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BRISTOL-MYERS SQUIBB HOSPITAL PURCHASING CONTRACT WITH AmHS

Executive Summary

BRISTOL-MYERS SQUIBB HOSPITAL PURCHASING CONTRACT WITH AmHS covers the sale of the full spectrum of BMS U.S. Pharmaceutical Group products, Mead Johnson nutritionals and enteral nutritionals, Zimmer orthopedic products, ConvaTec ostomy products, Linvatec surgical products and Xomed-Treace division ear, nose and throat surgical products to American Healthcare Systems' 1,010 not-for-profit healthcare facilities. Announced Aug. 12, the five-year managed care purchasing agreement goes into effect Sept. 1. Bristol-Myers Squibb said the agreement will "significantly expand" the purchase of its products by AmHS. The alliance characterizes the agreement as a "very significant" expansion in the med/surg business. Individual BMS business units have had purchase contracts with AmHS previously -- a pharmaceutical products agreement is in place -- but the new agreement is the first to cover the full range of BMS products except consumer goods such as Bufferin. The contract has a potential "multibillion" dollar value over its five-year life, BMS said, and could be the company's single largest purchasing contract. A "performance driven" discount structure is built into the purchase agreement with increased savings based on increased purchases, BMS said. The company did not disclose further details. The agreement confers key corporate partner status to BMS. AmHS currently has a number of corporate agreements, which cover a broad section of healthcare- and nonhealthcare-related products -- Johnson & Johnson, DuPont, Kodak, IBM and GE are contract holders -- and a number of long-term pharmaceutical contracts. For example, in August 1991, SmithKline Beecham signed a three-year deal with AmHS, valued at an estimated $30 mil. in annual pharmaceutical sales ("The Pink Sheet" Aug. 26, 1991, T&G-7). Baxter remains AmHS' largest corporate partner. Corporate partners work with AmHS' 39 limited partners representing the alliance's health care facilities to facilitate long-term volume discount contracts for the AmHS healthcare facilities in 47 states. The largest U.S. not-for-profit purchasing alliance, AmHS represents approximately 18% of U.S. community hospitals. Monroe Trout, MD, a former Sterling Drug exec VP, is chairman and CEO of the privately held alliance based in San Diego.

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