Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Directors, Executive Officers, and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
PART IV
Exhibits and Financial Statement Schedule
Form 10-K Summary
Signatures
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McKESSON CORPORATION
PART I
Item 1. Business.
INDEX TO BUSINESS
Section
Page
General
Business Segments
North American Pharmaceutical
Oncology & Multispecialty
Prescription Technology Solutions
Medical-Surgical Solutions
Investments, Restructuring, Business Combinations, and Divestitures
Competition
Patents, Trademarks, Copyrights, and Licenses
Human Capital
Government Regulation
Other Information about the Business
Forward-Looking Statements
General
McKesson Corporation together with its subsidiaries (collectively, the “Company,” “McKesson,” “we,” “our,” or “us” and other similar pronouns), which traces its business roots to 1833, is a diversified healthcare services leader dedicated to advancing health outcomes for patients everywhere. Our teams partner with biopharma companies, care providers, pharmacies, manufacturers, governments, and others to deliver insights, products, and services to help make quality care more accessible and affordable.
The Company’s fiscal year begins on April 1 and ends on March 31. Unless otherwise noted, all references in this document to a particular year refer to the Company’s fiscal year. The Company was incorporated on July 7, 1994 in the State of Delaware.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), are available free of charge on the Company’s website ( www.mckesson.com under the “Investors — Financials — SEC Filings” caption) as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). The content on any website referred to in this Annual Report on Form 10-K (“Annual Report”) is not incorporated by reference into this report, unless expressly noted otherwise. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers, including the Company, that file electronically with the SEC. The address of the website is www.sec.gov .
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Business Segments
Commencing in the second quarter of fiscal 2026, we implemented a new segment reporting structure which resulted in four reportable segments: North American Pharmaceutical, Oncology & Multispecialty, Prescription Technology Solutions, and Medical-Surgical Solutions. Our former Norwegian operati ons were included in Other. All prior segment information has been recast to reflect the Company’s new segment structure and current period presentation.
Our North American Pharmaceutical segment distributes branded, generic, specialty, biosimilar and over-the-counter (“OTC”) pharmaceutical drugs, and other healthcare-related products to customers in the United States (“U.S.”) and Canada. In addition, the segment sells financial, operational, and clinical solutions to pharmacies (retail, hospital, alternate sites) and provides consulting, outsourcing, technological, and other services. The U.S. distribution operations were previously included in the former U.S. Pharmaceutical reportable segment, and the Canadian operations were previously included in the former International reportable segment.
Our Oncology & Multispecialty segment includes provider solutions that encompass specialty drug distribution, group purchasing organizations, infusion services, direct to patient pharmacy capabilities, InspiroGene™ cell and gene therapy services, technology solutions, practice consulting services, and vaccine distribution. In addition, the segment supports the U.S. Oncology Network, one of the largest networks of physician-led, integrated, community-based oncology practices dedicated to advancing high-quality, evidence-based cancer care in the U.S. The segment also includes PRISM Vision Holdings, LLC (“ PRISM Vision”); which drives patient outcomes in a retina and ophthalmology setting. Combined with Sarah Cannon Research Institute (“SCRI”) and our technology business, Ontada, this segment provides research, insights, technologies, and services that address and improve cancer and specialty care. This segment was previously reflected in the former U.S. Pharmaceutical reportable segment.
Our Prescription Technology Solutions segment helps solve medication access, affordability, and adherence challenges for patients by working across healthcare to connect patients, pharmacies, providers, pharmacy benefit managers, health plans, and biopharma companies. Prescription Technology Solutions serves our biopharma and life sciences partners, delivering innovative solutions that help people get the medicine they need to live healthier lives. Prescription Technology Solutions offers technology services, which includes electronic prior authorization, prescription price transparency, benefit insight, dispensing support services, and patient enrollment, in addition to third-party logistics and wholesale distribution support designed to benefit stakeholders.
Our Medical-Surgical Solutions segment is a leading provider of medical-surgical supplies, laboratory equipment, and pharmaceutical distribution, logistics, and other services to non-acute settings in the U.S. These include healthcare providers operating in ambulatory care environments, such as physician offices, surgery centers, and hospital reference labs, as well as extended care settings, including nursing homes, hospice and home health care agencies, government markets, and online marketplaces and retailers. This segment offers more than 270,000 national brand medical-surgical products as well as its own line of more than 4,000 high-quality products through a network of distribution centers in the U.S. During fiscal 2026, we announced our intention to separate this segment into an independent company. As a part of the separation strategy, on April 20, 2026, we announced a definitive agreement under which funds managed by affiliates of Apollo Global Management, Inc. (“Apollo Funds”) will acquire approximately 13% minority ownership interest in our Medical‑Surgical Solutions segment through an investment of approximately $1.25 billion in the segment’s convertible preferred equity. This transaction is subject to regulatory approvals and customary closing conditions.
Our former Norwegian operations, which provided distribution and services to wholesale and retail customers in Norway where we owned, partnered, or franchised with retail pharmacies, were included in Other. During fiscal 2026, we completed the sale of our businesses in Norway. Refer to Financial Note 2, “Business Acquisitions and Divestitures ,” to the consolidated financial statements included in this Annual Report for more information.
North American Pharmaceutical Segment:
Our North American Pharmaceutical segment provides distribution and logistics services for branded, generic, specialty, biosimilar, and OTC pharmaceutical drugs along with other healthcare-related products to customers in the U.S. and Canada. This business provides solutions and services to pharmacies, hospitals, pharmaceutical manufacturers, physicians, payors, and patients. We also source generic pharmaceutical drugs through our ClarusONE Sourcing Services LLP joint venture with Walmart Inc. (“ClarusONE”).
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U.S. Pharmaceutical
Our U.S. Pharmaceutical business operates and serves customers through a network of 27 distribution centers in the U.S., including two strategic redistribution centers. We invest in technology and other systems at all of our distribution centers to enhance safety, reliability, and product availability. For example, we offer McKesson Connect SM , an internet-based ordering system that provides item look-up and real-time inventory availability as well as ordering, purchasing, third-party reconciliation, and account management functionality. We make extensive use of technology as an enabler to ensure customers have the right products at the right time in the right place.
To maximize distribution efficiency and effectiveness, we follow the Six Sigma methodology, which is an analytical approach that emphasizes setting high-quality objectives, collecting data, and analyzing results to a fine degree in order to improve processes, reduce costs, and enhance service accuracy and safety. We provide solutions to our customers including supply management technology, world-class marketing programs, managed care, and services to help them meet their business and quality goals. We continue to implement information systems to help achieve greater consistency and accuracy both internally and for our customers, as well as make investments to increase capacity and automation.
Within U.S. Pharmaceutical, we have three primary pharmaceutical distribution customer channels: (i) retail national accounts, which include national and regional retail chains, food and drug combinations, mail order pharmacies, and mass merchandisers, (ii) community pharmacy and health, and (iii) institutional healthcare providers such as hospitals, health systems, integrated delivery networks, and long-term care providers.
Retail National Accounts: We provide business solutions that help our retail national account customers increase revenues and profitability. Solutions include:
• Central Fill SM – Prescription refill service that enables pharmacies to more quickly refill prescriptions remotely, more accurately, and at a lower cost, while reducing inventory levels and improving customer service.
• Strategic Redistribution Centers – Two facilities totaling over 740,000 square feet that offer access to inventory for single source warehouse purchasing, including pharmaceuticals and biologics. These distribution centers also provide the foundation for a two-tiered distribution network that supports best-in-class direct store delivery.
• McKesson SynerGx ® – Generic pharmaceutical purchasing program and inventory management that helps pharmacies maximize their cost savings with a broad selection of generic drugs, competitive pricing, and one-stop shopping.
• Inventory Management – An integrated solution comprised of forecasting software and automated replenishment technologies that reduce inventory-carrying costs.
• ExpressRx Track ™ – Pharmacy automation solution featuring state-of-the-art robotics, upgraded imaging, and expanded vial capabilities, and industry-leading speed and accuracy in a small footprint.
Community Pharmacy and Health: We strengthen the overall health of community pharmacies and elevate the role they play in people’s lives. We accomplish this by providing supply chain excellence, pharmacy and patient solutions, as well as supporting independent pharmacies through industry and legislative advocacy. Our pharmacy and patient solutions include:
• Health Mart ® – A national network of approximately 3,900 independently-owned pharmacies and one of the industry’s most comprehensive pharmacy franchise programs. Health Mart provides solutions for franchisees to promote excellence in business operations, team development, patient health, marketing and merchandising, and protects financial health through proactive audit support.
• Health Mart Atlas ® and Atlas Specialty – Comprehensive managed care services that connect the continuum of care to help community pharmacies, health systems, and physician practices save time, access competitive reimbursement rates, and improve cash flow.
• McKesson Reimbursement Advantage SM (“MRA”) – MRA is one of the industry’s most comprehensive reimbursement optimization packages, comprising financial services (automated claim resubmission), analytic services, and customer care.
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• McKesson Provider Pay ® – An automated reconciliation and payment management solution designed to maximize third-party cash flow and pursue unpaid claims.
• McKesson Amplify – Provides resources for state pharmacy associations in all 50 states, including dedicated support funding, resources, and opportunities to participate in best practice sharing consortia. The funding helps to support advocacy initiatives that address the unique challenges faced by independent pharmacies and promote their sustainability and growth.
• McKesson OneStop Generics ® – Generic pharmaceutical purchasing program that helps pharmacies maximize their cost savings with a broad selection of generic drugs, competitive pricing, and one-stop shopping.
• Pinpoint Community Solutions – McKesson’s perpetual inventory management system targeted to independent pharmacy owners with five or fewer stores. The solution provides customers the opportunity to improve cash flow and increase efficiency with inventory visibility to help maximize operational performance.
• FrontEdge™ – Strategic planning, merchandising, and price maintenance program that helps community pharmacies maximize store profitability.
• McKesson RxOwnership Program – A confidential, no-fee resource for pharmacists and pharmacy owners interested in buying, starting, or selling an independent pharmacy, regardless of their pharmacy affiliation.
Institutional Healthcare Providers: At McKesson, we aim to achieve operational efficiency, reduce waste, and improve the financial performance of our customers so they can achieve more of their goals today and into the future. Solutions include:
• Professional and Advisory Services – Comprehensive suite of advisory and consulting services designed to support pharmacy initiatives across health systems, including patient care, business operations, ambulatory services, inpatient operations, data and digitization, pharmacy workforce management, leadership, and compliance with safety, quality, and regulatory standards. Specialized consulting areas include 340B optimization, orphan drug support, and retail pharmacy payer solutions.
• McKesson Plasma and Biologics – Specialty and plasma drug distributor that leads in market exclusive drug access; partner to health systems customers in navigating the complexities of limited distribution drug; and optimization of McKesson Distribution benefits.
• Outpatient, Retail, and Specialty Pharmacy – A portfolio of services and solutions customized to each customer’s business and clinical strategy.
• Contracting and Contract/Purchasing Optimization – Solutions across generics, specialty, branded products, biosimilars, and 340B products, for inpatient and outpatient settings.
• Supply Assurance – Solutions and strategies to enhance product availability and proactively manage inventory of critical items.
Our U.S. Pharmaceutical business also offers solutions which enable its customers to drive greater efficiencies in their day-to-day operations, effectively managing their inventories and complying with complex government regulations. Solutions include McKesson Pharmacy Systems, MacroHelix, and Supply Logix, all of which provide innovative software technology and services that support retail pharmacies and hospitals.
McKesson Canada
Our Canadian pharmaceutical business is one of the largest pharmaceutical wholesale and retail distributors in Canada. The wholesale business delivers products to retail pharmacies, hospitals, long-term care centers, clinics, and institutions in Canada through a national network of distribution centers and provides logistics and distribution services for manufacturers.
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Beyond wholesale pharmaceutical logistics and distribution, our Canadian Pharmaceutical business provides automation and technology solutions to its retail and hospital customers. We also provide specialty health services in Canada and biopharma services to pharmaceutical manufacturers, including a national network of specialized pharmacies and patient support and care programs. These services include INVIVA, which operates Canada’s first nationally accredited and one of the largest networks of private infusion clinics.
Through our Specialty Health platform, McKesson Canada provides data‑driven insights and real‑world evidence offerings, leveraging de‑identified, privacy‑compliant data to support manufacturers with commercialization, market access, and patient journey optimization. Additionally, McKesson Canada owns and operates PDCI Market Access, a leading Canadian market access and reimbursement consultancy that supports manufacturers in the launch and commercialization of new products in Canada.
Our Canadian retail business operates approximately 2,600 independent pharmacies under five nationally recognized banners: IDA®, Guardian®, Remedy’sRx®, Proxim®, and Uniprix®.
Oncology & Multispecialty:
The Oncology & Multispecialty segment provides a range of solutions to oncology and other specialty practices and offers community physician specialists (oncologists, rheumatologists, ophthalmologists, urologists, neurologists, and other specialists) an extensive set of customizable solutions and services designed to strengthen core practice operations, enhance value-based care delivery, and expand their service offering to patients. Community-based physicians supported by this business have broad flexibility and discretion to select the products and commitment levels that best meet their practice needs. Services in provider solutions include specialty drug distribution, group purchasing organizations (“GPOs”) like Onmark ® , technology solutions, practice consulting services, and vaccine distribution.
This segment provides a variety of solutions, including practice operations, healthcare information technology, revenue cycle management and managed care contracting solutions, evidence-based guidelines, and quality measurements to support our practice management platforms. These include the U.S. Oncology Network, one of the nation’s largest networks of physician-led, integrated, community-based oncology practices dedicated to advancing high-quality, evidence-based cancer care. The segment also includes an 80% controlling interest in PRISM Vision, a leading provider of general ophthalmology and retina management services. In addition, the segment includes a 51% controlling interest in SCRI, an oncology research business that is one of the nation’s largest research networks and specializes in enhancing clinical trial access and availability across the country.
This segment also includes Ontada ® , McKesson’s oncology technology and insights business providing software to support the clinical, financial, and operational needs of our oncology practice customers. Ontada also partners with oncology providers and biopharma partners to perform real-world evidence studies, retrospective research, and to provide clinical data insights, electronic health record to electronic data capture capabilities, advisory solutions, and education opportunities.
When we use the terms specialty products or specialty services, we consider the following factors: diseases requiring complex treatment regimens such as cancer and rheumatoid arthritis, plasma and biologics products, ongoing clinical monitoring requirements, high-cost, special handling, storage, and delivery requirements and, in some cases, exclusive distribution arrangements. Our use of the term “specialty” may not be comparable to that used by other industry participants, including our competitors.
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Prescription Technology Solutions Segment:
Our Prescription Technology Solutions segment works across healthcare to connect patients, pharmacies, providers, pharmacy benefit managers, health plans, and biopharma to deliver medication access solutions that support patients from first prescription fill to ongoing therapy, regardless of their insurance coverage. Prescription Technology Solutions has connections with most electronic health record systems, over 50,000 pharmacies, more than 1,000,000 providers, most pharmacy benefit managers and health plans, and has supported over 650 biopharma brands representing most therapeutic areas. Through its industry connections and ability to navigate the healthcare ecosystem, Prescription Technology Solutions offers innovative solutions created to benefit healthcare stakeholders. Its comprehensive solution suites and technology services span across the entire patient journey, including medication access and affordability, prescription decision support, prescription price transparency, benefit insight and dispensing support services, patient enrollment, as well as third-party logistics and wholesale distribution support, to help increase speed to therapy, reduce prescription abandonment, and support improved health outcomes for the patient. In the past year, Prescription Technology Solutions helped patients save approximately $10 billion on brand and specialty medications, helped to prevent an estimated 12 million prescriptions from being due to affordability , and helped patients access their medicine more than 135 million times.
Medical-Surgical Solutions Segment:
Our Medical-Surgical Solutions segment is a leading provider of medical-surgical supplies, laboratory equipment, and pharmaceutical distribution, logistics, biomedical maintenance, and other services to U.S. healthcare providers across the non-acute and alternate-site spectrum. Our more than 336,000 customers include physician offices, surgery centers, post-acute care facilities, hospital reference labs, and home health agencies. We partner with manufacturers and channel partners to support our key markets, including ambulatory care, extended care, government, and other online marketplaces, and retailers. We distribute medical-surgical supplies (such as gloves, needles, syringes, and wound care products), infusion pumps, laboratory equipment and supplies, and pharmaceuticals. Through a network of distribution centers in the U.S., we offer more than 270,000 products from national brand manufacturers and our own brand of more than 4,000 high-quality products. Through the right mix of products and services, we help improve efficiencies, profitability, and compliance. Our focus is to help customers improve patient and business outcomes. We develop customized plans to address the product, operational, and clinical support needs of our customers, including inventory management, reducing administrative burdens, and training and educating clinical staff. We deliver for our customers, so they can deliver and care for their patients. During fiscal 2026, we announced our intention to separate this segment into an independent company. As a part of the separation strategy, on April 20, 2026, we announced we had entered into a definitive agreement under which Apollo Funds will acquire approximately 13% minority ownership interest in our Medical‑Surgical Solutions segment through an investment of approximately $1.25 billion in the segment’s convertible preferred equity. This transaction is subject to regulatory approvals and customary conditions.
Investments, Restructuring, Business Combinations, and Divestitures
We invest in new and existing distribution centers to increase scale and capacity, improve efficiency through automation and technology, and enhance regulatory compliance capabilities. Additionally, we invest in data and analytics to support our growth priorities, including artificial intelligence (“AI”). We are in the early stages of exploring potential AI capabilities and related data and analytics across our enterprise to improve productivity and efficiency, as well as enhance our products and services to better support patients, employees, and customers.
We have undertaken additional strategic initiatives in recent years designed to increase operational efficiencies, focus on our core healthcare businesses, execute our business strategy, and enhance our competitive position. These initiatives are detailed in Financial Note 2, “Business Acquisitions and Divestitures, ” and Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the consolidated financial statements included in this Annual Report.
Competition
We operate in highly competitive markets across North America, and the healthcare industry has experienced significant consolidation in recent years. Within the pharmaceutical distribution landscape in which our North American Pharmaceutical segment operates, we face strong competition from international, national, regional, and local full-line, short-line, and specialty distributors; service merchandisers; self-warehousing chain drugstores; manufacturers engaged in direct distribution; third-party logistics companies; and large payer organizations. Our primary competitors in distribution, wholesaling, and logistics are Cencora, Inc. and Cardinal Health, Inc.
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In our Oncology & Multispecialty segment, we compete with other specialty distributors; GPOs; specialty pharmacies; oncology networks and platforms; ophthalmology and retina management services providers; and healthcare information technology and data and analytics companies. Certain competitors also offer combinations of distribution, GPO, and provider services capabilities, including Cencora, Inc. and Cardinal Health, Inc. In addition, our clinical research offerings compete with contract research organizations, site management organizations, academic medical centers, and health systems that support clinical trials.
Our Prescription Technology Solutions business experiences substantial competition from variety of organizations, including other biopharma services providers, software and technology service firms, consulting firms, shared services vendors, and internet-based companies offering healthcare-focused technology solutions. Competition in this space ranges widely in size, geographic reach, and the scope and depth of products and services offered.
Our Medical-Surgical Solutions segment competes with numerous national and regional distributors of medical supplies and equipment throughout the U.S.
Additionally, we compete with other service providers and healthcare manufacturers, as well as potential customers who may choose to build internal supply management capabilities rather than rely on external partners like us. We believe that our scale and the breadth of our product and service portfolio are key competitive advantages. In all areas, primary competitive factors include price, quality of service, product assortment, innovation, adoption of emerging technologies, and, in some cases, customer convenience.
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 innovations and obtain copyright protection for 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, trademarks, and intellectual property licenses 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 or is inherently uncertain, we do not believe that the resolution of any of these notices would have a material impact on our results of operations.
We hold inbound licenses for certain intellectual property that is used internally, and in some cases, utilized in McKesson’s products or services. While in the future it may be necessary 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, as well as our products and services, are not materially dependent on any single license or other agreement with any third party.
Human Capital
Everything we do at McKesson begins with our employees, who bring our mission and purpose to life every day. As of March 31, 2026, we had more than 43,000 employees worldwide, which includes 1,400 part-time employees. We had approximately 38,000 employees in the U.S., 5,000 employees in Canada, and 400 employees in the rest of the world. We supplement our workforce with contractors and/or consultants for certain business projects, processes, and operations.
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We take pride in our strong culture and fostering a sense of belonging, finding meaning in our work, and caring for each other, our customers, and all those who depend on us. We seek to attract and retain the best talent through regular training, financial assistance programs for higher education opportunities and competitive benefits, compensation and pay for performance, while prioritizing recognition of merit and compliance with laws. Our compensation philosophy is rooted in a fair and transparent program that regularly conducts benchmarking to assess market rates for talent, based on geography and other factors.
We solicit employee feedback through annual and mid-year employee opinion surveys that assess our employees’ levels of engagement, commitment and overall satisfaction using industry benchmarks, and then design action plans to improve those metrics.
We have procedures and invest in equipment for both physical and electronic safety and security. Our employees receive specialized training related to their role, work setting, and equipment used in their work environment.
Government Regulation
We operate in many highly regulated environments and are subject to oversight by various federal, state, and local governmental entities in the U.S. and elsewhere. We incur significant expense and make large capital expenditures and investments to enable us to comply with laws and guidance promulgated by governmental entities.
The regulatory framework affecting our business and industry is continually evolving and influenced by conditions such as public policy developments; shifts in governmental priorities, initiatives, and focus areas, including due to changes in federal, state, and local representation; and varied interpretations of laws and agency rulemaking conventions. These conditions create uncertainties for our business, and we are unable to predict the impact of future changes to the regulatory framework, or any prolonged uncertainty, on our operations and compliance costs.
See “Risk Factors” in Item 1A of Part I below for additional information regarding material risks associated with our compliance with governmental regulations.
Operational Licenses and Permits; Controlled Substances: We are subject to the operating and security standards of the U.S. Drug Enforcement Administration (“DEA”), the U.S. Food and Drug Administration (“FDA”), the U.S. Department of Health and Human Services (“HHS”), the Centers for Medicare & Medicaid Services (“CMS”), various state boards of pharmacy, state health departments, and comparable agencies in the U.S. and other countries. Certain of our businesses may be required to register for permits and/or licenses with governmental agencies, depending upon the type of operations and location of product development, manufacture, distribution, and sale. For example, we are required to hold valid DEA and state-level registrations and licenses, meet various security and operating standards, and comply with the Controlled Substances Act and its accompanying regulations governing the sale, marketing, packaging, holding, distribution, and disposal of controlled substances. We maintain extensive controlled substance monitoring and reporting programs at considerable expense in order to help us meet those standards.
Government Contracts: Our contracts with governmental entities typically are subject to procurement laws that include socio-economic, employment practices, environmental protection, recordkeeping and accounting, and other requirements. These statutory and regulatory requirements complicate our business and increase our compliance burden. We are subject to audits, investigations, and oversight proceedings about our compliance with contractual and legal requirements.
Healthcare Program Regulation : Federal, state, and local governmental entities in the U.S. and elsewhere continue to strengthen their position on, and scrutiny of, practices that they believe may indicate fraud, waste, and abuse affecting government healthcare programs such as Medicare and Medicaid. Our relationships with pharmaceutical and medical-surgical product manufacturers, healthcare providers, and other companies and individuals, as well as our provision of products and services to governmental entities, subject our business to statutes, regulations, and government guidance that are intended to prevent fraud and abuse. Among other things, those laws: (1) prohibit persons from soliciting, offering, receiving, or paying any remuneration in order to induce the referral of an individual for, or to induce the ordering or purchasing of, items or services that are in any way paid for by Medicare, Medicaid, or other government healthcare programs; (2) prohibit physicians from referring certain “designated health services” to an entity with which they have a financial relationship, unless an exception applies; (3) prohibit knowingly submitting, or causing to be submitted, a false or claim for payment to the
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government; and (4) require certain entities to report and return an overpayment by Medicare or Medicaid within 60 days of identifying the overpayment.
Many of these healthcare fraud and abuse laws are vague or indefinite, and are often subject to varied and evolving interpretations by courts, regulators, and enforcing agencies and, as such, may be interpreted or applied by a prosecutorial, regulatory, or judicial authority in a manner that could require us to make changes in our operations at added expense.
The healthcare industry continues to be impacted by reform efforts aimed at reducing costs and government spending, as well as by challenges to those efforts. In the U.S., the Patient Protection and Affordable Care Act (“ACA”) significantly expanded health insurance coverage to uninsured Americans and changed the way healthcare is financed by both governmental and private payors. The ACA has faced scrutiny since its adoption, and we cannot predict the impact of any initiatives to change or repeal its provisions. Further, the ACA’s enhanced premium subsidies expired on December 31, 2025, and remain subject to ongoing Congressional review. The nonrenewal of, or any modifications to, these subsidies may reduce the availability of insurance coverage for certain patients and, in turn, impact our customers and our business. The Inflation Reduction Act of 2022 (“IRA”) made meaningful changes affecting benefit design and how Medicare pays for drugs, which are all intended to reduce the price of drugs. Three central features of the IRA have authorized the government to negotiate drug prices for certain Medicare Part B and Medicare Part D drugs over time, establish an inflation rebate program, and cap patient cost sharing under Medicare Part D. The ongoing implementation of the IRA may significantly affect the pharmaceutical value chain as manufacturers, pharmacy managers, managed care organizations, and other stakeholders adapt their business models. Considerable uncertainty remains, including due to any future regulations and guidance.
The One Big Beautiful Bill (“OBBBA”), enacted in July 2025, includes provisions expected to reduce Medicaid enrollment and federal funding to state Medicaid programs, which may limit coverage or payment for products and services and impact the financial stability of our customers. Executive Order 14297, “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients,” issued in May 2025, seeks to facilitate manufacturers’ sale of certain drugs in the U.S. at no higher than the lowest prices paid in other developed countries. It also directs HHS to enable direct-to-consumer purchasing programs for prescription drugs at most-favored-nation prices, which may bypass supply chain intermediaries. Separately, CMS adopted a rule, effective January 1, 2026, on bona fide service fees (“BFSFs”) paid by drug manufacturers, including wholesaler distribution fees. The rule requires manufacturers to obtain certifications from wholesalers and other fee recipients that the fee recipient does not pass on the fee to a client or customer. Manufacturers are required to submit these certifications to CMS as part of their quarterly average sales price reporting. This rule creates a risk that certifications, when and if given, could be challenged, and that manufacturers may seek modifications to their service agreements. CMS waived the initial Q1 2026 reporting deadline that had been set for April 30, 2026. As of the date of this report, the form and scope of the certification requirements remain subject to change. CMS may also pursue additional changes to BFSF requirements in future rulemaking cycles that may impact fee recipients, including wholesalers.
CMS also proposed two rules in December 2025 that, if finalized, would implement mandatory manufacturer rebate models for certain Medicare Part B and Medicare Part D drugs based on international pricing benchmarks. These models would be tested in select geographic areas over a multi-year trial period.
There are ongoing developments with respect to the 340B Drug Pricing Program (the “340B program”) administered by the Health Resources and Services Administration (“HRSA”). The 340B program requires manufacturers to offer discounts on certain drugs purchased by “covered entities” such as safety-net providers, and some of our customers are covered entities or contract pharmacies for covered entities. Various manufacturers have unilaterally restricted sales under the 340B program to a limited number of contract pharmacies, and these practices are the subject of ongoing litigation. Further, HRSA continues to evaluate the potential implementation of a retrospective rebate model to effectuate 340B pricing in lieu of upfront discounts. A coalition of covered entities successfully challenged HRSA’s previously proposed rebate model pilot program, which had been scheduled to take effect on January 1, 2026. HRSA announced that pilot program amid separate litigation over its refusal to approve alternative rebate models proposed by manufacturers, and this litigation continues. These developments could, for example, limit the availability of 340B pricing or discounts for our customers. It is uncertain whether other changes to the 340B program may be effected through legislation, regulation, or judicial decision, or whether manufacturers will reduce their participation in or take other approaches to the 340B program. The cumulative impact of the foregoing on our customers and our business is to predict.
Additionally, some states have enacted or are considering laws imposing caps or limits on the price of certain drugs distributed by wholesalers in those states. If upheld or enacted, these laws could encourage similar measures in other jurisdictions and could, directly or indirectly, affect wholesaler distribution economics. We continue to monitor these and other state reform initiatives and their potential impact on our business.
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Outside the U.S., provincial governments in Canada that provide partial funding for the purchase of pharmaceuticals and independently regulate the sale and reimbursement of drugs have sought to reduce the costs of publicly funded health programs. For example, these governments have taken steps to reduce consumer prices for generic pharmaceuticals and, in some provinces, change professional allowances paid to pharmacists by generic drug manufacturers.
FDA Regulation and Supply Chain Integrity: In the U.S., the FDA is the principal federal authority that regulates the safety, efficacy, quality, testing, premarket approval, manufacture, labeling, storage, distribution, and post-market surveillance of healthcare products, such as drugs and medical devices, foods, and cosmetics.
Federal and state laws regulate the pharmaceutical drug supply chain in order to prevent the distribution of counterfeit, stolen, contaminated, or otherwise harmful prescription drugs in interstate commerce. At the federal level, the Drug Supply Chain Security Act (“DSCSA”), among other things, requires standardized, unit-level traceability of pharmaceutical products along the entire drug supply chain and requires all trading partners to cooperate in an electronic, interoperable prescription drug traceability system. The DSCSA also sets forth national standards for the licensure of wholesale drug distributors and third-party logistic providers and other requirements applicable to these entities and the FDA has issued a proposed rule with respect to these requirements. These federal and state regulatory requirements have increased, and may further increase, our compliance burden and distribution costs.
Additionally, federal and state governments may adopt other laws intended to protect the integrity of the supply chain, and those laws could affect our distribution business. For example, the Federal Trade Commission (“FTC”) and HHS issued a request for public comment in 2024 on how the practices of pharmaceutical wholesalers and group purchasing organizations impact generic drug shortages. Various industry stakeholders responded to this request, but no further action has been taken by the FTC or HHS.
Cybersecurity, Data Security, Privacy, and AI: We are subject to many cybersecurity, privacy, and data protection laws that change frequently and have requirements that vary from jurisdiction to jurisdiction. Our efforts to comply with these laws complicate our operations and add to our costs. We are subject to significant compliance obligations under privacy laws such as the Health Insurance Portability and Accountability Act of 1996, the General Data Protection Regulation in the European Union, the Personal Information Protection and Electronic Documents Act in Canada, and an expanding list of comprehensive state privacy laws in the U.S. Some privacy laws may prohibit the transfer of personal information to certain other jurisdictions or otherwise limit our use and disclosure of data. Many of these laws also require us to provide access or other data rights (modification, deletion, portability, etc.) to consumers’ and patients’ individual personal data records within specified periods of time. Cybersecurity laws such as the federal Cyber Incident Reporting for Critical Infrastructure Act of 2022, proposed changes to the Federal Acquisition Regulation, and SEC reporting requirements may require us to provide notifications of certain cybersecurity incidents within short timeframes. Regulations and guidance targeting critical infrastructure entities, including McKesson, continue to be a focus of regulators. We are subject to privacy and data protection compliance audits or by various governmental agencies. Additionally, AI laws and guidance are rapidly expanding and changing, with potential differences or across jurisdictions. This creates uncertainty and regulatory risk, including for healthcare-related uses of AI. If we or our third-party providers are restricted from using AI as a result of any laws, regulatory views, or other measures, it could impact our operations and competitiveness, increase our compliance expense and (including related to any documentation, risk management, or measures), and cause us to modify our use, development, or deployment of AI and incur substantial costs. We also could be subject to increased and enforcement risks. The cumulative impact of these evolving requirements on our business is to predict.
Environmental Regulation: We are subject to requirements in various jurisdictions concerning the environment, including laws addressing discharges into the air and water, the management and disposal of hazardous substances and wastes, and the remediation of contaminated sites, as well as laws governing the operation of radiation-emitting equipment at the U.S. Oncology Network practices.
We sold our chemical distribution operations in 1987 and retained responsibility for certain environmental obligations. Agreements with the U.S. Environmental Protection Agency and certain states have required and may require environmental assessments and remediation at several sites. These matters are described further in Financial Note 17, “Commitments and Contingent Liabilities,” to the consolidated financial statements included in this Annual Report.
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Climate Change Regulation: Governments in the U.S. and abroad have adopted or are considering new or expanded policies and laws to address climate change. Such policies and laws may necessitate reductions in greenhouse gas (“GHG”) emissions; mandate that companies implement processes and controls to monitor and disclose climate-related matters; and impose additional taxes or offset charges on specified energy sources, among other requirements. Compliance with climate-related policies and laws may be further complicated by disparate regulatory approaches in various jurisdictions. New or expanded climate-related policies and laws could impose costs on us, including capital expenditures to develop or modify data gathering and reporting systems, third-party attestations, and additional GHG reduction measures. Until the timing and extent of climate-related policies and laws are clarified, including due to legal challenges, we cannot predict their potential effect on our capital expenditures, results of operations, or competitive position.
Competition and Related Laws : Antitrust and competition laws (“competition laws”) in the U.S. and elsewhere prohibit types of conduct, practices, or arrangements deemed to be anti-competitive. Enforcement of competition laws in the healthcare industry remains a focus of the FTC and the U.S. Department of Justice. Some of our strategic transactions may require review by competition regulators, with potential delays or other unfavorable outcomes. Violations of competition laws can result in sanctions and other adverse actions, including criminal and civil penalties. Private plaintiffs also may bring civil lawsuits for alleged violations of competition laws, including claims for treble damages. Additionally, laws may be proposed to restrict certain healthcare ownership structures or arrangements, such as vertical integration involving physician practice administrative or management services and pharmaceutical distribution services, where traditional standards might not be . Competition and related laws contribute to our compliance efforts and expense, and the enforcement, enactment, expansion, or application of any of the foregoing types of laws might materially affect our operations and growth strategy.
Other Information about the Business
Customers: During fiscal 2026, sales to our ten largest customers, including group purchasing organizations (“GPOs”) accounted for approximately 73% of our total consolidated revenues. Sales to our largest customer, CVS Health Corporation (“CVS”), accounted for approximately 24% of our total consolidated revenues in fiscal 2026. In fiscal 2023, we extended our pharmaceutical distribution partnership with CVS to June 2027. Sales to our next two largest customers accounted for 11% and 10% of total consolidated revenues in fiscal 2026. Our ten largest customers comprised approximately 43% of total trade accounts receivable at March 31, 2026. CVS was approximately 21% of our total trade accounts receivable at March 31, 2026. We also have agreements with GPOs, each of which functions as a purchasing agent on behalf of member hospitals, pharmacies, and other healthcare providers, as well as with government entities and agencies. The accounts receivable balances are with individual members of the GPOs, and therefore no significant concentration of credit risk exists. Substantially all of these revenues and accounts receivable are included in our North American Pharmaceutical segment.
Suppliers: We obtain pharmaceutical and other products from manufacturers and our largest supplier accounted for 11% of our total purchases in fiscal 2026. The loss of a supplier could adversely affect our business if alternate sources of supply are unavailable. We believe that our relationships with our suppliers are generally sound. The ten largest suppliers in fiscal 2026 accounted for approximately 71% of our total purchases.
Some of our distribution arrangements with manufacturers provide us consideration based on a percentage of our purchases. In addition, we have certain distribution arrangements with pharmaceutical manufacturers that include an inflation-based consideration component whereby we benefit when the manufacturers increase their prices as we sell our existing inventory at the new higher prices. For these manufacturers, a reduction in the frequency and magnitude of price increases, as well as restrictions in the amount of inventory available to us, could have an adverse impact on our gross profit margin.
Research and Development: Research and development expenses were $103 million, $91 million, and $77 million for the years ended March 31, 2026, 2025, and 2024, respectively.
Financial Information About Foreign and Domestic Operations: Certain financial information relating to foreign and domestic operations is discussed in Financial Note 20, “Segments of Business,” to the consolidated financial statements included in this Annual Report as well as in “Foreign Operations” in Item 7 of Part II of this Annual Report.
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Forward-Looking Statements
This Annual Report, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II of this report and the “Risk Factors” in Item 1A of Part I of this report, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (“Securities Act”) and Section 21E of the Exchange Act. Forward-looking statements may be identified by their use of terminology such as “believes,” “expects,” “anticipates,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “projects,” “plans,” “estimates,” “targets,” or the negative of these words or other comparable terminology. The discussion of trends, strategy, plans, prospects, assumptions, expectations, or intentions may also include forward-looking statements. Forward-looking statements are not representations of historical or current facts or circumstances and they involve known and unknown risks and uncertainties that could cause actual results to differ materially from those projected, anticipated, or implied. Although it is not possible to predict or identify all such risks and uncertainties, they include, but are not limited to, the factors discussed in Item 1A of Part I of this report under “Risk Factors” and in our publicly available SEC filings and press releases. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date such statements were first made. Except to the extent required by federal securities laws, we undertake no obligation to publicly release the result of any revisions to any forward-looking statements to reflect events or circumstances after the date the statements are made, or to reflect the occurrence of events.
Available Information
We routinely post on our company website, and via our social media channels, information that may be material to investors, including details and updates to information disclosed elsewhere, which may include business developments, earnings and financial performance, sustainability matters, details regarding upcoming events, and materials for presentations to investors and financial analysts. Investors are encouraged to monitor our website, www.mckesson.com . Interested parties can sign up on our website, including our Investor Relations site, to receive automated e-mail alerts, such as via RSS newsfeed, when we post certain information. Interested parties can also follow our social media feed @McKesson on X. The content on any website or social media channel is not incorporated by reference into this report, unless expressly noted otherwise.
Item 1A. Risk Factors.
INDEX TO RISK FACTORS
Section
Page
Litigation and Regulatory Risks
Company and Operational Risks
Industry and Economic Risks
General Risks
The discussion below identifies certain representative risks that might cause our actual business results to materially differ from our forward looking statements. It is not practical to identify or describe all risks and uncertainties that might materially impact our business operations, reputation, financial position, or results of operations. Our business could be materially affected by risks that we have not identified or that we currently consider to be immaterial. This is not a complete discussion of all potential risks and uncertainties. The characterization of a risk as potential does not mean the risk has not occurred, is not currently occurring, or is unlikely to occur.
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Litigation and Regulatory Risks
We experience costly and disruptive legal disputes.
We are routinely named as a defendant in litigation or regulatory proceedings and other legal disputes, which may include asserted class action litigation, such as those described in Financial Note 17, “Commitments and Contingent Liabilities, ” to the consolidated financial statements included in this Annual Report. Regulatory proceedings involve allegations such as false claims, healthcare fraud and abuse, and violations of competition laws. Civil litigation proceedings involve commercial, employment, environmental, intellectual property, tort, and other claims. Despite valid defenses that we assert, legal disputes are often costly, time-consuming, distracting to management, and to normal business operations. The uncertainty and expense associated with legal might our business and reputation even if the matter ultimately is resolved. The outcome of legal is to predict, and outcomes may occur that we believe are not justified by the evidence or existing law. Outcomes include monetary , and , and injunctive or other relief that requires us to change our business operations, practices, or arrangements and incur significant expense. Accordingly, legal might have a materially impact on our reputation, our business operations, and our financial position or results of operations.
We experience losses not covered by insurance or indemnification.
Our business exposes us to risks that are inherent in the distribution, manufacturing, dispensing, and administration of pharmaceuticals and medical-surgical supplies, the provision of ancillary services, the conduct of our payer businesses, practice support services, and the provision of products that assist clinical decision-making and relate to patient medical histories and treatment plans. For example, pharmacy operations are exposed to risks such as improper filling of prescriptions, mislabeling of prescriptions, inadequacy of warnings, unintentional distribution of counterfeit drugs, and expiration of drugs. Although we seek to maintain adequate insurance coverage, such as property insurance for inventory and professional and general liability insurance, coverages on acceptable terms might be unavailable, or coverages might not cover our losses. We generally seek to limit our contractual exposure, but limitations of liability or indemnity provisions in our contracts may not be enforceable or protect us from liability. or non-indemnified might have a materially impact on our business operations and our financial position or results of operations.
We experience costly legal disputes, government actions, and adverse publicity regarding our role in distributing controlled substances such as opioids.
The Company is a defendant in many litigation matters alleging claims related to the distribution of controlled substances (opioids), as described in Financial Note 17, “Commitments and Contingent Liabilities,” to the consolidated financial statements in this Annual Report. We are sometimes named as a defendant in similar, new cases. The plaintiffs in those cases include governmental entities (such as states, provinces, counties, and municipalities) as well as businesses, groups, and individuals. The cases allege violations of controlled substance laws and other laws, and they make common law claims such as negligence and public nuisance. Many of these cases raise novel theories of liability and can have unexpected outcomes that we believe are not justified by evidence or existing law. Legal proceedings such as these often involve significant expense, management time and , and risk of that can be to predict or quantify. It is not uncommon for to be resolved over many years. Outcomes include monetary , and , and injunctive or other relief that requires us to change our business operations and incur significant expense. Although the Company has valid defenses and is vigorously itself, some proceedings have been, and others may be, resolved by negotiated outcome. For example, we are subject to consent decrees issued by state courts that govern our distribution of controlled substances. Not all proceedings, however, are resolved by settlement. Our reputation has been and may continue to be impacted by publicity regarding opioids and related . An outcome of any such legal proceedings might have a materially impact on our business operations and our financial position or results of operations.
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We are subject to extensive, complex, challenging, and frequently changing healthcare, environmental, and other laws, and may experience increased costs to distribute controlled substances such as opioids.
We are subject to extensive, complex, challenging, and frequently changing healthcare, environmental, and other laws. As described in “Government Regulation” in Item 1 of Part I above, our industry is highly regulated and subject to a regulatory framework that is continually evolving. Legislative, regulatory, or industry measures related to the distribution of pharmaceuticals and controlled substances could affect our business in ways that we may not be able to predict. Further regulation of our distribution operations, technology, products, or services, or other aspects of our business, could impose increased costs, negatively impact our profit margins and the profit margins of our customers, delay the introduction or implementation of our new products, place restrictions on or require modifications to our practices or arrangements, limit our strategic options, or expose us to litigation and regulatory investigations, reviews, or other proceedings. We are subject to routine and ad hoc inspections and requests for information by governmental agencies to determine compliance with various statutes and regulations. We also incur remediation costs, and may incur additional costs, under environmental laws. Any noncompliance by us with applicable laws, or any to maintain, renew, or obtain necessary permits and licenses, could result in enforcement actions, , , or other sanctions. In addition, certain states have enacted, and others continue to consider, legislation that would impose taxes, assessments, or similar charges on the distribution of controlled substances, including prescription opioids. Any such taxes, assessments, or other related compliance obligations could increase our costs, require changes to our distribution practices, or lead to publicity. The scope, application, and financial impact of these measures vary by jurisdiction and may be to predict. Any of the foregoing risks might have a materially impact on our reputation, our business operations and our financial position or results of operations.
We are subject to extensive and frequently changing laws relating to healthcare fraud, waste, and abuse.
As described in “Government Regulation” in Item 1 of Part I above, federal, state, and local governmental entities in the U.S. and elsewhere continue to strengthen their position on, and scrutiny of, practices that may indicate fraud, waste, and abuse affecting government healthcare programs such as Medicare and Medicaid. Those laws may be interpreted or applied in a manner that could require us to make changes in our operations at added expense. Alleged failures to comply with those laws, including the federal Anti-Kickback Statute, expose us to federal or state government investigations or qui tam actions, and to liability for damages and civil and criminal penalties. Such failures might result in the loss of licenses or our ability to participate in Medicare, Medicaid, or other federal and state healthcare programs, or pursue government contracts. These sanctions might have a materially impact on our reputation, our business operations and our financial position or results of operations.
We might lose our ability to purchase, store, or distribute pharmaceuticals, including controlled substances, and medical products.
As described in “Government Regulation” in Item 1 of Part I above, we are subject to the operating, quality, regulatory, and security requirements of the DEA, the FDA, various state boards of pharmacy, state health departments, CMS, and other agencies. Noncompliance with these requirements can result in inspectional observations, warning letters, product recalls, withdrawals or other market action, fines, seizures, injunctions, and other administrative, civil, and criminal enforcement actions. Noncompliance, enforcement actions or adverse decisions by regulators, or the inability to obtain, maintain, or renew permits, licenses, or other regulatory approvals needed for the operation of our businesses might have a materially adverse impact on our reputation, our business operations and our financial position or results of operations.
Privacy, cybersecurity, data protection, and AI laws and guidance increase our compliance burden and expose us to risks.
As described in “Government Regulation” in Item 1 of Part I above, we are subject to a variety of privacy, cybersecurity, and data protection laws that change frequently and have requirements that vary from jurisdiction to jurisdiction, as well as to rapidly developing and potentially divergent AI laws and guidance. Some of our contractual obligations might be breached if we fail to comply with privacy and data security laws. The use of AI solutions by our employees or third parties on which we rely could also lead to the misuse of data or public disclosure of confidential information (including personal data or proprietary information) in contravention of our internal policies and safeguards, applicable laws, contractual requirements, or third-party intellectual property rights. Our efforts to comply with privacy, data security, and AI laws and guidance complicate our operations and add to our costs. Any failure or perceived failure by us or any third-party providers to comply with these laws and guidance could subject us to regulatory enforcement activity, fines, investigations, legal proceedings (including private such as class actions), liability, reputational impacts, and costs. Any of the foregoing risks might have a materially impact on our reputation, our business operations, and our financial position or results of operations.
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Anti-bribery and anti-corruption laws increase our compliance burden and expose us to risks.
We are subject to laws prohibiting improper payments and bribery, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar regulations in other jurisdictions. Our failure to comply with these laws might subject us to civil and criminal penalties that might have a materially adverse impact on our reputation, our business operations, and our financial position or results of operations.
Company and Operational Risks
We might record significant charges from impairment to goodwill, intangibles, and other long-lived assets.
We are required under U.S. Generally Accepted Accounting Principles (“GAAP”) to test our goodwill for impairment annually, or more frequently if indicators for potential impairment exist. Indicators that are considered include significant changes in performance relative to expected operating results, significant changes in the use of the assets, significant negative industry or economic trends, or a significant decline in the Company’s stock price and/or market capitalization for a sustained period of time. In addition, we periodically review our intangible and other long-lived assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Factors that may be considered a change in circumstances indicating that the carrying value of our intangible and other long-lived assets may not be recoverable include slower growth rates, the loss of a significant customer, burdensome new laws or other adverse legal developments, or divestiture of a business or asset for less than its carrying value. There are inherent uncertainties in management’s estimates, judgments, and assumptions used in assessing recoverability of goodwill, intangibles, and other long-lived assets. Any material changes in key assumptions, including to meet business plans, changes in government reimbursement rates, a in the U.S. and global financial markets, an increase in interest rates, an increase in inflation, or an increase in the cost of equity financing by market participants within the industry, or other events and circumstances, may decrease the projected cash flows or increase the discount rates and could potentially result in an charge. We have in the past recorded, and may be required to record, a significant charge to earnings in our consolidated financial statements during the period in which any of our goodwill or intangible and other long-lived assets is determined, which might have a materially impact on our business operations and our financial position or results of operations. See Financial Note 10, “Goodwill and Intangible Assets,” for descriptions of of goodwill or intangible or other long-lived assets in recent periods.
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We experience cybersecurity incidents that might significantly compromise our technology systems or might result in material data breaches.
We, our external service providers, vendors, and other third parties with which we do business, use technology and systems to perform our business operations, such as the secure electronic transmission, processing, storage, and hosting of sensitive information, including protected health information and other types of personal information, confidential financial information, proprietary information, and other sensitive information relating to our customers, company, and workforce. Despite our physical, technical, and administrative security measures as well as third party risk management processes as discussed in “Cybersecurity” in Item 1C of Part I below, technology systems and operations of the Company and third parties, including our external service providers and vendors, with which we do business, have experienced cybersecurity incidents and are subject to future cyberattacks and cybersecurity incidents. Companies in the healthcare industry are increasingly targeted for cyberattacks. Cybersecurity incidents include unauthorized occurrences on or conducted through our or our third parties’ information systems, such as tampering, malware insertion, ransomware attacks, or other system integrity events. The risk and efficacy of increases from time to time due to a variety of internal and external factors, including, but not limited to, the use by actors of sophisticated and rapidly evolving techniques, such as AI (which makes more likely and may make them more to detect, contain, or mitigate), and the existence of political or military . Our own adoption and use of AI also may create new attack surfaces or methods and generally increase cybersecurity and data protection risks and costs. A cybersecurity might involve a material data or other material impact to the confidentiality, , availability, or operations of our technology systems or data (including the , , disclosure, or of proprietary or personal information), which might result in to patients, consumers, or employees; or regulatory action; of our business operations; of customers or revenue; cash flow impacts; and increased expense. Additionally, it may take considerable time for us to and evaluate the full impact of , particularly for sophisticated attacks. These factors may inhibit our ability to provide prompt, full, and reliable information about the to our customers, regulators, and the public. Any cybersecurity might have a materially impact on our business, our operations, our reputation, and our financial position or results of operations.
We experience significant problems with information systems or networks.
We rely on sophisticated information systems and networks to perform our business operations, such as to obtain, rapidly process, analyze, and manage data that facilitate the purchase and distribution of thousands of inventory items from distribution centers. We provide remote services that involve hosting customer data and operating software on our own or third-party systems. Our customers rely on their ability to access and use these systems, and their data, as needed, and our ability to compete effectively is increasingly dependent on access to, and interpretation of, data. Data quality impacts customer ordering, order fulfillment and higher order processing. If we fail to effectively implement and maintain data governance structures across our businesses, to effectively interpret and utilize such data, or protect the integrity of such data, including systems powered by or incorporating AI and machine learning, our operations could be impacted, and we may be at a competitive disadvantage. Our networks and hosting systems are also vulnerable to interruption or damage from sources beyond our control. When those information systems or networks are disrupted, or if the timely delivery of medical care or other customer business requirements are , we experience to patients or consumers, or regulatory action, of our business operations, of customers or revenue, cash flow impacts, and increased expense. In addition, hardware, software, and other applications and updates procured from third parties may contain that have, or may in the future, restrict access to or with the proper operations of our information systems and hardware. Any such might have a materially impact on our business, our reputation, and our financial position or results of operations.
Our technology products or services might not conform to specifications or perform as we intend.
We sell and provide services involving complex software and technology that may contain errors, especially when first introduced to market. Healthcare professionals delivering patient care have heightened sensitivity to system and software errors due, among other reasons, to the critical nature of healthcare decisions. If our software and technology services are alleged to have contributed to faulty clinical decisions, compromised continuity of patient care, or injury to patients, we might be subject to regulatory scrutiny or claims by users of our software or services and/or their patients. Errors or failures might damage our reputation and negatively affect future sales. A failure of a system or software to conform to specifications might constitute a breach of warranty that could result in repair costs, contract , refunds, or for . The adoption and use of new technologies, including AI, may introduce new or risks, such as data , unreliability, or bias, as well as ethical or privacy . Any of these types of , , or risks might have a materially impact on our reputation, our business operations, and our financial position or results of operations.
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The adoption and use of AI in our business operations exposes us to risks and uncertainties .
We increasingly rely on technologies powered by or incorporating AI in our internal operations and business processes. The use of AI technologies introduces risks and uncertainties. AI can generate outputs that are false, misleading, incomplete, biased, or inconsistent. AI performance may degrade over time, or earlier than we planned, due to changes in inputs, data drift, updates by vendors, adversarial manipulations, and other causes. Our investments in AI may not yield anticipated benefits, and we might expend significant resources to maintain responsible and effective AI capabilities. Reliance on third-party AI tools and solutions may expose us to risks that are outside of our control, including compliance gaps. Our AI policies and safeguards may not be sufficient to protect us against negative outcomes, such as the misuse or loss of data or the compromise of our intellectual property. Any of the foregoing risks could impact our reputation, our business operations, and our financial position or results of operations.
Pharmaceutical and medical products that we distribute might not conform to specifications or perform as intended.
We distribute pharmaceutical, medical, and other FDA-regulated products manufactured by third parties and by our private label businesses, including medications that may be temperature sensitive or have limited shelf lives. Our systems and procedures are designed to maintain the safety and efficacy of the products throughout the sourcing and distribution process. Issues affecting product safety or efficacy can arise from manufacturing, storing, distributing, dispensing, or using products, and can result in adverse consequences such as safety alerts, seizures, bans, recalls, withdrawals or other market action, suspensions, and other regulatory actions and sanctions, civil lawsuits, increased costs, disruptions, delays, and reputational damage. Any of these types of issues or results might have a materially adverse impact on our reputation, our business operations, and our financial position or results of operations.
We might not realize expected benefits from business process initiatives.
From time to time, we implement restructuring, cost reduction, or other business process initiatives that result in significant charges and expenses. These initiatives might fail to achieve our desired objectives or have unintended consequences such as distraction of our management and employees, business disruption, attrition beyond any planned reduction in workforce, inability to attract or retain key personnel and reduced employee productivity. Any of these risks might have a materially adverse impact on our business operations and our financial position or results of operations.
We might be unable to successfully complete or integrate acquisitions or other strategic transactions, and our investments in businesses may not perform as we expect.
Our growth strategy includes consummating acquisitions, investments, or other strategic transactions that either expand or complement our business. To fund these strategic transactions, we may require financing that may not be available on acceptable terms. We may not receive governmental approvals needed to complete proposed transactions, or such approvals may be subject to delays or conditions that reduce transaction benefits. Achieving the desired outcomes of these strategic transactions involves significant risks including: diverting management’s attention from other business operations or priorities; challenges with assimilating the acquired businesses, such as integration of operations, systems, and technologies; failure or delay in realizing operating synergies; difficulty retaining key acquired company personnel; unanticipated accounting or financial systems issues with the acquired business, which might affect our internal controls over financial reporting; disputes with the sellers of acquired businesses; unanticipated compliance issues in the acquired business; unknown or cybersecurity issues, as well as heightened during integration; retaining customers of the acquired business; expenses or charges to earnings, including depreciation and amortization or potential charges; risks of known and unknown assumed liabilities in the acquired business; of an acquired business or investment to perform as projected in the near or long term; and changes in laws or their interpretation or application with respect to an acquired business or investment, such as potential restrictions on certain healthcare ownership structures or arrangements (see “Government Regulation” in Item 1 of Part I above). Certain of these factors at times have affected, and any of these factors could in the future affect, our ability to the anticipated benefits of an acquisition, investment, or other strategic transaction. Any of the foregoing risks might have a materially impact on our business operations and our financial position or results of operations.
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From time to time we are adversely impacted by delays or other difficulties with divestitures.
When we decide to sell or otherwise divest assets or a business, we may encounter difficulty in finding buyers or exit strategies on acceptable terms or in a timely manner, which could delay the achievement of our strategic objectives. After the disposition, we might experience greater dissynergies than expected, and the impact of the divestiture on our revenue or profit might be larger than we expected. We might have difficulties with pre-closing conditions such as governmental approvals, which could delay or prevent the divestiture. We might have financial exposure in a divested business, such as through minority equity ownership, financial or performance guarantees, indemnities, or other obligations, such that conditions outside of our control might negate the expected benefits of the disposition. Any of these risks could adversely affect our ability to the anticipated benefits of a and might have a materially impact on our business operations and our financial position or results of operations.
Our planned separation of Medical-Surgical Solutions is contingent upon the satisfaction of certain conditions, may not be completed on the currently contemplated terms or timeline, or at all, and, if completed, may not achieve the intended financial and strategic benefits.
The Company intends to separate the Medical-Surgical Solutions segment into an independent company (“NewCo”). The separation is expected to be effected, ultimately, through a split-off or spin-off, or a combination of both (the “Exit”), intended to qualify as a tax-free transaction to the Company and its stockholders for U.S. federal income tax purposes. Completion of the planned separation will be subject to the satisfaction of various conditions, including, among others: the receipt of a favorable opinion from outside legal counsel as to the tax-free nature of the Exit; the effectiveness of a registration statement to be filed with the SEC; the receipt of other governmental approvals; the finalization of the NewCo capital structure; and the approval of our Board of Directors. The planned separation is complex in nature, and unanticipated business, market, governmental, or other developments could delay or prevent completion of the separation or cause the separation to occur on less favorable terms. We face certain risks in connection with the separation, including, among others: the diversion of management’s attention from other business operations and priorities; a determination by the Internal Revenue Service (the “IRS”) or any court that the Exit (or any aspect thereof) is taxable for U.S. federal income tax purposes; and in maintaining transitional services and operational continuity between the Company and NewCo, in establishing or maintaining standalone functions and infrastructure at NewCo, or in retaining existing or attracting new business and operational relationships, including with customers, suppliers, and employees. There can be no assurance that the separation, if completed, will the intended financial and strategic benefits (which are based on a number of assumptions, some or all of which may prove ) or provide value to our stockholders than is currently reflected in our stock price, or that the dissynergies from the separation will not be than expected. Any of these factors could affect our stock price or have a materially impact on our business operations and on our financial condition or results of operations.
We might not realize the expected tax treatment from our split-off of Change Healthcare.
On March 10, 2020, the Company completed a separation of its interest in Change Healthcare LLC (“Change Healthcare JV”). The divestiture was effected through the split-off of PF2 SpinCo, Inc. (“SpinCo”), a wholly owned subsidiary of the Company that held all of the Company’s interest in the Change Healthcare JV, to certain of the Company’s stockholders through an exchange offer (the “Exchange Offer”), followed by a merger of SpinCo with and into Change Healthcare Inc. (“Change”), with Change surviving the merger (the “Merger” and, together with the Exchange Offer, the “Transactions”). The Company received an opinion from outside legal counsel to the effect that the Transactions qualified as generally tax-free transactions to the Company and its stockholders for U.S. federal income tax purposes. An opinion of legal counsel is not binding on the IRS or the courts, and the IRS or the courts may not agree with the intended tax-free treatment of the Transactions. In addition, the opinion could not be relied upon if certain assumptions, representations, and undertakings upon which the opinion was based are materially inaccurate or incomplete, or are violated in any material respect. If the intended tax-free treatment of the Transactions is not sustained, the Company and its stockholders who participated in the Transactions may be required to pay substantial U.S. federal income taxes. In connection with the Transactions, the Company, SpinCo, Change, and the Change Healthcare JV entered into the Tax Matters Agreement, which governs their respective rights, responsibilities, and obligations with respect to tax liabilities and benefits, tax attributes, tax contests, and other tax sharing regarding U.S. federal, state, and local, and non-U.S. taxes, other tax matters, and related tax returns. Under the Tax Matters Agreement, Change is required to indemnify the Company if the Transactions become taxable as a result of certain actions by Change or SpinCo, or as a result of certain changes in ownership of the stock of Change after the Merger. If Change does not its obligations to indemnify the Company, or if the Transactions to qualify for the intended tax-free treatment for reasons not related to a action by Change or SpinCo, the resulting tax to the Company could have a significant effect on our financial position or results of operations.
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We might be adversely impacted by outsourcing or similar third-party relationships.
We rely on third parties to perform certain business and administrative functions for us. We might not adequately develop, implement, and monitor these outsourced service providers, and we might not realize expected cost savings or other benefits. Third-party service providers experience cybersecurity incidents and other disruptions and can fail to perform their obligations due to various causes, which might cause us to incur operational difficulties, additional compliance requirements, or increased costs related to outsourced services. For example, our ability to use outsourcing resources in certain jurisdictions might be limited by legislative action or customer contracts, with the result that the work must be performed at greater expense or we may be subject to sanctions for non-compliance. Any of these risks might have a materially adverse impact on our reputation, our business operations, and our financial position or results of operations.
We may be unsuccessful in achieving our strategic growth objectives.
Our business strategy as a diversified healthcare services company includes investing, organically and inorganically, to further build an integrated oncology and multispecialty care platform and expand our biopharma services business. Our ability to grow those businesses will depend, among other things, on our: hiring and retaining talented individuals with necessary knowledge and skills; acquiring, developing, and implementing new technologies and capabilities, including AI; establishing new offerings and pivoting or enhancing existing ones; successfully identifying, completing, and realizing the anticipated benefits of strategic transactions; forming and expanding business relationships; anticipating the needs of our customers; and successfully competing against providers of similar services. New technologies, such as AI, may not result in the benefits we anticipate, may not enable us to keep pace with our competitors and the rapidly evolving technological landscape, and may require us to expend significant resources, including to maintain our capabilities. We have increased, and expect to continue to increase, our use of AI technology, which could heighten these risks. Additionally, some of our historical competitors and a growing number of new competitive entrants have more experience than we do in enabling technologies such as data analytics, machine learning, or AI. As described in “Government Regulation” in Item 1 of Part I above, we also face certain regulatory risks in executing our growth strategy, including potential laws that place restrictions on certain healthcare ownership structures or arrangements. We may not our return on our investments through our growth strategy, or acceptable sales and in our strategic growth areas. Any of the foregoing risks might have a materially impact on our business prospects and our financial position or results of operations.
We are impacted by customer purchase reductions, contract non-renewals, payment defaults, and bankruptcies.
Some of our customers from time to time reduce the amounts they purchase from us, do not renew their purchase contracts with us, renew their purchase contracts at less favorable terms, delay or default on their payments to us, or avoid payments to us through bankruptcy proceedings. At March 31, 2026, sales to our largest customer represented approximately 24% of our total consolidated revenues and approximately 21% of our total trade receivables, and those of our ten largest customers combined accounted for approximately 73% of our consolidated revenues and approximately 43% of our trade receivables. Refer to “Other Information about the Business” in Item 1 of Part I above for additional details on our customers. One or more customer purchase reductions, contract non-renewals, renewals at less favorable terms, payment defaults, or bankruptcies might have a materially adverse impact on our business operations and our financial position or results of operations.
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Our contracts with governmental entities involve future funding and compliance risks.
Our contracts with governmental entities are subject to risks such as lack of funding and compliance with unique requirements. For example, government contract purchase obligations are typically subject to the availability of funding, which may be eliminated or reduced. In addition, the future volume of products or services purchased by a government customer is often uncertain. Our government contracts might not be renewed or might be terminated for convenience with little prior notice. They might be modified with less favorable terms. Government contracts typically expose us to higher potential liability than do other types of contracts. In addition, government contracts typically are subject to procurement laws that include socio-economic, employment practices, environmental protection, recordkeeping and accounting, and other requirements. For example, our contracts with the U.S. government generally require us to comply with the Federal Acquisition Regulation, Procurement Integrity Act, Buy American Act, Trade Agreements Act, and other laws and requirements. New or revised laws, requirements, and policies, or changes in the interpretation of existing laws, requirements, and policies, could adversely affect our business and competitiveness and increase our compliance costs. We are subject to government audits, , and oversight proceedings. Governmental agencies routinely review and audit government contractors to determine whether they are complying with contractual and legal requirements. If we to comply with these requirements, or we an audit, we may be subject to various sanctions such as monetary , and civil , contract or , and or from government contract work. These requirements our business and increase our compliance . The occurrence of any of these risks could our reputation and might have a materially impact on our business operations and our financial position or results of operations.
We might be harmed by changes in our relationships or contracts with suppliers.
We attempt to structure our distribution agreements with manufacturers to ensure that we are appropriately and predictably compensated for the services we provide. Certain distribution agreements with manufacturers include product price inflation as a component of our consideration, and we cannot control the frequency or magnitude of price changes. Laws limiting or reducing product prices, and changes to manufacturers’ pricing policies or practices as a result of changing laws, impact our distribution agreements or arrangements. We might be unable to renew or modify distribution agreements with manufacturers in a timely and favorable manner. Any of these risks might have a materially adverse impact on our business operations and our financial position or results of operations.
We might infringe intellectual property rights or our intellectual property protections might be inadequate.
We believe that our products and services do not infringe the proprietary rights of third parties, but third parties have asserted infringement claims against us and may do so in the future. If a court were to hold that we infringed other’s rights, we might be required to pay substantial damages, develop non-infringing products or services, obtain a license, stop selling or using the infringing products or services, or incur other sanctions. We rely on trade secret, patent, copyright, and trademark laws, nondisclosure obligations, and other contractual provisions and technical measures to protect our proprietary rights in our products and solutions. We might initiate costly and time-consuming litigation to protect our trade secrets, to enforce our patent, copyright, and trademark rights, and to determine the scope and validity of the proprietary rights of others. Our intellectual property protection efforts might be to protect our rights. Our competitors might develop non- products or services equivalent or to ours. Our development and use of AI technologies may result in new or risks, including the of proprietary and confidential inputs or of third-party rights as well as uncertainties over the ownership of AI-generated outputs. Any of these risks might have a materially impact on our business operations and our financial position or results of operations.
Our use of third-party data is subject to risks and limitations that could impede the growth of our data services business.
We attempt to structure our processes to satisfy contractual and other operative data usage rights and limitations associated with customers, industry partners, and other third-party data flowing through our businesses. These rights and limitations can apply to confidential commercial data and personal data provided to us. Failure to satisfy these data usage rights and limitations can lead to legal claims such as contractual breaches or data protection and privacy law violations. If a court were to hold that our use of data is not consistent with our rights and limitations, we might be required to pay substantial damages; we might need to stop using, sharing, and/or selling certain products and services; or we might incur other financial, legal, and/or reputational consequences. In addition, we might be unable to negotiate and/or obtain at an acceptable cost the data usage rights needed to advance our data strategy growth and AI-related objectives. Any of these risks might have a materially impact on our business operations and our financial position or results of operations.
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We might be unable to successfully recruit and retain qualified employees.
Our ability to attract, engage, develop, and retain qualified and experienced employees, including key executives and other talent, is essential for us to meet our objectives. We compete with many other businesses to attract and retain employees. Competition among potential employers results in increased salaries, benefits, or other employee-related costs, or in our failure to recruit and retain employees. We may experience loss of key personnel, including unexpectedly. Although we must adequately plan for timely succession of key management roles, our succession plans might not be effective, and employees might not successfully transition into new roles. Any of these risks might have a materially adverse impact on our business operations and our financial position or results of operations.
Industry and Economic Risks
We might be adversely impacted by healthcare reform such as changes in pricing and reimbursement models.
Many of our products and services are designed to function within the structure of current healthcare financing and reimbursement systems. The healthcare industry and related government programs continue to change. Some of these changes increase our risks and create uncertainties for our business.
For example, certain changes in reimbursement methodologies (including government rates) for pharmaceuticals, medical treatments, and related services reduce profit margins for us and our customers and impose new legal requirements on healthcare providers. Those changes have included cuts in Medicare and Medicaid reimbursement levels, changes in the bases for payments, shifts from fee-for-service pricing towards value-based payments and risk-sharing models, and increases in the use of managed care.
As described under “Healthcare Program Regulation” in Item 1 of Part I above, our business is subject to a broad range of recent and ongoing reform efforts, and challenges to those efforts, that could affect healthcare program access and spending, pharmaceutical pricing and reimbursement, and distribution economics. These include: the IRA; the OBBBA; Executive Order 14297; CMS rulemaking on BFSFs and proposed rebate models; 340B program litigation and developments; and state drug pricing legislation. Additionally, the pace and volume of healthcare reform initiatives and changes heighten the risks for our business.
There is substantial uncertainty about the likelihood, timing, and results of these healthcare reform efforts and challenges, and their implementation or outcome might have a materially adverse impact on our business operations and our financial position or results of operations.
We are adversely impacted by competition and industry consolidation.
Our businesses face a highly competitive global environment with strong competition from international, national, regional, and local full-line, short-line, and specialty distributors, service merchandisers, self-warehousing chain drug stores, manufacturers engaged in direct distribution, third-party logistics companies, and large payer organizations. In addition, our businesses face competition from various other service providers and from pharmaceutical and other healthcare manufacturers as well as other potential customers, which may from time to time decide to develop, for their own internal needs, supply management capabilities that might otherwise be provided by our businesses. We also may face competition from companies that move faster to adopt emerging technologies. Due to consolidation, a few large suppliers control a significant share of the pharmaceuticals market. This concentration reduces our ability to negotiate favorable terms with suppliers and causes us to depend on a smaller number of suppliers. Many of our customers, including healthcare organizations, have consolidated or joined group purchasing organizations and have greater power to negotiate favorable prices. Consolidation by our customers, suppliers, and competitors might reduce the number of market participants and give the remaining enterprises greater bargaining power, which might lead to erosion in our profit margin. Consolidation might increase counterparty credit risk because credit purchases increase for fewer market participants. Consolidation also might affect our ability to our growth objectives through acquisitions and other strategic transactions. These competitive pressures and industry consolidation might have a materially impact on our business operations and our financial position or results of operations.
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From time to time we have difficulties in sourcing or selling products due to a variety of causes and are adversely impacted by disruptions or changes in product supply.
We rely on third parties for the supply of pharmaceutical and other products, and our operations are subject to our suppliers’ continued ability to supply the products that we require. From time to time, we experience difficulties and delays in sourcing and selling products due to a variety of causes that result in suppliers’ failure to satisfy production demand. Among these causes are suppliers’ challenges in complying with legal requirements (including product and production quality standards), access to raw materials, inputs, and finished goods, manufacturing shutdowns, and operational and systems difficulties. Supply disruptions also arise from other factors beyond our control, such as product rationalization; government actions or policies (including trade sanctions, tariffs and other trade restrictions, as well as the requisition, diversion, or allocation of inventory); shifts in customer or societal demand for products; labor disputes or ; ethical sourcing issues; supplier financial ; natural and weather-related events; civil ; military ; and epidemics or pandemics. In these types of situations, our alternative sourcing efforts are not always fully . We might experience extended or incur higher sourcing costs or to our customer relationships and reputation. Furthermore, changes in the healthcare industry’s or our suppliers’ pricing, selling, inventory, distribution, or supply policies or practices could significantly reduce our revenues and net income. Any of these or changes might have a materially impact on our business operations and our financial position or results of operations.
We are adversely impacted as a result of our distribution of generic pharmaceuticals.
Our generic pharmaceuticals distribution business is subject to both product availability and pricing risks. We might experience disruptions in our supply of generic pharmaceuticals. We have been impacted when, due to regulatory and supply chain challenges, our supplier partners are not able to deliver products that we have committed to source from them. Input cost increases, product discontinuations, and market shortages could result in ClarusONE being unsuccessful in sourcing product to meet the needs of our customers, or could negatively impact our margin. Generic drug manufacturers offer a generic version of branded pharmaceuticals and routinely challenge the validity or enforceability of branded pharmaceutical patents in order to launch the drug pre- or post-loss of exclusivity. Patent holders have asserted infringement claims against us for distributing those generic versions they believed to have a patent, and the generic drug manufacturers may not fully indemnify us such . These risks and outcomes, as well as changes in the nature, frequency, or magnitude of generic pharmaceutical launches, might have a materially impact on our business operations and our financial position or results of operations.
We are adversely impacted by changes in the economic environments in which we operate, including from inflation, an economic slowdown, a recession, or fluctuations in foreign currency exchange rates.
Inflationary conditions result in increased costs associated with our normal business operations and decreased levels of consumer commercial spending and, to the extent we are not able to offset such cost increases from our suppliers, increase the costs which we incur to purchase inventories and services. Inflationary pressure is increased by factors such as supply chain disruptions, labor market tightness, actual or announced tariffs, government policies, interest rate changes, and foreign exchange rate changes. An economic slowdown or a recession could also reduce the prices our customers are able or willing to pay for our products and services and reduce the volume of their purchases. In addition to rising inflation, rising interest rates, the impact of banking failures or perceived failures and related contagion, consumer sentiment, political circumstances, military conflicts, and civil unrest may contribute to recessionary pressure. Our non-U.S. operations, import and export of products sold in currencies other than U.S. dollar (non-USD), non-USD intercompany loans, and our substantial international net assets also us to foreign currency exchange rate risk. Changes in the economic environments in which we operate might have a materially impact on our business operations and our financial position or results of operations.
Changes affecting capital and credit markets might impede access to credit, increase borrowing costs, and disrupt banking services for us and our customers and suppliers and might impair the financial soundness of our customers and suppliers.
Volatility and disruption in global capital and credit markets, including the bankruptcy or restructuring of certain financial institutions, reduced lending activity by financial institutions, reduced creditworthiness of our customers or suppliers, or decreased liquidity and increased costs in the commercial paper market, might adversely affect the borrowing ability and cost of borrowing for us and our customers and suppliers. Credit rating agencies regularly review our credit and rate our outstanding debt; and any downgrades in our credit ratings might limit our access to public debt markets, decrease the willingness of financial institutions to lend to us, lead to more restrictive debt covenants, increase our borrowing costs, and adversely affect our earnings. We generally sell our products and services under short-term unsecured credit arrangements. An adverse change in general or entity - specific economic conditions or access to capital might cause our customers to reduce their purchases from
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us, or delay payments, or fail to pay amounts, owed to us. Suppliers might increase their prices, reduce their output, or change their terms of sale due to limited availability of credit. Suppliers might be unable to make payments due to us for fees, returned products, or incentives. Interest rate increases or changes in capital market conditions, including as a result of macroeconomic events, might impede our or our customers’ or suppliers’ ability or cost to obtain credit. Any of these risks might have a materially adverse impact on our business operations and our financial position or results of operations.
We might be adversely impacted by tax legislation or challenges to our tax positions.
We are subject to the tax laws in the U.S. at the federal, state, and local government levels and to the tax laws of other jurisdictions in which we operate or sell products or services. Tax laws might change in ways that adversely affect our tax positions, effective tax rate, and cash flow. The tax laws are extremely complex and subject to varying interpretations. For example, the European Union and other countries (including countries in which we operate) have committed to enacting changes to numerous long-standing tax principles impacting how large multinational enterprises are taxed. In particular, the Organization for Economic Co-operation and Development’s Pillar Two initiative introduces a 15% global minimum tax applied on a country-by-country basis which many jurisdictions have enacted or committed to enact. Additionally, the OBBBA introduced modifications to various U.S. federal tax provisions. While we evaluated the implications of these measures and concluded that they are not expected to have a material impact on our consolidated financial position, results of operations, or cash flows, their ultimate impact may differ from our estimates. We are subject to tax examinations in various jurisdictions that might assess additional tax liabilities against us. Our tax reporting positions are sometimes challenged by relevant tax authorities, we might incur significant expense in our efforts to those , and we might be in those efforts. Developments in examinations and might materially change our provision for taxes in the affected periods and might differ materially from our historical tax accruals. Any of these risks might have a materially impact on our business operations, our cash flows, and our financial position or results of operations.
General Risks
Conditions and events outside of our control, such as widespread public health issues, natural disasters, and geopolitical factors adversely impact our business operations and our financial position or results of operations.
From time to time we are adversely affected by conditions and events outside of our control, including: widespread public health issues such as epidemic or pandemic infectious diseases; natural disasters and other catastrophic events such as earthquakes, floods, or severe weather; and geopolitical factors such as terrorism, military conflicts, civil unrest, political circumstances (including changes in international relations), changes or uncertainty in government policies (including with respect to U.S. or international trade), actual or announced tariffs or other trade restrictions, government shutdowns, or changes in laws or their interpretation. These conditions and events can disrupt operations for us, our suppliers, our vendors, and our customers, as well as impair product manufacturing, supply, and transport availability and cost in unpredictable ways that depend on highly uncertain future developments. They might affect consumer confidence levels and spending or the availability of certain goods, commodities, raw materials, and other inputs. In response to these types of conditions and events, we might seek alternate sources for product supply, incur additional sourcing or distribution costs, operations, implement extraordinary procedures, or consequences that are and to mitigate. For example, the trade environment remains highly dynamic and uncertain, and trade policies may be interrelated with other government initiatives. Imposed or tariffs or other trade restrictions might require us to incur substantial additional sourcing costs, raise prices on certain products, or seek alternate supply sources. If we are to effectively manage or offset the impact of tariffs or other trade restrictions, or find alternate sources of supply, we might be competitively or experience reduced profit margins or supply . Further, we might to our customer relationships. Any of the foregoing risks might have a materially impact on our business operations and our financial position or results of operations.
We may be adversely affected by global climate change or by regulatory or market responses to such change.
The long-term effects of climate change are difficult to predict and may be widespread. The impacts may include physical risks (such as rising sea levels or frequency and severity of extreme weather conditions), social and human effects (such as population dislocations or harm to health and well-being), compliance costs and transition risks (such as regulatory or technology changes), costs for critical services (such as transportation costs), and other adverse effects. The effects could impair, for example, the availability and cost of certain products, commodities, transportation, and energy (including utilities), which in turn may impact our ability to procure goods or services, and transport those goods, required for the operation of our business at the quantities and levels we require. We bear losses incurred as a result of, for example, physical damage to or destruction of our facilities (such as distribution or fulfillment centers), loss or spoilage of inventory due to unusual ambient
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temperatures, and business interruption due to weather events that may be attributable to climate change. These risks might have a materially adverse impact on our business operations and our financial position or results of operation.
Evolving expectations and regulatory requirements related to governance and sustainability matters may damage our reputation and have an adverse effect on our business, financial condition, and results of operations.
Investors, regulators, employees, customers, and other stakeholders continue to focus on companies’ governance and sustainability (“G&S”) practices and policies, including those related to human capital management, climate change, environmental responsibility, and social impact. Given the varied and at times divergent views of different stakeholder groups, any action or inaction by us with respect to G&S matters may be perceived negatively by some stakeholders. Furthermore, the G&S regulatory landscape is evolving and uncertain. New or revised laws and policies, or changes in the interpretation of existing laws and policies, could increase our compliance costs and expose us to legal risks. From time to time, we make statements regarding our sustainability goals. Although we intend to meet these goals, we may be required to expend significant resources to do so, which could impose costs on us. In addition, we could be criticized for the scope or nature of these goals, or for any revisions to our goals. Moreover, we may determine that it is in the best interests of the Company and our stockholders to prioritize other business investments over the achievement of our sustainability goals based on various factors such as our business strategy, technological and regulatory developments, industry standards, and input or pressure from stakeholders. If our G&S practices or outcomes do not align with stakeholder expectations or evolving regulatory requirements, our reputation, stock price, ability to access capital markets, and employee recruitment and retention efforts might be affected. We also could face or government action. Any of the foregoing risks might have a materially impact on our business, financial condition, and results of operations.
Exclusive forum provisions in our bylaws could limit our stockholders’ ability to choose their preferred judicial forum for disputes with us or our directors, officers, or employees.
Our amended and restated bylaws provide that, unless the Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for specified legal actions is the Court of Chancery of the State of Delaware or the United States District Court for the District of Delaware if the Court of Chancery does not have or declines to accept jurisdiction (collectively, “Delaware Courts”). Current and former stockholders are deemed to have consented to the personal jurisdiction of the Delaware Courts in connection with any action to enforce that exclusive forum provision and to service of process in any such action. These provisions of the bylaws are not a waiver of, and do not relieve anyone of duties to comply with, federal securities laws including those specifying the exclusive jurisdiction of federal courts under the Exchange Act and concurrent jurisdiction of federal and state courts under the Securities Act. To the extent that these provisions of the bylaws limit a current or former stockholder’s ability to select a judicial forum other than the Delaware Courts, they might discourage the specified legal actions, might cause current or former stockholders to incur additional litigation-related expenses, and might result in outcomes to current or former stockholders. A court might determine that these provisions of the bylaws are inapplicable or unenforceable in any particular action, in which case we may incur additional related expenses in such action, and the action may result in outcomes to us, which could have a materially impact on our reputation, our business operations, and our financial position or results of operations.
Item 1B. Unresolved Staff Comments.
None.
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Item 1C. Cybersecurity.
Risk Management and Security
As a diversified healthcare services leader that is dedicated to advancing health outcomes for patients everywhere , cybersecurity risk management is integral to our enterprise risk management strategy. Our management, with involvement and input from external consultants and oversight from our Board of Directors (“Board”), performs an annual enterprise-wide risk assessment (“ERA”) to identify key existing and emerging risks. One of the principal risks identified and assessed through this process is cybersecurity, which remains a key focus for the Company, management, and our Board.
Our Cybersecurity Program is aligned with the National Institute of Standards and Technology Cybersecurity Framework (“NIST CSF”) and other industry best practices. The Cybersecurity Program is designed to identify, assess and mitigate material cybersecurity risks.
We have implemented cybersecurity controls designed to protect our systems, data, and operations from cybersecurity risks. Enterprise-wide cybersecurity and privacy training continues to serve an important role in risk reduction and protection of the Company and our stakeholders. We require periodic access-based and role-based privacy and cybersecurity training, which is updated to reflect changes in the threat environment, audit findings, laws, and regulations. We also engage and educate employees through cybersecurity and privacy awareness programs and communication campaigns. In addition, as cybersecurity attacks become increasingly complex in part due to the emergence of new AI enabled technologies that allow threat actors to target particular entities and IT systems, we are taking measures to manage these risks by deploying new tools and capabilities, including AI.
Our Cybersecurity Incident Response Plan (“CIRP”) provides a framework for responding to cybersecurity incidents . The CIRP is based on the NIST CSF framework and governs activities such as preparation, detection, coordination, eradication and recovery. It also provides processes for appropriate escalations to the Company’s senior management, disclosure committee, Board, and relevant Board committees. The CIRP is routinely tested, reviewed, and updated as appropriate under the leadership of our Chief Information Officer and Chief Technology Officer (“CIO/CTO”) with the assistance of the Company’s Chief Information Security Officer (“CISO”).
We also engage internal and external assessors, consultants, auditors, and other third-parties, to assess our Cybersecurity Program’s maturity . We manage cybersecurity risks associated with third parties, including vendors, service providers, and external users of our systems. This includes conducting due diligence on the third parties we use along with using third party cybersecurity monitoring and alerting tools.
Although we believe that we maintain reasonable cybersecurity measures, we recognize that cyber threats continue to evolve, and no system is immune to risk.
As of March 31, 2026, we are not aware of any cybersecurity incidents that have materially affected, or are reasonably likely to materially affect, our business strategy, results of operations, or financial condition. For a discussion of whether and how any risks from cybersecurity threats have affected or, if realized, are reasonably likely to materially affect the Company, s ee “Risk Factors” in Item 1A of Part I above for additional information on risks related to our business, including for example, risks related to privacy and data protection, cybersecurity incidents, third-party relationships, and continuity of our information systems and networks, operational technology, and technology products or services .
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Governance
Our CIO/CTO leads management’s assessment and management of cybersecurity risk with the assistance of the Company’s CISO who reports to the CIO/CTO. The CIO/CTO reports to our CEO, is a member of the Executive Operating Team, and provides updates to the Board about cybersecurity matters. Our CIO/CTO has more than 30 years of experience managing technology and risks, and advising on cybersecurity issues and our CISO has more than 22 years of relevant experience, is a Certified Information System Security Professional (CISSP), and a Certified Information Systems Auditor (CISA).
C ybersecurity is among the risks identified by our ERA for Board-level oversight. The Audit Committee of the Board has oversight of information technology controls related to financial reporting , while the Compliance Committee of the Board has oversight of technology -related risk, including privacy and cybersecurity . The Audit Committee and Compliance Committee meet jointly at least annually to review cybersecurity risks and program s , and they are updated as needed on cybersecurity threats, incidents, or new developments in our cybersecurity risk profile. The chairs of the Audit Committee and Compliance Committee provide update s to the Board after each committee meeting . The CIO/CTO and CISO provide regular updates to the Board, Audit Committee, or Compliance Committee about material risks from cybersecurity threats. The CIO/CTO or CISO also provides regular updates to the Board, Audit Committee, or Compliance Committee about cybersecurity trends and regulatory updates, data governance and usage, technology infrastructure, our training and compliance efforts, and implications for our business strategy. In addition to the information provided in these meetings, members of our Board have access to continuing education, which includes topics relating to cybersecurity risks.
Item 2. Properties.
Because of the nature of our principal businesses, our plant, warehousing, retail pharmacies, offices, and other facilities for all of our reportable segments are operated in widely dispersed locations, primarily throughout North America. Retail pharmacies and most warehouses are typically owned or leased on a long-term basis. We consider our operating properties to be in satisfactory condition and adequate to meet our needs for the next several years without making capital expenditures materially higher than historical levels. Information as to material lease commitments is included in Financial Note 9, “Leases, ” to the consolidated financial statements included in this Annual Report.
Item 3. Legal Proceedings.
Certain legal proceedings in which we are involved are discussed in Financial Note 17, “Commitments and Contingent Liabilities,” to the consolidated financial statements included in this Annual Report. Disclosure of an environmental proceeding with a governmental agency is generally included only if we expect monetary sanctions in the proceeding to exceed $1 million, unless otherwise material.
Item 4. Mine Safety Disclosures.
Not applicable.
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Information about our Executive Officers
The following table sets forth information regarding the executive officers of the Company, including their principal occupations during the past five years. The Board of Directors elects executive officers annually. Our executive officers serve until their successors are duly elected and qualified, or until their earlier death, resignation, or removal.
Name
Age
Position with Registrant and Business Experience
Brian S. Tyler
Chief Executive Officer and a director since April 2019; President and Chief Operating Officer from August 2018 to March 2019; Chairman of the Management Board of McKesson Europe AG from 2017 to 2018; President and Chief Operating Officer, McKesson Europe from 2016 to 2017; President of North America Distribution and Services from 2015 to 2016; and Executive Vice President, Corporate Strategy and Business Development from 2012 to 2015.
Britt J. Vitalone
Executive Vice President and Chief Financial Officer since January 2018; Senior Vice President and Chief Financial Officer, U.S. Pharmaceutical from July 2014 to December 2017; Senior Vice President and Chief Financial Officer, U.S. Pharmaceutical and Specialty Health from October 2017 to December 2017; Senior Vice President of Corporate Finance and M&A Finance from March 2012 to June 2014.
Francisco J. Fraga
Executive Vice President, Chief Information Officer and Chief Technology Officer since September 2023; Senior Vice President and Chief Information Officer, U.S. Pharmaceutical from 2021 to 2023. Previously, Chief Technology and Information Officer for Campbell Soup Company, Inc. (branded food manufacturer) from 2017 to 2021.
Michele Lau
Executive Vice President and Chief Legal Officer since January 2024. Previously, Chief Legal Officer and Corporate Secretary for GoDaddy (technology services) from July 2021 to November 2023. Senior Vice President, Corporate Secretary and Associate General Counsel at McKesson from March 2018 to June 2021 and various other legal roles at McKesson from 2008 to 2018.
Thomas L. Rodgers
Executive Vice President, Chief Strategy and Business Development Officer since June 2020. Previously, Senior Vice President and Managing Director of McKesson Ventures from 2014 to 2020.
LeAnn B. Smith
Executive Vice President and Chief Human Resources Officer since December 2022. Previously, Senior Vice President, Talent Management and Development from 2021 to 2022. Chief People Leader, Global Corporate Functions for Walmart Inc. (retail) from 2018 to 2021.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.
Market Information: The principal market on which our common stock is traded is the New York Stock Exchange (“NYSE”) under the trading symbol “MCK.”
Holders: At March 31, 2026, there were 3,667 holders of record of our common stock.
Dividends: In July 2025, our quarterly dividend was raised from $0.71 to $0.82 per share of common stock. We declared regular cash dividends of $3.17, $2.75, and $2.40 per share for the years ended March 31, 2026, 2025, and 2024, respectively.
We anticipate that we will continue to pay quarterly cash dividends in the future. However, the declaration and amount of future dividends remain within the discretion of the Board and will depend upon our future earnings, financial condition, capital requirements, legal requirements, and other factors.
Securities Authorized for Issuance under Equity Compensation Plans: Information relating to this item is provided under Item 12 of Part III included in this Annual Report.
Share Repurchase Plans: The Board has authorized the repurchase of common stock. We may affect stock repurchases from time-to-time through open market transactions, privately negotiated transactions, accelerated share repurchase (“ASR”) programs, or by combinations of such methods, any of which may use pre-arranged trading plans that are designed to meet the requirements of Rule 10b5-1(c) of the Exchange Act. The timing of any repurchases and the actual number of shares repurchased will depend on a variety of factors, including our stock price, corporate and regulatory requirements, tax implications, restrictions under our debt obligations, other uses for capital, impacts on the value of remaining shares, cash generated from operations, and market and economic conditions. During the last three fiscal years, our share repurchases were transacted through both open market transactions and ASR programs with third-party financial institutions.
Excise taxes incurred on share repurchases of an entity’s own common stock are direct and incremental costs to purchase treasury stock, and accordingly are included in the total cost basis of the common stock acquired and reflected as a reduction of stockholders’ equity within “Treasury shares” in our Consolidated Balance Sheets and Consolidated Statements of Stockholders’ Deficit. Excise taxes do not reduce our remaining authorization for the repurchase of common stock. Excise taxes of $40 million and $26 million were accrued within “Other accrued liabilities” in our Consolidated Balance Sheets, for shares repurchased during the years ended March 31, 2026 and 2025, respectively. On October 30, 2024, we made a payment of $25 million for fiscal 2024 excise taxes previously accrued. On July 30, 2025, we made a payment of $26 million for fiscal 2025 excise taxes previously accrued.
Refer to Financial Note 18, “Stockholders' Deficit ,” to the accompanying consolidated financial statements included in this Annual Report on Form 10-K for a full discussion of our share repurchases for the years ended March 31, 2026, 2025, and 2024.
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The following table provides information on our share repurchases during the fourth quarter of fiscal 2026:
Share Repurchases (1)
(In millions, except price per share)
Total
Number of Shares
Purchased
Average Price Paid per Share (2)
Total Number of Shares Purchased as Part of Publicly Announced Programs (3)
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs (2)
January 1, 2026 - January 31, 2026
February 1, 2026 - February 28, 2026
March 1, 2026 - March 31, 2026 (4)
Total
(1) This table does not include the value of equity awards surrendered to satisfy tax withholding obligations or forfeitures of equity awards.
(2) The average price paid per share excludes $23 million of excise taxes incurred on share repurchases for the three months ended March 31, 2026. The remaining authorization outstanding for repurchases of common stock excludes $40 million of excise taxes incurred on share repurchases for the year ended March 31, 2026.
(3) In July 2024, the Board authorized the Company to repurchase up to an additional $4.0 billion shares of common stock which have no expiration date. On April 29, 2026, the Board of Directors approved the Company to repurchase up to an additional $5.0 billion shares of common stock to a total authorization of $7.7 billion as of April 2026.
(4) In March 2026, the Company entered into an ASR program with a third-party financial institution to repurchase $2.3 billion of the Company’s common stock. The average price paid per share and total number of shares purchased under this program are estimates based on the initial share purchase price and initial delivery of shares under an ASR agreement and may differ from the average price paid per share and total number of shares purchased under the ASR program upon its final settlement in the first quarter of Fiscal 2027.
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McKESSON CORPORATION
Stock Price Performance Graph* : The following graph compares the cumulative total stockholder return on our common stock for the periods indicated with the Standard & Poor’s (“S&P”) 500 Index and the S&P 500 Health Care Index. The S&P 500 Health Care Index was selected as a comparator because it is generally available to investors and broadly used by other companies in the same industry.
March 31,
McKesson Corporation
S&P 500 Index
S&P 500 Health Care Index
* Assumes $100 invested in McKesson Common Stock and in each index on March 31, 2021 and that all dividends are reinvested.
Item 6. Reserved.
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McKESSON CORPORATION
FINANCIAL REVIEW
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
INDEX TO MANAGEMENT’S DISCUSSION AND ANALYSIS
Section
Page
General
Overview of Our Business
Executive Summary
Trends and Uncertainties
Overview of Consolidated Results
Overview of Segment Results
Foreign Operations
Business Combinations
Fiscal 202 7 Outlook
Critical Accounting Estimates
Financial Condition, Liquidity, and Capital Resources
Related Party Balances and Transactions
New Accounting Pronouncements
GENERAL
Management’s discussion and analysis of financial condition and results of operations, referred to as the “Financial Review,” is intended to assist the reader in the understanding and assessment of significant changes and trends related to the results of operations and financial position of McKesson Corporation together with its subsidiaries (collectively, the “Company,” “McKesson,” “we,” “our,” or “us” and other similar pronouns). This discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying financial notes in Item 8 of Part II of this Annual Report on Form 10-K (“Annual Report”).
Our fiscal year begins on April 1 and ends on March 31. Unless otherwise noted, all references to a particular year refer to our fiscal year.
Our Financial Review within this Annual Report generally discusses fiscal 2026 and fiscal 2025 results and year-over-year comparisons between fiscal 2026 and fiscal 2025. For a discussion of our year-over-year comparisons between fiscal 2025 and fiscal 2024, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of Part II of our Annual Report on Form 10-K for the year ended March 31, 2025, previously filed with the Securities and Exchange Commission on May 9, 2025.
Certain statements in this Annual Report constitute forward-looking statements. See Item 1 - Business - Forward-Looking Statements in Part I of this Annual Report for additional factors relating to these statements and Item 1A - Risk Factors in Part I of this Annual Report for a list of certain risk factors applicable to our business, financial condition and liquidity, and results of operations.
Overview of Our Business:
We are a diversified healthcare services leader dedicated to advancing health outcomes for patients everywhere. Our teams partner with biopharma companies, care providers, pharmacies, manufacturers, governments, and others to deliver insights, products, and services to help make quality care more accessible and affordable.
We implemented a new segment reporting structure commencing in the second quarter of fiscal 2026, which resulted in four reportable segments: North American Pharmaceutical, Oncology & Multispecialty, Prescription Technology Solutions, and
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FINANCIAL REVIEW (Continued)
Medical-Surgical Solutions. Our former Norwegian operations were included in Other. All prior segment information has been recast to reflect our new segment structure and current period presentation. Our organizational structure also includes Corporate, which consists of income and expenses associated with administrative functions and projects, as well as the results of certain investments. The factors for determining the reportable segments include the manner in which management evaluates the performance of the Company combined with the nature of individual business activities. We evaluate the performance of our operating segments on a number of measures, including revenues and operating profit before interest expense and income taxes.
The following summarizes our four reportable segments. Refer to Financial Note 20, “Segments of Business,” to the consolidated financial statements included in this Annual Report for further information regarding our reportable segments.
• North American Pharmaceutical segment provides distribution and logistics services for branded, generic, specialty, biosimilar, and over-the-counter pharmaceutical drugs along with other healthcare-related products to customers in the United States (“U.S.”) and Canada. In addition, the segment sells financial, operational, and clinical solutions to pharmacies (retail, hospital, alternate sites) and provides consulting, outsourcing, technological, and other services. The U.S. distribution operations were previously included in the former U.S. Pharmaceutical reportable segment and the Canadian operations were previously included in the former International reportable segment.
• Oncology & Multispecialty segment includes provider solutions that encompass specialty drug distribution, group purchasing organizations, infusion services, direct to patient pharmacy capabilities, cell and gene therapy services with InspiroGene, technology solutions, practice consulting services, and vaccine distribution. In addition, the segment supports the U.S. Oncology Network, one of the largest networks of physician-led, integrated, community-based oncology practices dedicated to advancing high-quality, evidence-based cancer care in the U.S., and includes PRISM Vision Holdings, LLC (“PRISM Vision”), which drives patient outcomes in a retina and ophthalmology setting. Combined with Sarah Cannon Research Institute and our technology business, Ontada, this segment provides research, insights, technologies, and services that address and improve cancer and specialty care. This segment was previously reflected in the former U.S. Pharmaceutical reportable segment.
• Prescription Technology Solutions segment combines automation and our ability to navigate the healthcare ecosystem to connect patients, pharmacies, providers, pharmacy benefit managers, health plans, and biopharma companies to address patients’ medication access, affordability, and adherence challenges. Prescription Technology Solutions offers technology services, which includes electronic prior authorization, prescription price transparency, benefit insight, dispensing support services, and patient enrollment, in addition to third-party logistics, and wholesale distribution support across various therapeutic categories and temperature ranges to biopharma customers throughout the product lifecycle.
• Medical-Surgical Solutions segment provides medical-surgical, laboratory, and pharmaceutical distribution, logistics, and other services to U.S. healthcare providers operating in the non-acute settings. These include ambulatory care environments, such as physician offices, surgery centers, and hospital reference labs, as well as extended care settings, including nursing homes, hospice and home health care agencies, government facilities, and online marketplaces and retailers. This segment offers national brand medical-surgical products as well as our own line of more than 4,000 high-quality products through a network of distribution centers within the U.S. During fiscal 2026, we announced our intention to separate this segment into an independent company. As a part of the separation strategy, on April 20, 2026, we announced a definitive agreement under which funds managed by affiliates of Apollo Global Management, Inc. (“Apollo Funds”) will acquire approximately 13% minority ownership interest in our Medical‑Surgical Solutions segment through an investment of approximately $1.25 billion in the segment’s convertible preferred equity. The transaction is subject to regulatory approvals and customary closing conditions.
Our former Norwegian operations, which provided distribution and services to wholesale and retail customers in Norway where we owned, partnered, or franchised with retail pharmacies, were included in Other. During fiscal 2026, we completed the transaction to sell our businesses in Norway (“Norway disposal group”). This divestiture is further described in the “Business Acquisitions and Divestitures” section below.
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FINANCIAL REVIEW (Continued)
Business Acquisitions and Divestitures
Norwegian Divestiture Activities
On January 30, 2026, we completed the sale of our Norway disposal group for an adjusted purchase price of $821 million. We recorded a net gain of $480 million for the year ended March 31, 2026 in total operating expenses. The gain includes a $164 million loss related to the accumulated other comprehensive loss balances associated with the disposal group.
PRISM Vision Holdings, LLC
On April 1, 2025, we completed the acquisition of a controlling interest in PRISM Vision, a leading provider of general ophthalmology and retina administrative services. We acquired an 80% interest in PRISM Vision for $875 million in cash, and prior owners, including management and physicians in PRISM Vision practices, retained a 20% ownership interest. As of the acquisition date, the financial results of PRISM Vision are reported within our Oncology & Multispecialty segment.
Community Oncology Revitalization Enterprise Ventures, LLC
On June 2, 2025, we completed the acquisition of a controlling interest in Community Oncology Revitalization Enterprise Ventures, LLC (“Core Ventures”), a business and administrative services organization established by Florida Cancer Specialists & Research Institute, LLC, (“FCS”). We acquired a 70% controlling interest in Core Ventures for $2.5 billion in cash and FCS physicians retained a 30% ownership interest. As of the acquisition date, Core Ventures is a part of the Oncology platform and financial results are reported within our Oncology & Multispecialty segment.
Refer to Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report for additional information regarding these transactions.
Executive Summary:
The following summary provides highlights and key factors that impacted our business, operating results, financial condition, and liquidity for the year ended March 31, 2026:
• For the year ended March 31, 2026 compared to the prior year, revenues increased by 12%, gross profit increased by 9%, total operating expenses decreased by 6%, and other income, net increased by 17%. Refer to the “Overview of Consolidated Results” section below for an analysis of these changes;
• Diluted earnings per common share attributable to McKesson Corporation increased to $38.38 in fiscal 2026 from $25.72 in the prior year;
• For the year ended March 31, 2026, we recorded restructuring charges of $170 million related to an enterprise-wide initiative to drive operational efficiencies as further described in the “Restructuring Initiatives” section of “Overview of Consolidated Results” below;
• On April 1, 2025, we completed the acquisition of a controlling interest in PRISM Vision for $875 million in cash, as discussed in further detail in the “ Business Acquisitions and Divestitures” section above;
• On May 8, 2025, we entered into a syndicated $1.0 billion 364-Day senior unsecured credit facility (the “364-Day Credit Facility”) that was scheduled to mature in May 2026 but was terminated on April 24, 2026 and replaced with the 2026 5-Year Facility described in the “ Recent Developments” section below. Refer to Financial Note 11, “Debt and Financing Activities,” to the consolidated financial statements included in this Annual Report for additional information;
• On May 30, 2025, we completed a public debt offering of 4.65% Notes due May 30, 2030 in a principal amount of $650 million, 4.95% Notes due May 30, 2032 in a principal amount of $650 million, and 5.25% Notes due May 30, 2035 in a principal amount of $700 million, for total proceeds received, net of discounts and debt offering expenses, of 2.0 billion. The net proceeds from these notes in addition to cash on hand were utilized to fund the purchase of our interest in Core Ventures. Refer to Financial Note 11, “Debt and Financing Activities,” to the consolidated financial statements included in this Annual Report for additional information;
• On June 2, 2025, we completed the acquisition of a controlling interest in Core Ventures for $2.5 billion in cash, as discussed in further detail in the “ Business Acquisitions and Divestitures” section above;
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FINANCIAL REVIEW (Continued)
• On November 14, 2025, our €600 million outstanding principal amount of 1.50% Notes matured and were repaid using cash on hand;
• On December 3, 2025, our $500 million outstanding principal amount of 0.90% Notes matured and were repaid using cash on hand;
• On January 30, 2026, we completed the sale of our Norway disposal group, as discussed in further detail in the “ Business Acquisitions and Divestitures” section above;
• During fiscal 2026, we returned $5.1 billion of cash to shareholders through $4.8 billion of common stock repurchases and $381 million of dividend payments. The total remaining authorization outstanding for repurchases of the Company’s common stock at March 31, 2026 was $2.7 billion; and
• On July 29, 2025, our Board of Directors (the “Board”) raised our quarterly dividend to $0.82 from $0.71 per share of common stock.
Recent Developments:
The following highlights events that impacted our business subsequent to March 31, 2026:
• On April 1, 2026, certain of our subsidiaries within the Medical-Surgical Solutions segment entered into a syndicated credit agreement for: a $750 million principal senior secured term loan due in 2031 and a $250 million principal senior secured term loan due in 2028, for total proceeds received, net of discounts and debt offering expenses, of $993 million; and a $1.0 billion senior secured revolving credit facility scheduled to mature in April 2031. Refer to Financial Note 11, “Debt and Financing Activities,” to the consolidated financial statements included in this Annual Report for additional information;
• During fiscal 2026, we announced our intention to separate our Medical-Surgical Solutions segment into an independent company. As a part of the separation strategy, on April 20, 2026, we announced a definitive agreement under which Apollo Funds will acquire approximately 13% minority ownership interest in our Medical‑Surgical Solutions segment through an investment of approximately $1.25 billion in the segment’s convertible preferred equity. This transaction is subject to regulatory approvals and customary closing conditions;
• On April 24, 2026, we terminated our 2022 revolving credit facility and our 364-Day credit facility and entered into a new Credit Agreement (the “2026 Credit Facility”) that provides a syndicated $5.0 billion senior unsecured credit facility with a $4.5 billion aggregate sublimit of availability in Canadian dollars, British pound sterling, and Euro. The 2026 Credit Facility is scheduled to mature in April 2031. Refer to Financial Note 11, “Debt and Financing Activities,” to the consolidated financial statements included in this Annual Report for additional information; and
• On April 29, 2026, the Board approved the Company to repurchase up to an additional $5.0 billion shares of common stock to a total authorization of $7.7 billion as of April 2026.
Trends and Uncertainties:
Government Policies
As described in “Item 1. Government Regulation” and “Item 1A - Risk Factors” in Part I of this Annual Report, our industry is highly regulated and is subject to risks and uncertainty caused by the volume and speed of changes to regulatory policies. Changes in regulatory posture and law may result in significant changes in healthcare policy, government funding of healthcare costs, and other laws affecting our operations, but the ultimate outcomes are difficult to predict.
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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
RESULTS OF OPERATIONS
Overview of Consolidated Results:
(In millions, except per share data)
Years Ended March 31,
Change
Revenues
Gross profit
Gross profit margin
Total operating expenses
Total operating expenses as a percentage of revenues
Other income, net
Interest expense
Income before income taxes
Income tax expense
Reported income tax rate
Net income
Net income attributable to noncontrolling interests
Net income attributable to McKesson Corporation
Diluted earnings per common share attributable to McKesson Corporation
Weighted-average diluted common shares outstanding
Any percentage changes displayed above which are not meaningful are displayed as zero percent.
bp - basis point
Revenues
Revenues increased for the year ended March 31, 2026 compared to the prior year largely due to market growth in our North American Pharmaceutical segment, including higher volumes primarily from retail national account customers. Market growth includes growing drug utilization and newly launched products, partially offset by branded to generic drug conversion and branded pharmaceutical price decreases. Revenue growth was also favorably impacted by growth in our Oncology & Multispecialty segment primarily due to higher specialty pharmaceutical sales.
Gross Profit
Gross profit increased for the year ended March 31, 2026 compared to the prior year primarily due to growth in our Oncology & Multispecialty segment, driven by the addition of providers in practice management and growth of specialty pharmaceuticals, and in our Prescription Technology Solutions segment driven by higher volumes.
Gross profit for the years ended March 31, 2026 and 2025 included gains of $23 million and $444 million, respectively, representing our share of antitrust legal settlements. We recognized these amounts within "Cost of sales" in the Consolidated Statements of Operations within our North American Pharmaceutical segment.
Gross profit for the years ended March 31, 2026 and 2025 also included a last-in, first-out (“LIFO”) credit of $210 million and charge of $82 million, respectively. The LIFO credit in fiscal 2026 was primarily due to brand deflation compared to the prior year charge which was primarily due to brand inflation. Refer to the “Critical Accounting Estimates” section included in this Financial Review for further information regarding the use of the LIFO method of accounting within our North American Pharmaceutical business.
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FINANCIAL REVIEW (Continued)
Gross profit for the year ended March 31, 2025 was impacted by an inventory impairment charge of $58 million related to restructuring initiatives to drive operational efficiencies and increase cost optimization efforts as discussed in Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the consolidated financial statements in this Annual Report. We recorded this amount within "Cost of sales" in the Consolidated Statements of Operations within our North American Pharmaceutical segment.
Total Operating Expenses
A summary and description of the components of our total operating expenses for the years ended March 31, 2026 and 2025 is as follows:
• Selling, distribution, general, and administrative expenses (“SDG&A”): consists of personnel costs, transportation costs, depreciation and amortization, lease costs, professional fee expenses, administrative expenses, provision for bad debts and related recoveries, gains and losses on the sale of certain businesses, remeasurement charges to fair value less costs to sell, and other general charges.
• Claims and litigation charges, net: These charges include adjustments for estimated probable settlements related to our controlled substance monitoring and reporting, and opioid-related claims, as well as any applicable income items or credit adjustments due to subsequent changes in estimates. Legal fees to defend claims, which are expensed as incurred, are included within SDG&A.
• Restructuring, impairment, and related charges, net: Charges recorded under this component include those incurred for programs in which we change our operations, the scope of a business undertaken by our business units, or the manner in which that business is conducted, as well as long-lived asset impairments.
Years Ended March 31,
(Dollars in millions)
Change
Selling, distribution, general, and administrative expenses
Claims and litigation charges, net
Restructuring, impairment, and related charges, net
Total operating expenses
Percent of revenues
Any percentage changes displayed above which are not meaningful are displayed as zero percent.
bp - basis point
Total operating expenses and total operating expenses as a percentage of revenues decreased for the year ended March 31, 2026 compared to the prior year. Total operating expenses for the years ended March 31, 2026 and 2025 were affected by the following significant items:
Fiscal 2026
• SDG&A includes a net gain of $480 million related to the sale of our Norway disposal group. The net gain includes a $164 million loss related to the accumulated other comprehensive loss balances associated with this disposal. Of the total net gain recorded during the period, a gain of $503 million is included within Other and a net charge of $23 million is included within Corporate expenses, net;
• SDG&A includes net charges of $77 million related to our planned separation of the Medical‑Surgical Solutions segment;
• SDG&A was impacted by lower operating expenses from the completed divestiture of our Canadian retail disposal group in fiscal 2025, as discussed in more detail in Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report;
• SDG&A was impacted by higher operating expenses related to the acquisitions completed during fiscal 2026, as discussed in more detail in Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report; and
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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
• Restructuring, impairment, and related charges, net of $245 million, are discussed below under “Restructuring Initiatives” as well as Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the consolidated financial statements included in this Annual Report.
Fiscal 2025
• SDG&A includes charges of $667 million to remeasure the sale of our Rexall and Well.ca businesses in Canada (“Canadian retail disposal group”) to fair value less costs to sell. The remeasurement adjustment includes a $48 million loss related to the accumulated other comprehensive loss balances associated with this disposal. Of the total charges recorded during the period, $605 million were included within our North American Pharmaceutical segment and $62 million were included within Corporate expenses, net;
• SDG&A includes a credit of $206 million related to the bankruptcy of our customer Rite Aid Corporation (including certain of its subsidiaries, “Rite Aid”);
• Claims and litigation charges, net primarily consists of a charge of $108 million related to our estimated liability for opioid-related claims as discussed in Financial Note 17, “Commitments and Contingent Liabilities,” to the consolidated financial statements included in this Annual Report; and
• Restructuring, impairment, and related charges, net of $286 million, are discussed below under “Restructuring Initiatives” as well as Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the consolidated financial statements included in this Annual Report.
Goodwill Impairment
We evaluate goodwill for impairment on an annual basis in the first fiscal quarter, and at an interim date if indicators of potential impairment exist. The annual impairment testing performed in fiscal 2026 and fiscal 2025 did not indicate any impairment of goodwill, and no goodwill impairment charges were recorded in fiscal 2026 and fiscal 2025. However, other risks, expenses, and future developments, such as government actions, increased regulatory uncertainty, and material changes in key market assumptions limit our ability to estimate projected cash flows, which could adversely affect the fair value of various reporting units in future periods. Refer to “Critical Accounting Estimates” included in this financial review for further information.
Restructuring Initiatives
We recorded restructuring, impairment, and related charges of $245 million and $286 million for the years ended March 31, 2026 and 2025, respectively. These charges were included in “Restructuring, impairment, and related charges, net” in the Consolidated Statements of Operations.
During the fourth quarter of fiscal 2026, we approved an initiative within our Prescription Technology Solutions segment to increase operational efficiencies and cost optimization efforts, with the intent of aligning with our long-term strategy. This initiative includes headcount reductions, the exit or downsizing of certain facilities, and other costs. We anticipate total charges between $200 million and $250 million, consisting primarily of employee severance and other employee-related costs, and facility and other exit-related costs, including long-lived asset impairments. We recorded immaterial charges in fourth quarter of fiscal 2026 associated with this initiative. This program is anticipated to be substantially complete by the end of fiscal 2029.
During the second quarter of fiscal 2025, we approved enterprise-wide initiatives to modernize and accelerate our technology service operating model, which were intended to improve business continuity, compliance, operating efficiency, and advance investments to streamline the organization. These initiatives include cost reduction efforts and support other rationalization efforts within Corporate, and the Medical-Surgical Solutions and North American Pharmaceutical segments to help realize long-term sustainable growth. We anticipate total charges related to these initiatives of $650 million to $700 million, consisting primarily of employee severance and other employee-related costs as well as facility, exit and other related costs, including long-lived asset impairments. These programs are anticipated to be substantially complete in fiscal 2028. For the year ended March 31, 2026, we recorded charges of $170 million related to the initiatives, which primarily includes facility, exit and other related costs as well as severance and other employee-related costs recorded within “Restructuring, impairment, and related charges, net” in the Consolidated Statement of Operations. For the year ended March 31, 2025, we recorded charges of $240 million related to the initiatives, which primarily included severance and other employee-related costs as well as facility, exit and other related costs, including long-lived asset recorded within “, , and related charges, net” in the Consolidated Statement of Operations, and $58 million for the year
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FINANCIAL REVIEW (Continued)
ended March 31, 2025 related to inventory impairments recorded within “Cost of sales” in the Consolidated Statements of Operations.
Refer to Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the consolidated financial statements included in this Annual Report for more information.
Other Income, Net
Other income, net increased for the year ended March 31, 2026 compared to the prior year primarily due to prior year charges of $87 million related to the termination of the U.K. pension plan, a prior year loss of $43 million related to one of our equity method investments, and a favorable year-over-year impact from interest income, partially offset by a prior year net gain of $101 million related to our investments in equity securities of certain U.S. growth stage companies in the healthcare industry.
Interest Expense
Interest expense decreased for the year ended March 31, 2026 compared to the prior year primarily due to changes in our derivative portfolio in fiscal 2026 and increased capitalized interest from higher capital spending, partially offset by interest from increased average balances of the Company’s loan portfolio in fiscal 2026. Interest expense may fluctuate based on timing, amounts, and interest rates of term debt repaid and new term debt issued, amounts and interest rates of commercial paper borrowings, as well as amounts incurred associated with financing fees. Refer to Financial Note 11 , “ Debt and Financing Activities ,” to the consolidated financial statements included in this Annual Report for more information.
Income Tax Expense
We recorded income tax expense of $1.1 billion and $878 million for the years ended March 31, 2026 and 2025, respectively. Our income tax rates were 17.8% and 20.1% in 2026 and 2025, respectively.
Fluctuations in our reported income tax rates are primarily due to changes in our business mix of earnings between various taxing jurisdictions and recognized discrete tax items. Refer to Financial Note 6, “Income Taxes,” to the consolidated financial statements included in this Annual Report for more information.
Net Income Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests for the years ended March 31, 2026 and 2025 primarily represents the proportionate results of third-party equity interests in ClarusONE Sourcing Services LLP, Vantage Oncology Holdings, LLC, and SCRI Oncology, LLC.
Noncontrolling interests with redemption features, such as put rights, that are not solely within our control are considered redeemable noncontrolling interests, and are presented outside of stockholders’ deficit in our Consolidated Balance Sheet. During the year ended March 31, 2026, we initially recognized redeemable noncontrolling interests of $700 million and $25 million related to our acquisitions of Core Ventures and PRISM Vision, respectively. On a quarterly basis, we determine the fair value and redemption value of the redeemable noncontrolling interests. As a result of this valuation process, we recorded fair value adjustments to redeemable noncontrolling interests within additional paid-in capital. We also recorded an adjustment to redemption value of the redeemable noncontrolling interests for the year ended March 31, 2026, which was recorded within “Net income attributable to noncontrolling interests”. Refer to Financial Note 7, “Redeemable Noncontrolling Interests and Noncontrolling Interests,” to the consolidated financial statements included in this Annual Report for additional information on changes to our redeemable and noncontrolling interests during fiscal 2026.
The increase in net income attributable to noncontrolling interests was primarily driven by contributions from the Core Ventures and PRISM Vision acquisitions and higher volumes in our ClarusONE joint venture. Net income attributable to noncontrolling interest was also impacted by the $122 million charge to remeasure the redeemable noncontrolling interest balance for Core Ventures to redemption value.
Net Income Attributable to McKesson Corporation
Net income attributable to McKesson Corporation was $4.8 billion and $3.3 billion for the years ended March 31, 2026 and 2025, respectively. Diluted earnings per common share attributable to McKesson Corporation was $38.38 and $25.72 for the years ended March 31, 2026 and 2025, respectively. Our diluted earnings per share includes the cumulative effects of share repurchases during each period.
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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
Weighted-Average Diluted Common Shares Outstanding
Diluted earnings per common share was calculated based on a weighted-average number of shares outstanding of 124.1 million and 128.1 million for the years ended March 31, 2026 and 2025, respectively. Weighted-average diluted shares outstanding for fiscal 2026 decreased from the prior year primarily due to the cumulative effect of share repurchases, as discussed in the “Share Repurchases Plans” section of this Financial Review.
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FINANCIAL REVIEW (Continued)
Overview of Segment Results:
Segment Revenues:
Years Ended March 31,
(Dollars in millions)
Change
Segment revenues
North American Pharmaceutical
Oncology & Multispecialty
Prescription Technology Solutions
Medical-Surgical Solutions
Other
Total revenues
Any percentage changes displayed above which are not meaningful are displayed as zero percent.
North American Pharmaceutical
North American Pharmaceutical revenues for the year ended March 31, 2026 increased $32.1 billion or 11% compared to the prior year. Within the segment, sales to U.S. pharmacies and healthcare providers increased $31.6 billion primarily due to higher volumes from retail national account customers, partially offset by branded to generic drug conversions and branded pharmaceutical price decreases.
Oncology & Multispecialty
Oncology & Multispecialty revenues for the year ended March 31, 2026 increased $11.6 billion or 31% compared to the prior year primarily driven by growth in provider solutions due to the addition of providers within practice management and higher specialty pharmaceutical sales.
Prescription Technology Solutions
Prescription Technology Solutions revenues for the year ended March 31, 2026 increased $589 million or 11% compared to the prior year due to increased volumes from our third-party logistics and higher technology services revenues.
Medical-Surgical Solutions
Medical-Surgical Solutions revenues for the year ended March 31, 2026 increased $127 million or 1% compared to the prior year. Within the segment, sales to ambulatory care customers increased $60 million driven by underlying business growth, sales to extended care customers increased by $53 million, and other sales increased by $14 million.
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FINANCIAL REVIEW (Continued)
Other Segment Expense, Segment Operating Profit, and Corporate Expenses, Net:
Years Ended March 31,
(Dollars in millions)
Change
Other segment expense, net (1)
North American Pharmaceutical (2)
Oncology & Multispecialty (3)
Prescription Technology Solutions
Medical-Surgical Solutions (4)
Other (5)
Total other expense, net
Segment operating profit
North American Pharmaceutical
Oncology & Multispecialty
Prescription Technology Solutions
Medical-Surgical Solutions
Other
Subtotal
Corporate expenses, net (6)
Interest expense
Income from continuing operations before income taxes
Segment operating profit margin
North American Pharmaceutical
Oncology & Multispecialty
Prescription Technology Solutions
Medical-Surgical Solutions
Other
bp - basis point
(1) Other segment expense, net includes cost of sales, total operating expenses, and other income, net, for our reportable segments.
(2) Other segment expense, net for our North American Pharmaceutical segment includes the following:
• a credit of $210 million and a charge of $82 million for the years ended March 31, 2026 and 2025, respectively, related to the LIFO method of accounting for inventories;
• cash receipts for our share of antitrust legal settlements of $23 million and $444 million for the years ended March 31, 2026 and 2025, respectively;
• a charge of $605 million for the year ended March 31, 2025 to remeasure the assets and liabilities of our Canadian retail disposal group to fair value less costs to sell, as discussed in Financial Note 2 , “ Business Acquisitions and Divestitures ,” to the consolidated financial statements included in this Annual Report;
• a credit of $206 million for the year ended March 31, 2025 to reassess the previously reserved prepetition balance related to the bankruptcy of our customer Rite Aid;
• restructuring charges of $59 million for the year ended March 31, 2025 for restructuring initiatives, as discussed in Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the consolidated financial statements included in this Annual Report; and
• a charge of $57 million for the year ended March 31, 2025 related to our estimated liability for opioid-related claims as discussed in Financial Note 17, “Commitments and Contingent Liabilities,” to the consolidated financial statements included in this Annual Report.
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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
(3) Other segment expense, net for our Oncology & Multispecialty segment includes the following:
• charges of $96 million for the year ended March 31, 2026 related to the acquisition and integration of PRISM Vision and Core Ventures;
• a net gain of $51 million for the year ended March 31, 2026 related to the sale of an investment and market decisions; and
• a loss of $43 million for the year ended March 31, 2025 related to one of our equity method investments.
(4) Other segment expense, net for our Medical-Surgical Solutions segment includes the following:
• charges of $25 million for the year ended March 31, 2026 related to our planned separation of the Medical‑Surgical Solutions segment; and
• restructuring charges of $43 million and $204 million for the years ended March 31, 2026 and 2025, respectively, related to a broad set of initiatives to drive operational efficiencies and increase cost optimization efforts, as discussed in Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the consolidated financial statements included in this Annual Report.
(5) Other segment expense, net for Other for the year ended March 31, 2026 includes a net gain of $503 million related to the sale of our Norway disposal group, as discussed in Financial Note 2 , “ Business Acquisitions and Divestitures ,” to the consolidated financial statements included in this Annual Report.
(6) Corporate expenses, net includes the following:
• charges of $52 million for the year ended March 31, 2026 related to our planned separation of the Medical‑Surgical Solutions segment;
• a net charge of $23 million for the year ended March 31, 2026 related to the sale of our Norway disposal group as discussed in Financial Note 2 , “ Business Acquisitions and Divestitures ,” to the consolidated financial statements included in this Annual Report;
• a charge of $87 million for the year ended March 31, 2025 related to the termination of the U.K. pension plan as discussed in Financial Note 13, “Pension Benefits,” to the consolidated financial statements included in this Annual Report;
• a charge of $62 million for the year ended March 31, 2025 related to the effect of accumulated other comprehensive loss components from our Canadian retail disposal group, as discussed in Financial Note 2 , “ Business Acquisitions and Divestitures ,” to the consolidated financial statements included in this Annual Report;
• a net gain of $101 million for the year ended March 31, 2025 related to our investments in equity securities of certain U.S. growth stage companies in the healthcare industry, as discussed in Financial Note 15, “Fair Value Measurements,” to the consolidated financial statements included in this Annual Report;
• charges of $51 million for the year ended March 31, 2025 related to our estimated liability for opioid-related claims as discussed in Financial Note 17, “Commitments and Contingent Liabilities,” to the consolidated financial statements included in this Annual Report; and
• restructuring charges of $158 million and $68 million for the years ended March 31, 2026 and 2025, respectively, for restructuring initiatives as discussed in Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the consolidated financial statements included in this Annual Report.
North American Pharmaceutical
Operating profit for this segment increased for the year ended March 31, 2026 compared to the prior year largely due to prior year remeasurement charges related to our Canadian retail disposal group, as discussed in Financial Note 2 , “ Business Acquisitions and Divestitures ,” to the consolidated financial statements included in this Annual Report, higher pharmaceutical distribution volumes across the segment, a LIFO credit of $210 million in fiscal 2026 compared to a charge in the prior year period, and a prior year charge of $57 million related to our estimated liability for opioid-related claims. These increases were partially offset by a decrease in net cash proceeds received for our share of antitrust legal settlements, the prior year impact of the bankruptcy of Rite Aid, and an increase in operating expenses to support higher volumes.
Oncology & Multispecialty
Operating profit for this segment increased for the year ended March 31, 2026 compared to the prior year primarily due to growth in specialty pharmaceuticals, including contributions from FY26 business acquisitions, a net gain of $51 million related to the sale of an investment and market decisions, and a prior year loss of $43 million related to one of our equity method investments, partially offset by an increase in operating expenses to support higher volumes.
Prescription Technology Solutions
Operating profit increased for the year ended March 31, 2026 compared to the prior year primarily driven by higher demand for access solutions.
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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
Medical-Surgical Solutions
Operating profit increased for the year ended March 31, 2026 compared to the prior year primarily due to lower restructuring charges in fiscal 2026 compared to the prior year period and lower expenses resulting from business rationalization initiatives, partially offset by $25 million charges related to our planned separation of this segment and a decline in the contribution from our ambulatory care business.
Corporate
Corporate expenses, net increased for the year ended March 31, 2026 compared to the prior year primarily driven by higher restructuring charges in fiscal 2026, prior year gains of $101 million related to our investments in equity securities of certain U.S. growth stage companies in the healthcare industry, a charge of $52 million related to our planned separation of the Medical‑Surgical Solutions segment, and charges related to the sale of our Norway disposal group as discussed in Financial Note 2 , “ Business Acquisitions and Divestitures ,” to the consolidated financial statements included in this Annual Report. These increases were partially offset by a prior year charge of $87 million related to the termination of the U.K. pension plan, lower litigation charges in the current year compared to prior year, and prior year remeasurement charges related to our Canadian retail disposal group, as discussed in Financial Note 2 , “ Business Acquisitions and Divestitures ,” to the consolidated financial statements included in this Annual Report.
FOREIGN OPERATIONS
Our foreign operations represented approximately 4% of our consolidated revenues in each of fiscal 2026 and fiscal 2025, respectively. Foreign operations are subject to certain risks, including currency fluctuations. Refer to Item 1A - Risk Factors in Part I of this Annual Report for a risk factor related to fluctuations in foreign currency exchange rates, and risks from trade and tariffs. We monitor our operations and adopt strategies responsive to changes in the economic and political environment in each of the countries in which we operate. We conduct our business worldwide in local currencies, including the Canadian dollar. As a result, the comparability of our results reported in U.S. dollars can be affected by changes in foreign currency exchange rates. In discussing our operating results, we may use the term “foreign currency exchange fluctuations,” which refers to the effect of changes in foreign currency exchange rates used to convert the local currency results of our operations in foreign countries where the functional currency is not the U.S. dollar. We present this information to provide a framework for assessing how our business performed excluding the effect of foreign currency exchange rate fluctuations. In computing the foreign currency exchange fluctuations, we translate our current year results of our operations in foreign countries recorded in local currencies into U.S. dollars by applying their respective average foreign currency exchange rates of the corresponding prior year periods, and we subsequently compare those results to the previously reported results of the comparable prior year periods reported in U.S. dollars.
We completed the sale of our Norway disposal group and our Canadian retail disposal group in fiscal 2026 and 2025, respectively. Refer to Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report for more information.
Additional information regarding our foreign operations is also included in Financial Note 20, “Segments of Business,” to the consolidated financial statements included in this Annual Report.
BUSINESS COMBINATIONS
Refer to Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report for additional information.
FISCAL 2027 OUTLOOK
Information regarding the Company’s fiscal 2027 outlook is contained in the release of our fourth quarter fiscal 2026 financial results included as an exhibit to our Form 8-K furnished to the SEC on May 7, 2026, which is not incorporated by reference into this Annual Report. That Form 8-K should be read in conjunction with the cautionary statements in Item 1 - Business - Forward-Looking Statements and Item 1A - Risk Factors, in Part I of this Annual Report.
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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
CRITICAL ACCOUNTING ESTIMATES
We consider an accounting estimate to be critical if the estimate requires us to make assumptions about matters based upon past experience and management’s judgment that were uncertain at the time the accounting estimate was made and if different estimates that we reasonably could have used in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on our financial condition or results from operations. Below are the estimates that we believe are critical to the understanding of our operating results and financial condition. Other accounting policies are described in Financial Note 1, “Significant Accounting Policies,” to the consolidated financial statements included in this Annual Report. Because of the uncertainty inherent in such estimates, actual results may differ from these estimates.
Allowances for Credit Losses: Our receivables primarily consist of short-term trade accounts receivable from customers that result from the sale of goods and services. We also provide customer financing arrangements to customers who purchase our products and services. Customer financing primarily relates to guarantees provided to our customers, or their creditors, regarding the repurchase of inventories. We also provide financing to certain customers related to the purchase of pharmacies, which serve as collateral for the loans. We estimate the receivables for which we do not expect full collection based on historical collection rates and specific knowledge regarding the current creditworthiness of our customers and record an allowance in our consolidated financial statements for these amounts.
We consider historical credit losses, the current economic environment, customer credit ratings, collections on past due amounts, legal disputes, and bankruptcies, as well as reasonable and supportable forecasts to develop our allowance for credit losses. Management reviews these factors quarterly to determine if any adjustments are needed to the allowance.
Sales to our ten largest customers, including group purchasing organizations (“GPOs”), accounted for approximately 73% of total consolidated revenues in fiscal 2026 and comprised approximately 43% of total trade accounts receivable at March 31, 2026. Sales to our largest customer, CVS Health Corporation (“CVS”), accounted for approximately 24% of our total consolidated revenues in fiscal 2026 and comprised approximately 21% of total trade accounts receivable at March 31, 2026. Sales to our next two largest customers accounted for 11% and 10% of total consolidated revenues in fiscal 2026. As a result, our sales and credit concentration is significant. We also have agreements with GPOs, each of which functions as a purchasing agent on behalf of member hospitals, pharmacies and other healthcare providers, as well as with government entities and agencies. The accounts receivable balances are with individual members of the GPOs, and therefore no significant concentration of credit risk exists. A material default in payment, a material reduction in purchases from GPOs or any other large customers, or the loss of a large customer or GPO could have a material adverse impact on our financial position, results of operations, and liquidity.
Reserve methodologies are assessed annually based on historical losses and economic, business, and market trends. In addition, reserves are reviewed quarterly and updated if unusual circumstances or trends are present. We believe the reserves maintained and expenses recorded in fiscal 2026 are appropriate and consistent in the context of historical methodologies employed, as well as assessment of trends currently available.
At March 31, 2026, trade and notes receivables were $24.5 billion prior to allowances of $204 million. Our provision for bad debts was a charge of $100 million, in fiscal 2026, a credit of $130 million in fiscal 2025, and a charge of $819 million in fiscal 2024, respectively. At March 31, 2026 and 2025, our allowance as a percentage of trade and notes receivables was 0.8% and 2.1%. The provision for bad debts for fiscal 2024 included a charge of $725 million within our North American Pharmaceutical segment related to the bankruptcy of our customer Rite Aid, as discussed in the Financial Note 20, “Segments of Business,” to the consolidated financial statements included in this Annual Report. This amount represented the uncollected trade accounts receivable balance due from Rite Aid prior to its bankruptcy petition filing in October 2023. During the year ended March 31, 2025, we reassessed our initial estimates made in conjunction with the previously reserved prepetition balances, including cash received during the period, resulting in a reversal of $206 million recorded within “Selling, distribution, general, and administrative expenses” in our Consolidated Statements of Operations and included within our North American Pharmaceutical segment. During the years ended March 31, 2026 and 2025, we released $483 million and $237 million, respectively, of uncollectible receivables related to the Rite Aid provision in the Consolidated Balance Sheets.
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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
An increase or decrease of a hypothetical 0.1% in the fiscal 2026 allowance as a percentage of trade and notes receivables would result in an increase or decrease in the provision for bad debts of approximately $25 million. The selected 0.1% hypothetical change does not reflect what could be considered the best or worst-case scenarios. Additional information concerning our allowances for credit losses may be found in Schedule II included in this Annual Report.
Inventories: Inventories consist of merchandise held for resale. We report inventories at the lower of cost or net realizable value, except for inventories determined using the LIFO method which are valued at the lower of LIFO cost or market. The LIFO method presumes that the most recent inventory purchases are the first items sold and the inventory cost under LIFO approximates market. The majority of the cost of domestic inventories is determined using the LIFO method. The majority of the cost of inventories held in foreign and certain domestic locations is based on the first-in, first-out (“FIFO”) method or weighted-average purchase prices. Rebates, cash discounts, and other incentives received from vendors relating to the purchase or distribution of inventory are considered product discounts and are accounted for as a reduction in the cost of inventory and are recognized when the inventory is sold.
In determining whether an inventory valuation allowance is required, we consider various factors including estimated quantities of slow-moving inventory by reviewing on-hand quantities, outstanding purchase obligations, and forecasted sales. Shifts in market trends and conditions, changes in customer preferences due to the introduction of generic drugs or new pharmaceutical products, or the loss of one or more significant customers are factors that could affect the value of our inventories. We write down inventories which are considered excess and obsolete as a result of these reviews. These factors could make our estimates of inventory valuation differ from actual results.
We believe the moving-average inventory costing method reasonably approximates current replacement cost (“Market”). Accordingly, LIFO inventories are carried at the lower of LIFO cost or Market. At March 31, 2026 and 2025, inventories, net, totaled $24.2 billion and $23.0 billion, respectively, with approximately 59% and 63% valued using LIFO. At March 31, 2026 and 2025, our LIFO reserves were $99 million and $309 million. LIFO reserves include both pharmaceutical and non-pharmaceutical products.
A LIFO charge is recognized when the net effect of price increases on pharmaceutical and non-pharmaceutical products held in inventory exceeds the impact of price declines, including the effect of branded pharmaceutical products that have lost market exclusivity. A LIFO credit is recognized when the net effect of price declines exceeds the impact of price increases on pharmaceutical and non-pharmaceutical products held in inventory. We recognized a LIFO credit of $210 million in fiscal 2026, a LIFO charge of $82 million in fiscal 2025, and a LIFO credit of $157 million in fiscal 2024, all within “Cost of sales” in our Consolidated Statements of Operations. The LIFO credit in fiscal 2026 compared to a LIFO charge in fiscal 2025 was primarily due to significant brand deflation in the current fiscal year, compared to the prior fiscal year brand inflation. The LIFO charge in fiscal 2025 compared to a LIFO credit in fiscal 2024 was primarily due to higher brand inflation in fiscal 2025. Our LIFO valuation amount includes both pharmaceutical and non-pharmaceutical products.
Business Combinations: We account for business combinations using the acquisition method of accounting whereby the identifiable assets and liabilities of the acquired business, including contingent consideration, as well as any noncontrolling interest in the acquired business, are recorded at their estimated fair values as of the date that we obtain control of the acquired business. Any purchase consideration in excess of the estimated fair values of the net assets acquired is recorded as goodwill. Acquisition-related expenses and related costs are expensed as incurred.
Several valuation methods may be used to determine the fair value of assets acquired and liabilities assumed. For intangible assets, we typically use a variation of the income approach, whereby a forecast of future cash flows attributable to the asset is discounted to present value using a risk-adjusted discount rate. Some of the more significant estimates and assumptions inherent in the income approach include the amount and timing of projected future cash flows, the discount rate selected to measure the risks inherent in the future cash flows, and the assessment of the asset’s expected useful life. Refer to Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report for additional information regarding our acquisitions.
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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
Certain business combinations involve the potential for future payments of consideration that is contingent upon the achievement of performance milestones or other agreed-upon events. The liability for the contingent consideration is measured at its fair value as of the acquisition date using unobservable inputs. These inputs include the estimated amount and timing of projected operational and financial information, the probability of achievement of performance milestones or other agreed-upon events, and the risk-adjusted discount rate used to calculate the present value of the probability-weighted projected financial information . Contingent liabilities are remeasured to fair value at each reporting date until the liability is resolved with changes in fair value being recognized within “Selling, distribution, general, and administrative expenses” in the Consolidated Statements of Operations included in this Annual Report. Changes in any of the inputs may result in a significant adjustment to the fair value.
Goodwill and Long-Lived Assets:
Goodwill
As a result of acquiring businesses, we have $11.3 billion and $10.0 billion of goodwill at March 31, 2026 and 2025, respectively, and $4.1 billion and $1.5 billion of intangible assets, net at March 31, 2026 and 2025, respectively.
We perform an impairment test on goodwill balances annually in the first fiscal quarter and more frequently if indicators for potential impairment exist. Indicators that are considered include significant declines in performance relative to expected operating results, significant changes in the use of the assets, significant negative industry or economic trends, or a significant decline in the Company’s stock price and/or market capitalization for a sustained period of time.
Goodwill impairment testing is conducted at the reporting unit level, which is generally defined as an operating segment or a component, one level below our operating segments, for which discrete financial information is available and where segment management regularly reviews the operating results of that reporting unit.
We apply the goodwill impairment test by comparing the estimated fair value of a reporting unit to its carrying value and an impairment charge is recorded equal to the amount of excess carrying value above the estimated fair value, if any, but not to exceed the amount of goodwill allocated to the reporting unit.
To estimate the fair value of our reporting units, we generally use a combination of the market approach and the income approach. Under the market approach, we estimate fair value by comparing the business to similar businesses, or guideline companies whose securities are actively traded in public markets. Under the income approach, we use a discounted cash flow model in which cash flows anticipated over several periods, plus a terminal value at the end of that time horizon, are discounted to their present value using an appropriate rate that is commensurate with the risk inherent within the reporting unit. In addition, we compare the aggregate of the reporting units’ fair values to our market capitalization as further corroboration of the reasonableness of our concluded fair values.
Estimates of fair value result from a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions at a point in time. Judgments made in determining an estimate of fair value may materially impact our results of operations. The valuations are based on information available as of the impairment testing date and are based on expectations and assumptions that have been deemed reasonable by management. Any material changes in key assumptions, including failure to meet business plans, negative changes in government reimbursement rates, deterioration in the U.S. and global financial markets, an increase in interest rates, or an increase in the cost of equity financing by market participants within the industry, or other unanticipated events and circumstances may decrease the projected cash flows or increase the discount rates and could potentially result in an impairment charge. Under the market approach, significant estimates and assumptions also include the selection of appropriate guideline public companies and the determination of appropriate valuation multiples to apply to the reporting unit. Under the income approach, significant estimates and assumptions also include the determination of discount rates. The discount rates represent the weighted-average cost of capital measuring the reporting unit’s cost of debt and equity financing, which are weighted by the percentage of debt and percentage of equity in a company’s target capital structure. Included in the estimate of the weighted-average cost of capital is the assumption of an unsystematic risk premium to address incremental uncertainty related to the reporting unit’s future cash flow projections.
The annual impairment testing performed for fiscal 2026, fiscal 2025, and fiscal 2024 did not indicate any impairment of goodwill.
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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
Refer to Financial Note 10, “Goodwill and Intangible Assets, Net,” to the consolidated financial statements included in this Annual Report for additional information.
Long-Lived Assets
Currently, all of our identifiable intangible and other long-lived assets are amortized or depreciated based on the pattern of their economic consumption or a straight-line basis over their estimated useful lives, ranging from three to 26 years. We review intangible and other long-lived assets for impairment at an asset group level whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Determination of recoverability of intangible and other long-lived assets is based on the lowest level of identifiable estimated future undiscounted cash flows resulting from the use of the asset and its eventual disposition. Measurement of any impairment loss is based on the excess of the carrying value of the asset group over its fair value. Assumptions and estimates about future values and the remaining useful lives of our purchased intangible assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts.
Our ongoing consideration of all the factors described previously could result in further impairment charges in the future, which could adversely affect our net income. Refer to Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the consolidated financial statements included in this Annual Report for additional information on our long-lived asset impairments.
Long-lived assets classified as held for sale are measured at the lower of their carrying amount or fair value less costs to sell and are not depreciated or amortized. Fair value is determined based on the total consideration expected to be received by the Company. The fair value of a disposal group, less any costs to sell, is assessed each reporting period it remains classified as held for sale and any remeasurement to the lower of carrying value or fair value less costs to sell is reported as an adjustment to the carrying value of the disposal group. When the net realizable value of a disposal group increases during a period, a gain can be recognized to the extent that it does not increase the value of the disposal group beyond its original carrying value when the disposal group was reclassified as held for sale.
Restructuring Charges: We have certain restructuring reserves which require significant estimates related to the timing and amount of future employee severance and other exit-related costs to be incurred when the restructuring actions take place. We generally recognize employee severance costs when payments are probable and amounts can be reasonably estimated. Costs related to contracts without future benefit or contract termination are recognized at the earlier of the contract termination or the cease-use dates. Other exit-related costs are expensed as incurred. In connection with these restructuring actions, we also assess the recoverability of long-lived assets used in the business, and as a result, we may recognize accelerated depreciation and amortization reflecting shortened useful lives of the underlying assets. Refer to Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the consolidated financial statements included in this Annual Report for additional information on restructuring matters.
Income Taxes: Our income tax expense and deferred tax assets and liabilities reflect management’s best assessment of estimated current and future taxes to be paid. We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgments and estimates are required in determining the consolidated income tax provision and in evaluating income tax uncertainties, including those used to conclude on the unrecognized tax position related to opioid-related litigation and claims, and may differ from the actual amounts of tax benefit recognized. We review our tax positions at the end of each quarter and adjust the balances as new information becomes available.
Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence including our past operating results, the existence of cumulative net operating losses in the most recent years, and our forecast of future taxable income. In estimating future taxable income, we develop assumptions including the amount of future federal, state, and foreign pre-tax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we use to manage the underlying businesses.
Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. Should tax laws change, our tax expense and cash flows could be materially impacted.
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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
In addition, the calculation of our tax liabilities includes estimates for uncertainties in the application of complex new tax regulations across multiple global jurisdictions where we conduct our operations.
We recognize liabilities for tax and related interest for issues in the U.S. and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes and related interest will be due. If our current estimate of tax and interest liabilities is less than the ultimate settlement, an additional charge to income tax expense may result. If our current estimate of tax and interest liabilities is more than the ultimate settlement, a reduction to income tax expense may be recognized. Refer to Financial Note 6, “Income Taxes,” to the consolidated financial statements included in this Annual Report for additional information on income tax matters.
Loss Contingencies: We are subject to various claims, including claims with customers and vendors, pending and potential legal actions for damages, investigations relating to laws and regulations and other matters arising out of the normal conduct of our business. 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 and whether it is possible to reasonably estimate a range of possible . When a material is reasonably possible, or probable but a reasonable estimate cannot be made, disclosure of the proceeding is provided. Legal fees are expensed as incurred when the legal services are provided.
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 potential loss or range of the 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 future negotiations with or decisions by third parties, such as regulatory agencies, the court system, and other interested parties.
In conjunction with the preparation of the consolidated financial statements included in this Annual Report, we considered matters related to ongoing controlled substances claims to which we are a party. At March 31, 2026, our estimated accrued liability for opioid-related claims was $5.7 billion. We are not able to reasonably estimate the upper or lower ends of the range of ultimate possible losses for all opioid-related litigation matters. We are not able to predict the outcome in these matters, and an adverse judgment or negotiated resolution in any of these matters could have a material adverse effect on our results of operations, financial position, and cash flows or liquidity. Refer to Financial Note 17, “Commitments and Contingent Liabilities,” to the consolidated financial statements included in this Annual Report for additional information.
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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
We expect our available cash generated from operations and our short-term investment portfolio, together with our existing sources of liquidity from our credit facilities, commercial paper program, and other borrowings will be sufficient to fund our short-term and long-term capital expenditures, working capital, and other cash requirements. At March 31, 2026, we remained adequately capitalized, including access to liquidity from our $4.0 billion revolving credit facility and $1.0 billion 364-day credit facility, and were in compliance with all debt covenants and believe we have the ability to continue to meet our debt covenants in the future. In April 2026, our revolving credit facility and 364-day credit facility were terminated and a new $5.0 billion revolving credit facility was executed, with a maturity date in April 2031. Refer to Financial Note 11 , “ Debt and Financing Activities , ” to the consolidated financial statements included in this Annual Report for additional information.
The following table summarizes the net change in cash, cash equivalents, and restricted cash for the periods shown:
Years Ended March 31,
(Dollars in millions)
Change
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash, cash equivalents and restricted cash
Net change in cash, cash equivalents, and restricted cash
Operating Activities
Operating activities provided cash of $6.2 billion and $6.1 billion for the years ended March 31, 2026 and 2025, respectively. Cash flows from operations can be significantly impacted by factors such as the timing of receipts from customers, inventory receipts, and payments to vendors. Additionally, working capital is primarily a function of sales and purchase volumes, inventory requirements, and vendor payment terms.
For the year ended March 31, 2026, net cash provided by operating activities increased by $70 million compared to the prior year period. This increase was primarily due to the following:
• the Company’s net income increased by $1.6 billion and was impacted by lower net non-cash items of $836 million, compared to the prior year period driven by factors discussed in more detail in the “Overview of Consolidated Results” section of this Financial Review;
• an increase in net cash of $1.9 billion related to accounts receivable primarily due to favorable timing of collections in the current period and the impact from branded pharmaceutical price decreases;
• a decrease in net cash of $4.0 billion related to accounts payable as a result of customary vendor payment scheduling, timing related to the day of the week on which the period ends, and the impact from branded pharmaceutical price decreases, partially offset by an increase in net cash of $1.2 billion due to higher inventory requirements during the period compared to the prior year; and
• an increase in net cash from other assets and liabilities primarily related to lower contract liability and customer rebate payments.
Investing Activities
Investing activities used cash of $3.4 billion and $733 million for the years ended March 31, 2026 and 2025, respectively. Investing activities for the March 31, 2026 included $3.4 billion of net cash payments for acquisitions, including $2.5 billion and $875 million for the acquisitions of the interests in Core Ventures and PRISM Vision, respectively, as discussed in further detail in Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report.
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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
Investing activities for the year ended March 31, 2026 were also impacted by the receipt of proceeds from sales of businesses and investments of $830 million, including cash proceeds, net of cash divested, of $693 million from the completed divestiture of our Norway disposal group, as discussed in Financial Note 2, “Business Acquisitions and Divestitures,” to the consolidated financial statements included in this Annual Report. Investing activities for the year ended March 31, 2026 included $436 million and $309 million, respectively, in capital expenditures for property, plant, and equipment and capitalized software.
Investing activities for the year ended March 31, 2025 included $537 million and $322 million, respectively, in capital expenditures for property, plant, and equipment and capitalized software. Investing activities for the year ended March 31, 2025 were also impacted by the receipt of proceeds of $189 million related to investments in equity securities, as discussed in Financial Note 15, “Fair Value Measurements,” to the consolidated financial statements included in this Annual Report.
Financing Activities
Financing activities used cash of $4.6 billion and $4.0 billion for the years ended March 31, 2026 and 2025, respectively. Financing activities for the year ended March 31, 2026 included $4.8 billion of cash paid for share repurchases and $381 million of cash paid for dividends. Financing activities also included cash receipts and cash payments of $9.2 billion related to short-term borrowings of commercial paper in fiscal 2026.
On May 30, 2025, we completed a public debt offering of 4.65% Notes due May 30, 2030 in a principal amount of $650 million, 4.95% Notes due May 30, 2032 in a principal amount of $650 million, and 5.25% Notes due May 30, 2035 in a principal amount of $700 million, for total proceeds received, net of discounts and debt offering expenses, of $2.0 billion. The net proceeds from these notes in addition to cash on hand were utilized to fund the purchase of our interest in Core Ventures.
On November 14, 2025, our €600 million outstanding principal amount of 1.50% Notes matured and on December 3, 2025, our $500 million outstanding principal amount of 0.90% Notes matured, and were repaid using cash on hand.
Financing activities for the year ended March 31, 2025 included $3.1 billion of cash paid for share repurchases and $345 million of cash paid for dividends. Financing activities also included cash receipts and cash payments of $15.1 billion related to short-term borrowings of commercial paper in fiscal 2025. On September 10, 2024, we completed a public offering of 4.25% Notes due September 15, 2029 in a principal amount of $500 million. Proceeds received from this note issuance, net of discounts and offering expenses, were $496 million. We utilized the net proceeds from this note issuance along with cash on hand to redeem our $500 million outstanding principal amount of 5.25% Notes due February 15, 2026 prior to maturity at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest through the settlement date.
Refer to Financial Note 11, “Debt and Financing Activities,” to the consolidated financial statements included in this Annual Report for additional information.
Cash used for other financing activities generally includes shares surrendered for tax withholding and payments to noncontrolling interests.
Share Repurchase Plans
The Board has authorized the repurchase of common stock. We may repurchase common stock from time-to-time through open market transactions, privately negotiated transactions, accelerated share repurchase (“ASR”) programs, or by combinations of such methods, any of which may use pre-arranged trading plans that are designed to meet the requirements of Rule 10b5-1(c) of the Securities Exchange Act of 1934 (“Exchange Act”). The timing of any repurchases and the actual number of shares repurchased will depend on a variety of factors, including our stock price, corporate and regulatory requirements, tax implications, restrictions under our debt obligations, other uses for capital, impacts on the value of remaining shares, cash generated from operations, and market and economic conditions.
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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
Excise taxes incurred on our share repurchases are direct and incremental costs to purchase treasury stock, and accordingly are included in the total cost basis of the common stock acquired and reflected as a reduction of stockholders’ equity within “Treasury shares” in our Consolidated Balance Sheets and Consolidated Statements of Stockholders’ Deficit. Excise taxes do not reduce our remaining authorization for the repurchase of common stock. Excise taxes of $40 million and $26 million were accrued for shares repurchased during the years ended March 31, 2026 and 2025, respectively. On October 30, 2024, we made a payment of $25 million for fiscal 2024 excise taxes previously accrued. On July 30, 2025, we made a payment of $26 million for fiscal 2025 excise taxes previously accrued. As of March 31, 2026 and March 31, 2025, the amount accrued for excise taxes was $40 million, and $26 million, respectively, within “Other accrued liabilities” in our Consolidated Balance Sheets.
Information regarding the share repurchase activity over the last two fiscal years was as follows:
Share Repurchases (1)
(In millions, except price per share)
Total
Number of
Shares
Purchased (2)
Average Price
Paid Per Share
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the
Programs (3) (4)
Balance, March 31, 2024
Share repurchase authorization increase in fiscal 2025
Shares repurchased - Open market
Balance, March 31, 2025
Shares repurchased - Open market
Shares repurchased - March 2026 ASR (5)
Balance, March 31, 2026
(1) This table does not include the value of equity awards surrendered to satisfy tax withholding obligations or forfeitures of equity awards.
(2) The number of shares purchased reflects rounding adjustments.
(3) The remaining authorization outstanding for repurchases of common stock excludes $40 million and $26 million of excise taxes incurred on share repurchases for the years ended March 31, 2026 and 2025, respectively.
(4) In July 2024, the Board authorized the Company to repurchase with no expiration date up to an additional $4.0 billion shares of common stock. On April 29, 2026, the Board of Directors approved the Company to repurchase up to an additional $5.0 billion shares of common stock to a total authorization of $7.7 billion of April 2026.
(5) In March 2026, the Company entered into an ASR program with a third-party financial institution to repurchase $2.3 billion of the Company’s common stock. The average price paid per share and total number of shares purchased under this program are estimates based on the initial share purchase price and initial delivery of shares under an ASR agreement and may differ from the average price paid per share and total number of shares purchased under the ASR program upon its final settlement in the first quarter of Fiscal 2027.
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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
Selected Measures of Liquidity and Capital Resources
March 31,
(Dollars in millions)
Cash, cash equivalents, and restricted cash
Working capital
Days outstanding for: (1)
Customer receivables
Inventories
Drafts and accounts payable
Debt to capital ratio (2)
(1) Based on year-end balances and sales or cost of sales for the last 90 days of the year.
(2) This ratio describes the relationship and changes within our capital resources, and is computed as the sum of total debt divided by the sum of total debt and McKesson stockholders’ deficit, which excludes noncontrolling interests and accumulated other comprehensive loss.
Cash equivalents, which are readily convertible to known amounts of cash, are carried at fair value. Cash equivalents are primarily invested in AAA-rated U.S. government money market funds, short-term deposits with financial institutions, and short-term commercial papers issued by non-financial institutions. Deposits with financial institutions are primarily denominated in U.S. dollars and the functional currencies of our foreign subsidiaries, including Canadian dollars. Deposits could exceed the amounts insured by the Federal Deposit Insurance Corporation in the U.S. and similar deposit insurance programs in other jurisdictions. We mitigate the risk of our short-term investment portfolio by depositing funds with reputable financial institutions and monitoring risk profiles and investment strategies of money market funds.
Our cash and cash equivalents balance as of March 31, 2026 and 2025 included approximately $1.8 billion and $2.9 billion, respectively, of cash held by our subsidiaries outside of the U.S. Our primary intent is to utilize this cash for foreign operations for an indefinite period of time. Although the majority of cash held outside the U.S. is available for repatriation, doing so could subject us to foreign withholding taxes and state income taxes. We may remit foreign earnings to the U.S. to the extent it is tax efficient to do so. We do not anticipate the tax impact from remitting these earnings to be material. Following enactment of the 2017 Tax Cuts and Jobs Act, the repatriation of cash to the U.S. is generally no longer taxable for federal income tax purposes.
Working capital primarily includes cash and cash equivalents, receivables, inventories, and prepaid expenses, net of drafts and accounts payable, short-term borrowings, current portion of long-term debt, current portion of operating lease liabilities, and other accrued liabilities. Our businesses require substantial investments in working capital that are susceptible to large variations during the year as a result of inventory purchase patterns and seasonal demands. Inventory purchase activity is a function of sales activity and other requirements.
Consolidated working capital decreased at March 31, 2026 compared to the prior year primarily due to an increase in drafts and accounts payable from increased purchasing driven by increased sales and timing, a decrease in cash and cash equivalents, an increase in other accrued liabilities, and an increase in the current portion of long term debt. These were partially offset by an increase in receivables, net, and inventories, net, driven by higher sales and timing.
Our debt to capital ratio increased for the year ended March 31, 2026 compared to the prior year primarily due to share repurchases and dividend payments as well as repayments of long-term debt, partially offset by net income attributable to McKesson for fiscal 2026 and issuance of new long-term debt.
On July 29, 2025, we raised our quarterly dividend from $0.71 to $0.82 per share of common stock. Dividends were $3.17 per share in fiscal 2026 and $2.75 per share in fiscal 2025, and we paid total cash dividends of $381 million and $345 million in fiscal 2026 and fiscal 2025, respectively. We anticipate that we will continue to pay quarterly cash dividends in the future. However, the payment and amount of future dividends remain within the discretion of the Board and will depend upon our future earnings, financial condition, capital requirements, legal requirements, and other factors.
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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
Material Cash Requirements:
The table and information below presents our significant financial obligations and commitments as of March 31, 2026:
Years
(In millions)
Total
Within 1
Over 1 to 3
Over 3 to 5
After 5
On balance sheet
Total debt (1)
Operating lease obligations (2)
Other (3)
Off balance sheet
Interest on borrowings (4)
Purchase obligations (5)
Other (6)
Total
(1) Represents maturities of the Company’s long-term obligations, including finance lease obligations. Refer to Financial Note 11, “Debt and Financing Activities,” to the consolidated financial statements included in this Annual Report for more information, including certain debt financing transactions which occurred subsequent to March 31, 2026 but are not included in the table above.
(2) Represents undiscounted minimum operating lease obligations under non-cancelable operating leases having an initial remaining term over one year and is not adjusted for imputed interest. Refer to Financial Note 9, “Leases,” to the consolidated financial statements included in this Annual Report for more information.
(3) Represents estimated benefit payments for our unfunded benefit plans and minimum funding requirements for our pension plans.
(4) Represents interest that will become due on our fixed rate long-term debt obligations.
(5) Primarily relates to the expected purchase of goods and services, including inventory and capital commitments, from vendors in the normal course of business.
(6) Includes agreements under which we have guaranteed the repurchase of our customers’ inventory and our customers’ debt in the event these customers are unable to meet their obligations to those financial institutions. Refer to Financial Note 16, “Financial Guarantees and Warranties,” to the consolidated financial statements included in this Annual Report for more information.
The material cash requirements table above excludes the following obligations:
At March 31, 2026, the Company had accrued liabilities of $5.7 billion related to the settlement of opioid-related litigation claims with U.S. governmental entities, including Native American tribes, and certain non-governmental plaintiffs as described in Financial Note 17, “Commitments and Contingent Liabilities,” to the consolidated financial statements included in this Annual Report. The majority of this amount relates to opioid settlements payable to governmental entities in annual installments through 2038 pursuant to the schedule set forth in the agreements. As of March 31, 2026, $601 million is estimated to be paid within the next twelve months.
At March 31, 2026, the liability recorded for uncertain tax positions, excluding associated interest and penalties, was approximately $1.2 billion. The ultimate amount and timing of any related future cash settlements cannot be predicted with reasonable certainty. Refer to Financial Note 6, “Income Taxes,” to the consolidated financial statements included in this Annual Report for additional information on income tax matters.
At March 31, 2026, our banks and insurance companies have issued $288 million of standby letters of credit and surety bonds. These were issued on our behalf and are mostly related to our customer contracts and to meet the security requirements for statutory licenses and permits, court and fiduciary obligations, pension obligations in Europe, and our workers’ compensation and automotive liability programs.
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McKESSON CORPORATION
FINANCIAL REVIEW (Concluded)
Capital Resources
We fund our working capital requirements primarily with cash and cash equivalents, proceeds from short-term borrowings from our commercial paper issuances, and longer-term credit agreements and debt offerings. Funds necessary for future debt maturities and our other cash requirements, including any future payments that may be made related to our total estimated litigation liability of $5.7 billion as of March 31, 2026 payable under the terms of various settlement agreements for opioid-related claims, are expected to be met by existing cash balances, cash flow from operations, existing credit sources, and future borrowings. Long-term debt markets and commercial paper markets, our primary sources of capital after cash flow from operations, are open and accessible to us should we decide to access those markets. Detailed information regarding our debt and financing activities is included in Financial Note 11, “Debt and Financing Activities,” to the consolidated financial statements included in this Annual Report.
We believe that our future operating cash flow, financial assets, and access to capital and credit markets, including our credit facilities, give us the ability to meet our financing needs for the foreseeable future. However, there can be no assurance that an increase in volatility or disruption in the global capital and credit markets will not impair our liquidity or increase our costs of borrowing.
RELATED PARTY BALANCES AND TRANSACTIONS
Information regarding our related party balances and transactions is included in Financial Note 19, “Related Party Balances and Transactions,” to the consolidated financial statements included in this Annual Report.
NEW ACCOUNTING PRONOUNCEMENTS
New accounting pronouncements that we have recently adopted, as well as those that have been recently issued but not yet adopted by us, are included in Financial Note 1, “Significant Accounting Policies,” to the consolidated financial statements included in this Annual Report.
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McKESSON CORPORATION
