2003 JP Morgan 2003 JP Morgan Healthcare ConferenceHealthcare Conference

January 6, 2003January 6, 2003

John HammergrenJohn Hammergren

Chairman and Chairman and Chief Executive Officer Chief Executive Officer

Safe Harbor ClauseSafe Harbor Clause

Some of the information in this presentation may constitute forward-looking statements which are subject to various uncertainties and could cause actual results to differ materially from those projected or implied. These uncertainties are described in the Company’s reports and exhibits filed with the Securities and Exchange Commission.

Agenda For Today’s PresentationAgenda For Today’s Presentation

Market and Strategy OverviewMarket and Strategy Overview

Business Unit ReviewBusiness Unit Review

SummarySummary

McKesson Investment HighlightsMcKesson Investment Highlights

Positive momentum in Pharmaceutical Solutions Positive momentum in Pharmaceutical Solutions and Information Solutions: revenue growth and and Information Solutions: revenue growth and margin expansionmargin expansionTurnaround underway in MedicalTurnaround underway in Medical--Surgical Surgical SolutionsSolutionsSeven quarters of EPS momentum and Seven quarters of EPS momentum and improving return on committed capitalimproving return on committed capitalDemographics, economics and public policy Demographics, economics and public policy drive demand for McKesson products and drive demand for McKesson products and services services

Largest Healthcare Services CompanyLargest Healthcare Services Company

$2.7 billion in revenues

Hospitals

Physician offices

Nursing homes

Long-term care facilities

$46 billion in revenues

US and Canadian pharma distribution

Hospital and retail automation

Pharmacy outsourcing

Health Solutions

$1 billion in revenues

Most comprehensive HIT product line: software, services, outsourcing

New clinical offering includes decision support, order entry and digital medical imaging

Medical-Surgical

Solutions

MedicalMedical--SurgicalSurgical

SolutionsSolutionsPharmaceutical

SolutionsPharmaceuticalPharmaceutical

SolutionsSolutionsInformationSolutions

InformationInformationSolutionsSolutions

McKesson Solutions Improve McKesson Solutions Improve Quality and Reduce CostQuality and Reduce Cost

Services for payors, patientsand manufacturers

HIT outsourcing

Pharmaceutical and medical-surgical distribution to all sites

Automated drug dispensing for retail and

hospital pharmacies

Pharmacy outsourcing

Specialty pharmaceuticaldistribution

Physician portal

Solution for Medication Safety

Clinical, financial and resource management

systems for hospital andIDNs

Unique Conversations with Customers At Higher LevelsUnique Conversations with Customers At Higher LevelsUnique Conversations with Customers At Higher Levels

Favorable Market Factors Drive Favorable Market Factors Drive McKesson GrowthMcKesson Growth

Aging population consumes more drugs, suppliesAging population consumes more drugs, supplies

More sophisticated population demands higher qualityMore sophisticated population demands higher quality

Employer and government focus on higher qualityEmployer and government focus on higher quality

Costs and incentives drive increased use of genericsCosts and incentives drive increased use of generics

Pharmacist and nurse shortage widensPharmacist and nurse shortage widens

Costs and quality concerns lead to increased disease Costs and quality concerns lead to increased disease managementmanagement

Expanding pipeline of higherExpanding pipeline of higher--tech drugstech drugs

Seven Quarters of MomentumSeven Quarters of Momentum

All results exclude warehouse sales, special items and discontinAll results exclude warehouse sales, special items and discontinued operationsued operationsand include impact of FAS 142 in FY02and include impact of FAS 142 in FY02

17%17%

48%48%

18.8%18.8%

16%16%

41%41%

18.7%18.7%

19%19%

45%45%

19.4%19.4%

20%20%

58%58%

20.4%20.4%

16%16%

55%55%

22.0%22.0%

19%19%

35%35%

22.4%22.4%

15%15%

31%31%

22.9%22.9%

FY01FY01Q4Q4 Q2Q2 Q3Q3

Revenue Revenue YY--OO--YY

EPS EPS YY--OO--YY

Q4Q4 Q1Q1FY02FY02 FY03FY03

Q1Q1 Q2Q2

ROCCROCC

Agenda For Today’s PresentationAgenda For Today’s Presentation

Market and Strategy OverviewMarket and Strategy Overview

Business Unit ReviewBusiness Unit Review

SummarySummary

To achieve the best financialperformance in the industry

Financial SuccessFinancial Success

To provide an environmentthat attracts and retainsoutstanding talent

Employee SatisfactionEmployee Satisfaction

To have the most satisfiedcustomers in the industry

Customer SatisfactionCustomer Satisfaction MetricMetric--Driven Driven ExecutionExecution

Business Metrics Drive ResultsBusiness Metrics Drive Results

Business Process SuccessBusiness Process Success

To fulfill our commitments toour customers and toeach other

Supply Businesses Across All Sites Supply Businesses Across All Sites

DistributionDistributionRepackagingRepackagingInformaticsInformaticsInternationalInternational

Retail PharmacyRetail PharmacyHospital / Hospital / InstitutionalInstitutional

Medical Medical Management Management Software and Software and ServicesServicesSpecialty Specialty Pharmaceutical Pharmaceutical ServicesServices

Pharmacy and Pharmacy and Medication Medication Management Management ServicesServices

EndEnd--toto--End Continuum of ServicesEnd Continuum of ServicesMultiple Points of LeverageMultiple Points of Leverage

Comprehensive North American DistributionComprehensive North American Distribution

Primary CarePrimary CareExtended CareExtended CareAcute CareAcute Care

McKessonPharmaceutical

McKessonMcKessonPharmaceuticalPharmaceutical

McKessonAutomationMcKessonMcKesson

AutomationAutomationMcKesson Health

SolutionsMcKesson Health McKesson Health

SolutionsSolutionsMcKessonMedication

Management

McKessonMcKessonMedication Medication

ManagementManagementMcKesson

Medical SurgicalMcKessonMcKesson

Medical SurgicalMedical Surgical

Pharmaceutical Solutions: Strong Pharmaceutical Solutions: Strong Growth and Expanding MarginsGrowth and Expanding Margins

Q2 U.S. pharmaceutical distribution revenues Q2 U.S. pharmaceutical distribution revenues up 17%up 17%

Generic sales slow market growth but drive Generic sales slow market growth but drive margin expansionmargin expansion

Q2 operating margin up 20 bp driven by Q2 operating margin up 20 bp driven by generics, strong pricing and increased sales generics, strong pricing and increased sales of related products and servicesof related products and services

McKesson Canada revenues up 14% with McKesson Canada revenues up 14% with margin expansion in Q2margin expansion in Q2

Pharmaceutical Solutions Margin Pharmaceutical Solutions Margin MomentumMomentum

9 Consecutive Quarters of Y9 Consecutive Quarters of Y--OO--Y Operating Margin ExpansionY Operating Margin Expansion

1.00%

1.25%

1.50%

1.75%

2.00%

2.25%

2.50%

2.75%

3.00%

3.25%

3.50%

Q1 Q2 Q3 Q4

FY01 FY02 FY03

+55 +55 bpbp in FY01 and FY02in FY01 and FY02

Ope

ratin

g M

argi

n %

of R

even

ues

+22 bp +20 bp

+36 bp

+20 bp+29 bp+34 bp

-13 bp +17 bp+24 bp

+70 bp

Pharmaceutical Solutions DC Pharmaceutical Solutions DC ProductivityProductivity

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

FY98 FY99 FY00 FY01 FY02 FY03 EST

Ann

ual R

even

ue/D

C

($Billions)

CAGR 37%

Note: Excludes Alaska and Hawaii

Pharmaceutical Solutions Operating Pharmaceutical Solutions Operating LeverageLeverage

4.12%

3.67%3.42%

3.08%2.91%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

FY99 FY00 FY01 FY02 FY03 YTD

Ope

ratin

g Ex

pens

es %

of R

evs

Balanced Profit Components in Balanced Profit Components in Pharmaceutical SolutionsPharmaceutical Solutions

Inventory ProfitInventory Profit

Branded product sourcingBranded product sourcingPrice increasesSpecial programsCollaborative agreements

Generic product sourcingGeneric product sourcing

Related products and servicesRelated products and servicesMcKesson CanadaNadroSpecialty PharmaceuticalsAutomationRepackagingDisease ManagementPharmacy OutsourcingPayor ServicesZee Medical

Significant Generics OpportunitySignificant Generics OpportunityBranded pharmaceuticals going off patentBranded pharmaceuticals going off patent

<$10B<$10B

$52B$52B

19981998--20002000 20012001--20062006(proj.)(proj.)

Should drive significant generic growth Should drive significant generic growth and margin expansionand margin expansion

• McKesson OneStop program

• 20,000 pharmacy outlets

• Generic Rx GP$ and margin higher than that of branded Rx

Source: IMS and analyst reports; internal McKesson analysisSource: IMS and analyst reports; internal McKesson analysis

Generics Gross Profit DriversGenerics Gross Profit Drivers

Better sell marginBetter sell margin

Margin expansion through buying leverageMargin expansion through buying leverage

“Formulary” fees“Formulary” fees

Portfolio opportunities with manufacturersPortfolio opportunities with manufacturers

Free goods/creditsFree goods/credits

Pharmaceutical Solutions: Levers to Pharmaceutical Solutions: Levers to Expand Operating MarginsExpand Operating Margins

Product SourcingSix Sigma Increased Generics SalesGrow Packaging Capabilities and PenetrationAutomation Market Expansion and Cross SellingGrowth of Related Products and Services

Significant Momentum in FY03 Significant Momentum in FY03 and Beyondand Beyond

Margin Trends Remain Margin Trends Remain FavorableFavorable

5.27%5.41%5.44%5.39%

2.45%2.15%

1.89%

2.44%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

2000 2001 2002 FH 2003

% o

f S

ales

Gross Profit Operating Profit

Pharmaceutical Environment Pharmaceutical Environment Remains PositiveRemains Positive

Market growth of 11Market growth of 11--14% driven partially by 14% driven partially by rapid penetration of generics, which creates rapid penetration of generics, which creates profit opportunitiesprofit opportunitiesRepublican majority increases probability of Republican majority increases probability of Medicare drug benefit through private sector Medicare drug benefit through private sector Drug price increases continue to be strongDrug price increases continue to be strongRelationships with manufacturers are Relationships with manufacturers are cooperative and collaborative cooperative and collaborative

MedicalMedical--Surgical Solutions Strategic Surgical Solutions Strategic ValueValue

Strategic role delivering supply chain Strategic role delivering supply chain solutionssolutions

Strategic presence in alternate site market Strategic presence in alternate site market

Potential for shareholder value creationPotential for shareholder value creation

McKesson MedicalMcKesson Medical--Surgical:Surgical:Not A Market IssueNot A Market Issue

0.280.28

18.7218.72Q2FY03Q2FY03

2.842.843.493.493.403.404.224.22Operating Profit MarginOperating Profit Margin% Revenues% Revenues

19.2619.2619.4619.4619.1819.1819.6319.63Gross Profit MarginGross Profit Margin% Revenues% Revenues

Q1FY03Q1FY03FY02FY02FY01FY01FY00FY00

McKesson MedicalMcKesson Medical--Surgical:Surgical:What We’re DoingWhat We’re Doing

Install experienced leadership with track record for Install experienced leadership with track record for successful turnaround and augment with resourcessuccessful turnaround and augment with resourcesImprove financial and operating processesImprove financial and operating processesExecute DC network consolidationExecute DC network consolidationComplete ERP system implementationComplete ERP system implementationIncrease private brand salesIncrease private brand sales

Stabilize this year with margin improvement Stabilize this year with margin improvement expected in FY04expected in FY04

6,300 employees

1,250 R&D

850 customer support

500 clinicians

60% of health systems

82% of covered lives

Largest / most profitable International HIT business

$1 billion revenues

15% of revenue goes to R&D investment

Most comprehensive

Best-of-class•Software• PACS•Services•Outsourcing•Consulting•Content•Connectivity

Employee ExpertiseEmployee Employee ExpertiseExpertise

CustomerReach

CustomerCustomerReachReach

FinancialStrengthFinancialFinancialStrengthStrength

Solution PortfolioSolution Solution PortfolioPortfolio

Information Solutions Market Information Solutions Market LeadershipLeadership

Customer Needs Drive Demand for IT Customer Needs Drive Demand for IT Solutions Solutions IT Demand IT Demand Drivers

Care Delivery

Purchasing & Supply

Billing & Claims

ProcessesProcesses

Reduce variability

Improve MD connectivity

Reduce medical errors

Improve cash flowReduce reworkAnalyze financial performance

Standardization of supplies

Improve order management

Improve product movement

Clinical NeedsClinical Needs

Revenue Cycle NeedsRevenue Cycle Needs

Resource Management NeedsResource Management Needs

Drivers

Core Process

Improvements

Information Solutions: Expanding Information Solutions: Expanding Margin and Clinical MomentumMargin and Clinical Momentum

Q2 revenues up 16%, software up 20%Q2 revenues up 16%, software up 20%

Q2 operating margin up 309 bp to 8.78%Q2 operating margin up 309 bp to 8.78%

Q2 software bookings up 43%Q2 software bookings up 43%

Horizon Expert Orders GA 12/9/02Horizon Expert Orders GA 12/9/0220 Horizon Expert Orders sales to date4 being delivered now12 in implementation by fiscal year end

Information Solutions Operating Information Solutions Operating Margin MomentumMargin Momentum

6 consecutive quarters of Y6 consecutive quarters of Y--OO--YYOperating Margin expansionOperating Margin expansion

4.00%

4.50%

5.00%

5.50%

6.00%

6.50%

7.00%

7.50%

8.00%

8.50%

9.00%

Q1 Q2 Q3 Q4 Q1 Q2FY02 FY03

+290 bp

+502 bp

+296 bp

+855 bp+534 bp

+309 bp

Information Solutions Positive OutlookInformation Solutions Positive Outlook

Growing Demand for Clinical ProductsGrowing Demand for Clinical Products

McKesson Positioned for Clinical LeadershipMcKesson Positioned for Clinical Leadership

Margin Expansion StrategiesMargin Expansion Strategies

Improving revenue mix

Leveraging existing infrastructure

Agenda For Today’s PresentationAgenda For Today’s Presentation

Market and Strategy OverviewMarket and Strategy Overview

Business Unit ReviewBusiness Unit Review

SummarySummary

FY00 to FY03 AchievementsFY00 to FY03 Achievements

Highest revenue growth and largest operating Highest revenue growth and largest operating margin expansion in pharmaceutical distribution margin expansion in pharmaceutical distribution industry over the past 2industry over the past 2--1/2 years1/2 yearsLargest increase in customer satisfaction, more Largest increase in customer satisfaction, more new product introductions and largest operating new product introductions and largest operating margin expansion in healthcare information margin expansion in healthcare information technology industry over past 3 yearstechnology industry over past 3 yearsEPS growth above 30% for seven consecutive EPS growth above 30% for seven consecutive quarters despite erosion in Medicalquarters despite erosion in Medical--Surgical Surgical Solutions segment operating marginSolutions segment operating margin

McKesson Differentiated SolutionsMcKesson Differentiated Solutions

Presbyterian Healthcare, Spartanburg Health Presbyterian Healthcare, Spartanburg Health Systems, Solaris Health Systems, Atlantic Systems, Solaris Health Systems, Atlantic Healthcare, Duke UniversityHealthcare, Duke University

Tenet HealthcareTenet Healthcare

OTNOTN

CaremarkCaremark

Together Rx CardTogether Rx Card

Goals for Delivering Sustained Goals for Delivering Sustained Financial PerformanceFinancial Performance

IndustryIndustry--leading solutions and margin leading solutions and margin expansion in Pharmaceutical Solutionsexpansion in Pharmaceutical SolutionsClinical leadership, continued new product Clinical leadership, continued new product innovation and continued margin expansion innovation and continued margin expansion in Information Solutionsin Information SolutionsFinancial turnaround and return to historical Financial turnaround and return to historical operating margins in Medicaloperating margins in Medical--Surgical Surgical SolutionsSolutions

Value Creation for Customers and ShareholdersValue Creation for Customers and ShareholdersValue Creation for Customers and Shareholders