MCKESSON CORP

Trends and Uncertainties:

Opioid-Related Litigation and Claims

As described in the discussion of opioid-related matters in Financial Note 9, “Commitments and Contingent Liabilities,” to the condensed consolidated financial statements accompanying this Quarterly Report, we are a defendant in many legal proceedings asserting claims related to the distribution of controlled substances (opioids) in federal and state courts throughout the U.S., and in Puerto Rico and Canada. The plaintiffs in these actions have included state attorneys general, county and municipal governments, tribal nations, hospitals, health and welfare funds, third-party payors, and individuals. We believe we have valid legal defenses in all opioid-related matters, including claims not covered by settlement agreements, and we intend to mount a vigorous defense. Other than as to the settlements described in Financial Note 9, we have not concluded a loss is probable in any of the matters; nor is any possible loss or range of loss reasonably estimable. An adverse judgment or negotiated resolution in any of these matters could have a material adverse impact on our financial position, cash flows or liquidity, or results of operations.

The Company and two other national distributors have reached agreements in principle with representatives of nationwide groups of acute care hospitals and certain third-party payors.

With respect to acute care hospitals, for the year ended March 31, 2024, the Company recorded a charge of $149 million within “Claims and litigation charges, net” in the Consolidated Statement of Operations to reflect its portion of a proposed settlement with a nationwide class of acute care hospitals, of which $75 million was recorded within Corporate expenses, net, and $74 million was recorded within U.S. Pharmaceutical. The corresponding liability was included within “Other accrued liabilities” in the Consolidated Balance Sheet. The proposed settlement is subject to, among other things, court approval and sufficient participation by hospitals.

With respect to the third party payors, the Company has reached an agreement in principle with representatives of a nationwide group of certain third-party payors. For the three months ended June 30, 2024, we recorded a charge of $114 million within “Claims and litigation charges, net” in the Condensed Consolidated Statement of Operations to reflect our portion of the proposed settlement with representatives of a nationwide group of certain third-party payors, of which $57 million was recorded within Corporate expenses, net, and $57 million was recorded within U.S. Pharmaceutical. The corresponding liability was included within “Other accrued liabilities” in the Condensed Consolidated Balance Sheet. The proposed settlement is subject to, among other things, court approval and sufficient participation by third-party payors. The claims of remaining U.S. non-governmental plaintiffs and those plaintiffs in Canada are not included in the charges recorded by the Company.

During the three months ended June 30, 2024, we made no payments associated with various settlement agreements for opioid-related claims. Our total estimated liability for opioid-related claims was $6.9 billion as of June 30, 2024, of which $778 million was included within “Other accrued liabilities” for the amount estimated to be paid within the next twelve months, and the remaining liability was included in “Long-term litigation liabilities” in our Condensed Consolidated Balance Sheet. In July 2024, we made payments totaling $500 million associated with the Settlement and the separate settlement agreements.