Premier Inc. and 11 Leading Health Systems Invest in Exela Pharma Sciences to Secure and Support U.S.-Based Drug Supply and Manufacturing

Drug shortages have long plagued U.S. healthcare providers; COVID-19 has compounded sourcing challenges. New initiative will manufacture pharmaceutical products in North Carolina, primarily using APIs from the U.S. and Europe

Premier Inc., a technology-driven healthcare improvement company, and 11 leading health systems acquired a minority stake in Exela Holdings, Inc., the holding company of Exela Pharma Sciences, LLC, to secure vital supply of pharmaceutical products and support domestic production.

Under the arrangement, participating Premier member health systems are expected to have uninterrupted supply of 19 pharmaceutical products, including several generic injectables that frequently appear on the U.S. Food and Drug Administration’s drug shortage list, as well as 503B pharmaceutical products made by Exela. Exela primarily sources active pharmaceutical ingredients (APIs) from the United States and Europe, and manufactures finished-dose products in its recently expanded state-of-the-art U.S. manufacturing facility in Lenoir, NC. Exela’s manufacturing capacity provides participating Premier members with a unique opportunity to bolster the supply of critical products and support domestic manufacturing infrastructure.

Pervasive drug shortages for more than a decade have led to sub-optimal patient outcomes and approximately $230 million in additional annual drug costs. COVID-19 has exacerbated pharmaceutical sourcing challenges as overseas manufacturing, export bans from large producers of APIs and demand spikes have, at times, left providers struggling to secure basic, life-saving therapies for patients.

“Leveraging Exela’s significant production capacity, this collaboration is expected to give Premier’s participating members uninterrupted access to high-quality, U.S.-made pharmaceutical products and safety stock,” said Michael J. Alkire, President and CEO of Premier. “With this investment, we are committing to support the domestic production of vital medicines for our members and the market — and to bring much-needed solutions to help eliminate drug shortages.”

“Both Exela’s commitment to, and track record of, addressing drug shortages as well as its experience in supplying 503B compounded products make them an ideal partner for Premier and our members,” added Andy Brailo, Chief Customer Officer at Premier. “Their ability to quickly provide vital medications can help to address moment-in-time market imbalances, including spot, regional and emergency-related shortages.”

“We are thrilled to enter into this partnership with Premier and these proactive health systems to deliver consistent supply of high-quality, U.S.-manufactured medicines at affordable prices to help combat drug shortages and supply chain issues,” said Phanesh Koneru, President and CEO of Exela.

The participating health systems signed multi-year commitments to purchase a portion of their pharmaceutical products from Exela through Premier’s group purchasing organization. Premier members participating in the initial investment include Baystate Health (Springfield, MA), Genesis Health System (Davenport, IA), Henry Ford Health System (Detroit, MI), McLaren Health Care (Grand Blanc, MI), Memorial Healthcare System (Hollywood, Florida), OSF HealthCare (Peoria, IL), Riverside Health System (Newport News, VA), Saint Francis Health System (Tulsa, OK), Texas Health Resources (Arlington, TX) and Universal Health Services, Inc. (King of Prussia, PA).

Premier has been a long-time leader in addressing supply chain challenges and drug shortages. Through innovative programs such as ProvideGx, Premier and its members are incenting manufacturers to increase drug supply, invest in redundancies, enter or re-enter markets and explore new therapeutic categories for innovation.

The collaboration with Exela builds on this legacy and represents another step forward in Premier’s long-term resiliency strategy — working with members to pursue innovative relationships with U.S. companies that specialize in critical product categories. The first such investment with Prestige Ameritech is currently providing 5 million additional N95 masks per month for U.S. healthcare providers. The second partnership with DeRoyal Industries Inc. is expected to produce more than 40 million domestically manufactured gowns annually. The third collaboration with Honeywell is expected to produce at least 750 million domestically made nitrile exam gloves in the first year alone.

The financial terms of the transaction with Exela were not disclosed. The transaction is not expected to materially impact Premier’s fiscal year 2022 financial results. McDermott Will & Emery LLP served as legal counsel to Premier. SVB Leerink served as financial advisor to Exela. Brown Rudnick LLP served as legal counsel to Exela.