Health Industry Distribution Leaders Agree To Form Independent Company To Bring Internet Efficiency, Shared Standards to Healthcare Purchasing On the Web
Initiative Will Bring Greater Efficiency to the Healthcare Supply Chain
NEW YORK--(BUSINESS WIRE)--April 18, 2000-- In a move to bring greater efficiency to the healthcare supply chain, five of the nation's largest healthcare distributors --AmeriSource Health Corporation (NYSE: AAS), Cardinal Health, Inc. (NYSE: CAH), Fisher Scientific International Inc. (NYSE: FSH), McKesson HBOC, Inc. (NYSE: MCK) and Owens & Minor, Inc. (NYSE: OMI) --announced today they have agreed, in principle, to form an Internet-based company that would be an independent, commercially neutral healthcare product information exchange focused on streamlining the processes involved in identifying, purchasing and distributing pharmaceutical products, medical-surgical products, devices and other laboratory products and services.
The companies expect to complete a definitive joint-venture agreement by the end of July and begin implementation of the exchange by the end of the year.
The founding members of the new exchange distribute products from nearly all suppliers and virtually every pharmaceutical, medical or laboratory product needed by caregivers. Collectively, the founding members of the exchange process millions of healthcare product orders each day from hospitals, pharmacies, laboratories and healthcare manufacturers in America, as well as many physician offices and long-term care sites.
The new exchange expects to work with group purchasing organizations and healthcare manufacturers, which are developing their own Internet-based exchanges to streamline healthcare procurement. The new exchange will work closely with group purchasing organizations to assure linkages with their exchanges and information systems. Through their respective exchanges, the founding members and the group purchasing organizations are committed to reduce costs, eliminate redundancies and improve service to their customers and members.
"All customers will realize the value of their efforts more quickly and more certainly as a result of this initiative," said John Hammergren, co-chief executive officer of McKessonHBOC. "Every healthcare provider in America is being asked to deliver the highest possible quality of care for growing numbers of patients while payments for that care are being ratcheted down further and further. 'Virtual organizations' like this new exchange will make the movement of information along the supply chain extremely efficient. They allow the industry to raise efficiency and quality at the same time. This is an important and fitting role for the nation's healthcare distributors."
"We believe the future of Internet commerce will be driven largely by established companies with proven infrastructures that can offer a more efficient online and offline solution," said Robert D. Walter, chairman and chief executive officer of Cardinal Health. "Together our companies meet the needs of hundreds of thousands of healthcare customers for daily product ordering, delivery, logistics and financial transaction support. We employ tens of thousands of people who deliver millions of products each day ordered through sophisticated, large-scale information systems."
"To be successful in this space, you've got to choose partners who can offer great Internet technology with a rock-solid procurement and fulfillment infrastructure, and who have relationships up and down the supply chain," said G. Gilmer Minor, III, chairman and chief executive officer of Owens & Minor. "Each of us is eager to deploy these critical capabilities to improve healthcare."
Goal of the New Exchange
The goal of the venture is to streamline the healthcare supply chain for all manufacturers, distributors, group purchasing organizations and healthcare providers. Specifically, the joint venture seeks to:
-- simplify the complex and numerous steps required to manage healthcare product rebates. Currently, several hundred people in the five founding companies are needed full-time to process these transactions and related paperwork;
-- establish an industry standard for product information, including the use of common code numbers and electronic systems that simplify and reduce errors in identifying, ordering, handling and delivering products;
-- offer standardized access to thousands of manufacturer product catalogs on the Internet, where they can be refreshed and updated continuously for use by healthcare providers;
-- simplify order entry and processing procedures for healthcare purchasing professionals and reduce operating costs for the companies that serve them.
"The exchange will provide the healthcare industry with an option of a standardized information channel for manufacturer contract management that can dramatically reduce the cost of contract administration and increase the benefits of contract purchasing for healthcare providers, group purchasing organizations and suppliers," said R. David Yost, president and chief executive officer of AmeriSource Health Corporation. "With more timely information on contract changes and product information, the new exchange will be able to significantly reduce errors and streamline customer eligibility, product recalls, rebates and many other processes that add unnecessarily to the costs of healthcare."
Structure of the New Exchange
The founding members expect the new exchange to require investments totaling more than $100 million. The exchange will be an independent company with its own management team and board of directors. The chief executives of the founding companies will serve as directors of the exchange. The founders will constitute a majority of the board. Three outside directors and the exchange's chief executive officer also will be board members.
The leadership of the exchange will be charged with building a comprehensive, efficient online ordering center for healthcare providers and manufacturers. They also will be free to explore strategic partnerships that further open customer access to an even greater array of products and cost-saving services.
"This commercially neutral portal is expected to link the broadest and deepest network of business, technology and healthcare providers and manufacturers on the Internet," said Paul M. Montrone, chairman and chief executive officer, Fisher Scientific International. "We are confident of achieving this goal since we each have relationships with many of these companies today. In addition, the founding members collectively employ hundreds of information technology professionals who, in turn, work with virtually all of the leading information and Internet technology firms. This will give the exchange a window into deploying the best solutions current technology has to offer."
Benefits to Healthcare Providers
Healthcare providers - from retail pharmacies to hospitals, laboratories, physicians' offices and other sites of care - will have immediate access to information from their suppliers about product availability, contract pricing and delivery with continuously refreshed data from the largest online catalog in healthcare. The information will be secure, ensuring its confidentiality. Purchasing professionals will be able to execute product orders online at any time and from any computer with Internet access. They will be able to view up-to-date contract terms and track their orders in real time. Healthcare providers who are members of group purchasing organizations will have access to their portfolios through the new exchange and the exchanges developed by the group purchasing organizations.
The exchange also will empower medical professionals with instant access to the widest array of supply-management information they need to improve quality in patient care and drive costs out of their operations. The exchange plans to work collaboratively with group purchasing organizations to facilitate full access to data to improve product standardization and utilization.
The exchange will offer real-time order management and a flexible ordering system that is available 24 hours a day, every day. Via the Web, healthcare providers will have the convenience of a single gateway to products from independent suppliers throughout the United States. It will be a secure, confidential and reliable service that offers customized information based on the caregiver's affiliation and personal profile.
Internet Link for More News
For more news on this initiative, please visit http://www.newhealthexchange.com, the temporary site for facts and information about the new health exchange and its founding members.
AmeriSource Health Corporation
AmeriSource is a leading full-service wholesale distributor of pharmaceutical products and related healthcare services. Headquartered in Malvern, Pennsylvania, the company serves 21,000 customer accounts through a national network of 24 distribution facilities. AmeriSource is the industry's largest provider of pharmaceuticals to the acute care/institutional market. More information about AmeriSource is available at http://www.amerisource.com.
Cardinal Health, Inc. (http://www.cardinal.com) of Dublin, Ohio, is a leading provider of products and services supporting the healthcare industry. Cardinal companies develop, manufacture, package and market products for patient care; develop drug-delivery technologies; distribute pharmaceuticals, medical-surgical and laboratory supplies; and offer consulting and other services that improve quality and efficiency in health care.
As a world leader in serving science, Fisher Scientific International Inc. (http://www.fishersci.com) is a global source of laboratory supplies and equipment, integrated e-commerce procurement technology and related services for research and testing, health care, science education and occupational safety.
Owens & Minor
Owens & Minor, Inc., a Fortune 500 company headquartered in Richmond, Va., is a leading distributor of national name brand medical-surgical supplies. The company's distribution centers throughout the United States serve hospitals, integrated healthcare systems and group purchasing organizations. In addition to its diverse product offering, Owens & Minor helps customers control healthcare costs and improve inventory management through innovative services in supply chain management, logistics and technology. More information about Owens & Minor is available at http://www.owens-minor.com.
McKesson HBOC, Inc., a Fortune 40 corporation, is a leading supply management and healthcare information technology company. McKessonHBOC provides supply management and information technologies across the entire continuum of health care. More information about McKessonHBOC is available at http://www.mckhboc.com.
Except for historical information, all other information in this news release consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. The most significant of these uncertainties are described in the Form 10-K, Form 8-K and Form 10-Q reports and exhibits to those reports filed with the U.S. Securities and Exchange Commission by the founding members of the new health exchange, and include (but are not limited to) the costs and difficulties related to the formation of the exchange, the loss of one or more key customer or supplier relationships, changes in the distribution outsourcing pattern for healthcare products, and the costs and other effects of governmental regulation and legal and administrative proceedings. The companies undertake no obligation to update or revise any forward-looking statements.
News Conference, Telephone Briefing and Audio Cybercast
A news conference, telephone briefing and audio cybercast for media and the financial community will be held at 11:00 a.m. EDT in Manhattan at the Millenium Hilton, 55 Church St.
The 11:00 a.m. news conference can be attended via conference call: 1-800-857-5044. For those who cannot access the conference call at 11:00 a.m., an audio playback will be available from 2:00 p.m. EDT on April 18 until April 25 at 4:00 p.m. 1-800-645-7409.
The conference also will be broadcast via a listen-only audio cybercast at http://www.newhealthexchange.com.
AmeriSource Health Media/Investor: Marybeth Alvin, 610-993-3411
Cardinal Health Media: Geoffrey D. Fenton, 614-757-7871 Investor: Steve Fischbach, 614-757-7067 Fisher Scientific Media: Norman Ritter, 603-929-2322 Investor: Robert J. Gagalis, 603/929-2346 McKesson HBOC Media/Investor: Larry Kurtz, 415-983-8418 Owens & Minor Media: Trudi Allcott, 804-935-4291 Investor: Richard F. Bozard, 804-965-2921 CONTACT: AmeriSource, Malvern, PA Media Contact: Dulcie Kogut, GCI Healthcare, 212/537-8102 (Office) 516/314-3599 (Cell)