McKesson Corporation

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Case Summary

Company Name
McKesson Corporation
Stock Symbol
Class Period
October 24, 2013 to January 25, 2017
Motion Deadline
December 24, 2018
Northern District of California

The complaint charges McKesson and certain of its officers with violations of the Securities Exchange Act of 1934.  McKesson delivers pharmaceutical and medical products and business services to retail pharmacies and institutional healthcare providers such as hospitals and health systems throughout North America and internationally. The majority of its income is derived from its business as a pharmaceutical wholesaler in which it purchases drugs in bulk directly from manufacturers and then sells and distributes those drugs to pharmacy networks, hospitals, and independent pharmacies.

The complaint alleges that during the Class Period, defendants made false and misleading statements and/or failed to disclose adverse information regarding McKesson’s business and operations, including that McKesson and several of its industry peers had colluded to fix the price of certain generic drugs, that this collusive conduct constituted a violation of federal antitrust laws, and that, as a consequence, McKesson’s revenues during the Class Period were, in part, the result of illegal conduct and were therefore unsustainable.  As a result of defendants’ false statements and/or omissions, the price of McKesson common stock was artificially inflated during the Class Period to more than $240 per share.

Then, after the close of trading on January 25, 2017, McKesson announced disappointing financial results for the third quarter of fiscal 2017.  The Company reported adjusted earnings per diluted share of $3.05, a 4% decrease from the same period in the prior fiscal year, and lower than expected revenue for its North American Pharmaceutical Distribution and Services business unit.  According to the complaint, these disappointing results were caused by the unraveling of McKesson’s collusive price-fixing scheme, which meant that McKesson was no longer able to fix prices with drug manufacturers and other wholesalers.  The Company’s CEO stated that the poor results were “a result of the generic pricing actions we began to implement late in our second quarter,” as McKesson’s “prices were ultimately set at a lower level than our initial expectations that were included in our previous guidance.”  On this news, the price of McKesson stock fell $12.55 per share, or more than 8%, to close at $138.55 per share on January 26, 2017. 

Subsequently, on October 31, 2017, a group of state attorneys general issued a press release regarding their continuing investigation into companies in the generic drug industry for collusive price fixing in connection with a proposed amended complaint to be filed in the case that included additional defendants.  The attorneys general’s press release stated that “the states’ investigation involves allegations of conspiracy and collusion with the entirety of the generic drug industry, and wholesalers, distributors and other customers are certainly player within the industry.”

Class Period: October 24, 2013 - January 25, 2017
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