A Brief History of McKesson
Founded in 1833 by John McKesson and Charles Olcott as a small wholesale drug business in Manhattan, the company has evolved over nearly two centuries into a healthcare behemoth. It remains the No. 1 drug distributor in North America, delivering roughly one-third of all medicines used across the U.S. and reporting revenue of $308.9 billion in 2024.
McKesson’s portfolio spans pharmaceutical distribution, retail pharmacy franchising (Health Mart), healthcare IT, international operations, and its medical-surgical unit. The company has weathered major transformations and challenges, from the McKesson & Robbins accounting scandal in the 1930s to its role in COVID-19 vaccine distribution under Operation Warp Speed.
A key milestone came in 1999 with the acquisition of HBO & Co., a healthcare IT provider, as McKesson sought to expand beyond drug distribution. That diversification push was later dialed back, with the company returning to its core strengths while strategically pruning its portfolio.
Why Spin It Off Now?
CEO Brian Tyler has framed the move as part of “disciplined capital deployment.” The Medical-Surgical business, while large and profitable, operates in a different growth and margin profile compared to McKesson’s core oncology and specialty pharmaceuticals operations.
Spinning it off will allow both companies to focus on tailored investment strategies. For McKesson, that means doubling down on its higher-margin pharma distribution and specialty services. For the new Medical-Surgical company, it means investing more heavily in outpatient care markets, home healthcare, and equipment distribution—areas growing faster than traditional hospital-centered services.
The Numbers & Financial Prism
- Medical-Surgical Revenue (FY 2025): ~$11.4 billion
- McKesson Total (FY 2024): ~$308.9 billion in revenue—Medical-Surgical accounts for ~3.7%
- Potential Market Re-rating: Standalone medical supply distributors often trade at higher multiples than integrated pharma distributors
- Strategic Benefit: McKesson’s return on invested capital could improve as capital is redeployed into higher-growth, higher-margin segments
Broader Context
McKesson is no stranger to portfolio reshaping. On March 10, 2020, it completed the tax-efficient separation of its stake in Change Healthcare(ticker at that time was CHNG), by means of a Reverse Morris Trust transaction(which we, being derelict in our duty to you, dear reader, never mentioned). Change was subsequently purchased by United Healthcare(UNH) in October 2022. Unlike that deal, which was partially about divesting a non-core holding, the Medical-Surgical separation is aimed at giving a growth-ready business the focus to
What’s Next? Timeline & Considerations
McKesson expects the separation to take 12–18 months, with completion targeted by mid-2026. While specifics on structure are not yet finalized, a tax-free spin to shareholders is likely.
Key points to watch:
| Metric | Expectation |
|---|---|
| Completion Timeline | Mid-2026 |
| Transaction Type | Tax-free spin-off or split-off |
| Parent Focus | Pharmaceutical distribution & specialty |
| NewCo Focus | Medical supplies & outpatient care |
Interestingly, in releasing its first quarter 2026 results on August 6, 2025, the company didn’t even mention the Medical-Surgical spinoff. Even on the earnings call, McKesson had just this to say:
Now, I want to provide a brief update as to our portfolio actions. Last quarter, we announced our intent to separate the Medical Surgical segment into an independent company. This is a strategic decision that aligns with our enterprise focus on capital allocation and portfolio management, and it will enhance the operational focus for both companies. We firmly believe this action will unlock significant value for the medical business in McKesson. We have a strong track record of executing on large complex transactions like the spin-off of Change Healthcare and the divestiture of our European business. We’re confident in our ability to execute on this strategic initiative and maximize shareholder value. We look forward to providing an update on our progress at our upcoming Investor Day event in September.
So for more information on the spinoff, stay tuned for McKesson Investor Day on September 23, 2025.
Final Take
The McKesson Medical-Surgical spinoff is a classic example of a conglomerate sharpening its strategic profile. For McKesson, it’s a way to highlight its core strengths and allocate capital to faster-growing businesses. For investors, it’s an opportunity to gain exposure to a large-scale, pure-play medical supply distributor with growth opportunities in outpatient and home health markets.
Disclosure: The author holds no position in any stock mentioned