McKesson CEO: Brian Tyler
McKesson Corporation, currently ranked 6th on the FORTUNE 500, is a global leader in healthcare supply chain management solutions, retail pharmacy, community oncology and specialty care, and healthcare information technology.
McKesson partners with pharmaceutical manufacturers, providers, pharmacies, governments and other organizations in healthcare to help provide the right medicines, medical products and healthcare services to the right patients at the right time, safely and cost-effectively.
United by ICARE shared principles, employees work every day to innovate and deliver opportunities that make customers and partners more successful — all for the better health of patients. McKesson has been named the “Most Admired Company” in the healthcare wholesaler category by FORTUNE, a “Best Place to Work” by the Human Rights Campaign Foundation, and a top military-friendly company by Military Friendly.
Crisis in America
According to a 2017 report by the White House Council of Economic Advisers, the opioid epidemic has cost the U.S more than $504 billion and killed more than 400,000 people.
The Origins of the Opioid Epidemic
The United States Department of Health and Human Services (HHS) explains that “In the late 1990s, pharmaceutical companies reassured the medical community that patients would not become addicted to opioid pain relievers and healthcare providers began to prescribe them at greater rates.”
Consequently, “Increased prescription of opioid medications led to widespread misuse of both prescription and non-prescription opioids before it became clear that these medications could indeed be highly addictive.”
Patients had the symptoms, doctors wrote the prescriptions, pharmacy’s ordered the drugs, and the distributor’s like McKesson delivered those orders. With so many different moving parts and each operating on an independent basis, you can begin to see how there was plenty of room for error.
Opioids Spill Over into Heroin Use
Fortune magazine finds “Pharmacists were not as curious as they should have been about doctors doling out prescriptions or patients filling them.”
Also, “Despite warning signs, the DEA consistently raised the national quotas for prescription opioids until 2013. Some argue that when the agency did choke the supply, the epidemic simply got worse, as addicts turned to heroin.”
This is how prescription pain killers become a gateway drug to heroin.
A Crisis Unfolds
An article published by Fortune in 2017 established “It is now significantly more likely that an American will die of a drug overdose than in a car crash.”
In 2015, fatalities grew to 91 lives a day in the U.S. In addition, on any given day in 2017, “more than a thousand people are [were] treated in ERs across the country for misusing prescription opioids. Since 1999 the amount of opioids sold almost quadrupled.”
How does somebody begin misusing their pills? Simple. These people are experiencing severe pain. Some to the point they become dependent on their drugs just to make it through the day. The same way our body can build up a tolerance to alcohol, their bodies build a tolerance for their meds.
Eventually, the day will come when their initial dosage just isn’t cutting it. Their pain is so severe they decide it couldn’t hurt to take an extra pill. Wallah! It works, they’re feeling great again and have an amazing day! Only until the day comes where their dosage plus that extra pill isn’t quite enough…so they take another extra pill, and the cycle repeats.
At some point, the user goes back to their doctor demanding a stronger dosage at a higher volume. Some doctors will oblige their patients while others may say no. When a patient is told no they get creative looking for ways to circumnavigate the system. They need their fix.
2018-19 U.S. Opioid Epidemic Statistics
Based on information gathered by the U.S. HHS between February 2018 and February 2019.
- 10.3 million misused prescription opioids.
- 2 million people had an opioid misuse disorder.
- 2 million people misused prescription opioids for the first time.
- 47,600 people DIED from overdosing on opioids.
- 32,656 people DIED from overdosing on synthetic opioids other than methadone.
U.S. HHS Statistics for those making the transition from opioids to heroin between February 2018 and February 2019.
- 808,000 people used heroin.
- 81,000 people tried heroin for the first time.
- 15,349 people DIED from overdosing on heroin.
McKesson’s Role in the Epidemic
As a distributor, McKesson is responsible for keeping an eye out for any suspicious activity when it comes to the orders they receive. For example, in the event that a pharmacy or doctor is ordering an absurd volume of pills that doesn’t correspond with their patient’s actual needs, McKesson is supposed to at least report the suspicious activity and hopefully strongly reconsider filling the order.
This was not happening, as a matter of fact, a page from the complaint filed by the New York attorney general’s office shows that “of the 1.6 million orders for controlled substances processed between 2008 and 2013 by its Aurora, Colorado Distribution Center, McKesson reported only sixteen as suspicious.”
West Virginia was being flooded with pills as well, as Fortune reports “The numbers are hard to fathom: Between 2007 and 2012, as the nation’s opioid epidemic spiraled out of control, wholesalers collectively shipped 780 million pain pills to West Virginia—or 433 doses for every man, woman, and child there.”
While it’s easy – and potentially very profitable – to direct blame at those with the biggest pockets, such as the distributors. You can say “They flooded the streets with these drugs,” and that’d be an accurate statement as yes, they did fulfill the orders placed by government-sanctioned pharmacies. Who filed orders with the pharmacies? Oath swearing Doctors did in order to help their patients.
McKesson, along with other distributors, finds itself reluctant to take responsibility for the epidemic due to the fact that they were simply doing their job in delivering subscription pain killers for people in need.
Who Do We Blame?
Sooner or later the lawsuits begin pouring in. Why don’t they go after the mom and pop pharmacies or doctors who placed the orders? They do in some cases but the big fish has more to offer.
But what lawyer wouldn’t want to build reputation and revenue by taking on a multi-billion dollar corporation under the guise of moral superiority. It’s a shot at a one-liner that’ll look great in the national headlines during the campaign season for politicians, they get to say “I took on ‘Big Pharma!”
Then said politician turns around the next moment to pick up donations from the same company. They even accept contributions from others in the pharmaceutical industry who play just as much a role in this mess as the distributors! This happens on both sides of the aisle so apparently, when it comes to campaign financing, even in today’s climate, bipartisanship does exist.
According to a Forbes review of Federal Election Commission filings from 2009 through the end of 2018, PACs of AbbVie ABBV +0%, AstraZeneca , Bristol-Myers Squibb BMY +0%, Johnson & Johnson JNJ +0%, Merck, Pfizer PFE +0% and Sanofi the seven companies set to appear before the Senate Finance Committee—have contributed some $1.6 million to the campaign committees of 27 out of 28 current members of the Finance Committee. (Forbes looked at donations made over the last decade to encompass at least one election cycle per senator.)
Yes, the distributors should have been more strict about monitoring suspicious orders but this whole crisis is functioning on so many levels it’d be impossible for the distributors to fix it on their own, therefore they should not bear all the blame.
But they will pay the price, literally.
It’s painstakingly practical to blame the many individual doctors who issue these drugs to their patients, it’s pragmatic to blame the small-business pharmacy shops on main street, and it’s profitable to blame the distributors. Easy choice.
The New York Times reports that “In 2017, after years of allegedly flouting legal requirements to monitor suspicious orders of opioids, McKesson agreed to a $150 million settlement with the Justice Department, a record for a distributor.”
Then, “In 2008, McKesson, which supplies Walmart, paid $13.25 million and Cardinal, the main CVS supplier, paid $34 million to settle federal claims that they had been filling suspicious orders.”
According to the McKesson website, “AmerisourceBergen (NYSE: ABC), Cardinal Health (NYSE: CAH) and McKesson (NYSE: MCK) announced this morning that they have agreed to a $215 million settlement with two Ohio counties, Cuyahoga and Summit, in the first track of the multi-district opioid litigation. With this settlement agreed upon, the companies and the other parties will now continue the work toward a global resolution.”
The icing on this epidemic cake is that the money won from these lawsuits doesn’t have to go towards fixing the problem. It’s up to state legislators to appropriate the funds. In one West Virginia case, they are re-outfitting a prison with all new security scanning equipment!
What Does McKesson Have to Say About All This?
“It would certainly be simpler if we didn’t sell them anymore, but the reality is there’s a need,” says John Hammergren, McKesson’s longtime CEO, adding, “The reason we distribute these products is that there are legitimate patients that need these medicines and who are being prescribed these medicines by well-informed, well-intended doctors who are caring for these patients.”
McKesson CEO from 1999 to March 31st of 2019, Hammergren is largely celebrated for having taken over at a time of inner-turmoil, quadrupled revenues to $208 billion, expanded into global markets, and advanced to number six on the Fortune 500, reflecting total shareholder returns of more than 400% or 9% on a compound annual basis (as of October 31, 2018).
Whether due to mounting pressure from lawyers, the media, politicians, or for some other reason, Hemmergren announced he’d be retiring from the company and 21-year McKesson veteran Brian Tyler would be taking his place.
It is interesting he’d leave at such a pivotal moment in the companies history. However, with a New York Times reported $114 million retirement package, retirement right now doesn’t sound like a bad idea.
Alan McGonigal, an Assistant U.S. Attorney for the Northern District of West Virginia remains objective, saying “They didn’t care enough about the issue,” he says. “I’m sure there was no malevolent desire to flood the street with narcotics. There was just too much emphasis on sales numbers and not enough with keeping an eye on suspicious ordering.”
McKesson calls those unfounded allegations and says the company complies with laws and regulations. Furthermore, a spokesman says that “at no point has there ever been a direct correlation between the sale of controlled substances and incentive compensation for McKesson sales personnel.”
A Brief History of McKesson
In order to gather a complete picture of the challenge which lay ahead for newly appointed CEO Brian Tyler, let’s delve into the past to see where McKesson has been, how it got where it is, and what this means for where it’s going. Courtesy of McKesson.com, here is an outlined history of the company.
McKesson took roots in the earliest days of the United States—when organized health care in America was just taking shape. Over the past 180+ years, we have played a fundamental role in helping to shape the design and direction of health care: helping to set standards for the health care supply chain and playing a large role in our industry’s technology revolution.
1833: Founded by John McKesson and Charles Olcott in New York City to import and sell therapeutic drugs and chemicals wholesale.
1853: Renamed McKesson & Robbins, after a new partner, Daniel Robbins. Distributing pharmaceutical products by covered wagon to 17 states and territories from Vermont to California.
1855: Became one of the first wholesale firms to manufacture drugs. The company’s fluid extracts, tinctures, pills and tablets won medals for its pioneering work.
1900s: Persuaded several wholesalers to its subsidiaries, forming a national drug wholesaling company and becoming the leading distributor of pharmaceutical drug products.
1929: Achieved unprecedented sales million and sustains steady growth despite the Great Depression.
1960s: Merged with Foremost Dairies to form Foremost-McKesson Inc. becoming the largest U.S. distributor of pharmaceutical drugs, alcoholic beverages and chemicals.
1990’s: Decided to focus more on health care by divesting unrelated businesses and acquired General Medical, the largest distributor of medical-surgical supplies.
1993: Pioneered Acumax™, a proprietary barcode warehouse-management solution, and received the Computerworld Smithsonian Award for information technology innovation.
1998: Acquired HBO & Company and operated for a time as McKesson HBOC — the world’s largest health care services company.
2010: Acquired US Oncology, becoming the second-largest specialty company.
2014: Acquired Celesio to become a global health care leader moving its ranking to 11th on the FORTUNE 500 with more than $179 billion in annual revenue.
A New CEO
John Hammergren Steps Down
On November 1st, 2018 McKesson posted a press release announcing Hammergren’s retirement as effective March 31st, 2019.
Hemmergren said in a statement, “It has been an honor to serve as McKesson’s CEO for nearly 20 years.”
He continues, “We are making solid progress with our strategic growth initiative and the company is in a strong financial position. This is the right time to turn the leadership reins over to the next generation and no one is better equipped than Brian to lead McKesson into the future. He is a gifted leader with deep industry knowledge and an unwavering commitment to enhancing value for our customers and their patients.”
Brian Tyler was unanimously voted CEO by McKesson’s Board of Directors, having proven his competence over the course of a 21-year career with the company. What did he do before McKesson? Great question. Not much really, as your about to discover.
Market Watch indicates that upon graduating high school, Tyler attended the University of California of Santa Cruz to receive a B.A. with high honors in Economics (1989).
After doing so he studied under a grant from the National Science Foundation at the University of Chicago, where he earned his Ph.D. and M.A from their Department of Economics (1994).
The Dallas Business Journal reports “Prior to joining McKesson in 1997, Tyler spent three years at Integral, Inc. as a senior associate, Health Care Consulting in Cambridge, MA.”
Tyler has worn many hats while at McKesson, the company documents the roles he’s played in another press release.
- McKesson Europe: Tyler served as chairman of the Management Board (CEO) of McKesson Europe, where he drove revenue growth to $27.3 billion by focusing on operational excellence, collaboration and innovation.
- North American Pharmaceutical Distribution Services: He had overall leadership responsibility for McKesson’s pharmaceutical distribution and related businesses in North America, including McKesson U.S. Pharmaceutical, McKesson Canada, McKesson Specialty Health and McKesson Pharmacy Systems & Automation.
- Corporate Strategy and Business Development: Tyler served as executive vice president of Corporate Strategy and Business Development where he led the overall corporate strategy for McKesson. Tyler helped guide strategy development across McKesson’s business units as well as led the mergers and acquisitions function across the company.
- U.S. Pharmaceutical: He oversaw the business unit’s operations and the distribution of pharmaceuticals and other healthcare related products to customers in four primary segments: national and regional retail pharmacy chains; retail independent pharmacies; hospital providers; and mail pharmacy.
- McKesson Medical-Surgical: He led the nation’s largest alternate site distributor to physician offices, long-term care facilities, surgery centers, direct-to-patient home care and occupational health, and employers.
- McKesson Specialty Care Solutions: Tyler served as president with responsibility for distribution, logistics and pharmacy operations, marketing services, and Prospective Health, Inc.
- McKesson Distribution Solutions: He joined the company as vice president of strategy and business development for McKesson Distribution Solutions in 1997.
Bloomberg documents he has been a member of the boards of McKesson Europe AG, Health Industry Distributors Assn, and Patterson Cos Inc.