Bergen Brunswig, Kaiser Permanente Sign 5-Year Deal

Bergen Brunswig Corp. said Friday it signed a five-year agreement valued at about $4 billion to supply drugs and pharmaceutical products to Kaiser Permanente, the nation’s largest nonprofit health-care organization.

Bergen Brunswig, one of the largest U.S. drug wholesalers, will become the primary pharmaceuticals supplier to the 9-million-member health plan. Previously, Bergen had acted as one of several suppliers.

The agreement, which took effect Monday, will boost Bergen’s business with Oakland-based Kaiser Permanente by an estimated 70% in the first year.

Orange-based Bergen Brunswig and other wholesale drug distributors are benefiting from the move by health care plans to cut costs by hiring distributors to manage their pharmaceutical supplies.

“This is what’s happening with a lot of the drug companies today,” said Sally Schaadt, an analyst with Fourteen Research, who rates Bergen a “hold.”

The contract includes a revenue-sharing formula based on performance, an incentive for both Kaiser and Bergen to keep costs down. Bergen has been working on that concept in recent contracts, although this is the largest agreement to implement the idea, analysts said.

On March 25, the company said it extended its $400-million-a-year contract with health care provider Tenant Healthcare Corp. into 2002. Bergen Brunswig, which had 1997 sales of $11.7 billion, also has contracts with Columbia HCA Healthcare Corp. and Safeway Corp.

U.S. regulators are trying to block two major merger deals involving the nation’s four largest drug distributors, including Cardinal Health Inc.’s proposed $4.16-billion acquisition of Bergen. The Federal Trade Commission says that the acquisition, along with McKesson Corp.’s plan to buy AmeriSource Health Corp., violates antitrust laws and will push up drug prices.

A trial is scheduled next month. Bergen has said that it intends to move ahead with business in case the merger doesn’t go through.

Shares of Bergen Brunswig rose 25 cents to $44.25 Friday on the New York Stock Exchange.