Paul Julian
       President
McKesson Supply Solutions



       June 7, 2002
Agenda

      Business Overview
  l

      Financial Performance
  l

      Strategy
  l

      McKesson Health Solutions
...
Supply Solutions Organization



                                         Paul Julian
                                    ...
Supply Solutions Business

                                           Health           Medication        Medical
         ...
Supply Solutions Business

                               Health      Medication   Medical
Pharmaceutical   Automation
Pha...
Supply Solutions Business

                                    Health      Medication   Medical
Pharmaceutical    Automati...
Supply Solutions Business

                                 Health      Medication   Medical
                             ...
Supply Solutions Business

                                 Health      Medication   Medical
                             ...
Supply Solutions Business

                               Health         Medication    Medical
                           ...
Supply Solutions

       Significant Positive Momentum
   l
        – Strong Revenue Growth and Operating Margin
         ...
Positive Momentum - Financial Performance

Supply Solutions Revenue                                 Supply Solutions Opera...
Positive Momentum - Operating Margin

Supply Solutions
Operating Margin

                  53 bps1
                 Expans...
North America Leads Global Pharmaceutical
Growth
     2001 Global Pharmaceutical Sales
     US $ Billions
                ...
Aging Demographics Drives Utilization



                 • 75% of All Rx
                                         85
    ...
McKesson Health Solutions

            McKesson Supply Solutions

             McKesson Health Solutions

  Specialty Phar...
Multiple Constituents with Specific Needs

   SPS Constituent              Specific Need

        Payor              Contr...
Established Base & Large Growth
Opportunity

      McKesson Today:                                Strategy:
              ...
Supply Solutions: Expand Operating
Margins in FY03
      Product Sourcing
  l
      3 Year Operations / IT Plans
  l
     ...
Summary


     Favorable External Fundamentals
 l
     Strong Market Position Throughout North America
 l

     Many Point...
Paul Julian
    Interim President
Medical-Surgical Solutions
Agenda


      Business and Financial Overview
  l

      Strategy
  l

      Medical-Surgical Summary
  l




           ...
Medical-Surgical Today


       Largest Customer Base-Continuum of Care
   l

       Leading Alternate Site Supplier
   l
...
Financial Performance
Medical-Surgical Revenue                                        Medical Surgical Operating Profit
$ ...
Operating Margin

                 Medical-Surgical Operating Margin


                            4.22%
                 ...
Medical-Surgical Plan

     Recognize Business Performance Issues
 l

     Regain Revenue Growth and Operating Margin
 l
 ...
Medical-Surgical: Continuum of Care

  Primary Care           Extended Care             Acute Care

• Market Leader       ...
Care is Shifting to Alternate Site

  Primary Care        Extended Care          Acute Care

                     • Aging ...
FY03 Key Initiatives

  Leverage Operational       Penetrate Primary and
     Improvements               Extended Care

  ...
Leverage Operational Improvements

 l   DC Network Optimization
     – Consolidated Number of Sites
     – Standardized La...
Integrated Technology Solutions

 l   Sales Force Automation
     – Supply Management Online
     – Further Enhancements w...
McKesson Brand

 l   Expanding Product Portfolio
 l   Increasing Customer Awareness
     – Overall Value to Our Customers
...
Alternate Site Penetration

  l   Primary Care
      – Strong Revenue Growth in Surgery Centers
      – Supply Management ...
Summary

     Regain Operating Momentum
 l

     Infrastructure Improvements Underway
 l

     Closed Loop Supply Manageme...
Patrick Blake           Heidi Yodowitz
     President                 CFO
Customer Operations


         McKesson Pharmace...
McKesson Pharmaceutical Review


      Operating Performance
  l


      Business Overview
  l


      Strategy
  l


    ...
FY02 Business Successes


     Strong Pharmaceutical Performance
          20%+ Y/Y Revenue Growth
      l

          Stro...
Balanced Segment Mix

      Retail                Retail
                                                    Institutional...
Pharmaceutical Industry Drivers

      Aging Population
  l
      Increasing Pharmaceutical Utilization
  l

      Generic...
50+ Age Group Continues to Grow

                   Percent of Population Age 50 or Over
         30.0%
         29.5%
   ...
US Rx Spend Continues to Increase

                    US Pharmaceutical Market Spend
                    $ Billion

     ...
Favorable Industry Segment Trends


   Retail National         Retail Independent            Institutional
   Retail Natio...
FY03 Pharmaceutical Key Initiatives

        Operational                 Cross Business Unit
        Performance          ...
Six Sigma Operational Excellence

 Pharmaceutical FY02                 Continue Operating
  Accomplishments               ...
Operations / IT Plan Drives Margins


               Investment       Returns
               Investment       Returns
    ...
Continued Back-Office Improvements

  Improving Contract
    Administration /                  Excellent Results
  Chargeb...
Significant Generics Opportunity

Branded Pharmaceuticals
Going Off Patent1
                                 $35B
        ...
Increasing Value for Our Customers

l Enhances  “Select” Program
l Increases Operational Efficiency
  – Program Simplicity...
Cross Business Unit Synergies

   Retail Small Chain /   Canadian Market /
      Automation            Automation




    ...
New Business Initiatives


          Verispan                   Together-Rx Card
                                     Toge...
Pharmaceutical Summary


      Favorable External Fundamentals
  l

      Strong Market Position
  l

      Many Points of...
Rich Lunak
     President
McKesson Automation
Agenda


       McKesson Automation Overview
   l


       Inpatient Automation
   l


       Retail / Outpatient Automati...
Customer Segments


       Inpatient                    Retail


                    Broadest Footprint
     Continuous Co...
Inpatient Automation




                       54
Inpatient Customer Needs

    Better Quality of Care
l

    Cost Reduction Initiatives
l

    Retention of Valuable Nursin...
Measuring the Impact of Error

n Overwhelming Cost to Human Life
       7,000 Deaths per Year
   l
       770,000 ADEs
   ...
Solutions at Every Point of Care

                         Product                          Analysis
                     ...
Inpatient History of Innovation

 1992         1998          1999             2000             2001            2002




  ...
SupplyScan


    Large Unpenetrated Market
l

    Over 160 Live Hospitals in Less
l
    Than 2 Years
    Integrated with M...
Inpatient Penetration

Large University Hospitals
Large University Hospitals
                                        Cover...
FY03 Inpatient Strategy


 n Continued Introduction of ROI and Safety Based
   Solutions
 n Continuous Product Innovation
...
Retail / Outpatient Automation




                                 62
Retail Customer Need


           Script Count Outpacing Pharmacist Entry
       l

           Sharp Rise in the Number of...
Retail Rx Trends Are Favorable For Automation


                                  1998   2005E   Growth

     Number of Rx...
Retail History of Innovation

                                      1999
                  1998
  1995                    ...
Retail Integration

   n Baker Universal           (all size pharmacies)
   n Dial Rx IVR               (all size pharmaci...
Retail Penetration

 Small Chain /          Large          Government /
 Independents           Chain          Institution...
FY03 Retail Strategy


n Ongoing Product Innovation

n Further Penetrate Existing Base

n Continue to Expand Out-of-Store ...
McKesson Automation Summary

    Broadest Footprint
l
    Continuous Commercialization of Innovative Products
l
    Fully-...
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McKesson Investor/Analyst Day (Part II: Pharmaceutical and Medical-Surgical Solutions

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McKesson Investor/Analyst Day (Part II: Pharmaceutical and Medical-Surgical Solutions

  1. 1. Paul Julian President McKesson Supply Solutions June 7, 2002
  2. 2. Agenda Business Overview l Financial Performance l Strategy l McKesson Health Solutions l Summary l 2
  3. 3. Supply Solutions Organization Paul Julian President McKesson Supply Solutions Brian Tyler Heidi Yodowitz Ted Ramlet Senior Vice President CFO Senior Vice President Business Development & Strategy Business Process Redesign 3
  4. 4. Supply Solutions Business Health Medication Medical Health Medication Medical Pharmaceutical Automation Pharmaceutical Automation Solutions Management Surgical Solutions Management Surgical n Distribution n Retail Pharmacy n Medical n Pharmacy and n Primary Care Management Medication n Repackaging n Hospital / n Extended Care Software and Management Institutional n Informatics n Acute Care Services Services n International n Specialty Pharmaceutical Services End to End Continuum of Services Multiple Points of Leverage Comprehensive North American Distribution 4
  5. 5. Supply Solutions Business Health Medication Medical Pharmaceutical Automation Pharmaceutical Solutions Management Surgical n Growth Outside Channel n 3 year OPS / IT plans n Six Sigma n Verispan Joint Venture n Strong Canadian Growth 5
  6. 6. Supply Solutions Business Health Medication Medical Pharmaceutical Automation Automation Solutions Management Surgical n #1 in Retail Automation n Eight New Product Introductions n Alaris Partnership n Solutions for Medication Safety n Expand into Supply Segment n Retail Small Chain Cross-Sell 6
  7. 7. Supply Solutions Business Health Medication Medical Health Pharmaceutical Automation Solutions Management Surgical Solutions n VitaRx Acquisition n Together -Rx Card n PEG-Intron Program n Focus on Payor Services 7
  8. 8. Supply Solutions Business Health Medication Medical Medication Pharmaceutical Automation Solutions Management Surgical Management n Grew in excess of market n Best demonstrated practice n McKesson manages purchasing n Addresses pharmacist shortage n Pull-through pharmaceutical distribution 8
  9. 9. Supply Solutions Business Health Medication Medical Medical Pharmaceutical Automation Solutions Management Surgical Surgical n Largest Customer Base n Leading Share in Alternate Care n Closed Loop Supply n Focus on McKesson Brand n DC Network Optimization 9
  10. 10. Supply Solutions Significant Positive Momentum l – Strong Revenue Growth and Operating Margin Expansion – Largest North American Distribution Footprint – Expanded Business Portfolio – Cross Business Unit Synergies Sustaining Momentum l – Execute on Business Unit plans – Specialty Pharmaceutical Services 10
  11. 11. Positive Momentum - Financial Performance Supply Solutions Revenue Supply Solutions Operating Profit $ Billions $ Millions 32.0% CAGR 16.7% CAGR $803 $33.1 $27.6 $594 $24.3 $461 FY00 FY01 FY02 FY00 FY01 FY02 Excellent Performance Note: Excludes Medical-Surgical results and warehouse sales 11
  12. 12. Positive Momentum - Operating Margin Supply Solutions Operating Margin 53 bps1 Expansion 2.43% 7 Consecutive Quarters of Operating Margin 2.15% Expansion 1.90% FY00 FY01 FY02 Note: 1. FY02 includes 3 bps from discontinuation of goodwill amortization 12
  13. 13. North America Leads Global Pharmaceutical Growth 2001 Global Pharmaceutical Sales US $ Billions CAGR Sales % Share % Growth 97-00 North America 181.8 49.9% 17.0% 13.1% Europe 88.0 24.2% 10.0% 6.3% Japan 47.6 13.1% 4.4% 2.1% Asia/Africa/Australia 27.9 7.7% 8.7% 9.8% Latin America 18.9 5.2% 0.1% 4.2% Total Global Market 364.2 100% 11.9% 8.4% Source: IMS Health 2002 13
  14. 14. Aging Demographics Drives Utilization • 75% of All Rx 85 • 65% of Hospital Million Bed / Days 75 > 50 Years Million Old • 42% of Physician > 50 Years Visits Old 2001 2005 14
  15. 15. McKesson Health Solutions McKesson Supply Solutions McKesson Health Solutions Specialty Pharmaceutical Medical Management Specialty Pharmaceutical Medical Management Services (SPS) Software & Services Services (SPS) Software & Services Pharma / Biotech Payors 15
  16. 16. Multiple Constituents with Specific Needs SPS Constituent Specific Need Payor Control over drug spend n Payor Pharma // Biotech Access to patients n Pharma Biotech Provider One-stop shop for SPS products n Provider Patient Easy access to latest drugs n Patient Pharmacies Ability to participate in market n Pharmacies 16
  17. 17. Established Base & Large Growth Opportunity McKesson Today: Strategy: Leverage McKesson capabilities & n 40 million covered lives Leverage McKesson capabilities & n 40 million covered lives relationships: relationships: n Access to majority of SPS products n Access to majority of SPS products l Structured payor programs l Structured payor programs n Physician office presence n Physician office presence l Integrated pharmaceutical // biotech l Integrated pharmaceutical biotech n Extensive retail pharmacy n Extensive retail pharmacy channel solutions channel solutions relationships relationships l MD Office & Retail “Pull-Through” l MD Office & Retail “Pull- “Pull-Through” Sizeable & growing opportunity Sizeable & growing opportunity Proven & scaleable capabilities Proven & scaleable capabilities Established McKesson relationships Established McKesson relationships Focused business unit Focused business unit 17
  18. 18. Supply Solutions: Expand Operating Margins in FY03 Product Sourcing l 3 Year Operations / IT Plans l Six Sigma l Expand Generics Program: “OneStop” l Grow Packaging Capabilities l Specialty Pharmaceutical Services l Automation Market Expansion l Significant Momentum Moving into FY03 18
  19. 19. Summary Favorable External Fundamentals l Strong Market Position Throughout North America l Many Points of Leverage l Continue Growth Momentum l Execute to Drive Operating Margin Improvement 19
  20. 20. Paul Julian Interim President Medical-Surgical Solutions
  21. 21. Agenda Business and Financial Overview l Strategy l Medical-Surgical Summary l 21
  22. 22. Medical-Surgical Today Largest Customer Base-Continuum of Care l Leading Alternate Site Supplier l Provide Integrated Technology Solutions l Favorable External Trends l Flat Operating Performance l 22
  23. 23. Financial Performance Medical-Surgical Revenue Medical Surgical Operating Profit $ Billions $ Millions (pro-forma) $2.73 $2.72 $110.7 $95.1 $2.63 $92.4 FY00 FY01 FY02 FY00 FY01 FY02 Note: FY02 includes $19 million of operating profit from discontinuation of goodwill amortization 23
  24. 24. Operating Margin Medical-Surgical Operating Margin 4.22% 3.40% 3.49% FY00 FY01 FY02 Note: FY02 includes 70 bps from discontinuation of goodwill amortization 24
  25. 25. Medical-Surgical Plan Recognize Business Performance Issues l Regain Revenue Growth and Operating Margin l Expansion – Perform at Market Growth Rates – Drive Operation Margin Expansion Execution l – Operational Improvements – Extend Leading Alternate Site Position – Penetrate McKesson Brand Products – Utilize Cross Business Unit Solutions 25
  26. 26. Medical-Surgical: Continuum of Care Primary Care Extended Care Acute Care • Market Leader • Strong #1 Position • Major GPO Relationships • Physician Offices • Long-Term Care -HPG • Clinics • HomeCare Sites -Premier -Novation • Comprehensive Solutions Provider 57,000 Active Customers Integrated Supply Chain Technology Solutions Provider 26
  27. 27. Care is Shifting to Alternate Site Primary Care Extended Care Acute Care • Aging Population • Shift from Acute • Integrated Supply Model Chain Technology • Strong Home Care Solutions -Outpatient Care Growth • Consolidation / -Surgery Center Margin Pressures Well Positioned in Growth Segments 27
  28. 28. FY03 Key Initiatives Leverage Operational Penetrate Primary and Improvements Extended Care Integrated Technology McKesson Brand Solutions Productivity Improvement; Alternate Site Growth; Higher Margins 28
  29. 29. Leverage Operational Improvements l DC Network Optimization – Consolidated Number of Sites – Standardized Layout and Processes – Reduced Inventory and Operating Expenses l ERP System Integration Underway l Formulary 29
  30. 30. Integrated Technology Solutions l Sales Force Automation – Supply Management Online – Further Enhancements with ERP Deployment l Closed Loop Supply (Intelligent Distribution) – Supply Scan – Pathways Materials Manager 30
  31. 31. McKesson Brand l Expanding Product Portfolio l Increasing Customer Awareness – Overall Value to Our Customers l Penetrating Major GPO Contracts – Leverage GPO Relationships l All Business Segments Increasing Profitability 31
  32. 32. Alternate Site Penetration l Primary Care – Strong Revenue Growth in Surgery Centers – Supply Management Online l Extended Care – Significant Revenue Growth in Home Care – Horizon Clinical Home Care Integration 32
  33. 33. Summary Regain Operating Momentum l Infrastructure Improvements Underway l Closed Loop Supply Management l Favorable Demographics l Well Positioned in Growth Segments l Execution 33
  34. 34. Patrick Blake Heidi Yodowitz President CFO Customer Operations McKesson Pharmaceutical June 7, 2002
  35. 35. McKesson Pharmaceutical Review Operating Performance l Business Overview l Strategy l Summary l 35
  36. 36. FY02 Business Successes Strong Pharmaceutical Performance 20%+ Y/Y Revenue Growth l Strong Operating Profit Growth l New Business Wins New Contracts (OTN, Randall’s, Caremark) l Automation Cross-Sell l Secure Major Contracts Extended Wal-Mart Agreement l Renewed Target l 36
  37. 37. Balanced Segment Mix Retail Retail Institutional National Independent (36%) (36%) (42%) (22%) (42%) (22%) • Strong Independent and • All Major GPOs • Strong Y/Y Growth Rate Small Chain Position • HCA / HPG • Chain Stores • Buying Group • Omnicare Partnerships • Food / Drug Stores • Specialty Logistics • Mass Merchandise (OTN) • Mail Order 37
  38. 38. Pharmaceutical Industry Drivers Aging Population l Increasing Pharmaceutical Utilization l Generics Opportunity l Emerging Biotech Drug Pipeline l Strong Pricing Environment l Excellent External Fundamentals 38
  39. 39. 50+ Age Group Continues to Grow Percent of Population Age 50 or Over 30.0% 29.5% 29.0% 28.5% 28.0% 27.5% 27.0% 26.5% 26.0% 2000 2001 2002 2003 2004 2005 2006 Source: IMS Health, Census Bureau Estimates and Forecasts, 2001 39
  40. 40. US Rx Spend Continues to Increase US Pharmaceutical Market Spend $ Billion Projected CAGR 13.8% 289 Historic CAGR 254 16% 223 196 172 147 128 1999 2000 2001 2002E 2003E 2004E 2005E Source: IMS Health 2002 40
  41. 41. Favorable Industry Segment Trends Retail National Retail Independent Institutional Retail National Retail Independent Institutional • Store Growth • Store Count Stabilized • Improving Financial Condition • Mail Order / Food are • Service, Value, and Fastest Growing Relationships • Integrated Supply Segments Chain Solutions 41
  42. 42. FY03 Pharmaceutical Key Initiatives Operational Cross Business Unit Performance Synergies • Retail Small Chain - • Six Sigma Automation • 3 year Operations / IT Plan • Canadian Market – • Carrollton Customer & Automation Financial Services Generics New Initiatives • “OneStop” Program • Verispan • Together-Rx Card Execute to Drive Margin Improvement 42
  43. 43. Six Sigma Operational Excellence Pharmaceutical FY02 Continue Operating Accomplishments Excellence in FY03 $30MM Expense Expanding Six Sigma l l Reduction DC Delivery and Order l 60 Blackbelts Process l 70 Projects Completed Marketing - Generics l l 85 Active Projects Back-Office Operations l l An Integral Part of Our Operating Culture 43
  44. 44. Operations / IT Plan Drives Margins Investment Returns Investment Returns Buying Processes Buying Processes Generics Credit Process Generics Credit Process OPS / IT 3 Year Plan Supplier Sales Supplier Sales Profitability Re-Engineering Profitability Re-Engineering Inventory Profitability Inventory Profitability Management Models Management Models 44
  45. 45. Continued Back-Office Improvements Improving Contract Administration / Excellent Results Chargeback Process Further Automation and Reduced working capital by l l Refinement of Processes $88MM in FY02 Reducing Working Capital Reduced expenses by $3MM l l in FY02 Lowering Overhead Costs l Targeting World Class l Supplier Scorecard Drives l Operating Metrics Operational Excellence Highest Service Levels in l Past 18 Months 45
  46. 46. Significant Generics Opportunity Branded Pharmaceuticals Going Off Patent1 $35B Drives Generics Volume and Expands Margins Generic Rx GP% and GP$ l are Higher than Branded Rx <$10B McKesson “ OneStop” l Generics Program 2000-2001 2002-2005 (Projected) Note: 1) In 2001 Sales dollars Source: IMS Health, Analysts reports, Internal McKesson analysis 46
  47. 47. Increasing Value for Our Customers l Enhances “Select” Program l Increases Operational Efficiency – Program Simplicity / Technology – Comprehensive Drug Portfolio l Improves Quality of Service – Higher Service Levels Positive l Lowers Cost to Serve Customer Feedback – Real -Time Competitive Pricing Drive Greater Generics Volume and Expand McKesson Operating Margins 47
  48. 48. Cross Business Unit Synergies Retail Small Chain / Canadian Market / Automation Automation 48
  49. 49. New Business Initiatives Verispan Together-Rx Card Together-Rx Pharmacy Informatics Business Administer Innovative Solution • Lower Cost, Easier Access • De-Identified Patient Level, • Seven Major Pharmaceutical Longitudinal Data Companies • Solutions for Manufacturers • Retail Pharmacy (Wal-Mart, and Retail Drug Chains RiteAid, CVS, Walgreens, etc.) • $100MM First Year Sales Cross Business Unit Synergy • McKesson Health Solutions Will Administer Program 49
  50. 50. Pharmaceutical Summary Favorable External Fundamentals l Strong Market Position l Many Points of Leverage l Continuing Growth Momentum l Execute to Drive Operating Margin Improvement 50
  51. 51. Rich Lunak President McKesson Automation
  52. 52. Agenda McKesson Automation Overview l Inpatient Automation l Retail / Outpatient Automation l Summary l 52
  53. 53. Customer Segments Inpatient Retail Broadest Footprint Continuous Commercialization of New Products Fully-Integrated Product Offering Scaleable Solutions Over 10,000 Customers 53
  54. 54. Inpatient Automation 54
  55. 55. Inpatient Customer Needs Better Quality of Care l Cost Reduction Initiatives l Retention of Valuable Nursing and Pharmacy Staff l Better Management of the Supply Distribution Process l Reduction of Medical and Medication Errors l Re-Direct Professional Time to Clinical Roles l Requires Automation 55
  56. 56. Measuring the Impact of Error n Overwhelming Cost to Human Life 7,000 Deaths per Year l 770,000 ADEs l n ASHP Survey: “Hospitalized Patients Are Fearful” of Medication Errors n Staggering Financial Impact $2 Billion Annually for Inpatient l Preventable ADEs 56
  57. 57. Solutions at Every Point of Care Product Analysis fulfillment Process Usage Management analysis Programs DISTRIBUTION: CONSULTING: MONITORING: PRESCRIBING: TRANSCRIBING: DISPENSING: ADMINISTERING: 39% of errors 12% of errors 11% of errors 38% of errors Quality & Improved Pharmacist Bar Coding Point of Care Outcomes Physician Verification Robotics Check “5” Workflow Clinical Alerts Intervention Rights Centralized & Clinical tracking Longitudinal Decentralized Care Team Screening Dispensing Communication Record
  58. 58. Inpatient History of Innovation 1992 1998 1999 2000 2001 2002 MedCarousel ™ ROBOT-Rx® AcuDose-Rx™ PakPlus-Rx® Bulk Packager MedDirect™ SurePak ™ Admin-Rx™ DataStation™ NarcStation™ NarcStation™ Cartless Delivery SupplyScan™ Vault Alaris System™ 58
  59. 59. SupplyScan Large Unpenetrated Market l Over 160 Live Hospitals in Less l Than 2 Years Integrated with MIS and MMS l Solutions Diversified product offering l Open solution l Closed solution l Procedure-based application l 59
  60. 60. Inpatient Penetration Large University Hospitals Large University Hospitals Coverage Integrated Integrated Health Networks (IHNs) Health Networks (IHNs) Smallest: 80-patient hospital Smallest: 80-patient hospital Multi-Site Multi-Site Largest: > 1,500-patient IHN Largest: > 1,500-patient IHN Facilities Facilities Community United States Community United States Hospitals Canada Hospitals Canada Australia Australia Hospitals Serving Hospitals Serving Long-Term Care Long-Term Care VA Hospitals VA Hospitals Over 500 Customers 60
  61. 61. FY03 Inpatient Strategy n Continued Introduction of ROI and Safety Based Solutions n Continuous Product Innovation n Closed-Loop Strategies n Fully Utilize All McKesson Sales Channels (Cross-Sell) Leading Provider of Integrated Medication and Supply Automation Solutions 61
  62. 62. Retail / Outpatient Automation 62
  63. 63. Retail Customer Need Script Count Outpacing Pharmacist Entry l Sharp Rise in the Number of Complex l Therapeutic Drugs Efficiency and Quality l Scaleable Solutions l Requires Automation Demand Reflects Aging Population, 3/99 David Mott, Asst. Prof. of Pharmacy, University of Wisconsin, Pharmacist Pharmacist 63
  64. 64. Retail Rx Trends Are Favorable For Automation 1998 2005E Growth Number of Rxs 2.8 4.0 43% Billions Number of Pharmacists 129 137 6.2% Thousands Number of Rxs / Pharmacist 93 125 34% Requires Automation Source: NACDS 64
  65. 65. Retail History of Innovation 1999 1998 1995 2001 2002 Pharmacy 2000 AutoScript III Productivity Station Baker Universal 2010 Rx-Port SuperFill Serverless Two New Solution Products Three New Product Releases Positioned in Next 6 – 18 Months 65
  66. 66. Retail Integration n Baker Universal (all size pharmacies) n Dial Rx IVR (all size pharmacies) n Cells and Cassettes (>100 script/day) n Productivity Station™ (>180 script/day) n Pharmacy 2000 (>300 script/day) n AutoScript III (>500 script/day) n SI / Baker Central Fill (scaleable) Scaleable, Integrated Products 66
  67. 67. Retail Penetration Small Chain / Large Government / Independents Chain Institutional • Peltons • Walgreens • Dept. of Defense • Causey’s • Kroger • VA System • Grandview • Eckerd • NYU • Bi-Rite • Longs • North Carolina Medical • Savoy • Safeway • LA County 10,000+ Total Installs #1 Position in Each Customer Segment 67
  68. 68. FY03 Retail Strategy n Ongoing Product Innovation n Further Penetrate Existing Base n Continue to Expand Out-of-Store Models n Fully Utilize All McKesson Sales Channels (Cross-Sell) Leading Provider of Integrated Medication Dispensing Solutions 68
  69. 69. McKesson Automation Summary Broadest Footprint l Continuous Commercialization of Innovative Products l Fully-Integrated Product Offering l Expansion into Supply l Fully-Scaleable Solution l Large, Under-Penetrated Retail Customer Opportunity l Powerful Growth Drivers l Strong Selling Channels with McKesson Divisions l Continued Leadership Position 69
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