by
Brendon Nafziger, DOTmed News Associate Editor | March 01, 2011
From the March 2011 issue of HealthCare Business News magazine
In fact, this confusion gets to the core issue critics say underlies the whole problem: the lack of transparency. Many of the GPOs are privately held companies (of the big ones, only MedAssets is publicly traded). Although in response to public pressure, the GPOs set up a code of conduct they’re supposed to adhere to, it’s not independently monitored the economist Sethi says, which makes it hard to know what’s really going on.
What’s more, most of the studies – pro or con – on GPOs are based on fragmented data, as most medical device companies try to keep a tight lid on their prices. The prices that are usually shared are list or “sticker” prices, which nobody pays, and often the really expensive deals are protected by nondisclosure agreements with purchasers.
“Everybody thinks they got the best deal in town. You can go to a hospital in New York, and they all think they’ve done great,” Schneller says. “I can show you they pay 30 to 40 percent more for any given item [than the other buyer].”
This means that the data used for studies have serious limitations. “Put it this way, if they say they have great price data and they know what the price points are, I’d love to have access to it,” Schneller says.
GPOs: peeping into the crystal ball
To GPO critics, the hope is simple. “Our objective is to restore the illegality of these kickbacks to GPOs,” MDMA’s Leahy says.
But this practice has become increasingly widespread outside even the United States. Schneller says he recently spent two months in Europe looking at pricing, and found the GPO model – where the organizations were paid a cut of the transactions costs – was common throughout much of the Continent.
“I was at a meeting in Paris, where GPOs from around the world came together. There are GPOs in France, there are GPOs in Italy, there are GPOs in Portugal,” he says. “This is not unusual.”
So what sort of changes will occur? Integrated Delivery Networks, or IDNs, which are networks of hospitals in the same system and which can negotiate with vendors, have grown in popularity, but even these frequently rely on GPOs. And some larger hospitals are finding they can negotiate with vendors directly – for instance, for decades, Duke University’s pharmacy department, because of its massive, multimillion dollar drugs budget, was able to enjoy volume-based bargains from suppliers. And with better software, the process has gotten easier.
When it comes to competition amongst themselves, GPOs do about as well with commodity pricing as each other, according to most observers. “I think what we’re starting to see in the market, is that for everyday commodities there’s hardly a lot of price differences in and among GPOs,” Schneller says. But some have started to distinguish themselves in other fields. Duke, for instance, works with a GPO – not for drug pricing – but for knowledge-exchange and practice-management meetings. (However, a recent survey found many hospitals preferred GPOs for hard pricing metrics, and less for “touchy feely” endeavors.)
