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Executive Summary

The National Wholesale Druggists Association needs to have a "monthly scoreboard" update on the recently-initiated Interorganizational System (IoS) drug industry electronic data interchange network to keep the IoS founders group and association members abreast of the system's new applications as well as its rough spots, Searle President-U.S. Operations Andy Anderson suggested at NWDA's annual meeting in San Diego Nov. 14-18. Anderson, whose company is among the founders group that contributed start-up funding to the Healthcom EDI system, acknowledged that the applications of IoS are "still kind of fuzzy my mind." Therefore, "I think it's important that we have some kind of scoreboard that's understood not only by the technicians of this business but also by those of us who make the financial decision....I think the whole issue of understanding ...what our baseline extremely important." Anderson commented on the need for a regular system of IoS updates as one of nine panelists at NWDA's "town meeting" Nov. 16. The panel of wholesalers, manufacturers and consultants discussed possible hurdles to the full acceptance of IoS. Initial awareness of the IoS project is spotty. Via an electronic polling system used to gauge the opinion of company representatives in the audience, NWDA found that, of those polled, 45% said they were members of the IoS founding group; 42% were not and 13% were not sure. In fact, Healthcom exceeded its Nov. 1 funding deadline goal with 186 business entities representing more than 90% of all industry companies with EDI capabilities participating in the start-up process ("The Pink Sheet" Nov. 16, p. 20). Healthcom is currently in mid-phase one, a trial run of communication capabilities that is expected to be completed in mid-January. Phase two will permit many companies to use the IoS network in addition to their own EDI capabilities. Bruce Siecker, PhD, president of NWDA Service Corp., the arms-length, for-profit entity that runs Healthcom, said IoS should be operational in "60- 90 days." IoS is operated on a consensus basis by the founders group, which will determine what new applications are added to the system and in what sequence. FoxMeyer President and CEO Bob King said "it takes a long time" to work out differences between the goals and standard operating procedures of wholesalers and manufacturers. King admitted that he initially worried that by joining IoS "we would put ourselves in a position not to be able to take advantage of some strategic advantage that we as a company... could maybe bring to the table." The way FoxMeyer "finally analyzed it and came down is that this will be the way that we do business in the wholesale drug business and in health care delivery and we want to certainly be a part of it. There are many ways to differentiate yourself; this will just be a way we do business." Speaking of the need for cooperation between and among wholesalers and manufacturers to make IoS a success, Anderson told the audience: "The cold hard facts are that there aren't that many" marketing surprises "left out there." To improve "the execution of the day-to-day activities of our business, it's imperative that we have to understand that suspicion and...harbored secrets really are a thing of the past." Calling the IoS system "information rich," Anderson said "we need information, we need it quickly, as manufacturers. The wholesalers are our committed partner." Talking about the increased access to information IoS will provide, Becton Dickinson's Baer said he thought it would increase sales. "If we can get new product information out quickly... information on out-of-stocks...on older products, we can actually move the sales cycle as well, speed it up and make it more efficient." Marion Merrell Dow Prescription Products Division President David Roche said: "There is so much waste in the system today -- we all know it; we don't necessarily always talk about it, but we can eliminate the gridlock by developing a win-win attitude.... It's not the new systems; it's not the money we're pouring in; it's the way that we're going to work together." Asked about the impediments to IoS during the panel discussion, 26% of audience members polled said a sticking point would be companies trying to take competitive advantage of the information available through the system, 20% cited a lack of industry consensus and 15% cited industry resistance to change. The high percentage of company representatives expressing uncertainty about IoS prompted NWDA Service Corp.'s Siecker to cite a pressing need for the quick dissemination of information about the program. "We've got a big job to do to get some more information on the street," Siecker acknowledged. Noting that NWDA has identified "more than 100 ways" IoS "can help industry," Siecker added a note of caution about proceeding too quickly with the program: "One of our big challenges will be to make sure that we don't get so excited about all these ways that we dissipate all our resources and don't take advantage and focus stepwise." Bergen Brunswig Chairman Bob Martini chided IoS holdouts saying: "I don't think it [IoS] has gotten the priority that it needs to have by key characters" in industry. Noting that the industry has "great pressures" on it for cost reduction, he urged holdouts to join the founding group. Martini called IoS "an exemplary opportunity for us all to join and share in cost reduction. To avoid it for any longer, simply means we're raising our costs. So the answer is simple: whether you like change or not, you better get on with change." Additional panel members included John Letizia (Value Drug); Chuck Baer (Becton Dickinson Consumer Products); and consultants Jeff Goldsmith (Health Futures, Inc.) and David Main (Gardner Carton & Douglas managed care group).

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