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ABBOI.V. SOLUTIONS REPRESENT SOLE BRANDNAME COMPANY PRODUCTS FOR PACE ALLIANCE BUYING GROUP; CONTRACTS ARE "ALMOST ALL" GENERIC, EXEC SAYS

Executive Summary

Abbott I.V. solutions are virtually the only products from a brandname supplier handled under contract by the Kansas-based retail pharmacy buying group Pace Alliance, President Benji Wyatt noted in a presentation at the National Association of Pharmaceutical Manufacturers annual meeting in Puerto Rico Jan. 20-24. Asked whether his buying group solicits bids from brandname companies, Wyatt said that "Carnrick has bid a few items with us, and a couple of those are indeed the brandname items. Abbott Laboratories awarded us a contract on I.V. solutions, but that is the extent of it." Wyatt said, however, that although Pace Alliance does now and will continue to solicit bids from brandname companies, "as a matter of fact we have gotten practically no response." "Our contracts on multisource drugs, almost all of them, are with generic vendors," Wyatt said. Pace Alliance was established in 1985, initially as a joint venture between privately-owned Pace and the Kansas state pharmacy association. The group now includes over 2,000 independent pharmacy departments with participation by eleven state pharmacy associations, Wyatt said. Pace Alliance's volume purchasing leverage allows the group to obtain average discounts "approximately 36% lower than the wholesaler cost [compared to] the wholesaler cost catalogue," Wyatt said. He added that Pace Alliance will not list products from brandname companies in its catalogue unless those products can be obtained at special prices. "Some buying groups will list in their catalogue contract prices from brandname companies and then they will promote their group by saying, 'Why don't you deal with us rather than Pace Alliance. We not only have contracts on generics, we have contracts with brandname companies,'" he said. "But what they are is regular cost. I consider that to be inappropriate." Wyatt noted that retail pharmacists are purchasing I.V. products because of opportunities in home I.V. therapy brought on by the changing health care environment. He illustrated the importance of a buying group for pharmacists in the home I.V. market. "Pharmacists in the retail sector who participate in home I.V.s pay [about] $ 7 a bottle, when the hospital pharmacists through their group are buying for maybe 80 or 90 cents. We got them for $ 1.05," he said. Wyatt listed the factors which are important for buying groups negotiating vendor contracts. One of the top priorities is price. "If we don't have price, then we really don't have anything to offer our members," he said. "We have never listed an item in our contract catalogue at regular wholesale price." He added that "we are not interested in a lot of added value things" such as generic brandnames on prescription items. Pharmacists, he explained, are accustomed to identifying products by generic nomenclature. [That does not hold true, Wyatt said, for OTC products. Brandnames for OTC items are important, he declared, because of consumer unfamiliarity with generic drug names.] Fill rates are so important to group members, Wyatt stated, "that they will not tolerate a very poor fill rate, even if the price is very good. They would rather pay a little more money and have their orders filled." The reason is that pharmacists do not want to switch back and forth between different vendors whose products have different physical characteristics which must be explained to customers. A related factor, breadth of the vendors product line, is important because the wholesaler prime vendors "give us great resistance if we try to get them to add more and more and more vendors to an unreasonable number," Wyatt explained. Another factor that is important, he said, is that vendors "be willing to distribute the items through our prime vendor wholesaler. Our whole program is based on distribution through our prime vendor wholesaler."
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