Logistics Moat: McKesson Moves Drugs, Unlocks High-Margin Services
Some thoughts on $McKesson(MCK)$
Most patients never encounter McKesson. Doctors prescribe drugs, pharmacies dispense them, and manufacturers produce them. But McKesson actually moves the medicine through the system.
They function less like a healthcare company and more like infrastructure. They operate a massive logistics network that moves pharmaceuticals from manufacturers to hospitals, pharmacies, and clinics across the US.
Once something becomes embedded this deeply into a system, it stops looking like a business and starts looking like plumbing.
From the outside the economics appear unusual. McKesson generates hundreds of billions in annual revenue, but operates on thin margins. Enormous volumes are moved, but with only small margins attached.
That scale creates a strong economic position. Hospitals and pharmacies depend on reliable drug supply, manufacturers depend on national distribution, and the logistics network required to support that system takes decades to build.
But the most interesting part of McKesson’s model sits on top of that infrastructure.
The distribution network provides a vantage point across the entire pharmaceutical supply chain. From there the company has expanded into higher-value areas like specialty drug distribution and services that help providers manage reimbursement and patient access. These parts of the healthcare system tend to grow faster and carry meaningfully higher margins than basic distribution. In other words, the logistics network is the foundation, with higher-margin services layered on top.
McKesson’s core distribution business is one of the lowest-margin segments in healthcare, yet it may also be one of the most strategically valuable. By moving such a large share of the nation’s pharmaceuticals, the company sits directly in the middle of the healthcare supply chain.
McKesson may not control the drugs, the doctors, or the patients, but it does control the pipes that connect them.
What are your views on the company?
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