The document provides an overview and agenda for a McKesson Supply Solutions business meeting. It summarizes the company's financial performance, growth strategies across different business units including pharmaceuticals, automation, health solutions, and medical-surgical solutions. It highlights momentum in revenue growth, operating margin expansion, and market leadership across North America. The agenda outlines plans to continue this momentum through business unit execution, specialty pharmaceutical services, and driving further operating margin improvements.
2017 Investor Day presentation for McKesson Corporation. Provides an overview of McKesson's businesses and strategic direction, targeting the financial and investment community.
I designed the slides and created the theme illustration that appears throughout the presentations.
You can also download the presentation from www.mckesson.com under the Investors section.
Life Sciences Implications of the U.S. Affordable Care ActCognizant
Life sciences companies will see substantial changes due to the upholding of the U.S. Affordable Care Act (ACA), and we offer a map of some of the forseeable developments for drug and device manufacturers, biotechnology innovators, and others. A primer on ACA impact on revenue opportunities, earnings pressures, pricing effectiveness, compliance and business models.
2017 Investor Day presentation for McKesson Corporation. Provides an overview of McKesson's businesses and strategic direction, targeting the financial and investment community.
I designed the slides and created the theme illustration that appears throughout the presentations.
You can also download the presentation from www.mckesson.com under the Investors section.
Life Sciences Implications of the U.S. Affordable Care ActCognizant
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Impulsreferat von Matthias Wartenberg, Executive Director Advisory Service LifeScience, Ernst & Young, Eschborn
Similar to McKesson Investor/Analyst Day (Part II: Pharmaceutical and Medical-Surgical Solutions (16)
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McKesson Investor/Analyst Day (Part II: Pharmaceutical and Medical-Surgical Solutions
1. Paul Julian
President
McKesson Supply Solutions
June 7, 2002
2. Agenda
Business Overview
l
Financial Performance
l
Strategy
l
McKesson Health Solutions
l
Summary
l
2
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. 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. 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. 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. 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. 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. 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. 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
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. 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. 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. 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. 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. 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. 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. 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. Paul Julian
Interim President
Medical-Surgical Solutions
21. Agenda
Business and Financial Overview
l
Strategy
l
Medical-Surgical Summary
l
21
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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. Patrick Blake Heidi Yodowitz
President CFO
Customer Operations
McKesson Pharmaceutical
June 7, 2002
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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. Cross Business Unit Synergies
Retail Small Chain / Canadian Market /
Automation Automation
48
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. 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
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. 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. 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
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. 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. 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
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. 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. 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. 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. 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. 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. 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