Paul Julian talks about the company's strategy
McKesson in recent years has made a number of strategic acquisitions that deepen and extend its reach in health care, and restructured part of the business to maximize the impact of its information technology offerings and core pharmaceutical distribution operation.
The San Francisco-based company agreed in April to acquire Uniprix, which provides services to a franchised network of 330 pharmacies in Quebec. That deal followed McKesson’s earlier purchase of Rexall Health, which operates some 470 drug stores across Canada, and GMB, a specialty distributor that concentrates on ophthalmic products.
“These moves help us expand our presence on a more global scale,” says Paul Julian, executive vice president and group president at McKesson, who has operational responsibility for the vast majority of the business. “We have held the No. 1 market share in Canada for a long time, and these moves add to our scale and presence and bring the company into a couple new areas at the regional level, including specialty, which is a segment that we’re concentrating on around the world right now.”
Perhaps nothing illustrates McKesson’s global ambitions better than its acquisition in 2013 of Celesio AG, a Stuttgart, Germany-based distribution and retail company. With a presence in 13 European countries, Celesio includes 109 wholesale branches as well as 2,150 drug stores, some 300 managed pharmacies and more than 5,500 participants in brand partnership arrangements.
“The assimilation process has gone very well,” Julian notes, “and following the Celesio deal we’ve made a couple smaller acquisitions in Europe — United Drug Group in Ireland, Sainsbury’s pharmacy business in the U.K., and Bupa, a home health specialty company in the U.K. — that give us a platform to develop across Europe. We’ve also done a few other tuck-in acquisitions in Belgium, Portugal and Sweden.”
The strategy is to maintain critical mass, giving McKesson enough clout to be a difference maker for its partners throughout the health care system. “Scale matters,” Julian asserts. “We’ve seen what has happened in the U.S. and other places with consolidation and partnerships such as WBAD [the generic pharmaceutical purchasing operation for Walgreens Boots Alliance and AmerisourceBergen], Red Oak Sourcing [a similar venture involving CVS Health and Cardinal Health], and ClarusOne, our sourcing partnership with Walmart. We’re continuing to look for ways that we can grow our presence, add to our scale, and deliver value to our customers across the globe.”
McKesson is bringing that strategy to bear in the U.S., where ongoing controversy over the nature and structure of the health care system complicates matters for everyone involved in the sector. “I’m not sure what’s going to come out of Washington at this point,” says Julian, referring to efforts by the Trump administration and House Republicans to repeal and replace the Affordable Care Act. “The one thing we can focus on that isn’t going to change is the fact that the population is getting older and medications are often one of the most efficacious ways to keep people healthy and treat chronic disease. We’re well positioned in the markets that we compete in today, and the fundamentals work for our industry.”
The company’s ability to deliver value to its customers is evident in the work it does with the 4,800 independent pharmacies that are part of the burgeoning Health Mart network. “Independent pharmacists are feeling the pinch. Through Health Mart we can give them the opportunity to join an organization that shares their values and provides the services — contracting with PBMs, sourcing expertise, access to technology, the list goes on — that they need to compete effectively on a national scale,” Julian notes.
“If I were starting a pharmacy, I’d be looking to an organization like McKesson for help. You can’t do it alone today. Even we can’t do it alone; neither can WBAD or Red Oak. People are partnering up, but you have to be sure to find a partner that cares about your business, has the right assets and is willing to make the necessary investments. I think we represent that.”
In order to sharpen its focus on that mission, McKesson earlier this year completed the spin-off of a number of its information technology assets into a company called Change Healthcare, in which it has 70% ownership. “This will give the businesses from our technology segment the ability to concentrate on the broader health care technology space, which is extraordinarily fast-moving, as well as raise their own capital, separate from McKesson, and it gives us the opportunity to concentrate 100% on our core,” says Julian.
He is quick to point out that McKesson retained the technology assets that relate directly to community pharmacy, including McKesson Pharmacy Systems, which makes products that automate the prescription filling process; RelayHealth Pharmacy Solutions, whose network provides essential health care connectivity to retail pharmacies, manufacturers and payors; and the recently acquired CoverMyMeds, a leader in electronic prior authorization solutions. “We believe technology is a differentiator for us versus our major competitors,” he notes. “Our technology assets enable us to have a far more vibrant relationship with our customer base than if we were just a drug wholesaler.”