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Item 1A. Risk Factors

2022-11-22 compared with 2021-11-23 · 189 added, 132 removed, 238 unchanged (57% of the section changed)

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and any potential issues that could impede our ability to continue to work collaboratively with WBA in an efficient and effective manner in furtherance of the anticipated strategic and financial benefits of the relationship.

In addition, WBA has the right, but not the obligation, under the transactions contemplated by the Framework Agreement dated March 18, 2013 and the Amended and Restated AmerisourceBergen Shareholders Agreement dated June 1, 2021 to make certain additional investments in our common stock.

In addition, WBA has the right, but not the obligation, under the transactions contemplated by the Framework Agreement dated March 18, 2013 and the Amended and Restated AmerisourceBergen Shareholders Agreement dated June 1, 2021, as further amended on August 2, 2022 (the “Shareholders Agreement”), to make certain additional investments in our common stock.

WBA also has the right to sell any of the shares of our common stock that it has acquired so long as WBA has held the shares beyond the requisite dates specified in the Shareholders Agreement, subject to certain restrictions on the number of shares that may be sold at any given time.

Any sales in the public market of common stock currently held by WBA or acquired by WBA pursuant to open market purchases could adversely affect prevailing market prices of our common stock.

For example, in November 2022, WBA sold 13.2 million shares of our common stock.

Any sales of common stock by WBA could adversely affect prevailing market prices of our common stock.

We could also encounter unforeseen costs, circumstances, or issues with respect to the transactions and collaboration we anticipate pursuing with WBA.

Many of these potential circumstances are outside of our control and any of them could result in increased costs, decreased revenue, decreased benefits and the diversion

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of management time and attention.

Many of these potential circumstances are outside of our control and any of them could result in increased

costs, decreased revenue, decreased benefits and the diversion of management time and attention.

If we are unable to achieve any of our objectives, the expected future benefits may not be realized fully or may take longer to realize than expected, which could have a material adverse impact on our business, financial condition, and results of operations.

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If our operations are seriously disrupted for any reason deemed within our control, we may have an obligation to pay or credit WBA for failure to supply products.

In addition, upon the expiration or termination of our distribution agreement for Walgreens pharmacies, our distribution agreement with Boots UK Ltd or our generics purchasing services arrangement with WBAD, there can be no assurance that we or WBA will be willing to renew, on terms favorable to us or at all.

In addition, upon the expiration or termination of our distribution agreement for Walgreens pharmacies, our distribution agreement with Boots UK Ltd.

or our generics purchasing services arrangement with WBAD, there can be no assurance that we or WBA will be willing to renew, on terms favorable to us or at all.

Our generic pharmaceutical program has also benefited from the generics purchasing services arrangement with WBAD.

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We make public disclosure of pending and completed acquisitions when appropriate and required by applicable securities laws and regulations.

As previously announced, on June 1, 2021, we completed our acquisition of Alliance Healthcare from WBA for $6,602.0 million in cash, subject to certain purchase price adjustments, $229.1 million of the Company's common stock (2 million shares at the Company's June 1, 2021 opening stock price of $114.54 per share), $96.9 million of estimated accrued consideration, and $6.1 million of other equity consideration (see Note 2 of the Notes to Consolidated Financial Statements).

Alliance Healthcare operates in the United Kingdom, a number of countries in the European Union and in select other markets.

We may find that our ability to integrate and control Alliance Healthcare is more difficult, time consuming or costly than expected, especially in certain countries where our investment is not wholly-owned, such as our 50%-owned Alliance Healthcare Egypt subsidiary.

Alliance Healthcare may fail to achieve its expected future financial and operating performance and results and the acquisition may have the effect of disrupting relationships with employees, suppliers, and other business partners.

On June 1, 2021, we completed our acquisition of Alliance Healthcare from WBA for $5,596.7 million in net cash, $229.1 million of the our common stock, and $6.1 million of other equity consideration (see Note 2 of the Notes to Consolidated Financial Statements).

On September 12, 2022, we announced our intent to acquire PharmaLex Holding GmbH (“PharmaLex”) for €1,280 million in cash, subject to certain customary adjustments.

The PharmaLex transaction is expected to close by March 2023 and is subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals.

Alliance Healthcare and PharmaLex operate in the United Kingdom, Germany, a number of other countries in the European Union, and in select other markets.

We may find that our ability to integrate and control Alliance Healthcare and PharmaLex is more difficult, time consuming or costly than expected, especially in certain countries where our investment is not wholly-owned, such as our 50%-owned Alliance Healthcare Egypt subsidiary.

Each of Alliance Healthcare and PharmaLex may fail to achieve its expected future financial and operating performance and results and the acquisitions may have the effect of disrupting relationships with employees, suppliers, and other business partners.

Acquisitions involve numerous risks and uncertainties and may be of businesses or in regions in which we lack operational or market experience.

Acquired companies may have business practices that we are not accustomed to or have unique terms and conditions with their business partners.

As a result of the acquisition of Alliance Healthcare and other future acquisitions, our results of operations and financial condition may be adversely affected by a number of factors, including:

As a result of the acquisition of Alliance Healthcare and other future acquisitions, including PharmaLex, our results of operations and financial condition may be adversely affected by a number of factors, including:

regulatory or compliance issues that could arise;

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and the failure to achieve the strategic objectives of these acquisitions.

Alliance Healthcare operates in a number of jurisdictions, including Egypt and other locations, that have a higher business, operating and regulatory risk profile than the United States and European Union jurisdictions.

Our businesses operate in a number of jurisdictions, including Egypt and other locations, that have a higher business, operating and regulatory risk profile than the United States and European Union jurisdictions.

Such risks may include risks of violation of United States, United Kingdom and other anti-corruption, anti-bribery and international trade laws.

Our results of operations and financial condition may be adversely affected if we are not able to effectively put in place effective financial controls and compliance policies to safeguard against such risks as part of our integration of Alliance Healthcare.

Our business and results of operations may be adversely affected if we fail to manage and complete divestitures.

We regularly evaluate our portfolio in order to determine whether an asset or business may no longer help us meet our objectives.

We regularly evaluate our portfolio to determine whether an asset or business may no longer help us meet our objectives.

When we decide to sell assets or a business, we may encounter difficulty finding buyers or alternative exit strategies, which could delay the achievement of our strategic objectives.

Further, divestitures may be delayed due to failure to obtain required approvals on a timely basis, if at all, from governmental authorities, or may become more difficult to execute due to

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conditions placed upon approval that could, among other things, delay or prevent us from completing a transaction, or otherwise restrict our ability to realize the expected financial or strategic goals of a transaction.

Further, divestitures may be delayed due to failure to obtain required approvals on a timely basis, if at all, from governmental authorities, or may become more difficult to execute due to conditions placed upon approval that could, among other things, delay or prevent us from completing a transaction, or otherwise restrict our ability to realize the expected financial or strategic goals of a transaction.

The impact of a divestiture on our results of operations could also be greater than anticipated.

Our results of operations and our financial condition may be adversely affected by our global operations.

Our operations in jurisdictions outside of the United States are subject to various risks inherent in global operations.

We currently have operations in over 50 countries.

We conduct operations in over 50 countries, which subjects us to various risks inherent in global operations.

We may conduct business in additional foreign jurisdictions in the future, which may carry operational risks in addition to the risks of acquisition described above.

At any particular time, our global operations may be affected by local changes in laws, regulations, and political and economic environments, including inflation, recession, currency volatility, and competition, as well as business and operational decisions made by joint venture partners.

For example, during fiscal 2022, Turkey became a “highly inflationary economy,” as defined under U.S.

GAAP, which impacted our consolidated financial statements.

Furthermore, geopolitical dynamics caused by political, economic, social or other conditions in foreign countries and regions may impact our business and results of operations.

During fiscal 2022, we have experienced increased costs, including for fuel, and it is possible that we could experience supply disruptions or shortages if tariffs or other protective measures are enacted.

Significantly higher and sustained rates of inflation, with subsequent increases in operational costs, could have a material adverse effect on our business, financial position and results of operations.

The continued threat of terrorism and heightened security and military action in response thereto, or any other current or future acts of terrorism, war (such as the ongoing Russia and Ukraine war), and other events (such as economic sanctions and trade restrictions, including those related to the on-going Russia and Ukraine war) may cause further disruptions to the economies of the United States and other countries and create further uncertainties or could otherwise negatively impact our business, operating results, and financial condition.

Changes or uncertainty in U.S.

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Any of these risks might have an adverse impact on our business operations and our financial position, results of operations, or cash flows.

We might be adversely impacted by the withdrawal of the United Kingdom from the European Union.

We have operations in the United Kingdom and the European Union and face risks associated with the uncertainty and potential disruptions associated with the United Kingdom withdrawing from the European Union (“Brexit”).

Brexit could adversely affect political, regulatory, economic or market conditions and contribute to instability in global political institutions, regulatory agencies and financial markets.

We might be adversely impacted by the January 2020 withdrawal of the United Kingdom from the European Union.

We have continued to expand our operations in the United Kingdom and the European Union and face risks associated with the uncertainty and potential disruptions associated with the United Kingdom's withdrawal from the European Union (“Brexit”).

We continue to believe Brexit could adversely affect political, regulatory, economic or market conditions and contribute to instability in global political institutions, regulatory agencies and financial markets.

For example, we might experience volatility in exchange rates and interest rates and changes in laws regulating our United Kingdom operations as well as sourcing disruptions and associated pricing volatility.

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Any of these risks might have a materially adverse impact on our business operations and our financial position or results of operations.

Similar future trade disruptions or disputes could have a negative impact on our operations in the United Kingdom and European Union and other parts of the world.

We are subject to operational and logistical risks that might not be covered by insurance.

We have distribution centers and facilities located in the United States, the United Kingdom, the European Union and throughout the world.

Our business exposes us to risks that are inherent in the distribution of pharmaceuticals and the provision of related services, including with respect to cold chain storage and shipping.

The volume of cold chain storage and shipping has increased due to the COVID-19 pandemic and the requirements for distribution of COVID-19 vaccines and certain treatments.

We expect this trend to continue in the near term.

Although we seek to maintain adequate insurance coverage, coverage on acceptable terms might be unavailable, or coverage might not cover our losses or may require large deductibles.

Our business exposes us to risks that are inherent in the distribution of pharmaceuticals and the provision

of related services, including cold chain storage and shipping.

The volume of cold chain storage and shipping has increased in part due to the COVID-19 pandemic and the requirements for distribution of COVID-19 vaccines and certain treatments.

We expect this trend to continue.

Although we seek to maintain adequate insurance coverage, coverage on acceptable terms might be unavailable, coverage might not cover our losses, coverage might be significantly more costly or may require large deductibles.

Additionally, we seek to maintain coverage for risks associated with cybersecurity, but such insurance has become increasingly difficult to secure and, in some cases, policies may not provide adequate coverage for possible losses.

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Any of these risks might have a materially adverse impact on our business operations and our financial position or results of operations.

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Additionally, approximately 27% of our employees are covered by collective bargaining agreements, a large majority of which are Alliance Healthcare employees located outside of the United States.

Additionally, approximately 28% of our employees are covered by collective bargaining agreements, nearly all of whom are employees located outside of the United States.

We believe that our relationship with our employees is good but if any of our employees in locations that are unionized should engage in strikes or other such bargaining tactics in connection with the negotiation of new collective bargaining agreements upon the expiration of any existing collective bargaining agreements, such tactics could be disruptive to our operations and adversely affect our results of operations.

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Our results of operations could be adversely impacted by manufacturer pricing changes.

In fiscal 2021, we continued to experience less favorable brand and generic pharmaceutical pricing trends, which negatively impacted our Pharmaceutical Distribution Services reportable segment profit and our consolidated operating earnings.

We expect these trends to continue in fiscal 2022, which could have an adverse effect on our results of operations.

Our contractual arrangements with pharmaceutical manufacturers for the purchase of brand pharmaceutical products in the United States generally use wholesale acquisition cost (“WAC”) as the reference price.

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Competition and industry consolidation may erode our profit.

As described in greater detail in the "Competition" section beginning on page 5, the industries in which we operate are highly competitive.

In addition, in recent years the healthcare industry has been subject to increasing consolidation, including among pharmaceutical manufacturers, retail pharmacies, and health insurers, which may create further competitive pressures on our pharmaceutical distribution business.

If we do not compete successfully, it could have a material and adverse effect on our business and results of operations.

The impact on us will be greater if consolidation among our customers, suppliers, and competitors gives the resulting enterprises greater bargaining power, which could lead to greater pressure on us to reduce prices for our products and services.

As described in greater detail in the “Competition” section, the industries in which we operate are highly competitive.

In addition, the healthcare industry continues to experience increasing consolidation, including through the formation of strategic alliances among pharmaceutical manufacturers, retail pharmacies, healthcare providers and health insurers, which may create further competitive pressures on our pharmaceutical distribution business.

Continued consolidation within the healthcare industry could adversely affect our results of operations, to the extent we experience reduced negotiating power or possible customer losses.

Our revenue and results of operations may suffer upon the bankruptcy, insolvency, or other credit failure of a significant customer.

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As of September 30, 2022, our two largest trade receivable balances due from customers represented approximately 38% and 7% of accounts receivable, net.

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Our results of operations may suffer upon the bankruptcy, insolvency, or other credit failure of a significant supplier.

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The bankruptcy, insolvency, or other credit failure of any supplier at a time when the supplier has a substantial account payable balance due to us could have a material adverse effect on our results of operations.

Furthermore, the bankruptcy, insolvency or other credit failure of a significant supplier could have an adverse effect on the supply or availability of products which may cause supply chain disruptions and increases in the price of substitutes or alternatives.

Our stock price and our ability to access credit markets may be adversely affected by financial market volatility and disruption or a downgrade in our credit ratings.

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There have been increasing efforts in the United States by Congress and state and federal agencies, including state boards of pharmacy, departments of health, the FDA, DEA, and TSA, and by similar regulators in the United Kingdom, the European Union, and other countries, to regulate the pharmaceutical supply chain.

Regulation of pharmaceutical distribution is intended to prevent diversion and the introduction of counterfeit, adulterated, and/or mislabeled drugs into the pharmaceutical distribution system.

Regulation of pharmaceutical distribution is intended to prevent diversion and the introduction of counterfeit, adulterated, and/or mislabeled drugs into the pharmaceutical distribution system, as well as provide assurance over the integrity of products traversing the supply chain.

Consequently, we are subject to the risk of changes in various laws, which include operating, record keeping, and security standards of the DEA, the FDA, various state boards of pharmacy and comparable agencies.

In recent years, some governments have passed or proposed laws and regulations that are intended to protect the safety and security of the supply channel but that also may substantially increase the costs and burden of pharmaceutical distribution.

At the federal level, in the United States, the DQSA establishes federal traceability standards requiring drugs to be labeled and tracked at the bottle level, preempts state drug pedigree requirements, and will require all supply-chain stakeholders to participate in an electronic, interoperable prescription drug traceability system by November 2023.

The DQSA, and in

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particular Title II of the DQSA, the Drug Supply Chain Security Act ("DSCSA") also established requirements for drug wholesale distributors and third-party logistics providers, including licensing requirements applicable in states that had not previously licensed third-party logistics providers.

Failure to fully comply with the DQSA requirements, including the DSCSA requirements, or with additional similar governmental regulatory and licensing requirements, and any failure to comply may result in suspension or delay of certain operations and additional costs to bring our facilities into compliance.

At the federal level, in the United States, the DSCSA establishes national traceability standards requiring drugs to be labeled and tracked at the bottle level, preempts state drug pedigree requirements, and requires all supply-chain stakeholders to participate in an electronic, interoperable prescription drug traceability system by November 2023.

The DSCSA also establishes requirements for drug wholesale distributors and third-party logistics providers, including licensing requirements applicable in states that had not previously licensed third-party logistics providers.

The FDA, and eventually all comparable state agencies, will promulgate implementing regulations governing wholesale distributor and third-party logistics providers.

Most recently, on February 4, 2022, the FDA issued a proposed rule, which, when finalized, will establish the national standards for the licensure of wholesale drug distributors and third-party logistics providers.

Failure to comply with the DQSA requirements or with additional similar governmental regulatory and licensing requirements may result in suspension or delay of certain operations and additional costs to bring our facilities into compliance.

Our international operations may also be subject to local regulations containing record-keeping and other obligations related to our distribution operations in those locations.

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Additionally, on occasion, price increases and pricing practices with respect to certain brand and generic pharmaceuticals have been the subject of governmental inquiries, national, federal and state investigations and private litigation.

The United States Congress is currently considering proposals to allow centralized negotiation of manufacturer prices based on indexing models in the context of certain government programs.

Any law or regulation impacting pharmaceutical pricing or reimbursement, such as pricing controls or indexing models at a national, federal or state level, could adversely affect our operations.

In the European Union, many governments provide or subsidize healthcare to consumers and regulate pharmaceutical prices, patient eligibility and reimbursement levels in order to control government healthcare system costs.

In most EU member states, for example, the government regulates pricing of a new pharmaceutical product at launch often through direct price controls, international price comparisons, controlling profits and/or reference pricing.

Some European governments have implemented or are considering austerity measures to reduce healthcare spending such as volume discounts, cost caps, cost sharing for increases in excess of prior year costs for individual products or aggregated market level spending, outcome-based pricing schemes and free products for a portion of the expected therapy period.

All of these measures exert pressure on the

pricing and reimbursement levels for pharmaceuticals and may cause our customers to purchase fewer of our products and services or influence us to reduce prices.

In the United States, federal insurance and healthcare reform legislation known as the Affordable Care Act (“ACA”) became law in March 2010, and included numerous reforms broadening healthcare access and affecting Medicare and Medicaid reimbursement, pricing, and contracting for prescription drugs, including changes to the Medicaid rebate statute.

Given the scope of the changes made by the ACA and continuing implementation controversies, we cannot predict the impact of every aspect of the law on our operations.

Likewise, we cannot predict the impact of any efforts to change or repeal any provisions of the ACA may have on the ACA or other healthcare legislation and regulation.

We cannot predict the impact that any efforts to change or repeal any provisions of the ACA may have on the ACA or other healthcare legislation and regulation.

Subsequent legislation has made additional changes to federal drug payment policies, including the Bipartisan Budget Act of 2018, which increased the Medicaid rebate due with respect to line extensions of single source or innovator multiple source oral solid dosage form drugs.

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Unless we are able to successfully advocate to prevent or mitigate the impact of these legislative and regulatory changes, these changes in reimbursement and related reporting requirements could adversely affect our results of operations.

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pricing schemes and free products for a portion of the expected therapy period.

All of these measures exert pressure on the pricing and reimbursement levels for pharmaceuticals and may cause our customers to purchase fewer of our products and services or influence us to reduce prices.

More recently, on August 16, 2022, President Biden signed into law the Inflation Reduction Act (“IRA”), an omnibus budget law which contains significant reforms affecting prescription drug pricing and reimbursement.

These reforms include:

(i) manufacturer inflation rebates on drugs covered under Medicare Part B and Medicare Part D, to the extent such products’ prices increase faster than the rate of consumer price inflation, beginning in the fourth quarter of 2022 for Part D drugs and the first quarter of 2023 for Part B drugs;

(ii) limits on Medicare Part B and Part D patients’ cost sharing for insulin, beginning in 2023;

(iii) Medicare Part D benefit redesign beginning in 2024, including replacement of the “coverage gap discounts” that pharmaceutical manufacturers currently pay with new mandatory manufacturer discounts applicable during all phases of the Part D benefit after satisfaction of the deductible, beginning in 2025;

and (iv) federal price negotiation of “maximum fair prices” for certain “selected” high-expenditure drugs under Medicare Parts D and B, applicable beginning in 2026 for Part D drugs and 2028 for Part B drugs, under which maximum fair prices must be made available to pharmacies, physicians, and other entities dispensing or providing drugs covered under Medicare Parts D and B.

Although the primary effects of the IRA reforms will be felt by manufacturers, these changes may impact our customer pricing structures, our manufacturer distribution relationships and revenue, our customers' billing processes and reimbursement amounts, and drug prices more generally (including outside of the Medicare context).

Among other issues, the mechanisms by which maximum fair prices will be made available to pharmacies, physicians and other purchasers of selected drugs, and our associated role and responsibilities, remain to be determined.

More broadly, the law contains reimbursement and pricing incentives designed to promote biosimilar introduction and competition which may affect our customers’ selection of products.

Each of these considerations, as well as other issues that may arise in connection with the implementation of the IRA, may adversely affect our operations and profitability.

Our businesses also sell specialty and other drugs to physicians, hospitals, community oncology practices and other providers that are reimbursed under Part B of the Medicare program.

The Centers for Medicare & Medicaid Services (“CMS”) published a final rule in November 2017 that reduces Medicare outpatient hospital reimbursement for separately payable drugs (other than vaccines) purchased through the 340B drug discount program from average sales price (“ASP”) plus 6% to ASP minus 22.5% (with certain exceptions), effective January 2018.

In July 2020, the United States Court of Appeals for the District of Columbia reversed the district court’s decision, which would allow the payment reductions to take effect.

The United States Supreme Court has agreed to review the decision, with a decision expected sometime in 2022.

While the appeals process is still underway, CMS solicited comments in the proposed calendar year 2020 Medicare outpatient prospective payment system rule on appropriate payment for such 340B-acquired drugs, and finalized a rule in November 2019 that would impose the same ASP minus 22.5% rate that was the subject of the litigation described above.

More recently, in August 2020, CMS proposed further reductions such that net payments would be based on an ASP minus 28.7% rate.

Separately, November 2018, CMS published a final rule that reduces from 6% to 3% the “add-on” payment for new, separately-payable Part B drugs and biologicals that are paid based on WAC when ASP data during first quarter or sales is unavailable.

There can be no assurance that recent or future rules established by CMS will not have an adverse impact on our business.

Subsequently, CMS issued proposed rules for later years containing similar reductions in hospital outpatient payments for 340B drugs.

In June 2022, the United States Supreme Court ruled in American Hospital Association v.

Becerra that CMS’s final rule was inconsistent with the Medicare statute and was therefore invalid.

Following the Supreme Court’s decision, CMS published a proposed rule for the calendar year 2023 hospital outpatient payment system, which did not propose a specific “refund” mechanism to implement reimbursement provisions consistent with the Supreme Court’s decision but advised the public that the final rule is likely to include such a mechanism and solicited comments on particular approaches.

While the Court’s decision (if fully implemented by CMS) removes the reimbursement restrictions for 340B products affecting our customers and indirectly the company, there can be no assurance that recent or future rules established by CMS will not have an adverse impact on our business.

Further, even where a government does not affirmatively change drug price regulation standards, other parties in the drug manufacturing and distribution system may change their interpretation or approach to implementing or complying with those standards, in a manner that may adversely affect our business.

For example, the 340B drug discount program requires manufacturers to provide discounts on outpatient drugs to “covered entity” safety net providers, and previous Health Resources and Services Administration (“HRSA”) guidance has allowed covered entities to dispense 340B discounted drugs through arrangements with multiple “contract pharmacies.” Recently, several manufacturers have announced initiatives that may inhibit or limit covered entities’ ability to use any, or multiple, contract pharmacies, and may direct us not to honor 340B discounted pricing requests on orders to be shipped to contract pharmacies (or may not honor chargebacks where such discounts are extended to contract pharmacies).

HRSA has initially indicated that it lacks regulatory authority to enforce its prior guidance allowing multiple contract pharmacies, but recently advised that it is considering whether it may have other enforcement remedies in the event that manufacturers do not extend 340B discounts through contract pharmacy arrangements.

Since these manufacturer policies were first announced, both manufacturers and covered entities have filed lawsuits against HRSA regarding the contract pharmacy policy, which are currently pending, and in September 2021, HRSA advised certain manufacturers that it was referring their policies to the Office of Inspector General of the Department of Health and Human Services for potential civil money penalty enforcement proceedings.

pharmacies, or direct us not to honor 340B discounted pricing requests on orders to be shipped to contract pharmacies (or may not honor chargebacks where such discounts are extended to contract pharmacies).

Since these manufacturer policies were first announced, both manufacturers and covered entities have filed lawsuits against HRSA regarding the contract pharmacy policy, which are currently pending, in several federal district and appellate courts, and HRSA has also advised certain manufacturers that it was referring their policies to the Office of Inspector General of the Department of Health and Human Services for potential civil money penalty enforcement proceedings.

We cannot predict the outcome of these proceedings.

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The federal government may adopt measures in the future that would further reduce Medicare and/or Medicaid spending or impose additional requirements on healthcare entities.

Any future reductions in Medicare reimbursement rates or modifications to Medicare drug pricing regulations such as ASP calculations could negatively impact our customers' businesses and their ability to continue to purchase such drugs from us, or could indirectly affect the structure of our relationships with manufacturers and our customers.

At this time, we can provide no assurances that future Medicare and/or Medicaid payment or policy changes, if adopted, would not have a material adverse effect on our business.

Any future reductions in Medicare reimbursement rates or modifications to Medicare drug pricing regulations such as ASP calculations, or the extension of IRA pricing reforms to commercial health plans, could negatively impact our customers' businesses and their ability to continue to purchase such drugs from us, or could indirectly affect the structure of our relationships with manufacturers and our customers.

At this time, we can provide no assurances that future Medicare, Medicaid or other insurance payment or policy changes, if adopted, would not have a material adverse effect on our business.

Finally, federal and state governments may adopt policies affecting drug pricing and contracting practices outside of the context of federal programs such as Medicare and Medicaid, which may adversely affect our business.

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Despite the ongoing litigation, on July 9, 2021, President Biden signed an Executive Order pertaining to drug pricing that directs the Commissioner of the FDA to work with states and Indian Tribes to facilitate the commercial importation of certain prescription drugs from Canada.

In March 2022, FDA met with representatives from Colorado, Florida, Maine, New Mexico and Vermont to provide assistance in developing importation proposals.

If implemented, importation of drugs from Canada may materially and adversely affect our business.

The regulatory and market implications of the final rule and guidance are unknown at this time.

Proponents of drug reimportation may attempt to pass legislation that would directly allow reimportation under

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certain circumstances.

Proponents of drug reimportation may attempt to pass legislation that would directly allow reimportation under certain circumstances.

Legislation or regulations allowing the reimportation of drugs, if enacted, could decrease the price we receive for products and adversely affect our future revenues and prospects for profitability.

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Many states have enacted similar statutes which are not necessarily limited to items and services for which payment is made by federal healthcare programs.

While we believe that we are in compliance with applicable laws and regulations, many of the regulations applicable to us, including those relating to certain incentives offered in connection with sales of pharmaceutical products and related services, are vague or indefinite, and have not been interpreted by the courts.

While we believe that we are in compliance with applicable laws and regulations, many of the regulations applicable to us, including those relating to certain

incentives offered in connection with sales of pharmaceutical products and related services, are vague or indefinite, and have not been interpreted by the courts.

They may be interpreted or applied by a prosecutorial, regulatory or judicial authority in a manner that could require us to make changes in our operations.

If we fail to comply with applicable laws and regulations, we could be subject to administrative, civil and criminal penalties, including the loss of licenses or our ability to participate in Medicare, Medicaid, and other federal, state, or governmental healthcare programs.

Public concern over the abuse of opioid medications, including increased legal and regulatory action, could negatively affect our business.

Certain governmental and regulatory agencies, as well as state and local jurisdictions, are focused on the abuse of opioid medications in the United States.

Federal, state and local governmental and regulatory agencies are conducting investigations of us and others in the pharmaceutical supply chain, including pharmaceutical manufacturers, national retail pharmacy chains, independent pharmacies, prescribers, and other pharmaceutical wholesale distributors, regarding the manufacture, dispensing, and distribution of opioid medications.

In addition, a significant number of lawsuits have been filed against us, other pharmaceutical wholesale distributors, and others in the pharmaceutical supply chain by state and local governmental entities and other plaintiffs for claims related to the Company’s distribution of opioid medications.

The lawsuits against us and other pharmaceutical wholesale distributors allege, among other claims, that we failed to provide effective controls and procedures to guard against the diversion of controlled substances, acted negligently by distributing controlled substances to pharmacies that serve individuals who abuse controlled substances, and failed to report suspicious orders of controlled substances in accordance with regulations.

Additional governmental and regulatory entities have indicated an intent to sue and may conduct investigations of us in the future and lawsuits could be brought against the Company by other plaintiffs under other theories related to opioid abuse.

We are deeply committed to diversion control efforts, have sophisticated systems to identify orders placed warranting further review to determine if they are suspicious (including through the use of data analytics), and engage in due diligence and ongoing monitoring of customers.

While we are vigorously defending ourselves in these lawsuits, the allegations may negatively affect our business in various ways, including through increased costs and harm to our re putation.

Legislative, regulatory or industry measures to address the misuse of prescription opioid medications may also affect our business in ways that we are not be able to predict.

Certain jurisdictions have enacted and others are considering legislation that could require entities to pay an assessment or tax on the sale or distribution of opioid medications in those states.

If additional state or local jurisdictions enact legislation that taxes or assesses the sale or distribution of opioid medications and we are not able to mitigate the impact on our business through operational changes or commercial arrangements where permitted, such legislation in the aggregate may have a material adverse effect on the Company's results of operations, cash flows, or financial condition.

Failure to finalize the proposed settlement agreement and settlement process could negatively affect our business.

On July 21, 2021, we announced that AmerisourceBergen and the two other national pharmaceutical distributors had negotiated a comprehensive proposed settlement agreement that, if all conditions are satisfied, would result in the resolution of

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a substantial majority of opioid lawsuits filed by state and local governmental entities.

The proposed settlement agreement and settlement process is subject to conditions and will not become effective unless and until we and the two other distributors each make separate independent determinations that (1) following a 30-day sign-on period, a sufficient number of “States” (including the District of Columbia and U.S.

territories) have agreed to the proposed settlement agreement (the “Settling States”);

and, subsequently, (2) following a 120-day sign-on period, a sufficient number of political subdivisions in the Settling States, including those that have not sued, have agreed to the proposed settlement agreement (or otherwise had their claims foreclosed).

On September 4, 2021, we announced that AmerisourceBergen and the two other national pharmaceutical distributors had determined that enough States had agreed to proceed to the next phase of the settlement agreement process.

Further details on the status of a global resolution of the multi-district opioid litigation involving c ertain state and local governmental entities and other related state court litigation are provided in Note 14 of the Notes to Consolidated Financial Statements.

While a global settlement with respect to certain governmental entities within the Multidistrict Litigation ("MDL") and other related state court litigation remains subject to contingencies that could impact whether the parties ultimately decide to move forward, we believe a global settlement is probable and its liability related thereto can be reasonably estimated as of September 30, 2021.

We recorded a charge of $6.6 billion in the fiscal year ended September 30, 2020 related to the proposed global settlement and other related opioid litigation and recorded an additional $147.7 million accrual in the fiscal year ended September 30, 2021 in connection with the proposed settlement agreement and related obligations and other opioid-related litigation.

Until such time as a plaintiff participates in a global settlement or otherwise resolves its lawsuit, we will continue to litigate and prepare for trial in the cases pending in the MDL, those remanded from the MDL to federal district courts, as well as in state courts where lawsuits have been filed, and we intend to continue to vigorously defend ourselves in all such cases.

Further, any final settlement amongst parties may differ materially from our advanced discussions related to global resolution of the MDL.

The inability to reach a global settlement of the MDL and adverse resolution of any of these lawsuits or investigations could have a material adverse effect on our business, results of operations, and cash flows and could result in a lower than historical level of capital available for deployment, including a lower level of capital returned to stockholders.

Our business, results of operations, and cash flows could be adversely affected by legal proceedings.

We conduct our operations through a variety of businesses, including the distribution of pharmaceuticals, the dispensing of healthcare products, and the provision of services to the pharmaceutical industry.

Each of our businesses may cause us to become involved in legal disputes or proceedings.

These disputes or proceedings have involved or may involve healthcare fraud and abuse, the False Claims Act, antitrust, class action, commercial, employment, environmental, intellectual property, licensing, public disclosures and various other claims, including claims related to opioid medications as discussed in the above risk factor.

Due to the nature of our operations, which we conduct through a variety of businesses, including the distribution of pharmaceuticals, the dispensing of healthcare products, and the provision of services to the pharmaceutical industry, each of our businesses may cause us to become involved in government investigations, legal disputes or proceedings.

These investigations, disputes or proceedings have involved or may involve healthcare fraud and abuse, the False Claims Act, antitrust, class action, commercial, employment, environmental, intellectual property, licensing, public disclosures and various other claims, including claims related to opioid medications as discussed in the risk factor below.

Litigation is inherently unpredictable and the unfavorable outcome of legal proceedings could adversely affect our results of operations or financial condition.

Litigation is costly, time-consuming, and disruptive to ordinary business operations.

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Failure to comply with obligations under the Corporate Integrity Agreement could lead to monetary or other penalties.

Opioid-related legal proceedings and the comprehensive settlement agreement that we have entered into could adversely impact our cash flows or results of operations.

On July 21, 2021, we announced that AmerisourceBergen and the two other national pharmaceutical distributors had negotiated a comprehensive proposed settlement agreement that would result in the resolution of a substantial majority of opioid lawsuits filed by state and local governmental entities (the “Settlement Agreement”).

On April 2, 2022, the Settlement Agreement became effective, and as of September 30, 2022, it included 48 of 49 eligible states (the “Settling States”), as well as 99% by population of the eligible political subdivisions in the Settling States.

Pursuant to the Settlement Agreement and related agreements with Settling States, we will pay up to approximately $6.4 billion over 18 years and comply with other requirements, including establishment of a clearinghouse that will consolidate data from all three national distributors.

The Settlement Agreement does not contemplate participation by any non-governmental or non-political entities or individuals.

Our estimated liability related to the State of Alabama (with whom we have not reached a settlement agreement), as well as other opioid-related litigation for which we have reached settlements agreements, is approximately $0.4 billion.

Net of $0.8 billion of payments made through September 30, 2022,we have a $6.0 billion liability on our Consolidated Balance Sheet as of September 30, 2022 for litigation relating to the Settlement Agreement, as well as other opioid-related litigation.

We currently estimate that $528.7 million will be paid prior to September 30, 2023, which is recorded in Accrued Expenses and Other on our Consolidated Balance Sheet.

The remaining long-term liability of $5.5 billion is recorded in Accrued Litigation Liability on our Consolidated Balance Sheet.

While we have accrued an estimated liability for opioid litigation, we are unable to estimate the range of possible loss associated with the matters that are not included in the settlement accrual.

Because loss contingencies are inherently unpredictable and unfavorable developments or resolutions can occur, the

assessment is highly subjective and requires judgments about future events, and the amount of ultimate loss may differ materially from the amount accrued to date.

Until such time as otherwise resolved, we will continue to litigate and prepare for trial and to vigorously defend ourself in all such matters.

Since these matters are still developing, we are unable to predict the outcome, but the result of these lawsuits could include excessive monetary verdicts and/or injunctive relief that may affect our operations, which could have a material adverse effect on our business, results of operations, and cash flows and could result in a lower than historical level of capital available for deployment, including a lower level of capital returned to stockholders.

Further details on the Settlement Agreement and opioid litigation are provided in Note 13 of the Notes to Consolidated Financial Statements.

Public concern over the abuse of opioid medications, including increased legal and regulatory action, could negatively affect our business.

Certain governmental and regulatory agencies, as well as state and local jurisdictions, are focused on the abuse of opioid medications in the United States.

Additional governmental and regulatory entities have indicated an intent to sue and may conduct investigations of us in the future, and lawsuits could be brought against the Company by other plaintiffs under other theories related to opioid abuse.

In addition to the claims brought by states and other local governmental entities, we are also being sued by private plaintiffs, such as unions, other health and welfare funds, hospital systems, third party payors, other healthcare providers and individuals alleging personal injury for the same activities, and continue to be named as a defendant in additional lawsuits.

In April 2022, the Settlement Agreement described above, which settles the vast majority of opioid-related lawsuits filed against us by state and local governmental entities, became effective.

The Settlement Agreement includes a cash component, pursuant to which we will pay up to approximately $6.4 billion, the majority of which we expect to be paid over 18 years.

The Settlement Agreement also includes injunctive relief terms relating to distributors’ controlled substance anti-diversion programs, including with respect to:

(i) governance;

(ii) independence and training of the personnel operating controlled substances monitoring programs;

(iii) due diligence for new and existing customers;

(iv) ordering limits for certain products;

and (v) suspicious order monitoring.

A monitor will oversee compliance with these provisions for a period of five years.

In addition, the distributors will engage a third-party vendor to act as a clearinghouse for data aggregation and reporting, which the distributors will fund for ten years.

It is possible that the implementation and maintenance of the required changes to distributors’ controlled substance anti-diversion programs may result in unforeseen costs or operational challenges which could have an adverse impact on our results of operations or performance.

Legislative, regulatory or industry measures to address the misuse of prescription opioid medications may also affect our business in ways that we are not be able to predict.

Certain jurisdictions have enacted, and others are considering, legislation that could require entities to pay an assessment or tax on the sale or distribution of opioid medications in those states.

If additional state or local jurisdictions enact legislation that taxes or assesses the sale or distribution of opioid medications and we are not able to mitigate the impact on our business through operational changes or commercial arrangements where permitted, such legislation in the aggregate may have a material adverse effect on the Company’s results of operations, cash flows, or financial condition.

Ongoing unfavorable publicity regarding the abuse or misuse of prescription opioid pain medications and the role of wholesale distributors in the supply chain of such prescription medications, as well as the continued proliferation of the opioid lawsuits, investigations, regulations and legislative actions, and unfavorable publicity in relation to those lawsuits could continue to have a material adverse effect on our reputation or results of operations.

Tax legislation or challenges to our tax positions could adversely affect our results of operations and financial condition.

We are a large corporation with operations in the United States and select global markets.

As such, we are subject to tax laws and regulations of the U.S.

We are subject to tax laws and regulations of the U.S.

federal, state and local governments, and various foreign jurisdictions.

From time to time, various legislative initiatives, such as corporate tax rate and law changes, the repeal of last-in, first-out ("LIFO") U.S.

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treatment or the promulgation of state opioid taxes and fees, may be proposed that could adversely affect our tax positions and/or our tax liabilities.

There can be no assurance that our effective tax rate or tax payments will not be adversely affected by legislation resulting from these initiatives both within the United States and other jurisdictions in which we operate.

From time to time, various legislative initiatives may be proposed that could adversely affect our tax positions and/or our tax liabilities.

In August 2022, the U.S.

Inflation Reduction Act of 2022 was signed into law.

This law, among other

things, provides for a corporate alternative minimum tax on adjusted financial statement income and an excise tax on corporate stock repurchases.

We are continuing to evaluate the impact this new law may have on our financial position and results of operations.

In addition, there are several proposed changes to U.S.

tax legislation, which if enacted, could have a negative impact on our effective tax rate.

Foreign governments may enact tax laws that could result in further changes to global taxation that could materially affect our financial position and results of operations.

In addition, we are subject to the continuous examination of our income tax returns by the U.S.

Internal Revenue Service and other tax authorities.

We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.

These examinations may result in unforeseen tax-related liabilities, which may harm our future financial results.

An increasing number of states and foreign jurisdictions have adopted laws or administrative practices, that impose new taxes on all or a portion of gross revenue or other similar amounts or impose additional obligations to collect transaction taxes such as sales, consumption, value added, or similar taxes.

We may not have sufficient lead time to build systems and processes to collect these taxes properly, or at all.

Failure to comply with such laws or administrative practices, or a successful assertion by such states or foreign jurisdictions requiring us to collect taxes where we do not, could result in material tax liabilities, including for past sales, as well as penalties and interest.

In addition, tax laws and regulations are extremely complex and subject to varying interpretations.

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Bribery Act, any violation of which could create substantial liability for us and also cause a loss of reputation in the market.

We may also have substantial liability if a third party acting on our behalf or on the behalf of our subsidiaries (including our joint venture partners) is in violation of these laws.

The FCPA generally prohibits U.S.

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If we are found to have violated the FCPA, we may face sanctions including civil and criminal fines, disgorgement of profits, and suspension or debarment of our ability to contract with government agencies or receive export licenses.

We have business operations in many countries worldwide, including business operations in Egypt (through our 50%-owned Alliance Healthcare Egypt subsidiary) as well as Turkey, Ukraine, Brazil, and other countries that are considered to have business environments with higher risk of conduct that could give rise to potential violations and liabilities.

We have business operations in many countries worldwide, including business operations in Egypt (through our 50%-owned Alliance Healthcare Egypt subsidiary) as well as Brazil and Turkey, and other countries that are considered to have business environments with higher risk of conduct that could give rise to potential violations and liabilities.

From time to time, we may face audits or investigations by one or more domestic or foreign government agencies relating to our international business activities, compliance with which could be costly and time-consuming, and could divert our management and key personnel from our business operations.

An adverse outcome under any such investigation or audit could subject us to fines or other penalties, which could adversely affect our business, financial position, and results of operations.

Risks generally associated with data privacy regulation and the international transfer of personal data.

Our actual or perceived failure to adequately protect personal data could result in claims of liability against us, damage our reputation or otherwise materially harm our business.

Given the nature of our business, we, together with third parties acting on our behalf, receive, collect, process, use, and retain sensitive and confidential customer and employee data, in addition to proprietary business information.

Some of our third-party service providers, such as identity verification and payment processing providers, also regularly have access to customer data.

Additionally, we maintain other confidential, proprietary, or otherwise sensitive information relating to our business and from third parties.

Global privacy, cybersecurity and data protection-related laws and regulations are evolving, extensive, and complex.

Compliance with these laws and regulations is difficult and costly.

The interpretation and application of these laws in some

instances is uncertain, and our legal and regulatory obligations are subject to frequent changes.

We are required to comply with increasingly complex and changing data privacy regulations both in the United States and beyond that regulate the collection, use, security, processing, and transfer of personal data, including particularly the transfer of personal data between or among countries.

Many of these regulations also grant rights to individuals.

Many foreign data privacy regulations (including, without limitation, GDPR in the European Union, UK GDPR, Brazil's General Data Protection Law, LGPD, and the Personal Information Protection and Electronic Documents Act in Canada) and certain state laws and regulations (including California's CCPA) impose requirements beyond those enacted under United States federal law including, in some instances, private rights of action.

Many foreign data privacy regulations (including, without limitation, GDPR in the European Union, UK GDPR, Brazil’s General Data Protection Law, LGPD, and the Personal Information Protection and Electronic Documents Act in Canada) and certain state laws and regulations (including California’s CCPA and recently enacted consumer privacy laws in Colorado, Connecticut, Utah, and Virginia) impose requirements beyond those enacted under United States federal law including, in some instances, private rights of action.

For example, the EU GDPR imposes more stringent data protection requirements, including a broader scope of protected data, restrictions on cross-border transfers of personal data and more onerous breach reporting requirements, and the EU GDPR imposes greater penalties for non-compliance than the federal data protection laws in the United States.

We may also face audits or investigations by one or more domestic or foreign government agencies relating to our compliance with these regulations.

Other states and countries continue to enact similar legislation.

We are also required to comply with expanding and increasingly complex cybersecurity regulations in the United States and abroad with respect to reporting adverse events and additional requirements for avoiding or responding to an adverse event.

We may also face audits or investigations by domestic or foreign government agencies relating to our compliance with these regulations.

An adverse outcome under any such investigation or audit could subject us to fines or other penalties.

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The foregoing or other circumstances related to our collection, use, and transfer of personal data could cause a loss of reputation in the market and/or adversely affect our business and financial position.

We face risks related to health epidemics and pandemics, and the continued spread of COVID-19 has had adverse effects on our business.

We face risks related to health epidemics and pandemics, including risks related to any responses thereto by the federal, state or foreign governments as well as customers and suppliers.

The COVID-19 pandemic has adversely affected our operations, supply chains and distribution network, and we have experienced and expect to continue to experience unpredictable reductions in supply and demand for certain of our products and services.

Further, it is possible that the

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manufacturers that produce the products that we distribute may experience delays or shutdowns due to COVID-19, such as from disruptions in their supply chains or in a suspension of production at their own facilities.

Accordingly, we expect the continued spread of COVID-19 to adversely affect the supply of products and/or potentially disrupt our ability to deliver products to customers.

The implementation of any government mandated vaccination or testing mandates may impact our ability to retain current employees and attract new employees.

For example, the federal Occupational Safety and Health Administration issued an Emergency Temporary Standard requiring employers with at least 100 employees to require their employees to get vaccinated or submit to regular COVID-19 testing.

Any extended disruption in our ability to service our customers could have a material adverse effect on our revenue, results of operations, and cash flows.

We also face risks related to our employees' health and the impact it may have on operations.

Certain of our employees have contracted COVID-19 which resulted in our decision to temporarily close, and subsequently reopen, a small number of our distribution centers in the first half of fiscal year 2021 in accordance with our internal protocols.

We have implemented measures designed to keep our employees safe and have protocols in place to address business continuity issues at our distribution centers and other locations, but a widespread or sustained outbreak of COVID-19 at one or more locations could disrupt our ability to service our customers.

We also face risks related to a downturn in our customers' respective businesses, including the operations of our retail pharmacy and health systems customers due to COVID-19.

An economic slowdown or recession related to COVID-19 may affect our customers' ability to obtain credit to finance their business on acceptable terms, which could result in reduced spending on our products and services.

The impacts of the continued spread of COVID-19 could also cause other unpredictable events, each of which could adversely affect our business, revenue, results of operations, cash flows or financial condition.

For example, the continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which could increase our cost of capital and adversely affect our ability to access the capital markets.

A sustained or prolonged outbreak could exacerbate the adverse impact of such events, and the impact of COVID-19 may also exacerbate other risks discussed in Item 1A to our Form 10-K, any of which could have a material adverse effect on us.

Risks generally associated with our information systems and cyber security may adversely affect our business and results of operations.

The loss or disruption of information systems could disrupt our operations and have a material adverse effect on our business.

Our businesses rely on sophisticated information systems to obtain, rapidly process, analyze, and manage data to facilitate the purchase and distribution of thousands of inventory items from numerous distribution centers;

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and to process payments to suppliers.

We continue to make substantial investments in data centers and information systems, including, but not limited to, those relating to our recent acquisition of Alliance Healthcare.

To the extent our information systems are not successfully implemented or fail, or to the extent there are data center interruptions, our business and results of operations may be adversely affected.

We continue to make substantial investments in data centers and information systems, including, but not limited to, those relating to our acquisition of Alliance Healthcare.

To the extent our information systems are not successfully implemented or fail, or to the extent there are data center interruptions or outages, our business and results of operations may be materially adversely affected.

Our business and results of operations may also be adversely affected if a third-party service provider does not perform satisfactorily, or if the information systems are interrupted or damaged by unforeseen events, including due to the actions of third parties.

Information security risks have generally increased in recent years because of the proliferation of cloud-based infrastructure and other services, new technologies, and the increased sophistication and activities of perpetrators of cyber-attacks.

These risks have increased with the growth of our business, including as we integrate the information systems of Alliance Healthcare into our enterprise.

A failure, interruption, or breach of our operational or information security systems, or those of our third-party service providers, as a result of cyber attacks or information security breaches could disrupt our business, result in the disclosure or misuse of confidential or proprietary information or personal data, damage our reputation, cause loss of customers or revenue, increase our costs, result in litigation and/or regulatory action, and/or cause other losses, any of which might have a materially adverse impact on our business operations and our financial position or results of operations.

Security incidents such as ransomware attacks are becoming increasingly prevalent and severe, as well as increasingly difficult to detect.

These risks have increased with the growth of our business, including as we integrate the information systems of acquired businesses, such as Alliance Healthcare, into our enterprise.

In addition, security incidents may require that we expend substantial additional resources related to the security of information systems and disrupt our businesses.

We, and our third-party service providers, may experience cyberattacks aimed at disrupting services.

Security breaches can also occur as a result of non-technical issues, including intentional or inadvertent actions by our employees, third-party service providers or their personnel or other parties.

A failure, interruption, or breach of our operational or information security systems, or those of our third-party service providers, as a result of cyber-attacks or information security breaches could disrupt our business, result in the disclosure or misuse of confidential or proprietary information or personal data, damage our reputation, cause loss of customers or revenue, increase our costs, result in litigation and/or regulatory action, and/or cause other losses, any of which might have a materially adverse impact on our business operations and our financial position or results of operations.

As a result, cyber security and the continued development and enhancement of the controls and processes designed to protect our systems, computers, software, data, and networks from attack, damage, or unauthorized access remain a priority for us.

Although we believe that we have robust information security procedures, controls and other safeguards in place, as cyber threats continue to evolve, we may be required to expend additional resources to continue to enhance our information security measures and/or to investigate and remediate any information security vulnerabilities.

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Our failure to protect our reputation could have a material adverse effect on our business and operations.

We believe that maintaining and enhancing our reputation is critical to our ability to expand and retain our customer base, strategic partnerships and other key relationships.

Any negative publicity about us or the industry in which we operate we offer may adversely impact our business and operations.

Furthermore, failure to comply with ethical, social, product, labor, health and safety, accounting, or environmental standards could also jeopardize our reputation and potentially lead to various

adverse actions, including litigation.

Negative claims or publicity, including those made on social media, also could adversely affect our reputation and business, regardless of whether such claims are accurate.

Our reputation may also depend on the success of our environmental, social and governance (“ESG”) initiatives, inclusive of sustainability, social impact and corporate responsibility, which require company-wide coordination and alignment.

Risks associated with these initiatives include increased focus on ESG targets, goals and disclosure, including by governmental and nongovernmental organizations, increased costs associated with sustainability efforts, and compliance with laws and regulations.

All of the foregoing could expose us to market, operational and execution costs or risks.

Any ESG or sustainability metrics that we currently or may in the future disclose, whether based on the standards we set for ourselves or those set by others, may influence our reputation and the value of our brands.

There is also increased focus, including by investors, customers, and other stakeholders, on ESG matters, including the use of materials, climate change, waste generation, supply chain, human capital, health equity and worker safety.

Our reputation could be damaged if we do not, or are perceived to not, act responsibly with respect to sustainability matters, which could also have a material adverse effect on our business, results of operations, financial position, and cash flows.

We face risks related to health epidemics and pandemics, and the ongoing COVID-19 pandemic has had adverse effects on our business.

We face risks related to health epidemics and pandemics, including risks related to any responses thereto by the federal, state or foreign governments as well as customers and suppliers.

Further, it is possible that the manufacturers that produce the products that we distribute may experience delays or shutdowns due to COVID-19, such as from disruptions in their supply chains or in a suspension of production at their own facilities.

Accordingly, we expect the impacts of the ongoing COVID-19 pandemic to adversely affect the supply of products and/or potentially disrupt our ability to deliver products to customers.

The implementation of any government-mandated vaccination or testing mandates may impact our ability to retain current employees and attract new employees.

Any extended disruption in our ability to service our customers could have a material adverse effect on our revenue, results of operations, and cash flows.

Our management of the impact of COVID-19 has and will continue to require significant investment of time from our management and employees, as well as resources across our global enterprise.

This may cause us to divert or delay the application of our resources toward new initiatives or investments, which may adversely impact our future results of operations.

In addition, issues relating to the COVID-19 pandemic may result in legal claims or litigation against us.

We also face risks related to a downturn in our customers’ respective businesses, including the operations of retail pharmacy and health systems customers due to COVID-19.

An economic slowdown or recession related to COVID-19 may affect our customers’ ability to obtain credit to finance their business on acceptable terms, which could, in turn, result in reduced spending.

The extent to which the COVID-19 pandemic continues to impact our results of operations and financial condition will depend on future developments that are highly uncertain and cannot be predicted, including the resurgence of COVID-19 and its variants in regions recovering from the impacts of the pandemic, the effectiveness of COVID-19 vaccines and the speed at which populations are vaccinated around the globe, the impact of COVID-19 on economic activity and regulatory actions taken to contain the impact of COVID-19 on public health and the global economy.

The impact of COVID-19 may also exacerbate other risks discussed in this Risk Factors section, any of which could have a material effect on us.

Our goodwill, indefinite-lived intangible assets, or long-lived assets may become impaired, which may require us to record a further significant charge to earnings in accordance with generally accepted accounting principles.

generally accepted accounting principles (“GAAP”) require us to test our goodwill and indefinite-lived intangible assets for impairment on an annual basis, or more frequently if indicators for potential impairment exist.

Indicators that are considered include significant changes in performance relative to expected operating results, significant negative industry or economic trends, or a significant decline in our stock price and/or market capitalization for a sustained period of time.

In addition, we periodically review our intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

Indicators that are considered include significant changes in performance relative to expected operating results, significant negative industry or economic trends, including rising interest rates, or a significant decline in our stock price and/or market capitalization for a sustained period of time.

In addition, we periodically review our intangible and long-lived assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

Factors that may be considered a change in circumstances indicating that the carrying value of our long-lived assets may not be recoverable include slower growth rates, the loss of a significant customer, or divestiture of a business or asset for below its carrying value.

The testing required by GAAP involves estimates and judgments by management.

For example, as a result of a prolonged decline in Profarma’s stock price, we performed an impairment assessment over our Profarma reporting unit as of June 30, 2022.

As a result of the June 30, 2022 interim test, we recorded a $75.9 million impairment to goodwill in fiscal 2022.

We may be required to record a significant charge to earnings in our consolidated financial statements during the period in which any impairment of our goodwill, indefinite-lived intangible assets, or long-lived assets is determined.

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We continue to focus on strategies and systems, such as reducing greenhouse gas emissions and packaging waste, to address climate change.

However, we face climate and environmental risks and the occurrence of one or more unexpected events, including fires, tornadoes, tsunamis, hurricanes, earthquakes, floods, and other severe hazards or accidents in the United States, the United Kingdom, the European Union or in other countries or regions in which we operate could adversely affect our operations and financial performance.

However, we face climate and environmental risks and the occurrence of one or more unexpected events, including fires, tornadoes, tsunamis, hurricanes, earthquakes, drought, storms, sea level rise, floods, and other severe hazards or accidents in the United States, the United Kingdom, the European Union or in other countries or regions in which we operate could adversely affect our operations and financial performance.

Extreme weather, natural disasters, power outages, or other unexpected events could result in physical damage to and complete or partial closure of one or more of distribution centers or outsourcing facilities, temporary or long-term disruption in the supply of products, delay in the delivery of products to our distribution centers, and/or disruption of our ability to deliver products to customers.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors