CARDINAL HEALTH INC

Pharmaceutical and Specialty Solutions Segment

Branded Pharmaceuticals

There are a number of proposed and adopted U.S. government policy initiatives being considered that could directly or indirectly impact pharmaceutical manufacturer list prices for branded pharmaceutical products. The Inflation Reduction Act has and will continue to adversely impact our revenue by capping prices for certain drugs; however, our profitability has not been materially impacted. Additionally, the Executive Order titled “Delivering Most-Favored Nation Prescription Drug Pricing to American Patients” and other administrative policies or actions may impact sales or profitability of branded pharmaceutical products. The extent of any future impacts is uncertain and may vary depending on the timeline for implementation and the extent of any price reductions.

An April 2026 proclamation issued by the President of the United States imposed tariffs on imports of branded pharmaceutical products and associated ingredients imported into the United States. If pharmaceutical manufacturers raise their prices or stop importing certain products, we could experience increased costs or supply disruptions which may impact our financial results.

With respect to GLP-1 medications, we experienced increased demand during the three months ended September 30, 2026, which positively impacted our Pharma segment revenue and consolidated revenue; however, increased GLP-1 sales did not meaningfully contribute to segment profit. Demand growth for GLP-1 medications began to moderate in fiscal year 2026 and we expect future demand growth moderation to continue; however, demand for these medications is unpredictable.

Generics Program

The financial results of our Pharma segment generics program include, among other things, the impact of generic pharmaceutical product launches, customer volumes, pricing changes, the Red Oak Sourcing, LLC venture ("Red Oak Sourcing") with CVS Health Corporation ("CVS Health"), and generic pharmaceutical contract manufacturing and sourcing costs.

The frequency, timing, magnitude, and profit impact of generic pharmaceutical customer volumes, pricing changes, customer contract renewals, generic pharmaceutical manufacturer pricing changes, and generic pharmaceutical contract manufacturing and sourcing costs all impact Pharma segment profit and are subject to risks and uncertainties. Additionally, while generic pharmaceutical products are not currently subject to U.S. tariffs, it is possible that this may change in the future, which may impact our costs or decrease available supply. These risks and uncertainties may impact Pharma segment profit and consolidated operating earnings during the remainder of fiscal 2027 and beyond.

Tariffs

International Emergency Economic Powers Act ("IEEPA") Tariffs

In February 2025, the United States imposed tariffs under the IEEPA on certain goods, materials, and products imported into the United States from countries where we do business. Between February 2025 and 2026, we have paid approximately $200 million in IEEPA tariffs, related to products that we source, manufacture, or distribute, primarily in our GMPD segment.

In February 2026, the U.S. Supreme Court ruled that the IEEPA tariffs were unlawful. Subsequent to this ruling, U.S. Customs and Border Protection (the "CBP") worked to establish a phased process to administer refunds required by the Supreme Court ruling. In April 2026 and June 2026, the U.S. Government launched its program to administer refund requests under Phase 1 and Phase 2, respectively, and additional phases are expected to be communicated in the future. The majority of our refund requests fall under Phase 2. Our refund requests under Phases 1 and 2 have been submitted and accepted by the CBP. We expect that the remainder of our refund requests will be submitted in later phases or through other established mechanics.

As of September 30, 2026, we have recovered the majority of refunds for the claims submitted under Phase 1 and Phase 2. We expect the remainder of claims to be submitted in future phase filings, for which the CBP has not yet opened the claims submission process. After receiving refunds of all IEEPA tariffs from the U.S. Government, we expect to return to customers the portion of those refunds that reflect the estimated increased prices paid related to IEEPA tariffs. The ultimate resolution of this matter could impact our results of operations in future periods, including GMPD segment profit and consolidated operating income.

Tariff Environment

The tariff environment remains dynamic and we do not expect to be able to establish alternative sources of supply or otherwise mitigate the potential impact of tariffs on all of the products that we source, manufacture, or distribute. For example, in addition to the IEEPA tariffs discussed above, our GMPD segment has experienced, and expects to continue to experience, increased costs as a result of tariffs imposed or expected to be imposed under different legal authority. Our GMPD segment continues to take action to reduce the impact of these and other potential tariffs on our financial results, including through cost optimization initiatives and by increasing prices on impacted products to customers; however, these measures have not fully offset the adverse impact and may not in the future. We are still incurring increased costs from tariffs, and if we are not successful at increasing prices to customers, our financial results will continue to be negatively impacted. Furthermore, if our competitors do not increase prices, or increase prices to a lesser extent than we do or are able to offset the impact of tariffs through other actions, our competitive and financial position may be adversely affected.

Additionally, while generic pharmaceutical products are not currently subject to U.S. tariffs, in July 2026, the President issued a statement indicating that generic pharmaceutical products will be subject to 100% tariffs beginning in 2028 and 200% tariffs beginning in 2029. There remains significant uncertainty about the ultimate implementation of this proposal; however, these potential tariffs may impact our costs or decrease available supply, which could impact Pharma segment profit and consolidated operating earnings.

Iran Conflict

The conflict in Iran has resulted in higher than anticipated costs for fuel and transportation across the enterprise as well as products manufactured or distributed by our GMPD segment. We may not be successful at offsetting these increased prices through cost-savings measures or increasing prices to customers. If we are not able to offset these increased prices, profit may be negatively impacted to a greater extent than initially expected.