MCKMcKesson Corporation

McKesson distributes medicines to pharmacies and hospitals — enormous turnover at a very thin margin.

A distributor stands between manufacturer and pharmacy and earns small fractions of a per cent on each pack. At those margins profit is set not by price but by logistics: warehouses, routes, inventory turns and demand forecasting accuracy. An error in any of those consumes the entire margin.

The market is split among three distributors, which makes it durable: a new entrant cannot build a comparable warehouse network, and manufacturers will not deliver themselves. Additional, higher-margin income comes from services to oncology clinics and from working with manufacturers on product launches.

A specific factor is opioid litigation settlements: payments are spread over years and recognised in the accounts. Separately significant are high-cost medicines, where the shipment value is large but the percentage the same. McKesson pays a small dividend and buys back stock actively.