Group Purchases for Prescription Drugs Get Bad Rap | Commentary

Posted October 30, 2013 at 2:30pm

Critical prescription drug shortages continue to plague American hospitals and health care providers and jeopardize patient access to many essential medicines. Although Congress, the Food and Drug Administration and the private sector have made progress toward a solution, shortages persist.

Drug shortages are a complex problem with many root causes, including manufacturing problems, quality issues and barriers to getting new suppliers on line when supply is disrupted. This is an element of a broader challenge in a changing and stressed health care system, and central to the solution will be group purchasing organizations, a little-known sector of the health care supply chain.

GPOs are the sourcing and purchasing partners to virtually all of the 5,000-plus hospitals in this country. Hospitals use GPOs to aggregate their purchasing power and use the power of competition to deliver cost savings on everything from cotton swabs and hospital food to prescription drugs and MRI machines.

Health care providers have relied on group purchasing organizations for more than a century to negotiate discounts with manufacturers, distributors and vendors — reducing costs in all areas of the health care supply chain.

In 2002, executives from the major GPOs formed a self-regulatory, independent ethics and best practices organization called the Healthcare Group Purchasing Industry Initiative. The HGPII is dedicated to ensuring that group purchasing organizations follow the most up-to-date ethics and business practices.

GPO signatories of HGPII are required to be transparent with the public regarding their business practices, submit responses to an annual public accountability questionnaire, and attend an annual best practices forum in Washington, D.C., to recommit themselves to strenuous industry standards.

In 2011, we at Arent Fox LLP took over the comprehensive annual independent review of GPO business practices, including extensive GPO surveys, interviews with employees and site visits.

It’s our conclusion that, despite these reforms, GPOs have been the focus of outlandish accusations, including the farfetched idea that GPOs are to blame for drug shortages.

That claim is categorically false. GPOs are currently working collaboratively with manufacturers, distributors, the FDA and the Department of Health and Human Services to ensure that hospitals and patients have access to the life-saving drugs they need. They are also taking a variety of innovative steps to mitigate the impact of drug shortages.

Besides, all GPO purchasing contracts are voluntary — that is, hospitals can purchase products or services though their GPOs but are also free to purchase “off-contract” outside of the GPO arrangement.

The HGPII review determined that the GPO industry has every incentive to ensure that patients get the medications they need when they need them. If there is no product — or if manufacturers leave the market — there is no role for the GPO.

GPOs don’t have the ability — nor would it be in their interest — to force manufacturers into contracts that undermine their ability to deliver product. And it’s important to remember that the GPOs don’t actually stock goods; they simply facilitate bulk purchasing between health care providers and manufacturers to save consumers money.

Our review further determined that GPOs had developed and implemented policies that facilitate and promote the availability of new, innovative technologies for health care; improved transparency in the bidding and awards process; and created internal safeguards and enforcement mechanisms to prevent conflicts of interest in the contract process.

As the health care supply chain continues to search for solutions to the global health crisis of drug shortages, the GPOs will continue to perform a vital service for hospitals and the patients they serve, just as they have in the wake of other recent crises such as Superstorm Sandy. Indeed, although the cost efficiencies of the group-buying model have made GPOs virtually ubiquitous across many industries, it’s difficult to think of another industry where GPOs are more necessary.

Former Rep. Phil English, R-Pa., and former Sens. Byron Dorgan, D-N.D., and Robert Bennett, R-Utah, are senior advisers at Arent Fox LLP and the co-coordinators of the Healthcare Group Purchasing Industry Initiative.