Chain Drug Review: McKesson Sits “At the Nexus of Health Care”
Chain Drug Review, a publication recognized by industry professionals as the most influential and authoritative news serving the chain drug store industry, dedicated more than a dozen pages of coverage to the McKesson business in June 2013 in honor of the company’s 180th anniversary. Featuring interviews with more than twenty executives, the Chain Drug Review articles discussed topics such as industry trends and opportunities, distribution excellence, generics, managed care services, pharmacy ownership and franchise opportunities, vaccinations and immunizations, healthcare policy and more, proving that McKesson truly is “at the nexus of health care.”
John H. Hammergren
Throughout its 180-year history, McKesson Corp. has consistently demonstrated the ability to understand the evolution of health care and anticipate the future needs of customers. As the nation’s largest health services provider, with a major presence in the distribution of pharmaceutical products and medical supplies; technology that facilitates delivery of care; and community pharmacy, the company finds itself in an enviable position as implementation of the Affordable Care Act (ACA) and market forces recast the health care paradigm.
It is often said that McKesson commands a 360-degree view of health care. If one executive can be credited with having the same perspective on the inner workings of the company, it’s group president Paul Julian, who has senior operating responsibility for the majority of McKesson’s business units, which generate all but about $4 billion of the company’s almost $125 billion in annual sales.
The company is a major force in community pharmacy and health care technology, as well as the distribution of pharmaceutical products and medical supplies.Less readily apparent but equally significant are McKesson’s efforts to help shape health care policy, work governed by the same principles that guide other aspects of its business. “We believe that the patient is at the center of health care,” says senior vice president of public affairs Ann Berkey, who heads a team that is involved with policy makers at the federal, state and local levels in the United States and their counterparts internationally.
These are exciting times for Brian Tyler. As executive vice president of corporate strategy and business development at McKesson, he is responsible for identifying growth opportunities and fostering innovation at the company, whose involvement in health care is as broad and deep as that of any business in America. Implementation of the Affordable Care Act (ACA), together with changing market dynamics, has created a fluid situation where traditional relationships between health care stakeholders are in the process of being redefined. Tyler is helping McKesson navigate the transition
Although McKesson has rightly garnered a lot of attention in recent years for its role as an innovator in such areas as health care technology and patient adherence programs, the heart and soul of its business remains pharmaceutical distribution. Through a network of 30 distribution centers across the United States, the company provides branded, generic and over-the-counter medications to more than 40,000 clients, ranging from major pharmacy chains to independent drug stores and institutional customers.
Much of what McKesson does for retail pharmacy from a distribution perspective is driven by its people and culture. The company’s call to action pervades its facilities and network and is reinforced daily, says Frank Starn, chief operating officer of the company’s U.S. Pharmaceutical business. “It’s a pretty simple message: ‘It’s not just a package. It’s a patient,’” he says. “McKesson employees understand the important impact that their job has on the patients that our retail pharmacies and other customers serve every day.”
McKesson is keenly aware of the competitive pressures in retail pharmacy. “One of the things that a pharmacist does not need to worry about is whether an order is going to get there, whether it’s going to get there complete, and whether it’s priced right,” says senior vice president of distribution operations Don Walker. “Our focus is on making it very easy to do business with us from a logistical standpoint.”
Every pharmacy operator in North America is aware of the increasingly important role generics are playing in the nation’s health care system. At McKesson, executives are working hard to ensure that the company’s retail customers can get the maximum benefits from these lower-price, higher margin drugs.
With community pharmacies across the country becoming primary providers of flu shots in recent years, McKesson has developed a unique program to ensure that its customers are supplied with adequate amounts of vaccine.
With the nation’s health care system continuing to evolve, community pharmacies that fail to become part of payers’ networks — particularly those offered by the federal government — will be left out in the cold. At McKesson several programs are under way to ensure that retailers do not suffer this fate.
For retailers who rely on McKesson to supply them with pharmaceuticals and other products, the company is much more than just another vendor, vice president of strategic segment marketing Matt Lowe says. “In an increasingly competitive environment, you need someone who is going to do more than just supply drugs,” he says.
Both the top and bottom lines declined at McKesson during the fourth quarter and full fiscal 2013 year, and adjusted earnings fell far short of Wall Street’s expectations. While reported and adjusted results were hurt by a big fourth quarter impairment charge linked to plans to shed an equity investment, management predicted strong profit growth for fiscal 2014 and investors responded by driving up the company’s share price to a 52-week high.
One emerging issue that McKesson has taken the lead in addressing is the Food and Drug Administration’s move to regulate all health care software as a medical device. If fully implemented, that development would greatly complicate the work of retail pharmacies and other health care providers.
As independent drug stores across the country face increasing competition from other trade classes, McKesson is ensuring that they have access to advanced technologies and tools necessary to stay competitive.
Pharmacists need to be able to practice pharmacy, says Nathan Mott, president of McKesson Pharmacy Systems and Automation.
A sea change is occurring in the market where pharmacies are using automation from suppliers like Parata Systems to improve operational efficiencies and patient health outcomes.
Running an independent pharmacy requires store owners to be adept at a wide variety of functions — many of which are never seen by patients and customers.
With health care reform fully kicking in next year, the way payers, providers and patients operate will change for the better, according to Jeff Felton, president of RelayHealth, a McKesson business unit.
With increasing emphasis being put on adherence and improving outcomes, a four-year-old McKesson program is demonstrating that community pharmacists can make a marked difference in patients’ health.
No one knows the mind-set of a pharmacy owner like another pharmacy owner, a fact that has served Bob Graul, who owned drug stores for a quarter century, well in his current role as McKesson’s national vice president of RxOwnership.
As American health care continues to evolve, more retail pharmacy operators are finding opportunities outside of the corner drug store.
As community pharmacies continue to become an integral part of the country’s revamped health care system, McKesson is working to ensure that they can participate in federal prescription drug programs.
When McKesson decided to relaunch the Health Mart franchise seven years ago it was a timely move that helped fulfill an unmet need in the marketplace. Recently surpassing 3,000 member pharmacies, Health Mart has become a compelling success story in retail pharmacy.
While part of McKesson’s stable of companies since it was incorporated as part of the wholesaler’s 1996 acquisition of FoxMeyer, Health Mart really began to come to prominence about seven years ago.