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Healthcare Giants Fuel B2B Frenzy

By Paul A. Greenberg & Robert Conlin
Mar 31, 2000 12:00 AM PT

Healthcare giants Johnson & Johnson, GE Medical Systems, Baxter International, Inc., Abbott Laboratories and Medtronic, Inc. have further fueled the current business-to-business (B2B) feeding frenzy by announcing plans to create a privately held exchange to streamline purchasing for healthcare providers.

Healthcare Giants Fuel B2B Frenzy

"Every healthcare system around the world is under enormous pressure to create efficiency and take out costs," said James T. Lenehan, Johnson & Johnson's worldwide chairman of Medical Devices, Diagnostics and Health Systems group. "This exchange is a big part of the solution -- access to state-of-the-art supply chain management and clinical content without the capital expense."

The intent of the exchange is to streamline the purchase, sale and distribution of medical equipment and devices, healthcare products, and related services worldwide. It will also provide access to extensive clinical content.

The exchange will eventually provide equal access to all healthcare manufacturers, suppliers, distributors, providers, group purchasing organizations and other healthcare trading partners.

First Venture for New Alliance

The healthcare exchange is the first major venture for the IBM, Ariba and i2 alliance that was formed earlier this month to target the burgeoning business-to-business market. The alliance provides hardware, software, marketing, integration and business support services.

It will likely pose stiff competition for Commerce One, a company that has been very active in building B2B marketplaces in a number of industries within the past few weeks.

The selection of a management team for the healthcare exchange is underway, and plans are to have it up and running by the third quarter of this year. All of the founding partners will make equity investments into the new venture, and all will benefit from fees paid by participating suppliers.

However, unlike similar ventures that have been established recently, this marketplace will not charge customer transaction fees.

Met With Enthusiasm

Healthcare industry players have received the news of the new marketplace, which plans to expand beyond the U.S. by next year, with enthusiasm.

"This new online exchange has the potential of dramatically reducing the number of technology systems that we currently need to procure and purchase products, and providing access to accurate and timely information," said William J. Donelan, executive vice-president, Duke University Health System.

"It should save time and money, and enhance our focus on what we do best -- providing the best possible care for our patients," he said.

Retail Giants Join Game

In related news, 11 leading global retailers, including Kmart, Target and Safeway, announced Friday that they are forming the WorldWide Retail Exchange, a business-to-business (B2B) collaborative venture.

Joining the three retail giants are Albertson's and CVS in the U.S., Tesco, Marks & Spencer and Kingfisher in the United Kingdom, Auchan and Casino in France and Royal Ahold in The Netherlands. Together, they operate 30,000 stores around the globe and had combined sales last year of more than $300 billion.

Once launched this summer, the exchange will link some 100,000 suppliers, partners and distributors, the companies said in a joint statement.


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