McKesson Gets Out of Pharmacy Outsourcing

Implications: McKesson (MCK) is selling its pharmacy outsourcing business to Comprehensive Pharmacy Services (CPS). McKesson has been the most active out of the big 3 in adjusting its health care business portfolio. For example, the company sold its acute care supply business to Owens & Minor last year. Last week, McKesson acquired Rosebud Solutions, a provider of software solutions to track and manage instruments, endoscopes and tissue implants for surgical services. I expect McKesson to continue tweaking its business mix over the coming year.

Analysis:

Each of the big 3 wholesalers, which also includes AmerisourceBergen (ABC) and Cardinal Health (CAH), have businesses that operate institutional pharmacies on an outsourced basis. I discuss the controversy around the outsourcing business last month in The Dark Side of Pharmacy Outsourcing (Council Site). As you may recall from that post, I'm skeptical of the claim that problems at a single hospital indicated systemic flaws in the pharmacy outsourcing business.

You can read more about McKesson’s business at the McKesson Medication Management page. As a guess, Medication Management probably represents less than $1 billion in revenue but has better 2 to 3 times better profitability than the core drug distribution business. In the absence of any formal statement from the company, I presume that the risks and controversy did not outweigh these incremental profits.