McKesson Corporation 2013 Investor Day. June 26, 2013

Transcription

1 McKesson Corporation 2013 Investor Day June 26, 2013

2 Erin Lampert Senior Vice President, Investor Relations

3 2013 Investor Day Agenda Erin Lampert - Senior Vice President, Investor Relations John Hammergren - Chairman, President and Chief Executive Officer Paul Julian - Executive Vice President, MDS Group President Mark Walchirk - President, U.S. Pharmaceutical Nick Loporcaro - President, McKesson Canada Marc Owen - President, McKesson Specialty Health Paul Julian - Executive Vice President, MDS Group President Break Pat Blake - Executive Vice President, MTS Group President Erin Lampert - Senior Vice President, Investor Relations Q&A and Wrap-Up

4 Forward-looking Statements Some of the information in this presentation is not historical in nature and may constitute forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of These statements may be identified by the use of forward-looking terminology such as believes, expects, anticipates, may, will, should, seeks, approximately, intends, plans, estimates, or the negative of these words or other comparable terminology. The discussion of financial trends, strategy, plans or intentions may also include forward-looking statements. These forwardlooking statements involve risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied by such statements. Although it is not possible to predict or identify all such risks and uncertainties, they may include, but are not limited to, those described in the Company s annual, quarterly and current reports (i.e., Form 10-K, Form 10-Q and Form 8-K) as filed or furnished with the Securities and Exchange Commission (SEC). You are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date such statements were first made. To the degree financial information is included in this presentation, it is in summary form only and must be considered in the context of the full details provided in the Company s most recent annual, quarterly or current report as filed or furnished with the SEC. The Company s SEC reports are available at under the Investors tab. Except to the extent required by law, the Company undertakes no obligation to publicly release the result of any revisions to these forwardlooking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events. GAAP / Non-GAAP Reconciliation In an effort to provide additional and useful information regarding the Company s financial results and other financial information as determined by generally accepted accounting principles (GAAP), certain materials presented during this event include non-gaap information. The rationale for management s use of non-gaap information, a reconciliation of that information to GAAP, and other related information is available in the supplemental material attached as an appendix to this presentation and posted to under the Investors tab.

5 Welcome John Hammergren Chairman, President and Chief Executive Officer McKesson Corporation

6 Strong, Experienced Leadership Team Paul Julian Mark Walchirk Nick Loporcaro EVP and Group President, McKesson Distribution Solutions Joined McKesson in 1996; formerly President, U.S. Pharmaceutical and President, McKesson Medical-Surgical President, U.S. Pharmaceutical Joined McKesson in 2001; formerly President, McKesson Specialty Health and COO of U.S. Pharmaceutical President, McKesson Canada Joined McKesson in 2003; formerly General Manager, McKesson Eastern Canada Marc Owen Pat Blake Erin Lampert President, McKesson Specialty Health Joined McKesson in 2001; formerly McKesson s EVP of Strategy and Business Development EVP and Group President, McKesson Technology Solutions Joined McKesson in 1996; formerly President, McKesson Specialty Health and President, Customer Operations for McKesson U.S. Pharmaceutical Senior Vice President, Investor Relations Joined McKesson in 2005; formerly Vice President, Financial Planning and Analysis and Vice President, Mergers and Acquisition Finance

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8 McKesson Distribution Solutions Paul Julian Executive Vice President, Group President

9 Profiles Of McKesson Distribution Solutions Business Units 2013 Most Admired Companies: Achieved Highest Rating Amongst U.S. Health Care Wholesalers $119B in Revenues and $2.5B in Adjusted Operating Profit U.S. Pharmaceutical Distribution Health Mart AccessHealth NorthStar Packaging Canada Distribution Retail Pharmacy Banners Technology Solutions Specialty/Infusion Health Management Services Specialty Health Provider Sales & Operations (Distribution and Onmark GPO) The US Oncology Network Pharma & Biotech Solutions Onmark Payer Solutions Technology Services Medical-Surgical Physician Offices Long Term Care Home Care Surgery Centers Retail Clinics Urgent Care Centers Pharmacy Systems and Automation Pharmacy Systems High Volume Solutions Parata Systems Reflects non-gaap information calculated on an Adjusted Earnings basis. A reconciliation to GAAP is available in the appendix to this presentation and on the Company s website under the Investors tab

10 FY13 Milestones Global Sourcing creates purchasing power and operational efficiencies, adding value for our stakeholders U.S. Pharmaceutical Generated strong operating cash flow Expanded Health Mart from 2,941 to 3,095 stores Grew McKesson OneStop Generics 8% year-over-year Continued long track record of annual operating margin expansion Specialty Health Signed new physicians to our Network Launched new dialysis offering; rheumatology network model Recognized for quality by payers with 7 exclusive contracts in place Canada Generated more than 50% growth in operating cash flow Achieved 10% 1 profit growth in a challenging regulatory environment Completed integration of Drug Trading and The Medicine Shoppe Medical-Surgical Grew revenue 15% Expanded global sourcing and McKesson Brand Strong growth in large customers and IDNs Completed acquisitions of PSS and National Rehab Pharmacy Systems and Automation Grew bookings in independent market by 58% Added more than 750 pharmacies across three core products 1 Excludes $40M legal charge taken in Q3 FY13

11 Operational Excellence McKesson has been at the forefront of distribution excellence by delivering consistently and reliably U.S. Pharmaceutical Order Accuracy 99.98% Inventory Accuracy 99.99% Six Sigma process improvement generated over $77M in savings Opened new 630,000 square foot state-of-the-art National Re-Distribution Center Medical-Surgical Order Accuracy 99.75% Six Sigma process improvement generated over $10M in savings Shipped 40M lines 7M Patient home deliveries Canada Order Accuracy 99.97% Warehouse picking errors of 0.023% Six Sigma process improvement generated over $9M in savings Lines per man hour picked increased by 3.4% Specialty Health Order Accuracy 99.90% Inventory Accuracy 99.99% Six Sigma process improvement generated $15M in savings Reduced cost per line in distribution center by >10%

12 Sourcing Excellence CANADA ENGLAND IRELAND GERMANY POLAND SPAIN SLOVENIA HUNGARY USA ITALY MALTA ISRAEL CHINA SOUTH KOREA BERMUDA BRITISH VIRGIN ISLANDS INDIA HONG KONG TAIWAN PHILIPPINES THAILAND MALAYSIA Europe India China ENGLAND GERMANY IRELAND POLAND SPAIN SLOVENIA HUNGARY SOUTH KOREA ITALY TAIWAN MALTA HONG KONG

13 McKesson Is A Valuable Partner To Manufacturers Reach Supply Chain Manufacturer Benefits Breadth of Services Scale

14 Experienced Management Team Paul C. Julian Executive Vice President, Group President McKesson Corporation (17 years) Mark Walchirk President, U.S. Pharmaceutical (12 years) Nick Loporcaro President, McKesson Canada (10 years) Marc Owen President, McKesson Specialty Health (11 years) Saul Factor President, Global Sourcing (7 years) Stanton McComb President, McKesson Medical-Surgical (11 years) Nathan Mott President, Pharmacy Systems & Automation (19 years)

15 U.S. Pharmaceutical Mark Walchirk President, U.S. Pharmaceutical

16 Pharmaceutical Industry Landscape Low single-digit growth in the near future Sales ($ Billions) % Change 10% 8% 6% 4% 2% 0% -2% -4% Upward Trends Aging population/ prescription demand Specialty growth Manufacturer support Drug pipeline improvement Downward Pressures Generic conversions Cost containment Inconsistent utilization Note: This information is an estimate derived from the use of information under license from the following IMS Health information service: Market Prognosis North America for the period (published March 2013). IMS expressly reserves all rights, including rights of further copying, distribution and republication. McKesson does not warrant or represent the accuracy of IMS data or McKesson s interpretations of IMS data. Any subsequent use or interpretation of this data will be the liability of the receiving party and not of McKesson or IMS.

17 U.S. Pharmaceutical Market Overview $251 $247 $48 $77 $235 $32 $55 $ Brand Sales ($ Billions) Generic Sales ($ Billions) Note: This information is an estimate derived from the use of information under license from the following IMS Health information service: Market Prognosis North America for the period (published March 2013). IMS expressly reserves all rights, including rights of further copying, distribution and republication. McKesson does not warrant or represent the accuracy of IMS data or McKesson s interpretations of IMS data. Any subsequent use or interpretation of this data will be the liability of the receiving party and not of McKesson or IMS.

18 Brand Sales at Risk (US $ Billions) Generics Launch Opportunity $62B $73B Note: This information is an estimate derived from the use of information under license from the following IMS Health information service: Market Prognosis North America for the period (published March 2013). IMS expressly reserves all rights, including rights of further copying, distribution and republication. McKesson does not warrant or represent the accuracy of IMS data or McKesson s interpretations of IMS data. Any subsequent use or interpretation of this data will be the liability of the receiving party and not of McKesson or IMS.

19 U.S. Pharma Has A Broad Value Proposition Independent & Small Chain Pharmacy Health Mart Franchise OneStop Generics Managed Care Contracting Automation Pharmacy & Point-of-Sale Systems Private Brand Clinical Services RelayHealth Mail Order Automation OneStop Generics Central Fill Pharmacy Systems RelayHealth NorthStar Alternate Site Pharmacy OneStop Generics Six Sigma Automation Pharmacy Systems RelayHealth Market #1 Share National Chain Pharmacy Re-Distribution Center Central Fill OneStop Generics Six Sigma Automation Clinical Services Pharmacy Systems RelayHealth NorthStar Health Systems OneStop Generics Clinical/Operational Solutions & Consulting Inventory Management 340B Solutions Ambulatory Pharmacy Pharmacy Systems Packaging RelayHealth Six Sigma

20 McKesson: A Valuable Generics Channel Partner With Global Scale Manufacturers McKesson Pharmacies Channel Strength in Generics Purchasing Global Relationships Scale Efficiencies/Benefits Private Label Virtual Inventory Management Rapid Shipment Solutions

21 NorthStar Delivers Global Value To U.S. Customers Ingredients Raw Materials McKesson Distribution Raw Materials Manufacturer Generics Manufacturer Pharmacy

22 McKesson: A Valuable Partner To Manufacturers Pharma/Biotech Company Needs Services Reach Scale High Efficiency Broad distribution offering 40,000+ customer locations Best-in-class network High value and reliability

23 McKesson: A Valuable Partner To Independent Pharmacy Health Mart Store Count Higher pharmaceutical sales 2,615 2,787 2,941 3,095 Faster sales growth 1,851 2,017 Greater generics compliance Improved reimbursement efficiency Industry-leading customer satisfaction 1,236 FY07 FY08 FY09 FY10 FY11 FY12 FY13 J.D. Power: Health Mart is #1 in customer satisfaction among drug store chains Source: J.D. Power 2012: National Pharmacy Study (September 2012)

24 Our People, Infrastructure And Investments Allow Us To Achieve Operational Excellence

25 McKesson Canada Nick Loporcaro President, McKesson Canada

26 Canadian Pharmacy Rx Purchases By Market Segment Canadian Pharmacy Rx Purchases $22.2 Billion CAD 12% Hospital 88% Retail Source: IMS Brogan, Canadian Drug Store and Hospital Purchases Moving Annual Total to December 2012

27 Generics Now Consist Of >60% Of Total Prescriptions Canadian Retail Pharmacy Rx Market Share: Brand versus Generic 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Rx Market Share - Brand 56.1% 54.9% 51.7% 48.2% 45.3% 42.7% 40.0% 37.1% Rx Market Share - Generic 43.9% 45.1% 48.3% 51.8% 54.7% 57.3% 60.0% 62.9% Source: IMS Brogan, Canadian CompuScript, Moving Annual Total to December 2012

28 McKesson Canada Has A Broad Value Proposition Market #1 Share Retail 8,000 retail pharmacies Out-patient automation Web-based order management Administrative and supply chain services Generic formulary Retail services Government & Institution 93 Integrated Health Networks & 1,350 hospitals In-patient automation/integrated supply chain Information technology solutions Chronic Disease Management/teletriage Manufacturer 800 pharmaceutical partners Distribution services Informatics McKesson Specialty Adherence Infusion Services

29 Scaled Distribution Presence Across Canada 16 Distribution Centres 13 Offices British Columbia Alberta Manitoba Newfoundland and Labrador Quebec Ontario New Brunswick Nova Scotia

30 Global Sourcing Banner Programs Generic Rx Private Label Program OTC Products

31 We Help Independent/Banner Members Grow And Thrive #1 by store count with >1,700 members

32 Comprehensive Specialty Capabilities Specialty Pharmacies & Distribution Infusion Services Manufacturer Programs

33 Leveraging Our Ecosystem Sivem Specialty Distribution Hospitals Manufacturers Community Health Community Pharmacy Community Pharmacy Connectivity Payers Patients Medical Clinics RelayHealth Home Health Care Specialty Community Network Pharmacy Technology Solutions

34 McKesson Specialty Health Marc Owen President, McKesson Specialty Health

35 Specialty Market Overview Steady Growth Expected in Specialty 1 Aging population driving new cancer cases Growth from in-line products and new products in oncology will offset major patent expirations 2 Strong growth in other specialties FY14 FY15 FY16 FY17 Note: Total specialty market does not necessarily reflect McKesson Specialty Health s portfolio Source: IMS Market Prognosis USA (March 2013) Combined Clinics Sector Forecasts 1 EvaluatePharma World Preview 2018 (June 2012) 2 Note: This information is an estimate derived from the use of information under license from the following IMS Health information service: Market Prognosis North America for the period (published March 2013) Combined Clinics Sector Forecasts. IMS expressly reserves all rights, including rights of further copying, distribution and republication. McKesson does not warrant or represent the accuracy of IMS data or McKesson Specialty s interpretations of IMS data. Any subsequent use or interpretation of this data will be the liability of the receiving party and not of McKesson Specialty or IMS.

36 McKesson Specialty Health Has A Broad Value Proposition Market #2 Share `` Physician Distribution and Contracting Robust Practice Management Services Integrated Technology Platform Lynx and iknowmed Technology Solutions Payer Support Services Practice Growth Services Integrated Care Offerings Hospital Management Services Manufacturer Efficacy and Safety Market Intelligence Supply Chain Services Patient Access to Therapy Provider Engagement Patient Engagement and Support Payer Oncology Medical Home Offerings Value Based Reimbursement Evidence Based Pathways Solutions to Support Clinical Decision Making at the Point of Care Prior Authorization Automation Advanced Care Planning and End of Life Models

37 McKesson Specialty Coverage The US Oncology Network: Radiation Locations The US Oncology Network: Practice Locations Onmark Select Program: Practice Locations Scale Serve 3,000+ physicians and more than 3,100 multi-specialty practices ~400 payer relationships through affiliated practices >50 pharmaceutical and biotech customers Technology Platform >1,700 physicians using Lynx Mobile >1,300 physicians using iknowmed EHR >35K patients on new patient portal Breadth of Services ~100 radiation oncology facilities >55,000 patients accrued to clinical trials to date

38 We Can Manage Care In Any Setting Advanced Technology Enhancing practice operations, workflow and clinical decision making Business & Operational Leadership Streamlining operations, group purchasing, patient quality measures, reporting and payer relations support Clinical Leadership Resources to support evidence-based medicine, increase access to clinical trials and enhanced patient education resources

39 Positioned To Lead Payment Shifts Traditional Contracting Environment Quality-Based Performance Environment Leverage market position Fee-for-service focus Optimize drug margins Package and market a comprehensive, high quality patient experience Improve payer-provider financial incentives and reduce overall administrative costs Move away from drug pricing focus to value-based reimbursement with Level I Pathways Address total cancer costs and bend the cost curve Novel payment models (e.g. episodes) protect against reimbursement reductions

40 McKesson Specialty Health Broad expertise in all aspects of cancer care delivery Deep Physician Engagement Technology platform to drive enhanced value for physicians, payers and pharmaceutical manufacturers Expanding presence in other specialties

41 McKesson Medical-Surgical Paul Julian Executive Vice President, Group President

42 ($ Billions) Medical-Surgical Market Overview Medical-Surgical Revenue Market Trends Favorable demographic and utilization trends Consolidation of customers and distributors McKesson FY Markets remain highly fragmented Extended care markets remain attractive 2013 revenue includes approximately 5 weeks of PSS World Medical

43 Medical-Surgical Has A Broad Value Proposition Primary Care Medical Supplies & Equipment In-Office Rx & Vaccines In-Office Lab McKesson Brand Products Practice Management & EMR Inventory Management Tools Surgery Centers Medical Supplies & Equipment Pharmaceuticals McKesson Brand Products Inventory Management Tools Cost Savings Services Occupational Health Medical Supplies & Equipment McKesson Brand Products Inventory Management Tools Vaccines Market #1 Share Home Care Medical Supplies & Equipment Direct-to-Patient Services McKesson Brand Products Respiratory Vaccines Inventory Management Tools Spend Utilization Management Extended Care Medical Supplies & Equipment Vaccines McKesson Brand Products Formulary & Inventory Manager Budget Manager and Charge Capture Business Management Insight Reimbursement Services

44 PSS World Medical Integration Update Leadership Salesforce Engagement Synergies

45 Combined Company Has Wide Footprint $5.5 Billion in Total Sales Salesforce of >1,400 Sales Capabilities Combined Scale Total Sales is comprised of McKesson Medical-Surgical total sales and PSS World Medical total sales and discounted operations for the calendar year 2012

46 Wrap-Up

47 McKesson: Recognized As A Leader 100 Best Corporate Citizens: Supplier of the Year: 2010 #1 Healthcare Wholesaler for Innovation, People Management, and Financial Soundness, Best Employers for Healthy Lifestyles : Platinum certification Named as global high performing company: 2010 The Civic 50: Top Health Care Wholesaler Highest in Customer Satisfaction among Chain Drug Store Pharmacies (Health Mart): 2011, 2012

48 Distribution Solutions Summary Demographics and healthcare reform will drive demand Leading market position: #1 or #2 in all markets we serve Operational excellence: the foundation of McKesson s value proposition Established and leading sourcing program a decade of experience Comprehensive value proposition linking distribution, services, and technology

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50 McKesson Technology Solutions Pat Blake Executive Vice President, Group President

51 Agenda MTS Overview Industry Trends and Strategy Major Businesses Innovating for Today and Tomorrow Summary

52 Technology Solutions Overview Comprehensive solutions across the healthcare continuum $3.4B in revenues and $371M in adjusted operating profit Payers Physicians Manufacturers Technology Solutions Hospitals and Health Systems Retail Pharmacies Consumers Reflects non-gaap information calculated on an Adjusted Earnings basis. A reconciliation to GAAP is available in the appendix to this presentation and on the Company s website under the Investors tab

53 Experienced Management Team Pat Blake Executive Vice President, Group President McKesson Corporation (17 years) Jeff Felton President, RelayHealth (13 years) Emad Rizk, MD President, Health Solutions (10 years) Kevan Torgerson President, Enterprise Imaging & Departmental Solutions (27 years) Jim Pesce President, Enterprise Information Solutions (31 years) Patrick Leonard President, Business Performance Services (18 years)

54 McKesson Technology Solutions FY13 Adjusted Operating Profit Contribution RelayHealth Distribution Solutions 87% Technology Solutions 13% Health Solutions Enterprise Imaging & Departmental Solutions Enterprise Information Solutions Business Performance Services Reflects non-gaap information calculated on an Adjusted Earnings basis. A reconciliation to GAAP is available in the appendix to this presentation and on the Company s website under the Investors tab

55 Agenda MTS Overview Industry Trends and Strategy Major Businesses Innovating for Today and Tomorrow Summary

56 Healthcare Industry Transformation Economic & Regulatory Changes Economic Regulatory Increasing Healthcare Costs ICD-10 Reimbursement Pressure Meaningful Use New Payment Models New Care Delivery Models Physician Employment/ Provider Consolidation Accountable Care Interoperability & Information Exchange Quality Reporting Requirements Engaged Patient

57 Better Health 2020 Enabling customers to overcome challenges Optimize Performance and Quality Navigate Evolving Payment Models Better Health Coordinate Care Maximize Technology Value

58 Agenda MTS Overview Industry Trends and Strategy Major Businesses Innovating for Today and Tomorrow Summary

59 RelayHealth Coordinating care across the continuum Overview Pharmacy Network Clinical Exchange Analytics Population Health Capacity Management Market Leadership & Scale # 1 in Pharmacy 37M+ # 1 Network 50,000+ Retail Pharmacies 15.8B Transactions/Year Patient Health Records 44,000+ Providers Using Clinical Exchange in Analytics & Workforce Management 1,000+ Analytics Facilities

60 Health Solutions Driving efficient care and payment for payers and providers Overview Market Leadership & Scale Payer Solutions Decision Management Financial Management Provider Network Management Provider Solutions Pre-Settlement Adjudication # 1 in Decision Management Payer & Provider 1 100% of Top 10 U.S. Health Plans 91% of Blues Plans 1.9B Financial Transactions Processed Last Year # 1 in Financial Management Payer & Provider in Provider # Network Management Payer 100% of Top 10 Medicaid Plans CMS, VA & 42 States

61 Enterprise Imaging & Departmental Solutions Increasing provider productivity Overview Diagnostic Imaging Document Imaging Departmental Solutions (laboratory, surgery, scheduling, materials management) Presence & Recognition Nearly # Best in KLAS PACS 2,800 Diagnostic Imaging Ranked Facilities # 2 1,400+ Document Imaging Facilities Ranked 2012 Best in KLAS Cardiology 2012 Best in KLAS Awards: Software & Professional Services Report; December 2012, KLAS Enterprises, LLC. All rights reserved.

62 Enterprise Information Solutions Maximizing the value of technology Overview Paragon is a fully integrated EHR Solution Clinical, financial and resource management applications on a single Microsoft database More than a decade of commercial success Presence & Recognition 25%+ of Paragon Facilities >200 beds 2 # Overall Software Suite 7 th Consecutive Year Paragon named Best In KLAS Community HIS 2012 Best in KLAS Awards: Software & Professional Services Report; December 2012, KLAS Enterprises, LLC. All rights reserved.

63 Business Performance Services Improving physician practice performance Overview Comprehensive suite of practice management solutions Leader in physician revenue cycle services Presence & Scale 40+ Specialties 135,000+ Physicians Scalable technology solutions and services for independent and affiliated physicians Presence in all 50 States MED3OOO Acquisition Expanded Scale

64 Agenda MTS Overview Industry Trends and Strategy Major Businesses Innovating for Today and Tomorrow Summary

65 Innovating For Population Health To Support Risk-Based Payment Models Connected Data Analytics Why McKesson? Payers Care Management Hospitals & Health Systems Leading vendor with health system analytics, providing true provider profitability analysis Home Care Solutions to facilitate shift to risk-based models for providers Long Term Care Vendor & payer neutrality ability to wrap third-party products Pharmacy Tailored Intervention Actionable Insight Physician Office Experience more than 10,000 physicians utilize our tools to manage quality Longitudinal Health Record

66 Innovating for Business Intelligence To Empower Strategic & Point of Care Decisions Strategic Management Optimize the core business of healthcare Performance Analytics Quality and Regulatory Intelligence Capacity Management Predict supply and demand across the enterprise Patient Demand Forecasting Workforce Management Patient Flow Why McKesson? Vendor-neutral suite with large number of customers from other core clinical vendors Flexible data model, allowing for analysis across financial and operational measures Predictive modeling and scenario analysis capabilities

67 Innovating for Value-Based Reimbursement To Drive Payment Based on Episodes and Outcomes Payment Models Fee for Service Bundled Payments Pay for Performance Blended Payments Partial Capitation Global Payment No Risk Full Risk Why McKesson? Market leader in financial and episode management Payer-Provider experience and customer base Unique combination of clinical and financial intelligence combined with technology

68 Innovating for Interoperability To Enable Connectivity Across the Continuum An independent not-for-profit organization that will support universal access to health care data through seamless interoperability Founding Members

69 Agenda MTS Overview Majority Industry Trends and Strategy Major Businesses Innovating for Today and Tomorrow Summary

70 McKesson Technology Solutions Healthcare Technology Poised for Steady Growth From regulatory pressures to reimbursement complexity, healthcare organizations require solutions to address near and long term challenges McKesson Technology Solutions is focused in the areas where we have a leading industry position, to improve the business health of customers Well positioned to lead for the critical emerging requirements our customers will face in the coming years

71 Financial Update Erin Lampert Senior Vice President, Investor Relations

72 Agenda Overview Segment Financial Review Looking Forward Financial Flexibility Track Record of Financial Performance Summary

73 McKesson Drives Sustained Value Creation Attractive healthcare markets Public policy agenda supports greater access and improved efficiency Demographics drive long-term demand Well positioned businesses with margin expansion opportunities Market leading positions and scale Operational excellence Focus on higher margin products and services Strong balance sheet and solid liquidity position used for a portfolio approach to capital deployment Experienced and tenured management team with a steady track record of delivering results

74 Distribution Solutions Broad Value Proposition with Evolving Mix of Higher Margin Products and Services

75 Distribution Solutions: Organic Revenue Growth, Spurred By Acquisitions $ Billions $119 $104 $68 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13

76 Operating Margin Expansion Has Been Consistent Over The Long-Term Q4 FY05 earnings release: Issued initial operating margin target of bps Achieved full-year adjusted operating margin of 193 bps Achieved full-year adjusted operating margin of 207 bps FY05 FY07 FY10 FY11 FY13 Achieved full-year adjusted operating margin of 156 bps Q4 FY11 earnings release: Issued new adjusted operating margin target of bps Reflects non-gaap information calculated on an Adjusted Earnings basis. A reconciliation to GAAP is available in the appendix to this presentation and on the Company s website under the Investors tab

77 Major Levers For Operating Profit Expansion Have Varied In Their Contribution Generics & Private Label Branded Manufacturer Economics Sell Margin Operating Expense Leverage Continued ability to drive steady profit growth over the long-term Focus on higher margin, higher growth areas

78 Distribution Solutions Financial Drivers Scaled leadership positions across broad portfolio drive steady long-term growth Operational excellence Growth in gross profit with steady contribution from generic and branded drugs Focus on higher margin, higher growth areas provides margin expansion opportunities Cash flow strength

79 Technology Solutions Diversified Portfolio with Solid Long-Term Fundamentals

80 Technology Solutions Is A Broad And Diversified Portfolio McKesson Health Solutions RelayHealth Technology Solutions Enterprise Imaging Enterprise Information Systems Business Performance Services

81 McKesson Technology Solutions FY13 Adjusted Operating Profit Contribution RelayHealth Distribution Solutions 87% Technology Solutions 13% Health Solutions Enterprise Imaging & Departmental Solutions Enterprise Information Solutions Business Performance Services Reflects non-gaap information calculated on an Adjusted Earnings basis. A reconciliation to GAAP is available in the appendix to this presentation and on the Company s website under the Investors tab

82 Technology Solutions Financial Drivers Increasing demand for technology driven by industry dynamics and government support Scaled leadership positions across broad portfolio drive steady long-term growth Focus on higher margin, higher growth areas provides margin expansion opportunities Cash flow strength

83 Financial Flexibility Steady Cash Flow and Healthy Balance Sheet Lead to Value Creation

84 Our Operating Cash Flows Have Steadily Increased OCF $ Billions $2.5 7 Year Moving Average $2.0 $119 $119 $1.5 $104 $106 $109 $1.0 $0.5 FY07 FY08* FY09 FY10 FY11 FY12 FY13 *FY08 excludes $962 million Securities Litigation payment

85 We Use a Portfolio Approach To Capital Deployment $ Billions Internal Capital Spending $2.6 $8.8 Acquisitions Dividends $8.7 Share Repurchases $21 Billion of Capital Deployed from FY07 FY13 Value-creating acquisitions Measured share repurchase over time Internal capital spending Dividend policy periodically reviewed Financial strength and flexibility to continue to execute our strategy

86 Our Internal Capital Spending Needs Are Modest $ Millions $76 $104 $126 $73 $74 $75 $88 $123 $104 $195 $195 $199 $64 $47 $49 $91 $131 $111 $233 $225 $246 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Capital Expenditures Capitalized Internal Use Software Capitalized Software Held for Sale

87 Our Dividend Philosophy Periodically reviewed Ongoing dialogue with Board and shareholders Prefer flexibility to allocate capital to value-creating acquisitions Raised three times since FY07

88 Disciplined Acquisitions Enhance Strategy Nearly $9 billion deployed to complete a series of value-creating acquisitions since FY07 $ Billions FY07 FY13: 22 Acquisitions Distribution Solutions 22 Acquisitions Technology Solutions $1.8 Per-Se $1.4 Other $2.1 US Oncology $2.1 PSS $0.9 Katz $0.5 OTN $6.3 Distribution Solutions $2.5 Technology Solutions

89 We Have Returned Nearly $9 Billion To Shareholders Through Share Repurchases Since FY07 Diluted Weighted Average Shares Outstanding (in millions) FY07 FY08 FY09 FY10 FY11 FY12 FY13

90 Our Stock Option Overhang Has Significantly Declined 36 Million Outstanding 7 Million Outstanding Yr 2 Yr 3 Yr 4 Yr 5 Yr 1 2 Yr Yr 5 Yr 6 Yr Fiscal Year 2007 Fiscal Year 2013

91 We Maintain A Strong Balance Sheet With Significant Financial Flexibility Investment Grade Debt Ratings Reaffirmed after February 2013 financing Ended FY13 at the top end of our target debt / capital ratio range of 30-40% Healthy Cash Position March 31, 2013 cash and cash equivalents: $2.5B, of which approximately $1.5B was offshore Significant capital for future deployment Strong Operating Cash Flow

92 How Does It All Add Up? Steady Track Record of Great Results

93 We Have A Track Record Of Steady Revenue Growth $ Billions $93 $102 $107 $109 $112 $123 $122 FY07 FY08 FY09 FY10 FY11 FY12 FY13

94 That We Have Leveraged Into Higher Adjusted EPS Growth FY14 Guidance: $ $8.20 $3.02 $3.53 $4.35 $4.85 $5.31 $6.38 $6.33 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Reflects non-gaap information calculated on an Adjusted Earnings basis. A reconciliation to GAAP is available in the appendix to this presentation and on the Company s website under the Investors tab

95 We Expect Fiscal 2014 Adjusted Earnings Per Diluted Share Of $ $8.20 Revenue growth - Distribution Solutions will rebound significantly - Technology Solutions will accelerate from FY13 levels Branded and generic price trends similar to those observed in our FY13 Profit from the launch of new oral generic pharmaceuticals will decline significantly year-over-year Property acquisitions and capitalized software expenditures between $400 million and $450 million Adjusted tax rate of 31%, which may vary from quarter-to-quarter Cash flow from operations is expected to be $2.0 billion Weighted average shares of 231 million for diluted EPS calculation Based on acquisitions closed as of March 31, 2013: - Amortization of acquisition-related intangible assets of approximately 78 cents per diluted share - Acquisition-related expenses are estimated at approximately 22 cents per diluted share The Fiscal 2014 guidance range does not include any potential litigation reserve adjustments, or the impact of any potential new acquisitions, divestitures, impairments, material restructurings or charges for LIFO inventory accounting adjustments

96 McKesson Drives Sustained Value Creation Attractive healthcare markets Public policy agenda supports greater access and improved efficiency Demographics drive long-term demand Well positioned businesses with margin expansion opportunities Market leading positions and scale Operational excellence Focus on higher margin products and services Strong balance sheet and solid liquidity position used for a portfolio approach to capital deployment Experienced and tenured management team with a steady track record of delivering results

97

98 RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) FOR FISCAL 2007 THROUGH 2013 (unaudited) (in millions, except per share amounts) As Reported (GAAP) Amortization of Acquisition- Related Intangibles Year Ended March 31, 2013 Acquisition Expenses and Related Adjustments Litigation Reserve Adjustments Adjusted Earnings (Non-GAAP) Revenues $ 122,455 $ - $ - $ - $ 122,455 Gross profit $ 6,984 $ 16 $ - $ - $ 7,000 Operating expenses (4,669) 199 (9) 72 (4,407) Other income, net Impairment of an equity investment (191) (191) Interest expense (240) (229) Income from continuing operations before income taxes 1, ,208 Income tax (expense) benefit (581) (78) (6) (27) (692) Income from continuing operations $ 1,338 $ 137 $ (4) $ 45 $ 1,516 Diluted earnings per common share from continuing operations (a) $ 5.59 $ 0.57 $ (0.02) $ 0.19 $ 6.33 As Reported (GAAP) Amortization of Acquisition- Related Intangibles Year Ended March 31, 2012 Acquisition Expenses and Related Adjustments Litigation Reserve Adjustments Adjusted Earnings (Non-GAAP) Revenues $ 122,734 $ - $ - $ - $ 122,734 Gross profit $ 6,567 $ 20 $ - $ - $ 6,587 Operating expenses (4,418) (4,067) Other income, net Interest expense (251) (251) Income from continuing operations before income taxes 1, ,290 Income tax (expense) benefit (516) (72) (11) (89) (688) Income from continuing operations $ 1,403 $ 119 $ 20 $ 60 $ 1,602 Diluted earnings per common share from continuing operations (a) $ 5.59 $ 0.47 $ 0.08 $ 0.24 $ 6.38 (a) Certain computations may reflect rounding adjustments In April 2013, the Company committed to a plan to sell its International Technology and Hospital Automation businesses. This appendix does not reflect the financial results of these businesses as discontinued operations. Financial results for these businesses will be reported as discontinued operations commencing in the first quarter of fiscal 2014

99 McKESSON CORPORATION RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) FOR FISCAL 2007 THROUGH 2013 (unaudited) (in millions, except per share amounts) As Reported (GAAP) Amortization of Acquisition- Related Intangibles Year Ended March 31, 2011 Acquisition Expenses and Related Adjustments Litigation Reserve Adjustments Adjusted Earnings (Non-GAAP) Revenues $ 112,084 $ - $ - $ - $ 112,084 Gross profit $ 5,970 $ 16 $ - $ - $ 5,986 Operating expenses (4,149) (3,777) Other income, net 36 - (16) - 20 Interest expense (222) (197) Income from continuing operations before income taxes 1, ,032 Income tax (expense) benefit (505) (51) (16) (64) (636) Income from continuing operations $ 1,130 $ 81 $ 36 $ 149 $ 1,396 Diluted earnings per common share from continuing operations (a) $ 4.29 $ 0.31 $ 0.14 $ 0.57 $ 5.31 As Reported (GAAP) Amortization of Acquisition- Related Intangibles Year Ended March 31, 2010 Acquisition Expenses and Related Adjustments Litigation Reserve Adjustments Adjusted Earnings (Non-GAAP) Revenues $ 108,702 $ - $ - $ - $ 108,702 Gross profit $ 5,676 $ 21 $ - $ - $ 5,697 Operating expenses (3,668) 97 - (20) (3,591) Other income, net Interest expense (187) (187) Income from continuing operations before income taxes 1, (20) 1,962 Income tax (expense) benefit (601) (46) - 8 (639) Income from continuing operations $ 1,263 $ 72 $ - $ (12) $ 1,323 Diluted earnings per common share from continuing operations (a) $ 4.62 $ 0.26 $ - $ (0.04) $ 4.85 (a) Certain computations may reflect rounding adjustments In April 2013, the Company committed to a plan to sell its International Technology and Hospital Automation businesses. This appendix does not reflect the financial results of these businesses as discontinued operations. Financial results for these businesses will be reported as discontinued operations commencing in the first quarter of fiscal 2014

100 RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) FOR FISCAL 2007 THROUGH 2013 (unaudited) (in millions, except per share amounts) As Reported (GAAP) Amortization of Acquisition- Related Intangibles Year Ended March 31, 2009 Acquisition Expenses and Related Adjustments Litigation Reserve Adjustments Adjusted Earnings (Non-GAAP) Revenues $ 106,632 $ - $ - $ - $ 106,632 Gross profit $ 5,378 $ 29 $ - $ - $ 5,407 Operating expenses (4,182) (3,590) Other income, net Interest expense (144) (144) Income from continuing operations before income taxes 1, ,685 Income tax (expense) benefit (241) (49) - (182) (472) Income from continuing operations $ 823 $ 79 $ - $ 311 $ 1,213 Diluted earnings per common share from continuing operations (a) $ 2.95 $ 0.28 $ - $ 1.11 $ 4.35 As Reported (GAAP) Amortization of Acquisition- Related Intangibles Year Ended March 31, 2008 Acquisition Expenses and Related Adjustments Litigation Reserve Adjustments Adjusted Earnings (Non-GAAP) Revenues $ 101,703 $ - $ - $ - $ 101,703 Gross profit $ 5,009 $ 27 $ - $ - $ 5,036 Operating expenses (3,531) 79 4 (5) (3,453) Other income, net Interest expense (142) (142) Income from continuing operations before income taxes 1, (5) 1,562 Income tax (expense) benefit (468) (41) (2) 2 (509) Income from continuing operations $ 989 $ 65 $ 2 $ (3) $ 1,053 Diluted earnings per common share from continuing operations (a) $ 3.32 $ 0.22 $ 0.01 $ (0.01) $ 3.53 (a) Certain computations may reflect rounding adjustments In April 2013, the Company committed to a plan to sell its International Technology and Hospital Automation businesses. This appendix does not reflect the financial results of these businesses as discontinued operations. Financial results for these businesses will be reported as discontinued operations commencing in the first quarter of fiscal 2014

101 RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) FOR FISCAL 2007 THROUGH 2013 (unaudited) (in millions, except per share amounts) As Reported (GAAP) Amortization of Acquisition- Related Intangibles Year Ended March 31, 2007 Acquisition Expenses and Related Adjustments Litigation Reserve Adjustments Adjusted Earnings (Non-GAAP) Revenues $ 92,977 $ - $ - $ - $ 92,977 Gross profit $ 4,332 $ 12 $ - $ - $ 4,344 Operating expenses (3,068) 41 7 (6) (3,026) Other income, net Interest expense (99) (95) Income from continuing operations before income taxes 1, (6) 1,355 Income tax (expense) benefit (329) (20) (4) (81) (434) Income from continuing operations $ 968 $ 33 $ 7 $ (87) $ 921 Diluted earnings per common share from continuing operations (a) $ 3.17 $ 0.11 $ 0.02 $ (0.29) $ 3.02 (a) Certain computations may reflect rounding adjustments In April 2013, the Company committed to a plan to sell its International Technology and Hospital Automation businesses. This appendix does not reflect the financial results of these businesses as discontinued operations. Financial results for these businesses will be reported as discontinued operations commencing in the first quarter of fiscal 2014

102 McKESSON CORPORATION RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP) - BY ADJUSTMENT TYPE FOR FISCAL 2009 THROUGH 2013 (unaudited) (in millions) Year Ended March 31, 2013 Year Ended March 31, 2012 Year Ended March 31, 2011 Year Ended March 31, 2010 Year Ended March 31, 2009 Distribution Technology Solutions Solutions Corporate & Interest Expense TOTAL Distribution Solutions Technology Solutions Corporate & Interest Expense TOTAL Distribution Solutions As Reported (GAAP): Revenues $ 119,054 $ 3,401 $ - $ 122,455 $ 119,424 $ 3,310 $ - $ 122,734 $ 108,889 $ 3,195 $ - $ 112,084 $ 105,578 $ 3,124 $ - $ 108,702 $ 103,568 $ 3,064 $ - $ 106,632 Technology Solutions Corporate & Interest Expense TOTAL Distribution Solutions Technology Solutions Corporate & Interest Expense TOTAL Distribution Solutions Technology Solutions Corporate & Interest Expense TOTAL Gross profit $ 5,439 $ 1,545 $ - $ 6,984 $ 5,057 $ 1,510 $ - $ 6,567 $ 4,565 $ 1,405 $ - $ 5,970 $ 4,219 $ 1,457 $ - $ 5,676 $ 3,955 $ 1,423 $ - $ 5,378 Operating expenses (3,071) (1,252) (346) (4,669) (2,854) (1,151) (413) (4,418) (2,673) (1,108) (368) (4,149) (2,260) (1,077) (331) (3,668) (2,777) (1,096) (309) (4,182) Other income (expense), net (20) Impairment of an equity investment (191) - - (191) Operating pre-tax profit 2, (335) 2,159 2, (413) 2,170 1, (341) 1,857 1, (322) 2,051 1, (284) 1,208 Interest expense - - (240) (240) - - (251) (251) (1) - (221) (222) (2) (2) (183) (187) 2 (4) (142) (144) Income from continuing operations before income taxes $ 2,197 $ 297 $ (575) $ 1,919 $ 2,219 $ 364 $ (664) $ 1,919 $ 1,896 $ 301 $ (562) $ 1,635 $ 1,986 $ 383 $ (505) $ 1,864 $ 1,160 $ 330 $ (426) $ 1,064 Gross profit margin 4.57% 45.43% % 4.23% 45.62% % 4.19% 43.97% % 4.00% 46.64% % 3.82% 46.44% % Operating expenses as a % of revenues 2.58% 36.81% % 2.39% 34.77% % 2.45% 34.68% % 2.14% 34.48% % 2.68% 35.77% % Operating pre-tax profit as a % of revenues 1.85% 8.73% % 1.86% 11.00% % 1.74% 9.42% % 1.88% 12.32% % 1.12% 10.90% % Pre-Tax Adjustments: Gross profit $ 2 $ 14 $ - $ 16 $ 1 $ 19 $ - $ 20 $ - $ 16 $ - $ 16 $ 1 $ 20 $ - $ 21 $ 1 $ 28 $ - $ 29 Operating expenses Amortization of acquisition-related intangibles Operating expenses 47 8 (64) (9) Other income (expense), net (16) (16) Interest expense Acquisition expenses and related adjustments 47 8 (53) Operating expenses (20) (20) Litigation reserve adjustments (20) (20) Adjustments total $ 267 $ 74 $ (52) $ 289 $ 294 $ 76 $ 1 $ 371 $ 324 $ 62 $ 11 $ 397 $ 51 $ 67 $ (20) $ 98 $ 544 $ 77 $ - $ 621 Adjusted Earnings (Non-GAAP): Revenues $ 119,054 $ 3,401 $ - $ 122,455 $ 119,424 $ 3,310 $ - $ 122,734 $ 108,889 $ 3,195 $ - $ 112,084 $ 105,578 $ 3,124 $ - $ 108,702 $ 103,568 $ 3,064 $ - $ 106,632 Gross profit $ 5,441 $ 1,559 $ - $ 7,000 $ 5,058 $ 1,529 $ - $ 6,587 $ 4,565 $ 1,421 $ - $ 5,986 $ 4,220 $ 1,477 $ - $ 5,697 $ 3,956 $ 1,451 $ - $ 5,407 Operating expenses (2,806) (1,192) (409) (4,407) (2,561) (1,094) (412) (4,067) (2,349) (1,062) (366) (3,777) (2,210) (1,030) (351) (3,591) (2,234) (1,047) (309) (3,590) Other income (expense), net (20) Impairment of an equity investment (191) - - (191) Operating pre-tax profit 2, (398) 2,437 2, (412) 2,541 2, (355) 2,229 2, (342) 2,149 1, (284) 1,829 Interest expense - - (229) (229) - - (251) (251) (1) - (196) (197) (2) (2) (183) (187) 2 (4) (142) (144) Income from continuing operations before income taxes $ 2,464 $ 371 $ (627) $ 2,208 $ 2,513 $ 440 $ (663) $ 2,290 $ 2,220 $ 363 $ (551) $ 2,032 $ 2,037 $ 450 $ (525) $ 1,962 $ 1,704 $ 407 $ (426) $ 1,685 Gross profit margin 4.57% 45.84% % 4.24% 46.19% % 4.19% 44.48% % 4.00% 47.28% % 3.82% 47.36% % Operating expenses as a % of revenues 2.36% 35.05% % 2.14% 33.05% % 2.16% 33.24% % 2.09% 32.97% % 2.16% 34.17% % Operating pre-tax profit as a % of revenues 2.07% 10.91% % 2.10% 13.29% % 2.04% 11.36% % 1.93% 14.47% % 1.64% 13.41% % (a) Certain computations may reflect rounding adjustments In April 2013, the Company committed to a plan to sell its International Technology and Hospital Automation businesses. This appendix does not reflect the financial results of these businesses as discontinued operations. Financial results for these businesses will be reported as discontinued operations commencing in the first quarter of fiscal 2014

103 McKESSON CORPORATION RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP) FOR FISCAL 2007 THROUGH 2008 (unaudited) (in millions) Year Ended March 31, 2008 Year Ended March 31, 2007 Distribution Technology Solutions Solutions Corporate & Interest Expense TOTAL Distribution Solutions Technology Solutions Corporate & Interest Expense As Reported (GAAP): Revenues $ 98,719 $ 2,984 $ - $ 101,703 $ 90,738 $ 2,239 $ - $ 92,977 TOTAL Gross profit $ 3,586 $ 1,423 $ - $ 5,009 $ 3,252 $ 1,080 $ - $ 4,332 Operating expenses (2,138) (1,115) (278) (3,531) (1,896) (884) (288) (3,068) Other income (expense), net Operating pre-tax profit 1, (203) 1,599 1, (205) 1,396 Interest expense 4 (4) (142) (142) - (4) (95) (99) Income from continuing operations before income taxes $ 1,487 $ 315 $ (345) $ 1,457 $ 1,395 $ 202 $ (300) $ 1,297 Gross profit margin 3.63% 47.69% % 3.58% 48.24% % Operating expenses as a % of revenues 2.17% 37.37% % 2.09% 39.48% % Operating pre-tax profit as a % of revenues 1.50% 10.69% % 1.54% 9.20% % Pre-Tax Adjustments: Gross profit $ 1 $ 26 $ - $ 27 $ - $ 12 $ - $ 12 Operating expenses Amortization of acquisition-related intangibles Operating expenses Other income (expense), net Interest expense Acquisition-related expenses Operating expenses - - (5) (5) - - (6) (6) Litigation reserve adjustments - - (5) (5) - - (6) (6) Adjustments total $ 33 $ 77 $ (5) $ 105 $ 18 $ 42 $ (2) $ 58 Adjusted Earnings (Non-GAAP): Revenues $ 98,719 $ 2,984 $ - $ 101,703 $ 90,738 $ 2,239 $ - $ 92,977 Gross profit $ 3,587 $ 1,449 $ - $ 5,036 $ 3,252 $ 1,092 $ - $ 4,344 Operating expenses (2,106) (1,064) (283) (3,453) (1,878) (854) (294) (3,026) Other income (expense), net Operating pre-tax profit 1, (208) 1,704 1, (211) 1,450 Interest expense 4 (4) (142) (142) - (4) (91) (95) Income from continuing operations before income taxes $ 1,520 $ 392 $ (350) $ 1,562 $ 1,413 $ 244 $ (302) $ 1,355 Gross profit margin 3.63% 48.56% % 3.58% 48.77% % Operating expenses as a % of revenues 2.13% 35.66% % 2.07% 38.14% % Operating pre-tax profit as a % of revenues 1.54% 13.27% % 1.56% 11.08% % (a) Certain computations may reflect rounding adjustments In April 2013, the Company committed to a plan to sell its International Technology and Hospital Automation businesses. This appendix does not reflect the financial results of these businesses as discontinued operations. Financial results for these businesses will be reported as discontinued operations commencing in the first quarter of fiscal 2014