McKesson FY 4Q15 Earnings Call Notes

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29% EPS growth

“For the full year, revenues increased 30% to $179 billion and adjusted earnings per share from continuing operations increased 29% over the prior year to $11.11.”

Policy makers will support value based care in the US

“The policymakers have set meaningful direction to support a transition to value-based care in the United States. Recently Congress overwhelmingly passed H.R. 2 which permanently replaces Medicare’s sustainable growth rate system. The bill, which was signed by the President, provides needed reimbursement stability and predictability for providers in the near term while they transition to a more incentive-based payment system by the year 2019. The bill also contains provisions for healthcare data interoperability among other important provisions.”

Lots of considerations for biosimilars

“I want to acknowledge that there has been quite a lot of talk of late regarding biosimilars. We expect the biosimilar landscape to evolve over time and we believe this new category will play a growing role in the specialty market. The success of each biosimilar drug and drug class has many dependencies, including the channel of delivery, the disease which the drug addresses, physicians’ views on quality and efficacy and the value delivered by various participants in the supply chain.”

More dollar value of generics in FY 2016, but economics not quite as good

“I think we actually expect more dollar value of generic launches, or I should say branded generic launches – launches of branded drugs in fiscal 2016 than there were in 2015. So you’re right, there’s more dollar value of product going generic. I think as we look at our portfolio of generic estimates, we frankly see the character and characteristics of some of those generics being not quite as favorable for us as the launches that took place in FY 2015.

So an example would be a generic that might have many, many participants, and the value back to the supply chain as a result of that competitive activity wouldn’t be as great.”

If the Sup Ct. rules out of favor of subsidy, congress will probably act

“I think the end result or even if something were to come from the Supreme Court ruling that may put a question mark on the subsidy or support for these patients I think that there’ll be a quick reaction on the Hill to try to find another way to provide low-cost quality care to patients so they don’t fall through the crack and end up in the emergency rooms in America.”

Plug for our industry: Pharmaceuticals are the best way to treat patients

“I would remind also to the listeners that know this well that pharmaceutical use and the appropriate use of pharmaceuticals and primary care physicians is the best way to treat patients as opposed to letting them their situations falter and having them end up in an acute situation in one of our Great American hospitals and that I think needs to be avoided.”

Justification for focusing on Europe over Brazil:

“I think the way we think about Europe is the way I think about McKesson 16 years ago when I landed in this seat. How do we – how can we optimize the performance of the businesses we have and focus on those businesses and then how do we branch from those businesses to adjacencies that we know how to operate in markets where we can compete. And I think the situation with Brazil, it was not obvious that we could create a market-leading strategy there particularly given the vertical nature of some of the retailers in that market. And nuances associated with the business models down there and clearly whether it was scaled properly, et cetera, that I think the conclusion was reached that we should have our focus on Europe and in those markets where we currently have a strong beachhead.”