Commitments and Contingent Liabilities

3 Months Ended

Jun. 30, 2011

Commitments and Contingent Liabilities [Abstract]

Commitments and Contingent Liabilities

10. Commitments and Contingent Liabilities

     In addition to commitments and obligations in the ordinary course of business, we are subject to various claims, other pending and potential legal actions for damages, investigations relating to governmental laws and regulations and other matters arising out of the normal conduct of our business. As described below, many of these proceedings are at preliminary stages and many seek an indeterminate amount of damages.

     When a loss is considered probable and reasonably estimable, we record a liability in the amount of our best estimate for the ultimate loss. However, the likelihood of a loss with respect to a particular contingency is often difficult to predict and determining a meaningful estimate of the loss or a range of loss may not be practicable based on the information available and the potential effect of future events and decisions by third parties that will determine the ultimate resolution of the contingency. Moreover, it is not uncommon for such matters to be resolved over many years, during which time relevant developments and new information must be reevaluated at least quarterly to determine both the likelihood of potential loss and whether it is possible to reasonably estimate a range of possible loss. When a loss is probable but a reasonable estimate cannot be made, disclosure of the proceeding is provided.

     Disclosure also is provided when it is reasonably possible that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the recorded provision. We review all contingencies at least quarterly to determine whether the likelihood of loss has changed and to assess whether a reasonable estimate of the loss or range of loss can be made. As discussed above, development of a meaningful estimate of loss or a range of potential loss is complex when the outcome is directly dependent on negotiations with or decisions by third parties, such as regulatory agencies, the court system and other interested parties. Such factors bear directly on whether it is possible to reasonably estimate a range of potential loss and boundaries of high and low estimates.

     Significant developments in previously reported proceedings and in other litigation and claims since the filing of our 2011 Annual Report on Form 10-K are set out below. Unless otherwise stated, we are currently unable to estimate a range of reasonably possible losses for the unresolved proceedings described below. Should any one or a combination of more than one of these proceedings be successful, or should we determine to settle any or a combination of these matters, we may be required to pay substantial sums, become subject to the entry of an injunction or be forced to change the manner in which we operate our business, which could have a material adverse impact on our financial position or results of operations.

     A. Average Wholesale Price Litigation

     As previously reported regarding the coordinated public payor Average Wholesale Price (“AWP”) actions, collectively In re McKesson Governmental Entities Average Wholesale Price Litigation, filed against the Company in the United States District Court for Massachusetts and relating to alleged misstatements and manipulations of a benchmark for drug reimbursement known as AWP, Board of County Commissioners of Douglas County, Kansas et al. v. McKesson Corporation, (Civil Action No. 1:08-CV-11349-PBS) (“Douglas County, Kansas Action”); and San Francisco Health Plan v. McKesson Corporation (Civil Action No. 1:08-CV-10843-PBS) (“San Francisco Action”); the United States Court of Appeals for the First Circuit, on May 13, 2011, denied the Company’s petition and plaintiffs’ cross-petition seeking permission to appeal the district court’s March 4, 2011 class certification order in the Douglas County, Kansas Action. On June 28 and June 29, 2011, respectively, the Company executed agreements to settle the claims asserted by the States of Oklahoma and Montana on behalf of their respective Medicaid programs in the Douglas County, Kansas Action. On May 23, 2011, the court entered a scheduling order, upon stipulation of the parties, setting December 12, 2011, as the trial date in the San Francisco Action. On July 19, 2011, the trial date in the Douglas County, Kansas Action was set for March 2012.

     On May 24, 2011, the court entered an order denying the Company’s motion to dismiss in the previously reported action filed in Alaska state court by the State of Alaska against the Company and First DataBank, Inc., State of Alaska v. McKesson Corporation, et al., (Case No. 3AN-10-11348-CI). On June 6, 2011, the Company filed an answer denying the allegations in the State of Alaska’s complaint. The case is set for trial in February 2013.

     On May 31, 2011, the court entered final judgment in favor of the Company in the previously reported action filed by the Company in Arizona Superior Court against the Arizona Health Care Cost Containment System (“AHCCCS”), McKesson Corporation v. AHCCCS, (Case No. CV-2011-004446). On June 16, 2011, AHCCCS filed a Notice of Appeal from the judgment entered on May 31, 2011, and the court’s April 28, 2011 ruling that enjoined AHCCCS from prosecuting or reinitiating any administrative proceeding seeking penalties or assessments against the Company.

     On June 2, 2011, the court granted the State of Louisiana’s motion to consolidate for all purposes, including trial, the previously reported action filed in Louisiana state court by the State against the Company, State of Louisiana v. McKesson Corporation, (Case No. C597634 Sec. 23), with the State’s pending action against numerous drug manufacturers, State of Louisiana v. Abbott Laboratories, Inc., et al., (Case No. C596164). On June 13, 2011, the trial court granted the Company’s motion for permission to appeal the court’s June 2 consolidation order. On June 16, 2011, the Company filed a notice of intent to apply for a supervisory writ of review to determine the scope of the Company’s appeal of the court’s June 2 consolidation order.

     On June 2, 2011, an action was filed in Michigan state court, County of Ingham, by the State of Michigan against the Company, First DataBank, Inc., and the Hearst Corporation based on essentially the same factual allegations as alleged in In re McKesson Governmental Entities Average Wholesale Price Litigation, asserting claims under the Michigan false claims act statute, and for fraud based on false representation, silent fraud, civil conspiracy to commit fraud, tortious interference with contract, and unjust enrichment, and seeking damages and treble damages, civil penalties, restitution, disgorgement of profits, interest, attorneys’ fees and costs of suit, all in unspecified amounts, Bill Schuette ex rel. State of Michigan v. McKesson Corporation, et al., (11-629-CZ). The Company has not yet responded to the complaint in this matter.

     On June 8, 2011, an action was filed against the Company and two of its employees in the United States District Court, Northern District of California, by the Commonwealth of Virginia based on essentially the same factual allegations as alleged in In re McKesson Governmental Entities Average Wholesale Price Litigation, asserting claims under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), the Virginia false claims act statute, the Virginia Fraud statute, and for conspiracy to defraud, and seeking damages and treble damages, civil penalties, interest, and costs of suit, all in unspecified amounts, Commonwealth of Virginia v. McKesson Corporation, et al., (C11-02782-SI). The Company has not yet responded to the complaint in this matter.

     On June 16, 2011, the Company filed an answer denying the allegations in the State of Hawaii’s complaint in the previously reported action filed in Hawaii state court by the State against the Company and First DataBank, Inc., State of Hawaii v. McKesson Corporation, et al., (Civil No. 10-1-2411-11-GWBC). The parties are now engaged in discovery. No trial date has been set.

     On July 1, 2011, the court denied the Company’s motion to transfer or, in the alternative, to dismiss the previously reported action filed in Mississippi state court by the State of Mississippi against the Company, State of Mississippi v. McKesson Corporation, et al., (Case No. 251-10-862CIV). No trial date has been set.

     On July 13, 2011, the Company was named as a co-defendant to First DataBank, Inc., in an action filed in Indiana state court, County of Marion, by the State of Indiana based on essentially the same factual allegations as alleged in In re McKesson Governmental Entities Average Wholesale Price Litigation, asserting claims under the Indiana false claims act statute, the Indiana Medicaid fraud statute, the Indiana theft statute, and for fraud and civil conspiracy, and seeking damages and treble damages, civil penalties, disgorgement of profits, interest, injunctive and declaratory relief, attorneys’ fees and costs of suit, all in unspecified amounts, State of Indiana v. McKesson Corp. et al., (Case No. 49D11-1106-PL-021595).

     On July 19, 2011, the court denied the Company’s motion to dismiss the previously reported action filed in the United States District Court, Northern District of California, by the State of Utah against the Company, State of Utah v. McKesson Corporation, (Case No. CV 10-4743-SI). No trial date has been set.

     B. Other Litigation and Claims

     On May 27, 2011, the Company filed a motion to dismiss the relator’s complaint in the previously reported qui tam action pending in the United States District Court for the District of Massachusetts, United States ex rel. Scott Bartz v. Ortho McNeil Pharmaceuticals, Inc., et al., (Case No. 2:05-cv-06010). On June 10, 2011, the relator filed a notice of intent to voluntarily dismiss the Company from the action.

     In the previously reported federal class action brought on behalf of certain California residents and against the Company and its indirect subsidiary NDCHealth Corporation (“NDC”), Rodriguez et al. v. Etreby Computer Company et al., (Civil Action No. CV 10-3522-VBF), alleging wrongful release of individual confidential medical information, the previously reported settlement was given final approval by the trial court on June 30, 2011, fully resolving and terminating this action as to all defendants.

     As previously reported, the Company’s subsidiary, Northstar Rx LLC (“Northstar”), is one of multiple vendor defendants in approximately 350 cases alleging that plaintiffs were injured after ingesting Reglan and/or its generic equivalent, metoclopramide. The Company is also named in approximately 550 cases as a distributor of these products. On June 23, 2011, the United States Supreme Court issued an opinion holding that generic drug manufacturers cannot be held liable under state laws based on allegations that they failed to provide adequate label warnings, Pliva, Inc. v. Mensing, (Nos. 09-993, 09-1039 and 09-1501) (“Mensing”). It is anticipated that plaintiffs will file amended complaints in these matters and that defendants, including Northstar, will move for dismissals based on the Supreme Court’s ruling in Mensing.

     On April 26, 2011, the previously reported qui tam action pending in the United States District Court for the District of Kansas, Saleaumua, Inc., et al. v. McKesson Corporation et al. (Case No. 4:08-CV-0848), was dismissed; and as previously reported, the related investigation by the United States Attorneys’ Office in Kansas City has been closed with no action recommended or taken against the Company.