March 4, 2010 – The Government Accountability Office (GAO) says it can identify just one peer-reviewed study conducted during the past five years that examines whether group purchasing organizations (GPOs) save hospitals and other health care providers money.
That single study, however, a 2008 national opinion survey of hospital materials management executives, vindicates GPO supporters. Most executives, it found, think that GPOs cut their prices and costs, raise hospital revenues, and behave ethically. Their biggest complaint is that the buying groups’ ancillary services are not that satisfying.
Hospitals participating in the 340B drug discount program, which is currently limited to the outpatient setting, are forbidden from purchasing 340B drugs through a GPO or any other group purchasing arrangement. They may, however, join such groups to negotiate lower prices on inpatient medications. They also can use the government’s prime vendor program, operated by Texas-based Apexus Inc., to help them negotiate prices below the mandated 340B ceiling price.
The congressional watchdog agency waded into the debate over the efficacy of GPOs at the behest of Sen. Charles Grassley of Iowa, the ranking Republican on the Senate Finance Committee. It made its findings known to the senator on Jan. 29 and to the public on March 1.
Scrutiny on Capitol Hill
Grassley is among a bipartisan group of lawmakers who want to know if the buying groups actually raise health care costs at the federal government’s expense. The organizations often are funded by manufacturers, rather than by hospitals, under an exemption to the federal anti-kickback statute—an arrangement that some believe invites corruption. Some smaller and newer manufacturers also assert that GPOs limit their access to the hospital market.
The peer-reviewed study identified by GAO was conducted by researchers at the University of Pennsylvania’s Wharton Center for Health Management and Economics and funded by the National Science Foundation. In a late 2008 interview with The Journal of Heathcare Contracting, the lead author, Lawton R. Burns, Ph.D., said he did the research because GPO skeptics were judging the groups “based off of everyone else’s perspective except that of the end customer—the hospital.”
“If you look inside a hospital, there’s one individual who is responsible for dealing with the GPO—that’s the director of materials management,” he said. Asked what he would tell senators who are wary of GPOs, he added: “I think there is a lot more smoke than fire here with regard to [alleged anti-competitive] GPO practices.”
The Health Industry Group Purchasing Association (HIGPA), which represents 16 GPOs, welcomed the GAO’s findings as outlined in its letter to Grassley.
Those findings and other non-peer-reviewed studies, HIGPA President Curtis Rooney says, show that GPOs save hospitals billions of dollars annually, including an estimated $6.8 billion alone for hospital inpatient pharmaceuticals.
Rooney attributes the paucity of peer-reviewed research to “people just coming on to the fact that the supply chain is important” and will soon surpass labor’s share of total hospital costs.
“There might be just one peer-reviewed study,” Rooney says, “but the real peers out there know that GPOs save hospitals money.”