McKesson 2015 Annual Report Download - page 15

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McKESSON CORPORATION
Competition
In every area of healthcare distribution operations, our Distribution Solutions segment faces a highly
competitive global environment with strong competition, both in price and service, from international, national,
regional and local full-line, short-line and specialty wholesalers, service merchandisers, self-warehousing chains,
manufacturers engaged in direct distribution, third-party logistics companies and large payer organizations. In
addition, this segment faces competition from various other service providers and from pharmaceutical and other
healthcare manufacturers as well as other potential customers of the segment, which may from time-to-time
decide to develop, for their own internal needs, supply management capabilities that would otherwise be
provided by the segment. Price, quality of service, innovation and, in some cases, convenience to the customer
are generally the principal competitive elements in this segment.
Our Technology Solutions segment experiences substantial competition from many firms, including other
software services firms, consulting firms, shared service vendors, certain hospitals and hospital groups, payers,
care management organizations, hardware vendors and internet-based companies with technology applicable to
the healthcare industry. Competition varies in size from small to large companies, in geographical coverage and
in scope and breadth of products and services offered.
Patents, Trademarks, Copyrights and Licenses
McKesson and its subsidiaries hold patents, copyrights, trademarks and trade secrets related to McKesson
products and services. We pursue patent protection for our innovation, and obtain copyrights covering our
original works of authorship, when such protection is advantageous. Through these efforts, we have developed a
portfolio of patents and copyrights in the U.S. and worldwide. In addition, we have registered or applied to
register certain trademarks and service marks in the U.S. and in foreign countries.
We believe that, in the aggregate, McKesson’s confidential information, patents, copyrights, and trademarks
are important to its operations and market position, but we do not consider any of our businesses to be dependent
upon any one patent, copyright, trademark, or trade secret, or any family or families of the same. We cannot
guarantee that our intellectual property portfolio will be sufficient to deter misappropriation, theft, or misuse of
our technology, nor that we can successfully enjoin infringers. We periodically receive notices alleging that our
products or services infringe on third party patents and other intellectual property rights. These claims may result
in McKesson entering settlement agreements, paying damages, discontinuing use or sale of accused products, or
ceasing other activities. While the outcome of any litigation or dispute is inherently uncertain, we do not believe
that the resolution of any of these infringement notices would have a material adverse impact on our results of
operation.
We hold inbound licenses for certain intellectual property that is used internally, and in some cases, utilized
in McKesson’s products or services. While it may be necessary in the future to seek or renew licenses relating to
various aspects of our products and services, we believe, based upon past experience and industry practice, such
licenses generally can be obtained on commercially reasonable terms. We believe our operations and products
and services are not materially dependent on any single license or other agreement with any third party.
Other Information about the Business
Customers: During 2015, sales to our ten largest customers accounted for approximately 44% of our total
consolidated revenues. Sales to our largest customer, CVS Caremark Corporation (“CVS”), accounted for
approximately 15% of our total consolidated revenues. At March 31, 2015, trade accounts receivable from our ten
largest customers were approximately 36% of total trade accounts receivable. Accounts receivable from CVS were
approximately 14% of total trade accounts receivable. We also have agreements with group purchasing
organizations (“GPOs”), each of which functions as a purchasing agent on behalf of member hospitals, pharmacies
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