McKesson
McKesson Case Analysis
One of America’s largest companies, McKesson Corporation, is a provider of healthcare equipment and medical-surgical products, software and connectivity solutions, and drug distribution and other services to a large population of healthcare customers. As the case outlines, the company is considering their future strategy based on recent industry trends, acquisitions and current business positioning. Historically, McKesson was mainly a wholesaler-distributor, dealing with customers on a transactional basis. However, the company has evolved to expand its strategy in health care, to engage customers with IT and other value-added offerings. The company has strengthened their positioning in customer relationships through creation of Health Mart, a program for independent pharmacies, and through the purchase of US Oncology (USON), a community based alliance providing operational support to practices. McKesson senior management is currently evaluating business strategy and whether to pursue an opportunity to expand the USON offering. Specifically, the plan would introduce similar programs to independent physicians in other specialties, including primary care, rheumatology, orthopedics or gastroenterology. In order to evaluate this business decision, it is first necessary to examine the USON model and the McKesson positioning within the changing US healthcare environment based on the six factors affecting innovation.
The USON acquisition provided further integration with customers. The model allows practices to remain independent, while providing operational support with capital investment, administrative functions, technology support and nonclinical staff employment. Financially it is a risk/profit sharing arrangement where USON provides the capital required and receives fees based on practice profitability levels. As well, this acquisition gives McKesson a stronger hold of the specialty drug distribution market, increasing to 25% share.
One of America’s largest companies, McKesson Corporation, is a provider of healthcare equipment and medical-surgical products, software and connectivity solutions, and drug distribution and other services to a large population of healthcare customers. As the case outlines, the company is considering their future strategy based on recent industry trends, acquisitions and current business positioning. Historically, McKesson was mainly a wholesaler-distributor, dealing with customers on a transactional basis. However, the company has evolved to expand its strategy in health care, to engage customers with IT and other value-added offerings. The company has strengthened their positioning in customer relationships through creation of Health Mart, a program for independent pharmacies, and through the purchase of US Oncology (USON), a community based alliance providing operational support to practices. McKesson senior management is currently evaluating business strategy and whether to pursue an opportunity to expand the USON offering. Specifically, the plan would introduce similar programs to independent physicians in other specialties, including primary care, rheumatology, orthopedics or gastroenterology. In order to evaluate this business decision, it is first necessary to examine the USON model and the McKesson positioning within the changing US healthcare environment based on the six factors affecting innovation.
The USON acquisition provided further integration with customers. The model allows practices to remain independent, while providing operational support with capital investment, administrative functions, technology support and nonclinical staff employment. Financially it is a risk/profit sharing arrangement where USON provides the capital required and receives fees based on practice profitability levels. As well, this acquisition gives McKesson a stronger hold of the specialty drug distribution market, increasing to 25% share.
References: Herzlinger, R. “Why Innovation in Healthcare Is So Hard.” Harvard Business Review, May2006. Herzlinger, R, and Kindred, N. "McKesson" Harvard Business School Case 9-312-002, October 2011. (Revised August 2014.)