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Commitments, Contingent Liabilities and Litigation | 6 Months Ended
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Dec. 31, 2014
Commitments and Contingencies Disclosure [Abstract] |
Commitments, contingent liabilities and litigation | Commitments, Contingent Liabilities and Litigation Commitments Generic Sourcing Venture With CVS Health Corporation In July 2014, we established Red Oak Sourcing, LLC ("Red Oak Sourcing"), a U.S.-based generic pharmaceutical sourcing entity with CVS Health Corporation (“CVS”) with an initial term of 10 years. Both companies have contributed sourcing and supply chain expertise to the 50/50 generic sourcing venture and have committed to source generic pharmaceuticals through arrangements negotiated by it. Red Oak Sourcing negotiates generic pharmaceutical supply contracts on behalf of both companies, but does not own products or hold inventory on behalf of either company. We are required to pay 39 quarterly payments of $25.6 million to CVS which commenced in October 2014. In addition, only if certain milestones are achieved, we are required to pay additional predetermined amounts to CVS beginning in fiscal 2016. Beginning in the three months ended December 31, 2014, the $25.6 million payment is being expensed quarterly over the remaining term of the sourcing venture. Legal Proceedings We become involved from time to time in disputes, litigation and regulatory matters incidental to our business. We may be named from time to time in qui tam actions, which are initiated by private third parties purporting to act on behalf of federal or state governments, that allege that false claims have been submitted or have been caused to be submitted for payment by the government. After a private party has filed a qui tam action, the government must investigate the private party's claim and determine whether to intervene in and take control over the litigation. These actions may remain under seal while the government makes this determination. If the government declines to intervene, the private party may nonetheless continue to pursue the litigation on his or her own on behalf of the government. From time to time, we receive subpoenas or requests for information from various government agencies relating to our business or to the business of a customer, supplier or other industry participant. The responses to these subpoenas and requests for information sometimes require considerable time and effort, and can result in us incurring considerable costs. Such subpoenas and requests also can lead to the assertion of claims or the commencement of legal proceedings against us, which can result in substantial settlements. In addition, we occasionally may suspect that products we manufacture, market or distribute do not meet product specifications, published standards or regulatory requirements. In such circumstances, we investigate and take appropriate corrective action. Such actions can lead to product recalls, costs to repair or replace affected products, t emporary interruptions in product sales and action by regulators. We accrue for contingencies related to disputes, litigation and regulatory matters if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because these matters are inherently unpredictable and unfavorable developments or resolutions can occur, assessing contingencies is highly subjective and requires judgments about future events. We regularly review contingencies to determine whether our accruals and related disclosures are adequate. While we have accrued for certain matters as described below at our best estimate of the amount of possible loss, the amount of ultimate loss may differ from these estimates. With respect to the matters described below, we are unable to estimate a range of reasonably possible loss for matters for which there is no accrual, since damages or fines have not been specified or the proceedings are at stages where significant uncertainty exists as to legal or factual issues and as to whether such matters will proceed to trial. We do not believe, based on currently available information, that the outcomes of these matters will have a material adverse effect on our financial position, results of operations or cash flows, though the outcome of one or more of these matters could be material to our results of operations for a particular period. We recognize income from the favorable outcome of litigation when we receive the associated cash or assets. We recognize estimated loss contingencies for litigation and regulatory matters and income from favorable resolution of litigation in litigation (recoveries)/charges, net in our condensed consolidated statements of earnings. DEA Investigation and Related Matters In February 2012, the U.S. Drug Enforcement Administration (the "DEA") issued an order to show cause and immediate suspension of our Lakeland, Florida distribution center's registration to distribute controlled substances, asserting that we failed to maintain required controls against the diversion of controlled substances. In May 2012, we entered into a settlement agreement with the DEA that resolved the administrative aspects of the DEA's action but did not resolve potential liability for civil fines in Florida or elsewhere for the conduct covered by the settlement agreement. In that regard, we are continuing to engage in discussions with several offices of the U.S. Department of Justice (the "DOJ"), including discussions regarding a possible settlement. We incurred litigation charges of $7 million and $34 million for this matter during the three and six months ended December 31, 2014, respectively. Our total accrual for this matter at December 31, 2014 is $34 million and is included in other accrued liabilities in the condensed consolidated balance sheet. State of West Virginia vs. Cardinal Health, Inc. In June 2012, the West Virginia Attorney General filed complaints, which have been amended, against 13 pharmaceutical wholesale distributors, including us, in the Circuit Court of Boone County, West Virginia alleging, among other things, that the distributors failed to maintain effective controls to guard against diversion of controlled substances in West Virginia, failed to report suspicious orders of controlled substances in accordance with the West Virginia Uniform Controlled Substances Act and were negligent in distributing controlled substances to pharmacies that serve individuals who abuse controlled substances. In addition to injunctive and other equitable relief, the complaints seek monetary damages and the creation of a court-supervised fund, to be financed by the defendants in these actions, for a medical monitoring program focused on prescription drug abuse. We are vigorously defending ourselves in this matter. FTC Investigation The Federal Trade Commission (“FTC”) has been investigating supplier arrangements involving our Nuclear Pharmacy Services division primarily focused on the period between 2003 and 2008. We have been providing information to and cooperating with the FTC on this matter. Additionally, we have begun discussions with the FTC staff regarding a possible settlement of this matter, which would include, among other things, a payment to the government. We incurred a litigation charge of $27 million for this matter during the three months ended December 31, 2014, which represents the amount we believe we will pay if we are able to settle this matter and is included in other accrued liabilities in the condensed consolidated balance sheet. Qui Tam Action Our Cardinal Health at Home division was named as a defendant in an amended qui tam complaint that was filed in November 2014 in the U.S. District Court for the District of Massachusetts against several manufacturers and distributors of ostomy and continence care products. The complaint seeks damages and penalties on behalf of the United States for alleged violations of the federal healthcare fraud and abuse laws, Medicare regulations and the federal False Claims Act in connection with the marketing and sale of these products. The DOJ has not yet determined whether to intervene in this qui tam action and is currently conducting an investigation of this matter. We are providing information to the DOJ in connection with its investigation. Antitrust Litigation Proceeds We recognized income resulting from settlements of class action antitrust claims in which we were a class member of $16 million during both the three and six months ended December 31, 2013.

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