NWDA’s IOS WHOLESALER-MANUFACTURER EDI NETWORK TO BE FULLY OPERATIONAL IN OCTOBER; INDUSTRY HAS CONTRIBUTED OVER 25% OF FUNDS NEEDED FOR SYSTEM START-UP

Executive Summary

NWDA's Interorganizational System (IOS) drug industry EDI network is expected to be fully operational by the end of October, NWDA Services Corp. VP-IOS Development David Prins is predicting. Prins said that a number of IOS features, including electronic mail, facsimile, bulletin board and electronic data interchange (EDI) capabilities, are already available on the electronic IOS. Eight companies are currently on-line as the system undergoes a shakedown prior to start-up, he noted. Other features that will be added at a later date, Prins said, include an item-level data base and a number of directories for facsimile broadcast. Prins said he expects the item-level database to be in testing by the first quarter of 1993 and to be fully operational by the middle of next year. As envisioned by the National Wholesale Druggists Association, IOS will provide an industry-wide infrastructure that will allow the electronic exchange of data among trading partners. In a Sept. 18 press release, NWDA said that IOS will speed the adoption of EDI within the pharmaceutical industry by allowing EDI users to communicate with all trading partners regardless of their current EDI capabilities by X.12 EDI documents to those with EDI capability, and by facsimile, E-mail or NWDA fixed-format EDI records for the remainder. NWDA's IOS initiative was unveiled at the association's annual meeting in November 1991 ("The Pink Sheet" Nov. 18, 1991, p. 22). The association has placed operations of the system under the aegis of an arms-length, for-profit organization, NWDA Services Corp., which will be run by a board of directors comprised of association executives and three representatives each from the wholesaler and manufacturer sectors. Representing the manufacturers on the board are Marion Merrell Dow VP-Sales, National Accounts Herb Atwater, Searle Director-EDI & Sales Information Randy Falkenrath and Bristol-Myers Squibb's David Rogers. Wholesalers are represented by Whitmire VP-Marketing Steve Divine, Chapman Drug President David Pesterfield and Alco Health Services Group President David Yost. In response to a bid solicitation to 13 value-added EDI networks earlier this year, NWDA reviewed eight contract bids and selected GE Information Services for the IOS network ("The Pink Sheet" Aug. 24, In Brief). The new system was launched at a series of regional meetings in Phoenix, Newark and Chicago in late August where NWDA described IOS and its capabilities, sought industry participation in the system and approached wholesalers and manufacturers for contributions to cover IOS start-up costs. "Within two weeks of the meetings," NWDA reported in a Sept. 18 press release, "more than 25% of the total funds needed to launch the program had been received at association headquarters." NWDA has established a "founders" group of companies, who in return for helping fund startup costs before Nov. 1, 1992 will receive priority treatment in coming on line and the possibility of a rebate of their contributions once IOS becomes operational and begins generating revenues. Such funding contributions are on "fair share" basis -- the amount depends on the volume of transactions a company would do through the channel. According to a Coopers & Lybrand study commissioned by NWDA, the IOS EDI system will produce industry-wide savings of $4 mil. annually with $16 mil. in annual savings possible five years out from the IOS startup. The study predicted another $21 mil. to $58 mil. in savings from the item-level database. A contract data base feature could generate additional industry savings of $38 mil. to $80 mil. NWDA President-elect Ron Streck emphasized at the August launch meetings that IOS "is not SES (or sales evaluated settlement)," a term used in the Coopers & Lybrand report to describe a trading system that eliminates charge-backs and speculative buying. The association is now defining a fourth feature of IOS as "replacement manufacturing," which would allow manufacturers to monitor wholesaler inventory levels and provide daily sales information.