VHA and University HealthSystem Consortium said in Securities and Exchange Commission filings that they will sell their combined majority ownership in Neoforma, a Web-based purchasing exchange that is five years into an exclusive 10-year outsourcing agreement with the alliances' joint group purchasing organization, Novation. The alliances said they believed they have been paying too much for Neoforma's e-commerce services, based on the findings of a consultant, and they intended to renegotiate the outsourcing agreement. A renegotiation is a condition of continuing the outsourcing agreement after any sale or merger of Neoforma, the alliances said. Neoforma maintained in a company news release that its fee is "reasonable and market-competitive."
VHA and UHC own 41.8% and 10.4%, respectively, of Neoforma's outstanding common stock. Under the outsourcing agreement, beginning in 2004, the maximum payment from Novation to Neoforma was set at $15.25 million per quarter, or $61 million per year. Neoforma announced in January that it was evaluating strategic alternatives, including a possible sale or merger. In its news release, the company said, "Now that VHA and UHC have determined their current intent, Neoforma and its advisers intend to accelerate their investigation of strategic alternatives ... and to enter into negotiations with prospective parties in connection with certain alternatives." -- by Cinda Becker