Some purchasing groups are finding themselves in tight spots as drug companies merge or affiliate to broaden their product lines.
Many groups have longstanding contracts with leading drugmakers. Many of the drug companies that once had no rival products, however, now compete because their investments have so greatly expanded their offerings. Purchasing groups, under pressure to buy more of the products companies offer, tread cautiously.
Consider American Home Products' acquisition of American Cyanamid Co. last month. The deal will create the world's fourth-largest prescription-drug company with annual pharmaceutical sales of $5.6 billion (Aug. 22, p. 11).
It will match American Home's Wyeth-Ayerst Laboratories and its interest in Genetics Institute with American Cyanamid's Lederle Laboratories and its interest in Immunex Corp.
Lederle now is taking on products of Merck & Co. and SmithKline Beecham in a new campaign for its antibiotic Zosyn.
Most purchasing groups likely have some type of contract with each of the giant companies.
For example, GNYHA Ventures, the purchasing arm of the Greater New York Hospital Association, contracted with Lederle for purchases of Zosyn in January.
It also has several contracts with Merck, which recently asked the group to endorse a program involving its competing antibiotic.
"We let them take it to the members and fight it out," said William Larkin, director of the pharmaceutical purchasing program at GNYHA. "Two years from now, I might have to decide who's more important. Months ago, I might have been able to dismiss Lederle. This is something that's going to shake out in the marketplace."
Other purchasing executives agree with Mr. Larkin.
"Drug companies are going to put more pressure on us," said Earl Norman, chief executive officer of Health Services Corporation of America, a Cape Girardeau, Mo.-based group. "I don't think it's going to be an insurmountable problem."
After all, the drug industry still consists of hundreds of companies. And purchasing groups have gained some negotiating strength from the drug industry mergers, too, purchasing executives contend. If companies slash their sales forces following mergers, they might rely more heavily on groups to market products.