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Commitments and Contingent Liabilities
9 Months Ended
Dec. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingent Liabilities
Commitments and Contingent Liabilities
In addition to commitments and obligations in the ordinary course of business, we are subject to various claims, including claims with customers and vendors, pending and potential legal actions for damages, investigations relating to governmental laws and regulations and other matters arising out of the normal conduct of our business. As described below, many of these proceedings are at preliminary stages and many seek an indeterminate amount of damages.
When a loss is considered probable and reasonably estimable, we record a liability in the amount of our best estimate for the ultimate loss. However, the likelihood of a loss with respect to a particular contingency is often difficult to predict and determining a meaningful estimate of the loss or a range of loss may not be practicable based on the information available and the potential effect of future events and decisions by third parties that will determine the ultimate resolution of the contingency. Moreover, it is not uncommon for such matters to be resolved over many years, during which time relevant developments and new information must be reevaluated at least quarterly to determine both the likelihood of potential loss and whether it is possible to reasonably estimate a range of possible loss. When a loss is probable but a reasonable estimate cannot be made, disclosure of the proceeding is provided.
Disclosure also is provided when it is reasonably possible that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the recorded provision. We review all contingencies at least quarterly to determine whether the likelihood of loss has changed and to assess whether a reasonable estimate of the loss or range of loss can be made. As discussed above, development of a meaningful estimate of loss or a range of potential loss is complex when the outcome is directly dependent on negotiations with or decisions by third parties, such as regulatory agencies, the court system and other interested parties. Such factors bear directly on whether it is possible to reasonably estimate a range of potential loss and boundaries of high and low estimates.
Significant developments in previously reported proceedings and in other litigation and claims, since the filing of our 2017 Annual Report and our Quarterly Report on Form 10-Q for the quarters ended June 30, 2017 and September 30, 2017 are set out below. We are party to the legal proceedings described below. Unless otherwise stated, we are currently unable to estimate a range of reasonably possible losses for the unresolved proceedings described below. Should any one or a combination of more than one of these proceedings be successful, or should we determine to settle any or a combination of these matters, we may be required to pay substantial sums, become subject to the entry of an injunction or be forced to change the manner in which we operate our business, which could have a material adverse impact on our financial position or results of operations.
Litigation, Government Subpoenas and Investigations
As previously reported, the Company is a defendant in many cases alleging claims related to the distribution of controlled substances to pharmacies, often together with other pharmaceutical wholesale distributors and pharmaceutical manufacturers and retail pharmacy chains named as defendants. The Company has been served with 192 complaints filed in state and federal courts in Alabama, Arkansas, Connecticut, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Minnesota, Mississippi, Missouri, New Hampshire, New Jersey, New Mexico, New York, Ohio, Oklahoma, Oregon, Pennsylvania, Tennessee, Texas, West Virginia and Wisconsin. These complaints allege violations of controlled substance laws and various other statutes in addition to common law claims, including negligence and public nuisance, and seek monetary damages and equitable relief. On December 5, 2017, the cases pending in federal district courts were transferred to a multi-district litigation proceeding in the United States District Court for the Northern District of Ohio captioned In re: National Prescription Opiate Litigation, Case No. 17-md-2804. Approximately 29 cases remain in state courts in Connecticut, Florida, New Mexico, New York, Pennsylvania, Tennessee and Texas.

As previously disclosed, the Company and others filed suit in the United States District Court for the Northern District of Oklahoma, McKesson Corporation, et al. v. Todd Hembree, Attorney General of the Cherokee Nation, et al., seeking a declaratory judgment that the Cherokee Nation District Court has no jurisdiction over the claims asserted by the Cherokee Nation in the suit captioned Cherokee Nation v. McKesson Corporation, et al. On January 9, 2018, the court granted the motion for a preliminary injunction enjoining the defendants from taking any action in the case pending in the tribal court. On January 19, 2018, the Cherokee Nation refiled its suit against the Company and five other original defendants in the district court of Sequoyah County, Oklahoma. The Cherokee Nation v. McKesson Corporation, et al., Case no. CT-2081-11.

As previously disclosed, two shareholder derivative suits filed against certain officers and directors of the Company and the Company as a nominal defendant, alleging violations of fiduciary duties relating to the Company’s previously disclosed agreement with the DEA and the Department of Justice and various United States Attorneys’ offices to settle all potential administrative and civil claims relating to investigations about the Company’s suspicious order reporting practices for controlled substances were consolidated in the United States District Court for the Northern District of California as In re McKesson Corporation Derivative Litigation, No. 4:17-cv-1850. On January 5, 2018, the defendants moved to dismiss the consolidated suit.

As previously disclosed, Chaile Steinberg, a purported shareholder, filed a shareholder derivative complaint in the Court of Chancery of the State of Delaware against certain officers and directors of the Company and the Company as a nominal defendant, alleging violations of fiduciary duties relating to the Company’s previously disclosed agreement with the DEA and the Department of Justice and various United States Attorneys’ offices to settle all potential administrative and civil claims relating to investigations about the Company’s suspicious order reporting practices for controlled substances. Two similar suits were then filed by purported shareholders, including Police & Fire Ret. Sys of the City of Detroit v. McKessson Corporation, et al., No. 2017-0803, and Amalgamated Bank v. McKesson Corporation, et al., No. 2017-0881. The Court of Chancery consolidated these three actions and the plaintiffs designated the complaint in the Steinberg action as the operative complaint on January 11, 2018. The consolidated matter is captioned In re McKesson Corporation Stockholder Derivative Litigation, No. 2017-0736. The defendants filed a motion to dismiss this action on January 18, 2018. On January 19, 2018, purported shareholder Katielou Greene filed a shareholder derivative complaint in the Court of Chancery that is similar to the operative complaint in In re McKesson Corporation Stockholder Derivative Litigation. Greene v. McKesson Corporation, et al.

On May 21, 2014, four hedge funds managed by Magnetar Capital filed a complaint against McKesson Europe Holdings GmbH & Co. KGaA (“McKesson Europe Holdings”, formerly known as “Dragonfly GmbH & Co. KGaA”), a wholly‑owned subsidiary of the Company, in a German court in Frankfurt, Germany, alleging that McKesson Europe Holdings violated German takeover law in connection with the Company’s acquisition of McKesson Europe by paying more to some holders of McKesson Europe’s convertible bonds than it paid to the shareholders of McKesson Europe’s stock, Magnetar Capital Master Fund Ltd. et al. v. Dragonfly GmbH & Co KGaA, No. 3-05 O 44/14. On December 5, 2014, the court dismissed Magnetar’s lawsuit. Magnetar subsequently appealed that ruling. On January 19, 2016, the Appellate Court reversed the lower court’s ruling and entered judgment against McKesson Europe Holdings. On February 22, 2016, McKesson Europe Holdings filed a notice of appeal, on which oral argument was heard by the German Federal Supreme Court on November 7, 2017. The final decision upholding the Appellate Court’s ruling in favor of Magnetar was issued on December 12, 2017; this decision does not materially impact McKesson’s consolidated financial statements.

From time to time, the Company receives subpoenas or requests for information from various government agencies. The Company generally responds to such subpoenas and requests in a cooperative, thorough and timely matter. These responses sometimes require time and effort and can result in considerable costs being incurred by the Company. Such subpoenas and requests also can lead to the assertion of claims or the commencement of civil or criminal legal proceedings against the Company and other members of the healthcare industry. Examples of such subpoenas and investigations are included in the Company’s 2017 Annual Report on Form 10-K and previously filed 10-Qs.