News | May 26, 1999

MckessonHBOC and Advocate Health Care Sign Pharmaceutical and Supply Management Agreements

Pharmaceutical supplier McKessonHBOC, Inc. (San Francisco, CA) and integrated healthcare delivery network Advocate Health Care (Oak Brook, IL) announced that they have signed a five-year agreement designating McKessonHBOC the primary supplier of pharmaceuticals to Advocate's eight hospital pharmacies. McKessonHBOC, with pro forma revenues of $21 billion, estimates that the supply agreement will generate $230 million in incremental revenues over the five-year term. Of McKesson's $21 billion revenues, total pharmaceutical distribution and services revenues were $19.4 billion for the year ended March 31.

Also announced was a separate agreement in which McKessonHBOC will provide Advocate its CoSource supply management program in exchange for service fees.

"We anticipate that we will reduce our pharmacy expenditures by over seven million dollars during the first three years of this agreement." said Lloyd Dean, executive vice president, operations, of Advocate Health Care in a statement. "We will use those funds to invest in technology and systems that will improve outcomes for our patients."

"The pharmacy savings will come from contract compliance, more extensive use of bar coding for better inventory management, and pharmacy staff reductions," said Janet Teeter, director, Advocate Pharmacy Program. Advocate will also take advantage of McKessonHBOC's consulting services to target prescribing patterns and will also improve its tracking of cost savings.

McKessonHBOC's CoSource supply management program is said to integrate automated technologies and information systems with pharmaceutical distribution. Under the CoSource agreement, McKessonHBOC will receive service fees for providing Advocate's multiple sites:

  • Two ROBOT-Rx units, automated pharmacy-dispensing and utilization-tracking systems that enable hospitals to lower pharmacy costs while improving the accuracy of drug dispensing
  • ConnectRx pharmacy information management software providing information tools to pharmacy management
  • Customized cost management analyses and implementation through its SupplyNET Diagnostic Service
  • Pharmacy consulting services
  • Management of ROBOT-Rx product inventory
  • EconoLink inventory and asset-management services.

In March, McKesson announced a five-year contract with UW Health/University of Wisconsin Hospitals and Clinics under which McKesson HBOC will provide its CoSource supply management program to UW Health.

Advocate Health Care has more than 200 sites of care, including 35 Advocate health centers and eight hospitals with approximately 3,000 beds. McKessonHBOC, Inc. is said to be the world's largest pharmaceutical supply management and healthcare information technology company.