McKesson Corporation - McKesson Investor Relations

McKesson Corporation 2013 Investor Day

June 26, 2013

Erin Lampert

Senior Vice President,

Investor Relations

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

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 1995. 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 forward-

looking 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 www.mckesson.com 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 forward-

looking 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 www.mckesson.com under the “Investors” tab.

Welcome

John Hammergren

Chairman, President and

Chief Executive Officer

McKesson Corporation

Strong, Experienced Leadership Team

Paul Julian EVP and Group President, McKesson Distribution Solutions

Joined McKesson in 1996; formerly President, U.S. Pharmaceutical and President,

McKesson Medical-Surgical

Mark Walchirk President, U.S. Pharmaceutical

Joined McKesson in 2001; formerly President, McKesson Specialty Health and

COO of U.S. Pharmaceutical

Nick Loporcaro President, McKesson Canada

Joined McKesson in 2003; formerly General Manager, McKesson Eastern Canada

Marc Owen President, McKesson Specialty Health

Joined McKesson in 2001; formerly McKesson’s EVP of Strategy and

Business Development

Pat Blake 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

Erin Lampert Senior Vice President, Investor Relations

Joined McKesson in 2005; formerly Vice President, Financial Planning and

Analysis and Vice President, Mergers and Acquisition Finance

McKesson Distribution Solutions

Paul Julian

Executive Vice President, Group President

Profiles Of McKesson Distribution Solutions –

Business Units

U.S. Pharmaceutical

• Distribution

• Health Mart

• AccessHealth

• NorthStar

• Packaging

2013 Most Admired Companies:

Achieved Highest Rating Amongst U.S. Health Care Wholesalers

$119B in Revenues and $2.5B in Adjusted Operating Profit

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

FY13 Milestones

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

Global Sourcing creates purchasing power and operational efficiencies, adding value for our stakeholders

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

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

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

1Excludes $40M legal charge taken in Q3 FY13

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



$10M in savings

Shipped 40M lines

7M Patient home deliveries

Canada


Warehouse picking errors of 0.023%


$9M in savings

Lines per man hour picked increased by 3.4%

Specialty Health


Inventory Accuracy 99.99%

Six Sigma process improvement generated

$15M in savings

Reduced cost per line in distribution center by >10%

USA

CANADA

IRELAND

SLOVENIA

GERMANY

INDIA

CHINA

TAIWAN

MALAYSIA

SPAIN

MALTA

PHILIPPINES

HUNGARY

SOUTH KOREA

THAILAND

ISRAEL

POLAND

HONG KONG

ITALY

BRITISH VIRGIN ISLANDS

BERMUDA

ENGLAND

Sourcing Excellence

IRELAND

SLOVENIA

GERMANY

SPAIN

MALTA

HUNGARY

POLAND

ITALY

ENGLAND

Europe India China

SOUTH KOREA

TAIWAN

HONG KONG

McKesson Is A Valuable Partner To

Manufacturers

Scale

Reach

Breadth of

Services

Supply

Chain Manufacturer Benefits

Experienced Management Team

Paul C. Julian Executive Vice President, Group President

McKesson Corporation (17 years)

Nick Loporcaro President, McKesson Canada

(10 years)

Mark Walchirk President, U.S. Pharmaceutical

(12 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)

U.S. Pharmaceutical

Mark Walchirk

President, U.S. Pharmaceutical

Pharmaceutical Industry Landscape Low single-digit growth in the near future

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 2007-2013 (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.

Sales ($ Billions) % Change

-4%

-2%

0%

2%

4%

6%

8%

10%

0

50

100

150

200

250

300

350

400Upward Trends

• Aging population/

prescription demand

• Specialty growth

• Manufacturer support

• Drug pipeline improvement

Downward Pressures

• Generic conversions

• Cost containment

• Inconsistent utilization

$32

$48

2007 2011

$55

$77

2013 2017

$224

$251

2007 2011

$235

$247

2013 2017

U.S. Pharmaceutical Market Overview




Brand Sales ($ Billions) Generic Sales ($ Billions)

16.0

8.7

17.7 19.0

21.0

34.5

13.2

20.9

28.4

13.0

10.7

0

5

10

15

20

25

30

35

40

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Generics Launch Opportunity




$62B $73B

Bra

nd S

ale

s a

t R

isk (

US

$ B

illio

ns)

Health Systems • OneStop Generics

• Clinical/Operational Solutions & Consulting

• Inventory Management • 340B Solutions • Ambulatory Pharmacy • Pharmacy Systems • Packaging • RelayHealth • Six Sigma

National Chain Pharmacy • Re-Distribution Center • Central Fill • OneStop Generics • Six Sigma • Automation • Clinical Services • Pharmacy Systems • RelayHealth • NorthStar

Alternate Site Pharmacy • OneStop Generics • Six Sigma • Automation • Pharmacy Systems • RelayHealth

Mail Order • Automation • OneStop Generics • Central Fill • Pharmacy Systems • RelayHealth

• NorthStar

Independent & Small Chain Pharmacy • Health Mart Franchise • OneStop Generics

• Managed Care Contracting • Automation • Pharmacy & Point-of-Sale Systems • Private Brand • Clinical Services • RelayHealth

U.S. Pharma Has A Broad Value Proposition

Market

Share #1

McKesson: A Valuable Generics Channel Partner With Global Scale

Manufacturers

Channel Strength in Generics Purchasing

Global Relationships

Scale Efficiencies/Benefits

Private Label

Virtual Inventory Management

Rapid Shipment Solutions

Pharmacies McKesson

NorthStar Delivers Global Value To U.S. Customers

Ingredients

Raw Materials

Manufacturer

Raw

Materials

Generics

Manufacturer

McKesson

Distribution

Pharmacy

McKesson: A Valuable Partner To Manufacturers Pharma/Biotech Company Needs

Broad distribution offering

Services

40,000+ customer locations

Reach

Best-in-class network

Scale

High value and reliability

High Efficiency

McKesson: A Valuable Partner To Independent

Pharmacy

Source: J.D. Power 2012: National Pharmacy Study (September 2012)

• Higher pharmaceutical sales

• Faster sales growth

• Greater generics compliance

• Improved reimbursement efficiency

• Industry-leading customer satisfaction

1,236

1,851 2,017

2,615 2,787

2,941 3,095

FY07 FY08 FY09 FY10 FY11 FY12 FY13

Health Mart Store Count

J.D. Power: Health Mart is #1 in customer satisfaction among drug store chains

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

McKesson Canada

Nick Loporcaro

President, McKesson Canada

Canadian Pharmacy Rx Purchases By

Market Segment

Canadian Pharmacy Rx Purchases $22.2 Billion CAD

88% Retail

12% Hospital

Source: IMS Brogan, Canadian Drug Store and Hospital Purchases Moving Annual Total to December 2012

Generics Now Consist Of >60% Of

Total Prescriptions

Source: IMS Brogan, Canadian CompuScript, Moving Annual Total to December 2012

Canadian Retail Pharmacy Rx Market Share: Brand versus Generic

2005 2006 2007 2008 2009 2010 2011 2012

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%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

McKesson Canada Has A

Broad Value Proposition Market

Share #1

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

Scaled Distribution Presence Across Canada

16 Distribution Centres

13 Offices

British

Columbia Alberta

Manitoba

Ontario

Quebec

Nova Scotia

New Brunswick

Newfoundland

and Labrador

Global Sourcing

Banner

Programs

Generic Rx Private Label

Program

OTC Products

We Help Independent/Banner Members Grow And Thrive

#1 by store count with >1,700 members

Comprehensive Specialty Capabilities

Specialty Pharmacies & Distribution

Infusion Services

Manufacturer Programs

Community

Pharmacy

Distribution

Connectivity Community Health

• Sivem

• Specialty

• Hospitals

• Manufacturers

• Payers

• Patients

• Medical Clinics

• RelayHealth

• Home Health Care

• Specialty Community

Network

• Pharmacy

Technology Solutions

Leveraging Our Ecosystem

Community

Pharmacy

McKesson Specialty Health

Marc Owen

President, McKesson Specialty Health

FY14 FY15 FY16 FY17

Specialty Market Overview

Note: Total specialty market does not necessarily reflect McKesson Specialty Health’s portfolio

Source: IMS Market Prognosis 2013-2017 USA (March 2013) – Combined Clinics Sector Forecasts1 EvaluatePharma World Preview 2018 (June 2012)2


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.

• Aging population driving new

cancer cases

• Growth from in-line products and

new products in oncology will

offset major patent expirations2

• Strong growth in other

specialties

Steady Growth Expected in Specialty1

McKesson Specialty Health Has

A Broad Value Proposition Market

Share #2

Physician

• Distribution and Contracting

• Robust Practice

Management Services

• Integrated Technology

Platform

‒ Lynx and iKnowMed


• 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

``

McKesson Specialty Coverage

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

The US Oncology Network: Radiation Locations

The US Oncology Network: Practice Locations

Onmark Select Program: Practice Locations

We Can Manage Care In Any Setting

Advanced Technology

Enhancing practice operations, workflow and

clinical decision making

Clinical Leadership

Resources to support evidence-based medicine,

increase access to clinical trials and enhanced

patient education resources

Business & Operational Leadership

Streamlining operations, group purchasing,

patient quality measures, reporting and payer

relations support

Quality-Based Performance Environment

Positioned To Lead Payment Shifts

• 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

Traditional Contracting Environment

McKesson Specialty Health

Broad expertise in all aspects of cancer care delivery

Deep

Physician

Engagement

Expanding presence in other specialties

Technology platform to

drive enhanced value

for physicians, payers

and pharmaceutical

manufacturers

McKesson Medical-Surgical

Paul Julian


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2010 2011 2012 2013

Medical-Surgical Market Overview

2013 revenue includes approximately 5 weeks of PSS World Medical

Market Trends

• Favorable demographic and utilization trends

• Consolidation of customers and distributors

• Markets remain highly fragmented

• Extended care markets remain attractive

Medical-Surgical Revenue

McKesson FY

($ B

illio

ns)

Medical-Surgical Has A

Broad Value Proposition Market

Share #1

Extended Care • Medical Supplies & Equipment • Vaccines

• McKesson Brand Products • Formulary & Inventory Manager • Budget Manager and Charge

Capture • Business Management Insight • Reimbursement Services

Home Care • Medical Supplies & Equipment

• Direct-to-Patient Services • McKesson Brand Products • Respiratory • Vaccines • Inventory Management Tools • Spend Utilization Management

Occupational Health • Medical Supplies & Equipment • McKesson Brand Products • Inventory Management Tools • Vaccines

Surgery Centers • Medical Supplies & Equipment • Pharmaceuticals • McKesson Brand Products • Inventory Management Tools • Cost Savings Services

Primary Care • Medical Supplies & Equipment • In-Office Rx & Vaccines • In-Office Lab • McKesson Brand Products • Practice Management & EMR • Inventory Management Tools

PSS World Medical Integration Update

Leadership

Salesforce Engagement

Synergies

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

Wrap-Up

McKesson: Recognized As A Leader

#1 Healthcare

Wholesaler

for Innovation,

People

Management,

and Financial

Soundness,

2012

100 Best Corporate Citizens:

2010-2011

Highest in Customer Satisfaction among Chain Drug

Store Pharmacies (Health Mart): 2011, 2012

Supplier of the Year: 2010

2010 2011 2012 2013

The Civic 50: 2012 2013 Top Health

Care Wholesaler

2013 Best

Employers for

Healthy Lifestyles®:

Platinum certification

Named as global high

performing company: 2010

• 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

Distribution Solutions Summary

McKesson Technology Solutions

Pat Blake


Agenda

MTS Overview

Industry Trends and Strategy

Major Businesses

Innovating for Today and Tomorrow

Summary

Technology Solutions Overview Comprehensive solutions across the healthcare continuum

$3.4B in revenues and $371M in adjusted operating profit

Consumers Retail Pharmacies

Payers

Manufacturers Hospitals and

Health Systems

Physicians

Technology

Solutions



Experienced Management Team

Pat Blake Executive Vice President, Group President McKesson Corporation (17 years)

Jeff Felton President, RelayHealth

(13 years)

Jim Pesce President, Enterprise Information

Solutions (31 years)

Emad Rizk, MD President, Health Solutions

(10 years)

Kevan Torgerson President, Enterprise Imaging &

Departmental Solutions (27 years)

Patrick Leonard President, Business Performance Services

(18 years)

Distribution Solutions

87%


13%

McKesson Technology Solutions FY13 Adjusted Operating Profit Contribution

Enterprise Information

Solutions

Business Performance Services

RelayHealth

Health Solutions

Enterprise Imaging &

Departmental Solutions



Agenda

MTS Overview


Major Businesses


Summary

Healthcare Industry Transformation Economic & Regulatory Changes

Economic

Increasing Healthcare Costs

Reimbursement Pressure

New Payment Models

New Care Delivery Models

Physician Employment/

Provider Consolidation

Regulatory

ICD-10

Meaningful Use

Accountable Care

Interoperability & Information

Exchange

Quality Reporting

Requirements

Engaged Patient

Maximize

Technology

Value

Optimize

Performance

and Quality

Coordinate

Care

Navigate

Evolving

Payment

Models

Better Health 2020 Enabling customers to overcome challenges

Better Health

Agenda

MTS Overview


Major Businesses


Summary

RelayHealth Coordinating care across the continuum

Market Leadership & Scale

1 # in Pharmacy

Network 1 # in Analytics &

Workforce

Management

Providers Using Clinical Exchange

1,000+

Analytics Facilities

37M+ Patient Health Records

15.8B Transactions/Year

50,000+ Retail Pharmacies

Overview

• Pharmacy Network

• Clinical Exchange

• Analytics

• Population Health

• Capacity Management

44,000+

Health Solutions Driving efficient care and payment for payers and providers

Overview

Payer Solutions

• Decision Management

• Financial Management

• Provider Network

Management

Provider Solutions

• Pre-Settlement

Adjudication

Market Leadership & Scale

1 # in Decision

Management –

Payer &

Provider 1 #

in Provider

Network

Management –

Payer

1 #

in Financial

Management –

Payer & Provider

1.9B Financial Transactions Processed Last Year

CMS, VA & 42 States

91% of Blues Plans

100% of Top 10 U.S. Health Plans

100% of Top 10 Medicaid Plans

Enterprise Imaging & Departmental Solutions Increasing provider productivity

Overview

• Diagnostic Imaging

• Document Imaging

• Departmental Solutions

(laboratory, surgery,

scheduling, materials

management)

Presence & Recognition

Nearly 3 # 2012 Best in KLAS® PACS

2,800 Diagnostic

Imaging

Facilities 2 # 2012 Best in KLAS® Cardiology

1,400+ Document Imaging Facilities

Ranked

Ranked

2012 Best in KLAS Awards: Software & Professional Services Report; December 2012, www.KLASresearch.com; © 2012 KLAS Enterprises, LLC. All rights reserved.

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 #

7 th

Consecutive Year

Overall Software Suite

Paragon named

Best In KLAS

Community

HIS ®

2012 Best in KLAS Awards: Software & Professional Services Report; December 2012, www.KLASresearch.com; © 2012 KLAS Enterprises, LLC. All rights reserved.

Business Performance Services Improving physician practice performance

Overview

• Comprehensive

suite of practice

management solutions

• Leader in physician

revenue cycle services

• Scalable technology

solutions and services

for independent and

affiliated physicians

Presence & Scale

40+ Specialties

50 Presence in all

135,000+ Physicians

Acquisition

Expanded

Scale

MED3OOO

States

Agenda

MTS Overview


Major Businesses


Summary

Innovating For Population Health To Support Risk-Based Payment Models

Why McKesson?

• Leading vendor with

health system analytics,

providing true provider

profitability analysis

• Vendor & payer neutrality

– ability to wrap third-party

products

• Experience – more than

10,000 physicians utilize

our tools to manage

quality

Pharmacy

Payers Hospitals &

Health Systems

Physician Office

Solutions to facilitate shift to risk-based

models for providers Long Term Care Home Care

Care Management

Analytics

Tailored Intervention

Actionable Insight

Connected Data

Longitudinal Health Record

Innovating for Business Intelligence To Empower Strategic & Point of Care Decisions

• Performance Analytics

• Quality and Regulatory

Intelligence

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

Strategic Management Optimize the core business of healthcare

Capacity Management Predict supply and demand across the enterprise

• Patient Demand Forecasting

• Workforce Management

• Patient Flow

Innovating for Value-Based Reimbursement To Drive Payment Based on Episodes and Outcomes

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

Payment Models

Fee for Service

Bundled Payments

Pay for Performance

Blended Payments

Partial Capitation

Global Payment

No

Risk

Full

Risk

Innovating for Interoperability To Enable Connectivity Across the Continuum

Founding Members

An independent not-for-profit

organization that will support

universal access to health care

data through seamless

interoperability

http://www.athenahealth.com/

http://www.cerner.com/

http://www.greenwaymedical.com/

http://www.allscripts.com/

Agenda

MTS Overview

Majority Industry Trends and Strategy

Major Businesses


Summary

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

Financial Update

Erin Lampert

Senior Vice President, Investor Relations

Agenda

Overview

Segment Financial Review

Looking Forward – Financial Flexibility

Track Record of Financial Performance

Summary

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


Broad Value Proposition

with Evolving Mix of

Higher Margin Products

and Services

Distribution Solutions: Organic Revenue

Growth, Spurred By Acquisitions

FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13

$104

$68

$119

$ Billions

Achieved full-year adjusted operating margin of 156 bps

Operating Margin Expansion Has Been

Consistent Over The Long-Term

Q4 FY05 earnings release: Issued initial operating

margin target of 150 – 200 bps


Q4 FY11 earnings release: Issued new adjusted

operating margin target of 200 – 250 bps


FY05 FY07 FY10 FY11 FY13



Major Levers For Operating Profit Expansion

Have Varied In Their Contribution

Generics &

Private Label

Operating Expense Leverage

Sell Margin

Focus on higher margin, higher growth areas

Continued ability to drive steady profit

growth over the long-term

Branded Manufacturer

Economics

• Scaled leadership positions across broad portfolio drive steady long-term growth


• 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

Distribution Solutions Financial Drivers


Diversified Portfolio

with Solid Long-Term

Fundamentals

Technology Solutions Is A Broad And

Diversified Portfolio


McKesson Health Solutions RelayHealth

Enterprise Imaging | Enterprise Information Systems |

Business

Performance

Services


87%


13%

McKesson Technology Solutions FY13 Adjusted Operating Profit Contribution

Enterprise Information

Solutions

Business Performance Services

RelayHealth

Health Solutions

Enterprise Imaging &

Departmental Solutions



• 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

Technology Solutions Financial Drivers

Financial Flexibility

Steady Cash Flow and

Healthy Balance Sheet

Lead to Value Creation

Our Operating Cash Flows Have

Steadily Increased

$104 $106 $109

$119 $119

*FY08 excludes $962 million Securities Litigation payment

$0.5

$1.0

$1.5

$2.0

$2.5

FY07 FY08* FY09 FY10 FY11 FY12 FY13

7 Year Moving Average

OCF $ Billions

$8.8

$8.7 $2.6

Acquisitions

Share Repurchases

We Use a Portfolio Approach To

Capital Deployment $ Billions

$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

Dividends Internal Capital

Spending

Our Internal Capital Spending Needs

Are Modest

$126 $195 $195 $199 $233 $225 $246

$104

$88 $123 $104 $91 $131 $111

$76

$73 $74 $75 $64

$47 $49


Capital Expenditures Capitalized Internal Use Software Capitalized Software Held for Sale

$ Millions

• Periodically reviewed

• Ongoing dialogue with Board and

shareholders

• Prefer flexibility to allocate capital to

value-creating acquisitions

• Raised three times since FY07

Our Dividend Philosophy

$2.1 US Oncology $2.1

PSS

$1.4 Other

$0.9 Katz

Disciplined Acquisitions Enhance Strategy

$ Billions

FY07 – FY13: 22 Acquisitions Distribution Solutions 22 Acquisitions Technology Solutions

Nearly $9 billion deployed to complete a series of value-creating acquisitions since FY07

$0.5 OTN

$6.3 Distribution

Solutions

Technology

Solutions

$2.5 $1.8 Per-Se

We Have Returned Nearly $9 Billion To Shareholders

Through Share Repurchases Since FY07

305 298 279 273

263 251

239


Diluted Weighted Average Shares Outstanding (in millions)

Our Stock Option Overhang Has

Significantly Declined

1

2 3

1 2 Yr

3 Yr

5 Yr

6 Yr

2

8

1 19

6

1 Yr

2 Yr

3 Yr

4 Yr

5 Yr

36 Million Outstanding 7 Million Outstanding

Fiscal Year 2007 Fiscal Year 2013

We Maintain A Strong Balance Sheet With

Significant Financial Flexibility

Significant capital for future

deployment

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

Strong Operating Cash Flow

How Does It All Add Up?

Steady Track Record of

Great Results

We Have A Track Record Of Steady

Revenue Growth… $ Billions

$93 $102 $107 $109 $112

$123 $122


$3.02 $3.53 $4.35 $4.85 $5.31

$6.38 $6.33

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

…That We Have Leveraged Into Higher

Adjusted EPS Growth



FY14 Guidance: $7.90 - $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

We Expect Fiscal 2014 Adjusted Earnings

Per Diluted Share Of $7.90 - $8.20

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


• 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

As Reported

(GAAP)

Amortization

of Acquisition-

Related

Intangibles

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 35 - - - 35

Impairment of an equity investment (191) - - - (191)

Interest expense (240) - 11 - (229)

Income from continuing operations before income taxes 1,919 215 2 72 2,208

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

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) 171 31 149 (4,067)


Interest expense (251) - - - (251)



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$

RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP)

FOR FISCAL 2007 THROUGH 2013

(unaudited)

(in millions, except per share amounts)

Year Ended March 31, 2013


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

(a) Certain computations may reflect rounding adjustments

As Reported

(GAAP)

Amortization

of Acquisition-

Related

Intangibles

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) 116 43 213 (3,777)

Other income, net 36 - (16) - 20




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

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)



Income from continuing operations before income taxes 1,864 118 - (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$

McKESSON CORPORATION



(unaudited)







As Reported

(GAAP)

Amortization

of Acquisition-

Related

Intangibles

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) 99 - 493 (3,590)



Income from continuing operations before income taxes 1,064 128 - 493 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

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)



Income from continuing operations before income taxes 1,457 106 4 (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$



(unaudited)







As Reported

(GAAP)

Amortization

of Acquisition-

Related

Intangibles

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)



Income from continuing operations before income taxes 1,297 53 11 (6) 1,355


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$



(unaudited)





Distribution

Solutions

Technology

Solutions

Corporate

& Interest

Expense TOTAL

Distribution

Solutions

Technology

Solutions

Corporate

& Interest

Expense TOTAL

Distribution

Solutions

Technology

Solutions

Corporate

& Interest

Expense TOTAL

Distribution

Solutions

Technology

Solutions

Corporate

& Interest

Expense TOTAL

Distribution

Solutions

Technology

Solutions

Corporate

& Interest

Expense TOTAL

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$

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 4 11 35 16 5 - 21 5 4 27 36 29 5 9 43 (20) 7 25 12

Impairment of an equity investment (191) - - (191) - - - - - - - - - - - - - - - -

Operating pre-tax profit 2,197 297 (335) 2,159 2,219 364 (413) 2,170 1,897 301 (341) 1,857 1,988 385 (322) 2,051 1,158 334 (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% - 5.70% 4.23% 45.62% - 5.35% 4.19% 43.97% - 5.33% 4.00% 46.64% - 5.22% 3.82% 46.44% - 5.04%

Operating expenses as a % of revenues 2.58% 36.81% - 3.81% 2.39% 34.77% - 3.60% 2.45% 34.68% - 3.70% 2.14% 34.48% - 3.37% 2.68% 35.77% - 3.92%

Operating pre-tax profit as a % of revenues 1.85% 8.73% - 1.76% 1.86% 11.00% - 1.77% 1.74% 9.42% - 1.66% 1.88% 12.32% - 1.89% 1.12% 10.90% - 1.13%

Pre-Tax Adjustments:

Gross profit 2$ 14$ -$ 16$ 1$ 19$ -$ 20$ -$ 16$ -$ 16$ 1$ 20$ -$ 21$ 1$ 28$ -$ 29$

Operating expenses 146 52 1 199 120 51 - 171 70 46 - 116 50 47 - 97 50 49 - 99

Amortization of acquisition-related intangibles 148 66 1 215 121 70 - 191 70 62 - 132 51 67 - 118 51 77 - 128

Operating expenses 47 8 (64) (9) 24 6 1 31 41 - 2 43 - - - - - - - -

Other income (expense), net - - - - - - - - - - (16) (16) - - - - - - - -

Interest expense - - 11 11 - - - - - - 25 25 - - - - - - - -

Acquisition expenses and related adjustments 47 8 (53) 2 24 6 1 31 41 - 11 52 - - - - - - - -

Operating expenses 72 - - 72 149 - - 149 213 - - 213 - - (20) (20) 493 - - 493

Litigation reserve adjustments 72 - - 72 149 - - 149 213 - - 213 - - (20) (20) 493 - - 493

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 4 11 35 16 5 - 21 5 4 11 20 29 5 9 43 (20) 7 25 12

Impairment of an equity investment (191) - - (191)

Operating pre-tax profit 2,464 371 (398) 2,437 2,513 440 (412) 2,541 2,221 363 (355) 2,229 2,039 452 (342) 2,149 1,702 411 (284) 1,829

Interest expense - - (229) (229) - - (251) (251) (1) - (196) (197) (2) (2) (183) (187) 2 (4) (142) (144)


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% - 5.72% 4.24% 46.19% - 5.37% 4.19% 44.48% - 5.34% 4.00% 47.28% - 5.24% 3.82% 47.36% - 5.07%

Operating expenses as a % of revenues 2.36% 35.05% - 3.60% 2.14% 33.05% - 3.31% 2.16% 33.24% - 3.37% 2.09% 32.97% - 3.30% 2.16% 34.17% - 3.37%

Operating pre-tax profit as a % of revenues 2.07% 10.91% - 1.99% 2.10% 13.29% - 2.07% 2.04% 11.36% - 1.99% 1.93% 14.47% - 1.98% 1.64% 13.41% - 1.72%

(in millions)


RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP) - BY ADJUSTMENT TYPE


(unaudited)

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

Solutions

Technology

Solutions

Corporate

& Interest

Expense TOTAL

Distribution

Solutions

Technology

Solutions

Corporate

& Interest

Expense TOTAL

As Reported (GAAP):

Revenues 98,719$ 2,984$ -$ 101,703$ 90,738$ 2,239$ -$ 92,977$

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 35 11 75 121 39 10 83 132

Operating pre-tax profit 1,483 319 (203) 1,599 1,395 206 (205) 1,396

Interest expense 4 (4) (142) (142) - (4) (95) (99)


before income taxes 1,487$ 315$ (345)$ 1,457$ 1,395$ 202$ (300)$ 1,297$

Gross profit margin 3.63% 47.69% - 4.93% 3.58% 48.24% - 4.66%

Operating expenses as a % of revenues 2.17% 37.37% - 3.47% 2.09% 39.48% - 3.30%

Operating pre-tax profit as a % of revenues 1.50% 10.69% - 1.57% 1.54% 9.20% - 1.50%

Pre-Tax Adjustments:

Gross profit 1$ 26$ -$ 27$ -$ 12$ -$ 12$

Operating expenses 28 51 - 79 15 26 - 41

Amortization of acquisition-related intangibles 29 77 - 106 15 38 - 53

Operating expenses 4 - - 4 3 4 - 7

Other income (expense), net - - - - - - - -

Interest expense - - - - - - 4 4

Acquisition-related expenses 4 - - 4 3 4 4 11

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 35 11 75 121 39 10 83 132

Operating pre-tax profit 1,516 396 (208) 1,704 1,413 248 (211) 1,450

Interest expense 4 (4) (142) (142) - (4) (91) (95)


before income taxes 1,520$ 392$ (350)$ 1,562$ 1,413$ 244$ (302)$ 1,355$

Gross profit margin 3.63% 48.56% - 4.95% 3.58% 48.77% - 4.67%

Operating expenses as a % of revenues 2.13% 35.66% - 3.40% 2.07% 38.14% - 3.25%

Operating pre-tax profit as a % of revenues 1.54% 13.27% - 1.68% 1.56% 11.08% - 1.56%

(unaudited)


RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP)


(in millions)

Year Ended March 31, 2008 Year Ended March 31, 2007




McKesson Corporation - McKesson Investor Relations

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