Global Healthcare Exchange to Acquire Neoforma

Consolidation in the electronic healthcare marketplace continued in October with the announcement that the Global Healthcare Exchange LLC (GHX; Westminster, CO) will acquire Neoforma Inc. (San Jose, CA) in an estimated $200 million deal.

GHX was founded in 2000 by five major medtech firms: Johnson & Johnson Inc. (New Brunswick, NJ); GE Healthcare (Chalfont St. Giles, UK) ; Baxter International Inc. (Deerfield, IL); Medtronic Inc. (Minneapolis); and Abbott Labs (Abbott Park, IL). The company links 150 manufacturer divisions with more than 2200 hospitals. Neoforma, launched in 1996, currently serves 1600 hospitals. GHX claims to be the largest healthcare exchange in the country by virtue of the number of hospitals it serves. In terms of annual trading volume, however, Neoforma at $13 billion surpasses GHX’s $8 billion.

The merger was not unexpected. The two companies formed a partnership in 2001, and Neoforma announced last December that it was pursuing strategic alternatives, including the possible sale of the company. Under the terms of the merger, GHX will pay $10 for each share of Neoforma stock that is not owned by its two major shareholders, VHA Inc. (Irving, TX) and University HealthSystem Consortium (UHC; Oakbrook, IL). These entities will become equity participants in GHX following the merger. VHA and UHC are the owners of Novation LLC (Irving, TX), a leading group purchasing organization (GPO) and Neoforma’s largest customer. GHX announced separately that it has entered into a new outsourcing agreement with VHA, UHC, and Novation.

GHX’s Mahoney: Streamlining the supply chain.

Describing the acquisition as an “opportunity to continue improving efficiencies and lowering costs in the healthcare supply chain,” Michael Mahoney, CEO of GHX, said, “By combining these two organizations, GHX can offer new services to a broader range of both buyer and seller participants, and enable greater efficiencies across the supply chain.” Robert Zollars, chairman and CEO of Neoforma, added, “This combination with GHX will provide our customers with more cost-effective solutions at an accelerated pace.”

Many smaller medtech manufacturers are likely to see the GHX acquisition of Neoforma as yet another threat to an open and competitive marketplace. Although GHX bills its service as “open and neutral,” critics are quick to point out that GHX is owned by large medtech manufacturers and therefore not particularly motivated to foster competition.

MDMA’s Leahey: Concern for small manufacturers.

Commenting on the acquisition, Mark Leahey, executive director of the Medical Device Manufacturers Association (MDMA; Washington, DC), said, “GHX now has the e-healthcare marketplace pretty much to itself, and when you factor in its collaboration with and support from large GPOs, it’s cause for concern among our smaller, innovative manufacturers.”

The new company will operate under the GHX name and keep its headquarters in Westminster , CO. Mahoney will continue as CEO.

The deal is expected to close in the first quarter of 2006 following regulatory and shareholder approval.

© 2005 Canon Communications LLC

Return to main menu.