Case | HBS Case Collection | May 2012 (Revised August 2014)

McKesson

by Regina E. Herzlinger and Natalie Kindred

Abstract

McKesson, a large, diversified drug distribution and health care IT company, is considering development of new business offerings to help private practice physicians remain independent. The company, with $122 billion in 2010 revenues, just made its first foray into health care services with the acquisition of U.S. Oncology, an integrated cancer care company, whose expertise it could leverage in offerings catered to other physician specialties. With a vast portfolio of products and services serving a wide spectrum of health care stakeholders, McKesson appears uniquely positioned to understand and capitalize on the needs of health care businesses. With the recent passage of health care reform adding to the pressures already squeezing the health care industry—including new payment models requiring significant coordination and IT capabilities—independent physicians are migrating in droves to large health care organizations, abandoning the private practice model. McKesson could potentially provide them with an alternative. McKesson is an exceedingly large company with somewhat autonomous business units, making the prospect of collaborating to create a "cross-disciplinary" offering for independent practices difficult. Moreover, doing so would potentially extend McKesson into the clinical health services (and potentially risk-sharing) business, the strategic merits of which can be debated. Given the uncertainty surrounding the physician practice environment, the ideal shape of a solution to help these customers remains unclear, and competitors with a different product mix could be better positioned than McKesson to provide it. Finally, it could be too late altogether to reverse the trends eroding the private practice model.

Keywords: health care industry; pharmaceutical industry; information technology; health care policy; change management; corporate strategy; organizational transformations; health services; Health Care and Treatment; Business Model; Service Operations; Change Management; Corporate Strategy; Information Technology; Policy; Pharmaceutical Industry; Health Industry; United States;

Citation:

Herzlinger, Regina E., and Natalie Kindred. "McKesson." Harvard Business School Case 312-002, May 2012. (Revised August 2014.)