McKesson's Commitment to Improving Healthcare

VALUES
DELIVERING ON OUR
DELIVERING ON OUR

McKesson’s Corporate Citizenship Report 2005
McKesson’s Corporate Citizenship Report 2007

COMMITMENT TO OUR
SHAREHOLDERS

COMMITMENT TO IMPROVING
THE QUALITY, SAFETY AND
EFFICIENCY OF HEALTHCARE

“OUR RESPONSIBILITY TO
IMPROVE THE HEALTH OF
THE HEALTHCARE SYSTEM,
SUPPORT THOSE IN NEED, TAKE
STEPS TO PROTECT THE
ENVIRONMENT, AND TREAT OUR
EMPLOYEES FAIRLY CARRIES
OVER FROM THE WORKPLACE
TO OUR ROLE AS MEMBERS OF
THE COMMUNITY.”
MCKESSON CORPORATE – Citizenship Report 2007

JOHN HAMMERGREN, CHAIRMAN AND CEO

LETTER FROM THE CHAIRMAN
7

These are very exciting times at McKesson. More than ever, we
As one of the world’s leading healthcare companies, McKesson
have the resources, the relationships and the know-how to help
touches millions of people every day. We also understand that
lead the much-needed transformation of healthcare. It is a chal-
excellence is not an option; it’s an obligation. We are committed
lenge we welcome, and an opportunity that energizes all of the
to doing the right thing for healthcare providers and patients,
men and women of our company.
our employees, shareholders and the communities wherever we
do business.

This is our second annual McKesson Corporate Citizenship
Report. In these pages, you’ll get a snapshot of our company, an
overview of recent business highlights and a progress report on
the many programs that distinguish us as an employer and cor-
porate citizen. John Hammergren
Chairman and Chief Executive Officer
Healthcare has been our business since McKesson was founded
in 1833. We are 32,000 people dedicated to making a differ-
ence. Our responsibility to improve the health of the healthcare
system, support those in need, take steps to protect the environ-
ment, and treat our employees fairly carries over from the
workplace to our role as members of the community.

OUR CORE VALUES, CALLED
ICARE, DRIVE OUR CORPORATE
CULTURE. OUTLINED IN THIS
REPORT IS HOW WE BRING THESE
PRINCIPLES TO BEAR ON OUR
DAILY OPERATIONS THROUGH
PRACTICES THAT AFFECT OUR
COMPANY, OUR PEOPLE AND OUR
WORLD.

COMPANY HISTORY
9

In 1967, Foremost, a nationwide dairy distributor, and McKesson
and Robbins merged to become Foremost-McKesson. Foremost-
McKesson, Inc. was the largest U.S. distributor of
A commitment to corporate citizenship runs deep through the
pharmaceuticals, alcoholic beverages and chemicals. It was the
company’s history. Almost 175 years ago, McKesson was found-
nation’s largest supplier of milk-based products and was the
ed with the goal of helping people get access to vital medicines.
largest producer of processed water in the western half of the U.S.
McKesson traces its roots back to 1833 when John McKesson
and Charles Olcott opened a small drug import and wholesale
Throughout the 1980s, Foremost-McKesson divested most of its
shop in New York City’s financial district. The Olcott and
peripheral businesses and began the process of refocusing on its
McKesson business thrived, providing clients with botanical
core healthcare supply management businesses and investing in
drugs - herbs, roots, leaves, bark and vegetable extracts. Early on
new technologies. In 1984, McKesson Corporation became the
they brought Daniel Robbins on board and in 1853, after Olcott
new name of the company.
passed away, the company was renamed McKesson and
In the second half of the 1990s, McKesson began expanding its
Robbins.
reach into additional healthcare areas. McKesson made a num-
By 1929, McKesson and Robbins’ profits had reached $4.1 mil-
ber of acquisitions during this period, diversifying its presence in
lion on unprecedented sales of $140 million. Due to progressive
the healthcare industry and building a formidable presence in the
business strategies, the company achieved steady growth despite
growing healthcare IT market.
the Great Depression.
For a time the company operated as McKesson HBOC — the
Leveraging post-war opportunities, McKesson and Robbins creat-
world's largest healthcare services company. In 2000, McKesson
ed McKesson Chemical Company, another major operating unit.
divested its only remaining non-healthcare asset, McKesson
By 1955, McKesson Chemical Company had become a diversi-
Water Products, and in 2001, the company changed its name
fied national distribution leader.
back to McKesson Corporation.

Today, McKesson is ranked 18th on the FORTUNE 500 with more
than $90 billion in annual revenue. The company delivers vital
medicines, medical supplies, and health information technology

OUR COMPANY

Company Overview
solutions that touch patient lives in every healthcare setting. The
depth and breadth of the company’s product and service offer-

McKesson’s Vision
ings, coupled with the largest customer base in the healthcare
industry, uniquely position McKesson to meet the needs of its McKesson is America's oldest and largest healthcare services
customers: company, with its pharmaceutical wholesaling roots dating back
175 years. In fact, the company created the first national drug
– 300,000 physicians
distribution system. Since then, McKesson has grown by provid-
– 26,000 retail pharmacies
ing pharmaceutical and medical-surgical supply management
– 10,000 long-term care sites across the spectrum of care; healthcare information technology
for hospitals, physicians, homecare and payors; hospital and
– 5,000 hospitals
retail pharmacy automation; and services for manufacturers and
– 2,000 medical-surgical manufacturers
payors designed to improve outcomes for patients.
– 750 homecare agencies
By combining its industry-leading technology and scale with
– 1,800 healthcare payors
unsurpassed clinical knowledge, McKesson is helping healthcare
– 450 pharmaceutical manufacturers
providers deliver better, safer care while reducing unnecessary
McKesson’s products and services empower healthcare by ensur- costs.
ing the safe and timely delivery of vital medications, improving
patient safety and reducing medication errors, and making Headquartered in San Francisco, Calif., McKesson employs over
healthcare systems more efficient for providers and more afford- 32,000 people across the nation and around the world dedicated
able for patients. to delivering vital medicines, medical supplies and health
information technology solutions that touch the lives of patients
in every healthcare setting.

McKesson’s vision is to bring together clinical knowledge,
process expertise, technology and the resources of a FORTUNE 18
company to fundamentally change the cost and quality of
healthcare.

TRANSFORMING HEALTHCARE
11

Distribution Infrastructure and Expertise
McKesson is helping to create a healthcare system where quality
is higher, mistakes are fewer and costs are lower. As the nation's
leading healthcare services company, we provide pharmaceuti- Today we are making healthcare transformation a reality in six
cals, medical supplies and technologies that make healthcare key ways.
safer while reducing costs. McKesson touches virtually every
aspect of healthcare. For instance, McKesson:
We use our distribution system, scale and supply chain excel-
– Is the largest pharmaceutical distributor in North America.
lence to ensure the safe and timely delivery of vital medications
Every day we distribute one-third of the medicines used in
and supplies.
North America, supplying more than 25,000 U.S. healthcare
locations from Wal-Mart to the Department of Veterans
Every day...
Affairs to community pharmacies.
– Is the nation's leading healthcare IT company, with software – Our people, processes and technology ensure that 1.5
and hardware technology installed in more than 70% of the million medicines and supplies reach patients every day,
nation's hospitals with greater than 200 beds. when and where they need them, even in the face of
– Provides decision support software to help physicians deter- natural disasters and product recalls.
mine the best possible clinical diagnosis and treatment plans – Employees in over 30 McKesson pharmaceutical distribution
for patients. centers ensure efficient and timely delivery of medications
– Develops and installs electronic systems that eliminate the throughout North America, filling orders with an astounding
need for paper prescriptions and paper medical records and 99.96% order accuracy.
provides physicians with easy and secure online access to – Our electronic pharmacy network is one of the nation’s
patient information. largest, connecting more than 90% of pharmacies and
– Helps prevent more than 330,000 medication errors every processing approximately 70% of all pharmacy transactions
week through bar-code scanning technology that helps to in the U.S. By connecting pharmacists with payors, we help
ensure the right patient gets the right drug at the right time. process more than eight billion healthcare transactions
annually.
– We operate the largest independent pharmacy franchise in
the country, a partnership that includes marketing and

12

Personal Health Management for Patients

Patient Safety and Error Reduction
– purchasing programs to help independent pharmacies thrive bedside, and physician’s office, so patients are safeguarded
in an increasingly competitive environment. against counterfeit or damaged goods.
– Our online ordering system processes more sales than any of – To help prevent mistakes, we provide clinicians with clinical
the top four retail Internet sites in the world, including information, decision support and an electronic view of their
Amazon.com. patients’ entire medical record. More than 100,000
physicians log on to our physician portal three million times
– We distribute more than 150,000 medical-surgical products –
per month to access electronic medical records.
ranging from gloves and bandages to surgical lasers and flu
vaccines – to more than 300,000 physician offices as well as
many other customers.
– Through our knowledge and resources, we provide inventory We help make healthcare more convenient and personal for
management solutions, robotics and software, and high patients.
volume packaging to help our customers serve patients and
Every day...
run their businesses more effectively and efficiently.

– We offer patients more convenient access to routine services,
providing home delivery of medical supplies and specialty
We develop processes and technologies that improve patient drugs, patient-friendly billing and scheduling solutions, and
safety and reduce medication errors. numerous patient assistance programs.
– We improve communication among patients, providers, and
Every day...
payors through secure, easy-to-use online services, Internet-
enabled home monitoring devices and insurer-reimbursed
– We reduce errors by automating healthcare delivery. Our bar-
online connections to the physician’s office.
code scanning, electronic prescription, and medical imaging
solutions help eliminate manual and paper-based processes. – We provide personalized care for patients with cancer and
We also automate tasks like medication counting, packaging chronic illnesses such as asthma, diabetes, and heart disease
and dispensing through pharmacy automation and mobile through personal health support and home delivery of medi-
workstations for nurses. cines and supplies. McKesson’s nursing call centers, specialty
drug distribution, and disease management serve 1.5 million
– We protect the integrity of pharmaceuticals and medical sup-
Medicaid and Medicare patients.
plies from the manufacturer to the pharmacy, hospital

13

Smarter Healthcare Spending Higher Quality Care and More Effective Clinicians
We ensure that healthcare dollars are well spent We help clinicians improve the quality of patient care.

Every day... Every day...

– We provide support and medication to chronically ill patients, – Our clinical software improves doctors’ medical decisions by
whose illnesses account for 80% of today’s U.S. healthcare providing evidence-based guidelines grounded in the latest
costs. Our disease management solutions, specialty drug dis- clinical research at the point of care.
tribution and medication adherence programs provide higher – We help clinicians focus on what they do best – caring for
quality care and reduce cost by helping patients avoid emer- patients – by reducing administrative work and other manual
gency room visits and hospital stays. tasks.
– We ensure healthcare dollars are well spent by improving rev- – We ensure clinicians are better connected to patients and
enue and resource management in hospitals, physician payors. For example, we provide:
offices and pharmacies, ensuring more appropriate care that • software to help home care providers connect to their
is better managed and paid for. patients and the hospital
– As the leading pharmaceutical distributor in North America, • claims management solutions to help providers submit
we use our purchasing power and supply chain to increase more accurate claims, and health plans to pay them more
the availability of affordable medicines like generic drugs. For accurately
example, our programs help retail pharmacies simplify pur- • internet-enabled home monitoring devices and online
chasing of cost-saving generics. connections to the physician’s office
– We also help our customers effectively manage their limited
resources by automating and streamlining work, removing
paper and film costs, reducing re-work, and improving supply
chains.

OUR SHARED PRINCIPLES

Next Generation of Healthcare

McKesson Shared Principles

Manager Resources
By embracing the ICARE
Shared Principles, we have
the foundation necessary
to deliver on our vision.

We facilitate the next generation of healthcarents.

Every day... As part of the McKesson team, we all strive to work in ways that
reflect our Shared Principles and promote the success of our
– We are a leader in digitizing healthcare to connect payors, company, our customers and each of us as individuals. Our
pharmacies, hospitals, physician offices, and patients and Shared Principles, reflected in the acronym ICARE, brings to life
ultimately to deliver a better care experience for those who the outcome that the Shared Principles seek to create, and aligns
need it most. Our goal is to enable care that is not just auto- our personal behaviors with the goal of our customers, to
mated within a single setting, but fully connected across the improve healthcare and lives.
healthcare spectrum.
Integrity: We do what’s right
– We are also selectively exploring opportunities to take our
Customer-first: We succeed when they succeed
products and services abroad, participating in global trends
Accountability: We do what we say we will do
including generic drug sourcing, demand for healthcare IT
Respect: We treat people with dignity and consideration
and preventive care.
Excellence: We insist upon quality
– Additionally, we are providing the support required for
groundbreaking next-generation therapies and approaches.

We encourage employees to embody the ICARE Shared
Principles through a comprehensive set of manager meeting
materials as well as an ICARE Recognition Program.

Our employee portal (McKNet) provides the tools and resources
employees need to integrate ICARE into their daily management
practices.

CORPORATE GOVERNANCE AND ETHICS
15

COMPLIANCE AND INTEGRITY
Our Managers are encouraged to use the ICARE Guide to help
them:
In January 2007, McKesson’s Board of Directors approved the
– Reflect on ways to incorporate Shared Principles into the
following significant corporate governance changes that
many aspects of managing their employees.
demonstrate the Board’s commitment to strong, stockholder-
– Ensure that they’re not just talking the values, but that they
focused, contemporary corporate governance practices which
are living the values.
we believe are consistent with our goal of creating long-term,
– Develop management skills through such things as ICARE
sustainable value for McKesson’s shareholders:
case studies and scenario assessment.
– Understand the history of our Shared Principles and the best – Declassification of the Board so that all directors are elected
practices that have made us successful.
on an annual basis beginning with the 2008 Annual
Meeting of Stockholders. This replaced a Board divided into
three classes, elected in three successive years, each for a
term of three years.
– Implementation of a majority vote standard in uncontested
As the largest pharmaceutical distributor in North America,
director elections, in place of the plurality vote standard,
McKesson has an unwavering commitment to protect the integrity
with the result that a director nominee will be elected only if
of the distribution network while ensuring the safe, efficient and
the number of votes cast “for” the nominee exceeds the
cost-effective delivery of medicines to our customers and their
number of votes cast against the nominee.
patients.

Compliance with laws and regulations is the foundation for eco-
nomic performance and customer and shareholder value
creation. McKesson focuses on developing, implementing and
continually refining systems and processes that enable compli-
ance with laws and regulations. We are especially aware of our
role in supporting the integrity of the pharmaceutical supply
chain and consumer and patient safety.


EthicsLine

PUBLIC AFFAIRS
McKesson’s Corporate Governance Guidelines reflect the Board's
commitment to transparency and oversight both at the Board Speaking up about misconduct is an important part of McKesson’s
and management level, and the Guidelines provide the frame- dedication to ethical behavior. To make it easier for employees to
work for the governance of the Company. voice their concerns about suspected illegal, unethical or unsafe
conduct, McKesson has established the McKesson EthicsLine,
– McKesson currently has four standing committees: Audit,
which is a toll-free number, available 24 hours a day, 7 days a
Compensation, Finance and Governance. Each of the com-
week.
mittees is composed entirely of independent directors,
satisfying applicable legal, regulatory and stock exchange When an employee calls the EthicsLine, 1-888-475-4358, a trained
requirements. third-party communication specialist will ask a series of questions
to better understand the situation. A report is prepared and for-
– The Board is also responsible for assuring that McKesson’s
warded to McKesson’s Law Department for review and
management and employees operate in a legal and ethically
appropriate action.
responsible manner. To ensure transparent accounting and
reporting practices, independent board members have
Callers may remain anonymous if they choose to do so. Any
access to the Company's outside advisors and meet in exec-
employee who chooses to reveal his or her identity and makes a
utive session without company management present on a
good faith complaint is protected by the company’s Code of
regularly scheduled basis.
Business Conduct and Ethics from retaliation for making such a
complaint.

As the nation’s largest healthcare services company, McKesson
Corporation recognizes its responsibility to participate in the
public policy process on healthcare issues and concerns.
Through our Public Affairs Department, the company builds and
maintains working relationships with elected and appointed offi-
cials at every level of government, from Washington, D.C. to

state capitals to HISTORY
COMPANY city halls across America. More importantly, we
17

Patient Safety

Protecting the Integrity of the Pharmaceutical Supply Chain
In 1967, Foremost, a nationwide dairy distributor, and McKesson
As the world’s largestto become Foremost-McKesson. Foremost-
& Robbins merged provider of health information technology
encourage these policymakers to visit our facilities and customer
(HIT), McKesson offers comprehensive solutions distributorto
McKesson, Inc. was the largest United States designed of
sitescommitment to corporate citizenship runs firsthand, how
A to meet with our executives and to witness, deep through
pharmaceuticals, alcoholic beverages and chemicals. It was the
our healthcare businesses and innovative solutions company the
McKesson’s history. More than 170 years ago, the improve was enhance patient safety at every touch point of the healthcare sys-
tem. Our largest supplier of milk-based products and was of
nation’s barcoding technology promotes the safe delivery the
quality and delivery goal of while removing unnecessaryhealthcare
founded with the of care helping people receive the costs.
medicines from pharmacy robotic systemsthe bedside medication
largest producer of processed water in to western half of the
they deserve. We trace our roots back to 1833 when John
Every day, McKesson actively works withsmall drug import and
McKesson and Charles Olcott opened a industry colleagues, United States.
administration. This unique medication management process
government shop in New electedCity’s financial solutions The
wholesale agencies, and York officials to find district. to saves lives and time, removes rework, and reduces human error
During the 1980s, Foremost-McKesson divested most of its
some of theand Olcott businessproblemsproviding clients botani-
McKesson most challenging thrived, facing the healthcare and resulting costs. This isbegan the process of refocusing on its
peripheral businesses and just the first step, however, on the
system.
cal drugs, such as herbs, roots, leaves, bark and vegetable path to ensure patient safety through greater use andtechnology.
core healthcare supply management businesses of investing in
extracts. Early on they brought Daniel Robbins on board and in Digitizing the healthcare system through Corporationadoption the
new technologies. In 1984, McKesson widespread became of
1853, after Olcott passed away, the company was renamed HIT will improve the quality of care for all Americans.
new name of the company.
For 175 years,Robbins.
McKesson & McKesson has led the industry in the delivery of
medicines to pharmacies. We purchase medicines from 450 McKesson has developed solutions that enable healthcarebe the
In the 1990s, McKesson further focused its mission: To pro-
manufacturers and supply more than 75,000 customer sitesmillion
By 1929, McKesson & Robbins’s profits had reached $4.1 in all
fessionals to in healthcare supply managementfrom information
world leader capture discrete patient data and disparate
50 states. McKesson has of $140 million. Due in developing and
on unprecedented sales long been a leader to progressive busi-
sources, includingadvancing the success of its partners as they
technologies by the pharmacy, physician’s office, laboratory
implementing cutting-edge technology steady growth despite the
ness strategies, the company achieved to enhance the security
and hospital,andform a comprehensive, portable and McKesson to
restructure to improve healthcare. This focus led confidential
Great Depression.
of the pharmaceutical supply chain. We were the first wholesaler electronicmedical technology company HBOC to millions of dol-
acquire patient record. Thousands of lives and bring innovative
to fully automate our warehouses and distribution Robbins created
Leveraging post-war opportunities, McKesson & networks with software solutions to its broad base of retail, hospital, health sys-
lars can be saved in reduced healthcare spending through the
radio frequency and scanning technology. Today, we areunit. By
McKesson Chemical Company, another major operating again rapid adoption of HIT. care, continue to work with our govern-
tem, payor, long-term We physician and home care customers.
taking the lead as we work with manufacturers and major retail-
1955, McKesson Chemical Company had become a diversified ment partners revenues thismore than $80 billion, McKesson now
With annual to make of dream a reality.
ers to testdistribution leader.
national radio frequency identification (RFID) technology that
ranks as the 15th-largest publicly-traded industrial company in
will track pharmaceutical products from the manufacturer to the
the United States.
wholesaler to the pharmacy. In addition to more stringent whole-
saler licensure standards and tougher criminal penalties for those
who counterfeit drugs, RFID technology will limit the ability and
opportunity for compromised or adulterated products to enter
the pharmaceutical distribution network.

$93 23.8 %
7% increase in revenues $2.0
$1.5 31,800
billion in revenue debt-to-capital ratio
FISCAL YEAR MARCH 31, 2007

FINANCIALS
billion in cash

billion cash flow from employees
operations

Disease Management
$ BILLIONS
Corporate Financial Highlights

Business Segments
Net revenues for our segments for the last two fiscal years were as follows:

our Distribution Solutions segment, we are a leading distributor
2007 2006

Distribution Solutions $ 90.7 98% $ 85.1 98%
Technology Solutions 2.3 2% 1.9 2%

Total $ 93.0 100% $ 87.0 100%

McKesson provides disease management programs for com-
McKesson strives to be a leader in the corporate citizenship
mercial, Medicaid and Medicare populations in which we
efforts of our industry. We believe that through ethical corporate
leverage our experience with patient services, pharmacy man-
governance, fair employment policies and sound environmental
agement and healthcare quality improvement activities. These
practices, we will experience strong financial performance.
outcomes-focused, evidence-based interventions improve
patients’ abilities to participate in their care and help physicians
by reinforcing their medical recommendations.
McKesson’s strategy is to create strong, value-based relationships
with customers. While we always remain focused on healthcare,
As federal and state governments consider new ways to
our diverse business segments allow us to offer our customers a
improve the quality and delivery of healthcare to populations
full range of products and services that reduce the cost of provid-
with chronic illnesses, McKesson believes greater utilization of
ing patients with quality care.
disease management programs is vital to enhancing care out-
comes for the elderly and vulnerable populations, while
McKesson conducts business through two segments. Through
concurrently reducing the cost of care. In eight states where
we provide disease management services to Medicaid patients,
of ethical and proprietary drugs, medical surgical supplies, first-
physician and patient satisfaction has improved along with
aid products and equipment, health and beauty care products
health outcomes. We estimate these states are saving approxi-
and provide logistics and other services throughout North
mately two dollars for every dollar spent with McKesson.
America. This segment also provides medical management and
specialty pharmaceutical solutions for biotech and pharmaceuti-
cal manufacturers, patient and other services for payors,
software and consulting and outsourcing services to pharmacies
and, through its investment in Parata Systems, LLC (quot;Parataquot;),
sells automated pharmaceutical dispensing systems for retail
pharmacies.

$ MILLIONS
$ MILLIONS
100000 4500
Gross Profit
4000
3500
90000 3000
2500
2000
80000 1500
Net Income**
1000
500
70000 0
05 06 07 05 06 07

FISCAL YEAR ENDED MARCH 31

COMPENSATION
Revenues ** Excludes impact of the
shareholder litigation charge

$ MILLIONS
$ DOLLARS
Gross Profit & Net Income
Revenues 19

25000
200

20000
150

15000
100

Our Technology Solutions segment delivers enterprise-wide
10000

50
5000

0
0
05 06 07
02 03 04 05 06 07


Value Line HealthCare Sector Index Stockholders' Equity

OUR PEOPLE BENEFITS
McKesson Corporation Total Assets
S & P 500 Index Total Debt

* Assumes $100 invested in McKesson Common
Five Year Cumulative

Stock and in each index on March 31, 2002 and
Total Return* Total Assets, Equity, Debt

that all dividends are reinvested.

patient care, clinical, financial, supply chain, and strategic man-
agement software solutions, pharmacy automation for hospitals, McKesson believes that every employee has the potential to add
as well as connectivity, outsourcing and other services, to health- value to our business, which is why we follow a “pay-for-per-
care organizations throughout North America, the United formance” compensation philosophy. This compensation
Kingdom and other European countries. This segment also pro- philosophy rewards employees of all levels based on their contri-
vides claims processing software to physicians and payors and bution to the company’s success. Depending on market pay
disease management services primarily to state Medicaid pro- practice and company approach, and the supply and demand for
grams. Its customers include hospitals, physicians, homecare specific skills, these rewards generally include salary or draw, and
providers, retail pharmacies, payors and state Medicaid pro- may include participation in incentive programs, such as bonus
grams. or long term programs.

McKesson believes that our most valuable and important asset is
McKesson’s benefits programs are another way of adding value
our workforce. It is for this reason that McKesson continually
to our employees’ total compensation package and focus on
strives to be an employer of choice, by treating our employees
improving the long-term health and welfare of our employees.
with respect, fairness and dignity.
Our benefits program can add as much as 27% percent or more
McKesson employee compensation and benefits programs in value to an employee’s pay. According to our 2006 Employee
reflect the wide-variety of needs faced by our employees. From Survey, 75% of employees responded favorably to McKesson's
retirement planning to chronic disease management to adoption benefits offering. This score is five points higher than the global
assistance, McKesson is committed to offering our employees high-performing benchmark. Due to the fact that McKesson has
the tools they need to manage the demands of both work and grown over many years of mergers and acquisitions, our Human
family life. Resources department has recently been focused on aligning the
entire employee benefits offered so that they are fair and equi-
table across the company.


Health Benefits
Employee benefits include a wide variety of life services, including: HealthMedia health risk assessment and healthy living programs,
and the McKesson CareEnhance Disease Management program
– Help with medical, dental and vision care costs
and 24/7 nurse line.
– Domestic partner benefits
Through a Section 125 cafeteria plan, McKesson offers employee
– Retirement savings
the opportunity to pay their portion of benefit costs on a pre-tax
– Disability coverage
basis. In addition, employees can set aside a designated amount
– Life insurance in pre-tax dollars for out of pocket healthcare expenses and/or
dependent childcare needs through Flexible Spending Accounts.
– Tuition reimbursement
Eligible McKesson employees are offered employer-sponsored
– Adoption assistance
health coverage in the United States and Canada, and state
– Access to a triage nurse call-in center sponsored health coverage in Europe, which is partly funded
– Learning opportunities focused on healthy living and through required contributions. U. S. employees are given the
work-life balance opportunity to “Build Your Own Point of Service (POS) medical
option.” Employees choose the deductible, copays, coinsurance
– Enhanced eldercare assessment and referral
and out of pocket maximum that meets their individual needs for
Through “My McKesson HR,” the company’s human resources
coverage and the right balance of between cost of deductions
intranet, employees have access to detailed information on ben-
versus cost at time of treatment. All medical plans cover office
efit plans, along with contact information and features to help
visits, hospital stays, surgery and other common medical services.
employees make the most of the available programs.
Through HealthMedia, employees can take a free, confidential
health risk assessment. Employees answer a simple health ques-
McKesson is dedicated to providing employees with access to tionnaire and provide their basic health history to receive
quality healthcare through a wide variety of programs and servic- personalized information about their risk factors and guidance
es. McKesson strives to provide employees with the tools they about which HealthMedia healthy living programs they might
need to proactively manage their own health by offering a wide find helpful. HealthMedia offers online programs on nutrition,
range of subsidized health options, discounts for use of high per- weight management, stress management, back care, overcom-
formance physicians, incentives for participation in the ing depression and overcoming sleep problems. Employees are

21

EAP

Retirement Savings
encouraged to participate in all HealthMedia activities to earn Basic life, AD&D and short term disability coverage are automati-
discounts on their portion of health plan coverage. cally provided to McKesson employees. Employees may purchase
reduced cost vision, dental, long term disability, supplemental life
Preventive health management is encouraged. Company spon- and AD&D coverage, as well as dependent life insurance for a
sored benefits include 100% coverage for preventive care spouse, domestic partner and children.
services, 100% reimbursement for in-home and on-site Weight
Watchers programs, and 100% reimbursement for the American
Cancer Society smoking cessation program, which includes tele- The McKesson Employee Assistance Program (EAP) provides toll-
phonic counseling and nicotine replacement. In some locations, free, 24-hour, 365-day support services at no cost to our
gym memberships are also subsidized. employees. EAP representatives can help with everyday prob-
lems, including referrals for locating child care, getting advice on
McKesson Health Solutions offers employees disease manage- legal matters and help with financial planning to more serious
ment programs for control of asthma, diabetes, cardiac problems related to stress, marital and relationship concerns and
problems, dyslipidemia and hypertension. In addition, employees alcohol or other drug problems. An Enhanced Eldercare program
enrolled in the POS plan can contact the nurse line for guidance offers assessment of elderly relatives capabilities to live independ-
and information. Employees can also research a medical concern, ently and referrals to appropriate assisted living
read articles online and listen to audio health information on the accommodations.
Health Solutions web site.

Pharmacy customers make up a large part of our business, and
McKesson’s Profit-Sharing Investment Plan is a 401(k) plan that
those relationships allow our Company to offer a generous
affords employees a smart, convenient way to save for a secure
employee prescription benefit plan. There are over 55,000 phar-
financial future. It offers financial choice and flexibility, and gives
macies in McKesson’s drug benefit plan network, allowing our
employees the opportunity to become a Company shareholder.
employees maximum choice. Our employees also have the
Approximately 70% of our employees are currently taking
option to maximize savings by ordering prescriptions by mail for
advantage of the plan.
a three-month supply of any brand name medication. Whether
our employees visit a pharmacy or fill their prescriptions online,
there is an annual cap on out-of-pocket costs.


Stock purchase plan

Adoption Assistance

Educational Assistance
McKesson believes strongly in providing our employees with the
tools they need to be financially prepared for retirement. The Employee Stock Purchase Plan (ESPP) allows eligible employ-
Beginning April 1, 2005, McKesson’s matching contribution is ees to participate in the plan and purchase shares of the
100% on the first 3% of pay contributed and 50% on the next Company's common stock at a 15% discount through payroll
2% of pay. Since the plan’s inception in 1972, McKesson has deductions. Each participating employee receives shares of the
matched employee contributions, up to the first six percent of Company's common stock based on their contributions over a
salary. Company contributions for the past three years were as three-month Purchase Period.
follows:

Plan Year Ended Company Match Adoption Assistance is available to help our employees with the
cost of adoption. This program reimburses up to $2,000 in
March 31, 2007 4% of pay
expenses for adoptions.
March 31, 2006 4% of pay
March 31, 2005 3.6% of pay

McKesson believes in life-long learning, and the Company offers
an education reimbursement program that pays 100% of eligible
expenses for approved courses. All course required fees (such as
tuition, lab fees, and registration fees) are considered eligible
expenses. The lifetime maximum for undergraduate courses is
$21,000 and the graduate lifetime maximum is $10,500.

23

National Merit™ Scholarships

Award and Recognition Programs

Scholarship America

Total Rewards
McKesson also offers two scholarship programs for employees’ Compensation represents the pay and incentives, as well as other
children. financial payments we make in return for this contribution. Other
rewards include company-sponsored programs that can make an
employee’s life easier and more enjoyable.
Up to 20 four-year college scholarships, ranging from $1,000 to
$2,500 per year are awarded to employees’ children each year.
This is a competitive academic scholarship and winners are deter-
McKesson also recognizes outstanding achievement through a
mined by an independent scholarship administrator.
wide variety of awards programs, such as the company-wide
ICARE and President’s Awards. The ICARE Award is for employees
who continually display behaviors exemplifying the Shared
Up to 20 four-year awards ranging from $1,000 to $2,500 are
Principles. The President’s Award recognizes consistently excellent
made each year to employees’ children enrolled full-time in
records of sustained contributions having significant impact on
accredited colleges or vocational schools. This scholarship is
McKesson’s pharmaceutical division.
awarded based upon the student’s overall potential to succeed,
rather than strictly focusing on academic achievement. Winners
Additionally, the Community Relations department offers two
are determined by an independent scholarship administrator.
award programs for employees showing leadership involvement
in the community. The President’s Award is a quarterly award
given by each business unit president to employees that have
McKesson provides employees with a Total Rewards web site
demonstrated outstanding community service, and the Neil
which explains the value of both pay and benefits. The personal-
Harlan Award, an annual national employee volunteer recognition
ized web site includes compensation, retirement and health care
program, provides five award winners with cash grants ranging
coverage, as well as life and disability insurance. Total Rewards
from $1,000 to $5,000 to the non-profits of their choice.
even embodies life, career and community opportunities, as well
as other compelling rewards. Every day on the job, each employee
makes a significant contribution to McKesson's success.

WORKPLACE SAFETY DIVERSITY

McKesson takes employee safety very seriously, and is constantly When you hear the word “diversity” at McKesson, we are not
striving to improve the safety of our workplaces. only speaking of gender, age and race. We believe that diversity
can be found everywhere - a diverse upbringing or life experi-
In addition to complying with all Occupational Safety and Health ence can cause diversity of thought and enable employees to
Administration (OSHA) regulations, McKesson also provides each bring a new perspective to the workplace. McKesson believes
of our facility managers with emergency preparedness courses, that valuing diversity gives us a competitive advantage and is a
fire drills, automatic defibrillators, first aid kits, and emergency cornerstone of our reputation as a great company. To that end,
preparedness posters for all break rooms. The Corporate Safety we promote a business model of diversity excellence.
Department has also developed and tailored an OSHA 10-Hour
Course for General Industry for McKesson’s operations. The McKesson was voted number one in workplace diversity by
training provides McKesson managers, supervisors and mainte- Computer World Magazine in 2003, was voted one of the best
nance personal information on workplace safety, accident places for minorities in Atlanta by The Atlanta Business Times,
prevention and investigation, and OSHA standards. and was voted number 14 of the top 25 companies for women
in the Bay Area by the San Francisco Chronicle. As a company,
In 2007, McKesson received six OSHA violations and $2,700 in McKesson is acknowledged internationally as one of the top ten
OSHA fines. companies related to women on the Board of Directors by the
National Association of Women Business Leaders. McKesson was
in the top 10 in a recent study published by the University of
California at Davis Graduate School of Management that looked
at the presence of director and officer roles held by women in
the 200 largest publicly held companies headquartered in
California.

25

Supplier Diversity
McKesson employees, under the guidance of the EVP of HR, McKesson is in the process of rolling out a virtual mentoring pro-
have formed Diversity Councils in four of the company’s offices gram throughout the company in an effort to ensure consistent
around the country. In January 2006, The Dubuque office accept- development opportunities to all employees. This program is
ed the CommUNITY Award for Diversity Initiatives. The award, mentee-driven with the mentee identifying his or her individual
sponsored by the Faces & Voices Awards Committee in conjunc- development needs and utilizing the system to help find a men-
tion with the Dubuque Human Rights Department, is given to a tor to fit that development need. The program allows traditional
local business that is a recognized leader in promoting and sup- advocacy based relationships, as well as peer-to-peer relation-
porting events and programs that embrace diversity. ships for skills building or information sharing.

The purpose of these Councils is to: In addition to our focus on existing employees, McKesson is
involved in diversity outreach efforts, specifically networking and
– Create awareness by conveying the company’s diversity
recruitment for diverse talent. We have enterprise-wide efforts to
message.
find talent throughout the country and have specific localized ini-
– Help create the environment for living diversity daily. tiatives in place as well. In the San Francisco Bay Area, for
example, we participate in the “Bay Area Diversity Summit” –
– Recommend diversity management implementation
sponsoring monthly receptions for various primary demographics
strategies to senior management.
of diversity such as race, gender, and sexual orientation. These
– Share information across business units and local councils.
receptions allow networking with other bay area companies for
– Lead development of and alignment with local council
best practice sharing and with associations representing specific
tactical objectives.
demographic groups.
– Create change-agents in our individual business units in
support of the diversity vision.
Our belief in diversity extends to our suppliers as well. McKesson
– Empower McKesson’s workforce to meet business
recognizes and promotes the outstanding contributions made by
objectives through a diversity focus.
diverse businesses to the economic health and diversity of com-
munities throughout the US. Our business partners include small,

OUR WORLD

The Environment

Electricity and CO2 Emissions

Fleet Fuel Usage and CO2 Emissions
disadvantaged, historically underutilized, minority-owned,
women-owned, veteran-owned, service-disabled and Historically
Underutilized Business Zones (HUB) businesses, as well as Javits-
Wagner-O’Day Act (JWOD) non-profit agencies. Today’s most pressing environmental issues are issues that are
important to all of us, both as individuals and as business leaders.
Through our company-wide subcontracting and purchasing pro-
McKesson’s dedication to reducing our energy, water and fuel
grams, McKesson encourages and facilitates small and diverse
consumption drives us to continue the complex task of measur-
business sales opportunities for qualified businesses. In addition
ing these resources.
to subcontracting opportunities, McKesson’s supplier diversity
program supports the viability and growth of diverse businesses
through contractual mentoring relationships that advance mean-
In this third year of data gathering and consolidation, we have
ingful growth opportunities. Since 1994, McKesson has
monitored nearly 4.8 million square feet of real estate for pur-
maintained a mentoring program that provides extraordinary
chased electricity usage and resultant carbon dioxide emissions.
support and guidance to its business protégés.
To calculate carbon dioxide emissions from our purchased elec-
tricity and from our fleet fuel usage, we used the highly
esteemed GHG Protocol, a corporate accounting and reporting
standard for greenhouse gas (GHG) emissions.

McKesson’s CO2 emissions are mainly derived from the impact of
our delivery vehicles and those of our outsourced carriers. We
have begun to measure our fleet fuel usage statistics in order to
monitor, manage and reduce our CO2 emissions. The average
CO2 emissions per vehicle in FY07 was 18.4 metric tons, up from
16.7 in FY06 and 17.4 in FY05.

ECO-EFFICIENCY INITIATIVES
27

Electricity and Water Consumption

Fiscal Year 05 Fiscal Year 06 Fiscal Year 07

LEED Certification
McKesson’s Commitment to Recycling
Facilities monitored for kWh 21 20 20
sq ft monitored for kWh 4,580,233 4,724,099 4,722,893
Total MWh (kWh/1000) 65,421 66,565 70,570
kWh /sq ft 14.28 14.09 14.94
lbs. CO2 /sq ft (resulting from consumption of electricity) 20.72 19.53 19.98
lbs. SO2 /sq ft (resulting from consumption of electricity) 0.10 0.10 0.07
lbs. NOx /sq ft (resulting from consumption of electricity) 0.04 0.04 0.03
% of RE monitored for kWh /sq ft and CO2 /sq ft 29% 31% 28%

Green Facilities
Facilities monitored for gallons of water 23 23 22
sq ft monitored for gallons of water 5,091,510 5,265,880 5,134,429
Gallons /sq ft 6.66 9.01 8.71
% of RE monitored for gallons /sq ft 32% 35% 30%
Total Fleet Fuel Usage in Thousands of Gallons 3,408 3,513 3,480
Total Fleet CO2 Emissions in Metric Tons 31,673 32,022 31,635

McKesson’s Environmental Council
Average CO2 emissions per Vehicle in Metric Tons 17.35 17.63 18.35

mental strategy that supports the company’s business objectives,
increases employee engagement and strengthens our position as
a good corporate citizen. The Council researches, develops and
In addition to beginning to measure and reduce our water, fuel
implements initiatives that preserve natural resources and reduce
and electricity consumption, we are also committed to a variety of
environmental risks while furthering our competitive advantage.
eco-efficiency initiatives aimed at conserving natural resources,

McKesson’s Environmental Council Mission Statement
which in turn, saves money and adds shareholder value.

The Leadership in Energy and Environmental Design (LEED)
Green Building Rating System™ is the nationally accepted
McKesson has established recycling programs in a majority of our
benchmark for the design, construction, and operation of high
locations. Additionally, McKesson’s Procurement Department
performance green buildings. McKesson is currently working to
strives to source recycled products whenever possible. In FY06,
secure LEED certification for its headquarter facility and is build-
we began to track the percentage of post-consumer recycled
ing its newest distribution center to LEED certification standards.
materials that we purchase compared to total spending on office
products. According to Corporate Express, the largest supplier of
office products to American corporations, McKesson’s recycled
McKesson has a wide variety of environmental initiatives in place
office products spending is 12.5%. In addition, our enterprise
in facilities around the country. Here is a small example of what
wide online supply purchasing system highlights items with recy-
we are doing:
cled content for easy ordering.

– We use energy-efficient lighting and many facilities have
lighting on motion sensors
In 2006, a group of employees formed McKesson’s first
Environmental Council. This group presented to and received – We use non-toxic cleaning products
support from the Executive Committee to further pursue envi-
– We purchase and install recycled carpeting and certified
ronmental initiatives within McKesson. The group meets monthly
environmentally friendly office products
to discuss best practices and encourage sustainability within the
– We are working to replace all ozone depleting cooling, air
company.
conditioning and fire suppression systems
– We have drinking water filtration systems
McKesson's Environmental Council advocates for an environ-

COMMUNITY INVOLVEMENT

Headquarters Sustainability

Employee Volunteer Support:
McKesson’s AngelPoints Program
McKesson's headquarters building's ENERGY STAR Rating is an
The McKesson Foundation was established in 1943 and the com-
84 which means it is in the top 25% of the nation in terms of
pany’s commitment to giving back has grown deeper ever since.
energy efficiency. Buildings that qualify for the ENERGY STAR
Investing in the communities where we live and work truly brings
typically use 35% less energy than average buildings. In 2006,
our ICARE Shared Principles to life.
the building was awarded 2nd place in the Commercial Recycler
of the Year Awards (the CoRY) in the medium building category.
In addition to cash grants from the McKesson Foundation,
In 2007, the building was awarded 1st place in the medium
McKesson employees donate their time to the causes most
building category for the 2007 BOMA SF Earth Award (formerly
important to them. Our employees volunteered an incredible
the CoRY award).
28,039 hours in FY07, which, according to The Independent
Sector, has a cash value of $526,292.
The Earth Award acknowledges the efforts by local commercial
properties to reduce water and energy usage, reduce or elimi-
The McKesson Foundation and the Community Relations
nate use of toxics that affect indoor air quality, educate
Department are committed to building healthier communities by
commercial tenants in sustainable operating practices, promote
investing our company’s resources in non-profit agencies and
the use of public transportation and bicycling in daily commut-
supporting employees in their volunteer activities.
ing, and recycle everything from paper, bottles, cans, cardboard
and food waste to construction debris.

In addition, building management offers used battery drop-off
McKesson’s AngelPoints Program promotes employee participa-
locations, desk side recycling bins and uses fresh air in the build-
tion at non-profit organizations by providing grants linked to
ing until the temperature reaches 74 degrees.
individual volunteer involvement with no personal monetary
donation required. Employees earn one AngelPoint for every
hour of completed volunteer work. McKesson’s volunteer web
portal allows employees to search for volunteer opportunities,

29

Volunteer Recognition
Neil Harlan Award

AngelPoints Volunteer Grants

Volunteer Leaders
AngelPoints Board of Director’s Grants
Regional Volunteer Coordinators

AngelPoints Team Volunteer Grants
read stories and view photos from volunteer events, log their vol-
unteer hours and download grant application forms. This web
portal can be accessed from employees’ home or work comput-
The Neil Harlan Award, named after a former Chairman and
ers, giving them the flexibility they need to find the perfect
champion of community involvement, is presented each year to
volunteer event.
five outstanding employee volunteers. The first prize is a $5000
grant to the employee’s non-profit choice, and the four other
winners receive grants ranging from $1000-$2500. Over the
For every 25 hours (25 AngelPoints) of volunteer work completed
years, employees have won this award for their outstanding
per calendar year, a $250 grant will be made to the employee’s
achievements with a variety of non-profits, from Habitat for
charity of choice. In order to encourage employees to volunteer
Humanity to the Humane Society to grassroots non-profits that
with any cause that they are connected to, employees do not
train immigrants for professional work in the U.S.
need to volunteer with the same agency each month.

McKesson values the leadership role played by the Board of
In 74 McKesson offices around the country, 105 outstanding
Directors of non-profit organizations. In order to recognize these
employee volunteers serve as Regional Volunteer Coordinators
leaders, employees that serve on the Board of Directors of a qual-
(RVCs). These RVCs have volunteered to serve in a leadership
ifying non-profit organization are eligible for a $500 grant.
capacity in their area to motivate employee volunteers and organ-
ize group volunteer activities. Our Regional Volunteer
Coordinators allow us to foster a sense of “One McKesson” by
In order to encourage teamwork among McKesson employees
bringing company-wide initiatives into our regional offices.
and to support volunteer projects that require a long-term com-
mitment, we offer employees AngelPoints Team Volunteer Grants.
These grants require a minimum of four employees participating,
and each must volunteer a minimum of 25 hours (earn 25
AngelPoints) with the same organization before receiving a grant.

30

Community Day Educational Support

Educational Matching Gifts

Pharmacy Scholarships

Heart Walk
In spring of 2006, San Francisco headquarter employees celebrated The McKesson Foundation supports education through a variety
the 9th annual Community Day, and the program was expanded to of educational grants, scholarships for employees’ children and
forty-seven regional offices. Employees volunteered at community our educational matching gift program. Each year, the McKesson
health clinics and hospitals painting murals to spruce up the patient Foundation awards 160 scholarships to employees’ children and
areas, furthering the impact of our giving beyond cash and gives over $250,000 in cash grants to employees’ favorite schools
strengthening our commitment to these important healthcare through our matching gifts program.
agencies. In addition, 2006 marked the launch of our in-house vol-
unteer projects, allowing employees with mission-critical jobs to
participate throughout the day. Employees gathered in break The Foundation matches gifts made by employees dollar for dollar to
rooms around the country and painted canvas mural panels which accredited educational institutions (elementary through graduate) for
were then donated to local community clinics and children’s hospi- educational purposes up to a total of $2,500 per employee per year.
tals. Around the country, nearly 2,050 McKesson employees In FY07, 552 McKesson employees took advantage of this company
participated in Community Day and painted more than 200 murals. match to their favorite schools.

In 2007, our employee participation increased by 107% and 71 dif-
ferent sites created nearly 800 fleece blankets which were donated In order to help address the need for more pharmacists, fifty
to foster youth agencies in the communities where we live and $1,000 McKesson Pharmacy Scholarships are awarded annually to
work. pharmacy students who are nominated by one of our company's
pharmacy customers. Once awarded, scholarships can be
renewed for an additional three years.
As a healthcare company, McKesson understands the importance
of taking preventative measures to preserve good health. That is
why our company encourages all employees to participate in the
American Heart Association’s Heart Walks. In FY07, 1,528
McKesson employees in offices around the country focused on
their own heart health by participating in their local Heart Walk
and helped fight heart disease and stroke by raising money for
the cause.

31

Nursing Scholarships Quest for Quality Award

Philanthropic Programs
McKesson Foundation
Regional Grant Committees
In order to help address the need for more nurses, twenty-five This cash award is a joint effort by the American Hospital
$1,000 McKesson Nursing Scholarships are awarded annually to Association (AHA), McKesson Corporation and the McKesson
low-income nursing students. Once awarded, scholarships can be Foundation to recognize hospitals or health systems for leadership
renewed for an additional year. and innovation in quality, safety and commitment to patient care.
Winning hospitals gain recognition as a leader in patient safety
and receive a $75,000 cash grant to continue their work.

We believe that healthy communities are tied to the health of our
The McKesson Foundation’s philosophy is one of decentralized
company. If people are well educated, provided with job training,
grantmaking—the Foundation staff in the San Francisco head-
have access to the childcare and healthcare they need, then
quarters is not as intimately aware of the needs of the grassroots
McKesson will have access to a qualified, healthy and diverse tal-
organizations in cities across the country as the employees who
ent pool that is focused on work. To that end, the McKesson
live and work in those regions. To support this philosophy, we
Foundation contributes more than $5 million every year to non-
have created 20 Regional Grant Committees around the country
profit organizations working to improve the health of our
to determine where grants will be given on a local level. The com-
communities. Grants are focused on organizations and programs
mittee members are volunteers and come from various business
providing access to healthcare services for low-income children
units throughout the organization, allowing for an opportunity to
and are made in cities where we have the greatest concentration
build relationships across different parts of the organization.
of employees.


Areas with Regional Grant Committees:

Alpharetta, GA
Broomfield/Louisville, CO
Canada
Carrollton, TX
Charlotte, NC
Chicago, IL
Delran, NJ/Philadelphia, PA
Dubuque, IA
Hadley, MA
Hartford, CT
Livonia, MI
Los Angeles, CA
Memphis, TN
Newton, MA
Pittsburgh, PA
Richmond, VA
San Francisco, CA
Scottsdale/Phoenix, AZ
Springfield, MO
Twin Cities, MN

For further information, or to provide us with your feedback on
this report, please contact community.relations@mckesson.com
or call (415) 983-9478.

McKesson's Commitment to Improving Healthcare

McKesson's Commitment to Improving Healthcare

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