Partnering to navigate change: McKesson’s staying power comes from adaptation

This story is one in a series about McKesson from DSN’s February issue. 

For a company approaching 200 years old, McKesson remains spry. It also is no stranger to changes, particularly this year. As the company prepares to move its headquarters from San Francisco to Las Colinas, Texas, it simultaneously is readying for a change in leadership. Effective April 1 — the same day the new headquarters become official — Brian Tyler, currently president and COO, will take over as CEO.

These changes take place as McKesson looks to help its customers — whose ranks in the pharmacy world run the gamut from such national chains as Walmart, such regional chains as Lewis Drug and independent players, many of whom operate under the Health Mart banner — navigate a constantly changing landscape.

“When we think about the future of retail pharmacy, we think independent and community pharmacies play a critical role in the health of the communities they serve,” Tyler said. “Supporting these pharmacies and finding new ways to help them improve the care they deliver — all while reducing costs and improving efficiency — are a key focus for us. Community pharmacy is an important part of addressing health care’s overall challenges.”

And McKesson is placing itself front and center to help navigate these changes. Tyler said that while retail pharmacy has long been a core part of its heritage, McKesson also is working to be on the forefront of technology and approaches that make it a distribution partner, as well as a resource for building out pharmacies’ offerings.

“Over the years, we’ve taken our highly efficient distribution network that’s able to deliver our core distribution services, and we’ve evolved the company to offer a variety of other healthcare technologies, clinical solutions and services. By helping our customers run more efficient business operations, we support them in delivering the important care for their communities,” Tyler said. He also said McKesson’s U.S. operations take learnings from its European and Canadian operations, where it owns and operates drug chains.

The need to support customers comes as the industry undergoes a shift that Chris Dimos, president of retail solutions for McKesson’s Health Mart division, characterized as a fundamental change in pharmacy’s role.

“Pharmacy was previously looked at as a distributive business, focused on product distribution. Today, we’re seeing that knowledge distribution is becoming much more important,” he said. That change creates the dual need “to provide knowledge in a way that is impactful for the patient, while still having quality products and a robust supply chain.”

Indeed, a key way that McKesson enables its customers to enhance their offerings is by leveraging its distribution network — through which roughly one-third of the nation’s medications pass on a nightly basis, according to Gene Cavacini, senior vice president and COO of U.S. Pharma.

“If we’re doing our pick, pack and ship job right, nobody ever thinks about us,” Cavacini said. “Everything should just happen seamlessly and invisibly so customers don’t have to give that part of our relationship a lot of thought. This allows us to focus on helping them become more efficient in their operations and supporting them in delivering care to their patients.”

To get to that point, though, the company has invested heavily in its distribution capabilities, according to Ammie McAsey, senior vice president of distribution operations.

“Our network of 26 distribution centers has continually undergone upgrades, in some cases, we’ve built new locations and we’ve retrofitted others,” she said. “For the last 10 years, we’ve accelerated our implementation of automation.”

Among the automation that McKesson’s DCs leverage are automatic order-picking machines that can operate between 800 and 1,000 “lines” per hour — a “line” is a line item in a customer’s order, such as three bottles of acetaminophen. McAsey said that the best human pickers might hit 600 lines per hour. The company also uses an order storage retrieval system, or OSRs, in its facilities, which brings products directly to workers at their station. The small-footprint OSRs can hold roughly 15,000 items, McAsey said.

McKesson also is set to open a new distribution center in Seattle this April, replacing an older facility in Everett, Wash., and serving the same geographic area as the older facility. McAsey said that the company is taking a new approach that gives the facility a smaller footprint. The Seattle DC will work with McKesson’s Portland, Ore., DC on cross-stock opportunities, building orders in two different facilities, but offering a seamless delivery for its customers.

McKesson’s central distribution capabilities also encompass six central-fill facilities that can help pharmacies — both chains and independents — with the time and cost of filling scripts.

“Our central-fill facilities are basically an extension of a retail pharmacy,” she said. “We have great partnerships with some of our chain customers, and we’re working to build similar partnerships in the independent space to be able to aggregate a number of independent pharmacies. If they can send some scripts to a central-fill pharmacy operated by McKesson, they can really reduce the cost of dispensing.”

Central fill is just one area where McKesson is investing in ways to improve its pharmacy customers’ capabilities. Other solutions include better ways to handle administrative burdens and methods for building clinical offerings. Among McKesson’s recent acquisitions is CoverMyMeds, a leader in healthcare technology, including electronic prior authorization and real-time benefits check. Tyler said that McKesson is focused on increasing its pharmacy customers’ access to specialty drugs for their patients. However, there are various administrative tasks that accompany these products. CoverMyMeds automates some of them, while helping facilitate better communication between various stakeholders, according to Nathan Mott, president of McKesson’s Rx technology solutions.

“We acquired CoverMyMeds to build out our network with providers, because ultimately, care is really a combination of providers and pharmacists interfacing with the patient,” Mott said. “The more we can have seamless communication between those two parties, the more everyone wins.”

“Further, the payers win because if a patient is adherent, it prevents more severe medical issues. And biopharma manufacturers are better able to get their therapy in the hands of patients, and we can provide clinical feedback right back to the manufacturer to make sure the patient is on the right therapy.”

CoverMyMeds’ ability to span various stakeholders and stages of the process is a good example of how Tyler said McKesson positions itself in the pharmacy distribution model.

“As the wholesale distributor, we fundamentally sit in the middle of this model,” he said. “It gives us a platform to have great conversations upstream — insights into how manufacturers are thinking about things — and then we can look downstream and be engaged in similar conversations with our retail and community-

based pharmacy partners. Hopefully, through investments in technology and clinical programs and services, we can marry those conversations and be a conduit, if you will, to help improve the end-to-end efficiency in the market.”

Being that conduit means helping customers maintain the human touch that builds patient relationships, while leveraging technology to help its customers continually deliver on patient needs, even as they continually shift.

“We firmly believe that health care is fundamentally a human-dependent industry. Pharmacy and pharmacists will always be an important