SMITHKLINE BEECHAM PREFERRED VENDOR DEAL WITH AMERICAN HEALTHCARE SYSTEMS

SMITHKLINE BEECHAM PREFERRED VENDOR DEAL WITH AMERICAN HEALTHCARE SYSTEMS will cover an estimated $ 30 mil. in annual pharmaceutical sales to AmHS' 1,200 healthcare facilities in 47 states. The contract with AmHS, which was announced Aug. 19, runs from June 1991 to June 1994. SmithKline Beecham, described the contract as one of the largest of the company's more than 100 such agreements. SmithKline has been one of the most aggressive pharmaceutical companies in pursuing long-term volume discount contracts with managed care businesses. The pharmaceutical products covered in the preferred vendor contract with AmHS include the ulcer drug Tagamet (cimetidine), the anti-emetic/anti-psychotic Compazine (prochlorperazine), the thrombolytic Eminase (anistreplase) and the recombinant hepatitis B vaccine Engerix-B as well as three antibiotics -- Ancef (cefazolin sodium), Monocid (cefonicid) and Timentin (ticarcillin/clavulanic acid). SmithKline's top-selling antibiotic Augmentin (amoxicillin/clavulanic acid) is not part of the AmHS contract. AmHS, a San Diego-based nationwide health care alliance, currently has 18 large corporate agreements, which cover a broad spectrum of healthcare and non-healthcare products -- Kodak and DuPont are contract holders -- and a number of long-term pharmaceutical contracts. The corporate agreements generate dollar volume of $ 50 mil.-$ 100 mil. annually; the pharmaceutical contracts are smaller. AmHS estimates it total purchasing volume annually at about $ 3 bil. AmHS is a privately-held firm that represents over 900 hospitals and 150 nursing homes among its 1,200 health care facilities in every state in the U.S. except New York, Vermont and Utah. AmHS's 39 multihospital shareholders include Henry Ford (Detroit); the Cleveland Clinic; the Presbyterian system in New Mexico; Group Health of Puget Sound; and Unihealth in Los Angeles. The company is led by Chairman Monroe Trout, MD, who was formerly exec VP of Sterling Drug prior to joining AmHS five years ago. SmithKline recently has been stressing its goal of leading the managed care pharmaceutical field. At an April 12 meeting with securities analysts, SmithKline Beecham North America Pharmaceuticals President Jean-Paul Garnier, called managed care one of the three "critical factors" for SmithKline's future, along with heightened sales force effectiveness and new product introductions. The firm claims to have the largest dedicated managed care salesforce in the U.S. At that meeting, Garnier cited several case studies of the impact of managed care contract on boosting market share for certain products, among them Ancef, Tagamet and Eminase. For example, the Ancef brand of cefazolin increased its market share from 49.3% in 1989 to 57.2% in 1990, gaining at the expense of Lilly's Kefzol and generic cefazolins, according to a slide presented at the meeting. Tagamet's share of the retail ulcer drug market dropped from 24.6% in 1989 to 21.1% in 1990, but conversely, cimetidine's share of the managed health care market climbed from 34.5% to 36.8% in that same period among the top 20 managed care accounts. Eminase, which has benefited from study results that have caused some slippage in share by market leader Activase (TPA) from Genentech, increased in percentage of dosages dispensed in hospitals, from 7.3% in December 1990 to 15.2% in February 1991, SmithKline Beecham reported to the analysts.