19. Other Commitments and Contingent Liabilities

In addition to commitments and obligations in the ordinary course of business, we are subject to various claims, other 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.

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.

I. Average Wholesale Price Litigation

The following matters involve a benchmark referred to as "AWP," which is utilized by some public and private payers to calculate a portion of the amount that pharmacies and other providers are reimbursed for dispensing certain covered prescription drugs.

A. In re McKesson Governmental Entities Average Wholesale Price Litigation

Commencing in May of 2008, a series of complaints were filed in the United States District Court for the District of Massachusetts by various public payers — governmental entities that paid a portion of the price of certain prescription drugs — alleging that in late 2001 the Company and First DataBank, Inc. ("FDB"), a publisher of pharmaceutical pricing information, conspired to improperly raise the published AWP for certain prescription drugs, and that this alleged conduct resulted in higher drug reimbursement payments by plaintiffs and others similarly situated. These actions were all consolidated under the caption In re McKesson Governmental Entities Average Wholesale Price Litigation. A description of the actions pending during fiscal year 2012 is as follows:

The Douglas County, Kansas Nationwide Class Action

On August 7, 2008, an action was filed by the Board of County Commissioners of Douglas County, Kansas on behalf of itself and a purported national class of state, local and territorial governmental entities against the Company and FDB alleging violations of RICO and federal antitrust laws, and seeking treble damages, as well as injunctive relief, interest, attorneys' fees and costs of suit, all in unspecified amounts, Board of County Commissioners of Douglas County, Kansas v. McKesson Corporation, et al., (No. 1:08-CV-11349-PBS) ("Douglas County, Kansas Action").

On December 24, 2008, an amended and consolidated class action complaint was filed abandoning the previously alleged antitrust claims, and adding as named plaintiffs the City of Panama City, Florida; the State of Oklahoma; the County of Anoka, Minnesota; Baltimore, Maryland; Columbia, South Carolina; and Goldsboro, North Carolina. On March 3, 2009, a second amended and consolidated class action complaint was filed, adding the State of Montana as a plaintiff, adding Montana state law claims, and adding a claim for tortious interference. On February 10, 2009, plaintiffs filed a notice of dismissal without prejudice of defendant FDB.

On May 20, 2009, an action was filed by Oakland County, Michigan and the City of Sterling Heights, Michigan against the Company as the sole defendant asserting claims under RICO, Michigan's Antitrust Reform Act, Michigan's Consumer Protection Act, California's antitrust statute, and for fraud, and seeking damages, treble damages, interest and attorneys' fees, all in unspecified amounts, Oakland County, Michigan et al. v. McKesson Corporation, (No. 1:09-CV-10843-PBS) ("Michigan Counties Action"). On August 4, 2009, the court granted the Company's motion to stay the Michigan Counties Action.

On March 4, 2011, the court entered an order granting, in part, and denying, in part, plaintiffs' motion for class certification in the Douglas County, Kansas Action. Specifically, the court certified a nationwide class comprised of all non-federal and non-state governmental entities for liability and equitable relief for the period from August 1, 2001, to June 2, 2005, and for damages for the period August 1, 2001, to December 31, 2003. On March 30, 2011, the court granted, in part, plaintiffs' motion for reconsideration by extending the liability-only class period from June 2, 2005, to October 6, 2006. On May 13, 2011, the United States Court of Appeals for the First Circuit denied the Company's petition and the plaintiffs' cross-petition seeking permission to appeal the district court's March 4, 2011 class certification order.

On June 28 and June 29, 2011, respectively, the Company executed settlement agreements with the States of Oklahoma and Montana with respect to the claims those States asserted on behalf of their respective Medicaid programs in the Douglas County, Kansas Action. On December 6, 2011, the Company executed a settlement agreement with the State of Oklahoma with respect to the claims it asserted on behalf of the Oklahoma State and Education Employees Group Insurance Board. Pursuant to these settlements, the court dismissed with prejudice all claims asserted by the States of Oklahoma and Montana in the Douglas County, Kansas Action.

On October 25, 2011, the Company executed a settlement agreement with the certified class of plaintiffs in the Douglas County, Kansas Action. The settlement provides that the Company will pay $82 million in settlement of all claims on behalf of a nationwide class of cities, counties, and other non-federal and non-state governmental entities. The settlement amount of $82 million is to be paid into a settlement escrow in installments following preliminary and final approvals of the settlement by the court. The escrow account shall be used for settlement administration costs, including notice, attorneys' fees as approved by the court, and the remainder will be distributed to class members in a manner determined by plaintiffs and subject to court approval. The settlement also provides that the settlement class will release all claims against the Company relating to FDB's allegedly inflated AWPs, whenever such claims were incurred, and includes an express denial of any liability on the part of the Company.

The court granted preliminary approval of the settlement on November 8, 2011, and, on April 19, 2012, the court granted final approval of the settlement and entered final judgment. To date, approximately $32 million has been paid by the Company into the settlement escrow, and the balance of the $82 million is expected to be paid into the settlement escrow during the first quarter of 2013.

On January 5, 2012, the Company and the plaintiffs in the Michigan Counties Action filed a stipulated order of dismissal with prejudice, which the court entered on January 12, 2012, and which became effective upon the court granting final approval of the settlement in the Douglas County, Kansas Action on April 19, 2012.

State Medicaid AWP Cases

Beginning in September 2010, a series of suits were filed by individual states in jurisdictions other than the United States District Court for the District of Massachusetts based on essentially the same factual allegations as alleged in In re McKesson Governmental Entities Average Wholesale Price Litigation. A description of the actions pending during fiscal year 2012 is as follows:

The Kansas Action

On September 13, 2010, an action was filed in the Kansas state court of Wyandotte County by the State of Kansas against the Company and FDB asserting claims under Kansas's Restraint of Trade Act, Kansas's Consumer Protection Act, and Kansas's false claims statute, and for civil conspiracy, fraud, unjust enrichment, and breach of contract, and seeking damages, treble damages, civil penalties, as well as injunctive relief, interest, disgorgement of profits, attorneys' fees and costs of suit, all in unspecified amounts, State of Kansas ex rel. Steve Six v. McKesson Corporation, et al., (No. 10CV1491). On February 24, 2011, the court denied the Company's motion to dismiss the State's complaint and set trial for August 7, 2012. On February 15, 2012, the court granted the Company's motion for a continuance and reset trial for May 28, 2013. Discovery is ongoing.

The Mississippi Action

On October 8, 2010, an action was filed in the Mississippi state court of Hinds County by the State of Mississippi against the Company as the sole defendant asserting claims under RICO, Mississippi's Medicaid Fraud Control Act, Mississippi's Consumer Protection Act, and for civil conspiracy, tortious interference with contract, unjust enrichment, and fraud, and seeking damages, treble damages, civil penalties, restitution, as well as injunctive relief, interest, attorneys' fees and costs of suit, all in unspecified amounts, State of Mississippi v. McKesson Corporation, et al., (No. 251-10-862CIV). On November 9, 2010, the Company filed a Notice of Removal to the United States District Court, for the Southern District of Mississippi. On January 27, 2011, the case was remanded back to Mississippi state court after the State dismissed its RICO claim. On February 15, 2011, the Company filed a motion to transfer the Mississippi Action from the Circuit Court of Hinds County to the Chancery Court of Hinds County, or in the alternative, to dismiss the State's claim under Mississippi's Consumer Protection Act for lack of subject matter jurisdiction. On July 1, 2011, the court denied the Company's motion to transfer or, in the alternative, to dismiss. On July 22, 2011, the Company filed a petition with the Supreme Court of Mississippi seeking permission to appeal the trial court's July 1, 2011 order. On December 15, 2011, the Supreme Court of Mississippi denied the Company's petition but ordered the trial court to dismiss the State's claim under Mississippi's Consumer Protection Act. On July 26, 2011, a second amended complaint was filed that formally abandoned the previously alleged RICO claims and added claims on behalf of the Mississippi state employee health plan. On August 25, 2011, the Company filed a motion to dismiss the State's claim under Mississippi's Medicaid Fraud Control Act, which the court denied on March 12, 2012. On March 9, 2012, the Company filed a motion to extend the scheduling deadlines set by the court, including the trial date. On April 6, 2012, the parties filed a stipulated scheduling order requesting the court to continue the previously set trial date of November 26, 2012, to a date after March 1, 2013. The court has not yet ruled on this request. Discovery is ongoing.

The Alaska Action

On October 12, 2010, an action was filed in Alaska state court by the State of Alaska against the Company and FDB asserting claims under Alaska's unfair and deceptive trade practices statute, and for fraud and civil conspiracy, and seeking damages, treble damages, punitive damages, civil penalties, disgorgement of profits, as well as declaratory relief, interest, attorneys' fees and costs of suit, all in unspecified amounts, State of Alaska v. McKesson Corporation, et al., (No. 3AN-10-11348-CI). On May 24, 2011, the court denied the Company's motion to dismiss the State's complaint. Discovery is ongoing, and trial is set for February 4, 2013.

The Utah Action

On October 20, 2010, an action was filed in the United States District Court for the Northern District of California by the State of Utah against the Company as the sole defendant asserting claims under RICO and for civil conspiracy, tortious interference with contract, and unjust enrichment, and seeking damages, treble damages, restitution, as well as injunctive relief, interest, attorneys' fees and costs of suit, all in unspecified amounts, State of Utah v. McKesson Corporation, et al., (No. CV 10-4743-SC). On July 19, 2011, the court denied the Company's motion to dismiss the State's complaint. Discovery is ongoing, and trial is set for March 11, 2013.

The Arizona Administrative Proceeding

On November 5, 2010, the Company received a Notice of Proposed Civil Monetary Penalty from the Office of Inspector General for the Arizona Health Care Cost Containment System ("AHCCCS") purporting to initiate an administrative claim process against the Company, and seeking civil penalties in the amount of $101 million and an assessment in the amount of $112 million for false claims allegedly submitted to the Arizona Medicaid program (No. 2010-1218). On February 28, 2011, the Company filed a complaint in Arizona Superior Court, County of Maricopa, against AHCCCS and its Director, alleging that the administrative proceeding commenced by AHCCCS violates the Arizona Administrative Procedure Act and the Due Process Clauses of the Arizona Constitution and the United States Constitution, and seeking to enjoin AHCCCS's administrative proceeding, a declaratory judgment that AHCCCS lacks jurisdiction and legal authority to impose penalties or assessments against the Company, as well as costs of suit, McKesson Corporation v. AHCCCS, (No. CV-2011-004446). On April 28, 2011, the court ruled that AHCCCS has no jurisdiction to impose penalties or assessments against the Company and enjoined AHCCCS from prosecuting or reinitiating any penalty proceeding against the Company. On May 31, 2011, the court entered final judgment in favor of the Company. On June 16, 2011, AHCCCS filed a notice of appeal. The briefing on AHCCCS's appeal is complete, but a hearing date has not yet been set.

The Hawaii Action

On November 10, 2010, an action was filed in Hawaii state court by the State of Hawaii against the Company and FDB asserting claims under Hawaii's false claims statute, Hawaii's unfair and deceptive trade practices statute, and for fraud and civil conspiracy, and seeking damages, treble damages, punitive damages, civil penalties, disgorgement of profits, as well as interest, attorneys' fees and costs of suit, all in unspecified amounts, State of Hawaii v. McKesson Corporation, et al., (CV. No. 10-1-2411-11-GWBC). On April 12, 2011, the court denied the Company's motion to dismiss the State's complaint. Discovery is ongoing, and trial is set for April 15, 2013.

The Louisiana Action

On December 20, 2010, an action was filed in Louisiana state court by the State of Louisiana against the Company as the sole defendant asserting claims under Louisiana's unfair and deceptive trade practices statute, Louisiana's Medical Assistance Programs Integrity Law, Louisiana's antitrust statute, and for fraud, negligent misrepresentation, civil conspiracy, and unjust enrichment, and seeking damages, statutory fines, civil penalties, disgorgement of profits, as well as interest, attorneys' fees and costs of suit, all in unspecified amounts, State of Louisiana v. McKesson Corporation, (No. C597634 Sec. 23). On June 2, 2011, the court granted the State's motion to consolidate for all purposes, including trial, the State's suit against the Company with the State's pending action against numerous drug manufacturers, State of Louisiana v. Abbott Laboratories, Inc., et al., (No. C596164). On September 8, 2011, the trial court entered an order granting the State's motion to voluntarily dismiss its antitrust claims. The Louisiana Court of Appeals, on September 20, 2011, denied the Company's appeal challenging the trial court's June 2, 2011 consolidation order. On December 14, 2011, the trial court denied the Company's motion to dismiss the State's complaint. On December 19, 2011, the Company filed an application for a supervisory writ, with the Louisiana Court of Appeals, seeking to challenge the trial court's ruling that the State is the proper party to assert damages claims on behalf of Louisiana's Medicaid program, which application was denied. No trial date has been set.

The Michigan Action

On June 2, 2011, an action was filed in Michigan state court, County of Ingham, by the State of Michigan against the Company, FDB, and the Hearst Corporation asserting claims under Michigan's false claims statute, and for fraud based on false representation, silent fraud, civil conspiracy to commit fraud, tortious interference with contract, and unjust enrichment, and seeking damages, treble damages, civil penalties, restitution, disgorgement of profits, interest, attorneys' fees and costs of suit, all in unspecified amounts, Bill Schuette ex rel. State of Michigan v. McKesson Corporation, et al., (11-629-CZ). On November 29, 2011, the court denied the Company's motion to dismiss the State's complaint. No trial date has been set.

The Virginia Action

On June 8, 2011, an action was filed in the United States District Court for the Northern District of California by the Commonwealth of Virginia against the Company and two of its employees asserting claims under RICO, Virginia's false claims statute, Virginia's fraud statute, and for conspiracy to defraud, and seeking damages, treble damages, civil penalties, interest, and costs of suit, all in unspecified amounts, Commonwealth of Virginia v. McKesson Corporation, et al., (C11-02782-SI). On October 13, 2011, the court denied the Company's motion to dismiss the Commonwealth's complaint. Discovery is ongoing, and trial is set for March 11, 2013.

The Indiana Action

On July 13, 2011, the Company was named as a co-defendant to FDB in an action filed in Indiana state court, County of Marion, by the State of Indiana asserting claims under Indiana's false claims statute, Indiana's Medicaid fraud statute, Indiana's theft statute, and for fraud and civil conspiracy, and seeking damages, treble damages, civil penalties, disgorgement of profits, interest, injunctive and declaratory relief, attorneys' fees and costs of suit, all in unspecified amounts, State of Indiana v. McKesson Corp. et al., (No. 49D11-1106-PL-021595). On January 20, 2012, the court granted, in part, and denied, in part, the Company's motion to dismiss the State's complaint. Specifically, the court dismissed without prejudice the State's claims under Indiana's Medicaid fraud statute and Indiana's theft statute, and for fraud. On February 21, 2012, a second amended complaint was filed asserting claims under Indiana's false claims statute, and for fraud and civil conspiracy. On March 22, 2012, McKesson moved to dismiss the fraud claim in the second amended complaint. Discovery is ongoing, and trial is set for April 7, 2014.

The Kentucky Action

On July 15, 2011, the Company was named as a co-defendant to FDB in an action filed in Kentucky state court, Franklin County, by the Commonwealth of Kentucky asserting claims under Kentucky's consumer protection statute, Kentucky's Medicaid fraud statute, Kentucky's theft by deception statute, Kentucky's false advertising statute, and for fraud, negligent misrepresentation, and civil conspiracy, and seeking damages, punitive damages, civil penalties, disgorgement of profits, interest, injunctive and declaratory relief, attorneys' fees and costs of suit, all in unspecified amounts, Commonwealth of Kentucky v. McKesson Corp. et al., (No. 11-CI-00935). On March 12, 2012, the court held a hearing on the Company's motion to dismiss the Commonwealth's complaint but the court has not yet issued a ruling. No trial date has been set.

The Oregon Action

On November 11, 2011, an action was filed in the United States District Court for the Northern District of California by the State of Oregon against the Company as the sole defendant asserting claims under RICO, Oregon's RICO statute, and for unjust enrichment, civil conspiracy, tortious interference with contract, and fraud, and seeking damages, treble damages, punitive damages, a constructive trust, as well as interest, attorneys' fees and costs of suit, all in unspecified amounts, State of Oregon v. McKesson Corporation, No. C11-05384-SI. The Company filed an answer to the State's complaint on January 9, 2012. Discovery is ongoing, and trial is set for July 8, 2013.

B. The New Jersey United States Attorney's Office AWP Investigation

In June 2007, the Company was informed that a relator had previously filed a qui tam action in the United States District Court for the District of New Jersey, purportedly on behalf of the United States, twelve states (California, Delaware, Florida, Hawaii, Illinois, Louisiana, Massachusetts, Nevada, New Mexico, Tennessee, Texas and Virginia) and the District of Columbia against the Company and seven other defendants. In January 2009, the Company was provided with a courtesy copy of the relator's third amended complaint, which alleges claims against the Company and seven other defendants under the False Claims Act and various state false claims statutes. The claims arise out of alleged manipulation of AWP by the defendants. This qui tam action is brought on behalf of the United States and various states, and seeks damages, treble damages and civil penalties, as well as attorneys' fees and costs of suit.

C. General

On January 30, 2012, the Company reached an agreement in principle with a coalition of State Attorneys General to resolve state Medicaid claims relating to AWP for payment by the Company of approximately $173 million. This amount shall be reduced by the total amount allocated to any state that declines to subscribe to the settlement. This agreement is subject to execution of written settlement agreements acceptable to the Company and each participating state. Although the Company believes that there will be substantial participation by the states, the final level of participation is not yet known. The Company will continue to defend vigorously any action pursued by a non-settling state. The Company has fully reserved for the financial effect of this agreement in principle.

The Company has a reserve relating to AWP public entity claims, which is reviewed at least quarterly and whenever events or circumstances indicate changes, including consideration of the pace and progress of discussions relating to potentially resolving other public entity claims. Pre-tax charges relating to changes in the Company's AWP litigation reserve, including accrued interest, are recorded in the Distribution Solutions segment. The Company's AWP litigation reserve is included in other current liabilities in the consolidated balance sheets. In view of the number of outstanding cases and expected future claims, and the uncertainties of the timing and outcome of this type of litigation, it is possible that the ultimate costs of these matters may exceed or be less than the reserve.

The following is the activity related to the AWP litigation reserve for the years ended March 31, 2012, 2011 and 2010:


	Years Ended March 31,
(In millions)		2012			2011			2010
AWP litigation reserve at beginning of period	$	330		$	143		$	143
Charges incurred		149			213			0
Payments made		(26	)		(26	)		0
AWP litigation reserve at end of period	$	453		$	330		$	143

The charges for 2012 primarily related to the Douglas County, Kansas Action settlement and the state and federal Medicaid claims. The charges for 2011 primarily related to the state and federal Medicaid claims.

On April 3, 2012, the Company entered into a settlement agreement with the United States Department of Justice to resolve the federal share of Medicaid claims related to AWP. The total settlement amount of $191 million, which includes interest, was paid on April 9, 2012. Pursuant to the settlement agreement, the United States Department of Justice filed a notice seeking the dismissal with prejudice of the claims on behalf of the United States asserted by the relator in the qui tam action pending in New Jersey federal court to the extent those claims are encompassed by the settlement release in the parties' agreement.

II. Other Litigation and Claims

On October 3, 2008, the United States filed a complaint in intervention in a pending qui tam action in the United States District Court for the Northern District of Mississippi, naming as defendants, among others, the Company and its former indirect subsidiary, McKesson Medical-Surgical MediNet Inc. ("MediNet"), now merged into and doing business as McKesson Medical-Surgical MediMart Inc., United States ex rel. Jamison v. McKesson Corporation, et al., (No. 2:08-CV-00214-SA). The United States ("USA") alleges violations of the federal False Claims Act, 31 U.S.C. Sections 3729-33, in connection with billing and supply services rendered by MediNet to the long-term care facility operator co-defendants. The action seeks monetary damages in an unstated amount. On July 7, 2009, defendants filed motions to dismiss the action filed by the relator, arguing that the relator was not the original source of the claims which he attempts to pursue in his qui tam action. On March 25, 2010, the trial court granted defendants' motions to dismiss the relator and his complaint, which ruling was later affirmed on appeal by the United States Court of Appeals for the Fifth Circuit. On June 2, 2010, the USA filed a motion for partial summary judgment, seeking a finding that the Company's co-defendant, a Medicare Part B supplier, failed to comply with certain of the 21 Supplier Standards ("Standards") established by federal regulations covering such Medicare suppliers, and that the relevant claims for which MediNet provided contract billing and/or supply services were rendered "false" by reason of such non-compliance. On July 2, 2010 the Company and MediNet filed their opposition to the USA's motion and themselves moved for summary judgment as to certain counts based on numerous arguments, including that the USA cannot, as a matter of law, establish that the co-defendant Medicare Part B supplier failed to meet the Standards. On March 28, 2011, the trial court issued its order denying the motion of the USA and granting the partial summary judgment motions of the Company and its co-defendants on grounds that, as a matter of law, the Standards had not been violated. All causes of action based on the alleged failure to comply with the Standards were dismissed. In September of 2011, the Company and MediNet moved for summary judgment on the USA's remaining causes of action which motions were denied on February 14, 2012. In its pretrial filings, the USA stated that it intends to seek damages, which after trebling as allowed by the False Claims Act, total $82 million, and will additionally seek between $407 million to $814 million in fines and penalties. The McKesson defendants strongly dispute any liability, disagree with those claims for damages, fines and penalties and, based on experience, believe that such claimed damages amounts are not meaningful indicators of potential liability. On February 21, 2012, a non-jury trial commenced. On March 8, 2012, the court set April 30, 2012 for the continuation of the trial to allow the USA to present its revised claim for damages which the USA represented at trial would be reduced from the amounts stated in pretrial filings. No rulings on liability or damages have been made yet.

As previously reported, the Company's subsidiary, McKesson Medical-Surgical Inc. ("MMS"), has been named as a defendant in multiple cases pending in Nevada state court alleging that plaintiffs contracted Hepatitis C after being administered the drug Propofol during medical procedures conducted by third parties. All but seven cases have been settled with no contribution from MMS, including the previously reported case with a jury verdict against MMS for $6 million in compensatory damages and $18 million in punitive damages. Of the seven remaining cases, the next trial date is January 2013.

Our subsidiary, Northstar Rx LLC, is one of multiple defendants in approximately 425 active cases alleging that plaintiffs were injured after ingesting Reglan and/or its generic equivalent, metoclopramide. There are an additional 52 cases in California, currently stayed, involving over 2,000 plaintiffs. The cases usually include state law claims for strict liability, failure to warn, negligence, and breach of warranty. Most of these cases are pending in state courts in Pennsylvania, California and New Jersey, with other cases pending in Alabama, Louisiana, Missouri, Mississippi, Oregon and Tennessee. Northstar Rx's insurers are providing coverage for these cases. The Company believes that all of these cases are subject to dismissal pursuant to the U.S. Supreme Court's 2011 ruling in Pliva, Inc. v. Mensing, which barred certain types of claims involving generic pharmaceuticals. The Company is also named in approximately 850 cases as a distributor of these products.

On January 4, 2011, the Company was served with a qui tam complaint that was originally filed in November 2005 in the United States District Court for the Eastern District of Pennsylvania by a relator, a former employee of a Johnson & Johnson affiliate, against the Company, Johnson & Johnson and its affiliate companies, and Omnicare, Inc., alleging that the Company received illegal "kickbacks" from the Johnson & Johnson defendants in violation of the federal Anti-Kickback Statute, the False Claims Act and various state false claims statutes, and seeking damages, treble damages, civil penalties, interest, attorneys' fees and costs of suit, all in unspecified amounts, United States ex rel. Scott Bartz v. Ortho McNeil Pharmaceuticals, Inc., et al., (No. 2:05-cv-06010). The United States declined to intervene in the suit.

On February 23, 2011, the case was transferred to the District of Massachusetts. On May 27, 2011, the Company filed a motion to dismiss the relator's complaint. On June 10, 2011, the relator filed a notice of intent to voluntarily dismiss the Company from the action, subject to approval by the United States and the various states on whose behalf the relator filed suit. On March 2, 2012, the court granted, in part, and denied, in part, the Johnson & Johnson defendants' motion to dismiss. Specifically, the court ruled that it lacked jurisdiction over the relator's claims under the False Claims Act, and it declined to exercise supplemental jurisdiction over the relator's claims under various state false claims statutes. On April 19, 2012, the Court granted the relator's unopposed motion to dismiss the Company from the action.

III. Government Investigations and Subpoenas

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 manner. These responses sometimes require considerable 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 health care industry, as well as to settlements. Examples of such requests and subpoenas include the following two items.

First, prior to its recent acquisition by the Company, US Oncology was informed that the United States Federal Trade Commission ("FTC") and the Attorney General for the State of Texas ("Texas AG") had opened investigations to determine whether a transaction in which certain Austin, Texas based oncology physicians became employees of an existing Texas US Oncology affiliated oncology practice group violated relevant state or federal antitrust laws. US Oncology has responded to requests for information from the government agencies and the Company has continued to cooperate with the FTC and the Texas Attorney General regarding these investigations. US Oncology has reached an agreement with the Texas AG fully resolving its inquiry, and the FTC has informed US Oncology that it has closed its file regarding the matter.

Second, the Company has been informed of an investigation by the Regie de l'assurance maladie Du Quebec ("RAMQ") to which the Company's subsidiary, McKesson Canada Corporation ("MCC"), has responded. RAMQ is a provincial government agency with administrative authority over the conduct of pharmaceutical businesses in Quebec Province. MCC has cooperated fully with the investigation which has been conducted, with substantial interruptions, from 2009 through the present. The Company believes that the investigation is focused on certain discounts and payments offered to pharmacies in the Quebec Province.

IV. Environmental Matters

Primarily as a result of the operation of the Company's former chemical businesses, which were fully divested by 1987, the Company is involved in various matters pursuant to environmental laws and regulations. The Company has received claims and demands from governmental agencies relating to investigative and remedial actions purportedly required to address environmental conditions alleged to exist at eight sites where it, or entities acquired by it, formerly conducted operations and the Company, by administrative order or otherwise, has agreed to take certain actions at those sites, including soil and groundwater remediation. In addition, the Company is one of multiple recipients of a New Jersey Department of Environmental Protection Agency directive and a separate United States Environmental Protection Agency directive relating to potential natural resources damages ("NRD") associated with one of these eight sites. Although the Company's potential allocation under either directive cannot be determined at this time, it has agreed to participate with a potentially responsible party ("PRP") group in the funding of an NRD assessment, the costs of which are reflected in the aggregate estimates set forth below.

Based on a determination by the Company's environmental staff, in consultation with outside environmental specialists and counsel, the current estimate of the Company's probable loss associated with the remediation costs for these eight sites is $7 million, net of approximately $1.7 million that third parties have agreed to pay in settlement or is expected, based either on agreements or nonrefundable contributions which are ongoing, to be contributed by third parties. The $7 million is expected to be paid out between April 2012 and March 2032. The Company's estimated probable loss for these environmental matters has been entirely accrued for in the accompanying consolidated balance sheets.

In addition, the Company has been designated as a PRP under the Superfund law for environmental assessment and cleanup costs as the result of its alleged disposal of hazardous substances at 13 sites. With respect to these sites, numerous other PRPs have similarly been designated and while the current state of the law potentially imposes joint and several liability upon PRPs, as a practical matter, costs of these sites are typically shared with other PRPs. At one of these sites, the United State Environmental Protection Agency has recently selected a preferred remedy with an estimated cost of approximately $70 million. It is not certain at this point in time what proportion of this estimated liability will be borne by the Company or by the other PRPs. Accordingly, the Company's estimated probable loss at those 13 sites is approximately $1 million, which has been entirely accrued for in the accompanying consolidated balance sheets. The aggregate settlements and costs paid by the Company in Superfund matters to date have not been significant.

V. Other Matters

The Company is involved in various other litigation and governmental proceedings, not described above, that arise in the normal course of business. While it is not possible to determine the ultimate outcome or the duration of any such litigation or governmental proceedings, the Company believes, based on current knowledge and the advice of counsel, that such litigation and proceedings will not have a material impact on the Company's financial position or results of operations.