Group Purchasers, Devices And Innovation
13 CommentsBy Ed Silverman // July 6th, 2010 // 12:01 pm
The focus on the site is generally on pharmaceuticals, but every so often an interesting item about the device world catches our eye, as did a piece in The Washington Monthly about group purchasing organizations, or GPOs, and their impact on the health care system and innovation. The lengthy article covers familiar ground, but the upshot is that GPOs remain controversial - despite years of exposes and lawsuits, small companies still appear to have little chance to win contracts to sell their inventions to most hospitals.
The oft-told tale of Retractable Technologies is the prime anecdote - the company’s syringe, which has been the subject of endless litigation, was developed with the help of government grants. But despite a settlement with several large device makers, including Becton Dickinson, ceo Tom Shaw says this device and other products largely remain locked out of the market.
But here’s an interesting epilogue: With the first of his patents to expire in four years and insufficient funding, he struck deals with Chinese companies, “which put up money to build assembly lines in China in return for rights to produce his syringes for the Chinese market,” the mag writes. “When his patents do run out, the Chinese companies will be the ones poised to bring his technology to the world market.”
Reforming GPOs, as the article explains, is tricky business, given the high stakes involved for hospitals, device makers and the GPOs themselves. The larger issue is the extent to which GPOs rightfully serve the healthcare system at a time of rising costs. There’s another aspect to this discussion - at a time when the US economy is struggling to right itself and innovation is seen as a necessary salve, the hold that GPOs have on purchasing may undermine this goal. How so? The jobs and economic benefits that could be generated by Retractable’s efforts will likely go to Gansu Province instead of the US. But read for yourself.
AV Block
Truly off comment here but… Congratulations! I didn’t know you restarted pharmalot! When did you restart?
Iam Serious
The article is true, GPO’s do add cost and they protect the largest suppliers. GPO’s don’t care if a product is better or inferior. Most of them are private companies, they are not the FDA and they don’t represent Medicare or the government. For the GPO it’s all about which supplier can deliver the highest “contract compliance” and other financial incentives. It’s all a numbers game. There are some hospitals know they can get lower costs on their own, so they will contract directly with manufacturers, bypassing and beating the GPO price. Therefore, if GPOs truly leveraged the best price, why do some of their members get better prices “off GPO contract”. It’s a fact Jack, check it out!
Anne PME
CC: WSJ Health Blog
Thanks for posting this. Likely due to the financial incentives which include discounts, other potential problems with GPO’s may include stockpiling and diversion into retail channels.
These strategies may lead to higher prices and higher rates of tampering and other types of adulteration.
Kester Freeman, former CEO, Palmetto Health
Where is the hospital view in this article? It’s mentioned repeatedly that hospitals belong to GPOs and are very loyal to them. That’s because GPOs save hospitals and the healthcare system more than $36B a year! The idea that sophisticated hospitals and their purchasing departments blindly follow GPOs is ridiculous. Get the facts on GPOs at http://actionforbetterhealthcare.com/.
Lowell Kruse
Where’s the balance in this article? Where’s the point of view of the hospitals who have saved billions working through their GPO? Where are the hundreds of small manufacturers that have increased their business, hired more employees and created vibrant economies in their local communities as a result of GPOs? It’s not in this “hit” piece. Instead, the reporter is more interesting in condemning a market that’s working based on the word of one company that has a profit motive associated with this smear campaign. Doesn’t seem very fair to me.
Mike Stephens, former President, Hoag Memorial Hospital Presbyterian
What Thomas Shaw and RTI don’t want you to know is that his product is available today through nearly every national GPO. The issue isn’t one of access, it’s about hospitals shopping around and making a better choice for their patients. You can fool some of the people some of the time, Mr. Shaw, but not all of the people all of the time.
Cindy Fithian
Mariah Blake nailed it. Her article “DIRTY MEDICINE” in the Washington Monthly hit a home run. It’s an outrage that the healthcare industry - nearly 1/6 of the US economy, has legalized bribes and kickbacks in the medical marketplace. No wonder health care costs so much!
Contact me @ cindyfithian@gmail.com if you’d like to receive the power point “The High Cost of GPOs”, explaining the inner workings of GPOs, and how everything changed in 1986 when Congress granted GPOs an exemption to the Medicare anti-kickback statute.
Transparency in Healthcare
If Mike Stephens, Lowell Kruse, and Kester Freeman are critical of Mariah Blake’s expose on GPOs, it’s because they are paid boosters for the industry. All three men are staff bloggers for Action for Better Healthcare, a Web site created and funded by one of the nation’s largest GPOs, Premier: http://actionforbetterhealthcare.com/?page_id=316
The site is a warehouse for blatant pro-GPO propaganda, as the following posts illustrate:
http://actionforbetterhealthcare.com/?p=198
http://actionforbetterhealthcare.com/?p=204
http://actionforbetterhealthcare.com/?p=201
http://actionforbetterhealthcare.com/?p=148
http://actionforbetterhealthcare.com/?p=147
http://actionforbetterhealthcare.com/?p=79
Like the site’s other bloggers, Kruse, Stephens, and Freeman have longstanding links to Premier. In fact, Kruse is chairman of Premier’s board of directors. Freeman sat on the company’s board for seven years, and Palmetto Health, the firm where he served as CEO, is a Premier shareholder, meaning it gets a cut of Premier’s profits. Why listen to people who are benefiting from kickback-fueled GPO model at taxpayers’ expense?
Truth Teller
Retired healthcare executives Kruse and Stephens are on GPO boards, and funded by GPOs. It’s not bad enough that these people sucked American healthcare dry through their GPO friends….but now, even after retiring, have to keep right on sucking. Just take your golden parachute and fade away, will you? You are retired, and a new generation of American innovators needs to clean up your mess. Please don’t make the job any harder than it already is. You have grandkids, don’t you?
Lobby Discloure
The lobbying activity contributions below were made by the GPO Premier, which has its own PAC and asks its employees to contribute. This is just for 2010, and is not representative of all Premier and other GPO lobbying activity. For example, the GPO Amerinet uses a firm called Venn Strategies to lobby- Medassets uses a law firm for lobbying and is a top contributor to Democrat Pete Stark- the GPO VHA spent over $250000 last year. Collectively, GPOs spend millions annually and have spent tens of millions in recent years. Check it out at OpenSecrets.org
Recipient Amount
Democratic Senatorial Campaign Cmte
$30,000
Blue Dog Pac
$10,000
Citizens For Altmire
$5,000
Hawkeye Pac
$5,000
New Democrat Coalition Pac
$5,000
New Democratic Network
$5,000
Friends Of Schumer
$4,200
Friends Of Kent Conrad
$3,500
Friends Of Blanche Lincoln
$3,000
Citizens For Arlen Specter
$2,750
Allyson Schwartz For Congress
$2,500
Berkley For Congress
$2,500
Blumenauer For Congress
$2,500
Bob Corker For Senate 2012
$2,500
Congressman Waxman Campaign Cmte
$2,500
Earl Pomeroy For Congress
$2,500
Friends Of Ginny Brown-Waite
$2,500
Friends Of John Barrow
$2,500
Friends Of Max Baucus
$2,500
Hatch Election Cmte
$2,500
Kind For Congress Cmte
$2,500
Mike Thompson For Congress
$2,500
Mikulski for Senate Cmte
$2,500
Orrinpac
$2,500
Pallone For Congress
$2,500
Pascrell For Congress
$2,500
Richard Burr Cmte
$2,500
Ryan For Congress
$2,500
Tammy Baldwin For Congress
$2,500
Wyden For Senate
$2,500
Friends For Harry Reid
$2,000
Mike Ross For Congress Cmte
$1,500
Citizens For Harkin
$1,000
Crowley For Congress
$1,000
Friends Of Lois Capps
$1,000
Christopher
Once again when someone poses an alternative point of view on a debate or a discussion their position is assumed to be worthless because they are related to pharma, communciations agencies, GPOs, managed care etc?
Are alternative perspectives always wrong? Does working for the ‘dark side’ make them clueless, or malevolent?
Ed writes prolifically and well, and usually raises a point worth discussing. It’s rare that there is only one side to the debate it causes, but those that shout loudest and longest seem to dominate here.
Transparency in Healthcare
Besides its PAC contributions, Premier also spent close to $900,000 on lobbying last year. Much of the money went to fighting language in the Physician Sunshine Payment Act that would have required GPOs to publicly disclose the kickbacks they receive from drug companies and device manufacturers:
http://www.opensecrets.org/lobby/clientsum.php?year=2009&lname=Premier+Inc&id=
All told, the industry has spent millions to fight this transparency measure. If GPOs are really saving the health care system money, why do they fight so hard to keep their financial data from becoming public? What do they have to hide?
Josh G.
It seems like this problem would affect incremental improvements to more or less commoditized technologies more so than it would disruptive technologies. (The retractable syringe being an incremental improvement)
Most incremental improvements are best (agree/disagree?) introduced to the market by licensing of IP by a 300 pound gorilla (which would have an easier time penetrating the GPOs and market in general) rather than by a start up company based solely on an incremental improvement? Agree/Disagree?
Further, did a VC invest in this company, seems like they would have seen this coming before investing? Agree/Disagree? Nonetheless, this problem clearly needs fixing and it is surprising that it has gone on for decades.