The tentative winners of coveted pharmacy contracts with group purchasing giant Novation already know who they are. Attention: Johnson & Johnson. Are you one of them?
It's a loaded question because all 126 drug companies that already have been unofficially notified of pharmacy awards have agreed "at some level" to sign on to the budding but still unprofitable Internet marketplace operated by Neoforma, said Larry McComber, vice president of pharmacy for the Irving, Texas-based group purchasing organization.
That would be a boost to Neoforma, Novation's San Jose, Calif.-based e-commerce partner. To spur laggard suppliers to the marketplace, Novation has put its $17 billion portfolio on the line, establishing a new policy last fall that in order to do business with the GPO, suppliers will have to do business with Neoforma (May 7, p. 26).
That's a tall order for drugmakers that might be eager for a stake in Novation's considerable pharmacy business but perhaps are a little reluctant to participate in an electronic marketplace, fearing that their closely guarded pricing policies may be exposed. But there's a lot on the line. The group's medicine chest, which contains more than 8,000 items, goes out to bid all at one time, rather than piecemeal as with many other hospital supplies, representing roughly 40% of Novation's total business. Novation's 2,200 members purchase $7 billion in drugs annually, about 85% of which are bought under contracts, McComber said.
The invitation to bid on supplying drug products through Novation went out to 215 companies last February. Novation received 139 responses, McComber said. The bid awards will be announced in early August.
If Johnson & Johnson has agreed to sign on with Neoforma, it would be a coup. The New Brunswick, N.J.-based pharmaceutical company, a founding member of the supplier-funded Internet site called Global Healthcare Exchange, has been a notable holdout in jumping on board GPO-sponsored Web sites. Abbott Laboratories, the only other pharmaceutical company that is a founding member of Global Healthcare Exchange, came on board Neoforma's site in April.
"I can't confirm at this point whether we have received any notification (of a pharmacy contract award from Novation)," said David Swearingen, a spokesman for Johnson & Johnson, a longtime Novation supply partner.