Impact of Optum Contract Loss
Q: How will the loss of the Optum contract affect fiscal '25 earnings, and what's being done to mitigate it?
A: The loss of the Optum contract will result in an estimated $80 million net impact on fiscal '25 segment EBIT, accounting for approximately 4 percentage points difference from their usual 4–6% profit growth target. Management plans to mitigate this impact through new customer wins, growth in specialty networks, cost reductions, and streamlining processes. They expect at least 1% profit growth in the segment for fiscal '25 despite the Optum loss.

Fiscal '25 Earnings Guidance and Growth Drivers
Q: What are the main factors influencing the fiscal '25 earnings outlook and growth guidance?
A: Fiscal '25 will see a significant volume drop at the start due to the Optum contract loss, but new customer business and the Specialty Networks acquisition will contribute to revenue, especially in the second half. Cost actions and process simplifications will help offset the impact over the year. Management confirms long-term profit growth guidance of 4–6%, with fiscal '25 expected to grow at least 1%, returning to normalized growth rates in fiscal '26.

Red Oak Sourcing Impact
Q: Does the loss of the Optum contract and a large payer contract by your partner affect Red Oak Sourcing?
A: Despite these losses, Red Oak Sourcing remains strong due to significant combined volume with their partner, CVS. The percentage of volume related to the lost customers is quite small relative to their total, so their scale, competitiveness, and ability to drive value and supply remain unaffected.

Progress in Medical Segment (GMPD)
Q: How is the medical segment progressing towards fiscal '25 operating income targets?
A: The medical segment (GMPD) is executing on its plan, having swung from a negative $165 million in fiscal '23 to a positive $65 million in fiscal '24, marking a $230 million improvement. For fiscal '25, they expect approximately $175 million in operating income, driven by full inflation mitigation, continued revenue growth, especially in the Cardinal Health Brand, and ongoing cost simplification.

Cardinal Health Brand Growth
Q: Where does the company stand on realizing the $50 million growth target for Cardinal Health Brand by fiscal '26?
A: The company has seen 4% revenue growth in the Cardinal Health Brand this quarter, indicating positive momentum. They've expanded product offerings and are on track with their plan, with Cardinal Health Brand volume growth being a key component of profit improvement from fiscal '25 to '26.

Competitive Environment in Specialty
Q: How is the competitive environment in specialty changing, and how prepared is the company?
A: While the overall market remains rational, recent contract switches are exceptions. The company feels confident with its broad suite of services and is building out capabilities upstream and downstream to add value for customers. The acquisition of Specialty Networks aids in getting closer to practitioners and offering incremental services demanded by the industry.

Generic Pricing and Margins
Q: What trends are you seeing in generic pricing and gross profit dollars?
A: The company observes consistent market dynamics with stability on both the buy and sell sides of generics. They continue to see strength in the generics portfolio and view the current stability as a strength.

Navista and Specialty Networks Integration
Q: Can you provide an update on Navista and the integration with Specialty Networks?
A: Progress on Navista is on track, with a focus on building tools and capabilities guided by customer needs. The integration of Specialty Networks enhances technology and capabilities but is customer-driven in terms of which services are utilized. The leadership and expertise from Specialty Networks are positively impacting the broader business.

Other Segment Revenue and Profit Growth
Q: When will the strong revenue growth in the Other segment translate into profit growth?
A: The Other segment is expected to achieve 8–10% profit growth for fiscal '24, confirming the high end of that range for fiscal '25. The strong industry sectors and leadership positions within the segment's businesses support this growth outlook.

GMPD Competitive Environment and Utilization Demand
Q: Are you seeing improvements in the competitive environment and underlying utilization demand in GMPD?
A: The company's performance has improved significantly, with customer loyalty scores increasing and product availability stabilizing. The market utilization is more normalized, supporting consistent growth aligned with the market.