McKesson Expands in Oncology With $2 Billion Acquisition

John H. Hammergren

One of the world's largest providers of medical services and information technologies sees strong growth in oncology services in the coming years, growth that can be leveraged into profits with the right blend of productivity and cost efficiency tools. With this in mind, McKesson plans to spend more than $2 billion to purchase the largest community-based cancer treatment and research network in America.

In November 2010, McKesson announced it had reached a definitive agreement to buy US Oncology, which works with more than 1,300 community-based oncologists to deliver care and conduct cancer research. The company will pay $2.16 billion in cash to purchase and assume all debt of US Oncology in a cash deal expected to close before year's end.

If successful, the move could catalyze community-based oncology in this country, providing management and information tools to improve productivity and drive down costs.

"We understand the oncology business and we have confidence that we are uniquely qualified to create additional value from existing (technology, distribution and service) platforms," said John H. Hammergren, McKesson chair and CEO.

Speaking at a telephone conference of analysts following the announcement of the proposed deal, Mr. Hammergren said the collective capabilities of McKesson and US Oncology "will help community oncologists improve the integrated care experience for patients and drive business and clinical innovation in today's rapidly evolving healthcare landscape."

The proposed acquisition of US Oncology is in keeping with a strategy of growth seen over the last several years at McKesson. Through internal growth, as well as past acquisitions, such as purchase of the physician services company Oncology Therapeutics Network in 2007, the company has become a major provider of pharmaceutical and medical-surgical supply management to healthcare providers, particularly in oncology. It also sells, services, and consults on healthcare information technology for hospitals, physicians, homecare, and payors; provides hospital and retail pharmacy automation; and offers services for manufacturers and payors designed to improve patient outcomes.

Its purchase of US Oncology will drive productivity through increased efficiency in the delivery of care to cancer patients, according to Mr. Hammergren. Physicians in the US Oncology network will benefit from access to a broad array of a la carte technology, practice-management, reimbursement, and clinical services to the community oncology segment. These include McKesson information technologies that support clinical outcomes and enable value-based reimbursement—notably the iKnowMed and Lynx technology platforms, which facilitate outcomes measurement, reporting, and advanced product and inventory management.

Additionally, McKesson offers practice-management solutions and consultative services that will help oncologists adapt to anticipated changes in the healthcare environment coming from government-driven reform efforts. Efficiency improvements may also come from McKesson's distribution and supply-chain expertise, according to the company.

"When we combine US Oncology with McKesson Specialty Care Solutions oncology customer segment, our presence will grow to nearly 3,000 oncologists," he said. "This broadened skill enables us to offer our customers industry-leading distribution services, a comprehensive technology platform, and innovative practice management and clinical support solutions."

The plan is to absorb US Oncology into McKesson's Specialty Care Solutions business. Bruce Broussard, chair and CEO of US Oncology, will run the business from US Oncology's current headquarters in The Woodlands, Tex., with continuing operations in the San Francisco area and other locations throughout the country. US Oncology's Comprehensive Strategic Alliance practice-management offering and core services will remain intact.