |

| Revenues | | $ | 231,051 | | | $ | 214,319 | | | $ | 208,357 | | | $ | 198,533 | | | $ | 190,884 | |

| Percent change | | 7.8 | | % | | 2.9 | | % | | 4.9 | | % | | 4.0 | | % | | 6.6 | | % |

| Gross profit | | $ | 12,023 | | | $ | 11,754 | | | $ | 11,184 | | | $ | 11,271 | | | $ | 11,416 | |

| Percent change | | 2.3 | | % | | 5.1 | | % | | (0.8 | | )% | | (1.3 | | )% | | — | | % |

| Income from continuing operations before income taxes (1) | | $ | 1,144 | | | $ | 610 | | | $ | 239 | | | $ | 6,861 | | | $ | 3,250 | |

| Income (Loss) after income taxes | | | | | | | | | | | | | | | | | | | | |

| Continuing operations (1) | | 1,126 | | | | 254 | | | | 292 | | | | 5,277 | | | | 2,342 | | |

| Discontinued operations | | (6 | | ) | | 1 | | | | 5 | | | | (124 | | ) | | (32 | | ) |

| Net income | | 1,120 | | | | 255 | | | | 297 | | | | 5,153 | | | | 2,310 | | |

| Net income attributable to noncontrolling interests (2) | | (220 | | ) | | (221 | | ) | | (230 | | ) | | (83 | | ) | | (52 | | ) |

| Net income attributable to McKesson Corporation (1) | | 900 | | | | 34 | | | | 67 | | | | 5,070 | | | | 2,258 | | |

| Financial Position | | | | | | | | | | | | | | | | | | | | |

| Working capital | | $ | (402 | ) | | $ | 839 | | | $ | 451 | | | $ | 1,336 | | | $ | 3,366 | |

| Days sales outstanding for: (3) | | | | | | | | | | | | | | | | | | | | |

| Customer receivables | | 26 | | | | 26 | | | | 25 | | | | 27 | | | | 28 | | |

| Inventories | | 27 | | | | 31 | | | | 30 | | | | 30 | | | | 32 | | |

| Drafts and accounts payable | | 61 | | | | 62 | | | | 60 | | | | 61 | | | | 59 | | |

| Total assets | | $ | 61,247 | | | $ | 59,672 | | | $ | 60,381 | | | $ | 60,969 | | | $ | 56,523 | |

| Total debt, including finance lease obligations (4) | | 7,387 | | | | 7,595 | | | | 7,880 | | | | 8,545 | | | | 8,114 | | |

| Total McKesson stockholders’ equity (5) | | 5,092 | | | | 8,094 | | | | 9,804 | | | | 11,095 | | | | 8,924 | | |

| Payments for property, plant and equipment | | 362 | | | | 426 | | | | 405 | | | | 404 | | | | 488 | | |

| Acquisitions, net of cash, cash equivalents and restricted cash acquired | | 133 | | | | 905 | | | | 2,893 | | | | 4,212 | | | | 40 | | |

| Common Share Information | | | | | | | | | | | | | | | | | | | | |

| Common shares outstanding at year-end | | 162 | | | | 190 | | | | 202 | | | | 211 | | | | 225 | | |

| Shares on which earnings per common share were based | | | | | | | | | | | | | | | | | | | | |

| Diluted | | 182 | | | | 197 | | | | 209 | | | | 223 | | | | 233 | | |

| Basic | | 181 | | | | 196 | | | | 208 | | | | 221 | | | | 230 | | |

| Diluted earnings (loss) per common share attributable to McKesson Corporation (5) | | | | | | | | | | | | | | | | | | | | |

| Continuing operations | | $ | 4.99 | | | $ | 0.17 | | | $ | 0.30 | | | $ | 23.28 | | | $ | 9.84 | |

| Discontinued operations | | (0.04 | | ) | | — | | | | 0.02 | | | | (0.55 | | ) | | (0.14 | | ) |

| Total | | 4.95 | | | | 0.17 | | | | 0.32 | | | | 22.73 | | | | 9.70 | | |

| Cash dividends declared | | 294 | | | | 298 | | | | 270 | | | | 249 | | | | 249 | | |

| Cash dividends declared per common share | | 1.62 | | | | 1.51 | | | | 1.30 | | | | 1.12 | | | | 1.08 | | |

| Book value per common share (6) (7) | | 31.43 | | | | 42.60 | | | | 48.53 | | | | 52.58 | | | | 39.66 | | |

| | [added: | |] Page | [added: | |]

| [Management's Annual Report on Internal Control Over Financial [removed: Reporting](#s45090DF6950452E4980BB4D7716717A8)] [added: Reporting](#i08f9baf810c0412e93ea6effc6d22995_79)] | [removed: [51](#s45090DF6950452E4980BB4D7716717A8)] | [added: | [64](#i08f9baf810c0412e93ea6effc6d22995_79) | | |]

| [Report of Independent Registered Public Accounting [removed: Firm](#s2FFCD0ADFFA357F3AF1E8B5BF22C9554)] [added: Firm](#i08f9baf810c0412e93ea6effc6d22995_82)] | [removed: [52](#s2FFCD0ADFFA357F3AF1E8B5BF22C9554)] | [added: | [65](#i08f9baf810c0412e93ea6effc6d22995_82) | | |]

| Consolidated Financial Statements: | | [added: | | | |]

| [Consolidated Statements of Operations for the years ended March 31, [removed: 2020, 2019 and 2018](#s65B437B169C75D6DB361836AC4482894)] [added: 2021, 2020](#i08f9baf810c0412e93ea6effc6d22995_85)[,](#i08f9baf810c0412e93ea6effc6d22995_85) [and 2019](#i08f9baf810c0412e93ea6effc6d22995_85)] | [removed: [57](#s65B437B169C75D6DB361836AC4482894)] | [added: | [70](#i08f9baf810c0412e93ea6effc6d22995_85) | | |]

| [Consolidated Statements of Comprehensive [removed: Income for] [added: Income](#i08f9baf810c0412e93ea6effc6d22995_88) [(Loss)](#i08f9baf810c0412e93ea6effc6d22995_88) [for] the years ended March 31, [removed: 2020, 2019 and 2018](#sDD1BCAFAA0B75AFABCD7AEB4E3562064)] [added: 2021, 2020](#i08f9baf810c0412e93ea6effc6d22995_88)[,](#i08f9baf810c0412e93ea6effc6d22995_88) [and 2019](#i08f9baf810c0412e93ea6effc6d22995_88)] | [removed: [58](#sDD1BCAFAA0B75AFABCD7AEB4E3562064)] | [added: | [71](#i08f9baf810c0412e93ea6effc6d22995_88) | | |]

| [Consolidated Balance Sheets as of March 31, [removed: 2020] [added: 2021] and [removed: 2019](#s3107115540045ADBA7D67C609924B6B9)] [added: 2020](#i08f9baf810c0412e93ea6effc6d22995_91)] | [removed: [59](#s3107115540045ADBA7D67C609924B6B9)] | [added: | [72](#i08f9baf810c0412e93ea6effc6d22995_91) | | |]

| [Consolidated Statements of Stockholders’ Equity for the years ended March 31, [removed: 2020, 2019 and 2018](#s3C845E17B6AE561CB038822AABED2334)] [added: 2021, 2020](#i08f9baf810c0412e93ea6effc6d22995_97)[,](#i08f9baf810c0412e93ea6effc6d22995_97) [and 2019](#i08f9baf810c0412e93ea6effc6d22995_97)] | [removed: [60](#s3C845E17B6AE561CB038822AABED2334)] | [added: | [73](#i08f9baf810c0412e93ea6effc6d22995_97) | | |]

| [Consolidated Statements of Cash Flows for the years ended March 31, [removed: 2020, 2019 and 2018](#s1EA3D1405E5A515C9B422A7B7665F9DE)] [added: 2021, 2020](#i08f9baf810c0412e93ea6effc6d22995_103)[,](#i08f9baf810c0412e93ea6effc6d22995_103) [and 2019](#i08f9baf810c0412e93ea6effc6d22995_103)] | [removed: [61](#s1EA3D1405E5A515C9B422A7B7665F9DE)] | [added: | [74](#i08f9baf810c0412e93ea6effc6d22995_103) | | |]

| [Financial [removed: Notes](#sFDC7F65C03045D74BF3631026AD9426B)] [added: Notes](#i08f9baf810c0412e93ea6effc6d22995_106)] | [removed: [62](#sFDC7F65C03045D74BF3631026AD9426B)] | [added: | [75](#i08f9baf810c0412e93ea6effc6d22995_106) | | |]

[removed: [Table] [added: [Table] of [removed: Contents](#s8AE717A86E6C5AD0BF7B80E343BCFC51)][added: Contents](#i08f9baf810c0412e93ea6effc6d22995_7)]

Based on this assessment, our management has concluded that our internal control over financial reporting was effective as of March 31, [removed: 2020.][added: 2021.]

Deloitte & Touche LLP, an independent registered public accounting firm, audited the financial statements included in this Annual Report on Form 10-K and has also audited the effectiveness of the Company’s internal control over financial reporting as of March 31, [removed: 2020.][added: 2021.]

This audit report appears on [added: the following] page [removed: 52] of this Annual Report on Form 10-K.

| /s/ Brian S. Tyler | [added: | |]

| Brian S. Tyler | [added: | |]

| Chief Executive Officer | [added: | |]

| (Principal Executive Officer) | [added: | |]

| /s/ Britt J. Vitalone | [added: | |]

| Britt J. Vitalone | [added: | |]

| Executive Vice President and Chief Financial Officer | [added: | |]

| (Principal Financial Officer) | [added: | |]

We have audited the accompanying consolidated balance sheets of McKesson Corporation and subsidiaries (the “Company”) as of March 31, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] the related consolidated statements of operations, comprehensive [removed: income,] [added: income (loss),] stockholders’ equity, and cash flows, for each of the three years in the period ended March 31, [removed: 2020,] [added: 2021,] and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”).

We also have audited the Company’s internal control over financial reporting as of March 31, [removed: 2020,] [added: 2021,] based on criteria established in *Internal Control — Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] and the results of its operations and its cash flows for each of the three years in the period ended March 31, [removed: 2020,] [added: 2021,] in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, [removed: 2020,] [added: 2021,] based on criteria established in *Internal Control — Integrated Framework (2013)* issued by COSO.

As discussed in Note [removed: 13] [added: 11] to the financial statements, effective April 1, 2019, the Company adopted the Financial Accounting Standards Board’s (“FASB”) new standard related to leases using the modified retrospective basis.

Contingent Liabilities - [removed: Litigation and Claims involving Distribution] [added: Broad Settlement] of [removed: Controlled Substances] [added: Opioid Claims brought by Governmental Entities] - Refer to Note [removed: 21] [added: 1 and Note 19] to the financial statements

The plaintiffs in these actions include state attorneys general, county and municipal governments, hospitals, [removed: Indian tribes, pension] [added: tribal nations, health and welfare] funds, third-party payors and individuals.

Our audit procedures related to [removed: litigation and claims involving distribution] [added: the potential broad settlement] of [removed: controlled substances] [added: opioid claims] included the following, among others:

[removed: | • |] [added: -] We tested the effectiveness of internal controls related to [removed: management’s review of litigation and claims involving] the [removed: distribution] [added: potential broad settlement] of [removed: controlled substances,] [added: opioid claims,] and approval of the accounting treatment and related disclosures based on the most recent facts and circumstances. [removed: |]

[removed: | • |] [added: -] We inquired of the Company’s internal and external legal [removed: counsel] [added: counsel, as well as executives and other members of management,] to understand the basis for the Company’s conclusion that [removed: any potential] [added: a] loss [removed: from the litigation and claims involving the distribution of controlled substances, including through] [added: related to a potential] broad [removed: resolution via settlement,] [added: settlement of opioid claims,] is [removed: neither] probable [removed: nor] [added: and] reasonably estimable as of March 31, [removed: 2020. In addition, we requested and received a written response from internal and external legal counsel as it relates to litigation and claims involving the distribution of controlled substances. |][added: 2021.]

[removed: | • |] [added: -] We obtained written representations from executives and internal counsel of the Company. [removed: |]

[removed: | • |] [added: -] We [removed: read] [added: evaluated] the Company’s related disclosures [removed: and evaluated them] for consistency with our testing. [removed: |]

Goodwill - Refer to Note [removed: 14] [added: 1 and Note 12] to the financial statements

The goodwill balance was [removed: $9.4] [added: $9.5] billion as of March 31, [removed: 2020,] [added: 2021,] of which [removed: $1.4] [added: $1.5] billion was allocated to the McKesson Canada reporting unit.

[removed: | • |] [added: -] We tested the effectiveness of internal controls related to management’s goodwill impairment evaluation, including those related to the selection of a discount rate and consideration of an unsystematic risk premium. [removed: |]

[removed: | • |] [added: -] We evaluated management’s ability to accurately forecast operating results for the McKesson Canada reporting unit by comparing actual results to management’s historical forecasts, in order to consider the reasonableness and adequacy of management’s selected unsystematic risk premium. [removed: |]

[removed: | • |] [added: -] As part of our assessment of the unsystematic risk premium, we evaluated the reasonableness of strategic plans expected to be implemented during the forecast period by comparing the forecasts to: [removed: |]

[removed: | ◦ |] [added: -] Actual results of historical strategic plans [removed: |]

| [Note 1 - Significant Accounting Policies](#i08f9baf810c0412e93ea6effc6d22995_109) | | | [75](#i08f9baf810c0412e93ea6effc6d22995_109) | | |

| [Note 3 - Held for Sale](#i08f9baf810c0412e93ea6effc6d22995_121) | | | [85](#i08f9baf810c0412e93ea6effc6d22995_121) | | |

| [Note 4 - Restructuring, Impairment, and Related Charges](#i08f9baf810c0412e93ea6effc6d22995_127) | | | [86](#i08f9baf810c0412e93ea6effc6d22995_127) | | |

| [Note 5 - Business Acquisitions and Divestitures](#i08f9baf810c0412e93ea6effc6d22995_133) | | | [90](#i08f9baf810c0412e93ea6effc6d22995_133) | | |

| [Note 8 - Income Taxes](#i08f9baf810c0412e93ea6effc6d22995_145) | | | [96](#i08f9baf810c0412e93ea6effc6d22995_145) | | |

| [Note 9 - Redeemable Noncontrolling Interests and Noncontrolling Interests](#i08f9baf810c0412e93ea6effc6d22995_151) | | | [99](#i08f9baf810c0412e93ea6effc6d22995_151) | | |

| [Note 10 - Earnings per Common Share](#i08f9baf810c0412e93ea6effc6d22995_157) | | | [101](#i08f9baf810c0412e93ea6effc6d22995_157) | | |

| [Note 1](#i08f9baf810c0412e93ea6effc6d22995_166)[1](#i08f9baf810c0412e93ea6effc6d22995_166) [- Leases](#i08f9baf810c0412e93ea6effc6d22995_166) | | | [102](#i08f9baf810c0412e93ea6effc6d22995_166) | | |

| [Note 1](#i08f9baf810c0412e93ea6effc6d22995_172)[2](#i08f9baf810c0412e93ea6effc6d22995_172) [- Goodwill and Intangible Assets, Net](#i08f9baf810c0412e93ea6effc6d22995_172) | | | [106](#i08f9baf810c0412e93ea6effc6d22995_172) | | |

| [Note 1](#i08f9baf810c0412e93ea6effc6d22995_178)[3](#i08f9baf810c0412e93ea6effc6d22995_178) [- Debt and Financing Activities](#i08f9baf810c0412e93ea6effc6d22995_178) | | | [109](#i08f9baf810c0412e93ea6effc6d22995_178) | | |

| [Note 1](#i08f9baf810c0412e93ea6effc6d22995_184)[4](#i08f9baf810c0412e93ea6effc6d22995_184) [- Variable Interest Entities](#i08f9baf810c0412e93ea6effc6d22995_184) | | | [111](#i08f9baf810c0412e93ea6effc6d22995_184) | | |

| [Note 1](#i08f9baf810c0412e93ea6effc6d22995_190)[5](#i08f9baf810c0412e93ea6effc6d22995_190) [- Pension Benefits](#i08f9baf810c0412e93ea6effc6d22995_190) | | | [111](#i08f9baf810c0412e93ea6effc6d22995_190) | | |

| [Note 1](#i08f9baf810c0412e93ea6effc6d22995_196)[6](#i08f9baf810c0412e93ea6effc6d22995_196) [- Hedging Activities](#i08f9baf810c0412e93ea6effc6d22995_196) | | | [117](#i08f9baf810c0412e93ea6effc6d22995_196) | | |

| [Note 1](#i08f9baf810c0412e93ea6effc6d22995_202)[7](#i08f9baf810c0412e93ea6effc6d22995_202) [- Fair Value Measurements](#i08f9baf810c0412e93ea6effc6d22995_202) | | | [120](#i08f9baf810c0412e93ea6effc6d22995_202) | | |

| [Note](#i08f9baf810c0412e93ea6effc6d22995_208) [18](#i08f9baf810c0412e93ea6effc6d22995_208) [- Financial Guarantees and Warranties](#i08f9baf810c0412e93ea6effc6d22995_208) | | | [122](#i08f9baf810c0412e93ea6effc6d22995_208) | | |

| [Note](#i08f9baf810c0412e93ea6effc6d22995_214) [19](#i08f9baf810c0412e93ea6effc6d22995_214) [- Commitments and Contingent Liabilities](#i08f9baf810c0412e93ea6effc6d22995_214) | | | [123](#i08f9baf810c0412e93ea6effc6d22995_214) | | |

| [Note 2](#i08f9baf810c0412e93ea6effc6d22995_220)[0](#i08f9baf810c0412e93ea6effc6d22995_220) [- Stockholders' Equity](#i08f9baf810c0412e93ea6effc6d22995_220) | | | [130](#i08f9baf810c0412e93ea6effc6d22995_220) | | |

| [Note 2](#i08f9baf810c0412e93ea6effc6d22995_226)[1](#i08f9baf810c0412e93ea6effc6d22995_226) [- Related Party Balances and Transactions](#i08f9baf810c0412e93ea6effc6d22995_226) | | | [134](#i08f9baf810c0412e93ea6effc6d22995_226) | | |

| [Note 2](#i08f9baf810c0412e93ea6effc6d22995_229)[2](#i08f9baf810c0412e93ea6effc6d22995_229) [- Segments of Business](#i08f9baf810c0412e93ea6effc6d22995_229) | | | [134](#i08f9baf810c0412e93ea6effc6d22995_229) | | |

| [Note 2](#i08f9baf810c0412e93ea6effc6d22995_235)[3](#i08f9baf810c0412e93ea6effc6d22995_235) [- Quarterly Financial Information (Unaudited)](#i08f9baf810c0412e93ea6effc6d22995_235) | | | [138](#i08f9baf810c0412e93ea6effc6d22995_235) | | |

May 12, 2021

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

| | | |

[Table of Contents](#i08f9baf810c0412e93ea6effc6d22995_7)

[Table of Contents](#i08f9baf810c0412e93ea6effc6d22995_7)

The Company is in ongoing, advanced discussions with state attorneys general and plaintiffs’ representatives, who represent states, their political subdivisions and other government entities (“governmental entities”), regarding a framework under which the three largest U.S. pharmaceutical distributors would pay up to approximately $21.0 billion over a period of 18 years, with up to approximately $8.0 billion to be paid by the Company to resolve the claims brought by governmental entities (“broad settlement of opioid claims”).

For the year ended March 31, 2021, management believes that a loss through broad settlement of opioid claims brought by governmental entities is both probable and reasonably estimable, and accordingly, recorded a charge in the amount of $8.0 billion, which represents management’s best estimate of future loss related to these specific matters.

We identified the potential broad settlement of opioid claims as a critical audit matter because of the significant judgment and challenges auditing management’s determination of whether such loss is probable and reasonably estimable.

Specifically, auditing management’s determination and disclosure of whether the contingent loss arising from the potential broad settlement of opioid claims is probable, and the related measurement of such loss, is subjective and requires significant judgment given that the potential loss is based upon settlement terms that have not yet been finalized.

[Table of Contents](#i08f9baf810c0412e93ea6effc6d22995_7)

In addition, we inspected responses to inquiry letters sent to both internal and external legal counsel as it relates to the status of discussions with plaintiffs’ counsel and the Company’s intent regarding the framework for a potential broad settlement of opioid claims.

- We evaluated management’s analysis of the potential broad settlement of opioid claims, including the methodology used by management to determine the probability of such loss.

We also evaluated the methodology used by management to estimate the most likely loss to be incurred by the Company as a result of a potential broad settlement of opioid claims.

- We examined Board of Directors meeting minutes, including relevant sub-committee meeting minutes, held inquiries with a director serving on the sub-committee, and compared to internal and external counsel’s written responses to our inquiry letters.

- We performed public domain searches for evidence contrary to management’s analysis.

- With the assistance of our specialists in accounting for loss contingencies, we evaluated the facts, evidence and the Company’s related accounting treatment for the potential broad settlement of opioid claims.

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May 22, 2020

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| --- |

As of March 31, 2020, the Company has determined that a liability associated with these claims, whether through settlement or litigation, is not probable and a loss or range of loss is not reasonably estimable.

We identified litigation and claims involving the distribution of controlled substances as a critical audit matter because of the challenges auditing management’s judgments applied in determining the likelihood of loss related to the resolution of such claims.

Specifically, auditing management’s determination of whether any contingent loss arising from the related litigation and claims is probable, reasonably possible, or remote, and the related disclosures, is subjective and requires significant judgment due to the large number of parties involved, together with the novelty and complexity of the issues.

| • | We evaluated management’s analysis of litigation and claims involving the distribution of controlled substances, read Board of Directors meeting minutes, including relevant sub-committee meeting minutes, and compared to responses from internal and external counsel. As part of our procedures, we also performed public domain searches for evidence contrary to management’s analysis. |

| • | We compared the Company's assessment of this matter to relevant history of similar legal contingencies that have been settled or otherwise resolved to evaluate the consistency of the Company's assessment of litigation and claims involving the distribution of controlled substances at March 31, 2020. |

| • | We consulted with our auditing and accounting experts to assist in our evaluation of the case facts and the Company’s related accounting treatment for the litigation and claims involving the distribution of controlled substances. |

| • | We evaluated any events subsequent to March 31, 2020 that might impact our evaluation of litigation and claims involving the distribution of controlled substances, including any related accrual or disclosure. |

On March 10, 2020, the Company completed the previously announced separation of its interest in the Change Healthcare Joint Venture (“Joint Venture”).

Following consummation of the Split-off, on March 10, 2020 the Merger was consummated.

The Split-off and Merger are intended to be generally tax-free transactions for U.S. Federal income tax purposes.

Following the Split-off, the Company does not beneficially own any of Change’s outstanding securities.

We identified the classification of the Split-off and Merger as a tax-free transaction for US Federal income tax purposes to be a critical audit matter because of the complexity of the interpretation and application of the Internal Revenue Code (“Code”), the materiality of the potential tax consequences, and the need to involve our income tax specialists when performing audit procedures to evaluate the U.S. Federal taxability of the Split-Off and Merger.

Our audit procedures related to the evaluation of the U.S Federal taxability of the Split-Off and Merger included the following, among others:

| • | We tested the effectiveness of controls over management’s evaluation of the Split-Off and Merger as tax free for U.S. Federal income tax. |

| • | We inspected the opinion from the Company’s outside legal counsel and external tax advisor that management utilized in forming their conclusions on U.S. Federal taxability of the Split-off and Merger, including certain interpretations of the Code and related statutes. |

| • | We inspected meeting minutes of the Board of Directors and its committees, income tax filings, support from external advisors, historical financial results of the Company and the Joint Venture, and contracts associated with the Split-off and Merger for corroborating or contradictory evidence. |

| • | We obtained written representations from management concerning management’s intent associated with future transactions that could affect U.S. Federal taxability and we obtained representations made by Change management that it does not intend to cause any transactions that could affect the Company’s U.S. Federal taxability. |

| • | We assessed the key facts in the opinion from the Company’s outside legal counsel and tax advisor detailing the requirements under the Code and specifying how such requirements were met. |

| • | With the assistance of our income tax specialists, we evaluated management’s conclusion that the requirements were met to qualify the Split-Off and Merger as tax free for U.S. Federal income tax purposes. |

| May 22nd, 2020 |

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

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

| Research and development | (96 | | ) | | (71 | | ) | | (125 | | ) |

| Gain from sale of business | — | | | | — | | | | 109 | | |

| Gain on healthcare technology net asset exchange, net | — | | | | — | | | | 37 | | |

| Loss on Debt Extinguishment | — | | | | — | | | | (122 | | ) |

| Diluted | 182 | | | | 197 | | | | 209 | | |

| Basic | 181 | | | | 196 | | | | 208 | | |

*57*

*58*

| | | | | | | | |

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

| Other Noncurrent Assets | 2,258 | | | | 2,099 | | |

| Other Noncurrent Liabilities | 1,662 | | | | 2,103 | | |

*59*

| | |

| --- | --- |

There was no change in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our fourth quarter of [removed: 2020] [added: 2021] that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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| --- | --- |

[Table of Contents](#s8AE717A86E6C5AD0BF7B80E343BCFC51)

McKESSON CORPORATION

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| --- | --- |

Information about our Directors is incorporated by reference from the discussion under Item 1 of our Proxy Statement for the [removed: 2020] [added: 2021] Annual Meeting of Stockholders (the “Proxy Statement”) under the heading “Election of Directors.” Information about our Executive Officers is incorporated by reference from the discussion in Part I of this report under the heading “Information about our Executive Officers.” Information about our Audit Committee, including the members of the committee and our Audit Committee Financial Expert, is incorporated by reference from the discussion under [added: Item 1 of our Proxy Statement under] the headings [removed: “Audit Committee,”] [added: “The Board, Committees] and [added: Meetings,” and] “Audit Committee [removed: Report” in our Proxy Statement.][added: Report.”]

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[Table of Contents](#i08f9baf810c0412e93ea6effc6d22995_7)

McKESSON CORPORATION

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| --- | --- |

The following table sets forth information as of March 31, [removed: 2020] [added: 2021] with respect to the plans under which the Company’s common stock is authorized for issuance:

| *Plan [removed: Category* *(In] [added: Category (In] millions, except per share amounts)* | [added: | |] Number of [removed: securities to] [added: securities to] be issued [removed: upon exercise of outstanding options, warrants] [added: upon exercise of outstanding options, warrants] and rights | | [added: | | | |] Weighted-average exercise price of outstanding options, warrants and rights (1) | | | | [added: | |] Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column) | | [added: |]

| Equity compensation plans [added: not] approved by security holders | [removed: 4.8 (2)] | | [added: — | | | | | |] $ | [removed: 180.48] [added: —] | | | [removed: 23.1 (3)] | | [added: — | | |]

| Equity compensation plans [removed: not] approved by security holders | [removed: ­—] | | [added: 4.2 (2) | | | | | |] $ | [removed: —] [added: 183.29] | | | [removed: —] | | [added: 21.9 (3) | | |]

[removed: |] (1) [removed: |] The weighted-average exercise price set forth in this column is calculated excluding outstanding restricted stock unit (“RSU”) awards, since recipients are not required to pay an exercise price to receive the shares subject to these awards. [removed: |]

[removed: |] (2) [removed: |] Represents option and RSU awards outstanding under the following plans: (i) 1997 Non-Employee Directors’ Equity Compensation and Deferral Plan; (ii) the 2005 Stock Plan; and (iii) the 2013 Stock Plan. [removed: |]

[removed: |] (3) [removed: |] Represents [removed: 2,640,734] [added: 2.23 million] shares available for purchase under the 2000 Employee Stock Purchase Plan and [removed: 20,423,484] [added: 19.67 million] shares available for grant under the 2013 Stock Plan. [removed: |]

[removed: [Table] [added: [Table] of [removed: Contents](#s8AE717A86E6C5AD0BF7B80E343BCFC51)][added: Contents](#i08f9baf810c0412e93ea6effc6d22995_7)]

The 2013 Stock Plan permits the grant of awards in the form of stock options, stock appreciation rights, restricted stock (“RS”), restricted stock units (“RSUs”), performance-based restricted stock units (“PeRSUs”), performance [removed: shares] [added: shares,] and other share-based awards.

The number of shares reserved for issuance under the 2013 Stock Plan equals the sum of (i) [removed: 30,000,000] [added: 30.0 million] shares, (ii) the number of shares reserved but unissued under the 2005 Stock Plan as of the effective date of the 2013 Stock Plan, and (iii) the number of shares that become available for reuse under the 2005 Stock Plan following the effective date of the 2013 Stock Plan.

Beginning with awards granted in fiscal year [removed: 2020,] [added: 2021,] RS and RSUs generally vest over three years.

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McKESSON CORPORATION

As to those employees, the ESPP does not qualify under Section 423 of the Internal Revenue Code.

Information with respect to certain transactions with directors and management is incorporated by reference from the Proxy Statement under the heading “Related Party Transactions Policy and Transactions with Related Persons.” Information regarding Director independence is incorporated by reference from the Proxy Statement under the heading “Director Independence.” Additional information regarding certain related party balances and transactions is included in the Financial Review section of this report and Financial Note [removed: 23,] [added: 21,] “Related Party Balances and Transactions” to the consolidated financial statements appearing in this report.

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| --- | --- |

Information regarding principal accountant fees and services is set forth under the heading “Ratification of Appointment of Deloitte & Touche LLP as the Company’s Independent Registered Public Accounting Firm for Fiscal [removed: 2021”] [added: 2022”] in our Proxy Statement and all such information is incorporated herein by reference.

[removed: [Table] [added: [Table] of [removed: Contents](#s8AE717A86E6C5AD0BF7B80E343BCFC51)][added: Contents](#i08f9baf810c0412e93ea6effc6d22995_7)]

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| [Report of Deloitte & Touche LLP, Independent Registered Public Accounting [removed: Firm](#s2FFCD0ADFFA357F3AF1E8B5BF22C9554)] [added: Firm](#i08f9baf810c0412e93ea6effc6d22995_82)] | [removed: [52](#s2FFCD0ADFFA357F3AF1E8B5BF22C9554)] | [added: | [65](#i08f9baf810c0412e93ea6effc6d22995_82) | | |]

| [Consolidated Statements of Operations for the years [removed: ended March] [added: ended](#i08f9baf810c0412e93ea6effc6d22995_85) [March] 31, [removed: 2020, 2019 and 2018](#s65B437B169C75D6DB361836AC4482894)] [added: 2021](#i08f9baf810c0412e93ea6effc6d22995_85)[,](#i08f9baf810c0412e93ea6effc6d22995_85) [2020](#i08f9baf810c0412e93ea6effc6d22995_85)[,](#i08f9baf810c0412e93ea6effc6d22995_85) [and](#i08f9baf810c0412e93ea6effc6d22995_85) [2019](#i08f9baf810c0412e93ea6effc6d22995_85)] | [removed: [57](#s65B437B169C75D6DB361836AC4482894)] | [added: | [70](#i08f9baf810c0412e93ea6effc6d22995_85) | | |]

| [Consolidated Statements of Comprehensive [removed: Income for] [added: Income](#i08f9baf810c0412e93ea6effc6d22995_88) [(L](#i08f9baf810c0412e93ea6effc6d22995_88)[oss)](#i08f9baf810c0412e93ea6effc6d22995_88) [for] the years ended March 31, [removed: 2020, 2019 and 2018](#sDD1BCAFAA0B75AFABCD7AEB4E3562064)] [added: 202](#i08f9baf810c0412e93ea6effc6d22995_88)[1](#i08f9baf810c0412e93ea6effc6d22995_88)[, 20](#i08f9baf810c0412e93ea6effc6d22995_88)[20](#i08f9baf810c0412e93ea6effc6d22995_88)[,](#i08f9baf810c0412e93ea6effc6d22995_88) [and 201](#i08f9baf810c0412e93ea6effc6d22995_88)[9](#i08f9baf810c0412e93ea6effc6d22995_88)] | [removed: [58](#sDD1BCAFAA0B75AFABCD7AEB4E3562064)] | [added: | [71](#i08f9baf810c0412e93ea6effc6d22995_88) | | |]

| [Consolidated Balance Sheets as of March 31, [removed: 2020 and 2019](#s3107115540045ADBA7D67C609924B6B9)] [added: 202](#i08f9baf810c0412e93ea6effc6d22995_91)[1](#i08f9baf810c0412e93ea6effc6d22995_91) [and 20](#i08f9baf810c0412e93ea6effc6d22995_91)[20](#i08f9baf810c0412e93ea6effc6d22995_91)] | [removed: [59](#s3107115540045ADBA7D67C609924B6B9)] | [added: | [72](#i08f9baf810c0412e93ea6effc6d22995_91) | | |]

| [Consolidated Statements of Stockholders’ Equity for the years ended March 31, [added: 2021,] 2020, [removed: 2019] and [removed: 2018](#s3C845E17B6AE561CB038822AABED2334)] [added: 2019](#i08f9baf810c0412e93ea6effc6d22995_97)] | [removed: [60](#s3C845E17B6AE561CB038822AABED2334)] | [added: | [73](#i08f9baf810c0412e93ea6effc6d22995_97) | | |]

| [Consolidated Statements of Cash Flows for the years ended March 31, [added: 2021,] 2020, [removed: 2019] and [removed: 2018](#s1EA3D1405E5A515C9B422A7B7665F9DE)] [added: 2019](#i08f9baf810c0412e93ea6effc6d22995_103)] | [removed: [61](#s1EA3D1405E5A515C9B422A7B7665F9DE)] | [added: | [74](#i08f9baf810c0412e93ea6effc6d22995_103) | | |]

| [Financial [removed: Notes](#sFDC7F65C03045D74BF3631026AD9426B)] [added: Notes](#i08f9baf810c0412e93ea6effc6d22995_106)] | [removed: [62](#sFDC7F65C03045D74BF3631026AD9426B)] | [added: | [75](#i08f9baf810c0412e93ea6effc6d22995_106) | | |]

| (a)(2) Financial Statement Schedule | | [added: | | | |]

[removed: | [Schedule II-Valuation and Qualifying Accounts](#s310D3C506D615C9B9ED9EDEA424D02DC) | [131](#s310D3C506D615C9B9ED9EDEA424D02DC) |][added: VALUATION AND QUALIFYING ACCOUNTS]

| All other schedules not included have been omitted because of the absence of conditions under which they are required or because the required information, where material, is shown in the financial statements, financial notes or supplementary financial information. | | [added: | | | |]

| [(a)(3) Exhibits submitted with this Annual Report on Form 10-K as filed with the SEC and those incorporated by reference to other filings are listed on the Exhibit [removed: Index](#s76836DA4E9E851CB910825CD9DF4F471)] [added: Index](#i08f9baf810c0412e93ea6effc6d22995_283)] | [removed: [132](#s76836DA4E9E851CB910825CD9DF4F471)] | [added: | [144](#i08f9baf810c0412e93ea6effc6d22995_283) | | |]

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[Table of Contents](#i08f9baf810c0412e93ea6effc6d22995_7)

McKESSON CORPORATION

SCHEDULE II

SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENT SCHEDULE

(In millions)

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

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

| | | | | | | | | | Additions | | | | | | | | | | | | | | | | | | | | |

| Description | | | Balance at Beginning of Year | | | | | | Charged to Costs and Expenses | | | | | | Charged to Other Accounts (3) | | | | | | Deductions From Allowance Accounts (1) | | | | | | Balance at End of Year (2) | | |

| Year Ended March 31, 2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Allowances for doubtful accounts | | | $ | 252 | | | | | $ | 4 | | | | | $ | 1 | | | | | $ | (46) | | | | | $ | 211 | |

| Other allowances | | | 30 | | | | | | 11 | | | | | | 9 | | | | | | — | | | | | | 50 | | |

| | | | $ | 282 | | | | | $ | 15 | | | | | $ | 10 | | | | | $ | (46) | | | | | $ | 261 | |

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| Year Ended March 31, 2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Allowances for doubtful accounts | | | $ | 273 | | | | | $ | 91 | | | | | $ | (19) | | | | | $ | (93) | | | | | $ | 252 | |

| Other allowances | | | 24 | | | | | | — | | | | | | — | | | | | | 6 | | | | | | 30 | | |

| | | | $ | 297 | | | | | $ | 91 | | | | | $ | (19) | | | | | $ | (87) | | | | | $ | 282 | |

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| Year Ended March 31, 2019 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Allowances for doubtful accounts | | | $ | 187 | | | | | $ | 132 | | | | | $ | (1) | | | | | $ | (45) | | | | | $ | 273 | |

| Other allowances | | | 39 | | | | | | — | | | | | | (15) | | | | | | — | | | | | | 24 | | |

| | | | $ | 226 | | | | | $ | 132 | | | | | $ | (16) | | | | | $ | (45) | | | | | $ | 297 | |

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| --- | --- |

[removed: [Table] [added: [Table] of [removed: Contents](#s8AE717A86E6C5AD0BF7B80E343BCFC51)][added: Contents](#i08f9baf810c0412e93ea6effc6d22995_7)]

[removed: McKESSON CORPORATION][added: | | | | | | | | | | MCKESSON CORPORATION | | |]

| Date: May [removed: 22, 2020] [added: 12, 2021] | | | [added: | | | | | |] /s/ Britt J. Vitalone | [added: | |]

| | | | [added: | | | | | |] Britt J. Vitalone | [added: | |]

| | | | [added: | | | | | |] Executive Vice President and Chief Financial Officer | [added: | |]

| /s/ Brian S. Tyler | | [added: | | | |] /s/ Marie L. Knowles | [added: | |]

| Brian S. Tyler Chief Executive Officer and Director (Principal Executive Officer) | | [added: | | | |] Marie L. Knowles, Director | [added: | |]

| /s/ Britt J. Vitalone | | [added: | | | |] /s/ Bradley E. Lerman | [added: | |]

| Britt J. Vitalone Executive Vice President and Chief Financial Officer (Principal Financial Officer) | | [added: | | | |] Bradley E. Lerman, Director | [added: | |]

| Sundeep G. Reddy Senior Vice President and Controller (Principal Accounting Officer) | | [removed: Maria Martinez,] [added: | | | | Linda Mantia,] Director | [added: | |]

| Dominic J. Caruso, Director | | [removed: Edward A. Mueller,] [added: | | | | Maria Martinez,] Director | [added: | |]

| N. Anthony Coles, M.D., Director | | [removed: Susan R. Salka,] [added: | | | | Edward A. Mueller,] Director | [added: | |]

| M. Christine Jacobs, Director | | [removed: Kenneth E. Washington,] [added: | | | | Susan R. Salka,] Director | [added: | |]

| /s/ Donald R. Knauss | | | [added: | | | /s/ Kenneth E. Washington | | |]

| Donald R. Knauss, Director | | | [added: | | | Kenneth E. Washington, Director | | |]

| Date: May [removed: 22, 2020] [added: 12, 2021] | | | [added: | | | | | |]

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| /s/ Sundeep G. Reddy | | | | | | /s/ Linda Mantia | | |

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| /s/ Dominic J. Caruso | | | | | | /s/ Maria Martinez | | |

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| /s/ N. Anthony Coles | | | | | | /s/ Edward A. Mueller | | |

| | | | | | | | | |

| /s/ M. Christine Jacobs | | | | | | /s/ Susan R. Salka | | |

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SCHEDULE II

SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENT SCHEDULE

VALUATION AND QUALIFYING ACCOUNTS

For the Years Ended March 31, 2020, 2019 and 2018

(In millions)

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

| | | | | | Additions | | | | | | | | | | | | | | |

| Description | Balance at Beginning of Year | | | | Charged to Costs and Expenses | | | | Charged to Other Accounts (3) | | | | Deductions From Allowance Accounts (1) | | | | Balance at End of Year (2) | | |

| Year Ended March 31, 2020 | | | | | | | | | | | | | | | | | | | |

| Allowances for doubtful accounts | $ | 273 | | | $ | 91 | | | $ | (19 | ) | | $ | (93 | ) | | $ | 252 | |

| Other allowances | 24 | | | | — | | | | — | | | | 6 | | | | 30 | | |

| | $ | 297 | | | $ | 91 | | | $ | (19 | ) | | $ | (87 | ) | | $ | 282 | |

| Year Ended March 31, 2019 | | | | | | | | | | | | | | | | | | | |

| Allowances for doubtful accounts | $ | 187 | | | $ | 132 | | | $ | (1 | ) | | $ | (45 | ) | | $ | 273 | |

| Other allowances | 39 | | | | — | | | | (15 | | ) | | — | | | | 24 | | |

| | $ | 226 | | | $ | 132 | | | $ | (16 | ) | | $ | (45 | ) | | $ | 297 | |

| Year Ended March 31, 2018 | | | | | | | | | | | | | | | | | | | |

| Allowances for doubtful accounts | $ | 243 | | | $ | 44 | | | $ | 13 | | | $ | (113 | ) | | $ | 187 | |

| Other allowances | 42 | | | | — | | | | (3 | | ) | | — | | | | 39 | | |

| | $ | 285 | | | $ | 44 | | | $ | 10 | | | $ | (113 | ) | | $ | 226 | |

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

| | | | 2020 | | | | 2019 | | | | 2018 | | |

| (1) | Deductions: | | | | | | | | | | | | |

| | Written off | | $ | (93 | ) | | $ | (45 | ) | | $ | (113 | ) |

| | Credited to other accounts | | 6 | | | | — | | | | — | | |

| | Total | | $ | (87 | ) | | $ | (45 | ) | | $ | (113 | ) |

| (2) | Amounts shown as deductions from current and non-current receivables (current allowances are $265 million, $279 million and $216 million at March 31, 2020, 2019 and 2018) | | $ | 282 | | | $ | 297 | | | $ | 226 | |

| (3) | Primarily represents reclassifications to other balance sheet accounts. | | | | | | | | | | | | |

EXHIBIT INDEX

The agreements included as exhibits to this report are included to provide information regarding their terms and not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements.

The agreements may contain representations and warranties by each of the parties to the applicable agreement that were made solely for the benefit of the other parties to the applicable agreement, and;

| | |

| --- | --- |

| • | should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; |

| • | may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and |

| • | were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. |

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time.

Exhibits identified under “Incorporated by Reference” in the table below are on file with the Commission and are incorporated by reference as exhibits hereto.