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GOLDLINE AND UDL LABS ARE PRIMARY VENDORS FOR VHA SUPPLY

Executive Summary

GOLDLINE AND UDL LABS ARE PRIMARY VENDORS FOR VHA SUPPLY following a paring back of major pharmaceutical suppliers last fall. VHA Supply, Clinical Products Division Senior Product Manager William Randle noted the change at an April 18 session of The National Managed Care Health Care Congress conference held in Washington, D.C. During VHA Supply's second contract cycle, which began last fall, "we decided that for this contract term we were going to consolidate our market into two primary vendors...Goldline and UDL," Randle said. VHA Supply is a for-profit, product purchasing division of Voluntary Hospitals of America. Previously, in addition to contracts with Goldline and UDL, the group had major contracts with two other solid oral drug manufacturers/packagers: Geneva Generics and Vangard Labs, a division of Owens & Minor. VHA Supply still obtains some products from Vangard. Owens & Minor has a major surgical supply contract with VHA. That contract generated $277 mil. in revenues for Owens & Minor in 1989. Randle explained that creating a bigger target for potential suppliers was a key reason for cutting back on the number of contracts. "It became very apparent to me," he recounted, "that if I'm going to have any credibility in working with these manufacturers that I've got to be able to consolidate my clout." The pharmacist noted that three years ago VHA Supply decided to stop sending out bids for supply contracts and start entering into contract negotiations. "It has given us an opportunity to more pro-actively explore the market," Randle said. The contracts usually last for two years. As part of his decision-making process for consolidating vendors, Randle toured most of the major generic manufacturers and packagers. In evaluating these companies, he looked at a number of factors, including their management, their facilities, and their quality assurance programs. Randle said his initial objective was to consolidate to only one broadline vendor, but he noted, "I was not able to find a vendor that could meet both my oral solid bulk needs and my unit dose needs." VHA Supply considered the choice between firms that were vertically integrated or those that were sourcing their products. If you choose a company that is completely vertically integrated and something happens, "then you're basically dead in the water," he said. "Goldline was somewhat vertically integrated in their Superpharm facility...and that was about 20% of their product line. The other 80% they did source outside." UDL contract packages 100% of their oral solid products, he noted. Randle commented on the impact of the generic drug scandal on the marketplace. VHA Supply, he pointed out, has kept its hospitals apprised of events arising from the generic drug investigations through written and telephone communications, and by use of a videotape developed by VHA Supply. The open communications system established the hospitals' confidence in VHA Supply's contract arrangements, Randle noted. "Overall, we really saw minimal purchasing impact. In fact, the two contracts with UDL and Goldline have had increasing sales since last September." At the time VHA Supply was negotiating new contracts, it changed some of the manufacturers that its vendors were using. "We did tend to move away from three manufacturers: those are Par, Vitarine and Bolar," because "we're concerned about supporting a company who's involved in illegal gratuities or illegal practices." Randle predicted that the generic drug industry "is going to be a much stronger industry." He noted that VHA Supply had a contract with Lyphomed when it experienced serious good manufacturing practice problems about two years ago. VHA Supply stayed with Lyphomed through the problems and a subsequent overhaul. After that experience, Randle said Lyphomed came out as a much stronger company. He said the management changes that are occurring in some generic companies "are obviously going to yield us improved ethical and business standards."
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