McKesson FY 1Q17 Earnings Call Notes

McKesson (MCK) John H. Hammergren on Q1 2017

Strategic sourcing partnership with Walmart is a clear endorsement of our capabilities

“Last, in May we announced a strategic sourcing partnership with Walmart. Walmart is a very sophisticated company, not just on the logistics side, but around their sourcing and procurement operations. The selection of McKesson is a clear endorsement of not only our long-term partnership, but also McKesson’s world-class pharmaceutical sourcing and procurement capabilities. Building a long-term relationship made sense for Walmart and we were the right partner”

Both party platforms are emphasizing cost and quality

“I think the thing that’s most notable is that in both platforms, you hear a discussion about cost and quality at some level. And clearly we believe the healthcare industry is headed on a continued improvement front on both of those dimensions. We need to take cost out of the healthcare system, and we need better visibility to quality, and people are increasingly going to be paid in a way that reflects the value they deliver on those two dimensions.”

That theme should stay in place regardless of which candidate wins

“So I think regardless of the candidate that wins, or the party platform that gets adopted, we’re trying to help our customers prepare for that environment of more cost pressure, and more inspection of their ability to deliver value. And part of that is also going to require them to collaborate and connect across the boundaries of their individual businesses. So I would say that that theme is the thing that stuck out the most, is that I think the issues that have been raised in the previous administration around these issues, or I should say the interest raised around these issues in the previous administration will continue.”

James A. Beer – Chief Financial Officer & Executive Vice President

Express Scripts (ESRX) Q1 2016 Earnings Call

Express Scripts (ESRX) CEO George Paz discussed their now very public lawsuit and disagreement with healthcare insurance provider Anthem

“A week ago, we filed a response to Anthem’s lawsuit. As I have said before I strongly prefer that we had never reach this point. However, we want to make clear that we are confident that we have negotiated in good faith; are fulfilling our contractual obligations; are providing excellent service to both Anthem and its members.  While it is unfortunate we are in this situation, we believe our legal case is strong. We value Anthem as a client and we very much would like to continue working with them for the long-term. We believe we are Anthem’s best PBM option, delivering great care, keeping drug costs in check and helping to grow their business. We are currently collaborating with them to implement solutions and we are proud of the results we are helping Anthem to achieve.”

Express Scripts (ESRX) President Tim Wentworth said the company serves about 25% of the US population 

“When you invest in Express Scripts, you’re investing in the healthcare of 85 million people we service. We have been successful because we focus on doing one thing extremely well, caring for our patients. Our business model alignment achieves better patient health outcomes and helps clients control healthcare costs.  Our mission is to keep our clients ahead of constantly evolving marketplace trends. We accomplish this by continuously developing new, innovative solutions for our clients. This is as critical today as it was in 1998 when I joined Express Scripts. In 18 years we’ve had dozens of earnings calls, hundreds of investor conferences and thousands of meetings with you. I have always had one clear theme, an independent PBM, fully aligned with clients, can dramatically improve health outcomes. You can measure our success in many ways, but the most important measure is that we have helped millions of people live better lives.”

Using big data to catch fraud and improve efficacy 

“And so we use great amounts of that data to not only in our own book run fraud, waste and abuse, but increasingly for our health plan clients to help power their programs, power their provider networks, power their payment mechanisms by virtue of being able to have a very complete look at prescribing patterns, at patient outcomes and so forth.”

Touted their iPhone app store rating

“in our digital app which if you follow it has evolved several iterations in the last year, and is now a four plus star app on the App Store, it was two when we started.”

McKesson FY 2Q16 Earnings Call Notes

McKesson (MCK) John H. Hammergren on Q2 2016 Results

Our industry is going through a period of dynamic change

“There’s no doubt our industry is going through a period of dynamic change. I’ve been CEO of this company for 15 years and in healthcare my entire career.”

Despite the political headlines, pharmaceuticals are still the most effective and affordable way to treat patients

“Coming back to the broader industry environment, pharmaceutical pricing trends have become the frequent subject of news headlines as we get deeper into this presidential election cycle. The observation I would make is that this pharmaceutical pricing discussions tend to ebb and flow over time. However, what remains clear is that pharmaceuticals are still the most effective and affordable way to treat patients. And innovation and drug development and the trend toward higher levels of generic penetration continue to deliver real value and cost savings through the healthcare industry.”

Clearly there is more media attention on price inflation, but we don’t expect manufacturers to change their strategy

“clearly there is more media attention and there is more discussion about price inflation in the market. But I happen to believe that the manufacturers that we work with at least will largely retain their current strategy. And there may be some outliers that begin to change their perspective slightly, but overall I think we expect the trends to continue.”

We’ll do everything we can to help RAD with this transition

“Clearly we’ve had a longstanding relationship with Rite Aid and we’ll do everything we can to help them in this transition. And we have a great deal of respect for Mr. Pessina and his team at Walgreens and the kind of value they’ve delivered over a long time.”

Our job is to deploy capital intelligently

“our job is to find ways to grow our business and to do it intelligently and to do it in a risk-bounded way and to deploy capital intelligently. So I think our number one priority is to deploy capital in places where we have a base and an expertise and where it’s not a completely new leg of the stool, but it’s something that’s additive to what we’re currently doing.”

This is clearly a period of dynamic change

“Our industry experiences periods of dynamic change, and this is certainly one of them. And I’m confident that we will continue to participate in that change in an extremely positive way. We remain extremely well positioned to deliver the best service and value in the industry on behalf of our customers.”